Ennis Board of Directors
Keith S. Walters
Chairman of the Board, CEO and President of Ennis, Inc.
Troy L. Priddy
President of Troy Priddy Custom Homes
Michael D. Magill
Executive Vice President and Secretary
Alejandro Quiroz
Chairman of the Board, President and CEO of InveStore
Frank D. Bracken
Retired and Former President of Haggar Corp.
Michael J. Schaefer
Retired and Former Executive Vice President, CFO and
Treasurer of Methodist Health Systems
John R. Blind
Retired and Former Vice President of the Printing and Carbonless
Division of the Specialty Papers Business Unit of Glatfelter
James C. Taylor
Retired and Former Principal of The Anderson Group, Inc.
Godfrey M. Long, Jr.
Former Director of Graphic Dimensions and Former Chairman
and CEO of Short Run Companies
Ennis Corporate Executive Offi cers
Keith S. Walters
Chairman of the Board, CEO and President
Michael D. Magill
Executive Vice President and Secretary
Richard L. Travis, Jr.
Vice President of Finance,
Chief Financial Offi cer and Treasurer
Ronald M. Graham
Vice President – Administration
Contents
3 Message to Shareholders
8 Financial Highlights
Form 10-K
Corporate Info
Message to Shareholders
Keith S. Walters
Chairman, CEO & President
We are now in our 110th
anniversary year as the
Company continues to
evolve. Ennis continues
to grow larger through
acquisition of new and
existing products, while
further penetrating all
areas of the country. The
paper industry’s peaks
and valleys of supply has
been challenging to us
throughout 2018. Paper
has moved from shortages
to surpluses already in this
fi scal year, indicating that
the pattern will continue. Our industry has inherited
an experienced but aging workforce which must be
replaced and trained. Freight and logistics system
companies face similar staffi ng issues with additional
challenges of travel time away from families. Both
of these issues may work to our advantage as we
continue to buy more companies with diverse labor
and geographic dispersion in the U.S. Our many
locations allow us to acquire employees in smaller
markets where labor is often less mobile. Our many
locations also allow us to place work closer to our
customer’s locations lessening the demand for
long freight hauls. Many
customers actually pick up
their jobs at our local and
regional
locations which
lessens the freight cost
and impact on the environment. The new companies
are also bringing welcome additional talents to Ennis.
We are fi nding expertise in the acquired workforce
in areas such as sales, new product knowledge, and
even computer systems which speed the integration
process into our ERP system. Demographics is also
affecting the market for potential acquisition targets.
Many private companies have become interested in
discussions as their succession planning has not
evolved as planned for many reasons. Some of our
competition is seeing the Ennis model as a good
alternative which allows many of their company goals
and values to continue. Of course all discussions do
not always lead to an acquisition but none do without
the fi rst contacts. After that our job is to deal with
an owner’s issues, fi nd solutions, and hopefully move
the merged companies forward.
Culture
One of our larger shareholders has become focused
on the culture of the companies in which they invest.
We share their opinion that the ability to navigate
the inevitable disruptions from technology, currency
fl uctuations, changing social and cultural patterns
requires a company with a strong, stable culture. That
a company has the ability to promote the attitudes and
behaviors to survive these challenges is becoming
an increasingly important factor of success. Such a
culture is necessary to grow and maintain the support
of vendors, customers, employees and shareholders.
Investors have found themselves caught unaware
in situations such as; the integrity breakdowns
occurring at one of the largest banks in the country;
the disintegration of shareholder value due to fi ghts
between an iconic pizza company owner and his
board; and the total lack of respect the CEO of one
of the largest U.S. television broadcasting companies
garnered as his actions towards women created chaos
and disharmony within his organization. We thought it
would be helpful for all of our shareholders to have an
idea of the culture within Ennis. We are playing the
long game in our efforts, and try not to focus on short
term fi xes.
First and foremost, we have an operational culture. Of
course that’s not to say that sales are unimportant, but
that our goal is to ensure that we are making the best
fi nancial return we can on our products and services
for our shareholders. We give our employees and our
managers the tools to effectively quote and produce
our products in an accurate and timely process.
We deliver a social commitment to our managers,
employees and locations to remain intact as long
they are contributing to shareholder returns. As
long as they deliver on their obligation to produce
and earn a reasonable profi t, we will deliver on our
obligation to maintain their jobs to support their
families and their communities.
ennis.com | 3
“Ennis continues to grow larger through
acquisition of new and existing products”
We deal with our major material and freight vendors
in a similar manner. We are often told by vendors we
are one of the few true “partnerships” they have. We
look to work with them in a manner that recognizes
that both sides need to profi t from the relationship. We
do not believe that realizing our profi ts on the backs
of “partners” is consistent with playing for the long
game. All we have ever asked is to remain competitive
in the marketplace, and demand our vendors deal with
integrity. There is no supplier in the marketplace who
does not appreciate the speed at which they get paid
and the transparency that they obtain by looking at
our published fi nancial statements. We do not think it
is fair to treat our suppliers as if they were a bank as
is often asked of them.
“We are often told by
vendors we are one of the
few true “partnerships”
they have.”
A healthy culture is established by promoting the
attitudes and behaviors throughout the organization.
While it starts at the top, it is maintained and grows
when everyone understands the rules. It can only be
established by constant repetition and consistency
as everyone is always watching for exceptions to
the rules.
Our decentralized approach requires delegation
of responsibility throughout our organization. We
have Business Unit Directors who are the top control
point for dozens of plants. This level is charged
with managing the culture at existing plants and
implementing the culture in new acquisitions. They
delegate the maintenance and performance of those
plants to the General Managers of those facilities. The
General Manager is responsible for all aspects of the
plant and delegates functions to various work centers,
each of which run as a small business. A manager at
that level will have “ownership” for the performance
of their work center, actually buying and selling to
other work centers in the plant. When reported in our
fi nancial system, each work center is a small business
that provides a product or service to another “internal
customer”, until the product is fi nished and shipped
to the end customer. The goal for each order is to
produce a quality product based on the specifi cations
outlined by the customer within the estimated cost of
that quote. Variances are created if there is a difference
between the actual cost and the quoted cost which
the General Manager or Cost Center Manager must
ultimately resolve. The fi nancials for each plant refl ect
these constant adjustments with the goal of getting
each plant as close to its potential as possible. The
annual budget is the Company’s collective estimate of
that plant’s potential for that year. In the fi nal analysis
the General Manager is either within his budget or
not, requiring corrective actions at the Business Unit
Director level.
Each manager relies on our ERP system to give a
report card on performance. It is the job of all within
the organization to ensure that the data input to the
system is accurate and complete. It is the level of
trust granted the General Managers which allows
each of them to function as owners of a business.
We at corporate, have entrusted them to maintain
the accuracy of the ERP system within guidelines.
We want them to have the freedom to run “their
business” in their personal style as long as they
abide by our culture.
A major goal at every level is to utilize the time of
each employee. We have applied the same concept
to our corporate offi ce. Therefore, many positions
which exist commonly in corporate offi ces are missing
at Ennis. Positions such as Purchasing, Investor
Relations, Secretaries for offi cers, Quality Assurance
Director, Continuous Improvement Manager and many
others do not exist at Ennis. It is not that we do not
believe these are important functions as they truly
are necessary. We have found that these duties can
be assumed by current positions in the Company to
better utilize their time. We all share some of these
extra duties at Corporate. The result is a much smaller
corporate footprint and cost. Of course this would not
be possible without our decentralized management
approach. Our culture encourages each manager to
achieve the potential of the facility and refl ect that in
a budget that is prepared by the operating employees,
not the fi nancial employees. We further promote the
culture by an annual meeting to talk about problems,
solutions, and ways to achieve growth, profi tability,
and accountability, within each of our facilities. All
members of management are present, and on several
occasions Board Members have attended to allow
them to interact with our General Managers and
Business Unit Directors. Fishing, hunting and an
occasional fl ag football game or whiffl e ball game
4
allow the competitive spirit to fl ow. But the week long
meeting creates a balance of equality and team spirit
which is carried over as each manager returns to his
or her respective plant.
In conclusion we believe our culture is about honesty,
integrity, playing for the team, setting goals, monitoring
them, and accepting accountability. It is something
that we have spent twenty-two years establishing and
supports our goal that the company focuses on serving
its employees, customers, vendors, and shareholders
for many years to come.
Financial Integrity
Another aspect of our culture is the conservative
manner in which we record our profi ts and transact our
acquisitions. The Company uses an ERP system which
automatically books each leg of the manufacturing
process into our fi nancials. The ordering, receiving
and utilization of material automatically enters our
inventory, payables, and cost of goods sold. Our payroll
system interfaces to record wages and salaries in cost
of goods sold and each work center, as well as in the
SG&A area of each entity. The products are monitored
on the shop fl oor as they move through each routing
step recording labor, material and burden and attaches
to each order as it reaches shipping. Once shipped
and ownership transfers, the invoice is generated
and freight is added. The automation of all of these
processes allows for accuracy as well as the limited
need for an accounting function at each plant. It also
allows for prompt closing of the fi nancials to meet the
reporting needs of a public company.
“The past year has been
successful with respect
to acquisitions.”
But outside of the fi nancial side of the ERP system
is the underlying assumptions used in making
the accounting policies adopted by the Company.
Equipment is valued at the lower of cost or market if
acquired in an acquisition and external appraisers are
used in this process. Real estate costs, whether owned
or leased, are allocated to the manufacturing process,
the administrative process, and the selling process, so
that gross profi ts or operating profi ts are accurately
portrayed. The assigned lives for depreciation purposes
are realistically assessed and utilized so that equipment
is written off over its conservative useful life.
For signifi cant acquisitions we use outside appraisers
to determine the value of purchased assets, including
customer lists, trade names and goodwill. Something
fairly unique about us with respect to both recorded
customer lists and trade names, is we amortize these
assets over their estimated lives. Given that the general
print industry is a declining industry, we elected some
years back to switch from treating these assets as
having infi nite lives to fi nite lives. This switch resulted
in us now being required to write these assets off over
their estimated useful lives, which while impacting
our operating results we feel from a conservative
perspective more appropriately accounts for these
assets. Once again we are playing the long game
rather than chasing short-term results.
Lastly, as many of our shareholders know, we do
not put forecasts of fi nancial performance out in the
market. We stand on our numbers as earned. If we
are not happy with them, we move to improve them
quickly. But we do not want to fall victim to the practice
of “making the numbers”. Some analysts who follow us
will put their own estimates of what they think we can
achieve in sales and profi ts. Those are not our numbers
and we would prefer to maintain our gross profi t
margins and operating profi ts in our historical range.
Our ERP system tells us how we are performing down
to the work center level. Our General Managers
can adjust their actual cost structure during the
month to deal with volume variances, and therefore
impact their profits in real time. It is one of the
reasons why we have never had to talk about a
“cost reduction program”. We believe that is a job
to be done every day.
Acquisitions
The past year has been
successful with respect
to acquisitions. As we
mentioned in last year’s
letter, we closed on
Allen-Bailey Tag & Label
in Caledonia, New York (“Allen-Bailey”). We also own
another facility in the same community, Specialized
Printed Forms and another facility, Printegra, is
located about 30 miles away in Fairport, New
York. We have been pleased with their production
capabilities and added market segments to our six
tag facilities throughout the U.S. We are one of the
largest tag producers in the country today.
ennis.com | 5
We also acquired
Wright Business
Graphics, Inc. (“WBG”) headquartered in Portland,
Oregon, with multiple facilities in Portland, one in
Kent, Washington, and one in Chino, California. WBG
gave us additional product capabilities in specialty
packaging, direct mail, high-color long run work, and
variable imaging forms. WBG had a large amount of
tangible assets in the form of high end printing and
digital equipment. This acquisition makes us one of the
largest printers in the Pacifi c Northwest and expands
our presence in California, which is both a blessing and
a curse. We were pleased to bring the staff of WBG into
our organization. They have provided us with additional
talent to tackle several of our ERP integrations. We
have continued to merge our acquisitions on to one
ERP system, a rare feat in the printing industry. This
was also an unusual transaction in that the owners
wanted some of their consideration in Ennis stock. We
were complemented that the former majority owner
Jim Wright wanted to continue to be invested in the
merged companies. While the gross profi t margins of
WBG were lower than our margins initially, they have
been rising since the acquisition and we hope to get
them close to our normal margins before the end of
this year.
the
We closed on
acquisition of Integrated
Print & Graphics
in
Chicago right after the
end of our fi scal year.
This facility has high-color equipment which we do not
currently have elsewhere. It allowed us to get a strong
position in the Chicago marketplace we previously
did not enjoy. We were happy to add a number of
new customers to our lists. We believe these new
customers can use products from our other plants in
fulfi lling the needs of their customers. I have known
the owner for twenty years and he shares many of
the cultural traits Ennis continues to employ. Given his
knowledge of the marketplace for both customers and
potential manufacturing acquisitions, it is our intent to
ask him to join the Board of Directors.
While 2018 was a great year for acquisitions, we
do not see any slowdown in opportunities during
2019 and into 2020. We are fi nding that some of
our competitors have decided that their succession
planning has changed and that we have a history of
maintaining the original brand name. They have a keen
interest in maintaining their family's brand on those
facilities. We believe in continuing the identity they
built with their efforts and honor their legacy by
keeping those names prominent.
The biggest financial challenge to acquisitions is
trying to control the amount of intangibles that can be
generated through a purchase. Our practice of keeping
a low but fair multiple has allowed us to minimize the
creation of intangibles for customer list, trade name
and goodwill. Some sellers try to push the envelope
in this arena by demanding multiples that make the
acquisition harder to justify fi nancially. As with our
general fi nancials, we do our best to approach the
acquisition pricing in a conservative manner. We will
continue to look into attractive opportunities that we
can acquire at a reasonable price and that will be
accretive to our shareholders.
Highlights of the Past Year and
Final Quarter
(cid:129) Our cash remained above $88 million, even after
using over $27 million for acquisitions, almost
$23 million for dividend payments and $5 million
for stock repurchases
(cid:129) Our working capital increased to $134.5 million, up
from $133.8 million
(cid:129) Revenues exceeded $400 million during the year
(cid:129) Our earnings from continuing operations increased
from $1.29 per diluted share to $1.45 per
diluted share
Financial Results Overview
The Company’s net sales from continuing operations
for the year increased from $370.2 million for fi scal
2018 to $400.8 million for fi scal 2019, an increase of
8.3%. Our gross profi t margin declined slightly from
31.7% for fi scal 2018 to 30.8% for fi scal 2019 due to
increased raw material costs and the diluted impact of
our acquisitions. While our margins declined slightly
during the year at the gross margin line, they were
basically in-line with last years’ results at the operating
income line and ahead at the net profi t line at 9.3%
for fi scal 2019 compared to 8.8% for fi scal 2018.
As a result, our diluted earnings per share increased
from $1.29 for fi scal 2018 to $1.45 for fi scal 2019,
or 12.4%.
Our fourth quarter showed similar trends as the year,
with revenue being up 15.6% and our gross profi t
6
not our mutual respect and friendship. Jim has been
the Chairman of the Nominating & Governance
Committee and the Compensation Committee, and
has been an active member of the Board. He regularly
attended Budget Meetings as well as the annual
Cabin Bluff meetings hosted by our primary paper
vendor, Pixelle. We want to thank Jim for his many
years of service and wish him well.
Closing Comments
While potential acquisitions will offer us continued
growth opportunities, our operational culture and
determination to maintain strong gross profi t margins
may not always drive growth in core sales. The
economy continues to appear to be strong, and the
Federal Reserve has abandoned, for the time being,
any further interest rate increases that might slow the
economy down. Many economists are forecasting a
recession in 2020 or 2021. A recession would impact
all phases of the economy and impact us as well. We
will, however, continue to mentor young and rising
managers, ensure their understanding of the uses
of our ERP system, maintain and foster our culture
so that future employees and managers will maintain
the goals we have set for them. Those goals are; a
strong balance sheet; ensuring that our burden,
labor and material rates are accurate in our quoting;
and striving to maintain the accuracy of the system
data that generates our fi nancials. Although there
are many things that are outside of the realm of our
control, we can maintain and use our system, provide
quality products in a timely manner, and treat all of our
constituencies with integrity and dignity which should
continue to produce a respected profi table company.
Thank you for your support and I hope to see you at
the Annual Meeting of Shareholders.
Keith S. Walters
margin percentage being slightly down over the
comparable period last year. Our operating margin for
the current quarter increased almost 200 basis points
from 9.0% to 10.9%. On paper our net earnings and
diluted earnings per share were similar at $8.2 million
and $.32 per diluted share for the current quarter
compared to $8.3 million and $.32 per diluted share
for the comparable quarter last year. However, last
year’s fourth quarter earnings and diluted earnings per
share included an overall positive benefi t associated
with the implementation of the Tax Cuts and Job Act
of 2017 of $2.45 million, or $.10 per diluted share.
While we don’t tend to talk a lot about it, our EBITDA
increased 9% for the year and 33% for the quarter.
This is an important metric as it allows us to
replenish our coffers and continue to deploy our
stated business strategy.
There is one additional item which I believe is
noteworthy during the first quarter of fiscal year
2020. We will be implementing the new ASU issued
by FASB (ASU 2016-02) Leases (Topic 842) which
modifies the lease recognition requirements. The
new rule requires entities to recognize the assets and
liabilities arising from leases on the balance sheet and
to disclose key qualitative and quantitative information
about the entity’s leasing arrangements. We anticipate
that we will elect to recognize our lease assets and
liabilities on a prospective basis, beginning on March
1, 2019, using an optional transition method.
We expect that the adoption of this standard will result
in a fairly signifi cant increase in the assets and liabilities
recorded on our consolidated balance sheet, but will
not have a significant impact on our consolidated
statement of income. While we continue to assess the
effects of this adoption, we currently believe the most
signifi cant effects relate to the recognition of new
right-of-use assets and lease liabilities on our balance
sheet of approximately $18.2 million. This would
have had the effect of increasing our total assets by
approximately 5%, our total debt by 25%, and would
have increased our total debt to equity ratio (before
the application of our $88 million in cash) from .20%
to .25% as of February 28, 2019.
Special Recognition
One of our long serving board members, Jim Taylor,
will not stand for re-election this year. Jim and I will be
concluding a long business relationship but certainly
ennis.com | 7
Financial Highlights
WORKING CAPITAL
— in millions —
119.3m
133.8m
134.5m
CURRENT RATIO
— to 1.0 —
4.98
5.52
5.25
2017
2018
2019
2017
2018
2019
LONG-TERM DEBT
— in millions —
2017
2018
2019
30.0m
30.0m
30.0m
LONG-TERM DEBT TO EQUITY RATIO
— to 1.0 —
2017
2018
2019
0.12
0.11
0.10
Selected Consolidation Financial Data
from Continuing Operations
Fiscal Year Ended
(Dollars and shares in thousands, except per share amounts)
2019
$400,782
123,360
49,934
37,437
1.45
1.45
.875
25,830
25,842
2018
$370,171
117,202
46,909
32,758
1.29
1.29
.875
25,392
25,417
2017
$356,888
104,730
40,033
26,417
1.03
1.03
2.20
25,735
25,749
Net Sales
Gross profi t margin
Earnings from continuing operations before taxes
Net earnings from continuing operations
Earnings and dividends per share from continuing operations:
Basic
Diluted
Dividends
Weighted average common shares outstanding:
Basic
Diluted
8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(cid:31)
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 28, 2019
OR
(cid:31)
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 1-5807
ENNIS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Texas
(State or Other Jurisdiction of Incorporation or Organization)
2441 Presidential Pkwy., Midlothian, Texas
(Address of Principal Executive Offices)
75-0256410
(I.R.S. Employer Identification No.)
76065
(Zip code)
(Registrant’s Telephone Number, Including Area Code) (972) 775-9801
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $2.50 per share
Trading
Symbol(s)
EBF
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:31) No (cid:31)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:31) No (cid:31)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes (cid:31) No (cid:31)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit such files). Yes (cid:31) No (cid:31)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer
Non-accelerated filer
Emerging growth company.
(cid:31)
(cid:31)
(cid:31)
Accelerated filer
Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:31)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:31) No (cid:31)
The aggregate market value of voting stock held by non-affiliates of the Registrant as of August 31, 2018 was approximately $554 million.
Shares of voting stock held by executive officers, directors and holders of more than 10% of the outstanding voting stock have been excluded
from this calculation because such persons may be deemed to be affiliates. Exclusion of such shares should not be construed to indicate that any
of such persons possesses the power, direct or indirect, to control the Registrant, or that any such person is controlled by or under common
control with the Registrant.
The number of shares of the Registrant’s Common Stock, par value $2.50, outstanding at April 30, 2019 was 26,175,737.
Portions of the Registrant’s Proxy Statement for the 2019 Annual Meeting of Shareholders are incorporated by reference into Part III of this
Report.
DOCUMENTS INCORPORATED BY REFERENCE
ENNIS, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE PERIOD ENDED FEBRUARY 28, 2019
TABLE OF CONTENTS
PART I:
Business ...........................................................................................................................................
Item 1
Item 1A Risk Factors .....................................................................................................................................
Item 1B Unresolved Staff Comments ...........................................................................................................
Properties .........................................................................................................................................
Item 2
Legal Proceedings ...........................................................................................................................
Item 3
Item 4 Mine Safety Disclosures .................................................................................................................
PART II:
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ...................................................................................................
Selected Financial Data ...................................................................................................................
Item 6
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations .........
Item 7A Quantitative and Qualitative Disclosures about Market Risk .........................................................
Consolidated Financial Statements and Supplementary Data .........................................................
Item 8
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .........
Item 9
Item 9A Controls and Procedures .................................................................................................................
Item 9B Other Information ............................................................................................................................
PART III:
Item 10 Directors, Executive Officers and Corporate Governance ..............................................................
Item 11 Executive Compensation .................................................................................................................
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ...................................................................................................................
Item 13 Certain Relationships and Related Transactions, and Director Independence ...............................
Item 14 Principal Accountant Fees and Services .........................................................................................
PART IV:
Item 15 Exhibits and Financial Statement Schedules ...................................................................................
Signatures ........................................................................................................................................
