Ennis(EBF) - 2021 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION Item 1. Financial Statements The company's financial position weakened slightly with decreased year-over-year sales and net earnings Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Items | Aug 31, 2020 | Feb 29, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $83,906 | $68,258 | | Accounts receivable, net | $33,523 | $43,086 | | Total current assets | $155,186 | $149,884 | | Goodwill | $82,527 | $82,527 | | Total assets | $360,201 | $365,699 | | Liabilities & Equity | | | | Total current liabilities | $34,608 | $37,969 | | Total liabilities | $65,889 | $71,370 | | Total shareholders' equity | $294,312 | $294,329 | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Aug 31, 2020 | Three Months Ended Aug 31, 2019 | Six Months Ended Aug 31, 2020 | Six Months Ended Aug 31, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $86,612 | $108,816 | $175,608 | $216,849 | | Gross profit margin | $25,155 | $32,458 | $49,062 | $65,154 | | Income from operations | $8,920 | $12,814 | $14,816 | $25,807 | | Net earnings | $6,421 | $9,533 | $10,606 | $19,165 | | Diluted EPS | $0.25 | $0.37 | $0.41 | $0.74 | Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended Aug 31, 2020 | Six Months Ended Aug 31, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,154 | $27,718 | | Net cash used in investing activities | ($353) | ($20,264) | | Net cash used in financing activities | ($12,153) | ($43,396) | | Net change in cash | $15,648 | ($35,942) | | Cash at end of period | $83,906 | $52,500 | Notes to Unaudited Consolidated Financial Statements Key notes detail the pandemic's impact, recent acquisitions, credit facility status, and stock repurchase activity - The COVID-19 pandemic led to reduced demand, resulting in the furlough of 320 employees and facility closures[103] - The company acquired The Flesh Company for approximately $9.9 million and Integrated Print & Graphics for $8.9 million[51][53] - As of August 31, 2020, the company had no outstanding long-term debt and $99.3 million in available borrowing capacity[78][79] - The company repurchased 26,472 shares for $0.42 million, with $10.7 million remaining available under the repurchase program[81][192] - On September 18, 2020, the Board declared a quarterly dividend of $0.225 per share[105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the pandemic's impact on sales, improved margins from cost controls, and strong liquidity Results of Operations Comparison (Three Months Ended Aug 31) | Metric | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $86.6M | $108.8M | ($22.2M) | (20.4%) | | Gross Profit Margin | 29.0% | 29.8% | (0.8 pts) | - | | Income from Operations | $8.9M | $12.8M | ($3.9M) | (30.5%) | | Net Earnings | $6.4M | $9.5M | ($3.1M) | (32.6%) | - The company's liquidity position is strong, with $83.9 million in cash and $99.3 million available under its credit facility[129][168] - Key business challenges include the COVID-19 pandemic, product portfolio transformation, and intense price competition[127][136][137] - Cash flow from operations remained strong at $28.2 million for the six-month period, slightly up from $27.7 million[169] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk is limited to interest rates on its credit facility, which currently has no outstanding debt - The company is exposed to interest rate risk on its variable-rate Credit Facility, but had no outstanding debt as of August 31, 2020[181] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 31, 2020[183] - There have been no material changes in internal control over financial reporting during the quarter[187] PART II: OTHER INFORMATION Item 1. Legal Proceedings The company is not a party to any material legal proceedings outside of ordinary business litigation - There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business[189] Item 1A. Risk Factors No material changes to the company's previously disclosed risk factors were reported during the quarter - No material changes in Risk Factors were reported from previous filings[190] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company continued its stock repurchase program, leaving $10.7 million available for future buybacks - The Board authorized a stock repurchase program of up to $40.0 million, with $10.7 million remaining available[191][192] Issuer Purchases of Equity Securities (Six Months Ended Aug 31, 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | May 1, 2020 - May 31, 2020 | 26,472 | $16.00 | | Total | 26,472 | $16.00 | Item 5. Other Information The company's CFO retired for personal reasons and an interim CFO was appointed from within the company - On September 28, 2020, CFO and Treasurer Richard L. Travis, Jr. retired for personal reasons[194] - Vera Burnett, the company's accounting manager since 1997, was appointed as Interim CFO and Treasurer[197][198] Item 6. Exhibits This section lists standard filed exhibits, including corporate documents, certifications, and XBRL data files - The report includes standard exhibits such as corporate governance documents, CEO/CFO certifications, and XBRL data files[200] Signatures Signatures The report was duly signed and authorized by the CEO and the newly appointed Interim CFO on October 7, 2020 - The report was signed on October 7, 2020, by Keith S. Walters (CEO) and Vera Burnett (Interim CFO)[204]