Exhibit 13
Contents

4 Letter To Shareholders
8 Forms Solutions Group
10 Promotional Solutions Group
12 Financial Solutions Group
14 Apparel Solutions Group
16 Selected Financial Data
17 Management's Discussion and Analysis
30 Ten-Year Financial Review
32 Consolidated Financial Statements
37 Notes to Financial Statements
53 Independent Auditors' Report
58 Management Report on Internal
Control Over Financial Accounting

Financial Highlights

Annual Summary

Fiscal Years Ended % Increase
2005 2004 (Decrease)
---- ---- ----------

Net sales $365,353,000 $259,360,000 40.9
Earnings before income
taxes 37,465,000 28,890,000 29.7
Income taxes 14,506,000 10,939,000 32.6
Net earnings 22,959,000 17,951,000 27.9
Dividends 11,574,000 10,146,000 14.1
Per share of common
stock:
Basic net earnings 1.21 1.10 10.0
Diluted net
earnings 1.19 1.08 10.2
Dividends .62 .62 --
Weighted average number
of shares of common
stock outstanding -
basic 18,935,533 16,358,107 15.8
Weighted average number
of shares of common
stock outstanding -
diluted 19,259,550 16,601,838 16.0

Letter to Shareholders

This was a year of great change. We were driven by the goal of
ensuring your Company a future of continued success. We
experienced more major events than during any other in our 96-
year history. The new elements of our business came from many
different business drivers, including government regulations, new
acquisitions, continued growth of E-commerce, and the evolving
business models of our large distributor base. While our staff
was stretched to accommodate the influx of challenges, we are
confident that the opportunities produced are well worth the
effort.

With the future in mind, the first change made was the name of
our Company. On June 17, 2004, the shareholders of our business
officially changed its name from Ennis Business Forms, Inc. to
Ennis, Inc. As our large customer base moves increasingly away
from dependence on business forms, we felt it necessary to
recognize Ennis' equally important moves to expand our offering
from primarily business forms. While our plan is to continue to
play a major role in the forms industry during the foreseeable
future, the lack of organic growth opportunities has required us
to look to other products for growth.

Our Mergers and Acquisitions program has led the charge in
guiding Ennis into new areas of opportunity. Our M & A
strategies have remained consistent for the last six years.
While we have discussed this strategy in previous communications,
I will review it due to the recent acquisitions.

Ennis' M & A strategy has always been a two-pronged initiative.
One element is to participate in the ongoing consolidation of the
business forms industry. While the entire business forms
industry is consolidating (suppliers, manufactures, distributors,
and trade associations) our interest is targeted only at the
manufacturing segment. We are confident we have adopted the
right formulas to make a solid return in the manufacturing of
forms and will continue to follow this model in future
acquisitions. With this in mind, we also recognize that the
future of business forms is limited. Therefore the price for the
target company must be compatible with that reality.

The second element of our M & A strategy is a realization of the
first. While business forms distributors are less dependent on
forms products, they are not going out of business. Since Ennis
enjoys the largest customer base in the industry, we chose to
follow our distributors into the markets they have been
developing. We found our forms distributors have expanded into a
wide variety of commercial printing, banking documents,
advertising specialties and apparel product offerings. While we
expect every acquisition to bring its own customer base to meet
our expected return of the purchase price, the opportunity to
expand our offering to Ennis customers is a significant plus.

The role of E-commerce continues to develop in our industry, as
well as playing a major role in world commerce as a whole.
Ennis, Inc. has been greatly affected by the shift in the way
people do business. Generally, discussion pertaining to this
topic addresses the decline in forms use attributable to E-
commerce, digital technology and computers. That impact is real
and will continue. The decline has been estimated to be between
2% and 5% a year. Our own decline has been at the low end,
closer to 2%. There is, in fact, a positive side for the forms
business in this technological evolution. The pre-press process
of printing has experienced major productive gains from the new
technologies. Ennis has used this technology extensively in our
continuing challenge to control inflation. The customer service
advantages of the Internet and E-commerce are also being utilized
in our operations. While virtually every Ennis product is
available online, we have designed some of our sites with the
distributor base in mind. Our new Storefront allows Ennis
products to be purchased online and also recognizes the business
model of a distributor that demands buying from multiple sources.
This can save a dealer considerable cost in maintaining end-
users' Storefronts without abandoning their multiple supplier
models.

Another significant change experienced during the past year was
in the area of government regulations. While the public company
landscape has changed significantly (Congress, SEC, NYSE, and the
media), the greatest impact on our company has been made by the
Sarbanes-Oxley Act. While the goals of these new regulations are
well intended, the

impacts they have made on our business have been both positive
and negative. We strongly support the concept of clear and
accurate reporting and are proud to state that this is not a new
concept to Ennis. Our Board of Directors has always demanded
such reporting integrity during the long history of our company.
The Board has played an active role in overseeing the
implementation of the new regulations and has met regularly with
our outside Auditors to review the Company's progress. We are
pleased to report that our controls have received a favorable
review. On the mixed side of the issue, I feel that the cost and
time involved in this process has been excessive for the limited
improvements found. I hope the regulatory authorities will
continue to seek a better balance of regulation with our need to
maintain a competitive environment in the world markets.

My final comments on the changes of 2005 are related to our
acquisition integration process. Many business books and
articles have been written concerning the perils of integrating
an acquisition into a company. Ennis has been fortunate that our
new companies have performed well for our shareholders. Our
integration process begins during the negotiation period of the
acquisition. Much is learned about the culture of the target
company during this courtship process. If the culture appears
too diverse to accomplish a clean integration, we will walk away
from the deal, however if we believe the compatibility is there,
we plan the process prior to closing. Naturally there are always
surprises after the close, but our process has helped us to avoid
experiencing any serious problems. Our philosophy places great
emphasis on treating the new company as a valued member of Ennis.
As we integrate systems, benefits, suppliers and other components
of our companies, the management of the acquisition plays a major
role. We attempt to recognize the change they are going through,
but unfortunately the outcome is not always positive for all
parties.

Promotional Solutions Group

The Promotional Solutions Group was a creation of the second tier
of our M & A program. We observed with great interest as a
growing percentage of our customers moved into markets such as
Point-of-Purchase displays, printing on plastics, and various
advertising specialty items. Delivering such products required
Ennis to adopt new processes. After a few minor attempts to
enter these markets through internal growth, we concluded that
the equipment and skills could be gained more effectively by
acquisition. Equally important, the acquisitions allowed us to
obtain a new customer base to help carry the costs of the
transaction. This strategy allowed Ennis to provide new product
offerings to our customers without loading the costs of the
acquisition onto those products. This also alleviated the
dreaded synergy promise that often accompanies many acquisitions.

Acquired companies in the Promotional Solutions Group also
facilitated new relationships with a wide spectrum of media
agencies. These agencies then brought household names such as 7-
Eleven, Blockbuster Video, Sonic Drive-Ins, Arby's and many
others to the Ennis customer base. In addition to their
promotional product needs, these customers also purchase business
forms, tags, and apparel, which our cross-selling efforts are
developing, but are not required to make the acquisition a
success. We believe that the skills and ideas gained in these
new ventures are strong selling points in our continued
relationships with the distributor community.

Financial Solutions Group

This group is also a product of our acquisition program. While
Ennis has owned the companies in the Financial Solutions Group
for less than five years, the shareholder monies used to acquire
the companies have already been repaid. The brands of these
companies continue to function as prominent and well-respected
members of the financial forms marketplace.

We are observing increased opportunities to grow this group
through internal sales. These new opportunities are coming from
several directions. First, the consolidation in the industry of
suppliers has led to fewer competitors. We are receiving an
increasing number of new inquiries due to the smaller supply of
qualified sources. Second, the size of Ennis has grown to a
level that we are in serious contention with several large
companies. Some large companies are only comfortable doing
business with suppliers of a minimum revenue level. Third, our
acquisitions have broadened our internal banking relationships.
These new banking partners are providing printing opportunities
as well as the additional financial resources necessary to grow
our company. We view these deepening partnerships as a source of
strength for both parties.

Forms Solutions Group

The Forms Solutions Group has been the core platform of Ennis
since it became a public company in 1960. As we progress into a
new year, our dependence on business forms continues to decrease.
We expect business forms to contribute approximately only 35% of
our total revenue during fiscal 2006, however, we will continue
to be profitable in our forms facilities. Ennis has developed a
strong relationship with suppliers in the paper industry, which
demonstrates a true partnership. As our business grows, so does
the business of our partner companies, allowing them to provide
Ennis with competitive costs for paper and other raw materials.
With our growth the last few years, Ennis has become one of the
largest consumers of particular grades of paper, further
solidifying our price position in the market.

Since the first element of our acquisition strategy is to
participate in the manufacturing consolidation of the business
forms industry this paper pricing stability has been crucial.
Equally important has been our integration process as previously
discussed. In the Forms Solutions Group, integration has often
meant application of our pricing and financial systems within our
new acquisitions. As with any system installation, there are
always unusual situations to be corrected. As the Forms
Solutions Group continues this process, the profitability of
these businesses is easier to assure. We have already witnessed
the positive effect this system has on our bottom line when
properly applied by management at the facility level.

There are still some forms businesses we will consider adding to
the group for the purpose of geographic diversification or other
reasons. At the same time, we will be forced to consider
consolidations of plants if the facilities cannot maintain an
acceptable level of earning performance. Fortunately, our
operating personnel have been effective in avoiding the need for
serious consolidation moves thus far.

Apparel Solutions Group

This group includes our new acquisition, Alstyle Apparel. We had
been considering entry into this market for some time because
apparel products have become a major growth source for our
distributors. The Apparel Group section will explain the company
and its capabilities in greater detail. This acquisition was not
based upon the necessity of selling apparel to our current
customer base. We expect that Alstyle products will meet or
exceed our expectations without any additional sales from Ennis
distributors, however we have already seen great interest from
our customers. Most recently, our apparel line was featured as
the cover story of the largest printing magazine in our industry.
We view that as a good indication of the level of industry
interest.

We mentioned that Ennis had considered an apparel product line
for some time due to demand from our customer base. Some of our
competitors have been offering distributors apparel products, but
not manufacturing them. Instead, they have been acquiring these
products from other sources for resale. Our investigations found
that this would provide an unacceptable margin with multiple
steps to market. Much of Ennis' strength comes from being a
manufacturer of the products we offer. Our final reason for
pursuing the acquisition was that we wanted to continue our
policy of not depending on synergies to make the deals work
financially. The apparel business had to be able to stand on its
own.

Guided by these criteria, Alstyle fit the profile we were looking
for. As with many acquisitions, timing factors were also
important. Alstyle was owned by the same group as the Crabar/GBF
properties, which enabled the merger to close more smoothly and
with less expense. While at the time of writing this letter we
are early in the integration process, we feel pleased about our
progress. Our relationship with the former, Centrum Capital
Partners, and the former operating partner of Alstyle, Roger
Brown, continues to be excellent. Due to the progress of
integration, Mr. Brown has been able to step down from the
President role at Alstyle, but continues to assist us as needed.
He has passed the day-to-day role to Todd Scarborough as
announced in February 2005.

A common question regarding Alstyle concerns the threat that Asia
poses to the apparel industry. Our research has discovered that
our market is not affected significantly due to lead-time demands
of the customer base and the relatively small amount of actual
labor required to produce our apparel products. The majority of
labor involved is already sourced in Mexico. Additionally,
Alstyle has gained a major customer who previously purchased
apparel in China for similar prices. We continue to be
optimistic and believe that the future holds great things for the
Ennis Apparel Group.

2005 Fiscal Year Results

Revenues for the fiscal year ended in February 2005 were
$365,353,000 compared to $259,360,000 in the prior year. Net
earnings for the fiscal year were $22,959,000 compared to
$17,951,000 in fiscal year 2004. The increases in both revenues
and earnings were primarily the result of the acquisitions of
Crabar/GBF, Inc., Royal Business Forms, Inc. and Alstyle Apparel.

Financial Condition

While the Company incurred significant debt in conjunction with
the merger with Alstyle Apparel, the Company continues to have a
strong financial condition. The acquisitions during fiscal year
2005 added sustainable cash flows adequate to assure repayment of
the approximately $120,000,000 additional debt incurred during
the year in a three to four year time frame. As of February 28,
2005, the current ratio was 1.8 to 1, the debt to equity ratio
was .49 to 1, and its return on equity was 13%.

Dividend Policy

The Board of Directors considers the Company's dividend policy to
be one of its most important considerations. The Company has
declared a dividend in one hundred twenty seven consecutive
quarters. As stated during the year, the Board plans to continue
the current $.62 per share annual dividend rate after the Alstyle
Apparel merger, and has done so.

The Future

In February 2005, Michael D. Magill was promoted to Executive
Vice President and Treasurer. In conjunction with the promotion,
Mr. Magill assumed responsibility for all of the Company's
printing segments. Beginning in fiscal 2006, the Company plans
to combine the Forms, Promotional and Financial Solutions Groups
into one Print Solutions Group.

This year will primarily be a year of absorbing our recent
acquisitions. Those goals will include system integrations,
marketing opportunities and exploring scale advantages between
our companies. As with M & A projects of the past, we expect to
pay down the debt absorbed by these purchases in a relatively
short period of time. We have been experiencing a payback period
of three to four years and believe that range will continue with
regard to our recent additions.

As we see the cash flow from these businesses develop as planned,
we will again be looking forward. The Apparel Solutions Group
gives us an opportunity to grow organically, something that has
not been possible in the forms market for many years. We
continue to be watchful of our debt to equity ratio and will
continue to maintain it in a conservative range.

The financial reporting integrity of Ennis will continue to be a
priority. The Board of Directors will continue to monitor the
evolving regulatory landscape and make the necessary adjustments,
but we see no system that substitutes for an ethical management
team. We will continue to make such values a major consideration
in our hiring and retention processes.

Although this was a year of considerable change, we were still
able to deliver a good return to our shareholders. The market is
adjusting to our scale and product line. We believe the
direction will be well accepted by the stock markets as more
results are seen. Thank you for your continued support as we
move into our 97th year!

Keith S. Walters
Chairman, CEO and President

FORMS SOLUTION GROUP
- ---------------------

LAYING THE FOUNDATION

The Ennis Forms Solutions Group has always been and will continue
to be a strong and stable entity for our customers. Since 1909,
we have listened to customer needs and built our product line
accordingly. With almost a century of innovation and experience
under our belt, Ennis is still proving itself to be a well-built
resource our customers can depend on.

The Forms Solutions Group operates from 18 facilities across the
United States. By expanding into forms, financial, promotional
and apparel products, Ennis has grown into a highly successful
company with a diverse product offering. Although Ennis has
recently grown as a company, our foundation was built in the
forms industry and we are steadfast in our commitment to building
success for our traditional forms customers.

MEASURING OUR PROGRESS

During fiscal year 2005, the Forms Solutions Group grew in both
size and sales revenue, increased manufacturing capacity and
underwent geographic diversification through acquisition. Ennis
was again recognized as one of the largest manufacturers in the
wholesale business forms industry.

Throughout the year, the Forms Solutions Group was especially
aggressive in our expansion efforts. The June 2004 acquisition
of Crabar/GBF, allowed us to further diversify geographic
coverage, especially in the Northeast, and offer manufacturing
capabilities that were previously outsourced. With locations
across the nation, the addition of Crabar/GBF added 6 new
facilities. In the past, Ennis did not have the capability to
supply our customers with the 50" roll products, integrated
labels and variable imaging that Crabar/GBF could offer. The
addition of these facilities to the Forms Solutions Group will
open many doors with regard to the sales of these products.

