Item 1. Business
Ennis Business Forms, Inc. was organized under the laws of Texas in 1909. Except for one subsidiary, Ennis (the Company and all of its other subsidiaries) prints and constructs a broad line of business forms and other business products for national distribution. Approximately 94% of the business products manufactured by Ennis are custom and semi-custom, constructed in a wide variety of sizes, colors, number of parts and quantities on an individual job basis depending upon the customers' specifications. Ennis operates sixteen manufacturing locations in eleven strategically located states providing the Ennis dealer a national network for meeting users' demands for hand or machine written records and documents. For the year ended February 28, 1999 the sale of business products represents approximately 96% of consolidated net sales.
While it is not possible, because of the lack of adequate statistical information, to determine Ennis' share of the total business products market, management believes Ennis is one of the largest producers of business forms in the United States distributing primarily through independent dealers, and that its business forms offering is more diversified than that of most companies in the business forms industry.
Distribution of business forms and other business products throughout the United States is primarily through independent dealers, including business forms distributors, stationers, printers, computer software developers, etc. No single customer accounts for as much as ten percent of consolidated net sales.
The Description of Business for the Company and its subsidiaries (Company) insofar as it relates to industry segments, is incorporated herein by reference to pages 26 and 27 of the Company's 1999 Annual Report to Shareholders which is attached as Exhibit (13) hereto.
Raw materials principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for business products purchased from a number of major suppliers at prevailing market prices.
Business form usage is generally not seasonal. General economic conditions are the predominant factor in quarterly volume fluctuations.
Competition
The forms industry is divided into two major competitive segments. One segment sells directly to end users, and is denominated by a few large manufacturers. The other segment which the Company serves distributes forms and other business products through a variety of resellers. These resellers consist of business form brokers, printers, both local and franchise, and office supply stores. The Company believes it is the largest forms company, which serves this segment of the market. There are a number of competitors which operate in this segment ranging in size from single employee-owner operations to multi-plant organizations. The Company's strategic plant locations and buying power permit it to compete on a favorable basis within this segment of the market on the competitive factors of service, quality and price.
Patents, Trademarks, Licenses, Franchises and Concessions:
The Company does not have any significant patents, trademarks, licenses, franchises or concessions.
Backlog:
At February 28, 1999 the Company's backlog of business forms orders believed to be firm was approximately $6,810,000 as compared to approximately $4,914,000 at February 28, 1998. The backlog of orders for tools, dies and special machinery at February 28, 1999 was approximately $5,537,000 as compared to approximately $3,603,000 at February 28, 1998. It is anticipated that all of the backlog of orders will be completed in the fiscal year ending February 29, 2000.
Research and Development:
While the Company continuously looks for new products to sell through its distribution channel, there have been no material amounts spent on research and development in the fiscal year ended February 28, 1999.
Environment:
There have been no material effects on the Company arising from compliance with Federal, State, and local provisions or regulations relating to the protection of the environment.
Employees:
At February 28, 1999, the Company had approximately 1,434 employees, of whom approximately 475 were represented by three unions and under five separate contracts expiring at various times.
Item 2.
Item 2. Properties The Company operates sixteen manufacturing facilities located in eleven states as follows:
Square feet of floor space -------------------------- Owned Leased Total
Ennis, Texas Manufacturing Facility and Administrative Offices 351,668 351,668
DeSoto, Texas Executive and Administrative Offices 13,577 13,577
Chatham, Virginia Manufacturing 127,956 127,956
Paso Robles, California Manufacturing 94,120 94,120
Knoxville, Tennessee Manufacturing 48,057 48,057
Wolfe City, Texas Two Manufacturing Facilities 119, 259 119,259
Portland, Oregon Manufacturing 47,000 47,000
Fort Scott, Kansas Manufacturing 86,660 86,660
DeWitt, Iowa Manufacturing 95,000 95,000
Dallas, Texas Manufacturing 82,400 82,400
Louisville, Kentucky Manufacturing 42,800 42,800
Moultrie, Georgia Manufacturing 25,000 25,000
Coshocton, Ohio Manufacturing 24,750 24,750
Bell, California Manufacturing 19,286 19,286
Macomb, Michigan Manufacturing 56,350 56,350
Houston, Texas Manufacturin 40,800 40,800 --------- ------- -------- 1,154,020 120,663 1,274,683 ========= ======= =========
All of the above properties are used for the production, warehousing and shipping of business forms and other business products except the Dallas, Texas plant, which is used for the production of tools, dies and special machinery. The Company also owns a plant in Boulder City, Nevada with 49,600 square feet. The plant was closed in November 1995 and the property and building are being leased to a third party.
