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

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

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 ~~and posted on its corporate web site, if any,~~ every Interactive Date File required to be submitted ~~and posted~~ 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 ~~and post~~ 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.

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 ~~December 29, 2017,~~September 24, 2021, there were ~~25,416,890~~26,121,463 shares of the Registrant’s common stock outstanding.

UNAUDITED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

1. Significant Accounting Policies and General Matters

Basis of Presentation

These unaudited 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, 2017~~August 31, 2021 have been prepared in accordance with generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles 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 28, ~~2017,~~2021, from which the accompanying consolidated balance sheet at February 28, ~~2017~~2021 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. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the disclosure and reported amounts of assets and liabilities at the date of the 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.~~

~~On May 25, 2016,~~year, especially in light of the ~~Company sold Alstyle Apparel, LLC and its subsidiaries, which constituted~~uncertainties surrounding the ~~Company’s apparel segment (the “Apparel Segment”), to Gildan Activewear Inc. As a result~~impact of ~~this action,~~ the ~~current year and prior year disclosures reflect these operations as discontinued operations.~~novel coronavirus (COVID-19) pandemic.

Recent Accounting Pronouncements

Recently Adopted Accounting Updates

In ~~March 2017,~~December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“~~ASU~~”)ASU” No. ~~2017-07,~~ ~~Compensation-Retirement Benefits~~2019-12, Income Taxes (Topic ~~715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~ (“~~ASU 2017-07~~”). The update requires the service cost component of net benefit costs to be reported in the same line of the income statement as other compensation costs and the other components of net benefit costs (non-service costs) to be presented separately from the service cost component, outside a subtotal of operating income. Additionally, only the service cost component of net benefit costs will be eligible for capitalization. The update is required to be adopted the first quarter of fiscal year 2019 and is required to be retrospectively adopted. The Company is currently evaluating the impact the adoption of ASU 2017-07 will have on its consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment~~Income Taxes (“ASU ~~2017-04~~2019-12”), ~~which simplifies how an entity is required~~as part of its overall simplification initiative to ~~measure goodwill impairment. The amendments in ASU 2017-04 require that goodwill impairment will be measured using~~reduce costs and complexity of applying accounting standards while maintaining or improving the ~~difference between the carrying amount and the fair value~~usefulness of the ~~reporting unit and the loss recognized should not exceed the total amount~~information provided to users of goodwill allocated to that reporting unit. The amendments in ASU 2017-04 should be applied on a prospective basis and are effective for annual or any interim goodwill impairment tests in annual reporting periods beginning after December 15, 2019. The Company adopted ASU 2017-04 on June 1, 2017, which had no impact on the Company’s consolidated financial ~~statements at the time~~statements. Amendments include removal of ~~adoption.~~

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718)~~ (“~~ASU 2016-09~~”), ~~which makes several modifications~~certain exceptions to the ~~accounting for employee share-based payment transactions, including the requirement to recognize the income tax effects~~general principles of ~~awards that vest or settle as income tax expense. The amendments~~Topic 740, Income Taxes, and simplification in several other areas. ASU ~~2016-09 also clarify the presentation of certain components of share-based awards in the statement of cash flows. ASU 2016-09~~2019-12 is effective for annual reporting periods beginning after December 15, ~~2016.~~2020, and interim periods therein. The Company adopted ASU ~~2016-09 in fiscal year 2018 beginning in~~2019-12 as of March ~~of 2017. The~~1, 2021, and the adoption of ~~ASU 2016-09~~this standard did not have a material impact on the Company’s consolidated financial ~~statements and related disclosures.~~statements.

Recently Issued Accounting Updates

In ~~February 2016,~~March 2020, the FASB issued ASU No. ~~2016-02,~~ ~~Leases~~2020-04, Reference Rate Reform (Topic ~~842)~~848): Facilitation of Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides companies with optional guidance, including expedients and exceptions for applying generally accepted accounting principles to contracts and other transactions affected by reference rate reform, such as the London Interbank Offered Rate (“~~ASU 2016-02~~LIBOR”), ~~which requires lessees~~. This new standard was effective upon issuance and generally can be applied to put most leases on the balance sheet but recognize expense on the income statement in a manner similar to current accounting. For lessors, ASU 2016-02 also modifies the classification criteria and the accounting for sales-type and direct financing leases. The standard requires a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements and is effective in the first quarter of fiscal year 2020. Early adoption of ASU 2016-02 is permitted.applicable contract modifications through December 31, 2022. The Company is currently evaluating ~~the~~ASU 2020-04, but does not expect it to have a significant impact ~~the adoption of ASU 2016-02 will have~~ on its consolidated financial statements.

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

6. 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 ~~presented.~~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.

11Operating lease expense is recognized on a straight-line basis over the lease term, and variable lease payments are expensed as incurred. The Company had 0 variable lease costs for the six months ended August 31, 2021 and August 31, 2020.

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 direct 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 BBB Corporate Bond Rate at lease commencement date as rates are not implicitly stated in most leases.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED ~~NOVEMBER 30, 2017~~AUGUST 31, 2021

5. ~~Discontinued Operations~~

~~On May 25, 2016~~Components of lease expense for the ~~Company sold its Apparel Segment to Gildan Activewear Inc. for an all-cash purchase price of $110.0 million, subject to a working capital adjustment, customary indemnification arrangements,~~three and ~~the other terms of the Unit Purchase Agreement dated May 4, 2016.~~

~~The operating results of these discontinued operations only reflect revenues~~six months ended August 31, 2021 and expenses that are directly attributable to the Apparel Segment and that have been eliminated from continuing operations. The following tables show the key components on the sale and discontinued operations related to the Apparel Segment that was completed on May 25, 2016August 31, 2020 were as follows (in thousands):

Sales price

$
110,000

Carrying value of disposed

(130,174
)
Expenses related to sales (1)

(4,365
)
Loss on sale before write-off of foreign currency translation
adjustment

(24,539
)
Write-off of foreign currency translation adjustments

recorded in other comprehensive income

(16,109
)
Loss on sale of sale of discontinued operations

$
(40,648
)


	Three months ended				Six months ended
	August 31, 2021		August 31, 2020		August 31, 2021		August 31, 2020
Operating lease cost	$	1,595	$	1,574	$	3,234	$	3,201

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	$	1,586	$	1,563	$	3,216	$	3,175

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	838	$	56	$	3,441	$	56


~~(1)~~Weighted Average Remaining Lease Terms	~~Includes the termination fee, in the amount of $3.0 million, paid as a result of the termination of a prior purchase agreement for the sale of the Apparel Segment to Alstyle Operations, LLC.~~
Operating leases		4 Years

Weighted Average Discount Rate
Operating leases			3.66	%

Nine months ended

November 30, 2016

Net sales

$
41,038

Income from discontinued operations before income taxes

3,873

Loss on sale of discontinued operations before income taxes

(40,648
)
Loss on discontinued operations before income taxes

(36,775
)
Income tax benefit

(13,214
)
Net loss from discontinued operations

$
(23,561
)

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


	Operating
	Lease
	Commitments
2022 (remaining 6 months)	$	2,598
2023		5,816
2024		4,423
2025		3,655
2026		2,164
2027		765
Thereafter		3
Total future minimum lease payments	$	19,424
Less imputed interest		1,253
Present value of lease liabilities	$	18,171

6. 7. Goodwill and Intangible Assets

~~Beginning March 1, 2017, given~~Goodwill represents the ~~general declining trend line~~excess of ~~print sales, and its expected continuance into~~ the ~~foreseeable future,~~purchase price over the ~~Company elected to treat the recorded~~fair value of ~~trademarks/trade names as no longer being an indefinite-lived asset. As such,~~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 ~~March~~December 1 ~~2017,~~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 ~~Company began amortizing~~fair value of a reporting unit exceeds its carrying amount, including goodwill. Some of the qualitative factors used 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 ~~these assets over their estimated remaining useful life, approximately 17 - 19 years.~~comparable companies) and an income approach (discounted cash flow analysis). The ~~amortization expense associated with this election is expected~~computations require management to ~~increase the Company’s selling, general~~make significant estimates and ~~administrative expense line by approximately $830,000 during fiscal year 2018.~~assumptions, including, among other things,

1213

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED ~~NOVEMBER 30, 2017~~AUGUST 31, 2021

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.

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

	Weighted
	Average								Weighted
	Remaining		Gross						Average
	Life		Carrying		Accumulated				Remaining		Gross
As of November 30, 2017	(in years)		Amount		Amortization		Net
									Life		Carrying		Accumulated
As of August 31, 2021									(in years)		Amount		Amortization		Net
Amortized intangible assets
Trademarks and trade names		16.2	$	19,625	$	2,109	$	17,516		11.4	$	28,107	$	9,313	$	18,794
Customer lists		8.3		58,040		24,884		33,156		6.4		76,424		45,695		30,729
Noncompete		0.1		175		130		45
Non-compete										3.5		877		744		133
Patent		0.3		783		754		29		—		783		783		—
Total		11.0	$	78,623	$	27,877	$	50,746		8.3	$	106,191	$	56,535	$	49,656

As of February 28, 2017
As of February 28, 2021
Amortized intangible assets
Trademarks and trade names		8.0	$	3,642	$	1,234	$	2,408		11.9	$	27,561	$	8,194	$	19,367
Customer lists		8.9		57,347		21,336		36,011		6.8		75,862		42,726		33,136
Noncompete		0.8		175		86		89
Non-compete										3.1		877		668		209
Patent		1.0		783		655		128		—		783		783		—
Total		8.8	$	61,947	$	23,311	$	38,636		8.7	$	105,083	$	52,371	$	52,712

November 30,

February 28,

2017

2017

Non-amortizing intangible assets

Trademarks and trade names

$
—

$
15,291

Aggregate amortization expense for the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016~~August 31, 2020 was ~~$4.6~~$4.2 million and ~~$3.5~~$3.9 million, respectively.

The Company’s estimated amortization expense for the current and next four fiscal years ~~ending in February of the stated fiscal year~~ is as follows (in thousands):

2018

$
5,992

2019

5,558

2020

5,476

2021

5,406

2022

5,363


2022	$	8,077
2023		7,052
2024		7,010
2025		6,835
2026		6,221

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

Balance as of March 1, 2016

$
64,537

Goodwill acquired

6,066

Goodwill impairment

—

Balance as of February 28, 2017

70,603

Goodwill acquired

—

Goodwill impairment

—

Balance as of November 30, 2017

$
70,603


Balance as of March 1, 2020	$	82,527
Goodwill acquired		6,120
Balance as of February 28, 2021		88,647
Goodwill acquired		14
Balance as of August 31, 2021	$	88,661

During ~~the~~ fiscal year ~~ended February 28, 2017, $6.1~~2021, $6.1 million was added to goodwill related to the acquisition of ~~Independent.~~Infoseal.

1314

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED ~~NOVEMBER 30, 2017~~AUGUST 31, 2021

7. ~~Other~~ 8. Accrued Expenses

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

	November 30,		February 28,
		2017		2017	August 31,		February 28,
Accrued taxes	$	140	$	329
						2021		2021
Employee compensation and benefits					$	11,861	$	11,742
Taxes other than income						1,465		467
Accrued legal and professional fees		438		414		329		272
Accrued interest		134		98		84		79
Accrued utilities		111		90		108		90
Accrued acquisition related obligations		759		789		92		164
Accrued credit card fees		127		119
Income taxes payable						1,005		1,528
Other accrued expenses		171		187		1,073		613
	$	1,880	$	2,026	$	16,017	$	14,955

8. 9. Long-Term Debt

~~Long-term debt consisted of the following as of the dates indicated (in thousands):~~

November 30,

February 28,

2017

2017

Revolving credit facility

$
30,000

$
30,000

The Company ~~has entered into~~is party to a Second Amended and Restated Credit Agreement, which has been amended from time to time, pursuant to which a credit facility has been extended to the Company until November 11, 2021(the “Credit Facility”) ~~until August 11, 2020 that~~. The Credit Facility provides the Company and its subsidiaries with up to ~~$100.0~~$100.0 million in revolving credit, as well as a ~~$20.0~~$20.0 million sublimit for the issuance of letters of credit and a ~~$15.0~~$15.0 million sublimit for swing-line loans. Under the Credit Facility, the Company or any of its subsidiaries ~~also~~ can request up to three increases in the aggregate commitments in an aggregate amount not to exceed ~~$50.0~~$50.0 million. Under the Credit Facility: (i) the Company’s consolidated net leverage ratio may not exceed ~~3.00:~~3.00:1.00, (ii) the Company’s fixed charge coverage ratio may not be less than ~~1.25:~~1.25:1.00, and (iii) the Company may make dividends or distributions to shareholders so long as ~~(a)~~(A) no event of default has occurred and is continuing and ~~(b)~~(B) the Company’s net leverage ratio both before and after giving effect to any such dividend or distribution is equal to or less than ~~2.50:~~2.50:1.00. All calculations are made based on U.S. Generally Accepted Accounting Principles existing at the time the Credit Facility was entered into. As of ~~November 30, 2017,~~August 31, 2021, the Company was in compliance with all terms and conditions of the Credit Facility.

