What changed in ENNIS, INC.'s 10-K — 2022 vs 2023
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Paragraph-level year-over-year comparison of ENNIS, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.
+150 added−181 removedSource: 10-K (2023-05-12) vs 10-K (2022-05-09)
Top changes in ENNIS, INC.'s 2023 10-K
150 paragraphs added · 181 removed · 114 edited across 7 sections
- Item 7. Management's Discussion & Analysis+71 / −98 · 54 edited
- Item 1A. Risk Factors+47 / −48 · 33 edited
- Item 1. Business+19 / −24 · 16 edited
- Item 5. Market for Registrant's Common Equity+6 / −6 · 6 edited
- Item 2. Properties+5 / −4 · 4 edited
Item 1. Business
Business — how the company describes what it does
16 edited+3 added−8 removed34 unchanged
Item 1. Business
Business — how the company describes what it does
16 edited+3 added−8 removed34 unchanged
2022 filing
2023 filing
Biggest changeThe products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, Specialized Printed Forms®, 360º Custom Labels SM , ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad Concepts SM , FormSource Limited SM , Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Falcon Business Forms SM , Forms Manufacturers SM , Mutual Graphics®, TRI-C Business Forms SM , Major Business Systems SM , Independent Printing SM , Hoosier Data Forms®, Hayes Graphics®, Wright Business Graphics SM , Wright 360 SM , Integrated Print & Graphics SM , the Flesh Company SM , Impressions Direct SM , Ace Forms SM , and AmeriPrint SM .
Biggest changeThe products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, 360º Custom Labels SM , ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad Concepts SM , FormSource Limited SM , Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Forms Manufacturers SM , Mutual Graphics®, TRI-C Business Forms SM , Major Business Systems SM , Independent Printing SM , Hoosier Data Forms®, Hayes Graphics®, Wright Business Graphics SM , Wright 360 SM , Integrated Print & Graphics SM , the Flesh Company SM , Impressions Direct SM and AmeriPrint SM ; We also sell the Adams McClure® brand (which provides Point of Purchase advertising); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & Label SM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & Label SM , Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents); Infoseal SM and PrintXcel® (which provide custom and stock pressure seal documents).
We have registered trademarks in the United States for Ennis®, EnnisOnline SM , B&D Litho of AZ®, B&D Litho®, ACR®, Block Graphics®, Enfusion®, 360º Custom Labels SM , Admore®, CashManagementSupply.com SM , Securestar®, Northstar®, MICRLink®, MICR Connection TM , Ennisstores.com TM , General Financial Supply®, Calibrated Forms®, PrintXcel®, Printegra®, Trade Envelopes®, Witt Printing®, Genforms®, Royal Business Forms®, Crabar/GBF SM , BF&S SM, Adams McClure®, Advertising Concepts TM , ColorWorx®, Allen-Bailey Tag & Label SM , Atlas Tag & Label®, Printgraphics SM , Uncompromised Check Solutions®, VersaSeal®, VersaSeal SecureX®, Folder Express®, Wisco®, National Imprint Corporation®, Star Award Ribbon®, Kay Toledo Tag®, Falcon Business Forms SM , Forms Manufacturers SM , Mutual Graphics®, TRI-C Business Forms SM , SSP®, EOSTouchpoint®, Printersmall®, Check Guard®, Envirofolder®, Independent®, Independent Checks®, Independent Folders®, Independent Large Format Solutions®, Wright Business Graphics SM , Wright 360 SM , Integrated Print & Graphics SM , the Flesh Company SM , Impressions Direct SM , Ace Forms SM , Megaform SM , Safe®, Infoseal SM , and variations of these brands as well as other trademarks.
We have registered trademarks in the United States for Ennis®, EnnisOnline SM , B&D Litho of AZ®, B&D Litho®, ACR®, Block Graphics®, Enfusion®, 360º Custom Labels SM , Admore®, CashManagementSupply.com SM , Securestar®, Northstar®, MICRLink®, MICR Connection TM , Ennisstores.com TM , General Financial Supply®, Calibrated Forms®, PrintXcel®, Printegra®, Trade Envelopes®, Witt Printing®, Genforms®, Royal Business Forms®, Crabar/GBF SM , BF&S SM, Adams McClure®, Advertising Concepts TM , ColorWorx®, Allen-Bailey Tag & Label SM , Atlas Tag & Label®, Printgraphics SM , Uncompromised Check Solutions®, VersaSeal®, VersaSeal SecureX®, Folder Express®, Wisco®, National Imprint Corporation®, Star Award Ribbon®, Kay Toledo Tag®, Falcon Business Forms SM , Forms Manufacturers SM , Mutual Graphics®, TRI-C Business Forms SM , SSP®, EOSTouchpoint®, Printersmall®, Check Guard®, Envirofolder®, Independent®, Independent Checks®, Independent Folders®, Independent Large Format Solutions®, Wright Business Graphics SM , Wright 360 SM , Integrated Print & Graphics SM , the Flesh Company SM , Impressions Direct SM , Megaform SM , Safe®, Infoseal SM , and variations of these brands as well as other trademarks.
Two of our largest facilities have solvent recovery systems which allows recovery of press plate washing solutions for re-use. These systems result in a substantial reduction of any hazardous waste. The Company ensures that we are in compliance with applicable state and federal environmental laws on hazardous materials including Proposition 65 in California and federal Conflict Materials compliance.
Two of our largest facilities have solvent recovery systems which allows recovery of press plate washing solutions for re-use. These systems result in a substantial reduction of any hazardous waste. The Company ensures that we are in compliance with applicable state and federal environmental laws on hazardous materials including Proposition 65 in California and federal Conflict Minerals compliance.
Research and Development While we seek new products to sell through our distribution channel, there have been no material amounts spent on research and development in fiscal years 2022, 2021 or 2020. Environment We are subject to various federal, state, and local environmental laws and regulations concerning, among other things, wastewater discharges, air emissions and solid waste disposal.
Research and Development While we seek new products to sell through our distribution channel, there have been no material amounts spent on research and development in fiscal years 2023, 2022 or 2021. Environment We are subject to various federal, state, and local environmental laws and regulations concerning, among other things, wastewater discharges, air emissions and solid waste disposal.
Approximately 94% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts and quantities on an individual job basis, depending upon the customers’ specifications.
Approximately 95% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts and quantities on an individual job basis, depending upon the customers’ specifications.
On June 1, 2021, the Company acquired the assets and business from AmeriPrint Corporation (" AmeriPrint ") in Harvard, Illinois, which prior to the acquisition generated approximately $6.5 million in sales for its fiscal year ended December 31, 2020, brings added capabilities and expertise to our expanding product offering including barcoding and variable imaging.
On June 1, 2021, the Company acquired the assets and business from AmeriPrint Corporation (" AmeriPrint ") in Harvard, Illinois, which prior to the acquisition generated approximately $6.5 million in sales for its fiscal year ended December 31, 2020, adding capabilities and expertise to our expanding product offering including barcoding and variable imaging.
Ennis is dedicated to ensuring that any business is conducted as ethically as possible. All Ennis management must read, agree with, and sign a Code of Conduct and Ethics policy at least annually. Each of our locations support local non-profit organizations, educational institutions and youth sport teams based on their local community needs.
Ennis is dedicated to ensuring that business is conducted ethically. All Ennis management must read, agree with, and sign a Code of Conduct and Ethics policy at least annually. Each of our locations support local non-profit organizations, educational institutions and youth sport teams based on their local community needs.
We are in the business of manufacturing, designing and selling business forms and other printed business products primarily to distributors located in the United States. We operate 55 manufacturing plants throughout the United States in 20 strategically located states as one reportable segment.
We are in the business of manufacturing, designing and selling business forms and other printed business products primarily to distributors located in the United States. We operate 54 manufacturing plants throughout the United States in 20 strategically located states as one reportable segment.
We are an Equal Opportunity Employer and we comply with all employment laws including Title VII of the Civil Rights Act of 1964, Immigration and Nationality Act, and the IRCA. We take allegations of harassment and unlawful discrimination seriously and address all such concerns that are raised regarding our Code of Conduct.
We are an Equal Opportunity Employer and we comply with all employment laws including Title VII of the Civil Rights Act of 1964, Immigration and Nationality Act, and the Immigration Reform and Control Act. We take allegations of harassment and unlawful discrimination seriously and address all such concerns that are raised regarding our Code of Conduct.
We have similar trademark registrations internationally for certain trademarks. Customers No single customer accounts for as much as five percent of our consolidated net sales or accounts receivable. Backlog At February 28, 2022, our backlog of firm orders was approximately $38.4 million, compared to approximately $23.6 million at February 28, 2021.
We have similar trademark registrations internationally for certain trademarks. Customers No single customer accounts for as much as five percent of our consolidated net sales or accounts receivable. Backlog At February 28, 2023, our backlog of firm orders was approximately $46.7 million, compared to approximately $38.4 million at February 28, 2022.
Our goal of operating in an environmentally responsible manner aligns with our goals of operating a profitable and responsible business. For example, we recycle waste material generated in our printing processes to generate income from selling the scrap material. We recycled 26.7 million pounds of paper and 1.4 million pounds of cardboard and cores in 2022.
Our goal of operating in an environmentally responsible manner aligns with our goals of operating a profitable and responsible business. For example, we recycle waste material generated in our printing processes to generate income from selling the scrap material. We recycled 23.1 million pounds of paper and 2.2 million pounds of cardboard and cores in 2023.
Employees At February 28, 2022, we had 1,997 employees. 170 employees are represented by labor unions under collective bargaining agreements, which are subject to periodic negotiations. We believe we have a good working relationship with all of the unions that represent our employees.
Human Capital At February 28, 2023, we had 1,919 employees. 167 employees are represented by labor unions under collective bargaining agreements, which are subject to periodic negotiations. We believe we have a good working relationship with all of the unions that represent our employees.
We sell predominantly through independent distributors, as well as to many of our competitors. Northstar Computer Forms, Inc., one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user).
Northstar Computer Forms, Inc., one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user). Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies.
Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies. The printing industry generally sells its products either predominantly to end users, a market dominated by a few large manufacturers, such as R.R. Donnelley and Sons, Staples, Inc., Standard Register Co.
