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 ending February 28, 1995 Commission File No. 1-5807
ENNIS BUSINESS FORMS, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0256410
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
107 N. Sherman Street, Ennis, Texas 75119
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code
(214) 875-6581
Securities registered pursuant to Section 12(b) of the Act:
Number of Shares
Outstanding Name of each exchange
Title of each class February 28, 1995 on which registered
Common Stock, par value 16,440,031 New York Stock Exchange
$2.50 per share
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.
As to (1) Yes X No As to (2) Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to be best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of April 14, 1995 (14,781,213 shares) was $194,003,421.
Documents Incorporated by References:
1995 Annual Report to Stockholders - incorporated in Parts I & II
Proxy Statement dated May 15, 1995 - incorporated in Parts I & III
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
PART I
Item 1. Business
The Description of Business for the Company, insofar as it relates to
history, products, distribution, competition, raw materials, seasonal
fluctuations, and industry segments is incorporated herein by reference to
pages 8 and 16 of the Company's Annual Report for 1995 which is attached as
Exhibit (13) hereto.
Patents, Trademarks, Licenses, Franchises and Concessions:
Neither the Company nor any of its subsidiaries has any significant
patents, trademarks, licenses, franchises or concessions.
Backlog:
At February 28, 1995 the Company's backlog of business forms orders
believed to be firm was approximately $5,285,000 as compared to
approximately $4,529,000 at February 28, 1994. The backlog of orders for
tools, dies and special machinery at February 28, 1995 was approximately
$3,817,000 as compared to approximately $2,509,000 at February 28, 1994.
It is anticipated that all of the backlog of orders will be completed in
the current fiscal year.
Research and Development:
Neither the Company nor any of its subsidiaries is involved in any
significant effort in the development of new products. There have been no
material amounts spent on research and development.
Environment:
There have been no material effects on the Company or any of its
subsidiaries arising from their compliance with Federal, State, and local
provisions or regulations relating to the protection of the environment.
Employees:
At February 28, 1995, the Company had approximately 1,368 employees, of
whom approximately 267 were represented by four unions and under five
separate contracts expiring at various times.
Item 2. Properties
The Company operates fifteen manufacturing facilities located in twelve
states and Mexico City as follows:
Square feet
of floor space
Owned Leased Total
Ennis, Texas Manufacturing 351,668 351,668
and
General Offices
Chatham, Virginia Manufacturing 127,956 127,956
Paso Robles, California Manufacturing 94,120 94,120
Boulder City, Nevada Manufacturing 49,600 49,600
Knoxville, Tennessee Manufacturing 48,057 48,057
Wolfe City, Texas Manufacturing 102,180 102,180
Portland, Oregon Manufacturing 47,000 47,000
Fort Scott, Kansas Manufacturing 69,000 69,000
DeWitt, Iowa Manufacturing 95,000 95,000
Dallas, Texas Manufacturing 40,000 40,000
Louisville, Kentucky Manufacturing 42,800 42,800
Moultrie, Georgia Manufacturing 25,000 25,000
Coshocton, Ohio Manufacturing 14,000 14,000
Macomb, Michigan Manufacturing 56,350 56,350
Mexico City, Mexico Manufacturing 9,444 9,444
1,115,731 56,444 1,172,175
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; the Dallas plant is used for the production of tools,
dies and special machinery. 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 plants and warehouses are deemed to be in good
condition and it is not anticipated that substantial expansion,
refurbishing or re-equipping will be required in the near future.
The rented property in Oregon is leased through December 1995. The
rented property in Mexico City is leased through September 1995. No
difficulties are presently foreseen in maintaining or renewing such leases
as they expire.
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. Submission of Matters to a Vote of Security Holders.
The information required by this item is incorporated herein by
reference to pages 2 through 11 of the Company's Proxy Statement dated May
15, 1995, which is attached as Exhibit (22) hereto.
EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3) 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 15, 1995.
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 15, 1995) 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.
Kenneth A. McCrady, Chairman of the Board and Chief Executive Officer,
age 64, was elected Chairman in April 1985. Mr. McCrady was employed by
the Company in 1970 and was elected to the office of Vice President of
Finance at that time. In May 1971 he was elected to the offices of
Executive Vice President and Treasurer. In August 1971 Mr. McCrady was
elected as President and Chief Executive Officer and served in this
capacity until his election as Chairman.
Charles F. Ray, President and Chief Operating Officer, age 51, was
elected President and Chief Operating Officer in January 1990. Mr. Ray has
been continuously employed by the Company since June 1964; he served as
Executive Vice President from June 1986 until his election as President and
Chief Operating Officer.
Harve Cathey, Vice President - Finance and Secretary, age 56, was
elected Vice President - Finance and Secretary in September 1983. Mr.
Cathey has been employed by the Company continuously since April 1969.
Prior to his election as Vice President and Secretary, Mr. Cathey served as
Treasurer (from June of 1978).
Albert V. Lemieux, Vice President - Manufacturing, age 53, was elected
Vice President - Manufacturing in September 1989. Mr. Lemieux has been
continuously employed by the Company since August 1975. Prior to his
election as Vice President - Manufacturing Mr. Lemieux served as General
Manager of the DeWitt, Iowa division of the Company from December 1986
through September 1989 and plant manager of the DeWitt, Iowa continuous
forms plant from June 1982 through December 1986.
Douglas O. Self, Vice President, age 53, was elected Vice President in
December 1989. Mr. Self has been continuously employed by the Company
since August 1965. Prior to his election as Vice President Mr. Self served
as Vice President and General Manager of a subsidiary of the Company from
February 1977.
Nelson D. Ward, Vice President - Sales and Marketing, age 53, was
elected Vice President - Sales and Marketing in September 1992. Mr. Ward
has been continuously employed by the Company since April 1971. Prior to
his election as Vice President, Mr. Ward served as President and General
Manager of a subsidiary of the Company from June 1978.
Victor V. DiTommaso, Jr., Treasurer, age 39, was elected Treasurer in
December 1992. Mr. DiTommaso has been continuously employed by the Company
since July 1991. Prior to his employment by the Company, Mr. DiTommaso
maintained a public accounting practice in Dallas, Texas from June 1986.
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. Market for the Registrant's Common Stock and Related Security
Holder Matters.
The information required by this item is incorporated herein by
reference to page 9 of the Company's Annual Report for 1995 which is
attached as Exhibit (13) hereto.
Item 6. Selected Financial Data.
