UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 6, 2000
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ENNIS BUSINESS FORMS, INC.
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(Exact name of registrant as specified in its charter)
TEXAS 1-5807 75-0256410
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(State or other Jurisdiction (Commission (I. R. S. Employer
of incorporation) File Number) Identification No.)
1510 N. Hampton Suite 300, DeSoto, Texas 75115
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(Address of principal executive offices) (Zip Code)
(972) 228-7801
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(Registrant's telephone number, including area code)
No Change
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(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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Financial Statements of Northstar Computer Forms, Inc.
Report of Independent Accountants
Consolidated Balance Sheets as of October 31, 1999 and 1998
Consolidated Statement of Earnings for the Years Ended October
31, 1999, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended October 31, 1999, 1998 and 1997
Consolidated Statement of Cash Flows for the Years Ended
October 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Unaudited Interim Financial Statements of Northstar Computer
Forms, Inc.
Condensed Consolidated Balance Sheet as of April 30, 2000 and
October 31, 1999
Condensed Consolidated Statement of Earnings for the Three and
Six Months Ended April 30, 2000 and 1999
Condensed Consolidated Statement of Cash Flow for the Six
Months Ended April 30, 2000 and 1999
Notes to the Condensed Consolidated Financial Statements
Unaudited Pro Forma Combined Financial Statements of Ennis
Business Forms
Pro Forma Combined Condensed Balance Sheet as of February 29,
2000
Pro Forma Combined Condensed Statement of Earnings for the
Year Ended February 29, 2000
Notes to Pro Forma Condensed Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Northstar Computer Forms, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of earnings, changes in stockholders'
equity, and cash flows present fairly, in all material respects, the
financial position of Northstar Computer Forms, Inc. and Subsidiary as of
October 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended October 31,
1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of
Northstar Computer Forms, Inc.'s management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States which require that we
plan and perform the audits 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
December 15, 1999
2
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
ASSETS 1999 1998
Current Assets:
Cash and cash equivalents $ 3,878,447 $4,162,845
Accounts receivable, net 5,958,522 4,936,112
Inventories 2,294,119 2,245,338
Deferred income taxes 261,656 255,656
Other current assets 442,743 687,769
---------- ----------
Total current assets 12,835,487 12,287,720
---------- ----------
Property, plant and equipment, net 13,368,676 14,153,269
Notes receivable, less current portion 60,634 161,573
Goodwill, net 1,354,786 1,556,293
Other assets, net 1,256,641 1,292,817
---------- ----------
Total assets $28,876,224 $29,451,672
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt 335,000 1,385,000
Accounts payable 1,296,485 1,316,878
Accrued liabilities 2,608,969 1,927,671
---------- ----------
Total current liabilities 4,240,454 4,629,549
---------- ----------
Long-term debt, less current portion 1,340,000 3,945,550
Deferred compensation 773,333 738,845
Deferred income taxes 1,461,633 1,526,633
Commitments (Notes 6 and 7)
Stockholders' equity:
Common shares; $.05 par value, authorized
5,000,000 shares; issued and outstanding,
1999: 2,744,708;1998: 2,714,436 137,235 135,722
Additional paid-in capital 2,862,678 2,671,492
Retained earnings 18,060,891 15,803,881
---------- ----------
Total stockholders' equity 21,060,804 18,611,095
---------- ----------
Total liabilities and stockholders'
equity $28,876,224 $29,451,672
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
3
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
1999 1998 1997
Net sales $46,338,793 $41,809,938 $46,277,461
Cost of goods sold 33,531,734 30,453,432 30,860,274
---------- ---------- ----------
Gross profit 12,807,059 11,356,506 15,417,187
Selling, general and
administrative expenses 8,399,901 7,877,820 8,118,695
---------- ---------- ----------
Operating income 4,407,158 3,478,686 7,298,492
---------- ---------- ----------
Other income (expense):
Interest expense (240,864) (642,169) (892,516)
Other, net, principally
interest income 191,454 158,424 196,946
---------- ---------- ----------
(49,410) (483,745) (695,570)
---------- ---------- ----------
Earnings before provision
for income taxes 4,357,748 2,994,941 6,602,922
Provision for income taxes 1,690,000 1,212,000 2,467,000
---------- ---------- ----------
Net earnings $ 2,667,748 $ 1,782,941 $ 4,135,922
========== ========== ==========
Net earnings per common share:
Basic $ 0.98 $ 0.67 $ 1.59
========== ========== ==========
Diluted $ 0.93 $ 0.62 $ 1.48
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
4
NORTHSTAR COMUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
COMMON STOCK
------------------ ADDITIONAL
STATED PAID-IN RETAINED
SHARES CAPITAL CAPITAL EARNINGS
Balances at October 31, 1996 1,716,571 $ 85,828 $1,995,177 $10,557,530
Stock options exercised 44,900 2,245 294,590
Cash dividends, $.175 per share (305,438)
Comprehensive income:
Net earnings 4,135,922
--------- ------- --------- ----------
Balances at October 31, 1997 1,761,471 88,073 2,289,767 14,388,014
Stock split 880,690 44,035 (46,269)
Stock options exercised 72,275 3,614 257,994
Cash dividends, $.137 per share (367,074)
Tax benefit from stock options exercised 170,000
Comprehensive income:
Net earnings 1,782,941
--------- ------- --------- ----------
Balances at October 31, 1998 2,714,436 135,722 2,671,492 15,803,881
Stock options exercised 30,275 1,513 147,217
Repurchase of common stock (3) (31)
Cash dividends, $.150 per share (410,738)
Tax benefit from stock options exercised 44,000
Comprehensive income:
Net earnings 2,667,748
--------- ------- --------- ----------
Balances at October 31, 1999 2,744,708 $137,325 $2,862,678 $18,060,891
========= ======= ========= ==========
The accompanying notes are an integral part of the consolidated financial
statements.
