ENNIS, INC. — Annual Report 2001

May 25, 2001

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 --------------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _ to _ Commission file number 1-5807 ENNIS BUSINESS FORMS, INC. - ---------------------------------------------------------------- (Exact name of registrant as specified in its charter) TEXAS 75-0256410 - -------------------------------- ---------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1510 N. Hampton, Suite 300, DeSoto, TX 75115 - ---------------------------------------- ------------------ (Address of principal executive offices) Zip Code Registrant's telephone number, including area code (972)228-7801 -------------- Securities registered pursuant to Section 12(b) of the Act: Number of Shares Outstanding on Name of each exchange Title of each class April 16, 2001 on which registered - ------------------- ---------------- ----------------------- Common Stock, par value 16,270,765 New York Stock Exchange $2.50 per share Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates of the registrant as of April 16, 2001 (15,400,234 shares) was $123,047,870. Documents Incorporated by Reference: Portions of 2001 Annual Report to Shareholders - Incorporated in Parts I & II Portions of Proxy Statement dated May 21, 2001 - Incorporated in Part III 1 SECURITIES AND EXCHANGE COMMISSION FORM 10-K PART I ------ Item 1. Business. - ------- --------- Ennis Business Forms, Inc. was organized under the laws of Texas in 1909. Ennis Business Forms, Inc. and its subsidiaries (collectively "Ennis" or the "Company") operates in three business segments. The Forms Solutions Group is primarily in the business of manufacturing and selling business forms and other printed business products. The Promotional Solutions Group is primarily in the business of design, production and distribution of printed and electronic media, presentation products, flexographic printing, advertising specialties and Post-it (registered trademark) Notes. The Financial Solutions Group designs, manufactures and markets printed forms and specializes in internal bank forms, secure and negotiable documents and custom products. Additional information concerning the segments is incorporated herein by reference to page 33 of the Company's 2001 Annual Report to Shareholders which is attached as Exhibit (13) hereto. Approximately 95% of the business products manufactured by Ennis are custom and semi-custom, constructed in a wide variety of sizes, colors, number of parts and quantities on an individual job basis depending upon the customers' specifications. Ennis operates twenty-nine manufacturing locations in twelve strategically located states providing the Ennis dealer a national network for meeting users' demands for hand or machine written records and documents. For the year ended February 28, 2001 the sale of business products represents approximately 86% of consolidated net sales. While it is not possible, because of the lack of adequate statistical information, to determine Ennis' share of the total business products market, management believes Ennis is one of the largest producers of business forms in the United States distributing primarily through independent dealers, and that its business forms offering is more diversified than that of most companies in the business forms industry. The forms industry is divided into two major competitive segments. One segment sells directly to end users, and is dominated by a few large manufacturers. The other segment, which the Company serves, distributes forms and other business products through a variety of resellers. The Company believes it is the largest forms company which serves this segment of the market. There are a number of competitors which operate in this segment ranging in size from single employee-owner operations to multi- plant organizations. The Company's strategic plant locations and buying power permit it to compete on a favorable basis within this segment of the market on the competitive factors of service, quality and price. Distribution of business forms and other business products throughout the United States is primarily through independent dealers, including business forms distributors, stationers, printers, computer software developers, etc. No single customer accounts for as much as ten percent of consolidated net sales. 