##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended May 31, 2010
 OR
 o
    
    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.
  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)
 (972) 775-9801
 
   þ o
  o o
  Large accelerated Filer o
    
    Accelerated filer þ
    

Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  
 TABLE OF CONTENTS
 PART I: FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets at May 31, 2010 (unaudited) and February 28, 2010
    
    
    3Unaudited Consolidated Statements of Earnings for the three months ended May 31, 2010 and 2009
    
    
    5Unaudited Consolidated Statements of Cash Flows for the three months ended May 31, 2010 and 2009
    
    
    6Notes to the Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    36Item 1A. Risk Factors
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 3. Defaults Upon Senior Securities
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders
    
    
    36Item 5. Other Information
    
    
    36Item 6. Exhibits
    
    
    37SIGNATURES
    
    
    38EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 ENNIS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands )
 May 31,
    
    
    February 28,2010
    
    
    2010(unaudited)AssetsCurrent assetsCash
    
    $
    13,498
    
    
    $
    21,063Accounts receivable, net of allowance for doubtful receivables
of $4,993 at May 31, 2010 and $4,446 at February 28, 2010
    
    
    59,917
    
    
    
    57,249Prepaid expenses
    
    
    5,942
    
    
    
    6,867Inventories
    
    
    77,942
    
    
    
    75,137Deferred income taxes
    
    
    5,319
    
    
    
    5,319Assets held for sale
    
    
    804
    
    
    
    804Total current assets
    
    
    163,422
    
    
    
    166,439Property, plant and equipment, at costPlant, machinery and equipment
    
    
    144,740
    
    
    
    138,419Land and buildings
    
    
    61,801
    
    
    
    55,430Other
    
    
    22,454
    
    
    
    22,402Total property, plant and equipment
    
    
    228,995
    
    
    
    216,251Less accumulated depreciation
    
    
    152,402
    
    
    
    150,531Net property, plant and equipment
    
    
    76,593
    
    
    
    65,720Goodwill
    
    
    117,341
    
    
    
    117,341Trademarks and tradenames, net
    
    
    58,864
    
    
    
    58,897Customer lists, net
    
    
    19,190
    
    
    
    19,753Deferred finance charges, net
    
    
    971
    
    
    
    1,079Other assets
    
    
    3,463
    
    
    
    3,470Total assets
    
    $
    439,844
    
    
    $
    432,699
 See accompanying notes to consolidated financial statements.
 3




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ENNIS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except for share amounts )
 May 31,
    
    
    February 28,2010
    
    
    2010(unaudited)Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    19,268
    
    
    $
    27,463Accrued expensesEmployee compensation and benefits
    
    
    13,638
    
    
    
    14,374Taxes other than income
    
    
    1,216
    
    
    
    1,539Federal and state income taxes payable
    
    
    6,839
    
    
    
    705Other
    
    
    6,595
    
    
    
    5,720Total current liabilities
    
    
    47,556
    
    
    
    49,801Long-term debt, less current installments
    
    
    41,432
    
    
    
    41,817Liability for pension benefits
    
    
    7,624
    
    
    
    7,132Deferred income taxes
    
    
    19,872
    
    
    
    19,821Other liabilities
    
    
    567
    
    
    
    868Total liabilities
    
    
    117,051
    
    
    
    119,439Commitments and contingenciesShareholders equityPreferred 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 May 31 and February 28, 2010
    
    
    75,134
    
    
    
    75,134Additional paid in capital
    
    
    121,372
    
    
    
    121,978Retained earnings
    
    
    215,096
    
    
    
    206,062Accumulated other comprehensive income (loss):Foreign currency translation, net of taxes
    
    
    107
    
    
    
    267Unrealized loss on derivative instruments, net of taxes
    
    
    (909
    )
    
    
    (1,154
    )Minimum pension liability, net of taxes
    
    
    (12,376
    )
    
    
    (12,376
    )(13,178
    )
    
    
    (13,263
    )398,424
    
    
    
    389,911Treasury stockCost of 4,234,944 shares at May 31, 2010 and
4,292,080 shares at February 28, 2010
    
    
    (75,631
    )
    
    
    (76,651
    )Total shareholders equity
    
    
    322,793
    
    
    
    313,260Total liabilities and shareholders equity
    
    $
    439,844
    
    
    $
    432,699
 See accompanying notes to consolidated financial statements.
 4




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ENNIS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 ( Dollars in thousands except share and per share amounts )
 (Unaudited)
 Three months endedMay 31,2010
    
    
    2009Net sales
    
    $
    140,741
    
    
    $
    130,830Cost of goods sold
    
    
    98,561
    
    
    
    99,846Gross profit margin
    
    
    42,180
    
    
    