The Credit Facility bears interest at ~~the~~ LIBOR ~~rate~~ plus a spread ranging from ~~1.0%~~1.85% to ~~2.0%, which rate was 2.5% (3 month LIBOR + 1.0%) at November 30, 2017 and 1.86% (2 month LIBOR + 1.0%) at February 28, 2017.~~2.5%. The Company had no outstanding long-term debt under the revolving credit line as of August 31, 2021. The rate is determined by ~~our~~the Company’s fixed charge coverage ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). As of ~~November 30, 2017, we~~August 31, 2021, the Company had ~~$30.0 million of borrowings under the revolving credit line and $1.2~~$0.6 million outstanding under standby letters of credit arrangements, leaving approximately ~~$68.8~~$99.4 million in available in borrowing capacity. The Credit Facility is secured by substantially all of ~~our~~the Company’s assets (other than real property), as well as all capital securities of each of ~~our~~the Company’s subsidiaries. The Company is considering the nonrenewal of the credit facility or renewing with a smaller line of credit limit

9. 10. Shareholders’ Equity

The Company’s board of directors (the “Board”) has authorized the repurchase ~~of up to an aggregate of $40.0 million~~ of the Company’s outstanding common stock through a stock repurchase ~~program.~~program, which authorized amount is currently up to $40.0 million in the aggregate. Under the repurchase program, ~~share~~ 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~~six months ended ~~November 30, 2017~~August 31, 2021, the Company ~~under the program, repurchased 191,033~~did 0t repurchase any shares of common stock ~~at an average price of $17.33 per share.~~under the program. Since the program’s inception in October 2008, there have been ~~1,442,236~~1,894,350 common shares repurchased at an average price of ~~$14.99~~$15.91 per share. As of ~~November 30, 2017 there was $18.4~~August 31, 2021, $9.9 million remained available to repurchase shares of the Company’s common stock under the program. ~~Unrelated to the stock repurchase program, the Company purchased 145 shares of its common stock during the nine months ended November 30, 2017.~~

~~ENNIS, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

~~10.~~ ~~Stock Option Plan and~~ 11. 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. ~~At November~~Prior to June 30, ~~2017,~~2021, the Company had one stock ~~option~~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 ~~formerly the 1998 Option and Restricted Stock Plan amended and restated as of May 14, 2008~~ (the “~~Plan~~”“Old Plan”). The Company ~~has 529,408~~

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AUGUST 31, 2021

had 177,436 shares of unissued common stock reserved under the Old Plan for issuance as of ~~November~~May 31, 2021. The Old Plan expired June 30, ~~2017.~~ 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.

The exercise price of each stock option granted under ~~the Plan~~either plan equals a referenced price of the Company’s common stock as reported on the New York Stock Exchange on the date of grant, and an option’s maximum term is ten ~~years.~~years. Stock options and restricted stock may be granted at different times during the year and vest ratably over various periods, from grant date up to five ~~years.~~years. RSUs can be either time vested or vested based upon the attainment of certain performance metrics over a certain time period. Performance conditions generally are tied to attainment of certain financial targets such as return on invested capital, EBITDA or other similar measures. Awards granted under the Old Plan generally have a performance or vesting period of three years from the date of grant. RSUs are eligible to receive tandem dividend equivalent rights that will allow the award holder to receive dividends at the same time other shareholders receive dividends. The Company uses treasury stock to satisfy option exercises and restricted stock awards.

The Company recognizes compensation expense based on the grant date fair value of the award for stock options, ~~and~~ restricted stock grants and RSUs on a straight-line basis over the requisite service period. The estimated number of shares to be achieved for performance based RSUs is updated each reporting period. For the three months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016,~~August 31, 2020, the Company included in selling, general and administrative expenses, compensation expense related to share-based compensation of ~~$0.3~~$0.6 million ~~($0.2~~and $0.4 million, ~~net of tax),~~respectively. For the six months ended August 31, 2021 and ~~$0.3 million ($0.2 million net of tax), respectively,~~August 31, 2020, the Company included in selling, general and administrative ~~expenses. For the nine months ended November 30, 2017 and November 30, 2016, the Company included~~expenses, compensation expense related to share-based compensation of ~~$1.0~~$1.8 million ~~($0.6~~and $0.7 million, ~~net of tax), and $1.0 million ($0.6 million net of tax), respectively, in selling, general, and administrative expenses.~~respectively.

Stock Options

The Company had 0 outstanding vested or unvested stock options at any time during the ~~following stock option activity for the nine~~six months ended ~~November 30, 2017:~~

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, 2017

172,496

$
15.95

4.2

$
223

Granted

—

—

Terminated

—

—

Exercised

—

—

Outstanding at November 30, 2017

172,496

$
15.95

3.5

$
896

Exercisable at November 30, 2017

170,880

$
15.97

3.4

$
884

~~(a)~~

~~Intrinsic value is measured as the excess of fair market value of the Company’s common stock as reported on the New York Stock Exchange over the applicable exercise price.~~

NoAugust 31, 2021 and August 31, 2020. NaN stock options were granted during the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016.~~August 31, 2020.

~~A summary of the stock options exercised and tax benefits realized from stock based compensation is presented below (in thousands):~~

Restricted Stock

Three months ended

Nine months ended

November 30,

November 30,

2017

2016

2017

2016

Total cash received

$
—

$
—

$
—

$
2,910

Income tax benefits

—

—

—

—

Total grant-date fair value

—

—

—

532

Intrinsic value

—

—

—

969

~~ENNIS, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

~~A summary of~~The following activity occurred with respect to the Company’s ~~unvested~~restricted stock ~~options at November 30, 2017 and~~awards for the ~~changes during the nine~~six months ended ~~November 30, 2017 are presented below:~~

Weighted

Average

Number

Grant Date

of Options

Fair Value

Unvested at March 1, 2017

5,073

$
2.41

New grants

—

—

Vested

(3,457
)

2.48

Forfeited

—

—

Unvested at November 30, 2017

1,616

$
2.24

AsAugust 31, 2021 of ~~November 30, 2017, there was approximately $0.8 million of unrecognized compensation cost related to unvested stock options~~which 18,179 shares were granted under the ~~Plan. The weighted average remaining requisite service period of the unvested stock options was 0.4 years.~~New Plan:

~~Restricted Stock~~


				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Outstanding at March 1, 2021		119,729		$	18.90
Granted		51,920			20.31
Terminated		—			—
Vested		(97,362	)		19.77
Outstanding at August 31, 2021		74,287		$	18.73

~~The Company had the following restricted stock grant activity for the nine months ended November 30, 2017:~~

Weighted

Average

Number of

Grant Date

Shares

Fair Value

Outstanding at March 1, 2017

166,546

$
16.35

Granted

74,900

16.30

Terminated

—

—

Vested

(88,105
)

15.91

Outstanding at November 30, 2017

153,341

$
16.58

As of ~~November 30, 2017,~~August 31, 2021, the total remaining unrecognized compensation cost related to unvested restricted stock granted under the Old Plan was approximately ~~$1.8~~$1.2 million. The weighted average remaining requisite service period of the unvested restricted stock awards was 1.7 years.

~~11.~~ Restricted Stock Units

During the six months ended August 31, 2021, 177,977 performance-based RSUs and 44,494 time-based RSUs were granted under the Old Plan. The fair value of the time-based RSUs was estimated based on the fair market value of the Company’s stock on the date of grant of $20.38 per unit. The fair value of the performance-based RSUs, using a Monte Carlo valuation model was $23.17 per unit. The performance measures include a threshold, target and maximum performance level providing the grantees an opportunity to receive more or less shares than targeted depending on actual financial performance. The award will be based on the Company’s return on equity, EBITDA and adjusted for the Company’s Relative Shareholder Return as measured against a defined peer group.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AUGUST 31, 2021

The performance-based RSUs vest on the third anniversary from the date of grant and the time-based RSUs vest ratably over three years from the date of grant.

The following activity occurred with respect to the Company’s restricted stock units for the six months ended August 31, 2021:


	Time-based				Performance-based
			Weighted				Weighted
			Average				Average
	Number of		Grant Date		Number of		Grant Date
	Shares		Fair Value		Shares		Fair Value
Outstanding at March 1, 2021		—	$	—		—	$	—
Granted		44,494		20.38		177,977		23.17
Terminated		—		—		—		—
Vested		—		—		—		—
Outstanding at August 31, 2021		44,494	$	20.38		177,977	$	23.17

As of August 31, 2021, the total remaining unrecognized compensation cost of time-based RSUs was approximately $0.8 million over a weighted average remaining requisite service period of 2.6 years. The total remaining unrecognized compensation of performance-based RSUs was approximately $3.6 million over a weighted average remaining requisite service period of 2.6 years.

12. Pension Plan

The Company and certain subsidiaries have a noncontributory defined benefit retirement plan (the “Pension Plan”), covering approximately ~~20%~~12% of the Company’s aggregate employees. Benefits are based on years of service and the employee’s average compensation for the highest five compensation years preceding retirement or termination.

Pension expense is composed of the following components included in cost of goods sold and selling, general, and administrative expenses in the Company’s consolidated statements of earnings (in thousands):


	Three months ended						Nine months ended						Three months ended						Six months ended
	November 30,						November 30,						August 31,						August 31,
	2017			2016			2017			2016			2021			2020			2021			2020
Components of net periodic benefit cost
Service cost	$	271		$	292		$	812		$	875		$	268		$	318		$	537		$	636
Interest cost		567			593			1,702			1,779			421			439			841			877
Expected return on plan assets		(948	)		(917	)		(2,845	)		(2,749	)		(930	)		(1,018	)		(1,861	)		(2,037	)
Amortization of:
Unrecognized net loss		510			671			1,531			2,012			640			839			1,280			1,679
Net periodic benefit cost	$	400		$	639		$	1,200		$	1,917		$	399		$	578		$	797		$	1,155

~~ENNIS, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

The Company is required to make contributions to the Pension Plan. These contributions are required under the minimum funding requirements of ~~ERISA.~~the Employee Retirement Income Security Act of 1974 (“ERISA”). Due to the enactment of the Highway and Transportation Funding Act (HATFA) in August 2014, plan sponsors can calculate the discount rate used to measure the Pension Plan liability using a ~~25-year~~25-year average of interest rates plus or minus a corridor. The Company’s minimum required contribution to the Pension Plan is ~~zero~~0 for the Pension Plan year ending February 28, ~~2018. However,~~2022. Assuming a stable funding status, the Company ~~made~~would expect to make a cash contribution to the Pension Plan of ~~$3.0~~between $1.5 million and $3.0 million per year. However, changes in actual investment returns or in discount rates could change this amount significantly. At August 31, 2021, we had an unfunded pension liability recorded on ~~December 28, 2017~~our balance sheet of $6.3 million. Management estimates the future lump-sum payments will exceed the settlement threshold resulting in a probable pension settlement charge of approximately $2.3 million. The settlement charges are non-cash charges that accelerate the recognition of unrecognized pension benefit costs, that would have been incurred in subsequent periods, when lump sum payments exceed a threshold of service and interest cost for ~~fiscal year 2018. The Company contributed $3.0 million to~~ the ~~Pension Plan during fiscal year 2017.~~period.

ENNIS, INC. AND SUBSIDIARIES

~~12.~~ NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AUGUST 31, 2021

13.Earnings ~~(loss) per~~Per Share

Basic earnings ~~(loss)~~ per share have been computed by dividing net earnings by the weighted average number of common shares outstanding during the applicable period. Diluted earnings ~~(loss)~~ per share reflect the potential dilution that could occur if stock options or other contracts to issue common shares were exercised or converted into common stock.