The plants are being operated at normal productive capacity. Productive capacity fluctuates with the ebb and flow of market demands and depends upon the product mix at a given point in time. Equipment is added as existing machinery becomes obsolete or unrepairable and as new equipment becomes necessary to meet market demands; however, at any given time these additions and replacements are not considered to be material additions to property, plant and equipment, although such additions or replacements may increase a plant's efficiency or capacity.
All of the foregoing facilities are considered to be in good condition. The Company does not anticipate that substantial expansion, refurbishing or re-equipping will be required in the near future.
All of the rented property is held under leases with original terms of five or more years, expiring at various times from December 2000 through October 2003. No difficulties are presently foreseen in maintaining or renewing such leases as they expire.
Item 3.
Item 3. Legal Proceedings.
There are no material pending legal proceedings or litigation pending or threatened to which the registrant or its subsidiaries are parties or of which property of the registrant or its subsidiaries is the subject.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G of Form 10-K, the following list is included as an unnumbered Item in Part I of this report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held on June 17, 1999.
The following is a list of names and ages of all of the executive officers of the registrant indicating all positions and offices with the registrant held by each such person and each such person's principal occupation or employment during the past five years. All such persons have been elected to serve until the next annual election of officers (which shall occur on June 17, 1999) and their successors are elected, or until their earlier resignation or removal. No person other than those listed below has been chosen to become an executive officer of the registrant.
Keith S. Walters, Chairman of the Board, CEO and President, age 49, was elected Chief Executive Officer in November 1997, Chairman in June 1998 and President in July 1998. Mr. Walters was employed by the Company in August 1997 and was elected to the office of Vice President Commercial Printing Operations at that time. Prior to joining the Company, Mr. Walters was with Atlas/Soundolier, a division of American Trading and Production Company, for 8 years, most recently as Vice President of Manufacturing. Prior to that time, Mr. Walters was with the Automotive Division of United Technologies Corporation for 15 years, primarily in manufacturing and operations.
Ronald M. Graham, Vice President Human Resources, age 51, was elected Vice President Human Resources in June 1998. Mr. Graham was employed by the Company in January 1998 as Director of Human Relations. Prior to joining the Company, Mr. Graham was with E. V. International, Inc. (formerly Mark IV Industries, Inc.) for 17 years as Corporate Vice President, Administration. Prior to that time, Mr. Graham was with Sheller- Globe (door div.) for 3 years as Corporate Director of Human Resources.
David P. Erickson, Vice President-Dealer Relations, age 52, was elected Vice President Dealer Relations in June 1998. Mr. Erickson was employed by the Company in December 1997 as Director of Dealer Relations. Prior to joining the Company, Mr. Erickson was with Atlas/Soundolier, a division of American Trading and Production Company, for 5 years, most recently as General Manager. Prior to that time, Mr. Erickson was with Engineered Polymer for 6 years, and United Technologies Corporation for 19 years, primarily as sales manager.
Robert M. Halowec, Vice President Finance and Chief Financial Officer, age 44 was elected Vice President Finance and Chief Financial Officer in January 1999. Mr. Halowec was employed by the Company in January 1999 as Vice President Finance and Chief Financial Officer. Prior to joining the Company, Mr. Halowec was with Moore Corporation for 13 years, most recently as Financial Director of Moore's Cut Products Group in Nacogdoches, Texas.
