ENNIS, INC. Cautionary Note Regarding Forward-Looking Statements
The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read together with the unaudited consolidated financial statements and related notes ofEnnis, Inc. (collectively with its subsidiaries, the "Company," "Registrant," "Ennis," or "we," "us," or "our"), included in Part 1, Item 1 of this report, and with the audited consolidated financial statements and the related notes of the Company included in our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2022 . All of the statements in this report, other than historical facts, are forward-looking statements, including, without limitation, the statements made in this "Management's Discussion and Analysis of Financial Condition and Results of Operations." As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The words "could," "should," "feel," "anticipate," "aim," "preliminary," "expect," "believe," "estimate," "intend," "intent," "plan," "will," "foresee," "project," "forecast," or the negative thereof or variations thereon, and similar expressions identify forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements. These statements reflect the current views and assumptions of management with respect to future events. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material. We believe these forward-looking statements are based upon reasonable assumptions. All such statements involve risks and uncertainties, and as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including but not limited to: general economic, business and labor conditions and the potential impact on our operations; our ability to implement our strategic initiatives and control our operational costs; dependence on a limited number of key suppliers; our ability to recover the rising cost of raw materials and other costs (including energy, freight, labor and benefit costs) in markets that are highly price competitive and volatile; uninsured losses, including those from natural disasters, catastrophes, pandemics, theft, sabotage, or cyber attacks; the impact of the COVID-19 pandemic or future pandemics on theU.S. and local economies, our business operations, our workforce, our supply chain and our customer base; our ability to timely or adequately respond to technological changes in the industry; the impact of the internet and other electronic media on the demand for forms and printed materials; the impact of foreign competition, tariffs, trade regulations and import restrictions; customer credit risk; competitors' pricing strategies; a decline in business volume and profitability could result in an impairment in our reported goodwill negatively impacting our operational results; our ability to retain key management personnel; our ability to identify, manage or integrate acquisitions; the impact of a data-breach of sensitive information, ransomware attack or other cyber incident on the Company; and changes in government regulations including measures intended to minimize the impact of COVID-19. In addition to the factors indicated above, you should carefully consider the risks described in and incorporated by reference herein and in the risk factors in our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2022 before making an investment in our common stock.
Overview
Ennis, Inc. (formerlyEnnis Business Forms, Inc. ) (collectively with its subsidiaries, "the "Company," "Registrant," Ennis," or "we," "us," or "our") was organized under the laws ofTexas in 1909. We and our subsidiaries print and manufacture a broad line of business forms and other business products. We distribute business products and forms throughoutthe United States primarily through independent distributors. This distributor channel encompasses independent print distributors, commercial printers, direct mail, fulfillment companies, payroll and accounts payable software companies, and advertising agencies, among others. We also sell products to many of our competitors to satisfy their customers' needs.
For a discussion regarding the impact of the ongoing COVID-19 pandemic on our business, please see Business Challenges-COVID-19 Pandemic and Results of Operations, below.
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--------------------------------------------------------------------------------ENNIS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE PERIOD ENDEDNOVEMBER 30, 2022 Business Overview
Our management believes we are the largest provider of business forms,
pressure-seal forms, labels, tags, envelopes, and presentation folders to
independent distributors in
We are in the business of manufacturing, designing, and selling business forms and other printed business products primarily to distributors located inthe United States . We operate 55 manufacturing plants throughoutthe United States in 20 strategically located states as one reportable segment. Approximately 96% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts, and quantities on an individual job basis, depending upon the customers' specifications. The products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, 360º Custom LabelsSM, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad ConceptsSM, FormSource LimitedSM, Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Forms ManufacturersSM, Mutual Graphics®, TRI-C Business FormsSM, Major Business SystemsSM, Independent PrintingSM, Hoosier Data Forms®, Hayes Graphics®, Wright Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM, Impressions DirectSM and AmeriPrintSM; We also sell the Adams McClure® brand (which provides Point of Purchase advertising); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & LabelSM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & LabelSM, Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents); InfosealSM and PrintXcel® (which provide custom and stock pressure seal documents). School Photo Marketing is a one-stop shop for over 1,300 school portrait photographers and professional photo labs nationwide, providing them with a complete array of products and services that reach over 15 million families and 30,000 schools, primarily in the K-8 market. We sell predominantly through independent distributors, as well as to many of our competitors.Northstar Computer Forms, Inc. , one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user).Adams McClure, LP , a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies. The printing industry generally sells its products either predominantly to end users, a market dominated by a few large manufacturers such asR.R. Donnelley and Sons ,Staples, Inc. ,Standard Register Co. (a subsidiary ofTaylor Corporation ), and Cenveo, Inc., or, like the Company, through a variety of independent distributors and distributor groups. While it is not possible, because of the lack of adequate public statistical information, to determine the Company's share of the total business products market, management believes the Company is the largest producer of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders inthe United States distributing primarily through independent distributors. There are a number of competitors that operate in this segment, ranging in size from single employee-owned operations to multi-plant organizations. We believe our strategic locations and buying power permit us to compete on a favorable basis within the distributor market on competitive factors, such as service, quality, and price. Distribution of business forms and other business products throughoutthe United States is primarily done through independent distributors, including business forms distributors, resellers, direct mail, commercial printers, payroll and accounts payable software companies, and advertising agencies. Raw materials principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for business products purchased primarily from one major supplier at favorable prices based on the volume of business.
