Ennis Board of Directors
Keith S. Walters
Chairman of the Board, CEO and President of Ennis, Inc.
Gary S. Mozina
Chief Executive Officer of Stevenson Holdings, Inc.
Frank D. Bracken
Retired and Former President of Haggar Corp.
Troy L. Priddy
President of Troy Priddy Custom Homes
John R. Blind
Retired and Former Vice President of the Printing and Carbonless
Division of the Specialty Papers Business Unit of Glatfelter
Alejandro Quiroz
Chairman of the Board, President and CEO of InveStore
Barbara T. Clemens
Retired and Former Vice President of Sales and Customer
Service for Boise Paper, a division of Packaging Corporation
of America
Godfrey M. Long, Jr.
Former Director of Graphic Dimensions and Former Chairman
and CEO of Short Run Companies
Michael J. Schaefer
Retired and Former Executive Vice President, CFO and
Treasurer of Methodist Health Systems
Ennis Corporate Executive Officers
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 Officer 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
I usually talk about last year’s
challenges and events in
these letters, but this is far
from a normal year. The
current environment proves
how quickly the past can
become less relevant with
the news since the end of
our fiscal year. What has
occurred in the first quarter
of this calendar year has not
occurred for a hundred years
in both The United States and
the rest of The World. Ennis
Business Forms (Ennis Inc.) began in 1909. The
business was founded before The First World War
and the onset of the Spanish Flu in 1918. World War
I impacted forty million people and caused eighteen
million deaths. The Spanish Flu, coming from a
barracks in Kansas, ultimately infected five hundred
million people worldwide, and killed twenty to fifty
million people. Those terrible statistics demonstrate
that the world population and its economy have
lived through worse impacts than the current
coronavirus crisis. Ennis Business Forms survived
and grew through both of those almost simultaneous
events. The focus of this management and board
is to grow the company through acquisitions and
sound operational management, notwithstanding
the COVID-19 pandemic. We believe this allows
us to maintain our dividend by continuing our best
in class operational excellence. We will continue
to bring value to all of our shareholders for many
years to come. I do, however, want to focus on our
acquisitions and M&A strategy briefly.
Acquisitions
Acquisitions
During this fiscal year we continued our pattern
of adding companies to our organization. As we
indicated last year, we signed and closed on the
Integrated Print & Graphics business in South
Elgin, Illinois. This company brought us access to
the greater Chicago metropolis which was an Ennis
goal for some time. Their facility was beneficial
in that it added more long-run capabilities to our
product lines and increased our collection of plants
providing direct mail operations. Historically Ennis
has not pursued longrun markets as the very large
public companies often filled that market niche.
My past letters have made comments on that
dynamic. Today we are seeing new opportunities
for us in those markets as many of the large
public companies have or are facing financial
difficulties. In some cases, the large printers have
moved to a different strategy as a market service
provider and choosing to outsource part or all of
the printing work.
“
This company brought us
access to the greater Chicago
metropolis which was an
Ennis goal for some time.
”
During the summer of 2019 we had the opportunity
to acquire a printing company almost as old as
Ennis, The Flesh Company (Flesh). Ennis acquired
the stock of Flesh and its subsidiary, Impressions
Direct, in July along with thirty-one million dollars in
sales. Their facilities added another printing location
in Parsons, Kansas, and a direct mail operation in
Fenton, Missouri. We now have five locations in the
state of Kansas and our second in Missouri. Flesh
provides much of the basic transactional printing
we have at other Ennis locations, but also expanded
our integrated forms and labels product line. These
products are used heavily by the medical industry
ennis.com | 3
and have stayed relatively busy through the current
business environment.
We also completed a tuck-in acquisition of Ace
Business Forms soon after the Flesh acquisition.
Ace Business Forms, which was located in
Pittsburg, Kansas was moved to several of our
other Kansas locations.
Mergers & Acquisition Strategy
Mergers & Acquisition Strategy
We have had several requests from shareholders
to review our current acquisition strategy since the
divestiture of the apparel facilities. The information
could be helpful in understanding how we approach
inter-relationship to our
acquisitions and the
business divestiture of the apparel product lines.
As longer term shareholders may recall, we sold
Alstyle Apparel in May of 2016 for $105 million.
Our business discussions with Mexican authorities
were often not conducted in a manner consistent
with our principles of business. We decided that
many of these issues in the Mexican business
environment made this an investment our board and
management no longer found comfortable. This
led to the decision to sell our Alstyle properties to
Gildan Activewear, which generated significant cash
from the sale. The transaction reduced our sales by
$183 million but added cash of over $100 million to
our balance sheet. The plan was to redeploy those
proceeds back into domestic printing businesses
at reasonable prices. Over the next three years we
added seven printing businesses with $159 million
in sales and redeployed $63 million of the cash we
received into the print business. As our most recent
Form 10-K indicates, we still have a $68 million
cash balance. Obviously having such balance of
cash, and no long-term debt, is extremely valuable
in the current situation.
The lack of debt brings up another point about our
acquisition philosophy. Since 1996, The Company
4
has acquired fifty-seven print companies of varying
sizes. We would generally be referred to as a roll-
up company, which is defined as a company who
buys smaller companies to achieve greater scale
in a fragmented market. The fact that we sit
with so many acquisitions and have no long-term
debt is a highly unusual set of circumstances.
Many companies have gone through such a roll-
up strategy only to be hampered by too much
debt, or crushed if the implementations do not
go as planned. It has been noted by some in the
M&A arena that there are three factors to being
successful with a roll-up strategy.
First, the most successful roll-ups target large,
yet highly fragmented industries with no dominant
players. In 1996 there were quite a few direct to
market players, (those manufacturers who dealt
directly with the end user) but no one who, at
that time, dominated the market in the indirect
marketplace. Our channel to market, (indirect
channel) is defined as selling through distributors
and resellers. Over time the direct players have
merged, or were bought by other players leaving
less direct printing companies. Ennis was still small
relative to the direct manufacturers and there
were a number of indirect manufacturers with
similar size to Ennis. This market was a large and
fragmented industry channel of indirect players
who often attempted to compete against Ennis by
forming buying groups to achieve scale without the
acquisitions. None of these buying groups have
survived the test of time.
Since 1996, The Company
has acquired fifty-seven print
companies of varying sizes.
Second, the consolidator needs to have a proven
operational formula that can be applied to acquired
”
“
companies in order to create value as opposed to
destroying it. Since the first acquisitions in 1997 to
the current day, we always look for ways to bring
better material pricing, better operational skills,
better personnel choices, and migrate the acquired
business into our enterprise reporting system (ERP)
as soon as possible. Our (ERP) system is invaluable
to improve the acquired company’s bottom line.
That task must be performed timely as many of
the acquired companies are actually marginally
profitable if profitable at all. The first task is to get
their production standards to accurately reflect
reality of the operation. While our scale generally
allows us to lower many of the acquired company’s
costs, we unfortunately commonly find the facilities
have never had an accurate picture of their full
costs. Once they have the costs defined correctly,
our quoting system can be quickly installed. We
have always been able to improve our margins
once we get a business set up under our ERP and
quoting system.
Our due diligence process requires us to have at
least half of the implementation plan of the target
company identified prior to closing. We will pass on
a potential acquisition as too high risk to being non-
accretive if we cannot see adequate improvement in
our pre- acquisition planning. Too many acquisitions
or mergers outline the creation of synergies over a
multi-year period. We want to see enough within
the first year to justify the expenditure of the
shareholders’ funds. Of course we want to build on
that going forward. In our opinion, in an industry
such as printing with continual decline in revenue,
acquisitions need to pay off today, not theoretical
years from now.
Our goal is to be an opportunistic buyer. Thus we
can’t always forecast when a deal might come
along that makes sense to us. We try to enter into
a contract and close as quickly as possible, if it can
be acquired for a reasonable price, and we can
deliver the potential within a very short time frame.
Discipline must be constantly enforced as it is easy
to “fall in love” with a deal as market pressure to
grow revenue is always present. If you forget your
disciplines and pay too much just to appease
outside factors, our core principles will suffer and
endanger our margins. We have seen too many
companies let the “need to grow” overshadow the
financial integrity necessary to avoid building up
enormous quantities of intangible value and debt
on their balance sheet.
Next Year
Next Year
The success of our acquisitions, the cash position
of The Company and the complete pay-down of our
long-term debt, have given us the strongest balance
sheet in the printing industry. The debt that you see
on our balance sheet is actually the lease costs of
some facilities. This is placed here due to a change
in how the accounting community wants this cost
classified. While we don’t anticipate any need to
use it, we did extend our $100 million credit facility
into next year as an additional resource should a
larger than normal acquisition opportunity arise.
In the last three years we have seen three of the
largest printers in the industry go into Chapter 11
and be acquired by private investors or companies.
In all cases excessive debt was the primary factor
which forced them to restructure and caused their
shareholders to lose their value.
Third, the platform needs a disciplined and proven
approach to finding, evaluating and integrating
targets. Being a disciplined buyer is easier said
than done but it can be boiled down to FOCUS.
The slide in the stock market this year and the
decline in the price of oil in such a short time are
reminiscent of The Great Depression. The COVID-19
pandemic has brought the world’s economic engine
to a standstill. National and local governments
ennis.com | 5
“
are only now thinking about a staged re-ignition
of the economic engine to avoid the likelihood of
slipping back into a disease growth model in the
fall. The Spanish Flu of March 1918 declined only
to reappear in the fall of 1918 even stronger than
before. The event which caused such a world-wide
effect was the shipment of U.S. soldiers to Europe,
who carried the virus with them. In our case it
was the free travel of people from many countries
visiting the Wuhan Province of China. Hopefully
history will not repeat itself in the 2020 COVID-19
crisis. It is difficult to predict today how the world’s
governments will react in managing our economies
if the world sees a re-occurrence this fall. Will we
see a second shutdown of business activity? We
plan to manage Ennis to survive and thrive in any
foreseeable model.
”
We plan to manage Ennis
to survive and thrive in any
foreseeable model.
While all of this is interesting, of more significance
to our shareholders is the impact of this pandemic
on The Company today. In 2001 the United States
created The Critical Infrastructure Sector Program
as part of The Department of Homeland Security.
Ennis found that our company provides products
to every one of the sixteen sectors outlined
as critical by Homeland Security. In addition,
Homeland Security has designated Printing as a
critical industry, which allows all of our plants to
remain open. A very small number of plants have
slowed to a point that we have “mothballed” the
plant by furloughing the employees. The work was
temporarily moved to other nearby facilities. Other
plants will continue to operate with fewer shifts,
fewer work days, and fewer employees. There are
some plants whose products are in such demand
that they have increased production to meet the
demand from industries which have boomed
during this pandemic period. In every plant we have
implemented “social distancing” and wear masks
where appropriate. While we ensure the safety of
our employees, we also perform a critical service
which requires us to continue to produce products
during this pandemic.
Our goal is to continue to operate efficiently and
profitably, generating operating cash flow as we
work through this pandemic. We cannot anticipate
when the economy will totally revive itself. Our
balance sheet is strong enough that we will require
no assistance from The Federal Government or
The Federal Reserve. We believe that we can
continue to generate operating profits during
this turmoil, and that we will use such profits to
continue our current dividend program. We have
the bank credit line as a potential source of cash
should acquisition opportunities arise. We don’t
envision cutting the dividend given our current
cash position. All of the forecast models we have
tested lead us to believe the statements made
above are safe. As our earlier management and
board led in Ennis of 1918, we anticipate coming
out of this period financially solid and possibly with
greater opportunities for acquisitions.
Highlights of the Past Year
Highlights of the Past Year
and Final Quarter
and Final Quarter
• Revenues increased $6.0 million, or 6.0% for
the comparative quarter, and $37.6 million, or
9.4%, for the comparative fiscal year.
• Earnings per diluted share for the current
quarter were $0.33 compared to $0.32 for
the comparative quarter last year. Earnings
per diluted share were $1.47 for the fiscal year
as compared to $1.45 for the last fiscal year.
• Our plants are essential to the supply chain
and are currently functioning.