The printing industry generally sells its products either predominantly to end users, a market dominated by a few large manufacturers, such as R.R. Donnelley and Sons, Staples, Inc., Standard Register Co. (a subsidiary of Taylor Corporation), and Cenveo, Inc., or, like the Company, through a variety of independent distributors and distributor groups.
Additionally, the use of soy based inks allows us to avoid more harmful cleaning solutions which are environmentally dangerous. We use those soy based inks in approximately 80% of our products. We use environmentally friendly cleaning agents to insure that our waste water is not contaminated and does not require special disposal.
Additionally, the use of soy based inks allows us to avoid cleaning solutions that may pose environmental hazards. We use environmentally friendly cleaning agents to insure that our waste water is not contaminated and does not require special disposal. Many of our plants engage with local energy suppliers to ask for recommendations on lowering energy usage.
Many of our plants engage with local energy suppliers to ask for recommendations on lowering energy usage. Participation in these energy audits generally results in replacing old lighting with more efficient LED lighting.
Participation in these energy audits generally results in replacing old lighting with more efficient LED lighting.
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We also sell the Adams McClure® brand (which provides Point of Purchase advertising for large franchise and fast food chains as well as kitting and fulfillment); the Admore®, Folder Express® and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & Label SM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & Label SM , Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents); Infoseal SM and PrintXcel® (which provide custom and stock pressure seal documents).
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School Photo Marketing is a one-stop shop for over 1,400 school portrait photographers and professional photo labs nationwide, providing them with a complete array of products and services that reach over 15 million families and 30,000 schools, primarily in the K-8 market. We sell predominantly through independent distributors, as well as to many of our competitors.
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(a subsidiary of Taylor Corporation), and Cenveo, Inc., or, like the Company, through a variety of independent distributors and distributor groups.
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On November 30, 2022, the Company acquired the assets and business from School Photo Marketing (" SPM ") in Morganville, New Jersey, which prior to the acquisition generated approximately $5.9 million in sales for its fiscal year ended December 31, 2021.
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On July 15, 2019, we acquired all the outstanding stock of The Flesh Company (“ Flesh ”). Flesh, together with its wholly owned subsidiary, Impressions Direct, Inc. (“ Impressions Direct ”), is a printing company with two locations, with the St.
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SPM provides printing, yearbook publishing and marketing related services to over 1,400 school and sports photographers servicing schools around the country.
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Louis location containing Flesh’s corporate office and the direct mail operations of Impressions Direct, and the Parsons, Kansas location containing Flesh’s main manufacturing facility and warehouse.
Removed
The acquisition of Flesh, which prior to the acquisition generated approximately $31.0 million in sales for its fiscal year ended September 30, 2018, expands our operations with respect to business forms, checks, direct mail services, integrated products and labels.
Removed
On March 16, 2019, we acquired the assets of Integrated Print & Graphics (“ Integrated ”), which is based in South Elgin, Illinois. The acquisition of Integrated, which prior to the acquisition generated approximately $20.0 million in sales for its fiscal year ended December 31, 2018, creates additional capabilities within our high color commercial print product line.
Removed
On July 31, 2018, we acquired, by way of a merger, all of the outstanding equity interests of Wright Business Forms, Inc., d/b/a Wright Business Graphics (“ Wright ”), a printing company headquartered in Portland, Oregon with additional locations in Washington and California.
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Wright produces forms, pressure seal, packaging, direct mail, checks, statement processing and commercial printing and sells mainly through distributors and resellers. Wright, prior to the acquisition, generated approximately $58.0 million in sales for its fiscal year ended March 31, 2018 and continues to operate under its brand names.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
33 edited+14 added−15 removed36 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
33 edited+14 added−15 removed36 unchanged
2022 filing
2023 filing
Biggest changeThe Tax Cuts and Jobs Act enacted on December 22, 2017 resulted in changes in our federal corporate tax rate, our deferred income taxes and limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system There may be changes in tax legislation, including a repeal or modification of the Tax Cuts and Jobs Act of 2017, changes in tax rates and tax base such as limiting, phasing-out or eliminating deductions, revising tax law interpretations in jurisdictions, and changes in other tax laws.
Biggest changeThe Tax Cuts and Jobs Act enacted on December 22, 2017 resulted in changes in our federal corporate tax rate, our deferred income taxes and limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system.
The tax rates applicable and the jurisdictions within which we operate can vary and therefore our effective tax rate may be adversely affected by changes in the mix of our earnings by jurisdiction. We may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities.
Applicable tax rates and the jurisdictions within which we operate can vary and therefore our effective tax rate may be adversely affected by changes in the mix of our earnings by jurisdiction. We may be subject to audits of our income, sales and other transaction taxes by U.S. federal and state authorities.
Although we maintain third party insurance against various liability risks and risks of property loss for items we believe are economically reasonable to 12 insure, we could incur uninsured losses and liabilities arising from such events which would adversely affect our results of operations and financial condition.
Although we maintain third party insurance against various liability risks and risks of property loss for items we believe are economically reasonable to insure, we could incur uninsured losses and liabilities arising from such events which would adversely affect our results of operations and financial condition.
While the Company has various cost control measures in place and employs an outside oversight review on larger claims, employee health benefits have been and are expected to continue to be a significant cost to us and may increase due to factors outside the Company’s control. 13
While the Company has various cost control measures in place and employs an outside oversight review on larger claims, employee health benefits have been and are expected to continue to be a significant cost to us and may increase due to factors outside the Company’s control.
We face the risk of our competition following a strategy of selling its products at or below cost in order to cover some amount of fixed costs, especially in stressed economic times. 11 Environmental regulations may impact our future operating results.
We face the risk of our competition following a strategy of selling its products at or below cost in order to cover some amount of fixed costs, especially in stressed economic times. 10 Environmental regulations may impact our future operating results.
Fluctuations in the quality of our paper, unexpected price changes or other factors that relate to our suppliers could have a material adverse effect on our operating results. In particular, the ongoing COVID-19 pandemic has made it more expensive or more 9 difficult to source raw materials for our products, whether from our existing suppliers or new suppliers.
Fluctuations in the quality of our paper, unexpected price changes or other factors that relate to our suppliers could have a material adverse effect on our operating results. In particular, the COVID-19 pandemic made it more expensive or more difficult to source raw materials for our products, whether from our existing suppliers or new suppliers.
Certain macroeconomic events, such as the past crisis in the financial markets, could have a more wide-ranging and prolonged impact on the general business environment, which could also adversely affect us. In particular, the ongoing COVID-19 pandemic has negatively impacted local, national and worldwide economies, and introduced market volatility .
Certain macroeconomic events, such as crises in the financial markets, could have a more wide-ranging and prolonged impact on the general business environment, which could also adversely affect us. In particular, the COVID-19 pandemic negatively impacted local, national and worldwide economies, and introduced market volatility.
Whether we can manage these risks effectively depends on several factors, including (i) our ability to manage movements in commodity prices and the impact of government actions to manage national economic conditions such as consumer spending, inflation rates and unemployment levels, particularly given the past volatility in the global financial markets, (ii) the impact on our margins of labor costs given our labor-intensive business model, the trend toward higher wages in both mature and developing markets and the potential impact of union organizing efforts on day-to-day operations of our manufacturing facilities and (iii) other factors, which may be beyond our control.
Whether we can manage these risks effectively depends on several factors, including (i) our ability to manage movements in commodity prices and the impact of government actions to manage national economic conditions such as consumer spending, inflation rates and unemployment levels, particularly given the past volatility in the global financial markets, (ii) the impact on our margins of labor costs given our labor-intensive business model, the trend toward higher wages in both mature and developing markets and the potential impact of union organizing efforts on day-to-day operations of our manufacturing facilities and (iii) other factors, which may be beyond our control. 8 Digital technologies will continue to erode the demand for our printed business documents.
Increased competition may require us to reduce prices or to offer other incentives in order to enable our distributors to attract new customers and retain existing customers. Low price, high value office supply chain stores offer standardized business forms, checks and related products.
Our distributors face increased competition from various sources, such as office supply superstores. Increased competition may require us to reduce prices or to offer other incentives in order to enable our distributors to attract new customers and retain existing customers. Low price, high value office supply chain stores offer standardized business forms, checks and related products.
As of February 28, 2022, approximately 9% of our employees are represented by labor unions under collective bargaining agreements, which are subject to periodic negotiations.
As of February 28, 2023, approximately 8% of our employees are represented by labor unions under collective bargaining agreements, which are subject to periodic negotiations.
The predominant method of our customers’ communication to their customers is by printed information. As their customers become more accepting of internet communications, our clients may increasingly opt for what is perceived to be a less costly electronic option, which would reduce our revenue. The pace of these trends is difficult to predict.
As their customers become more accepting of internet communications, our clients may increasingly opt for what is perceived to be a less costly electronic option, which would reduce our revenue. The pace of these trends is difficult to predict.
We attempt to address the potential risks inherent in assessing the attractiveness of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.
We have evaluated, and may continue to evaluate, potential acquisition transactions. We attempt to address the potential risks inherent in assessing the attractiveness of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.
Challenging financial market conditions and changes in long-term interest rates could adversely impact the funded status of our pension plan. We maintain a noncontributory defined benefit retirement plan (the “ Pension Plan ”) covering approximately 13% of our employees. Included in our financial results are Pension Plan costs that are measured using actuarial valuations.
Challenging financial market conditions and changes in long-term interest rates could adversely impact the funded status of our pension plan. We maintain a noncontributory defined benefit retirement plan (the “ Pension Plan ”) covering approximately 13% of our employees.
Additionally, as we experienced in recent months, the number of retirees taking lump sum distributions could be sufficiently high as to cause a settlement charge, which would impact current earnings of the Pension Plan.
Additionally, as we experienced in recent months, the number of retirees taking lump sum distributions could be sufficiently high as to cause a settlement charge, which would impact current earnings of the Pension Plan. We may be unable to identify or to complete acquisitions or to successfully integrate the businesses we acquire.
Additionally, there can be no assurance that suitable acquisition opportunities will be available in the future, which could harm our strategic business plan as acquisitions are part of our strategy to offset normal print attrition.
