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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended November 30, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Transition Period from to

Commission File Number 1-5807

ENNIS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Texas		75-0256410
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2441 Presidential Pkwy., Midlothian, Texas		76065
(Address of Principal Executive Offices)		(Zip code)

Registrant’s Telephone Number, Including Area Code: (972) 775-9801

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common Stock, par value $2.50 per share

    EBF

    New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 3, 2025, there were 26,012,603 shares of the Registrant’s common stock outstanding.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2024

TABLE OF CONTENTS


PART I: FINANCIAL INFORMATION

	Item 1. Condensed Consolidated Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets at November 30, 2024 and February 29, 2024	3

	Condensed Consolidated Statements of Operations for the three and nine months ended November 30, 2024 and November 30, 2023	5

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended November 30, 2024 and November 30, 2023	6

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended November 30, 2024 and November 30, 2023	7

	Condensed Consolidated Statements of Cash Flows for the three and nine months ended November 30, 2024 and November 30, 2023	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	30

	Item 4. Controls and Procedures	30

PART II: OTHER INFORMATION

	Item 1. Legal Proceedings	30

	Item 1A. Risk Factors	30

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	31

	Item 3. Defaults Upon Senior Securities	31

	Item 4. Mine Safety Disclosures	31

	Item 5. Other Information	31

	Item 6. Exhibits	31

SIGNATURES		32

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ENNIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands)


	November 30,		February 29,
	2024		2024
Assets
Current assets
Cash	$	55,704	$	81,597
Short-term investments		12,862		29,325
Accounts receivable, net		40,255		47,209
Inventories, net		39,379		40,037
Prepaid expenses		2,746		2,168
Prepaid income taxes		1,469		1,046
Total current assets		152,415		201,382
Property, plant and equipment
Plant, machinery and equipment		157,749		160,305
Land and buildings		67,772		67,121
Computer equipment and software		10,589		10,680
Other		3,996		4,124
Total property, plant and equipment		240,106		242,230
Less accumulated depreciation		186,911		187,265
Property, plant and equipment, net		53,195		54,965
Operating lease right-of-use assets, net		11,124		9,827
Goodwill		94,349		94,349
Intangible assets, net		34,532		38,327
Net pension asset		80		80
Other assets		360		260
Total assets	$	346,055	$	399,190

See accompanying notes to condensed consolidated financial statements.

ENNIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS-Continued

(unaudited, in thousands, except for par value and share amounts)


	November 30,			February 29,
	2024			2024
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	12,077		$	11,846
Accrued expenses		15,578			17,541
Current portion of operating lease liabilities		4,664			4,414
Total current liabilities		32,319			33,801
Deferred income taxes		9,377			9,305
Operating lease liabilities, net of current portion		6,161			5,160
Other liabilities		502			1,083
Total liabilities		48,359			49,349
Shareholders’ equity
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443 shares at November 30, 2024 and February 29, 2024		75,134			75,134
Additional paid-in capital		125,212			126,253
Retained earnings		182,140			236,196
Accumulated other comprehensive loss:
Minimum pension liability, net of taxes		(12,804	)		(13,019	)
Treasury stock		(71,986	)		(74,723	)
Total shareholders’ equity		297,696			349,841
Total liabilities and shareholders' equity	$	346,055		$	399,190

See accompanying notes to condensed consolidated financial statements.

ENNIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except share and per share amounts)


	Three months ended						Nine months ended
	November 30,						November 30,
	2024			2023			2024			2023
Net sales	$	99,771		$	104,621		$	301,917		$	322,675
Cost of goods sold		70,522			74,090			211,985			225,004
Gross profit		29,249			30,531			89,932			97,671
Selling, general and administrative		16,341			17,410			50,068			54,094
(Gain) loss from disposal of assets		(138	)		1			(95	)		53
Income from operations		13,046			13,120			39,959			43,524
Other income (expense)
Interest income		1,390			1,020			4,118			2,714
Other, net		(361	)		(324	)		(1,044	)		(979	)
Total other income (expense)		1,029			696			3,074			1,735
Earnings before income taxes		14,075			13,816			43,033			45,259
Income tax expense		3,871			3,910			11,834			12,808
Net earnings	$	10,204		$	9,906		$	31,199		$	32,451
Weighted average common shares outstanding
Basic		26,013,892			25,894,578			26,028,596			25,826,691
Diluted		26,088,957			26,083,301			26,192,008			25,991,567
Earnings per share
Basic	$	0.39		$	0.38		$	1.20		$	1.26
Diluted	$	0.39		$	0.38		$	1.19		$	1.25

See accompanying notes to condensed consolidated financial statements.

ENNIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited, in thousands)


	Three months ended				Nine months ended
	November 30,				November 30,
	2024		2023		2024		2023
Net earnings	$	10,204	$	9,906	$	31,199	$	32,451
Adjustment to pension, net of taxes		371		360		215		1,080
Comprehensive income	$	10,575	$	10,266	$	31,414	$	33,531

See accompanying notes to condensed consolidated financial statements.

ENNIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited, in thousands, except share and per share amounts)


											Accumulated
					Additional						Other
	Common Stock				Paid-in			Retained			Comprehensive			Treasury Stock
	Shares		Amount		Capital			Earnings			Income (Loss)			Shares			Amount			Total
Balance August 31, 2024		30,053,443	$	75,134	$	124,315		$	244,235		$	(13,175	)		(4,091,256	)	$	(72,140	)	$	358,369
Net earnings		—		—		—			10,204			—			—			—			10,204
Adjustment to pension, net of deferred tax of $124		—		—		—			—			371			—			—			371
Dividends paid ($2.75 per share)		—		—		—			(72,299	)		—			—			—			(72,299	)
Stock based compensation		—		—		877			—			—			—			—			877
Exercise of stock options and restricted stock		—		—		20			—			—			8,749			154			174
Common stock repurchases		—		—		—			—			—			—			—			—
Balance November 30, 2024		30,053,443	$	75,134	$	125,212		$	182,140		$	(12,804	)		(4,082,507	)	$	(71,986	)	$	297,696

Balance February 29, 2024		30,053,443	$	75,134	$	126,253		$	236,196		$	(13,019	)		(4,250,226	)	$	(74,723	)	$	349,841
Net earnings		—		—		—			31,199			—			—			—			31,199
Adjustment to pension, net of deferred tax of $72		—		—		—			—			215			—			—			215
Dividends paid ($3.25 per share)		—		—		—			(85,255	)		—			—			—			(85,255	)
Stock based compensation		—		—		3,350			—			—			—			—			3,350
Exercise of stock options and restricted stock		—		—		(4,391	)		—			—			259,642			4,565			174
Common stock repurchases		—		—		—			—			—			(91,923	)		(1,828	)		(1,828	)
Balance November 30, 2024		30,053,443	$	75,134	$	125,212		$	182,140		$	(12,804	)		(4,082,507	)	$	(71,986	)	$	297,696

Balance August 31, 2023		30,053,443	$	75,134	$	126,440		$	229,082		$	(13,384	)		(4,220,210	)	$	(74,126	)	$	343,146
Net earnings		—		—		—			9,906			—			—			—			9,906
Adjustment to pension, net of deferred tax of $120		—		—		—			—			360			—			—			360
Dividends paid ($0.25 per share)		—		—		—			(6,469	)		—			—			—			(6,469	)
Stock based compensation		—		—		1,041			—			—			—			—			1,041
Exercise of stock options and restricted stock		—		—		(346	)		—			—			(666	)		(11	)		(357	)
Balance November 30, 2023		30,053,443	$	75,134	$	127,135		$	232,519		$	(13,024	)		(4,220,876	)	$	(74,137	)	$	347,627

Balance February 28, 2023		30,053,443	$	75,134	$	125,887		$	219,459		$	(14,104	)		(4,266,835	)	$	(74,944	)	$	331,432
Net earnings		—		—		—			32,451			—			—			—			32,451
Adjustment to pension, net of deferred tax of $359		—		—		—			—			1,080			—			—			1,080
Dividends paid ($0.75 per share)		—		—		—			(19,391	)		—			—			—			(19,391	)
Stock based compensation		—		—		2,055			—			—			—			—			2,055
Exercise of stock options and restricted stock		—		—		(807	)		—			—			45,959			807			—
Balance November 30, 2023		30,053,443	$	75,134	$	127,135		$	232,519		$	(13,024	)		(4,220,876	)	$	(74,137	)	$	347,627

See accompanying notes to condensed consolidated financial statements.