For the three months ended November 30, 2017, all options were included in the diluted earnings per share computation because the average fair market value of the Company’s stock exceeded the exercise price of the options. For the nine months ended November 30, 2017, 42,500 shares related to stock options were not included in the diluted earnings per share computation because the exercise price exceeded the average fair market value of the Company’s stock. For the three and nine months ended November 30, 2016, 95,692 and 42,500 shares related to stock options were not included in the diluted earnings per share computation because the exercise price exceeded the average fair market value of the Company’s stock. TheThe following table sets forth the computation for basic and diluted earnings ~~(loss)~~ per share for the periods indicated:


	Three months ended		Six months ended
	August 31,		August 31,
	2021	2020		2021	2020
Basic weighted average common shares outstanding	26,080,121	25,974,412		26,055,056	25,965,370
Effect of dilutive RSUs	90,275	—		91,365	—
Diluted weighted average common shares outstanding	26,170,396	25,974,412		26,146,421	25,965,370
Earnings per share
Net earnings - basic	$0.29	$0.25		$0.57	$0.41
Net earnings - diluted	$0.29	$0.25		$0.57	$0.41
Cash dividends	$0.250	$0.225		$0.475	$0.450

The Company treats unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) as participating securities, which are included in the computation of earnings per share. Our unvested restricted shares participate on an equal basis with common shares; therefore, there is 0 difference in undistributed earnings allocated to each participating security. Accordingly, the presentation above is prepared on a combined basis. NaN options were outstanding for the six months ended August 31, 2021 and August 31, 2020.

Three months ended

Nine months ended

November 30,

November 30,

2017

2016

2017

2016

Basic weighted average common shares outstanding

25,360,452

25,673,824

25,387,389

25,802,658

Effect of dilutive options

33,030

9,789

21,870

15,488

Diluted weighted average common shares outstanding

25,393,482

25,683,613

25,409,259

25,818,146

Earnings (loss) per share - basic and diluted

Earnings per share on continuing operations

$
0.33

$
0.22

$
0.97

$
0.74

Earnings per share on discontinued operations

—

—

—

0.10

Loss per share on sale of discontinued operations

—

—

—

(1.01
)
Loss on discontinued operations

—

—

—

(0.91
)
Net earnings (loss)

$
0.33

$
0.22

$
0.97

$
(0.17
)
Cash dividends

$
0.200

$
0.175

$
0.575

$
2.025

~~ENNIS, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

~~13.~~ 14. Concentrations of Risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and trade receivables. Cash is placed with high-credit quality financial institutions. The Company believes its credit risk with respect to trade receivables is limited due to industry and geographic diversification. As disclosed on the ~~Consolidated Balance Sheets,~~consolidated balance sheets, the Company maintains an allowance for doubtful receivables to cover the Company’s estimate of credit losses associated with accounts receivable.

The Company, for quality and pricing reasons, purchases its paper products from a limited number of suppliers. While other sources may be available to the Company to purchase these products, they may not be available at the cost or at the quality the Company has come to expect.

For the purposes of the ~~Consolidated Statements~~consolidated statements of ~~Cash Flows,~~cash flows, the Company considers cash to include cash on hand and in bank accounts. The Federal Deposit Insurance Corporation insures accounts up to ~~$250,000.~~$250,000. At ~~November 30, 2017,~~August 31, 2021, cash balances included ~~$92.0~~$81.0 million that was not federally insured because it represented amounts in individual accounts above the federally insured limit for each such account. This at-risk amount is subject to fluctuation on a daily basis. While management does not believe there is significant risk with respect to such deposits, ~~we cannot~~no assurance can be ~~assured~~made that wethe Company will not experience losses on the Company’s deposits.

15. Related Party Transactions

The Company leases a facility and sells product to an entity controlled by a member of the Board who was the former owner of Integrated Print & Graphics, a business that the Company acquired. The total right-of-use asset and related lease liability as of August 31, 2021 was $1.3 million and $1.3 million, respectively. During the six months ended August 31, 2021, total lease payments made to, and sales made to, the related party were approximately $0.2 million and $1.5 million, respectively.

16. COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the ongoing COVID-19 outbreak to be a global pandemic. In response to the rapid spread of COVID-19 within the United States, federal, state and local governments have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. Due to the Company’s involvement in healthcare, government, food and beverage and banking, the Company’s plants have been deemed “essential” and, as such, the Company has continued to operate most of its manufacturing facilities, albeit at reduced production

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AUGUST 31, 2021

levels. Due to reduced demand for our ~~deposits.~~products during the pandemic, particularly in our transactional forms, the Company has reduced its workforce by 353 employees, ceased operating in 2 of its owned under-utilized facilities and exited 2 facilities with expiring leases.

~~14.~~ While economic activity has picked up significantly, the Company will continue to monitor projected sales and proactively adjust costs as necessary depending on the impact of surges in the Delta variant to the COVID-19 pandemic. The Company believes the cost cutting measures it has previously implemented will not materially impact its ability to service the increased customer demand as economic conditions continue to improve. As a recent indicator, according to the Bureau of Labor Statistics (“BLS”) total nonfarm payroll employment rose by 235,000 in August, and the unemployment rate declined by 0.2 percentage point to 5.2 percent. So far this year, monthly job growth has averaged 586,000. In August, notable job gains occurred in professional and business services, transportation and warehousing, private education, manufacturing, and other services. Employment in retail trade declined over the month.

17. Subsequent Events

On ~~December 21, 2017,~~September 17, 2021 the Board declared a quarterly ~~cash~~ dividend on the Company's common stock of 2025.0 cents per share, which will be paid on ~~February 9, 2018~~November 5, 2021 to ~~the~~ shareholders of record as of October 8, 2021. The expected payout for this dividend is approximately $6.5 million.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read together with the unaudited consolidated financial statements and related notes of Ennis, Inc. (collectively with its subsidiaries, the “Company,” “Registrant,” “Ennis,” or “we,” “us,” or “our”), included in Part 1, Item 1 of this report, and with the audited consolidated financial statements and the related notes of the Company included in our Annual Report on ~~January 12, 2018.~~Form 10-K for the fiscal year ended February 28, 2021.

All of the statements in this report, other than historical facts, are forward-looking statements, including, without limitation, the statements made in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The ~~Tax Cuts~~words “could,” “should,” “feel,” “anticipate,” “aim,” “preliminary,” “expect,” “believe,” “estimate,” “intend,” “intent,” “plan,” “will,” “foresee,” “project,” “forecast,” or the negative thereof or variations thereon, and ~~Jobs~~similar expressions identify forward-looking statements.

The Private Securities Litigation Reform Act ~~(the “Act”) was enacted on December 22, 2017~~of 1995 provides a “safe harbor” for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and ~~is effective for tax years beginning after December 31, 2017.~~unknown risks, uncertainties and other factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements.

These statements reflect the current views and assumptions of management with respect to future events. The Company ~~is currently evaluating~~does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

We believe these forward-looking statements are based upon reasonable assumptions. All such statements involve risks and uncertainties, and as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including but not limited to: general economic, business and labor conditions and the potential impact on our operations; our ability to implement our strategic initiatives and control our operational costs; dependence on a limited number of key suppliers; our ability to recover the rising cost of raw materials and other costs (i.e., energy, freight, labor, benefit costs, etc.) in markets that are highly price competitive and volatile; uninsured losses, including those from natural disasters, catastrophes, pandemics, theft or sabotage; the impact of the ~~Act~~novel coronavirus (COVID-19) pandemic or future pandemics on the ~~consolidated financial statements. Management expects~~U.S. and local economies, our business operations, our workforce, our supply chain and our customer base; our ability to timely or adequately respond to technological changes in the ~~Company’s effective tax rate and net deferred tax liabilities to decrease as a result~~industry; the impact of the ~~reduction~~Internet and other electronic media on the demand for forms and printed materials; the impact of foreign competition, tariffs, trade regulations and import restrictions; customer credit risk; competitors’ pricing strategies; a decline in business volume and profitability could result in an impairment in our reported goodwill negatively impacting our operational results; our ability to retain key management personnel; our ability to identify, manage or integrate acquisitions; and changes in government regulations including measures intended to minimize the ~~corporate tax rate from 35%~~impact of COVID-19. In addition to ~~21%, which will be partially offset~~the factors indicated above, you should carefully consider the risks described in and incorporated by ~~the elimination or reduction of certain tax deductions.~~

~~In conjunction with the signing of the Act, the Ennis Board of Directors approved a special one-time bonus to more than 2,200 non-management employees~~reference herein and in the ~~amount of $500 each. This payment will take place with~~risk factors in our Annual Report on Form 10-K for the ~~first payroll period~~fiscal year ended February 28, 2021 before making an investment in ~~January 2018.~~

~~In addition, in response to the Act, the Board of Directors declared a special one-time cash dividend of 10 cents per share of~~ our common stock. ~~The dividend will be paid on February 9, 2018 to the shareholders of record on January 12, 2018.~~

Overview

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

~~Item 2.~~

~~MANAGEMENT’S DISCUSSION AND~~ ~~ANALYSIS OF~~ ~~FINANCIAL CONDITION ANDRESULTS OF OPERATIONS~~

~~Overview~~

Ennis, Inc. (formerly Ennis Business Forms, Inc.) (“we(collectively with its subsidiaries, “the “Company,” “Registrant,” Ennis,” or ~~the “Company~~“we,” “us,” or “our”) was organized under the laws of Texas in 1909. ~~The Company~~We and ~~its~~our subsidiaries print and manufacture a broad line of business forms and other business products. We distribute business products and forms throughout the United States primarily through independent ~~dealers.~~distributors. This distributor channel encompasses independent print distributors, commercial printers, direct mail, fulfillment companies, payroll and accounts payable software companies, and advertising agencies, among others. We also sell products to ~~many of~~ our competitors, from time to time, to satisfy their customers’ needs.

~~On January 27, 2017, we completed~~For a discussion regarding the ~~acquisition of Independent Printing Company, Inc. and its related entities (collectively “Independent~~”) for $17.7 million in cash consideration, in a stock purchase transaction. Independent has 4 locations in Wisconsin, with its main facility located in DePere, Wisconsin. The business produces presentation folders, checks, wide format and commercial printing. Independent, which generated approximately $37.0 million in unaudited sales during calendar year 2016, will continue to operate under its brand names. Independent sells mainly through distributors and resellers. With this acquisition, we now have 4 folder facilities located in Michigan, Kansas, California and Wisconsin, as well as wide format capabilities in Colorado and Wisconsin.

~~On May 25, 2016 the Company sold its apparel operations conducted by Alstyle Apparel, LLC and its subsidiaries (the “Apparel Segment”) to Gildan Activewear Inc. for an all-cash purchase price of $110.0 million, subject to a working capital adjustment, customary indemnification arrangements, and the other terms~~impact of the ~~Unit Purchase Agreement dated May 4, 2016.~~

During the fourth quarter of fiscal year 2016, we moved our folder operations from Omaha, Nebraska to Columbus, Kansas, due to the landlord’s desire to sell the facility. The move and inefficiencies associated with starting-up and training new employees had a negative impact on revenues and operational margins over the first half of fiscal year 2017. However, during the second half of fiscal year 2017 we saw a turnaround and the operations were marginally profitable. We have continued to see this momentum carry over into this fiscal year. In addition, our medical claims during fiscal year 2017 exceeded historical levels, which resulted in us incurring an additional $4.3 million in increased medical charges that had a negative impactongoing novel coronavirus (COVID-19) pandemic on our ~~earnings. To mitigate further medical charges, we implemented a new cost reimbursement program, as well as other changes to our health plan, as~~business, please see Business Challenges—COVID-19 Pandemic and Results of the start of the calendar year 2017. Initial indications through the current fiscal year have been positive. While we are still in the early stages of this program and actual cost savings may vary from anticipated levels, we continue to believe that our future medical claims expenses will trend more in line with historical levels.Operations, below.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Business Overview

Our management believes we are the largest provider of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders to independent distributors in the United States.

