Acquisitions - The company acquired Eagle Graphics and Diamond Graphics on October 11, 2023, which generated approximately $8.7 million in combined sales in the last full year prior to acquisition [27]. - On June 2, 2023, Ennis acquired UMC Print, which reported approximately $16.1 million in sales for 2022, enhancing its commercial printing capabilities [28]. - The acquisition of Stylecraft Printing Company on May 23, 2023, added approximately $7.0 million in sales for the fiscal year ended December 31, 2022 [29]. - Ennis acquired School Photo Marketing assets on November 30, 2022, which had approximately $10 million in sales in the preceding twelve months [30]. - Acquisitions during the fiscal year constituted approximately 3.8% of total assets and 5.0% of total revenues as of February 29, 2024 [163]. - The company acquired Stylecraft, UMC, Eagle, and Diamond, which constituted approximately 3.8% of assets and 5% of net sales as of February 29, 2024 [197]. Financial Performance - Net sales for fiscal year 2024 were $420.1 million, a decrease of $11.7 million or 2.7% from $431.8 million in fiscal year 2023, primarily due to a $32.9 million decrease in volume demand, partially offset by a $21.2 million increase from recent acquisitions [126]. - Cost of goods sold decreased by $6.0 million or 2.0% from $300.8 million in fiscal year 2023 to $294.8 million in fiscal year 2024, resulting in a gross profit margin of 29.8% compared to 30.3% in the previous year [128]. - Selling, general and administrative expenses were $68.8 million in fiscal year 2024, a decrease of $2.0 million or 2.8% from $70.8 million in fiscal year 2023, maintaining a consistent percentage of sales at 16.4% [130]. - Income from operations decreased by $9.7 million to $56.5 million or 13.4% of net sales in fiscal year 2024, down from $66.2 million or 15.3% in fiscal year 2023 [133]. - Net earnings for fiscal year 2024 were $42.6 million, or $1.64 per diluted share, compared to $47.3 million, or $1.82 per diluted share in fiscal year 2023, impacted by decreased revenues [137]. - Cash provided by operating activities increased to $69.1 million in fiscal year 2024, up $22.3 million from $46.8 million in fiscal year 2023 [142]. - Working capital increased by approximately $12.2 million or 7.9% from $155.4 million at February 28, 2023, to $167.6 million at February 29, 2024, with a current ratio rising from 4.8 to 1.0 to 6.0 to 1.0 [140]. - Cash used in investing activities was $55.0 million in fiscal year 2024, compared to $11.5 million in fiscal year 2023, primarily due to net purchases of short-term investments and increased costs to acquire businesses [145]. - Total assets increased to $399,190,000 as of February 29, 2024, compared to $393,835,000 as of February 28, 2023, reflecting a growth of approximately 1.1% [209]. - Current assets rose to $201,382,000, up from $196,626,000, marking an increase of about 2.8% year-over-year [209]. - Cash decreased to $81,597,000 from $93,968,000, a decline of approximately 13.1% [209]. - Accounts receivable decreased to $47,209,000 from $53,507,000, representing a reduction of about 11.7% [209]. - Total liabilities decreased to $49,349,000 from $62,403,000, a significant decline of approximately 20.9% [212]. - Shareholders' equity increased to $349,841,000 from $331,432,000, reflecting a growth of about 5.5% [212]. - Retained earnings rose to $236,196,000, up from $219,459,000, indicating an increase of approximately 7.6% [212]. Operational Challenges - The company faces intense competition, particularly from office supply superstores, which may require price reductions or incentives to maintain market share [63][66]. - Digital technologies are expected to continue eroding demand for printed business documents, necessitating a shift towards custom and full-color products [54][56]. - Economic downturns may lead to increased customer bankruptcies, heightening the risk of non-payment on sales [70]. - Transportation costs are significant, and increases in freight expenses could adversely affect operational results [71]. - Environmental regulations may impose additional liabilities or obligations that could impact future operating results [67]. - Labor costs are increasing due to economic factors, with approximately 8% of employees represented by labor unions, which could lead to potential labor disputes and increased operational costs [64][65]. - The company relies on a limited number of suppliers for raw materials, with a significant portion of paper products sourced from one major supplier, which poses risks related to price fluctuations and supply disruptions [57][58]. - The company faces challenges including product obsolescence and increased pricing due to supply chain imbalances, impacting traditional business forms and documents [110]. Employee and Labor Relations - Ennis employs 1,941 individuals, with 156 represented by labor unions under collective bargaining agreements [45]. - Approximately 12% of employees are covered by a noncontributory defined benefit retirement plan, which may be impacted by fluctuations in market values and interest rates [59]. - Employee health benefits costs are significant and have risen in recent years, potentially impacting financial results and cash flow [77]. - The company has various cost control measures in place to manage rising healthcare costs, which are expected to continue impacting financial results [77]. Environmental Commitment - The company recycled 20.9 million pounds of paper and 1.7 million pounds of cardboard and cores in 2024, demonstrating its commitment to environmental stewardship [38]. Cybersecurity - The company experienced a ransomware attack on November 30, 2022, which resulted in a brief disruption but incurred no material expenses and is not expected to have a significant financial impact [76]. - The company has not identified any material cybersecurity risks affecting business operations or financial conditions during the fiscal year ended February 29, 2024 [82]. - The company has implemented a cybersecurity risk management program based on best practices and guidelines from the National Institute of Standards and Technology [80]. Shareholder Returns - A dividend of $0.25 per share was paid in each quarter of fiscal years 2023 and 2024, reflecting the company's commitment to returning value to shareholders [98]. - The company has authorized a stock repurchase program of up to $60.0 million, with $23.4 million remaining available for repurchases as of February 29, 2024 [101]. - The cumulative total shareholder return for Ennis, Inc. from February 28, 2019, to February 29, 2024, shows a performance of $121.81 on an initial $100 investment, compared to $199.09 for the S&P 500 and $139.56 for the Russell 2000 [103][104]. Pension and Retirement Plans - The Pension Plan was 100% funded on a projected benefit obligation basis and 107% on an accumulated benefit obligation basis as of February 29, 2024 [59]. - The discount rate for pension obligations increased to 5.15% in fiscal year 2024 from 5.00% in fiscal year 2023, impacting the pension plan's funded status [118]. - The company anticipates future contributions to its Pension Plan will be between $1.0 million and $3.0 million per year, depending on the plan's funding status [150]. - Estimated pension benefit payments to participants total $38.7 million, with $3.2 million due in less than one year [154].
Ennis(EBF) - 2024 Q4 - Annual Report