    30,984Selling, general and administrative
    
    
    21,247
    
    
    
    19,459Gain from disposal of assets
    
    
    
    
    
    
    (2
    )Income from operations
    
    
    20,933
    
    
    
    11,527Other income (expense)Interest expense
    
    
    (437
    )
    
    
    (695
    )Other, net
    
    
    40
    
    
    
    (300
    )(397
    )
    
    
    (995
    )Earnings before income taxes
    
    
    20,536
    
    
    
    10,532Provision for income taxes
    
    
    7,496
    
    
    
    3,897Net earnings
    
    $
    13,040
    
    
    $
    6,635Weighted average common shares outstandingBasic
    
    
    25,800,647
    
    
    
    25,821,139Diluted
    
    
    25,849,937
    
    
    
    25,836,817Per share amountsNet earnings  basic
    
    $
    0.51
    
    
    $
    0.26Net earnings  diluted
    
    $
    0.50
    
    
    $
    0.26Cash dividends per share
    
    $
    0.155
    
    
    $
    0.155
 See accompanying notes to consolidated financial statements.
 5




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ENNIS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)  (Unaudited)
 Three months endedMay 31,2010
    
    
    2009Cash flows from operating activities:Net earnings
    
    $
    13,040
    
    
    $
    6,635Adjustments
to reconcile net earnings to net cash provided by operating activities:Depreciation
    
    
    2,067
    
    
    
    2,356Amortization of deferred finance charges
    
    
    108
    
    
    
    112Amortization of tradenames and customer lists
    
    
    601
    
    
    
    602Gain from disposal of assets
    
    
    
    
    
    
    (2
    )Bad debt expense
    
    
    989
    
    
    
    539Stock based compensation
    
    
    416
    
    
    
    246Changes in operating assets and liabilities:Accounts receivable
    
    
    (3,651
    )
    
    
    (3,394
    )Prepaid expenses
    
    
    902
    
    
    
    3,799Inventories
    
    
    (2,761
    )
    
    
    13,587Other assets
    
    
    2
    
    
    
    (8
    )Accounts payable and accrued expenses
    
    
    (2,253
    )
    
    
    338Other liabilities
    
    
    (301
    )
    
    
    (392
    )Prepaid pension asset/liability for pension benefits
    
    
    492
    
    
    
    752Net cash provided by operating activities
    
    
    9,651
    
    
    
    25,170Cash flows from investing activities:Capital expenditures
    
    
    (13,158
    )
    
    
    (629
    )Proceeds from disposal of plant and property
    
    
    
    
    
    
    5Net cash used in investing activities
    
    
    (13,158
    )
    
    
    (624
    )Cash flows from financing activities:Repayment of debt
    
    
    
    
    
    
    (56
    )Dividends
    
    
    (4,006
    )
    
    
    (4,002
    )Purchase of treasury stock
    
    
    (2
    )
    
    
    (404
    )Net cash used in financing activities
    
    
    (4,008
    )
    
    
    (4,462
    )Effect of exchange rate changes on cash
    
    
    (50
    )
    
    
    433Net change in cash
    
    
    (7,565
    )
    
    
    20,517Cash at beginning of period
    
    
    21,063
    
    
    
    9,286Cash at end of period
    
    $
    13,498
    
    
    $
    29,803
 See accompanying notes to consolidated financial statements.
 6




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ENNIS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE PERIOD ENDED MAY 31, 2010
 1. Significant Accounting Policies and General Matters
 Basis of Presentation
  Recent Accounting Pronouncements
  2. Accounts Receivable and Allowance for Doubtful Receivables
   7




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 2. Accounts Receivable and Allowance for Doubtful Receivables-continued
  Three months endedMay 31,2010
    
    
    2009Balance at beginning of period
    
    $
    4,446
    
    
    $
    3,561Bad debt expense
    
    
    989
    
    
    
    539Recoveries
    
    
    12
    
    
    
    12Accounts written off
    
    
    (454
    )
    
    
    (547
    )Foreign currency translation
    
    
    
    
    
    
    28Balance at end of period
    
    $
    4,993
    
    
    $
    3,593
 3. Inventories
   May 31,
    
    
    February 28,2010
    
    
    2010Raw material
    
    $
    10,946
    
    
    $
    11,089Work-in-process
    
    
    18,132
    
    
    
    14,280Finished goods
    
    
    48,864
    
    
    
    49,768$
    77,942
    
    
    $
    75,137
 4. Goodwill and Other Intangible Assets
   8




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 4. Goodwill and Other Intangible Assets-continued
  GrossCarrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    NetAs of May 31, 2010Amortized intangible assets (in thousands)Tradenames
    