4
7
12
12
13
13
14
17
18
27
27
27
27
28
29
29
29
29
29
30
32
2
Cautionary Statements Regarding Forward-Looking Statements
All of the statements in this Annual Report on Form 10-K, other than historical facts, are forward-looking
statements, including, without limitation, the statements made in the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” particularly under the caption “Overview.” As a general matter,
forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to
matters that are not historical in nature. The words “could,” “should,” “feel,” “anticipate,” “aim,” “preliminary,”
“expect,” “believe,” “estimate,” “intend,” “intent,” “plan,” “will,” “foresee,” “project,” “forecast,” or the negative
thereof or variations thereon, and similar expressions identify forward-looking statements.
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for these forward-looking statements.
In order to comply with the terms of the safe harbor, Ennis, Inc. notes that forward-looking statements are subject to
known and unknown risks, uncertainties and other factors relating to its operations and business environment, all of
which are difficult to predict and many of which are beyond the control of Ennis, Inc. These known and unknown
risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in,
anticipated by or implied by such forward-looking statements.
These statements reflect the current views and assumptions of management with respect to future events. Ennis, Inc.
does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its
situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this
report does not constitute an admission by Ennis, Inc. or any other person that the events or circumstances described
in such statement are material.
We believe these forward-looking statements are based upon reasonable assumptions. All such statements involve
risks and uncertainties, and as a result, actual results could differ materially from those projected, anticipated or
implied by these statements. Such forward-looking statements involve known and unknown risks, including but not
limited to, general economic, business and labor conditions and the potential impact on our operations; our ability to
implement our strategic initiatives and control our operational costs; dependence on a limited number of key
suppliers; our ability to recover the rising cost of raw materials and other costs (including energy, freight, labor, and
benefit costs) in markets that are highly price competitive and volatile; our ability to timely or adequately respond to
technological changes in the industry; the impact of the Internet and other electronic media on the demand for forms
and printed materials; the impact of foreign competition, tariffs, trade regulations and import restrictions; customer
credit risk; competitors’ pricing strategies; a decline in business volume and profitability could result in an
impairment in our reported goodwill negatively impacting our operational results; our ability to retain key
management personnel; our ability to identify, manage or integrate acquisitions; and changes in government
regulations.
3
ITEM 1. BUSINESS
Overview
PART I
Ennis, Inc. (formerly Ennis Business Forms, Inc.) (collectively with its subsidiaries, the “Company,” “Registrant,”
“Ennis,” or “we,” “us,” or “our”) was organized under the laws of Texas in 1909. We and our subsidiaries print and
manufacture a broad line of business forms and other business products. We distribute business products and forms
throughout the United States primarily through independent dealers. This distributor channel encompasses independent
print distributors, commercial printers, direct mail, fulfillment companies, payroll and accounts payable software
companies, and advertising agencies, among others. We also sell products to many of our competitors to satisfy their
customers’ needs.
On July 31, 2018, we issued an aggregate of 829,126 shares of our common stock, par value $2.50 per share (the
“Shares”), to the former stockholders of Wright Business Forms, Inc., d/b/a Wright Business Graphics (“Wright” or
“WBG”), as partial consideration for the acquisition by us of all of the outstanding equity interests of WBG by way of a
merger of a wholly-owned subsidiary of ours with and into WBG pursuant to the Agreement and Plan of Merger, dated
July 16, 2018 (the “Merger Agreement”). The Shares issued to the former stockholders of WBG represent aggregate
consideration under the Merger Agreement equal to approximately $16.2 million. An additional $19.7 million was
paid in cash to the stockholders of Wright, subject to a final working capital adjustment, and $2.6 million was paid to
pay-off outstanding debt. The sale of the Shares was exempt from registration pursuant to Section 4(a)(2) under the
Securities Act of 1993, as amended, and Regulation D promulgated thereunder. The goodwill recognized as a part of
the merger is not deductible for tax purposes. Wright is a printing company headquartered in Portland, Oregon with
additional locations in Washington and California. The business produces forms, pressure seal, packaging, direct mail,
checks, statement processing and commercial printing and sells mainly through distributors and resellers. Wright,
which generated approximately $58.0 million in sales for its fiscal year ended March 31, 2018, continues to operate
under its brand names.
On April 30, 2018, we acquired the assets of Allen-Bailey Tag & Label (“ABTL”), a tag and label operation
located in New York for $4.7 million in cash plus the assumption of trade payables, subject to a working capital
adjustment. In addition, contingent consideration of up to $500,000 is payable to the sellers if certain sales levels
are maintained over the next three years. On July 7, 2017, we acquired the assets of a separate tag operation located
in Ohio for $1.4 million in cash plus the assumption of certain accrued liabilities. Management considers both of
these acquisitions immaterial.
On January 27, 2017, we completed the acquisition of Independent Printing Company, Inc. and its related
entities (collectively “Independent”) for $17.7 million in cash consideration, in a stock purchase transaction.
Independent’s main facility located in DePere, Wisconsin. The business produces presentation folders, checks, wide
format and commercial print. Independent operates under its brand name and generated approximately $37.0 million
in sales during the 2016 calendar year. Independent sells mainly through distributors and resellers. We now have
four folder facilities located in Michigan, Kansas, California and Wisconsin, as well as wide format capabilities in
Colorado and Wisconsin.
Business Overview
Our management believes we are the largest provider of business forms, pressure-seal forms, labels, tags,
envelopes, and presentation folders to independent distributors in the United States.
We are in the business of manufacturing, designing and selling business forms and other printed business
products primarily to distributors located in the United States. We operate 60 manufacturing plants throughout the
United States in 21 strategically located states as one reportable segment. Approximately 95% of the business
products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors,
number of parts and quantities on an individual job basis, depending upon the customers’ specifications.
4
The products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated
products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels:
Ennis®, Royal Business Forms®, Block Graphics®, Specialized Printed Forms®, 360º Custom LabelsSM,
ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad ConceptsSM, FormSource
LimitedSM, Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated
Forms®, PrintXcel®, Printegra®, Falcon Business FormsSM, Forms ManufacturersSM, Mutual GraphicsSM, TRI-C
Business FormsSM, Major Business SystemsSM, Independent PrintingSM, Hoosier Data Forms®, Hayes Graphics®,
Wright Business GraphicsSM and Wright 360SM. We also sell the Adams McClure® brand (which provides Point of
Purchase advertising for large franchise and fast food chains as well as kitting and fulfillment); the Admore®,
Folder Express® and Independent Folders® brands (which provide presentation folders and document folders);
Ennis Tag & LabelSM (which provides custom printed, high performance labels and custom and stock tags); Allen-
Bailey Tag & LabelSM, Atlas Tag & Label®, Kay Toledo Tag® and Special Service Partners® (SSP) (which
provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco® and National Imprint
Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply®
(which provide financial and security documents).
We sell predominantly through private printers and independent distributors, as well as to many of our
competitors. Northstar Computer Forms, Inc., our wholly-owned subsidiary, also sells direct to a small number of
customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user).
Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are
generally through advertising agencies.
The printing industry generally sells its products either predominantly to end users, a market dominated by a few
large manufacturers, such as R.R. Donnelley and Sons, Staples, Inc., Standard Register Co. (a subsidiary of Taylor
Corporation), and Cenveo, Inc., or, like the Company, through a variety of independent distributors and distributor
groups. While it is not possible, because of the lack of adequate public statistical information, to determine the
Company’s share of the total business products market, management believes the Company is the largest producer
of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders in the United States
distributing primarily through independent dealers.
There are a number of competitors that operate in this segment, ranging in size from single employee-owned
operations to multi-plant organizations. We believe our strategic locations and buying power permit us to compete
on a favorable basis within the distributor market on competitive factors, such as service, quality, and price.
Distribution of business forms and other business products throughout the United States is primarily done
through independent dealers, including business forms distributors, resellers, direct mail, commercial printers,
payroll and accounts payable software companies, and advertising agencies.
Raw materials principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for
business products purchased primarily from one major supplier at favorable prices based on the volume of business.
Business products usage in the printing industry is generally not seasonal. General economic conditions and
contraction of the traditional business forms industry are the predominant factors in quarterly volume fluctuations.
Patents, Licenses, Franchises and Concessions
Outside of the patent for our VersaSeal® product, we do not have any significant patents, licenses, franchises, or
concessions.
5
Intellectual Property
We market our products under a number of trademarks and trade names. The protection of our trademarks is
important to our business. We believe that our registered and common law trademarks have significant value and
these trademarks are important to our ability to create and sustain demand for our products. We have registered
trademarks in the United States for Ennis®, EnnisOnlineSM, B&D Litho of AZ®, B&D Litho®, ACR®, Block
Graphics®, Enfusion®, 360º Custom LabelsSM, Admore®, CashManagementSupply.comSM, Securestar®,
Northstar®, MICRLink®, MICR ConnectionTM, Ennisstores.comTM, General Financial Supply®, Calibrated
Forms®, PrintXcelSM, Printegra®, Trade Envelopes®, Witt Printing®, Genforms®, Royal Business Forms®,
Crabar/GBFSM, BF&SSM, Adams McClure®, Advertising ConceptsTM, ColorWorx®, Allen-Bailey Tag & LabelSM,
Atlas Tag & Label®, PrintgraphicsSM, Uncompromised Check Solutions®, VersaSeal®, VersaSeal SecureX®,
Folder Express®, Wisco®, National Imprint Corporation®, Star Award Ribbon®, Kay Toledo Tag®, Falcon
Business FormsSM, Forms ManufacturersSM, Mutual GraphicsSM, TRI-C Business FormsSM, SSP®,
EOSTouchpoint®, Printersmall®, Check Guard®, Envirofolder®,
Independent Checks®,
Independent Folders®, Independent Large Format Solutions®, Wright Business GraphicsSM, Wright 360SM and
variations of these brands as well as other trademarks. We have similar trademark registrations internationally.
Independent®,
Customers
No single customer accounts for as much as five percent of our consolidated net sales or accounts receivable.
Backlog
At February 28, 2019, our backlog of orders was approximately $22.5 million, as compared to approximately
$17.4 million at February 28, 2018.
Research and Development
While we seek new products to sell through our distribution channel, there have been no material amounts spent
on research and development in fiscal years 2019, 2018 or 2017.
Environment
We are subject to various federal, state, and local environmental laws and regulations concerning, among other
things, wastewater discharges, air emissions and solid waste disposal. Our manufacturing processes do not emit
substantial foreign substances into the environment. We do not believe that our compliance with federal, state, or
local statutes or regulations relating to the protection of the environment has any material effect upon capital
expenditures, earnings or our competitive position. There can be no assurance, however, that future changes in
federal, state, or local regulations, interpretations of existing regulations or the discovery of currently unknown
problems or conditions will not require substantial additional expenditures. Similarly, the extent of our liability, if
any, for past failures to comply with laws, regulations, and permits applicable to our operations cannot be
determined.
Employees
At February 28, 2019, we had 2,470 employees. 252 employees are represented by labor unions under collective
bargaining agreements, which are subject to periodic negotiations. We believe we have a good working relationship
with all of the unions that represent our employees.
Available Information
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
to reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 are
available free of charge under the Investors Relations page on our website, www.ennis.com, as soon as reasonably
practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission
(“SEC”). Information on our website is not included as a part of, or incorporated by reference into, this report. Our
SEC filings are also available through the SEC’s website, www.sec.gov.
6
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below, as well as the other information included or
incorporated by reference in this Annual Report on Form 10-K, before making an investment in our common stock.
The risks described below are not the only ones we face in our business. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also impair our business operations. If any
of the following risks occur, our business, financial condition or operating results could be materially harmed. In
such an event, our common stock could decline in price and you may lose all or part of your investment.
Our results and financial condition are affected by global and local market conditions, and competitors’ pricing
strategies, which can adversely affect our sales, margins, and net income.
Our results of operations can be affected by local, national and worldwide market conditions. The consequences
of domestic and international economic uncertainty or instability, volatility in commodity markets, and domestic or
international policy uncertainty, all of which we have seen in the past, can all impact economic activity.
Unfavorable conditions can depress the demand for our products and thus sales in a given market and may prompt
competitor’s pricing strategies that adversely affect our margins or constrain our operating flexibility. Certain
macroeconomic events, such as the past crisis in the financial markets, could have a more wide-ranging and
prolonged impact on the general business environment, which could also adversely affect us. Whether we can
manage these risks effectively depends mainly on the following:
• Our ability to manage movements in commodity prices and the impact of government actions to manage
national economic conditions such as consumer spending, inflation rates and unemployment levels,
particularly given the past volatility in the global financial markets; and
• The impact on our margins of labor costs given our labor-intensive business model, the trend toward higher
wages in both mature and developing markets and the potential impact of union organizing efforts on day-
to-day operations of our manufacturing facilities.
The terms and conditions of our credit facility impose certain restrictions on our operations. We may not be able
to raise additional capital, if needed, for proposed expansion projects.
The terms and conditions of our credit facility impose certain restrictions on our ability to incur additional debt,
make capital expenditures, acquisitions and asset dispositions, as well as impose other customary covenants, such as
requiring that our fixed charge coverage ratio not be less than 1.25:1.00 and our total leverage ratio not exceed
3.00:1:00. Our ability to comply with the covenants may be affected by events beyond our control, such as
distressed and volatile financial and/or consumer markets. A breach of any of these covenants could result in a
default under our credit facility. In the event of a default, the bank could elect to declare the outstanding principal
amount of our credit facility, all interest thereon, and all other amounts payable under our credit facility to be
immediately due and payable. As of February 28, 2019, we were in compliance with all terms and conditions of our
credit facility, which matures on August 11, 2020, and have cash on hand in excess of 2.9 times our current
outstanding debt level.
Declining financial market conditions and continued decline in long-term interest rates could adversely impact
the funded status of our pension plan.
We maintain a noncontributory defined benefit retirement plan (the “Pension Plan”) covering approximately
17% of our employees. Included in our financial results are Pension Plan costs that are measured using actuarial
valuations. The actuarial assumptions used may differ from actual results. In addition, as our Pension Plan assets
are invested in marketable securities, severe fluctuations in market values could potentially negatively impact our
funded status, recorded pension liability, and future required minimum contribution levels. A decline in long-term
debt interest rates puts downward pressure on the discount rate used by plan sponsors to determine their pension
liabilities. Each 10 basis point change in the discount rate impacts our computed pension liability by about
$900,000. Similar to fluctuations in market values, a drop in the discount rate could potentially negatively impact
our funded status, recorded pension liability and future contribution levels. Also, continued changes in the mortality
7
tables could potentially impact our funded status. As of February 28, 2019, the Pension Plan was 101.0% funded on
a projected benefit obligation (PBO) basis and 109.4% on an accumulated benefit obligation (ABO) basis.
We may be unable to identify or to complete acquisitions or to successfully integrate the businesses we acquire.
We have evaluated, and may continue to evaluate, potential acquisition transactions. We attempt to address the
potential risks inherent in assessing the attractiveness of acquisition candidates, as well as other challenges such as
retaining the employees and integrating the operations of the businesses we acquire. Integrating acquired operations
involves significant risks and uncertainties, including maintenance of uniform standards, controls, policies and
procedures; diversion of management’s attention from normal business operations during the integration process;
unplanned expenses associated with integration efforts; and unidentified issues not discovered in due diligence,
including legal contingencies. Due to these risks and others, there can be no guarantee that the businesses we
acquire will lead to the cost savings or increases in net sales that we expect or desire. Additionally, there can be no
assurance that suitable acquisition opportunities will be available in the future, which could harm our business plan.
We may be required to write down goodwill and other intangible assets, which could cause our financial
condition and results of operations to be negatively affected in the future.
When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and
other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill and other
intangible assets is the excess of the purchase price over the net identifiable tangible assets acquired. The annual
impairment test is based on several factors requiring judgment. An impairment may be caused by any number of
factors outside our control, such as a decline in market conditions caused by a recession, or protracted recovery
there-from, or other factors like competitor’s pricing strategies, which may be tied to such economic events. To
date, we have not been required to take an impairment charge relating to our print business, but continued sale-side
pressures due to technology transference, competitor pricing pressures, and economic uncertainties could result in a
determination that a portion of the recorded value of goodwill and intangible assets may be required to be written
down. Although such a charge would be a noncash expense, it would impact our reported operating results and
financial position. The Company has mitigated some of this risk by changing from indefinite lives to definite lives
accounting for all intangibles assets. Under definite lives accounting, the value of intangible assets is gradually
amortized over time, instead of being left on the Company’s books in full and only being written down when an
impairment event is deemed to have occurred. At February 28, 2019, our consolidated goodwill and other intangible
assets were approximately $81.6 million and $61.3 million, respectively.
Digital technologies will continue to erode the demand for our printed business documents.
The increasing sophistication of software, internet technologies, and digital equipment combined with our
customers’ general preference, as well as governmental influences for paperless business environments will continue
to reduce the number of traditional printed documents sold. Moreover, the documents that will continue to coexist
with software applications will likely contain less value-added print content.
Many of our custom-printed documents help companies control their internal business processes and facilitate
the flow of information. These applications will increasingly be conducted over the internet or through other
electronic payment systems. The predominant method of our customers’ communication to their customers is by
printed information. As their customers become more accepting of internet communications, our clients may
increasingly opt for what is perceived to be less costly electronic option, which would reduce our revenue. The pace
of these trends is difficult to predict. These factors will tend to reduce the industry-wide demand for printed
documents and require us to gain market share to maintain or increase our current level of print-based revenue
which could place pressure on our operating margins.
In response to the gradual obsolescence of our standardized forms business, we continue to develop our
capability to provide custom and full-color products. If new printing capabilities and new product introductions do
not continue to offset the obsolescence of our standardized business forms products, and we are unable to increase
our market share, our sales and profits will be affected. Decreases in sales of our standardized business forms and
products due to obsolescence could also reduce our gross margins or impact the value of our recorded goodwill and
intangible assets. This reduction could in turn adversely impact our profits, unless we are able to offset the reduction
through the introduction of new high margin products and services or realize cost savings in other areas.
Our distributor customers may be acquired by other manufacturers who redirect business within their plants.
8
Some of our customers are being absorbed by the distribution channels of some of our manufacturing
competitors. However, we do not believe this will significantly impact our business model. We have continued to
sell to some of these customers even after they were absorbed by our competition because of the breadth of our
product line and our geographic diversity.
Our distributors face increased competition from various sources, such as office supply superstores. Increased
competition may require us to reduce prices or to offer other incentives in order to enable our distributors to
attract new customers and retain existing customers.
Low price, high value office supply chain stores offer standardized business forms, checks and related products.
Because of their size, these superstores have the buying power to offer many of these products at competitive prices.
These superstores also offer the convenience of “one-stop” shopping for a broad array of office supplies that our
distributors do not offer. In addition, superstores have the financial strength to reduce prices or increase promotional
discounts to expand market share. This could result in us reducing our prices or offering incentives in order to
enable our distributors to attract new customers and retain existing customers, which could reduce our profits.
Technological improvements may reduce our competitive advantage over some of our competitors, which could
reduce our profits.
Improvements in the cost and quality of digital print technology is enabling some of our competitors to gain
access to products of complex design and functionality at competitive costs. Increased competition from these
competitors could force us to reduce our prices in order to attract and retain customers, which could reduce our
profits.
We could experience labor disputes that could disrupt our business in the future.
As of February 28, 2019, approximately 10% of our employees are represented by labor unions under collective
bargaining agreements, which are subject to periodic negotiations. While we believe we have a good working
relationship with all of the unions, there can be no assurance that any future labor negotiations will prove successful,
which may result in a significant increase in the cost of labor, or may break down and result in the disruption of our
business or operations.
We obtain our raw materials from a limited number of suppliers, and any disruption in our relationships with
these suppliers, or any substantial increase in the price of raw materials or material shortages could have a
material adverse effect on us.
We purchase our paper products from a limited number of sources, which meet stringent quality and on-time
delivery standards under long-term contracts. However, fluctuations in the quality of our paper, unexpected price
changes or other factors that relate to our paper products could have a material adverse effect on our operating
results.
Paper is a commodity that is subject to periodic increases or decreases in price, which are sometimes quite
significant. There is no effective market of derivative instruments to insulate us against unexpected changes in price
of paper in a cost-effective manner, and negotiated purchase contracts provide only limited protection against price
increases. Generally, when paper prices are increased, we attempt to recover the higher costs by raising the prices of
our products to our customers. In the price-competitive marketplaces in which we operate, we may not always be
able to pass through any or all of the higher costs. As such, any significant increase in the price of paper or
shortages in its availability, could have a material adverse effect on our results of operations. During the last fiscal
year, paper prices experienced increases due to higher pulp prices, reduced domestic capacity (which has been
caused by capacity being taken off-line (planned or unplanned) or transferred to different paper types) and fewer
imports due to the weakening of the U.S. dollar during the latter part of fiscal 2018 and first half of fiscal 2019.
Fewer imports and less domestic capacity generally allowed domestic paper suppliers to pass along multiple price
increases during the last fiscal year and, in some cases, to impose allocation restrictions on certain paper grades.
This put significant pressure on many manufacturer’s operating margins. Recently, with a strengthening U.S. dollar,
foreign imports generally have increased to meet domestic demand. Increasing imports, coupled with weaker
domestic demand, has historically meant downward pressure on paper pricing. It is difficult to project future
9
pricing, however, which may be affected by many factors, including recent changes in ownership at a number of
major mills.
We face intense competition to gain market share, which may lead some competitors to sell substantial amounts
of goods at prices against which we cannot profitably compete.
Our marketing strategy is to differentiate ourselves by providing quality service and quality products to our
customers. Even if this strategy is successful, the results may be offset by reductions in demand or price declines
due to competitors’ pricing strategies or other micro or macro-economic factors. We face the risk of our
competition following a strategy of selling its products at or below cost in order to cover some amount of fixed
costs, especially in stressed economic times.
Environmental regulations may impact our future operating results.
We are subject to extensive and changing federal, state and foreign laws and regulations establishing health and
environmental quality standards, concerning, among other things, wastewater discharges, air emissions and solid
waste disposal, and may be subject to liability or penalties for violations of those standards. We are also subject to
laws and regulations governing remediation of contamination at facilities currently or formerly owned or operated
by us or to which we have sent hazardous substances or wastes for treatment, recycling or disposal. We may be
subject to future liabilities or obligations as a result of new or more stringent interpretations of existing laws and
regulations. In addition, we may have liabilities or obligations in the future if we discover any environmental
contamination or liability at any of our facilities, or at facilities we may acquire.