The Crabar/GBF acquisition also allowed us to combine the Ennis -
Houston plant that was housed in a leased building into the
corporate owned Bellville, Texas facility. This enabled us to
accommodate a short and long run facility under the same roof, a
combination that is both unprecedented in the forms industry and
more convenient for customers. The consolidation also allowed
both facilities to improve turnaround times on exact repeat
orders. The former Crabar/GBF administrative center, located in
Dayton, Ohio was closed and customer service was moved into the
individual facilities, consistent with Ennis' existing model.
Likewise, we were able to consolidate the Edison, New Jersey
facility into other regional facilities in Chatham, Virginia;
Coshocton, Ohio and Medfield, Massachusetts to reduce overhead
and realize greater efficiencies from the Crabar/GBF acquisition.

Arlington, Texas based Royal Business Forms, another 2004
acquisition, focuses their marketing effort within the automotive
industry. They typically sell their products through numerous
automotive associations. In addition to their traditional forms
product offering, Royal is very efficient in producing cut-sheet
singles. This capability will allow Royal to provide certain
base stocks for other Ennis facilities.

During fiscal year 2005, the Calibrated facility took steps to
improve efficiency by focusing on its key products, traditional
business forms. Accordingly, check encoding was outsourced to
other Ennis facilities and the high efficiency cut sheet
operation was fully utilized. As a result of the 2003
acquisition, Ennis was able to establish relationships with
several major customers through their dealings with Calibrated.
Overall, Calibrated's performance during fiscal year 2005
included an increase in sales, an improvement in efficiency and
an expansion of plant capability.

BUILDING FOR THE FUTURE

The Forms Solutions Group has several plans for the upcoming
year. By preempting the competition with better service, higher
quality and more geographic locations, we look forward to
creating alliances with new customers and strengthening the bonds
we have with our existing distributor base. Growth and
technological advancement are also at the forefront of the Forms
Solutions Group objectives for the future.

In fiscal year 2006, the Forms Solutions Group plans to upgrade
equipment in many of our facilities in order to increase
productivity. The investment in more efficient technology
coupled with consolidations of some existing facilities will
allow our manufacturing plants to speed production while
maintaining the high quality of their products. The
implementation of Enterprise Resource Planning (ERP) systems in
most forms manufacturing plants has given managers more control
over the operations of their plants. In the upcoming year, we
plan to implement ERP systems in the remainder of our facilities
to optimize efficiency and performance across the entire
division.

The Ennis Online Store will make its debut during fiscal year
2006. By offering our customers an online solution, free of
charge, we intend to strengthen customer loyalty and provide our
distributors with one more way to buy and sell our products. The
online stores will be self-managed by the customer and available
for all divisions. E-commerce has become a necessity and we are
confident that it will prove to be a worthwhile investment for
all divisions of Ennis.

During the past year, many key Ennis customers secured large
accounts and we are looking forward to that business during the
upcoming year. The Forms Solutions Group is also confident in
the opportunity to sell apparel products to the traditional Ennis
distributor base. By acquiring companies and bringing in
prominent brands we have opened up new segments of existing
customers to all Ennis divisions. We also expect to see growth
as a result of utilizing E-commerce to grow sales and build
stronger relationships by simplifying the ordering process.

The Ennis Forms Solutions Group continues to be the foundation of
the company, offering value to our shareholders and customers.
We look forward to another year of growth and stability in the
business forms industry.

PROMOTIONAL SOLUTIONS GROUP

LAYING THE FOUNDATION

The Promotional Solutions Group consists of four companies and 10
locations across the United States. With each company producing
a different category of promotional printed product, this group
collectively services thousands of customers with an array of
diverse printing needs.

Adams McClure specializes in manufacturing point of purchase
advertising products and offers warehousing, kitting and
fulfillment services. Admore is known for manufacturing a wide
variety of presentation folders, utilitarian folders, commercial
printing and bindery. Ennis - Wolfe City produces custom tags,
labels, printed Post-it (registered trademark) Notes and
promotional give-away items. Finally, GenForms specializes in
value added custom forms, labels and form/label combinations.

With locations in Denver, Colorado and Dallas, Texas, Adams
McClure provides products and services to customers nationwide.
Well-known end users of Adams McClure products include 7-Eleven,
Blockbuster, Sonic and Burger King. Admore sells to distributors
from across the country out of their facilities in Bell,
California and Macomb, Michigan. Ennis - Wolfe City is located
in Wolfe City, Texas and serves regionally based customers in the
Southern United States. Cerritos, California based GenForms, a
former division of Crabar/GBF, supplies distributors located
primarily along the West coast.

MEASURING OUR PROGRESS

During fiscal year 2005, the Promotional Solutions Group had
great success improving efficiency, growing sales and cross
selling among companies within the group. We acquired several
large accounts and established relationships with numerous
potential customers that we will have the opportunity to serve in
the coming years.

By focusing on the primary business of each facility, the group
was able to improve efficiency. Additionally, we took steps to
keep all outsourced business within Ennis. By doing so, we were
able to collectively promote and sell more Promotional Solutions
Group products.

The Promotional Solutions Group realized the most growth within
the Adams McClure subsidiary. Throughout the year, Adams McClure
focused primarily on point of purchase advertising materials and
promotional products. As a result of continuously working with
potential accounts over the past few years, Adams McClure
recorded significant gains during fiscal year 2005. One such
account is Dallas based Blockbuster Video, which has recently
developed from several thousands of dollars in printing to
several millions in printing and fulfillment. Additionally, we
added Arby's, headquartered in Fort Lauderdale, Florida, to our
list of printing customers. Accounts such as these are served by
internal and external ad agencies, which have become a growing
distributor base for Ennis. In addition to our incredible sales
growth, Adams McClure was also able to take advantage of an
expansion opportunity. The company owned Connolly Tool plant
located in Dallas, Texas was recently converted into an Adams
McClure print fulfillment and production facility.

In addition to the significant growth within Adams McClure,
Admore experienced an immense increase in the sale of
presentation products as well as commercial printing. The Wolfe
City facility did well in the sales of traditional printed
products. Additionally, the development and kickoff of the 360
(Degree) Custom Label Line, a re-branding and marketing effort
for the existing Wolfe City and DeWitt label program, was highly
successful. These facilities will continue the 360 (Degree)
Custom Labels marketing push and this will remain a continued
focus of importance for the Promotional Solutions Group.

GenForms was added to the Promotional Solutions Group in July
2004 as a part of the Crabar/GBF acquisition. They continued
their strong performance after becoming an Ennis subsidiary.
GenForms brings many new capabilities that complement our
traditional business as well as the Promotional Solutions Group,
including their multiple color capability.

BUILDING FOR THE FUTURE

The Promotional Solutions Group has many objectives for the
upcoming year. While maintaining focus on cross selling among
companies and pursuing new accounts, we plan to upgrade our
technologies and further improve efficiency across the entire
Promotional Solutions Group.

All companies will continue to stay focused on their primary
business strengths. We plan to further coordinate commercial
product categories and cross sell at each location so that we may
better service our customer base while maximizing the performance
of the group. The Promotional Solutions Group also plans to
continue to focus on earning new key customers.

The Promotional Solutions Group will utilize the income from the
business generated this year to invest in equipment that will
help grow sales and better service existing customers in the
future.

FINANCIAL SOLUTIONS GROUP

LAYING THE FOUNDATION

Both companies that make up the Ennis Financial Solutions Group,
General Financial Supply (GFS) and Northstar, were established in
1962 and have provided dependable products and service to their
customers ever since. The Financial Solutions Group offers the
widest selection of financial forms in the industry including
internal bank documents, non-negotiable documents, negotiable
documents, security documents and specialized business forms.
The financial division has facilities in Brooklyn Park,
Minnesota; Roseville, Minnesota; Bridgewater, Virginia and
Nevada, Iowa that serve customers nationwide.

End users of GFS and Northstar products include financial
institutions, processors of MICR encoded documents, insurance
companies, a variety of government agencies and other
organizations that require secure documents. Day after day,
these customers rely on the quality and precision of the products
manufactured by the Ennis Financial Solutions Group.

MEASURING OUR PROGRESS

During fiscal year 2005, the Financial Solutions Group made great
strides to increase sales performance, product development and
manufacturing efficiency. Most impressively, Northstar continued
its status as the leading producer of money orders in the world
as well as one of the top 5 check producers in the nation.
Northstar printed over 5 billion lines of MICR during last year
alone. In addition to these astounding achievements, Northstar
was recognized by the North American Security Projects
Organization as one of the first certified security product
producers in North America.

Through their respective sales channels (indirect or direct), GFS
and Northstar entered into relationships with several of the top
200 banks in the United States. They also placed a great deal of
emphasis on studying the market, developing new products and
expanding existing lines to meet the needs of customers.
Northstar continued its expansion into new markets by promoting
its secure document production capabilities.

The changes brought about by the adoption of the Check Clearing
for the 21st Century Act (Check 21) created both threats and
opportunities for the Financial Solutions Group. The increased
use of check truncation, the act of using digital images for
check processing, altered the need for some financial products.
However, the shift opened numerous doors for product development
and an increased demand for image compliant documents. GFS and
Northstar took full advantage of these opportunities with the
release of several new and updated products and by taking steps
to encourage image compliance among their customer base.

Most importantly, the Financial Solutions Group made numerous
modifications to ensure GFS and Northstar remain convenient,
effective and profitable sources for their customers. GFS
purchased new equipment that allowed them to increase efficiency,
in some cases as much as 30%, and shorten turnaround time for
customers. To more effectively meet the needs of customers, the
customer service center in Denver, Colorado, was moved to the GFS
location in Nevada, Iowa. The move eliminated costs while
providing the same level of service and created the possibility
of opening an additional manufacturing facility on the West Coast
in the future.
12

BUILDING FOR THE FUTURE

As fiscal year 2006 begins, the Financial Solutions Group has
several key objectives for the upcoming year. Plans include
continuing to develop new product lines to keep up to date with
customer needs. Northstar is focused on pursuing more of the
larger banks that are not generally available to the distributor
market, while being careful to encourage and not compete with
distributors already serving these banks. Additionally, the
Financial Solutions Group has a desire to expand into non-
financial markets and profit from manufacturing secure forms.

A comprehensive branding push is currently underway for both
Northstar and GFS. Not only will these efforts update the
perception and message of the brands, but it will allow each
company to better concentrate on and reach its primary target
market. The re-branding will focus on the experience, precision
and extensive product line available through the Ennis Financial
Solutions Group.

By finding new ways to help their sales channels grow and by
training their distributors to sell financial forms, the
Financial Solutions Group intends to strengthen its sales base
and attract new customers. With plans to expand product lines,
pursue new markets, improve sales through the indirect market and
possibly open an additional facility, the next year is sure to
hold considerable growth for the Financial Solutions Group.

APPAREL GROUP

LAYING THE FOUNDATION

The most recent Ennis acquisition, Alstyle Apparel, is a
California based activewear manufacturer with tremendous
potential for growth. Alstyle built its foundation in 1976 as a
small company importing t-shirts for local screen printers.
After quickly becoming the nation's largest distributor of Fruit
of the Loom and Hanes products, Alstyle began manufacturing their
own line of high-quality t-shirts in 1990. They have since grown
into a large apparel manufacturer and currently operate
manufacturing and distribution facilities across the nation and
abroad.

Ennis acquired Alstyle Apparel on November 4, 2004 in a tax-free
exchange of stock. The merger will allow Alstyle to supply Ennis
distributors with products that we previously could not offer.
The rapid growth and success that Alstyle has historically
demonstrated will likely continue with the prospect of cross
selling to Ennis customers. Likewise, the Promotional, Forms and
Financial Groups of Ennis will have the opportunity to sell their
products to Alstyle's existing customer base.

MEASURING OUR PROGRESS

Alstyle is known for the high quality of its products and its
wide array of available colors. Most manufacturers in the
apparel industry are based overseas, with the majority of their
product being produced outside of the United States. Alstyle
Apparel has made it a priority to ensure that most of our
manufacturing remains in the United States. As a result, the
higher quality and stricter standards by which our apparel is
produced make purchasing the Alstyle product a better choice for
many consumers.

Our garments are crafted from yarn that has been grown, spun,
knitted and dyed in the United States and then cut, sewn and
finished at a plant in the U.S., Mexico or Caribbean Basin.
Alstyle is headquartered in Anaheim, California with distribution
centers in Anaheim, Chicago, Philadelphia, Atlanta, Dallas and
Canada. We offer fashions for men, women, juniors and youth in a
broad range of sizes and colors. Alstyle products include a wide
variety of apparel ranging from tees and fleece to shorts and
hats. Our products are sold under several well-known company
owned brands as well as customers' re-label and private labeling
programs. With a customer base consisting of screen printers,
embroiderers and various other businesses that specialize in
apparel embellishment, Alstyle services a wide variety of
customers across North America.

During calendar year 2004, Alstyle experienced record growth.
With the release of several new products, our sales averaged 15%
over the previous year's and we were able to outperform the
growing apparel industry by over 9%. During a typical week,
Alstyle uses 1.6 million pounds of cotton and manufactures 49,000
dozen shirts each day. With numbers like this, it is easy to see
why apparel and headwear are exciting opportunities for many
Ennis customers.

BUILDING FOR THE FUTURE

As we continue into 2006, Alstyle Apparel has highlighted several
objectives for the coming year's performance. These objectives
include growing our customer base, releasing new products and
expanding manufacturing capabilities.

With the opportunity to sell to existing Ennis customers, we plan
to expand our customer base to include businesses that have
already established relationships with other divisions of Ennis.
Early in fiscal year 2006, Ennis versions of the Alstyle Apparel
catalog will be mailed to Ennis' traditional distributor base.
As of March 1, Ennis distributors will be able to order apparel
products through a centralized number with their current customer
numbers and credit agreements. These steps will add an
additional 50,000 potential resellers of the apparel product, an
exciting opportunity and challenge at the same time for Alstyle.

We will be releasing a multitude of new products during fiscal
year 2006. With the addition of two headwear lines, a pant,
short and several sheer jersey products, we are excited about
expanding our product offering beyond t-shirts into additional
high-demand product lines. We are expanding in-house
manufacturing capabilities and equipment to include product lines
that are currently outsourced. Additionally, we have opened a
sourcing office to manage existing and future import business.
Expanding internal capabilities while developing import
opportunities will allow Alstyle to determine the best possible
solution scenario to keep costs low which will improve our margin
and keep customers' pricing in line with industry benchmarks.

Alstyle has a history of extreme growth and profitability. As a
part of Ennis, we are confident that we will maintain our
position as an innovative, successful and profitable company and
we look forward to what the future holds for the Ennis apparel
line.

Selected Financial Data

Fiscal Years 2005 2004 2003 2002 2001
Ended
(In thousands, except per
share amounts)

Net sales $365,353 $259,360 $240,757 $236,923 $229,186
Net earnings 22,959 17,951 15,247 14,966 13,177

Per share of
common stock:
Basic net
earnings 1.21 1.10 .94 .92 .81
Diluted net
earnings 1.19 1.08 .93 .92 .81
Dividends .62 .62 .62 .62 .62
Total assets 497,246 154,043 152,537 139,034 142,854
Long-term debt 112,342 7,800 18,135 9,170 23,555

In November 2002, the Company acquired Calibrated Forms Co.,
(Calibrated) which accounted for the increase in sales and
earnings in Fiscal 2003 and 2004 and also the increase in total
assets in fiscal year 2003. The Calibrated acquisition was
financed with an additional $15,000,000 in debt. During fiscal
year 2005, the Company completed acquisitions which accounted for
the increases in net sales, net earnings, total assets and long-
term debt (see details of the acquisitions in footnote 9 in the
accompanying notes to consolidated financial statements).

