☒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,~~30, 2022, there were ~~25,416,890~~25,836,392 shares of the Registrant’s common stock outstanding.

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

											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, August 31, 2022																								30,053,443	$	75,134	$	124,031		$	208,898		$	(17,803	)		(4,266,835	)	$	(74,944	)	$	315,316
Net earnings		—		—		—			24,598			—			—			—			24,598			—		—		—			11,286			—			—			—			11,286
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 $179																								—		—		—			—			717			—			—			717
Dividends paid ($0.25 per share)																								—		—		—			(6,459	)		—			—			—			(6,459	)
Stock based compensation																								—		—		562			—			—			—			—			562
Balance, November 30, 2022																								30,053,443	$	75,134	$	124,593		$	213,725		$	(17,086	)		(4,266,835	)	$	(74,944	)	$	321,422

Balance, February 28, 2022																								30,053,443	$	75,134	$	123,990		$	197,998		$	(18,587	)		(4,253,824	)	$	(74,720	)	$	303,815
Net earnings																								—		—		—			35,107			—			—			—			35,107
Adjustment to pension, net of deferred tax of $375																								—		—		—			—			1,501			—			—			1,501
Dividends paid ($0.75 per share)																								—		—		—			(19,380	)		—			—			—			(19,380	)
Stock based compensation		—		—		1,002			—			—			—			—			1,002			—		—		1,497			—			—			—			—			1,497
Exercise of stock options and restricted stock		—		—		(1,517	)		—			—			88,105			1,517			—			—		—		(894	)		—			—			51,071			894			—
Common stock repurchases		—		—		—			—			—			(191,178	)		(3,313	)		(3,313	)		—		—		—			—			—			(64,082	)		(1,118	)		(1,118	)
Balance November 30, 2017		30,053,443	$	75,134	$	121,010		$	160,648		$	(14,517	)		(4,789,894	)	$	(82,524	)	$	259,751
Balance, November 30, 2022																								30,053,443	$	75,134	$	124,593		$	213,725		$	(17,086	)		(4,266,835	)	$	(74,944	)	$	321,422

Balance, August 31, 2021																								30,053,443	$	75,134	$	123,116		$	196,809		$	(19,685	)		(4,006,268	)	$	(70,053	)	$	305,321
Net earnings																								—		—		—			7,563			—			—			—			7,563
Adjustment to pension, net of deferred tax of $295																								—		—		—			—			885			—			—			885
Dividends paid ($0.25 per share)																								—		—		—			(6,525	)		—			—			—			(6,525	)
Stock based compensation																								—		—		642			—			—			—			—			642
Exercise of stock options and restricted stock																								—		—		(14	)		—			—			826			14			—
Common stock repurchases																								—		—		—			—			—			(102,757	)		(1,942	)		(1,942	)
Balance, November 30, 2021																								30,053,443	$	75,134	$	123,744		$	197,847		$	(18,800	)		(4,108,199	)	$	(71,981	)	$	305,944

Balance, February 28, 2021																								30,053,443	$	75,134	$	123,017		$	194,436		$	(20,282	)		(4,103,630	)	$	(71,756	)	$	300,549
Net earnings																								—		—		—			22,327			—			—			—			22,327
Adjustment to pension, net of deferred tax of $494																								—		—		—			—			1,482			—			—			1,482
Dividends paid ($0.725 per share)																								—		—		—			(18,916	)		—			—			—			(18,916	)
Stock based compensation																								—		—		2,444			—			—			—			—			2,444
Exercise of stock options and restricted stock																								—		—		(1,717	)		—			—			98,188			1,717			—
Common stock repurchases																								—		—		—			—			—			(102,757	)		(1,942	)		(1,942	)
Balance, November 30, 2021																								30,053,443	$	75,134	$	123,744		$	197,847		$	(18,800	)		(4,108,199	)	$	(71,981	)	$	305,944

1. Significant Accounting Policies and General Matters

Basis of Presentation

These unaudited condensed consolidated financial statements of Ennis, Inc. and its subsidiaries (collectively referred to as the “Company,” “Registrant,” “Ennis,” or “we,” “us,” or “our”) for the period ended November 30, ~~2017~~2022 have been prepared in accordance with generally accepted accounting principles ~~for~~in the United States of America ("GAAP') and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial ~~reporting.~~statements. Accordingly, they do not include all of the information and footnotes required by ~~generally accepted accounting principles~~GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 28, ~~2017,~~2022, from which the accompanying consolidated balance sheet at February 28, ~~2017~~2022 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 preparation of the consolidated financial statements in conformity with GAAP requires 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis, including those related to bad debts, inventory valuations, property, plant and equipment, intangible assets, pension plan, accrued liabilities, and income taxes. The Company bases estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year.

On May 25, 2016, the Company sold Alstyle Apparel, LLC and its subsidiaries, which constituted the Company’s apparel segment (the “Apparel Segment”), to Gildan Activewear Inc. As a result of this action, the current year and prior year disclosures reflect these operations as discontinued operations.

Recent Accounting Pronouncements

~~In March 2017, the Financial~~

Recently Issued Accounting ~~Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-07,~~ ~~Compensation-Retirement Benefits (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~~Updates

There are no recent accounting pronouncements that are anticipated 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): Simplifying the Test for Goodwill Impairment~~ (“~~ASU 2017-04~~”), which simplifies how an entity is required to measure goodwill impairment. The amendments in ASU 2017-04 require that goodwill impairment will be measured using the difference between the carrying amount and the fair value of the reporting unit and the loss recognized should not exceed the total amount 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 of adoption.

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

2. Revenue

~~In February 2016,~~

Nature of Revenues

Revenues from contracts with customers for the ~~FASB issued ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ (“~~ASU 2016-02~~”), which requires lessees 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 beginningsale of ~~the earliest comparative period~~commercial printing products in the ~~financial statements and~~continental United States is ~~effective~~primarily recognized at a point in the first quarter of fiscal year 2020. Early adoption of ASU 2016-02 is permitted. The Company is currently evaluating the impact the adoption of ASU 2016-02 will have on its consolidated financial statements.

~~ENNIS, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~In January 2016, the FASB issued ASU No. 2016-01,~~ ~~Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~ (“~~ASU 2016-01~~”), which institutes a number of modifications to the reporting of financial assets and liabilities. These modifications include: (i) measurement of non-equity method assets and liabilities at fair value, with changes to fair value recognized through net income, (ii) performance of qualitative impairment assessments of equity investments without readily determinable fair values at each reporting period, (iii) elimination of the requirement to disclose methods and significant assumptions used in calculating the fair value of financial instruments measured at amortized cost, (iv) measurement of the fair value of financial instruments measured at amortized cost using the exit price notion consistent with Topic 820, Fair Value Measurement, (v) separate presentation in other comprehensive income of the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk, (vi) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset, and (vii) evaluation of the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This ASU is effective for financial statements issued with fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company is currently evaluating the impact the adoption of ASU 2016-01 will have on its consolidated financial statements.

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ (“~~ASU 2014-09”), which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers~~time in an amount that reflects the consideration ~~to which it~~the Company expects to be entitled to in exchange for those ~~goods~~goods. Revenue from the sale of commercial printing products, including shipping and handling fees billed to customers, is recognized upon the transfer of control to the customer, which is generally upon shipment to the customer when the terms of the sale are freight on board ("FOB") shipping point, or, ~~services.~~to a lesser extent, upon delivery to the customer if the terms of the sale are FOB destination.