2 Raw materials principally consist of a wide variety of weights, widths, colors, sizes and qualities of paper for business products purchased from a number of major suppliers at prevailing market prices. Business form usage is generally not seasonal. General economic conditions are the predominant factor in quarterly volume fluctuations. Patents, Trademarks, Licenses, Franchises and Concessions: - ---------------------------------------------------------- The Company does not have any significant patents, trademarks, licenses, franchises or concessions. Backlog: - -------- At February 28, 2001 the Company's backlog of business forms orders believed to be firm was approximately $4,952,000 as compared to approximately $6,663,000 at February 29, 2000. The backlog of orders for tools, dies and special machinery at February 28, 2001 was approximately $1,896,232 as compared to approximately $2,645,000 at February 29, 2000. The backlog of orders of promotional media at February 28, 2001 was approximately $9,257,065 as compared to approximately $9,340,000 at February 29, 2000. The backlog of financial forms at February 28, 2001 was approximately $2,500,000. Approximately $2,000,000 of the promotional media backlog is not expected to be filled in the fiscal year ending February 28, 2002. Research and Development: - ------------------------- While the Company continuously looks for new products to sell through its distribution channel, there have been no material amounts spent on research and development in the fiscal year ended February 28, 2001. Environment: - ------------ There have been no material effects on the Company arising from compliance with Federal, State or local provisions or regulations relating to the protection of the environment. Employees: - ---------- At February 28, 2001, the Company had approximately 2,181 employees, of whom approximately 502 were represented by three unions and under five separate contracts expiring at various times. 3 Item 2. Properties. - ------- ----------- The Company operates twenty-nine manufacturing facilities located in twelve states as follows: Approximate Square feet of floor space Location Owned Leased Total -------- ------ ------- ----- Forms Solutions Group ---------------------- Ennis, Texas Three Manufacturing Facilities 325,118 - 325,118 Chatham, Manufacturing Virginia 127,956 - 127,956 Paso Robles, Manufacturing California 94,120 - 94,120 Knoxville, Manufacturing Tennessee 48,057 - 48,057 Portland, Manufacturing Oregon - 47,000 47,000 Fort Scott, Manufacturing Kansas 86,660 - 86,660 DeWitt, Iowa Two Manufacturing Facilities 95,000 - 95,000 Dallas, Texas Manufacturing 82,400 - 82,400 Moultrie, Manufacturing Georgia 25,000 - 25,000 Coshocton, Ohio Manufacturing 24,750 - 24,750 Houston, Texas Manufacturing - 40,800 40,800 San Antonio, Manufacturing Texas 47,426 - 47,426 ------- ------- --------- 956,487 87,800 1,044,287 ======= ======= ========= Promotional Solutions Group --------------------------- Wolfe City, Two Manufacturing Texas Facilities 119,259 - 119,259 Macomb, Manufacturing Michigan 56,350 - 56,350 Bell, Manufacturing California - 19,286 19,286 Denver, Four Manufacturing Colorado Facilities and Warehouse - 186,528 186,528 Dallas, Texas Manufacturing - 23,976 23,976 ------- ------- --------- 175,609 229,790 405,399 ======= ======= ========= Financial Solutions Group ------------------------- Brooklyn Park, Manufacturing Minnesota 94,800 - 94,800 Roseville, Manufacturing Minnesota - 42,500 42,500 Arden Hills, Warehouse Minnesota - 23,684 23,684 Nevada, Iowa Manufacturing 48,500 - 48,500 Bridgewater, Manufacturing Virginia - 27,000 27,000 Golden, Manufacturing Colorado - 23,000 23,000 ------- ------- --------- 143,300 116,184 259,484 ======= ======= ========= Administrative Offices ---------------------- DeSoto, Texas Executive and Administrative Offices - 13,577 13,577 Ennis, Texas Administrative Offices 9,300 - 9,300 ------- ------- --------- 9,300 13,577 22,877 ======= ======= ========= 4 All of the Forms Solutions Group properties are used for the production, warehousing and shipping of business forms and other business products except the Dallas, Texas plant, which is used for the production of tools, dies and special machinery. The Promotional Solutions Group properties are used for the production, warehousing and shipping of the following: business forms, flexographic printing, advertising specialties and Post-it (registered trademark) Notes (Wolfe City, Texas); presentation products (Macomb, Michigan and Bell, California); and printed and electronic promotional media (Denver, Colorado). All of the Financial Solutions Group properties are used for the production of warehousing and shipping of forms. The plants are being operated at normal productive capacity. Productive capacity fluctuates with the ebb and flow of market demands and depends upon the product mix at a given point in time. Equipment is added as existing machinery becomes obsolete or unrepairable and as new equipment becomes necessary to meet market demands; however, at any given time these additions and replacements are not considered to be material