6
decide when we can watch sporting events, go out
to eat, see a movie, have political conventions and
ultimately vote on our elected officials.
All of this is just background noise to the
responsibilities of The Ennis Management Team.
We must try to maintain a normal work environment
for our vendors, sales force, plants, and our
customers. If we get caught in too much of the
chatter we will lose FOCUS. We are attempting
to not get wrapped up in the collateral damage
that has affected so many people during the
COVID-19 pandemic. We intend to push a business
as usual attitude in our plants and not take on a
“victim mentality.” We will keep reminding people
that we are open for business and continue to
become innovative in finding work from those
available sectors who are still operating and need
our products. We will manage social distancing in
the context of a company that is critical to other
sectors, and keep our plants open.
We have survived for more than a hundred years
and we will focus on surviving for another hundred
years. We appreciate your support of The Company
and will do our best to keep your investment safe.
Keith S. Walters
Chairman of the Board, President & CEO
Financial Overview
Financial Overview
The Company’s revenues for the fourth quarter
ended February 29, 2020 were $106.7 million
compared to $100.7 million for the same quarter
last year, an increase of 6.0%. Gross profit margin
(margin) was $29.9 million for the quarter, or
28.1%, as compared to $29.1 million, or 28.9%
for the fourth quarter last year. Net earnings for
the quarter were $8.5 million, or $0.33 per diluted
share, compared to $8.2 million, or $0.32 per
diluted share, for the fourth quarter last year.
The Company’s revenues for the fiscal year ended
February 29, 2020 were $438.4 million compared
to $400.8 million for the prior fiscal year, an
increase of 9.4%. Margin for the fiscal year was
$128.9 million, or 29.4%, as compared to $123.4
million, or 30.8% for the prior fiscal year. Net
earnings for the fiscal year were $38.3 million, or
$1.47 per diluted share compared to $37.4 million
or $1.45 per diluted share for the prior fiscal year.
Special Recognition
Special Recognition
Frank Bracken has served on the Ennis Board since
2008. The age limitation of our Board procedures
prevents Frank from continuing another term. We
thank Frank for his service and wish him well.
interaction of
Closing Comments
Closing Comments
Every day we are barraged with the COVID-19
statistics indicating cases, deaths and recoveries.
The
the economic slowdown
ripples through various sectors having disastrous
implications for some businesses. The Oil Industry
has been pummeled by excess production from two
large producers and the global decline in energy
consumption due to the “stay at home” orders by
many governments around the world. The non-
essential businesses have run through billions of
dollars of government money and we still have to
ennis.com | 7
Financial Highlights
WORKING CAPITAL
— in millions —
LONG-TERM DEBT
— in millions —
CURRENT RATIO
— to 1.0 —
LONG-TERM DEBT TO EQUITY RATIO
— to 1.0 —
Selected Consolidation Financial Data
from Continuing Operations
Net Sales
Gross profit 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
Fiscal Year Ended
(Dollars and shares in thousands, except per share amounts)
2020
$438,412
128,924
51,251
38,292
1.47
1.47
.900
26,036
26,036
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
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended February 29, 2020
OR
☐ 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 ☐ No ☒
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 ☐ No ☒
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 ☒ No ☐
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 ☒ No ☐
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.
☐
☐
☐
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. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of voting stock held by non-affiliates of the Registrant as of August 31, 2019 was approximately $507 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 27, 2020 was 26,099,594.
Portions of the Registrant’s Proxy Statement for the 2020 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 29, 2020
TABLE OF CONTENTS
PART I:
Item 1
Business ...........................................................................................................................................
Item 1A Risk Factors .....................................................................................................................................
Item 1B Unresolved Staff Comments ...........................................................................................................
Properties .........................................................................................................................................
Item 2
Item 3
Legal Proceedings ...........................................................................................................................
Item 4 Mine Safety Disclosures .................................................................................................................
PART II:
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ...................................................................................................
Item 6
Selected Financial Data ...................................................................................................................
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations .........
Item 7A Quantitative and Qualitative Disclosures about Market Risk .........................................................
Item 8
Consolidated Financial Statements and Supplementary Data .........................................................
Item 9
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .........
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 .........................................................................................
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14
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14
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17
27
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29
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PART IV:
Item 15 Exhibits and Financial Statement Schedules ...................................................................................
Signatures ........................................................................................................................................
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; the impact of the novel coronavirus (COVID-19)
pandemic or future pandemics on the U.S. and local economies, our business operations, our workforce, our supply
chain and our customer base; 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 including measures intended to minimize the impact of
COVID-19.
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 distributors. 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.
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 61 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.
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 Graphics®, TRI-C Business
FormsSM, Major Business SystemsSM, Independent PrintingSM, Hoosier Data Forms®, Hayes Graphics®, Wright
Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM, Impressions DirectSM, and
Ace FormsSM. 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 independent distributors, as well as to many of our competitors. Northstar
Computer Forms, Inc., one of our wholly-owned subsidiaries, 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 distributors.
4
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 distributors, 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.
Recent Acquisitions
We have completed a number of acquisitions in recent years. On July 15, 2019, we acquired all the outstanding
stock of The Flesh Company (“Flesh”) for approximately $9.9 million (which includes potential earn-out
consideration of up to $500,000) plus the assumption of trade payables, subject to final working capital and certain
other adjustments. The earn-out consideration is capped at $500,000 and is payable over the four years following the
closing if certain minimum operating income levels are achieved. We recorded intangible assets with definite lives
of approximately $1.2 million in connection with the transaction. Flesh, together with its wholly owned subsidiary,
Impressions Direct, Inc. (“Impressions Direct”), is a printing company with two locations, with the St. Louis location
containing Flesh’s corporate office and the direct mail operations of Impressions Direct, and the Parsons, Kansas
location containing Flesh’s main manufacturing facility and warehouse. The acquisition of Flesh, which prior to the
acquisition generated approximately $31.0 million in sales for its fiscal year ended September 30, 2018, expands our
operations with respect to business forms, checks, direct mail services, integrated products and labels.
On March 16, 2019, we acquired the assets of Integrated Print & Graphics (“Integrated”), which is based in South
Elgin, Illinois, for $8.9 million in cash plus the assumption of trade payables, subject to certain adjustments. Goodwill
of $893,000 recognized as a part of the acquisition is deductible for tax purposes. We also recorded intangible assets
with definite lives of approximately $1.8 million in connection with the transaction. The acquisition of Integrated,
which prior to the acquisition generated approximately $20.0 million in sales for its fiscal year ended December 31,
2018, creates additional capabilities within our high color commercial print product line.
On July 31, 2018, we acquired, by way of a merger, all of the outstanding equity interests of Wright Business Forms,
Inc., d/b/a Wright Business Graphics (“Wright”), a printing company headquartered in Portland, Oregon with additional
locations in Washington and California. As partial consideration for the acquisition, we issued an aggregate of 829,126
shares of our common stock to the stockholders of Wright, valued at approximately $16.2 million at the time of issuance
under the merger agreement. An additional $19.7 million in cash was paid to the stockholders of Wright, subject to a
final working capital adjustment, and $2.6 million was paid to extinguish outstanding debt. The goodwill recognized as
a part of the transaction is not deductible for tax purposes. Wright produces forms, pressure seal, packaging, direct mail,
checks, statement processing and commercial printing and sells mainly through distributors and resellers. Wright, prior
to the acquisition, generated approximately $58.0 million in sales for its fiscal year ended March 31, 2018 and 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. Prior to the acquisition, ABTL generated approximately $12.0 million in sales
for the twelve months ended December 31, 2017. 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.
5
Patents, Licenses, Franchises and Concessions
Other than the patent for our VersaSeal® product, we do not have any significant patents, licenses, franchises, or
concessions.
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 Graphics®, TRI-C Business FormsSM, SSP®, EOSTouchpoint®, Printersmall®, Check
Guard®, Envirofolder®, Independent®, Independent Checks®, Independent Folders®, Independent Large Format
Solutions®, Wright Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM,
Impressions DirectSM, Ace FormsSM, MegaformSM, Safe®, and variations of these brands as well as other trademarks.
We have similar trademark registrations internationally.
Customers
No single customer accounts for as much as five percent of our consolidated net sales or accounts receivable.
Backlog
At February 29, 2020, our backlog of firm orders was approximately $21.8 million, compared to approximately
$22.5 million at February 28, 2019. Due to the impact of COVID-19 on all businesses, our backlog as of April 30,
2020 was $17.5 million.
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 2020, 2019 or 2018.
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 29, 2020, we had 2,505 employees. 242 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
6
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.
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 business may be adversely affected by the ongoing COVID-19 pandemic.
In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China, and by early 2020,
the virus had spread to other countries, including the United States. The COVID-19 pandemic is a significant threat
to the health and economic wellbeing affecting our customers, suppliers and workforce. Federal, state and local
authorities have recommended social distancing and have imposed, or are considering, quarantine and isolation
measures on large portions of the population, including mandatory closures of businesses deemed “non-essential” in
certain jurisdictions. As of the date of this Annual Report on Form 10-K, our plants are deemed “essential,” largely
due to our business’s support of many important sectors of the economy, including healthcare, government, food and
beverage and banking, and thus most of our plants are currently operating at close-to-normal utilization levels. As the
virus continues to evolve, however, authorities could take new steps to control the outbreak, which could result in the
determination that our plants are no longer “essential” and therefore must close, among other outcomes. Even if our
plants are not forced to close by government regulation, the virus, in addition to prolonged stay-at-home orders or
other related regulations, could depress consumer demand or disrupt our supply chain. Depending on these
developments and others, we may deem it necessary to close plants, furlough or lay off employees or take other cost-
cutting measures.
The extent of the impact of COVID-19 on our business and financial results will depend on future developments,
including the duration and spread of the outbreak within the markets in which we operate, the related impact on our
customers and suppliers and the possibility of an economic recession after the virus has subsided, all of which are
highly uncertain and ever-changing. Any of these factors could materially increase our costs, negatively impact our
sales and damage our results of operations and liquidity. The severity and duration of any such impacts, including
after the virus has subsided, cannot be predicted.
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. In particular, the ongoing COVID-19 pandemic
has negatively impacted local, national and worldwide economies, introduced extreme market volatility and,
depending on severity and duration, may potentially trigger a prolonged nationwide or global recession. Whether we
can manage these risks effectively depends on several factors, including (i) 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,
(ii) 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 and (iii) other factors, which may be beyond our control.
7
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, including due to the impact of the ongoing COVID-19 pandemic. 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 29, 2020, we were in compliance
with all terms and conditions of our credit facility, which matures on November 11, 2021.
Challenging 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 16%
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 $930,000. 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 tables could
potentially impact our funded status. As of February 29, 2020, the Pension Plan was 87.2% funded on a projected
benefit obligation (PBO) basis and 95.7% 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 strategic business plan as
acquisitions are part of our strategy to offset normal print attrition.
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 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, including due to the COVID-19 pandemic, another pandemic or some other event,
protracted recovery from poor market conditions, or other factors that may be tied to such negative economic events,
including changes to a competitor’s pricing strategies. To date, we have not been required to take an impairment
charge relating to our existing 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 impairment charge relating
to our existing business, but continued sale-side pressures due to technology 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.
8
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 29, 2020, our consolidated goodwill and other intangible assets were approximately $82.5 million and
$56.6 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.
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 29, 2020, 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,
9
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 currently purchase the majority of our paper products from one major supplier at favorable costs based on the
volume of business, and traditionally we have purchased our paper products from a limited number of suppliers, all
of which must meet stringent quality and on-time delivery standards under long-term contracts. Fluctuations in the
quality of our paper, unexpected price changes or other factors that relate to our suppliers could have a material adverse
effect on our operating results. In particular, the ongoing COVID-19 pandemic may make it more expensive or more
difficult to source raw materials for our products, whether from our existing suppliers or new suppliers, and these
challenges could negatively impact the cost or availability of our raw materials.
Paper is a commodity that is subject to frequent increases or decreases in price, and these fluctuations are
sometimes significant. Domestic paper prices have increased and decreased in recent years due to global market
conditions. 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 increase, 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, however, 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 shortage
in its availability, whether due to the COVID-19 pandemic, the strength of the U.S. dollar, changes in mill ownership
or other factors, could have a material adverse effect on our results of operations.