In a small number of cases and upon customer request, the Company prints and stores commercial printing product for customer specified future delivery, generally within the same year as the product is manufactured. In this case, revenue is recognized upon the transfer of control when manufacturing is complete and title and risk of ownership is passed to the customer. Storage revenue for certain customers may be recognized over time rather than at a point in time. As of the date of this report, the amount of storage revenue is not significant to the Company’s condensed consolidated financial statements. The ~~standard will~~output method for measure of progress is determined to be ~~effective for us~~appropriate. The Company recognizes storage revenue in the ~~first quarter of fiscal 2019. We have a project plan in place~~amount for which it has the right to invoice for revenue that is recognized over time and for which it demonstrates that the invoiced amount corresponds directly with the value to the customer for the ~~transition~~performance completed to date.

The Company does not disaggregate revenue and operates in one sales category consisting of commercial printed product revenue, which is reported as net sales on the condensed consolidated statements of operations. The Company does not have material contract assets and contract liabilities as of November 30, 2022.

Significant Judgments

Generally, the Company’s contracts with customers are comprised of a written quote and customer purchase order or statement of work, and governed by the Company’s trade terms and conditions. In certain instances, it may be further supplemented by separate pricing agreements and customer incentive arrangements, which typically only affect the transaction price. Contracts do not contain a

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2022
(unaudited)

significant financing component as payment terms on invoiced amounts are typically between 30 to 60 days, based on the Company’s credit assessment of individual customers, as well as industry expectations. Product returns are not significant.

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

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

The Company’s contracts with customers are generally short-term in ~~accordance with Topic 606, including necessary changes to accounting processes, procedures and internal controls. Our initial evaluation is that~~nature. Accordingly, the Company does not disclose the value of unsatisfied performance obligations nor the timing of revenue recognition for our various revenue streams would not be materially impacted by the adoption of this standard. Thus, we do not expect the adoption of this standard to materially impact our consolidated financial statements, but we are still evaluating the impact on our financial statement disclosures. As we continue our assessment, we are reviewing selected revenue contracts in detail to validate our initial conclusions. We will adopt using the modified retrospective approach with any cumulative effect recognized in retained earnings on the date of adoption.recognition.

4. 5. Acquisitions

The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100% of the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets and liabilities assumed, is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred.

Acquisition of School Photo Marketing

On ~~July 7, 2017,~~November 30, 2022, the Company acquired the assets and business from School Photo Marketing ("SPM"), which is based in Morganville, New Jersey, for $8.8 million (with additional potential earn-out consideration of up to $1,000,000 over a ~~tag operation located~~four-year period upon the attainment of specified financial benchmarks) plus the assumption of trade payables, subject to certain adjustments. The Company performed a preliminary allocation of the total estimated consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on their estimated fair values using the information available as of the acquisition date. This allocation is preliminary and subject to change, which may be material. All goodwill of $4.8 million recognized as a part of this acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $3.2 million in ~~Ohio,~~connection with the transaction, which are also deductible for ~~$1.4~~tax purposes.

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


Accounts receivable		$1,403
Inventories		463
Other assets		84
Right-of-use asset		487
Property, plant and equipment		250
Goodwill and intangibles		7,974
Operating lease liability		(487)
Accounts payable and accrued liabilities		(1,407)
		$8,767

Acquisition of AmeriPrint Corporation

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2022
(unaudited)

On June 1, 2021, the Company acquired the assets and business from AmeriPrint Corporation ("AmeriPrint"), which is based in Harvard, Illinois, for $3.9 million in cash plus the assumption of trade payables, subject to certain ~~accrued liabilities. Management considers this acquisition immaterial.~~

~~On January 27, 2017, the Company completed~~adjustments. Goodwill of $0.5 million recognized as a part of the acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of ~~Independent Printing Company, Inc. and its related entities (collectively “Independent”) for $17.7~~approximately $1.1 million in ~~cash consideration, in a stock purchase~~connection with the 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,~~acquisition of AmeriPrint, which prior to the acquisition generated approximately ~~$37.0~~$6.5 million in ~~unaudited~~ sales ~~during calendar~~for its fiscal year ~~2016, will continue~~ended December 31, 2020, brings added capabilities and expertise to ~~operate under its respective brand names. Independent sells mainly through distributors~~our expanding product offering including barcoding and ~~resellers. The Company will now have 4 folder facilities in Michigan, Kansas, California and Wisconsin, as well as wide format capabilities in Colorado and Wisconsin.~~variable imaging.

The following is a summary of the ~~final~~ purchase price allocation for ~~Independent~~AmeriPrint (in thousands):

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


Accounts receivable	$	417
Inventories		732
Property, plant and equipment		2,000
Goodwill and intangibles		1,607
Accounts payable and accrued liabilities		(834	)
	$	3,922

6. Leases

The ~~results~~Company leases certain of ~~operations~~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 ~~Independent are included in~~additional periods at the Company’s ~~consolidated financial statements~~discretion. At lease inception, all renewal options reasonably certain to be exercised are considered when determining the lease term. The Company currently does not have leases that include options to purchase or provisions that would automatically transfer ownership of the leased property to the Company.

Operating lease expense is recognized on a straight-line basis over the lease term, and variable lease payments are expensed as incurred. The Company had no variable lease costs for the nine months ended November 30, 2022 and November 30, 2021.

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

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of ~~acquisition. The following table represents certain operating information~~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 ~~a pro forma basis~~the BBB Corporate Bond Rate at lease commencement date, as though all Independent operations had been acquired as of March 1, 2016, after the estimated impact of adjustments such as amortization of intangible assets, interest expense, interest income, and related tax effects (in thousands, except per share amounts):

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

~~The pro forma results~~rates are not ~~necessarily indicative~~implicitly stated in most leases.

Components of ~~what would have occurred if the acquisitions had been in effect~~lease expense for the ~~periods presented.~~three and nine months ended November 30, 2022 and November 30, 2021 were as follows (in thousands):


	Three months ended				Nine months ended
	November 30, 2022		November 30, 2021		November 30, 2022		November 30, 2021
Operating lease cost	$	1,517	$	1,454	$	4,545	$	4,688

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	$	1,522	$	1,459	$	4,550	$	4,675

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	2,042	$	—	$	2,848	$	3,441

ENNIS, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017~~2022
(unaudited)

5. ~~Discontinued Operations~~

On May 25, 2016 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, and the other terms of the Unit Purchase Agreement dated May 4, 2016.

The operating results of these discontinued operations only reflect revenues 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, 2016 (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
)


~~(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		3 Years

Weighted Average Discount Rate
Operating leases			3.84	%

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
2023 (remaining 3 months)	$	1,025
2024		5,248
2025		4,514
2026		2,893
2027		1,168
2028		153
Thereafter		-
Total future minimum lease payments	$	15,001
Less imputed interest		872
Present value of lease liabilities	$	14,129

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 comparable companies) and an income approach (discounted cash flow analysis). The computations require management to make significant estimates and assumptions, including, among other things, selection of comparable publicly traded companies, the discount rate applied to future earnings reflecting a weighted average cost of capital, and earnings growth assumptions. A discounted cash flow analysis requires management to make various assumptions about future sales, operating margins, capital expenditures, working capital, and growth rates. If the evaluation results in the fair value of the goodwill for the reporting unit being lower than the carrying value, ~~of these assets over their estimated remaining useful life, approximately 17 - 19 years. The amortization expense associated with this election~~an impairment charge is ~~expected to increase the Company’s selling, general and administrative expense line by approximately $830,000 during fiscal year 2018.~~recorded.

