SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
ENNIS BUSINESS FORMS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
ENNIS BUSINESS FORMS, INC.
1510 N. HAMPTON, SUITE 300
DESOTO, TEXAS 75115
TELEPHONE (972) 228-7801
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 19, 2003
------------------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Ennis
Business Forms, Inc., a Texas corporation (the "Company"), will be held in The
DeSoto City Hall, 211 East Pleasant Run Road, DeSoto, Texas 75115 at 10:00 a.m.,
Central Daylight Time, on Thursday, June 19, 2003 for the following purposes:
1. To elect three directors for terms ending in 2006;
2. To ratify the selection of Ernst & Young LLP as independent auditors of the
Company for the fiscal year ending February 29, 2004; and
3. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on April 15, 2003 are
entitled to notice of, and to vote at, the meeting or any adjournment or
adjournments thereof.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
A copy of the Company's Annual Report for the fiscal year ended February
28, 2003, which contains financial statements and other information of interest
to shareholders, is being mailed to you.
By Order of the Board of Directors,
Harve Cathey
Secretary
DeSoto, Texas
May 19, 2003
ENNIS BUSINESS FORMS, INC.
1510 N. HAMPTON, SUITE 300
DESOTO, TEXAS 75115
TELEPHONE (972) 228-7801
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 19, 2003
10:00 A.M. CDT
THE DESOTO CITY HALL
211 EAST PLEASANT RUN ROAD
DESOTO, TEXAS 75115
------------------------
The holders of the Company's Common Stock of record at the close of
business on April 15, 2003 are entitled to vote at the Annual Meeting of
Shareholders, which will be held on June 19, 2003. A form of Proxy is enclosed
for use at such meeting if you are unable to attend in person. The persons named
therein as proxies were selected by the Board of Directors of the Company. The
proxy is solicited by the board of directors of the company and is revocable at
any time before it is exercised. This proxy statement is first mailed to
shareholders on May 19, 2003.
VOTING RIGHTS AND VOTES REQUIRED
At the close of business on April 15, 2003, the Company had 16,332,973
shares of Common Stock issued and outstanding. Each share of Common Stock is
entitled to one vote, except in the election of directors, shareholders may
cumulate their votes. See "Election of Directors".
The presence, in person or by proxy, of stockholders entitled to cast a
majority of all votes entitled to be cast at the Annual Meeting will constitute
a quorum. Assuming a quorum, the nominees receiving a plurality of the votes
cast at the Annual Meeting for the election of directors will be elected as
directors.
With regard to the election of directors, votes may be cast in favor or
withheld, votes that are withheld will be counted for purposes of determining
the presence or absence of a quorum but will have no other effect. Abstentions
and broker non-votes, if any, will be counted for purposes of determining the
presence or absence of a quorum but will have no effect on the outcome of the
election of directors.
VOTING OF PROXIES
If the accompanying proxy is properly executed and returned, the shares
represented thereby will be voted in accordance with the instructions specified
in the proxy. In the absence of instructions to the contrary, such shares will
be voted in favor of the nominees for election to the Board of Directors listed
in this proxy statement and named in the accompanying Proxy. The Board of
Directors does not intend to bring any other matters before the Annual Meeting
and is not aware of any matters that will come before the Annual Meeting other
than as described herein. In the absence of instructions to the contrary,
however, it is the intention of each of the persons named in the accompanying
proxy to vote all properly executed proxies on behalf of the stockholders they
represent in accordance with their discretion with respect to any such other
matters properly coming before the Annual Meeting.
REVOCATION OF PROXIES
Any stockholder may revoke such stockholder's proxy at any time prior to
the voting thereof on any matter (without, however, affecting any vote taken
prior to such revocation). A proxy may be revoked by filing with Harve Cathey,
Secretary of Ennis Business Forms, Inc., at the Annual Meeting, a written notice
of revocation or a subsequently dated, executed proxy at any time prior to the
time it has been voted at the Annual Meeting, or by attending the Annual Meeting
and voting in person (although attendance at the Annual Meeting will not in and
of itself constitute revocation of a proxy).
COST OF SOLICITATION
The cost of preparing, assembling and mailing the Notice of Annual Meeting,
Proxy Statement and form of Proxy and the cost, which is estimated to be
nominal, of further solicitation hereinafter referred to, is to be borne by the
Company. In addition to the use of the mails, it may be necessary to conduct
some solicitation by telephone, facsimile machine or personal interview. Any
such solicitation will be done by the directors, officers and regular employees
of the Company; and, in addition, banks, brokerage houses and other custodians,
nominees or fiduciaries will be requested to forward proxy soliciting material
to their principals to obtain authorization for the execution of proxies on
their behalf. The Company will not pay such persons any compensation for
soliciting proxies, but the Company will reimburse such persons for their
out-of-pocket expenses incurred in this connection.
SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The following persons have reported to the SEC that they own more than five
percent of the outstanding voting securities of the Company:
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
TITLE OF CLASS BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
-------------- ---------------------------------- ----------------------- --------
Common Stock Royce & Associates, Inc.
1414 Avenue of the Americas
New York, New York 10019 1,865,100 shares 11.4%
NFJ Investment Group 934,800 shares 5.7%
2121 San Jacinto St., Suite 1840
Dallas, TX 75201
Cannell Capital LLC 910,600 shares 5.6%
150 California Street, Fifth Floor
San Francisco, CA 94111
Note - This information was obtained from Schedule 13G filings by Royce &
Associates, Inc. on March 28, 2003, and Cannell Capital LLC and NFJ Investment
Group on February 14, 2003.
2
The following table lists, as of the close of business on April 15, 2003,
the Company's common stock beneficially owned by each director, each of the most
highly compensated executive officers, and all directors and executive officers
as a group:
COMMON STOCK BENEFICIAL OWNERSHIP
------------------------------------------------------
NUMBER OF SHARES
------------------------------------------------------
OBTAINABLE PERCENT OF
NAME/GROUP DIRECTLY INDIRECTLY THROUGH STOCK OUTSTANDING
OWNED OWNED OPTION EXERCISE(4) TOTAL SHARES
-------- ---------- ------------------ ------ ------------
James B. Gardner 13,125 4,000 (2) 10,000 27,125 *
Ronald M. Graham 3,000 32,000 35,000
Harold W. Hartley 3,375 26,975 (1) 10,000 40,350 *
Robert L. Mitchell 59,581 10,000 69,581 *
Kenneth E. Overstreet 69,223 69,223 *
Thomas R. Price 51,500 5,000 (2) 10,000 66,500 *
Kenneth G. Pritchett 16,500 3,000 (2)&(3) 8,750 28,250 *
James C. Taylor 21,500 2,500 24,000 *
Keith S. Walters 7,650 226,250 233,900 1.4%
All Directors and Executive
Officers as a group (10) 270,073 38,975 340,000 649,048 4.0%
(1) Shares held in trust of which Mr. Hartley is one of two trustees with
shared voting power.
(2) Indirect shares attributable to Mr. Gardner, Mr. Price and Mr. Pritchett
are held in trust for the benefit of the named Directors. Each has voting
power over the shares.
(3) Additional shares held in a Profit Sharing plan in which Mr. Pritchett has
a beneficial interest.
(4) Shares exercisable through stock option exercise represent options
exercisable within 60 days.
* Indicates less than 1%.
---------------
ELECTION OF DIRECTORS (PROPOSAL 1)
The Board of Directors is divided into three classes which consist of nine
directors, five of whom are not, and have not been, officers or employees of the
Company. The terms of three directors currently expire at this year's Annual
Meeting, the terms of three directors currently expire at the 2004 Annual
Meeting and the terms of three directors currently expire at the 2005 Annual
Meeting. At this year's Annual Meeting, three directors will be elected for a
term expiring at the 2006 Annual Meeting.
Provided a quorum is present, a plurality of the votes cast in person or by
proxy by the holders of shares entitled to vote is required to elect directors.
With respect to the election of directors, shareholders have cumulative voting
rights, which means that each shareholder entitled to vote (a) has the number of
votes equal to the number of shares held by such shareholder multiplied by the
number of directors to be elected and (b) may cast all such votes for one
nominee or distribute such shareholder's votes among the nominees as the
shareholder chooses. The right to cumulate votes may not be exercised until a
shareholder has given written notice of the shareholder's intention to vote
cumulatively to the corporate
3
secretary on or before the day preceding the election. If any shareholder gives
such written notice, then all shareholders entitled to vote may cumulate their
votes. Upon such written notice, the persons named in the accompanying form of
Proxy may cumulate their votes if additional persons are nominated at the Annual
Meeting for the election of directors. As a result, the Board of Directors is
soliciting discretionary authority to cumulate votes.
The following table sets forth certain information concerning each nominee
and continuing director. Except as set forth therein, none of the nominees or
continuing directors is an officer or director of any other publicly owned
corporation or entity.