Business products usage in the printing industry is generally not seasonal. General economic conditions and contraction of the traditional business forms industry are the predominant factors in quarterly volume fluctuations.
Recent Acquisitions
OnJune 1, 2021 , we acquired the assets and business of AmeriPrint inHarvard, Illinois . The acquisition of AmeriPrint, which prior to the acquisition generated approximately$6.5 million in sales for its fiscal year endedDecember 31, 2020 , brings added capabilities and expertise to our expanding product offering including barcoding and variable imaging. 20 --------------------------------------------------------------------------------
ENNIS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE PERIOD ENDEDNOVEMBER 30, 2022
On
Our Business Challenges
Our industry is currently experiencing consolidation of traditional supply channels, product obsolescence, paper supplier capacity adjustments, and increased pricing and potential supply allocations due to demand/supply curve imbalance. Technology advances have made electronic distribution of documents, internet hosting, digital printing and print-on-demand valid, cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to our competitors. We face highly competitive conditions throughout our supply chain in a price-competitive print industry. The challenges of our business include the following: COVID-19 Pandemic - The global spread of the novel strain of COVID-19 has significantly impacted health and economic conditions throughoutthe United States and the world, including the markets in which we operate. Beginning inMarch 2020 in response to the sales impact of the COVID-19 pandemic, we made modifications to our cost structure by reducing employee cost, ceasing operations at an under-utilized facility, as well as exiting two facilities with expiring leases and moving production to our other facilities. The Company saw economic improvement during fiscal year endedFebruary 28, 2022 and we continue to see strong demand for our product. Although theU.S. economy has gained in recovery, it continues to be significantly impacted by supply chain disruptions, labor shortages, and shifting demand. There continues to be significant uncertainties associated with the COVID-19 pandemic. The full extent of the impact of the COVID-19 pandemic on the Company's operational and financial performance is currently uncertain and will depend on many factors outside the Company's control discussed under the caption, "Risk Factors", in Item 1A of our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2022 . For further information, please see "Cautionary Note Regarding Forward-Looking Statements," above and "Risk Factors" contained within our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2022 . We will continue to monitor incoming order volume as well as rising raw material and other input costs so that we can proactively adjust our pricing and costs accordingly. Transformation of our portfolio of products - While traditional business documents are essential in order to conduct business, many are being replaced through the use of cheaper paper grades or imported paper, or devalued with advances in digital technologies, causing steady declines in demand for a portion of our current product line. In addition, the impact of COVID-19 on the speed of this transformation is unknown, but it is expected to accelerate the decline for some of our products. Transforming our product offerings in order to continue to provide innovative, valuable solutions through lower labor and fixed charges to our customers on a proactive basis will require us to make investments in new and existing technology and to develop key strategic business relationships, such as print-on-demand services and product offerings that assist customers in their transition to digital business environments. In addition, we will continue to look for new market opportunities and niches through acquisitions, such as the addition of our envelope offerings, tag offerings, folder offerings, healthcare wristbands, specialty packaging, direct mail, pressure seal products, secure document solutions, innovative in-mold label offerings and long-run integrated products with high color web printing, which provide us with an opportunity for growth and differentiate us from our competition. The ability to make investments in new and existing technology and/or to acquire new market opportunities through acquisitions is dependent on the Company's liquidity and