1213

ENNIS, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017~~2022
(unaudited)

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 November 30, 2022									(in years)		Amount		Amortization		Net
Amortized intangible assets
Trademarks and trade names		16.2	$	19,625	$	2,109	$	17,516		10.4	$	29,328	$	11,786	$	17,542
Customer lists		8.3		58,040		24,884		33,156		5.3		79,126		52,666		26,460
Noncompete		0.1		175		130		45
Patent		0.3		783		754		29
Non-compete										2.8		235		159		76
Total		11.0	$	78,623	$	27,877	$	50,746		7.3	$	108,689	$	64,611	$	44,078

As of February 28, 2017
As of February 28, 2022
Amortized intangible assets
Trademarks and trade names		8.0	$	3,642	$	1,234	$	2,408		11.0	$	28,207	$	10,301	$	17,906
Customer lists		8.9		57,347		21,336		36,011		6.1		76,458		48,903		27,555
Noncompete		0.8		175		86		89
Patent		1.0		783		655		128
Non-compete										3.3		877		769		108
Total		8.8	$	61,947	$	23,311	$	38,636		8.0	$	105,542	$	59,973	$	45,569

November 30,

February 28,

2017

2017

Non-amortizing intangible assets

Trademarks and trade names

$
—

$
15,291

Aggregate amortization expense was $5.3 million and $6.1 million for the nine months ended November 30, ~~2017~~2022 and November 30, ~~2016 was $4.6 million and $3.5 million,~~2021, 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


2023	$	7,130
2024		7,354
2025		7,180
2026		6,565
2027		5,481

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, 2021	$	88,647
Goodwill acquired		30
Balance as of February 28, 2022		88,677
Goodwill acquired		4,761
Balance as of November 30, 2022	$	93,438

During ~~the~~ fiscal year ~~ended February 28, 2017, $6.1~~2022, the Company recorded a measurement period adjustment of $0.5 million to reduce goodwill related to the Infoseal acquisition. The Company records additions of $0.5 million and less than $0.1 million to goodwill related to the acquisition of AmeriPrint and Superior Copies, respectively. Additionally, $4.8 million was added to goodwill related to the acquisition of ~~Independent.~~SPM.

1314

ENNIS, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017~~2022
(unaudited)

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	November 30, 2022		February 28, 2022
Accrued taxes	$	140	$	329
Employee compensation and benefits					$	13,907	$	11,587
Taxes other than income						1,513		947
Accrued legal and professional fees		438		414		534		251
Accrued interest		134		98		-		31
Accrued utilities		111		90		128		108
Accrued acquisition related obligations		759		789		9		34
Accrued credit card fees		127		119
Income taxes payable						2,160		1,606
Other accrued expenses		171		187		866		858
	$	1,880	$	2,026	$	19,117	$	15,422

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 did not renew its Credit Agreement which expired November 11, 2021. The Company has ~~entered into 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 (the “Credit Facility~~”) until August 11, 2020 that 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. Under the Credit Facility: (i) the Company’s net leverage ratio may not exceed 3.00:1.00, (ii) the Company’s fixed charge coverage ratio may not be less than 1.25:1.00, and (iii) the Company may make dividends or distributions to shareholders so long as (a) no event of default has occurred and is continuing and (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 2.50:1.00. As of November 30, 2017, 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% 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 earnings before interest, taxes, depreciation and amortization (“~~EBITDA”). As of November 30, 2017, we~~ had ~~$30.0 million of borrowings~~no outstanding long-term debt under the revolving credit line ~~and $1.2~~since paid in full in August 2019. As of November 30, 2022, the Company had $0.5 million outstanding under a standby letters of credit ~~arrangements, leaving approximately $68.8 million available in borrowing capacity. The Credit Facility is~~arrangement secured by ~~substantially all~~a cash collateral bank account.

10. Shareholders’ Equity

The Company’s board of ~~our assets (other than real property), as well as all capital securities of each of our subsidiaries.~~

9. ~~Shareholders’ Equity~~

~~The~~ 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 $60.0 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 months ended November 30, ~~2017~~2022, the Company ~~under the program,~~ repurchased ~~191,033~~64,082 shares of common stock under the program at an average price of ~~$17.33 per share.~~$17.46. There were no repurchases of common stock during the three-month period ended November 30, 2022. Since the program’s inception in October 2008, there have been ~~1,442,236~~2,213,111 common shares repurchased at an average price of ~~$14.99~~$16.29 per share. As of November 30, ~~2017 there was $18.4~~2022, $23.9 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~~(the "Old Plan ~~amended and restated as of May 14, 2008 (the “Plan~~”"). The Old Plan expired June 30, 2021 and all remaining unused shares expired. Subject to the affirmative vote of the shareholders, the Board adopted the 2021 Long-Term Incentive Plan of Ennis, Inc. (the "New Plan") on April 16, 2021 authorizing 1,033,648 shares of common stock for awards and was approved by the shareholders at the Annual Meeting on July 15, 2021 by a majority vote. The New Plan expires June 30, 2031 and all unissued stock will expire on that date. At November 30, 2022, the Company has ~~529,408~~977,277 shares of unissued common stock reserved under the New Plan for issuance as of November 30, 2017. The exercise price of each stock option granted under the 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. 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. 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~~2022 and November 30, ~~2016,~~2021, the Company included ~~compensation expense related to share-based compensation of $0.3 million ($0.2 million net of tax), and $0.3 million ($0.2 million net of tax), respectively,~~ in selling, general and administrative ~~expenses.~~expenses, compensation expense related to stock-based compensation of $0.6 million and $0.6 million, respectively. For the nine months ended November 30, ~~2017~~2022 and November 30, ~~2016,~~2021, the Company

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2022
(unaudited)

included ~~compensation expense related to share-based compensation of $1.0 million ($0.6 million net of tax), and $1.0 million ($0.6 million net of tax), respectively,~~ in selling, general and administrative ~~expenses.~~expenses, compensation expense related to stock-based compensation of $1.5 million and $2.4 million, respectively.

Stock Options

The Company had ~~the following~~no outstanding vested or unvested stock ~~option activity for~~options at any time during the nine 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.~~

2022 and November 30, 2021. No stock options were granted during the nine months ended November 30, ~~2017~~2022 and November 30, ~~2016.~~2021.

~~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 stock options at November 30, 2017 and the changes during the nine 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

As of November 30, 2017, there was approximately $0.8 million of unrecognized compensation cost related to unvested stock options granted under the Plan. The weighted average remaining requisite service period of the unvested stock options was 0.4 years.

~~Restricted Stock~~

~~The Company had the following~~ restricted stock ~~grant activity~~awards for the nine months ended November 30, ~~2017:~~2022, of which 22,000 shares were granted under the New Plan:

				Weighted
				Average					Weighted
	Number of			Grant Date					Average
	Shares			Fair Value		Number of			Grant Date
Outstanding at March 1, 2017		166,546		$	16.35
						Shares			Fair Value
Outstanding at March 1, 2022							67,164		$	18.73
Granted		74,900			16.30		22,000			19.78
Terminated		—			—		—			—
Vested		(88,105	)		15.91		(39,381	)		19.00
Outstanding at November 30, 2017		153,341		$	16.58
Outstanding at November 30, 2022							49,783		$	18.99

As of November 30, ~~2017,~~2022, the total remaining unrecognized compensation cost related to unvested restricted stock ~~granted under the Plan~~ was approximately ~~$1.8~~$1.1 million. The weighted average remaining requisite service period of the unvested restricted stock awards was 1.7 years.

~~11.~~ Restricted Stock Units

During the nine months ended November 30, 2022, 39,574 performance-based RSUs and 9,893 time-based RSUs were granted under the New 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 $19.47 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.