We are subject to taxation related risks.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are
applied. On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The Tax
Act includes significant changes to the U.S. corporate income tax system including, among other things, a federal
corporate rate reduction from 35% to 21%; limitations on the deductibility of interest expense and executive
compensation and the transition of U.S. international taxation from a worldwide tax system to a modified territorial
tax system. In the future, we may be subject to increased taxes under the Tax Act, including due to the
aforementioned limitations on deductions. Also, we may be required to make material adjustments to provisional
items recorded. There can be no assurance that U.S. tax laws, including the corporate income tax rate, which the
Tax Act lowered to 21%, would not undergo additional changes in the future. The final impact of the Tax Act on
the Company may differ from the estimates previously reported, possibly materially, due to such factors as changes
in interpretations and assumptions made, additional guidance that may be issued, and actions taken by the Company
as a result of the Tax Act, among other factors. All of these factors and uncertainties may adversely affect our
results of operations, financial position and cash flows.
We are exposed to the risk of non-payment by our customers on a significant amount of our sales.
Our extension of credit involves considerable judgment and is based on an evaluation of each customer’s
financial condition and payment history. We monitor our credit risk exposure by periodically obtaining credit
reports and updated financials on our customers. We generally see a heightened amount of bankruptcies by our
customers during economic downturns. While we maintain an allowance for doubtful receivables for potential
credit losses based upon our historical trends and other available information, in times of economic turmoil, there is
heightened risk that our historical indicators may prove to be inaccurate. The inability to collect on sales to
significant customers or a group of customers could have a material adverse effect on our results of operations.
Our business incurs significant freight and transportation costs.
We incur transportation expenses to ship our products to our customers. Significant increases in the costs of
freight and transportation could have a material adverse effect on our results of operations, as there can be no
assurance that we could pass on these increased costs to our customers. Recently, due to imposed government
10
regulations, the availability of drivers has become a significant challenge in the industry. Costs to employ drivers
have increased and transportation shortages have become more prevalent.
We depend upon the talents and contributions of a limited number of individuals, many of whom would be
difficult to replace.
The loss or interruption of the services of our Chief Executive Officer, Executive Vice President or Chief
Financial Officer could have a material adverse effect on our business, financial condition or results of operations.
Although we maintain employment agreements with these individuals, it cannot be assured that the services of such
individuals will continue.
If our internal controls are found to be ineffective, our financial results or our stock price could be adversely
affected.
We believe that we currently have adequate internal control procedures in place. However, increased risk of
internal control breakdowns generally exists in a business environment that is decentralized. In addition, if our
internal control over financial reporting is found to be ineffective, investors may lose confidence in the reliability of
our financial statements, which may adversely affect our stock price.
Our services depend on the reliability of computer systems we and our vendors maintain. If these systems fail,
our operations may be adversely affected.
We depend on information technology and data processing systems to operate our business, and a significant
malfunction or disruption in the operation of our systems may disrupt our business and adversely affect our ability to
operate and compete in the markets we serve. These systems include systems that we own and operate, as well as
systems of our vendors. Such systems are susceptible to malfunctions and interruptions. We also periodically
upgrade and install new systems, which if installed or programmed incorrectly, may cause significant disruptions.
The disruptions could interrupt our operations and adversely affect our results of operations, financial condition and
cash flows.
We may suffer a data breach of sensitive information, which may result in significant costs to investigate and
remediate the breach, litigation expenses and government enforcement actions and penalties, all of which could
have an adverse effect on our operations and reputation.
It is critically important for us to maintain the confidentiality, integrity and availability of our systems, software
and solutions. Many of our clients provide us with information they consider confidential or sensitive, and many of
our client’s industries have established standards for safeguarding the confidentiality, integrity and availability of
information relating to their businesses and customers. Confidential and sensitive information stored in our systems
or available through web portals are susceptible to cybercrime or intentional disruption, which generally have
increased across all industries in terms of sophistication and frequency. Disclosure of confidential information
maintained on our systems or available through web portals due to human error, breach of our systems through
cybercrime, a leak of confidential information due to employee misconduct or similar events may damage our
reputation, subject us to regulatory enforcement action and cause significant reputational harm for our clients. Any
of these outcomes may adversely affect our results of operations, financial condition and cash flows.
Increases in the cost of employee benefits could impact our financial results and cash flow.
Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of such
benefits could impact our financial results and cash flow. Healthcare costs have risen significantly in recent years,
and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to
the U.S. healthcare system. While the Company has various cost controls measures in place and employs an outside
oversight review on larger claims, employee health benefits have been and are expected to continue to be a
significant cost to the Company. During fiscal year 2017, the Company incurred a significant increase to its medical
costs which was in excess of the increase that was anticipated. As such, effective with the start of calendar year
2017, the Company made significant changes to its medical reimbursement program. The program to date has not
11
only been extremely successful in stemming the increasing tide associated with medical costs to the Company, but
has reduced the trend line down to be more in line with historical levels. Even so, medical costs are and will
continue to be a significant expense to the Company and subject to increases outside the Company’s control.
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved SEC staff comments.
ITEM 2. PROPERTIES
Our corporate headquarters are located in Midlothian, Texas. We operate manufacturing facilities throughout the
United States. See the table below for additional information on our locations.
All of the properties are used for the production, warehousing and shipping of the following: business forms,
flexographic printing, advertising specialties and Post-it® Notes (Wolfe City, Texas); presentation products
(Macomb, Michigan; De Pere, Wisconsin and Columbus, Kansas); printed and electronic promotional media
(Denver, Colorado); envelopes (Portland, Oregon; Columbus, Kansas; Tullahoma, Tennessee and Claysburg,
Pennsylvania); financial forms (Minneapolis/St. Paul, Minnesota; Nevada, Iowa and Bridgewater, Virginia);
pressure seal products (Visalia, California; Chino, California and Clarksville, Tennessee) and other business
products.
Our plants are operated at production levels required to meet our forecasted customer demands. Production
levels fluctuate with market demands and depend upon the product mix at any given point in time. Equipment is
added as existing machinery becomes obsolete or not repairable, and as new equipment becomes necessary to meet
market demands; however, at any given time, these additions and replacements are not considered to be material
additions to property, plant and equipment, although such additions or replacements may increase a plant’s
efficiency or capacity.
All of the foregoing facilities are considered to be in good condition. We do not anticipate that substantial
expansion, refurbishing, or re-equipping will be required in the near future.
All of the rented property is held under leases with original terms of one or more years, expiring at various times
through February 2027. No difficulties are presently foreseen in maintaining or renewing leases as they expire.
The accompanying list contains each of our owned and leased locations:
Location
Ennis, Texas
Chatham, Virginia
Paso Robles, California
DeWitt, Iowa
Ft. Scott, Kansas
Portland, Oregon
Wolfe City, Texas
Coshocton, Ohio
Macomb, Michigan
Denver, Colorado
Brooklyn Park, Minnesota
Coon Rapids, Minnesota
Roseville, Minnesota
Nevada, Iowa
Nevada, Iowa
Bridgewater, Virginia
Columbus, Kansas
Leipsic, Ohio
El Dorado Springs, Missouri
Princeton, Illinois
Arlington, Texas
General Use
Three Manufacturing Facilities *
Two Manufacturing Facilities
Manufacturing
Two Manufacturing Facilities
Manufacturing
Two Manufacturing Facilities
Two Manufacturing Facilities
Manufacturing
Manufacturing
Four Manufacturing Facilities
Manufacturing
Warehouse
Manufacturing
Two Manufacturing Facilities
Held for Sale
Manufacturing
Two Manufacturing Facilities and Warehouse
Manufacturing
Manufacturing
Manufacturing
Two Manufacturing Facilities
12
Approximate Square Footage
Owned
Leased
325,118
127,956
94,120
95,000
86,660
—
119,259
24,750
56,350
60,000
94,800
—
—
232,000
58,752
—
174,089
83,216
70,894
—
69,935
—
—
—
—
—
261,765
—
—
—
117,575
—
4,800
41,300
—
—
27,000
—
—
—
44,190
—
Approximate Square Footage
Location
Tullahoma, Tennessee
Caledonia, New York
Sun City, California
Livermore, California
Perris, California
Chino, California
Phoenix, Arizona
Neenah, Wisconsin
West Chester, Pennsylvania
Claysburg, Pennsylvania
Vandalia, Ohio
Fairport, New York
Indianapolis, Indiana
Smyrna, Georgia
Clarksville, Tennessee
Fairhope, Alabama
Toledo, Ohio
Visalia, California
Corsicana, Texas
Girard, Kansas
Powell, Tennessee
Houston, Texas
DePere, Wisconsin
Mosinee, Wisconsin
Kent, Washington
Corporate Offices
Ennis, Texas
Midlothian, Texas
General Use
Two Manufacturing Facilities
Manufacturing
Two Manufacturing Facilities
Sales Office
Warehouse
Manufacturing
Manufacturing and Warehouse
Two Manufacturing Facilities & One Warehouse
Sales Office
Manufacturing
Held for Sale
Two Manufacturing Facilities
Two Manufacturing Facilities
Manufacturing
Manufacturing
Manufacturing
Three Manufacturing Facilities
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing
Manufacturing & One Warehouse
Manufacturing & One Warehouse
Manufacturing
Administrative Offices
Executive and Administrative Offices
Totals
Owned
142,061
191,730
52,617
—
—
—
—
72,354
—
—
47,820
—
—
—
51,900
65,000
120,947
—
39,685
69,474
43,968
—
—
—
—
2,670,455
9,300
28,000
37,300
2,707,755
Leased
—
—
—
650
6,788
63,016
59,000
97,161
1,150
69,000
—
40,800
38,000
65,000
—
—
—
56,000
—
—
—
29,668
142,347
5,700
48,789
1,219,699
—
—
—
1,219,699
*
7,000 square feet of Ennis, Texas location leased
ITEM 3. LEGAL PROCEEDINGS
From time to time we are involved in various litigation matters arising in the ordinary course of our business. We
do not believe the disposition of any current matter will have a material adverse effect on our consolidated financial
position or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
13
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the trading symbol “EBF”. The
following table sets forth the high and low sales prices, the common stock trading volume as reported by the NYSE
and dividends per share paid by the Company for the periods indicated:
Fiscal Year Ended February 28, 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended February 28, 2018
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Common Stock Dividends
Trading Volume per share of
Common Stock Price Range (number of shares Common
High
Low
in thousands)
Stock
$
$
20.70 $
22.95
21.90
21.36
17.90 $
19.80
21.45
21.30
17.65
18.20
18.55
17.36
15.20
15.95
18.70
19.15
1,116 $
1,552 $
2,153 $
2,422 $
1,514 $
1,420 $
1,188 $
1,265 $
0.200
0.225
0.225
0.225
0.175
0.200
0.200
0.300
Dividends paid in the first quarter of fiscal year 2019 were $0.20 per share of common stock, increasing to
$0.225 per share in each subsequent quarter of fiscal year 2019. Dividends paid in the fourth quarter of fiscal year
2018 included a special one-time cash dividend of $0.10 per share of common stock in response to the signing of the
Tax Act.
The last reported sale price of our common stock on NYSE on April 30, 2019 was $20.18. As of that date, there
were approximately 707 shareholders of record of our common stock. Cash dividends may be paid or repurchases of
our common stock may be made from time to time, as our Board of Directors (“Board”) deems appropriate, after
considering our growth rate, operating results, financial condition, cash requirements, restrictive lending covenants,
and such other factors as the Board may deem appropriate.
14
The Board has authorized the repurchase of the Company’s outstanding common stock through a stock
repurchase program, which authorized amount is currently up to $40.0 million. Under the repurchase program,
share purchases may be made from time to time in the open market or through privately negotiated transactions
depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be made
in accordance with applicable insider trading and other securities laws and regulations. These repurchases may be
commenced or suspended at any time or from time to time without prior notice. During our fiscal year ended
February 28, 2019, the Company repurchased 247,788 shares of common stock under the program at an average
price of $19.42 per share. Since the program’s inception in October 2008, there have been 1,690,024 common
shares repurchased at an average price of $15.64 per share. As of February 28, 2019 there was $13.6 million
available to repurchase shares of the Company’s common stock under the program. Unrelated to the stock
repurchase program, the Company purchased 15 shares of its common stock during the fiscal year ended February
28, 2019.
The following table details shares of stock repurchased during each of the three months ended February 28, 2019
and the remaining amount available to repurchase additional shares of the Company’s stock under the program.
Period
December 1, 2018 - December 31, 2018
January 1, 2019 - January 26, 2019
January 27, 2019 - February 28, 2019
Total
Total Number
Maximum Amount
of Shares
Total
that May Yet Be Used
Purchased as
Number Average
of Shares Price Paid
to Purchase Shares
Part of Publicly
Purchased per Share Announced Programs Under the Program
13,817,164
13,566,172
13,566,172
13,566,172
— $
12,980 $
— $
12,980 $
— $
12,965 $
— $
12,965 $
—
19.36
—
19.36
15
Stock Performance Graph
The graph below matches our cumulative 5-year total shareholder return on common stock with the cumulative
total returns of the S&P 500 Index and the Russell 2000 Index. The graph tracks the performance of a $100
investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from February
28, 2014 to February 28, 2019.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Ennis, Inc., the S&P 500 Index
and the Russell 2000 Index
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
2/14
2/15
2/16
2/17
2/18
2/19
Ennis, Inc.
S&P 500
Russell 2000
*$100 invested on 2/28/14 in stock or index, including reinvestment of dividends.
Fiscal year ending February 28.
Copyright© 2018 Standard & Poor's, a division of S&P Global. All rights reserved.
Copyright© 2018 Russell Investment Group. All rights reserved.
2014
2015
2016
2017
2018
2019
Ennis, Inc.
S&P 500
Russell 2000
$ 100.00 $ 92.68 $ 136.68 $ 127.61 $ 159.32 $ 180.93
166.00
100.00
142.64
100.00
135.42
122.25
158.57
135.10
115.51
105.63
108.36
89.82
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
16
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth key operating metrics as of and for the periods indicated and have been derived
from our audited historical consolidated financial statements for the five years ended February 28, 2019. Our
consolidated financial statements and notes thereto as of February 28, 2019, February 28, 2018, and for the three
years in the period ended February 28, 2019, and the reports of Grant Thornton LLP are included in Item 15 of this
Report. The selected financial data should be read in conjunction with Item 7 — “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes
thereto included in Item 15 of this Report.
Fiscal Years Ended
2019
2018
2017
2016
2015
(Dollars and shares in thousands, except per share and ratio amounts)
Operating results:
Net sales
Gross profit margin
Selling, general and administrative expenses
Earnings from continuing operations
Earnings (loss) from discontinued
operations, net of tax
Net earnings (loss)
Earnings (loss) and dividends per share:
Basic and Diluted
Continuing operations
Discontinued operations
Net earnings (loss)
Dividends
Weighted average shares outstanding:
Basic
Diluted
Financial Position:
Working capital
Current assets
Total assets
Current liabilities
Long-term debt
Total liabilities
Shareholders' equity
Current ratio
Long-term debt to equity ratio
$
$
$
$ 400,782 $ 370,171 $ 356,888 $ 385,946 $ 380,379
116,829 115,054
123,360 117,202
60,674
69,222
34,470
32,758
104,730
62,537
26,417
65,356
32,258
73,490
37,437
-
147
$ 37,437 $ 32,905 $
(24,637 )
(79,003 )
1,780 $ 35,736 $ (44,533 )
3,478
1.45 $
—
1.45 $
0.875 $
1.29 $
0.01
1.30 $
0.875 (1) $
1.03 $
(0.96 )
0.07 $
2.20 (1) $
1.25 $
0.14
1.39 $
0.70 $
1.33
(3.05 )
(1.72 )
0.70
25,830
25,842
25,392
25,417
25,735
25,749
25,688
25,722
25,864
25,864
$ 134,542 $ 133,773 $ 119,282 $ 135,441 $ 170,023
175,841 210,270
166,165 163,344
390,044 446,990
363,085 329,439
40,400
29,571
40,247
40,000 106,500
30,000
91,498 162,310
67,735
298,546 284,680
289,127 261,704
5.22 to 1.0
4.35 to 1.0
5.52 to 1.0
5.25 to 1.0
0.37 to 1.0
0.13 to 1.0
0.11 to 1.0
0.10 to 1.0
149,250
324,285
29,968
30,000
72,930
251,355
4.98 to 1.0
0.12 to 1.0
31,623
30,000
73,958
(1) Fiscal year 2018 included a special one-time cash dividend of $0.10 per share of common stock in response to
the signing of the Tax Act. Fiscal year 2017 included a special one-time cash dividend of $1.50 per share of
common stock as a result of the Company’s sale of its apparel business, consisting of Alstyle Apparel, LLC and its
subsidiaries, in May 2016.
17
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management’s Discussion and Analysis provides material historical and prospective disclosures intended to
enable investors and other users to assess our financial condition and results of operations. Statements that are not
historical are forward-looking and involve risk and uncertainties, including those discussed under the caption “Risk
Factors” in Item 1A of this Annual Report on Form 10-K and elsewhere in this Report. You should read this
discussion and analysis in conjunction with our Consolidated Financial Statements and the related notes appearing
elsewhere in this Report. The words “anticipate,” “preliminary,” “expect,” “believe,” “intend” and similar
expressions identify forward-looking statements. We believe these forward-looking statements are based upon
reasonable assumptions. All such statements involve risks and uncertainties, and as a result, actual results could
differ materially from those projected, anticipated, or implied by these statements.
In view of such uncertainties, investors should not place undue reliance on our forward-looking statements since
such statements may prove to be inaccurate and speak only as of the date when made. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
This Management’s Discussion and Analysis includes the following sections and is for the continuing operations
of the Company, which is comprised of the production and sale of business forms and other business products, and
excludes the discontinued operations of the Company’s apparel business, consisting of Alstyle Apparel, LLC and its
subsidiaries (the “Apparel Segment”), which the Company sold to Gildan Activewear Inc. in May 2016:
• Overview – An overall discussion on our Company, the business challenges and opportunities we believe
are key to our success, and our plans for facing these challenges relating to our continuing operations.
• Critical Accounting Policies and Estimates – A discussion of the accounting policies that require our most
critical judgments and estimates relating to our continuing operations. This discussion provides insight into
the level of subjectivity, quality, and variability involved in these judgments and estimates. This section
also provides a summary of recently adopted and recently issued accounting pronouncements that have or
may materially affect our business.
• Results of Operations – An analysis of our consolidated results of operations and segment results for the
three years presented in our consolidated financial statements. This analysis discusses material trends
within our continuing business and provides important information necessary for an understanding of our
continuing operating results.
• Liquidity and Capital Resources - An analysis of our cash flows and a discussion of our financial condition
and contractual obligations. This section provides information necessary to evaluate our ability to generate
cash and to meet existing and known future cash requirements over both the short and long term.
References to 2019, 2018 and 2017 refer to the fiscal years ended February 28, 2019, February 28, 2018 and
February 28, 2017, respectively.
Overview
The Company – Our management believes we are the largest provider of business forms, pressure-seal forms,
labels, tags, envelopes, and presentation folders to independent distributors in the United States.
Our Business Challenges - We are engaged in an industry experiencing consolidation of some of our traditional
channels, product obsolescence, paper supplier capacity adjustments, and increased pricing and potential supply
allocations due to demand/supply curve imbalance. Technology advances have made electronic distribution of
documents, internet hosting, digital printing and print-on-demand valid, cost-effective alternatives to traditional
custom-printed documents and customer communications. Improved equipment has become more accessible to our
competitors due to the continued low interest rate environment. We face highly competitive conditions throughout
the supply chain in an already over-supplied, price-competitive print industry. In addition to the risk factors
discussion under the caption “Risk Factors” in Item 1A of this Annual Report, some of the key challenges of our
business include the following:
18
Transformation of our portfolio of products – While traditional business documents are essential in order to
conduct business, many are being replaced through the use of cheaper paper grades or imported paper, or devalued
with advances in digital technologies, causing steady declines in demand for a portion of our current product line.
Transforming our product offerings in order to continue to provide innovative, valuable solutions through lower
labor and fixed charges to our customers on a proactive basis will require us to make investments in new and
existing technology and to develop key strategic business relationships, such as print-on-demand services and
product offerings that assist customers in their transition to digital business environments. In addition, we will
continue to look for new market opportunities and niches through acquisitions, such as the addition of our envelope
offerings, tag offerings, folder offerings, healthcare wristbands, specialty packaging, direct mail, pressure seal
products, secure document solutions, innovative in-mold label offerings and long-run integrated products with high
color web printing, which provide us with an opportunity for growth and differentiate us from our competition.
Production capacity and price competition within our industry – The strong U.S. dollar during the first half
of fiscal 2018 attracted cheaper material into the United States, notwithstanding the imposition of trade tariffs,
which impaired the price advantage larger suppliers had over smaller competitors and helped to maintain pricing.
However, with the subsequent weakening of the U.S. dollar during the latter portion of fiscal 2018 and first half of
fiscal 2019, the price advantage of foreign imports for the most part dissipated during most of fiscal 2019, which has
led to lower volumes of imported paper and an increase in domestic exports. Meanwhile, a significant amount of
capacity came out of the market this time, either planned or unplanned, as through the bankruptcy filing of several
mills. In addition, some mills moved capacity formerly used for coated production to uncoated production due to
their ability to get higher margins on these products. Even with shrinking demand, this led to a supply/demand
imbalance with most mills running in excess of 90% of capacity across all grades during fiscal 2019. At this level,
suppliers have historically raised prices in the marketplace, and fiscal year 2019 was no exception, with suppliers
raising prices multiple times across all facets of the manufacturing process, from raw materials to supplies. In the
past, price increases have been less frequent which allowed manufacturers to make pricing adjustments in a timely
manner. The size and number of increases this past fiscal year impacted the ability of manufacturers to timely pass
along the required price adjustments to the end users. Additionally, some paper grades this past fiscal year were
placed on allocations given the tight supply environment. Given our long-term relationship with our major paper
supplier, our financial strength and our size, we were able to avoid any potential disruptions in our supply chain this
past fiscal year. Some of these challenges have started to change recently. With the strengthening U.S. dollar,
imports into the domestic marketplace have begun to increase. This development, along with continued slowing
domestic demand, has resulted in increased marketing of certain paper grades that previously were placed on
allocation. Historically, this would result in the normalization of pricing and costs in the marketplace at more
typical levels, but with the change in ownership of several of the larger domestic paper mills, this historical
pendulum swing in pricing may not occur and manufacturer’s margins may continue to be negatively impacted.
Regardless of these factors, many of which are cyclical, we intend to continue to focus on effectively managing and
controlling our product costs, through the use of forecasting, production and costing models, as well as working
closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational
results. In addition, we will continue to look for ways to reduce and leverage our fixed costs.