Management's Discussion and Analysis

Overview

Ennis Business Forms, Inc. was organized under the laws of Texas
in 1909. On June 17, 2004, the shareholders approved a name
change from Ennis Business Forms, Inc. to Ennis, Inc. The change
was made to recognize the declining importance of business forms
to the overall organization. Ennis, Inc. and its subsidiaries
(collectively "Ennis" or the "Company") prints and constructs a
broad line of business forms and other business products and also
manufactures a line of activewear for distribution throughout
North America. Distribution of all of these products throughout
the United States and Canada is primarily through independent
dealers and with respect to activewear products, through sales
representatives. This distributor group encompasses print
distributors, stationers, quick printers, computer software
developers, activewear wholesalers, screen printers and
advertising agencies, among others.

On June 25, 2004, the Company announced it had reached an
agreement to purchase all of the outstanding shares of
Crabar/GBF, Inc., (Crabar/GBF) a privately held business forms
manufacturer with $69,000,000 in revenues in its most recent
fiscal year. The purchase price in this transaction was
$18,000,000 in cash and assumed debt. This amount, plus costs of
acquisition, totaled $18,260,000. This transaction was financed
from internal cash and borrowings from the then existing line of
credit held by the Company. This transaction closed as of June
30, 2004.

On June 25, 2004, in a separate announcement, the Company
announced an agreement to merge Centrum Acquisition, Inc. and its
wholly owned subsidiary, which did business under the name
Alstyle Apparel (collectively Alstyle) into a subsidiary of the
Company. Alstyle, based in Anaheim, California, had
approximately $200 million in revenues and 3,500 employees in
North America at the time of the announcement. Under the terms
of the transaction, Alstyle shareholders would receive Ennis
shares based upon a $242,000,000 valuation of Alstyle less debt
outstanding as of the day of merger (approximately $104 million).
This amount, plus costs of acquisition, totaled $246,486,000.
Completion of this transaction was subject to approval of the
Ennis shareholders to issuance of 8,803,583 shares of Ennis
common stock, which was approved at a special shareholders
meeting on November 4, 2004. The Company also announced it had
entered into a committed line of credit from LaSalle Bank, N.A.
for $100,000,000 in Revolver credit facilities and up to
$50,000,000 in Term credit facilities for a total of $150,000,000
in new financing. The merger with the parent of Alstyle was
completed on November 19, 2004. On a pro forma basis,
considering all acquisitions completed in 2005, the combined
company would have had $567,700,000 in sales for the fiscal year
ended February 28, 2005 and $545,686,000 for the fiscal year
ended February 29, 2004. Pro forma net earnings would have been
$30,595,000 for the fiscal year ended 2005, or $1.08 per share-
diluted, and $18,062,000 for the fiscal year ended 2004, or $0.70
per share-diluted. The pro forma EBITDA (earnings before
interest, taxes, depreciation and amortization) would have been
approximately $75,000,000 for the fiscal year ended 2005 and
$70,000,000 for the fiscal year ended 2004. After payment of pro
forma dividends and pro forma capital expenditures (free cash
available for payment of principal, interest and taxes) would
have been $34,000,000 for fiscal year 2005 and $36,000,000 for
fiscal year 2004.

Also on November 1, 2004, the Company announced an agreement to
acquire Royal Business Forms, Inc., (Royal) an Arlington, Texas
based manufacturer of business forms for $3,700,000 in Ennis
common stock. This amount, plus costs of acquisition, totaled
$3,827,000. Approximately 178,000 shares of treasury stock were
issued in this transaction. There was no debt on the balance
sheet of Royal other than trade payables and accrued expenses.
Royal had revenues of $12,100,000 in its most recent fiscal year.

President and CEO, as does the President of the Apparel Group.
The Company will now report in two operational segments - the
Printing Segment and the Apparel Segment. The three groups which
were previously considered individual segments have been
aggregated into the Printing Segment based on the relatively
similar nature of the product, product process, customer and
distribution methods. Information on the four groups within
these two segments is presented under note 11 to the financial
statements.

The first group in the Printing Segment, the Forms Solutions
Group, is primarily in the business of manufacturing and selling
business forms and other printed business products primarily to
distributors located in the United States. Except for the
Cerritos, California operation acquired in the Crabar/GBF, Inc.
transaction, all of the remaining Crabar/GBF, Inc. operations and
Royal were added to the Forms Solutions Group. The second group
in the Printing Segment, the Promotional Solutions Group, is
comprised of Adams McClure (design, production and distribution
of printed and electronic media), Admore (presentation products),
Wolfe City (flexographic printing, advertising specialties and
Post-it (registered trademark) Notes) and the Cerritos facility.
The third group in the Printing Segment, the Financial Solutions
Group designs, manufactures and markets printed forms and
specializes in internal bank forms, secure and negotiable
documents and custom products. This group sells through the
Northstar brand name as well as the GFS brand name to
distributors. The second segment, the Apparel Solutions Group
consists entirely of the manufacturing and distribution
operations of Alstyle, which manufactures and distributes
activewear (t-shirts & fleece goods). As the Company is
presently structured, the Apparel Solutions Group will become the
largest single segment of the Company.

Economic pressure and the contraction of the traditional business
forms industry continue to impact each segment of the Company.
As a result, the Company continues to concentrate on reducing
other costs where sales are declining. The installation of the
Company's Enterprise Resource Planning Software (ERP) System has
decreased the waste in materials and reduced labor in the plants
that have the system. The Company is continuing to install the
ERP System throughout the organization. The Company will also
install the system into its newly acquired companies, including
Alstyle.

The Company is also focusing on increasing sales where the market
is expanding. There are opportunities in the Promotional and
Financial Solutions Groups to increase sales organically and the
Company is actively pursuing that direction. The Company believes
that growth in the Forms Solutions Group will occur primarily
through acquisitions. In addition, the Company will continue to
search for acquisition opportunities that will expand the mix of
products away from traditional forms, as well as strategic
acquisitions within the traditional forms industry.

Business Segment Overview

Printing Segment
- ----------------
Forms Solutions Group - The Forms Solutions Group operates
through 16 manufacturing locations throughout the United States
and had approximately $178,000,000 a year in sales for fiscal
year 2005. The segment provided a majority of

the pre-tax profitability for the Company in fiscal year 2005 at
approximately $26,000,000 in pre-tax profits or 53.8% of the
gross pre-tax profits before corporate expense allocation. In
fiscal year 2006, this profitability percentage should drop
dramatically as the Apparel group is expected to generate a
significant amount of sales and profitability to the overall
Company. The Forms Solutions Group sells through approximately
40,000 private printers and independent distributors and
therefore sales reflect a smaller percentage of selling expense
than would exist in companies who market directly to the end
user. The products sold include snap sets, continuous forms,
laser cut sheets, tags & labels, integrated products, jumbo rolls
and pressure sensitive products in short, medium and long run.
The Group sells under the Ennis, GenForms, Witt Printing, &
Calibrated brand names.

Promotional Solutions Group - The Promotional Solutions Group
operates in 11 facilities in four states and had approximately
$84,000,000 in sales for fiscal year 2005, which is substantially
higher than the $67,000,000 recorded in fiscal 2004. Part of this
increase is the inclusion of the Cerritos, California facility
acquired in the Crabar/GBF acquisition as part of the Promotional
Solutions Group. The remainder of the increase comes through the
addition of several large customers during 2004. This group
operates under the Adams-McClure brand (which provides Point of
Purchase advertising for large franchise and fast food chains as
well as kitting and fulfillment); the Admore brand (which
provides presentation folders and documents); Ennis Tags & Label
(which provides tags & labels, promotional products and
advertising concepts); and GenForms, (which provides short-run
and long-run label production). With respect to Adams McClure,
the business is generally provided through advertising agencies.
The other facilities receive business through independent
distributors.

Financial Solutions Group - The Financial Group operates in 4
facilities located in three states and generated approximately
$48,000,000 in sales for fiscal year 2005. This is the only
group that showed a decline in sales from fiscal year 2004 of
approximately $2,000,000, primarily due to the loss of several
large customers, and a general decline in business in the GFS
brand sold by distributors. The Group, however, did show an
increase in profitability and provided 15.4% of the overall pre-
tax profitability before corporate expense allocations. The
Financial Group sells directly to customers and to resellers
through a sales staff (Northstar) as well as through distributors
(Northstar and GFS). Northstar has redirected its focus to large
banking organizations on a direct basis (where a distributor is
not acceptable or available to the end-user) and has acquired
several of the top 200 banks in the United States and is actively
working on other large banks within the top 200 tier of banks in
the United States.

Apparel Segment
- ----------------
Apparel Solutions Group - The Apparel Segment operates through 6
manufacturing facilities in California and Mexico. Alstyle
markets high quality knit basic activewear (t-shirts, tank tops
and fleece) across all market segments. Alstyle offers
approximately 55 different items comprised of approximately 3,500
stock keep units or SKUs. Approximately 88% of Alstyle's net
sales are derived from t-shirts, and 94% are domestic sales.
Alstyle's various branded product lines include the following:

AAA (registered trademark) - The AAA line is Alstyle's high-
end 6 ounce product line that is pre-approved by many of its
retail customers. Short sleeve and long sleeve products are
available from juvenile to adult sizes up to 6X, in a variety of
colors. AAA is Alstyle's best selling product line. This product
line is also offered under the Murina (registered trademark)
brand name in limited quantities and is manufactured exclusively
in, and marketed as, made in the USA.

Gaziani (registered trademark) - Gaziani (registered
trademark) is a higher-margin, women's activewear line that is
more style-focused than Alstyle's other product lines.

Diamond Star (registered trademark) - Diamond Star
(registered trademark) is a softer, high-quality ringspun that
commands a higher price point.

Tennessee River (registered trademark) - Tennessee River
(registered trademark) is a 5.5-ounce value offering that
complements Alstyle's AAA product.

Sales from Alstyle totaled approximately $56,000,000 for the
fiscal year 2005, (reflecting the period from the date of
acquisition to February 28, 2005). If Alstyle had been acquired
at the beginning of our fiscal year, its total sales would have
been approximately $200,000,000, or 35.6% of pro forma sales.
From a profitability standpoint, while the apparel group
contributed approximately $4,000,000 in pre-tax profits before
corporate expense allocations, they would have been significantly
greater for the full year.

Alstyle is headquartered in Anaheim, California where they knit
domestic cotton yarn and some polyester fibers into tubular
material. They dye the material at that facility and then ship
the dyed material to plants in Ensenada or Hermosillo, Mexico to
cut and sew into finished goods. Alstyle also ships a small
amount of their dyed and cut product to El Salvador or Costa Rica
for sewing. After sewing and packaging is completed, it is then
reshipped to Anaheim where it is either stored at the
distribution center in Anaheim, or re-directed to distribution
centers in Los Angeles, California; Chicago, Illinois; Dallas,
Texas; Philadelphia, Pennsylvania; Atlanta, Georgia or
Mississauga, Canada.

Alstyle utilizes a customer-focused internal sales team comprised
of 19 sales representatives assigned to specific geographic
territories in the United States and Canada. Sales
representatives are allocated performance objectives for their
respective territories and are provided financial incentives for
achievement of their target objective. Sales representatives are
responsible for developing business with large accounts and spend
approximately half their time in the field. Alstyle employs a
staff of customer service representatives that handle call-in
orders from smaller customers. Sales personnel sell directly to
Alstyle's customer base, which consists primarily of screen
printers, embellishers, retailers, and mass marketers.

A majority of Alstyle's sales are related to direct customer,
branded products and the remainder related to private label and
re-label programs. Generally, sales to screen printers and mass
marketers are driven by the availability of competitive products
and price considerations, while sales in the private label
business are characterized by slightly higher customer loyalty.

Alstyle's most popular styles are produced based on forecasts to
permit quick shipment and to level production schedules. Alstyle
offers same-day shipping and uses third party carriers to ship
products to its customers.

Alstyle's sales are seasonal, with sales in the first and second
quarters generally being the highest. The general apparel
industry is characterized by rapid shifts in fashion, consumer
demand and competitive pressures, resulting in both price and
demand volatility. However, the imprinted activewear market that
Alstyle sells to is "event" driven. Blank t-shirts can be thought
of as "walking billboards" promoting movies, concerts, sports
teams, and "image" brands. Still, the demand for any particular
product varies from time to time based largely upon changes in
consumer preferences and general economic conditions affecting
the apparel industry.

Liquidity and Capital Resources

Cash Flow

Cash provided by operating activities amounted to $20,046,000 in
fiscal year ended 2005, approximately $6,203,000, or 23.6% lower
than the $26,249,000 provided in fiscal year ended 2004. The
decrease was the result of higher than normal cash requirements
in the areas of receivables, inventories and accrued expenses
generated primarily by post-acquisition activities. During
fiscal year 2005, the Company obtained $114,200,000 from debt
issued to finance acquisitions, and expended

$115,429,000 to complete the acquisitions. Capital expenditures
of $6,143,000 and dividends of $11,574,000 were primarily paid
from operating cash flow. Cash provided by operations in fiscal
2006 is expected to increase to new levels, principally due to
the new structure and size of the Company. It is expected that
excess cash flows generated in fiscal year 2005, will, after
payments of dividends of approximately $15,760,000 and capital
requirements between $5,000,000 and $7,000,000, be directed to
repayment of debt. The Company must receive permission from its
banking group to increase its dividend rate or to engage in any
buyback of shares.

Working Capital
The Company maintains a strong financial position with working
capital at February 28, 2005 of $67,790,000, an increase of 77.4%
from the beginning of the year, and a current ratio of 1.8 to 1.
The increase in working capital is primarily due to the working
capital acquired in the Crabar/GBF, Alstyle and Royal
transactions. The Company has $10,694,000 in cash and
equivalents at February 28, 2005.

Credit Facility

The Company has $134,044,000 in outstanding debt. On November
19, 2004, in conjunction with the Alstyle merger, the Company
entered into a new credit facility with a group of lenders led by
LaSalle Bank NA. The facility consists of a $100,000,000
revolver and a $50,000,000 term note bearing interest at the rate
of LIBOR plus 1.50%. The rates on the facility may vary from
LIBOR plus 0.75% to LIBOR plus 1.75% depending upon leverage
ratios as determined quarterly. At the closing, the Company
borrowed the entire $50,000,000 available under the term note and
$56,626,000 under the revolver. The proceeds were applied to
repayment of $77,873,000 of assumed debt, $20,329,000 applied to
the Company's former credit facility, $3,924,000 as contractual
payments for selling shareholders and expenses and $4,500,000 for
working capital. Subsequent to the end of the fiscal year, the
Company borrowed an additional $5,000,000 under the revolver. By
the terms of the credit agreement, the Company is required to
make $2,500,000 quarterly payments on the term loan beginning in
March 2005. It is the intention of the Company to utilize its
existing cash flow to pay down the revolver. Since the end of
the fiscal year, the Company has made the quarterly term payment,
repaid approximately $4,000,000 of the capitalized leases of
Alstyle and reduced the revolver by $2,000,000. It is
anticipated that the available line of credit is sufficient to
cover, should it be required, working capital requirements for
the next twelve months.

Alstyle sells substantially all of its account receivables to
factors based on agreements with four financial institutions.
Under these agreements, the factoring institutions will typically
purchase the customer account receivable on a non-recourse basis,
and fund 80% to 85% of the receivable amount to Alstyle at
purchase and the remainder upon collection by the factor from the
end customer, net of factoring fees and commissions. Factor
advances were $24,675,000 at fiscal year end 2005 with $3,294,000
due from factors upon collection from the end customer.
Outstanding advances bear interest at the prime rate (as
defined). At February 28, 2005, approximately $1,200,000 in
factored receivables are recourse (at risk) to Alstyle in the
event the related customer defaults on its payment to the factor.
Such factoring agreements are generally renewable on an annual
basis.

