UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended August 31, 2021

OR

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

For the Transition Period from to

Commission File Number 1-5807

ENNIS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Texas	75-0256410
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
2441 Presidential Pkwy., Midlothian, Texas	76065
(Address of Principal Executive Offices)	(Zip code)

Registrant’s Telephone Number, Including Area Code: (972) 775-9801

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $2.50 per share	EBF	New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of September 24, 2021, there were 26,121,463 shares of the Registrant’s common stock outstanding.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED AUGUST 31, 2021

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
	Item 1. Financial Statements	3
	Unaudited Consolidated Balance Sheets at August 31, 2021 and February 28, 2021	3
	Unaudited Consolidated Statements of Operations for the three and six months ended August 31, 2021 and August 31, 2020	5
	Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended August 31, 2021 and August 31, 2020	6
	Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended August 31, 2021 and August 31, 2020	7
	Unaudited Consolidated Statements of Cash Flows for the six months ended August 31, 2021 and August 31, 2020	8
	Notes to Unaudited Consolidated Financial Statements	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
	Item 4. Controls and Procedures	28
PART II: OTHER INFORMATION
	Item 1. Legal Proceedings	29
	Item 1A. Risk Factors	29
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 3. Defaults Upon Senior Securities	29
	Item 4. Mine Safety Disclosures	29
	Item 5. Other Information	29
	Item 6. Exhibits	30
SIGNATURES		31

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)

	August 31,		February 28,
	2021		2021
Assets
Current assets
Cash and cash equivalents	$	82,101	$	75,190
Accounts receivable, net of allowance for doubtful receivables of $1,016 at August 31, 2021 and $961 at February 28, 2021		37,928		37,891
Prepaid expenses		1,689		1,605
Inventories		40,151		32,906
Assets held for sale		—		482
Total current assets		161,869		148,074
Property, plant and equipment
Plant, machinery and equipment		157,800		157,737
Land and buildings		57,166		56,185
Computer equipment and software		18,792		19,336
Other		4,521		4,808
Total property, plant and equipment		238,279		238,066
Less accumulated depreciation		183,987		182,682
Net property, plant and equipment		54,292		55,384
Operating lease right-of-use assets		18,382		19,187
Goodwill		88,661		88,647
Intangible assets, net		49,656		52,712
Other assets		385		384
Total assets	$	373,245	$	364,388

See accompanying notes to consolidated financial statements.

3

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS-Continued

(in thousands, except for par value and share amounts)

	August 31,			February 28,
	2021			2021
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	18,827		$	14,759
Accrued expenses		16,017			14,955
Current portion of operating lease liabilities		5,599			5,338
Total current liabilities		40,443			35,052
Liability for pension benefits		6,299			6,299
Deferred income taxes		7,877			7,677
Operating lease liabilities, net of current portion		12,572			13,567
Other liabilities		733			1,244
Total liabilities		67,924			63,839
Commitments and contingencies
Shareholders’ equity
Preferred stock $10 par value, authorized 1,000,000 shares; none issued		—			—
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443 shares at August 31, 2021 and February 28, 2021		75,134			75,134
Additional paid-in capital		123,116			123,017
Retained earnings		196,809			194,436
Accumulated other comprehensive income (loss):
Minimum pension liability, net of taxes		(19,685	)		(20,282	)
Total accumulated other comprehensive income (loss)		(19,685	)		(20,282	)
Treasury stock		(70,053	)		(71,756	)
Total shareholders’ equity		305,321			300,549
Total liabilities and shareholders' equity	$	373,245		$	364,388

See accompanying notes to consolidated financial statements.

4

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

	Three months ended		Six months ended
	August 31,		August 31,
	2021	2020	2021	2020
Net sales	$100,451	$86,612	$197,381	$175,608
Cost of goods sold	71,550	61,457	139,294	126,546
Gross profit margin	28,901	25,155	58,087	49,062
Selling, general and administrative	18,095	16,535	37,010	34,658
(Gain) loss from disposal of assets	1	(300)	(276)	(412)
Income from operations	10,805	8,920	21,353	14,816
Other expense
Interest expense	(2)	(3)	(4)	(6)
Other, net	(146)	(240)	(258)	(478)
Total other expense	(148)	(243)	(262)	(484)
Earnings before income taxes	10,657	8,677	21,091	14,332
Income tax expense	3,197	2,256	6,327	3,726
Net earnings	$7,460	$6,421	$14,764	$10,606
Weighted average common shares outstanding
Basic	26,080,121	25,974,412	26,055,056	25,965,370
Diluted	26,170,396	25,974,412	26,146,421	25,965,370
Earnings per share
Basic	$0.29	$0.25	$0.57	$0.41
Diluted	$0.29	$0.25	$0.57	$0.41
Cash dividends per share	$0.250	$0.225	$0.475	$0.450

See accompanying notes to consolidated financial statements.