Continued consolidation of our customers – Many of our customers, which are distributors, are consolidating
or are being acquired by competitors. Some customers may demand better pricing and services, and other customers
may be forced to relocate their business to their new parent company’s manufacturing facilities. While we continue
to maintain a majority of the historical business of these customers, it is possible that these consolidations and
acquisitions, which we expect to continue in the future, will impact our margins and sales.
Critical Accounting Policies and Estimates
In preparing our consolidated financial statements, we are required to make estimates and assumptions that affect
the disclosures and reported amounts of assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and
judgments on an ongoing basis, including those related to allowance for doubtful receivables, inventory valuations,
property, plant and equipment, intangible assets, pension plan obligations, accrued liabilities and income taxes. We
base our estimates and judgments on historical experience and on various other factors that we believe to be
reasonable under the circumstances. Actual results may differ materially from these estimates under different
assumptions or conditions. We believe the following accounting policies are the most critical due to their effect on
our more significant estimates and judgments used in preparation of our consolidated financial statements.
19
We maintain the Pension Plan for employees. Included in our financial results are Pension Plan costs that are
measured using actuarial valuations. The actuarial assumptions used may differ from actual results. As our Pension
Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding
status and associated liability recorded.
Amounts allocated to intangibles and goodwill are determined based on valuation analysis for our acquisitions.
Amortizable intangibles are amortized over their expected useful lives. We evaluate these amounts periodically (at
least once a year) to determine whether a triggering event has occurred during the year that would indicate potential
impairment.
We exercise judgment in evaluating our goodwill for impairment. We assess the impairment of goodwill as of
November 30 of each fiscal year or earlier if events or changes in circumstances indicate that the carrying value may
not be recoverable.
The Company uses qualitative factors to determine whether it is more likely than not (likelihood of more than
50%) that the fair value of a reporting unit exceeds its carrying amount, including goodwill. Some of the qualitative
factors considered in applying this test include consideration of macroeconomic conditions, industry and market
conditions, cost factors affecting the business, overall financial performance of the business, and performance of the
share price of the Company.
If qualitative factors are not deemed sufficient to conclude that it is more likely than not that the fair value of the
reporting unit exceeds its carrying value, then a one-step approach is applied in making an evaluation. The
evaluation utilizes multiple valuation methodologies, including a market approach (market price multiples of
comparable companies) and an income approach (discounted cash flow analysis). The computations require
management to make significant estimates and assumptions, including, among other things, selection of comparable
publicly traded companies, the discount rate applied to future earnings reflecting a weighted average cost of capital,
and earnings growth assumptions. A discounted cash flow analysis requires management to make various
assumptions about future sales, operating margins, capital expenditures, working capital, and growth rates. If the
evaluation results in the fair value of the goodwill for the reporting unit being lower than the carrying value, an
impairment charge is recorded. A goodwill impairment charge was not required for the fiscal years ended February
28, 2019 or February 28, 2018.
We recognize revenues from product sales upon shipment to the customer if the terms of the sale are freight on
board (“FOB”) shipping point (and therefore title and all risks of ownership, including risk of loss, passes to the
customer upon shipping) or, to a lesser extent, upon delivery to the customer if the terms of the sale are FOB
destination (and therefore title and all risks of ownership, including risk of loss, passes to the customer upon
delivery). Net sales consist of gross sales invoiced to customers, less certain related charges, including discounts,
returns and other allowances. Returns, discounts and other allowances have historically been insignificant. In some
cases and upon customer request, we print and store custom print product for customer specified future delivery,
generally within twelve months. In this case, risk of loss from obsolescence passes to the customer, the customer is
invoiced under normal credit terms and revenue is recognized when manufacturing is complete. Approximately
$10.3 million, $9.7 million, and $10.7 million of revenue were recognized under these agreements during fiscal
years ended February 28, 2019, February 28, 2018, and February 28, 2017, respectively.
We maintain an allowance for doubtful receivables to reflect estimated losses resulting from the inability of
customers to make required payments. On an on-going basis, we evaluate the collectability of accounts receivable
based upon historical collection trends, current economic factors, and the assessment of the collectability of specific
accounts. We evaluate the collectability of specific accounts using a combination of factors, including the age of the
outstanding balances, evaluation of customers’ current and past financial condition and credit scores, recent payment
history, current economic environment, discussions with our sales managers, and discussions with the customers
directly.
20
Our inventories are valued at the lower of cost or net realizable value. We regularly review inventory values on
hand, using specific aging categories, and write down inventory deemed obsolete and/or slow-moving based on
historical usage and estimated future usage to its estimated net realizable value. As actual future demand or market
conditions may vary from those projected by management, adjustments to inventory valuations may be required.
As part of the process of preparing our consolidated financial statements, we are required to estimate our income
taxes in each jurisdiction in which we operate. This process involves estimating our actual current tax exposure
together with assessing temporary differences resulting from different treatment of items for tax and financial
reporting purposes. These differences result in deferred tax assets and liabilities, which are included in our
consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered based
on our history of earnings expectations for future taxable income including taxable income in prior carry-back years,
as well as future taxable income. To the extent we believe that recovery is not likely, we must establish a valuation
allowance. To the extent we establish a valuation allowance, we must include an expense within the tax provision in
the consolidated statements of operations. In the event that actual results differ from these estimates, our provision
for income taxes could be materially impacted.
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act
includes significant changes to the U.S. corporate income tax system including, among other things, a federal
corporate rate reduction from 35% to 21%; limitations on the deductibility of interest expense and executive
compensation and the transition of U.S. international taxation from a worldwide tax system to a modified territorial
tax system. A majority of the provisions in the Tax Act are effective January 1, 2018. In response to the Tax Act,
the SEC staff issued guidance on accounting for the tax effects of the Tax Act. The guidance provides a one-year
measurement period for companies to complete the accounting. We reflected the income tax effects of those aspects
of the Tax Act for which the accounting is complete. To the extent our accounting for certain income tax effects of
the Tax Act is incomplete but we are able to determine a reasonable estimate, we recorded a provisional estimate in
the financial statements. If a company cannot determine a provisional estimate to be included in the financial
statements, it should continue to apply the provisions of the tax laws that were in effect immediately before the
enactment of the Tax Act. As a result of the reduction of the corporate tax rate to 21%, we re-valued our deferred
tax assets and liabilities as of the date of enactment, with resulting tax effects accounted for in the reporting period
of enactment. This change in the statutory tax rate resulted in reduction in income tax expense being recognized of
$3.6 million in the fourth quarter of fiscal year 2018 due to the adjustment of deferred tax liabilities based on the
expected prevailing tax rate at the expected time of their realization.
In addition to the above, we also have to make assessments as to the adequacy of our accrued liabilities, more
specifically our liabilities recorded in connection with our workers compensation and health insurance, as these
plans are self-funded. To help us in this evaluation process, we routinely get outside third-party assessments of our
potential liabilities under each plan.
In view of such uncertainties, investors should not place undue reliance on our forward-looking statements since
such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise.
Results of Operations
The discussion that follows provides information which we believe is relevant to an understanding of our results
of operations and financial condition. The discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements and notes thereto, which are incorporated herein by reference.
Unless otherwise indicated, this financial overview is for the continuing operations of the Company, which are
comprised of the production and sales of business forms and other business products, and exclude the discontinued
operations of the Apparel Segment, which we sold in May 2016. The operating results of the Company for fiscal
year 2019 and the comparative fiscal years 2018 and 2017 are included in the tables below.
21
Consolidated Summary
Consolidated Statements of
Operations - Data (in thousands,
except per share amounts)
Net sales
Cost of goods sold
Gross profit margin
Selling, general and administrative
(Gain) loss from disposal of assets
Income from operations
Other expense, net
Earnings from continuing operations before
income taxes
Provision for income taxes
Earnings from continuing operations
Earnings (loss) from discontinued operations,
net of tax
Net earnings
2019
Fiscal years ended
2018
2017
$ 400,782 100.0 % $ 370,171 100.0 % $ 356,888 100.0 %
277,422
123,360
73,490
(217 )
50,087
69.2
30.8
18.3
(0.1 )
12.4
(153 ) —
68.3
31.7
18.8
162 —
12.9
(0.2 )
252,158
104,730
62,537
278
41,915
(1,882 )
252,969
117,202
69,222
70.7
29.3
17.5
0.1
11.7
(0.5 )
47,818
(909 )
49,934
12,497
37,437
46,909
12.4
3.1
14,151
9.3 % 32,758
40,033
12.7
3.8
13,616
8.9 % 26,417
11.2
3.8
7.4 %
— —
147 —
$ 37,437
9.3 % $ 32,905
(24,637 )
8.9 % $ 1,780
(6.9 )
0.5 %
Earnings (loss) per share - diluted
Continuing operations
Discontinued operations
Net earnings
$
$
1.45
—
1.45
$
$
1.29
0.01
1.30
$
$
1.03
(0.96 )
0.07
Net Sales. Our net sales increased from $370.2 million for the fiscal year ended February 28, 2018 to $400.8
million for the fiscal year ended February 28, 2019, an increase of 8.3%. The market continues to be fairly soft with
competitive pricing pressures. However, during the current fiscal year the value of the U.S. dollar made domestic
paper production more attractive internationally. The attractiveness of domestic paper production, coupled with the
shrinking domestic mill capacity, resulted in an environment conducive for paper and other material price increases
domestically. Those increases, if able to be timely passed along to customers, would help offset some of the normal
industry sales attrition. The acquisitions of Wright, which was completed in July 2018, and ABTL, which was
completed in April 2018, are integral parts of our strategy to offset normal industry revenue declines due to print
attrition and other changes. These two acquisitions contributed over $44.7 million in net sales during the current
fiscal year.
Our net sales increased from $356.9 million for the fiscal year ended February 28, 2017 to $370.2 million for
the fiscal year ended February 28, 2018, an increase of 3.7%. The market was fairly soft with competitive pricing
pressures. However, the reversal of some of the U.S. dollar’s strength made domestic paper production more
attractive. This factor, along with the shrinking of some domestic mill capacity, resulted in paper price increases.
The acquisition of Independent Printing Company, Inc. and its related entities (“Independent”), which was
completed in January 2017, had a comparative impact of approximately $39.3 million on our net sales last fiscal
year. This acquisition remains an integral part of our strategy to offset normal industry print attrition and other
factors.
22
Cost of Goods Sold. Our manufacturing costs increased from $253.0 million for the fiscal year 2018 to $277.4
million for the fiscal year 2019, or 9.6%. Our gross profit margin (“margin”) decreased from 31.7% for the fiscal
year 2018 to 30.8% for the fiscal year 2019. Our margin during the period was impacted primarily by the increased
cost of raw materials, and to a lesser extent by the acquisition of ABTL and Wright, which had a dilutive impact on
the Company’s reported margin. The industry continues to be challenged by raw material and freight cost increases.
The tight supply conditions during the current fiscal year allowed for multiple price increases on raw materials, as
well as other items in the manufacturing process. Historical price increases were less frequent, which allowed
manufacturers the ability to pass the required pricing adjustments through to the marketplace in a timely manner.
However, this year the size and number of increases have impacted manufacturers’ ability to timely pass these price
adjustments to the end-users. These price increases will continue to have a negative impact on margins until they
are able to be passed through to the marketplace, or costs start to decline due to the recent increase in foreign
imports or weakening domestic demand. As mentioned earlier, the acquisition of Wright and ABTL had a dilutive
impact on our margins as neither of these organizations had margins approaching our level. We believe once we
have the opportunity to fully analyze the business cost structures and implement our costs systems, their margins
will improve to more normalized levels.
Our manufacturing costs increased slightly from $252.2 million for the fiscal year 2017 to $253.0 million for the
fiscal year 2018, or 0.3%. Our gross margin increased from 29.3% for the fiscal year 2017 to 31.7% for the fiscal
year 2018. In fiscal year 2017, our margin was negatively impacted by increased medical expenses due to our
medical claims exceeding historical levels. We implemented a new cost reimbursement program, as well as other
changes to our health plan, at the start of calendar year 2017. We believe the program positively impacted our
margin by over $4.0 million during fiscal year 2018.
Selling, general, and administrative expenses. For fiscal year 2019, our selling, general, and administrative
(“SG&A”) expenses increased approximately 6.2%, from $69.2 million for the fiscal year 2018 to $73.5 million for
the fiscal year 2019. As a percentage of sales, SG&A expenses declined from 18.8% in fiscal year 2018 to 18.3%
for fiscal year 2019. The acquisitions of Wright and ABTL added approximately $5.7 million and $1.7 million,
respectively, in SG&A expenses during fiscal year 2019. We continue to look for ways to reduce SG&A expenses
after acquisitions through the implementation of our systems and processes, which allows us to integrate many of
the acquired companies’ back-office processes.
For fiscal year 2018, our SG&A expenses increased approximately $6.7 million, or 10.7%, from $62.5 million
for the fiscal year 2017 to $69.2 million for the fiscal year 2018. As a percentage of sales, SG&A expenses were
18.8% and 17.5% for the fiscal years 2018 and 2017, respectively. The acquisition of Independent added
approximately $8.0 million in SG&A expenses during fiscal year 2018, or 20.3% of its respective net sales. As we
continue to integrate this acquisition into our culture and systems, we will continue to look for ways to reduce these
expenses to be more in line with our historical SG&A percentage. In addition, the Company (i) changed its
accounting practice for handling its trademarks/trade names from an indefinite life to a finite life method on March
1, 2017 which added approximately $0.8 million to SG&A expense during the period, (ii) paid a special bonus to
our non-management level employees of $500 per employee in December 2017 in connection with the enactment of
the Tax Act which impacted our SG&A expense by $1.2 million, and (iii) paid approximately $1.8 million more in
performance related bonuses in fiscal year 2018 in connection with its operating performance.
(Gain) loss from disposal of assets. The $0.2 million gain from disposal of assets for fiscal year 2019 is primarily
attributed to the sale of an unused manufacturing facility and manufacturing equipment. The $0.2 million loss from
disposal of assets for fiscal year 2018 related primarily to the sale of manufacturing equipment as well as the closing
and consolidation of manufacturing facilities. The $0.3 million loss from disposal of assets for fiscal year 2017
related primarily to the $0.5 million loss on the sale of an unused manufacturing facility and its associated property
offset by the $0.2 million gain on the sale of a second unused manufacturing facility and manufacturing equipment.
Income from operations. As a result of the above factors, our income from continuing operations for fiscal year
2019 was $50.1 million, or 12.4% of net sales, as compared to $47.8 million, or 12.9% of net sales, for fiscal year
2018. The acquisitions of Wright and ABTL contributed approximately $3.4 million and $1.1 million, respectively,
to our operational income during the current fiscal year, or 8.8%.
23
Our income from continuing operations for fiscal year 2018 was $47.8 million, or 12.9% of net sales, as
compared to $41.9 million, or 11.7% of net sales, for fiscal year 2017. The acquisition of Independent positively
impacted our operational results for fiscal year 2018 by approximately $4.9 million.
Other expense. Other expense was $0.2 million for fiscal year 2019 as compared to $0.9 million for fiscal year
2018. This decrease related primarily to the increase of investment income in fiscal year 2019. Other expense was
$0.9 million for fiscal year 2018 as compared to $1.9 million for fiscal year 2017. This decrease related primarily to
the increase of investment income in fiscal year 2018 as well as the reclassification of pension expense from cost of
goods sold and SG&A expense to other expense-net of $0.5 million and $1.4 million for fiscal years 2018 and 2017,
respectively.
Provision for income taxes. Our effective tax rates for fiscal years 2019, 2018 and 2017 were 25.03%, 30.2%,
and 34.0%, respectively. The lower effective tax rate for fiscal year 2019 was primarily due to the Tax Act. The
lower effective tax rate for fiscal year 2018 as compared to fiscal year 2017 was primarily due to the enactment of
the Tax Act, despite the Tax Act only being in effect for a small portion of the fiscal year.
Net earnings (loss). Our net earnings from continuing operations were $26.4 million, or $1.03 per diluted share
for fiscal year 2017, $32.8 million, or $1.29 per diluted share for fiscal year 2018 and $37.4 million, or $1.45 per
diluted share for fiscal year 2019. Net earnings from discontinued operations for fiscal year 2018 was $0.01 per
diluted share, which consisted of a write-off of a $2.0 million receivable ($1.4 million, net of tax) relating to the
escrowed purchase price from the sale of our Apparel Segment and a $1.6 million tax benefit related to the
determination of the final tax basis on assets sold in the sale of the Apparel Segment. Net loss from discontinued
operations for fiscal year 2017 was ($0.96) per diluted share, which consisted of the net earnings prior to the sale of
the Apparel Segment of $0.09 per diluted share and the net loss from the sale of $27.1 million, net of tax, or ($1.05)
per diluted share. The loss from the sale included the write-off of the balance of foreign currency translation
adjustments of $16.1 million, or $10.7 million, net of taxes. Overall, the Company realized net earnings of $37.4
million, or $1.45 per diluted share, for fiscal year 2019, $32.9 million, or $1.30 per diluted share, for fiscal year
2018 and $1.8 million, or $0.07 per diluted share, for fiscal year 2017.
Liquidity and Capital Resources
(Dollars in thousands)
Working Capital
Cash
2019
Fiscal Years Ended
2018
$ 134,542 $ 133,773 $ 119,282
$ 88,442 $ 96,230 $ 80,466
2017
Working Capital. Our working capital increased by approximately $0.8 million, or 0.6%, from $133.8 million at
February 28, 2018 to $134.5 million at February 28, 2019. The increase was primarily due to the increase in our
accounts receivable and inventories by $13.6 million, offset by a decrease in cash and prepaid income taxes of $11.2
million, as well as an increase in our accounts payable of $1.6 million. Our current ratio, calculated by dividing our
current assets by our current liabilities, decreased from 5.5-to-1.0 for the fiscal year 2018 to 5.3-to-1.0 for the fiscal
year 2019.
Our working capital increased by approximately $14.5 million, or 12.1%, from $119.3 million at February 28,
2017 to $133.8 million at February 28, 2018. Our working capital increased primarily due to the increase in our
cash. Our current ratio, calculated by dividing our current assets by our current liabilities, increased from 5.0-to-1.0
for the fiscal year 2017 to 5.5-to-1.0 for the fiscal year 2018. Our current ratio increased primarily as a result of the
increase in our cash.
Cash Flow Components
(Dollars in thousands)
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
24
2019
Fiscal years ended
2018
$ 51,335 $ 45,290 $ 58,887
$ (31,770 ) $ (3,953 ) $ 86,090
$ (27,353 ) $ (25,573 ) $ (72,468 )
2017
Cash flows from operating activities. Cash provided by operating activities was $51.3 million for the fiscal year
2019 compared to $45.3 million for the fiscal year 2018 and $58.9 million for the fiscal year 2017, or an increase of
$6.0 million in 2019 over 2018 and a decrease of $13.6 million in 2018 over 2017.
Our increased operational cash flows in fiscal year 2019 in comparison to fiscal year 2018 was primarily the
result of three factors: (i) a $4.5 million increase in net earnings; (ii) a $1.5 million decrease in our accounts
receivable; and (iii) a $3.4 million decrease in our prepaid expenses and income taxes. These three positive factors
were offset by two negative factors: (i) an increase in inventories of $3.6 million; and (ii) a $2.4 million decrease in
accounts payable and accrued expenses.
Our decreased operational cash flows in fiscal year 2018 in comparison to fiscal year 2017 was primarily the
result of four factors: (i) a decrease in operating cash flows related to our Apparel Segment of $34.8 million; (ii) a
decrease in our deferred taxes of $6.2 million; (iii) an increase in our prepaid income taxes of $2.7 million; and (iv)
increased earnings of $31.1 million.
Cash flows from investing activities. Cash provided by (used in) investing activities was $31.8 million used in
fiscal year 2019 compared to $4.0 million used in fiscal year 2018 and $86.1 million provided in fiscal year 2017.
The $27.8 million increase in cash used in fiscal year 2019 compared to fiscal year 2018 was primarily due to the a
$2.2 million increase in capital expenditures and the $26.0 million increase in the purchases of businesses. The
decrease in cash in fiscal year 2018 as compared to fiscal year 2017 was primarily due to the net proceeds of $107.4
million from the sale of the Apparel Segment which took place on May 25, 2016, offset by a decrease of $17.2
million in cash used for the purchases of businesses.
Cash flows from financing activities. Cash used in financing activities was $27.4 million in the fiscal year 2019
compared to $25.6 million used in fiscal year 2018 and $72.5 million used in fiscal year 2017.
The increase in our cash used in fiscal year 2019 as compared to fiscal year 2018 resulted from two factors: (i)
$0.4 million more in dividends were paid in fiscal year 2019 compared to fiscal year 2018; and (ii) $1.5 million
more was used to repurchase our common stock under the board-approved repurchase program.
The decrease in our cash used in the fiscal year 2018 as compared to the fiscal year 2017 resulted from three
factors: (i) no debt was paid down in the fiscal year 2018 compared to $10.0 million paid down in 2017; (ii) $34.9
million less in dividends were paid in the fiscal year 2018 compared to 2017, which included a special one-time
dividend of $1.50 per share that was paid as a result of the sale of the Apparel Segment; and (iii) $5.1 million less
was used to repurchase our common stock under the board-approved repurchase program in the fiscal year 2018 as
compared to 2017.
Stock Repurchase – The Board has authorized the repurchase of the Company’s outstanding common stock
through a stock repurchase program, which authorized amount is currently up to $40.0 million. Under the
repurchase program, share purchases may be made from time to time in the open market or through privately
negotiated transactions depending on market conditions, share price, trading volume and other factors. Such
purchases are made in accordance with applicable insider trading and other securities laws and regulations. These
repurchases may be commenced or suspended at any time or from time to time without prior notice. During our
fiscal year ended February 28, 2019, the Company repurchased 247,788 shares of common stock under the program
at an average price of $19.42 per share. Since the program’s inception in October 2008, there have been 1,690,024
common shares repurchased at an average price of $15.64 per share. As of February 28, 2019 there was $13.6
million available to repurchase shares of the Company’s common stock under the program. Unrelated to the stock
repurchase program, the Company purchased 15 shares of its common stock during the fiscal year ended February
28, 2019. The Company expects to continue to repurchase its shares under its repurchase program during fiscal year
2020 as it determines such repurchases to be in its and its shareholders best interest.