operational results. While currently the pandemic has not materially impacted our liquidity and it is not currently expected to, a protracted delay or reversal in the economy recovering could have a negative impact on our continued ability to make the aforementioned investments or to consummate acquisitions. Production capacity and price competition within our industry - Changes in the value of theU.S. dollar can have a significant impact on the pricing and supply of paper. The weakening of theU.S. dollar will usually result in the dissipation of any pricing advantage that foreign imports have over domestic suppliers, which typically results in lower levels of imported papers and an increase in domestic exports. With increased pricing power, domestic paper producers can better control the supply of paper by eliminating capacity or changing the products produced on their large paper machines. The strengthening of theU.S. dollar usually has the opposite effect: more cheap imported paper; less domestic exports; and lower pricing power in the hands of domestic paper producers. Domestic paper suppliers typically seek to balance supply and demand, including by (if possible) taking capacity out of the market, whether by taking production off-line or switching production to alternative paper products. Generally, if mills are running at high capacity, suppliers are able to raise prices. As the economy has improved, demand has increased for coated and uncoated freesheet papers which has reduced the excess inventory in the market. It is unclear whether this is a temporary situation or if conditions could stretch for a more extended amount of time. Regardless of these factors, many of which are cyclical, we continue to believe paper pricing will remain in a range which will not 21 --------------------------------------------------------------------------------
ENNIS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE PERIOD ENDEDNOVEMBER 30, 2022 unfavorably impact our margins. Additionally, the possibility of paper shortages in the market is not a major concern due to our primary material supplier's commitment to the Company. Consistent with our historical practice, we intend to continue to focus on effectively managing and controlling our product costs through the use of forecasting, production and costing models, as well as working closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational results. In addition, we will continue to look for ways to reduce and leverage our fixed costs. Continued consolidation of our customers - Our customers are distributors, many of which are consolidating or are being acquired by competitors. We continue to maintain a majority of the business we have had with our customers historically, but it is possible that these consolidations and acquisitions, which we expect to continue in the future, ultimately will impact our margins and sales.
Critical Accounting Policies and Estimates
In preparing our condensed consolidated financial statements, we are required to make estimates and assumptions that affect the disclosures and reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis, including those related to allowance for doubtful receivables, inventory valuations, property, plant and equipment, intangible assets, pension plan obligations, accrued liabilities and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. Our Annual Report on Form 10-K for the year endedFebruary 28, 2022 , includes a description of certain critical accounting estimates, including those with respect to the pension plan, goodwill and other intangible assets, revenue recognition, inventories and income taxes, which we believe are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. There have been no material changes to the critical accounting policies, significant judgements and estimates described in our Annual Report on Form 10-K for the year endedFebruary 28, 2022 .
Recent Accounting Pronouncements
There are no recent accounting pronouncements that are anticipated to have a material impact on our consolidated financial statements.
Results of Operations
The following discussion provides information which we believe is relevant to understanding our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto, which are incorporated herein by reference. The operating results of the Company for the three and nine months endedNovember 30, 2022 and the comparative period for 2021 are set forth in the unaudited consolidated financial information included in the tables below.