The performance-based RSUs will vest no later than March 15, 2024, which is the deadline for the Compensation Committee to determine the extent of the Company’s attainment of the Performance Goals during the Performance Period that ends on February 29, 2024. The time-based RSUs vest ratably over two to three years from the date of grant.

The following activity occurred with respect to the Company’s restricted stock units for the nine months ended November 30, 2022:


	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, 2022		35,071		$	20.38		140,287	$	23.17
Granted		9,893			19.47		39,574		23.17
Terminated		—			—		—		—
Vested		(11,690	)		20.38		—		—
Outstanding at November 30, 2022		33,274		$	20.11		179,861	$	23.17

As of November 30, 2022, the total remaining unrecognized compensation cost of time-based RSUs was approximately $0.4 million over a weighted average remaining requisite service period of 1.8 years. As of November 30, 2022, the total remaining unrecognized compensation of performance-based RSUs was approximately $1.7 million over a weighted average remaining requisite service period of 1.7 years.

ENNIS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2022
(unaudited)

12. Pension Plan

The Company and certain subsidiaries have a noncontributory defined benefit retirement plan (the “"Pension Plan”"), covering approximately ~~20%~~13% 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						Nine months ended
	November 30,						November 30,						November 30,						November 30,
	2017			2016			2017			2016			2022			2021			2022			2021
Components of net periodic benefit cost
Service cost	$	271		$	292		$	812		$	875		$	236		$	269		$	708		$	806
Interest cost		567			593			1,702			1,779			492			420			1,475			1,261
Expected return on plan assets		(948	)		(917	)		(2,845	)		(2,749	)		(924	)		(931	)		(2,774	)		(2,792	)
Amortization of:
Unrecognized net loss		510			671			1,531			2,012			601			639			1,806			1,919
Settlement charges														786			750			786			750
Net periodic benefit cost	$	400		$	639		$	1,200		$	1,917		$	1,191		$	1,147		$	2,001		$	1,944

~~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)~~("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 for the Pension Plan year ending February 28, ~~2018. However,~~2023. 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 ~~on December 28, 2017 for fiscal year 2018. The Company contributed $3.0~~and $3.0 million per year. However, changes in actual investment returns or in discount rates could change this amount significantly. There was a $2.0 million contribution made in September 2022 to ~~the~~avoid a Pension Benefit Guaranty Corporation variable premium. As our Pension Plan ~~during fiscal year 2017.~~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, 2022, we had an unfunded pension liability recorded on our balance sheet of approximately $3.7 million.

13.Earnings Per Share

~~12.~~ ~~Earnings (loss) 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, performance-based RSUs 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

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


	Three months ended				Nine months ended
	November 30,				November 30,
	2022		2021		2022		2021
Basic weighted average common shares outstanding		25,809,581		26,020,210		25,812,216		26,053,898
Effect of dilutive RSUs		79,234		—		80,657		97,582
Diluted weighted average common shares outstanding		25,888,815		26,020,210		25,892,873		26,151,480
Earnings per share
Net earnings - basic	$	0.44	$	0.29	$	1.36	$	0.86
Net earnings - diluted	$	0.44	$	0.29	$	1.36	$	0.85
Cash dividends	$	0.250	$	0.250	$	0.750	$	0.725

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 no difference in undistributed earnings allocated

ENNIS, INC. AND SUBSIDIARIES

NOTES TO ~~UNAUDITED~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017~~2022
(unaudited)

~~13.~~ to each participating security. Accordingly, the presentation above is prepared on a combined basis. No options were outstanding for the nine months ended November 30, 2022 and November 30, 2021.

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. For the purposes of the condensed consolidated statements of 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. At November 30, 2022, cash balances included $86.2 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, no assurance can be made that the Company will not experience losses on the Company’s deposits.

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,~~condensed 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.

15. Related Party Transactions

~~For the purposes~~The Company leases a facility and sells product to an entity controlled by a member of the ~~Consolidated Statements~~Board who was the former owner of ~~Cash Flows,~~Integrated Print & Graphics, a business that the Company ~~considers cash to include cash on hand~~acquired. The total right-of-use asset and ~~in bank accounts. The Federal Deposit Insurance Corporation insures accounts up to $250,000. At~~related lease liability as of November 30, ~~2017, cash balances included $92.0~~2022 was $0.8 million ~~that was not federally insured because it represented amounts in individual accounts above~~and $0.9 million, respectively. During the ~~federally insured limit for each such account. This at-risk amount~~nine months ended November 30, 2022, total lease payments made to, and sales made to, the related party were approximately $0.3 million and $3.0 million, respectively.

16. Income Taxes

The Company is subject to ~~fluctuation on a daily basis. While management does not believe there is significant risk with respect to such deposits, we cannot be assured that we will not experience losses~~U.S. federal income tax as well as income taxes of multiple state jurisdictions. The quarterly income tax provision was computed based on our ~~deposits.~~estimated annualized effective tax rate and the full-year forecasted income or loss plus the tax impact of unusual, infrequent, or nonrecurring significant items during the period.

~~14.~~ Our effective tax rate for the three and nine months ended November 30, 2022 and 2021 was 28.0% and 30.0%, respectively, which varied from the U.S. federal statutory tax rate of 21.0% primarily due to the effects of state income taxes, nondeductible compensation and other permanent items. The Company made cash payments for income taxes of $13.1 million and $9.7 million, respectively, for the nine months ended November 30, 2022 and 2021.

17. Subsequent Events

On December ~~21, 2017,~~15, 2022, the Board declared a quarterly ~~cash~~ dividend on the Company's common stock of 20 25.0 cents per share, which will be paid on February ~~9, 2018~~2, 2023 to ~~the~~ shareholders of record on as of January ~~12, 2018.~~5, 2023. The expected payout for this dividend is approximately $6.5 million.

~~The Tax Cuts and Jobs Act (the “Act~~”) was enacted on December 22, 2017 and is effective for tax years beginning after December 31, 2017. The Company is currently evaluating the impact of the Act on the consolidated financial statements. Management expects the Company’s effective tax rate and net deferred tax liabilities to decrease as a result of the reduction of the corporate tax rate from 35% to 21%, which will be partially offset 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 in the amount of $500 each. This payment will take place with the first payroll period 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.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017~~2022

~~Item 2.~~

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

~~Overview~~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 Form 10-K for the fiscal year ended February 28, 2022.

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 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 (including energy, freight, labor and benefit costs) in markets that are highly price competitive and volatile; uninsured losses, including those from natural disasters, catastrophes, pandemics, theft, sabotage, or cyber attacks; the impact of the COVID-19 pandemic or future pandemics on the 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 industry; the impact of the 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; the impact of a data-breach of sensitive information, ransomware attack or other cyber incident on the Company; and changes in government regulations including measures intended to minimize the impact of COVID-19. 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, 2022 before making an investment in our common stock.

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 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 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 NOVEMBER 30, 2022

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 5955 manufacturing plants throughout the United States in 2120 strategically located ~~states.~~states as one reportable segment. Approximately ~~95%~~96% 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 Forms~~^SM, 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 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)~~advertising); 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~~

School Photo Marketing is a one-stop shop for over 1,300 school portrait photographers and professional photo labs nationwide, providing them with a complete array of products and services that reach over 15 million families and 30,000 schools, primarily in the K-8 market. 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

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.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

On November 30, 2022, we acquired the net assets and business of SPM in Morganville, New Jersey. The acquisition of SPM brings a new channel with products produced through our existing manufacturing operations.