THREE-YEAR TERMS EXPIRING IN 2006
YEAR IN WHICH
NAME OF SERVICE AS A
CONTINUING DIRECTOR BACKGROUND AGE DIRECTOR BEGAN
------------------- ------------------------------------------------------------ --- --------------
Ronald M. Graham, Vice President Administration. 54 2003
Mr. Graham was elected Vice President Administration in April 2001. Mr.
Graham was employed by the Company in January 1998 as Director of Human
Relations and was elected Vice President Human Resources in June 1998.
Prior to joining the Company, Mr. Graham was with E. V. International, Inc.
(formerly Mark IV Industries, Inc.) for 17 years as Corporate Vice
President, Administration. Prior to that time, Mr. Graham was with
Sheller-Globe for 3 years as Corporate Director of Human Resources.
Robert L. Mitchell, Retired President of the Company. 69 1985
Mr. Mitchell retired in December 1989. Prior to that date, he served as
President and Chief Operating Officer of the Company from April 1985 and
was continuously employed by the Company beginning in 1969.
Thomas R. Price, Owner and President of Price Industries, Inc. 64 1989
Mr. Price has been engaged in his present occupation since 1975.
THREE-YEAR TERMS EXPIRING IN 2004
YEAR IN WHICH
NAME OF SERVICE AS A
CONTINUING DIRECTOR BACKGROUND AGE DIRECTOR BEGAN
------------------- ------------------------------------------------------------ --- --------------
Harold W. Hartley, Investments. 79 1971
Mr. Hartley retired in December 1985 and since that time has managed his
private investments. From June 1984 to December 1985, he served as a
consultant to Tenneco Financial Services,
4
Inc. From February 1981 to June 1984 Mr. Hartley served as Executive
Vice-President of Tenneco Financial Services, Inc. Mr. Hartley serves as a
director of the Conseco Fund Group.
Kenneth G. Pritchett, President of Ken Pritchett Properties, Inc. 65 1999
Ken Pritchett Properties, Inc. is a Commercial and Residential Development
Corporation in the Dallas/Ft. Worth Metropolitan area since 1968,
specializing in shopping center and exclusive residential development. Mr.
Pritchett is on the Board of Trustees and Chairman of the Planning
Committee for Charlton Methodist Hospitals. He is a Life Director for the
National Home Builders, and the Texas Home Builders Association. He serves
on the Executive Committee for the Metropolitan Homebuilders Association.
James C. Taylor, Principal, The Anderson Group, Inc. 61 1998
The Anderson Group Inc., Bloomfield Hills, Michigan, is a private
investment firm engaged in the acquisition and management of businesses in
a variety of industries. Mr. Taylor joined The Anderson Group Inc. in 1989
and served as the President and Chief Executive Officer of four businesses
affiliated with The Anderson Group Inc.: Display Technologies, Inc.
(January 2001 to the October 2001); Burwood Products Company, a wall decor
and clock manufacturer (February 1995 to February 2000); The Bargeman
Company, a supplier of proprietary products to the recreational vehicle and
utility trailer industries (January 1992 to December 1994); and Advance
Stamping Company, a supplier of metal stampings to the automotive,
electrical and hardware industries (January 1989 to September 1991). Prior
to 1989, Mr. Taylor was with United Technologies Corporation for 19 years,
primarily in manufacturing operations, including 7 years as a Group Vice
President.
THREE-YEAR TERMS EXPIRING IN 2005
YEAR IN WHICH
NAME OF SERVICE AS A
CONTINUING DIRECTOR BACKGROUND AGE DIRECTOR BEGAN
------------------- ------------------------------------------------------------ --- --------------
Keith S. Walters, Chairman of the Board, CEO and President of the Company. 53 1997
Mr. Walters joined the Company in August 1997 as Vice President-Commercial
Printing Operations and was appointed Vice Chairman of the Board and Chief
Executive Officer in November 1997. Prior to joining the Company, Mr.
Walters was with Atlas/Soundolier, a division of American Trading and
Production Company, for 8 years, most recently as Vice
5
President of Manufacturing. Prior to that time, Mr. Walters was with the
Automotive Division of United Technologies Corporation for 15 years,
primarily in manufacturing and operations.
James B. Gardner, Senior Managing Director of Service Asset Management 68 1970
Company (SAMCO).
Mr. Gardner has served in his present position with SAMCO, a financial
services firm, since May 1994. Mr. Gardner has also been a director of
Century Telephone Enterprises, Inc. since 1981 and serves as a director of
NAB Asset Corporation.