Additionally, there can be no assurance that suitable acquisition opportunities will be available in the future, which could harm our strategic business plan as acquisitions are part of our strategy to offset normal print attrition. Our distributor customers may be acquired by other manufacturers who redirect business within their plants.
Costs to employ drivers have increased and transportation shortages have become more prevalent. Additionally, the challenge of employing new drivers for the increasingly larger web-based economy could create shortages in trucks and drivers which could impact our sales. A natural disaster, catastrophe, pandemic or other unexpected events could adversely affect our operations.
Costs to employ drivers have increased and transportation shortages have become more prevalent. Additionally, the challenge of employing new drivers for the increasingly larger web-based economy could create shortages in trucks and drivers which could impact our sales.
Digital technologies will continue to erode the demand for our printed business documents. The increasing sophistication of software, internet technologies, and digital equipment combined with our customers’ general preference, as well as governmental influences for paperless business environments will continue to reduce the number of traditional printed documents sold.
The increasing sophistication of software, internet technologies, and digital equipment combined with our customers’ general preference, as well as governmental influences for paperless business environments will continue to reduce the number of traditional printed documents sold. Moreover, the documents that will continue to coexist with software applications will likely contain less value-added print content.
In particular, the COVID-19 pandemic, and its impact on our customers, could have a negative impact on our collection efforts. While we maintain an allowance for doubtful receivables for potential credit losses based upon our historical trends and other available information, in times of economic turmoil, there is heightened risk that our historical indicators may prove to be inaccurate.
While we maintain an allowance for doubtful receivables for potential credit losses based upon our historical trends and other available information, in times of economic turmoil, there is heightened risk that our historical indicators may prove to be inaccurate.
Moreover, the documents that will continue to coexist with software applications will likely contain less value-added print content. Many of our custom-printed documents help companies control their internal business processes and facilitate the flow of information. These applications will increasingly be conducted over the internet or through other electronic payment systems.
Many of our custom-printed documents help companies control their internal business processes and facilitate the flow of information. These applications will increasingly be conducted over the internet or through other electronic payment systems. The predominant method of our customers’ communication to their customers is by printed information.
Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to the U.S. healthcare system. Additionally, the ongoing COVID-19 pandemic may result in temporary or permanent healthcare reform measures, would could result in significant cost increases and other negative impacts to our business.
Additionally, the COVID-19 pandemic may result in temporary or permanent healthcare reform measures, would could result in significant cost increases and other negative impacts to our business.
Similar to fluctuations in market values, a drop in the discount rate could potentially negatively impact our funded status, recorded pension liability and future contribution levels. Also, continued changes in the mortality tables could potentially impact our funded status.
Each 10 basis point change in the discount rate impacts our computed pension liability by 9 approximately $525,000. Similar to fluctuations in market values, a drop in the discount rate can negatively impact our funded status, recorded pension liability and future contribution levels. Also, continued changes in the mortality assumptions can impact our funded status.
Paper is a commodity that is subject to frequent increases or decreases in price, and these fluctuations are sometimes significant. The prices for paper and many of our raw materials have been volatile and may continue to increase due to overall inflationary pressure and global market conditions.
The prices for paper and many of our raw materials have been volatile and may continue to increase due to overall inflationary pressure and global market conditions.
The U.S. government has proposed changes to increase the tax rates on corporations. All of these factors and uncertainties may adversely affect our results of operations, financial position and cash flows. We are exposed to the risk of non-payment by our customers on a significant amount of our sales.
All of these factors and uncertainties may adversely affect our results of operations, financial position and cash flows. We are exposed to the risk of non-payment by our customers on a significant amount of our sales. Our extension of credit involves considerable judgment and is based on an evaluation of each customer’s financial condition and payment history.
In addition, if our internal control over financial reporting is found to be ineffective, investors may lose confidence in the reliability of our financial statements, which may adversely affect our stock price. We depend on the reliability of our IT and network infrastructure as well as those of third parties. If these systems fail, our operations may be adversely affected.
We depend on the reliability of our IT and network infrastructure as well as those of third parties. If these systems fail, our operations may be adversely affected.
In the price-competitive marketplaces in which we operate, however, we may not always be able to pass through any or all of the higher costs.
In the price-competitive marketplaces in which we operate, however, we may not always be able to pass through any or all of the higher costs. As such, any significant increase in the price of paper or shortage in its availability could have a material adverse effect on our results of operations.
Our sales were significantly impacted by economic conditions driven by the COVID-19 pandemic and resulted in a decrease in sales volume and earnings in fiscal year 2021. While demand for our products appears to have recovered in 2022, the sustainability of the recovery remains unclear. The U.S. economy continues to be significantly impacted by the COVID-19 pandemic.
Our sales were significantly impacted by economic conditions driven by the COVID-19 pandemic and resulted in a decrease in sales volume and earnings in fiscal year 2021.
To the extent COVID-19 adversely affects our business, results of operations and financial condition, it may also have the effect of heightening many of the other risks described in this section. Our results and financial condition are affected by global and local market conditions, and competitors’ pricing strategies, which can adversely affect our sales, margins, and net income.
In such an event, our common stock could decline in price and you may lose all or part of your investment. Risks related to our business and operations Our results and financial condition are affected by global and local market conditions, and competitors’ pricing strategies, which can adversely affect our sales, margins, and net income.
The actuarial assumptions used may differ from actual results. In addition, as our Pension Plan assets are invested in marketable securities, severe fluctuations in market values could potentially negatively impact our funded status, recorded pension liability, and future required minimum contribution levels.
In addition, as our Pension Plan assets are invested in marketable securities, fluctuations in market values can negatively impact our funded status, recorded pension liability, and future required minimum contribution levels. A decline in long-term debt interest rates puts downward pressure on the discount rate used by plan sponsors to determine their pension liabilities.
We have continued to sell to some of these customers even after they were absorbed by our competition because of the breadth of our product line and our geographic diversity. Our distributors face increased competition from various sources, such as office supply superstores.
Some of our customers are being absorbed by the distribution channels of some of our manufacturing competitors. However, we do not believe this will significantly impact our business model. We have continued to sell to some of these customers even after they were absorbed by our competition because of the breadth of our product line and our geographic diversity.
Our extension of credit involves considerable judgment and is based on an evaluation of each customer’s financial condition and payment history. We monitor our credit risk exposure by periodically obtaining credit reports and updated financials on our customers. We generally see a heightened amount of bankruptcies by our customers during economic downturns.
We monitor our credit risk exposure by periodically obtaining credit reports and updated financials on our customers. We generally see a heightened amount of bankruptcies by our customers during economic downturns. In particular, the COVID-19 pandemic, and its impact on our customers, could have a negative impact on our collection efforts.
In such an event, our common stock could decline in price and you may lose all or part of your investment. The COVID-19 pandemic has had and may continue to have adverse effects on our results of operations, financial condition and stock price.
The COVID-19 pandemic has had and may continue to have adverse effects on our results of operations, financial condition and stock price. The COVID-19 pandemic caused a significant downturn in global economic activity and subsequently caused significant market volatility and operational challenges.
Increases in the cost of employee benefits could impact our financial results and cash flow. Our expenses relating to employee health benefits are significant. Unfavorable changes in the cost of such benefits could impact our financial results and cash flow.
Unfavorable changes in the cost of such benefits could impact our financial results and cash flow. Healthcare costs have risen significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform could result in significant changes to the U.S. healthcare system.
Paper supply and other raw materials have grown more limited, and due to tight demand and supply there has been a tremendous amount of upward pressure on prices. These challenges have and could in the future negatively impact the cost or availability of our raw materials .
Paper supply and other raw materials were limited, and due to tight demand and supply there was a significant amount of upward pressure on prices. Paper is a commodity that is subject to frequent increases or decreases in price, and these fluctuations are sometimes significant.
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The ongoing impacts of the public health crisis caused by the COVID-19 pandemic on our business and financial results continue to be unknown. The COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets.
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As of February 28, 2023, the Pension Plan was 99% funded on a projected benefit obligation (PBO) basis and 105% on an accumulated benefit obligation (ABO) basis. Included in our financial results are Pension Plan costs that are measured using actuarial valuations. The actuarial assumptions used may differ from actual results.
Removed
Parts of the economy have started to re-open but economic conditions remain subject to ongoing surges and local measures, creating a very fluid economic environment. Certain economic indicators, such as the improvement in the job market, reflect the continued resumption of economic activity that had been curtailed due to the COVID-19 pandemic.
Added
Most recently, on August 16, 2022, legislation commonly known as the Inflation Reduction Act (the " IRA ") was signed into law. Among other things, the IRA includes a 1% excise tax on corporate stock repurchases, applicable to repurchases after December 31, 2022, and also a new minimum tax based on book income.
Removed
The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and duration of the pandemic and the impact of the pandemic on the global economy including labor market conditions, economic activity, supply-chain shortages and disruptions, inflationary pressure and demand for the Company’s products.
Added
There may be changes in tax legislation, including a repeal or modification of the Tax Cuts and Jobs Act of 2017, changes in tax rates and tax base such as limiting, phasing-out or eliminating deductions, revising tax law interpretations in jurisdictions, and changes in other tax laws. The U.S. government has proposed changes to increase the tax rates on corporations.
Removed
Additional future impacts on the Company may include, but are not limited 8 to, material adverse effects on: demand for the Company’s products; the Company’s supply chain and sales and distribution channels; the Company’s ability to execute its strategic plans; and the Company’s profitability and cost structure.
Added
During fiscal year 2023, we experienced significantly higher freight and transportation costs as a result of overall inflationary pressures, and transportation and logistics constraints resulting from the COVID-19 pandemic. 11 A natural disaster, catastrophe, pandemic or other unexpected events could adversely affect our operations.
Removed
As such, any significant increase in the price of paper or shortage in its availability, whether due to the COVID-19 pandemic, the strength of the U.S. dollar, changes in mill ownership or other factors, could have a material adverse effect on our results of operations.
Added
While the demand for our products appears to have recovered in 2022 and 2023, economic uncertainties could continue to affect customer demand for our products and services, and the longer term effects of the pandemic, including supply chain disruptions and inflationary pressures are unknown and could have a material adverse effect on our results of operations.
Removed
A decline in long-term debt interest rates puts downward pressure on the discount rate used by plan sponsors to determine their pension liabilities. Each 10 basis point change in the discount rate impacts our computed pension liability by approximately $750,000.
