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. As of May 31, 2025, we operate 57 manufacturing plants throughout the United States in 20 strategically located states as one reportable segment: printing services. 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 August 31, 2025, we operate 55 manufacturing plants throughout the United States in 20 strategically located states as one reportable segment: printing services. 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

Production capacity and price competition within our industry – Industry supply of paper products is subject to fluctuation as changing industry conditions have and will continue to 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. Recently, there have been consolidations of paper suppliers and mill closure announcements which may cause the paper prices to fluctuate substantially in the future. The sole mill in the United States that produces rolls of carbonless paper announced that it would be closing this calendar year. In preparation for that supply disruption, we invested in and are continuing to purchase additional inventory as buffer stock in response to the transition to alternative sources of carbonless paper. While margins remain under pressure due to the resulting weak volumes, we 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 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 have and will continue to influence producers to idle or permanently close individual machines or mills, or convert them to different product lines, such as packaging to offset a decline in demand. Recently, there have been several major mill closures and consolidations, which could lead to substantial paper price fluctuations in the near future. The only mill located in the United States that produces rolls of carbonless paper has ceased production on a permanent basis. In response to this supply disruption, we have invested in additional inventory as buffer stock in response to the transition to alternative sources of carbonless paper. Margins remain under pressure due to weak volumes in parts of the market as well as rising input costs. To protect results, we continue to manage and control product costs through the use of forecasting, production and costing models; strengthening supplier relationships; negotiating favorable procurement terms; and increasing operational efficiency. We will continue to look for ways to reduce and leverage our fixed costs and focus on maintaining our margins.

Previous wording

Continued consolidation of our customers – Our customers are distributors, many of which are consolidating or are being acquired by competitors. We continue to maintain a majority of the business we have had with our customers historically, but it is possible that these consolidations and acquisitions, which we expect to continue in the future, ultimately will impact our margins and sales.

Current wording

Continued consolidation of our customers – Our customers are distributors, many of which are consolidating or are being acquired by competitors. We continue to maintain a high volume of the business with our customers but it is possible that these consolidations and acquisitions, which we expect to continue in the future, ultimately will impact our margins and sales.

Previous wording

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting guidance.

Current wording

See Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements.

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 months ended May 31, 2025 and the comparative period for 2024 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 and six months ended August 31, 2025 and the comparative period for 2024 are set forth in the tables below.

Previous wording

Net Sales. Our net sales were $97.2 million for the quarter ended May 31, 2025, compared to $103.1 million for the same quarter in the prior year, a decrease of $5.9 million, or -5.7%. Sales from legacy plants decreased $11.4 million due to weaker volume demand and was partially offset by an approximately $5.5 million increase in revenues generated from our recent acquisitions. We face increased competition with respect to certain product lines which is exerting downward pressure on prices and production volumes. We also observe softening demand in some markets as customers transition from print to digital products.

Current wording

Net Sales. Our net sales were $98.7 million for the quarter ended August 31, 2025, compared to $99.0 million for the same quarter in the prior year, a decrease of $0.3 million, or -0.3%. Sales volume decreased $5.9 million due to weaker volume demand and was offset by an approximately $5.5 million increase in revenues generated from our recent acquisitions.

Previous wording

Cost of Goods Sold and Gross Profit Margin. As a result of decreased sales volume, our cost of goods sold decreased $5.2 million, or -7.2%, from $72.2 million for the three months ended May 31, 2024 to $67.0 million for the three months ended May 31, 2025. Our gross profit was $30.2 million or 31.1% of revenue for the quarter ended May 31, 2025 compared to $30.9 million or 30.0% of revenue for the same quarter in the prior year. We continue to take mitigating actions through our cost management and pricing strategies to maintain our margins and offset continued pressure from soft market conditions and increased competition on price.

Current wording

Cost of Goods Sold and Gross Profit Margin. As a result of decreased sales volume, our cost of goods sold decreased $0.7 million, or -1.0%, from $69.3 million for the three months ended August 31, 2024 to $68.6 million for the three months ended August 31, 2025. Our gross profit was $30.1 million or 30.5% of revenue for the quarter ended August 31, 2025 compared to $29.8 million or 30.1% of revenue for the same quarter in the prior year. We continue to pursue cost management measures and target pricing actions intended to mitigate the effects of persistent market weakness and increased price competition on our results.

