Leases

3 Months Ended

May 31, 2025

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 months ended May 31, 2025 and 2024.

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 months ended May 31, 2025 and 2024 were as follows (in thousands):


	Three months ended
	May 31, 2025		May 31, 2024
Operating lease cost	$	1,431	$	1,347

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	$	1,446	$	1,369

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	2,299	$	648


Weighted Average Remaining Lease Terms
Operating leases	3.0 Years	2.4 Years

Weighted Average Discount Rate
Operating leases	4.39%	4.16%

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


	Operating
	Lease
	Commitments
2026 (remaining 9 months)	$	3,384
2027		3,675
2028		2,254
2029		1,391
2030		477
2031		12
Total future minimum lease payments	$	11,193
Less imputed interest		676
Present value of lease liabilities	$	10,517

ENNIS, INC. 10-Q