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,
10
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. In particular, the COVID-19 pandemic, and its impact on our customers, could have a negative
impact on our collection efforts. 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. Government regulations can and has impacted the availability
of drivers, which will be a significant challenge to 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
11
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. Additionally, the ongoing COVID-19 pandemic may result in temporary or permanent healthcare
reform measures, would could result in significant cost increases and other negative impacts to our business. 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. At the
beginning of the 2017 calendar year, the Company made significant changes to its medical reimbursement program
to address unexpected cost increases. Even with these remedial measures, which have been successful thus far,
medical costs will continue to be a significant expense to the Company and may increase due to factors 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, and we operate manufacturing facilities throughout
the United States. See the table below for additional information regarding our locations.
All of our properties are used for the production, warehousing and shipping of business products, including 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); and pressure seal products (Visalia, California; Chino, California and Clarksville, Tennessee).
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 our facilities are believed to be in good condition. We do not anticipate that substantial expansion,
refurbishing, or re-equipping of our facilities will be required in the near future.
All of our rented property is held under leases with original terms of one or more years, expiring at various times
through February 2027. Presently, we believe we will be able to maintain or renew leases as they expire without
significant difficulty.
Location
Ennis, Texas
Chatham, Virginia
Paso Robles, California
DeWitt, Iowa
Ft. Scott, Kansas
Portland, Oregon
General Use
Three Manufacturing Facilities *
Two Manufacturing Facilities
Manufacturing
Two Manufacturing Facilities
Manufacturing
Two Manufacturing Facilities
Approximate Square Footage
Owned
Leased
325,118
127,956
94,120
95,000
86,660
—
—
—
—
—
—
261,765
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Location
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
El Dorado Springs, Missouri
Princeton, Illinois
Arlington, Texas
Tullahoma, Tennessee
Caledonia, New York
Sun City, California
Livermore, California
Chino, California
Neenah, Wisconsin
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
South Elgin, Illinois
Parsons, Kansas
Fenton, Missouri
Corporate Offices
Ennis, Texas
Midlothian, Texas
General Use
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
Two Manufacturing Facilities
Two Manufacturing Facilities
Manufacturing
Two Manufacturing Facilities
Sales Office
Manufacturing
Two Manufacturing Facilities & One Warehouse
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
Manufacturing
Manufacturing & One Warehouse
Manufacturing**
Administrative Offices
Executive and Administrative Offices
Totals
*
22,000 square feet of Ennis, Texas location leased
** 21,477 square feet of Fenton, Missouri location leased
Approximate Square Footage
Owned
Leased
119,259
24,750
56,350
60,000
94,800
—
—
232,000
58,752
—
174,089
70,894
—
69,935
142,061
191,730
52,617
—
—
72,354
—
47,820
—
—
—
51,900
65,000
120,947
—
39,685
69,474
43,968
—
—
—
—
—
122,740
—
2,709,979
9,300
28,000
37,300
2,747,279
—
—
—
117,575
—
4,800
41,300
—
—
27,000
—
—
44,190
—
—
—
—
650
63,016
97,161
69,000
—
40,800
38,000
65,000
—
—
—
56,000
—
—
—
29,668
142,347
5,700
48,789
70,500
40,000
26,847
1,290,108
—
—
—
1,290,108
13
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.
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:
Common Stock Dividends
Trading Volume per share of
Common Stock Price Range (number of shares Common
High
in thousands)
Stock
Low
Fiscal Year Ended February 29, 2020
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended February 28, 2019
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
21.99 $
21.10
21.49
22.20
20.70 $
22.95
21.90
21.36
18.30
18.48
18.66
19.83
17.65
18.20
18.55
17.36
1,989 $
2,220 $
2,135 $
2,655 $
1,116 $
1,552 $
2,153 $
2,422 $
0.225
0.225
0.225
0.225
0.200
0.225
0.225
0.225
On April 27, 2020, the last reported sale price of our common stock on the NYSE was $17.82, and there were
approximately 718 shareholders of record.
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.
A dividend of $0.225 per share of common stock was paid in each quarter of fiscal year 2020. A dividend of $0.20
per share was paid in the first quarter of fiscal year 2019, and a dividend of $0.225 per share was paid in each
subsequent quarter of fiscal year 2019.
Our 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 in the aggregate. Under the repurchase program,
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. Repurchases may be commenced or suspended
at any time or from time to time without prior notice, provided that any purchases must be made in accordance with
applicable insider trading rules and securities laws and regulations. Since the program’s inception in October 2008,
we have repurchased 1,816,354 common shares under the program at an average price of $15.91 per share. During
our fiscal year 2020, we repurchased 126,330 shares of common stock at an average price of $19.56 per share. As of
February 29, 2020, $11.1 million remained available to repurchase shares of common stock under the program. No
additional shares of common stock were repurchased under the program in the three months ended February 29, 2020.
14
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, 2015 to
February 29, 2020.
2015
2016
2017
2018
2019
2020
Ennis, Inc.
S&P 500
Russell 2000
$ 100.00 $ 147.47 $ 137.68 $ 171.90 $ 195.21 $ 193.42
155.49
100.00
128.38
100.00
137.29
127.89
117.24
115.73
93.81
85.03
143.71
135.03
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
15
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 29, 2020. Our consolidated
financial statements and notes thereto as of February 29, 2020, February 28, 2019, and for the three years in the period
ended February 29, 2020, 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
2020
2019
2018
2017
2016
(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
$
$
$
$ 438,412 $ 400,782 $ 370,171 $ 356,888 $ 385,946
116,829
128,924 123,360 117,202
65,356
69,222
32,258
32,758
104,730
62,537
26,417
78,173
38,292
73,490
37,437
—
—
147
$ 38,292 $ 37,437 $ 32,905 $
(24,637 )
3,478
1,780 $ 35,736
1.47 $
—
1.47 $
0.90 $
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
26,036
26,036
25,830
25,842
25,392
25,417
25,735
25,749
25,688
25,722
$ 111,915 $ 134,542 $ 133,773 $ 119,282 $ 135,441
175,841
149,884 166,165 163,344
390,044
365,699 363,085 329,439
40,400
29,571
40,000
30,000
91,498
67,735
298,546
294,329 289,127 261,704
4.35 to 1.0
5.52 to 1.0
5.25 to 1.0
3.95 to 1.0
0.13 to 1.0
0.11 to 1.0
0.10 to 1.0
000 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
37,969
—
71,370
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.
16
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 covers the continuing operations of the Company, which are
comprised of the production and sale of business forms and other business products, and excludes the discontinued
operations of the Company, consisting of Alstyle Apparel, LLC and its subsidiaries (the “Apparel Segment”), which
the Company sold in May 2016. This Management’s Discussion and Analysis includes the following sections:
• Overview – An overall discussion regarding 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 2020, 2019 and 2018 refer to the fiscal years ended February 29, 2020, February 28, 2019 and
February 28, 2018, 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 – Our industry is currently experiencing consolidation of traditional supply 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 our supply chain in an
already over-supplied, price-competitive print industry. In addition to the risk factors discussed under the caption
“Risk Factors” in Item 1A of this Annual Report, some of the key challenges of our business include the following:
17
COVID-19 Pandemic – In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan,
China, and by early 2020, the virus had spread to other countries, including the United States. This pandemic has
significantly impacted health and economic conditions throughout the United States and the world, including the
markets in which we operate.
In response to COVID-19, federal, state and local authorities have recommended social distancing and have
imposed, or are considering, quarantine and isolation measures on large portions of the population, including
mandatory closures of businesses deemed “non-essential” in certain jurisdictions. As of the date of this Annual Report
on Form 10-K, our plants are deemed “essential,” largely due to our business’s support of many important sectors of
the economy, including healthcare, government, food and beverage and banking, and thus most of our plants are
currently operating at close-to-normal utilization levels. With respect to our plants that are underutilized, we have
made reductions in staffing levels as we deem appropriate, and we will continue to monitor the situation.
To date, the COVID-19 pandemic has not impacted, and we do not expect it to materially impact, the supply
chain for products we sell. Most of our products are sourced domestically from suppliers deemed “essential,” and
therefore in operation, and we have been able to switch from impacted suppliers to non-impacted suppliers in several
instances since the outbreak. However, if one or more of our major suppliers are negatively impacted by the COVID-
19 pandemic, through plant closures, deteriorating financial condition, or otherwise, it would adversely affect our
operational results and financial condition.
Currently, we do not expect the COVID-19 pandemic to have a material impact on our liquidity. As of February
29, 2020, we had over $68.0 million in cash and over $99.5 million available under our revolving credit facility, the
maturity date of which was recently extended to November 11, 2021. However, the ultimate impact of COVID-19 is
difficult to predict, including due to factors discussed under the caption “Risk Factors” in Item 1A of this Annual
Report on Form 10-K.
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 weakening of the U.S. dollar during
the latter portion of fiscal year 2018 and first half of fiscal year 2019 resulted in the dissipation of the pricing advantage
that foreign imports had held over domestic suppliers, which in turn led to lower volumes of imported paper and an
increase in domestic exports in fiscal year 2019. These factors give domestic paper producers more pricing power
since they can control the supply of paper by eliminating capacity or changing the products produced on their large
paper machines. Also during fiscal year 2019, significant production capacity left the market, whether planned, for
example due to the adoption of alternative paper products, or unplanned, for example due to bankruptcy.
Consequently, even with shrinking demand, a supply/demand imbalance resulted during the latter part of fiscal year
2019, with most mills running in excess of 90% of capacity across all grades. Given these levels, consistent with
historical practice, suppliers raised prices multiple times during the latter part of fiscal year 2019 and into the early
part of fiscal year 2020. These price increases occurred across all stages of the manufacturing process, from raw
materials to supplies. Additionally, some paper grades during fiscal year 2019 were placed on allocation 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 material disruptions to our supply chain during fiscal year 2019.
For fiscal year 2020, with the strengthening of the U.S. dollar, imports began to flow back into the domestic
marketplace. This development, along with continued slowing of domestic demand, resulted in renewed marketing
of certain paper grades that previously had been placed on allocation. Consequently, spot pricing became very
competitive. The uncoated paper market is relatively balanced currently, but overall demand remains weak, and mills
18
have dropped back to more normal operating levels. With more capacity shuts/conversions planned, we expect
operating rates to sustain in the lower 90% range. With declining demand expected to continue, combined with rising
imports, falling exports and a more balanced market, prices are expected to remain relatively stable until at least the
second half of fiscal year 2021, although the impact of the COVID-19 pandemic could reduce demand much faster
than the paper companies can adjust supply, thus impacting pricing. Coated paper demand has dropped considerably
and, even with several major capacity closures, operating rates are expected to remain low during the foreseeable
future, despite a recent increase. Continued closures/conversions, while expected, are not expected to be enough to
completely balance the market. Imports are expected to drop with demand, but the high dollar could push imports
even higher which could lead to pressure on coated paper pricing. Foreign imports may not appear as quickly as
previous years given the lack of containers in Asia and the overall disruption in shipping worldwide. 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 – Our customers are distributors, many of which are consolidating
or are being acquired by competitors. We continue to maintain a majority of the business we have had with our
customers historically, but it is possible that these consolidations and acquisitions, which we expect to continue in the
future, ultimately 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.
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.
The Company historically has performed its annual impairment test as of November 30, the last day of the third
quarter and during 2020 the Company changed its date to the first day of the fourth quarter, December 1. Accordingly,
the annual impairment test of goodwill was performed as of both November 30 and updated as of December 1 of fiscal
year 2020 with no impact on the financial statements. This change does not accelerate, delay, avoid or cause an
impairment charge, nor does this change result in adjustments to the Company’s previously issued financial
statements. No impairment was recorded during fiscal year 2020. The Company’s impairment tests indicated
significant cushion between its carrying value and fair market value.
For fiscal year 2019, the Company used 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.