5

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

	Three months ended				Six months ended
	August 31,				August 31,
	2021		2020		2021		2020
Net earnings	$	7,460	$	6,421	$	14,764	$	10,606
Adjustment to pension, net of taxes		298		433		597		866
Comprehensive income	$	7,758	$	6,854	$	15,361	$	11,472

See accompanying notes to consolidated financial statements.

6

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

							Accumulated
			Additional				Other
	Common Stock			Paid-in		Retained		Comprehensive		Treasury Stock
	Shares	Amount	Capital		Earnings		Income (Loss)		Shares		Amount	Total
Balance May 31, 2021	30,053,443	$75,134	$122,746		$195,874		$(19,983)		(4,021,466)		$(70,319)	$303,452
Net earnings	—	—	—		7,460		—		—		—	7,460
Adjustment to pension, net of deferred tax of $95	—	—	—		—		298		—		—	298
Dividends paid ($0.25 per share)	—	—	—		(6,525)		—		—		—	(6,525)
Stock based compensation	—	—	636		—		—		—		—	636
Exercise of stock options and restricted stock	—	—	(266)		—		—		15,198		266	—
Balance August 31, 2021	30,053,443	$75,134	$123,116		$196,809		$(19,685)		(4,006,268)		$(70,053)	$305,321
Balance February 28, 2021	30,053,443	$75,134	$123,017		$194,436		$(20,282)		(4,103,630)		$(71,756)	$300,549
Net earnings	—	—	—		14,764		—		—		—	14,764
Adjustment to pension, net of deferred tax of $199	—	—	—		—		597		—		—	597
Dividends paid ($0.475 per share)	—	—	—		(12,391)		—		—		—	(12,391)
Stock based compensation	—	—	1,802		—		—		—		—	1,802
Exercise of stock options and restricted stock	—	—	(1,703)		—		—		97,362		1,703	—
Balance August 31, 2021	30,053,443	$75,134	$123,116		$196,809		$(19,685)		(4,006,268)		$(70,053)	$305,321
Balance May 31, 2020	30,053,443	$75,134	$122,266		$192,130		$(24,773)		(4,098,607)		$(71,759)	$292,998
Net earnings	—	—	—		6,421		—		—		—	6,421
Adjustment to pension, net of deferred tax of $145	—	—	—		—		433		—		—	433
Dividends paid ($0.225 per share)	—	—	—		(5,866)		—		—		—	(5,866)
Stock based compensation	—	—	326		—		—		—		—	326
Exercise of stock options and restricted stock	—	—	(162)		—		—		9,262		162	—
Common stock repurchases	—	—	—		—		—		—		—	—
Balance August 31, 2020	30,053,443	$75,134	$122,430		$192,685		$(24,340)		(4,089,345)		$(71,597)	$294,312
Balance February 29, 2020	30,053,443	$75,134	$123,052		$193,809		$(25,206)		(4,136,286)		$(72,460)	$294,329
Net earnings	—	—	—		10,606		—		—		—	10,606
Adjustment to pension, net of deferred tax of $289	—	—	—		—		866		—		—	866
Dividends paid ($0.45 per share)	—	—	—		(11,730)		—		—		—	(11,730)
Stock based compensation	—	—	664		—		—		—		—	664
Exercise of stock options and restricted stock	—	—	(1,286)		—		—		73,413		1,286	—
Common stock repurchases	—	—	—		—		—		(26,472)		(423)	(423)
Balance August 31, 2020	30,053,443	$75,134	$122,430		$192,685		$(24,340)		(4,089,345)		$(71,597)	$294,312

See accompanying notes to consolidated financial statements.

7

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six months ended
	August 31,
		2021			2020
Cash flows from operating activities:
Net earnings	$	14,764		$	10,606
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		5,132			4,897
Amortization of intangible assets		4,164			3,924
Gain from disposal of assets		(276	)		(412	)
Bad debt expense, net of recoveries		159			780
Stock based compensation		1,802			664
Net pension expense		797			1,155
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable		221			8,783
Prepaid expenses and income taxes		(84	)		(736	)
Inventories		(6,013	)		1,519
Other assets		(15	)		1
Accounts payable and accrued expenses		4,296			(2,906	)
Other liabilities		(440	)		(121	)
Net cash provided by operating activities		24,507			28,154
Cash flows from investing activities:
Capital expenditures		(2,108	)		(1,289	)
Purchase of businesses, net of cash acquired		(3,922	)		—
Proceeds from disposal of plant and property		825			936
Net cash used in investing activities		(5,205	)		(353	)
Cash flows from financing activities:
Dividends paid		(12,391	)		(11,730	)
Common stock repurchases		—			(423	)
Net cash used in financing activities		(12,391	)		(12,153	)
Net change in cash		6,911			15,648
Cash at beginning of period		75,190			68,258
Cash at end of period	$	82,101		$	83,906

See accompanying notes to consolidated financial statements.