We are in the business of manufacturing, designing, and selling business forms and other printed business products primarily to distributors located in the United States. We operate 5957 manufacturing plants throughout the United States in 2120 strategically located ~~states.~~states as one reportable segment. Approximately ~~95%~~92% of the business products ~~manufactured~~we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts, and quantities on an individual job basis, depending upon the customers’ specifications.

The products ~~sold~~we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, Specialized Printed Forms®, 360º Custom LabelsSM, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad ConceptsSM, FormSource LimitedSM, Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, ~~PrintGraphics~~^SMPrintGraphics®, Calibrated Forms®, ~~PrintXcel~~^SMPrintXcel®, Printegra®~~, Curtis Business Forms~~^SM, Falcon Business FormsSM, Forms ManufacturersSM, Mutual ~~Graphics~~^SMGraphics®, TRI-C Business FormsSM, Major Business SystemsSM, Independent PrintingSM, ~~and~~ Hoosier Data Forms®, Hayes Graphics®, Wright Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM, Impressions DirectSM, Ace FormsSM, and AmeriPrintSM. We also sell the Adams McClure® brand (which provides Point of Purchase advertising for large franchise and fast food chains as well as kitting and fulfillment); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & LabelSM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & LabelSM, Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents); InfosealSM and PrintXcel® (which provide custom and stock pressure seal documents).

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

We sell predominantly through ~~private printers and~~ independent distributors, as well as to many of our competitors. Northstar Computer Forms, Inc., aone of our wholly-owned ~~subsidiary,~~subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user). Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies.

The printing industry generally sells its products either ~~through sales made~~ predominantly to end users, a market dominated by a few large manufacturers, such as R.R. Donnelley and Sons, Staples, Inc., Standard Register Co. (a subsidiary of Taylor Corporation), and Cenveo, Inc., or, like the Company, through a variety of independent distributors and distributor groups. While it is not possible, because of the lack of adequate public statistical information, to determine the Company’s share of the total business products market, management believes the Company is the largest producer of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders in the United States distributing primarily through independent ~~dealers.~~distributors.

There are a number of competitors that operate in this segment, ranging in size from single employee-owned operations to multi-plant organizations. We believe our strategic locations and buying power permit us to compete on a favorable basis within the distributor market on competitive factors, such as service, quality, and price.

Distribution of business forms and other business products throughout the United States is primarily done through independent ~~dealers,~~distributors, including business forms distributors, resellers, direct mail, commercial printers, payroll and accounts payable software companies, and advertising agencies.

Raw materials principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for business products purchased primarily from ~~generally~~ one major supplier at favorable prices based on the volume of business.

Business products usage in the printing industry is generally not seasonal. General economic conditions and contraction of the traditional business forms industry are the predominant factors in quarterly volume fluctuations.

Recent Acquisitions

We have completed a number of acquisitions in recent years. In the prior year on December 31, 2020, we acquired the assets of Infoseal LLC (“Infoseal”) in Roanoke, Virginia. The acquisition of Infoseal, which prior to the acquisition generated approximately $19.2 million in sales for its fiscal year ended December 31, 2020, creates additional capabilities and expertise to our product offering including our existing VersaSeal pressure seal product line.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

On June 1, 2021, we acquired the assets and business of AmeriPrint in Harvard, Illinois. The acquisition of Ameriprint, which prior to the acquisition generated approximately $6.5 million in sales for its fiscal year ended December 31, 2020, brings added capabilities and expertise to our expanding product offering including barcoding and variable imaging.

Our Business Challenges

~~We are engaged in an~~Our industry ~~undergoing significant changes, including~~is currently experiencing consolidation of ~~some of our~~ traditional supply channels, product obsolescence, paper supplier capacity adjustments, and ~~expansion of commodity materials to our competition, as well as cheaper material imports~~increased pricing and potential supply allocations due to ~~the strong dollar.~~demand/supply curve imbalance. Technology advances have made electronic distribution of documents, internet hosting, digital printing and print-on-demand valid, cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to our competitors due to the continued low interest rate environment. We face highly competitive conditions throughout ~~the~~our supply chain in an already over-supplied, price-competitive print industry. The challenges of our business include the following:

COVID-19 Pandemic – The global spread of the novel strain of COVID-19 has significantly impacted health and economic conditions throughout the United States and the world, including the markets in which we operate. The U.S. economy continues to be significantly impacted by the COVID-19 pandemic and parts of the economy have started to re-open as vaccinations become more prevalent, but remain subject to ongoing surges and local shutdowns, creating a very fluid economic environment. Current governmental statistics have indicated an increase in economic activity that had previously been curtailed due to the COVID-19 pandemic and efforts to contain it. These statistics provide evidence that various sectors continue to improve, while others have not, which we believe was reflected in our sequential sales increase and improvements in our gross profit margin and operational margin during the first quarter. While the impacts of the pandemic have been significant, our results of operations were within our forecasted parameters for the period ended August 31, 2021.

The following is a summary of our recent and anticipated actions in response to COVID-19 and its impact on our business.



Cash/Liquidity:

We believe our strong liquidity position will help us mitigate the ongoing adverse impacts of COVID-19. On August 31, 2021, we had $82.1 million in cash, in addition to $99.4 million available under our credit facility, if needed. During the period, our cash position increased by $6.9 million and our working capital position increased by $8.4 million from February 28, 2021. In addition, our liquidity and debt ratios have remained stable throughout the pandemic with our current ratio (calculated by dividing our current assets by our current liabilities) of 4.0 at August 31, 2021 and 4.20 at February 28, 2021, and our quick ratio (calculated by dividing our current assets less inventories by our current liabilities) of 3.01 at August 31, 2021 and 3.29 at February 28, 2021. Our net debt to equity ratio (after application of cash) -.05 at August 31, 2021 and -.04 at February 28, 2021.



Receivable and Inventory Management:

We continue to closely monitor and manage our outstanding trade receivables and inventories. During the current quarter, our days’ sales in our receivables decreased from 39 days to 35 days, while our days’ sales of inventory increased from 34 to 37 days. The Company continues to monitor incoming orders and is adjusting its raw material purchases accordingly.



Supply Chain:

To date, COVID-19 has not materially impacted, nor do we currently expect it to materially impact, the supply chain for the products we sell. Most of our products are sourced domestically from suppliers deemed “essential” by the government, and therefore currently remain in operation. However, if one or more of our major suppliers are negatively impacted by the COVID-19 pandemic, through plant closures, deteriorating financial condition, or otherwise, it could adversely affect our operational results and financial condition.



Cost Savings:

COVID-19 has severely impacted global economic activity, including the printing industry in the United States. In response to the sales impact of the COVID-19 pandemic, we made modifications to our cost structure by reducing employee cost, ceasing operations at an under-utilized facility, as well as exiting two facilities with expiring leases and moving production to our other facilities. We are in the process of consolidating three underperforming manufacturing facilities into existing

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

locations with excess capacity to reduce future costs and improve our operational efficiency. We will continue to monitor incoming order volume so that we can proactively adjust our costs accordingly. We believe the modifications to our cost structure in response to the sales impact of the COVID-19 pandemic will not materially impact our ability to service increased customer demand as economic conditions improve. During the six months ended August 31, 2021, our gross profit margin improved to 29.4% from the prior year’s period of 27.9% and our operating margin improved to 10.8% from the prior year’s period of 8.4%.



Capital Expenditures:

We continue to make capital expenditures for operational maintenance purposes, as may be required. Additionally, we will carefully review and make new capital expenditures for equipment to the extent such expenditures make economic sense by improving our operations and not jeopardizing our strong liquidity position.

There continue to be many uncertainties regarding the impact of the COVID-19 pandemic, including the scope of scientific and health issues. We continue to closely monitor the impact of the COVID-19 pandemic, including emerging variants, on all aspects of our business, including how it is affecting our employees, customers, supply chain and distribution network. The overall magnitude of the impact of the pandemic on our operating and financial results remains uncertain and will largely depend on the duration of the pandemic and the measures implemented in response, as well as the effect on our customers and suppliers. Given these factors, we are unable to reliably forecast the ultimate impact of COVID-19 on our business, including due to factors discussed under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 28, 2021. For further information, please see “Cautionary Note Regarding Forward Looking Statements,” above and “Risk Factors” contained within our Annual Report on Form 10-K for the fiscal year ended February 28, 2021.

Transformation of our portfolio of products –While traditional business documents are essential in order to conduct business, many are being replaced through the use of cheaper paper grades or imported paper, or devalued with advances in digital technologies, causing steady declines in demand for a portion of our current product line. In addition, the impact of COVID-19 on the speed of this transformation is unknown, but it is expected to accelerate the decline for some of our products. Transforming our product offerings in order to continue to provide innovative, valuable solutions through lower labor and fixed charges to our customers on a proactive basis will require us to make investments in new and existing technology and to develop key strategic business relationships, such as print-on-demand services and product offerings that assist customers in their transition to digital business environments. In addition, we will continue to look for new market opportunities and niches through acquisitions, such as the addition of our envelope offerings, tag offerings, folder offerings, healthcare wristbands, specialty packaging, direct mail, pressure seal products, secure document solutions, innovative in-mold label offerings and long-run integrated products with high color web printing, which provide us with an opportunity for growth and differentiate us from our competition. The ability to make investments in new and existing technology and/or to acquire new market opportunities through acquisitions is dependent on the Company’s liquidity and operational results. While currently the pandemic has not materially impacted our liquidity and it is not currently expected to, a protracted delay in the economy recovering could have a negative impact on our continued ability to make the aforementioned investments or to consummate acquisitions.

Production capacity and price competition within our industry – ~~Due to~~Changes in the ~~number of paper mills worldwide, some paper pricing has been and is expected to remain fairly weak. The strong dollar during the first half~~value of the ~~year attracted cheaper material into~~U.S. dollar can have an impact on the ~~United States notwithstanding the trade tariffs imposed, which has impaired the price advantage larger suppliers have held over smaller competitors~~pricing and ~~helped to maintain pricing. However, with the subsequent~~supply of paper. The weakening of the U.S. dollar will usually result in the ~~price~~dissipation of any pricing advantage ofthat foreign imports ~~has for the most part dissipated and resulted~~have over domestic suppliers, which typically results in lower ~~volumes~~levels of imported papers and an increase in domestic exports. With increased pricing power, domestic paper producers can better control the supply of paper by eliminating capacity or changing the products produced on their large paper machines. The strengthening of the U.S. dollar usually has the opposite effect: more cheap imported paper; less domestic exports; and lower pricing power in the hands of domestic paper producers. Domestic paper suppliers typically seek to balance supply and demand, including by (if possible) taking capacity out of the market, whether by taking production off-line or switching production to alternative paper products. Generally, if mills are running at high capacity, suppliers are able to raise prices.

Paper production declined last year due to the pandemic and, as the economy improved, increased demand initially was satisfied with existing inventory at the paper mills. While paper mills now are operating at a very high capacity, they are basically producing to fill orders rather than stock inventory, which is contributing to the tight market in some grades of paper. ~~This,~~Paper prices have also increased due to global logistics issues that have delayed and reduced imports that have typically filled gaps in domestic supply. While the availability of paper in the North American market is very low, our strong vendor relationship with our paper supplier allows us to meet customer demand for their business product needs. We have been adjusting our pricing to cover paper inflation during the year, but the impact of inflation with most of our other vendors, as well as the labor market, has had a slight impact on gross profit margin. We

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

anticipate additional pricing adjustments to cover all aspects of our supply chain and our labor force to maintain our gross profit margins at their historical levels. As such, pricing during the second half of fiscal 2022 is currently expected to increase.