Added
As previously disclosed, the Company was targeted with an encryption ransomware attack on November 30, 2022. The attack was discovered while it was in process and immediate action was taken to isolate our network to limit the scope of any damage.
Removed
As of February 28, 2022, the Pension Plan was 91% funded on a projected benefit obligation (PBO) basis and 98% on an accumulated benefit obligation (ABO) basis. We may be unable to identify or to complete acquisitions or to successfully integrate the businesses we acquire. We have evaluated, and may continue to evaluate, potential acquisition transactions.
Added
The attack resulted in a brief disruption to the operation of our systems as we took our servers offline to eradicate the ransomware and restore our data and applications from secure backups. The Company did not 12 communicate with the ransomware threat actor and never considered paying any ransom demand.
Removed
We may be required to write down goodwill and other intangible assets, which could cause our financial condition and results of operations to be negatively affected in the future. When we acquire a business, a portion of the purchase price may be allocated to goodwill and other identifiable intangible assets.
Added
Instead, the Company eliminated the ransomware and immediately proceeded to restore its critical files and functions. The Company incurred no material expense in connection with the ransomware attack.
Removed
The amount of the purchase price which is allocated to goodwill and other intangible assets is the excess of the purchase price over the net identifiable tangible assets acquired. The annual impairment test is based on several factors requiring judgment.
Added
Based on the information currently known to date, the incident has not had a significant financial impact and the Company does not believe the incident will have a material impact on its business, results of operations or financial condition.
Removed
An impairment may be caused by any number of factors outside our control, such as a decline in market conditions, including due to the COVID-19 pandemic, another pandemic or some other event, protracted recovery from poor market conditions, or other factors that may be tied to such negative economic events, including changes to a competitor’s pricing strategies.
Added
Despite us improving our Information Technology General Controls, we cannot give any assurances that the Company will not become the subject of a future more sophisticated, or more harmful attack. Increases in the cost of employee benefits could impact our financial results and cash flow. Our expenses relating to employee health benefits are significant.
Removed
To date, we have not been required to take an impairment charge relating to our existing business, but continued sale-side pressures due to technology transference, competitor 10 pricing pressures, and economic uncertainties could result in a determination that a portion of the recorded value of goodwill and intangible assets may be required to be written down.
Added
Risks related to our securities Because of the volatility in the stock market in general, the market price of our Common Stock will also likely be volatile. The stock markets have historically experienced price and volume fluctuations that at times have been extreme and have affected, and continue to affect, the market prices of equity securities of many companies.
Removed
Although an impairment charge relating to our existing business would be a noncash expense, it would impact our reported operating results and financial position. The Company has mitigated some of this risk by changing from indefinite lives to definite lives accounting for all intangibles assets.
Added
These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of our common stock.
Removed
Under definite lives accounting, the value of intangible assets is gradually amortized over time, instead of being left on the Company’s books in full and only being written down when an impairment event is deemed to have occurred. At February 28, 2022, our consolidated goodwill and other intangible assets were approximately $88.7 million and $45.6 million, respectively.
Added
If the market price of our Class A common stock falls below your investment price, you may lose some or all of your investment. In the past, companies that have experienced volatility in the marker price of their securities have been subject to securities class action litigation.
Removed
Our distributor customers may be acquired by other manufacturers who redirect business within their plants. Some of our customers are being absorbed by the distribution channels of some of our manufacturing competitors. However, we do not believe this will significantly impact our business model.
Added
We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management's attention.
Removed
If our internal controls are found to be ineffective, our financial results or our stock price could be adversely affected. We believe that we currently have adequate internal control procedures in place. However, increased risk of internal control breakdowns generally exists in a business environment that is decentralized.
Item 2. Properties
Properties — owned and leased real estate
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Item 2. Properties
Properties — owned and leased real estate
4 edited+1 added−0 removed3 unchanged
2022 filing
2023 filing
Biggest changePresently, we believe we will be able to maintain or renew leases as they expire without significant difficulty. 14 Approximate Square Footage Location General Use Owned Leased Fairhope, Alabama Manufacturing 65,000 — Chino, California Manufacturing — 63,016 Paso Robles, California Manufacturing 94,120 — Sun City, California Two Manufacturing Facilities 52,617 — Denver, Colorado One Manufacturing Facility 60,000 Lithia Springs, Georgia Manufacturing — 40,050 Harvard, Illinois Manufacturing and Warehouse 42,000 South Elgin, Illinois Manufacturing — 70,500 Indianapolis, Indiana Two Manufacturing Facilities — 38,000 DeWitt, Iowa Two Manufacturing Facilities 95,000 — Nevada, Iowa Two Manufacturing Facilities 232,000 — Columbus, Kansas Two Manufacturing Facilities and Warehouse 174,089 — Ft.
Biggest changeApproximate Square Footage Location General Use Owned Leased Fairhope, Alabama Manufacturing 65,000 — Chino, California Manufacturing — 63,016 Sun City, California Two Manufacturing Facilities 52,617 — Denver, Colorado One Manufacturing Facility 60,000 Lithia Springs, Georgia Manufacturing — 40,050 Harvard, Illinois Manufacturing and Warehouse 42,000 South Elgin, Illinois Manufacturing — 70,500 Indianapolis, Indiana Two Manufacturing Facilities — 38,000 DeWitt, Iowa Two Manufacturing Facilities 95,000 — Nevada, Iowa Two Manufacturing Facilities 232,000 — Columbus, Kansas Two Manufacturing Facilities and Warehouse 174,089 — Ft.
Equipment is added as existing machinery becomes obsolete or not repairable, and as new equipment becomes necessary to meet market demands; however, at any given time, these additions and replacements are not considered to be material additions to property, plant and equipment, although such additions or replacements may increase a plant’s efficiency or capacity.
Equipment is added as existing machinery becomes obsolete or not repairable, and as new equipment becomes necessary to meet market 13 demands; however, at any given time, these additions and replacements are not considered to be material additions to property, plant and equipment, although such additions or replacements may increase a plant’s efficiency or capacity.
All of our facilities are believed to be in good condition. We do not anticipate that substantial expansion, refurbishing, or re-equipping of our facilities will be required in the near future. All of our rented property is held under leases with original terms of one or more years, expiring at various times through August 2027.
All of our facilities are believed to be in good condition. We do not anticipate that substantial expansion, refurbishing, or re-equipping of our facilities will be required in the near future. All of our rented property is held under leases with original terms of one or more years, expiring at various times through August 2028.
Scott, Kansas Manufacturing 86,660 — Girard, Kansas Manufacturing 69,474 — Parsons, Kansas Manufacturing & One Warehouse 122,740 40,000 Macomb, Michigan Manufacturing 56,350 — Brooklyn Park, Minnesota Manufacturing 94,800 — Coon Rapids, Minnesota Warehouse — 4,800 El Dorado Springs, Missouri Manufacturing 70,894 — Fenton, Missouri Manufacturing — 26,847 Caledonia, New York Manufacturing and one vacant 191,730 — Fairport, New York Two Manufacturing Facilities 40,800 — Coshocton, Ohio Manufacturing 24,750 — Toledo, Ohio Three Manufacturing Facilities 120,947 — Portland, Oregon Two Manufacturing Facilities — 261,765 Claysburg, Pennsylvania Manufacturing — 69,000 Clarksville, Tennessee Manufacturing 51,900 — Powell, Tennessee Manufacturing 43,968 — Tullahoma, Tennessee Two Manufacturing Facilities 142,061 — Arlington, Texas Two Manufacturing Facilities 69,935 — Ennis, Texas Three Manufacturing Facilities * 325,118 — Houston, Texas Manufacturing — 29,668 Wolfe City, Texas Two Manufacturing Facilities 119,259 — Bridgewater, Virginia Manufacturing — 25,730 Chatham, Virginia Two Manufacturing Facilities 127,956 — Roanoke, Virginia Manufacturing 110,000 Kent, Washington Manufacturing — 48,789 DePere, Wisconsin Manufacturing & One Warehouse — 142,347 Mosinee, Wisconsin Manufacturing — 5,400 Neenah, Wisconsin Two Manufacturing Facilities & One Warehouse 72,354 97,161 2,646,522 1,073,073 Corporate Offices Ennis, Texas Administrative Offices 9,300 — Midlothian, Texas Executive and Administrative Offices 28,000 — 37,300 — Totals 2,683,822 1,073,073 * 22,000 square feet of Ennis, Texas location leased
Scott, Kansas Manufacturing 86,660 — Girard, Kansas Manufacturing 69,474 — Parsons, Kansas Manufacturing & One Warehouse 122,740 40,000 Macomb, Michigan Manufacturing 56,350 — Brooklyn Park, Minnesota Manufacturing 94,800 — Coon Rapids, Minnesota Warehouse — 4,800 El Dorado Springs, Missouri Manufacturing 70,894 — Fenton, Missouri Manufacturing — 26,847 Marlboro, New Jersey Manufacturing and Warehouse 7,450 Caledonia, New York Manufacturing and one vacant 191,730 — Fairport, New York Two Manufacturing Facilities 40,800 — Coshocton, Ohio Manufacturing 24,750 — Toledo, Ohio Three Manufacturing Facilities 120,947 — Portland, Oregon Two Manufacturing Facilities — 261,765 Claysburg, Pennsylvania Manufacturing — 69,000 Clarksville, Tennessee Manufacturing 51,900 — Powell, Tennessee Manufacturing 43,968 — Tullahoma, Tennessee Two Manufacturing Facilities 142,061 — Arlington, Texas Two Manufacturing Facilities 69,935 — Ennis, Texas Three Manufacturing Facilities * 325,118 — Houston, Texas Manufacturing — 29,668 Wolfe City, Texas Two Manufacturing Facilities 119,259 — Bridgewater, Virginia Manufacturing — 25,730 Chatham, Virginia Two Manufacturing Facilities 127,956 — Roanoke, Virginia Manufacturing 110,000 DePere, Wisconsin Manufacturing & One Warehouse — 142,347 Mosinee, Wisconsin Manufacturing — 5,400 Neenah, Wisconsin Two Manufacturing Facilities & One Warehouse 72,354 97,161 2,552,402 1,031,734 Corporate Offices Ennis, Texas Administrative Offices 9,300 — Midlothian, Texas Executive and Administrative Offices 28,000 — 37,300 — Totals 2,589,702 1,031,734 * 22,000 square feet of Ennis, Texas location leased 14
Added
Generally, we are able to maintain or renew leases as they expire without significant difficulty, but leases in certain markets may be subject to significant rent increases that necessitate consolidating operations to maintain profitability.