The information required by this item is incorporated herein by
reference to page 6 of the Company's Annual Report for 1995 which is
attached as Exhibit (13) hereto.
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 6 and 7 of the Company's Annual Report for 1995 which is
attached as Exhibit (13) hereto.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated herein by
reference to page 9 and pages 12 through 21 of the Company's Annual Report
for 1995 which is attached as Exhibit (13) hereto.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable
PART III
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 2 through 4 of the Company's Proxy
Statement dated May 15, 1995 which is attached as Exhibit (22) hereto.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by
reference to pages 5 through 10 of the Company's Proxy Statement dated May
15, 1995 which is attached as Exhibit (22) hereto.
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 15, 1995
which is attached as Exhibit (22) hereto.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is incorporated herein by
reference to page 10 of the Company's Proxy Statement dated May 15, 1995
which is attached as Exhibit (22) hereto.
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
Exhibits:
(3.(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.
(3.(ii)) Bylaws of the Registrant as amended through May
13, 1977 with attached amendments dated May 3, 1979 and
March 2, 1983 incorporated herein by reference to Exhibit 5
to the Registrant's form 10-K Annual Report for the fiscal
year ended February 28, 1993.
(13) 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
15, 1995.
(23) Independent Auditors' Consent.
Financial Statements and Financial Statement Schedule:
See accompanying index to financial statements and
financial statement schedule for a list of all financial
statements and financial statement schedule filed as part of this
report.
Reports on Form 8-K:
Not applicable
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, 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 stockholders
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 stockholders of the registrant, at the
time and in the manner such material is sent to its stockholders, copies of
all reports, proxy statements and other communications distributed to its
stockholders generally.
INDEX TO FINANCIAL STATEMENTS
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 Annual Report for 1995 are
incorporated herein by reference in Item 8. With the exception of the
pages listed in this index and pages listed in Items 1, 5, 6, 7 and 8
incorporating certain portions of the Company's Annual Report for 1995,
such Annual Report for 1995 is not deemed to be filed as part of this Form
10-K.
Reference Page
Annual
Form Report
10-K for 1995
Consolidated financial statements of the Company:
Independent auditors' report 21
Consolidated balance sheets - February 28, 1995
and February 28, 1994 14 - 15
Consolidated statements of earnings - years ended
February 28, 1995, 1994 and 1993 12
Consolidated statements of cash flows - years ended
February 28, 1995, 1994 and 1993 13
Notes to consolidated financial statements 16 - 20
Independent auditors' report on financial statement
schedule S-1
Financial Statement Schedule for three years ended
February 28, 1995:
II - Valuation and qualifying accounts S-2
All other schedules are omitted as the required information is
inapplicable or the information is presented in the financial statements,
related notes or other schedules.
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 25, 1995 BY: /s/ Kenneth A. McCrady
Kenneth A. McCrady, Chairman of the Board
and Chief Executive Officer
Date: May 25, 1995 BY: /s/ Harve Cathey
Harve Cathey, Vice President - Finance
and Principal Financial Officer
Date: May 25, 1995 BY: /s/ Victor V. DiTommaso, Jr.
Victor V. DiTommaso, Jr., Treasurer
and 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 25, 1995 BY: /s/ Kenneth A. McCrady
Kenneth A. McCrady, Director
Date: May 25, 1995 BY: /s/ Harold W. Hartley
Harold W. Hartley, Director
Date: May 25, 1995 BY: /s/ Robert L. Mitchell
Robert L. Mitchell, Director
Date: May 25, 1995 BY: /s/ Thomas R. Price
Thomas R. Price, Director
Date: May 25, 1995 BY: /s/ Charles F. Ray
Charles F. Ray, Director
INDEPENDENT AUDITORS' REPORT ON
FINANCIAL STATEMENT SCHEDULE
The Board of Directors and Stockholders
Ennis Business Forms, Inc.
Under date of April 18, 1995, we reported on the consolidated balance
sheets of Ennis Business Forms, Inc. and subsidiaries as of February 28,
1995 and 1994 and the related consolidated statements of earnings and cash
flows for each of the years in the three-year period ended February 28,
1995, as contained in the 1995 annual report to stockholders. These
financial statements and our report thereon are incorporated by reference
in the annual report on Form 10-K for the year 1995. In connection with
our audits of the aforementioned consolidated financial statements, we also
have audited the related consolidated financial statement schedule as
listed in the accompanying index to financial statements and financial
statement schedule on page 7. 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 Peat Marwick LLP
Dallas, Texas
April 18, 1995
Schedule II
ENNIS BUSINESS FORMS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three Years Ended February 28, 1995
(In thousands)
Additions
Balance at Charged Charged Balance
beginning to to other at end
Description of year operations accounts Deductions of year
Year ended February 28, 1995:
Allowance for
doubtful receivables $845 444 38 (1) 297 (2) 1,030
Year ended February 28, 1994:
Allowance for
doubtful receivables $573 556 86 (1) 370 (2) 845
Year ended February 28, 1993:
Allowance for
doubtful receivables $885 446 94 (1) 852 (2)(3)573
Allowance for doubtful
note receivable $127 -- -- 127 -- (4)
Notes:
(1) Principally collection of accounts previously charged off.
(2) Charge-off of uncollectible receivables.
(3) Includes the reserve of $224,000 for accounts sold in the sale of
the operating assets of American Business Equipment, Inc.
(4) Note received in sale of assets of a subsidiary.
Financial Highlights
Annual Summary
Percentage
Fiscal Year Ended Fiscal Year Ended Increase
February 28, 1995 February 28, 1994 (Decrease)
Net sales $140,097,000 $132,945,000 5.4
Earnings before income taxes 32,041,000 31,039,000 3.2
Income taxes 12,025,000 11,582,000 3.8
Net earnings 20,016,000 19,457,000 2.9
Dividends 9,453,000 9,270,000 2.0
Per share of common stock:
Net earnings 1.22 1.16 5.2
Dividends .575 .555 3.6
Weighted average number of shares
of common stock outstanding 16,439,844 16,717,525 (1.7)
Table of Contents
2 Management's Report
4 Directors and Officers
5 Manufacturing Locations and Executive Offices
6 Selected Financial Data
6 Management's Discussion and Analysis
8 Description of Business
9 Quarterly Information
10 Ten-Year Financial Review
12 Consolidated Statements of Earnings
13 Consolidated Statements of Cash Flows
14 Consolidated Balance Sheets
16 Notes to Consolidated Financial Statements
21 Independent Auditors' Report
MANAGEMENT'S REPORT TO STOCKHOLDERS
For our fiscal year ended February 28, 1995 we achieved record sales
and earnings per share, but net earnings dollars were 6% below the previous
record set in Fiscal 1993.