Kenneth E. Overstreet, Group President of the Company's Financial Solution 60 2000
and Promotional Solution Groups.
Mr. Overstreet joined the Company in June 2000 at the time of the
acquisition of Northstar Computer Forms, Inc. (NSCF). Prior to June 2000,
Mr. Overstreet was employed by NSCF since 1989, serving as President since
1993. Mr. Overstreet was elected a director of Delphax Technologies, Inc.
in 2003.
6
BOARD COMPENSATION
Non-employee directors receive an annual retainer of $15,000 plus $1,500
for each board meeting attended and $1,000 for each committee meeting attended
other than in conjunction with a board meeting. In addition, each committee
chairman receives an annual retainer of $4,000. The Company also reimburses
travel and accommodation expenses of directors incurred with respect to board
and committee meetings. The Company grants each outside director an option to
purchase 10,000 shares at the time of election and 5,000 shares annually while
service as a director continues. These are non-qualified options as provided
under the 1998 Option and Restricted Stock Plan. Pursuant to this policy, Mr.
Gardner, Mr. Hartley, Mr. Mitchell, Mr. Price, Mr. Pritchett and Mr. Taylor were
granted options of 5,000 shares each in April 2002.
MEETINGS OF BOARD AND COMMITTEES
The Company's Board held five meetings during the fiscal year ended
February 28, 2003. The Board's Executive Compensation and Stock Option,
Nominating and Executive committees each held two meetings. The Audit Committee
met five times. Each director attended at least 75% of the meetings of the Board
of Directors and the committees on which each served during the fiscal year.
COMMITTEES OF THE BOARD
AUDIT COMMITTEE. See Audit Committee Report for a discussion of the purpose of
the Committee and the names of the directors who serve on the Committee.
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE. See Executive Compensation
for a discussion of the purpose of the Committee and the names of the directors
who serve on this Committee.
NOMINATING COMMITTEE. This committee considers and makes recommendations to the
Board of Directors regarding any nominee submitted for election to the Board,
whether submitted by management, by other members of the Board of Directors or
by shareholders. Although no nominee has ever been submitted by shareholders, in
the event any shareholder wishes to nominate a candidate for director, the Board
of Directors, through this committee, would consider such a nomination upon
receipt of a written nomination, including the business history of the
candidate, mailed to the attention of the Board of Directors or upon an oral
presentation of the candidate's qualifications to the Board of Directors or the
committee. The committee currently consists of Mr. Taylor (Chairman), Mr.
Hartley and Mr. Pritchett.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation and Stock Option Committee of the Board of
Directors of the Company (the "Committee"), which is composed entirely of the
three non-employee directors listed below, has furnished the following report on
executive compensation. The Committee's report documents the components of the
Company's executive officer compensation programs and describes the
7
compensation philosophy on which 2003 compensation determinations were made by
the Committee with respect to the executive officers of the Company, including
the Chief Executive Officer and the four other executive officers that are named
in the compensation tables who are currently employed by the Company (the "Named
Executives"). The decisions of the Committee with respect to the compensation of
the executive officers are submitted to and subject to ratification by the Board
of Directors prior to implementation.
COMPENSATION PHILOSOPHY
The executive compensation program of the Company is reviewed annually by
the Committee and it is the philosophy of the Company that executive
compensation is directly linked to continuous improvements in corporate
performance. Specifically, the following objectives have been adopted by the
Committee as guidelines for compensation decisions:
o Provide a competitive total executive compensation package that
enables the Company to attract and retain key executives and maintain
a competitive position in the executive marketplace with employers of
comparable size and in similar lines of business.
o Enhance the compensation potential of executives by integrating pay
programs with the Company's annual and long-term business objectives
and strategy, and focus executives on the fulfillment of these
objectives.
o Provide variable compensation opportunities that are linked with the
performance of the Company, emphasizing net earnings, return on
capital and revenue growth.
The Committee periodically engages recognized independent compensation
consultants to undertake a third-party evaluation of current compensation
arrangements in light of competitive market conditions.
