Ennis, Inc. — FY2023 Form 10-K Summary
Reporting period: Fiscal year ended February 28, 2023; this is an annual report, not a standalone 2022 fourth-quarter report. Ennis manufactures and sells printed business products, primarily through independent U.S. distributors, and reports one operating segment.
Financial results and position
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $431.8 million | $400.0 million | +8.0% |
| Gross profit / margin | $131.1 million / 30.3% | $114.7 million / 28.7% | Margin +1.6 percentage points |
| Operating income / margin | $66.2 million / 15.3% | $43.6 million / 10.9% | +51.8% |
| Net earnings | $47.3 million | $29.0 million | +63.2% |
| Diluted EPS | $1.82 | $1.11 | +$0.71 |
| Operating cash flow | $46.8 million | $50.7 million | Down $3.9 million |
- Cash was $94.0 million at year-end, up from $85.6 million. Working capital was $155.4 million and the current ratio was 4.8:1.
- No long-term debt was outstanding; the revolving credit agreement expired in November 2021. A $0.6 million standby letter of credit was secured by cash collateral.
- Investing cash outflow was $11.5 million, including $8.8 million for School Photo Marketing (SPM) and $4.3 million in capital expenditures, partly offset by asset-sale proceeds. Financing cash outflow was $27.0 million, including $25.8 million of dividends.
- Gross margin improvement reflected pricing adjustments and operational efficiencies amid inflation in paper, supplies and labor. FY2023 results also included a $5.8 million gain from selling an unused manufacturing facility, within a total $5.9 million asset-disposal gain.
Changes, outlook and material items
- Sales growth included $3.3 million from recent acquisitions and price and volume increases; management said lower fourth-quarter volumes partly offset growth. The filing does not provide clear standalone fourth-quarter financial results.
- Operating income and earnings rose substantially, aided by improved gross margin, lower SG&A as a share of sales, and the facility-sale gain. Net earnings increased despite operating cash flow declining, principally amid working-capital movements and the asset-sale gain.
- Firm-order backlog was $46.7 million at February 28, 2023, versus $38.4 million a year earlier. SPM was acquired November 30, 2022, adding school-photo, yearbook and related services.
- No revenue or earnings guidance was provided. Management expects FY2024 capital expenditures of $3 million to $5 million, excluding potential acquisitions, and pension contributions of approximately $1 million to $3 million, subject to plan funding. It expects operating cash flow to cover operating and normal capital needs and said it expects to continue repurchases if the Board considers them in shareholders’ best interests.
- The quarterly dividend was $0.25 per share throughout FY2023 ($1.00 per share for the year). The company repurchased 64,082 shares for $1.1 million during FY2023; $23.9 million remained under its $40 million authorization.
- The pension plan was 99% funded on a projected-benefit-obligation basis and 105% on an accumulated-benefit-obligation basis. Ennis contributed $2.0 million in FY2023.
- A ransomware attack on November 30, 2022 briefly disrupted systems. The company reported no material expense or significant financial impact and said the related IT-control material weakness had been remediated by year-end; management cautioned that future attacks remain possible.
- In April 2023, a subsidiary was awarded $5.0 million in actual and punitive damages in litigation. The judgment was not included in the February 28, 2023 financial statements.
Key risks and investor verification points
- Structural decline in traditional printed forms from digital substitution, industry consolidation and intense price competition; verify whether newer products and acquisitions are offsetting attrition.
- Supplier concentration and input-cost exposure: one vendor supplied 50% of materials in FY2023, and paper, freight, labor and benefit costs may rise faster than pricing can recover them.
- Verify the sustainability of reported margin and earnings improvement excluding the $5.8 million facility-sale gain, and monitor whether reduced fourth-quarter volumes continued.
- Review cash conversion and working-capital trends, particularly receivables and inventory, as operating cash flow declined despite higher earnings.
- Assess the outcome and collectability of the $5.0 million post-year-end litigation award, and whether any resulting gain is recognized in a later period.
- Monitor cybersecurity controls following the remediated material weakness, pension funding and potential settlement charges, and the company’s reliance on uninsured bank deposits.