The business forms industry has experienced little or no growth in
recent years. In spite of this difficult environment, we continue to
maintain what we believe to be the highest profit margin and return on
investment of any publicly-owned business forms company in the United
States.
Operating Results
Sales for the year ended February 28, 1995 amounted to $140,097,000
compared to $132,945,000 in the prior year, an increase of 5.4%. Net
earnings for the year were $20,016,000 compared to $19,457,000 in the prior
year, an increase of 2.9%. Net earnings per share of common stock amounted
to $1.22 compared to $1.16 in the prior year, an increase of 5.2%. Per
share earnings computations were based on 16,439,844 shares for the year
ended February 28, 1995 and 16,717,525 shares for the prior year.
Although we experienced some improvement in incoming business from our
broad base of small customers this year, most of the sales increase was
from two business forms customers and Connolly Tool, which had a much
stronger year than last year.
The gross margin declined this year, primarily as a result of numerous
raw material cost increases which were not fully recovered through selling
price increases.
Financial Condition
The Company's financial condition remains strong. At February 28,
1995 the ratio of current assets to current liabilities was 4.6 to 1, and
long-term debt was less than 1% of stockholders' equity.
Dividends
Cash dividends of $.575 per share were paid during the year ended
February 28, 1995 compared to $.555 in the prior year, an increase of 3.6%
Treasury Stock Purchases
For many years, excess cash flow from operations was used to purchase
blocks of our stock. The resultant decrease in outstanding shares produced
higher per share growth rates in earnings and cash dividends than the
growth in net earnings in most years. As a result of the treasury stock
repurchase program, total equity capitalization of the Company was reduced
by nearly 70% in the twenty years from initiation of the program until the
Board of Directors temporarily suspended open market treasury stock
purchases in September, 1993. This decision was made for the purpose of
accumulating cash for possible acquisitions. Since our current plans are
to continue searching for acquisitions, we do not plan to resume open
market treasury stock purchases in the near future. The Board of Directors
will review this strategy regularly and a public announcement will be made
if the current policy is changed.
Acquisitions
Although we continue to actively search for acquisitions, none were
consummated during the current year. We did, however, establish a 70%-
owned business forms manufacturing operation in Mexico with a Mexican
partner. In spite of current economic conditions in Mexico, we are
optimistic about the long-term prospects for this venture, which
specializes in the evolving market for small business computer forms and
began shipping products late in the fiscal year.
Changes in the Board of Directors
J. C. McCormick served with distinction on our Board from 1967 until
his death on February 21, 1995, and he will be missed by all who knew him.
Pat G. Sorrells, a major shareholder of the Company who previously
served on our Board from June 1982 to April 1989, was appointed by the
Board at the April 1995 meeting to fill the unexpired term of J. C.
McCormick and was nominated for a three year term commencing in June 1995.
Outlook
For many years, our primary objective was to achieve annual increases
in earnings in the belief that if earnings increased each year the long
term would take care of itself. During fiscal 1994 it became clear that
changes in the business forms industry had rendered such an objective
unrealistic. The market for many of our products is in long-term decline,
and this trend is not expected to be reversed. Some of our products have
growth potential; however, in order to obtain meaningful growth in these
products, it is necessary to constantly improve service to customers and to
increase sales and marketing efforts. The costs associated with these
actions negatively affect earnings in the short-term, and we can't be
certain they will pay off in the long-term.
In spite of the outlook for the business forms market as a whole, we
have a strong position in an important segment of the market. This "niche"
is represented by small businesses, generally outside of major metropolitan
areas, which we serve through independent dealers. Although business forms
usage in this market segment, as in most others, is subject to elimination
or reduction as a result of advances in information processing,
transmitting, and reporting technologies, there is growth potential as new
small businesses are formed and existing small businesses grow and expand.
The small business market has been the most dynamic sector of the U. S.
economy for many years, and we intend to maintain our position in this
market and enhance our ability to serve it with business forms and other
products.
We have made one large and two small acquisitions during the last four
fiscal years which have provided new products for this market, and we plan
to continue to search for products which fit into our distribution system.
Our goal is to increase our product offering through both internal
development and additional acquisitions. We have recently increased our
emphasis on acquisitions.
The increased investment of what would otherwise be current profit
dollars in improved service to customers and expanded marketing activities
will probably continue to result in a decline in the net profit margin over
at least the next year or two; however, we expect to continue to maintain
the highest profit margin and return on equity in the business forms
industry. We also expect to continue generating cash flows adequate to at
least maintain our current dividend rate and to fund future internal growth
and acquisitions. We are totally committed to long-term profitable growth
for our Company and the creation of value for our stockholders, including
our employees who participate in the Ennis Business Forms Stock Ownership
Plan. We appreciate your continued support.
Kenneth A. McCrady
Chairman of the Board
and Chief Executive Officer
Charles F. Ray
President
and Chief Operating Officer
May 1, 1995
Directors and Officers
Directors Officers
Harry M. Cornell, Jr. (d) Kenneth A. McCrady
Chairman of the Board and Chief Chairman of the Board and
Executive Officer of Leggett & Chief Executive Officer
Platt, Inc.
Carthage, Missouri Charles F. Ray
President and
James B. Gardner (a)(c) Chief Operating Officer
Managing Director
Service Management Company Harve Cathey
Dallas, Texas Vice President-Finance
and Secretary
Harold W. Hartley (b) (c) Nelson Ward
Retired Vice President
Mabank, Texas Sales and Marketing
J. C. McCormick (a)(b) * Al Lemieux
Business Consultant Vice President
Dallas, Texas Manufacturing
Kenneth A. McCrady (a) Doug Self
Chairman of the Board and Vice President
Chief Executive Officer of
the Company Victor DiTommaso
Treasurer
Robert L. Mitchell (b)
Retired
Ennis, Texas
Thomas R. Price (c)(d)
Owner and President
Price Industries
Ennis, Texas
Charles F. Ray (a)
President and Chief Operating
Officer of the Company
Ewell L. Tankersley (b)(d)
Ranching and Investments
Austin, Texas (a) Member of Executive Committee
(b) Member of Audit Committee
Pat G. Sorrells ** (c) Member of Executive Compensation
Ranching and Investments and Stock Option Committee
Plano, Texas (d) Member of Nominating Committee
* Deceased February 21, 1995
** Elected to fill unexpired term of J. C. McCormick
Manufacturing Locations and Executive Offices
Manufacturing Locations Executive Offices
Paso Robles, California 107 N. Sherman Street
Moultrie, Georgia Ennis, TX 75119
DeWitt, Iowa (214) 875-6581
Fort Scott, Kansas
Louisville, Kentucky Registrar and Transfer Agent
Macomb, Michigan KeyCorp Shareholder Services, Inc.