ENNIS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Nine months ended
	November 30,
	2024			2023
Cash flows from operating activities:
Net earnings	$	31,199		$	32,451
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		6,703			7,465
Amortization of intangible assets		5,807			5,830
(Gain) loss from disposal of assets		(95	)		53
Amortization of discount on short-term investments		(944	)		(102	)
Bad debt expense, net of recoveries		152			373
Stock based compensation		3,350			2,055
Net pension expense		1,488			1,439
Changes in operating assets and liabilities, net of the effects of acquisitions
Accounts receivable		8,147			8,228
Prepaid expenses and income taxes		(1,001	)		(4,126	)
Inventories		2,484			6,828
Cash paid to pension plan		(1,200	)		—
Other assets		—			81
Accounts payable and accrued expenses		(2,365	)		(7,763	)
Other liabilities		(628	)		(312	)
Net cash provided by operating activities		53,097			52,500
Cash flows from investing activities:
Capital expenditures		(4,250	)		(4,884	)
Purchase of businesses, net of cash acquired		(5,537	)		(19,907	)
Purchase of short-term investments		(10,093	)		(18,393	)
Maturity of short-term investments		27,500			—
Proceeds from disposal of plant and property		299			9
Net cash provided by (used in) investing activities		7,919			(43,175	)
Cash flows from financing activities:
Dividends paid		(85,255	)		(19,391	)
Common stock repurchases		(1,828	)		—
Proceeds from exercise of stock options		174			—
Net cash used in financing activities		(86,909	)		(19,391	)
Net change in cash		(25,893	)		(10,066	)
Cash at beginning of period		81,597			93,968
Cash at end of period	$	55,704		$	83,902

See accompanying notes to condensed consolidated financial statements.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

1. Significant Accounting Policies and General Matters

Basis of Presentation

These unaudited condensed consolidated financial statements of Ennis, Inc. and its subsidiaries (collectively referred to as the “Company,” “Registrant,” “Ennis,” or “we,” “us,” or “our”) for the period ended November 30, 2024 have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP') and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 29, 2024, from which the accompanying consolidated balance sheet at February 29, 2024 was derived. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial information have been included and are of a normal recurring nature. The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the disclosure and reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis, including those related to bad debts, inventory valuations, property, plant and equipment, intangible assets, pension plan, accrued liabilities, and income taxes. The Company bases estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year.

Recent Accounting Pronouncements

Issued Accounting Standards Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which aims to improve disclosures about a public entity’s reportable segments. This update addresses requests from investors for more detailed information about a reportable segment’s expenses in order to improve understanding of a public entity’s business activities, overall performance, and potential future cash flows. The amendments in this ASU include a requirement for public business entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and are included within each reported measure of segment profit or loss. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years starting after December 15, 2024. This ASU must be applied retrospectively to all prior periods presented. Management expects the adoption of the pronouncement will result in additional segment disclosures in its Consolidated Financial Statements for fiscal year 2025.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in a public entity’s income tax rate reconciliation table and other disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024 (fiscal 2026 for the Company), but early adoption is permitted. This ASU should be applied on a prospective basis, although retrospective application is permitted. The Company is assessing the effect of this update on its Consolidated Financial Statements and related disclosures.

Proposed Accounting Standards

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance requires disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

2. Revenue

Nature of Revenues

Substantially all of the Company’s revenue is derived from the sale of commercial printing products in the continental United States of America and is primarily recognized at a point in time in an amount that reflects the consideration the Company expects to be provided in exchange for those goods. Revenue from the sale of commercial printing products, including shipping and handling fees billed to customers, is recognized when the performance obligation is met upon the transfer of control to the customer, which is generally upon shipment to the customer when the terms of the sale are freight on board ("FOB") shipping point, or, to a lesser extent, upon delivery to the customer if the terms of the sale are FOB destination. Net sales represent gross sales invoiced to customers, less certain related charges, including sales tax, discounts, returns and other allowances. Returns, discounts and other allowances have historically been insignificant.