CASH COMPENSATION
Cash compensation includes base salary and the Company's annual incentive
plan awards. The base salary of each of the Company's executive officers is
determined by an evaluation of the responsibilities of that position and by
comparison to the range of salaries paid in the competitive market in which the
Company competes for comparable executive ability and experience. The
performance of each Named Executive officer is reviewed annually by the
Committee and the Chief Executive Officer in the case of the other executive
officers, taking into account the Company's operating and financial results for
that year, the contribution of each executive officer to such results, the
achievement of goals established for each such executive officer at the
beginning of each year, and competitive salary levels for persons in those
positions in the markets in which the Company competes. To assist in its
deliberations, the Committee accesses comparable salary and incentive
compensation information for a number of representative companies in the
industry for comparison purposes. Following its review of the performance of the
Company's Named Executive officers, the Committee reports its recommendations
for salary increases and incentive awards to the Board of Directors. In fiscal
year 2003, annual base salary increases and incentive compensation awards were
approved by the Committee and reported to the Board of Directors for all of the
Named Executives, and incentive compensation awards were approved by the
Committee for all of the executives (other than the Named Executives). The
Committee believes the
8
recommended salary increases and incentive awards were warranted, are properly
aligned to the Board's compensation philosophy, and consistent with the
performance of such executives during fiscal year 2003 based on the Committee's
evaluation of each individual's overall contribution to accomplishing the
Company's fiscal year 2003 corporate goals and of each individual's achievement
of individual goals during the year.
STOCK OPTIONS
The Committee believes that it is essential to align the interests of the
Company executives and other management personnel responsible for the growth of
the Company with the interests of the Company's stockholders. The Committee
believes the long-term alignment of its executives to shareholders is best
accomplished through the provision of stock option grants. Therefore, pursuant
to the recommendation of the members of the Committee, the Company's Board of
Directors and stockholders approved the 1998 Option and Restricted Stock Plan at
the June 18, 1998 Shareholders Meeting that provides for granting stock options
and restricted stock awards. The purpose of this Plan is to foster and promote
the long-term financial success of the Company by providing a means through
which the Company and its subsidiaries can attract and retain key executive and
managerial employees, consultants and non-employee directors who can contribute
materially to that success. The Committee will continue to review long-term
incentives and make recommendations, where appropriate, to the Company's Board
of Directors, from time to time, to assure the Company's executive officers and
other key employees are appropriately motivated and rewarded based on the
long-term financial progress of the Company.
COMPENSATION OF CEO
In determining the compensation of Mr. Keith Walters, the Chairman and
Chief Executive Officer, the Committee (with Mr. Walters not participating)
reviewed the Company's operating and financial results for fiscal year,
evaluated his individual performance and contribution to those results, and
considered the compensation range for other chief executive officers of
companies in the industry. Based on that review and assessment, the Committee
recommended and the Company's Board of Directors ratified that his base annual
salary was adjusted to $430,000 (midpoint for his position in the Company's
salary administration system) in April 2001. A performance bonus of $47,203 was
approved for Mr. Walters based on predetermined performance criteria on revenue
growth, return on capital employed and net income for the fiscal year ended
February 2003. In addition, Mr. Walters was granted a discretionary bonus of
$80,000 (bringing the cash bonus to a total of $127,203).
SUMMARY
As demonstrated in each of the plans above, compensation in all its forms
is linked directly to objective performance criteria of the Company, business
units where applicable, and the individual executive's performance. By doing so,
the Committee has created an environment which encourages long-term decisions
which will benefit the Company, its shareholders, customers, and employees and
at the same time allows the executives, managers, and key contributors within
the Company to share in the success of those decisions and actions. Furthermore,
the Committee believes that the total compensation program for executive
officers of the Company will be competitive with the compensation programs
provided by other corporations with which the Company competes.
The Committee believes the actions taken regarding executive compensation
were appropriate in view of individual and corporate performance.
9
James B. Gardner James C. Taylor Kenneth Pritchett
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") disallows a corporation's deduction for remuneration paid to its chief
executive officer and its named executive officers in excess of $1 million per
person. Performance-based compensation and certain other compensation, as
defined, is not subject to the deduction limitation of this regulation.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has entered into employment agreements with the executive
officers of the Company. The agreements provide that for a continuing three-year
employment period plus two 1-year extensions. Each of such employment agreements
provides that if the officer terminates his employment for good reason or during
the two-year period following a change of control of the Company, the Company
will (a) make a lump sum payment to him of salary earned through the date of
termination, (b) make a lump sum severance payment to him of the amount
determined by multiplying his base amount times a multiple per his agreement,
(c) accelerate vesting of all long-term incentives, to include but not limited
to stock options, restricted stock, any other long-term incentive grants, and
(d) continue to provide certain welfare plan and other benefits for a period of
one year or as long as such plan or benefits allow or until the executive is
employed under the benefit plans of another company.