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.~~competitors. We face highly competitive conditions throughout ~~the~~our supply chain in ~~an already over-supplied,~~a 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. Beginning in March 2020 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. The Company saw economic improvement during fiscal year ended February 28, 2022 and we continue to see strong demand for our product. Although the U.S. economy has gained in recovery, it continues to be significantly impacted by supply chain disruptions, labor shortages, and shifting demand.

There continues to be significant uncertainties associated with the COVID-19 pandemic. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently uncertain and will depend on many factors outside the Company’s control discussed under the caption, “Risk Factors”, in Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 28, 2022. 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, 2022.

We will continue to monitor incoming order volume as well as rising raw material and other input costs so that we can proactively adjust our pricing and costs accordingly.

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 or reversal 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 a significant 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 ~~paper. This, with~~papers and an increase in domestic exports. With increased pricing power, domestic paper producers can better control the ~~shrinking~~supply of ~~some~~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 ~~mill capacity, has allowed domestic producers to announce price increases across all paper grades. Even with~~exports; and lower pricing power in the ~~shrinking~~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.

As the economy has improved, demand has increased for coated and ~~lower imports, most reports still indicate there to be an imbalance~~uncoated freesheet papers which has reduced the excess inventory in the ~~domestic marketplace~~market. It is unclear whether this is a temporary situation or if conditions could stretch for ~~most grades~~a more extended amount of time. Regardless of these factors, many of which are cyclical, we continue to believe paper pricing will remain in a range which will not

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

unfavorably impact our margins. Additionally, the possibility of paper shortages in the 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 our procurement ~~costs. We~~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 and we will continue to focus on maintaining our margins when these negative factors swing the other way.~~

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.

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 condensed 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. WeOur Annual Report on Form 10-K for the year ended February 28, 2022, includes a description of certain critical accounting estimates, including those with respect to the pension plan, goodwill and other intangible assets, revenue recognition, inventories and income taxes, which we believe are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. There have been no material changes to the critical accounting policies, ~~related to the aforementioned items are the most critical due to their effect on our more~~ significant judgements and estimates ~~and judgments used~~described 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.~~2022.

~~ENNIS, INC. AND SUBSIDIARIES~~Recent Accounting Pronouncements

~~FORM 10-Q~~There are no recent accounting pronouncements that are anticipated to have a material impact on our consolidated financial statements.

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

Results of Operations

The following 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 months ended November 30, ~~2017~~2022 and the comparative ~~periods~~period for ~~2016~~2021 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 November 30,										Nine Months Ended November 30,
Operations - Data (in thousands)	2022					2021					2022					2021
Net sales	$	110,245		100.0	%	$	102,968		100.0	%	$	329,145		100.0	%	$	300,349		100.0	%
Cost of goods sold		76,768		69.6			73,768		71.6			226,445		68.8			213,062		70.9
Gross profit margin		33,477		30.4			29,200		28.4			102,700		31.2			87,287		29.1
Selling, general and administrative		17,292		15.7			17,513		17.0			52,916		16.1			54,523		18.2
(Gain) loss from disposal of assets		15		—			1		—			15		—			(275	)	(0.1	)
Income from operations		16,170		14.7			11,686		11.3			49,769		15.1			33,039		11.0
Other expense		(496	)	(0.5	)		(881	)	(0.8	)		(1,010	)	(0.3	)		(1,143	)	(0.4	)
Earnings before income taxes		15,674		14.2			10,805		10.5			48,759		14.8			31,896		10.6
Provision for income taxes		4,388		4.0			3,242		3.1			13,652		4.1			9,569		3.2
Net earnings	$	11,286		10.2	%	$	7,563		7.4	%	$	35,107		10.7	%	$	22,327		7.4	%

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

Three months ended November 30, ~~2017~~2022 compared to three months ended November 30, ~~2016~~2021

Net Sales. Our net sales were ~~$93.6~~$110.2 million for the quarter ended November 30, ~~2017,~~2022, compared to ~~$88.7~~$103.0 million for the same quarter ~~last~~in the prior year, or an increase of ~~$4.9~~$7.2 million, or ~~5.5%~~7.0%. ~~The market continues~~Our net sales increased on a year-over-year basis due to ~~be fairly soft with competitive~~continued strong customer demand for our product and increased pricing ~~pressures. However,~~to cover inflationary cost. Our net sales decreased slightly $(1.0) million or -0.9% on a sequential quarter basis, from $111.2 million for the quarter ended August 31, 2022 to $110.2 million 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 declinesquarter due to ~~print attrition and other changes, contributed $9.8 million in net~~lower sales ~~during the three months ended November 30, 2017.~~volumes.

~~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~~$3.0 million, or 4.1%, from ~~$63.4~~$73.8 million for the three months ended November 30, ~~2016~~2021 to ~~$63.7~~$76.8 million for the three months ended November 30, ~~2017, or 0.5%.~~2022. Our gross profit ~~margin (“margin~~”) was ~~$29.9~~$33.5 million for the quarter ~~or 31.9% of net sales,~~ended November 30, 2022 compared to ~~$25.3~~$29.2 million ~~or 28.5% of net sales,~~ for the same quarter ~~last~~in the prior year. ~~During~~We made pricing adjustments to cover inflationary costs and improved operational efficiencies all of which contributed to improve our gross profit margin to 30.4% in the third quarter of ~~fiscal 2017 our margin was negatively impacted by increased medical expenses~~2022 compared to the prior year’s third quarter of ~~approximately $1.4 million.~~28.4%.

Selling, general, and administrative expense. For the three months ended November 30, ~~2017,~~2022, our selling, general, and administrative (“("SG&A”") expenses were ~~$16.7~~$17.3 million compared to ~~$15.8~~$17.5 million for the three months ended November 30, ~~2016,~~2021, a decrease of $0.2 million, or ~~an increase of 5.7%~~1.3%. As a percentage of net sales, ~~the~~ SG&A expenses for the current quarter were ~~17.8%~~15.7% and ~~17.8%~~17.0% for the three months ended November 30, ~~2017~~2022 and November 30, ~~2016,~~2021, respectively. The ~~acquisition of Independent added $2.0 million~~decrease in SG&A ~~expenses during~~costs were a result of savings from operational efficiencies and the ~~quarter, or 20.2%~~consolidation of ~~its respective net sales. As we continue to integrate this acquisition into~~ our ~~culture and systems, we will continue to look for ways to reduce these expenses to be more~~underperforming manufacturing facilities 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 to a finite life method. This change in accounting method added approximately $0.2 million to SG&A expense during the current quarter.prior year.

~~(Gain) loss~~Gain (loss) from disposal of assets. The ~~$4,000~~$15,000 net ~~gain~~loss 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 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.

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~~2022 was ~~$13.2~~$16.2 million, or ~~14.1%~~14.7% of net sales, as compared to ~~$9.2~~$11.7 million, or ~~10.4%~~11.3% of net sales, for the three months ended November 30, ~~2016. The acquisition of Independent contributed approximately $1.3~~2021. Income from operations decreased on a sequential quarter basis by $1.1 million ~~of income during~~from $17.3 million for the ~~third~~ quarter ~~of this fiscal year.~~ended August 31, 2022.

Other expense. Other expense was ~~$0.1~~$0.5 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~~2022 compared to other expense of $0.9 million for the three months ended November 30, ~~2017~~2021.

Provision for income taxes. Our effective tax rate was 28.0% for the three months ended November 30, 2022 as compared to ~~$5.7~~30.0% for the three months ended November 30, 2021. The primary reason for the decrease in the effective tax rate is permanent non-deductible expense resulting from final distributions in the prior year from our deferred compensation plan which was terminated in November 2020.