5
NORTHSTAR COMPUTER FORMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
1999 1998 1997
Cash flows from operating activities:
Net earnings $ 2,667,748 $ 1,782,941 $ 4,135,922
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation 2,608,725 2,517,552 2,458,399
Amortization 382,359 344,274 271,519
Provision for doubtful accounts 55,451 (70,586) 167,437
Deferred income taxes (71,000) 405,000 (25,000)
(Gain) loss on sale of land and
equipment (61,009) 50,286 (5,576)
Changes in certain operating
assets and liabilities (293,042) 153,764 (1,169,060)
---------- ---------- ----------
Net cash provided by operating
activities 5,289,232 5,183,231 5,833,641
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures and
equipment deposits (1,851,678) (1,577,203) (1,465,679)
Capitalized computer software costs (236,405) (584,321)
Proceeds from sale of land
and equipment 88,555 67,239 12,400
Notes receivable repayments 77,530 736,932 117,219
---------- ---------- ----------
Net cash used in investing
activities (1,685,593) (1,009,437) (1,920,381)
---------- ---------- ----------
Cash flows from financing activities:
Principal payments on long-term
debt (3,655,550) (5,235,000) (1,029,450)
Dividends paid (381,186) (353,204) (240,869)
Stock options exercised 148,730 261,608 296,835
Other, net (31) (2,234) --
---------- ---------- ----------
Net cash used in financing
activities (3,888,037) (5,328,830) (973,484)
---------- ---------- ----------
Net (decrease) increase in cash and
cash equivalents (284,398) 1,155,036) 2,939,776
Cash and cash equivalents at
beginning of year 4,162,845 5,317,881 2,378,105
---------- ---------- ----------
Cash and cash equivalents at end
of year $ 3,878,447 $ 4,162,845 $ 5,317,881
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
6
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF THE BUSINESS:
Northstar Computer Forms, Inc. and Subsidiary (the Company) designs,
manufactures and markets printed forms with an emphasis on MICR
(Magnetic Ink Character Recognition) printing. The Company's custom
business forms concentrations are negotiable documents and internal
bank forms which are marketed nationally. Sales are principally made
through distributors, with the remainder directly to end-user
customers.
CONSOLIDATION:
The consolidated financial statements include the accounts of Northstar
Computer Forms (Northstar) and General Financial Supply, Inc. (General
Financial), its wholly-owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost or market using the last-
in, first-out (LIFO) method. As of October 31, 1999 and 1998,
consolidated inventories, stated at LIFO, exceeds the cost of
consolidated inventories using the first-in, first-out (FIFO) method by
approximately $67,000 and $13,000 at October 31, 1999 and 1998,
respectively.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost and are depreciated
using the straight-line method. The estimated useful lives are 15 - 40
years for buildings, 5 - 10 years for machinery and equipment, and 3 -
8 years for furniture and fixtures and automobiles. Leasehold
improvements are amortized on a straight-line basis generally over the
term of the respective leases. Gains or losses on dispositions are
included in current earnings. Major renewals or betterments are
capitalized while repairs and maintenance are charged to current
operations when incurred.
COMPUTER SOFTWARE COSTS:
The Company capitalizes costs incurred for developing and obtaining
computer software, primarily relating to modifying and installing new
information technology systems for internal use. These costs are
amortized on a straight-line basis over five years, the estimated
useful lives of the underlying assets.
In March 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The Company is
reviewing the requirements of the SOP and does not expect it to
7
significantly change its current accounting for software costs. SOP 98-
1 is required to be adopted by the Company for its fiscal year 2000.
GOODWILL:
Goodwill represents the excess of the purchase price over the estimated
fair value of the identifiable assets acquired and is being amortized
on a straight-line basis over 10 years.
LONG-LIVED ASSETS:
The recoverability of long-lived assets, including goodwill, is
assessed annually or whenever adverse events or changes in
circumstances or business climate indicate that the expected cash flows
previously anticipated warrant reassessment. When such reassessments
indicate the potential of impairment, all business factors are
considered and, if the carrying value of long-lived assets are not
likely to be recovered from future net operating cash flows, they will
be written down for financial reporting purposes.
REVENUE RECOGNITION:
The Company recognizes revenue on product sales when title transfers to
customer, which is generally upon shipment.
INCOME TAXES:
Deferred income taxes are recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts based on enacted tax
laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. The income tax
provision is the tax payable or refundable for the period and the
change during the period in deferred tax assets and liabilities.
EARNINGS PER SHARE:
Net earnings per share (EPS) for all periods presented have been
computed by dividing net earnings by the weighted average number of
common shares outstanding (basic EPS) and by the weighted average
number of common and common equivalent shares outstanding (diluted
EPS). The Company's common equivalent shares consist of stock options
when their effect is not antidilutive.
The computations of basic and diluted weighted average common shares
outstanding are as follows:
1999 1998 1997
Weighted average common
shares outstanding 2,730,877 2,655,096 2,598,093
Common equivalent shares outstanding:
Option equivalents 137,865 199,387 187,860
--------- --------- ---------
Weighted average common and common
Equivalent shares outstanding 2,868,742 2,854,483 2,785,953
========= ========= =========
8
At October 31, 1999, 1998 and 1997, 150,000, 9,000 and 30,000
outstanding options were excluded from the computation of diluted
earnings per share for the year then ended because the options'
exercise price was greater than the average market price of the
Company's common shares during the respective year.
COMPREHENSIVE INCOME:
The Company's comprehensive income consists solely of net earnings. In
fiscal years 1999, 1998 and 1997, the Company did not have any changes
in stockholders' equity from nonowner sources.