    $
    1,234
    
    
    $
    908
    
    
    $
    326Customer lists
    
    
    29,908
    
    
    
    10,718
    
    
    
    19,190Noncompete
    
    
    500
    
    
    
    488
    
    
    
    12$
    31,642
    
    
    $
    12,114
    
    
    $
    19,528As of February 28, 2010Amortized intangible assets (in thousands)Tradenames
    
    $
    1,234
    
    
    $
    875
    
    
    $
    359Customer lists
    
    
    29,908
    
    
    
    10,155
    
    
    
    19,753Noncompete
    
    
    500
    
    
    
    483
    
    
    
    17$
    31,642
    
    
    $
    11,513
    
    
    $
    20,129
 May 31,
    
    
    February 28,2010
    
    
    2010Non-amortizing intangible assets (in thousands)Trademarks
    
    $
    58,538
    
    
    $
    58,538
   2011
    
    $
    2,397,0002012
    
    
    2,391,0002013
    
    
    2,347,0002014
    
    
    2,254,0002015
    
    
    2,136,0002016
    
    
    2,078,000
  Print
    
    
    ApparelSegment
    
    
    SegmentTotal
    
    
    Total
    
    
    TotalBalance as of March 1, 2009
    
    $
    42,792
    
    
    $
    74,549
    
    
    $
    117,341Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    Balance as of March 1, 2010
    
    
    42,792
    
    
    
    74,549
    
    
    
    117,341Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    Balance as of May 31, 2010
    
    $
    42,792
    
    
    $
    74,549
    
    
    $
    117,341
  9




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 5. Other Accrued Expenses
  May 31, 2010
    
    
    February 28, 2010Accrued taxes
    
    $
    286
    
    
    $
    265Accrued legal and professional fees
    
    
    239
    
    
    
    392Accrued interest
    
    
    135
    
    
    
    114Accrued utilities
    
    
    1,354
    
    
    
    1,322Accrued repairs and maintenance
    
    
    581
    
    
    
    547Accrued construction retainer
    
    
    954
    
    
    
    582Accrued phantom stock obligation
    
    
    470
    
    
    
    422Accrual-earn out agreements
    
    
    511
    
    
    
    594Other accrued expenses
    
    
    2,065
    
    
    
    1,482$
    6,595
    
    
    $
    5,720
 6. Derivative Instruments and Hedging Activities
   7. Fair Value Financial Instruments
   Level 1 
    
    Inputs utilize quoted prices (unadjusted) in active markets for identical
assets or liabilities that the Company has the ability to access.Level 2 
    
    Inputs utilize data points that are observable such as quoted prices,
interest rates and yield curves.Level 3 
    
    Inputs are unobservable data points for the asset or liability, and
include situations where there is little, if any, market activity for the asset or
liability.  10




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 7. Fair Value Financial Instruments-continued
  May 31,
    
    
    Fair Value MeasurementsDescription
    
    2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative liability (Swap)
    
    $
    (1,432
    )
    
    $
    
    
    
    $
    (1,432
    )
    
    $
    $
    (1,432
    )
    
    $
    
    
    
    $
    (1,432
    )
    
    $
    
 February 28,
    
    
    Fair Value MeasurementsDescription
    
    2010
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative liability (Swap)
    
    $
    (1,817
    )
    
    $
    
    
    
    $
    (1,817
    )
    
    $
    $
    (1,817
    )
    
    $
    
    
    
    $
    (1,817
    )
    
    $
    
 8. Long-Term Debt
  May 31,
    
    
    February 28,2010
    
    
    2010Revolving credit facility
    
    $
    40,000
    
    
    $
    40,000Interest rate swap
    
    
    1,432
    
    
    
    1,817Long-term debt
    
    $
    41,432
    
    
    $
    41,817
   11




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 9. Shareholders Equity
  Three months endedMay 31,2010
    
    
    2009Net earnings
    
    $
    13,040
    
    
    $
    6,635Foreign
currency translation adjustment, net of deferred taxes
    
    
    (160
    )
    
    
    1,030Unrealized
gain (loss) on derivative instruments, net of deferred taxes
    
    
    245
    
    
    
    (40
    )Comprehensive income
    
    $
    13,125
    
    
    $
    7,625
  AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance February 28, 2010
    
    
    30,053,443
    
    
    $
    75,134
    
    
    $
    121,978
    
    
    $
    206,062
    
    
    $
    (13,263
    )
    
    
    (4,292,080
    )
    
    $
    (76,651
    )
    
    $
    313,260Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,040
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,040Foreign currency
translation, net of
deferred tax of $92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (160
    )
    
    
    
    
    
    
    
    
    