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
0 edited+1 added−0 removed1 unchanged
Item 3. Legal Proceedings
Legal Proceedings — active lawsuits and investigations
0 edited+1 added−0 removed1 unchanged
2022 filing
2023 filing
Added
In April 2023, Crabar/GBF, Inc., a subsidiary of Ennis, was awarded $5.0 million in actual and punitive damages in a case against Wright Printing Company, its owner Mark Wright, and CEO Mardra Sikora. The impact of the Judgment has not been reflected in the accompanying consolidated financial statements as of February 28, 2023.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+0 added−0 removed4 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
6 edited+0 added−0 removed4 unchanged
2022 filing
2023 filing
Biggest changeThe following table sets forth the high and low sales prices, the common stock trading volume as reported by the NYSE and dividends per share paid by the Company for the periods indicated: Common Stock Dividends Trading Volume per share of Common Stock Price Range (number of shares Common High Low in thousands) Stock Fiscal Year Ended February 28, 2022 First Quarter $ 22.24 $ 19.99 2,703 $ 0.225 Second Quarter 21.85 19.26 2,842 $ 0.250 Third Quarter 20.08 17.65 5,703 $ 0.250 Fourth Quarter 20.26 18.07 5,685 $ 0.250 Fiscal Year Ended February 29, 2021 First Quarter $ 21.11 $ 13.99 3,772 $ 0.225 Second Quarter 19.56 16.00 2,915 $ 0.225 Third Quarter 18.46 15.19 2,526 $ 0.225 Fourth Quarter 20.50 16.35 2,954 $ 0.225 On April 29, 2022, the last reported sale price of our common stock on the NYSE was $17.25, and there were approximately 675 shareholders of record.
Biggest changeThe following table sets forth the high and low sales prices, the common stock trading volume as reported by the NYSE and dividends per share paid by the Company for the periods indicated: Common Stock Dividends Trading Volume per share of Common Stock Price Range (number of shares Common High Low in thousands) Stock Fiscal Year Ended February 28, 2023 First Quarter $ 19.24 $ 16.94 6,424 $ 0.250 Second Quarter 22.67 16.55 7,768 $ 0.250 Third Quarter 23.44 19.81 6,238 $ 0.250 Fourth Quarter 23.48 20.55 6,131 $ 0.250 Fiscal Year Ended February 28, 2022 First Quarter $ 22.24 $ 19.99 2,703 $ 0.225 Second Quarter 21.85 19.26 2,842 $ 0.250 Third Quarter 20.08 17.65 5,703 $ 0.250 Fourth Quarter 20.26 18.07 5,685 $ 0.250 On May 9, 2023, the last reported sale price of our common stock on the NYSE was $19.44, and there were approximately 655 shareholders of record.
A dividend of $0.225 per share of our common stock was paid in each quarter of fiscal year 2020, 2021 and in the first quarter of fiscal year 2022. A dividend of $0.25 per share of our common stock was paid in each subsequent quarter of fiscal year 2022.
A dividend of $0.225 per share of our common stock was paid in each quarter of fiscal year 2021 and in the first quarter of fiscal year 2022. A dividend of $0.25 per share of our common stock was paid in each subsequent quarter of fiscal year 2022 and in each quarter of fiscal year 2023.
As of February 28, 2022, $5.1 million remained available to repurchase shares of common stock under the program. 16 Stock Performance Graph The graph below matches Ennis, Inc.'s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the S&P 500 index and the Russell 2000 index.
As of February 28, 2023, $23.9 million remained available to repurchase shares of common stock under the program. Stock Performance Graph The graph below matches Ennis, Inc.'s cumulative 5-Year total shareholder return on common stock with the cumulative total returns of the S&P 500 index and the Russell 2000 index.
Repurchases may be commenced or suspended at any time or from time to time without prior notice, provided that any purchases must be made in accordance with applicable insider trading rules and securities laws and regulations. Since the program’s inception in October 2008, we have repurchased 2,149,029 common shares under the program at an average price of $16.25 per share.
Repurchases may be commenced or suspended at any time or from time to time without prior notice, provided that any purchases must be made in accordance with applicable insider trading rules and securities laws and regulations.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 2/28/2017 to 2/28/2022. 2017 2018 2019 2020 2021 2022 Ennis, Inc. $ 100.00 $ 124.85 $ 141.78 $ 140.48 $ 145.56 $ 144.81 S&P 500 100.00 117.10 122.58 132.62 174.12 202.66 Russell 2000 100.00 110.51 116.68 110.93 167.50 157.44 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 17
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 2/28/2018 to 2/28/2023. 2018 2019 2020 2021 2022 2023 Ennis, Inc. $ 100.00 $ 104.14 $ 114.43 $ 104.91 $ 114.56 $ 135.05 S&P 500 100.00 97.69 118.87 139.37 171.83 157.71 Russell 2000 100.00 96.48 105.36 137.15 135.50 130.92 The stock price performance included in this graph is not necessarily indicative of future stock price performance. 16
During our fiscal year 2022, we repurchased 254,679 shares of common stock at an average price of $18.81 per share.
Since the program’s inception in October 2008, 15 we have repurchased 2,213,111 common shares under the program at an average price of $16.25 per share. During our fiscal year 2023, we repurchased 64,082 shares of common stock at an average price of $17.46 per share.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
54 edited+17 added−44 removed34 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
54 edited+17 added−44 removed34 unchanged
2022 filing
2023 filing
Biggest changeCash used in investing activities decreased by $11.1 million in 2022 compared to 2021. The cost to acquire businesses in fiscal year 2022 decreased by $14.9 million and proceeds from disposal of property decreased by $0.9 million.
Biggest changeThe $1.4 million decrease in cash used in fiscal year 2023 compared to fiscal year 2022 was primarily due to a $2.2 million decrease in capital expenditures and $0.8 million increase in proceeds from disposal of plant and property, offset by a $4.4 million increase in costs to acquire businesses The $11.1 million increase in cash used in fiscal year 2022 compared to fiscal year 2021 was primarily due to a $14.9 million decrease in costs to acquire businesses offset by $2.9 million increase in capital expenditures.
This Management’s Discussion and Analysis includes the following sections: • Overview – An overall discussion regarding our Company, the business challenges and opportunities we believe are key to our success, and our plans for facing these challenges relating to our continuing operations. • Critical Accounting Policies and Estimates – A discussion of the accounting policies that require our most critical judgments and estimates relating to our continuing operations.
This Management’s Discussion and Analysis includes the following sections: • Overview – An overall discussion regarding our Company, the business challenges and opportunities we believe are key to our success, and our plans for facing these challenges relating to our continuing operations. • Critical Accounting Estimates – A discussion of the accounting policies that require our most critical judgments and estimates relating to our continuing operations.
We evaluate our estimates and judgments 20 on an ongoing basis, including those related to allowance for doubtful receivables, inventory valuations, property, plant and equipment, intangible assets, pension plan obligations, accrued liabilities and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.
We evaluate our estimates and judgments on an ongoing basis, including those related to allowance for doubtful receivables, inventory valuations, property, plant and equipment, intangible assets, pension plan obligations, accrued liabilities and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances.
Actual results may differ materially from these estimates under different assumptions or conditions. We believe the following accounting policies are the most critical due to their effect on our more significant estimates and judgments used in preparation of our consolidated financial statements. Pension Plan – We maintain the Pension Plan for employees.
Actual results may differ materially from these estimates under different assumptions or conditions. 18 We believe the following accounting policies are the most critical due to their effect on our more significant estimates and judgments used in preparation of our consolidated financial statements. Pension Plan – We maintain the Pension Plan for employees.
The funding of our Pension Plan is governed by the Employee Retirement Income Security Act of 1974 (“ ERISA ”), as amended, and the Internal Revenue Code and is also subject to the Moving Ahead 25 for Progress in the 21 st Century Act, the Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, and the American Rescue Plan Act of 2021.
The funding of our Pension Plan is governed by the Employee Retirement Income Security Act of 1974 (“ ERISA ”), as amended, and the Internal Revenue Code and is also subject to the Moving Ahead for Progress in the 21 st Century Act, the Highway and Transportation Funding Act of 2014, the Bipartisan Budget Act of 2015, and the American Rescue Plan Act of 2021.
The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, contributions to our noncontributory defined benefit plan and the payment of dividends to our shareholders. We expect to generate sufficient cash flows from operations to cover our operating and capital requirements for the foreseeable future.
The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, contributions to our noncontributory defined benefit plan and the payment of dividends to our shareholders. We expect 21 to generate sufficient cash flows from operations to cover our operating and capital requirements for the foreseeable future.
Critical Accounting Policies and Estimates In preparing our consolidated financial statements, we are required to make estimates and assumptions that affect the disclosures and reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Estimates In preparing our consolidated financial statements, we are required to make estimates and assumptions that affect the disclosures and reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
There was no contribution required or made in fiscal year 2021. Given our funding status as of February 28, 2022 and absent any significant negative event, we anticipate that our future contributions will be between $1.0 million and $3.0 million per year, depending on our Pension Plan’s funding.
There was no contribution required or made in fiscal year 2021. Given our funding status as of February 28, 2023 and absent any significant negative event, we anticipate that our future contributions will be between $1.0 million and $3.0 million per year, depending on our Pension Plan’s funding.
Management anticipates meeting the required volumes. Capital Expenditures – We expect our capital expenditure requirements for fiscal year 2023, exclusive of capital required for possible acquisitions, will be in line with our historical levels of between $3.0 million and $5.0 million. We expect to fund these expenditures through existing cash flows.
Management anticipates meeting the required volumes. Capital Expenditures – We expect our capital expenditure requirements for fiscal year 2024, exclusive of capital required for possible acquisitions, will be in line with our historical levels of between $3.0 million and $5.0 million. We expect to fund these expenditures through existing cash flows.