Boulder City, Nevada 5050 Renaissance Tower
Coshocton, Ohio 1201 Elm Street
Portland, Oregon Dallas, Texas 75270-2014
Knoxville, Tennessee
Dallas, Texas Auditors
Ennis, Texas KPMG Peat Marwick LLP
Wolfe City, Texas Auditors
Chatham, Virginia
Mexico City, Mexico Annual Meeting
10:00 a.m. June 15, 1995
Fairmont Hotel
Parisian Room
1717 N. Akard Street
Dallas, Texas
Stock Exchange Listing
New York Stock Exchange
Symbol: EBF
The Company's Form 10-K as
filed with the Securities and
Exchange Commission will be
provided to stockholders upon
written request therefor.
Selected Financial Data
Years Ended February 28 or 29,
1995 1994 1993 1992 1991
(In thousands, except per share amounts)
Net sales from continuing
operations $140,097 132,945 129,279 131,810 120,159
Earnings from continuing
operations 20,016 19,457 20,692 20,767 20,736
Earnings from continuing
operations per share of
common stock 1.22 1.16 1.18 1.14 1.10
Net earnings 20,016 19,457 21,252 21,216 21,100
Net earnings per share of
common stock 1.22 1.16 1.21 1.16 1.12
Total assets 84,991 74,499 75,923 81,244 73,208
Long-term debt 360 435 505 2,396 3,163
Cash dividends per share
of common stock .575 .555 .535 .51 .47
Notes: 1. The per share figures give effect to a three-for-two stock
distribution in July 1991.
2. Fiscal years 1992, 1993, 1994 and 1995 include the
operations of Admore, Inc. acquired March 4, 1991.
3. Net earnings for fiscal 1992 includes $1,500,000 (8 cents a
share) resulting from the cumulative effect of a change in
accounting for income taxes.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Company has maintained a strong financial position with working
capital at February 28, 1995 of $46,289,000, an increase of 28.7% from the
beginning of the year, and a current ratio of 4.6 to 1. The increase is
due to cash provided by operating activities and the Board of Directors'
decision, on September 15, 1993, to temporarily suspend open market
treasury stock purchases.
Discontinued Operation
Because of inadequate return on investment, the Company decided during
the year ended February 29, 1992 to discontinue its copier sales and
service subsidiary, American Business Equipment, Inc. (ABE) and recorded a
provision for loss on disposal. During the year ended February 28, 1993
the Company sold the assets and business of ABE and the ABE real estate on
a more favorable basis than was used in determining the provision for loss
on disposal. See Note 7 to the accompanying Consolidated Financial
Statements.
Accounting Standards
In May 1993 the Financial Accounting Standards Board (the Board)
issued Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The Statement
addresses the accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities. The provisions of Statement No. 115 became effective for
fiscal year 1995 and did not have a significant impact on the Company's
Consolidated Financial Statements.
In March 1995, the Board issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". This Statement provides guidance
for recognition and measurement of impairment of long-lived assets, certain
identifiable intangibles and goodwill related both to assets to be held and
used and assets to be disposed of. The provisions of Statement No. 121
will be effective for fiscal year 1997 and are not expected to have a
significant impact on the Company's Consolidated Financial Statements.
Results of Operations
1995 as compared to 1994
Net sales increased 5.4% in fiscal 1995 compared to 1994. Most of the
increase is attributable to additional business from two significant
customers in the business forms printing operations and sales from an award
ribbon company acquired in June 1993. The Company's tool and die
subsidiary, Connolly Tool and Machine Company, also had a significant
increase in net sales over the prior year. The upturn in the economy,
additional marketing activities, and improved customer service further
contributed to the increase in net sales. Sales by the Company's 70%-owned
Mexican subsidiary were not material. Cost of sales increased 7.1% in
fiscal 1995 compared to 1994, a greater percentage increase than was
experienced in net sales for the same period. Accordingly, gross profit
increased only 2.7%, less than the increase in sales. Competitive market
conditions have prohibited the Company from obtaining price increases
sufficient to fully offset the increased raw material costs of the business
forms printing operations. Selling, general, and administrative expenses
increased 6.4% over the prior year because of additional marketing costs,
customer service expenses and startup costs associated with a new
manufacturing facility in Mexico City. Interest expense continues to
decline due to scheduled decreases in outstanding long-term debt.
Investment and other income increased in the current year over the prior
year due to gains from asset sales, increased amounts of funds available
for investments and a steady increase in interest rates throughout the
year. The overall effective income tax rate remained substantially
unchanged from fiscal 1994. Net earnings increased 2.9%, comparable to the
increase in gross profits. The increased selling, general and
administrative expenses were largely offset by the higher investment
income. Earnings per share increased by a greater percentage than net
earnings because the weighted average number of shares of common stock
outstanding decreased in fiscal 1995 compared to the prior year. This
decrease in the weighted average number of shares of common stock
outstanding is because of treasury stock purchases in the first half of
fiscal 1994.
1994 as compared to 1993
Net sales from continuing operations increased 2.8% in fiscal 1994
compared to 1993. The increase is attributable to the acquisition of two
award ribbon companies (one in fiscal 1994 and one in fiscal 1993) and
additional business from several significant customers in the business
forms printing operation. Cost of sales increased 4.9% in fiscal 1994
compared to 1993, a greater percentage increase than was experienced in net
sales for the same period. Competitive market conditions have prohibited
the Company from obtaining price increases sufficient to offset the
increased raw material and labor costs of the business forms printing
operations. As a result of the competitive market conditions, gross
profits were substantially unchanged between years despite increased sales.