BUSINESS SEGMENTS:
Effective with its year end 1999 financial statements, the Company
adopted Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosure About Segments of an Enterprise and Related Information,"
which requires disclosure of segment data in a manner consistent with
that used by an enterprise for internal management reporting and
decision making. Accordingly, the Company reports its operations as a
single segment under SFAS No. 131.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
2. SELECTED BALANCE SHEET INFORMATION:
The following provides additional information concerning selected
balance sheet accounts at October 31, 1999 and 1998:
1999 1998
Accounts receivable, net:
Accounts receivable $ 6,111,522 $ 5,074,112
Allowance for doubtful accounts (153,000) (138,000)
---------- ----------
$ 5,958,522 $ 4,936,112
========== ==========
Inventories:
Raw material 1,503,444 1,394,156
Work in process 573,993 598,846
Finished goods 216,682 252,336
---------- ----------
$ 2,294,119 $ 2,245,338
========== ==========
9
Property, plant and equipment, net:
Land 109,626 109,626
Buildings 4,004,111 3,993,073
Machinery and equipment 25,400,896 24,124,637
Furniture and fixtures 1,937,239 1,804,043
Automobiles 440,756 335,322
Leasehold improvements 78,156 66,313
---------- ----------
31,970,784 30,433,014
Accumulated depreciation (18,535,203) (16,213,432)
Accumulated amortization (66,905) (66,313)
---------- ----------
$13,368,676 $14,153,269
========== ==========
Goodwill, net:
Goodwill 2,015,065 2,015,065
Accumulated amortization (660,279) (458,772)
---------- ----------
$ 1,354,786 $ 1,556,293
========== ==========
Other assets, net:
Computer software costs, net of accumulated
Amortization of $335,830 and $171,683 at
October 31, 1999 and 1998, respectively 484,896 649,043
Cash value of life insurance, net of
outstanding loans of $165,778 and
$166,857 at October 31, 1999 and 1998,
respectively 402,488 359,918
Other 369,257 283,856
---------- ----------
$ 1,256,641 $ 1,292,817
========== ==========
Accrued liabilities:
Payroll and bonuses 850,707 504,888
Vacation 377,270 345,471
Profit sharing 527,180 301,125
Real estate taxes 236,706 195,454
Dividends 219,569 190,017
Other 397,537 390,716
---------- ----------
$ 2,608,969 $ 1,927,671
========== ==========
10
3. SUPPLEMENTAL CASH FLOW INFORMATION:
Changes in certain operating assets and liabilities are as follows:
1999 1998 1997
Accounts receivable $(1,077,861) $1,748,683 $(2,052,911)
Inventories (48,781) (332,692) 379,411
Other assets 123,759 (592,914) (111,704)
Accounts payable (20,393) (56,927) (729,732)
Accrued liabilities 695,746 (612,825) 1,293,928
Deferred compensation 34,488 439 51,948
---------- --------- ----------
$ (293,042) $ 153,764 $(1,169,060)
========== ========= ==========
Cash paid during the year for:
Interest $ 244,471 $ 699,308 $ 834,348
Income taxes 1,487,500 1,456,894 2,222,243
4. NOTES RECEIVABLE:
Notes receivable consisted of the following at October 31, 1999 and
1998:
1999 1998
Brooklyn Park Economic Development Authority
Tax Increment Financing Note, interest at 9.5%,
payable in semi-annual installments of $48,889,
with remaining principal and interest due
August 2001. $143,775 $204,250
Other, mainly customers, with various terms 16,040 33,095
------- -------
159,815 237,345
Less current portion, included in "Other
current assets" (99,181) (75,772)
------- -------
$ 60,634 $161,573
======= =======
Management believes that the carrying values of its notes receivable as
of October 31, 1999, approximate their fair value.
5. BANK LINE OF CREDIT
The Company has a Revolving Credit agreement (Agreement) with a bank
under which the Company may borrow up to $1,500,000 with interest
accruing at the prime interest rate. Collateral for borrowing under
this Agreement, as well as the related covenants, are the same as the
term loan the Company entered into during July 1996. There were no
borrowings under this Agreement during fiscal years 1999 or 1998.
11
6. LONG-TERM DEBT:
Long-term debt consists of the following at October 31, 1999 and 1998:
1999 1998
Revenue Bonds $1,675,000 $ 2,010,000
Term Loan 3,320,550
--------- ----------
1,675,000 5,330,550
Less current portions (335,000) (1,385,000)
--------- ----------
$1,340,000 $ 3,945,550
========= ==========
REVENUE BONDS:
In August 1994, the Company received proceeds of $2,945,000 from the
issuance of Variable Rate Demand Industrial Development Revenue Bonds
(Revenue Bonds) in connection with the construction of the Company's
corporate headquarters and manufacturing facility. The Revenue Bonds
require annual principal payments of $335,000 through fiscal year 2004
and bear interest at a rate which varies based upon comparable tax-
exempt issues, but not to exceed 12%. The interest rate at October 31,
1999, was 3.75%. The Company has an option to convert the variable
interest rate on these bonds to a fixed interest rate determinable at
the date of conversion upon notification to the bond trustee. The
Revenue Bonds are collateralized by an outstanding irrevocable direct-
pay letter of credit with a financial institution equal to the
outstanding principal amount of the Revenue Bonds.
The letter of credit is renewable upon mutual agreement of the Company
and the financial institution. If the letter is not renewed and the
Company is unable to obtain a similar letter of credit with another
financial institution, the Revenue Bonds may be callable at the option
of the bond trustee.
The Company's outstanding letter of credit expires in August 2002 and
is collateralized by its corporate headquarters and manufacturing
facility, inventories and accounts receivable. The letter of credit
agreement, among other things, requires the Company to not exceed
annual capital expenditures limits, maintain certain minimum net worth
requirements, meet certain leverage and cash flow ratios, as well as
limits cash dividends. The letter of credit agreement also allows for
the lender to call the debt upon any "material change in the nature of
the business."
TERM LOAN:
In July 1996, the Company entered into a term loan (Term Loan) with a
bank for $9,000,000 in connection with the purchase of substantially
all of the assets of the Financial Forms Division of Deluxe Corporation
(Acquisition). The Term Loan was collateralized by substantially all
the Company's assets and required quarterly principal payments of
$262,500 through October 2001, with the remaining principal amount to
be paid in January 2002. The Company had an option, upon written
notice to the bank, to accrue interest on its outstanding Term Loan
balance based on the prime interest rate or the Eurodollar rate.