additions to property, plant and equipment, although such additions or replacements may increase a plant's efficiency or capacity. All of the foregoing facilities are considered to be in good condition. The Company does not anticipate that substantial expansion, refurbishing or re-equipping will be required in the near future. All of the rented property is held under leases with original terms of two or more years, expiring at various times from May 2001 through December 2005. No difficulties are presently foreseen in maintaining or renewing such leases as they expire. Item 3. Legal Proceedings. - ------- ------------------ There are no material pending legal proceedings or litigation pending or threatened to which the registrant or its subsidiaries are parties or of which property of the registrant or its subsidiaries is the subject. Item 4. Submission of Matters to a Vote of Security Holders. - ------- ---------------------------------------------------- None. EXECUTIVE OFFICERS OF THE REGISTRANT Pursuant to General Instruction G of Form 10-K, the following list is included as an unnumbered Item in Part I of this report in lieu of being included in the Proxy Statement for the Annual Meeting of Shareholders to be held on June 21, 2001. The following is a list of names and ages of all of the executive officers of the registrant indicating all positions and offices with the registrant held by each such person and each such person's principal occupation or employment during the past five years. All such persons have been elected to serve until the next annual election of officers (which shall occur on June 21, 2001) and their successors are elected, or until their earlier resignation or removal. No person other than those listed below has been chosen to become an executive officer of the registrant. 5 Keith S. Walters, Chairman of the Board, CEO and President, age 51, was elected Chief Executive Officer in November 1997, Chairman in June 1998 and President in July 1998. Mr. Walters was employed by the Company in August 1997 and was elected to the office of Vice President Commercial Printing Operations at that time. Prior to joining the Company, Mr. Walters was with Atlas/Soundolier, a division of American Trading and Production Company, for 8 years, most recently as Vice President of Manufacturing. Prior to that time, Mr. Walters was with the Automotive Division of United Technologies Corporation for 15 years, primarily in manufacturing and operations. Ronald M. Graham, Vice President Human Resources, age 53, was elected Vice President Human Resources in June 1998. Mr. Graham was employed by the Company in January 1998 as Director of Human Relations. Prior to joining the Company, Mr. Graham was with E. V. International, Inc. (formerly Mark IV Industries, Inc.) for 17 years as Corporate Vice President, Administration. Prior to that time, Mr. Graham was with Sheller-Globe (door div.) for 3 years as Corporate Director of Human Resources. Robert M. Halowec, Vice President Finance and Chief Financial Officer, age 46, was elected Vice President Finance and Chief Financial Officer in January 1999. Mr. Halowec was employed by the Company in January 1999 as Vice President Finance and Chief Financial Officer. Prior to joining the Company, Mr. Halowec was with Moore Corporation for 13 years, most recently as Financial Director of Moore's Cut Products Group in Nacogdoches, Texas. Harve Cathey, Secretary and Treasurer, age 62, was elected Secretary in October 1998 and Treasurer in July 1998. Mr. Cathey has been employed by the Company continuously since April 1969. Previously, Mr. Cathey served as Vice President-Finance and Secretary (from September 1983 to September 1996) and Treasurer (from June 1978 to December 1992). There is no family relationship among or between any executive officers of the registrant, nor any family relationship between any executive officers and directors. 6 PART II ------- Item 5. Market for the Registrant's Common Equity and Related - ------- ----------------------------------------------------- Shareholder Matters. -------------------- The Company's common stock is traded on the New York Stock Exchange. The following table sets forth for the periods indicated: the high and low closing sales prices and the common stock trading volume as reported by the New York Stock Exchange and dividends declared by the Company. Common Stock Trading Common Stock Volume Dividends Price Range (number of per share ----------- shares in of Common High Low Thousands) Stock ---- ---- ---------- ----- Fiscal Year Ended February 28, 2001 First Quarter $8.2500 $6.6875 1,284 $0.155 Second Quarter 8.5000 6.7500 1,461 0.155 Third Quarter 8.0000 6.5625 1,225 0.155 Fourth Quarter 8.4500 7.0000 1,496 0.155 Fiscal Year Ended February 29, 2000 First Quarter $9.0625 $7.8750 1,371 $0.155 Second Quarter 9.7500 8.3125 1,982 0.155 Third Quarter 9.5625 8.0000 1,495 0.155 Fourth Quarter 8.9375 7.2500 925 0.155 On April 16, 2001, the last sale price of the common stock was $7.99 per share and the number of shareholders of record was 1,507. 