Gross profit margins decreased 3.0% in fiscal 1994 as compared to the prior
year. Earnings from continuing operations decreased 6.0% between fiscal
1994 and 1993. The decrease in earnings was the result of greater selling,
general and administrative expenses which increased 6.1% in fiscal 1994
compared to 1993 and an increase in the Company's effective income tax
rate. The increase in expenses was primarily the result of additional
marketing costs and the beginning of a non-competition agreement. Total
income tax expense was unchanged between fiscal 1994 and 1993 despite the
decrease in earnings before income taxes. The overall effective income tax
rate increased from 35.9% in fiscal 1993 to 37.3% in the current year. The
increase was principally due to an increase in statutory Federal income tax
rates enacted under the Revenue Reconciliation Act of 1993. Interest
expense continued to decline as a result of scheduled decreases in and
early repayment of outstanding long-term debt. Investment and other income
declined in the current year compared to the prior year because of losses
from asset sales in the first quarter of the current year and gains from
asset sales in the second quarter of the prior year. Earnings per share
decreased by a smaller percentage than net earnings because of the
purchases of treasury stock in fiscal 1994 (767,500 shares).
1993 as compared to 1992
Net sales from continuing operations decreased 1.9% in fiscal 1993
compared to 1992. All of the decline is in the business forms printing
operation. Net sales of Connolly Tool and Machine Co. increased 6.3% over
the fiscal 1992 level. Net earnings from continuing operations remain
essentially unchanged for the fourth consecutive year, as the Company
continues to search for new products to market to its dealer network.
Admore again made a significant profit contribution. Without Admore's
contribution, net earnings from continuing operations for fiscal 1993 would
have declined 10.5% from fiscal 1991 results, the last year before the
Company acquired Admore. Cost of sales and gross margins remained
substantially the same as compared to the prior year. Fiscal 1993 has
virtually no LIFO liquidation gain as compared to a 1992 gain of $615,000.
Selling, general and administrative expenses declined 3.9% from 1992 to
1993. No single item of expense accounts for the decline. Interest
expense continued to decline as a result of scheduled reductions of long-
term debt. Investment and other income declined from fiscal year 1992
because of decreased amounts of funds available for investments and low
interest rates for the entire year. Funds available for investment
decreased because of treasury stock purchases, the majority of which
occurred in the second quarter. The overall effective income tax rate
remained substantially unchanged from fiscal 1992 despite continued
increases in state income tax expense. The full impact of changes in the
Texas franchise tax was not experienced until fiscal 1993. Purchases of
treasury stock in fiscal 1993 (1,055,258 shares) resulted in the percentage
increase in earnings per share exceeding the percentage increase in net
earnings.
Description of 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 92% 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 fourteen manufacturing locations in twelve
strategically located states and Mexico City, providing the Ennis dealer a
national network for meeting users' demands for hand or machine written
records and documents. The Company's other subsidiary, Connolly Tool and
Machine Company (Connolly), is located in Dallas, Texas and designs and
manufactures tools, dies and special machinery, all to customers'
specifications, for customers located primarily in the Southwestern part of
the United States. The operations of Connolly are not significant to
consolidated operations. For the year ended February 28, 1995 the sale of
business products represents approximately 95% 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 or Connolly's share of the total tool, dies and special machinery
market, or their positions in their respective industries, 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. Also, Connolly is believed to be one of
the leading independent designers and manufacturers of tools, dies and
special machinery in the Southwest.
Distribution of business forms and other business products throughout the
United States and Mexico is primarily through independent dealers,
including business forms distributors, stationers, printers, computer
software developers, etc. Distribution of tools, dies and special
machinery is on a contract basis with individual customers. No single
customer accounts for as much as ten percent of consolidated sales.
Raw materials principally consist of a wide variety of weights, widths,
colors, sizes, and qualities of paper for business forms and a variety of
types and grades of metals and electrical and mechanical components for
tools, dies and special machinery purchased from a number of major
suppliers at prevailing market prices.
Seasonal fluctuations in business forms usage have historically caused a
decline in sales during the first quarter, and operations are further
affected by the seasonal pattern of business forms used in the raw cotton
industry, which forms are generally sold during the months immediately
preceding the harvesting of cotton. However, recent experience indicates
that general economic conditions are the predominant factor in quarterly
volume fluctuations, not only in the business forms market, but also in the
markets in which Connolly participates.
Quarterly Information (Unaudited)
(In thousands, except per share amounts)
Quarter Ended
May August November February
Fiscal year ended February 28, 1995:
Net sales from continuing
operations $34,041 34,594 35,249 36,213
Gross margin 13,032 13,099 12,913 14,565
Net earnings (note 1) 4,975 4,893 4,784 5,364
Dividends paid 2,302 2,384 2,383 2,384
Per share of common stock:
Net earnings .30 .30 .29 .33
Dividends .14 .145 .145 .145
Common stock price range
per share 13.38 to 13.25 to 12.63 to 11.63 to
16.13 15.00 14.88 14.00
Common stock trading volume,
number of shares 722 593 900 992
Fiscal year ended February 28, 1994:
Net sales from continuing
operations $31,268 33,813 34,583 33,281
Gross margin 12,172 12,556 13,150 14,330
Net earnings (note 1) 4,598 4,486 4,893 5,480
Dividends paid 2,322 2,352 2,295 2,301
Per share of common stock:
Net earnings .27 .27 .29 .33
Dividends .135 .14 .14 .14
Common stock price range
per share 15.00 to 14.25 to 12.00 to 13.00 to
17.88 16.5 16.00 15.75
Common stock trading volume,
number of shares 789 1,333 1,167 872
The Company's common stock is traded on the New York Stock Exchange. The
number of common stockholders of record as of April 14, 1995 was 2,005.
Notes: 1. Year-end adjustments related to physical inventory counts and
LIFO valuation increased net earnings for the fourth quarter of
fiscal 1995 by approximately $267,000 (2 cents a share) as
compared to an increase in net earnings of approximately $953,000
(6 cents a share) from comparable adjustments in the fourth
quarter of fiscal 1994.