In a small number of cases and upon customer request, the Company prints and stores commercial printing product for customer specified future delivery, generally within the same year as the product is manufactured. In this case, revenue is recognized upon the transfer of control when manufacturing is complete and title and risk of ownership is passed to the customer. Storage revenue for certain customers may be recognized over time rather than at a point in time. As of the date of this report, the amount of storage revenue is not significant to the Company’s condensed consolidated financial statements. The output method for measure of progress is determined to be appropriate. The Company recognizes storage revenue in the amount for which it has the right to invoice for revenue that is recognized over time and for which it demonstrates that the invoiced amount corresponds directly with the value to the customer for the performance completed to date.

The Company does not disaggregate revenue and operates in one reportable segment consisting of commercial printed product revenue, which is reported as net sales on the condensed consolidated statements of operations. The Company does not have material contract assets and contract liabilities as of November 30, 2024.

Significant Judgments

Generally, the Company’s contracts with customers are comprised of a written quote and customer purchase order or statement of work, and governed by the Company’s trade terms and conditions. In certain instances, it may be further supplemented by separate pricing agreements and customer incentive arrangements, which typically only affect the contract’s transaction price. Contracts do not contain a significant financing component as payment terms on invoiced amounts are typically between 30 to 90 days, based on the Company’s credit assessment of individual customers, as well as industry expectations. Product returns are not significant as the bulk of our sales are custom in nature.

From time to time, the Company may offer incentives to its customers considered to be variable consideration including volume-based rebates or early payment discounts. Customer incentives considered to be variable consideration are recorded as a reduction to revenue as part of the transaction price at contract inception when there is a basis to reasonably estimate the amount of the incentive and only to the extent that it is probable that a significant reversal of any incremental revenue will not occur. Customer incentives are allocated entirely to the single performance obligation of transferring printed product to the customer and are not considered material.

For customers with terms of FOB shipping point, the Company accounts for shipping and handling activities performed after the control of the printed product has been transferred to the customer as a fulfillment cost. The Company accrues for the costs of shipping and handling activities if revenue is recognized before contractually agreed shipping and handling activities occur.

The Company’s contracts with customers are generally short-term in nature. Accordingly, the Company does not disclose the value of unsatisfied performance obligations nor the timing of revenue recognition.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

3. Short-term Investments and Fair Value Measurements

Short-term investments are securities with original maturities of greater than three months but less than twelve months and are comprised of U.S. Treasury Bills. The Company determines the classification of these securities as trading, available for sale or held to maturity at the time of purchase and re-evaluates these determinations at each balance sheet date. The Company's short-term investments are classified as held-to-maturity for the period presented as it has the positive intent and ability to hold these investments to maturity. The Company's held-to-maturity investments are stated at amortized cost with a zero credit loss allowance because the probability of default is virtually zero due to the high credit rating, long history of no credit losses and the widely recognized risk free nature of these investments.

Amortized cost and estimated fair value of investment securities classified as held-to-maturity were as follows at November 30, 2024 and February 29, 2024 (in thousands):


	November 30, 2024
			Gross		Gross
	Cost or		Unrealized		Unrealized		Estimated
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
November 30, 2024
Investment securities due in less than one year	$	12,862	$	9	$	—	$	12,871

February 29, 2024
Investment securities due in less than one year	$	29,325	$	—	$	45	$	29,280

The Company’s short-term investments in investment securities are Level 1 fair value measure. The Company did not hold any Level 2 or 3 financial assets or liabilities measured at fair value on a recurring basis. There were no transfers between levels during the three and nine months ended November 30, 2024.

4. Accounts Receivable and Allowance for Credit Losses

Accounts receivable are reduced by an allowance for an estimate of amounts that are uncollectible. Substantially all of the Company’s receivables are due from customers in North America. The Company extends credit to its customers based upon its evaluation of the following factors: (i) the customer’s financial condition, (ii) the amount of credit the customer requests, and (iii) the customer’s actual payment history (which includes disputed invoice resolution). The Company does not typically require its customers to post a deposit or supply collateral. The Company’s allowance for credit losses is based on an analysis that estimates the amount of its total customer receivable balance that is not collectible. This analysis includes assessing a default probability to customers’ receivable balances, which is influenced by several factors including (i) current market conditions, (ii) periodic review of customer credit worthiness, and (iii) review of customer receivable aging and payment trends.