Over the next year or two, these receivables will be funded
through the existing bank line or through working capital
generated by Alstyle. As such, the amount of receivables factored
will decline and the amount of accounts receivable on the books
of Alstyle will increase. It is anticipated that Alstyle will
analyze what additional credit department resources it may need
before eliminating the factoring agreements.

Pension

The Company is required to make contributions to its defined
benefit pension plan. These contributions are required under the
minimum funding requirements of the Employee Retirement Income
Security Act (ERISA). The Company anticipates it will pay from
$2,500,000 to $3,000,000 for the fiscal year ended 2006. The
Company made pension contributions in the amount of $2,880,000
for the fiscal year ended 2005.

Inventory
The Company believes current inventory levels are sufficient to
satisfy customer demand and anticipates having adequate sources
of raw materials to meet future business requirements. The
Company entered into a long-term arrangement with its principal
paper supplier, MeadWestvaco, to provide paper at contractual
rates. The Company, through its Alstyle subsidiary, also entered
into a long-term contract with its yarn supplier, Parkdale Mills,
to convert cotton to yarn at contractual rates. This contract
allows Alstyle to commit to future cotton shipments in amounts
and at prices based upon the current estimates of cotton for
future delivery. It also provides Alstyle with some ability to
elect to purchase cotton at current market rates should cotton
prices decline between the original order date and the expected
delivery date. The Company will continue to assess the price of
raw cotton and seek ways to mitigate price swings, which could
impair manufacturing margins. The Alstyle business model
requires a great deal more finished goods inventory than does the
printing side of the Company's business. Given that demand in
the activewear industry is greater than the ability to produce
activewear products, the Company anticipates that finished goods
inventory will continue at the levels sufficient to supply the
seasonal demands of Alstyle's customer base. Alstyle's finished
goods inventory generally turns 3 to 4 times a year.

Capital Expenditures

Capital expenditures for the next fiscal year are expected to be
between $5,000,000 and $7,000,000 and are expected to be financed
through existing cash flows. The Company expects to generate
sufficient cash flow from its operating activities to more than
cover its operating and other capital requirements for the
foreseeable future.

Commitments
The following table aggregates the Company's expected contractual
obligations and commitments subsequent to fiscal year ended 2005:

Payments due by period (in thousands)
-------------------------------------
2010 and
2006 2007 2008 2009 thereafter
---- ---- ---- ---- ----------

Term facility $10,000 $10,000 $10,000 $10,000 $10,000
Revolving credit
facility
(estimated) 13,675 24,926 24,899 -- --
Other 9,743 8,155 771 167 43
Capital lease
obligations 929 593 117 24 --
Operating lease
obligations 11,718 7,228 6,400 4,683 2,889

Accounting Standards

In July 2002, the Public Company Accounting Reform and Investor
Protection Act of 2002 (the Sarbanes-Oxley Act) was enacted.
Section 404 stipulates that public companies must take
responsibility for maintaining an effective system of internal
control. The Act requires public companies to report on the
effectiveness of their control over financial reporting and
obtain an audit report from their independent registered public
accountant about management's report. The Act requires certain
public companies (accelerated filers) to report on the company's
internal control over financial reporting for fiscal years ended
on or after November 15, 2004. Other public companies (non-
accelerated filers) must begin to comply with the new
requirements related to internal control over financial reporting
for their first fiscal year ending on or after July 15, 2006,
under the latest extension granted by the Securities and Exchange
Commission.

In November 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4".
This statement clarifies the accounting for abnormal amounts of
idle facility expense, freight handling costs and wasted material
(spoilage). This statement requires that these types of costs be
recognized as current period charges. SFAS No. 151 is effective
prospectively for inventory costs incurred during fiscal years
beginning after June 15, 2005, with earlier application permitted
for such costs incurred during fiscal years beginning after
November 24, 2004. Management does not expect the adoption of
SFAS No. 151 to have a significant impact on the Company's
financial statements as the Company's current method of
accounting for inventory costs are consistent with this standard.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets - an amendment of APB Opinion No. 29". SFAS
No. 153 amends Accounting Principles Board (APB) Opinion 29
concerning the accounting for exchanges of similar productive
assets. Such transactions should be accounted for at fair value,
the basic principle for nonmonetary transactions, unless the
exchange lacks commercial substance. The effective date of SFAS
No. 153 is for nonmonetary asset exchanges taking place in fiscal
years beginning after December 16, 2004. The Company will adopt
SFAS No. 153 in fiscal 2006 and does not expect it to have a
significant impact on the Company's financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004),
"Share Based Payment". This statement replaces SFAS No. 123,
"Accounting for Stock-Based Compensation," and supersedes APB
Opinion 25, "Accounting for Stock Issued to Employees." SFAS No.
123 (revised 2004) requires that the cost of share-based payment
transactions (including those with employees and non-employees)
be recognized as compensation costs in the financial statements.
SFAS No. 123 (revised 2004) applies to all share-based payment
transactions in which an entity acquires goods or services by
issuing (or offering to issue) its shares, share options, or
other equity instruments (except for those held by an ESOP) or by
incurring liabilities in amounts based (even in part) on the
price of the entity's shares or other equity instruments, or that
require (or may require) settlement by the issuance of an
entity's shares or other equity instruments. This statement
applies to all new awards granted during the fiscal year
beginning after June 15, 2005 and to previous awards that are
modified or cancelled after such date. We have not yet fully
evaluated the effect of SFAS No. 123 (revised 2004) on our
consolidated financial statements and have not determined the
method of adoption we will use to implement SFAS No. 123 (revised
2004).

In December 2004, the FASB issued FSP FAS 109-1, "Application of
FASB Statement No. 109, "Accounting for Income Taxes," to the Tax
Deduction on Qualified Production Activities Provided by the
American Jobs Creation Act of 2004 (AJCA)." The AJCA introduces a
special 9% tax deduction on qualified production activities. FSP
FAS 109-1 clarifies that this tax deduction should be accounted
for as a special tax deduction in accordance with Statement 109.
Based upon the Company's preliminary evaluation of the effects of
this guidance, we do not believe that it will have a significant
impact on the Company's financial statements.

In December 2004, the FASB issued FSP FAS 109-2, "Accounting and
Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creations Act of 2004." The
AJCA introduces a limited time 85% dividends received deduction
on the repatriation of certain foreign earnings to a U.S.
taxpayer (repatriation provision), provided certain criteria are
met. FSP FAS 109-2 provides accounting and disclosure guidance
for the repatriation provision. Based upon the Company's
preliminary evaluation of the effects of the repatriation
provision, we do not believe that it will have any impact on the
Company's financial statements.

During March 2005, the Securities Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 107, guidance on SFAS No. 123
(revised 2004). SAB No. 107 was issued to assist preparers by
simplifying some to the implementation challenges of SFAS No 123
(revised 2004) while enhancing the information that investors
receive. The Company will consider the guidance provided by SAB
No. 107 as it implements SFAS No. 123 (revised 2004) during
fiscal 2006.

Results of Operations - Consolidated
2005 as compared to 2004

Net sales in 2005 increased approximately $105,993,000 from
$259,360,000 to $365,353,000, or 35.6%. The acquisitions of
Crabar/GBF on June 30, 2004, Royal on November 2, 2004 and
Alstyle on November 19, 2004 accounted for substantially all of
the increase in net sales. Crabar/GBF, Inc. contributed
$41,226,000; Royal Business Forms, Inc. contributed $3,634,000;
and Alstyle contributed $56,045,000 to sales for fiscal 2005.
The Forms Solutions and Financial Groups, excluding the
acquisitions, experienced declines in net sales of 0.6% and 1.0%,
respectively. The decreases were the result of industry volume
shrinkage, offset by moderate price increases instituted to
offset material cost increases. Based upon industry forecasts,
revenue in these segments is declining at rates of between 2.0%
and 5.0%. The Promotional Solutions Group, excluding
acquisitions, increased 3.5% as a result of additional volume
from new customers. Going forward into fiscal 2006, quarter-to-
quarter revenues will fluctuate more than historical "experience"
due to the cyclicality of the Alstyle business. Alstyle
typically experiences its highest revenues in the Company's first
fiscal quarter, with revenues experiencing declines in the second
and third fiscal quarter and finally reaching a low point in the
fourth quarter. Since the products sold are activewear, it would
be logical to see greater volume in the spring and summer seasons
with declines occurring in the fall and winter seasons. The
Crabar/GBF, Inc. and Royal Business Forms, Inc. operations
experience revenue cycles similar to the Company's traditional
operations.

Gross margins decreased on a consolidated basis from 26.4% to
24.8% on a year-to-year basis due to the lower margins generated
by the sales of the acquired companies. Excluding the
acquisitions, gross margins for the combined operating units as
constituted at the beginning of the fiscal year were unchanged at
26.4%. The Company was able to maintain these margins during
fiscal year 2005 even though it experienced the first significant
raw material price increase in a number of years. The price
increase was approximately 5% on a blended basis and was offset
by cost controls instituted by the Company during the year and
sales price increases. Crabar/GBF and Royal both experienced
lower margins than typically experienced by other Company
operations during the period they were part of the consolidated
entity, with margins of approximately 17.7% and 18.6%
respectively. As part of the integration process, it is the goal
of the Company to improve the margins of these operations. Gross
margin for Alstyle, at 21.3.%, was impacted in the current fiscal
year as result of the timing of the acquisition, which occurred
during the low point of Alstyle's annual cycle of business.
Additionally, normal gross margins were affected in the fourth
quarter because of certain purchase accounting adjustments to
Alstyle's finished goods inventories. These adjustments reduced
our fourth quarter normal gross margins by approximately $1.1
million (pre-tax).In fiscal 2006, quarter-to-quarter gross margin
will fluctuate as a result of the cyclical nature of the Alstyle
operations.

Selling, general and administrative expense increased 32.8%
during fiscal 2005, from $38,521,000 to $51,159,000, as compared
to a modest 2.6% growth from 2003 to 2004. The increase was the
result of additional expenses added by the acquisitions of
Crabar/GBF, Royal and Alstyle and to the $1,500,000 expense
incurred for compliance with the Sarbanes-Oxley Act of 2002.
Selling, general and administrative expenses as a percent of net
sales excluding the acquisitions and Sarbanes-Oxley costs were
the same in both fiscal years 2005 and 2004 at 14.9%.

Interest expense increased from $830,000 to $2,755,000 in fiscal
2005. The increase is the result of the additional debt incurred
in conjunction with the Crabar/GBF acquisition and the Alstyle
merger. Because of this increase in debt, interest expense for
fiscal 2006 will increase significantly.

Other income increased in fiscal 2005, primarily as a result of
gains from sales of equipment in conjunction with the closing of
the Connolly Tool & Machine Co. during the year.

The Company's effective federal and state income tax rate
increased from 37.9% to 38.7% in fiscal 2005. The increase was
the result of increased state income taxes from the acquisitions
of Crabar/GBF, Inc. and Alstyle.

Results of Operations - Printing Segment

The Printing Segment is comprised of the three groups listed in
previous years: Forms Solutions, Promotional Solutions, and
Financial Solutions Groups.

The Forms Group grew from $142,006,000 in sales in fiscal year
2004 to $177,618,000 in fiscal year 2005, an increase of 25.1%.
All of this growth came from the acquisitions of Crabar/GBF and
Royal. Internal growth in forms sales actually declined by 0.6%
for the fiscal year 2005. The Forms Group earned $25,761,000
before tax for fiscal year 2005, an increase of 18.0% over the
$21,830,000 pre-tax earnings recorded for fiscal year 2004.
Gross margins declined from 27.1% in fiscal 2004 to 24.3% in
fiscal 2005 due to the increased amount of longer run production
generated in the Crabar/GBF facilities. Longer run production
generally creates more material usage and lower margins than
short run production.

The Promotional Group grew from $67,024,000 in sales in fiscal
year 2004 to $83,881,000 in fiscal year 2005, a growth of 25.2%.
Most of this growth came from the inclusion of the Cerritos,
California plant (a Crabar/GBF facility) as part of the
Promotional Group. Additional growth occurred internally through
the addition of some large accounts during the year. The
Promotional Groups pre-tax earnings grew from $7,433,000 in
fiscal year 2004 to $11,168,000 in fiscal year 2005, a growth of
50.2%. More impressively was the profit as a percent of sales,
11.6% in 2004 compared to 13.3% in 2005. This improvement was
due to cost controls as well as growth in sales volume. Gross
margins had a slight improvement from 23.5% in fiscal 2004 to
23.8% in fiscal 2005.

Sales in the Financial Group declined in 2005 from $50,330,000 in
sales in fiscal 2004 to $47,809,000. This decline was primarily
the result of losing some of our large customers from the
Northstar brand as well as continued declines in our GFS brand
customer base. Profitability, however, increased from $6,876,000
or 13.7% of sales for fiscal year 2004, to $7,346,000 or 15.4% of
sales for fiscal year 2005. This increase in profitability was
largely due to cost controls within the group. Material
increases were largely passed through to the customers so margins
were slightly higher than in 2004 increasing from 27.8% in fiscal
2004 to 28.0% in fiscal 2005. Since the acquisition in 1999, the
Financial Group has generated sufficient after-tax profits to
return the original investment made by the Company.

Results of Operations - Apparel Segment

Net sales in the Alstyle segment were $56,045,000 since the date
of acquisition, November 19, 2004. Approximately 86.0% of these
net sales were driven by our top 10 styles, dominated by our 6
ounce weight and 5.5 ounce basic cotton t-shirts. We anticipate
these top ten styles will continue to account for a majority of
our sales into the foreseeable future. Alstyle's sales are
primarily to retailers, screen printers, embellishers and mass
marketers. While the fourth quarter is traditionally a seasonal
low sales period for Alstyle and its competitors, net sales
benefited from several significant retail customers.
Approximately 30.0% of our net sales were to the top 10 customers
during this period, with 3 customers representing 15.0% of net
sales for the period. We anticipate that this concentration will
moderate lower to historical levels of 10.0 to 20.0% over the
balance of fiscal year 2006.

Segment gross margin was 21.3% for the period ended February 28,
2005. Gross margin is generally impacted by the cost of raw
materials - cotton yarn, manufacturing productivity, costs of
distribution and realized "average selling price" ("ASP"). The
segment results reflect the benefit of a negotiated fixed price
commitment with our major yarn suppliers and productivity
benefits from previous capital equipment and near capacity
utilization. In addition, while our top 2 styles - which
accounted for 50 percent of our net sales in the period -
experienced modest growth in ASP compared to the same time period
a year ago, the overall ASP for our top 10 styles was slightly
lower than the prior year corresponding period. This was
substantially due to style mix and competitive pressure on price.
We anticipate stable raw material pricing and availability,
sufficient manufacturing capacity to meet expected sales
requirements and stable market prices for our products.

Additional benefits to our gross margin are expected to occur due
to an investment in more efficient equipment by Alstyle's
previous owners prior to the merger. Alstyle had spent almost
$10,000,000 on new equipment prior to the merger that is expected
to improve the throughput of product in the manufacturing process
and reduce the cost to produce our products.

Additionally, Alstyle's normal gross margins were impacted in the
fourth quarter because of certain purchase accounting adjustments
to Alstyle's finished goods inventories. These adjustments
reduced our fourth quarter normal gross margins by approximately
$1.1 million (pre-tax). Excluding the effect of this adjustment,
gross margin would have been 23.3% during the period.