Consolidated Summary
Unaudited Consolidated Statements of Three Months Ended November 30, Nine Months Ended November 30, Operations - Data (in thousands) 2022 2021 2022 2021 Net sales$ 110,245 100.0 %$ 102,968 100.0 %$ 329,145 100.0 %$ 300,349 100.0 % Cost of goods sold 76,768 69.6 73,768 71.6 226,445 68.8 213,062 70.9 Gross profit margin 33,477 30.4 29,200
28.4 102,700 31.2 87,287 29.1 Selling, general and administrative 17,292 15.7 17,513
17.0 52,916 16.1 54,523 18.2 (Gain) loss from disposal of assets
15 - 1 - 15 - (275 ) (0.1 )
Income from operations 16,170 14.7 11,686 11.3 49,769 15.1 33,039 11.0
Other expense (496 ) (0.5 ) (881 ) (0.8 ) (1,010 ) (0.3 ) (1,143 ) (0.4 )
Earnings before income taxes 15,674 14.2 10,805 10.5 48,759 14.8 31,896 10.6
Provision for income taxes 4,388 4.0 3,242 3.1 13,652 4.1 9,569 3.2
Net earnings $ 11,286 10.2 % $ 7,563 7.4 % $ 35,107 10.7 % $ 22,327 7.4 %
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ENNIS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE PERIOD ENDEDNOVEMBER 30, 2022
Three months ended
Net Sales . Our net sales were$110.2 million for the quarter endedNovember 30, 2022 , compared to$103.0 million for the same quarter in the prior year, an increase of$7.2 million , or 7.0%. Our net sales increased on a year-over-year basis due to continued strong customer demand for our product and increased pricing to cover inflationary cost. Our net sales decreased slightly$(1.0) million or -0.9% on a sequential quarter basis, from$111.2 million for the quarter endedAugust 31, 2022 to$110.2 million for the current quarter due to lower sales volumes. Cost of Goods Sold and Gross Profit Margin. Our cost of goods sold increased$3.0 million , or 4.1%, from$73.8 million for the three months endedNovember 30, 2021 to$76.8 million for the three months endedNovember 30, 2022 . Our gross profit was$33.5 million for the quarter endedNovember 30, 2022 compared to$29.2 million for the same quarter in the prior year. We made pricing adjustments to cover inflationary costs and improved operational efficiencies all of which contributed to improve our gross profit margin to 30.4% in the third quarter of 2022 compared to the prior year's third quarter of 28.4%. Selling, general, and administrative expense. For the three months endedNovember 30, 2022 , our selling, general, and administrative ("SG&A") expenses were$17.3 million compared to$17.5 million for the three months endedNovember 30, 2021 , a decrease of$0.2 million , or 1.3%. As a percentage of net sales, SG&A expenses for the current quarter were 15.7% and 17.0% for the three months endedNovember 30, 2022 andNovember 30, 2021 , respectively. The decrease in SG&A costs were a result of savings from operational efficiencies and the consolidation of our underperforming manufacturing facilities in the prior year.
Gain (loss) from disposal of assets. The
Income from operations. Primarily due to factors described above, our income from operations for the three months endedNovember 30, 2022 was$16.2 million , or 14.7% of net sales, as compared to$11.7 million , or 11.3% of net sales, for the three months endedNovember 30, 2021 . Income from operations decreased on a sequential quarter basis by$1.1 million from$17.3 million for the quarter endedAugust 31, 2022 .
Other expense. Other expense was
Provision for income taxes. Our effective tax rate was 28.0% for the three months endedNovember 30, 2022 as compared to 30.0% for the three months endedNovember 30, 2021 . The primary reason for the decrease in the effective tax rate is permanent non-deductible expense resulting from final distributions in the prior year from our deferred compensation plan which was terminated inNovember 2020 . Net earnings. Net earnings, due to the factors above, were$11.3 million for the three months endedNovember 30, 2022 as compared to$7.6 million for the comparable quarter in the prior year, an increase of$3.7 million . Net earnings per diluted share for the three months endedNovember 30, 2022 were$0.44 , compared to$0.29 for the same quarter in the prior year.