7 Item 6. Selected Financial Data. - ------- ------------------------ The information required by this item is incorporated herein by reference to page 14 of the Company's 2001 Annual Report to Shareholders which is attached as Exhibit (13) hereto. Item 7. Management's Discussion and Analysis of Financial - ------- ------------------------------------------------- Condition and Results of Operations. - ------------------------------------ The information required by this item is incorporated herein by reference to pages 15 through 17 of the Company's 2001 Annual Report to Shareholders which is attached as Exhibit (13) hereto. Item 7a. Quantitative and Qualitative Disclosure About Market - -------- ---------------------------------------------------- Risk. - ----- The information required by this item is incorporated by reference to pages 16 through 17 of the Company's 2001 Annual Report to Shareholders which is attached as Exhibit (13) hereto. Item 8. Financial Statements and Supplementary Data. - ------- -------------------------------------------- The information required by this item is incorporated herein by reference to pages 20 through 35 of the Company's 2001 Annual Report to Shareholders which is attached as Exhibit (13) hereto. Item 9. Changes in and Disagreements with Accountants on - ------- ------------------------------------------------ Accounting and Financial Disclosure. - ------------------------------------ Not applicable. 8 PART III -------- Item 10. Directors and Executive Officers of the Registrant. - -------- --------------------------------------------------- For information with respect to executive officers of the registrant, see "Executive Officers of the Registrant" at the end of Part I of this report. The information required by this item regarding Directors is incorporated by reference to pages 3 through 7 of the Company's Proxy Statement dated May 21, 2001. Item 11. Executive Compensation. - -------- ----------------------- The information required by this item is incorporated herein by reference to pages 6 through 13 of the Company's Proxy Statement dated May 21, 2001. Item 12. Security Ownership of Certain Beneficial Owners and - -------- --------------------------------------------------- Management. - ----------- The information required by this item is incorporated herein by reference to pages 2 through 3 of the Company's Proxy Statement dated May 21, 2001. Item 13. Certain Relationships and Related Transactions. - -------- ----------------------------------------------- There were no significant transactions between the Company and any directors or officers during the past fiscal year. 9 PART IV ------- Item 14. Exhibits, Financial Statement Schedule, and Reports on - -------- ------------------------------------------------------ Form 8-K. --------- (a) 1. (a) 2. Financial Statements and Financial Statement Schedule. See accompanying index to financial statements and financial statement schedule for a list of all financial statements and the financial statement schedule filed as part of this report (page S-1). 3. Exhibits. (i) Restated Articles of Incorporation as amended through June 23, 1983 with attached amendments dated June 20, 1985, July 31, 1985 and June 16, 1988 incorporated herein by reference to Exhibit 5 to the Registrant's Form 10-K Annual Report for the fiscal year ended February 28, 1993. (ii) Bylaws of the Registrant as amended through October 15, 1997 incorporated herein by reference to Exhibit 3(ii) to the Registrants Form 10-Q Quarterly Report for the quarter ended November 30, 1997. (13) Portions of 2001 Annual Report to Shareholders. (21) Subsidiaries of Registrant. (23) Independent Auditors' Consent. (b) Reports on Form 8-K: The Company filed a report on Form 8-K on June 19, 2000 (as amended by an Amendment on Form 8-K/A filed on August 9, 2000) regarding the acquisition of Northstar Computer Forms, Inc. pursuant to Item 2 and 7 of such Form. 10 UNDERTAKINGS WITH RESPECT TO REGISTRANT'S REGISTRATION STATEMENTS, FORM S-8 (NUMBERS: 2-81124, 333-58963, 333-44624, 333-38100) (1) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, forming a part of the referenced registration statement, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of 1934; and, where interim financial information required to be presented by Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or cause to be