The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance in the period the payment is received. Credit losses from continuing operations have consistently been within management’s expectations.

The following table presents the activity in the Company’s allowance for credit losses (in thousands):


	Three months ended						Nine months ended
	November 30,						November 30,
	2024			2023			2024			2023
Balance at beginning of period	$	1,776		$	1,866		$	1,707		$	1,710
Bad debt expense, net of recoveries		(25	)		138			152			373
Accounts written off		(33	)		(46	)		(141	)		(125	)
Balance at end of period	$	1,718		$	1,958		$	1,718		$	1,958

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

The following table summarizes the components of accounts receivable as of the dates indicated (in thousands):


	November 30,		February 29,
	2024		2024
Trade receivables, net of allowance for credit losses	$	34,389	$	39,665
Vendor rebates		1,442		3,109
Note receivable		4,395		4,435
Other		29		—
	$	40,255	$	47,209

The note receivable relates to the sale of an unused manufacturing facility and was originally structured to be paid in 12 consecutive monthly installments, with a fixed interest rate of 5.95% per annum and a balloon payment due upon completion of the final payment. In accordance with the note receivable agreement, the note receivable has been extended beyond the one-year maturity date due to regulatory delays in clearing the facility for third-party financing. The note receivable continues to be classified as current as the Company believes the regulatory delays will be resolved in the next twelve months.

5. Inventories

With the exception of approximately 8.4% and 7.0% of its inventories valued at the lower of last-in first-out ("LIFO") for the periods ended November 30, 2024 and February 29, 2024, respectively, the Company values its inventories at the lower of first-in, first-out ("FIFO") cost or net realizable value. The Company regularly reviews inventories on hand, using specific aging categories, and writes down the carrying value of its inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage. In assessing the ultimate realization of its inventories, the Company is required to make judgments as to future demand requirements. As actual future demand or market conditions may vary from those projected by the Company, adjustments to inventories may be required. Reserves for excess and obsolete inventory at November 30, 2024 and February 29, 2024 were $1.8 million and $1.8 million, respectively.

The following table summarizes the components of inventories at the different stages of production as of the dates indicated (in thousands):


	November 30,		February 29,
	2024		2024
Raw material	$	21,111	$	21,764
Work-in-process		4,702		5,621
Finished goods		13,566		12,652
	$	39,379	$	40,037

6. 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 with certain limited exceptions permitted under US GAAP. 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 in the period incurred.

Acquisition of Printing Technologies

On June 26, 2024, the Company acquired the assets and business of Printing Technologies, Inc. ("PTI"), which is based in Indianapolis, Indiana, for approximately $5.5 million in cash. The Company performed an allocation of the total estimated consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on the estimated fair values using the information available as of the acquisition date. The Company recorded intangible assets with definite lives of approximately $2.0 million in connection with the transaction, which are deductible for tax purposes. The acquisition

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

of PTI strengthens our production capabilities and diversifies our product offerings to enable us to better serve our broad customer base.

The following table summarizes the Company's purchase price allocation for PTI subsequent to the acquisition date (in thousands):


Accounts receivable	$	1,339
Inventories		1,826
Other assets		100
Right-of-use asset		847
Property, plant and equipment		887
Intangibles		2,012
Operating lease liability		(847	)
Accounts payable and accrued liabilities		(633	)
Acquisition price	$	5,531

Acquisition of Eagle Graphics and Diamond Graphics

On October 11, 2023, the Company acquired the assets and business of Eagle Graphics, Inc. ("Eagle"), which is based in Annville, Pennsylvania, and Diamond Graphics, Inc. ("Diamond"), which is based in Bensalem, Pennsylvania, for approximately $7.9 million in cash. The Company performed an allocation of the total estimated consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on the estimated fair values prepared by management using the information available as of the acquisition date. All goodwill of $0.2 million recognized as a part of this acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $0.8 million in connection with the transaction, which are also deductible for tax purposes. The acquisition of Eagle and Diamond strengthens our production capabilities to serve our customers in the Northeast United States.