Harve Cathey, Secretary and Treasurer, age 60, was elected Secretary October 1998 and Treasurer July 1998. Mr. Cathey has been employed by the Company continuously since April 1969. Previously, Mr. Cathey served as Vice President-Finance and Secretary (from September 1983 to September 1996) and Treasurer (from June 1978 to December 1992).
There is no family relationship among or between any executive officers of the registrant, nor any family relationship between any executive officers and directors.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Shareholder Matters.
The Company's common stock is traded on the New York Stock Exchange. The following table sets forth for the periods indicated: the high and low closing sales prices and the common stock trading volume as reported by the New York Stock Exchange and dividends declared by the Company.
Common Stock Trading Volume Dividends number per share of Common Stock Price Range of shares Common High Low (in thousands) Stock Fiscal Year Ended February 28, 1999 First Quarter $ 12.6250 $9.7500 2,217 $0.155 Second Quarter 12.0000 9.9375 1,183 0.155 Third Quarter 10.8125 9.3125 1,069 0.155 Fourth Quarter 10.8750 8.8750 1,244 0.155
Fiscal Year Ended February 28, 1998 First Quarter $ 11.2500 $9.7500 1,195 $0.155 Second Quarter 11.1250 8.5000 2,426 0.155 Third Quarter 11.4375 9.3750 905 0.155 Fourth Quarter 10.6250 9.0625 1,094 0.155
On April 15, 1999, the last sale price of the common stock was $8.1875 per share and the number of shareholders of record was 1,621.
Item 6.
Item 6. Selected Financial Data
The information required by this item is incorporated herein by reference to page 10 of the Company's 1999 Annual Report to Shareholders which is attached as Exhibit (13) hereto.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information required by this item is incorporated herein by reference to pages 11 through 13 of the Company's 1999 Annual Report to Shareholders which is attached as Exhibit (13) hereto.
Item 7a.
Item 7a. Quantitative and Qualitative Disclosure About Market Risk.
The information required by this item is incorporated by reference to Page 13 of the Company's 1999 Annual Report to Shareholders which is attached as Exhibit (13) hereto.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated herein by reference to pages 16 through 28 of the Company's 1999 Annual Report to Shareholders which is attached as Exhibit (13) hereto.
Item 9.
Item 9. Changes in and disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
For information with respect to executive officers of the registrant, see "Executive Officers of the Registrant" at the end of Part I of this report.
The information required by this item regarding Directors is incorporated by reference to pages 3 through 5 of the Company's Proxy Statement dated May 17, 1999, which is attached as Exhibit (22) hereto.
Item 11.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by reference to pages 7 through 12 of the Company's Proxy Statement dated May 17, 1999 which is attached as Exhibit (22) hereto.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by reference to page 2 of the Company's Proxy Statement dated May 17, 1999 which is attached as Exhibit (22) hereto.
Item 13.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is incorporated herein by reference to page 13 of the Company's Proxy Statement dated May 17, 1999 which is attached as Exhibit (22) hereto.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
(a) 1. (a) 2. Financial Statements and Financial Statement Schedules. See accompanying index to financial statements and financial statement schedule for a list of all financial statements and the financial statement schedule filed as part of this report (page S-1). 3. Exhibits (i) Restated Articles of Incorporation as amended through June 23, 1983 with attached amendments dated June 20, 1985, July 31, 1985, and June 16, 1988 incorporated herein by reference to Exhibit 5 to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1993. (ii) Bylaws of the Registrant as amended through October 15, 1997 incorporated herein by reference to Exhibit 3(ii) to the Registrants Form 10-Q Quarterly Report for the quarter ended November 30, 1997. (13) 1999 Annual Report to Shareholders (21) Subsidiaries of Registrant. (22) Notice, Proxy Statement and proxy incorporated herein by reference to the Registrant's Proxy Statement dated May 17, 1999. (23) Independent Auditors' Consent. (27) Financial Data Schedule (submitted for SEC use only).
(b) Reports on Form 8-K: None
UNDERTAKINGS WITH RESPECT TO REGISTRANT'S REGISTRATION STATEMENT, FORM S-8, NUMBER 2-81124
(1) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, forming a part of the referenced registration statement, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered, to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.