    
    (160
    )Unrealized
gain on derivative
instruments, net of deferred
tax benefit of $141
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    245Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,125Dividends
declared ($.155 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,006
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,006
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    416Exercise of stock
options and restricted stock grants
    
    
    
    
    
    
    
    
    
    
    (1,022
    )
    
    
    
    
    
    
    
    
    
    
    57,227
    
    
    
    1,022
    
    
    
    Stock repurchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    (2
    )
    
    
    (2
    )Balance May 31, 2010
    
    
    30,053,443
    
    
    $
    75,134
    
    
    $
    121,372
    
    
    $
    215,096
    
    
    $
    (13,178
    )
    
    
    (4,234,944
    )
    
    $
    (75,631
    )
    
    $
    322,793
  10. Stock Option Plan and Stock Based Compensation
  12




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 10. Stock Option Plan and Stock Based Compensation-continued
  Stock Options
  WeightedNumber
    
    
    Weighted
    
    
    Average
    
    
    Aggregateof
    
    
    Average
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise
    
    
    Contractual
    
    
    Value(a)(exact quantity)
    
    
    Price
    
    
    Life (in years)
    
    
    (in thousands)Outstanding at February 28, 2010
    
    
    250,200
    
    
    $
    12.09
    
    
    
    6.0
    
    
    $
    1,003Granted
    
    
    62,500
    
    
    
    18.46Terminated
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Outstanding at May 31, 2010
    
    
    312,700
    
    
    $
    13.36
    
    
    
    6.6
    
    
    $
    1,445Exercisable at May 31, 2010
    
    
    171,450
    
    
    $
    13.53
    
    
    
    4.3
    
    
    $
    764
 
 (a)
    
    Intrinsic value is measured as the excess fair market value of the Companys Common Stock as
reported on the New York Stock Exchange over the applicable exercise price.  May 31,2010
    
    
    2009Expected volatility
    
    
    34.63
    %
    
    
    32.35
    %Expected term (years)
    
    
    3
    
    
    
    4Risk free interest rate
    
    
    1.58
    %
    
    
    2.01
    %Dividend yield
    
    
    4.24
    %
    
    
    4.74
    %Weighted average grant-date fair value
    
    $
    3.348
    
    
    $
    1.583
  13




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 10. Stock Option Plan and Stock Based Compensation-continued
  WeightedAverageNumber
    
    
    Grant Dateof Options
    
    
    Fair ValueUnvested at February 28, 2010
    
    
    110,000
    
    
    $
    1.64New grants
    
    
    62,500
    
    
    
    3.35Vested
    
    
    (31,250
    )
    
    
    1.79Forfeited
    
    
    
    
    
    
    Unvested at May 31, 2010
    
    
    141,250
    
    
    $
    2.36
  Restricted Stock
  WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Fair ValueOutstanding at February 28, 2010
    
    
    91,470
    
    
    $
    15.38Granted
    
    
    39,000
    
    
    
    18.46Terminated
    
    
    
    
    
    
    Vested
    
    
    (57,227
    )
    
    
    16.23Outstanding at May 31, 2010
    
    
    73,243
    
    
    $
    16.36
  11. Employee Benefit Plans
   14




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 11. Employee Benefit Plans-continued
 Three months endedMay 31,2010
    
    
    2009Components of net periodic benefit costService cost
    
    $
    303
    
    
    $
    285Interest cost
    
    
    654
    
    
    
    685Expected return on plan assets
    
    
    (765
    )
    
    
    (606
    )Amortization of:Prior service cost
    
    
    (36
    )
    
    
    (36
    )Unrecognized net loss
    
    
    336
    
    
    
    424Net periodic benefit cost
    
    $
    492
    
    
    $
    752
  12. Earnings per share
   Three months endedMay 31,2010
    
    
    2009Basic weighted average common shares outstanding
    
    
    25,800,647
    
    
    
    25,821,139Effect of dilutive options
    
    
    49,290
    
    
    
    15,678Diluted weighted average common shares outstanding
    
    
    25,849,937
    
    
    
    25,836,817Per share amounts:Net earnings  basic
    
    $
    0.51
    
    
    $
    0.26Net earnings  diluted
    
    $
    0.50
    
    
    $
    0.26Cash dividends
    
    $
    0.155
    
    
    $
    0.155
 15




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 13. Segment Information and Geographic Information
   ® ® ® SM SM ® ® SM SM ® ® ® ® SM ® ® ® ®
     Print
    
    
    Apparel
    
    
    
    
    
    
    ConsolidatedSegment
    
    
    Segment
    
    
    Corporate
    
    
    TotalsThree months ended May 31, 2010:Net sales
    
    $
    67,790
    
    
    $
    72,951
    
    
    $
    
    
    
