ENNIS INC

Previous wording

We are in the business of manufacturing, designing, and selling business forms and other printed business products primarily to distributors located in the United States. We operate 59 manufacturing plants throughout the United States in 20 strategically located states as one reportable segment. Approximately 96% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts, and quantities on an individual job basis, depending upon the customers’ specifications.

Current wording

We are in the business of manufacturing, designing, and selling business forms and other printed business products primarily to distributors located in the United States. As of May 31, 2024, we operate 57 manufacturing plants throughout the United States in 19 strategically located states as one reportable segment. Approximately 96% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts, and quantities on an individual job basis, depending upon the customers’ specifications.

Previous wording

The products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, 360º Custom Labels SM, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad Concepts SM, FormSource Limited SM, Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Forms Manufacturers SM, Mutual Graphics®, TRI-C Business Forms SM, Major Business Systems SM, Independent Printing SM, Hoosier Data Forms®, Hayes Graphics®, Wright Business Graphics SM, Wright 360 SM, Integrated Print & Graphics SM, the Flesh Company SM, Impressions Direct SM, AmeriPrint SM, Stylecraft SM, UMC Print SM; Eagle Graphics SM and Diamond Graphics SM. We also sell the Adams McClure® brand (which provides Point of Purchase advertising); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & Label SM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & Label SM, Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents); Infoseal SM and PrintXcel® (which provide custom and stock pressure seal documents). School Photo Marketing is a one-stop shop for over 1,400 school portrait photographers and professional photo labs nationwide, providing them with a complete array of products and services that reach over 15 million families and 30,000 schools, primarily in the K-8 market. We sell predominantly through independent distributors, as well as to many of our competitors. Northstar Computer Forms, Inc., one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user). Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies.

Current wording

The products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, 360º Custom LabelsSM, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad ConceptsSM, FormSource LimitedSM, Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Forms ManufacturersSM, Mutual Graphics®, TRI-C Business FormsSM, Major Business SystemsSM, Independent PrintingSM, Hoosier Data Forms®, Hayes Graphics®, Wright Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM, Impressions DirectSM, AmeriPrintSM; StylecraftSM, UMC PrintSM; Eagle GraphicsSM and Diamond GraphicsSM. We also sell the Adams McClure® brand (which provides Point of Purchase advertising); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & LabelSM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & LabelSM, Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents); InfosealSM and PrintXcel® (which provide custom and stock pressure seal documents). School Photo Marketing is a one-stop shop for over 1,400 school portrait photographers and professional photo labs nationwide, providing them with a complete array of products and services that reach over 15 million families and 30,000 schools, primarily in the K-8 market. We sell predominantly through independent distributors, as well as to many of our competitors. Northstar Computer Forms, Inc., one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user). Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

There are a number of competitors that operate in this segment. We believe our strategic locations and buying power permit us to compete on a favorable basis within the distributor market on factors such as service, quality and price.

Previous wording

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

Current wording

Our products are sold throughout the United States primarily by independent distributors, including business forms distributors, resellers, direct mail, commercial printers, software companies, and advertising agencies.

Previous wording

Our industry is currently experiencing consolidation of traditional supply channels, product obsolescence, paper supplier capacity adjustments, and increased pricing and potential supply allocations due to demand/supply curve imbalance. Technology advances have made electronic distribution of documents, internet hosting, digital printing and print-on-demand valid, cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to our competitors. We face highly competitive conditions throughout our supply chain in a price-competitive print industry. The challenges of our business include the following:

Current wording

Our industry is currently experiencing consolidation of traditional supply channels, product obsolescence, paper supplier capacity adjustments, and increased pricing and potential supply allocations due to demand/supply curve imbalance. Technology advances have made electronic distribution of documents, internet hosting, digital printing and print-on-demand valid, cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to our competitors. We face highly competitive conditions throughout our supply chain in an already over-supplied, price-competitive print industry. The challenges of our business include the following:

Previous wording

Production capacity and price competition within our industry – In 2022 there was a build-up of paper mill’s customer inventory and 2023 data showed an inventory correction in reduced spending. Paper mill shipments were down across the board through the first half of 2023 as buyers worked through elevated inventories of their products. Uncoated Free Sheet and Coated Free Sheet shipments through the first half of 2023 sustained levels near 2020 COVID lows when the government implemented mandatory lockdowns. Producers responded to the sluggish demand conditions with heavy downtime rather than permanent closures keeping prices mostly stable. Foreign imports have fallen from previous years as demand levels are low. The current quarter reflected demand for North America Printing and Writing Paper has stabilized indicating the severe destocking cycle is dissipating. While margins remain under pressure due to the resulting weak volumes, we intend to continue to focus on effectively managing and controlling our product costs through the use of forecasting, production and costing models, as well as working closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational results. In addition, we will continue to look for ways to reduce and leverage our fixed costs and focus on maintaining our margins.