The following table summarizes the Company's purchase price allocation for Eagle and Diamond as of the acquisition date (in thousands):


Accounts receivable	$	838
Inventories		917
Property, plant and equipment		5,304
Goodwill and intangibles		971
Accounts payable and accrued liabilities		(159	)
Acquisition price	$	7,871

Acquisition of UMC Print

On June 2, 2023, the Company acquired the assets and business of UMC Print ("UMC"), which is based in Overland Park, Kansas, for approximately $7.5 million in cash plus the assumption of trade payables of approximately $0.8 million. The Company performed an allocation of the total estimated consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on the estimated fair values prepared by management using the information available as of the acquisition date. In January 2024, the Company received an indemnity claim from escrow related to a piece of equipment in the amount of $0.2 million. All goodwill of $2.2 million recognized as a part of this acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $2.7 million in connection with the transaction, which are also deductible for tax purposes. The acquisition of UMC brings the Company expanded commercial print capabilities serving customers throughout the Midwest United States.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

The following table summarizes the Company's purchase price allocation for UMC as of the acquisition date (in thousands):


Cash	$	758
Accounts receivable		1,839
Inventories		553
Property, plant and equipment		2,137
Goodwill and intangibles		2,971
Accounts payable and accrued liabilities		(789	)
Acquisition price	$	7,469

Acquisition of Stylecraft Printing

On May 23, 2023, the Company acquired the real estate and operations of Stylecraft Printing Company ("Stylecraft"), which is based in Canton, Michigan, for $5.0 million plus the assumption of trade payables. The Company performed an allocation of the total estimated consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on their estimated fair values using the information available as of the acquisition date. All goodwill of $0.2 million recognized as a part of this acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $0.3 million in connection with the transaction, which are also deductible for tax purposes. The acquisition of Stylecraft expands the Company's product lines and footprint specializing in business forms, integrated products and commercial printing.

The following table summarizes the Company's purchase price allocation for Stylecraft as of the acquisition date (in thousands):


Accounts receivable	$	554
Inventories		849
Right-of-use asset		28
Property, plant and equipment		3,160
Goodwill and intangibles		476
Operating lease liability		(28	)
Accounts payable and accrued liabilities		(12	)
Acquisition price	$	5,027

The results of operations for Stylecraft, UMC, Eagle and PTI 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 each acquisition had occurred as of the beginning of the comparable prior period (that is, March 1, 2023). The following pro forma information includes 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				Nine months ended
	November 30, 2024		November 30, 2023		November 30, 2024		November 30, 2023
Pro forma net sales	$	99,771	$	108,830	$	306,582	$	344,268
Pro forma net earnings		10,204		10,235		31,274		34,543
Pro forma earnings per share - diluted	$	0.39	$	0.39	$	1.19	$	1.33

The pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the full duration of the comparative periods presented.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

7. Leases

The Company leases certain of its facilities and equipment under operating leases, which are recorded as right-of-use assets and lease liabilities. The Company’s leases generally have terms of 1 – 5 years, with certain leases including renewal options to extend the leases for additional periods at the Company’s discretion. At lease inception, all renewal options reasonably certain to be exercised are considered when determining the lease term. The Company currently does not have leases that include options to purchase or provisions that would automatically transfer ownership of the leased property to the Company.

Operating lease expense is recognized on a straight-line basis over the lease term, and variable lease payments are expensed as incurred. The Company had no material variable lease costs for the three and nine months ended November 30, 2024 and 2023.

The Company determines whether a contract is or contains a lease at the inception of the contract. A contract will be deemed to be or contain a lease if the contract conveys the right to control and directs the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date, as rates are not implicitly stated in most leases.