The apparel segment selling, general and administrative expenses
were approximately $6,000,000 during the fourth quarter ended
February 28, 2005, or approximately 12.1% of net sales, and
consist primarily of administrative and sales personnel wages,
commissions, marketing, advertising and professional fees. These
expenses are expected to be consistent throughout the year and we
do not expect significant changes in fiscal 2006 from the current
level.

The apparel segment pre-tax operating margin was 6.4% during the
period. Excluding the effect of the Statement of Financial
Accounting Standards No. 141 "Business Combinations" (SFAS No.
141) adjustment above, operating margin would have been 8.2%.

2004 as compared to 2003

Printing Segment Only

Net sales in 2004 increased 7.7% from 2003. The increase was
attributable to the inclusion of revenue for the full fiscal year
ended 2004 from the Company's acquisition of Calibrated Forms
Co., Inc, (Calibrated), Calibrated was acquired in November

2002 to augment the Forms Solutions Group. This group, excluding
Calibrated, continued to be impacted by both the general economy
and industry declines and accordingly had a decrease in sales of
2.4%. The Financial Solutions Group sales experienced a slight
decrease of 0.3%. The Promotional Solutions Group continued to
experience the negative impact of the general economy and
business declines and had a decrease in sales of 1.6%.

Gross profit margin increased to 26.4% in 2004 as compared to
26.3% in 2003. The Forms Solutions Group gross profit margin
decreased from 28.0% in fiscal 2003 to 26.6% in fiscal 2004. The
gross profit margin of the Financial Solutions Group and the
Promotional Solutions Group both increased from 26.6% and 21.9%
in fiscal 2003 to 27.8% and 23.1%, respectively, in fiscal 2004.
The general weakness in the economy and the decline in the forms
industry contributed to lower prices in the Forms Solutions
Group. In addition, the gross profit margin decreased due to a
combination of lower fixed cost absorption resulting from
decreased sales volumes in certain plants and a shift in mix to
lower margin products. The Financial Solutions Group and the
Promotional Solutions Group both experienced increases in profit
margin due to more efficient fixed cost absorption and an
increase in the volume of profitable sales.

Selling, general and administrative expense increased 2.6% during
fiscal 2004 as compared to 2003. The Financial Solutions Group
and the Promotional Solutions Group accounted for a 2.4% and 2.0%
decrease in selling, general and administrative expenses,
respectively. Effective cost reduction programs implemented in
the groups accounted for the reduction. The Forms Solutions
Group and corporate selling, general and administrative expenses
increased 4.4% and 2.6% respectively. The increase in the Forms
Solutions Group is primarily due to the inclusion of Calibrated
for the full fiscal year ended 2004. The increase in corporate
expense is primarily due to the centralization, on a corporate
level, of the administrative and accounting functions of recent
acquisitions.

Investment income decreased 82.6% in 2004 as compared to 2003 due
to declines in interest rates. Interest expense decreased from
$1,306,000 in fiscal 2003 to $830,000 in fiscal 2004 as a result
of the reduction in long-term financial debt and the declines in
interest rates. Other expenses were flat in 2004 as compared to
2003.

The Company's effective federal and state income tax rate
remained relatively constant from 2003 to 2004, increasing 0.5%.

Critical Accounting Policies and Judgments

In preparing our consolidated financial statements, we are
required to make estimates and assumptions that affect the
disclosures and reported amounts of assets and liabilities at the
date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period. We
evaluate our estimates and judgments on an ongoing basis,
including those related to allowance for doubtful accounts,
inventory valuations, property, plant and equipment, intangible
assets, 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. The Company
believes the following accounting policies are the most critical
due to their affect on the Company's more significant estimates
and judgments used in preparation of its consolidated financial
statements.

The Company maintains a defined-benefit pension plan for
employees. Included in our financial results are pension costs
that are measured using actuarial valuations. The actuarial
assumptions used may differ from actual results.

Intangibles generated through acquisitions are based upon
independent appraisals of their values and are either amortized
over their useful life, or evaluated periodically (at least once
a year) to determine whether the value has been impaired by
events occurring during the fiscal year.

We exercise judgment in evaluating our long-lived assets for
impairment. The Company assesses the impairment of long-lived
assets that include other intangible assets, goodwill, and plant
and equipment annually or whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. In performing tests of impairment, the Company must
make assumptions regarding the estimated future cash flows and
other factors to determine the fair value of the respective
assets in assessing the recoverability of its goodwill and other
intangibles. If these estimates or the related assumptions
change, the Company may be required to record impairment charges
for these assets in the future. Actual results could differ from
assumptions made by management. We believe our businesses will
generate sufficient undiscounted cash flow to more than recover
the investments we have made in property, plant and equipment, as
well as the goodwill and other intangibles recorded as a result
of our acquisitions. The Company cannot predict the occurrence
of future impairment triggering events nor the impact such events
might have on its reported asset values.

Revenue is generally recognized upon shipment of products. Net
sales represents gross sales invoiced to customers, less certain
related charges, including discounts, returns and other
allowances. Returns, discounts and other allowances have
historically been insignificant. In some cases and upon customer
request, the Company prints and stores custom print product for
customer specified future delivery, generally within six months.
In this case, risk of loss passes to the customer, the customer
is invoiced under normal credit terms and revenue is recognized
when manufacturing is complete. Approximately $13,945,000 of
revenue was recognized under these agreements during fiscal 2005.
There were no significant sales in foreign countries.

Derivative instruments are recognized on the balance sheet at
fair value. Changes in fair values of derivatives are accounted
for based upon their intended use and designation. The Company's
interest rate swap is held for purposes other than trading. The
Company utilized swap agreements related to its term and
revolving loans to effectively fix the interest rate for a
specified principal amount of the loans. The swap has been
designated as a cash flow hedge, and the after tax effect of the
mark-to-market valuation that relates to the effective amount of
derivative financial instrument is recorded as an adjustment to
accumulated other comprehensive income with the offset included
in accrued expenses.

As part of the process of preparing our consolidated financial
statements, we are required to estimate our income taxes in each
jurisdiction in which we operate. This process involves
estimating our actual current tax exposure together with
assessing temporary differences resulting from different
treatment of items for tax and accounting purposes. These
differences result in deferred tax assets and liabilities, which
are included in our consolidated balance sheet. We must then
assess the likelihood that our deferred tax assets will be
recovered from future taxable income and to the extent we believe
that recovery is not likely, we must establish a valuation
allowance. To the extent we establish a valuation allowance, we
must include an expense within the tax provision in the
consolidated statements of income. In the event that actual
results differ from these estimates, our provision for income
taxes could be materially impacted.

In view of such uncertainties, investors should not place undue
reliance on our forward-looking statements since such statements
speak only as of the date when made. We undertake no obligation
to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.

Management's letter to shareholders, operations overview and
discussion, and analysis of results of operations contain forward-
looking statements that reflect the Company's current view with
respect to future revenues and earnings. These statements are
subject to numerous uncertainties, including (but not limited to)
the rate at which the traditional business forms market is
contracting, the application of technology to the production of
business forms, demand for the Company's products in the context
of the contracting market, variability in the prices of paper and
other raw materials, and competitive conditions in the business
forms market. Because of such uncertainties, readers are
cautioned not to place undue reliance on such forward-looking
statements which speak only as of May 16, 2005.

Ten-Year Financial Review
(In thousands, except per share amounts)
Fiscal years ended 2005 2004 2003 2002
---- ---- ---- ----

Net sales $365,353 $259,360 $240,757 $236,923

Earnings before income
taxes 37,465 28,890 24,345 24,403

Provision for income taxes 14,506 10,939 9,098 9,437

Net earnings 22,959 17,951 15,247 14,966

As a % of sales 6.3% 6.9% 6.3% 6.3%

Per common share -
diluted $1.19 $1.08 $0.93 $0.92

Dividends 11,574 10,146 10,093 10,089

Per share .62 .62 .62 .62

Shareholders' equity 271,731 110,582 96,903 96,035

Per share - basic 14.33 6.76 5.95 5.89

Current assets 149,173 63,605 65,012 62,646

Current liabilities 81,383 25,400 25,294 23,966

Net working capital 67,790 38,205 39,718 38,680

Ratio of current assets to
current liabilities 1.8:1 2.5:1 2.6:1 2.6:1

Depreciation of plant and
equipment 10,367 9,216 9,156 8,683

Additions to property,
plant and equipment 6,143 4,543 3,763 2,254

Ten-Year Financial Review
(In thousands, except per share amounts)
2001 2000 1999 1998 1997 1996
---- ---- ---- ---- ---- ----

$229,186 $176,600 $159,690 $162,962 $161,969 $150,071

21,571 24,041 22,558 15,805 21,485 30,104

8,394 8,918 8,448 5,597 7,992 11,487

13,177 15,123 14,110 10,208 13,493 18,617

5.7% 8.6% 8.8% 6.3% 8.3% 12.4%

$0.81 $0.93 $0.87 $0.62 $0.82 $1.13

10,075 10,068 10,116 10,191 10,110 9,782

.62 .62 .62 .62 .615 .595

91,540 88,267 83,499 81,672 81,586 78,195

5.63 5.45 5.12 4.97 4.96 4.76

58,263 43,305 52,676 53,660 52,627 67,544

17,908 10,525 8,367 10,396 10,307 13,054

40,355 32,780 44,309 43,264 42,320 54,490

3.3:1 4.1:1 6.3:1 5.2:1 5.1:1 5.2:1

8,313 5,389 4,941 5,634 4,475 3,553

3,594 2,988 3,663 9,576 13,575 6,106

Consolidated
Statements of
Earnings
(In thousands, except
share and per share
amounts)

Fiscal Years Ended
2005 2004 2003
---- ---- ----

Net sales $365,353 $259,360 $240,757
Costs and expenses:
Cost of sales 274,596 190,812 177,485
Selling, general and
administrative expenses 51,159 38,521 37,559
------- ------- -------
325,755 229,333 215,044
------- ------- -------
Earnings from operations 39,598 30,027 25,713
------- ------- -------
Other income (expense):
Investment income 246 29 167
Interest expense (2,755) (830) (1,306)
Other 376 (336) (229)
------- ------- -------

(2,133) (1,137) (1,368)
------- ------- -------
Earnings before income taxes 37,465 28,890 24,345
Provision for income taxes 14,506 10,939 9,098
------- ------- -------
Net earnings $ 22,959 $ 17,951 $ 15,247
======= ======= =======

Net earnings per share of common
stock - basic $ 1.21 $ 1.10 $ .94
======= ======= =======
Net earnings per share of common
stock - diluted $ 1.19 $ 1.08 $ .93
======= ======= =======

Weighted average number of
common shares outstanding -
basic 18,935,533 16,358,107 16,284,575
Weighted average number of
common shares outstanding -
diluted 19,259,550 16,601,838 16,478,140

See accompanying notes to consolidated financial statements.

Consolidated
Statements of Cash
Flows
(In thousands)

Fiscal Years Ended
2005 2004 2003
---- ---- ----

Cash flows from operating activities:
Net earnings $ 22,959 $ 17,951 $ 15,247
Adjustments to reconcile net
earnings
to net cash provided by operating
activities:
Depreciation 10,367 9,216 9,156
Amortization 709 132 38
Gain on the sale of equipment (316) (65) (93)
Bad debt expense 893 890 941
Changes in operating assets and
liabilities:
Receivables (2,922) 1,387 (989)
Prepaid expenses (1,315) (314) (98)
Inventories (3,958) (617) (42)
Contract costs in excess of
billing -- 875 (711)
Other current assets (2,084) 314 (452)
Accounts payable and accrued
expenses (6,640) 1,017 (578)
Other assets and liabilities 2,349 (4,537) 197
Foreign exchange gain 4 -- --
------- ------- -------
Net cash provided by operating
activities 20,046 26,249 22,616
------- ------- -------

Cash flows from investing activities:
Acquisition of businesses (net of
cash acquired) (115,429) -- (20,522)
Capital expenditures (6,143) (4,543) (3,763)
Proceeds from disposal of property 481 176 176
Redemption of investments -- -- 1,802
Other -- (179) (38)
------- ------- -------
Net cash used in investing
activities (121,091) (4,546) (22,345)
------- ------- -------

Cash flows from financing activities:
Debt issued to finance acquisitions 114,200 -- 15,000
Repayment of debt issued to finance
acquisitions (6,375) (11,038) (7,540)
Dividends (11,574) (10,146) (10,093)
Purchase of treasury stock (2) (7) (55)
Proceeds from exercise of stock
options 423 695 593
Other -- -- (496)
------- ------- -------
Net cash provided by (used in)
financing activities 96,672 (20,496) (2,591)
------- ------- -------

Net change in cash and cash (4,373) 1,207 (2,320)
equivalents
Cash and cash equivalents at beginning
of year 15,067 13,860 16,180
------- ------- -------

Cash and cash equivalents at end of
year $ 10,694 $ 15,067 $ 13,860
======= ======= =======

Non-cash activities and cash used to pay taxes and interest
are included in the accompanying notes to consolidated
financial statements.

See accompanying notes to consolidated financial statements.
33

Consolidated Balance Sheets
(In thousands, except share and par value amounts)

Fiscal Years Ended
2005 2004
---- ----

Assets
Current assets:
Cash and cash equivalents $10,694 $ 15,067
Receivables, principally trade, less
allowance for doubtful receivables of
$3,567 in 2005 and $1,771 in 2004 46,685 29,800
Prepaid expenses 5,162 2,022
Inventories 79,900 13,721
Other current assets 6,732 2,995
------- -------

Total current assets 149,173 63,605
------- -------

Property, plant and equipment, at cost:
Plant, machinery and equipment 114,053 96,423
Land and buildings 38,846 28,362
Other 19,521 16,811
------- -------
172,420 141,596
Less accumulated depreciation 100,401 95,116
------- -------

Net property, plant and equipment 72,019 46,480
------- -------

Goodwill 178,472 34,420

Trademarks 62,090 1,154

Purchased customer list 23,275 --

Other assets 12,217 8,384
------- -------

$497,246 $154,043
------- -------

Consolidated Balance Sheets
(In thousands, except share and par value amounts)

Fiscal Years Ended
2005 2004
---- ----

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 33,887 $ 5,804
Accrued expenses:
Employee compensation and benefits 16,135 7,908
Taxes other than income 3,154 1,427
Federal and state income taxes payable 1,389 --
Other 5,116 3,926
Current installments of long-term debt 21,702 6,335
------- -------
Total current liabilities 81,383 25,400
------- -------

Long-term debt, less current installments 112,342 7,800
Deferred credits, principally income taxes 31,790 10,261

Commitments and contingencies -- --

Shareholders' equity:
Series A junior participating preferred
stock of $10 par value.
Authorized 1,000,000 shares; none
issued -- --
Common stock of $2.50 par value.
Authorized 40,000,000 shares; issued
30,053,443 shares
in 2005 and 21,249,860 shares in 2004 75,134 53,125
Additional paid in capital 123,640 126
Retained earnings 156,666 145,653
Accumulated other comprehensive income
(loss):
Foreign currency translation 5 --
Unrealized gain (loss) on derivative
instruments, net of
deferred taxes of $0 and $70 1 (114)
------- -------
Total accumulated other
comprehensive income (loss) 6 (114)
------- -------

355,446 198,790

Treasury stock, 4,635,444 and 4,856,626
shares, respectively 83,715 88,208
------- -------

Total shareholders' equity 271,731 110,582
------- -------

$497,246 $154,043
======= =======

See accompanying notes to consolidated financial statements.
35

Consolidated Statement of Changes in Shareholders' Equity
(In thousands, except share amounts):

Accumulated
Common Stock Additional Other Treasury Stock
------------ Paid-in Retained Comprehensive --------------
Shares Amount Capital Earnings Income (Loss) Shares Amount Total
------ ------ ------- ------- ----------- ------ ------ -----
- --