For fiscal year 2020, because qualitative factors were deemed insufficient to conclude that it is more likely than
not that the fair value of a reporting unit exceeds its carrying value, and because enough time had elapsed that
19
management believed it was prudent to perform a quantitative assessment, a one-step approach was applied to make
an evaluation. This 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 fiscal year 2020 or fiscal year
2019.
Subsequent to the evaluation described above, the COVID-19 outbreak occurred, causing major economic
disruption and significant volatility in the stock markets. As a result, the December 1, 2019 assessment performed
with respect to fiscal year 2020 was updated by management through February 29, 2020. Based on this updated
qualitative assessment, no impairment to the Company’s recorded goodwill was deemed required.
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 $11.0 million, $10.3
million, and $9.7 million of revenue were recognized under these agreements during fiscal years ended 2020, 2019
and 2018, 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.
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.
20
The outbreak of the COVID-19 pandemic presents various global risks. The full impact of the COVID-19
pandemic continues to evolve as of the date of this report. Management is actively monitoring the situation as pertains
to the Company’s financial condition, liquidity, operations, suppliers, industry and workforce. Given the ongoing
evolution of the pandemic and the global responses to control its spread, the Company is not able to estimate the
ultimate effects of the COVID-19 pandemic on its results of operation, financial condition, or liquidity for fiscal year
2021. Currently, the Company is considering deferring payments of payroll taxes to the extent allowable under the
Coronavirus Aid, Relief and Economic Security (CARES) Act. The Company is also reviewing other provisions of
the CARES Act and does not expect a significant tax impact.
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. As a result of the reduction of the corporate
tax rate to 21%, we revalued 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 assessments described 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.
Results of Operations
The following discussion provides information which we believe is relevant to understanding 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 our
Apparel Segment, which we sold in May 2016. The operating results of the Company for fiscal year 2020 and the
comparative fiscal years 2019 and 2018 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 income (expense), net
Earnings from continuing operations before
income taxes
Provision for income taxes
Earnings from continuing operations
Earnings from discontinued operations, net of
tax
Net earnings
2020
Fiscal years ended
2019
2018
$ 438,412 100.0 % $ 400,782 100.0 % $ 370,171 100.0 %
309,488
128,924
78,173
252,969
117,202
69,222
70.6
29.4
17.8
(87 ) —
11.6
0.1
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 )
50,838
413
47,818
(909 )
51,251
12,959
38,292
11.7
3.0
8.7
49,934
12,497
37,437
12.4
3.1
9.3
46,909
14,151
32,758
12.7
3.8
8.9
— —
$ 38,292
8.7 % $ 37,437
— —
147
9.3 % $ 32,905
-
8.9 %
Earnings per share - diluted
Continuing operations
Discontinued operations
Net earnings
$
$
1.47
—
1.47
$
$
1.45
-
1.45
$
$
1.29
0.01
1.30
Net Sales. Our net sales increased from $400.8 million for fiscal year 2019 to $438.4 million for fiscal year
2020, an increase of 9.4%. The recent increase in supply of cheaper foreign paper imports, due to the strengthening
of the U.S. dollar, unseasonal weather conditions in parts of the country and current domestic pricing levels, continues
to provide the elements for a challenging marketplace. Each of these factors negatively impacted sales. In particular,
our competition was able to be more price-competitive due to the availability of cheaper materials, and some of our
sales were negatively impacted by weather conditions. The acquisitions of Integrated, which was completed in March
2019, and Flesh, which was completed in July 2019, were integral parts of our strategy to offset normal industry
revenue declines due to print attrition and other changes. Our acquisitions during fiscal years 2020 and 2019 positively
impacted our net sales by approximately $55.3 million during fiscal year 2020.
Our net sales increased from $370.2 million for fiscal year 2018 to $400.8 million for fiscal year 2019, an increase
of 8.3%. The market continued to be fairly soft with competitive pricing pressures in fiscal year 2019. However,
during fiscal year 2019, 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, contributed over $44.7 million
in net sales during fiscal year 2019.
Cost of Goods Sold. Our manufacturing costs increased from $277.4 million for fiscal year 2019 to $309.5
million for fiscal year 2020, or 11.6%. Our gross profit margin (“margin”) decreased from 30.8% for fiscal year
2019 to 29.4% for fiscal year 2020. Our margin during the period continues to be impacted for the most part by the
dilutive impact of the acquisitions completed in the last year and to a lesser extent to the numerous raw material
price increases taken last fiscal year, some of which could not be completely passed through to the customer.
During the previous fiscal year, tight supply conditions allowed for multiple price increases on raw materials which
could be passed through to the customer due to apportionment of paper, as well as other items in the manufacturing
process. Historically price increases have been less frequent, which allowed manufacturers the ability to pass the
required pricing adjustments through to the marketplace in a timely manner. However, the size and number of
increases impacted manufacturers’ abilities to timely pass these price adjustments to the end-users. We believe
22
these price increases will continue to have a negative impact on margins until the excess costs are able to be passed
through to the marketplace, or until material costs decline in the marketplace. Recently, due to current pricing levels
and the strengthening U.S. dollar, imports have increased and created an excess supply condition domestically. This
historically has led to some normalization/stability in the marketplace which is starting to be seen as material prices
have become softer. Our acquisitions completed during the past year have had a dilutive impact on our margins as
we transition them into our enterprise resource planning system. Without the impact of the acquisitions completed
over the past 18 months, the margins from our other plants continued to be above 30.8% during the period,
comparable to historical levels. Once we have the opportunity to fully analyze the business cost structure and
implement our costs systems, we believe margins at the recently acquired plants will improve to levels closer to the
rest of our business.
Our manufacturing costs increased from $253.0 million for fiscal year 2018 to $277.4 million for fiscal year 2019,
or 9.6%. Our margin decreased from 31.7% for fiscal year 2018 to 30.8% for 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 continued to be
challenged by raw material and freight cost increases. The tight supply conditions during fiscal year 2019 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, the size and number of increases impacted manufacturers’ ability to
timely pass these price adjustments to the end-users. These price increases continued to have a negative impact on
margins. The acquisition of Wright and ABTL had a dilutive impact on our margins. We believe once we have the
opportunity to fully analyze relevant cost structures and implement our costs systems, the margins of Wright and
ABTL will improve to levels closer to the rest of our business.
Selling, general, and administrative expenses. Our selling, general, and administrative (“SG&A”) expenses
increased approximately 6.4%, from $73.5 million for fiscal year 2019 to $78.2 million for fiscal year 2020. As a
percentage of sales, SG&A expenses declined from 18.3% in fiscal year 2019 to 17.8% for fiscal year 2020. Our
acquisitions negatively impacted our SG&A expenses by approximately $6.6 million during fiscal year 2020. We
continue to seek ways to more fully leverage our SG&A expenses, and to reduce SG&A expenses following
acquisitions through the implementation of our systems and processes, which allows us to integrate many of our
acquired companies’ back-office processes.
Our SG&A expenses increased approximately 6.2%, from $69.2 million for fiscal year 2018 to $73.5 million for
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.
(Gain) loss from disposal of assets. The $0.1 million gain from disposal of assets for fiscal year 2020 is primarily
attributed to the sale of a manufacturing facility. 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.
Income from operations. Primarily due to factors described above, our income from continuing operations for
fiscal year 2020 was $50.8 million, or 11.6% of net sales, compared to $50.1 million, or 12.5% of net sales, for fiscal
year 2019. Our acquisitions contributed approximately $6.2 to our operational income during fiscal year 2020.
Our income from continuing operations for fiscal year 2019 was $50.1 million, or 12.4% of net sales, compared
to $47.8 million, or 12.9% of net sales, for fiscal year 2018. Our acquisitions contributed approximately $4.5 million
to our operational income during fiscal year 2020, or 8.8%.
Other income (expense). Other income was $0.4 million for fiscal year 2020 compared to expense of $0.2 million
for fiscal year 2019. The decrease in expense related primarily to approximately $0.5 million less in interest expense
due to the payoff of the Credit Facility at the end of the second quarter of fiscal year 2020. Other expense was $0.2
23
million for fiscal year 2019 compared to $0.9 million for fiscal year 2018. This decrease related primarily to the $0.8
million increase of interest income in fiscal year 2019.
Provision for income taxes. Our effective tax rates for fiscal years 2020, 2019 and 2018 were 25.3%, 25.0%, and
30.2%, respectively. The slightly higher effective tax rate for fiscal year 2020 was primarily due to the establishment
of a reserve against our foreign tax credits. The lower effective tax rate for fiscal year 2019 compared to fiscal year
2018 was primarily due to the enactment of the Tax Act which was in effect for all of fiscal year 2019, but only in
effect for a small portion of fiscal year 2018.
Net earnings (loss). Our net earnings from continuing operations were $38.3 million, or $1.47 per diluted share
for fiscal year 2020, $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.
Liquidity and Capital Resources
(Dollars in thousands)
Working Capital
Cash
2020
Fiscal Years Ended
2019
$ 111,915 $ 134,542 $ 133,773
$ 68,258 $ 88,442 $ 96,230
2018
Working Capital. Our working capital decreased by approximately $22.6 million, or 16.8%, from $134.5 million
at February 28, 2019 to $111.9 million at February 29, 2020. Our current ratio, calculated by dividing our current
assets by our current liabilities, decreased from 5.3-to-1.0 for fiscal year 2019 to 4.0-to-1.0 for fiscal year 2020. Our
working capital and current ratio were negatively impacted by the repayment of long-term debt of $30.0 million and
the adoption of Accounting Standards Update No. 2018-11, Leases (ASC 842): Targeted Improvements, which
increased our current liabilities by $5.7 million.
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 decreased from 5.5-to-1.0 for fiscal year 2018 to
5.3-to-1.0 for fiscal year 2019.
Our operations may be affected by the ongoing COVID-19 pandemic. The ultimate disruption that may result from
the virus is uncertain, but it may result in a material adverse impact on our financial position, operations and cash
flows. Possible areas that may be affected include, but are not limited to, disruption to our customers and revenue,
labor workforce, and an impairment in the value of our long-lived assets, including property, plant and equipment,
goodwill and other intangible assets.
Cash Flow Components
(Dollars in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2020
Fiscal years ended
2019
$ 57,219 $ 51,335 $ 45,290
$ (21,446 ) $ (31,770 ) $ (3,953 )
$ (55,957 ) $ (27,353 ) $ (25,573 )
2018
Cash flows from operating activities. Cash provided by operating activities was $57.2 million for fiscal year 2020
(an increase of $5.9 million compared to fiscal year 2019), $51.3 million for fiscal year 2019 (an increase of $6.0
million compared to fiscal year 2018) and $45.3 million for fiscal year 2018.
Our increased operational cash flows in fiscal year 2020 compared to fiscal year 2019 was primarily the result of
three factors: (i) a $0.9 million increase in net earnings; (ii) a $0.3 million decrease in our accounts receivable; and
24
(iii) a $6.8 million decrease in our inventories. These three positive factors were offset by an increase in our prepaid
expenses and prepaid income taxes of $4.9 million.
Our increased operational cash flows in fiscal year 2019 compared 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 positive factors were offset by a $3.6
million increase in inventories and a $2.4 million decrease in accounts payable and accrued expenses.
Cash flows from investing activities. Cash used in investing activities was $21.4 million fiscal year 2020 compared
to $31.8 million fiscal year 2019 and $0.4 million fiscal year 2018. The $10.3 million decrease in cash used in fiscal
year 2020 compared to fiscal year 2019 was primarily due to a $1.4 million decrease in capital expenditures and an
$8.7 million decrease in costs to acquire businesses. The $27.8 million increase in cash used in fiscal year 2019
compared to fiscal year 2018 was primarily due to a $2.2 million increase in capital expenditures and a $26.0 million
increase in the cost to acquire businesses.
Cash flows from financing activities. Cash used in financing activities was $56.0 million in fiscal year 2020
compared to $27.4 million used in fiscal year 2019 and $25.6 million used in fiscal year 2018.
The increase in our cash used in fiscal year 2020 compared to fiscal year 2019 resulted from two factors: (i) the
payment of $30.0 million in long-term debt in fiscal year 2020, compared to the payment of no long-term debt in fiscal
year 2019; and (ii) the payment of $0.9 million more in dividends in fiscal year 2020 compared to fiscal year 2019.