During fiscal year 1998, the Company made additional principal payments
of $2,000,000 in excess of its scheduled principal payments. During
fiscal year 1999, the Company fully repaid its Term Loan by making
additional principal payments of $2,533,050 in excess of its scheduled
principal payments due under the Term Loan.
12
Aggregate maturities of long-term debt are as follows:
FISCAL YEAR
2000 $ 335,000
2001 335,000
2002 335,000
2003 335,000
2004 335,000
---------
$1,675,000
=========
Management believes that the carrying value of its long-term debt as of
October 31, 1999, approximates its fair value.
7. OPERATING LEASES, INCLUDING RELATED PARTY LEASE:
The Company leases certain buildings and equipment under five separate
operating lease agreements expiring through 2007 and requiring monthly
payments in addition to real estate taxes, insurance and maintenance
costs. The Company has the option to extend the lease term upon
expiration of one of the leases.
In August 1997, the Company began leasing one of the Company's
manufacturing facilities from the Company's Chairman and Chief
Executive Officer under an operating lease agreement expiring in fiscal
year 2007, with two additional five-year extensions available at the
option of the Company. This operating lease agreement requires monthly
payments, subject to increase every three years based on the period's
average price index, as defined in the lease agreement, in addition to
real estate taxes, utilities, assessments, insurance and maintenance
costs.
Future minimum payments, excluding real estate taxes, utilities,
assessments, insurance and maintenance costs, under operating lease
agreements with noncancellable terms are as follows:
Non-
Related Related
Party Party Total
FISCAL YEAR
2000 $ 433,420 $ 191,000 $ 624,420
2001 254,686 191,000 445,686
2002 197,969 191,000 388,969
2003 110,141 191,000 301,141
2004 110,141 191,000 301,141
Thereafter 100,963 541,167 642,130
--------- --------- ---------
$1,207,320 $1,496,167 $2,703,487
========= ========= =========
Total rent expense was $668,811, $695,062 and $774,372 in fiscal years
1999, 1998 and 1997, respectively, exclusive of real estate taxes,
insurance and maintenance costs. Rent expense related to the related
party lease, exclusive of real estate taxes, insurance and maintenance
costs, was $191,000 in fiscal years 1999 and 1998.
13
8. INCOME TAXES:
The provision for income taxes consists of the following:
1999 1998 1997
Currently payable:
Federal $1,495,000 $ 684,000 $2,153,000
State 266,000 123,000 339,000
--------- --------- ---------
1,761,000 807,000 2,492,000
--------- --------- ---------
Deferred provision (benefit):
Federal (17,000) 343,000 (21,000)
State (54,000) 62,000 (4,000)
--------- --------- ---------
(71,000) 405,000 (25,000)
--------- --------- ---------
$1,690,000 $1,212,000 $2,467,000
========= ========= =========
The actual provision for income taxes differed from the "expected"
amounts computed by applying the U.S. federal corporate tax rate of 34%
to earnings before provisions for income taxes for the fiscal years
ended October 31, 1999, 1998 and 1997, respectively, as follows:
FISCAL YEARS
---------------------------------
1999 1998 1997
Computed "expected" provision
for income taxes $1,482,000 $1,018,000 $2,245,000
State income taxes, net of
federal tax effect 256,000 148,000 221,000
Other, net (48,000) 46,000 1,000
--------- --------- ---------
Actual provision for income
taxes $1,690,000 $1,212,000 $2,467,000
========= ========= =========
The approximate effects of temporary differences that gave rise to
deferred tax balances at October 31, 1999 and 1998, are as follows:
1999 1998
Deferred tax assets:
Accounts receivable allowance
for doubtful accounts $ 61,200 $ 55,200
Inventories 41,500 40,851
Accrued liabilities 122,908 124,188
Deferred compensation 345,596 331,034
Goodwill 84,991 58,124
--------- ---------
Total deferred tax assets 656,195 609,397
--------- ---------
14
Deferred tax liabilities:
Property, plant and equipment (1,644,618) (1,669,331)
Investment in limited partnership (211,554) (211,043)
---------- ----------
Total deferred tax liabilities (1,856,172) (1,880,374)
---------- ----------
Net deferred tax liabilities $(1,199,977) $(1,270,977)
========== ==========
The Company has not recorded a valuation allowance as of October 31,
1999 and 1998, related to its deferred tax assets as management does
not believe an allowance is necessary.
9. PROFIT-SHARING AND BONUS PLANS:
The Company has a profit-sharing and 401(k) plan (the Plan) covering
substantially all full-time employees of the Company. Company
contributions are determined based upon a profitability formula
approved by the Company's Board of Directors, but are not to exceed 15%
of the salary and wages paid to the participants for the year. Vesting
of benefits occurs at a rate of 20% for each year of service,
commencing after the second full year of service. Vested benefits
allocated to the employees' accounts are payable upon retirement, death
or earlier termination in a lump sum or installments. The Company
recognized expense related to the Plan of $527,180, $301,125 and
$540,000 in fiscal years 1999, 1998 and 1997, respectively.
The Company also has a bonus plan for certain key salaried employees.
Bonuses are determined, in part, based on a profitability formula
approved by the Company's Board of Directors and, in part, at the
discretion of the Board of Directors. Company expense under the bonus
plan was $521,164, $203,805 and $408,440 in fiscal years 1999, 1998 and
1997, respectively.
10. DEFERRED COMPENSATION:
The Company has deferred compensation plans covering four current
officers and one former officer of the Company. The plans for one
current and the former officer call for periodic payments ranging from
10 to 15 years at retirement or death of such employees. The plans for
the remaining three officers call for contributions to a "rabbi trust"
to maintain benefits to be paid upon retirement or termination.
Deferred compensation expense was $30,064, $78,882 and $51,397 in
fiscal years 1999, 1998 and 1997, respectively.