For purposes of the employment agreements, "good reason" includes (i) a
change in the officer's position, authority, duties or responsibilities, (ii)
changes in the office or location at which he is based without his consent (such
consent not to be unreasonably withheld), (iii) certain breaches of the
agreement and (iv) a reduction in base annual salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the members of the Executive Compensation and Stock Option Committee
are non-employee directors of the Company and are not former officers of the
Company. During fiscal year 2003, no executive officer of the Company served as
a member of the Board of Directors or on the compensation committee of a
corporation where one of whose executive officers served on the Executive
Compensation and Stock Option Committee or on the Board of Directors of the
Company.
10
SUMMARY COMPENSATION TABLE *
NAME AND PRINCIPAL POSITION (A)
NUMBER OF
SECURITIES
UNDERLYING
OPTIONS
ANNUAL COMPENSATION (B) LONG-TERM
----------------------------------------- COMPENSATION
YEAR SALARY BONUS OTHER AWARDS
---- -------- ------- ---------- ------------
Keith S. Walters 2003 $424,230 127,203 10,000 (e) --
Chairman of the Board, 2,420 (f)
President and Chief 2002 $392,308 195,154 25,000
Executive Officer 2001 $345,192 30,000 100,000
Ronald M. Graham 2003 $155,192 31,709 6,000 (e)
Vice President - 4,140 (f)
Administration 2002 $133,000 40,000 5,000
2001 $121,039 7,500 15,000
Harve Cathey 2003 $107,808 31,270 2,475 (f) --
Vice President - Finance 2002 $100,000 20,000 --
and CFO, Secretary 2001 $99,039 1,786 15,000
and Treasurer
Robert M. Halowec 2003 $136,575 -- 125,136 (d)
Vice President - Finance 2002 $150,000 39,318 --
and CFO 2001 $146,154 5,358 15,000
Kenneth E. Overstreet 2003 $225,000 47,597 52,392 (c) --
Group President 2002 $210,576 35,000 52,392 (c) --
2001 $150,000 52,392 (c) --
-------------
* There were no Restricted Stock Awards, SARs or LTIP Payouts during the
three most recent fiscal years.
(a) This table includes the Chief Executive Officer and all other executive
officers whose compensation exceeded $100,000 for the most recent fiscal year.
(b) All amounts are for fiscal years ended February 28 or 29.
(c) Mr. Overstreet was paid a "Transaction Complete Bonus" in conjunction with
the contract to acquire Northstar Computer Forms, Inc. which is payable in three
annual installments beginning in June 2000.
11
(d) Mr. Halowec resigned from the Vice President-Finance and CFO position in
January 2003. In conjunction with his separation from the Company, he was paid
separation payments of $119,886 which is included as other compensation along
with a car allowance of $5,250.
(e) Car allowance of $10,000 for Mr. Walters and $6,000 for Mr. Graham.
(f) Life insurance.
12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
BY FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
underlying unexercised
unexercised in-the-money
options/SARs options/SARs
Shares at fiscal at fiscal
acquired year end year end
on Value --------------------------- ---------------------------
Name exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Keith S. Walters 90,000 255,000 $384,875 $629,125
Robert M. Halowec 23,250 64,358 -- -- $ 0 $ 0
Ronald M. Graham 11,750 39,250 $ 58,537 $ 99,483
Harve Cathey 20,500 17,500 $ 31,716 $ 53,609
EQUITY COMPENSATION PLAN INFORMATION
Number of securities
Number of Securities Weighted average remaining available for
to be issued exercise price future issuance under equity
upon exercise of of outstanding compensation plans
outstanding options, options, warrants (excluding securities
Plan Category warrants and rights and rights reflected in column (a)
------------------ ---------------------- -------------------- -----------------------------
Equity compensation
plans approved by
security holders 767,750 10.23 66,027
Equity compensation
Plans not approved by
security holders -- -- --
------- ----- ------
Total 767,750 10.23 66,027
======= ===== ======
13
PENSION PLAN TABLE (1)
YEARS OF SERVICE
--------------------------------------------------------------
REMUNERATION 15 20 25 30 35
------------ -- -- -- -- --
$125,000 $19,392 $25,856 $32,321 $38,785 $45,249
150,000 24,080 32,106 40,133 48,160 56,186
175,000 28,767 38,356 47,946 57,535 67,124
200,000 33,455 44,606 55,758 66,910 78,061
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(1) The Company has a noncontributory retirement plan that covers substantially
all of the employees of the Company and certain of its subsidiaries. The plan
provides for retirement benefits on a formula based on the average pay of the
highest five consecutive compensation years during active employment,
integration of certain Social Security benefits, length of service and a normal
retirement age of sixty-five. All forms of remuneration, including overtime,
shift differentials and bonuses, are covered by the plan. However, due to
restrictions imposed by the Revenue Reconciliation Act of 1993, effective March
1, 1997, the maximum annual compensation covered by the plan is limited to
$160,000. Future years' maximum can be increased for inflation. The tables above
sets forth approximate annual retirement benefits that would be received under
the plan, computed on the basis of the specified average annual earnings and
years of service. The table presents annual benefit amounts for remuneration
above the current $160,000 since (a) the $160,000 maximum can increase with
inflation and (b) prior to 1994 the maximum annual compensation limitation was
more than $160,000.