These increases were offset by an approximate $2.3 million reduction in cash used to purchase our common stock
under our repurchase program in fiscal year 2020 compared to fiscal year 2019.
The increase in our cash used in fiscal year 2019 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.
Stock Repurchase – The Board has authorized the repurchase the Company’s outstanding common stock through
a stock repurchase program, which authorized amount is currently up to $40.0 million in the aggregate. Under the
repurchase program, 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. Repurchases may be
commenced or suspended at any time or from time to time without prior notice, provided that any purchases must be
made in accordance with applicable insider trading rules and securities laws and regulations. Since the program’s
inception in October 2008, we have repurchased 1,816,354 common shares under the program at an average price of
$15.91 per share. During our fiscal year 2020, we repurchased 126,330 shares of common stock at an average price
of $19.56 per share. As of February 29, 2020, $11.1 million remained available to repurchase shares of common stock
under the program. The Company expects to continue to repurchase its shares under the repurchase program during
fiscal year 2021 provided that the Board determines such repurchases to be in the best interests of the Company and
its shareholders.
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 until November 11,
2021 (the “Credit Facility”). The Credit Facility 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 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 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. 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. All calculations are made based on U.S. Generally Accepted Accounting Principles existing
at the time the Credit Facility was entered into. As of February 29, 2020, the Company was in compliance with all
terms and conditions of the Credit Facility.
25
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. As a result of the extension of maturity until November 11,
2021, the spread will range from 1.85% to 2.5% on future borrowings, depending on our fixed charge coverage ratio
of total funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA). 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.
During fiscal year 2020, we paid down the remaining $30.0 million on the revolving credit line. As a result, under
the Credit Facility as of February 29, 2020, the Company had no outstanding debt and $0.7 million outstanding under
standby letters of credit arrangements, leaving approximately $99.3 million in available borrowing capacity. It is
anticipated that, should it be required, the line of credit available under the Credit Facility will be sufficient to cover
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. Given our funding status as of February 29, 2020 and absent any significant negative event, we
anticipate that our future contributions will be between $1.5 million and $3.0 million per year, depending on our
Pension Plan’s funding. 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 29, 2020, we had an unfunded pension liability recorded on our balance sheet of $8.9 million. During
fiscal year 2020 due to the decrease in long-term rates, we decreased the discount rate we used to calculate our pension
liability to 2.65% from 4.1% used in fiscal year 2019, which increased our recorded pension liability by approximately
$13.5 million (each 10 basis point change in the discount rate potentially impacts our computed pension liability by
approximately $930,000). In addition, we adopted the new MP-2019 mortality improvement scale and the new Pri-
2012 Blue Collar mortality tables, which reduced our recorded pension liability by approximately $0.5 million. The
updated mortality table reflects slightly higher mortality compared to the prior tables and the mortality improvement
scale reflects slightly lower projected mortality experience improvement in the future compared to the previous
assumptions utilized in fiscal year 2019’s valuation of liabilities. The projected return on our Pension Plan assets was
reduced during fiscal year 2019 from 7.5% to 7.0% for fiscal year 2020. Each 50 basis point increase in our projected
return rate would impact our pension expense by approximately $0.3 million.
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 2021, 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.
Contractual Obligations & Off-Balance Sheet Arrangements – There have been no significant changes in our
contractual obligations since February 29, 2020 that have, or that 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 29,
2020. The following table represents our contractual commitments as of February 29, 2020 (in thousands).
Total
Due in less Due in
than 1 year 1-3 years
Due in
4-5 years
Due in more
than 5 years
Estimated pension benefit payments to
Pension Plan participants
Letters of credit
Operating leases
Total
43,000
652
21,822
20,600
—
1,498
$ 65,474 $ 11,037 $ 17,339 $ 15,000 $ 22,098
9,900
—
5,100
4,600
652
5,785
7,900
—
9,439
26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Interest Rates
From time to time, 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. We had no variable rate financial instruments outstanding at February 29, 2020 due to the pay-down of our
Credit Facility, but we will be exposed to interest rate risk if we borrow under the Credit Facility in the future.
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
None.
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 29, 2020. Based upon that review and evaluation, we
have concluded that our disclosure controls and procedures were effective as of February 29, 2020.
In conducting our evaluation, we excluded the assets and liabilities and results of operations of Integrated Print
and Graphics and The Flesh Company, which we acquired on March 16, 2019 and July 15, 2019, respectively, 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 these acquisitions constituted
approximately 7 and 8 percent, respectively, of the related consolidated financial statement amounts as of and for the
year ended February 29, 2020.
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.
27
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 29, 2020. 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 29, 2020, 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 Integrated Print
and Graphics and The Flesh Company, which we acquired on March 16, 2019 and July 15, 2019, respectively, 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 these acquisitions constituted
approximately 7 and 8 percent, respectively, of the related consolidated financial statement amounts as of and for the
year ended February 29, 2020.
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 29, 2020 and has attested to the effectiveness of the
Company’s internal control over financial reporting as of February 29, 2020. 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
None.
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 2020 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 2020 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 2020 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 2020 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 2020 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 4.1
Description of Ennis, Inc. Securities Registered under Section 12 of the Exchange Act of 1934.*
Exhibit 10.1 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 10.2 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 10.3 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 10.4
Seventh Amendment to Second Amended and Restated Credit Agreement, dated April 13, 2020, 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 April 15, 2020 (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 May 15, 2019, herein incorporated by reference to Exhibit 10.1 to the Registrant’s Form
8-K filed on May 16, 2019 (File No. 001-05807).+
Exhibit 10.8 Amended and Restated Executive Employment Agreement between Ennis, Inc. and Ronald M.
Graham, effective as of May 15, 2019, herein incorporated by reference to Exhibit 10.2 to the
Registrant’s Form 8-K filed on May 16, 2019 (File No. 001-05807).+
Exhibit 10.9 Amended and Restated Executive Employment Agreement between Ennis, Inc. and Richard L. Travis,
Jr., effective as of May 15, 2019, herein incorporated by reference to Exhibit 10.3 to the Registrant’s
Form 8-K filed on May 16, 2019 (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
29, 2020, filed on May 4, 2020, 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 4, 2020
Date: May 4, 2020
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 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
Date: May 4, 2020
/s/ KEITH S. WALTERS
Keith S. Walters, Chairman of the Board,
Chief Executive Officer and President
/s/ JOHN R. BLIND
John R. Blind, Director
/s/ FRANK D. BRACKEN
Frank D. Bracken, Director
/s/ BARBARA T. CLEMENS
Barbara T. Clemens, Director
/s/ GODFREY M. LONG, JR.
Godfrey M. Long, Jr., Director
/s/ GARY S. MOZINA
Gary S. Mozina, Director
/s/ TROY L. PRIDDY
Troy L. Priddy, Director
/s/ ALEJANDRO QUIROZ
Alejandro Quiroz, Director
/s/ MICHAEL J. SCHAEFER
Michael J. Schaefer, 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 29, 2020 and February 28, 2019 ......................................................... F-5
Consolidated Statements of Operations — Fiscal years ended 2020, 2019 and 2018 ........................................... F-7
Consolidated Statements of Comprehensive Income — Fiscal years ended 2020, 2019 and 2018 ....................... F-8
Consolidated Statements of Changes in Shareholders’ Equity — Fiscal years ended 2020, 2019 and 2018 ........ F-9
Consolidated Statements of Cash Flows — Fiscal years ended 2020, 2019 and 2018 .......................................... 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 29, 2020 and February 28, 2019, 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 29, 2020, 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 29,
2020 and February 28, 2019, and the results of its operations and its cash flows for each of the three years in the period
ended February 29, 2020, 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 29, 2020, 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 4, 2020 expressed an unqualified
opinion.
Change in accounting principle
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for
leases on March 1, 2019 due to the adoption of Accounting Standards Update No. 2016-02: Leases (Topic 842).
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 regarding 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 4, 2020
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 29, 2020, 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 29, 2020, 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 29,
2020, and our report dated May 4, 2020 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 Integrated Print and Graphics and The Flesh Company, wholly-owned subsidiaries
whose financial statements reflect total assets and revenues constituting 7 and 8 percent, respectively, of the related
consolidated financial statement amounts as of and for the year ended February 29, 2020. As indicated in
Management’s Report, Integrated Print and Graphics and The Flesh Company were acquired during the year ended
2020. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting
excluded internal control over financial reporting of Integrated Print and Graphics and The Flesh Company.
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.
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
F-3
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 4, 2020
F-4
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
Assets
February 29,
2020
February 28,
2019
Current assets
Cash
Accounts receivable, net of allowance for doubtful receivables of $715 at February
29, 2020 and $1,020 at February 28, 2019
Prepaid expenses
Prepaid income taxes
Inventories
$
68,258 $
88,442
43,086
1,541
2,164
34,835
149,884
40,357
1,760
195
35,411
166,165
155,744
57,887
19,312
4,873
237,816
181,414
56,402
20,068
82,527
56,557
—
261
146,001
56,394
19,084
4,754
226,233
173,099
53,134
—
81,634
61,272
580
300
$ 365,699 $ 363,085
Total current assets
Property, plant and equipment
Plant, machinery and equipment
Land and buildings
Computer equipment and software
Other
Total property, plant and equipment
Less accumulated depreciation
Net property, plant and equipment
Operating lease right-of-use assets
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
February 29,
2020
February 28,
2019
$
Current liabilities
Accounts payable
Accrued expenses
Current portion of operating lease liabilities
Total current liabilities
Long-term debt
Liability for pension benefits
Deferred income taxes
Operating lease liabilities, net of current portion
Other liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity
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 29, 2020 and February 28, 2019
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss:
17,235 $
15,069
5,665
37,969
—
8,936
8,749
14,200
1,516
71,370
13,728
17,895
—
31,623
30,000
—
10,898
—
1,437
73,958
—
—
75,134
123,052
193,809
75,134
123,065
179,003
Minimum pension liability, net of taxes
Treasury stock
Total shareholders’ equity
Total liabilities and shareholders' equity
(16,704 )
(25,206 )
(71,371 )
(72,460 )
294,329
289,127
$ 365,699 $ 363,085
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 from discontinued operations, net of tax
Net earnings
Weighted average common shares outstanding
Basic
Diluted
Earnings per share - basic and diluted
Continuing operations
Discontinued operations
Net earnings
Cash dividends per share
$
2020
438,412 $
309,488
128,924
78,173
(87 )
50,838
Fiscal Years Ended
2019
400,782 $
277,422
123,360
73,490
(217 )
50,087
(606 )
1,019
413
51,251
12,959
38,292
—
38,292 $
(1,154 )
1,001
(153 )
49,934
12,497
37,437
—
37,437 $
$
2018
370,171
252,969
117,202
69,222
162
47,818
(777 )
(132 )
(909 )
46,909
14,151
32,758
147
32,905
26,036,393 25,829,804 25,391,998
26,036,393 25,842,179 25,417,244
$
$
$
$
1.47 $
— $
1.47 $
0.900 $
1.45 $
— $
1.45 $
0.875 $
1.29
0.01
1.30
0.875
See accompanying notes to consolidated financial statements.