11. STOCK OPTIONS:
The Company has an incentive stock option plan for option grants to
employees (ISO Plan) and a nonqualified stock option plan for option
grants to the Company's Outside Board of Directors (BOD Plan). As of
October 31, 1999, the Company has reserved 500,000 and 150,000 shares
of its common stock for grant under the ISO Plan and BOD Plan,
respectively. During fiscal year 1998, the Company amended its ISO
Plan to increase the maximum number of shares reserved for issuance
under that plan to 500,000. During fiscal year 1999, the Company
amended its BOD Plan to add 100,000 shares for issuance under that
plan. Options granted under the ISO Plan and BOD Plan have exercise
prices not less than the fair market value of the Company's common
stock at the date of grant and become exercisable generally over a five-
year period or based on the discretion of the Company's Board of
Directors. Options granted under the ISO and BOD Plans expire 10 years
from the date of grant.
15
In addition, the Company has a nonqualified stock option plan for
option grants to the Company's Board of Directors (Non-Active Plan).
At October 31, 1999, 20,000 of these options are outstanding and have a
weighted average exercise price of $3.88. All of these options are
exercisable at October 31, 1999. These options expire through 2003.
The following is a summary of the stock option activity with respect to
the ISO, BOD and Non-Active Plans:
WEIGHTED
AVERAGE OPTIONS
EXERCISE PRICE AVAILABLE
PER SHARE OPTIONS FOR GRANT
Balance at October 31, 1996 4.39 394,300 75,602
Exercised 4.41 (67,350)
Cancelled 5.58 (8,550) 8,550
Granted 7.17 96,000 (96,000)
Expired 3.87 (14,000)
------- --------
Balance at October 31, 1997 5.13 355,400 (11,848)
Authorization of additional stock options 300,000
Exercised 3.62 (72,275)
Cancelled 4.28 (3,300) 3,300
Granted 12.67 9,000 (9,000)
Expired 4.42 (250)
------- --------
Balance at October 31, 1998 5.75 288,575 282,452
Authorization of additional stock options 100,000
Exercised 4.91 (30,275)
Cancelled 6.98 (9,700) 9,700
Granted 9.48 251,400 (251,400)
------- --------
Balance at October 31, 1999 7.65 500,000 140,752
======= ========
The Company may grant nonqualified stock options outside of the ISO and
BOD Plans to other parties at the discretion of the Company's Board of
Directors. The terms of these options, including the exercise price,
vesting provision and expiration of the options, are determined by the
Company's Board of Directors prior to the granting of the options.
During fiscal year 1995, the Company granted 30,000 of these options to
a vendor. At October 31, 1999, all of these options are outstanding
and have a weighted average exercise price of $5.09. These options
expire in November 2003.
16
The following table summarizes information about all stock options
outstanding and exercisable at October 31, 1999:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------- ---------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
$3.75 - $6.17 245,900 3.79 $ 4.94 206,600 $ 4.82
$8.00 134,100 9.33 8.00 40,100 8.00
$10.58 - 12.67 150,000 8.35 11.28 7,500 10.58
------- ---- ----- ------- -----
530,000 6.48 $ 7.51 254,200 $ 5.50
======= ==== ===== ======= =====
The Company accounts for stock-based compensation using the intrinsic
value method. Accordingly, compensation cost for stock options granted
to employees is measured as the excess, if any, of the fair market
value of the Company's common stock at the date of the grant over the
amount an employee must pay to acquire the stock. The Company accounts
for stock-based compensation to nonemployees using the fair value
method. Such compensation costs are amortized on a straight-line basis
over the underlying option vesting terms.
If the Company had elected to recognize compensation expense for
options granted in fiscal years 1999, 1998 and 1997 based on the fair
value of the options granted at the date of grant, the Company's net
earnings and diluted net earnings per share for fiscal years 1999, 1998
and 1997 would have been as follows:
1999 1998 1997
Net earnings:
As reported $2,667,748 $1,782,941 $4,135,922
Pro forma 2,443,958 1,708,430 4,021,562
Diluted net earnings per share:
As reported $ 0.93 $ 0.62 $ 1.48
Pro forma $ 0.85 $ 0.60 $ 1.44
The weighted average fair value of options at the date of grant was
$4.50, $5.45 and $3.26 per option during fiscal years 1999, 1998 and
1997, respectively.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model and the following key
assumptions:
1999 1998
Risk-free interest rates 5.5% 5.5%
Expected life 7 years 5 years
Expected volatility 44.54% 46.20%
Expected dividend yield 1.48% 1.26%
17
12. STOCK SPLIT
On May 31, 1998, the common stock of the Company was split 3 for 2.
All per share and number of share data have been retroactively restated
to reflect the stock split, except for those presented in the
Consolidated Statements of Changes in Stockholders' Equity.
13. PREFERRED STOCK:
The Company has 200,000 shares of authorized, nonvoting preferred stock
that to date have not been issued. The terms of the preferred stock
will be finalized and approved by the Board of Directors prior to
issuance.
14. CONCENTRATIONS OF CREDIT RISK:
Approximately 23%, 34% and 37% of the Company's net sales were directly
to financial institutions in fiscal years 1999, 1998 and 1997,
respectively.
At October 31, 1999 and 1998, cash and cash equivalents totaling
approximately $3,700,000 and $3,400,000, respectively, were
concentrated in one financial institution. At October 31, 1999, 13% of
the Company's accounts receivable were from one customer. Revenues
from the same customer represent approximately 16% of the Company's
fiscal year 1999 consolidated revenues. The Company generally requires
no collateral from its customers to support their accounts receivable.
15. FOURTH QUARTER ADJUSTMENTS:
In the fourth quarter of fiscal year 1997, the Company recorded certain
adjustments to reflect changes in accounting estimates to amounts
reported in previous interim periods of the fiscal year. The
adjustments were related to the estimation of gross profit on net sales
from the Company's financial forms division and the interim income tax
rate used in previous interim periods of fiscal year 1997. These
adjustments increased fourth quarter net earnings by approximately
$207,000 and diluted net earnings per common share by $0.07.