Balance
February 28,
2002 21,249,860 $53,125 $1,040 $132,694 $ (401) (4,976,922) $(90,423) $96,035
Net earnings -- -- -- 15,247 -- -- -- 15,247
Unrealized
gain on
derivative
instruments 158 158
Minimum
pension
liability,
net of tax
effect (4,982) (4,982)
------
Comprehensive
income 10,423
Dividends
declared
($.62 per
share) -- -- -- (10,093) --
-- -- (10,093)
Treasury
stock issued -- -- (579) -- -- 64,500 1,172 593
Treasury
stock
purchases -- -- -- -- -- (4,465) (55) (55)
--------- ------ ------- ------- ------- ---------- ------ -------

Balance
February 28,
2003 21,249,860 53,125 461 137,848 (5,225) (4,916,887) (89,306) 96,903
Net
earnings -- -- -- 17,951 -- -- -- 17,951
Unrealized
gain on
derivative
instruments 129 129
Minimum
pension
liability,
net of tax
effect 4,982 4,982
-------
Comprehensive
income 23,062
Dividends
declared
($.62 per -- -- -- (10,146) -- -- -- (10,146)
share)
Treasury
stock issued -- -- (410) -- -- 60,825 1,105 695
Treasury
stock
purchases -- -- -- -- -- (564) (7) (7)
Other -- -- 75 -- -- -- -- 75
--------- ------ ------- ------- ------- --------- ------- -------
Balance
February 29,
2004 21,249,860 53,125 126 145,653 (114) (4,856,626) (88,208) 110,582
Net earnings -- -- -- 22,959 -- -- -- 22,959
Foreign
currency
translation -- -- -- -- 5 -- -- 5
Unrealized
gain on
derivative
instruments 115 115
-------
Comprehensive
income 23,079
Dividends
declared
($.62 per -- -- -- (11,574) -- -- -- (11,574)
share)
Shares
issued in
acquisi-
tions 8,803,583 22,009 123,514 -- -- 177,458 3,700 149,223
Treasury
stock issued -- -- -- (372) -- 43,850 795 423
Treasury
stock
purchases -- -- -- -- -- (126) (2) (2)
--------- ------ ------- ------- ------- --------- ------- -------
Balance
February 28, 30,053,443 $75,134 $123,640 $156,666 $ 6 (4,635,444) $(83,715)$271,731
2005 ========== ====== ======= ======= ======= ========= ====== =======

See accompanying notes to consolidated financial statements.
36

Notes to Consolidated Financial Statements

(1) Significant Accounting Policies and General Matters

Nature of Operations. Ennis, Inc. and its wholly owned
subsidiaries (the Company) is principally engaged in the
production of and sale of business forms, other business products
and apparel to customers primarily located in the United States.

Basis of Consolidation. The consolidated financial statements
include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain accounts have been
reclassified to present comparable results. The Company's fiscal
years ended on the following days: February 28, 2005, February
29, 2004 and February 28, 2003 (fiscal years ended 2005, 2004 and
2003, respectively).

Cash and Cash Equivalents. The Company invests cash in excess of
daily operating requirements in income producing investments.
All such investments (consisting of Eurodollar deposits of U.S.
banks) have an original maturity of 90 days or less and are
considered to be cash equivalents.

Receivable and Notes Receivable. Trade receivables are
uncollateralized customer obligations due under normal trade
terms requiring payment generally within 30 days from the invoice
date. The Company's estimate of the allowance for doubtful
accounts for trade receivables is primarily determined based upon
the length of time that the receivables are past due. In
addition, management estimates are used to determine probable
losses based upon an analysis of prior collection experience,
specific account risks and economic conditions.

The Company initiates a series of actions that occur based upon
the aging of past due trade receivables, including letters,
statements and direct customer contact. Accounts are deemed
uncollectible based on past account experience and current
account financial condition. When it is determined an account
will not be collected it is written off.

Notes receivable are stated at the principal amount; interest is
accrued where applicable. An allowance for uncollectible notes
receivable is recorded based upon management's determination of
probable losses based upon an analysis of prior collection
experience, specific account risks and economic conditions.
Select trade accounts receivable are sold by the Company to
various factors on both non-recourse and recourse basis. These
transactions are accounted for as a sale of financial assets.
Advances may be paid at the Company's request on receivables not
yet collected by the factors.

Bad debt expense was $893,000, $890,000 and $941,000 for fiscal
years 2005, 2004, and 2003, respectively.

Inventories. The Company values the raw material content of most
of its business forms inventories at the lower of last-in, first-
out (LIFO) cost or market and all apparel inventory at the lower
of first in, first out (FIFO) cost or market. At fiscal years
ended 2005 and 2004, approximately 10% of inventories are valued
at LIFO with the remainder of inventories valued at the lower of
FIFO cost or market. The Company provides reserves for excess
and obsolete inventory based upon analysis of quantities on hand,
recent sales volumes and reference to market prices.

Property, Plant and Equipment. Depreciation of property, plant
and equipment is provided by the straight-line method at rates
presently considered adequate to amortize the total cost over the
useful lives of the assets, which range from 3 to 11 years for
plant machinery and equipment and 10 to 40 years for buildings
and improvements. Leasehold improvements are

amortized over the shorter of the lease term or the estimated
useful life of the improvements. Repairs and maintenance are
expensed as incurred. Renewals and betterments are capitalized
and depreciated over the remaining life of the specific property
unit. The Company capitalizes all leases, which are in substance
acquisitions of property.

Goodwill and Other Intangible Assets. Goodwill is the excess of
the purchase price paid over the value of net assets of
businesses acquired and is not amortized. Intangible assets with
determinable lives are amortized on a straight-line basis over
the estimated useful life. Goodwill and indefinite-lived
intangibles are evaluated for impairment on an annual basis, or
more frequently if impairment indicators arise, using a fair-
value-based test that compares the fair value of the asset to its
carrying value.

Long-Lived Assets. Long-lived assets, including intangible
assets, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to
future undiscounted net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the
impairment to be recognized is based upon future discounted net
cash flows.

Approximately $4,500,000 of the company's plant property and
equipment are located in Mexico at fiscal year end 2005. Assets
to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Plant and equipment are
stated at cost less accumulated depreciation. Costs of normal
maintenance and repairs are charged to expense when incurred.
Upon the disposition of assets, their cost and related
depreciation are removed from the respective accounts.

Fair Value of Financial Instruments. The carrying amount of cash
and cash equivalents, receivables and accounts payable
approximates fair value because of the short maturity of these
instruments. Long-term debt as of fiscal years ended 2005 and
2004 approximates its fair value. The related interest rate
swaps were recorded at fair value at fiscal years ended 2005 and
2004. See also Note 4.

Derivative Financial Instruments. Derivative instruments are
recognized on the balance sheet at fair value. Changes in fair
values of derivatives are accounted for based upon their intended
use and designation. The Company's interest rate swap is held
for purposes other than trading. The Company utilized swap
agreements related to its term and revolving loans to effectively
fix the interest rate for a specified principal amount of the
loans. The swap has been designated as a cash flow hedge and the
after-tax effect of the mark-to-market valuation that relates to
the effective amount of derivative financial instrument is
recorded as an adjustment to accumulated other comprehensive
income with the offset included in accrued expenses.

Revenue Recognition. Revenue is generally recognized upon
shipment of products. Net sales represents gross sales invoiced
to customers, less certain related charges, including discounts,
returns and other allowances. Returns, discounts and other
allowances have historically been insignificant. In some cases
and upon customer request, the Company prints and stores custom
print product for customer specified future delivery, generally
within six months. In this case, risk of loss passes to the
customer, the customer is invoiced under normal credit terms and
revenue is recognized when manufacturing is complete.
Approximately $13,945,000 of revenue was recognized under these
agreements during fiscal 2005. There were no significant sales
in foreign countries.

Advertising Expenses. The Company expenses advertising costs as
incurred. Catalog and brochure preparation and printing costs,
which are considered direct response advertising, are amortized
to expense over the life of the catalog, which typically

ranges from three to twelve months. Advertising expense was
approximately $1,628,000, $1,434,000 and $1,528,000, during the
fiscal years ended 2005, 2004 and 2003, respectively. Included
in advertising expense is amortization related to direct response
advertising of $454,000, $537,000 and $474,000 for the fiscal
years ended 2005, 2004 and 2003, respectively. Unamortized
direct response advertising costs included in other current
assets at fiscal years ended 2005 and 2004 were $208,000 and
$193,000, respectively.

Income Taxes. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry forwards. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the
enactment date.

Credit Risk. The Company's financial instruments that are
exposed to credit risk consist of its trade receivables and cash
equivalents. The trade receivables are geographically dispersed
primarily within the continental United States. Credit losses are
provided for in the financial statements. One customer accounts
for 15.7% of accounts receivable at fiscal year end 2005.

Earnings Per Share. Basic earnings per share is computed by
dividing earnings by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is
computed by dividing earnings by the weighted average number of
common shares outstanding plus the number of additional shares
that would have been outstanding if potentially dilutive
securities had been issued, calculated using the treasury stock
method. At fiscal years ended 2004 and 2003, 10,500 and 70,250
of options, respectively, were not included in the diluted
earnings per share computation because their exercise price
exceeded the average fair market value for the Company's stock
for the year.

Accumulated Other Comprehensive Income (Loss). Accumulated other
comprehensive loss consists of the changes in the fair value of
the Company's cash flow hedge and foreign currency translation
and pension. Amounts charged directly to shareholders' equity
related to the Company's interest rate swap and pension plan are
included in "other comprehensive income." Adjustments resulting
from the translation of the financial statements of our Mexican
operations are charged or credited directly to shareholders
equity and shown as cumulative translation adjustments in other
comprehensive income (loss).

Estimates. The preparation of financial statements in conformity
with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could
differ from these estimates.

Shipping and Handling Costs. Amounts billed to customers for
shipping and handling costs are included in revenue and related
costs are included in cost of sales.

Stock Based Compensation. The Company accounts for employee and
director stock-based compensation arrangements in accordance with
the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB No. 25), and
related interpretations, and complies with the disclosure
provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123) and
Statement of Financial Accounting Standards No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure" (SFAS
No. 148). Under APB No. 25, compensation expense for fixed
awards is based upon the difference, if any, on the date of grant
between the estimated

fair value of the Company's stock and the exercise price and is
amortized over the vesting period. All stock-based awards to non-
employees, if any, are accounted for at their fair value. The
Company is required to disclose the pro forma net income as if
the fair value method defined in SFAS No. 123 had been applied.

The following table represents the effect on net income and
earnings per share as if the Company had applied the fair value
based method and recognition provisions of SFAS No. 123 to stock-
based Employee Compensation for the fiscal years ended (in
thousands, except per share amounts):

2005 2004 2003
---- ---- ----

Net earnings, as reported $22,959 $17,951 $15,247
Deduct total stock-based
employee
compensation expense
determined under fair
value based methods for
all awards, net of related
tax effects (47) (26) (85)
------ ------ ------
Pro forma net earnings $22,912 $17,925 $15,162
====== ====== ======

Earnings per share:
As reported - basic $1.21 $1.10 $.94
Pro forma - basic $1.21 $1.10 $.94
As reported - diluted $1.19 $1.08 $.93
Pro forma - diluted $1.19 $1.08 $.92

For purposes of pro forma disclosures, the estimated fair value
of stock-based compensation plans and other options is amortized
to expense over the vesting period.

Recent Accounting Pronouncements. In July 2002, the Public
Company Accounting Reform and Investor Protection Act of 2002
(the Sarbanes-Oxley Act) was enacted. Section 404 stipulates that
public companies must take responsibility for maintaining an
effective system of internal control. The Act requires public
companies to report on the effectiveness of their control over
financial reporting and obtain an audit report from their
independent registered public accountant about management's
report. The Act requires certain public companies (accelerated
filers) to report on the company's internal control over
financial reporting for fiscal years ended on or after November
15, 2004. Other public companies (non-accelerated filers) must
begin to comply with the new requirements related to internal
control over financial reporting for their first fiscal year
ending on or after July 15, 2006, under the latest extension
granted by the Securities and Exchange Commission.

(2) Due From Factors

Pursuant to terms of an agreement between the Company and various
factors, the Company sells a majority of its trade accounts
receivable to the factors on a non-recourse basis. The price at
which the accounts are sold is the invoice amount reduced by the
factor commission of between 0.25% and 0.50%. Additionally, some
trade accounts receivable are sold to the factors on a recourse
basis.

Trade accounts receivable not sold to the factor remain in the
custody and control of the Company and the Company maintains all
credit risk on those accounts as well as accounts which are sold
to the factor with recourse.

The Company may request payment from the factor in advance of the
collection date or maturity. Any such advance payments are
assessed in interest charges through the collection date or
maturity at the prime rate as published by The Chase Manhattan
Bank. The Company's obligations with respect to advances from
the factor are limited to the interest charge thereon. Advance
payments are limited to a maximum of 90% (ninety percent) of
eligible accounts receivable.

At February 28, 2005, included in receivables in the balance
sheet amounts, due from factors consists of the following (in
thousands):

Outstanding factored
receivables
Without recourse $ 26,756
With recourse 1,213
Advances (24,675)
-------
Due from factors $ 3,294
=======

(3) Inventories

The following table summarizes the components of inventories at
the different stages of production at fiscal years ended (in
thousands):

2005 2004
---- ----
Raw material $ 26,517 $ 6,911
Work-in-process 17,669 1,393
Finished goods 34,893 5,417
------ ------
$79,079 $13,721
------ ------

The excess of current costs at FIFO over LIFO stated values was
approximately $4,166,000 and $3,761,000 at fiscal years ended
2005 and 2004, respectively. The Company provides reserves for
excess and obsolete inventory based upon analysis of quantities
on hand, recent sales volumes and reference to market prices.
For fiscal years ended 2005 and 2004, the reserves were
$3,823,000 and $244,000, respectively.

There were no significant liquidations of LIFO inventories during
the fiscal years ended 2005 and 2004.

(4) Long-Term Debt

Long-term debt consisted of the following at fiscal years ended
(in thousands):

2005 2004
---- ----
Revolving credit facility $ 63,500 $13,800
Term credit facility 50,000 --
Capital lease obligations 1,664 --
Notes payable to finance companies 8,344 --
Other 10,536 335
------- ------
134,044 14,135
Less current installments 21,702 6,335
------- ------
Long-term debt $112,342 $ 7,800
======= ======

The Company has a $150,000,000 term/revolver credit facility
agreement, which matures November 2009. The Company is also
required to pay a commitment fee on the total unused credit
facility amount. Availability under the revolving credit
facility at fiscal year ended 2005 was $36,500,000. The
agreement provides for a five-year commitment and contains
financial covenants which were in compliance at fiscal year end
2005. The term facility requires quarterly payments in the
amount of $2,500,000. The revolver facility requires annual
payments in an amount equal to 50% of excess cash flows if the
Company's ratio of Total Funded Debt of EBITDA is less than 2 to
1 and an amount equivalent to proceeds received as a result of
sale of assets. The Credit Facility is secured by substantially
all personal and investment property and incurs interest at a
floating rate of the London Interbank Offered Rate (LIBOR) plus a
spread dependent upon the Company's total funded debt level to
cash flows as defined. The rate at the end of fiscal 2005 was
4.09%.

The Company acquired certain equipment under capital leases with
its acquisition of Alstyle (see Note 9). The asset value of
$6,037,284 and the related accumulated amortization of $524,521
at February 28, 2005 is included in property and equipment.
Amortization of assets under capital leases is included in
depreciation expense.