As the economy has improved, demand has increased in 2021 for coated and uncoated freesheet papers which has reduced the excess inventory in the market along with the ~~shrinking~~reduction in supply from the closing of ~~some domestic mill capacity, has allowed domestic producers~~several paper mills. Regardless of these factors, many of which are cyclical, we continue to ~~announce price increases across all~~believe paper ~~grades. Even with~~pricing will remain in a range which will not unfavorably impact our margins over the ~~shrinking~~long term. Additionally, the possibility of ~~domestic capacity and lower imports, most reports still indicate there to be an imbalance~~paper shortages in the ~~domestic marketplace for most grades~~market is not a major concern due to ~~lower demand. Therefore, it is too early to tell whether or not these announced price increases will truly stick and have to be passed on~~our primary material supplier’s commitment to the ~~marketplace. In the past, the Company has been fairly successful in passing increases through~~Company. Consistent with our historical practice, we intend to ~~the marketplace over time. We will~~ continue to focus ~~our efforts~~ on effectively managing and controlling our product costs ~~to minimize these effects on our operational results, primarily~~ through the use of forecasting, production and costing models, as well as working

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

closely with our domestic suppliers to ~~reduce~~manage our procurement ~~costs. We~~and logistics costs, in order to minimize effects on our operational results. In addition, we will continue to look for ways to reduce ~~as well as~~and leverage our fixed ~~costs. As always, some of these negative factors are cyclical~~costs as we consolidate plants where leases expire and sell unused real estate where we ~~will continue~~have the opportunity to ~~focus on maintaining our margins when these negative factors swing~~relocate the ~~other way.~~business to another facility.

Continued consolidation of our customers – Our customers ~~who~~ are distributors, many of which are consolidating or are being acquired by competitors. ~~As such, they demand better pricing and services, or they are required to relocate their business to their new parent company’s manufacturing facilities. While we~~We continue to maintain a majority of ~~this~~the business we have had with our customers historically, but it is possible that these consolidations and acquisitions, which we expect to continue in the future, ultimately will impact our margins and ~~our~~ sales.

~~Cautionary Statements Regarding Forward Looking Statements~~

You should read this discussion and analysis in conjunction with our Consolidated Financial Statements and the related notes appearing elsewhere in this Report. All of the statements in this Report, other than historical facts, are forward-looking statements, including, without limitation, the statements made in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” particularly under the caption “Overview.” As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The words “could,” “should,” “feel,” “anticipate,” “aim,” “preliminary,” “expect,” “believe,” “estimate,” “intend,” “intent,” “plan,” “will,” “foresee,” “project,” “ forecast,” or the negative thereof or variations thereon, and similar expressions identify forward-looking statements.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements.

These statements reflect the current views and assumptions of management with respect to future events. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

We believe these forward-looking statements are based upon reasonable assumptions. All such statements involve risks and uncertainties, and as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including but not limited to, general economic, business and labor conditions and the potential impact on our operations; our ability to implement our strategic initiatives and control our operational costs; dependence on a limited number of key suppliers; our ability to recover the rising cost of raw materials and other costs (i.e., energy, freight, labor, benefit costs, etc.) in markets that are highly price competitive and volatile; our ability to timely or adequately respond to technological changes in the industry; the impact of the Internet and other electronic media on the demand for forms and printed materials; the impact of foreign competition; changes in economic conditions; customer credit risk; competitors’ pricing strategies; a decline in business volume and profitability could result in an impairment in our reported goodwill negatively impacting our operational results; our ability to retain key management personnel; our ability to identify, manage or integrate acquisitions; and changes in government regulations. In addition to the factors indicated above, you should carefully consider the risks described in and incorporated by reference herein and in the risk factors in our Annual Report on Form 10-K for the fiscal year ended February 28, 2017 before making an investment in our common stock.

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements, we are required to make estimates and assumptions that affect the disclosures and reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis, including those related to allowance for doubtful receivables, inventory valuations, property, plant and equipment, intangible assets, pension plan obligations, accrued liabilities and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We believe our accounting policies related to the aforementioned items are the most critical due to their effect on our more significant estimates and judgments used in preparation of our consolidated financial statements. For additional information, reference is made to the Critical Accounting Policies and Estimates section of our Annual Report on Form 10-K for the fiscal year ended February 28, ~~2017.~~2021.

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

Results of Operations

The discussion that follows provides information which we believe is relevant to an understanding of our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto, which are incorporated herein by reference. Unless otherwise indicated, this financial overview is for the continuing operations of the Company, which are comprised of the production and sales of business forms and other business products, and exclude the discontinued operations of the Apparel Segment. The operating results of the Company for the three and ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 and the comparative ~~periods~~period for ~~2016~~2020 are set forth in the unaudited consolidated financial information included in the tables below.

Consolidated Summary

Unaudited Consolidated Statements of

Three Months Ended November 30,

Nine Months Ended November 30,

Operations - Data (Dollars in thousands, except per share amounts)

2017

2016

2017

2016

Net sales

$
93,606

100.0
%

$
88,660

100.0
%

$
283,083

100.0
%

$
270,316

100.0
%
Cost of goods sold

63,722

68.1

63,368

71.5

192,493

68.0

191,292

70.8

Gross profit margin

29,884

31.9

25,292

28.5

90,590

32.0

79,024

29.2

Selling, general and administrative

16,699

17.8

15,833

17.8

51,167

18.1

47,961

17.7

(Gain) loss from disposal of assets

(4
)

—

264

0.3

59

—

266

0.1

Income from operations

13,189

14.1

9,195

10.4

39,364

13.9

30,797

11.4

Other expense, net

(55
)

(0.1
)

(84
)

(0.1
)

(319
)

(0.1
)

(313
)

(0.1
)
Earnings from continuing operations
   before income taxes

13,134

14.0

9,111

10.3

39,045

13.8

30,484

11.3

Provision for income taxes

4,860

5.2

3,371

3.8

14,447

5.1

11,277

4.2

Earnings from continuing operations

8,274

8.8
%

5,740

6.5
%

24,598

8.7
%

19,207

7.1
%
Income from discontinued operations, net
   of tax

—

—

—

—

—

—

2,481

0.9

Loss on sale of discontinued operations,
   net of tax

—

—

—

—

—

—

(26,042
)

(9.6
)
Earnings (loss) from discontinued
   operations, net of tax

—

—

—

—

—

—

(23,561
)

(8.7
)
Net earnings (loss)

$
8,274

8.8
%

$
5,740

6.5
%

$
24,598

8.7
%

$
(4,354
)

-1.6
%

Earnings (loss) per share - diluted

Continuing operations

$
0.33

$
0.22

$
0.97

$
0.74

Discontinued operations

—

—

—

0.10

0.33

0.22

0.97

0.84

Sale of discontinued operations

—

—

—

(1.01
)

Net earnings (loss)

$
0.33

$
0.22

$
0.97

$
(0.17
)


Unaudited Consolidated Statements of	Three Months Ended August 31,										Six Months Ended August 31,
Operations - Data (in thousands)	2021					2020					2021					2020
Net sales	$	100,451		100.0	%	$	86,612		100.0	%	$	197,381		100.0	%	$	175,608		100.0	%
Cost of goods sold		71,550		71.2			61,457		71.0			139,294		70.6			126,546		72.1
Gross profit margin		28,901		28.8			25,155		29.0			58,087		29.4			49,062		27.9
Selling, general and administrative		18,095		18.0			16,535		19.1			37,010		18.8			34,658		19.7
(Gain) loss from disposal of assets		1		—			(300	)	(0.4	)		(276	)	(0.1	)		(412	)	(0.2	)
Income from operations		10,805		10.8			8,920		10.3			21,353		10.8			14,816		8.4
Other income (expense)		(148	)	(0.1	)		(243	)	(0.3	)		(262	)	(0.1	)		(484	)	(0.3	)
Earnings before income taxes		10,657		10.6			8,677		10.0			21,091		10.7			14,332		8.1
Provision for income taxes		3,197		3.2			2,256		2.6			6,327		3.2			3,726		2.1
Net earnings	$	7,460		7.4	%	$	6,421		7.4	%	$	14,764		7.5	%	$	10,606		6.0	%

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Three months ended ~~November 30, 2017~~August 31, 2021 compared to three months ended ~~November 30, 2016~~August 31, 2020

Net Sales. Our net sales were ~~$93.6~~$100.5 million for the quarter ended ~~November 30, 2017,~~August 31, 2021, compared to ~~$88.7~~$86.6 million for the same quarter ~~last~~in the prior year, or an increase of ~~$4.9~~$13.9 million, or ~~5.5%~~16.0%. ~~The market continues~~Our net sales increased on a sequential quarter basis as well, $3.5 million or 3.6% from $96.9 million for the quarter ended May 31, 2021 to $100.5 million for the current quarter. While our revenues continue to be ~~fairly soft with competitive pricing pressures. However,~~impacted by the COVID-19 pandemic, some of our customers are seeing sales return to normalized levels. Infoseal, our acquisition in January of last fiscal year and AmeriPrint, our acquisition from June 1, 2021, added $6.7 million in sales for the current reversal of some of the dollar’s strength has made domestic paper production more attractive. This factor, along with the shrinking of some domestic mill capacity, has resulted in the announcement of some recent paper price increases. It is still too early to tell whether or not these will stick and be passed through to the marketplace. If so, this may offset some of the normal industry sales attrition expected in the marketplace. The acquisition of Independent, which was completed in January 2017 and which is an integral part of our strategy to offset normal industry revenue declines due to print attrition and other changes, contributed $9.8 million in net sales during the three months ended November 30, 2017.quarter.

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

Cost of Goods ~~Sold.~~ Sold and Gross Profit Margin. Our cost of goods sold increased ~~slightly by $0.3~~$10.1 million, or 16.4%, from ~~$63.4~~$61.5 million for the three months ended ~~November 30, 2016~~August 31, 2020 to ~~$63.7~~$71.6 million for the three months ended ~~November 30, 2017, or 0.5%.~~August 31, 2021. Our gross profit margin (“~~margin~~”) was ~~$29.9~~$28.9 million for the quarter ~~or 31.9% of net sales,~~ended August 31, 2021 compared to ~~$25.3~~$25.2 million ~~or 28.5% of net sales,~~ for the same quarter ~~last~~in the prior year. ~~During the third~~Our second quarter ~~of fiscal 2017 our~~gross profit margin ~~was negatively impacted by increased medical expenses of approximately $1.4 million.~~percentage slightly decreased from 29.0% in 2020 to 28.8% in 2021 due primarily to higher inflationary factors.

Selling, general, and administrative expense. For the three months ended ~~November 30, 2017,~~August 31, 2021, our selling, general, and administrative (“SG&A”) expenses were ~~$16.7~~$18.1 million compared to ~~$15.8~~$16.5 million for the three months ended ~~November 30, 2016, or~~August 31, 2020, an increase of ~~5.7%~~$1.6 million, or 9.4%. As a percentage of net sales, ~~the~~ SG&A expenses for the current quarter were ~~17.8%~~18.0% and ~~17.8%~~19.1% for the three months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016,~~August 31, 2020, respectively. ~~The~~Our acquisition of ~~Independent added $2.0 million in~~Infoseal and AmeriPrint impacted our SG&A expenses ~~during the quarter, or 20.2%~~by approximately $0.7 million. As part of ~~its respective net sales. As~~our on-going corporate strategy, we ~~continue to integrate this acquisition into our culture and systems, we will~~ continue to look for ways to reduce ~~these expenses to be~~and more ~~in line with~~fully leverage our ~~historical~~ SG&A percentage. In addition to the foregoing, the Company changed its accounting practice for handling its trademarks/trade names from an indefinite life to a finite life method. This change in accounting method added approximately $0.2 million to SG&A expense during the current quarter.expenses.

~~(Gain) loss~~Gain from disposal of assets. The ~~$4,000~~$0.3 million net gain from disposal of assets during the prior year quarter ~~related~~is primarily attributed to the sale of ~~manufacturing equipment. The $0.3 million net loss during the same quarter last year related primarily~~underutilized land and buildings. Remaining product from these facilities was transitioned to ~~the $0.5 million loss on the sale of an unused manufacturing facility and its associated property offset by a $0.2 million gain on the sale a second unused manufacturing facility and equipment.~~another Company facility.

Income from operations. ~~As a result of the~~ Primarily due to factors described above, ~~factors,~~ our income from operations for the three months ended ~~November 30, 2017~~August 31, 2021 was ~~$13.2~~$10.8 million, or ~~14.1%~~10.8% of net sales, as compared to ~~$9.2~~$8.9 million, or ~~10.4%~~10.3% of net sales, for the three months ended ~~November 30, 2016. The acquisition of Independent contributed approximately $1.3~~August 31, 2020 and increased on a sequential quarter basis as well from $10.5 million ~~of income during~~for the ~~third~~ quarter ~~of this fiscal year.~~ended May 31, 2021.