18
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
April 30, October 31,
2000(Unaudited) 1999
---------------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 5,455,360 $ 3,878,447
Accounts receivable, less allowance for
doubtful accounts of $197,000 at April 30,
2000 and $153,000 at October 31, 1999 5,102,581 5,958,522
Inventories 2,109,156 2,294,119
Other current assets 1,076,635 442,743
Deferred income taxes 267,456 261,656
----------- -----------
Total current assets 14,011,188 12,835,487
----------- -----------
Property, plant and equipment 32,723,465 31,970,784
Less accumulated depreciation and
amortization (19,889,442) (18,602,108)
----------- -----------
Net property, plant and equipment 12,834,023 13,368,676
----------- -----------
Notes receivable, less current portion 23,546 60,634
Goodwill, net 1,254,033 1,354,786
Other assets, net 1,258,818 1,256,641
----------- -----------
Total assets $ 29,381,608 $ 28,876,224
=========== ===========
(Continued)
19
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
April 30, October 31,
2000(Unaudited) 1999
---------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 335,000 $ 335,000
Accounts payable 1,688,260 1,296,485
Accrued liabilities 1,494,727 2,608,969
----------- ----------
Total current liabilities 3,517,987 4,240,454
Deferred compensation 790,402 773,333
Deferred income taxes 1,494,133 1,461,633
Long-term debt, less current portion 1,340,000 1,340,000
Commitments
Stockholders' equity:
Common shares; $.05 par value, authorized
5,000,000 shares; issued and outstanding,
2,753,858 at April 30, 2000 and 2,744,708
at October 31, 1999 137,693 137,235
Additional paid-in capital 2,913,109 2,862,678
Retained earnings 19,188,284 18,060,891
----------- -----------
Total stockholders' equity 22,239,086 21,060,804
----------- -----------
Total liabilities and stockholders'
equity $ 29,381,608 $ 28,876,224
=========== ===========
See accompanying notes to unaudited Condensed Consolidated Financial
Statements.
20
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended Six Months Ended
April 30 April 30
----------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net sales $11,059,406 $11,878,269 $22,670,865 $22,521,887
Cost of goods sold 7,947,568 8,492,505 16,728,860 16,408,754
---------- ---------- ---------- ----------
Gross Profit 3,111,838 3,385,764 5,942,005 6,113,133
Selling, general and
administrative expenses 2,053,103 2,142,427 4,122,833 4,088,147
---------- ---------- ---------- ----------
Operating income 1,058,735 1,243,337 1,819,172 2,024,986
Other income (expense):
Interest expense (26,860) (76,202) (54,105) (168,222)
Other, net, principally
interest income 39,169 21,691 83,326 92,560
---------- ---------- ---------- ----------
12,309 (54,511) 29,221 (75,662)
---------- ---------- ---------- ----------
Earnings before income
taxes 1,071,044 1,188,826 1,848,393 1,949,324
Provision for income taxes 417,500 491,500 721,000 780,500
---------- ---------- ---------- ----------
Net earnings $ 653,544 $ 697,326 $ 1,127,393 $ 1,168,824
---------- ---------- ---------- ----------
Net earnings per common share:
Basic $ 0.24 $ 0.26 $ 0.41 $ 0.43
---------- ---------- ---------- ----------
Diluted $ 0.22 $ 0.25 $ 0.38 $ 0.41
---------- ---------- ---------- ----------
Dividends declared per
common share $ --- $ 0.07 $ --- $ 0.07
---------- ---------- ---------- ----------
See accompanying notes to unaudited Condensed Consolidated Financial
Statements.
21
NORTHSTAR COMPUTER FORMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
for the six months ended April 30, 2000 and 1999
2000 1999
Cash flows from operating activities:
Net earnings $1,127,393 $ 1,168,824
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation 1,332,639 1,307,642
Amortization 189,849 191,186
Provision for doubtful accounts 40,200 27,600
Gain on sale of equipment (3,281) (7,900)
Deferred income taxes 26,700 163,400
Changes in certain operating assets
and liabilities (210,290) (289,613)
--------- ----------
Net cash provided by operating activities 2,503,210 2,561,139
--------- ----------
Cash flows from investing activities:
Capital expenditures and equipment
deposits (797,986) (1,035,054)
Proceeds from sale of equipment 3,281 13,600
Notes receivable repayments 37,088 46,356
--------- ----------
Net cash used in investing activities (757,617) (975,098)
--------- ----------
Cash flows from financing activities:
Principal payments on long-term debt --- (1,525,000)
Dividends paid (219,569) (190,017)
Stock options exercised 50,889 83,832
--------- ----------
Net cash used in financing activities (168,680) (1,631,185)
--------- ----------
Net increase (decrease) in cash and
cash equivalents 1,576,913 (45,144)
Cash and cash equivalents at beginning
of period 3,878,447 4,162,845
--------- ----------
Cash and cash equivalents at end of
period $5,455,360 $ 4,117,701
========= ==========
See accompanying notes to unaudited Condensed Consolidated Financial
Statements
22
NORTHSTAR COMPUTER FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
April 30, 2000
1. Basis of Presentation
The interim condensed consolidated financial statements included in this
Form 10-Q have been prepared by Northstar Computer Forms, Inc. (the
Company), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to these rules and regulations. The
year-end balance sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted
accounting principles. These unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements
and related notes included in the Company's 1999 Annual Report on Form
10-K as filed with the Securities and Exchange Commission.
The unaudited condensed consolidated financial statements presented
herein as of April 30, 2000, and for the three and six month periods
ended April 30, 2000, and 1999 reflect, in the opinion of management,
all adjustments (which include only normal, recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows as of and for the periods presented. The
results of operations and cash flows for any interim period are not
necessarily indicative of results for the full year.
2. Earnings per share
Net earnings per share (EPS) for all periods presented have been
computed by dividing net earnings by the weighted average number of
common shares outstanding (basic EPS) and by the weighted average number
of common and common equivalent shares outstanding (diluted EPS). The
Company's common equivalent shares consist of stock options, when their
effect is dilutive.