25
Credit Facility – The Company is party to a Second Amended and Restated Credit Agreement, which has been
amended from time to time, pursuant to which a credit facility has been extended to the Company ( the “Credit
Facility”). The Credit Facility, which matures on August 11, 2020, provides the Company and its subsidiaries with
up to $100.0 million in revolving credit, as well as a $20.0 million sublimit for the issuance of letters of credit and a
$15.0 million sublimit for swing-line loans. Under the Credit Facility, the Company or any of its subsidiaries also
can request up to three increases in the aggregate commitments in an aggregate amount not to exceed $50.0 million.
The terms and conditions of the Credit Facility impose certain restrictions on our ability to incur additional debt,
make capital expenditures, acquisitions and asset dispositions, as well as imposing other customary covenants, such
as requiring that our fixed charge coverage ratio not be less than 1.25:1.00 and our total leverage ratio not exceed
3.00:1.00. The Company may make dividends or distributions to shareholders so long as (i) no event of default has
occurred and is continuing and (ii) the Company’s net leverage ratio both before and after giving effect to any such
dividend or distribution is equal to or less than 2.50:1.00.
The Credit Facility bears interest at the LIBOR rate plus a spread ranging from 1.0% to 2.0%, which rate was
3.6% (3 month LIBOR + 1.0%) at February 28, 2019 and 3.0% (3 month LIBOR + 1.0%) at February 28, 2018.
The rate is determined by our fixed charge coverage ratio of total funded debt to earnings before interest, taxes,
depreciation and amortization (“EBITDA”). As of February 28, 2019, we had $30.0 million of borrowings under
the revolving credit line and $0.7 million outstanding under standby letters of credit arrangements, leaving
approximately $69.3 million available in borrowing capacity. The Credit Facility is secured by substantially all of
our assets (other than real property), as well as all capital securities of each of our subsidiaries.
We did not pay any additional amounts on the revolving credit line for fiscal year 2019. It is anticipated that the
available line of credit is sufficient to cover, should it be required, our working capital needs for the foreseeable
future.
Pension Plan – We are required to make contributions to our Pension Plan. These contributions are required
under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Due to the recent enactment of the Moving Ahead for Progress in the 21st Century (“MAP-21”) in July 2012, plan
sponsors can calculate the discount rate used to measure the Pension Plan liability using a 25-year average of
interest rates plus or minus a corridor. Prior to MAP-21, the discount rate used in measuring the pension liability
was based on the 24-month average of interest rates. We made contributions of $3.0 million to our Pension Plan
during each of our last three fiscal years. However, given our current funding status as of February 28, 2019 and
absent any significant negative event, we anticipate that our future contributions will be in line with our expected
service costs, which are between $1.0 million to $1.5 million per year. As our Pension Plan assets are invested in
marketable securities, fluctuations in market values could potentially impact our funded status, associated liabilities
recorded, and future required minimum contributions. At February 28, 2019, we had a prepaid pension asset
recorded on our balance sheet of $0.6 million. During fiscal year 2019, we increased the discount rate we used to
calculate our pension liability to 4.1% from 4.05% used in fiscal year 2018, which decreased our recorded pension
liability by approximately $0.4 million (each 10 basis point change in the discount rate potentially impacts our
computed pension liability by approximately $900,000). In addition, we adopted the new MP-2018 mortality
improvement scale associated with the RP-2014 mortality tables (which were adopted four years ago), which
reduced our recorded pension liability by approximately $0.1 million. The updated mortality improvement scale
MP-2018 reflects slightly lower projected mortality experience improvement in the future compared to the previous
scale MP-2017 utilized in fiscal year 2018’s valuation of liabilities. The projected return on our pension assets
remained at 7.5% for fiscal year 2019.
Inventories – We believe our current inventory levels are sufficient to satisfy our customer demands and we
anticipate having adequate sources of raw materials to meet future business requirements. We have long-term
contracts in effect with paper suppliers that govern prices, but do not require minimum purchase commitments.
Certain of our rebate programs do, however, require minimum purchase volumes. Management anticipates meeting
the required volumes.
Capital Expenditures – We expect our capital expenditure requirements for fiscal year 2020, exclusive of capital
required for possible acquisitions, will be in line with our historical levels of between $3.0 million and $5.0 million.
We expect to fund these expenditures through existing cash flows. We expect to generate sufficient cash flows from
our operating activities to cover our operating and other normal capital requirements for the foreseeable future.
26
Contractual Obligations & Off-Balance Sheet Arrangements – There have been no significant changes in our
contractual obligations since February 28, 2019 that have, or are reasonably likely to have, a material impact on our
results of operations or financial condition. We had no off-balance sheet arrangements in place as of February 28,
2019. The following table represents our contractual commitments as of February 28, 2019 (in thousands).
Debt:
Revolving credit facility
$ 30,000 $
— $ 30,000 $
— $
—
Total
Due in less Due in
than 1 year 1-3 years
Due in
4-5 years
Due in more
than 5 years
Other contractual commitments:
Estimated pension benefit payments
Pension Plan participants
Letters of credit
Operating leases
Total other contractual commitments
to
Total
40,800
652
18,134
59,586
$ 89,586 $
21,000
3,500
—
652
2,431
5,586
9,738
23,431
9,738 $ 44,890 $ 11,527 $ 23,431
7,800
—
3,727
11,527
8,500
—
6,390
14,890
We expect future interest payments of $1.1 million for the fiscal year ending February 29, 2020 and $0.5 million
for the fiscal year ending February 28, 2021, assuming interest rates and debt levels remain the same throughout the
remaining term of the facility.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Interest Rates
We are exposed to interest rate risk on short-term and long-term financial instruments carrying variable interest
rates. We may from time to time utilize interest rate swaps to manage overall borrowing costs and reduce exposure
to adverse fluctuations in interest rates. We do not use derivative instruments for trading purposes. Our variable
rate financial instruments totaled $30.0 million at February 28, 2019 and are subject to fluctuations in the LIBOR
rate. The impact on our results of operations of a one-point interest rate change on the outstanding balance of the
variable rate financial instruments as of February 28, 2019 would be approximately $0.3 million.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and Supplementary Data required by this Item 8 are set forth following
the signature page of this report and are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No matter requires disclosure.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
A review and evaluation was carried out under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and
operation of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of
the Exchange Act of 1934, as amended (the “Exchange Act”)) as of February 28, 2019. Based upon that review and
evaluation, we have concluded that our disclosure controls and procedures were effective as of February 28, 2019.
In conducting our evaluation, we excluded the assets and liabilities and results of operations of Wright Business
Graphics, which we acquired on July 31, 2018, in accordance with the SEC’s guidance concerning the reporting of
internal controls over financial reporting in connection with a material acquisition. The assets and revenues
27
resulting from this acquisition constituted approximately 14 and 9 percent, respectively, of the related consolidated
financial statement amounts as of and for the year ended February 28, 2019.
Management’s Report on Internal Control over Financial Reporting
The financial statements, financial analysis and all other information in this Annual Report on Form 10-K were
prepared by management, who is responsible for their integrity and objectivity and for establishing and maintaining
adequate internal controls over financial reporting.
The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America. The Company’s internal control over
financial reporting includes those policies and procedures that:
i. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of assets of the Company;
ii. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the Company are being made only in accordance with authorizations of management and directors of the
Company; and
iii. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
dispositions of the Company’s assets that could have a material effect on the financial statements.
There are inherent limitations in the effectiveness of any internal control, including the possibility of human
error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only
reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the
effectiveness of internal controls may vary over time.
Management assessed the design and effectiveness of the Company’s internal control over financial reporting as
of February 28, 2019. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in the 2013 Internal Control—Integrated
Framework (“2013 COSO framework”). Based on management’s assessment using those criteria, we believe that,
as of February 28, 2019, the Company’s internal control over financial reporting is effective.
In conducting our evaluation, we excluded the assets and liabilities and results of operations of Wright Business
Forms, Inc., which we acquired on July 31, 2018, in accordance with the SEC’s guidance concerning the reporting
of internal controls over financial reporting in connection with a material acquisition. The assets and revenues
resulting from this acquisition constituted approximately 14 and 9 percent, respectively, of the related consolidated
financial statement amounts as of and for the year ended February 28, 2019.
Changes in Internal Controls
There were no changes in our internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
Grant Thornton LLP, an independent registered public accounting firm, has audited the consolidated financial
statements of the Company for the fiscal year ended February 28, 2019 and has attested to the effectiveness of the
Company’s internal control over financial reporting as of February 28, 2019. Their report on the effectiveness of
internal control over financial reporting is presented on page F-3 of this Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
No matter requires disclosure.
28
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Except as set forth below, the information required by Item 10 is incorporated herein by reference to the
definitive Proxy Statement for our 2019 Annual Meeting of Shareholders.
The SEC and the NYSE have issued multiple regulations requiring policies and procedures in the corporate
governance area. In complying with these regulations, it has been the goal of the Company’s Board and senior
leadership to do so in a way which does not inhibit or constrain the Company’s unique culture, and which does not
unduly impose a bureaucracy of forms and checklists. Accordingly, formal, written policies and procedures have
been adopted in the simplest possible way, consistent with legal requirements, including a Code of Ethics applicable
to the Company’s principal executive officer, principal financial officer, and principal accounting officer or
controller. The Company’s Corporate Governance Guidelines, its charters for each of its Audit, Compensation,
Nominating and Corporate Governance Committees and its Code of Ethics covering all Employees are available on
the Company’s website, www.ennis.com, and a copy will be mailed upon request to Investor Relations at 2441
Presidential Parkway, Midlothian, TX 76065. If we make any substantive amendments to the Code, or grant any
waivers to the Code for any of our senior officers or directors, we will disclose such amendment or waiver on our
website and in a report on Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is hereby incorporated herein by reference to the definitive Proxy Statement
for our 2019 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information required by Item 12, as to certain beneficial owners and management, is hereby incorporated by
reference to the definitive Proxy Statement for our 2019 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by Item 13 is hereby incorporated herein by reference to the definitive Proxy Statement
for our 2019 Annual Meeting of Shareholders.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is hereby incorporated herein by reference to the definitive Proxy Statement
for our 2019 Annual Meeting of Shareholders.
29
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report.
1.
Index to Consolidated Financial Statements of the Company
An “Index to Consolidated Financial Statements” has been filed as a part of this Report beginning on page F-1
hereof.
2. All schedules for which provision is made in the applicable accounting regulation of the SEC have been omitted
because of the absence of the conditions under which they would be required or because the information
required is included in the consolidated financial statements of the Registrant or the notes thereto.
3. Exhibits
Exhibit Number
Description
Exhibit 3.1(a) Restated Articles of Incorporation, as amended through June 23, 1983 with attached amendments
dated June 20, 1985, July 31, 1985, June 16, 1988 and November 4, 1998, incorporated herein by
reference to Exhibit 3.1(a) to the Registrant’s Form 10-Q filed on October 6, 2017 (File No. 001-
05807).
Exhibit 3.1(b) Amendment to Articles of Incorporation, dated June 17, 2004, incorporated herein by reference to
Exhibit 3.1(b) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended February 28,
2007 filed on May 9, 2007(File No. 001-05807).
Exhibit 3.2
Fourth Amended and Restated Bylaws of Ennis, Inc., dated July 10, 2017, incorporated herein by
reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 10, 2017 (File
No. 001-05807).
Exhibit 10.1 Unit Purchase Agreement, dated May 4, 2016, by and between Ennis, Inc. and Gildan Activewear
Inc., incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed on May 4, 2016 (File No. 001-05807).
Exhibit 10.2 Fourth Amendment and Consent to Second Amended and Restated Credit Agreement, effective as of
May 25, 2016, by and among Ennis, Inc., each of the co-borrowers party thereto, each of the lenders
party thereto, and Bank of America, N.A., in its capacity as administrative agent for the Lenders
incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on June 24, 2016
(File No. 001-05807).
Exhibit 10.3 Fifth Amendment to Second Amended and Restated Credit Agreement, dated June 20, 2016, by and
among Ennis, Inc., each of the co-borrowers party thereto, each of the lenders party thereto, and
Bank of America, N.A., in its capacity as administrative agent for the Lenders incorporated herein by
reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on June 24, 2016 (File No. 001-05807).
Exhibit 10.4 Sixth Amendment to Second Amended and Restated Credit Agreement, dated August 11, 2016, by
and among Ennis, Inc., each of the co-borrowers party thereto, each of the lenders party thereto, and
Bank of America, N.A., in its capacity as administrative agent for the Lenders incorporated herein by
reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on August 17, 2016 (File No. 001-
05807).
Exhibit 10.5 2004 Long-Term Incentive Plan, as amended and restated effective June 30, 2011, incorporated
herein by reference to Appendix A of the Registrant’s Form DEF 14A filed on May 26, 2011.+
Exhibit 10.6 Amended and Restated Chief Executive Officer Employment Agreement between Ennis, Inc. and
Keith S. Walters, effective as of December 19, 2008, herein incorporated by reference to Exhibit 10.1
to the Registrant’s Form 8-K filed on January 20, 2009 (File No. 001-05807).+
30
Exhibit Number
Description
Exhibit 10.7 Amended and Restated Executive Employment Agreement between Ennis, Inc. and Michael D.
Magill, effective as of July 31, 2017, herein incorporated by reference to Exhibit 10.1 to the
Registrant’s Form 8-K filed on August 3, 2017 (File No. 001-05807).+
Exhibit 10.8 Amended and Restated Executive Employment Agreement between Ennis, Inc. and Ronald M.
Graham, effective as of July 31, 2017, herein incorporated by reference to Exhibit 10.2 to the
Registrant’s Form 8-K filed on August 3, 2017 (File No. 001-05807).+
Exhibit 10.9 Amended and Restated Executive Employment Agreement between Ennis, Inc. and Richard L.
Travis, Jr., effective as of July 31, 2017, herein incorporated by reference to Exhibit 10.3 to the
Registrant’s Form 8-K filed on August 3, 2017 (File No. 001-05807).+
Exhibit 10.10 Stock Purchase Agreement, dated January 27, 2017, by and between Ennis, Inc., Independent
Printing Company, Inc. and the related entities signatory thereto, herein incorporated by reference to
Exhibit 10.8 to the Registrant’s Form 10-K filed on May 5, 2017 (File No. 001-05807).
Exhibit 10.11 Agreement and Plan of Merger, dated July 16, 2018, by and among Ennis, Inc., Cascadia Merger
Sub, Inc., Cascadia Merger Sub II LLC, Wright Business Forms, Inc., the Shareholders of Wright
Business Forms, Inc. and the other signatories thereto, herein incorporated by reference to Exhibit
10.1 to the Registrant’s Form 10-Q filed on October 5, 2018 (File No. 001-05807).
Exhibit 21
Subsidiaries of Registrant*
Exhibit 23
Consent of Independent Registered Public Accounting Firm*
Exhibit 31.1 Certification Pursuant to Rule 13a-14(a) of Chief Executive Officer.*
Exhibit 31.2 Certification Pursuant to Rule 13a-14(a) of Chief Financial Officer.*
Exhibit 32.1 Section 1350 Certification of Chief Executive Officer.**
Exhibit 32.2 Section 1350 Certification of Chief Financial Officer.**
Exhibit 101
The following information from Ennis, Inc.’s Annual Report on Form 10-K for the year ended
February 28, 2019, filed on May 6, 2019, formatted in XBRL: (i) Consolidated Balance Sheets,
(ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income,
(iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of
Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in
detail.
* Filed herewith.
** Furnished herewith.
+ Represents a management contract or a compensatory plan or arrangement.
31
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: May 6, 2019
Date: May 6, 2019
ENNIS, INC.
/s/ KEITH S. WALTERS
Keith S. Walters, Chairman of the Board,
Chief Executive Officer and President
/s/ RICHARD L. TRAVIS, JR.
Richard L. Travis, Jr.
Vice President — Finance and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
Date: May 6, 2019
/s/ KEITH S. WALTERS
Keith S. Walters, Chairman of the Board,
Chief Executive Officer and President
/s/ MICHAEL D. MAGILL
Michael D. Magill, Executive Vice President, Secretary
and Director
/s/ JOHN R. BLIND
John R. Blind, Director
/s/ FRANK D. BRACKEN
Frank D. Bracken, Director
/s/ GODFREY M. LONG, JR.
Godfrey M. Long, Jr., Director
/s/ TROY L. PRIDDY
Troy L. Priddy, Director
/s/ ALEJANDRO QUIROZ
Alejandro Quiroz, Director
/s/ MICHAEL J. SCHAEFER
Michael J. Schaefer, Director
/s/ JAMES C. TAYLOR
James C. Taylor, Director
/s/ RICHARD L. TRAVIS, JR.
Richard L. Travis, Jr., Principal Financial and
Accounting Officer
32
ENNIS, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm .................................................................................. F-2
Report of Independent Registered Public Accounting Firm .................................................................................. F-3
Consolidated Balance Sheets — February 28, 2019 and February 28, 2018 ......................................................... F-5
Consolidated Statements of Operations — Fiscal years ended 2019, 2018 and 2017 ........................................... F-7
Consolidated Statements of Comprehensive Income — Fiscal years ended 2019, 2018 and 2017 ....................... F-8
Consolidated Statements of Changes in Shareholders’ Equity — Fiscal years ended 2019, 2018 and 2017 ....... F-9
Consolidated Statements of Cash Flows — Fiscal years ended 2019, 2018 and 2017 .......................................... F-10
Notes to Consolidated Financial Statements .......................................................................................................... F-11
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Ennis, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Ennis, Inc. (a Texas corporation) and subsidiaries
(the “Company”) as of February 28, 2019 and 2018, the related consolidated statements of operations,
comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period
ended February 28, 2019, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of
February 28, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the
period ended February 28, 2019, in conformity with accounting principles generally accepted in the United States of
America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of February 28, 2019, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”), and our report dated May 6, 2019 expressed an unqualified
opinion thereon.
Change in accounting principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting
for revenue from contracts with customers due to the adoption of the new revenue standard. The Company adopted
the new revenue standard using the modified retrospective method.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2005.
Dallas, Texas
May 6, 2019
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Ennis, Inc.
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Ennis, Inc. (a Texas corporation) and subsidiaries
(the “Company”) as of February 28, 2019, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our
opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
February 28, 2019, based on criteria established in the 2013 Internal Control—Integrated Framework issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended February 28,
2019, and our report dated May 6, 2019 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting (“Management’s Report”). Our responsibility is
to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal
control over financial reporting of Wright Business Forms, Inc., a wholly-owned subsidiary, whose financial
statements reflect total assets and revenues constituting 14 and 9 percent, respectively, of the related consolidated
financial statement amounts as of and for the year ended February 28, 2019. As indicated in Management’s Report,
Wright Business Forms, Inc. was acquired on July 31, 2018. Management’s assertion on the effectiveness of the
Company’s internal control over financial reporting excluded internal control over financial reporting of Wright
Business Forms, Inc.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
F-3
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ GRANT THORNTON LLP
Dallas, Texas
May 6, 2019
F-4
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
February 28,
2019
February 28,
2018
Assets
Current assets
Cash
Accounts receivable, net of allowance for doubtful receivables of $1,020 at
February 28, 2019 and $1,194 at February 28, 2018
Prepaid expenses
Prepaid income taxes
Inventories
Assets held for sale
$
88,442 $
96,230
40,357
1,760
195
35,411
—
166,165
35,654
1,305
3,600
26,480
75
163,344
146,001
56,394
23,838
226,233
173,099
53,134
81,634
61,272
580
300
133,222
54,318
23,208
210,748
164,840
45,908
70,603
49,254
—
330
$ 363,085 $ 329,439
Total current assets
Property, plant and equipment
Plant, machinery and equipment
Land and buildings
Other
Total property, plant and equipment
Less accumulated depreciation
Net property, plant and equipment
Goodwill
Intangible assets, net
Net pension asset
Other assets
Total assets
See accompanying notes to consolidated financial statements.
F-5
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS-continued
(in thousands, except for par value and share amounts)
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Accrued expenses
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred income taxes
Other liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity
February 28,
2019
February 28,
2018
$
13,728 $
17,895
31,623
30,000
—
10,898
1,437
73,958
12,168
17,403
29,571
30,000
735
6,189
1,240
67,735
Preferred stock $10 par value, authorized 1,000,000 shares; none issued
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443
shares at February 28, 2019 and February 28, 2018
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income (loss):
—
—
75,134
123,065
179,003
75,134
121,333
164,177
Minimum pension liability, net of taxes
Total accumulated other comprehensive income (loss)
Treasury stock
Total shareholders’ equity
Total liabilities and shareholders' equity
(16,704 )
(16,704 )
(71,371 )
289,127
(16,428 )
(16,428 )
(82,512 )
261,704
$ 363,085 $ 329,439
See accompanying notes to consolidated financial statements.
F-6
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Net sales
Cost of goods sold
Gross profit margin
Selling, general and administrative
(Gain) loss from disposal of assets
Income from operations
Other income (expense)
Interest expense
Other, net
Total other income (expense)
Earnings from continuing operations before income taxes
Income tax expense
Earnings from continuing operations
Earnings (loss) from discontinued operations, net of tax
Net earnings
Weighted average common shares outstanding
Basic
Diluted
Earnings (loss) per share - basic and diluted
Continuing operations
Discontinued operations
Net earnings
Cash dividends per share
$
2019
400,782 $
277,422
123,360
73,490
(217 )
50,087
Fiscal Years Ended
2018
370,171 $
252,969
117,202
69,222
162
47,818
(1,154 )
1,001
(153 )
49,934
12,497
37,437
—
37,437 $
(777 )
(132 )
(909 )
46,909
14,151
32,758
147
32,905 $
$
2017
356,888
252,158
104,730
62,537
278
41,915
(613 )
(1,269 )
(1,882 )
40,033
13,616
26,417
(24,637 )
1,780
25,829,804 25,391,998 25,734,667
25,842,179 25,417,244 25,749,185
$
$
$
$
1.45 $
— $
1.45 $
0.875 $
1.29 $
0.01 $
1.30 $
0.875 $
1.03
(0.96 )
0.07
2.20
See accompanying notes to consolidated financial statements.
F-7
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net earnings
Foreign currency translation adjustment, net of taxes
Adjustment to pension, net of taxes
Comprehensive income
2019
Fiscal Years Ended
2018
2017
$
$
37,437 $
—
(276 )
37,161 $
32,905 $
—
1,680
34,585 $
1,780
9,940
2,084
13,804
See accompanying notes to consolidated financial statements.