F-7
ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net earnings
Adjustment to pension, net of taxes
Comprehensive income
2020
Fiscal Years Ended
2019
$
$
38,292 $
(8,502 )
29,790 $
37,437 $
(276 )
37,161 $
2018
32,905
1,680
34,585
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 2018, 2019, AND 2020
(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, 2017
30,053,443 $ 75,134 $ 121,525 $ 150,685 $
— 32,905
—
—
(15,261 ) (4,686,821 ) $ (80,728 ) $ 251,355
— 32,905
—
—
Balance February 28, 2018
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
Net earnings
Adjustment to pension, net of deferred tax
of $2,834
Dividends paid ($0.90 per share)
Stock based compensation
Exercise of stock options and restricted
stock
Common stock repurchases
Balance February 28, 2019
Balance February 29, 2020
—
—
—
—
—
—
—
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
—
—
—
—
30,053,443 $ 75,134 $ 123,065 $ 179,003 $
— 38,292
1,874
—
—
—
—
—
— 829,126 14,344 16,218
(4,811 )
— (247,803 ) (4,811 )
(16,704 ) (4,097,099 ) $ (71,371 ) $ 289,127
— 38,292
—
—
—
—
—
—
—
—
—
—
— (23,486 )
—
1,369
(8,502 )
—
—
—
—
—
—
(8,502 )
— (23,486 )
1,369
—
—
—
—
—
30,053,443 $ 75,134 $ 123,052 $ 193,809 $
(1,382 )
—
—
—
—
87,143 1,382
— (126,330 ) (2,471 )
—
(2,471 )
(25,206 ) (4,136,286 ) $ (72,460 ) $ 294,329
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
(Gain) loss from disposal of assets
Bad debt expense, net of recoveries
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 disposal of plant and property
Net cash used in investing activities
Cash flows from financing activities:
Repayment of debt
Dividends paid
Common stock repurchases
Proceeds from exercise of stock options
Net cash used in financing activities
Net change in cash
Cash at beginning of period
Cash at end of period
2020
Fiscal Years Ended
2019
2018
$
38,292
$
37,437
$
32,905
10,425
47
7,769
—
(87 )
(59 )
1,369
478
(1,819 )
1,781
(1,538 )
3,241
43
(2,614 )
(109 )
57,219
(3,394 )
(18,733 )
681
(21,446 )
(30,000 )
(23,486 )
(2,471 )
—
(55,957 )
(20,184 )
88,442
68,258
$
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
$
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 29, 2020, February 28, 2019 and February 28, 2018
(fiscal years ended 2020, 2019 and 2018, 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 9.4% and 8.9% of its inventories valued at the lower of last-in, first-
out (LIFO) for fiscal years 2020 and 2019, 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 2020 and
2019 were $1.1 million and $0.9 million, respectively.
Property, Plant and Equipment. Depreciation and amortization 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.
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 quantitative or qualitative 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 year ended 2019 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 $11.0
million, $10.3 million and $9.7 million of revenue was recognized under these arrangements during fiscal years 2020,
2019 and 2018, 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 $1.0 million, $0.8 million
and $0.9 million during the fiscal years ended 2020, 2019 and 2018, 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 $0.2 million, $0.1 million, and $0.2 million for
the fiscal years ended 2020, 2019 and 2018, respectively. Unamortized direct advertising costs included in prepaid
expenses at fiscal years ended 2020, 2019 and 2018 were approximately $0.1 million, $0.2 million, and $0.1 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. The Company established a valuation allowance related to its
foreign tax credit of $0.4 million as a result of continued focus on domestic opportunities and no current plans to enter
foreign markets.
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
F-12
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
would have been outstanding if potentially dilutive securities had been issued. This is calculated using the treasury
stock method. 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. No options
were outstanding at the end of fiscal year 2020.
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 funded
status of the Company’s pension plan.
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 $15,000, $18,000, and $7,000 for fiscal years
ended 2020, 2019 and 2018, 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 over the requisite service
period of the individual grants, which generally equals the vesting period. Actual forfeitures are recorded when they
occur. The fair value of all share based awards is estimated on the date of grant.
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as
part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while
maintaining or improving the usefulness of the information provided to users of financial statements. Amendments
include removal of certain exceptions to the general principles of Topic 740, Income Taxes, and simplification in
several other areas. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and
interim periods therein. The Company is currently evaluating the impact of ASU 2019-12 on the consolidated
financial statements.
In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-
General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans
(“ASU 2018-14”), which removes certain disclosures that are no longer cost beneficial and also includes additional
disclosures to improve the overall usefulness of the disclosure requirements to financial statement users. ASU 2018-
14 is effective for fiscal years ending after December 15, 2020, and earlier adoption is permitted. The Company is
currently evaluating the impact of ASU 2018-14 on the consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The standard is effective
for public business entities in fiscal years beginning after December 15, 2019, and for interim periods within those
fiscal years. Early adoption is permitted, including during an interim period. This new standard requires changes to
disclosure requirements for fair value measurements for certain Level 3 items, and specifies that some of the changes
must be applied prospectively, while others should be applied retrospectively. The Company is evaluating the
standard, but does not expect it to have a significant impact on its financial statement disclosures.
In March 2017, the FASB issued 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
F-13
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
guidance as of March 1, 2018. The impact of adoption was a $288,000 decrease in cost of sales, a $229,000 decrease
in selling, general and administrative expenses and a $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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial
assets and certain other instruments. Under the new guidance, entities will be required to measure expected credit
losses for financial instruments, including trade receivables, based on historical experience, current conditions and
reasonable forecasts. ASU 2016-13 will be effective for public entities for fiscal years, and interim periods within
those fiscal years, beginning after December 15, 2019. The Company does not expect the adoption of ASU 2016-13
will have a significant impact on the Company’s financial condition.
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.
The Company adopted this guidance as of March 1, 2019, using the optional transition method and elected the option
to not apply ASC 842 to comparative periods, which continue to be presented under the accounting standards in effect
for those periods.
The Company elected 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 elected to treat lease and non-lease components as a single lease component.
Adoption of the new standard resulted in the recording of operating lease right-of-use (“ROU”) assets of $18.0 million
and operating lease liabilities of $18.2 million. The difference between the leased assets and lease liabilities represents
the existing deferred rent liabilities balance at adoption, resulting from historical straight line recognition of operating
leases, which was reclassified upon adoption to reduce the measurement of the leased assets. The adoption of the
standard did not have an impact on the Company’s shareholders’ equity, statement of operations, or cash flows.
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.
F-14
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 FOB shipping point,
or, to a lesser extent, upon delivery to the customer if the terms of the sale are FOB destination.
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. Storage revenue for certain customers may be recognized over time rather than at a point in
time. The amount of storage revenue is immaterial to the financial statements. 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 29, 2020.
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 are generally short-term in nature. 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
F-15
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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
2020
2019
2018
$
$
1,020 $
(59 )
(246 )
715 $
1,194 $
212
(386 )
1,020 $
1,674
(265 )
(215 )
1,194
(4) Inventories
The following table summarizes the components of inventories at the different stages of production as of February 29,
2020 and February 28, 2019 (in thousands):
Raw material
Work-in-process
Finished goods
2020
20,267 $
4,557
10,011
34,835 $
2019
21,717
4,172
9,522
35,411
$
$
The excess of current costs at FIFO over LIFO stated values was approximately $4.9 million and $5.0 million as of
fiscal years ended 2020 and 2019, respectively. During both fiscal year 2020 and 2019, as inventory quantities were
reduced, this resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years
compared with the cost of fiscal year 2019 and 2018, as applicable. The effect decreased cost of sales by
approximately $0.1 million, $0.1 million and $0.3 million for fiscal years 2020, 2019 and 2018, 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 15, 2019, the Company acquired all the outstanding stock of The Flesh Company (“Flesh”) for approximately
$9.9 million (which includes potential earn-out consideration of up to $500,000) plus the assumption of trade payables,
subject to final working capital and certain other adjustments. The earn-out consideration is capped at $500,000 and
is payable over the four years following the closing if certain minimum operating income levels are achieved. The
Company recorded intangible assets with definite lives of approximately $1.2 million in connection with the
transaction. Flesh, together with its wholly owned subsidiary, Impressions Direct, Inc. (“Impressions Direct”), is a
printing company with two locations, with the St. Louis location containing Flesh’s corporate office and the direct
mail operations of Impressions Direct, and the Parsons, Kansas location containing Flesh’s main manufacturing
facility and warehouse. The acquisition of Flesh expands the Company’s operations with respect to business forms,
checks, direct mail services, integrated products and labels.
F-16
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a summary of the preliminary purchase price allocation for Flesh (in thousands):
Accounts receivable
Inventories
Other assets
Right-of-use asset
Property, plant & equipment
Customer lists
Trademarks
Non-compete
Accounts payable and accrued liabilities
Operating lease liability
Deferred income taxes
$ 2,480
1,343
191
715
7,065
337
880
20
(2,251 )
(700 )
(206 )
$ 9,874
On March 16, 2019, the Company acquired the assets of Integrated Print & Graphics (“Integrated”), which is based
in South Elgin, Illinois, for $8.9 million in cash plus the assumption of trade payables, subject to certain adjustments.
During the fiscal year ended February 29, 2020, the Company incurred approximately $29,000 of costs (including
legal and accounting fees) related to the acquisition. Goodwill of $893,000 recognized as a part of the acquisition is
deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $1.8
million in connection with the transaction. The acquisition of Integrated, which prior to the acquisition generated
approximately $20.0 million in sales for its fiscal year ended December 31, 2018, creates additional capabilities within
our high color commercial print product line.
The following is a summary of the preliminary purchase price allocation for Integrated (in thousands):
Accounts receivable
Inventories
Other assets
Property, plant & equipment
Right-of-use asset
Customer lists
Trademarks
Non-compete
Goodwill
Accounts payable and accrued liabilities
Operating lease liability
$ 1,971
1,322
72
3,828
2,041
896
896
25
893
(1,044 )
(2,041 )
$ 8,859
On July 31, 2018, the Company acquired, by way of a merger, all of the outstanding equity interests of Wright Business
Forms, Inc., d/b/a Wright Business Graphics (“Wright”), a printing company headquartered in Portland, Oregon with
additional locations in Washington and California. As partial consideration for the acquisition, the Company issued
an aggregate of 829,126 shares of its common stock to the stockholders of Wright, valued at approximately $16.2
million at the time of issuance under the merger agreement. An additional $19.7 million in cash was paid to the
stockholders of Wright, subject to a final working capital adjustment, and $2.6 million was paid to extinguish
outstanding debt. The goodwill recognized as a part of the transaction is not deductible for tax purposes. Since the
acquisition, the Company has 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 produces
forms, pressure seal, packaging, direct mail, checks, statement processing and commercial printing and sells mainly
through distributors and resellers.
F-17
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 following the closing. Prior to the acquisition, ABTL generated approximately $12.0 million
in sales for the twelve months ended December 31, 2017. 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.
The results of operations for Wright, Integrated and Flesh are included in the Company’s consolidated financial
statements from the respective dates of acquisition. The following table sets forth certain operating information on a
pro forma basis as though the respective acquisition had occurred as of the beginning of the comparable prior period.
The following pro forma information for fiscal year 2020 includes Flesh and Integrated, fiscal year 2019 includes
Flesh, Wright and Integrated, and fiscal year 2018 includes Wright. The pro forma information includes the estimated
impact of adjustments such as amortization of intangible assets, depreciation expense and interest expense and related
tax effects (in thousands, except per share amounts).
Pro forma net sales
Pro forma net earnings
Pro forma earnings per share - diluted
2020
Unaudited Unaudited Unaudited
2019
$ 449,841 $ 474,124 $ 427,174
37,379 38,474 35,694
1.40
1.49
1.44
2018
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, consisting of Alstyle Apparel, LLC and its subsidiaries (the
“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.
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
F-18
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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) Leases
$
$
2018
2017
— $
—
(2,000 )
(2,000 )
(2,147 )
147 $
41,038
3,873
(40,648 )
(36,775 )
(12,138 )
(24,637 )
The Company leases certain of its facilities and equipment under operating leases, which are recorded as right-of-use
assets and lease liabilities. The Company’s leases generally have terms of 1 – 5 years, with certain leases including
renewal options to extend the leases for additional periods at the Company’s discretion. At lease inception, all renewal
options reasonably certain to be exercised are considered when determining the lease term. The Company currently
does not have leases that include options to purchase or provisions that would automatically transfer ownership of the
leased property to the Company.
Operating lease expense is recognized on a straight-line basis over the lease term, and variable lease payments are
expensed as incurred. The Company had no variable lease costs for the fiscal year ended February 29, 2020.
The Company determines whether a contract is or contains a lease at the inception of the contract. A contract will be
deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property,
plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the
right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment.
F-19
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of
lease payments over the lease term. To determine the present value of lease payments not yet paid, the Company
estimates incremental borrowing rates based on the information available at lease commencement date as rates are not
implicitly stated in most leases.