Notes payable to finance companies, with interest due monthly at
5.25% to 9.46% principal paid in equal monthly installments. The
notes mature at dates ranging from May 2005 through June 2009 and
are collateralized by certain equipment.

Notes payable classified as "Other" are obligations of Alstyle
and Crabar/GBF. These are loans to individuals with annual
payments bearing interest at rates ranging from 4.0% to 8.0% and
maturing on dates ranging from December 2005 through November
2006.

Total interest paid in fiscal years ended 2005, 2004 and 2003 was
$2,755,000, $830,000 and $1,291,000, respectively.

Excluding capital lease obligations (see Note 13), the Company's
long-term debt maturities for the five years following February
28, 2005 are as follows (in thousands):

2006 $ 19,743
2007 18,155
2008 10,771
2009 10,167
2010 73,544
-------
$132,380
=======

(5) Shareholders' Equity

In fiscal year 1999, the Company adopted a Shareholder Rights
Plan, which provides that the holders of the Company's common
stock receive one preferred share purchase right (a "Right") for
each share of the Company's common stock they own. Each Right
entitles the holder to buy one one-thousandth of a share of
Series A Junior Participating Preferred Stock, par value $10.00
per share, at a purchase price of $27.50 per one one-thousandth
of a share, subject to adjustment. The Rights are not currently
exercisable, but would become exercisable if certain events
occurred relating to a person or group acquiring or attempting to
acquire 15% or more of the outstanding shares of common stock of
the Company. Under those circumstances, the holders of Rights
would be entitled to buy shares of the Company's common stock or
stock of an acquiror of the Company at a 50% discount. The
Rights expire on November 4, 2008, unless earlier redeemed by the
Company. The Company's term/revolver credit facility restricts
acquisition of treasury shares and distributions to holders of
its capital securities.

(6) Stock Options

At fiscal year ended 2005, the Company has two incentive stock
option plans: the 1998 Option and Restricted Stock Plan amended
and restated as of June 17, 2004 and the 1991 Incentive Stock
Option Plan. The Company has 494,077 shares of unissued common
stock reserved under the stock option plans for issuance to
officers and directors, and supervisory employees of the Company
and its subsidiaries. The exercise price of each option granted
equals the quoted market price of the Company's common stock on
the date of grant, and an option's maximum term is ten years.
Options may be granted at different times during the year and
vest over a five-year period.

The per share weighted-average fair value of options granted
during fiscal years ended 2005, 2004 and 2003 was $2.86, $1.75
and $1.96, respectively, on the date of grant using the Black
Scholes option-pricing model with the following weighted-average
assumptions for the fiscal years ended:

2005 2004 2003
---- ---- ----

Expected dividend yield 3.42% 4.38% 5.01%
Stock price volatility 23.59% 23.24% 22.50%
Risk-free interest rate 3.93% 2.89% 4.64%
Expected option term 5 years 5 years 5 years

Following is a summary of transactions of incentive stock options
during the three fiscal years ended in 2005:

Weighted
Number Average
of Exercise
Shares Price
------ -----
Outstanding at February 2002
(291,375 shares exercisable) 804,000 $9.20
Granted 35,000 13.28
Terminated (6,750) 10.84
Exercised (64,500) 9.19
-------

Outstanding at February 2003
(376,438 shares exercisable) 767,750 $9.37
Granted 40,000 12.46
Terminated (47,750) 11.34
Exercised (60,825) 11.42
-------

Outstanding at February 2004
(445,425 shares exercisable) 699,175 $9.23
Granted 48,700 16.05
Terminated (12,000) 10.42
Exercised (40,550) 9.61
------

Outstanding at February 2005
(511,250 shares exercisable) 695,325 $9.67
=======

The following table summarizes information about incentive stock
options outstanding at fiscal year ended 2005:

Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Exercise Number Life (In Exercise Number Exercise
Prices Outstanding Years) Price Exercisable Price
------ ----------- ------ ----- ------------ -----

$7.06 to
$10.25 522,125 4.5 $ 8.49 449,250 $ 8.66
11.06 to
11.67 85,000 3.9 11.34 55,000 11.17
13.28 to
16.21 88,200 8.4 14.98 7,000 13.28
------- -------
695,325 4.9 $ 9.67 511,250 $ 9.00
======= =======

(7) Income Taxes

The components of the provision for income taxes for fiscal years
ended 2005, 2004, and 2003 are (in thousands):

2005 2004 2003
---- ---- ----
Current:
Federal $13,254 $ 8,752 $ 8,688
State, local and foreign 2,234 1,127 1,040
Deferred (982) 1,060 (630)
------ ------ ------
Total provision for income taxes $14,506 $10,939 $ 9,098
====== ====== ======

Total income taxes paid $13,273 $10,208 $10,088
====== ====== ======

The following summary reconciles the statutory U.S. Federal
income tax rate to the Company's effective tax rate:

2005 2004 2003
---- ---- ----

Statutory rate 35.0% 35.0% 35.0%
Provision for state income taxes,
net of Federal income tax benefit 3.9 2.8 2.8
Other (0.2) 0.1 (0.4)
---- ---- ----
Effective tax rate 38.7% 37.9% 37.4%
==== ==== ====

The components of deferred income tax assets and liabilities are
summarized as follows (in thousands) for fiscal years ended:

2005 2004
---- ----
Current deferred assets related to:
Allowance for doubtful receivables $ 1,283 $ 666
Inventory valuation 2,239 366
Employee compensation and benefits 2,041 1,346
Other 760 235
------ -----
$ 6,323 $2,613
====== =====
Noncurrent deferred liability related to:
Depreciation $ 8,017 $6,480
Intangibles amortization and impairments 17,651 (560)
Prepaid pension cost 2,540 2,027
Partnership interest 207 200
Other 213 357
------ -----
$28,628 $8,504
====== =====

(8) Employee Benefit Plans

The Company and certain subsidiaries have a noncontributory
defined benefit retirement plan covering approximately 20% of
their employees. Benefits are based on years of service and the
employee's average compensation for the highest five compensation
years preceding retirement or termination. The Company's funding
policy is to contribute annually an amount in accordance with the
requirements of the Employee Retirement Income Security Act of
1974 (ERISA).

The Company's pension plan asset allocation for fiscal years
ended 2005 and 2004, by asset category, is as follows:

2005 2004
---- ----

Equity Securities 0% 44%
Debt Securities 0% 41%

Cash and Cash Equivalents 100% 15%

Total 100% 100%
==== ====

The Company's target asset allocation is 50.0% equities and 50.0%
fixed income, with a 10.0% plus or minus factor based upon the
combined judgments of the Company's Administrative Committee and
its investment advisors. The Plan's investments were liquidated
at fiscal year end 2005 in anticipation of a transfer of the
account to a new trustee. The larger than normal amounts in the
Cash and Cash Equivalents at fiscal year ended 2005 was the
result of cash contributions received at year end which were
subsequently invested per the target asset allocation after year
end.

The Company estimates the long-term rate of return on plan assets
will be 8.0% based upon target asset allocation. Expected
returns are developed based upon the information obtained from
the Company's investment advisors. The advisors provide ten-year
historical and five-year expected returns on the fund in the
target asset allocation. The return information is weighted
based upon the asset allocation at the end of the fiscal year.
The expected rate of return at the beginning of the fiscal year
ended 2005 was 8.0%, the rate used in the calculation of the
current year pension expense.

Pension expense for fiscal years 2005, 2004 and 2003 included the
following components (in thousands):

2005 2004 2003
---- ---- ----
Service cost $1,470 $1,337 $1,475
Interest cost 2,417 2,359 2,554
Expected return on plan assets (2,663) (2,193) (2,483)
Net amortization 921 901 368
----- ----- -----

Net periodic pension cost $2,145 $2,404 $1,914
===== ===== =====

Assumptions used to determine benefit obligations and net
periodic pension cost for fiscal years 2005, 2004 and 2003 are as
follows:

2005 2004 2003
---- ---- ----

Weighted average discount rate 6.00% 6.50% 6.50%
Earnings progression 3.50% 3.50% 4.50%
Expected long-term rate of
return on plan assets 8.00% 8.50% 9.25%

Amounts recognized in the consolidated balance sheets for fiscal
years ended 2005 and 2004 consist of (in thousands):

2005 2004
---- ----

Prepaid benefit cost $7,548 $2,852
Contributions 2,880 7,100
Net periodic pension cost (2,145) (2,404)
----- -----
Net amount recognized $8,283 $7,548
===== =====

The accumulated benefit obligation for the defined benefit
pension plan was $35,766,000 for fiscal year ended 2005 and
$34,667,000 for fiscal year ended 2004.

Assets and obligations for fiscal years 2005 and 2004 are as
follows (in thousands):

2005 2004
---- ----
Projected benefit obligation:
Beginning of year $ 41,340 $ 37,445
Service and interest cost 3,887 3,696
Actuarial gain 405 3,274
Benefits paid (3,054) (3,075)
------ ------

End of year $ 42,578 $ 41,340
------ ------

Fair value of plan assets:
Beginning of year $ 34,791 $ 26,216
Company contributions 2,880 7,100
Net gains 1,162 4,550
Benefits paid (3,054) (3,075)
------ ------

End of year $ 35,779 $ 34,791
------ ------

Funded status (6,800) (6,549)
Unrecognized losses 16,616 15,775
Prior service cost (1,533) (1,678)
------ ------

Total pension asset $ 8,283 $ 7,548
====== ======

Estimated future benefit payments which reflect expected future
service, as appropriate, are expected to be paid (in thousands):

Year Projected
Payments
2005 $2,099
2006 3,519
2007 3,618
2008 4,384
2009 2,490
2010 - 2014 22,321

The Company has 401k plans that are substantially funded by
employee contributions. The Company made matching 401k
contributions in the amount of $187,000 in 2005.

(9) Acquisitions and Disposal

The Company acquired all the outstanding shares in its merger
with Alstyle Apparel (Alstyle) on November 19, 2004. Alstyle
shareholders received 8,803,583 shares valued at approximately
$145,523,000 and $2,889,000 cash. Debt of approximately
$98,074,000 was assumed. Alstyle produces and sells activewear
apparel through 6 facilities in California and Mexico and 7
distribution centers located throughout the U.S. and Canada.
Alstyle was acquired to supplement and broaden the scope of
products offered by Ennis. The purchase price has been allocated
to assets acquired and liabilities assumed based on fair market
value at the date of acquisition. Approximately $37,774,000 of
goodwill related to Alstyle acquisition is deductible for tax
purposes. The purchase price of Alstyle was as follows (in
thousands of dollars):

Ennis common stock
issued 8,803,583
shares $145,523
Cash 2,889
Alstyle debt assumed 98,074
-------

Purchase price of Alstyle $246,486
=======

On November 1, 2004, the Company acquired 100% of the stock of
Royal Business Forms, Inc., (Royal) a privately held company
headquartered in Arlington, Texas for $3,700,000 in Ennis
treasury stock (approximately 178,000 shares). Royal has been in
existence and operating in Arlington, Texas since 1959 and has
customers throughout the United States. The acquisition of Royal
continues the Ennis strategy of growth through related
manufactured products for Ennis' existing customer base. The
acquisition will add additional short-run print products and
solutions and financial documents sold through the indirect sales
(distributorship) marketplace.

Effective June 30, 2004, the Company completed its acquisition of
all of the outstanding stock of Crabar/GBF, Inc. for
approximately $18,000,000 with consideration in the form of debt
assumed and cash. The primary reason for the acquisition was to
increase Ennis' market share. However, Crabar/GBF, Inc. will add
high-quality long and medium run print production, along with
pressure sensitive label and form-label combinations to Ennis'
current line of medium and short run

print products and solutions. The transaction was financed with
$11,000,000 in bank loans with the balance being provided by
internal cash resources.

The Company has recognized certain costs related to exit
activities and integration costs attributable to the Crabar/GBF
acquisition. These costs totaling approximately $1,500,000 were
recognized as part of the assumed liabilities and included in
"Other - Accrued Expenses" in the Consolidated Balance Sheet.
The costs were primarily related to contracts related to previous
owners. Other costs include lease exit costs and severance
payments.

The following is a summary of the purchase price allocation (in
thousands):

Crabar Royal Alstyle
------ ----- -------

Cash $ 133 $ 601 $ 3,187
Accounts receivable, net 7,553 1,125 4,457
Other receivables 1,082 -- 639
Prepaid expenses 298 76 1,451
Other current assets -- 211 1,697
Inventories 4,435 1,985 55,801
Fixed assets 8,087 808 21,033
Goodwill 5,956 -- 138,134
Trademarks 80 -- 61,000
Customer list 1,760 -- 22,000
Other identifiable intangibles 92 -- 3,763
Accounts payable and accrued
liabilities 11,476 1,106 66,676
------ ----- -------
$18,000 $3,700 $246,486
====== ===== =======

The results of operations for Alstyle, Royal and Crabar/GBF are
included in the Company's consolidated financial statements from
the dates of acquisition. The following table represents certain
operating information on a pro forma basis as though all three
companies had been acquired as of March 1, 2003, after the
estimated impact of adjustments such as amortization of
intangible assets, interest expense, and related tax effects (in
thousands except per share amounts):

Unaudited
---------
2005 2004
---- ----
Net sales $567,700 $545,686
Net earnings 30,595 18,062
Net earnings per share-basic 1.09 .71
Net earnings per share-diluted 1.08 .70

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

(10) Goodwill and Other Intangible Assets
------------------------------------
Goodwill represents the excess of the purchase price over the
fair value of net assets of acquired businesses and is not
amortized. Goodwill and indefinite-lived intangibles are
evaluated for impairment on an annual basis, or more frequently
if impairment indicators arise, using a fair-value-based test
that compares the fair value of the asset to its carrying value.
Fair values are typically calculated using a factor of expected
earnings before interest, taxes, depreciation, and amortization.
Based on this evaluation, no impairment was recorded. The
Company must make assumptions regarding estimated future cash
flows and other factors to determine the fair value of the
respective assets in assessing the recoverability of its goodwill
and other intangibles. If these estimates or the related
assumptions change, the Company may be required to record
impairment charges for these assets in the future.

Intangible assets with determinable lives are amortized on a
straight-line basis over the estimated useful life. The cost of
trademarks is based on fair values at the date of acquisition.
Trade names with determinable lives and a net book value of
$1,090,000 at fiscal year end 2005 are amortized on a straight-
line basis over the estimated useful life (between 5 and 10
years). Trademarks with indefinite-lived lives with a net book
value of $61,000,000 at fiscal year end 2005 are evaluated for
impairment on an annual basis.

The cost of purchased trade names is based on appraised values at
the date of acquisition and is amortized on a straight-line basis
over the estimated useful life (between 10 and 15 years) of such
trade names. The Company assesses the recoverability of its
definite-lived intangible assets primarily based on its current
and anticipated future undiscounted cash flows.