8

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AUGUST 31, 2021

1. Significant Accounting Policies and General Matters

Basis of Presentation

These unaudited consolidated financial statements of Ennis, Inc. and its subsidiaries (collectively referred to as the “Company,” “Registrant,” “Ennis,” or “we,” “us,” or “our”) for the period ended August 31, 2021 have been prepared in accordance with generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2021, from which the accompanying consolidated balance sheet at February 28, 2021 was derived. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial information have been included and are of a normal recurring nature. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the disclosure and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis, including those related to bad debts, inventory valuations, property, plant and equipment, intangible assets, pension plan, accrued liabilities, and income taxes. The Company bases estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year, especially in light of the uncertainties surrounding the impact of the novel coronavirus (COVID-19) pandemic.

Recent Accounting Pronouncements

Recently Adopted Accounting Updates

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU” No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, Income Taxes, and simplification in several other areas. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods therein. The Company adopted ASU 2019-12 as of March 1, 2021, and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Updates

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides companies with optional guidance, including expedients and exceptions for applying generally accepted accounting principles to contracts and other transactions affected by reference rate reform, such as the London Interbank Offered Rate (“LIBOR”). This new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company is currently evaluating ASU 2020-04, but does not expect it to have a significant impact on its consolidated financial statements. 

2. Revenue

Nature of Revenues

Substantially all of the Company’s revenue is generated from contracts with customers for the sale of commercial printing products in the continental United States and is primarily recognized at a point in time in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods. Revenue from the sale of commercial printing products, including shipping and handling fees billed to customers, is recognized upon the transfer of control to the customer, which is generally upon shipment to the customer when the terms of the sale are freight on board (“FOB”) shipping point, or, to a lesser extent, upon delivery to the customer if the terms of the sale are FOB destination.

In a small number of cases and upon customer request, the Company prints and stores commercial printing product for customer specified future delivery, generally within the same year as the product is manufactured. In this case, revenue is recognized upon the transfer of control when manufacturing is complete and title and risk of ownership is passed to the customer. Storage revenue for certain customers may be recognized over time rather than at a point in time. As of the date of this report, the amount of storage revenue is immaterial to the Company’s financial statements. The output method for measure of progress is determined to be appropriate. The Company recognizes storage revenue in the amount for which it has the right to invoice for revenue that is

9

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED AUGUST 31, 2021

recognized over time and for which it demonstrates that the invoiced amount corresponds directly with the value to the customer for the performance completed to date.

The Company does not disaggregate revenue and operates in one sales category consisting of commercial printed product revenue, which is reported as net sales on the consolidated statements of operations. The Company does not have material contract assets and contract liabilities as of August 31, 2021.

Significant Judgments

Generally, the Company’s contracts with customers are comprised of a written quote and customer purchase order or statement of work, and governed by the Company’s trade terms and conditions. In certain instances, it may be further supplemented by separate pricing agreements and customer incentive arrangements, which typically only affect the contract’s transaction price. Contracts do not contain a significant financing component as payment terms on invoiced amounts are typically between 30 to 60 days, based on the Company’s credit assessment of individual customers, as well as industry expectations. Product returns are not significant.

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

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

The Company’s contracts with customers are generally short-term in nature. Accordingly, the Company does not disclose the value of unsatisfied performance obligations nor the timing of revenue recognition. 

3. Accounts Receivable and Allowance for Doubtful Receivables

Accounts receivable are reduced by an allowance for an estimate of amounts that are uncollectible. Substantially all of the Company’s receivables are due from customers in the United States. The Company extends credit to its customers based upon its evaluation of the following factors: (i) the customer’s financial condition, (ii) the amount of credit the customer requests, and (iii) the customer’s actual payment history (which includes disputed invoice resolution). The Company does not typically require its customers to post a deposit or supply collateral. The Company’s allowance for doubtful receivables is based on an analysis that estimates the amount of its total customer receivable balance that is not collectible. This analysis includes the pooling of receivables based on risk assessment and then assessing a default probability to these pooled balances, which can be influenced by several factors including (i) current market conditions, (ii) historical experience, (iii) reasonable forecast, and (iv) review of customer receivable aging and payment trends.

The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance in the period the payment is received.

The following table presents the activity in the Company’s allowance for doubtful receivables (in thousands):

	Three months ended						Six months ended
	August 31,						August 31,
	2021			2020			2021			2020
Balance at beginning of period	$	954		$	940		$	961		$	715
Bad debt expense, net of recoveries		121			132			159			780
Accounts written off		(59	)		(198	)		(104	)		(621	)
Balance at end of period