The Company expects to continue to repurchase its shares under the repurchase program during fiscal year 2023 provided that the Board determines such repurchases to be in the best interests of the Company and its shareholders. Credit Facility – We did not renew our Credit Agreement, which expired November 11, 2021.
The Company expects to continue to repurchase its shares under the repurchase program during fiscal year 2024 provided that the Board determines such repurchases to be in the best interests of the Company and its shareholders. Credit Facility – We did not renew our Credit Agreement, which expired November 11, 2021.
Our decreased operational cash flows in fiscal year 2022 compared to fiscal year 2021 was primarily the result of a $7.6 million decrease from inventories and a $7.2 million decrease from our accounts receivable offset by a $4.9 million increase from our accounts payable and accrued expenses, and a $4.9 million increase in net earnings.
Our decreased operational cash flows in fiscal year 2022 compared to fiscal year 2021 was primarily the result of a $7.6 million decrease from inventories and a $7.2 million decrease from our accounts receivable offset by a $4.9 million increase from our accounts payable and accrued expenses, and a $4.9 million increase in net earnings. Cash flows from investing activities.
As our Pension Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status and associated liability recorded. The expected rate of return on assets was unchanged from the 6.50% at February 28, 2021.
As our Pension Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status and associated liability recorded. The expected rate of return on assets was unchanged from the 6.50% at February 28, 2022.
Unless otherwise indicated, this financial overview is for the continuing operations of the Company, which are comprised of the production and sales of business forms and other business products. The operating results of the Company for fiscal year 2022 and the comparative fiscal years 2021 and 2020 are included in the tables below.
Unless otherwise indicated, this financial overview is for the continuing operations of the Company, which are comprised of the production and sales of business forms and other business products. The operating results of the Company for fiscal year 2023 and the comparative fiscal years 2022 and 2021 are included in the tables below.
We have had no outstanding long term debt under the revolving credit line, since paid in August 2019. As of February 28, 2022, we had $0.6 million outstanding under a standby letter of credit arrangement secured by a cash collateral bank account.
We have had no outstanding long-term debt under the revolving credit line, since paid in August 2019. As of February 28, 2023, we had $0.6 million outstanding under a standby letter of credit arrangement secured by a cash collateral bank account.
Contractual Obligations – There have been no significant changes in our contractual obligations since February 28, 2022 that have, or that are reasonably likely to have, a material impact on our results of operations or financial condition. The following table represents our contractual commitments as of February 28, 2022 (in thousands).
Contractual Obligations – There have been no significant changes in our contractual obligations since February 28, 2023 that have, or that are reasonably likely to have, a material impact on our results of operations or financial condition. The following table represents our contractual commitments as of February 28, 2023 (in thousands).
The $0.4 million gain from disposal of assets for fiscal year 2021 is primarily attributed to the $.5 million gain on the sale of land and manufacturing facilities offset by approximately a $0.1 million loss in the sale of manufacturing equipment.
The $0.4 million gain from disposal of assets for fiscal year 2021 is primarily attributed to the $.5 million gain on the sale of land and manufacturing facilities offset by approximately a $0.1 million loss in the sale of manufacturing equipment. Income from operations.
Repurchases may be commenced or suspended at any time or from time to time without prior notice, provided that any purchases must be made in accordance with applicable insider trading rules and securities laws and regulations. Since the program’s inception in October 2008, we have repurchased 2,149,029 common shares under the program at an average price of $16.25 per share.
Repurchases may be commenced or suspended at any time or from time to time without prior notice, provided that any purchases must be made in accordance with applicable insider trading rules and securities laws and regulations. Since the program’s inception in October 2008, we have repurchased 2,213,111 common shares under the program at an average price of $16.25 per share.
Consistent with our historical practice, we intend to continue to focus on effectively managing and controlling our product costs through the use of forecasting, production and costing models, as well as working closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational results.
We intend to continue to focus on effectively managing and controlling our product costs through the use of forecasting, production and costing models, as well as working closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational results.
This section provides information necessary to evaluate our ability to generate cash and to meet existing and known future cash requirements over both the short and long term. References to 2022, 2021 and 2020 refer to the fiscal years ended February 28, 2022, February 28, 2021 and February 29, 2020, respectively.
This section provides information necessary to evaluate our ability to generate cash and to meet existing and known future cash requirements over both the short and long term. References to 2023, 2022 and 2021 refer to the fiscal years ended February 28, 2023, February 28, 2022 and February 28, 2021, respectively.
Under these regulations, the liabilities are discounted using 25-year average corporate bond rates within a specified corridor. For the period ended February 28, 2022, the specified corridor around the 25-year average was 5%. We made a contribution of $3.0 million to our Pension Plan in fiscal year 2020 and $1.0 million in fiscal year 2022.
Under these regulations, the liabilities are discounted using 25-year average corporate bond rates within a specified corridor. For the period ended February 28, 2023, the specified corridor around the 25-year average was 5%. We made a contribution of $2.0 million to our Pension Plan in fiscal year 2023 and $1.0 million in fiscal year 2022.
Results of Operations The following discussion provides information which we believe is relevant to understanding our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto, which are incorporated herein by reference.
Results of Operations The following discussion provides information which we believe is relevant to understanding our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
Amortizable intangibles are amortized over their expected useful lives. We evaluate these amounts periodically (at least once a year) to determine whether a triggering event has occurred during the year that would indicate potential impairment. We assess goodwill for impairment annually as of December 1, or more frequently if impairment indicators are present.
We evaluate these amounts periodically (at least once a year) to determine whether a triggering event has occurred during the year that would indicate potential impairment. We assess goodwill for impairment annually as of December 1, or more frequently if impairment indicators are present.
The $0.3 million gain from disposal of assets for fiscal year 2022 is primarily related to the sale of an unused manufacturing facility and manufacturing equipment.
The $5.9 million gain from disposal of assets for fiscal 2023 is primarily from the sale of an unused manufacturing facility, $5.8 million, and $0.1 million of manufacturing equipment. The $0.3 million gain from disposal of assets for fiscal year 2022 is primarily related to the sale of an unused manufacturing facility and manufacturing equipment.
Cash provided by operating activities was $50.7 million for fiscal year 2022 (a decrease of $2.1 million compared to fiscal year 2021), $52.8 million for fiscal year 2021 (a decrease of $4.4 million compared to fiscal year 2020) and $57.2 million for fiscal year 2020.
Cash provided by operating activities was $46.8 million for fiscal year 2023 (a decrease of $3.9 million compared to fiscal year 2022), $50.7 million for fiscal year 2022 (a decrease of $2.1 million compared to fiscal year 2021) and $52.8 million for fiscal year 2021.
Cash Flow Components Fiscal years ended (Dollars in thousands) 2022 2021 2020 Net cash provided by operating activities $ 50,678 $ 52,817 $ 57,219 Net cash used in investing activities $ (10,052 ) $ (21,183 ) $ (21,446 ) Net cash used in financing activities $ (30,210 ) $ (24,702 ) $ (55,957 ) 24 Cash flows from operating activities.
Cash Flow Components Fiscal years ended (Dollars in thousands) 2023 2022 2021 Net cash provided by operating activities $ 46,776 $ 50,678 $ 52,817 Net cash used in investing activities $ (11,457 ) $ (10,052 ) $ (21,183 ) Net cash used in financing activities $ (26,957 ) $ (30,210 ) $ (24,702 ) Cash flows from operating activities.
Our selling, general, and administrative (“ SG&A ”) expenses increased approximately 4.5%, from $68.3 million for fiscal year 2021 to $71.4 million for fiscal year 2022. As a percentage of sales, SG&A expenses declined from 19.1% in fiscal year 2021 to 17.9% for fiscal year 2022.
Our selling, general, and administrative (“ SG&A ”) expenses decreased approximately 0.9%, from $71.4 million for fiscal year 2022 to $70.8 million for fiscal year 2023. As a percentage of sales, SG&A expenses declined from 17.9% in fiscal year 2022 to 16.4% for fiscal year 2023.
Primarily due to factors described above, our income from operations for fiscal year 2022 was $43.6 million, or 10.9% of net sales, compared to $35.9 million, or 10.0% of net sales, for fiscal year 2021.
Primarily due to factors described above, our income from operations for fiscal year 2023 increased 51.8% to $66.2 million, or 15.3% of net sales, from $43.6 million, or 10.9% of net sales in 2022, and increased 21.4% to $43.6 million, or 10.9% of net sales, compared to $35.9 million, or 10.0% of net sales, for fiscal year 2021.
Consolidated Summary Consolidated Statements of Fiscal years ended Operations - Data ( in thousands, 2022 2021 2020 except per share amounts) Net sales $ 400,014 100.0 % $ 357,973 100.0 % $ 438,412 100.0 % Cost of goods sold 285,291 71.3 254,207 71.0 309,488 70.6 Gross profit margin 114,723 28.7 103,766 29.0 128,924 29.4 Selling, general and administrative 71,410 17.9 68,270 19.1 78,173 17.8 Gain from disposal of assets (271 ) (0.1 ) (405 ) (0.1 ) (87 ) — Income from operations 43,584 10.9 35,901 10.0 50,838 11.6 Other income (expense), net (1,640 ) (0.4 ) (2,614 ) (0.7 ) 413 0.1 Earnings before income taxes 41,944 10.5 33,287 9.3 51,251 11.7 Provision for income taxes 12,962 3.2 9,193 2.6 12,959 3.0 Net earnings $ 28,982 7.2 % $ 24,094 6.7 % $ 38,292 8.7 % Net Sales.
Consolidated Summary Consolidated Statements of Fiscal years ended Operations - Data ( in thousands) 2023 2022 2021 Net sales $ 431,837 100.0 % $ 400,014 100.0 % $ 357,973 100.0 % Cost of goods sold 300,787 69.7 285,291 71.3 254,207 71.0 Gross profit margin 131,050 30.3 114,723 28.7 103,766 29.0 Selling, general and administrative 70,793 16.4 71,410 17.9 68,270 19.1 Gain from disposal of assets (5,896 ) (1.4 ) (271 ) (0.1 ) (405 ) (0.1 ) Income from operations 66,153 15.3 43,584 10.9 35,901 10.0 Other expense (1,223 ) (0.3 ) (1,640 ) (0.4 ) (2,614 ) (0.7 ) Earnings before income taxes 64,930 15.0 41,944 10.5 33,287 9.3 Provision for income taxes 17,630 4.1 12,962 3.2 9,193 2.6 Net earnings $ 47,300 11.0 % $ 28,982 7.2 % $ 24,094 6.7 % Net Sales.