For the six months ended April 30, 2000 and 1999, 63,000 and 178,600
outstanding options were excluded from the computation of diluted EPS
because the options' exercise prices were greater than the average
market price of the Company's common shares. For the three months ended
April 30, 1999, 39,000 outstanding options were excluded from the
computation of diluted EPS. No shares were excluded from the
computation of diluted EPS for the three months ended April 30, 2000.
23
For all periods presented, the weighted average common and common
equivalent shares outstanding are as follows:
For the three months For the six months
ended April 30 ended April 30
2000 1999 2000 1999
---- ---- ---- ----
Weighted average common shares
outstanding 2,749,425 2,729,386 2,747,558 2,724,244
Common equivalent shares
outstanding 232,482 103,234 188,811 98,706
--------- --------- --------- ---------
Weighed average common and
common equivalent shares
outstanding 2,981,907 2,832,620 2,936,369 2,822,950
========= ========= ========= =========
3. Inventory
At April 30, 2000 and October 31, 1999, inventories consisted of the
following:
April 30, October 31,
2000 1999
---- ----
Raw Materials $1,428,831 $1,503,444
Work in Process 407,437 573,993
Finished Goods 272,888 216,682
--------- ---------
$2,109,156 $2,294,119
========= =========
4. Subsequent Events
On February 21, 2000, the Company announced that it entered into a
definitive merger agreement with Ennis Business Forms to acquire all of
the stock of Northstar Computer Forms, Inc. This acquisition is subject
to customary terms and conditions, including stockholder approval. The
special meeting for stockholder approval was held on June 6, 2000, and
the merger was approved. The merger was subsequently completed on that
date.
24
Unaudited Pro Forma Combined Condensed Financial Information of Ennis
On June 6, 2000, Ennis Business Forms, Inc. (Ennis) completed its
acquisition of Northstar Computer Forms, Inc (Northstar). The
acquisition price of $42,673,302 ($14/share) consisted of
$6,173,302 in cash from internal funds and $36,500,000 in bank
loans. Pursuant to the merger agreement, each stock option to
acquire shares of common stock issued by Northstar and
outstanding immediately prior to the merger, except certain
options issued to the president of Northstar, were settled by
Northstar for a cash payment (less applicable withholding taxes)
equal to the product of the number of shares of common stock
subject to such stock options times the difference between the
merger consideration and the per share exercise price of such
stock option. Ennis reimbursed Northstar for the cost of the
settlement. Ennis also incurred various transaction costs in
connection with the merger. The stock options of Northstar's
president were exchanged for Ennis options with equivalent terms.
As a result of the merger, Northstar became a wholly owned
subsidiary of the Company and will operate as its Financial
Solutions Group. Northstar designs, manufactures and markets
printed forms with an emphasis on machine-readable MICR (Magnetic
Ink Character Recognition) printing. Its two business
concentrations are custom business/negotiable forms and internal
bank forms. In connection with the merger, the Company entered
into employment agreements with the senior management of
Northstar.
The following unaudited pro forma combined condensed financial
information gives effect to the acquisition by Ennis of Northstar
as if the acquisition occurred as of February 29, 2000, in the
case of the unaudited pro forma combined condensed balance sheet
as of February 29, 2000, and as of February 28, 1999, in the case
of the unaudited pro forma combined condensed statement of
earnings for the year ended February 29, 2000. The acquisition
of Northstar by Ennis is being accounted for under the purchase
method of accounting for business combinations.
Northstar's latest fiscal year ended on October 31, 1999. The
historical consolidated balance sheet of Northstar is as of
January 31, 2000 (the end of its first quarter), and the
historical consolidated statement of earnings of Northstar is for
the year ended January 31, 2000. The historical consolidated
statement of earnings of Northstar for the year ended January 31,
2000 was derived by adjusting the historical consolidated
statement of earnings of Northstar for the year ended October 31,
1999 to add the results of operations for the quarter ended
January 31, 2000 and subtract the results of operations for the
comparable quarter of the preceding year, each as reported in the
Form 10-Q of Northstar for the quarter ended January 31, 2000.
The unaudited pro forma combined condensed financial information
is based on the historical financial statements of Ennis and
Northstar and should be read in conjunction with such historical
financial statements. The pro forma combined condensed financial
information is presented for illustrative purposes only and is
not necessarily indicative of the financial position or results
of operations that would have been achieved if the acquisition
had been completed on the date or as of the beginning of the
period presented, nor is it necessarily indicative of the future
financial position or operating results of Ennis.
25
Ennis Business Forms, Inc.
Pro Forma Combined Condensed Balance Sheet
As of February 29, 2000
(Dollars in Thousands)
(Unaudited)
Pro Forma Pro Forma
Ennis Northstar Adjustments Combined
------ --------- ----------- ---------
Assets
------
Current Assets:
Cash and cash equivalents 2,037 4,224 (6,261) (b) --
Investment securities 1,438 -- (1,438) (b) --
Accounts receivable, net 26,015 5,115 31,130
Inventories 9,890 2,165 12,055
Other current assets 3,925 1,584 5,509
------- ------ ------- -------
Total current assets 43,305 13,088 (7,699) 48,694
------- ------ ------- -------
Investment securities 7,565 -- (101) (b) 7,464
Property, plant and equipment, net 41,728 13,108 8,300 (c) 63,136
Cost of purchased businesses in
excess of amounts allocated to
tangible net assets 8,680 1,304 17,356 (a) 27,340
Other assets and deferred charges 1,656 1,326 2,982
------- ------ ------- -------
Total assets 102,934 28,826 17,856 149,616
======= ====== ======= =======
(Continued)
26
Ennis Business Forms, Inc.