Components of lease expense for the three and nine months ended November 30, 2024 and 2023 were as follows (in thousands):


	Three months ended				Nine months ended
	November 30, 2024		November 30, 2023		November 30, 2024		November 30, 2023
Operating lease cost	$	1,412	$	1,390	$	4,148	$	4,241

Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,431	$	1,394	$	4,210	$	4,256

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	4,052	$	214	$	5,547	$	993


Weighted Average Remaining Lease Terms
Operating leases	3.0 Years	3.0 Years

Weighted Average Discount Rate
Operating leases	4.56%	4.03%

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

Future minimum lease commitments under non-cancelable operating leases for each of the fiscal years ending are as follows (in thousands):


	Operating
	Lease
	Commitments
2025 (remaining 3 months)	$	947
2026		4,807
2027		3,104
2028		1,666
2029		824
2030		297
Total future minimum lease payments	$	11,645
Less imputed interest		820
Present value of lease liabilities	$	10,825

8. Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets of acquired businesses and is not amortized. Goodwill and other intangible assets are tested for impairment at a reporting unit level. The annual impairment test of goodwill and intangible assets is performed as of December 1 of each fiscal year.

The Company uses qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit exceeds its carrying amount, including goodwill. Some of the qualitative factors considered in applying this test include consideration of macroeconomic conditions, industry and market conditions, cost factors affecting the business, overall financial performance of the business, and performance of the share price of the Company.

If qualitative factors are not deemed sufficient to conclude that the fair value of the reporting unit more likely than not exceeds its carrying value, then a one-step approach is applied in making an evaluation. The evaluation utilizes multiple valuation methodologies, including a market approach (market price multiples of comparable companies) and an income approach (discounted cash flow analysis). The computations require management to make significant estimates and assumptions, including, among other things, selection of comparable publicly traded companies, the discount rate applied to future earnings reflecting a weighted average cost of capital, and earnings growth assumptions. A discounted cash flow analysis requires management to make various assumptions about future sales, operating margins, capital expenditures, working capital, and growth rates. If the evaluation results in the fair value of the goodwill for the reporting unit being lower than the carrying value, an impairment charge is recorded.

Definite-lived intangible assets are amortized over their estimated useful lives and tested for impairment if events or changes in circumstances indicate that the asset may be impaired.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

The carrying amount and accumulated amortization of the Company’s intangible assets at each balance sheet date are as follows (in thousands):


	Weighted
	Average
	Remaining		Gross
	Life		Carrying		Accumulated
As of November 30, 2024	(in years)		Amount		Amortization		Net
Definite-lived intangible assets
Trademarks and trade names		7.1	$	30,911	$	15,991	$	14,920
Customer lists		4.8		82,653		63,558		19,095
Non-compete		1.1		256		203		53
Technology		5.0		650		186		464
Total		5.8	$	114,470	$	79,938	$	34,532


As of February 29, 2024
Definite-lived intangible assets
Trademarks and trade names		7.6	$	29,817	$	14,366	$	15,451
Customer lists		5.1		81,753		59,473		22,280
Non-compete		1.6		238		176		62
Technology		5.8		650		116		534
Total		6.1	$	112,458	$	74,131	$	38,327

Aggregate amortization expense was $1.9 million and $5.8 million for the three and nine months ended November 30, 2024 and $1.9 million and $5.8 million for the three and nine months ended November 30, 2023.

The Company’s estimated amortization expense for the current and next five fiscal years is as follows (in thousands):


2025 (remaining)	$	1,981
2026	$	7,158
2027	$	6,066
2028	$	4,569
2029	$	3,934
2030	$	2,719

Changes in the net carrying amount of goodwill as of the dates indicated are as follows (in thousands):


Balance as of March 1, 2023	$	91,819
Goodwill acquired		2,530
Balance as of February 29, 2024		94,349
Goodwill acquired		—
Balance as of November 30, 2024	$	94,349

During fiscal year 2024, $2.5 million was added to goodwill related to the acquisition of Stylecraft, UMC, Eagle and Diamond.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

9. Accrued Expenses

The following table summarizes the components of accrued expenses as of the dates indicated (in thousands):


	November 30,		February 29,
	2024		2024
Employee compensation and benefits	$	11,507	$	13,714
Taxes other than income		1,561		1,341
Accrued legal and professional fees		522		510
Accrued utilities		108		108
Accrued acquisition related obligations		—		200
Income taxes payable		654		626
Other accrued expenses		1,226		1,042
	$	15,578	$	17,541

10. Credit Facility

As of November 30, 2024, the Company had $0.3 million outstanding under a standby letters of credit arrangement secured by a cash collateral bank account.