Our acquisitions negatively impacted our SG&A expenses by approximately $2.3 million during fiscal year 2022. Our SG&A expenses decreased approximately 12.7%, from $78.2 million for fiscal year 2020 to $68.3 million for fiscal year 2021. As a percentage of sales, SG&A expenses increased from 17.8% in fiscal year 2020 to 19.1% for fiscal year 2021.
As a percentage of sales, SG&A expenses declined from 19.1% in fiscal year 2021 to 17.9% for fiscal year 2022. Our acquisitions negatively impacted our SG&A expenses by approximately $2.3 million SG&A during fiscal year 2022. (Gain) loss from disposal of assets.
During our fiscal year 2022, we repurchased 254,679 shares of common stock at an average price of $18.81 per share. As of February 28, 2022, $5.1 million remained available to repurchase shares of the Company’s common stock under the program.
During our fiscal year 2023, we repurchased 64,082 shares of common stock at an average price of $17.46 per share. As of February 28, 2023, $23.9 million remained available to repurchase shares of the Company’s common stock under the program.
Fiscal Years Ended (Dollars in thousands) 2022 2021 2020 Working Capital $ 127,839 $ 113,022 $ 111,915 Cash $ 85,606 $ 75,190 $ 68,258 Working Capital. Our working capital increased by approximately $14.8 million, or 13.1%, from $113.0 million at February 28, 2021 to $127.8 million at February 28, 2022.
Fiscal Years Ended (Dollars in thousands) 2023 2022 2021 Working Capital $ 155,379 $ 127,839 $ 113,022 Cash $ 93,968 $ 85,606 $ 75,190 Working Capital. Our working capital increased by approximately $27.5 million, or 21.5%, from $127.8 million at February 28, 2022 to $155.4 million at February 2023.
The increase in our cash used in fiscal year 2022 compared to fiscal year 2021 resulted from two factors: (i) an increase of $3.6 million of common stock repurchases; and (ii) the payment of $2.0 million more in dividends in fiscal year 2022 compared to fiscal year 2021.
The increase in our cash used in financing activities in fiscal year 2022 compared to fiscal year 2021 resulted from two factors: (i) an increase of $3.6 million of common stock repurchases; and (ii) the payment of $2.0 million more in dividends in fiscal year 2022 compared to fiscal year 2021. 22 Stock Repurchase – The Board has authorized the repurchase of the Company’s outstanding common stock through a stock repurchase program, which authorized amount is currently up to $40.0 million in the aggregate.
During fiscal year 2022 the discount rate used to determine the net pension obligations for purposes of our Consolidated Financial Statements increased to 3.10% from 2.65% in fiscal year 2021. Each 10 basis point change in the discount rate impacts our computed pension liability by about $0.75 million.
During fiscal year 2023, the discount rate used to determine the net pension obligations for purposes of our Consolidated Financial Statements increased to 5.00% from 3.10% in fiscal year 2022.
Production capacity and price competition within our industry – Changes in the value of the U.S. dollar can have a significant impact on the pricing and supply of paper.
The ability to make investments in new and existing technology and/or to acquire new market opportunities through acquisitions is dependent on the Company’s liquidity and operational results. Production capacity and price competition within our industry – Changes in the value of the U.S. dollar can have a significant impact on the pricing and supply of paper.
Other expense was $1.6 million for fiscal year 2022 compared to expense of $2.6 million for fiscal year 2021. The decrease in expense was primarily related to decrease in pension expense. Other expense was $2.6 million for fiscal year 2021 compared to income of $0.4 million for fiscal year 2020.
Other expense was $1.6 million for fiscal year 2022 compared to expense of $2.6 million for fiscal year 2021. The decrease in expense was primarily related to decrease in pension expense. Provision for income taxes. Our effective tax rates for fiscal years 2023, 2022 and 2021 were 27.2%, 30.9%, and 27.6%, respectively.
Our acquisitions of Infoseal and AmeriPrint added $23.9 million in revenues and $0.08 in diluted earnings per share for the fiscal year compared to the corresponding prior year. Our net earnings continue to be impacted by COVID-19 pandemic.
Our acquisitions of Infoseal and AmeriPrint added $23.9 million in revenues and $0.08 in diluted earnings per share for the fiscal year compared to the corresponding prior year. Liquidity and Capital Resources We rely on our cash flows generated from operations to meet cash requirements of our business.
Paper supply has grown more limited and due to tight demand and supply, there has been a tremendous amount of upward pressure on prices. We have been adjusting our pricing to cover paper inflation during the year, but the increasing backlog of unproduced orders creates timing issues which has an impact on our gross profit margins.
We have been adjusting our pricing to cover paper inflation during the year, but the increased backlog of unproduced orders created timing issues which had an impact on our gross profit margins. Selling, general, and administrative expenses.
Inventories – Our inventories are valued at the lower of cost or net realizable value. We regularly review inventory values on hand, using specific aging categories, and write down inventory deemed obsolete and/or slow-moving based on historical usage and estimated future usage to its estimated net realizable value.
We regularly review inventory values on hand, using specific aging categories, and write down inventory deemed obsolete and/or slow-moving based on historical usage and estimated future usage to its estimated net realizable value. As actual future demand or market conditions may vary from those projected by management, adjustments to inventory valuations may be required.
Cash used in financing activities was $30.2 million in fiscal year 2022 compared to $24.7 million used in fiscal year 2021 and $56.0 million used in fiscal year 2020.
Cash flows from financing activities. Cash used in financing activities was $27.0 million in fiscal year 2023 compared to $30.2 million in fiscal year 2022 and $24.7 million used in fiscal year 2021. The decrease in our cash used in financing activities in fiscal year 2023 was primarily due to a $3.7 million decrease of common stock repurchases.
The acquisition of Ameriprint, which was completed in June 2021, is an integral part of our strategy to offset normal industry revenue declines due to print 22 attrition and other changes. Our acquisitions during fiscal years 2021 and 2022 positively impacted our net sales by approximately $23.9 million during fiscal year 2022 compared to 2021.
The acquisition of AmeriPrint, and School Photo Marketing, is an integral part of our strategy to offset normal industry revenue declines due to print attrition and other changes. Our net sales increased from $358.0 million for fiscal year 2021 to $400.0 million for fiscal year 2022, an increase of 11.7%.
Our manufacturing costs increased from $254.2 million for fiscal year 2021 to $285.3 million for fiscal year 2022, or 12.2%. Our gross profit margin (“ margin ”) decreased slightly from 29.0% for fiscal year 2021 to 28.7% for fiscal year 2022.
Our gross profit margin (“ margin ”) increased from 28.7% for fiscal year 2022 to 30.3% for fiscal year 2023.
The higher effective tax rate for fiscal year 2021 was primarily impacted by permanent nondeductible expenses and settlement of certain state and local tax matters. Net earnings. Net earnings were $29.0 million, or $1.11 per diluted share for fiscal year 2022, as compared to $24.1 million, or $0.93 per share for fiscal year 2021.
The higher effective tax rate for fiscal year 2022 was primarily the result of distributions during the year from our deferred compensation plan which was terminated in fiscal year 2021. Net earnings. Net earnings were $47.3 million, or $1.82 per diluted share for fiscal year 2023, as compared to $29.0 million, or $1.11 per diluted share for fiscal year 2022.
Our working capital increased by approximately $1.1 million, or 1.0%, from $111.9 million at February 29, 2020 to $113.0 million at February 28, 2021. Our current ratio, calculated by dividing our current assets by our current liabilities, increased from 4.0-to-1.0 for fiscal year 2020 to 4.2-to-1.0 for fiscal year 2021.
Our current ratio, calculated by dividing our current assets by our current liabilities, increased from 4.4 to 1.0 for fiscal year 2022 to 4.8 to 1.0 for fiscal year 2023.
Due in less Due in Due in Due in more Total than 1 year 1-3 years 4-5 years than 5 years Estimated pension benefit payments to Pension Plan participants 38,100 2,300 7,700 8,100 20,000 Letters of credit 583 583 — — — Operating leases 16,306 5,182 8,071 3,053 — Total $ 54,989 $ 8,065 $ 15,771 $ 11,153 $ 20,000
Due in less Due in Due in Due in more Total than 1 year 1-3 years 4-5 years than 5 years Estimated pension benefit payments to Pension Plan participants $ 36,100 $ 3,000 $ 6,700 $ 6,500 $ 19,900 Letters of credit 583 583 — — — Operating leases 14,174 5,349 7,504 1,321 — Total $ 50,857 $ 8,932 $ 14,204 $ 7,821 $ 19,900 23
Our net sales increased from $358.0 million for fiscal year 2021 to $400.0 million for fiscal year 2022, an increase of 11.7%. Our sales for the period partially rebounded from the impact on economic conditions driven by the COVID-19 pandemic and resulted in an increase in sales volume.
Our sales for the period partially rebounded from the impact on economic conditions driven by the COVID-19 pandemic and resulted in an increase in sales volume. The acquisition of AmeriPrint, which was completed in June 2021, is an integral part of our strategy to offset normal industry revenue declines due to print attrition and other changes.
These decreases were offset by a $4.3 million increase in our accounts receivable and a $3.6 million increase in our prepaid expenses and prepaid income taxes. Cash flows from investing activities. Cash used in investing activities was $10.1 million in fiscal year 2022 compared to $21.2 million in fiscal year 2021 and $21.4 million in fiscal year 2020.
Cash used in investing activities was $11.5 million in fiscal year 2023 compared to $10.1 million in fiscal year 2022, and $21.2 million in fiscal year 2021.
In addition to the risk factors discussed under the caption “Risk Factors” in Item 1A of this Annual Report, some of the key challenges of our business include the following: COVID-19 Pandemic – The global spread of the novel strain of COVID-19 has significantly impacted health and economic conditions throughout the United States and the world, including the markets in which we operate. 18 Although the U.S. economy has gained in recovery, it continues to be significantly impacted by supply-chain disruptions, labor shortages, and shifting demand.