<TABLE>
Ten-Year Financial Review
(In thousands, except per share and per dollar of sales amounts)
<CAPTION>
Fiscal years ended February 28 or 29 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales from continuing
operations $140,097 132,945 129,279 131,810 120,159 122,941 120,016 110,002 103,460 101,955
Earnings from continuing operations
before income taxes 32,041 31,039 32,276 32,303 32,225 32,630 28,735 25,614 22,377 20,120
Federal and state income taxes 12,025 11,582 11,584 11,536 11489 11,629 10,259 10,008 10,191 9,198
Earnings from continuing operations 20,016 19,457 20,692 20,767 20,736 21,001 18,476 15,606 12,186 10,922
Per dollar of sales .143 .146 .16 .158 .173 .171 .154 .142 .118 .107
Per share (a) 1.22 1.16 1.18 1.14 1.10 1.06 .91 .73 .54 .47
Net earnings 20,016 19,457 21,252 21,216 21,100 21,027 18,839 15,751 12,562 11,399
Per share (a) 1.22 1.16 1.21 1.16 1.12 1.06 .92 .74 .56 .49
Dividends 9,453 9,270 9,400 9,310 8,810 8,158 6,609 4,761 3,340 2,328
Per share (a) .575 .555 .535 .51 .47 .41 .32 .22 .15 .10
Stockholders' equity 69,338 58,897 60,565 66,485 55,830 60,737 52,954 49,586 53,950 50,309
Per share (a) 4.22 3.52 3.52 3.65 3.05 3.10 2.66 2.41 2.43 2.19
Current assets 59,265 48,519 48,928 51,035 50,927 55,527 46,797 45,600 53,390 48,012
Current liabilities 12,976 12,548 12,087 9,631 10,203 10,074 10,080 12,619 12,642 11,497
Net working capital 46,289 35,971 36,841 41,404 40,724 45,453 36,717 32,981 40,748 36,515
Ratio of current assets to
current liabilities 4.6:1 3.9:1 4.0:1 5.3:1 5.0:1 5.5:1 4.6:1 3.6:1 4.2:1 4.2:1
Depreciation of plant and equipment 3,499 3,805 4,086 4,368 3,694 3,486 3,372 3,249 3,097 2,782
Additions to property, plant and
equipment 4,010 2,215 1,315 2,484 3,684 3,639 2,096 2,563 2,906 5,765
(a) Earnings from continuing operations per share, net earnings per share, dividends per share and stockholders' equity per
share figures have been adjusted to reflect the following stock distributions:
July 1991 3 for 2
July 1989 3 for 2
February 1987 3 for 2
June 1985 2 for 1
</TABLE>
Consolidated Statements of Earnings
(In thousands, except per share amounts)
For the years ended February 28,
1995 1994 1993
Net sales $140,097 132,945 129,279
Costs and expenses:
Cost of sales 86,488 80,737 76,952
Selling, general and
administrative expenses 22,893 21,525 20,287
Interest expense 87 120 251
109,468 102,382 97,490
Earnings from operations 30,629 30,563 31,789
Investment and other income - net 1,412 476 487
Earnings from continuing
operations before income
taxes 32,041 31,039 32,276
Provision for income taxes (note 5) 12,025 11,582 11,584
Earnings from continuing
operations 20,016 19,457 20,692
Gain on disposal of discontinued
operation - net of taxes (note 7) -- -- 560
Net earnings $20,016 19,457 21,252
Per share of common stock:
Continuing operations $1.22 1.16 1.18
Discontinued operation -- -- .03
Net earnings $1.22 1.16 1.21
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
(In thousands)
For the years ended February 28,
1995 1994 1993
Cash flows from operating activities:
Net earnings $20,016 19,457 21,252
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 3,657 4,107 4,392
Deferred income taxes (272) (675) 8
(Gain) on disposal of discontinued
operation, net of income taxes -- -- (560)
Other 216 200 (629)
Changes in assets and liabilities:
Receivables (3,185) 659 321
Inventories (1,553) (716) (1,202)
Other current assets
(net of deferred taxes) 344 (127) (108)
Accounts payable and
accrued expenses 1,188 2,349 1,226
Federal and state income taxes (688) (98) 524
Net cash provided by operating
activities 19,723 25,156 25,224
Cash flows from investing activities:
Capital expenditures (4,010) (2,215) (1,315)
Purchase of operating assets -- (1,000) (363)
Purchase of short-term investments (17,600) -- --
Proceeds from sale of discontinued
operation -- -- 1,841
Proceeds from disposal of property 379 24 103
Net cash provided by (used in)
investing activities (21,231) (3,191) 266
Cash flows from financing activities:
Exercise of incentive stock options 18 19 156
Purchase of treasury stock (15) (11,874) (17,928)
Dividends (9,453) (9,270) (9,400)
Payment of long-term debt (70) (1,860) (798)
Net cash flows used in financing
activities (9,520) (22,985) (27,970)
Effect of exchange rate changes on cash (8) -- --
Net change in cash and equivalents (11,036) (1,020) (2,480)
Cash and equivalents at beginning
of year 21,577 22,597 25,077
Cash and equivalents at end of year $10,541 21,577 22,597
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheets
(In thousands, except share amounts)
February 28, February 28,
1995 1994
Assets
Current assets:
Cash and equivalents $10,541 21,577
Short-term investments 17,600 --
Receivables, principally trade, less
allowance for doubtful receivables
of $1,033 in 1995 and $845 in 1994 18,284 15,106
Inventories, at lower of cost (principally
last-in, first-out) or market (note 2) 10,301 8,760
Other current assets (note 5) 2,539 3,076
Total current assets 59,265 48,519
Property, plant and equipment, at cost:
Plant machinery and equipment 48,600 47,349
Land and buildings 14,548 14,427
Other 4,776 4,326
67,924 66,102
Less accumulated depreciation 48,403 46,896
Net property, plant and equipment 19,521 19,206
Cost of purchased businesses in excess of
amounts allocated to tangible net assets 4,356 4,477
Other assets and deferred charges (note 6) 1,849 2,297
$84,991 74,499
See accompanying notes to consolidated financial statements.
February 28, February 28,
1995 1994
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term
debt $75 70
Accounts payable 5,014 4,309
Accrued expenses:
Employee compensation and benefits 5,303 5,135
Taxes other than income 740 693
Other 764 507
Federal and state income taxes payable
(note 5) 1,080 1,834
Total current liabilities 12,976 12,548
Long-term debt, less current installments 360 435
Deferred credits, principally Federal
income taxes (note 5) 2,317 2,619
Stockholders' equity (notes 3 and 4):
Preferred stock of $10 par value.
Authorized 1,000,000 shares;
none issued -- --
Common stock of $2.50 par value.