11. Shareholders’ Equity

The Company’s board of directors (the "Board") has authorized the repurchase of the Company’s outstanding common stock through a stock repurchase program, which authorized amount is currently up to $60.0 million in the aggregate. Under the repurchase program, purchases may be made from time to time in the open market or through privately negotiated transactions depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be made in accordance with applicable insider trading and other securities laws and regulations. These repurchases may be commenced or suspended at any time or from time to time without prior notice.

During the nine months ended November 30, 2024, the Company repurchased 40 shares of common stock unrelated to the stock repurchase program at an average price of $22.62. During the nine month period ended November 30, 2024, the Company repurchased 91,883 shares of common stock under the program at an average price of $19.79. The Company did not repurchase, under the program, any shares for the three months ended November 30, 2024 or for the three and nine months ended November 30, 2023. Since the program’s inception in October 2008, there have been 2,334,344 common shares repurchased at an average price of $16.47 per share. As of November 30, 2024, $21.5 million remained available to repurchase shares of the Company’s common stock under the program.

During the quarter, the Company returned $72.3 million to shareholders in dividends which included a special dividend of $2.50 per share.

12. Stock Based Compensation

The Company grants stock options, restricted stock and restricted stock units ("RSUs") to key executives and managerial employees and non-employee directors. Prior to June 30, 2021, the Company had one stock incentive plan, the 2004 Long-Term Incentive Plan of Ennis, Inc., as amended and restated as of May 18, 2008 and was further amended on June 30, 2011 (the "Old Plan"). The Old Plan expired June 30, 2021 and all remaining unused shares expired. Subject to the affirmative vote of the shareholders, the Board adopted the 2021 Long-Term Incentive Plan of Ennis, Inc. (the "New Plan") on April 16, 2021 authorizing 1,033,648 shares of common stock for awards. The New Plan was approved by the shareholders at the Annual Meeting on July 15, 2021 by a majority vote. The New Plan expires June 30, 2031 and all unissued stock will expire on that date. At November 30, 2024, the Company has 227,940 shares of unissued common stock reserved under the New Plan for issuance and uses treasury stock to satisfy option exercises and restricted stock awards.

The Company recognizes compensation expense for stock options and restricted stock grants based on the grant date fair value of the award for stock options, restricted stock grants and RSUs on a straight-line basis over the requisite service period. The estimated

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2024
(unaudited)

number of shares to be achieved for performance based RSUs is updated each reporting period. For the three months ended November 30, 2024 and November 30, 2023, the Company included in selling, general and administrative expenses, compensation expense related to stock-based compensation of $0.9 million and $0.7 million, respectively. For the nine months ended November 30, 2024 and November 30, 2023, the Company included in selling, general and administrative expenses, compensation expense related to stock-based compensation of $3.3 million and $2.0 million, respectively.

Stock Options

The Company had the following stock option activity for the nine months ended November 30, 2024.


						Weighted
				Weighted		Average		Aggregate
	Number			Average		Remaining		Intrinsic
	of Shares			Exercise		Contractual		Value(a)
	(exact quantity)			Price		Life (in years)		(in thousands)
Outstanding at March 1, 2024		52,500		$	19.88		10.0		—
Granted		—			—
Terminated		(2,500	)		19.88
Exercised		(8,749	)		19.88
Outstanding at November 30, 2024		41,251		$	19.88		8.4	$	59.8
Exercisable at November 30, 2024		7,915		$	19.88		8.4	$	11.5

A summary of the status of the Company’s unvested stock options at November 30, 2024 and the changes during the nine months ended November 30, 2024 are presented below:


		Weighted
		Average
	Number	Grant Date
	of Options	Fair Value
Unvested at March 1, 2024	52,500	2.47
New grants	—	—
Vested	(17,497)	2.47
Forfeited	(1,667)	2.47
Unvested at November 30, 2024	33,336	2.47

As of November 30, 2024, there was $0.1 million of unrecognized compensation cost related to unvested stock options granted under the Plan. The weighted average remaining requisite service period of the unvested stock options was 1.4 years.

Restricted Stock

The following activity occurred with respect to the Company’s restricted stock awards for the nine months ended November 30, 2024:


					Weighted
					Average

ENNIS, INC. 10-Q