    $
    140,741Depreciation
    
    
    1,376
    
    
    
    501
    
    
    
    190
    
    
    
    2,067Amortization of identifiable intangibles
    
    
    234
    
    
    
    367
    
    
    
    
    
    
    
    601Segment earnings (loss) before
income tax
    
    
    12,502
    
    
    
    12,502
    
    
    
    (4,468
    )
    
    
    20,536Segment assets
    
    
    138,896
    
    
    
    285,413
    
    
    
    15,535
    
    
    
    439,844Capital expenditures
    
    
    621
    
    
    
    12,534
    
    
    
    3
    
    
    
    13,158
 16




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 13. Segment Information and Geographic Information-continued
 Print
    
    
    Apparel
    
    
    
    
    
    
    ConsolidatedSegment
    
    
    Segment
    
    
    Corporate
    
    
    TotalsThree months ended May 31, 2009:Net sales
    
    $
    71,710
    
    
    $
    59,120
    
    
    $
    
    
    
    $
    130,830Depreciation
    
    
    1,554
    
    
    
    584
    
    
    
    218
    
    
    
    2,356Amortization of identifiable intangibles
    
    
    235
    
    
    
    367
    
    
    
    
    
    
    
    602Segment earnings (loss) before
income tax
    
    
    10,810
    
    
    
    3,399
    
    
    
    (3,677
    )
    
    
    10,532Segment assets
    
    
    146,276
    
    
    
    261,756
    
    
    
    33,266
    
    
    
    441,298Capital expenditures
    
    
    207
    
    
    
    353
    
    
    
    69
    
    
    
    629Identifiable long-lived assets by country include property, plant, and equipment, net of
accumulated depreciation. The Company attributes revenues from external customers to individual
geographic areas based on the country where the sale originated. Information about the Companys
operations in different geographic areas as of and for the three months ended is as follows (in
thousands):United States
    
    
    Canada
    
    
    Mexico
    
    
    TotalThree months ended May 31, 2010:Net sales to unaffiliated customersPrint Segment
    
    $
    67,790
    
    
    $
    
    
    
    $
    
    
    
    $
    67,790Apparel Segment
    
    
    66,942
    
    
    
    5,320
    
    
    
    689
    
    
    
    72,951$
    134,732
    
    
    $
    5,320
    
    
    $
    689
    
    
    $
    140,741Identifiable long-lived assetsPrint Segment
    
    $
    37,228
    
    
    $
    
    
    
    $
    
    
    
    
    37,228Apparel Segment
    
    
    15,100
    
    
    
    32
    
    
    
    19,826
    
    
    
    34,958Corporate
    
    
    4,407
    
    
    
    
    
    
    
    
    
    
    
    4,407$
    56,735
    
    
    $
    32
    
    
    $
    19,826
    
    
    $
    76,593Three months ended May 31, 2009:Net sales to unaffiliated customersPrint Segment
    
    $
    71,710
    
    
    $
    
    
    
    $
    
    
    
    $
    71,710Apparel Segment
    
    
    54,699
    
    
    
    3,395
    
    
    
    1,026
    
    
    
    59,120$
    126,409
    
    
    $
    3,395
    
    
    $
    1,026
    
    
    $
    130,830Identifiable long-lived assetsPrint Segment
    
    $
    40,923
    
    
    $
    
    
    
    $
    
    
    
    
    40,923Apparel Segment
    
    
    5,648
    
    
    
    41
    
    
    
    1,308
    
    
    
    6,997Corporate
    
    
    5,184
    
    
    
    
    
    
    
    
    
    
    
    5,184$
    51,755
    
    
    $
    41
    
    
    $
    1,308
    
    
    $
    53,104
 14. Supplemental Cash Flow Information
  Three months endedMay 31,2010
    
    
    2009Interest paid
    
    $
    417
    
    
    $
    688Income taxes paid
    
    $
    1,392
    
    
    $
    467
 17




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2010
 15. Concentrations of Risk
    16. Assets Held for Sale
  18




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ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
  Business Segment Overview
  Print Segment
  ® ® ® SM SM ® ® SM SM ® ® ® ® SM ® ® ® ®
   19




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
      Our Print Business Challenges 
 
    
    Transformation of our portfolio of products
    
    Excess production capacity and price competition within our industry
    
    Economic uncertainties
  Transformation of our portfolio of products
 Excess production capacity and price competition within our industry
  20




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ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  Economic uncertainties
 Apparel Segment
 ® ®
       21




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
    Our Apparel Business Challenges 
 
    
    Cotton prices
    
    Completion of our new manufacturing facility
    
    Economic uncertainties
 Cotton prices
 Completion of our new manufacturing facility
  22




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  Economic uncertainties
 Risk Factors
  Our results and financial condition are affected by global and local market conditions, and
competitors pricing strategies, which can adversely affect our sales, margins, and net income.
  