Current wording

Production capacity and price competition within our industry – Industry supply of paper products is subject to fluctuation as changing industry conditions influence producers to idle or permanently close individual machines or mills, and/or convert them to different product lines, such as packaging to offset a decline in demand. Paper mill shipments were down across the board through the first half of 2023 as buyers worked through elevated inventories of their products. Producers responded to the sluggish demand conditions with heavy downtime rather than permanent closures keeping prices mostly stable. While our supply of paper in the first quarter of 2024 has remained stable, margins remain under pressure due to the resulting weak volumes and competitive pricing, we intend to continue to focus on effectively managing and controlling our product costs through the use of forecasting, production and costing models, as well as working closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational results. In addition, we will continue to look for ways to reduce and leverage our fixed costs and focus on maintaining our margins.

Previous wording

Our Annual Report on Form 10-K for the year ended February 28, 2023, includes a description of certain critical accounting estimates, including those with respect to the pension plan, goodwill and other intangible assets, revenue recognition and inventories, which we believe are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. During the quarter ended November 30, 2023, there have been no material changes to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended February 28, 2023.

Current wording

Our Annual Report on Form 10-K for the year ended February 29, 2024, includes a description of certain critical accounting estimates, including those with respect to the pension plan, impairment assessments on goodwill and other intangible assets, allowance for credit losses and accounts receivable, and allowance for excess and obsolete inventories, which we believe are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. During the quarter ended May 31, 2024, there have been no material changes to the critical accounting estimates described in our Annual Report on Form 10-K for the year ended February 29, 2024.

Previous wording

The following discussion provides information which we believe is relevant to understanding our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying interim unaudited consolidated financial statements and notes included in this filing. The operating results of the Company for the three and nine months ended November 30, 2023 and the comparative period for 2022 are set forth in the tables below.

Current wording

The following discussion provides information which we believe is relevant to understanding our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying interim unaudited consolidated financial statements and notes included in this filing. The operating results of the Company for the three months ended May 31, 2024 and the comparative period for 2023 are set forth in the tables below.

Previous wording

Cost of Goods Sold and Gross Profit Margin. As a result of decreased sales volume, our cost of goods sold decreased $2.7 million, or 3.5%, from $76.8 million for the three months ended November 30, 2022 to $74.1 million for the three months ended November 30, 2023. Our gross profit was $30.5 million or 29.2% of revenue for the quarter ended November 30, 2023 compared to $33.5 million or 30.4% of revenue for the same quarter in the prior year. Our gross profit margin for the quarter of 29.2% showed a 180 basis point decline from 31.0% in the immediately preceding quarter ending August 31, 2023 and declined 120 basis points to 29.2% compared to 30.4% in the same prior year quarter. Our gross profit margin as a percentage of sales was impacted by our recent acquisitions, which had a dilutive impact of approximately 40 basis points on our margin for the third quarter. We believe once we have fully analyzed the acquired business’ cost structures and implemented our ERP system, the margins of the acquired businesses will improve to expected levels.

Current wording

Cost of Goods Sold and Gross Profit Margin. As a result of decreased sales volume, our cost of goods sold decreased $5.1 million, or 6.6%, from $77.3 million for the three months ended May 31, 2023 to $72.2 million for the three months ended May 31, 2024. Our gross profit was $30.9 million or 30.0% of revenue for the quarter ended May 31, 2024 compared to $34.0 million or 30.6% of revenue for the same quarter in the prior year. Our gross profit margin for the quarter of 30.0% showed a 60 basis point increase from 29.4% in the immediately preceding quarter ending February 29, 2024. In the first quarter we completed the integration of our ERP system at two of our recent acquisitions and are beginning to see improved efficiencies and performance. This along with our disciplined cost management and pricing strategies contributed to our improved margins over the sequential quarter, despite continued pressure from soft market conditions and increased competition on price.