Net earnings. Net earnings, due to the factors above, were $11.3 million for the three months ended November 30, 2022 as compared to $7.6 million for the comparable quarter ~~last~~in the prior year, an increase of ~~45.6%. Earnings from operations~~$3.7 million. Net earnings per diluted share for the three months ended November 30, ~~2017 was $0.33,~~2022 were $0.44, compared to ~~$0.22~~$0.29 for the same quarter ~~last~~in the prior year. ~~There were no discontinued operations during the three months ended November 30, 2017 and November 30, 2016.~~

Nine months ended November 30, ~~2017~~2022 compared to nine months ended November 30, ~~2016~~2021

Net Sales. Our net sales were ~~$283.1~~$329.1 million for the ~~nine month~~nine-month period ended November 30, ~~2017,~~2022, compared to ~~$270.3~~$300.3 million for the same period last year, or an increase of ~~4.7%~~$28.8 million, or 9.6%. ~~The market continues~~Our net sales increased due to ~~be fairly soft with competitive~~continued strong customer demand for our products and increase in pricing ~~pressures which intensified with the influx of cheaper off-shore paper coming into the United States~~to cover inflationary costs. In addition, AmeriPrint, our acquisition completed on June 1, 2021, positively impacted our net sales by approximately $1.9 million during the ~~first half of the year. However, the~~ current reversal of 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 early to tell whether or not these announced increases will stick and be passed throughperiod compared to the marketplace. If so, this may offset some of the normal industry sales attrition expected in the marketplace. The acquisition of Independent in January of 2017, which is an integral part of our strategy to offset normal industry revenue declines, contributed $29.9 million in net sales during the nine months ended November 30, 2017.same period last year.

Cost of Goods ~~Sold.~~ Sold and Gross Profit Margin. Our cost of goods sold ~~was $192.5~~increased $13.3 million, or 6.2%, from $213.1 million for the nine months ended November 30, ~~2017, compared~~2021 to $191.3 million for the same period last year, a slight increase of $1.2 million, or 0.6%. Our margin was $90.6 million for the nine month period ended November 30, 2017, or 32.0% of net sales, compared to $79.0 million, or 29.2% of net sales, for the same nine 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~~$226.4 million for the nine months ended November 30, ~~2017,~~2022. Our gross profit was $102.7 million for the nine-month period ended November 30, 2022 compared to ~~$48.0~~$87.3 million for the same period ~~last~~in the prior year. We made pricing adjustments to cover inflationary costs and improved operational efficiencies all of which contributed to improve our gross profit margin to 31.2% from the prior year ~~or an increase~~nine-month period of ~~6.7%~~29.1%. ~~As a percentage of net sales,~~

Selling, general, and administrative expense. For the nine months ended November 30, 2022, our SG&A expenses were ~~18.1% and 17.7%~~$52.9 million compared to $54.5 million for the nine months ended November 30, ~~2017~~2021, a decrease of $1.6 million, or 2.9%. As a percentage

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

of net sales, SG&A expenses for the period were 16.1% and 18.2% for the nine months ended November 30, 2022 and November 30, ~~2016,~~2021, respectively. The ~~acquisition of Independent added $6.3 million~~decrease in SG&A ~~expenses~~costs was a result of savings from operational efficiencies and the consolidation of our underperforming manufacturing facilities in the prior year.

Gain (loss) from disposal of assets. The $15,000 loss from disposal of assets during the ~~nine month~~nine-month period ended November 30, 2017, or 21.2% of its respective net sales. As we continue to integrate this acquisition into our culture and systems, we will continue to look for ways to reduce these expenses to be more in line with our historical SG&A percentage. In addition2022 was primarily attributed 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 $0.6sale of equipment. The $0.3 million ~~to SG&A expense during the nine month period ended November 30, 2017.~~

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

Income from operations. ~~Our~~ Primarily due to factors described above, our income from ~~continuing~~ operations for the nine months ended November 30, ~~2017~~2022 was ~~$39.4~~$49.8 million, or ~~13.9%~~15.1% of net sales, as compared to ~~$30.8~~$33.0 million, or ~~11.4%~~11.0% of net sales, for the nine months ended November 30, ~~2016. The acquisition of Independent contributed approximately $4.2 million of income during the current nine month period.~~2021.

Other expense. Other expense was ~~$0.3~~$1.0 million for the nine months ended November 30, ~~2017 and November 30, 2016.~~

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

~~Net earnings (loss).~~ ~~Earnings from continuing operations were $24.6~~2022 compared to expense of $1.1 million for the nine months ended November 30, ~~2017~~2021.

Provision for income taxes. Our effective tax rate was 28.0% for the nine months ended November 30, 2022 as compared to ~~$19.2~~30.0% for the nine months ended November 30, 2021. The primary reason for the decrease in the effective tax rate is permanent non-deductible expense resulting from final distributions in the prior year from our deferred compensation plan which was terminated in November 2020.

Net earnings. Net earnings, due to the factors above, were $35.1 million for the nine months ended November 30, 2022 as compared to $22.3 million for the comparable period ~~last~~in the prior year, an increase of ~~$5.4~~$12.8 million. ~~Earnings from continuing operations~~Net earnings per diluted share for the nine months ended November 30, ~~2017 was $0.97,~~2022 were $1.36, compared to ~~$0.74~~$0.85 for the same ~~nine month~~ period ~~last year. There were no discontinued operations during the nine months ended November 30, 2017, compared to a net loss from discontinued operations of ($0.91) per diluted share~~ in the ~~same nine month period last~~prior 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.

Liquidity and Capital Resources

We rely on our cash flows generated from operations ~~and the borrowing capacity under our Credit Facility~~ to meet all 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 plan~~compensation obligations 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. We believe our strong liquidity position will help us mitigate the ongoing adverse impacts of COVID-19 and the inflationary environment.

November 30,

February 28,

(Dollars in thousands)

2017

2017

Working Capital

$
135,574

$
119,282

Cash and cash equivalents

$
92,930

$
80,466


	November 30,		February 28,
(Dollars in thousands)	2022		2022
Working capital	$	145,702	$	127,839
Cash	$	87,000	$	85,606

Working Capital. ~~Our~~On November 30, 2022, we had $87.0 million in cash. During the period, our cash position increased by $1.4 million and our working capital increased ~~$16.3~~$17.9 million or ~~13.7%~~14.0%, from ~~$119.3~~$127.8 million at February 28, ~~2017~~2022 to ~~$135.6~~$145.7 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.2022. Our current ratio, calculated by dividing our current assets by our current liabilities, increased from ~~5.0~~4.4 to 1.0 at February 28, ~~2017~~2022 to ~~6.0~~4.7 to 1.0 at November 30, ~~2017.~~2022. Our working capital and current ratio were positively impacted primarily by an increase in our cash, inventories and accounts receivable offset by an increase in our income taxes payable.