Nine months ended
Net Sales . Our net sales were$329.1 million for the nine-month period endedNovember 30, 2022 , compared to$300.3 million for the same period last year, an increase of$28.8 million , or 9.6%. Our net sales increased due to continued strong customer demand for our products and increase in pricing to cover inflationary costs. In addition, AmeriPrint, our acquisition completed onJune 1, 2021 , positively impacted our net sales by approximately$1.9 million during the current period compared to the same period last year. Cost of Goods Sold and Gross Profit Margin. Our cost of goods sold increased$13.3 million , or 6.2%, from$213.1 million for the nine months endedNovember 30, 2021 to$226.4 million for the nine months endedNovember 30, 2022 . Our gross profit was$102.7 million for the nine-month period endedNovember 30, 2022 compared to$87.3 million for the same period in the prior year. We made pricing adjustments to cover inflationary costs and improved operational efficiencies all of which contributed to improve our gross profit margin to 31.2% from the prior year nine-month period of 29.1%. Selling, general, and administrative expense. For the nine months endedNovember 30, 2022 , our SG&A expenses were$52.9 million compared to$54.5 million for the nine months endedNovember 30, 2021 , a decrease of$1.6 million , or 2.9%. As a percentage 23 --------------------------------------------------------------------------------
ENNIS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE PERIOD ENDEDNOVEMBER 30, 2022 of net sales, SG&A expenses for the period were 16.1% and 18.2% for the nine months endedNovember 30, 2022 andNovember 30, 2021 , respectively. The decrease in SG&A costs was a result of savings from operational efficiencies and the consolidation of our underperforming manufacturing facilities in the prior year. Gain (loss) from disposal of assets. The$15,000 loss from disposal of assets during the nine-month period endedNovember 30, 2022 was primarily attributed to the sale of equipment. The$0.3 million net gain from disposal of assets during the nine months endedNovember 30, 2021 is primarily attributed to the sale of a previously held-for-sale facility that had transferred its operations to another facility. Income from operations. Primarily due to factors described above, our income from operations for the nine months endedNovember 30, 2022 was$49.8 million , or 15.1% of net sales, as compared to$33.0 million , or 11.0% of net sales, for the nine months endedNovember 30, 2021 . Other expense. Other expense was$1.0 million for the nine months endedNovember 30, 2022 compared to expense of$1.1 million for the nine months endedNovember 30, 2021 . Provision for income taxes. Our effective tax rate was 28.0% for the nine months endedNovember 30, 2022 as compared to 30.0% for the nine months endedNovember 30, 2021 . The primary reason for the decrease in the effective tax rate is permanent non-deductible expense resulting from final distributions in the prior year from our deferred compensation plan which was terminated inNovember 2020 . Net earnings. Net earnings, due to the factors above, were$35.1 million for the nine months endedNovember 30, 2022 as compared to$22.3 million for the comparable period in the prior year, an increase of$12.8 million . Net earnings per diluted share for the nine months endedNovember 30, 2022 were$1.36 , compared to$0.85 for the same period in the prior year.
Liquidity and Capital Resources
We rely on our cash flows generated from operations to meet all cash
requirements of our business. The primary cash requirements of our business are
payments to vendors in the normal course of business, capital expenditures,
compensation obligations and the payment of dividends to our shareholders. We
expect to generate sufficient cash flows from operations necessary to cover our
operating and capital requirements for the foreseeable future. We believe our
strong liquidity position will help us mitigate the ongoing adverse impacts of
COVID-19 and the inflationary environment.
November 30, February 28,
(Dollars in thousands) 2022 2022
Working capital $ 145,702 $ 127,839
Cash $ 87,000 $ 85,606
Working Capital. On November 30, 2022 , we had $87.0 million in cash. During the
period, our cash position increased by $1.4 million and our working capital
increased $17.9 million or 14.0%, from $127.8 million at February 28, 2022 to
$145.7 million at November 30, 2022 . Our current ratio, calculated by dividing
our current assets by our current liabilities, increased from 4.4 to 1.0 at
February 28, 2022 to 4.7 to 1.0 at November 30, 2022 . Our working capital and
current ratio were positively impacted primarily by an increase in our cash,
inventories and accounts receivable offset by an increase in our income taxes
payable.
