15
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended NOVEMBER 30, 1997
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 (I. R. S.
Employer
incorporation or organization) Identification
No.)
107 N. Sherman Street, Ennis, TX 75119
(Address of principal executive offices) (Zip Code)
(972) 872-3100
(Registrant's telephone number, including area code)
No Change
(Former name, former address and former fiscal year, if changed
since last report.)
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 prior that the
registrant was required to file such report), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as the latest practicable date.
Class Outstanding at November 30, 1997
Common stock, par value $2.50 per share 16,437,685
ENNIS BUSINESS FORMS, INC.
INDEX
Part I. Financial Information
Condensed Consolidated Balance Sheets --
November 30, 1997 and February 28, 1997 2
Condensed Consolidated Statements of Earnings --
Three and Nine Months Ended November 30,
1997 and 1996 3
Condensed Consolidated Statements of Cash
Flows --Nine Months Ended November 30,
1997 and 1996 4
Notes to Condensed Consolidated Financial
Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II. Other Information 7
PART I. FINANCIAL INFORMATION
ENNIS BUSINESS FORMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
November 30, February 28,
1997 1997
Assets
Current assets
Cash and equivalents $19,758 18,494
Accounts receivable, net 17,965 18,600
Inventories 7,423 10,500
Other current assets 5,542 5,033
Total current assets 50,688 52,627
Property, plant and equipment, net 37,653 33,560
Cost of purchased businesses in excess of amounts
allocated to tangible net assets 4,620 5,942
Other assets and deferred charges 1,878 2,828
Total assets $94,839 94,957
Liabilities and Stockholders' Equity
Current liabilities
Current installments of long-term debt $ 180 85
Accounts payable 5,544 5,234
Accrued expenses 7,046 4,988
Federal and state income taxes payable 730 --
Total current liabilities 13,500 10,307
Long-term debt, less current installments 231 195
Deferred credits, principally Federal income taxes 1,029 2,869
Stockholders' equity
Common stock, at par value 53,125 53,125
Additional capital 1,040 1,040
Retained earnings 117,795 119,318
Cumulative foreign currency translation adjustments (53) (76)
171,907 173,407
Less:
Treasury stock 91,828 91,821
Total stockholders' equity 80,079 81,586
Total liabilities and stockholders' equity $94,839 94,957
See accompanying notes to condensed consolidated financial statements.
ENNIS BUSINESS FORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
November 30, November 30,
1997 1996 1997 1996
Net sales $ 40,311 40,210 $116,516 115,849
Costs and expenses:
Cost of sales 27,822 27,986 81,404 78,559
Selling, general and
administrative expenses 7,770 7,488 22,981 20,867
Loss on disposal of Heath
Printers, Inc. 3,067 -- 3,067 --
Interest expense 17 15 54 61
38,676 35,489 107,506 99,487
Earnings from operations 1,635 4,721 9,010 16,362
Investment and other income 301 290 852 1,168
Earnings before income taxes 1,936 5,011 9,862 17,530
Provision for income taxes 805 1,894 3,741 6,596
Net earnings $ 1,131 3,117 $ 6,121 10,934
Weighted average number of common
shares outstanding 16,437,828 16,438,636 16,438,071 16,438,919
Per share amounts:
Net earnings $ .07 .19 $ .37 .67
Cash dividends $ .155 .155 $.465 .46
See accompanying notes to condensed consolidated financial statements.
ENNIS BUSINESS FORMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
November 30,
1997 1996
Cash flows from operating activities:
Net earnings $ 6,121 10,934
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,685 3,638
Loss on disposal of Heath Printers, Inc. 3,067 --
Changes in assets and liabilities 5,911 (3,773)
Other (2,105) (848)
Net cash provided by operating activities 17,679 9,951
Cash flows from investing activities:
Capital expenditures (8,916) (8,887)
Purchases of operating assets -- (7,342)
Other 21 11
Net cash used in investing activities (8,895) (16,218)
Cash flows from financing activities:
Purchase of treasury stock (7) (11)
Proceeds from capital lease financing 289 --
Reduction of long-term debt (158) (80)
Dividends (7,644) (7,562)
Net cash used in financing activities (7,520) (7,653)
Net changes in cash and equivalents 1,264 (13,920)
Cash and equivalents at beginning of period 18,494 38,606
Cash and equivalents at end of period $ 19,758 24,686
See accompanying notes to condensed consolidated financial statements.
ENNIS BUSINESS FORMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The information included herein reflects all adjustments (none of which
were other than normal recurring accruals) which, in the opinion of the
Company, are necessary to a fair statement of the financial position as
of November 30, 1997 and February 28, 1997, and the results of
operations and cash flows for the three months and nine months ended
November 30, 1997 and 1996.