    
    Our ability to manage upward pressure on commodity prices and the impact of
government actions to manage national economic conditions such as consumer spending,
inflation rates and unemployment levels, particularly given the current volatility in
the global financial markets;
    
    The impact on our margins of labor costs given our labor-intensive business model,
the trend toward higher wages in both mature and developing markets and the potential
impact of union organizing efforts on day-to-day operations of our manufacturing
facilities.
 Declining economic conditions could negatively impact our business.
   23




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 The terms and conditions of our credit facility impose certain restrictions on our operations. We
may not be able to raise additional capital, if needed, for proposed expansion projects.
   Declining financial market conditions could adversely impact the funding status of our pension
plan.
  We may be required to write down goodwill and other intangible assets which could cause our
financial condition and results of operations to be negatively affected in the future.
  Digital technologies will continue to erode the demand for our printed business documents.
   24




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  Our distributors face increased competition from various sources, such as office supply
superstores. Increased competition may require us to reduce prices or to offer other incentives in
order to enable our distributors to attract new customers and retain existing customers.
  Technological improvements may reduce our competitive advantage over some of our competitors, which
could reduce our profits.
  We could experience labor disputes that could disrupt our business in the future.
  We obtain our raw materials from a limited number of suppliers, and any disruption in our
relationships with these suppliers, or any substantial increase in the price of raw materials or
material shortages could have a material adverse effect on us.
    25




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  We face intense competition to gain market share, which may lead some competitors to sell
substantial amounts of goods at prices against which we cannot profitably compete.
  The apparel industry is heavily influenced by general economic cycles.
  Our apparel foreign operations could be subject to unexpected changes in regulatory requirements,
tariffs and other market barriers and political and economic instability in the countries where it
operates, which could negatively impact our operating results.
  Our apparel products are subject to foreign competition, which in the past have been faced with
significant U.S. government import restrictions.
   26




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
     Environmental regulations may impact our future operating results.
  Our construction of a new apparel manufacturing facility in Mexico is subject to multiple approvals
and uncertainties that could affect our ability to complete the project on schedule or at budgeted
cost.
  We are exposed to the risk of non-payment by our customers on a significant amount of our sales.
  27




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  Our business incurs significant freight and transportation costs.
  The price of energy is prone to significant fluctuations and volatility.
  We rely on independent contract production for a portion of our apparel production.
  We depend upon the talents and contributions of a limited number of individuals, many of whom would
be difficult to replace.
  Cautionary Statements
  28




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
   Critical Accounting Policies and Estimates
       29




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
      30




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 Result of Operations
  
    
    Consolidated Summary this section provides an overview of our consolidated results of
operations for the three months ended May 31, 2010 and 2009.
    
    Segment Operating Results this section provides an analysis of our net sales, gross
profit margin and operating income by segment.
 Consolidated Summary
 Three Months Ended May 31,Consolidated Statements of Earnings - Data
    
    2010
    
    
    2009Net sales
    
    $
    140,741
    
    
    
    100.0
    %
    
    $
    130,830
    
    
    
    100.0
    %Cost of goods sold
    
    
    98,561
    
    
    
    70.0
    
    
    
    99,846
    
    
    
    76.3Gross profit margin
    
    
    42,180
    
    
    
    30.0
    
    
    
    30,984
    
    
    
    23.7Selling, general and administrative
    
    
    21,247
    
    
    
    15.1
    
    
    
    19,459
    
    
    
    14.9Gain from disposal of assets
    
    
    
    
    
    
    
    
    
    
    (2
    )
    
    
    Income from operations
    
    
    20,933
    
    
    
    14.9
    
    
    
    11,527
    
    
    
    8.8Other expense, net
    
    
    (397
    )
    
    
    (0.3
    )
    
    
    (995
    )
    
    
    (0.7
    )Earnings before income taxes
    
    
    20,536
    
    
    
    14.6
    
    
    
    10,532
    
    
    
    8.1Provision for income taxes
    
    
    7,496
    
    
    
    5.3
    
    
    
    3,897
    
    
    
    3.0Net earnings
    
    $
    13,040
    
    
    
    9.3
    %
    
    $
    6,635
    
    
    
    5.1
    %
 Net Sales.
 Cost of Goods Sold.
 Selling, general and administrative expense.
 Gain/Loss from disposal of assets.
 Income from operations.
 31




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 Other income and expense.
 Provision for income taxes.
 Net earnings.
 Segment Operating Results
 Three months endedMay 31,Net Sales by Segment (in thousands)
    