F-8
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE FISCAL YEARS ENDED 2017, 2018, AND 2019
(in thousands, except share and per share amounts)
Common Stock
Shares
Additional
Paid-in
Amount Capital
Retained Comprehensive Treasury Stock
Earnings Income (Loss) Shares
Amount Total
Accumulated
Other
Balance March 1, 2016
30,053,443 $ 75,134 $ 121,597 $ 206,105 $
1,780
—
—
—
(27,285 ) (4,437,005 ) $ (77,005 ) $ 298,546
1,780
—
—
—
Balance February 28, 2017
Net earnings
Foreign currency translation, net of
deferred tax of $6,087
Adjustment to pension, net of
deferred tax of $1,276
Dividends paid ($2.20 per share)
Excess tax benefit of stock option
exercises and restricted stock grants
Stock based compensation
Stock based compensation allocated to
loss on sale of discontinued operations
Exercise of stock options and
restricted stock
Common stock repurchases
Net earnings
Adjustment to pension (net of deferred
tax of $1,030) and reclassification of the
income tax effects of the US Tax Cuts
and Jobs Act
Dividends paid ($0.875 per share)
Stock based compensation
Exercise of stock options
and restricted stock
Common stock repurchases
Net earnings
Adjustment to pension, net of deferred
tax of $92
Dividends paid ($0.875 per share)
Stock based compensation
Exercise of stock options
and restricted stock
Common stock issued for acquisition of
business
Common stock repurchases
Balance February 28, 2018
—
—
—
—
9,940
—
—
9,940
—
—
— (57,200 )
2,084
—
—
—
—
—
—
—
—
—
265
1,361
—
—
—
—
112
—
—
—
—
—
—
2,084
— (57,200 )
—
—
265
1,361
—
—
112
—
—
—
—
—
—
—
30,053,443 $ 75,134 $ 121,525 $ 150,685 $
— 32,905
(1,810 )
—
—
—
—
—
—
282,988 4,720
— (532,804 ) (8,443 )
2,910
(8,443 )
(15,261 ) (4,686,821 ) $ (80,728 ) $ 251,355
— 32,905
—
—
—
—
—
—
—
—
—
2,847
— (22,260 )
—
1,337
(1,167 )
—
—
—
—
—
—
1,680
— (22,260 )
1,337
—
—
—
—
—
30,053,443 $ 75,134 $ 121,333 $ 164,177 $
— 37,437
(1,529 )
—
—
—
—
—
—
88,771 1,529
— (191,178 ) (3,313 )
—
(3,313 )
(16,428 ) (4,789,228 ) $ (82,512 ) $ 261,704
— 37,437
—
—
—
—
—
—
—
—
—
—
— (22,611 )
—
1,397
(276 )
—
—
—
—
—
—
(276 )
— (22,611 )
1,397
—
—
—
(1,539 )
—
—
110,806 1,608
69
Balance February 28, 2019
—
—
—
—
30,053,443 $ 75,134 $ 123,065 $ 179,003 $
1,874
—
—
—
—
— (247,803 ) (4,811 )
829,126 14,344 16,218
(4,811 )
(16,704 ) (4,097,099 ) $ (71,371 ) $ 289,127
See accompanying notes to consolidated financial statements.
F-9
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation
Amortization of deferred finance charges
Amortization of intangible assets
Pre-tax loss from discontinued operations
Operating cash flows of discontinued operations
(Gain) loss from disposal of assets
Bad debt expense, net of recoveries
Stock based compensation
Excess tax benefit of stock based compensation
Deferred income taxes
Net pension expense
Changes in operating assets and liabilities, net of the effects
of acquisitions:
Accounts receivable
Prepaid expenses and income taxes
Inventories
Other assets
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Purchase of businesses, net of cash acquired
Proceeds from sale of discontinued operations
Investing cash flows of discontinued operations
Proceeds from disposal of plant and property
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Borrowings on debt
Dividends paid
Common stock repurchases
Proceeds from exercise of stock options
Excess tax benefit of stock based compensation
Net cash used in financing activities
Net change in cash
Cash at beginning of period
Cash at end of period
2019
Fiscal Years Ended
2018
2017
$
37,437
$
32,905
$
1,780
9,071
114
7,118
—
—
(217 )
212
1,397
—
(742 )
(1,683 )
1,480
3,408
(3,580 )
5
(2,383 )
(302 )
51,335
(4,824 )
(27,389 )
—
—
443
(31,770 )
—
(22,611 )
(4,811 )
69
—
(27,353 )
(7,788 )
96,230
88,442
$
8,033
114
6,058
2,000
—
162
(265 )
1,337
—
(1,794 )
(1,400 )
(21 )
(2,699 )
1,566
65
(847 )
76
45,290
(2,667 )
(1,350 )
—
—
64
(3,953 )
—
(22,260 )
(3,313 )
—
—
(25,573 )
15,764
80,466
96,230
$
$
7,934
65
4,673
36,775
538
278
263
1,361
(265 )
4,359
(443 )
3,315
1,134
1,428
(589 )
(140 )
(3,579 )
58,887
(3,065 )
(18,584 )
107,354
(279 )
664
86,090
(10,000 )
(57,200 )
(8,443 )
2,910
265
(72,468 )
72,509
7,957
80,466
See accompanying notes to consolidated financial statements.
F-10
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Significant Accounting Policies and General Matters
Nature of Operations. Ennis, Inc. and its wholly owned subsidiaries (collectively, the “Company”) are principally
engaged in the production of and sale of business forms and other business products to customers primarily located
in the United States.
Basis of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company’s
last three fiscal years ended on the following days: February 28, 2019, February 28, 2018 and February 28, 2017
(fiscal years ended 2019, 2018 and 2017, respectively).
Accounts Receivable. Trade receivables are uncollateralized customer obligations due under normal trade terms
requiring payment generally within 30 days from the invoice date. The Company’s allowance for doubtful
receivables reserve is based on an analysis that estimates the amount of its total customer receivable balance that is
not collectible. This analysis includes assessing a default probability to customers’ receivable balances, which is
influenced by several factors including (i) current market conditions, (ii) periodic review of customer credit
worthiness, and (iii) review of customer receivable aging and payment trends.
Inventories. With the exception of approximately 8.9% and 12.9% of its inventories valued at the lower of last-in,
first-out (LIFO) for fiscal years 2019 and 2018, respectively, the Company values its inventories at the lower of
first-in, first-out (FIFO) cost or net realizable value. The Company regularly reviews inventories on hand, using
specific aging categories, and writes down the carrying value of its inventories for excess and potentially obsolete
inventories based on historical usage and estimated future usage. In assessing the ultimate realization of its
inventories, the Company is required to make judgments as to future demand requirements. As actual future
demand or market conditions may vary from those projected by the Company, adjustments to inventories may be
required. The Company provides reserves for excess and obsolete inventory when necessary based upon analysis of
quantities on hand, recent sales volumes and reference to market prices. Reserves for excess and obsolete inventory
at fiscal years ended 2019 and 2018 were $0.9 million and $0.8 million, respectively.
Property, Plant and Equipment. Depreciation of property, plant and equipment is calculated using the straight-line
method over a period considered adequate to amortize the total cost over the useful lives of the assets, which range
from 3 to 11 years for machinery and equipment and 10 to 33 years for buildings and improvements. Leasehold
improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements.
Repairs and maintenance are expensed as incurred. Renewals and betterments are capitalized and depreciated over
the remaining life of the specific property unit. The Company capitalizes all leases that are in substance acquisitions
of property. As of February 28, 2018, the Company had building and improvements of approximately $0.1 million
classified as assets held for sale on the consolidated balance sheet.
Goodwill and Other Intangible Assets. Goodwill is the excess of the purchase price paid over the value of net
assets of businesses acquired and is not amortized. Intangible assets are amortized on a straight-line basis over their
estimated useful lives. Goodwill is evaluated for impairment on an annual basis, or more frequently if impairment
indicators arise, using a fair-value-based test that compares the fair value of the related business unit to its carrying
value.
Long-Lived Assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is based upon
the fair value of assets.
F-11
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments. Certain assets and liabilities are required to be recorded at fair value on a
recurring basis. Fair value is determined based on the exchange price that would be received for an asset or
transferred for a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants. The carrying amounts of cash, accounts receivables, and accounts
payable approximate fair value because of the short maturity and/or variable rates associated with these instruments.
Long-term debt as of fiscal years ended 2019 and 2018 approximates its fair value as the interest rate is tied to
market rates. The Company categorizes each of its fair value measurements in one of these three levels based on the
lowest level input that is significant to the fair value measurement in its entirety. These levels are:
Level 1 -
Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the
Company has the ability to access.
Level 2 -
Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.
Level 3 -
Inputs are unobservable data points for the asset or liability, and include situations where there is
little, if any, market activity for the asset or liability.
Treasury Stock. The Company accounts for repurchases of common stock using the cost method with common
stock in treasury classified in the Consolidated Balance Sheets as a reduction of shareholders’ equity.
Deferred Finance Charges. Deferred finance charges in connection with the Company’s revolving credit facility
are amortized to interest expense over the term of the facility using the straight-line method. If the facility is
extinguished before the end of the term, the remaining balance of the deferred finance charges will be amortized
fully in such year.
Revenue Recognition. We recognize revenues from product sales upon shipment to the customer if the terms of the
sale are freight on board (“FOB”) shipping point (and therefore title and all risks of ownership, including risk of
loss, passes to the customer upon shipping) or, to a lesser extent, upon delivery to the customer if the terms of the
sale are FOB destination (and therefore title and all risks of ownership, including risk of loss, passes to the customer
upon delivery). Net sales represent gross sales invoiced to customers, less certain related charges, including sales
tax, discounts, returns and other allowances. Returns, discounts and other allowances have historically been
insignificant. In some cases and upon customer request, the Company prints and stores custom print product for
customer specified future delivery, generally within twelve months. In this case, risk of loss passes to the customer,
the customer is invoiced under normal credit terms, and revenue is recognized when manufacturing is complete.
Approximately $10.3 million, $9.7 million and $10.7 million of revenue was recognized under these arrangements
during fiscal years 2019, 2018 and 2017, respectively.
Advertising Expenses. The Company expenses advertising costs as incurred. Catalog and brochure preparation and
printing costs, which are considered direct response advertising, are amortized to expense over the life of the
catalog, which typically ranges from three to twelve months. Advertising expense was approximately $0.8 million,
$0.9 million and $0.6 million during the fiscal years ended 2019, 2018 and 2017, respectively, and is included in
selling, general and administrative expenses in the Consolidated Statements of Operations. Included in this
advertising expense is amortization related to direct response advertising of approximately $0.1 million, $0.2
million, and $0.1 million for the fiscal years ended 2019, 2018 and 2017, respectively. Unamortized direct
advertising costs included in prepaid expenses at fiscal years ended 2019, 2018 and 2017 were approximately $0.2
million, $0.1 million, and $0.2 million, respectively.
Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Earnings Per Share. Basic earnings per share is computed by dividing net earnings by the weighted average
number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net
earnings by the weighted average number of common shares outstanding, and then adding the number of additional
shares that would have been outstanding if potentially dilutive securities had been issued. This is calculated using
F-12
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the treasury stock method. At year-end 2017, there were 42,500 options not included in the diluted earnings per
share computation because their effect was anti-dilutive. For fiscal years 2019 and 2018, all options were included
in the diluted earnings per share computation because the average fair market value of the Company’s stock
exceeded the exercise price of the options.
Accumulated Other Comprehensive Loss. Accumulated other comprehensive loss is defined as the change in
equity resulting from transactions from non-owner sources. Other comprehensive income consisted of changes in
the following: changes in the funded status of the Company’s pension plan and the election to reclassify the
stranded income tax effects of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).
Foreign Currency Translation. Transaction gains and losses that arise from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency are included in the results of operations in
other expense, net as incurred. Transaction losses totaled approximately $18,000, $7,000, and $22,000 for fiscal
years ended 2019, 2018 and 2017, respectively.
Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in
the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from these estimates.
Shipping and Handling Costs. The Company records amounts billed to customers for shipping and handling costs
in net sales and related costs are included in cost of goods sold.
Stock Based Compensation. The Company recognizes stock based compensation expense net of estimated
forfeitures over the requisite service period of the individual grants, which generally equals the vesting period.
Estimated forfeiture rates are derived from our historical forfeitures of similar awards. The fair value of all share
based awards is estimated on the date of grant.
Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension
Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). The update requires the service cost
component of net benefit costs to be reported in the same line of the income statement as other compensation costs
and the other components of net benefit costs (non-service costs) to be presented separately from the service cost
component, outside a subtotal of operating income. Additionally, only the service cost component of net benefit
costs will be eligible for capitalization. The Company retrospectively adopted this guidance as of March 1, 2018.
The impact of adoption was a $288,000 decrease in cost of sales, $229,000 decrease in selling, general and
administrative expenses and $517,000 increase in other expense-net for the fiscal year ended February 28, 2018
compared to the amount previously reported. The impact of adoption was a $780,000 decrease in cost of sales,
$610,000 decrease in selling, general and administrative expenses and $1,390,000 increase in other expense-net for
the fiscal year ended February 28, 2017 compared to the amount previously reported.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which modifies the
lease recognition requirements and requires entities to recognize the assets and liabilities arising from leases on the
balance sheet and to disclose key qualitative and quantitative information about the entity’s leasing arrangements.
Based on the original guidance in ASU 2016-02, lessees and lessors would have been required to recognize and
measure leases at the beginning of the earliest period presented using a modified retrospective approach, including a
number of practical expedients. In July 2018, the FASB issued ASU No. 2018-11, Leases (ASC 842): Targeted
Improvements, which provides entities with an option to apply the guidance prospectively, instead of retrospectively,
and allows for other classification provisions. ASU 2016-02 is effective for annual reporting periods beginning after
December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The
Company currently anticipates that it will elect to recognize its lease assets and liabilities on a prospective basis,
beginning on March 1, 2019, using an optional transition method.
F-13
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company expects to elect the ‘package of practical expedients’ as lessee, which permits it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs.
Additionally, the Company expects to elect to treat lease and non-lease components as a single lease component.
The Company expects that the adoption of this standard will result in a fairly significant increase to its recorded
assets and liabilities on its consolidated balance sheets but will not have a material impact on the consolidated
statement of operations. While the Company is continuing to assess all the effects of adoption, it currently believes
the most significant effects relate to (i) the recognition of new right-of-use assets and lease liabilities on its balance
sheet for its property and equipment operating leases and (ii) providing significant new disclosures about its leasing
activities. Adoption of the standard will result in the recognition of additional right-of-use assets and lease liabilities
for leases of approximately $18.2 million as of March 1, 2019.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which institutes a
number of modifications to the reporting of financial assets and liabilities. These modifications include:
(i) measurement of non-equity method assets and liabilities at fair value, with changes to fair value recognized
through net income, (ii) performance of qualitative impairment assessments of equity investments without readily
determinable fair values at each reporting period, (iii) elimination of the requirement to disclose methods and
significant assumptions used in calculating the fair value of financial instruments measured at amortized cost,
(iv) measurement of the fair value of financial instruments measured at amortized cost using the exit price notion
consistent with Topic 820, Fair Value Measurement, (v) separate presentation in other comprehensive income of the
portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit
risk, (vi) separate presentation of financial assets and financial liabilities by measurement category and form of
financial asset, and (vii) evaluation of the need for a valuation allowance on a deferred tax asset related to available-
for-sale securities in combination with the entity’s other deferred tax assets. This ASU is effective for financial
statements issued with fiscal years beginning after December 15, 2017, including interim periods within that
reporting period.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU
2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods
or services. Our conclusion is that the timing of revenue recognition for our various revenue streams is not
materially impacted by the adoption of this standard. The Company adopted this standard on March 1, 2018 using
the modified retrospective approach. The adoption did not have, and is not expected to have, a significant impact on
the consolidated operating results, financial position or cash flows of the Company. See Note 2, Revenue, below for
further disclosures associated with the adoption of this pronouncement.
(2) Revenue
On March 1, 2018, the Company adopted ASU 2014-09 using the modified retrospective method applied to those
contracts which were not completed as of March 1, 2018. Results for reporting periods beginning after March 1,
2018 are presented under ASU 2014-09, while prior period amounts are not adjusted and continue to be reported in
accordance with the Company’s historic accounting under Topic 605, and no adjustment has been recorded to
beginning retained earnings due to there being no change in revenue recognition for prior periods.
The adoption did not have a significant effect on the Company’s consolidated results of operations, financial
position or cash flows.
Nature of Revenues
Substantially all of the Company’s revenue from contracts with customers consist of the sale of commercial printing
products in the continental United States and is primarily recognized at a point in time in an amount that reflects the
consideration the Company expects to be entitled to in exchange for those goods. Revenue from the sale of
commercial printing products, including shipping and handling fees billed to customers, is recognized upon the
transfer of control to the customer, which is generally upon shipment to the customer when the terms of the sale are
freight on board (“FOB”) shipping point, or, to a lesser extent, upon delivery to the customer if the terms of the sale
are FOB destination.
F-14
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In a small number of cases and upon customer request, the Company prints and stores commercial printing product
for customer specified future delivery, generally within the same year as the product is manufactured. In this case,
revenue is recognized upon the transfer of control when manufacturing is complete and title and risk of ownership is
passed to the customer, which for certain customers may be recognized over time rather than at a point in time. As
the output method for measure of progress is determined to be appropriate, the Company recognizes revenue in the
amount for which it has the right to invoice for revenue that is recognized over time and for which it demonstrates
that the invoiced amount corresponds directly with the value to the customer for the performance completed to date.
The Company does not disaggregate revenue and operates in one sales category consisting of commercial printed
product revenue, which is reported as net sales on the consolidated statements of operations. The Company does not
have material contract assets and contract liabilities as of February 28, 2019.
Significant Judgments
Generally, the Company’s contracts with customers are comprised of a written quote and customer purchase order or
statement of work, and governed by the Company’s trade terms and conditions. In certain instances, it may be
further supplemented by separate pricing agreements and customer incentive arrangements, which typically only
affect the contract’s transaction price. Contracts do not contain a significant financing component as payment terms
on invoiced amounts are typically between 30 to 90 days, based on the Company’s credit assessment of individual
customers, as well as industry expectations. Product returns are not significant.
From time to time, the Company may offer incentives to its customers considered to be variable consideration
including volume-based rebates or early payment discounts. Customer incentives considered to be variable
consideration are recorded as a reduction to revenue as part of the transaction price at contract inception when there
is a basis to reasonably estimate the amount of the incentive and only to the extent that it is probable that a
significant reversal of any incremental revenue will not occur. Customer incentives are allocated entirely to the
single performance obligation of transferring printed product to the customer.
For customers with terms of FOB shipping point, the Company accounts for shipping and handling activities
performed after the control of the printed product has been transferred to the customer as a fulfillment cost. The
Company accrues for the costs of shipping and handling activities if revenue is recognized before contractually
agreed shipping and handling activities occur.
The Company’s contracts with customers generally have a duration of one year or less. Accordingly, the Company
does not disclose the value of unsatisfied performance obligations nor the timing of revenue recognition.
(3) Accounts Receivable and Allowance for Doubtful Receivables
Accounts receivable are reduced by an allowance for an estimate of amounts that are uncollectible. Substantially all
of the Company’s receivables are due from customers in North America. The Company extends credit to its
customers based upon its evaluation of the following factors: (i) the customer’s financial condition, (ii) the amount
of credit the customer requests, and (iii) the customer’s actual payment history (which includes disputed invoice
resolution). The Company does not typically require its customers to post a deposit or supply collateral. The
Company’s allowance for doubtful receivables is based on an analysis that estimates the amount of its total customer
receivable balance that is not collectible. This analysis includes assessing a default probability to customers’
receivable balances, which is influenced by several factors including (i) current market conditions, (ii) periodic
review of customer credit worthiness, and (iii) review of customer receivable aging and payment trends.
The Company writes off accounts receivable when they become uncollectible, and payments subsequently received
on such receivables are credited to the allowance in the period the payment is received. Credit losses from
continuing operations have consistently been within management’s expectations.
F-15
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table represents the activity in the Company’s allowance for doubtful receivables for the fiscal years
ended (in thousands):
Balance at beginning of period
Bad debt expense, net of recoveries
Accounts written off
Balance at end of period
2019
2018
2017
$
$
1,194 $
212
(386 )
1,020 $
1,674 $
(265 )
(215 )
1,194 $
2,041
263
(630 )
1,674
(4) Inventories
The following table summarizes the components of inventories at the different stages of production as of February
28, 2019 and February 28, 2018 (in thousands):
Raw material
Work-in-process
Finished goods
2019
21,717 $
4,172
9,522
35,411 $
2018
15,854
3,114
7,512
26,480
$
$
The excess of current costs at FIFO over LIFO stated values was approximately $5.0 million and $4.9 million as of
fiscal years ended 2019 and 2018, respectively. During both fiscal year 2019 and 2018, as inventory quantities were
reduced, this resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as
compared with the cost of fiscal year 2018 and 2017. The effect decreased cost of sales by approximately $0.1
million, $0.3 million and $0.2 million for fiscal years 2019, 2018 and 2017, respectively. Cost includes materials,
labor and overhead related to the purchase and production of inventories.
(5) Acquisitions
The Company applies the acquisition method of accounting for business combinations. Under the acquisition
method, the acquiring entity in a business combination recognizes 100% of the assets acquired and liabilities
assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or
liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to
assets acquired, including identifiable intangible assets, and liabilities assumed is recorded as goodwill. Where
amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase
gain is recognized. Acquisition-related costs are expensed as incurred.