Other expense. Other expense was $0.1 million for the three months ended ~~November 30, 2017 and November 30, 2016.~~

~~Provision for income taxes.~~ ~~Our effective tax rate for operations was 37.0% for the three months ended November 30, 2017 and November 30, 2016.~~

~~Net earnings.~~ ~~Earnings from operations were $8.3~~August 31, 2021 compared to expense of $0.2 million for the three months ended ~~November 30, 2017~~August 31, 2020. This decrease was primarily due to a decrease in our pension expense of $0.1 million over the comparable quarter.

Provision for income taxes. Our effective tax rate was 30.0% for the three months ended August 31, 2021 as compared to ~~$5.7~~26.0% for the three months ended August 31, 2020. The primary reason for the increase in the effective tax rate is permanent non-deductible expense resulting from probable distributions this year from our deferred compensation plan which was terminated last fiscal year.

Net earnings. Net earnings, due to the factors above, were $7.5 million for the three months ended August 31, 2021 as compared to $6.4 million for the comparable quarter ~~last~~in the prior year, an increase of ~~45.6%. Earnings from operations~~$1.0 million. Net earnings per diluted share for the three months ended ~~November 30, 2017~~August 31, 2021 was ~~$0.33,~~$0.29, compared to ~~$0.22~~$0.25 for the same quarter ~~last~~in the prior year. ~~There were no discontinued operations during the three~~Our acquisition of Infoseal and AmeriPrint added $0.02 to our diluted earnings per share.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Six months ended ~~November 30, 2017 and November 30, 2016.~~

~~Nine~~August 31, 2021 compared to six months ended ~~November 30, 2017 compared to nine months ended November 30, 2016~~August 31, 2020

Net Sales. Our net sales were ~~$283.1~~$197.4 million for the ~~nine month~~six-month period ended ~~November 30, 2017,~~August 31, 2021, compared to ~~$270.3~~$175.6 million for same period last year, or an increase of ~~4.7%~~12.4%. ~~The market continues~~While our revenues continue to be ~~fairly soft with competitive pricing pressures which intensified with~~impacted by the ~~influx of cheaper off-shore paper coming into the United States during the first half of the year. However, the current reversal of~~COVID-19 pandemic, some of the dollar’s strength has made domestic paper production more attractive. This, with the shrinking of some domestic mill capacity, has resulted in the announcement of some recent paper price increases. It is still too earlyour customers are seeing sales return to tell whether or not these announced increases will stick and be passed through to the marketplace. If so, this may offset some of the normal industry sales attrition expected in the marketplace. Thenormalized levels. Infoseal, our acquisition ~~of Independent~~ in January of ~~2017, which is an integral part of~~last fiscal year and AmeriPrint our ~~strategy to offset normal industry revenue declines, contributed $29.9~~acquisition in June 1, 2021, added $11.9 million in ~~net~~ sales during the ~~nine~~six months ended ~~November 30, 2017.~~August 31, 2021.

Cost of Goods ~~Sold.~~ Sold and Gross Profit Margin. Our cost of goods sold was ~~$192.5~~$139.3 million for the ~~nine~~six months ended ~~November 30, 2017,~~August 31, 2021, compared to ~~$191.3~~$126.5 million for the same period last year, a ~~slight~~ increase of ~~$1.2~~$12.8 million, or ~~0.6%~~10.1%. Our margin was ~~$90.6~~$58.1 million for the ~~nine month~~six-month period ended ~~November 30, 2017,~~August 31, 2021, or ~~32.0%~~29.4%. In response to the sales impact of ~~net sales, compared~~the COVID-19 pandemic, we made modifications to ~~$79.0 million, or 29.2% of net sales,~~our cost structure by reducing employee cost, ceasing operations at an under-utilized facility, as well as exiting two facilities with expiring leases and moving production to our other facilities. These modifications to our cost structure resulted in improvements to our gross profit margin from 27.9% for the same ~~nine month~~six-month period last year. For the same nine month period last year, our margin was negatively impacted by the costs associated with the move of our folder operations in Nebraska to Kansas. The start-up training process for the labor force decreased efficiencies, thereby decreasing our sales and negatively impacting our margins for the nine months ended November 30, 2016 by an estimated $3.0 million for the period. In addition, we incurred additional medical expenses due to our medical claims exceeding our historical levels during our second and third quarters; this impacted our margin for the nine months ended November 30, 2016 by approximately $2.9 million.

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

Selling, general, and administrative expense. Our SG&A expenses were ~~$51.2~~$37.0 million for the ~~nine~~six months ended ~~November 30, 2017,~~August 31, 2021, compared to ~~$48.0~~$34.7 million for the same period last year, or an increase of ~~6.7%~~6.8%. As a percentage of ~~net~~ sales, the SG&A expenses were ~~18.1%~~18.8% and ~~17.7%~~19.7% for the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016,~~August 31, 2020, respectively. ~~The acquisition~~As part of ~~Independent added $6.3 million in SG&A expenses during the nine month period ended November 30, 2017, or 21.2% of its respective net sales. As~~our ongoing corporate strategy, we ~~continue to integrate this acquisition into our culture and systems, we will~~ continue to look for ways to reduce ~~these expenses~~and more fully leverage our SG&A expenses. During the period, the Board approved a change to ~~be more in line with~~ our ~~historical SG&A percentage. In addition to the foregoing, the Company changed its accounting practice for handling its trademarks/trade names from an indefinite life~~“Long-Term Incentive Equity Awards” program to a ~~finite life method. This change in accounting method added approximately $0.6 million to SG&A expense~~three-year performance period from a one-year performance period. A bridge award of restricted stock was granted during the ~~nine month period ended November 30, 2017.~~transition and resulted in the recognition of an additional $0.8 million in restricted stock expense. Our acquisition of Infoseal and AmeriPrint impacted our SG&A expenses by approximately $1.3 million.

~~Loss~~Gain from disposal of assets. The ~~$59,000~~$0.3 million net ~~loss~~gain from disposal of assets during the ~~nine~~six months ended ~~November 30, 2017 related~~August 31, 2021 is primarily attributed to the sale of ~~manufacturing equipment.~~a previously held-for-sale facility that had transferred its operations to another facility. The ~~$0.3~~$0.4 million net ~~loss~~gain from disposal of assets during the ~~nine~~six months ended ~~November 30, 2016 resulted~~August 31, 2020 is primarily ~~from the $0.5 million loss on~~attributed to the sale of ~~an unused~~ manufacturing ~~facility~~underutilized equipment, land and ~~its associated property offset by a $0.2 million gain from the sale of a second unused manufacturing facility and equipment.~~buildings.

Income from operations. Our income from continuing operations for the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 was ~~$39.4~~$21.4 million, or ~~13.9%~~10.8% of ~~net~~ sales, as compared to ~~$30.8~~$14.8 million, or ~~11.4%~~8.4% of ~~net~~ sales, for the ~~nine~~six months ended ~~November 30, 2016. The acquisition of Independent contributed approximately $4.2 million of income during the current nine month period.~~August 31, 2020.

Other expense. Other expense for the six months ended August 31, 2021 was $0.3 million as compared to $0.5 million expense for the ~~nine~~six months ended ~~November 30, 2017 and November 30, 2016.~~August 31, 2020. This decrease was primarily due to the decrease in pension expense for the current fiscal year.

Provision for income taxes. Our effective tax rate was 30.0% for ~~continuing operations was 37.0% for both~~ the ~~nine~~six months ended ~~November 30, 2017 and~~August 31, 2021 as compared to 26.0% for the ~~nine~~six months ended ~~November 30, 2016.~~August 31, 2020. The primary reason for the increase in the effective tax rate is permanent non-deductible expense resulting from probable distributions this year from our deferred compensation plan which was terminated last fiscal year.

Net earnings. Net earnings ~~(loss).~~ ~~Earnings from continuing operations~~ were ~~$24.6~~$14.8 million for the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 as compared to ~~$19.2~~$10.6 million for the comparable period last year, an increase of ~~$5.4~~$4.2 million. ~~Earnings from continuing operations~~Net earnings per diluted share for the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 was ~~$0.97,~~$0.57, compared to ~~$0.74~~$0.41 for the same ~~nine month~~six-month period last year. ~~There were no discontinued operations during the nine months ended November 30, 2017, compared~~Our acquisition of Infoseal and AmeriPrint added $0.04 to ~~a net loss from discontinued operations of ($0.91)~~our diluted earnings per diluted share in the same nine month period last year. Overall, the Company realized a net profit of $0.97 per diluted share for the nine months ended November 30, 2017 compared to a net loss of ($0.17) per diluted share for the nine months ended November 30, 2016.share.

Liquidity and Capital Resources

We rely on our cash flows generated from operations and the borrowing capacity under our credit facility extended pursuant to our Second Amended and Restated Credit Agreement, as amended from time to time (the “Credit Facility”), to meet cash requirements of our business. The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, debt repayments and related interest payments, contributions to our ~~pension~~noncontributory defined benefit retirement plan, which covers approximately 12% of our aggregate employees (the “Pension Plan”), and the payment of dividends to our shareholders. We expect to generate sufficient cash flows from operations, supplemented by our Credit Facility as ~~required~~necessary, to cover our operating and capital requirements for the foreseeable future.

November 30,

February 28,

(Dollars in thousands)

2017

2017

Working Capital

$
135,574

$
119,282

Cash and cash equivalents

$
92,930

$
80,466


	August 31,		February 28,
(Dollars in thousands)	2021		2021
Working capital	$	121,426	$	113,022
Cash	$	82,101	$	75,190

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Working Capital. Our working capital increased ~~$16.3~~$8.4 million or ~~13.7%~~7.4%, from ~~$119.3~~$113.0 million at February 28, ~~2017~~2021 to ~~$135.6~~$121.4 million at November 30, 2017. Our working capital was impacted primarily by an increase in our cash of $12.5 million, an increase in our receivables of $1.0 million and a reduction of our current liabilities of approximately $3.0 million.August 31, 2021. Our current ratio, calculated by dividing our current assets by our current liabilities, ~~increased~~decreased from ~~5.0~~4.2 to 1.0 at February 28, ~~2017~~2021 to ~~6.0~~4.0 to 1.0 at ~~November 30, 2017.~~August 31, 2021. The increase in working capital primarily reflects the increase in cash and inventory partially offset by the increase in our accounts payable.


	Nine months ended November 30,						Six months ended August 31,
(Dollars in thousands)	2017			2016			2021			2020
Net cash provided by operating activities	$	33,818		$	42,560		$	24,507		$	28,154
Net cash provided by (used in) investing activities	$	(3,406	)	$	104,919
Net cash used in investing activities							$	(5,205	)	$	(353	)
Net cash used in financing activities	$	(17,948	)	$	(67,571	)	$	(12,391	)	$	(12,153	)

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

Cash flows from operating activities. Cash provided by operating activities decreased ~~by $8.7 million~~ from ~~$42.6~~$28.2 million for the ~~nine~~six months ended ~~November 30, 2016~~August 31, 2020 to ~~$33.8~~$24.5 million for the ~~nine~~six months ended ~~November 30, 2017.~~August 31, 2021. Our decreased operational cash flows in comparison to the comparable period ~~last~~in the prior year was primarily the result of ~~four factors: (i)~~ a ~~decrease in operating cash flows from the recognition of a pre-tax loss of $36.8~~$8.5 million ~~of our former Apparel Segment that was sold in the first quarter of last fiscal year, (ii) increased earnings of $29.0 million, (iii) an~~ increase ~~of $1.7 million~~ in our ~~prepaid expenses~~accounts receivable and ~~income taxes, and (iv)~~ a ~~decrease~~$7.5 million increase in our ~~receivables~~inventories. These increases were offset by ~~$2.2 million.~~a $4.2 million increase in our operational earnings, in addition to a $7.2 million increase in our accounts payable and accrued expenses.

Cash flows from investing activities. Cash ~~provided by (used in)~~used in investing activities ~~decreased $108.3~~increased from $0.4 million ~~from $104.9 million provided~~cash used to ~~$3.4~~$5.2 million used for the ~~nine~~six months ended ~~November 30, 2016~~August 31, 2020 and ~~November 30, 2017,~~August 31, 2021, respectively. This was primarily due to the ~~net proceeds of $107.4~~$3.9 million ~~from the sale of the Apparel Segment which took place on May 25, 2016, offset by $0.4 million more in cash used for the acquisition of businesses. In addition,~~cost to acquire businesses and additional capital expenditures during the ~~nine~~six months ended ~~November 30, 2017 we used $2.1 million in cash on capital expenditures,~~August 31, 2021 as compared to ~~$1.9 million during~~ the ~~same period last year.~~six months ended August 31, 2020.