Nine months ended November 30,
(Dollars in thousands) 2022 2021
Net cash provided by operating activities $ 33,997 $ 34,295
Net cash used in investing activities $ (12,105 ) $ (7,658 )
Net cash used in financing activities $ (20,498 ) $ (20,858 )
Cash flows from operating activities. Cash provided by operating activities was
$34.0 million in the nine months ended November 30, 2022 compared to $34.3
million in the comparative period ended November 30, 2021 . Our net earnings
increased $12.8 million for the nine months ended November 30, 2022 compared to
the nine months ended November 30, 2021 . An increase in accounts receivable used
cash of $5.9 million in the current period compared to an increase in accounts
receivable using cash of $0.6 million in the prior year. An increase in
inventories used cash of $10.9 million in the nine months ended November 30,
2022 compared to $6.2
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--------------------------------------------------------------------------------ENNIS, INC. AND SUBSIDIARIES FORM 10-Q FOR THE PERIOD ENDEDNOVEMBER 30, 2022 million in the nine months endedNovember 30, 2021 . An increase in accounts payable provided cash of$1.5 million in the nine months endedNovember 30, 2022 compared to an increase in accounts payable providing cash of$2.1 million in the nine months endedNovember 30, 2021 . The increase in accounts receivable in the current period was primarily due to higher sales volumes and increases in selling prices as well as timing of payments from customers. Our days sales outstanding, which measures how quickly receivables are collected, increased slightly to 38 days from 36 days (February 28, 2022 ). There are multiple factors that have contributed to the increased inventory balances. First, raw material prices are higher. Second, some plants have ordered additional paper supplies to accommodate large orders amidst less predictable supply chain conditions. Our days' sales of inventory increased to 53 days fromFebruary 28, 2022 (46 days). We continue to closely monitor and manage our outstanding trade receivables and inventories. The Company continues to monitor incoming orders and is adjusting its raw material purchases accordingly. Cash flows from investing activities. Cash used in investing activities was$12.1 million in the nine months endedNovember 30, 2022 compared to$7.7 million in the nine months endedNovember 30, 2021 . Capital expenditures primarily of equipment was$3.3 million and$4.1 million for the nine months endedNovember 30, 2022 andNovember 30, 2021 , respectively. In the nine months endedNovember 30, 2022 ,$8.8 million was used to acquire businesses as compared to$4.3 million used to acquire businesses in the nine-month period endedNovember 30, 2021 . Cash flows from financing activities. We used$0.4 million less cash in financing activities during the nine months endedNovember 30, 2022 compared to the same period in the prior year. The decrease in cash used during the nine months endedNovember 30, 2022 compared to the nine months endedNovember 30, 2021 resulted from$0.8 million less of common stock repurchased under our stock repurchase program in the current period compared to the nine months endedNovember 30, 2021 and the payment of$0.5 million more in dividends in the current period. Credit Facility - We did not renew our Credit Agreement, which expiredNovember 11, 2021 . We have had no outstanding long-term debt under the revolving credit line since paid in full inAugust 2019 . As ofNovember 30, 2022 , we had$0.5 million outstanding under a standby letters of credit arrangement secured by a cash collateral bank account. It is anticipated that our cash and funds from operating cash flows will be sufficient to fund anticipated future expenses. Pension Plan - We are required to make contributions to our Pension Plan. These contributions are required under the minimum funding requirements of ERISA. Due to the enactment of HATFA inAugust 2014 , which effectively raises the discount rates mandated for determining the value of a plan's benefit liability and annual cost of accruals, our minimum required contribution to the Pension Plan is zero for the Pension Plan year endingFebruary 28, 2023 . Assuming a stable funding status, we would expect that our future contributions to be between$1.0 million and$3.0 million per year. However, changes in actual investment returns or in discount rates could change this amount significantly. There was a$2.0 million contribution made inSeptember 2022 to avoid aPension Benefit Guaranty Corporation variable premium. As our Pension Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status, associated liabilities recorded and future required minimum contributions. AtNovember 30, 2022 , we had an unfunded pension liability recorded on our balance sheet of$3.7 million . Inventories - We believe our inventory levels are sufficient to satisfy our customer demands and we anticipate having adequate sources of raw materials to meet future business requirements. We have long-term contracts in effect with paper suppliers that govern prices, but do not require minimum purchase commitments. Certain of our rebate programs do, however, require minimum purchase volumes. Capital Expenditures - We continue to make capital expenditures for operational maintenance purposes, as may be required. Additionally, we will carefully review and make new capital expenditures for equipment to the extent such expenditures make economic sense by improving our operations and not jeopardizing our strong liquidity position. We expect our capital requirements for our current fiscal year, exclusive of capital required for possible acquisitions, will be within our historical levels of between$3.0 million and$5.0 million . For the nine months endedNovember 30, 2022 , we have spent approximately$3.3 million on capital expenditures. We expect to fund these expenditures through existing cash flows.
Contractual Obligations - There have been no significant changes in our
contractual obligations since
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ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED NOVEMBER 30, 2022 © Edgar Online, source