Components of lease expense for the three fiscal years ended (in thousands):
Operating lease cost
2020
2019
2018
$
6,523 $
— $
—
Supplemental cash
related to leases was as follows:
flow
information
Cash paid for amounts included in the
measurement of lease liabilities
Operating
operating leases
cash
flows
from
$
6,483 $
— $
—
Right-of-use
exchange for lease obligations
assets
obtained
in
Operating leases
$
5,009 $
— $
—
Under the previous accounting standard, ASC Topic 840, Leases, which was effective though February 28, 2019, the
rent expense under operating leases for the years ended February 28, 2019 and 2018, was $5.9 million and $5.3 million,
respectively.
Weighted Average Remaining Lease Terms
Operating leases
Weighted Average Discount Rate
Operating leases
4 Years
4.34 %
Future minimum lease commitments under non-cancelable operating leases for each of the fiscal years ending are as
follows (in thousands):
2021
2022
2023
2024
2025
Thereafter
Total future minimum lease payments
Less imputed interest
Present values of lease liabilities
Operating
Lease
Commitments
$
$
$
5,785
5,194
4,245
2,946
2,154
1,498
21,822
1,957
19,865
As of February 28, 2019, future minimum payments, under operating leases applying legacy guidance prior to the
adoption of ASU 2016-02, that were either non-cancelable or subject to significant penalty upon cancellation, were
$5,586 for 2020, $3,783 for 2021, $2,607 for 2022, $2,108 for 2023, $1,619 for 2024 and $2,431 for thereafter.
F-20
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(8) Goodwill and Intangible Assets
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 Company
historically has performed its annual impairment test as of November 30, the last day of the third quarter and during
2020 the Company changed its date to the first day of the fourth quarter, December 1. Accordingly, the annual
impairment test of goodwill was performed as of both November 30 and updated as of December 1 of fiscal year 2020
with no impact on the financial statements. This change does not accelerate, delay, avoid or cause an impairment
charge, nor does this change result in adjustments to the Company’s previously issued financial statements. No
impairment was recorded during fiscal year 2020. The Company’s impairment tests indicated significant cushion
between its carrying value and fair market value.
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 fiscal year 2020 or fiscal year 2019.
Beginning March 1, 2017, given the general declining trend line of print sales, and its expected continuance into the
foreseeable future, the Company determined 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 increased
the Company’s selling, general and administrative expense line by approximately $0.8 million during fiscal year 2018,
approximately $1.2 million during fiscal year 2019 and approximately $1.9 million during fiscal year 2020.
F-21
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 29, 2020
Amortized intangible assets
Trademarks and trade names
Customer lists
Non-compete
Patent
Total
As of February 28, 2019
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
12.6 $ 26,161 $
73,102
7.4
767
1.8
—
783
9.2 $ 100,813 $
5,811 $ 20,350
35,941
37,161
266
501
—
783
44,256 $ 56,557
13.8 $ 24,385 $
71,869
8.2
722
2.5
783
—
10.0 $ 97,759 $
3,906 $ 20,479
40,371
31,498
422
300
—
783
36,487 $ 61,272
Aggregate amortization expense for each of the fiscal years 2020, 2019 and 2018 was approximately $7.8 million,
$7.1 million and $6.1 million, respectively.
The Company’s estimated amortization expense for the next five fiscal years is as follows (in thousands):
2021
2022
2023
2024
2025
$
7,772
7,596
6,666
6,516
6,341
Changes in the net carrying amount of goodwill for fiscal years 2019 and 2020 are as follows (in thousands):
Balance as of March 1, 2018
Goodwill acquired
Balance as of February 28, 2019
Goodwill acquired
Balance as of February 29, 2020
$
$
70,603
11,031
81,634
893
82,527
During fiscal year 2020, $0.9 million was added to goodwill related to the acquisition of Integrated. During fiscal
year 2019, $11.0 million was added to goodwill related to the acquisition of Wright.
F-22
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) 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 29, February 28,
2020
13,171 $
464
190
78
90
240
195
641
15,069 $
2019
15,950
583
203
188
90
214
146
521
17,895
$
$
(10) Long-Term Debt
Long-term debt consisted of the following at fiscal years ended (in thousands):
Revolving credit facility
February 29,
2020
February 28,
2019
$
— $
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 until November 11, 2021 (the “Credit
Facility”). The Credit Facility 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 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 29, 2020, 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. As a result of the extension of maturity until November 11, 2021,
the spread will range from 1.85% to 2.5% on future borrowings, depending on the Company’s fixed charge coverage
ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (EBITDA). The Credit
Facility is secured by substantially all of the Company’s assets (other than real property), as well as all capital securities
of each of the Company’s subsidiaries.
During fiscal year 2020, the Company paid down the remaining $30.0 million on the revolving credit line. As a result,
under the Credit Facility as of February 29, 2020, the Company had no outstanding debt and $0.7 million outstanding
under standby letters of credit arrangements, leaving approximately $99.3 million in available borrowing capacity.
(11) 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 in the aggregate. Under the repurchase program,
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-23
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the fiscal year ended February 29, 2020 the Company repurchased 126,330 shares of common stock under the
program at an average price of $19.56 per share. Since the program’s inception in October 2008, there have been
1,816,354 common shares repurchased at an average price of $15.91 per share. As of February 29, 2020 there was
$11.1 million available to repurchase shares of the Company’s common stock under the program.
The Company’s revolving credit facility maintains certain restrictions on the amount of treasury shares that may be
purchased and distributions to its shareholders.
(12) 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 520,104 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 2020, 2019 and 2018, the Company included in selling, general
and administrative expenses, compensation expense related to share based compensation of $1.4 million, $1.4 million
and $1.3 million, respectively.
Stock Options
The following occurred with respect to the Company’s stock options for each of the three years ended February 29,
2020:
Outstanding at March 1, 2017
Granted
Terminated
Exercised
Outstanding at February 28, 2018
Granted
Terminated
Exercised
Outstanding at February 28, 2019
Granted
Terminated
Exercised
Outstanding at February 29, 2020
Exercisable at February 29, 2020
Weighted
Weighted Average
Average
Exercise
Aggregate
Intrinsic
Remaining
Contractual Value(a)
Life (in years) (in thousands)
4.2 $
223
Number
of Shares
(exact quantity) Price
172,496 $
—
—
—
172,496 $
—
—
(110,906 )
61,590 $
—
—
(61,590 ) $
—
—
15.95
—
—
—
15.95
—
—
15.99
15.88
—
—
15.88
—
—
3.2 $
612
1.8 $
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 2020, 2019 or 2018.
F-24
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
Total grant-date fair value
Intrinsic value
Fiscal years ended
2020
$ —
201
267
$
2019
69
345
534
2018
$ —
—
—
The Company had no unvested stock options outstanding at any time during the fiscal year ended February 29, 2020.
Restricted Stock
The following occurred with respect to the Company’s restricted stock awards for each of the three fiscal years ended
February 29, 2020:
Outstanding at March 1, 2017
Granted
Terminated
Vested
Outstanding at February 28, 2018
Granted
Terminated
Vested
Outstanding at February 28, 2019
Granted
Terminated
Vested
Outstanding at February 29, 2020
Weighted
Average
Number of Grant Date
Shares
Fair Value
166,546 $
74,900
—
(88,771 )
152,675 $
83,789
—
(81,359 )
155,105 $
66,669
(3,920 )
(73,928 )
143,926 $
16.35
16.30
—
15.90
16.59
20.54
—
16.01
19.03
20.41
17.02
18.90
19.79
As of February 29, 2020, the total remaining unrecognized compensation cost related to unvested restricted stock was
approximately $1.7 million. The weighted average remaining requisite service period of the unvested restricted stock
awards was 1.5 years. As of February 29, 2020, the Company’s outstanding restricted stock had an underlying fair
value of $2.8 million at date of grant.
(13) Pension Plan
The Company and certain subsidiaries have a noncontributory defined benefit retirement plan (the “Pension Plan”),
covering approximately 16% 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
2020
2019
47 %
44 %
9 %
100 %
46 %
48 %
6 %
100 %
F-25
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 29, 2020 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 7.0% 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 fiscal year ended 2020 was 7.0%. The rate used in the calculation of fiscal
year 2019 pension expense was 7.5%.
The following tables present the Pension Plan’s fair value hierarchy for those assets measured at fair value as of
February 29, 2020 and February 28, 2019 (in thousands):
Description
Cash and cash equivalents
Government bonds
Corporate bonds
Domestic equities
Foreign equities
Description
Cash and cash equivalents
Government bonds
Corporate bonds
Domestic equities
Foreign equities
Total
(Level 1)
(Level 2)
(Level 3)
February 29, 2020
5,615 $
9,836
16,879
20,567
7,703
60,600 $
5,615 $
—
—
20,567
7,703
33,885 $
— $
9,836
16,879
—
—
26,715 $
Total
(Level 1)
(Level 2)
(Level 3)
February 28, 2019
3,945 $
16,128
10,722
20,903
6,023
57,721 $
3,945 $
—
—
20,903
6,023
30,871 $
— $
16,128
10,722
—
—
26,850 $
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
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.
F-26
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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:
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
2020
2019
2018
$
1,088 $
2,254
(4,198 )
1,106 $
2,274
(4,109 )
1,083
2,270
(3,794 )
2,036
1,180
2,047
1,318
2,041
1,600
13,371
(2,036 )
11,335
2,414
(2,047 )
367
(669 )
(2,041 )
(2,710 )
Total recognized in net periodic pension cost and
other comprehensive income
$
12,515 $
1,685 $
(1,110 )
The estimated net actuarial loss of the Pension Plan expected to be amortized from Accumulated Other Comprehensive
Loss into net periodic benefit cost over the next fiscal year is approximately $3.4 million.
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)
2020
2019
2018
4.10 %
3.00 %
4.05 %
3.00 %
4.10 %
3.00 %
7.00 %
7.50 %
7.50 %
2.65 %
3.00 %
4.10 %
3.00 %
4.05 %
3.00 %
During fiscal year 2020, the Company adopted the new MP-2019 improvement scale and the new Pri-2012 Blue Collar
mortality tables to determine their benefit obligations under the Pension Plan. The accumulated benefit obligation
F-27
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(“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
$
$
$
$
$
2020
2019
57,141 $
1,088
2,254
12,853
(549 )
(3,251 )
69,536 $
57,721 $
3,000
3,130
(3,251 )
60,600 $
(8,936 ) $
63,340 $
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
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 2020. Depending on the Pension Plan’s
projected funding status, the Company expects to contribute between $1.5 and $3.0 million to the Pension Plan during
fiscal year 2021.
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
2021
2022
2023
2024
2025
2026 – 2030
Projected
Payments
$
4,600
4,700
3,200
4,900
5,000
20,600
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 $2.1 million, $1.7 million and $1.2 million in
fiscal years ended 2020, 2019 and 2018, 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 $194,000, $206,000, and $203,000, in
fiscal years ended 2020, 2019 and 2018, respectively.
F-28
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) Income Taxes
The following table represents components of the provision for income taxes for fiscal years ended (in thousands):
2020
2019
2018
Current:
Federal
State and local
Total current
Deferred:
Federal
State and local
Total deferred
Total provision for income taxes
$ 10,838 $ 11,381 $ 14,001
1,944
15,945
1,858
13,239
1,642
12,480
526
(47 )
479
(1,811 )
17
(1,794 )
$ 12,959 $ 12,497 $ 14,151
(651 )
(91 )
(742 )
The Company’s effective tax rate on earnings from operations for the year ended February 29, 2020, was 25.3%,
compared to 25.0% and 30.2% in 2019 and 2018, 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
Change in valuation allowance
Federal true-up
Tax Cuts and Jobs Act
Other
2020
2019
2018
21.0 %
21.0 %
32.7 %
2.5
—
0.8
0.9
—
0.1
25.3 %
2.8
—
—
0.4
—
0.8
25.0 %
2.8
(2.8 )
—
4.1
(7.6 )
1.0
30.2 %
F-29
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
Operating lease liabilities
Net operating loss and foreign tax credits
Stock options
Other
Total deferred tax assets
Less: valuation allowance
Total deferred tax assets, net
Deferred tax liabilities
Property, plant and equipment
Goodwill and other intangible assets
Right-of-use assets
Property tax
Other
Total deferred tax liabilities
Net deferred income tax liabilities
2020
2019
164 $
925
883
5,011
4,868
1,097
233
60
13,241 $
(408 )
12,833 $
6,060 $
10,547
4,804
95
76
21,582 $
8,749 $
204
924
820
2,653
—
429
326
—
5,356
—
5,356
5,485
10,710
—
59
—
16,254
10,898
$
$
$
$
$
$
During fiscal year 2020, the Company established a valuation allowance related to its foreign tax credit of $0.4 million
as a result of continued focus on domestic opportunities and no current plans to enter foreign markets.