Previous wording

Selling, general, and administrative expense. For the three months ended November 30, 2023, our selling, general, and administrative ("SG&A") expenses were $17.4 million compared to $17.3 million for the three months ended November 30, 2022, a slight increase of $0.1 million, or 0.6%. As a percentage of net sales, SG&A expenses for the current quarter were 16.6% and 15.7% for the three months ended November 30, 2023 and November 30, 2022, respectively. Our recent acquisitions added $0.9 million in SG&A expenses during the quarter which was offset by lower expenses related to lower product volume.

Current wording

Selling, general, and administrative expense. For the three months ended May 31, 2024, our selling, general, and administrative ("SG&A") expenses were $17.2 million compared to $18.3 million for the three months ended May 31, 2023, a decrease of $1.1 million, or 6.0%. As a percentage of net sales, SG&A expenses for the current quarter remained relatively flat and were 16.7% and 16.5% for the three months ended May 31, 2024 and May 31, 2023, respectively.

Previous wording

Gain from disposal of assets. The $1,000 net loss from disposal of assets during the three-month period ended November 30, 2023 and the $15,000 net loss from disposal of assets during the three-month period ended November 30, 2022 was primarily attributed to the sale of equipment.

Current wording

Loss from disposal of assets. The $4,000 net loss from disposal of assets during the three-month period ended May 31, 2024 was primarily attributed to the sale of equipment.

Previous wording

Income from operations. Primarily due to factors described above, our income from operations for the three months ended November 30, 2023 was $13.1 million, or 12.5% of net sales, as compared to $16.2 million, or 14.7 % of net sales, for the three months ended November 30, 2022. Income from operations declined on a sequential quarter basis by $1.6 million and was $14.7 million for the quarter ended August 31, 2023.

Current wording

Income from operations. Primarily due to factors described above, our income from operations for the three months ended May 31, 2024 was $13.7 million, or 13.3% of net sales, as compared to $15.7 million, or 14.1% of net sales, for the three months ended May 31, 2023. Income from operations increased on a sequential quarter basis by $0.8 million over the $12.9 million for the preceding quarter.

Previous wording

Other income (expense). Other income was $0.7 million for the three months ended November 30, 2023 compared to other expense of $0.5 million for the three months ended November 30, 2022. Our increase in income was primarily from an increase in interest income from higher interest rates in the current quarter, $1.0 million for the three months ended November 30, 2023 compared to $0.2 million for the three months ended November 30, 2022.

Current wording

Other income (expense). Other income was $1.0 million for the three months ended May 31, 2024 compared to $0.5 million for the three months ended May 31, 2023. Our increase in income was primarily from an increase in interest income from higher interest rates in the current quarter, $1.4 million for the three months ended May 31, 2024 compared to $0.8 million for the three months ended May 31, 2023.

Previous wording

Provision for income taxes. Our effective tax rate was 28.3% and 28.0% for the three months ended November 30, 2023 and November 30, 2022, respectively.

Current wording

Provision for income taxes. Our effective tax rate was 27.5% and 28.0% for the three months ended May 31, 2024 and May 31, 2023, respectively. The slight decrease in our overall tax rate this period as compared to last period is due to a decrease in our overall expected state tax rate due to changes in state apportionment.

Previous wording

Net earnings. Net earnings, due to the factors above, were $9.9 million for the three months ended November 30, 2023 as compared to $11.3 million for the comparable quarter in the prior year. Net earnings per diluted share for the three months ended November 30, 2023 were $0.38, compared to $0.44 for the same quarter in the prior year. Diluted earnings per share were negatively impacted approximately $0.02 per diluted earnings per share. Additional expense related to the recent acquisitions negatively impacted the quarter earnings.

Current wording

Net earnings. Net earnings, due to the factors above, were $10.7 million for the three months ended May 31, 2024 as compared to $11.6 million for the comparable quarter in the prior year. Net earnings were impacted by decreased revenues for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. After-tax earnings per diluted share for the three months ended May 31, 2024 were $0.41, compared to $0.45 for the same quarter last year.

Previous wording

We rely on our cash flows generated from operations to meet all cash requirements of our business. The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, compensation to employees and the payment of dividends to our shareholders. We have no debt and anticipate timely access to credit should larger acquisition opportunities materialize. We believe that our current cash balance of $83.9 million and cash flows from operations should be adequate to cover the next twelve months and beyond of our operating and capital requirements. Our capital requirements are expected to be within our historical levels of between $3.0 million and $6.0 million.