Authorized 40,000,000 shares; issued
21,249,860 in 1995 and 1994 53,125 53,125
Additional capital 1,040 1,095
Retained earnings 107,100 96,537
Cumulative foreign currency translation
adjustments (125) --
161,140 150,757
Less cost of 4,809,829 shares in 1995 and
4,812,663 shares in 1994 of common stock
in treasury 91,802 91,860
Total stockholders' equity 69,338 58,897
$ 84,991 74,499
Notes to
Consolidated Financial Statements
(1) Significant Accounting Policies and General Matters
Basis of Consolidation. The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The cost of purchased businesses in excess of amounts allocated to tangible
net assets is being amortized by the straight-line method over forty years.
Related accumulated amortization totaled $459,000 and $338,000 at February
28, 1995 and 1994, respectively.
Cash and Short-Term Investments. Investments with original maturities of
less than three months are classified as cash equivalents. Short-term
investments consist of debt securities issued by the U. S. Treasury with
varying maturities through October 1995. Short-term investments are
classified as held-to-maturity securities and reported at amortized cost,
which approximates fair market value, in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities."
Property, Plant and Equipment. Depreciation of property, plant and
equipment is provided by the straight-line method at rates presently
considered adequate to amortize the total cost over the useful lives of the
assets. 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 significant leases
which are in substance acquisitions of property.
Investment Income. Investment income was approximately $1,215,000,
$536,000 and $697,000 for fiscal years 1995, 1994 and 1993, respectively,
and is included in Investment and other income.
Income Taxes. The Company complies with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." The Statement requires
the use of the asset and liability method of accounting for income taxes.
Accordingly, changes in statutory income tax rates, such as the rate
increase enacted under the Revenue Reconciliation Act of 1993, increase or
decrease deferred income tax expense in the period of enactment.
Credit Risk. The Company's financial instruments which are exposed to
credit risk consist of its trade receivables and short term investments.
The trade receivables are geographically dispersed within the continental
United States and Mexico and the short term investments are generally
restricted to investment grade commercial paper, Eurodollar deposits of
U.S. banks, and U. S. Government obligations.
Business Segment. The Company is principally in the business of
manufacturing and selling business forms and other printed business
products. For the fiscal years 1995, 1994 and 1993, business forms
operations represented approximately 89% to 95% of net sales, operating
profits, depreciation and identifiable assets in each year. Capital
expenditures attributable to business forms operations for the same years
were 100%, 98% and 91%, respectively.
Net Earnings Per Common Share. Net earnings per common share amounts are
based on the weighted average number of shares outstanding during each
year. Common stock equivalents (options) have not been included in
determining earnings per common share amounts because their inclusion would
not materially dilute the amounts shown. The weighted average number of
shares outstanding for the fiscal years 1995, 1994 and 1993 were
16,439,844, 16,717,525 and 17,557,716, respectively.
Foreign Currency Translation Adjustments. Financial position and results
of operations of the Company's foreign, 70% - owned, subsidiary are
measured using the local currency as the functional currency. Assets and
liabilities of this operation were translated at the exchange rate in
effect at the balance sheet date. Income statement accounts were
translated at the average exchange rates prevailing during the year.
Translation adjustments are included in the cumulative foreign currency
translation adjustments caption in the stockholders' equity section of the
consolidated balance sheet. Gains and losses that result from foreign
currency transactions are included in earnings. Such amounts were not
material in any of the years presented.
(2) Inventories
The Company values the raw material content of most of its business
forms inventories at the lower of last-in, first-out (LIFO) cost or market.
At February 28, 1995 and 1994 approximately 78% and 74%, respectively, of
business forms inventories are valued at LIFO with the remainder of
inventories valued at the lower of first-in, first-out cost or market. The
following table summarizes the components of inventory at the different
stages of production (in thousands):
February 28,
1995 1994
Raw material $6,746 5,390
Work-in-process 963 769
Finished goods 2,592 2,601
$10,301 8,760
The excess of current costs over LIFO stated values amounts to
approximately $5,486,000 and $4,529,000 at February 28, 1995 and 1994,
respectively.
(3) Stockholders' Equity
Following is a summary of transactions in stockholders' equity accounts for
the three years ended February 28, 1995 (amounts in thousands, except share
amounts):
<TABLE>
<CAPTION>
Cumulative
Foreign Currency Treasury Stock
Common Stock Additional Retained Translation (at cost)
Shares Amount Capital Earnings Adjustments Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
Balance February 29, 1992 21,249,860 $53,125 1,409 74,498 -- (3,014,663) $(62,547)
Net earnings -- -- -- 21,252 -- -- --
Dividends declared ($.535 per share) -- -- -- (9,400) -- -- --
Treasury stock transactions:
Purchases -- -- -- -- -- (1,055,258) (17,928)
Exercise of stock options -- -- (214) -- -- 18,632 370
Balance February 28, 1993 21,249,860 53,125 1,195 86,350 -- (4,051,289) (80,105)
Net earnings -- -- -- 19,457 -- -- --
Dividends declared ($.555 per share) -- -- -- (9,270) -- -- --
Treasury stock transactions:
Purchases -- -- -- -- -- (767,500) (11,874)
Exercise of stock options -- -- (100) -- -- 6,126 119
Balance February 28, 1994 21,249,860 53,125 1,095 96,537 -- (4,812,663) (91,860)
Net earnings -- -- -- 20,016 -- -- --
Dividends declared ($.575 per share) -- -- -- (9,453) -- -- --
Foreign currency translation
adjustment -- -- -- -- (125) -- --
Treasury stock transactions:
Purchases -- -- -- -- -- (1,037) (15)
Exercise of stock options -- -- (55) -- -- 3,871 73
Balance February 28, 1995 21,249,860 $53,125 1,040 107,100 (125) (4,809,829) $(91,802)
</TABLE>
(4) Stock Options
At February 28, 1995, 378,958 shares of the Company's unissued common
stock were reserved under an incentive stock option plan for issuance to
officers and supervisory employees of the Company and its subsidiaries.