The number of full years of continuous service in the plan as of February
28, 2003 for Mr. Walters, Graham and Cathey were 6, 5, and 34, respectively. Mr.
Overstreet is not covered by the plan.
AUDIT COMMITTEE REPORT
The Audit Committee is responsible for monitoring and assuring the
integrity of the Company's financial reporting process. It accomplishes this
function by assessing the internal accounting and auditing practices of the
Company, and the independent auditor's fulfillment of its role in the financial
reporting process. The Board of Directors adopted a written charter for the
Audit Committee in June 2000 further describing the role of the Committee.
During the fiscal year ended in February 2003, the Audit Committee reviewed
interim quarterly financial statements with management and the independent
auditors. This review was conducted prior to filing of the Company's 10-Q
reports containing the respective interim quarterly financial statements. In
addition, the Committee reviewed and discussed the 2003 year-end audited
financial statements with executive management, including the Chief Financial
Officer, and the independent auditors. This review took place prior to
publication of the audited financial statements in the 10-K filing and annual
report to shareholders. Each review was conducted with the understanding that
management is responsible for preparing the Company's financial statements and
the independent auditors are responsible for reviewing the interim quarterly
financial statements and auditing the annual financial statements.
In further discharge of its responsibilities, the Audit Committee met with
the independent auditors, both in the presence of management and privately. The
Committee and independent auditors discussed those matters described in
Statement of Auditing Standards No. 61, "Communications with Audit
14
Committee." These discussions included review of the scope of the audit
performed with respect to the Company's financial statements.
The Audit Committee received the independent auditor's written statement
required by Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees." This written statement described any
relationships between the independent auditors and the company that may
reasonably be thought to bear on independence. Following receipt of this written
statement and discussions of the matters described in it, the Committee was
satisfied as to the auditor's independence.
Based upon the foregoing, the Audit Committee recommended to Board of
Directors that audited financial statements be included in the Company's annual
report on form 10-K, for the fiscal year ended February 28, 2003.
AUDIT FEES
AUDIT FEES - Fees billed or expected to be billed to the Company by Ernst &
Young LLP for the audit of the Company's annual financial statements for the
year ended February 28, 2003 and for reviews of those financial statements
included in the Company's fiscal year 2003 quarterly reports on Form 10-Q total
$224,000. Aggregate fees for audit services in 2002 was $130,000.
ALL OTHER FEES - In addition to the fees described above, other fees billed to
the Company by Ernst & Young LLP for services provided during the Company's 2003
fiscal year total $269,000. Including audit related services in the amount of
$224,000 and other services of $45,000. The audit related services include
services rendered in connection with audits of the Company's employee benefit
plans and assurance services in connection with SEC registration statements. The
other services consist primarily of tax services. In reviewing the independence
of Ernst & Young LLP, the Audit Committee considered whether the provision of
these other services is compatible with maintaining the auditor's independence,
and has determined that the provision of such services in 2003 has not adversely
impacted the auditor's independence. There were no non-audit fees in 2002.
The Audit Committee:
James B. Gardner (Chairman)
Harold W. Hartley
Kenneth G. Pritchett
The foregoing Audit Committee Report shall not be deemed to be incorporated by
reference into any of Ennis Business Forms' previous or future filings with the
Securities and Exchange Commission except as otherwise explicitly specified by
Ennis Business Forms in any such filing.
15
FIVE-YEAR PERFORMANCE COMPARISON (1)
The graph below provides an indicator of cumulative total shareholder
returns for the Company compared with the S&P 500 Stock Index and a Peer Group
(2).