(2) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus to each employee to whom the prospectus is sent or given a copy of the registrant's annual report to shareholders for its last fiscal year, unless such employee otherwise has received a copy of such report, in which case the registrant shall state in the prospectus that it will promptly furnish, without charge, a copy of such report on written request of the employee. If the last fiscal year of the registrant has ended within 120 days prior to the use of the prospectus, the annual report of the registrant for the preceding fiscal year may be so delivered, but within such 120 day period the annual report for the last fiscal year will be furnished to each such employee.
(3) The undersigned registrant hereby undertakes to transmit or cause to be transmitted to all employees participating in the plan who do not otherwise receive such material as shareholders of the registrant, at the time and in the manner such material is sent to its shareholders, copies of all reports, proxy statements and other communications distributed to its shareholders generally.
SIGNATURES
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.
(Registrant) ENNIS BUSINESS FORMS, INC.
Date: May 28, 1999 BY: /s/ Keith S. Walters Keith S. Walters, Chairman of the Board, Chief Executive Officer and President
Date: May 28, 1999 BY: /s/ Robert M. Halowec Robert M. Halowec Vice President - Finance and Chief Financial Officer
Date: May 28, 1999 BY: /s/ Harve Cathey Harve Cathey Secretary and Treasurer, Principal Accounting 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 28, 1999 BY: /s/ Keith S. Walters Keith S. Walters, Director
Date: May 28, 1999 BY: /s/ Harold W. Hartley Harold W. Hartley, Director
Date: May 28, 1999 BY: /s/ Robert L. Mitchell Robert L. Mitchell, Director
Date: May 28, 1999 BY: /s/ James C. Taylor James C. Taylor, Director
Date: May 28, 1999 BY: /s/ Joe R. Bouldin Joe R. Bouldin, Director
AND FINANCIAL STATEMENT SCHEDULE
The following is a list of the financial statements and financial statement schedule which are included in this Form 10-K or which are incorporated herein by reference. The consolidated financial statements of the Company included in the Company's 1999 Annual Report to Shareholders are incorporated herein by reference in Item 8. With the exception of the pages listed in this index and pages listed in Items 1, 7 and 8 incorporating certain portions of the Company's 1999 Annual Report to Shareholders, such 1999 Annual Report to Shareholders is not deemed to be filed as part of this Form 10-K.
Annual Form Report to 10-K Shareholders Consolidated financial statements of the Company: Independent auditors' report 28 Consolidated balance sheets - February 28, 1999 and 1998 18 Consolidated statements of earnings - years ended February 28, 1999, 1998 and 1997 16 Consolidated statements of cash flows - years ended February 28, 1999, 1998 and 1997 17 Notes to consolidated financial statements 19 - 27
Independent auditors' report on financial statement schedule S-2 Financial Statement Schedule for three years ended February 28, 1999, 1998 and 1997 II - Valuation and qualifying accounts S-3
All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statement or related notes.
S-1
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Stockholders Ennis Business Forms, Inc.:
Under date of April 15, 1999, we reported on the consolidated balance sheets of Ennis Business Forms, Inc. and subsidiaries as of February 28, 1999 and 1998 and the related consolidated statements of earnings and cash flows for each of the years in the three-year period ended February 28, 1999 which are included in the 1999 annual report to shareholders. These financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1999. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index to financial statements and financial statement schedule on page S-1. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Dallas, Texas April 15, 1999
S-2
Schedule II
ENNIS BUSINESS FORMS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three Years Ended February 28, 1999 (In thousands)
Additions --------------- Charged Balance at to Charged Description beginning oper- to other at end of year ations accounts Deductions of year
Year ended February 28, 1999: Allowance for doubtful receivables $1,006 582 101 (1) 487 (2) 1,202
Year ended February 28, 1998: Allowance for doubtful receivables $1,090 414 45 (1) 543 (2) 1,006
Year ended February 28, 1997: Allowance for doubtful receivables $1,085 382 36 (1) 413 (2) 1,090
Notes: (1) Principally collection of accounts previously charged off. (2) Charge-off of uncollectible receivables.
S-3