Following is a summary of transactions in qualified stock options and
incentive stock options during the three fiscal years ended in 1995:
Number Exercise
of Price
Shares Per Share
Outstanding at February 29, 1992
(120,702 shares exercisable) 239,992 $3.04 to 19.25
Exercised (18,632) 3.04 to 15.63
Terminated (4,344) 19.25
Outstanding at February 28, 1993
(142,196 shares exercisable) 217,016 $3.04 to 19.25
Exercised (6,126) 3.04
Granted 46,500 13.81
Terminated (1,000) 15.63
Outstanding at February 28, 1994
(166,119 shares exercisable) 256,390 $3.04 to 19.25
Exercised (3,557) 3.04 to 10.17
Granted 5,750 12.00 to 14.25
Terminated (2,375) 13.81 to 19.25
Outstanding at February 28, 1995
(189,763 shares exercisable) 256,208 $10.17 to 19.25
(5) Income Taxes
The components of the provision for income taxes related to continuing
operations for fiscal years 1995, 1994 and 1993 are (in thousands):
1995 1994 1993
Current:
Federal $11,029 11,003 10,918
State and local 1,268 1,254 1,415
Deferred Federal (272) (675) (749)
Total provision for income taxes $12,025 11,582 11,584
Total income taxes paid $12,986 12,369 11,470
The following summary for the three fiscal years ended in 1995
reconciles the statutory U. S. Federal income tax rate to the Company's
effective tax rate:
1995 1994 1993
Statutory rate 35.0% 35.0% 34.0%
Provision for state income taxes,
net of Federal income tax benefit 2.5 2.6 2.9
ESOP pass-through dividend deduction (0.6) (0.7) (0.6)
Other 0.6 0.4 (0.4)
Effective tax rate 37.5% 37.3% 35.9%
The Federal and state income tax assets and liabilities are summarized
as follows (in thousands):
February 28,
1995 1994
Currently payable $1,080 1,834
Deferred:
Current asset 1,682 1,857
Noncurrent liability 2,045 2,426
The components of deferred income tax assets and liabilities are
summarized as follows (in thousands):
February 28,
1995 1994
Current deferred asset:
Allowance for doubtful receivables $491 457
Employee compensation and benefits 884 1,100
Foreign net operating loss carryforward 112 --
Other 307 300
Subtotal 1,794 1,857
Valuation allowance (112) --
$1,682 1,857
Noncurrent deferred liability:
Depreciation $1,475 1,765
Prepaid pension cost 177 388
Other 393 273
$2,045 2,426
The valuation allowance relates to the foreign net operating loss
carryforward.
(6) Employee Benefit Plans
The Company and certain subsidiaries have noncontributory defined
benefit retirement plans covering substantially all of their employees.
Benefits are based on years of service and the employee's average
compensation for the highest five consecutive compensation years preceding
retirement or termination. The Company's funding policy is to contribute
annually an amount in accordance with the requirements of ERISA. The
following table sets forth the Plans' funded status and amounts recognized
in the Company's consolidated balance sheets at February 28, 1995 and 1994
(in thousands):
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $19,971 and $21,931
in 1995 and 1994, respectively $22,198 27,029
Projected benefit obligation for service
rendered to date $(30,286) (34,484)
Plan assets at fair value 27,904 31,371
Plan assets (less than) projected
benefit obligation (2,382) (3,113)
Unrecognized net loss 8,059 10,006
Unrecognized net transition asset being
recognized over the average
remaining service life (4,899) (5,591)
Prepaid pension cost included in other assets $778 1,302
Net pension cost for fiscal years 1995, 1994 and 1993 included the
following components (in thousands):
1995 1994 1993
Service cost - benefits earned during
the current period $1,520 1,383 1,446
Interest cost on projected benefit
obligation 2,563 2,185 2,097
Actual (return) loss on plan assets 119 (3,365) (2,221)
Net amortization and deferral (3,490) (78) (1,321)
Net periodic pension cost $712 125 1
Assumptions used in accounting for the defined benefit plans for fiscal
years 1995, 1994 and 1993 are as follows:
1995 1994 1993
Weighted average discount rate 8.25% 7.50% 8.00%
Earnings progression 4.50% 4.50% 4.50%
Expected long-term rate of return on
plan assets 10.00% 9.75% 10.00%
(7) Discontinued Operation
During fiscal 1992 the Company decided to discontinue its investment
in American Business Equipment, Inc. (ABE), its copier sales and service
subsidiary. The Company's intention was to sell the operation in its
entirety, but it was also recognized that it might be necessary to sell
selected locations and close other sites. Accordingly, in its 1992
financial statements the Company provided for a loss on disposal on this
basis. During fiscal 1993 the Company was successful in selling the
operation in its entirety and, accordingly, realized a smaller loss on
disposal than had been provided for. The fiscal 1993 gain on disposal of
discontinued operation totaling $560,000 (net of income taxes of $315,000)
represents the adjustment of the 1992 loss provision to the amount
ultimately realized.
Independent Auditors' Report
The Board of Directors and Stockholders
Ennis Business Forms, Inc.:
We have audited the accompanying consolidated balance sheets of Ennis
Business Forms, Inc. and subsidiaries as of February 28, 1995 and 1994, and
the related consolidated statements of earnings and cash flows for each of
the years in the three-year period ended February 28, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ennis
Business Forms, Inc. and subsidiaries as of February 28, 1995 and 1994, and
the results of their operations and their cash flows for each of the years
in the three-year period ended February 28, 1995, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
April 18, 1995
Subsidiaries of the Registrant
The registrant owns 100 percent of the outstanding voting securities
of the following subsidiary companies.
Name of Company Jurisdiction
Ennis Tag & Label Company Delaware
Ennis Business Forms of Georgia, Inc. Georgia
Ennis Business Forms of Ohio, Inc. Ohio
Ennis Business Forms of Kentucky, Inc. Kentucky
Ennis Business Forms of Oregon, Inc. Oregon
Ennis Business Forms of Kansas, Inc. Kansas
Ennis Business Forms of Tennessee, Inc. Texas
Ennis Business Forms of Texas, Inc. Delaware
Connolly Tool and Machine Company Delaware
United Continental Leasing Co. Delaware
Admore, Inc. Texas
Business Copy Machine Center of Amarillo, Inc. Texas
The registrant owns 70 percent of the outstanding voting securities of
the following subsidiary company.
Formas Para Negocios Ennis, S.A. DE C.V. Mexico
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Ennis Business Forms, Inc.:
We consent to incorporation by reference in the registration statement (No.
2-81124) on Form S-8 of Ennis Business Forms, Inc. of our reports dated
April 18, 1995, relating to the consolidated balance sheets of Ennis
Business Forms, Inc. and subsidiaries as of February 28, 1995 and 1994 and
the related consolidated statements of earnings and cash flows and related
schedule for each of the years in the three-year period ended February 28,
1995, which reports appear, or are incorporated by reference in, the 1995
annual report on Form 10-K of Ennis Business Forms, Inc.
KPMG Peat Marwick LLP
Dallas, Texas
May 25, 1995