Previous wording

Selling, general, and administrative expense. For the three months ended May 31, 2025, our selling, general, and administrative ("SG&A") expenses were $16.9 million compared to $17.2 million for the three months ended May 31, 2024, a decrease of $0.3 million, or -1.7%. As a percentage of net sales, SG&A expenses for the current quarter were 17.4% and 16.7% for the three months ended May 31, 2025 and May 31, 2024, respectively. Our SG&A expense decreased as a result of operational efficiencies.

Current wording

Selling, general, and administrative expense. For the three months ended August 31, 2025, our selling, general, and administrative ("SG&A") expenses were $17.7 million compared to $16.6 million for the three months ended August 31, 2024, an increase of $1.1 million, or 6.6%. As a percentage of net sales, SG&A expenses for the current quarter were 18.0% and 16.7% for the three months ended August 31, 2025 and August 31, 2024, respectively. The increase in SG&A expenses primarily reflects higher variable incentive compensation tied to profitability and inclusion of SG&A expenses from our recent acquisition.

Previous wording

Gain and 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. There was no gain or loss in the three month period ended May 31, 2025.

Current wording

Gain and loss from disposal of assets. The $39,000 net loss from disposal of assets during the three month period ended August 31, 2024, was primarily attributed to the sale of equipment. There was no gain or loss in the three month period ended August 31, 2025.

Previous wording

Income from operations. Primarily due to factors described above, our income from operations for the three months ended May 31, 2025 was $13.3 million, or 13.7% of net sales, and remained relatively flat compared to $13.7 million, or 13.3% of net sales, for the three months ended May 31, 2024.

Current wording

Income from operations. Primarily due to factors described above, our income from operations for the three months ended August 31, 2025 was $12.4 million, or 12.5% of net sales, as compared to $13.2 million, or 13.3% of net sales, for the three months ended August 31, 2024.

Previous wording

Other income (expense). Other income was $0.2 million for the three months ended May 31, 2025 compared to $1.0 million for the three months ended May 31, 2024. Our decrease in income was primarily from a decrease in interest income from lower cash, cash equivalent, and investment balances. Interest income for the three months ended May 31, 2025 and 2024 were $0.6 and $1.4 million.

Current wording

Other income (expense). Other income was $5.8 million for the three months ended August 31, 2025 compared to $1.0 million for the three months ended August 31, 2024. During the quarter we received cash proceeds of $5.7 million in actual damages, exemplary damages and attorney’s fees in a case against Wright Printing Company its owners Mark Wright, and CEO Mardra Sikora. This amount included $0.4 million of interest income. Interest income for the three months ended August 31, 2025 and 2024 were $0.8 and $1.4 million. Our decrease in interest income was primarily from lower cash, cash equivalent, and investment balances.

Previous wording

Net earnings. Net earnings, due to the factors above, were $9.8 million for the three months ended May 31, 2025 as compared to $10.7 million for the comparable quarter in the prior year. Net earnings were impacted by decreased revenues for the three months ended May 31, 2025 compared to the three months ended May 31, 2024. After-tax earnings per diluted share for the three months ended May 31, 2025 were $0.38, compared to $0.41 for the same quarter last year.

Current wording

Net earnings. Net earnings, due to the factors above, were $13.2 million for the three months ended August 31, 2025 as compared to $10.3 million for the comparable quarter in the prior year. After-tax earnings per diluted share for the three months ended August 31, 2025 were $0.51, compared to $0.40 for the same quarter last year. Diluted earnings per share for the current quarter were positively impacted $0.03 per diluted share from our recent acquisition and approximately $0.14 per diluted share from the lawsuit settlement proceeds.

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 and benefits for employees and the payment of dividends to our shareholders. We believe that our current cash balance of $32.6 million at May 31, 2025, as well as our anticipated cash flows from operations, which are expected to be similar to prior periods, should be adequate to cover the next twelve months and beyond of our operating and capital requirements. Our capital requirements to maintain our manufacturing property are expected to be between $4.0 million and $7.0 million over the next twelve months. These amounts are consistent with our historical levels.