In 17 addition to the risk factors discussed under the caption “Risk Factors” in Item 1A of this Annual Report, some of the key challenges of our business include the following: COVID-19 Pandemic – Our sales were significantly impacted by economic conditions driven by the COVID-19 pandemic and resulted in a decrease in sales volume and earnings in fiscal year 2021.
A goodwill impairment charge was not required for the fiscal years ended February 28, 2022 or February 28, 2021.
A goodwill impairment charge was not required for the fiscal years ended February 28, 2023 or February 28, 2022. Revenue Recognition – Net sales consist of gross sales invoiced to customers, less certain related charges, including discounts, returns and other allowances.
Our decreased operational cash flows in fiscal year 2021 compared to fiscal year 2020 was primarily the result of two factors: (i) a $14.2 million decrease in net earnings and (ii) a $0.7 million increase in our accounts payable and accrued expenses.
Our decreased operational cash flows in fiscal year 2023 compared to fiscal year 2022 was primarily the result of a $3.4 million decrease from inventories, $8.2 million decrease from our accounts receivable, $5.9 million gain from disposal of assets and a $5.0 million decrease from deferred tax liability offset by $18.3 million in increased earnings.
In this case, risk of loss from obsolescence passes to the customer, the customer is 21 invoiced under normal credit terms and revenue is recognized when manufacturing is complete. Approximately $14.6 million, $12.5 million, and $11.0 million of revenue were recognized under these agreements during fiscal years ended 2022, 2021 and 2020, respectively.
In some cases and upon customer request, we print and store custom print product for customer specified future delivery, generally within twelve months. In this case, risk of loss from obsolescence passes to the customer, the customer is invoiced under normal credit terms and revenue is recognized when manufacturing is complete.
The increase in pension expense from fiscal year 2020 to 2021 included in other expense impacted our results by $0.07 per diluted share. Net earnings were $28.9 million, or $1.11 per diluted share for fiscal year 2022.
Net earnings were impacted by increased revenues and a $5.8 million gain from disposal of assets that added $0.17 per share. Net earnings were $29.0 million, or $1.11 per diluted share for fiscal year 2022, as compared to $24.1 million, or $0.93 per share for fiscal year 2021.
Paper supply has grown more limited and due to tight demand and supply, there has been a tremendous amount of upward pressure on prices. As such, pricing into fiscal 2023 is currently expected to increase. As the economy has improved, demand has increased for coated and uncoated freesheet papers which has reduced the excess inventory in the market.
Our margin decreased slightly from 29.0% for fiscal year 2021 to 28.7% for fiscal year 2022. Paper supply has grown more limited and due to tight demand and supply, there has been a significant amount of upward pressure on prices.
During the period, our cash position increased by $10.4 million and our working capital position increased by $14.8 million from February 28, 2021.
Our increase in working capital primarily reflects the increase in cash, $8.4 million, accounts receivable $14.5 million, and inventory $8.3 million, offset by the increase in our accounts payable and accrued expense. Our working capital increased by approximately $14.8 million, or 13.1%, from $113.0 million at February 28, 2021 to $127.8 million at February 28, 2022.
The acquisition of Infoseal, which was completed in December 2020, is an integral part of our strategy to offset normal industry revenue declines due to print attrition and other changes. Our acquisitions during fiscal years 2021 and 2020 positively impacted our net sales by approximately $12.5 million during fiscal year 2021 compared to 2020. Cost of Goods Sold.
Our acquisitions during fiscal years 2021 and 2022 positively impacted our net sales by approximately $23.9 million during fiscal year 2022 compared to 2021. Cost of Goods Sold. Our manufacturing costs increased from $285.3 million for fiscal year 2022 to $300.8 million for fiscal year 2023, or 5.4%.
Removed
Certain economic indicators, such as the improvement in the job market, reflect the continued resumption of economic activity that had been curtailed due to the COVID-19 pandemic. Even so, there continue to be significant uncertainties associated with the COVID-19 pandemic.
Added
The demand for our products strengthened in fiscal year 2022 and fiscal year 2023, and our sales increased. We were also confronted with rising raw material and logistics costs, delayed delivery times and labor shortages. Despite these challenges, our disciplined cost management and pricing strategies contributed to our improved performance in fiscal year 2022 and 2023.
Removed
The full extent of the impact of COVID-19 on our financial condition, liquidity, operations, suppliers, industry, workforce and operational results is currently uncertain and will depend on many factors outside the Company’s control, including without limitation the timing, extent, trajectory and duration of the pandemic and the impact of the pandemic on the global economy including labor market conditions, economic activity, supply chain shortages and disruptions, inflationary pressure and demand for the Company’s products.
Added
While the markets appear to have recovered from the more direct negative impacts of the pandemic, the longer term effects of the pandemic, including supply chain disruptions and inflationary pressures, are unknown and could have a material adverse effect on our business, results of operations and financial results.
Removed
While the impacts of the pandemic have been significant, our results of operations were within our forecasted parameters for the period ended February 28, 2022.
Added
Increased foreign imports and demand declines have currently stabilized price increases of North American printing & writing paper. The extent to which import pressures remain in place will likely play a major role in price stability or decreases.
Removed
The following is a summary of our recent and anticipated actions in response to COVID-19 and its impact on our business. ➣ Cash/Liquidity: We believe our strong liquidity position will help us mitigate the ongoing adverse impacts of COVID-19. On February 28, 2022 we had $85.6 million in cash.
Added
The discount rate is reviewed by management annually and is adjusted to reflect movements in the average Mercer and FTSE (formerly Citigroup) pension yield curves for mature pension plans with duration of about 12-15 years. The Company estimated the duration of its pension benefit obligation (PBO) to be approximately 12-15 years.
Removed
In addition, our liquidity and debt ratios have all improved since the start of the pandemic, with our current ratio (calculated by dividing our current assets by our current liabilities) increasing from 4.22 to 4.44, our quick ratio (calculated by dividing our current assets less inventories by our current liabilities) increasing from 3.29 to 3.35, and our net debt to equity ratio (after application of cash) decreasing from -0.04 to -0.20. ➣ Receivable and Inventory Management : We continue to closely monitor and manage our outstanding trade receivables and inventories.
Added
Each 10 basis point change in the discount rate impacts our computed pension liability by about $0.53 million. Also, continued changes in the mortality assumptions could potentially impact our funded status. For the February 28, 2023 measurement, no change was made to the mortality assumption.
Removed
During the period, our days’ sales in our receivables decreased slightly to 35 days from 39 days (February 28, 2021), and our days’ sales of inventory increased slightly to 37 days from February 28, 2021 (34 days).
Added
While U.S. mortality has been higher in the last couple of years due to the pandemic and other related factors, the mortality assumption is used to estimate the future lifetime of plan participants.
Removed
The Company continues to monitor incoming orders and is adjusting its raw material purchases accordingly. ➣ Supply Chain: Most of our products are sourced domestically from suppliers deemed “essential” by the government, and therefore currently remain in operation, and we have been able to switch from impacted suppliers to non-impacted suppliers in several instances since the outbreak of COVID-19.
Added
Any actual impact on the Pension Plan from the higher than expected mortality has already been recognized in the underlying participant data used to measure the pension liability. The impact on future longevity is still being studied, and there is a general expectation that the current population is a healthier cohort such that mortality rates may return to pre-pandemic levels.
Removed
While the availability of paper in the North American market is tighter than it has been in a long time, our strong vendor relationship with our paper supplier allows us to meet customer demand for our business product needs.
Added
This assumption will continue to be monitored. Goodwill and Other Intangible Assets – Amounts allocated to intangibles and goodwill are determined based on valuation analyses for our acquisitions. Amortizable intangibles are amortized over their expected useful lives.
Removed
However, if one or more of our major suppliers are negatively impacted by the COVID-19 pandemic, through plant closures, deteriorating financial condition, or otherwise, it could adversely affect our operational results and financial condition. ➣ Cost Savings: We consolidated a few of our underperforming manufacturing facilities into existing locations with excess capacity to reduce future costs and improve our operational efficiencies.
Added
Our allowance for credit losses is based on an analysis that estimates the amount of our total customers receivable balance that is not collectible.
Removed
We believe the modifications to our cost structure in response to the sales impact of the COVID-19 pandemic will not impact our ability to service increased customer demand when economic conditions improve. ➣ Capital Expenditures: We continue to make capital expenditures for operational maintenance purposes, as may be required.
Added
This analysis includes assessing a default probability to customers’ receivable balances, which is influenced by several factors including (i) current market conditions, (ii) periodic review of customer credit worthiness, and (iii) review of customer receivable aging and payment trends.
Removed
Additionally, we will carefully review and make new capital expenditures for equipment to the extent such 19 expenditures make economic sense by improving our operations and not jeopardizing our strong liquidity position.
Added
While we believe we have exercised prudent judgment and applied reasonable assumptions, there 19 can be no assurance that in the future, changes in economic conditions or other factors would not cause changes in the financial health of our customers.
Removed
The ultimate impact of COVID-19 is difficult to predict, including due to factors discussed under the caption “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Added
If the financial health of our customers deteriorates, the timing and level of payments received could be impacted and therefore, could result in a change to our estimated losses. Returns, discounts and other allowances have historically been insignificant.
Removed
The ability to make investments in new and existing technology and/or to acquire new market opportunities through acquisitions is dependent on the Company’s liquidity and operational results.
Added
Approximately $17.1 million, $14.6 million, and $12.5 million of revenue were recognized under these agreements during fiscal years ended 2023, 2022 and 2021, respectively. Inventories – Our inventories are valued at the lower of cost or net realizable value.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
1 edited+0 added−0 removed2 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
1 edited+0 added−0 removed2 unchanged
2022 filing
2023 filing
Biggest changeWe do not use derivative instruments for trading purposes. While we had no outstanding debt at February 28, 2022, we will be exposed to interest rate risk if we borrow under a credit facility in the future. This market risk discussion contains forward-looking statements.
Biggest changeWe do not use derivative instruments for trading purposes. While we had no outstanding debt at February 28, 2023, we will be exposed to interest rate risk if we borrow under a credit facility in the future. This market risk discussion contains forward-looking statements.