Company Operations and Acquisitions - Ennis, Inc. operates 56 manufacturing plants across 20 states in the U.S., primarily producing custom and semi-custom printed products, with approximately 94% of products tailored to customer specifications [18]. - The company acquired Printing Technologies, Inc. on June 26, 2024, which generated approximately $12.5 million in sales in the year prior to the acquisition, enhancing production capabilities [24]. - On October 11, 2023, Ennis acquired Eagle Graphics, Inc. and Diamond Graphics, Inc., which together generated approximately $8.7 million in sales in the previous year, strengthening production in the Northeast [25]. - The acquisition of UMC Print on June 2, 2023, added approximately $16.1 million in sales for 2022, expanding the distributor customer base and product offerings [26]. Financial Performance - Net sales for fiscal year 2025 were $394.6 million, a decrease of $25.5 million or -6.1% from $420.1 million in fiscal year 2024, primarily due to a $38.7 million decrease in volume demand [126]. - Cost of goods sold decreased by $17.4 million or -5.9% from $294.8 million in fiscal year 2024 to $277.3 million in fiscal year 2025, resulting in a gross profit margin of 29.7% [128]. - Selling, general and administrative expenses for fiscal year 2025 were $65.4 million, a decrease of $3.5 million or -5.0% from $68.8 million in fiscal year 2024 [130]. - Income from operations decreased by $4.5 million to $52.0 million or 13.2% of net sales in fiscal year 2025, compared to $56.5 million or 13.4% in fiscal year 2024 [133]. - Net earnings for fiscal year 2025 were $40.2 million, or $1.54 per diluted share, down from $42.6 million or $1.64 per diluted share in fiscal year 2024 [137]. Employee and Labor Relations - The company employs 1,856 individuals, with 157 represented by labor unions, maintaining a good relationship with employees and unions [42]. - Employee health benefits costs are significant and have risen, impacting financial results and cash flow [76]. - Labor shortages and rising labor-related costs could adversely impact the company's earnings [62]. Environmental and Sustainability Efforts - Ennis recycled 21.1 million pounds of paper and 1.1 million pounds of cardboard in fiscal year 2025, demonstrating commitment to environmental stewardship [35]. - The company’s primary paper supplier is certified by SFI, FSC, and PEFC, ensuring sustainable sourcing of raw materials [38]. Risks and Challenges - The company faces risks from global and local market conditions, which can adversely affect sales, margins, and net income [49]. - The company has a significant reliance on a limited number of suppliers for raw materials, which could impact operations if disruptions occur [54]. - The prices for paper and raw materials have been volatile, with significant fluctuations potentially impacting operating results [55]. - The company is monitoring changes in U.S. tariff and trade policies, which could lead to higher costs and impact demand from customers [65]. - The company is exposed to the risk of non-payment by customers, which could materially affect results of operations [68]. Cybersecurity and Technology - The company experienced a ransomware attack on November 30, 2022, which was eliminated, and systems were restored [74]. - The company has implemented additional security measures, including multifactor authentication and a robust firewall, to enhance network security [75]. - The company views cybersecurity as a shared responsibility and conducts annual risk assessments and penetration testing to maintain a robust cybersecurity program [80]. - The company has not identified any material risks from cybersecurity threats that have affected business operations or financial conditions during the fiscal year ended February 28, 2025 [81]. Shareholder Returns and Stock Performance - The company's common stock price fluctuated between $18.88 and $25.75 during the fiscal year ended February 28, 2025, with a trading volume of 7,439 thousand shares in the first quarter [98]. - A special dividend of $2.50 per share was paid in addition to the ordinary dividend of $0.25 per share during the third quarter of fiscal year 2025 [99]. - The company has authorized a stock repurchase program of up to $60.0 million, with $21.5 million remaining as of February 28, 2025 [101]. - Since the program's inception in October 2008, the company has repurchased 2,334,344 shares at an average price of $16.47 per share, with 91,883 shares repurchased in fiscal year 2025 at an average price of $19.79 [101]. Pension and Retirement Plans - As of February 28, 2025, the company's Pension Plan was 103% funded on a projected benefit obligation basis and 109% on an accumulated benefit obligation basis [57]. - Approximately 12% of the company's employees are covered by a noncontributory defined benefit retirement plan [57]. - The expected rate of return on pension plan assets was 5.50% as of February 28, 2025, down from 6.00% in the previous year [117]. - The discount rate for pension obligations was 5.15% for fiscal years 2024 and 2025, with a 10-basis point change impacting pension liability by approximately $0.5 million [118]. Inventory and Capital Expenditures - The allowance for excess and obsolete inventory was $1.8 million for fiscal year 2025, up from $1.7 million in fiscal year 2024 [124]. - The company intends to build a surplus of inventory as a buffer until transitioning to other sources of carbonless paper [150]. - The company anticipates capital expenditures for fiscal year 2025 to be between $4.0 million and $7.0 million, funded through existing cash flows [151]. Legal Matters - The company is involved in litigation matters but does not believe any current matter will materially affect its consolidated financial position or results of operations [93]. - The company has accrued a liability reserve of approximately $0.4 million related to a lawsuit concerning the lease of a facility [95].
Ennis(EBF) - 2025 Q4 - Annual Report