Cash flows from financing activities. We used ~~$49.6~~$0.2 million less in cash from financing activities ~~this period than~~ during the six months ended August 31, 2021 compared to the same period ~~last~~in the prior year. ~~We used $10.0 million~~The decrease in cash used during the ~~comparable period last year to pay down our debt,~~six months ended August 31, 2021 compared to the six months ended August 31, 2020 resulted from no ~~repayment of debt~~common stock being repurchased under our stock repurchase program in ~~this period. We used $52.7 million last year~~the current period compared to pay dividends which included a special one-time dividend of $1.50 per share that was paid as a result of the sale of the Apparel Segment, whereas we used $14.6 million to pay dividends this year. We used $3.3$0.4 million to repurchase our common stock ~~under our stock repurchase program~~ during the ~~nine~~six months ended November 30, 2017, whereas we used $7.8 million to repurchase shares of our common stock during the nine months ended November 30, 2016. In addition, we received $2.9 million from the exercise of stock options in the comparable period last year, whereas in this period no stock options were exercised.August 31, 2020.

Credit Facility. The Company’s Credit Facility, pursuant to which a credit facility has been extended to the Company until ~~August~~November 11, ~~2020,~~2021, provides the Company and its subsidiaries with up to $100.0 million in revolving credit, as well as a $20.0 million sublimit for the issuance of letters of credit and a $15.0 million sublimit for swing-line loans. Under the Credit Facility, the Company or any of its subsidiaries ~~also~~ can request up to three increases in the aggregate commitments in an aggregate amount not to exceed $50.0 million. The terms and conditions of the Credit Facility impose certain restrictions on our ability to incur additional debt, make capital expenditures, acquisitions and asset dispositions, as well as impose other customary covenants, such as requiring that our fixed charge coverage ratio not be less than 1.25:1.00 and our total leverage ratio not exceed 3.00:1.00. The Company may make dividends or distributions to shareholders so long as ~~(a)~~(i) no event of default has occurred and is continuing and ~~(b)~~(ii) the Company’s net leverage ratio both before and after giving effect to any such dividend or distribution is equal to or less than 2.50:1.00. All calculations are made based on U.S. Generally Accepted Accounting Principles existing at the time the Credit Facility was entered into. As of August 31, 2021, the Company was in compliance with all terms and conditions of the Credit Facility.

The Credit Facility bears interest at the LIBOR rate plus a spread ranging from ~~1.0%~~1.85% to ~~2.0%, which rate was~~ 2.5% ~~(3 month LIBOR + 1.0%) at November 30, 2017 and 1.86% (2 month LIBOR + 1.0%) at February 28, 2017.~~. The rate is determined by our fixed charge coverage ratio of total funded debt to ~~EBITDA.~~earnings before interest, taxes, depreciation and amortization (“EBITDA”). As of ~~November 30, 2017, we~~August 31, 2021, the Company had ~~$30.0 million of borrowings under~~no outstanding debt, and the ~~revolving credit line and $1.2~~Company had $0.6 million outstanding under standby letters of credit arrangements, leaving approximately ~~$68.8~~$99.4 million available in borrowing ~~capacity.~~capacity under the Credit Facility. The Credit Facility is secured by substantially all of our assets (other than real property), as well as all capital securities of each of our subsidiaries.

It is anticipated that our cash and funds from operating cash flows will be sufficient to fund anticipated future expenditures. We are considering the ~~available~~nonrenewal of the facility or renewing with a smaller line of credit ~~is sufficient to cover~~limit during the ~~Company’s working capital requirements for the foreseeable future, should it be required.~~third quarter.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Pension Plan – We are required to make contributions to our Pension Plan. These contributions are required under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Due to the enactment of the Highway and Transportation Funding Act (HATFA) in August 2014, which effectively raises the discount rates mandated for determining the value of a plan’s benefit liability and annual cost of accruals, our minimum required contribution to the Pension Plan is zero for the Pension Plan year ending February 28, ~~2018. However,~~2022. Assuming a stable funding status, we ~~made a cash contribution~~would expect that our future contributions to ~~the Pension Plan of~~be between $1.0 million and $3.0 million ~~on December 28, 2017 for fiscal year 2018. We~~per year. However, changes in actual investment returns or in discount rates could change this amount significantly. There was no contribution required or made ~~contributions totaling $3.0 million~~ to our Pension Plan ~~during~~in fiscal ~~2017.~~year 2021. As our Pension Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status, associated liabilities recorded and future required minimum contributions. At ~~November 30, 2017,~~August 31, 2021, we had an unfunded pension liability recorded on our balance sheet of ~~$4.8~~$6.3 million.

Inventories – We believe our inventory levels are sufficient to satisfy our customer demands and we anticipate having adequate sources of raw materials to meet future business requirements. We have long-term contracts in effect with paper suppliers that govern prices, but do not require minimum purchase commitments. Certain of our rebate programs do, however, require minimum purchase volumes. Management anticipates meeting the required ~~volumes.~~volumes or to be able to get the required volumes temporarily waived given the COVID-19 pandemic.

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

Capital Expenditures – We expect our capital requirements for our current fiscal year, exclusive of capital required for possible acquisitions, will be within our historical levels of between $3.0 million and $5.0 million. ~~To date~~For the quarter, we have spent approximately $2.1 million on capital expenditures. We expect to fund these expenditures through existing cash flows.

Contractual Obligations ~~& Off-Balance Sheet Arrangements~~ – There have been no significant changes in our contractual obligations since February 28, ~~2017~~2021 that have, or are reasonably likely to have, a material impact on our results of operations or financial condition. ~~We had no off-balance sheet arrangements in place as of November 30, 2017.~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Interest Rates

WeFrom time to time, we are exposed to interest rate risk on short-term and long-term financial instruments carrying variable interest rates. We may from time to time utilize interest rate swaps to manage overall borrowing costs and reduce exposure to adverse fluctuations in interest rates. We do not use derivative instruments for trading purposes. ~~Our~~While we had no variable rate financial instruments ~~consisting of the~~ outstanding ~~loans~~at August 31, 2021 given no outstanding debt under the Credit Facility, ~~totaled $30.0 million at November 30, 2017. The annual impact on our results of operations of a one-point~~we will be exposed to interest rate ~~change on~~risk if we borrow under the ~~outstanding balance of~~Credit Facility in the ~~variable rate financial instruments as of November 30, 2017 would be approximately $0.3 million.~~future.

This market risk discussion contains forward-looking statements. Actual results may differ materially from this discussion based upon general market conditions and changes in domestic and global financial markets.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. A review and evaluation were carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q, pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that review and evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures as of ~~November 30, 2017~~August 31, 2021 are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations of control systems, not all misstatements may be detected. Those inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

Additionally, controls could be circumvented by the individual acts of some persons or by collusion of two or more people. Our controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

There ~~were~~have been no changes in our internal control over financial reporting ~~identified~~(as defined in ~~connection with~~Rule 13a–15(f) or Rule 15d–15(f) of the ~~evaluation required by paragraph (d) of~~ Exchange ~~Act Rule 13a-15~~Act) that occurred during ~~our fiscal quarter~~the six months ended ~~November 30, 2017~~August 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

~~FOR THE PERIOD ENDED NOVEMBER 30, 2017~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject.

Item 1A. Risk Factors

There have been no material changes in our Risk Factors as previously discussed in our Annual Report on Form 10-K for the year ended February 28, ~~2017.~~2021.

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

In ~~the 2016 calendar year,~~October 2008, the Board authorized the repurchase of the Company’s outstanding common stock through a stock repurchase program, which authorized amount is currently up to ~~an aggregate of~~ $40.0 million ofin the ~~Company’s stock through the Company’s stock repurchase program.~~aggregate. Under the repurchase program, ~~share~~ 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 rules 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~~six months ended ~~November 30, 2017,~~August 31, 2021, the Company ~~under the program, repurchased 191,033~~did not repurchase any shares of common stock ~~at an average price of $17.33 per share. Since~~under the ~~program’s inception in October 2008, there have been 1,442,236 common shares repurchased at an average price of $14.99 per share.~~program. As of ~~November 30, 2017 there was $18.4~~August 31, 2021, $9.9 million remained available to repurchase shares of the Company’s common stock under the program. ~~Unrelated to the stock repurchase program, the Company purchased 145 shares of its common stock during the nine months ended November 30, 2017.~~

Total Number

Total

of Shares

Maximum Amount

Number

Average

Purchased as

that May Yet Be Used

of Shares

Price Paid

Part of Publicly

to Purchase Shares

Period

Purchased

per Share

Announced Programs

Under the Program

September 1, 2017 - September 30, 2017

—

$
—

—

$
18,377,146

October 1, 2017 - October 31, 2017

145

$
20.30

—

$
18,377,146

November 1, 2017 - November 30, 2017

—

$
—

—

$
18,377,146

Total

145

$
20.30

—

$
18,377,146

Items 3, 4 and 5 are not applicable and have been omitted

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED ~~NOVEMBER 30, 2017~~AUGUST 31, 2021

Item 6. Exhibits

The following exhibits are filed as part of this report.


Exhibit Number		Description

Exhibit 3.1(a)		Restated Articles of Incorporation, as amended through June 23, 1983 with attached amendments dated June 20, 1985, July 31, 1985, June 16, 1988 and November 4, 1998, incorporated herein by reference to Exhibit 3.1(a) to the Registrant’s Form 10-Q filed on October 6, 2017 (File No. 001-05807).

Exhibit 3.1(b)		Amendment to Articles of Incorporation, dated June 17, 2004, incorporated herein by reference to Exhibit 3.1(b) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007 filed on May 9, 2007 (File No. 001-05807).

Exhibit 3.2		Fourth Amended and Restated Bylaws of Ennis, Inc., dated July 10, 2017, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 10, 2017 (File No. 001-05807).

Exhibit 31.1		Certification Pursuant to Rule 13a-14(a) of Chief Executive Officer.*

Exhibit 31.2		Certification Pursuant to Rule 13a-14(a) of Chief Financial Officer.*

Exhibit 32.1		Section 1350 Certification of Chief Executive Officer.**

Exhibit 32.2		Section 1350 Certification of Chief Financial Officer.**

Exhibit 101		The following information from Ennis, Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~November 30, 2017,~~August 31, 2021, filed on ~~January 5, 2018,~~October 1, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.*

Exhibit 104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*	~~Filed herewith~~

**	~~Furnished herewith~~

28* Filed herewith

** Furnished herewith

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED ~~NOVEMBER 30, 2017~~AUGUST 31, 2021

~~SIGNATURES~~SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		ENNIS, INC.