Current wording

We rely on our cash flows generated from operations to meet all cash requirements of our business. The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, compensation and benefits for employees and the payment of dividends to our shareholders. We believe that our current cash balance of $91.4 million at May 31, 2024, short-term investments of $32.3 million and anticipated cash flows from operations are expected to be similar to prior periods which should be adequate to cover the next twelve months and beyond of our operating and capital requirements. Our capital requirements are expected to be within our historical levels of between $3.0 million and $6.0 million.

Previous wording

Working Capital. On November 30, 2023, we had $83.9 million in cash and $18.5 million in short-term investments. During the period, our cash position decreased by $10.1 million and our working capital increased $9.7 million or 6.2%, from $155.4 million at February 28, 2023 to $165.0 million at November 30, 2023. Our current ratio, calculated by dividing our current assets by our current liabilities, increased from 4.8 to 1.0 at February 28, 2023 to 5.8 to 1.0 at November 30, 2023. Our working capital and current ratio were positively impacted primarily by an increase in our cash and inventories offset by a decrease in our accounts payable and accrued expenses.

Current wording

Working Capital. Our working capital increased $6.8 million or 4.0%, from $167.6 million at February 29, 2024 to $174.3 million at May 31, 2024. Our current ratio, calculated by dividing our current assets by our current liabilities, decreased from 6.0 to 1.0 at February 29, 2024 to 5.7 to 1.0 at May 31, 2024. Our increase in working capital primarily reflects the increase in cash and short-term investments, $12.8 million, offset by the decrease in accounts receivable, $3.3 million and the increase in our accounts payable and accrued expense, $3.7 million.

Previous wording

Cash flows from operating activities. Cash provided by operating activities was $52.5 million in the nine months ended November 30, 2023 compared to $34.0 million in the comparative period ended November 30, 2022. A decrease in accounts receivable, net of accounts receivable from acquired business since the prior fiscal year end provided cash of $8.2 million in the current year nine-month period, while an increase in accounts receivable used cash of $5.9 million in the comparable nine-month period of the prior year. A decrease in inventories provided cash of $6.8 million in the nine-month period ended November 30, 2023 and used cash of $10.9 million in the same period of 2022. A decrease in accounts payable and accrued expenses used cash of $7.8 million in the current year nine-month period and an increase in accounts payable and accrued expenses provided cash of $1.5 million in the prior year comparable nine-month period. The decrease in accounts receivable in the current period was primarily due to decreased sales. The decrease in inventory, accounts payable and accrued expenses during the current period was primarily due to a decrease in purchasing activities and improved predictability in the supply chain conditions. We continue to monitor incoming orders and adjust raw material purchases accordingly.

Current wording

Cash flows from operating activities. Cash provided by operating activities was $23.1 million in the three months ended May 31, 2024 compared to $21.7 million in the comparative period ended May 31, 2023. A decrease in accounts receivable, net of accounts receivable from acquired business since the prior fiscal year end provided cash of $3.2 million in the current year three-month period, and $7.3 million in the comparable three-month period of the prior year. An increase in inventories used cash of $1.0 million in the three-month period ended May 31, 2024 and $0.4 million in the same period of 2023. An increase in accounts payable and accrued expenses provided cash of $3.3 million in the current year three-month period and a decrease in accounts payable and accrued expenses used cash of $2.8 million in the prior year comparable three-month period. The decrease in accounts receivable in the current period was primarily due to decreased sales. The increase in accounts payable and accrued expenses during the current period was primarily due to an increase in purchasing activities and inflationary pressures. We continue to monitor incoming orders and adjust raw material purchases accordingly.

Previous wording

Cash flows from investing activities. Cash used in investing activities was $43.2 million in the nine months ended November 30, 2023 compared to $12.1 million in the nine months ended November 30, 2022. Capital expenditures primarily of equipment was $4.9 million and $3.3 million for the nine months ended November 30, 2023 and November 30, 2022, respectively. In the nine months ended November 30, 2023, $19.9 million was used to acquire businesses, compared to $8.8 million used to acquire businesses for the first nine months of the prior year. During the current period, we purchased approximately $18.4 million of U.S. government treasury bills with staggered maturities of between three months and twelve months.