	Nine months ended November 30,						Nine months ended November 30,
(Dollars in thousands)	2017			2016			2022			2021
Net cash provided by operating activities	$	33,818		$	42,560		$	33,997		$	34,295
Net cash provided by (used in) investing activities	$	(3,406	)	$	104,919
Net cash used in investing activities							$	(12,105	)	$	(7,658	)
Net cash used in financing activities	$	(17,948	)	$	(67,571	)	$	(20,498	)	$	(20,858	)

~~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~~was $34.0 million ~~from $42.6~~in the nine months ended November 30, 2022 compared to $34.3 million in the comparative period ended November 30, 2021. Our net earnings increased $12.8 million for the nine months ended November 30, ~~2016~~2022 compared to ~~$33.8~~the nine months ended November 30, 2021. An increase in accounts receivable used cash of $5.9 million in the current period compared to an increase in accounts receivable using cash of $0.6 million in the prior year. An increase in inventories used cash of $10.9 million in the nine months ended November 30, 2022 compared to $6.2

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

million in the nine months ended November 30, 2021. An increase in accounts payable provided cash of $1.5 million in the nine months ended November 30, 2022 compared to an increase in accounts payable providing cash of $2.1 million in the nine months ended November 30, 2021. The increase in accounts receivable in the current period was primarily due to higher sales volumes and increases in selling prices as well as timing of payments from customers. Our days sales outstanding, which measures how quickly receivables are collected, increased slightly to 38 days from 36 days (February 28, 2022). There are multiple factors that have contributed to the increased inventory balances. First, raw material prices are higher. Second, some plants have ordered additional paper supplies to accommodate large orders amidst less predictable supply chain conditions. Our days’ sales of inventory increased to 53 days from February 28, 2022 (46 days). We continue to closely monitor and manage our outstanding trade receivables and inventories. The Company continues to monitor incoming orders and is adjusting its raw material purchases accordingly.

Cash flows from investing activities. Cash used in investing activities was $12.1 million in the nine months ended November 30, 2022 compared to $7.7 million in the nine months ended November 30, 2021. Capital expenditures primarily of equipment was $3.3 million and $4.1 million for the nine months ended November 30, 2017. Our decreased operational cash flows in comparison to the comparable period last 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 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 expenses2022 and ~~income taxes, and (iv) a decrease in our receivables by $2.2 million.~~

~~Cash flows from investing activities.~~ ~~Cash provided by (used in) investing activities decreased $108.3 million from $104.9 million provided to $3.4 million used for~~November 30, 2021, respectively. In the nine months ended November 30, ~~2016 and~~2022, $8.8 million was used to acquire businesses as compared to $4.3 million used to acquire businesses in the nine-month period ended November 30, ~~2017, respectively. This was primarily due to the net proceeds of $107.4 million~~2021.

Cash flows from ~~the sale of the Apparel Segment which took place on May 25, 2016, offset by~~financing activities. We used $0.4 million ~~more~~less cash in ~~cash used for the acquisition of businesses. In addition,~~financing activities during the nine months ended November 30, ~~2017 we used $2.1 million in cash on capital expenditures,~~2022 compared to ~~$1.9 million during~~ the same period ~~last~~in the prior year.

~~Cash flows from financing activities.~~ ~~We used $49.6 million less~~ The decrease in cash ~~from financing activities this period than during the same period last year. We~~ used $10.0 million in cash during the comparable period last year to pay down our debt, compared to no repayment of debt in this period. We used $52.7 million last year 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 million to repurchase our common stock under our stock repurchase program during the nine months ended November 30, ~~2017, whereas we used $7.8 million~~2022 compared to ~~repurchase shares of our common stock during~~ the nine months ended November 30, ~~2016. In addition, we received $2.9~~2021 resulted from $0.8 million ~~from the exercise~~less of common stock ~~options~~repurchased under our stock repurchase program in the ~~comparable~~current period ~~last year, whereas~~compared to the nine months ended November 30, 2021 and the payment of $0.5 million more in ~~this period no stock options were exercised.~~dividends in the current period.

~~Credit Facility.~~ ~~The Company’s~~

Credit Facility ~~extended to the Company until August~~– We did not renew our Credit Agreement, which expired November 11, 2020, 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 additional2021. We have had no outstanding long-term 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) no event of default has occurred and is continuing and (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 2.50:1.00.

The Credit Facility bears interest at the LIBOR rate plus a spread ranging from 1.0% 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. As of November 30, 2017, we had $30.0 million of borrowings under the revolving credit line ~~and $1.2~~since paid in full in August 2019. As of November 30, 2022, we had $0.5 million outstanding under a standby letters of credit ~~arrangements, leaving approximately $68.8 million available in borrowing capacity. The Credit Facility is~~arrangement secured by ~~substantially all of our assets (other than real property), as well as all capital securities of each of our subsidiaries.~~

a cash collateral bank account. It is anticipated that ~~the available line of credit is~~our cash and funds from operating cash flows will be sufficient to ~~cover the Company’s working capital requirements for the foreseeable~~fund anticipated future ~~should it be required.~~expenses.

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”).~~ERISA. Due to the enactment of ~~the Highway and Transportation Funding Act (HATFA)~~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,~~2023. 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 a $2.0 million contribution made ~~contributions totaling $3.0 million~~in September 2022 to ~~our~~avoid a Pension ~~Plan during fiscal 2017.~~Benefit Guaranty Corporation variable premium. 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,~~2022, we had an unfunded pension liability recorded on our balance sheet of ~~$4.8~~$3.7 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.~~

~~ENNIS, INC. AND SUBSIDIARIES~~

~~FORM 10-Q~~

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

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. 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 nine months ended November 30, 2022, we have spent approximately ~~$2.1~~$3.3 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~~2022 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~~

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017.~~2022

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 variable rate financial instruments, consisting of the~~While we had no outstanding ~~loans under the Credit Facility, totaled $30.0 million~~debt at November 30, ~~2017. The annual impact on our results of operations of a one-point~~2022, we will be exposed to interest rate ~~change on~~risk if we borrow in the ~~outstanding balance of 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 ourWe maintain “disclosure controls and procedures” ~~(as such~~as that term is defined in ~~Rule~~Rules 13a-15(e) ofand 15d-15(e) under 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~~ are ~~effective~~designed to ensure that information required to be disclosed by usthe Company in ~~the~~ reports ~~filed~~that it files or ~~submitted by us~~submits 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.~~disclosures. Our controls and procedures are tested and evaluated at regular intervals to confirm that they are adequate and followed by our personnel to prevent misstatement of the Company’s financial statements. 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. 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. Pursuant to Exchange Act Rules 13a-15 and 15d-15, 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 of November 30, 2022. Based upon that review and evaluation, the company concluded that there were deficiencies in certain aspects of our information technology controls that permitted a threat actor to gain access to the Company’s network on November 30, 2022 and subsequently launch a ransomware attack that resulted in the encryption of some of the Company’s servers and desktop computers. While the encryption attack did not result in any impairment of the Company’s financial data in its ERP system, the deficiencies in our network access IT controls that made our network vulnerable to the ransomware attack constituted a material weakness. Accordingly, we concluded that our disclosure controls and procedures were ineffective as of November 30, 2022 due to the deficiencies in our IT controls as discussed below.

The Company experienced a cyber-attack between November 30, 2022 and December 2, 2022. Due to a limited gap in the protection provided by our network security software, a threat actor was able to gain access to a remote server at one of our plants during the evening hours of November 30, 2022, the last day of our third quarter of our fiscal year. By gaining access to that remote server, the threat actor was able to glean corporate administrator credentials that had been recorded on that remote server, which gave the threat actor the ability to launch a ransomware attack on servers at the corporate headquarters that was carried out on December 2, 2022. That ransomware attack was detected while in progress and immediate action was taken to isolate our network and eradicate the ransomware from our servers so that we could begin the process of restoring the affected devices from backups. Notably, the databases used for our financial reporting and disclosures were not affected by the cyber-attack and we validated that our third quarter financial data recorded before the attack was the same as the financial data following the attack. Nevertheless, the aggregate deficiencies in our network access IT controls that permitted the cyber-attack constitute a material weakness in that they created a possible opportunity for the threat actor to impair our systems and accounting processes to the extent that there could be a reasonable possibility that a material misstatement of the company’s annual or interim financial statements would not be prevented or detected in a timely manner. However, in this instance, based on our subsequent investigation we believe that the material weakness did not result in any identified misstatements to the financial statements and there are no changes in previously released financial results.

