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Acquisitions | 6 Months Ended
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Aug. 31, 2019
Business Combinations [Abstract] |
Acquisitions | 5. Acquisitions The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100% of the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets and liabilities assumed, is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred. On July 15, 2019, the Company acquired all the outstanding stock of The Flesh Company (“Flesh”) and its wholly owned subsidiary, Impressions Direct, Inc. for approximately $9.9 million (which includes a potential earn-out consideration of up to $500,000) plus the assumption of trade payables, subject to final working capital and certain other adjustments. The earn-out consideration is capped at $500,000 and is paid over the next four years if certain minimum operating income levels are achieved. The goodwill recognized as a part of the acquisition is not deductible for tax purposes. The Company recorded intangible assets with definite lives of approximately $1.5 million in connection with the transaction. During the six months ended August 31, 2019, the Company incurred approximately $175,000 of costs (including legal and accounting fees) related to the acquisition. Flesh and its subsidiary Impressions Direct, is a printing company with two locations. The St. Louis, Missouri location contains their corporate office and the direct mail operations of Impressions Direct, and their Parsons, Kansas location has their main manufacturing facility and warehouse. The acquisition of Flesh, which generated approximately $31.0 million in sales for its fiscal year ended September 30, 2018, expands the Company’s operations for business forms, checks, direct mail services, integrated products and labels. The following is a summary of the preliminary purchase price allocation for Flesh (in thousands):
Accounts receivable |  | $ | 2,480 |
Inventories |  |  | 1,343 |
Other assets |  |  | 152 |
Right-of-use asset |  |  | 715 |
Property, plant & equipment |  |  | 7,072 |
Customer lists |  |  | 434 |
Trademarks |  |  | 1,000 |
Non-compete |  |  | 20 |
Goodwill |  |  | 423 |
Accounts payable and accrued liabilities |  |  | (2,351 | )
Operating lease liability |  |  | (700 | )
Deferred income taxes |  |  | (714 | )
|  | $ | 9,874 |
On March 16, 2019, the Company, through one of its subsidiaries, acquired the assets of Integrated Print & Graphics (“Integrated”) for $8.9 million in cash plus the assumption of trade payables, subject to certain adjustments. Integrated is located in South Elgin, Illinois. During the six months ended August 31, 2019, the Company incurred approximately $29,000 of costs (including legal and accounting fees) related to the acquisition. Goodwill of $893,000 recognized as a part of the acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $1.8 million in connection with the transaction. The acquisition of Integrated, which generated approximately $20.0 million in sales for its fiscal year ended December 31, 2018, created additional capabilities within the Company’s high color commercial print product line. The following is a summary of the preliminary purchase price allocation for Integrated (in thousands):
Accounts receivable |  | $ | 1,971 |
Inventories |  |  | 1,322 |
Other assets |  |  | 72 |
Property, plant & equipment |  |  | 3,828 |
Right-of-use asset |  |  | 2,041 |
Customer lists |  |  | 896 |
Trademarks |  |  | 896 |
Non-compete |  |  | 25 |
Goodwill |  |  | 893 |
Accounts payable and accrued liabilities |  |  | (1,044 | )
Operating lease liability |  |  | (2,041 | )
|  | $ | 8,859 |
On July 31, 2018, the Company issued an aggregate of 829,126 shares of common stock to the former stockholders of Wright Business Forms, Inc., d/b/a Wright Business Graphics (“Wright”), as partial consideration for the acquisition by the Company of all of the outstanding equity interests of Wright pursuant to the Agreement and Plan of Merger, dated July 16, 2018 (the “Merger Agreement”). The Company shares issued to the former stockholders of Wright represented aggregate consideration under the Merger Agreement of approximately $16.2 million at the time of issuance. An additional $19.7 million was paid in cash to the stockholders of Wright, subject to a final working capital adjustment, and $2.6 million was paid to pay-off Wright’s outstanding debt. Since the acquisition, the Company has incurred approximately $0.2 million of costs (including legal and accounting fees) related to the acquisition. These costs were recorded in selling, general and administrative expenses. The goodwill recognized as a part of this merger is not deductible for tax purposes. Wright is a printing company which produces forms, pressure seal, packaging, direct mail, checks, statement processing and commercial printing and sells mainly through distributors and resellers. Wright is headquartered in Portland, Oregon and has additional locations in Washington and California. Wright, which generated approximately $58.0 million in sales for its fiscal year ended March 31, 2018, continues to operate under its brand names. The purchase price of Wright was as follows (in thousands):
Ennis shares of common stock |  | $ | 16,218 |
Cash |  |  | 22,653 |
Purchase price of Wright Business Graphics |  | $ | 38,871 |
The following is a summary of the preliminary purchase price allocation for Wright (in thousands):
Accounts receivable |  | $ | 5,220 |
Prepaid expenses |  |  | 427 |
Inventories |  |  | 4,365 |
Other assets |  |  | 88 |
Property, plant & equipment |  |  | 10,331 |
Non-compete |  |  | 447 |
Customer lists |  |  | 12,900 |
Trade names |  |  | 3,830 |
Goodwill |  |  | 11,031 |
Accounts payable and accrued liabilities |  |  | (4,226 | )
Deferred income taxes |  |  | (5,542 | )
|  | $ | 38,871 |
The results of operations for Wright, Integrated and Flesh are included in the Company’s consolidated financial statements from the respective dates of acquisition. The following table sets forth certain operating information on a pro forma basis as though all Wright, Integrated and Flesh operations had been acquired as of March 1, 2018, after the estimated impact of adjustments such as amortization of intangible assets, depreciation expense and interest expense and related tax effects (in thousands, except per share amounts).
|  | Three months ended |  |  | Six months ended |
|  | August 31, |  |  | August 31, |
|  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Pro forma net sales |  | $ | 112,142 |  |  | $ | 120,542 |  |  | $ | 228,278 |  |  | $ | 240,597 |
Pro forma net earnings |  |  | 8,684 |  |  |  | 10,096 |  |  |  | 18,252 |  |  |  | 20,001 |
Pro forma earnings per share - diluted |  |  | 0.33 |  |  |  | 0.39 |  |  |  | 0.70 |  |  |  | 0.78 |
The pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the period presented. On April 30, 2018, the Company acquired the assets of Allen-Bailey Tag & Label, a tag and label operation located in New York, for $4.7 million in cash plus the assumption of trade payables, subject to a working capital adjustment. In addition, contingent consideration of up to $500,000 is payable to the sellers if certain sales levels are maintained over the next three years. Management considers this acquisition to be immaterial.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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