Current wording

Cash flows from investing activities. Cash used in investing activities was $5.0 million in the three months ended May 31, 2024 compared to $7.1 million in the three months ended May 31, 2023. Capital expenditures primarily of equipment was $2.5 million and $2.1 million for the three months ended May 31, 2024 and May 31, 2023, respectively. In the three months ended May 31, 2023, $5.0 million was used to acquire businesses. During the current period, we purchased approximately $10.1 million of U.S. government treasury bills, which was partially offset by $7.5 million in matured treasury bills.

Previous wording

Cash flows from financing activities. We used $1.1 million less cash in financing activities during the nine months ended November 30, 2023 compared to the same period in the prior year. The decrease in cash used during the nine months ended November 30, 2023 resulted from $1.1 million common stock repurchased under our stock repurchase program in the nine months ended November 30, 2022.

Current wording

Cash flows from financing activities. We used $1.8 million more cash in financing activities during the three months ended May 31, 2024 compared to the same period in the prior year. The increase in cash used during the three months ended May 31, 2024 resulted from $1.8 million common stock repurchased under our stock repurchase program in the three months ended May 31, 2024.

Previous wording

Credit Facility –We did not renew our Credit Agreement, which expired November 11, 2021. We have had no outstanding long-term debt under the revolving credit line since paid in full in August 2019. As of November 30, 2023, we had $0.3 million outstanding under a standby letters of credit arrangement secured by a cash collateral bank account. It is anticipated that our cash and funds from operating cash flows will be sufficient to fund anticipated future expenses.

Current wording

Credit Facility –As of May 31, 2024, we had $0.3 million outstanding under a standby letter of credit arrangement secured by a cash collateral bank account. It is anticipated that our cash, short-term investments and funds from operating cash flows will be sufficient to fund anticipated future expenditures, including acquisitions.

Previous wording

Pension Plan –The funded status of our Pension Plan and funding requirements is dependent on many factors, including returns on invested assets, the level of market interest rates and the level of funding. Assuming a stable funding status, we would expect that our future contributions to be between $1.0 million and $3.0 million per year. However, changes in actual investment returns or in discount rates could change this amount significantly. There was a $2.0 million contribution made in September 2022 to avoid a Pension Benefit Guaranty Corporation variable premium and we anticipate making a required contribution of approximately $1.2 million prior to the end of the current fiscal year. As our Pension Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status, associated liabilities recorded and future required minimum contributions. At November 30, 2023, we had an unfunded pension liability recorded on our balance sheet of $0.6 million.

Current wording

Pension Plan –The funded status of our Pension Plan is dependent on many factors, including returns on invested assets, the level of market interest rates and the level of funding. Assuming a stable funding status, we would expect that future required contributions would be between $1.0 million and $3.0 million per year. As our pension assets are invested in marketable securities, changes in actual investment returns or in discount rates could change funding status and requirements significantly. We made a contribution of $1.2 million to our Pension Plan in fiscal year 2024 and anticipate making a required contribution of approximately $1.2 million prior to the end of the current fiscal year. At May 31, 2024, we had a funded pension asset of $0.1 million.

Previous wording

Inventories–We believe our inventory levels are sufficient to satisfy our customer demands and we anticipate having adequate sources of raw materials to meet future business requirements. We have long-term contracts in effect with paper suppliers that govern prices, but do not require minimum purchase commitments. Certain of our rebate programs do, however, require minimum purchase volumes.

Current wording

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

Previous wording

Capital Expenditures–We continue to make capital expenditures for operational maintenance purposes, as may be required. Additionally, we will carefully review and make new capital expenditures for equipment to the extent such expenditures make economic sense by improving our operations and not jeopardizing our strong liquidity position. We expect our capital requirements for our current fiscal year, exclusive of capital required for possible acquisitions, will be within our historical levels of between $3.0 million and $6.0 million. For the nine months ended November 30, 2023, we have spent approximately $4.9 million on capital expenditures. We expect to fund these expenditures through existing cash on the November 30, 2023 balance sheet.

Current wording

Capital Expenditures–We continue to make capital expenditures for operational maintenance purposes, as may be required. Additionally, we will carefully review and make capital expenditures for additional equipment to the extent such additions make economic sense by improving our operations and not jeopardizing our strong liquidity position. We expect our capital requirements for our current fiscal year, exclusive of capital required for possible acquisitions, will be within our historical levels of between $3.0 million and $6.0 million. For the three months ended May 31, 2024, we spent approximately $2.5 million on capital expenditures that was funded out of our cash balance. We expect to generate sufficient cash flows from our operating activities to cover our operating and other normal capital requirements for the foreseeable future.