2. Earnings per common share amounts are based on the weighted average
number of shares outstanding during the period. Common stock
equivalents (options see Note 3) have not been included in determining
earnings per common share amounts because their inclusion, either for
purposes of computing primary or fully diluted earnings per share,
would not produce sufficient incremental shares (using the treasury
stock method) to reduce the per share amounts shown.
3. As of November 30, 1997, the Company has reserved 378,958 shares of
common stock under incentive stock options plans.
4. The Company uses the Last-In, First-Out (LIFO) method of pricing the
raw material content of most of its business forms inventories, and the
First-In, First-Out (FIFO) method is used to value the remainder. The
following table summarizes the components of inventory at the different
stages of production (in thousands of dollars):
November 30, February 28,
1997 1997
Raw material $ 4,392 6,394
Work-in-process 888 1,127
Finished goods 2,143 2,979
$ 7,423 10,500
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At November 30, 1997, the Company's financial position continues to be
strong. Working capital decreased from $42,320,000 at February 28, 1997 to
$37,188,000 at November 30, 1997. The decrease is due to lower
inventories, increased accrued expenses and capital expenditures. The
Company's cash flow from operations continues to be adequate to sustain
operations, meet debt repayment requirements and fund capital additions.
No liquidity problems are anticipated.
Results of Operations
For the three months and nine months ended November 30, 1997, net
sales increased .3% and .6% respectively from the corresponding periods of
last year. The gross profit margin increased 2.2% and decreased 5.8% for
the three months and nine months ended November 30, 1997 from the
corresponding periods of last year. The gross profit margin increased for
the current quarter from the same period in the prior year due to higher
sales prices. Selling, general and administrative expenses for the three
and nine months ended November 30, 1997 increased 3.8% and 10.1%,
respectively, compared to the corresponding periods in the prior year. The
increases are primarily due to higher marketing and promotion costs,
increased customer telephone call activity, increased personnel costs and
expanded information and communications systems, all associated with the
ongoing efforts to grow sales. Investment and other income for the periods
ended November 30, 1997 compared to the same periods in the prior year
increased 3.8% for the quarter and decreased 27.0% for the nine months due
to higher funds available for investment early in the prior year. Net
earnings declined 63.7% and 44%, respectively, for the three months and
nine months ended November 30, 1997 from the corresponding periods of last
year. Earnings per share declined $.12 and $.30, respectively, for the
three months and nine months ended November 30, 1997 from the corresponding
periods of last year. The per share earnings were based upon three months
and nine months weighted average shares outstanding of 16,437,828 and
16,438,071, respectively at November 30, 1997, and 16,438,636 and
16,438,919 weighted average shares outstanding at November 30, 1996. The
$.12 per share decline in earnings from the quarter ended November 30, 1997
compared to the corresponding period in the prior year was due to a
$1,994,000 non cash charge resulting from the Company's decision to sell
its commercial printing subsidiary, Heath Printers, Inc. The charge
represents what the Company estimates it can reasonably expect (net of
income tax benefit) to realize from a sale as compared to its carrying
value. Excluding the special charge from Heath, quarterly earnings
increased 17.9% from the immediately preceding quarter and increased
fractionally from the corresponding period in the prior year. The increase
in earnings from the second quarter to the third quarter (excluding the
special charge) was primarily the result of higher quarter to quarter
sales. Aside from cotton tags (which have been in decline for several
years), we continue to expect 3% to 4% unit sales growth in our traditional
products. The effective rate of Federal and state income tax expense is
substantially the same each year.
Management's results of operations contains forward-looking statements
that reflect the Company's current view with respect to future revenues and
earnings. These statements are subject to numerous uncertainties,
including (but not limited to) the rate at which the business forms market
is contracting, the application of technology to the production of
business forms, demand for the Company's products in the context of a
contracting market, variability in the prices of paper and other raw
materials, and competitive conditions in the business forms market.
Because of such uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of January
9, 1998.
PART II. OTHER INFORMATION
Item 6. Exhibits
Exhibit:
(3) (ii) Amended Bylaws
Exhibit:
(27) Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ENNIS BUSINESS FORMS, INC.
Date January 9, 1998 /s/Victor V. DiTommaso
Victor V. DiTommaso
Vice President - Finance, Secretary & Treasurer
Principal Financial and Accounting Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ENNIS BUSINESS FORMS, INC.
Date January 9, 1998
Victor V. DiTommaso
Vice President - Finance, Secretary & Treasurer
Principal Financial and Accounting Officer