Current wording

We fund our operations primarily through cash generated from operating activities. Our principal cash requirements include payments to vendors in the ordinary course of business, capital expenditures, employee compensation and benefits, and dividends to shareholders. As of August 31, 2025, we had a cash balance of $31.9 million. We expect operating cash flows to be consistent with prior periods, and we anticipate reduced purchasing needs over the next several quarters. Based on these factors, we believe our cash on hand, together with anticipated cash flows from operations, will be sufficient to meet our operating and capital requirements the next twelve months. Our capital expenditures to maintain our manufacturing facilities are expected to range between $4.0 million and $7.0 million over the next twelve months, consistent with historical spending levels.

Previous wording

Working Capital. Due primarily to the acquisition of NEC and ESS for approximately $34.9 million during the three months ended May 31, 2025, our working capital decreased $29.2 million or -24.4%, from $119.4 million at February 28, 2025 to $90.2 million at May 31, 2025. Our current ratio, calculated by dividing our current assets by our current liabilities, decreased from 4.6 to 1.0 at February 28, 2025 to 3.0 to 1.0 at May 31, 2025. Our decrease in working capital primarily reflects the decrease in cash, cash equivalents and short-term investments of $39.9 million, an increase in other receivables of $8.8 million, and an increase in inventory of $14.3, offset by the increase in accounts payable and accrued expenses of $12.4 million.

Current wording

Working Capital. During the six months ended August 31, 2025, our working capital decreased $21.6 million or -18.1%, from $119.4 million at February 28, 2025 to $97.8 million at August 31, 2025. The decline was due primarily to our acquisition of NEC and ESS for approximately $34.9 million, as well as our strategic decision to increase inventory levels in response to the closure of the only domestic producer of carbonless paper. Our current ratio, calculated by dividing current assets by current liabilities, decreased from 4.6 to 1.0 at February 28, 2025 to 3.4 to 1.0 at August 31, 2025. The decrease in working capital primarily reflects a reduction in cash, cash equivalents and short-term investments of $40.6 million, an increase in other receivables of $8.8 million, and an increase in inventory of $23.3 million, partially offset by the increase in accounts payable of $5.8 million.

Previous wording

Cash flows from investing activities. Cash used by investing activities was $30.8 million in the three months ended May 31, 2025 compared to cash used in investing activities of $5.1 million in the three months ended May 31, 2024. In the three months ended May 31, 2025, $34.9 million was used to acquire NEC and ESS. In addition, during the current period, we did not purchase any U.S. government treasury bills and therefore, there is a $10.1 million change from the same period in the prior year.

Current wording

Cash flows from investing activities. Cash used in investing activities was $32.0 million in the six months ended August 31, 2025 compared to cash used in investing activities of $1.8 million in the six months ended August 31, 2024. Capital expenditures primarily of equipment was $2.8 million and $3.6 million for the six months ended August 31, 2025 and August 31, 2024, respectively. In the six months ended August 31, 2025, $34.9 million was used to acquire a business compared to $5.6 million in the same period last year. During the current period, approximately $5.5 million of U.S. government treasury bills matured and invested in money market funds. During the six months ended August 31, 2024 we purchased approximately $10.1 million of U.S. government treasury bills, which was partially offset by $17.5 million in matured treasury bills and invested in money market funds.

Previous wording

Cash flows from financing activities. We used $3.3 million more cash in financing activities during the three months ended May 31, 2025 compared to the same period in the prior year. During the three months ended May 31, 2025 and May 31, 2024, we purchased $5.0 million and $1.8 million, respectively in common stock under our stock repurchase program.

Current wording

Cash flows from financing activities. We used $6.8 million more cash in financing activities during the six months ended August 31, 2025 compared to the same period in the prior year. During the six months ended August 31, 2025 and August 31, 2024, we purchased $8.6 million and $1.8 million, respectively in common stock under our stock repurchase program. We made dividend payments of $13.1 million and $13.0 million for the six months ended August 31, 2025 and August 31, 2024, respectively.

Previous wording

Credit Facility –As of May 31, 2025, 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.

Current wording

Credit Facility –As of August 31, 2025, we had $0.2 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

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 $4.0 million and $7.0 million. For the three months ended May 31, 2025, we spent approximately $1.4 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.

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 $4.0 million and $7.0 million. For the six months ended August 31, 2025, we spent approximately $2.8 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.