On July 31, 2018, the Company issued an aggregate of 829,126 shares of common stock of the Company, par value
$2.50 per share (the “Shares”), to the former stockholders of Wright Business Forms, Inc., d/b/a Wright Business
Graphics (“Wright” or “WBG”), as partial consideration for the acquisition by the Company of all of the outstanding
equity interests of WBG by way of a merger of a wholly-owned subsidiary of the Company with and into WBG
pursuant to the Agreement and Plan of Merger, dated July 16, 2018 (the “Merger Agreement”). The Shares issued
to the former stockholders of WBG represent aggregate consideration under the Merger Agreement equal to
approximately $16.2 million. An additional $19.7 million was paid in cash to the stockholders of Wright, subject to
a final working capital adjustment, and $3.0 million was paid to pay-off outstanding debt. The issuance of the
Shares was exempt from registration pursuant to Section 4(a)(2) under the Securities Act of 1993, as amended, and
Regulation D promulgated thereunder. During the fiscal year ended February 28, 2019, the Company incurred
approximately $0.2 million of costs (including legal and accounting fees) related to the acquisition. These costs
were recorded in selling, general and administrative expenses. Wright is a printing company headquartered in
Portland, Oregon with additional locations in Washington and California. The business produces forms, pressure
seal, packaging, direct mail, checks, statement processing and commercial printing and sells mainly through
distributors and resellers. The goodwill recognized as a part of the merger is not deductible for tax purposes. With
this acquisition we will continue to be the preeminent provider of all types of printed products and services to the
west coast. The addition of packaging, statement processing and direct mail will add to the overall capabilities of
our existing operations, which should help us to continue to penetrate additional markets throughout the United
F-16
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
States. Wright, which generated approximately $58.0 million in sales for its fiscal year ended March 31, 2018,
continues to operate under its brand names. The purchase price of Wright was as follows (in thousands):
Ennis shares of common stock
Cash
Purchase price of Wright Business Graphics
$ 16,218
22,653
$ 38,871
The following is a summary of the preliminary purchase price allocation for Wright (in thousands):
Accounts receivable
Prepaid expenses
Inventories
Other assets
Property, plant & equipment
Non-compete
Customer lists
Trade names
Goodwill
Accounts payable and accrued liabilities
Deferred income taxes
$ 5,220
427
4,365
88
10,331
447
12,900
3,830
11,031
(4,226 )
(5,542 )
$ 38,871
On April 30, 2018, the Company acquired the assets of Allen-Bailey Tag & Label, a tag and label operation located
in New York for $4.7 million in cash plus the assumption of trade payables, subject to a working capital adjustment.
In addition, contingent consideration of up to $500,000 is payable to the sellers if certain sales levels are maintained
over the next three years. On July 7, 2017, the Company acquired the assets of a separate tag operation located in
Ohio for $1.4 million in cash plus the assumption of certain accrued liabilities. Management considers both of these
acquisitions immaterial.
On January 27, 2017, the Company completed the acquisition of Independent Printing Company, Inc. and its related
entities (collectively “Independent”) for $17.7 million in cash consideration, in a stock purchase transaction. The
goodwill recognized as a part of this acquisition is not deductible for tax purposes. Independent has four locations
in Wisconsin, with its main facility located in DePere, Wisconsin. The business produces presentation folders,
checks, wide format and commercial print. Independent, which generated approximately $37.0 million in unaudited
sales during calendar year 2016, will continue to operate under its respective brand names. Independent sells mainly
through distributors and resellers. The Company now has four folder facilities in Michigan, Kansas, California and
Wisconsin, as well as wide format capabilities in Colorado and Wisconsin.
The following is a summary of the final purchase price allocation for Independent (in thousands):
Accounts receivable
Inventories
Other assets
Property, plant & equipment
Customer lists
Trademarks
Goodwill
Accounts payable and accrued liabilities
$ 4,252
1,539
575
5,526
3,390
2,408
6,066
(6,079 )
$ 17,677
F-17
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The results of operations for Wright is included in the Company’s consolidated financial statements from the date of
acquisition. The following table represents certain operating information on a pro forma basis as though all Wright
operations had been acquired as of March 1, 2017, after the estimated impact of adjustments such as amortization of
intangible assets, interest expense and related tax effects (in thousands, except per share amount):
Unaudited Unaudited
2019
2018
Pro forma net sales
Pro forma net earnings
Pro forma earnings per share from continuing
operations - diluted
$ 423,901 $ 427,174
38,434 35,694
1.49
1.40
The pro forma results are not necessarily indicative of what would have occurred if the acquisition had been in effect
for the period presented.
(6) Discontinued Operations
On May 25, 2016 the Company sold its Apparel Segment to Gildan Activewear Inc. for an all-cash purchase price of
$110.0 million, subject to a working capital adjustment, customary indemnification arrangements, and the other
terms of the Unit Purchase Agreement dated May 4, 2016.
At the time of the sale of the Company’s former apparel operations, $2.0 million of the purchase price was placed in
escrow as a source of funds to pay any liabilities that arose post-closing from an employment contract with a former
officer of the Company. The Company believed in good faith, based on consultation with its advisors, that no
liability existed with respect to the employment contract, and as such, recorded a receivable for the full amount of
the funds held in escrow. In January 2017, the purchaser, without notice to the Company, voluntarily paid $2.0
million to the former officer of the Company and requested that all of the escrowed funds be released to it as
reimbursement. The Company denied the request, due in part because of the purchaser’s failure to provide the
Company prior notice and a right to defend as the Company believes was contractually required. In February 2018
an arbitrator ruled that the escrow funds be released to the purchaser. Although the Company has filed a complaint
to vacate the arbitrator’s opinion, in the fourth quarter of fiscal year 2018 the Company wrote off the full amount of
the receivable.
The Company recognized a tax benefit in the amount of $2.1 million related to discontinued operations during fiscal
year 2018. This includes a $0.5 million tax benefit from the write-off of the $2.0 million receivable described in the
previous paragraph as well as a $1.6 million tax benefit related to the determination of the final tax basis on assets
sold in the sale of the Apparel Segment in fiscal year 2017.
The operating results of these discontinued operations only reflect revenues and expenses that are directly
attributable to the Apparel Segment and that have been eliminated from ongoing operations. The following tables
show the key components of the sale and discontinued operations related to the Apparel Segment that was
completed on May 25, 2016 (in thousands):
Sales price
Carrying value of disposed
Expenses related to sales (1)
Loss on sale before write-off of foreign currency
translation adjustment
Write-off of foreign currency translation adjustments
recorded in other comprehensive income
Loss on sale of sale of discontinued operations
$ 110,000
(130,174 )
(4,365 )
(24,539 )
(16,109 )
(40,648 )
$
(1) Includes the termination fee, in the amount of $3.0 million, paid as a result of the termination of a prior
purchase agreement for the sale of the Apparel Segment to Alstyle Operations, LLC.
F-18
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net sales
Income from discontinued operations before income taxes
Loss on sale of discontinued operations before income taxes
Income (loss) on discontinued operations before income taxes
Income tax (benefit) expense
Net income (loss) from discontinued operations
(7) Goodwill and Intangible Assets
$
$
2018
2017
— $
—
(2,000 )
(2,000 )
(2,147 )
147 $
41,038
3,873
(40,648 )
(36,775 )
(12,138 )
(24,637 )
Goodwill represents the excess of the purchase price over the fair value of net assets of acquired businesses and is
not amortized. Goodwill and other intangible assets are tested for impairment at a reporting unit level. The annual
impairment test of goodwill and intangible assets is performed as of November 30 of each fiscal year.
The Company uses qualitative factors to determine whether it is more likely than not (likelihood of more than 50%)
that the fair value of a reporting unit exceeds its carrying amount, including goodwill. Some of the qualitative
factors considered in applying this test include consideration of macroeconomic conditions, industry and market
conditions, cost factors affecting the business, overall financial performance of the business, and performance of the
share price of the Company.
If qualitative factors are not deemed sufficient to conclude that the fair value of the reporting unit more likely than
not exceeds its carrying value, then a one-step approach is applied in making an evaluation. The evaluation utilizes
multiple valuation methodologies, including a market approach (market price multiples of comparable companies)
and an income approach (discounted cash flow analysis). The computations require management to make significant
estimates and assumptions, including, among other things, selection of comparable publicly traded companies, the
discount rate applied to future earnings reflecting a weighted average cost of capital, and earnings growth
assumptions. A discounted cash flow analysis requires management to make various assumptions about future sales,
operating margins, capital expenditures, working capital, and growth rates. If the evaluation results in the fair value
of the goodwill for the reporting unit being lower than the carrying value, an impairment charge is recorded. A
goodwill impairment charge was not required for the fiscal years ended February 28, 2019 and 2018.
F-19
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Beginning March 1, 2017, given the general declining trend line of print sales, and its expected continuance into the
foreseeable future, the Company elected to treat the recorded value of trademarks/trade names as no longer being an
indefinite-lived asset. As such, as of March 1, 2017, the Company began amortizing the carrying value of these
assets over their estimated remaining useful life, approximately 17 - 19 years. The amortization expense associated
with this election increased the Company’s selling, general and administrative expense line by approximately $0.8
million during fiscal year 2018 and approximately $1.2 million during fiscal year 2019.
The carrying amount and accumulated amortization of the Company’s intangible assets at each balance sheet date
are as follows (in thousands):
As of February 28, 2019
Amortized intangible assets
Trademarks and trade names
Customer lists
Non-compete
Patent
Total
As of February 28, 2018
Amortized intangible assets
Trademarks and trade names
Customer lists
Non-compete
Patent
Total
Weighted
Average
Remaining Gross
Life
Carrying
(in years) Amount
Accumulated
Amortization
Net
13.8 $ 24,385 $
71,869
722
783
10.0 $ 97,759 $
8.2
2.5
—
31,498
300
783
3,906 $ 20,479
40,371
422
—
36,487 $ 61,272
16.0 $ 19,625 $
58,040
175
783
10.8 $ 78,623 $
8.1
1.1
0.4
26,039
140
782
2,408 $ 17,217
32,001
35
1
29,369 $ 49,254
Aggregate amortization expense for each of the fiscal years 2019, 2018 and 2017 was approximately $7.1 million,
$6.1 million and $4.7 million, respectively.
The Company’s estimated amortization expense for the next five fiscal years is as follows (in thousands):
2020
2021
2022
2023
2024
$
7,390
7,265
7,097
6,260
6,222
Changes in the net carrying amount of goodwill for fiscal years 2018 and 2019 are as follows (in thousands):
Balance as of March 1, 2017
Goodwill acquired
Goodwill impairment
Balance as of February 28, 2018
Goodwill acquired
Goodwill impairment
Balance as of February 28, 2019
$
$
70,603
—
—
70,603
11,031
—
81,634
During the fiscal year ended February 28, 2019, $11.0 million was added to goodwill related to the acquisition of
Wright.
F-20
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Accrued Expenses
The following table summarizes the components of other accrued expenses for the fiscal years ended (in thousands):
Employee compensation and benefits
Taxes other than income
Accrued legal and professional fees
Accrued interest
Accrued utilities
Accrued acquisition related obligations
Accrued credit card fees
Other accrued expenses
February 28, February 28,
2019
15,950 $
583
203
188
90
214
146
521
17,895 $
2018
15,597
296
282
143
148
654
115
168
17,403
$
$
(9) Long-Term Debt
Long-term debt consisted of the following at fiscal years ended (in thousands):
Revolving credit facility
February 28,
2019
February 28,
2018
$
30,000 $
30,000
The Company is party to a Second Amended and Restated Credit Agreement, which has been amended from time to
time, pursuant to which a credit facility has been extended to the Company ( the “Credit Facility”). The Credit
Facility, which matures on August 11, 2020, provides the Company and its subsidiaries with up to $100.0 million in
revolving credit, as well as a $20.0 million sublimit for the issuance of letters of credit and a $15.0 million sublimit
for swing-line loans. Under the Credit Facility, the Company or any of its subsidiaries also can request up to three
increases in the aggregate commitments in an aggregate amount not to exceed $50.0 million. Under the Credit
Facility: (i) the Company’s net leverage ratio may not exceed 3.00:1.00, (ii) the Company’s fixed charge coverage
ratio may not be less than 1.25:1.00, and (iii) the Company may make dividends or distributions to shareholders so
long as (a) no event of default has occurred and is continuing and (b) the Company’s net leverage ratio both before
and after giving effect to any such dividend or distribution is equal to or less than 2.50:1.00. As of February 28,
2019, the Company was in compliance with all terms and conditions of its Credit Facility.
The Credit Facility bears interest at the LIBOR rate plus a spread ranging from 1.0% to 2.0%, which rate was 3.6%
(3 month LIBOR + 1.0%) at February 28, 2019 and 3.0% (3 month LIBOR + 1.0%) at February 28, 2018. The rate
is determined by our fixed charge coverage ratio of total funded debt to earnings before interest, taxes, depreciation
and amortization (“EBITDA”). As of February 28, 2019, we had $30.0 million of borrowings under the revolving
credit line and $0.7 million outstanding under standby letters of credit arrangements, leaving approximately $69.3
million available in borrowing capacity. The Credit Facility is secured by substantially all of our assets (other than
real property), as well as all capital securities of each of our subsidiaries.
(10) Shareholders’ Equity
The Board has authorized the repurchase of the Company’s outstanding common stock through a stock repurchase
program, which authorized amount is currently up to $40.0 million. Under the repurchase program, share purchases
may be made from time to time in the open market or through privately negotiated transactions depending on market
conditions, share price, trading volume and other factors. Such purchases, if any, will be made in accordance with
applicable insider trading and other securities laws and regulations. These repurchases may be commenced or
suspended at any time or from time to time without prior notice.
F-21
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the fiscal year ended February 28, 2019 the Company repurchased 247,788 shares of common stock under
the program at an average price of $19.42 per share. Since the program’s inception in October 2008, there have
been 1,690,024 common shares repurchased at an average price of $15.64 per share. As of February 28, 2019 there
was $13.6 million available to repurchase shares of the Company’s common stock under the program. Unrelated to
the stock repurchase program, the Company purchased 15 shares of its common stock during the fiscal year ended
February 28, 2019.
The Company’s revolving credit facility maintains certain restrictions on the amount of treasury shares that may be
purchased and distributions to its shareholders.
(11) Stock Option Plan and Stock Based Compensation
The Company grants stock options and restricted stock to key executives and managerial employees and non-
employee directors. At fiscal year ended 2018, the Company has one stock option plan: the 2004 Long-Term
Incentive Plan of Ennis, Inc., as amended and restated as of June 30, 2011, formerly the 1998 Option and Restricted
Stock Plan amended and restated as of May 14, 2008 (the “Plan”). The Company has 534,478 shares of unissued
common stock reserved under the Plan for issuance. The exercise price of each stock option granted under the Plan
equals a referenced price of the Company’s common stock as reported on the New York Stock Exchange (“NYSE”)
on the date of grant, and an option’s maximum term is ten years. Stock options and restricted stock may be granted
at different times during the year and vest ratably over various periods, from grant date up to five years. The
Company uses treasury stock to satisfy option exercises and restricted stock awards.
The Company recognizes compensation expense for stock options and restricted stock grants on a straight-line basis
over the requisite service period. For the years ended 2019, 2018 and 2017, the Company included in selling,
general and administrative expenses, compensation expense related to share based compensation of $1.4 million,
$1.3 million and $1.4 million, respectively.
Stock Options
The Company had the following stock option activity for each of the three years ended February 28, 2019:
Weighted
Weighted Average
Average
Exercise
Aggregate
Remaining
Intrinsic
Contractual Value(a)
Life (in years) (in thousands)
Number
of Shares
(exact quantity)
Price
Outstanding at March 1, 2016
Granted
Terminated
Exercised
Outstanding at February 28, 2017
Granted
Terminated
Exercised
Outstanding at February 28, 2018
Granted
Terminated
Exercised
Outstanding at February 28, 2019
Exercisable at February 28, 2019
370,949 $
—
(5,000 )
(193,453 )
172,496 $
—
—
—
172,496 $
—
—
(110,906 )
61,590 $
61,590 $
15.38
—
8.94
15.04
15.95
—
—
—
15.95
—
—
15.99
15.88
15.88
5.9 $ 1,616
4.2 $
223
3.2 $
612
1.8 $
1.8 $
327
327
(a) Intrinsic value is measured as the excess fair market value of the Company’s common stock as reported on the
NYSE over the applicable exercise price.
No stock options were granted during fiscal years 2019, 2018 or 2017.
F-22
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the stock options exercised and tax benefits realized from stock based compensation is presented
below for the three fiscal years ended (in thousands):
Total cash received
Income tax benefits
Total grant-date fair value
Intrinsic value
Fiscal years ended
2019
$
69
—
345
534
2018
$ —
—
—
—
2019
$ 2,910
265
532
969
A summary of the status of the Company’s unvested stock options at February 28, 2018, and changes during the
fiscal year ended February 28, 2019 is presented below:
Unvested at February 28, 2018
New grants
Vested
Forfeited
Unvested at February 28, 2019
Weighted
Average
Grant Date
Number
of Options Fair Value
1,616 $
—
(1,616 )
—
—
2.24
—
2.24
—
—
The following table summarizes information about stock options outstanding at the end of fiscal year 2019:
Options
Outstanding
Number
Outstanding
Weighted Average
Remaining Contractual
Life (in Years)
Weighted
Average
Exercise Price
Options
Exercisable
Number
Exercisable
Weighted
Average
Exercise Price
10,000
12,949
38,641
61,590
0.2 $
3.3
1.8
1.8
8.94
15.18
17.92
15.88
10,000 $
12,949
38,641
61,590
8.94
15.18
17.92
15.88
Exercise Prices
$8.94
$14.05 to $15.48
$17.57 to $18.46
Restricted Stock
The Company had the following restricted stock grants activity for each of the three fiscal years ended February 28,
2019:
Weighted
Average
Number of Grant Date
Shares
Fair Value
189,396 $
66,685
—
(89,535 )
166,546 $
74,900
—
(88,771 )
152,675 $
83,789
—
(81,359 )
155,105 $
14.36
19.49
—
14.46
16.35
16.30
—
15.90
16.59
20.54
—
16.01
19.03
Outstanding at March 1, 2016
Granted
Terminated
Vested
Outstanding at February 28, 2017
Granted
Terminated
Vested
Outstanding at February 28, 2018
Granted
Terminated
Vested
Outstanding at February 28, 2019
F-23
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of February 28, 2019, the total remaining unrecognized compensation cost related to unvested restricted stock
was approximately $1.8 million. The weighted average remaining requisite service period of the unvested restricted
stock awards was 1.6 years. As of February 28, 2019, the Company’s outstanding restricted stock had an underlying
fair value of $3.0 million at date of grant.
(12) Pension Plan
The Company and certain subsidiaries have a noncontributory defined benefit retirement plan (the “Pension Plan”),
covering approximately 17% of aggregate employees. Benefits are based on years of service and the employee’s
average compensation for the highest five compensation years preceding retirement or termination. The Company’s
funding policy is to contribute annually an amount in accordance with the requirements of the Employee Retirement
Income Security Act of 1974 (“ERISA”).
The Company’s Pension Plan asset allocation, by asset category, is as follows for the fiscal years ended:
Equity securities
Debt securities
Cash and cash equivalents
Total
2019
2018
46 %
48 %
6 %
100 %
57 %
42 %
1 %
100 %
The current asset allocation is being managed to meet the Company’s stated objective of asset growth and capital
preservation. The factor is based upon the combined judgments of the Company’s Administrative Committee and
its investment advisors to meet the Company’s investment needs, objectives, and risk tolerance. The Company’s
target asset allocation percentage, by asset class, for the year ended February 28, 2019 is as follows:
Asset Class
Cash
Fixed Income
Equity
Target
Allocation
Percentage
1 - 5%
35 - 55%
45 - 60%
The Company estimates the long-term rate of return on Pension Plan assets will be 7.5% based upon target asset
allocation. Expected returns are developed based upon the information obtained from the Company’s investment
advisors. The advisors provide ten-year historical and five-year expected returns on the fund in the target asset
allocation. The return information is weighted based upon the asset allocation at the end of the fiscal year. The
expected rate of return at the beginning of the fiscal year ended 2019 was 7.5%, the rate used in the calculation of
the fiscal year 2018 pension expense.
The following tables present the Pension Plan’s fair value hierarchy for those assets measured at fair value as of
February 28, 2019 and February 28, 2018 (in thousands):
Description
Cash and cash equivalents
Government bonds
Corporate bonds
Domestic equities
Foreign equities
Assets
Measured at
Fair Value
at 2/28/19
$
(Level 1)
Fair Value Measurements
(Level 2)
(Level 3)
3,945 $
16,128
10,722
20,903
6,023
— $
16,128
10,722
—
—
$ 57,721 $ 30,871 $ 26,850 $
3,945 $
—
—
20,903
6,023
—
—
—
—
—
—
F-24
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Description
Cash and cash equivalents
Government bonds
Corporate bonds
Domestic equities
Foreign equities
Assets
Measured at
Fair Value
at 2/28/18
$
(Level 1)
Fair Value Measurements
(Level 2)
(Level 3)
893 $
14,005
9,609
25,558
6,819
— $
14,005
9,609
—
—
$ 56,884 $ 33,270 $ 23,614 $
893 $
—
—
25,558
6,819
—
—
—
—
—
—
Fair value estimates are made at a specific point in time, based on available market information and judgments about
the financial asset, including estimates of timing, amount of expected future cash flows, and the credit standing of
the issuer. In some cases, the fair value estimates cannot be substantiated by comparison to independent markets.
The disclosed fair value may not be realized in the immediate settlement of the financial asset. In addition, the
disclosed fair values do not reflect any premium or discount that could result from offering for sale at one time an
entire holding of a particular financial asset. Potential taxes and other expenses that would be incurred in an actual
sale or settlement are not reflected in amounts disclosed.
Pension expense is composed of the following components included in cost of goods sold and selling, general and
administrative expenses in the Company’s consolidated statements of operations for fiscal years ended (in
thousands):
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of:
Prior service cost
Unrecognized net loss
Net periodic benefit cost
Other changes in Plan Assets and Projected
Benefit Obligation
Recognized in Other comprehensive Income
Net actuarial loss (gain)
Amortization of net actuarial loss
Amortization of prior service credit
2019
2018
2017
$
1,106 $
2,274
(4,109 )
1,083 $
2,270
(3,794 )
1,166
2,372
(3,665 )
—
2,047
1,318
—
2,041
1,600
—
2,683
2,556
2,414
(2,047 )
—
367
(669 )
(2,041 )
—
(2,710 )
(723 )
(2,683 )
—
(3,406 )
Total recognized in net periodic pension cost and
other comprehensive income
$
1,685 $
(1,110 ) $
(850 )
F-25
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table represents the assumptions used to determine benefit obligations and net periodic pension cost
for fiscal years ended:
Weighted average discount rate (net periodic
pension cost)
Earnings progression (net periodic pension cost)
Expected long-term rate of return on plan assets
(net periodic pension cost)
Weighted average discount rate (benefit
obligations)
Earnings progression (benefit obligations)
2019
2018
2017
4.05 %
3.00 %
4.10 %
3.00 %
4.30 %
3.00 %
7.50 %
7.50 %
7.50 %
4.10 %
3.00 %
4.05 %
3.00 %
4.10 %
3.00 %
During the current fiscal year, the Company adopted the new MP-2017 improvement scale to determine their benefit
obligations under the Pension Plan. The accumulated benefit obligation (“ABO”), change in projected benefit
obligation (“PBO”), change in Pension Plan assets, funded status, and reconciliation to amounts recognized in the
consolidated balance sheets are as follows (in thousands):
Change in benefit obligation
Projected benefit obligation at beginning of year
$
Service cost
Interest cost
Actuarial (gain) loss
Other assumption change
Benefits paid
Projected benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Company contributions
Gain on plan assets
Benefits paid
Fair value of plan assets at end of year
Funded (unfunded) status
Accumulated benefit obligation at end of year
$
$
$
$
$
2019
2018
57,619 $
1,106
2,274
(367 )
(120 )
(3,371 )
57,141 $
56,884 $
3,000
1,208
(3,371 )
57,721 $
580 $
52,747 $
57,658
1,083
2,270
978
(423 )
(3,947 )
57,619
52,812
3,000
5,019
(3,947 )
56,884
(735 )
53,244
The measurement dates used to determine pension and other postretirement benefits is the Company’s fiscal year
end. The Company contributed $3.0 million to the Pension Plan during fiscal year 2019. Given current funding
status, the Company expects to contribute between $1.0 and $1.5 million to the Pension Plan during fiscal year
2020.