    2010
    
    
    2009Print
    
    $
    67,790
    
    
    $
    71,710Apparel
    
    
    72,951
    
    
    
    59,120Total
    
    $
    140,741
    
    
    $
    130,830
 Print Segment
 Apparel Segment
 Three months endedMay 31,Gross Profit by Segment (in thousands)
    
    2010
    
    
    2009Print
    
    $
    20,536
    
    
    $
    18,901Apparel
    
    
    21,644
    
    
    
    12,083Total
    
    $
    42,180
    
    
    $
    30,984
 Print Segment
 32




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
  Apparel Segment
 Three months endedMay 31,Profit by Segment (in thousands)
    
    2010
    
    
    2009Print
    
    $
    12,502
    
    
    $
    10,810Apparel
    
    
    12,502
    
    
    
    3,399Total
    
    
    25,004
    
    
    
    14,209Less corporate expenses
    
    
    4,468
    
    
    
    3,677Earnings before income taxes
    
    $
    20,536
    
    
    $
    10,532
 Print Segment
 Apparel Segment
 Liquidity and Capital Resources
 May 31,
    
    
    February 28,(Dollars in thousands)
    
    2010
    
    
    2010
    
    
    ChangeWorking Capital
    
    $
    115,866
    
    
    $
    116,638
    
    
    
    -0.7
    %Cash
    
    $
    13,498
    
    
    $
    21,063
    
    
    
    -35.9
    %
 Working Capital.
 33




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 Three months ended May 31,(Dollars in thousands)
    
    2010
    
    
    2009
    
    
    ChangeNet Cash provided by operating activities
    
    $
    9,651
    
    
    $
    25,170
    
    
    
    -61.7
    %Net Cash used in investing activities
    
    $
    (13,158
    )
    
    $
    (624
    )
    
    
    2008.7
    %Net Cash used in financing activities
    
    $
    (4,008
    )
    
    $
    (4,462
    )
    
    
    -10.2
    %
 Cash flows from operating activities.
 Cash flows from investing activities.
 Cash flows from financing activities.
 Credit Facility.
    34




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 Pension 
 Inventories 
 Capital Expenditures 
  Contractual Obligations & Off-Balance Sheet Arrangements 
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
 Cash
  Interest Rates
  Foreign Exchange
  35




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
   
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   
 Items 3 and 5 are not applicable and have been omitted
 
 Item 4. Submission of Matters to a Vote of Security Holders
  36




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 
 Item 6. Exhibits
  Exhibit Number
    
    DescriptionExhibit 3.1(a)
    
    Restated Articles of Incorporation as amended through June 23, 1983 with
attached amendments dated June 20, 1985, July 31, 1985 and June 16, 1988
incorporated herein by reference to Exhibit 5 to the Registrants Form 10-K
Annual Report for the fiscal year ended February 28, 1993.Exhibit 3.1(b)
    
    Amendment to Articles of Incorporation dated June 17, 2004 incorporated herein
by reference to Exhibit 3.1(b) to the Registrants Form 10-K Annual Report for
the fiscal year ended February 28, 2007.Exhibit 3.2(a)
    
    Bylaws of the Registrant as amended through October 15, 1997 incorporated
herein by reference to Exhibit 3(ii) to the registrants Form 10-Q Quarterly
Report for the quarter ended November 30, 1997.Exhibit 3.2(b)
    
    First amendment to Bylaws of the Registrant dated December 20, 2007
incorporated herein by reference to Exhibit 3.1 to the Registrants Form 8-K
Current Report filed on December 20, 2007.Exhibit 10.1
    
    Employee Agreement between Ennis, Inc. and Keith S. Walters dated December 19,
2008 incorporated herein by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.2
    
    Employee Agreement between Ennis, Inc. and Michael D. Magill dated December
19, 2008 incorporated herein by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.3
    
    Employee Agreement between Ennis, Inc. and Ronald M. Graham dated December 19,
2008 incorporated herein by reference to Exhibit 10.3 to the Registrants
Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.4
    
    Employee Agreement between Ennis, Inc. and Richard L. Travis, Jr. dated
December 19, 2008 incorporated herein by reference to Exhibit 10.4 to the
Registrants Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.5
    
    Employee Agreement between Ennis, Inc. and Irshad Ahmad, Vice
President-Apparel Group and CTO dated December 19, 2008 incorporated herein by
reference to Exhibit 10.5 to the Registrants Current Report on Form 8-K filed
on January 20, 2009.Exhibit 10.6
    
    2004 Long-Term Incentive Plan as amended and restated effective May 14, 2008
incorporated herein by reference to Appendix A of the Registrants Form DEF
14A filed on May 23, 2008.Exhibit 10.7
    