At fiscal year-end 2020, the Company had federal net operating loss (“NOL”) carry forwards of approximately $3.0
million. This NOL is related to the acquisitions of Flesh and Impressions Direct. The NOL is subject to a Section
382 limitation of $0.1 million per year. Based on historical earnings and expected sufficient future taxable income,
management believes it will be able to fully utilize the NOL.
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 2020 and 2019, unrecognized tax benefits related to uncertain tax positions, including accrued
interest and penalties of $0.1 million and $0.1 million, respectively, are included in other liabilities on the consolidated
balance sheets and would impact the effective rate if recognized. The interest expense associated with the
F-30
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
unrecognized tax benefit is not material. A reconciliation of the change in the unrecognized tax benefits for fiscal
years ended 2020 and 2019 is as follows (in thousands):
Balance at March 1, 2019
Additions based on tax positions
Reductions due to lapses of statues of limitations
Balance at February 29, 2020
2019
2020
$ 120 $ 141
26
—
(47 )
(20 )
$ 100 $ 120
The Company is subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company
has concluded all U.S. federal income tax matters for years through 2015. All material state and local income tax
matters have been concluded for years through 2015 and foreign tax jurisdictions through 2015.
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 2020,
2019 and 2018.
The outbreak of the COVID-19 pandemic presents various global risks. The full impact of the COVID-19 pandemic
continues to evolve as of the date of this report. Management is actively monitoring the situation as pertains to the
Company’s financial condition, liquidity, operations, suppliers, industry and workforce. Given the ongoing evolution
of the pandemic and the global responses to control its spread, the Company is not able to estimate the ultimate effects
of the COVID-19 pandemic on its results of operation, financial condition, or liquidity for fiscal year 2021. Currently,
the Company is considering deferring payments of payroll taxes to the extent allowable under the Coronavirus Aid,
Relief and Economic Security (CARES) Act. The Company is also reviewing other provisions of the CARES Act
and does not expect a significant tax impact.
(15) 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 per share - basic and diluted
Earnings per share on continuing operations
Earnings per share on discontinued operations
Net earnings
Cash dividends
2020
2019
26,036,393 25,829,804 25,391,998
25,246
26,036,393 25,842,179 25,417,244
12,375
—
2018
$
$
$
1.47 $
—
1.47 $
0.900 $
1.45 $
—
1.45 $
0.875 $
1.29
0.01
1.30
0.875
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. 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. No options were outstanding at the end of fiscal year 2020.
F-31
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(16) Commitments and Contingencies
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.
(17) 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
2020
2019
2018
$
$
715 $
14,470 $
1,109 $
9,866 $
731
15,468
Noncash investing and financing activities
Reclassification of the income tax effects of the Tax Act
$
— $
— $
2,847
(18) Quarterly Consolidated Financial Information (Unaudited)
The following table represents the unaudited quarterly financial data of the Company for fiscal years ended 2020 and
2019 (in thousands, except per share amounts and quarter over quarter comparison):
For the three months ended
Fiscal year ended 2020:
Net sales
Gross profit margin
Net earnings
Dividends paid
Per share of common stock:
Basic net earnings
Diluted net earnings
Dividends
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
(19) Related Party Transactions
May 31
August 31 November 30 February 29
$ 108,033 $ 108,816 $ 114,860 $ 106,703
29,934
32,696 32,458
8,574
9,533
5,864
5,876
33,836
10,553
5,871
9,632
5,875
0.37 $
0.37 $
0.37 $
$
$
0.37 $
$ 0.225 $ 0.225 $
0.41 $
0.41 $
0.225 $
0.33
0.33
0.225
$ 93,419 $ 98,591 $ 108,070 $ 100,702
29,091
30,191 30,323
8,204
9,567
5,878
5,728
33,755
10,419
5,922
9,247
5,083
0.37 $
0.36 $
$
0.37 $
0.37 $
$
$ 0.200 $ 0.225 $
0.40 $
0.40 $
0.225 $
0.32
0.32
0.225
F-32
ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company leases a facility and sells product to an entity controlled by a board member who was the former owner
of Independent Printing Company, Inc., a business that the Company acquired. The total right-of-use asset and related
lease liability as of February 29, 2020 was $1.8 million and $1.8 million, respectively. During fiscal year 2020, total
lease payments made to, and sales made to, the related party were approximately $0.4 million and $1.5 million,
respectively.
(20) Concentrations of Risk
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 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. For
fiscal years 2020, 2019 and 2018, the Company purchased 41%, 45% and 47%, respectively, of its materials from one
third party vendor. As of February 29, 2020 and February 28, 2019, the net amount due to the vendor was $4.7 million
and $4.0 million, respectively. 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 29, 2020, cash balances included $66.6 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.
(21) Subsequent Events
In December 2019, a novel strain of coronavirus (COVID-19) was reported in Wuhan, China, and by early 2020, the
virus had spread to other countries, including the United States. This pandemic has significantly impacted health and
economic conditions throughout the United States and the world, including the markets in which the Company
operates.
In response to COVID-19, federal, state and local authorities have recommended social distancing and have imposed,
or are considering, quarantine and isolation measures on large portions of the population, including mandatory closures
of businesses deemed “non-essential” in certain jurisdictions. The Company’s plants are deemed “essential,” largely
due to the Company’s involvement in many important sectors of the economy, including healthcare, government, food
and beverage and banking, and thus most of the Company’s plants are currently operating at close-to-normal utilization
levels. With respect to plants that are underutilized, the Company has made reductions in staffing levels as deemed
appropriate, and the Company may take further actions in the future.
The Company has developed and continues to hone contingency plans covering multiple scenarios with respect to
COVID-19, but the ultimate impact of the pandemic on the Company’s business, results of operations and financial
condition will depend on future developments that are highly uncertain and which cannot be predicted. As
stabilization is starting to take place, states and local governments have recently begun to institute their phased
reopening plans to restart their state and local economies. Whether this will be long lasting or lead to another round
of closures is not known. As of the date of his report, no other financial statement impact has been recorded, including
any impairment of goodwill or long-lived assets.
F-33
Exhibit 4.1
DESCRIPTION OF ENNIS, INC. CAPITAL STOCK
The following description of the terms of Ennis’ capital stock is a summary only and is qualified by
reference to the relevant provisions of Texas law and the Ennis restated certificate of incorporation and by-laws.
Authorized Capital Stock
Under the Ennis restated certificate of incorporation, Ennis’ authorized capital stock consists of forty million
(40,000,000) shares of common stock, with $2.50 par value, and one million (1,000,000) shares of preferred stock,
with $10 par value.
Description of Common Stock
Voting Rights. Each holder of Ennis common stock is entitled to one vote for each share of Ennis common
stock held of record on the applicable record date on all matters submitted to a vote of shareholders. Shareholders
of common stock can use cumulative voting to aggregate director votes.
Dividend Rights. Holders of Ennis common stock are entitled to receive such dividends as may be declared
from time to time by Ennis’ board of directors out of funds legally available therefor, subject to any preferential
dividend rights granted to the holders of any outstanding Ennis’ preferred stock.
Rights upon Liquidation. Holders of Ennis common stock are entitled to share pro rata, upon any
liquidation, dissolution or winding up of Ennis, in all remaining assets available for distribution to shareholders
after payment of or provision for Ennis’ liabilities and the liquidation preference of any outstanding Ennis
preferred stock.
Preemptive Rights. Holders of Ennis common stock have no preemptive rights to purchase, subscribe for
or otherwise acquire any unissued or treasury shares or other securities.
Description of Preferred Stock
Preferred Stock Outstanding. As of the date of this filing, no shares of Ennis preferred stock were issued
and outstanding.
Designation and Amount. Shares of Preferred Stock may be issued from time to time in one or more series,
each such series to have such designations as may be fixed by the Board of Directors prior to the issuance of any
shares thereof. In November of 1998 the board created a new series of Preferred Stock pursuant to the adoption
of a Shareholder Rights Plan. The shares of such series shall be designated as “Series A Junior Participating
Preferred Stock” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred
Stock shall be 25,000.The Series A Preferred Stock shall rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class of the Company’s Preferred Stock. Such number of
shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series A
Preferred Stock. This Shareholders Rights Plan expired on November 8, 2008.
Dividend Rights. Holders of Ennis Series A Preferred Stock shall be entitled to receive dividends (which
may be cumulative or noncumulative) as may be declared from time to time by Ennis’ board of directors out of
funds legally available therefor.
Transfer Agent and Registrar
Computershare Trust Company, N.A. is the transfer agent and registrar for Ennis common stock.
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
Integrated Print and Graphics
The Flesh Company
Impressions Direct, Inc. (6)
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
Delaware
Missouri
Missouri
(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) A wholly-owned subsidiary of Skyline Business Forms, Inc.
(6) A wholly-owned subsidiary of The Flesh Company
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have issued our reports dated May 4, 2020, 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 29, 2020. 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 4, 2020
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 4, 2020
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 4, 2020
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 29, 2020, 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 4, 2020
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.
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 29, 2020, 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 4, 2020
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.
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 4, 2020
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 29, 2020, 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 4, 2020
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.
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 29, 2020, 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 4, 2020
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.
Company Information
Financial & Other Company Information
Financial & Other
Outside Corporate Counsel
Outside Corporate Counsel
Copies of our financial information, such as this Annual
Report on Form 10-K and our Proxy Statement to our
shareholders, as filed with the Securities and Exchange
Commission (SEC), Quarterly Reports on Form 10-Q, and
other filings 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
Annual Meeting of Shareholders
The Annual Meeting of Shareholders will be held on
July 16, 2020, 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
Common Stock
Ennis, Inc. common stock is listed on the New York Stock
Exchange under the ticker symbol “EBF.”
As of April 27, 2020, there were approximately 26.1 million
shares outstanding and approximately 718 shareholders
of record.
Fiscal Year 2O2O Stock Closing
Fiscal Year 2O2O Stock Closing
Price Performance
Price Performance
$22.20
High:
$18.30
Low:
Close (2/28/20) $20.10
Number of Employees
Number of Employees
Dorsey & Whitney, LLP
Shareholder Services
Shareholder Services
Computershare Investor Services, LLC
Certifications
Certifications
Ennis has filed with the SEC as exhibits to its Annual
Report on Form 10-K for the year ended February 29,
2020, the certification of each of its Chief Executive
Officer and Chief Financial Officer required by Section
302 of the Sarbanes-Oxley Act. In addition, Ennis has
submitted to the New York Stock Exchange the required
certification of the Chief Executive Officer with respect to
Ennis’ compliance with the New York Stock Exchange’s
corporate governance listing standards.
Caution Concerning Forward-
Caution Concerning Forward-
Looking Statements
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
filed 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 2,505 worldwide at February 29, 2020
Corporate Publications
Corporate Publications
Corporate Address
Corporate Address
2441 Presidential Parkway
Midlothian, Texas 76065
Investor Relations
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
Independent Accountants
Grant Thornton, LLP
Copies of Ennis, Inc.’s Annual Report on Form 10-K
(excluding exhibits) and other filings 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
Trademark Information
All trademark and service marks referenced herein are
owned by the respective trademark or service mark owners.
PM103
Ennis, Inc.
Corporate Headquarters
2441 PRESIDENTIAL PKWY • MIDLOTHIAN, TX 76065
ENNIS.COM
Designed by Ennis National Marketing.
Printed by Independent Printing, a division of Ennis, Inc. located in De Pere, WI.