Date: ~~January 5, 2018~~October 1, 2021		/s/ Keith S. Walters
		Keith S. Walters
		Chairman, Chief Executive Officer and President

Date: ~~January 5, 2018~~October 1, 2021		/s/ ~~Richard L. Travis, Jr.~~Vera Burnett
		~~Richard L. Travis, Jr.~~Vera Burnett
		~~Vice President — Finance and CFO,~~Chief Financial Officer, Treasurer and
		Principal Financial and Accounting Officer

2931


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

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


Large accelerated filer	☐		Accelerated filer	☒

Non-accelerated filer	☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

			Emerging growth company	☐


PART I: FINANCIAL INFORMATION

	Item 1. Financial Statements	3

	Unaudited Consolidated Balance Sheets at ~~November 30, 2017~~August 31, 2021 and February 28, ~~2017~~2021	3

	Unaudited Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016~~ August 31, 2020	5

	Unaudited Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~November 30, 2017~~ August 31, 2021 and ~~November 30, 2016~~August 31, 2020	6

	Unaudited Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity for the ~~nine~~three and six months ended ~~November 30, 2017~~August 31, 2021 and August 31, 2020	7

	~~Unaudited~~Unaudited Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~November 30, 2017~~August 31, 2021 and ~~November 30, 2016~~August 31, 2020	8

	Notes to Unaudited Consolidated Financial Statements	9

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1920

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	2628

	Item 4. Controls and Procedures	2628

PART II: OTHER INFORMATION

	Item 1. Legal Proceedings	2729

	Item 1A. Risk Factors	2729

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2729

	Item 3. Defaults Upon Senior Securities	2729

	Item 4. Mine Safety Disclosures	2729

	Item 5. Other Information	2729

	Item 6. Exhibits	2830

SIGNATURES		2931


	November 30,		February 28,		August 31,		February 28,
	2017		2017		2021		2021
Assets
Current assets
Cash and cash equivalents	$	92,930	$	80,466	$	82,101	$	75,190
Accounts receivable, net of allowance for doubtful receivables of $1,306 at November 30, 2017 and $1,674 at February 28, 2017		38,409		37,368
Accounts receivable, net of allowance for doubtful receivables of $1,016 at August 31, 2021 and $961 at February 28, 2021						37,928		37,891
Prepaid expenses		1,228		1,351		1,689		1,605
Prepaid income taxes		888		855
Inventories		27,799		27,965		40,151		32,906
Assets held for sale		1,320		1,245		—		482
Total current assets		162,574		149,250		161,869		148,074
Property, plant and equipment
Plant, machinery and equipment		135,367		136,584		157,800		157,737
Land and buildings		53,587		53,821		57,166		56,185
Computer equipment and software						18,792		19,336
Other		23,556		23,644		4,521		4,808
Total property, plant and equipment		212,510		214,049		238,279		238,066
Less accumulated depreciation		166,274		164,054		183,987		182,682
Net property, plant and equipment		46,236		49,995		54,292		55,384
Operating lease right-of-use assets						18,382		19,187
Goodwill		70,603		70,603		88,661		88,647
Intangible assets, net		50,746		53,927		49,656		52,712
Other assets		357		510		385		384
Total assets	$	330,516	$	324,285	$	373,245	$	364,388


	November 30,			February 28,			August 31,			February 28,
	2017			2017			2021			2021
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	9,988		$	14,202		$	18,827		$	14,759
Accrued expenses								16,017			14,955
Employee compensation and benefits		14,775			13,515
Taxes other than income		357			225
Other		1,880			2,026
Current portion of operating lease liabilities								5,599			5,338
Total current liabilities		27,000			29,968			40,443			35,052
Long-term debt		30,000			30,000
Liability for pension benefits		4,846			4,846			6,299			6,299
Deferred income taxes		7,408			6,953			7,877			7,677
Operating lease liabilities, net of current portion								12,572			13,567
Other liabilities		1,511			1,163			733			1,244
Total liabilities		70,765			72,930			67,924			63,839
Commitments and contingencies
Shareholders’ equity
Preferred stock $10 par value, authorized 1,000,000 shares; none issued		—			—
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443 shares at November 30 and February 28, 2017		75,134			75,134
Preferred stock $10 par value, authorized 1,000,000 shares; NaN issued								—			—
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443 shares at August 31, 2021 and February 28, 2021								75,134			75,134
Additional paid-in capital		121,010			121,525			123,116			123,017
Retained earnings		160,648			150,685			196,809			194,436
Accumulated other comprehensive loss:
Accumulated other comprehensive income (loss):
Minimum pension liability, net of taxes		(14,517	)		(15,261	)		(19,685	)		(20,282	)
Total accumulated other comprehensive loss		(14,517	)		(15,261	)
Total accumulated other comprehensive income (loss)								(19,685	)		(20,282	)
Treasury stock		(82,524	)		(80,728	)		(70,053	)		(71,756	)
Total shareholders’ equity		259,751			251,355			305,321			300,549
Total liabilities and shareholders' equity	$	330,516		$	324,285		$	373,245		$	364,388

											Accumulated
					Additional						Other																		Accumulated
	Common Stock				Paid-in			Retained			Comprehensive			Treasury Stock											Additional				Other
	Shares		Amount		Capital			Earnings			Income (Loss)			Shares			Amount			Total			Common Stock			Paid-in		Retained		Comprehensive		Treasury Stock
Balance March 1, 2017		30,053,443	$	75,134	$	121,525		$	150,685		$	(15,261	)		(4,686,821	)	$	(80,728	)	$	251,355
																							Shares	Amount	Capital		Earnings		Income (Loss)		Shares		Amount	Total
Balance May 31, 2021																							30,053,443	$75,134	$122,746		$195,874		$(19,983)		(4,021,466)		$(70,319)	$303,452
Net earnings		—		—		—			24,598			—			—			—			24,598		—	—	—		7,460		—		—		—	7,460
Adjustment to pension, net of deferred tax of $456		—		—		—			—			744			—			—			744
Dividends paid ($0.575 per share)		—		—		—			(14,635	)		—			—			—			(14,635	)
Adjustment to pension, net of deferred tax of $95																							—	—	—		—		298		—		—	298
Dividends paid ($0.25 per share)																							—	—	—		(6,525)		—		—		—	(6,525)
Stock based compensation																							—	—	636		—		—		—		—	636
Exercise of stock options and restricted stock																							—	—	(266)		—		—		15,198		266	—
Balance August 31, 2021																							30,053,443	$75,134	$123,116		$196,809		$(19,685)		(4,006,268)		$(70,053)	$305,321

Balance February 28, 2021																							30,053,443	$75,134	$123,017		$194,436		$(20,282)		(4,103,630)		$(71,756)	$300,549
Net earnings																							—	—	—		14,764		—		—		—	14,764
Adjustment to pension, net of deferred tax of $199																							—	—	—		—		597		—		—	597
Dividends paid ($0.475 per share)																							—	—	—		(12,391)		—		—		—	(12,391)
Stock based compensation																							—	—	1,802		—		—		—		—	1,802
Exercise of stock options and restricted stock																							—	—	(1,703)		—		—		97,362		1,703	—
Balance August 31, 2021																							30,053,443	$75,134	$123,116		$196,809		$(19,685)		(4,006,268)		$(70,053)	$305,321

Balance May 31, 2020																							30,053,443	$75,134	$122,266		$192,130		$(24,773)		(4,098,607)		$(71,759)	$292,998
Net earnings																							—	—	—		6,421		—		—		—	6,421
Adjustment to pension, net of deferred tax of $145																							—	—	—		—		433		—		—	433
Dividends paid ($0.225 per share)																							—	—	—		(5,866)		—		—		—	(5,866)
Stock based compensation		—		—		1,002			—			—			—			—			1,002		—	—	326		—		—		—		—	326
Exercise of stock options and restricted stock		—		—		(1,517	)		—			—			88,105			1,517			—		—	—	(162)		—		—		9,262		162	—
Common stock repurchases		—		—		—			—			—			(191,178	)		(3,313	)		(3,313	)	—	—	—		—		—		—		—	—
Balance November 30, 2017		30,053,443	$	75,134	$	121,010		$	160,648		$	(14,517	)		(4,789,894	)	$	(82,524	)	$	259,751
Balance August 31, 2020																							30,053,443	$75,134	$122,430		$192,685		$(24,340)		(4,089,345)		$(71,597)	$294,312

Balance February 29, 2020																							30,053,443	$75,134	$123,052		$193,809		$(25,206)		(4,136,286)		$(72,460)	$294,329
Net earnings																							—	—	—		10,606		—		—		—	10,606
Adjustment to pension, net of deferred tax of $289																							—	—	—		—		866		—		—	866
Dividends paid ($0.45 per share)																							—	—	—		(11,730)		—		—		—	(11,730)
Stock based compensation																							—	—	664		—		—		—		—	664
Exercise of stock options and restricted stock																							—	—	(1,286)		—		—		73,413		1,286	—
Common stock repurchases																							—	—	—		—		—		(26,472)		(423)	(423)
Balance August 31, 2020																							30,053,443	$75,134	$122,430		$192,685		$(24,340)		(4,089,345)		$(71,597)	$294,312


Accounts receivable	$	1,966
Inventories		1,758
Right-of-use asset		3,865
Property, plant & equipment		7,000
Goodwill and intangibles		9,889
Accounts payable and accrued liabilities		(1,411	)
Operating lease liability		(3,865	)
	$	19,202

Accounts receivable	$	4,252
Inventories		1,539
Other assets		575
Property, plant & equipment		5,526
Customer lists		3,390
Trademarks		2,408
Goodwill		6,066
Accounts payable and accrued liabilities		(6,079	)
	$	17,677

	Three months ended		Nine months ended
	November 30, 2016		November 30, 2016
Pro forma net sales	$	97,803	$	297,745
Pro forma net earnings		5,990		19,957
Pro forma earnings per share - diluted		0.23		0.77


	Three months ended		Six months ended
	Aug 31, 2021	Aug 31, 2020	Aug 31, 2021	Aug 31, 2020
Pro forma net sales	$100,451	$93,040	$199,049	$188,465
Pro forma net earnings	7,460	6,642	14,727	11,049
Pro forma earnings per share - diluted	$0.29	$0.26	$0.56	$0.43

Sales price	$	110,000
Carrying value of disposed		(130,174	)
Expenses related to sales (1)		(4,365	)
Loss on sale before write-off of foreign currency translation adjustment		(24,539	)
Write-off of foreign currency translation adjustments
recorded in other comprehensive income		(16,109	)
Loss on sale of sale of discontinued operations	$	(40,648	)

Balance as of March 1, 2016	$	64,537
Goodwill acquired		6,066
Goodwill impairment		—
Balance as of February 28, 2017		70,603
Goodwill acquired		—
Goodwill impairment		—
Balance as of November 30, 2017	$	70,603

				Weighted
				Average
	Number			Grant Date
	of Options			Fair Value
Unvested at March 1, 2017		5,073		$	2.41
New grants		—			—
Vested		(3,457	)		2.48
Forfeited		—			—
Unvested at November 30, 2017		1,616		$	2.24

Unaudited Consolidated Statements of	Three Months Ended November 30,											Nine Months Ended November 30,
Operations - Data (Dollars in thousands, except per share amounts)	2017						2016					2017					2016
Net sales	$	93,606			100.0	%	$	88,660		100.0	%	$	283,083		100.0	%	$	270,316		100.0	%
Cost of goods sold		63,722			68.1			63,368		71.5			192,493		68.0			191,292		70.8
Gross profit margin		29,884			31.9			25,292		28.5			90,590		32.0			79,024		29.2
Selling, general and administrative		16,699			17.8			15,833		17.8			51,167		18.1			47,961		17.7
(Gain) loss from disposal of assets		(4	)	—				264		0.3			59		—			266		0.1
Income from operations		13,189			14.1			9,195		10.4			39,364		13.9			30,797		11.4
Other expense, net		(55	)		(0.1	)		(84	)	(0.1	)		(319	)	(0.1	)		(313	)	(0.1	)
Earnings from continuing operations before income taxes		13,134			14.0			9,111		10.3			39,045		13.8			30,484		11.3
Provision for income taxes		4,860			5.2			3,371		3.8			14,447		5.1			11,277		4.2
Earnings from continuing operations		8,274			8.8	%		5,740		6.5	%		24,598		8.7	%		19,207		7.1	%
Income from discontinued operations, net of tax		—			—			—		—			—		—			2,481		0.9
Loss on sale of discontinued operations, net of tax		—			—			—		—			—		—			(26,042	)	(9.6	)
Earnings (loss) from discontinued operations, net of tax		—			—			—		—			—		—			(23,561	)	(8.7	)
Net earnings (loss)	$	8,274			8.8	%	$	5,740		6.5	%	$	24,598		8.7	%	$	(4,354	)	-1.6	%

Earnings (loss) per share - diluted
Continuing operations	$	0.33					$	0.22				$	0.97				$	0.74
Discontinued operations		—					—						—					0.10
		0.33						0.22					0.97					0.84
Sale of discontinued operations		—						—					—					(1.01	)
Net earnings (loss)	$	0.33					$	0.22				$	0.97				$	(0.17	)

					Total Number
	Total				of Shares		Maximum Amount
	Number		Average		Purchased as		that May Yet Be Used
	of Shares		Price Paid		Part of Publicly		to Purchase Shares
Period	Purchased		per Share		Announced Programs		Under the Program
September 1, 2017 - September 30, 2017		—	$	—		—	$	18,377,146
October 1, 2017 - October 31, 2017		145	$	20.30		—	$	18,377,146
November 1, 2017 - November 30, 2017		—	$	—		—	$	18,377,146
Total		145	$	20.30		—	$	18,377,146