    Second Amended and Restated Credit Agreement between Ennis, Inc., each of the
other co-borrowers who are parties, Bank of America, N.A. as Administrative
Agent, Swing Line Lender and L/C Issuer, Compass Bank, as Syndication Agent,
Wells Fargo Bank, N.A., as Documentation Agent, the other lenders who are
parties and Banc of America Securities, LLC, as Sole Lead Arranger and Sole
Book Manager, dated as of August 18, 2009 herein incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on August 20, 2009.Exhibit 31.1
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Chief Executive Officer.*Exhibit 31.2
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Chief Financial Officer.*Exhibit 32.1
    
    Section 1350 Certification of Chief Executive Officer.**Exhibit 32.2
    
    Section 1350 Certification of Chief Financial Officer.**
 
 *
    
    Filed herewith**
    
    Furnished herewith 37




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2010
 
   ENNIS, INC.Date: June 28, 2010
    /s/ Keith S. WaltersKeith S. WaltersChairman, Chief Executive Officer and
PresidentDate: June 28, 2010
    /s/ Richard L. Travis, Jr.Richard L. Travis, Jr.V.P.  Finance and CFO, Secretary and
Principal Financial and Accounting Officer 38




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##### Table of Contents



INDEX TO EXHIBITS
 Exhibit Number
    
    DescriptionExhibit 3.1(a)
    
    Restated Articles of Incorporation as amended through June 23, 1983 with
attached amendments dated June 20, 1985, July 31, 1985 and June 16, 1988
incorporated herein by reference to Exhibit 5 to the Registrants Form 10-K
Annual Report for the fiscal year ended February 28, 1993.Exhibit 3.1(b)
    
    Amendment to Articles of Incorporation dated June 17, 2004 incorporated herein
by reference to Exhibit 3.1(b) to the Registrants Form 10-K Annual Report for
the fiscal year ended February 28, 2007.Exhibit 3.2(a)
    
    Bylaws of the Registrant as amended through October 15, 1997 incorporated
herein by reference to Exhibit 3(ii) to the registrants Form 10-Q Quarterly
Report for the quarter ended November 30, 1997.Exhibit 3.2(b)
    
    First amendment to Bylaws of the Registrant dated December 20, 2007
incorporated herein by reference to Exhibit 3.1 to the Registrants Form 8-K
Current Report filed on December 20, 2007.Exhibit 10.1
    
    Employee Agreement between Ennis, Inc. and Keith S. Walters dated December 19,
2008 incorporated herein by reference to Exhibit 10.1 to the Registrants
Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.2
    
    Employee Agreement between Ennis, Inc. and Michael D. Magill dated December
19, 2008 incorporated herein by reference to Exhibit 10.2 to the Registrants
Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.3
    
    Employee Agreement between Ennis, Inc. and Ronald M. Graham dated December 19,
2008 incorporated herein by reference to Exhibit 10.3 to the Registrants
Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.4
    
    Employee Agreement between Ennis, Inc. and Richard L. Travis, Jr. dated
December 19, 2008 incorporated herein by reference to Exhibit 10.4 to the
Registrants Current Report on Form 8-K filed on January 20, 2009.Exhibit 10.5
    
    Employee Agreement between Ennis, Inc. and Irshad Ahmad, Vice
President-Apparel Group and CTO dated December 19, 2008 incorporated herein by
reference to Exhibit 10.5 to the Registrants Current Report on Form 8-K filed
on January 20, 2009.Exhibit 10.6
    
    2004 Long-Term Incentive Plan as amended and restated effective May 14, 2008
incorporated herein by reference to Appendix A of the Registrants Form DEF
14A filed on May 23, 2008.Exhibit 10.7
    
    Second Amended and Restated Credit Agreement between Ennis, Inc., each of the
other co-borrowers who are parties, Bank of America, N.A. as Administrative
Agent, Swing Line Lender and L/C Issuer, Compass Bank, as Syndication Agent,
Wells Fargo Bank, N.A., as Documentation Agent, the other lenders who are
parties and Banc of America Securities, LLC, as Sole Lead Arranger and Sole
Book Manager, dated as of August 18, 2009 herein incorporated by reference to
Exhibit 10.1 to the Registrants Form 8-K filed on August 20, 2009.Exhibit 31.1
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Chief Executive Officer.*Exhibit 31.2
    
    Certification Pursuant to Rule 13a-14(a)/15d-14(a) of Chief Financial Officer.*Exhibit 32.1
    
    Section 1350 Certification of Chief Executive Officer.**Exhibit 32.2
    
    Section 1350 Certification of Chief Financial Officer.**
 
 *
    
    Filed herewith**
    
    Furnished herewith