Pro Forma Combined Condensed Balance Sheet
As of February 29, 2000
(Dollars in Thousands)
(Unaudited)
Pro Forma Pro Forma
Ennis Northstar Adjustments Combined
------ --------- ----------- ---------
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current installments of long-
term debt 302 335 5,240 (d) 5,877
Accounts payable 5,380 1,849 7,229
Accrued expenses 4,843 1,480 6,323
------- ------ ------- --------
Total current liabilities 10,525 3,664 5,240 19,429
------- ------ ------- --------
Long-term debt, less current
installments 462 1,340 31,260 (d) 33,062
Deferred credits, principally Federal
income taxes 3,680 2,273 2,905 (e) 8,858
Shareholders' equity:
Preferred stock, at par value -- -- --
Common stock, at par value 53,125 137 (137) (f) 53,125
Additional paid in capital 1,040 2,877 (2,877) (f) 1,040
Retained earnings 125,980 18,535 (18,535) (f) 125,980
------- ------ ------- -------
180,145 21,549 (21,549) 180,145
Less: Treasury stock 91,878 -- 91,878
------- ------ ------- -------
Total shareholders' equity 88,267 21,549 (21,549) 88,267
------- ------ ------- -------
Total liabilities and
shareholders' equity 102,934 28,826 17,856 149,616
======= ====== ======= =======
See accompanying notes to the pro forma combined condensed financial
statements.
27
Ennis Business Forms, Inc.
Pro Forma Combined Condensed Statement of Earnings
Year Ended February 29, 2000
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Pro Forma Pro Forma
Ennis Northstar Adjustments Combined
------ --------- ----------- ---------
Net sales 166,525 47,306 213,831
Costs and expenses:
Cost of sales 113,740 34,397 148,137
Selling, general &
administrative expenses 30,856 8,524 1,987 (g) 41,367
------- ------ ------- -------
144,596 41,921 1,987 189,504
------- ------ ------- -------
Earnings from operations 21,929 4,385 (1,987) 24,327
Other income (expense):
Investment income 1,150 165 (508) (h) 807
Interest expense (40) (176) (2,763) (i) (2,979)
Other, principally gain on assets 1,002 -- 1,002
------- ------ ------- -------
2,112 (11) (3,271) (1,170)
------- ------ ------- -------
Earnings before income taxes 24,041 4,374 (5,258) 23,157
Provision for income taxes 8,918 1,704 (1,435) (j) 9,187
------- ------ ------- -------
Net earnings 15,123 2,670 (3,823) 13,970
======= ====== ======= =======
Weighted average number of common
shares outstanding 16,249,861 16,249,861
========== ==========
Earnings per basic and diluted
share of common stock 0.93 0.86
==== ====
See accompanying notes to the pro forma combined condensed financial
statements.
28
Ennis Business Forms, Inc.
Notes to Pro Forma Combined Condensed Financial Statements
February 29, 2000
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
(a) To reflect the excess of acquisition cost over the estimated fair
value of net assets acquired (goodwill). The purchase price, purchase
price allocation, and financing of the transaction are summarized as
follows:
Purchase price paid as:
Debt $36,500
Cash paid for shares 6,173
Cash paid for options 1,148
Cash paid for transaction costs 479
------
Total purchase consideration 44,300
Allocated to:
Historical book value of Northstar's
assets and liabilities $21,549
Adjustments to record assets and
liabilities at fair value:
Property, plant and equipment 8,300
Goodwill (1,304)
Deferred taxes (2,905)
------
Total allocation 25,640
------
Excess purchase price over allocation to
identifiable assets and liabilities (goodwill) $18,660
======
(b) Reflects the funding of the cash portion of the purchase price from
cash and assumed liquidation of investment securities.
(c) Reflects the step-up in property, plant and equipment values to fair
value based on appraised values.
(d) Reflects the increase in debt incurred in connection with the
acquisition, consisting of a revolving note of $11,500 (due in quarterly
installments of $460) and a term loan of $25,000 (due in quarterly
installments of $850). Both loans mature in June 2003.
(e) Reflects estimated deferred taxes arising from the acquisition.
(f) Reflects the elimination of shareholders' equity accounts of
Northstar.
(g) Reflects the increase in depreciation and amortization due to (1) the
amortization of goodwill on a straight-line basis over 15 years ($1,157),
and (2) the increase in depreciation resulting from step-up of property,
plant and equipment ($830).
(h) Reflects the decrease in investment income related to the reduction of
available cash for investment.
(continued)
29
Ennis Business Forms, Inc.
Notes to Pro Forma Combined Condensed Financial Statements
February 29, 2000
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
(i) Reflects the increase in interest expense resulting from the increase
in debt incurred in connection with the acquisition. The interest rate on
new debt is a variable rate of 7.65% on the revolving note and a fixed rate
of 7.89% (as a result of an interest rate swap) on the term loan. A
change of 1/8 percent in the interest rate on the revolver would be
insignificant.
(j) Reflects the tax effects of adjustments to income.
30
(c) Exhibits
*2.1 Agreement and Plan of Merger among Northstar Computer Forms, Inc.,
Ennis Business Forms, Inc. and Polaris Acquisitions Corp. dated
June 6, 2000
*2.2 Amendment No. 1 to Agreement and Plan of Merger among Northstar
Computer Forms, Inc., Ennis Business Forms, Inc. and Polaris
Acquisitions Corp dated May 9, 2000
*2.3 Articles of Merger of Polaris Acquisition Corp into Northstar
Computer Forms, Inc.
*10.1 Credit Agreement among Ennis Business Forms, Inc., Bank One,
Texas, N.A., U.S. Bank National Association, Certain Financial
Institutions and Banc One Capital Markets, Inc. dated June 6, 2000
*10.2 Consent, Assumption and Amendment Agreement among Northstar
Computer Forms, Inc., Ennis Business Forms, Inc. and U.S. Bank
National Association
23.1 Consent of PriceWaterhouseCoopers LLP
*99.1 Press Release dated June 6, 2000
* Previously filed with 8-K submitted June 19, 2000
31
SIGNATURES
Pursuant to the requirements 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.
ENNIS BUSINESS FORMS, INC.
Date: August 9, 2000 /s/Robert M. Halowec
-------------- --------------------------------
Robert M. Halowec
Vice President Finance
And Chief Financial Officer
Date: August 9, 2000 /s/Harve Cathey
-------------- --------------------------------
Harve Cathey
Secretary and Treasurer
Principal Accounting Officer
32