Estimated future benefit payments which reflect expected future service, as appropriate, are expected to be paid to
the Pension Plan participants in the fiscal years ended (in thousands):
Year
2020
2021
2022
2023
2024
2025 - 2029
Projected
Payments
$
3,500
4,200
4,300
3,000
4,800
21,000
F-26
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective February 1, 1994, the Company adopted a Defined Contribution 401(k) Plan (the “401(k) Plan”) for its
United States employees. The 401(k) Plan covers substantially all full-time employees who have completed sixty
days of service and attained the age of eighteen. United States employees can contribute up to 100 percent of their
annual compensation, but are limited to the maximum annual dollar amount allowable under the Internal Revenue
Code. The 401(k) Plan provides for employer matching contributions or discretionary employer contributions for
certain employees not enrolled in the Pension Plan for employees of the Company. Eligibility for employer
contributions, matching percentage, and limitations depends on the participant’s employment location and whether
the employees are covered by the Pension Plan, among other factors. The Company’s matching contributions are
immediately vested. The Company made matching 401(k) contributions in the amount of $1.7 million, $1.2 million
and $1.2 million in fiscal years ended 2019, 2018 and 2017, respectively.
In addition, the Northstar Computer Forms, Inc. 401(k) Profit Sharing Plan was merged into the 401(k) Plan on
February 1, 2001. The Company declared profit sharing contributions on behalf of the former employees of
Northstar Computer Forms, Inc. in accordance with its original plan in the amounts of $206,000, $203,000, and
$228,000, in fiscal years ended 2019, 2018 and 2017, respectively.
(13) Income Taxes
The following table represents components of the provision for income taxes for fiscal years ended (in thousands):
2019
2018
2017
Current:
Federal
State and local
Total current
Deferred:
Federal
State and local
Total deferred
Total provision for income taxes
$ 11,381 $ 14,001 $ 10,543
2,254
12,797
1,944
15,945
1,858
13,239
(651 )
(91 )
(742 )
932
(113 )
819
$ 12,497 $ 14,151 $ 13,616
(1,811 )
17
(1,794 )
The Company’s effective tax rate on earnings from operations for the year ended February 28, 2019, was 25.0%, as
compared to 30.2% and 34.0% in 2018 and 2017, respectively. The following summary reconciles the statutory
U.S. federal income tax rate to the Company’s effective tax rate for the fiscal years ended:
Statutory rate
Provision for state income taxes, net of federal
income tax benefit
Domestic production activities deduction
Valuation allowance
Federal true-up
Tax Cuts and Jobs Act
Other
2019
2018
2017
21.0 %
32.7 %
35.0 %
2.8
—
—
0.4
—
0.8
25.0 %
2.8
(2.8 )
—
4.1
(7.6 )
1.0
30.2 %
3.5
(2.5 )
(3.4 )
0.6
—
0.8
34.0 %
On December 22, 2017, H.R. 1, known as the Tax Cuts and Jobs Act (the “Tax Act”), was signed into law.
Among other things, the Tax Act permanently lowered the corporate tax rate to 21% from the prior maximum rate of
35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate
tax rate to 21%, we re-valued our deferred tax assets and liabilities as of the date of enactment, with resulting tax
effects accounted for in the reporting period of enactment. This change in the statutory tax rate resulted in reduction
in income tax expense being recognized of $3.6 million in the fourth quarter of fiscal year 2018 due to the
adjustment of deferred tax liabilities based on the expected prevailing tax rate at the expected time of their
realization.
F-27
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred taxes are recorded to give recognition to temporary differences between the tax basis of assets and
liabilities and their reported amounts in the financial statements. The tax effects of these temporary differences are
recorded as deferred tax assets and deferred tax liabilities. Deferred tax assets generally represent items that can be
used as a tax deduction or credit in future years. Deferred tax liabilities generally represent items that have been
deducted for tax purposes, but have not yet been recorded in the consolidated statements of operations. To the
extent there are deferred tax assets that are more likely than not to be realized, a valuation allowance would not be
recorded. The components of deferred income tax assets and liabilities are summarized as follows (in thousands) for
fiscal years ended:
Deferred tax assets
Allowance for doubtful receivables
Inventories
Employee compensation and benefits
Pension and noncurrent employee compensation
benefits
Net operating loss and foreign tax credits
Stock options
Total deferred tax assets
Deferred tax liabilities
Property, plant and equipment
Goodwill and other intangible assets
Property tax
Other
Total deferred tax liabilities
Net deferred income tax liabilities
2019
2018
204 $
924
820
2,653
429
326
5,356 $
255
738
703
2,888
429
285
5,298
5,485 $
10,710
59
—
16,254 $
10,898 $
4,140
7,158
158
31
11,487
6,189
$
$
$
$
$
As of the fiscal year ended 2019, the Company has federal net operating loss carry forwards of approximately
$84,000 expiring in fiscal years 2024 through 2025. Based on historical earnings and expected sufficient future
taxable income, management believes it will be able to fully utilize the net operating loss carry forwards.
Accounting standards require a two-step approach to determine how to recognize tax benefits in the financial
statements where recognition and measurement of a tax benefit must be evaluated separately. A tax benefit will be
recognized only if it meets a “more-likely-than-not” recognition threshold. For tax positions that meet this
threshold, the tax benefit recognized is based on the largest amount of tax benefit that is greater than 50 percent
likely of being realized upon ultimate settlement with the taxing authority.
At fiscal year-end 2019 and 2018, unrecognized tax benefits related to uncertain tax positions, including accrued
interest and penalties of $120,000 and $141,000, respectively, are included in other liabilities on the consolidated
balance sheets and would impact the effective rate if recognized. For fiscal year 2019, the unrecognized tax benefit
includes an aggregate of $1,000 of interest expense. Approximately $1,000 of unrecognized tax benefits relate to
items that are affected by expiring statutes of limitations within the next 12 months. A reconciliation of the change
in the unrecognized tax benefits for fiscal years ended 2019 and 2018 is as follows (in thousands):
Balance at March 1, 2018
Additions based on tax positions
Reductions due to lapses of statues of limitations
Balance at February 28, 2019
2019
2018
$
$
141 $
26
(47 )
120 $
249
(25 )
(83 )
141
The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions and foreign
tax jurisdictions. The Company has concluded all U.S. federal income tax matters for years through 2014. All
F-28
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
material state and local income tax matters have been concluded for years through 2014 and foreign tax jurisdictions
through 2014.
The Company recognizes interest expense on underpayments of income taxes and accrued penalties related to
unrecognized non-current tax benefits as part of the income tax provision. Other than amounts included in the
unrecognized tax benefits, the Company did not recognize any interest or penalties for the fiscal years ended 2019,
2018 and 2017.
(14) Earnings per Share
Basic earnings (loss) per share have been computed by dividing net earnings (loss) by the weighted average number
of common shares outstanding during the applicable period. Diluted earnings (loss) per share reflect the potential
dilution that could occur if stock options or other contracts to issue common shares were exercised or converted into
common stock.
The following table sets forth the computation for basic and diluted earnings (loss) per share for the fiscal years
ended:
Basic weighted average common shares outstanding
Effect of dilutive options
Diluted weighted average common shares outstanding
Earnings (loss) per share - basic and diluted
Earnings per share on continuing operations
Earnings (loss) per share on discontinued operations
Net earnings
Cash dividends
2019
2018
25,829,804 25,391,998 25,734,667
14,518
25,842,179 25,417,244 25,749,185
12,375
25,246
2017
$
$
$
1.45 $
—
1.45 $
0.875 $
1.29 $
0.01
1.30 $
0.875 $
1.03
(0.96 )
0.07
2.20
The Company treats unvested share-based payment awards that contain non-forfeitable rights to dividends or
dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of
earnings per share. Our unvested restricted shares participate on an equal basis with common shares; therefore,
there is no difference in undistributed earnings allocated to each participating security. Accordingly, the
presentation above is prepared on a combined basis. At fiscal year-end 2017, 42,500 stock options were excluded
from the calculation above, as their effect would be anti-dilutive. For fiscal years 2019 and 2018, all options were
included in the diluted earnings per share computation because the average fair market value of the Company’s
stock exceeded the exercise price of the options.
(15) Commitments and Contingencies
The Company leases certain of its facilities under operating leases that expire on various dates through fiscal year
ended 2027. Future minimum lease commitments under non-cancelable operating leases for each of the fiscal years
ending are as follows (in thousands):
Operating
Lease
Commitments
5,586
$
3,783
2,607
2,108
1,619
2,431
18,134
$
2020
2021
2022
2023
2024
Thereafter
F-29
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rent expense attributable to such leases totaled $5.9 million, $5.3 million, and $4.3 million for the fiscal years ended
2019, 2018 and 2017, respectively.
In the ordinary course of business, the Company also enters into real property leases, which require the Company as
lessee to indemnify the lessor from liabilities arising out of the Company’s occupancy of the properties. The
Company’s indemnification obligations are generally covered under the Company’s general insurance policies.
From time to time, the Company is involved in various litigation matters arising in the ordinary course of business.
The Company does not believe the disposition of any current matter will have a material adverse effect on its
consolidated financial position or results of operations.
(16) Supplemental Cash Flow Information
Net cash flows from operating activities reflect cash payments for interest and income taxes, as well as the noncash
reclassification of the income tax effects associated with the Tax Act, are as follows for the three fiscal years ended
(in thousands):
Supplemental disclosure of cash flow information
Interest paid, net
Income taxes paid, net
2019
2018
2017
$
$
1,109 $
9,866 $
731 $
15,468 $
853
975
Noncash investing and financing activities
Reclassification of the income tax effects of the Tax Act
$
— $
2,847 $
—
(17) Quarterly Consolidated Financial Information (Unaudited)
The following table represents the unaudited quarterly financial data of the Company for fiscal years ended 2019
and 2018 (in thousands, except per share amounts and quarter over quarter comparison):
For the three months ended
Fiscal year ended 2019:
Net sales
Gross profit margin
Net earnings
Dividends paid
Per share of common stock:
Basic net earnings
Diluted net earnings
Dividends
Fiscal year ended 2018:
Net sales
Gross profit margin
Net earnings
Dividends paid
Per share of common stock:
Basic net earnings
Diluted net earnings
Dividends
(18) Concentrations of Risk
May 31
August 31 November 30 February 28
$ 93,419 $ 98,591 $ 108,070 $ 100,702
29,091
30,191 30,323
8,204
9,247 9,567
5,878
5,083 5,728
33,755
10,419
5,922
0.37 $
0.36 $
0.37 $
$
$
0.37 $
$ 0.200 $ 0.225 $
0.40 $
0.40 $
0.225 $
0.32
0.32
0.225
$ 94,590 $ 94,887 $
29,992 30,859
7,784 8,540
4,468 5,084
93,606 $ 87,088
26,395
29,956
8,160
8,274
7,625
5,083
0.31 $
0.31 $
0.34 $
$
0.34 $
$
$ 0.175 $ 0.200 $
0.33 $
0.33 $
0.200 $
0.32
0.32
0.300
Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of
cash and trade receivables. Cash is placed with high-credit quality financial institutions. The Company believes its
credit risk with respect to trade receivables is limited due to industry and geographic diversification. As disclosed on
F-30
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the Consolidated Balance Sheets, the Company maintains an allowance for doubtful receivables to cover the
Company’s estimate of credit losses associated with accounts receivable.
No single customer accounts for as much as five percent of the Company’s consolidated net sales or accounts
receivable.
The Company, for quality and pricing reasons, purchases its paper products from a limited number of suppliers.
While other sources may be available to the Company to purchase these products, they may not be available at the
cost or at the quality the Company has come to expect.
For the purposes of the Consolidated Statements of Cash Flows, the Company considers cash to include cash on
hand and in bank accounts. The Federal Deposit Insurance Corporation (“FDIC”) insures accounts up to $250,000.
At February 28, 2019, cash balances included $86.0 million that was not federally insured because it represented
amounts in individual accounts above the federally insured limit for each such account. This at-risk amount is
subject to fluctuation on a daily basis. While management does not believe there is significant risk with respect to
such deposits, we cannot be assured that we will not experience losses on our deposits.
(19) Subsequent Events
On March 16, 2019, the Company, through one of its subsidiaries, acquired the assets of Integrated Print & Graphics
of South Elgin, Illinois, for approximately $8.8 million in cash plus the assumption of trade payables and subject to
certain adjustments. The acquisition of Integrated will enable the Company to provide additional capabilities to its
product line and its focus on high color commercial print to the direct mail channel is consistent with the Company’s
model.
desire
Company’s
throughout
business
product
expand
line
this
the
to
F-31
Subsidiaries of the Registrant
Exhibit 21
The Registrant directly or indirectly owns 100 percent of the outstanding voting securities of the following
subsidiary companies.
Name of Company
Jurisdiction
Ennis, Inc.
Ennis Business Forms of Kansas, Inc.
Calibrated Forms Co., Inc.
Print Your Marketing, Inc.
Admore, Inc.
PFC Products, Inc.(1)
Ennis Acquisitions, Inc.
Texas EBF, LP
Ennis Sales, LP
Ennis Management, LP
Adams McClure, LP
American Forms I, LP
Northstar Computer Forms, Inc.
General Financial Supply, Inc. (2)
Crabar/GBF, Inc.
Royal Business Forms, Inc.
Tennessee Business Forms Company
TBF Realty, LLC (3)
Specialized Printed Forms, Inc.
SPF Realty, LLC (4)
Block Graphics, Inc.
B&D Litho of Arizona, Inc.
Skyline Business Forms, Inc.
Skyline Business Properties, LLC (5)
Kay Toledo Tag
Specialized Service Partners
American Paper Converting LLC
Independent Printing Company, Inc.
Wright Business Graphics LLC
Texas
Kansas
Kansas
Delaware
Texas
Delaware
Nevada
Texas
Texas
Texas
Texas
Texas
Minnesota
Iowa
Delaware
Texas
Tennessee
Delaware
New York
Delaware
Oregon
Delaware
Delaware
Delaware
Ohio
Wisconsin
Ohio
Delaware
Oregon
(1) A wholly-owned subsidiary of Admore, Inc.
(2) A wholly-owned subsidiary of Northstar Computer Forms, Inc.
(3) A wholly-owned subsidiary of Tennessee Business Forms, Inc.
(4) A wholly-owned subsidiary of Specialized Printed Forms, Inc.
(5)
wholly-owned
subsidiary
of
A
Skyline
Business
Forms,
Inc.
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated May 6, 2019, with respect to the consolidated financial statements and internal
control over financial reporting included in the Annual Report of Ennis, Inc. on Form 10-K for the year ended
February 28, 2019. We consent to the incorporation by reference of said reports in the Registration Statements
of Ennis, Inc. on Forms S-8 (File No. 333-38100, File No. 333-44624 and File No. 333-175261).
Exhibit 23
/s/ GRANT THORNTON LLP
Dallas, Texas
May 6, 2019
RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Exhibit 31.1
I, Keith S. Walters, certify that:
1.
I have reviewed this annual report on Form 10-K of Ennis, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual report;
4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13-15(f) and 15d-15(f) for the Registrant and we
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this annual report based on such evaluation; and
d) Disclosed in this annual report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting; and
5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Registrant's internal control over financial reporting.
/S/ KEITH S. WALTERS
Keith S. Walters
Chairman of the Board, Chief Executive Officer and President
May 6, 2019
RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER
Exhibit 31.2
I, Richard L. Travis, Jr., certify that:
1)
I have reviewed this annual report on Form 10-K of Ennis, Inc.;
2) Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this annual report;
3) Based on my knowledge, the financial statements, and other financial information included in this annual
report, fairly present in all material respects the financial condition, results of operations and cash flows of
the Registrant as of, and for, the periods presented in this annual report;
4) The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13-15(f) and 15d-15(f) for the Registrant and we
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this annual report based on such evaluation; and
d) Disclosed in this annual report any change in the Registrant’s internal control over financial reporting
that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
Registrant’s internal control over financial reporting; and
5) The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's
board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the Registrant's internal control over financial reporting.
/S/ RICHARD L. TRAVIS, JR.
Richard L. Travis, Jr.
Vice President - Finance and Chief Financial Officer
May
6,
2019
Exhibit 32.1
SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Keith S. Walters, Chairman of the Board and Chief Executive Officer of Ennis, Inc. (the “Company”), certify,
that pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code:
(1) The Company’s Annual Report on Form 10-K for the year ended February 28, 2019, as filed with the
Securities Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) Information contained in the Report fairly presents, in all material respects, the financial condition and
result of operations of the Company as of the dates and for the periods expressed in the Report.
/S/ KEITH S. WALTERS
Keith S. Walters
Chairman of the Board, Chief Executive Officer and President
May 6, 2019
The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350; it is not being filed for
purposes of Section 18 of the Securities Exchange Act, and is not to be incorporated by reference into any filing
of the Company, whether made before or after the date hereof, regardless of any general incorporation
filing.
languages
such
in
Exhibit 32.2
SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Richard L. Travis, Jr., Chief Financial Officer of Ennis, Inc. (the “Company”), certify, that pursuant to Section
1350 of Chapter 63 of Title 18 of the United States Code:
(1) The Company’s Annual Report on Form 10-K for the year ended February 28, 2019, as filed with the
Securities Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) Information contained in the Report fairly presents, in all material respects, the financial condition and
result of operations of the Company as of the dates and for the periods expressed in the Report.
/S/ RICHARD L. TRAVIS, JR.
Richard L. Travis, Jr.
Vice President – Finance and Chief Financial Officer
May 6, 2019
The foregoing Certification is being furnished solely pursuant to 18 U.S.C. Section 1350; it is not being filed for
purposes of Section 18 of the Securities Exchange Act, and is not to be incorporated by reference into any filing
of the Company, whether made before or after the date hereof, regardless of any general incorporation
languages in such filing.
Financial & Other Company Information
Outside Corporate Counsel
Copies of our fi nancial information, such as this Annual
Report on Form 10-K and our Proxy Statement to our
shareholders, as fi led with the Securities and Exchange
Commission (SEC), Quarterly Reports on Form 10-Q, and
other fi lings with the SEC may be viewed or downloaded
from the Company’s website: www.ennis.com
Alternatively, you can order copies, free of charge, by
contacting Ms. Sharlene Reagan – Executive Assistant to
our Vice President of Finance at:
sharlene_reagan@ennis.com
Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held on
July 18, 2019, beginning at 10:00 a.m., local time. The
meeting will take place at the Midlothian Conference
Center located at One Community Circle, Midlothian,
Texas 76065.
Common Stock
Ennis, Inc. common stock is listed on the New York Stock
Exchange under the ticker symbol “EBF.”
As of April 30, 2019, there were approximately 26.1 million
shares outstanding and approximately 707 shareholders
of record.
Fiscal Year 2019 Stock Closing
Price Performance
$22.75
High:
$17.45
Low:
Close (2/28/19) $21.20
Number of Employees
Dorsey & Whitney, LLP
Shareholder Services
Computershare Investor Services, LLC
Certifi cations
Ennis has fi led with the SEC as exhibits to its Annual
Report on Form 10-K for the year ended February 28,
2019, the certifi cation of each of its Chief Executive
Offi cer and Chief Financial Offi cer required by Section
302 of the Sarbanes-Oxley Act. In addition, Ennis has
submitted to the New York Stock Exchange the required
certifi cation of the Chief Executive Offi cer with respect to
Ennis’ compliance with the New York Stock Exchange’s
corporate governance listing standards.
Caution Concerning Forward-
Looking Statements
This document includes certain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are
based on management’s current expectation and are
subject to uncertainty and changes in circumstances.
Actual results may vary materially from the expectations
contained herein due to changes in economic, business,
competitive, technology, strategic and or regulatory
factors. More detailed information about these factors
is set forth in our Quarterly Reports on Form 10-Q, as
fi led with the SEC, and in this Annual Report on Form
10-K under the caption “Certain Risk Factors.” Ennis
is under no obligation to [and expressly disclaims any
such obligation to] update or alter its forward-looking
statements, whether as a result of new information,
subsequent events or otherwise.
More than 2,438 worldwide at February 28, 2019
Corporate Publications
Corporate Address
2441 Presidential Parkway
Midlothian, Texas 76065
Investor Relations
Keith S. Walters
Chairman of the Board, CEO and President
2441 Presidential Parkway
Midlothian, Texas 76065
(800) 752-5386
keith_walters@ennis.com
Independent Accountants
Grant Thornton, LLP
Copies of Ennis, Inc.’s Annual Report on Form 10-K
(excluding exhibits) and other fi lings with the SEC are
available without charge upon written request to Ennis,
Inc., 2441 Presidential Parkway, Midlothian, Texas 76065,
Attn: Investor Relations, or by email: investor@ennis.com.
All such filings are also available on our website:
www.ennis.com/about/investor-relations/
Trademark Information
All trademark and service marks referenced herein are
owned by the respective trademark or service mark
owners.
OM111
Ennis, Inc.
Corporate Headquarters
2441 PRESIDENTIAL PKWY (cid:129) MIDLOTHIAN, TX 76065
ENNIS.COM
Designed by Ennis National Marketing.
Printed by Independent Printing, a division of Ennis, Inc. located in De Pere, WI.