delivered, to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information. (2) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus to each employee to whom the prospectus is sent or given a copy of the registrant's annual report to shareholders for its last fiscal year, unless such employee otherwise has received a copy of such report, in which case the registrant shall state in the prospectus that it will promptly furnish, without charge, a copy of such report on written request of the employee. If the last fiscal year of the registrant has ended within 120 days prior to the use of the prospectus, the annual report of the registrant for the preceding fiscal year may be so delivered, but within such 120 day period the annual report for the last fiscal year will be furnished to each such employee. (3) The undersigned registrant hereby undertakes to transmit or cause to be transmitted to all employees participating in the plan who do not otherwise receive such material as shareholders of the registrant, at the time and in the manner such material is sent to its shareholders, copies of all reports, proxy statements and other communications distributed to its shareholders generally. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) ENNIS BUSINESS FORMS, INC. Date: May 25, 2001 BY: /s/ Keith S. Walters ----------------------------- Keith S. Walters, Chairman of the Board, Chief Executive Officer and President Date: May 25, 2001 BY: /s/ Robert M. Halowec ----------------------------- Robert M. Halowec Vice President - Finance and Chief Financial Officer Date: May 25, 2001 BY: /s/ Harve Cathey ----------------------------- Harve Cathey Secretary and Treasurer, Principal Accounting Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Date: May 25, 2001 BY: /s/ Keith S. Walters ------------------------------ Keith S. Walters, Director Date: May 25, 2001 BY: /s/ Harold W. Hartley ------------------------------ Harold W. Hartley, Director Date: May 25, 2001 BY: /s/ Robert L. Mitchell ------------------------------ Robert L. Mitchell, Director Date: May 25, 2001 BY: /s/ Thomas R. Price ------------------------------ Thomas R. Price, Director Date: May 25, 2001 BY: /s/ Kenneth G. Pritchett ------------------------------ Kenneth G. Pritchett, Director 12 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The following is a list of the financial statements and financial statement schedule which are included in this Form 10-K or which are incorporated herein by reference. The consolidated financial statements of the Company included in the Company's 2001 Annual Report to Shareholders are incorporated herein by reference in Item 8. With the exception of the pages listed in this index and pages listed in Items 1, 6, 7 and 8 incorporating certain portions of the Company's 2001 Annual Report to Shareholders, such 2001 Annual Report to Shareholders is not deemed to be filed as part of this Form 10-K. 2001 Annual Report to Form Share- 10-K holders ----- ------- Consolidated Financial Statements of the Company: Consolidated Balance Sheets - February 28 or 29, 2001 and 2000 22 Consolidated Statements of Earnings - years ended February 28 or 29, 2001, 2000 and 1999 20 Consolidated Statements of Cash Flows - years ended February 28 or 29, 2001, 2000 and 1999 21 Notes to Consolidated Financial Statements 23 - 34 Independent Auditors' Report 35 Independent Auditors' Report on Financial Statement Schedule S-2 Financial Statement Schedule for three years ended February 28 or 29, 2001, 2000 and 1999 II - Valuation and qualifying accounts S-3 All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statement or related notes. S-1 INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE The Board of Directors and Shareholders Ennis Business Forms, Inc.: Under date of April 12, 2001, we reported on the consolidated balance sheets of Ennis Business Forms, Inc. and subsidiaries as of February 28, 2001 and February 29, 2000, and the related consolidated statements of earnings and cash flows for each of the years in the three-year period ended February 28, 2001 which are included in the 2001 annual report to shareholders. These financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 2001. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule as listed in the accompanying index to financial statements and financial statement schedule on page S-1. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Dallas, Texas April 12, 2001 S-2 Schedule II ENNIS BUSINESS FORMS, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts Three Years Ended February 28, 2001 (In thousands)

Notes: (1) Principally Allowance from Acquisition of Northstar Computer Forms, Inc. (2) Principally collection of accounts previously charged off. (3) Charge-off of uncollectible receivables. S-3