[PERFORMANCE GRAPH]
16
2/28/98 2/28/99 2/29/00 2/28/01 2/28/02 2/28/03
------- ------- ------- ------- ------- -------
S&P 500 100.00 119.74 133.78 122.81 111.13 85.92
Ennis Business Forms, Inc. 100.00 89.18 79.69 99.98 134.75 151.18
Peer Group 100.00 74.35 39.54 47.44 67.66 67.89
Total shareholder returns assume reinvestment of dividends.
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(1) The data to prepare this performance comparison was obtained from Standard
& Poor's Compustat Services, Inc.
(2) The Peer Group consists of the following publicly-held business forms
manufacturers: Moore Corporation Ltd., The Standard Register Company, Wallace
Computer Services, Inc., New England Business Services, Inc., Mail-Well, Inc.
and Ennis Business Forms, Inc.
SELECTION OF AUDITORS (PROPOSAL 2)
The selection of independent auditors is to be ratified at the meeting and
it is intended that persons named in the accompanying form of Proxy will vote
for Ernst & Young LLP, Certified Public Accountants. The members of the Audit
Committee of the Board of Directors, Messrs. Gardner, Hartley and Pritchett,
join with the remaining members of the Board of Directors in recommending the
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending February 28, 2004. Representatives of the
firm will be present at the Annual Meeting of shareholders to answer questions
and to make any statements they wish to make regarding the Company's financial
statements. Ratification of the selection of auditors requires the affirmative
vote of the holders of a majority of the shares voting at the Annual Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than 10% of the
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than 10% beneficial owners are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on a review of the copies of the forms furnished to the
Company, the Company believes that during the fiscal year ended February 28,
2003, all Section 16(a) filing requirements applicable to its officers and
directors were made.
MISCELLANEOUS
Management is not aware of any other matters that may be presented for
action at the meeting. If any other matters should be presented at the meeting
for which a vote may properly be taken, then the enclosed form of Proxy will be
voted in such manner as the persons named in the Proxy shall in their discretion
determine.
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The Company will upon written request furnish to any shareholder, without
charge, a copy of its Annual Report on Form 10-K for the fiscal year ended
February 28, 2003 filed with the Securities and Exchange Commission. Such
written request should be directed to Harve Cathey, Secretary, Ennis Business
Forms, Inc., 1510 N. Hampton, Suite 300, DeSoto, Texas 75115.
If you do not expect to attend the meeting, please date, sign and return
the Proxy at your earliest convenience. No postage is required for mailing in
the United States. A prompt return of your Proxy will be appreciated, as it will
save the expense of further mailing.
RELATED PARTY TRANSACTIONS
On December 18, 2002, the Company purchased its new headquarters site from
the Corporation for the Economic Development of Midlothian, a special purpose
corporation (the "Corporation"), which is an affiliate of the City of
Midlothian, Texas. This site was formerly owned by a corporation which is an
affiliate of Kenneth G. Pritchett, a Director of the Company, and is located in
a business park which is being developed by Mr. Pritchett. Mr. Pritchett has
owned and developed a substantial amount of commercial real estate in this area
for many years. An ad hoc committee of the Board, of which Mr. Pritchett was a
non-voting member, conducted an extensive search for a new site in the area and
concluded that this site was the most suitable for Ennis. Ennis had previously
held discussions with the Corporation regarding its policy of purchasing,
developing and re-selling business sites as a matter of policy to attract new
businesses to the city to increase its tax base. After the site was identified
by the Committee and approved by the Board, Ennis indicated its interest in
purchasing the property from the Corporation, and the Corporation then purchased
the property from Mr. Pritchett for $780,000 on December 12, 2002, below
independently appraised value. Subsequently, on December 18, 2002, the
Corporation sold the property to Ennis at the same price. However, Ennis will
receive a $300,000 cash incentive from the Corporation on occupancy. Mr.
Pritchett is not a member of the Midlothian city council nor an officer or
director of the Corporation and did not participate in the negotiation of the
price of the property to Ennis. The Corporation had the power and authority to
make an independent decision to sell the property to Ennis and to determine the
sale price. The selection and purchase of the site was unanimously approved by
the Board, with Mr. Pritchett abstaining.
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SHAREHOLDER PROPOSALS
In order for proposals of shareholders to be considered for inclusion in
the proxy statement and form of Proxy for the 2003 Annual Meeting of
Shareholders, the Secretary of the Company must receive such proposals not less
than 120 days in advance of May 19, 2003.
By Order of the Board of Directors
Harve Cathey
Secretary
DeSoto, Texas May 19, 2003
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