The Company's amortization expense for the next five years is as
follows:

2006 $1,975,000
2007 $1,917,000
2008 $1,795,000
2009 $1,792,000
2010 $1,776,000

The changes in the carrying amount of intangibles for the fiscal
years ended 2005 and 2004 are as follows:

Forms Promotional Financial Apparel
Solutions Solutions Solutions Solutions
Group Group Group Group Total
----- ----- ----- ----- -----

Balance as of
March 1, 2003 $14,933 $6,579 $14,014 $ -- $ 35,526
Trademarks
amortization (131) -- -- -- (131)
Goodwill
Acquired
during the
year 179 -- -- -- 179
------ ------ ------ ------- -------

Balance as of
fiscal year
ended 2004 14,981 6,579 14,014 -- 35,574
Trademarks
Acquired
during the
year 80 -- -- 61,000 61,080
Trademarks
amortization (183) -- -- -- (183)
Customer list
Acquired
during the
year 1,760 -- -- 22,000 23,760
Customer list
amortization (117) -- -- (367) (484)
Other
Intangibles
Acquired
during the
year -- -- -- -- --
Other
amortization -- -- -- -- --
Goodwill
Acquired
during the
year 5,956 -- -- 138,134 144,090
------ ------ ------ ------- -------

Balance as of
fiscal year
ended 2005 $22,477 $6,579 $14,014 $220,767 $263,837

(11) Segment Information

In February of 2005, the Company announced a change in
management in which the Forms Solutions, Promotional Solutions
and Financial Solutions Groups began reporting to a newly
created executive officer position. This officer reports to the
President and CEO, as does the President of the Apparel Group.
The Company will now report in two operational segments - the
Printing Segment and the Apparel Segment. The first group in
the Printing Segment, the Forms Solutions Group is primarily in
the business of manufacturing and selling business forms and
other printed business products primarily to distributors
located in the United States. The second group in the Printing
Segment, Promotional Solutions Group, is primarily engaged in
the business of design, manufacturing and distribution of
printed and electronic media, presentation products,
flexographic printing, advertising specialties and Post-it
(registered trademark) Notes. The third group in the Printing
Segment, the Financial Solutions Group, designs, manufactures
and markets printed forms and specializes in internal bank
forms, secure and negotiable documents and custom products.
The second segment, Apparel Solutions Group, which consists of
the newly acquired Alstyle, is primarily engaged in the product
and sales of activewear including t-shirts, fleece goods, and
other wearables. Corporate information is included to
reconcile segment data to the consolidated financial statements
and includes assets and expenses related to the Company's
corporate headquarters and other administrative costs. As
indicated in the Management's Discussion and Analysis,
Management intends to operate and report these segments as the
Printing Segment and the Apparel Segment in future periods.
52

Segment data for the fiscal years ended 2005, 2004 and 2003 were
as follows (in thousands):

Apparel
Printing Segment Segment
------------------------- -------
Forms Promotional Financial Apparel
Solutions Solutions Solutions Solutions Consolidated
Group Group Group Group Corporate Totals
----- ----- ----- ----- --------- ------

Fiscal
year
ended
2005:
Net $177,618 $83,881 $47,809 $56,045 $ -- $365,353
sales
Depreci-
ation 3,356 2,455 2,141 1,878 537 10,367
Amorti-
zation 283 -- -- 426 -- 709
Segment

earnings
(loss)
before
income 25,761 11,168 7,346 3,575 (10,385) 37,465
taxes
Segment
assets 90,950 45,514 33,230 312,788 14,764 497,246
Capital
expendi-
tures 1,313 1,332 557 237 2,704 6,143

Fiscal
year
ended
2004:
Net $142,006 $67,024 $50,330 -- $ -- $259,360
sales
Depreci-
ation 3,288 2,355 2,959 -- 614 9,216
Amorti-
zation 132 -- -- -- -- 132
Segment

earnings
(loss)
before
income 21,830 7,433 6,876 -- (7,249) 28,890
taxes
Segment
assets 68,950 33,287 36,004 -- 15,802 154,043
Capital
Expendi-
tures 1,408 620 1,011 -- 1,504 4,543

Fiscal
year
ended
2003:
Net $118,763 $70,847 $51,147 -- $ -- $240,757
sales
Depreci-
ation 2,829 2,320 3,174 -- 833 9,156
Amorti-
zation 38 -- -- -- -- 38
Segment

earnings
(loss)
before
income 18,850 6,670 4,916 -- (6,091) 24,345
taxes
Segment
assets 63,232 38,563 39,730 -- 11,012 152,537
Capital
expendi-
tures 631 699 772 -- 1,661 3,763

"Post-it" is a registered trademark of 3M.

(12) Quarterly Information (Unaudited)
(In thousands, except per share amounts)

For the Three Months Ended May 31 August November February 28
31 30
- -------------------------- ------ -------- ---------- -----------
Fiscal year ended 2005:
Net sales $65,736 $73,374 $91,750 $134,493
Gross profit 17,060 19,352 22,874 31,471
Net earnings 4,582 5,370 6,104 6,903
Dividends paid 2,542 2,546 2,546 3,939
Per share of common
stock:
Basic net earnings .28 .33 .36 .27
Diluted net earnings .27 .32 .35 .27
Dividends .155 .155 .155 .155

May 31 August November February 29
31 30
------ -------- ---------- -----------
Fiscal year ended 2004:
Net sales $64,874 $65,003 $66,398 $63,085
Gross profit 16,550 17,507 17,574 16,917
Net earnings 4,104 4,497 4,475 4,875
Dividends paid 2,533 2,535 2,537 2,541
Per share of common
stock:
Basic net earnings .25 .28 .27 .30
Diluted net earnings .25 .27 .27 .29
Dividends .155 .155 .155 .155

(13) Commitments and Contingencies

The Company leases its facilities under operating leases that
expire on various dates through fiscal year ended 2011. Future
minimum lease commitments and sublease income under noncancelable
operating leases for each of the fiscal years ending are as
follows (in thousands):

Operating
Lease Sublease
Commitments Income Net
----------- ------ ---
2006 $11,718 $(1,192) $10,526
2007 7,228 (1,253) 5,975
2008 6,400 (1,276) 5,124
2009 4,683 (106) 4,577
2010 1,549 -- 1,549
Thereafter 1,340 -- 1,340
------- -------- -------
$32,918 $(3,827) $29,091
======= ======== =======

Rent expense attributable to such leases totaled $5,837,000,
$2,407,000 and $2,550,000 for the fiscal years ended 2005, 2004
and 2003, respectively.

Annual maturities of capital lease obligations are as follows (in
thousands):

2006 $ 950
2007 628
2008 136
2009 24
------
1,738
Amount representing interest (74)
------
$1,664
=====

In the ordinary course of business, the Company also enters into
real property leases, which require the Company as lessee to
indemnify the lessor from liabilities arising out of the
Company's occupancy of the properties. The Company's
indemnification obligations are generally covered under the
Company's general insurance policies.

The Company is party to various claims, legal actions, and
complaints arising in the ordinary course of business. The
Company is self-insured with respect to potential losses related
to workers' compensation claims and health insurance. The
Company maintains reserves for anticipated self-insurance losses.
Although the results of any litigation or claim cannot be
predicted with certainty, management believes that the outcome of
pending litigation and claims, when considered in conjunction
with self-insurance reserves established, will not have a
material adverse effect on the Company's financial position,
results of operations or cash flows.

(14) Subsequent Events

On March 15, 2005, the Company declared a quarterly cash dividend
of 15 1/2 cents a share on its common stock and has set the
record date for the Annual Shareholder Meeting. The dividend was
paid May 2, 2005 to shareholders of record on April 15, 2005.
April 15, 2005 also has been set as the record date for
shareholders entitled to notice of and to vote at the Annual
Meeting of Shareholders to be held on June 16, 2005.

Report of Independent Registered Public Accounting Firm

Board of Directors and
Shareholders of Ennis, Inc.

We have audited the accompanying consolidated balance sheet of
Ennis, Inc. (the "Company"), as of February 28, 2005, and the
related consolidated statements of earnings, stockholders'
equity, and cash flows for the year ended February 28, 2005. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. Our audit included examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Ennis, Inc., as of February 28, 2005, and
the results of its consolidated operations and its consolidated
cash flows for the year ended February 28, 2005, in conformity
with accounting principles generally accepted in the United
States of America.

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Company's internal control over financial
reporting as of February 28, 2005, based on criteria established
in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission, and our
report dated May 6, 2005, expressed an unqualified opinion with
respect to management's assessment of internal control and an
adverse opinion with respect to the Company's internal control
over financial reporting as of February 28, 2005.

/s/ Grant Thornton LLP
Dallas, Texas
May 16, 2005

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and
maintaining adequate internal control over financial reporting.
Internal control over financial reporting is a process designed
by, or under the supervision of, our principal executive and
financial officers, and effected by our board of directors,
management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of consolidated financial statements for external
purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:

(bullet) Pertain to the maintenance of records that in
reasonable detail accurately and fairly
reflect the transactions and dispositions of
the assets of our company.

(bullet) Provide reasonable assurance that transactions
are recorded as necessary to permit
preparation of consolidated financial
statements in accordance with generally
accepted accounting principles, and that our
receipts and expenditures are being made only
in accordance with authorizations of our
management and directors.

(bullet) Provide reasonable assurance regarding
prevention or timely detection of unauthorized
acquisition, use or disposition of our assets
that could have a material effect on our
consolidated financial statements.

Management assessed our internal control over financial
reporting as of February 28, 2005, the end of our fiscal year.
Management based its assessment on criteria established in
Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission, or COSO.
Management's assessment included evaluation of such elements as
the design and operating effectiveness of key financial reporting
controls, process documentation, accounting policies, and our
overall control environment for all of the Company's subsidiaries
other than Alstyle Apparel, Inc. (Alstyle). Alstyle was acquired
on November 19, 2004 and as of February 28, 2005 Alstyle's total
assets represent 63% of consolidated total assets. The revenues
of Alstyle represent 15% of consolidated net revenue for the year
ended February 28, 2005. Through discussions with consultants
regarding Management's assessment, and with our external auditors
regarding the audit of internal controls over financial
reporting, the Board and Management have concluded that due to
the late date of acquiring Alstyle that it is not possible to
conduct a complete assessment of Alstyle's internal control over
financial reporting in the period between November 19, 2004 (the
date of acquisition) and February 28, 2005 (the date of
management's assessment). However as the year-end financial close
occurred, it was concluded that the issues described below should
be disclosed as of February 28, 2005.

An internal control material weakness is a deficiency, or
combination of deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.

Based upon management's understanding of internal control
over financial reporting at Alstyle as of February 28, 2005 and
as part of the integration process currently undergoing to
integrate Alstyle's accounting systems into the Company's
JDEdwards ERP system, management has identified the following
material weaknesses in internal controls over financial reporting
from an acquired entity that should be disclosed.

Related to the acquisition of Alstyle, which occurred on
November 19, 2004, we identified insufficient controls over the
accounting for assets acquired which we believe constitutes a
material weakness. In addition, we believe that the
insufficiency of controls existing over the financial reporting
function at Alstyle, also constitutes a material weakness. These
weaknesses are expected to be corrected as the Company integrates
Alstyle's financial systems into the JDEdwards ERP system as part
of the ongoing integration of Alstyle into the Company and with
additional staffing and training.1

While not originally scheduled to be included in our
assessment of internal control due to the timing of the
acquisition; management felt that due to the material weaknesses
described in the preceding paragraphs, management must report
that

it believes that, as of February 28, 2005, our internal control
over financial reporting due to the acquisition of Alstyle was
not effective based on the COSO criteria.

Our independent registered public accounting firm, Grant
Thornton LLP, has issued an attestation report on management's
assessment of the Company's internal control over financial
reporting, which is included below.

Completed and Planned Remediation Actions to Address Internal
Control Weaknesses
- ----------------------------------------------------------------
Management believes that actions that we have taken since
February 28, 2005 and actions that will be taken in fiscal 2006,
along with other improvements yet to be formally identified, will
address the material weaknesses in our internal control over
financial reporting noted above. Some of these remediation
actions are discussed below.

In relation to the material weakness related to the
accounting for assets acquired, we plan to strengthen and improve
our accounting capabilities through improved staffing and
training in fiscal 2006.

In relation to the material weakness over financial
reporting at Alstyle, we plan to take the following actions in
2006:

(bullet) Corporate information systems will be
redesigned and implemented to confirm the
proper, necessary and appropriate levels and
breadth of access and control to functional
areas of our systems, all in conjunction with
the integration process.

(bullet) Reconciliations of account balances will be
prepared timely and thoroughly and properly
be reviewed and documented.

Inherent Limitations on Effectiveness of Controls
- ----------------------------------------------------------------

Ennis' management, including our CEO and CFO, does not expect
that our disclosure controls, including our internal control over
financial reporting, will prevent or detect all error and all
fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that the control system's objectives will be met. The design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or
fraud will not occur or that all control issues and instances of
fraud, if any, within the company have been detected. These
inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be
circumvented by the individual acts of some persons, by collusion
of two or more people, or by management override of the controls.
The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions. Projections
of any evaluation of controls effectiveness to future periods are
subject to risks. Over time, controls may become inadequate
because of changes in conditions or deterioration in the degree
of compliance with policies or procedures.

Changes in Internal Control Over Financial Reporting
- ----------------------------------------------------------------

There have been no changes in our internal control over
financial reporting during the quarter ended February 28, 2005
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
The discussion above under "Completed and Planned Remediation
Actions to Address Internal Control Weaknesses" describes a
number of changes we have made since February 28, 2005 that we
believe have materially improved our internal control over
financial reporting, as well as other improvements that we plan
to make in fiscal 2006.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Ennis, Inc.

We have audited management's assessment included in the
accompanying Management's Report on Internal Control Over
Financial Reporting, that Ennis, Inc. did not maintain effective
internal control over financial reporting as of February 28,
2005, because of the effect of the material weaknesses identified
in management's assessment and described below, based on criteria
established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Ennis, Inc. management is
responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express an opinion on management's assessment and an
opinion on the effectiveness of the company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of
the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
management's assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our
opinion.

A company's internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only
in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use,
or disposition of the company's assets that could have a material
effect on the financial statements.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination
of control deficiencies, that results in more than a remote
likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected.

We identified a material weakness relating to insufficient
controls over the accounting for assets acquired in the Alstyle
Apparel Inc. (Alstyle) acquisition which occurred on November 19,
2004.

As described in Management's Annual Report on Internal Control
over Financial Reporting, management excluded Alstyle from its
assessment of internal control over financial reporting as of
February 28, 2005 because ownership interest in Alstyle was
acquired by the Company late in fiscal 2005. We have also
excluded Alstyle from our audit of internal control over
financial reporting. However, during the course of our audit of
the consolidated financial statements, we became aware of a
material weakness related to the insufficiency of controls over
financial reporting at Alstyle. Alstyle's total assets represent
63% of

consolidated total assets as of February 28, 2005. The revenues
of Alstyle represent 15% of consolidated net revenue for the year
ended February 28, 2005.

These material weaknesses were considered in determining the
nature, timing, and extent of audit tests applied in our audit of
the fiscal 2005 consolidated financial statements, and this
report does not affect our report dated May 6, 2005 on those
consolidated financial statements.

In our opinion, management's assessment that Ennis, Inc. did
not maintain effective internal control over financial reporting
as of February 28, 2005, is fairly stated, in all material
respects, based on the COSO control criteria. Also, in our
opinion, because of the effect of the material weakness described
above on the achievement of the objectives of the control
criteria, Ennis, Inc has not maintained effective internal
control over financial reporting as of February 28, 2005, based
on the COSO control criteria.

We do not express an opinion or any other form of assurance
on management's statement referring to the integration of
Alstyle's financial systems into the JDEdwards ERP system,
additional staffing and training and management's completed an
planned remediation actions to address internal control
weaknesses.

Grant Thornton LLP
May 16, 2005

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Ennis, Inc.

We have audited the accompanying consolidated balance sheet of
Ennis, Inc. and subsidiaries (the Company) as of February 29,
2004 and the related consolidated statements of earnings,
shareholders' equity and cash flows for each of the two years in
the period ended February 29, 2004. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting.
Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Ennis Inc. and subsidiaries as of February
29, 2004 and the consolidated results of their operations and
their cash flows for each of the two years in the period ended
February 29, 2004, in conformity with U.S. generally accepted
accounting principles.

/s/ Ernst & Young LLP

Dallas, Texas
April 14, 2004