Our management including our Chief Executive Officer and Chief Financial Officer, has concluded that, notwithstanding the material weakness arising out of the aggregate deficiencies in some of our network access IT controls that were evident as of November 30, 2022, the consolidated financial statements in this Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the period presented in conformity with U.S. GAAP.

The Company has already taken corrective action to address the network access IT control deficiencies that permitted the cyber-attack. The Company has also retained independent experts to assist in the investigation of the cyber-attack. As the Company continues

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

its investigation with the assistance of its retained experts, it may identify further deficiencies in its IT controls which will then be addressed in the Company’s continuing remediation efforts.

There ~~were~~have been no other 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 nine months ended November 30, ~~2017~~2022 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.~~2022.

Increasing global cybersecurity attacks and regulatory focus on privacy and security issues could impact our business, expose us to increased liability, subject us to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.

Along with our own data and information in the normal course of our business, we and our customers and partners collect and retain significant volumes of certain types of data, some of which are subject to specific laws and regulations. Complying with varying jurisdictional requirements is becoming increasingly complex and could increase the costs and difficulty of compliance, and violations of applicable data protection laws. Many of our clients provide us with information they consider confidential or sensitive, and many of our client’s industries have established standards for safeguarding the confidentiality, integrity and availability of information relating to their businesses and customers. Data stored in our systems or available through web portals is susceptible to cybercrime or intentional disruption, which have increased globally across all industries in terms of sophistication and frequency. Disclosure of data maintained on our network, a security breach of our systems or other similar events may damage our reputation, subject us to regulatory enforcement action, third party litigation and cause significant reputational or financial harm for our clients and partners. Any of these outcomes may adversely affect our results of operations, financial condition and cash flows.

The Company was targeted with an encryption ransomware attack on November 30, 2022. The attack was discovered while it was in process and immediate action was taken to isolate our network to limit the scope of any damage. The attack resulted in brief disruption to the operation of our systems as we took our servers offline to eradicate the ransomware and restore our data and applications from secure backups. The Company did not communicate with the ransomware threat actor and never considered paying any ransom demand. Instead, the Company eliminated the ransomware and immediately proceeded to restore its critical files and functions. The Company incurred no material expense in connection with the ransomware attack. Based on the Company’s assessment to date and on the information currently known, the incident has not had a significant financial impact and the Company does not believe the incident will have a material impact on its business or future operating results.

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

At its July 14, 2022 meeting, the ~~2016 calendar year, the~~Ennis, Inc. Board of Directors authorized ~~the repurchase of up to~~ an ~~aggregate of $40.0~~additional $20 million ofin funding for the Company’s ~~stock through~~share repurchase program that was first implemented in 2008. With this latest funding authorization, the ~~Company’s stock repurchase program.~~cumulative funds authorized for share repurchases totals $60 million. 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.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2022

During the nine months ended November 30, ~~2017,~~2022, the Company ~~under the program,~~ repurchased ~~191,033~~64,082 shares of common stock under the program at an average price of ~~$17.33 per share. Since 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.~~$17.46. As of November 30, ~~2017 there was $18.4~~2022, $23.9 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~~

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,~~2022, filed on January ~~5, 2018,~~10, 2023, 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~~

* Filed herewith

** Furnished herewith

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, ~~2017~~2022

~~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~~10, 2023		/s/ Keith S. Walters
		Keith S. Walters
		Chairman, Chief Executive Officer and President

Date: January ~~5, 2018~~10, 2023		/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


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. Condensed Consolidated Financial Statements (unaudited)	3

	~~Unaudited~~Condensed Consolidated Balance Sheets at November 30, ~~2017~~2022 and February 28, ~~2017~~2022	3

	~~Unaudited~~Condensed Consolidated Statements of Operations for the three and nine months ended November 30, ~~2017~~2022 and November 30, ~~2016~~2021	5

	~~Unaudited~~Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended November 30, ~~2017~~2022 and November 30, ~~2016~~2021	6

	~~Unaudited~~Condensed Consolidated ~~Statement~~Statements of Changes in Shareholders’ Equity for the three and nine ~~months~~ ended November 30, ~~2017~~2022 and November 30, 2021	7

	~~Unaudited~~Condensed Consolidated Statements of Cash Flows for the nine months ended November 30, ~~2017~~2022 and November 30, ~~2016~~2021	8

	Notes to ~~Unaudited~~Condensed Consolidated Financial Statements (unaudited)	9

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	26

	Item 4. Controls and Procedures	26

PART II: OTHER INFORMATION

	Item 1. Legal Proceedings	27

	Item 1A. Risk Factors	27

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27

	Item 3. Defaults Upon Senior Securities	2728

	Item 4. Mine Safety Disclosures	2728

	Item 5. Other Information	2728

	Item 6. Exhibits	28

SIGNATURES		29


	November 30,		February 28,		November 30,		February 28,
	2017		2017		2022		2022
Assets
Current assets
Cash and cash equivalents	$	92,930	$	80,466
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
Cash					$	87,000	$	85,606
Accounts receivable, net of allowance for doubtful receivables of $1,692 at November 30, 2022 and $1,200 at February 28, 2022						45,738		39,022
Inventories, net						49,922		38,538
Prepaid expenses		1,228		1,351		2,434		1,863
Prepaid income taxes		888		855
Inventories		27,799		27,965
Assets held for sale		1,320		1,245
Total current assets		162,574		149,250		185,094		165,029
Property, plant and equipment
Plant, machinery and equipment		135,367		136,584		153,504		151,126
Land and buildings		53,587		53,821		59,987		59,642
Computer equipment and software						18,430		18,368
Other		23,556		23,644		4,321		4,275
Total property, plant and equipment		212,510		214,049		236,242		233,411
Less accumulated depreciation		166,274		164,054		186,802		179,778
Net property, plant and equipment		46,236		49,995		49,440		53,633
Operating lease right-of-use assets, net						14,214		15,544
Goodwill		70,603		70,603		93,438		88,677
Intangible assets, net		50,746		53,927		44,078		45,569
Other assets		357		510		386		392
Total assets	$	330,516	$	324,285	$	386,650	$	368,844


	November 30,			February 28,			November 30,			February 28,
	2017			2017			2022			2022
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	9,988		$	14,202		$	15,361		$	16,678
Accrued expenses								19,117			15,422
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								4,914			5,090
Total current liabilities		27,000			29,968			39,392			37,190
Long-term debt		30,000			30,000
Liability for pension benefits		4,846			4,846			3,729			5,729
Deferred income taxes		7,408			6,953			11,905			11,405
Operating lease liabilities, net of current portion								9,215			10,241
Other liabilities		1,511			1,163			987			464
Total liabilities		70,765			72,930			65,228			65,029
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
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443 shares at November 30, 2022 and February 28, 2022								75,134			75,134
Additional paid-in capital		121,010			121,525			124,593			123,990
Retained earnings		160,648			150,685			213,725			197,998
Accumulated other comprehensive loss:
Minimum pension liability, net of taxes		(14,517	)		(15,261	)		(17,086	)		(18,587	)
Total accumulated other comprehensive loss		(14,517	)		(15,261	)
Treasury stock		(82,524	)		(80,728	)		(74,944	)		(74,720	)
Total shareholders’ equity		259,751			251,355			321,422			303,815
Total liabilities and shareholders' equity	$	330,516		$	324,285		$	386,650		$	368,844

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

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

					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