##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the Quarterly Period Ended May 31, 2007
 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
    
    (I.R.S. Employer Identification No.)Organization)2441 Presidential Pkwy., Midlothian, Texas
    
    76065(Address of Principal Executive Offices)
    
    (Zip code)
 (972) 775-9801  (Registrants Telephone Number, Including Area Code)
 þ o
  o þ o
 o þ




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##### 



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2007
 TABLE OF CONTENTS
 PART I: FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets at May 31, 2007 (unaudited) and February 28, 2007
    
    
    3Unaudited Consolidated Statements of Earnings for the three months ended May 31, 2007 and 2006
    
    
    5Unaudited Consolidated Statements of Cash Flows for the three months ended May 31, 2007 and 2006
    
    
    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
    
    
    31Item 4. Controls and Procedures
    
    
    32PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults Upon Senior Securities
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    33Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33SIGNATURES
    
    
    34Certification Pursuant to Rule 13a-14(a)/15d-14(a) of CEOCertification Pursuant to Rule 13a-14(a)/15d-14(a) of CFOSection 1350 Certification of CEOSection 1350 Certification of CFO
  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 28,2007
    
    
    2007(unaudited)AssetsCurrent assetsCash and cash equivalents
    
    $
    2,551
    
    
    $
    3,582Accounts receivable, net of allowance for doubtful receivables
of $2,973 at May 31, 2007 and $2,698 at February 28, 2007
    
    
    54,068
    
    
    
    47,285Prepaid expenses
    
    
    5,039
    
    
    
    5,628Inventories
    
    
    87,838
    
    
    
    85,696Deferred income taxes
    
    
    7,444
    
    
    
    7,444Assets held for sale
    
    
    1,881
    
    
    
    1,881Total current assets
    
    
    158,821
    
    
    
    151,516Property, plant and equipment, at costPlant, machinery and equipment
    
    
    128,070
    
    
    
    127,521Land and buildings
    
    
    40,922
    
    
    
    40,680Other
    
    
    22,574
    
    
    
    22,506Total property, plant and equipment
    
    
    191,566
    
    
    
    190,707Less accumulated depreciation
    
    
    130,767
    
    
    
    127,650Net property, plant and equipment
    
    
    60,799
    
    
    
    63,057Goodwill
    
    
    178,388
    
    
    
    178,314Trademarks and tradenames, net
    
    
    63,015
    
    
    
    63,052Customer lists, net
    
    
    19,868
    
    
    
    20,287Deferred finance charges, net
    
    
    1,269
    
    
    
    1,382Other assets
    
    
    590
    
    
    
    620Total assets
    
    $
    482,750
    
    
    $
    478,228
 See
accompanying notes to consolidated financial statements.
 3




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except for share amounts )
 May 31,
    
    
    February 28,2007
    
    
    2007(unaudited)Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    25,781
    
    
    $
    25,597Accrued expensesEmployee compensation and benefits
    
    
    14,293
    
    
    
    15,799Taxes other than income
    
    
    658
    
    
    
    611Federal and state income taxes payable
    
    
    5,413
    
    
    
    973Other
    
    
    5,153
    
    
    
    5,615Current installments of long-term debt
    
    
    532
    
    
    
    652Total current liabilities
    
    
    51,830
    
    
    
    49,247Long-term debt, less current installments
    
    
    83,386
    
    
    
    88,971Liability for pension benefits
    
    
    3,106
    
    
    
    2,702Deferred income taxes
    
    
    19,861
    
    
    
    19,603Other liabilities
    
    
    1,014
    
    
    
    1,302Total liabilities
    
    
    159,197
    
    
    
    161,825Commitments and contingenciesShareholders equitySeries A junior participating preferred stock of $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, 2007
    
    
    75,134
    
    
    
    75,134Additional paid in capital
    
    
    122,283
    
    
    
    122,305Retained earnings
    
    
    213,779
    
    
    
    207,190Accumulated other comprehensive income (loss):Foreign currency translation
    
    
    459
    
    
    
    25Minimum pension liability
    
    
    (7,396
    )
    
    
    (7,396
    )(6,937
    )
    
    
    (7,371
    )404,259
    
    
    
    397,258Treasury stockCost of 4,467,742 shares at May 31, 2007 and
4,475,962 shares at February 28, 2007
    
    
    (80,706
    )
    
    
    (80,855
    )Total shareholders equity
    
    
    323,553
    
    
    
    316,403Total liabilities and shareholders equity
    
    $
    482,750
    
    
    $
    478,228
 See
accompanying notes to consolidated financial statements.
 4




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF EARNINGS
 ( Dollars in thousands except share and per share amounts )
 (Unaudited)
 Three months endedMay 31,2007
    
    
    2006Net sales
    
    $
    152,774
    
    
    $
    145,113Cost of goods sold
    
    
    114,207
    
    
    
    107,298Gross profit
    
    
    38,567
    
    
    
    37,815Selling, general and administrative
    
    
    18,987
    
    
    
    18,078Income from operations
    
    
    19,580
    
    
    
    19,737Other income (expense)Interest expense
    
    
    (1,492
    )
    
    
    (1,792
    )Other income (expense), net
    
    
    (951
    )
    
    
    38(2,443
    )
    
    
    (1,754
    )Earnings before income taxes
    
    
    17,137
    
    
    
    17,983Provision for income taxes
    
    
    6,341
    
    
    
    6,653Net earnings
    
    $
    10,796
    
    
    $
    11,330Weighted average common shares outstandingBasic
    
    
    25,585,449
    
    
    
    25,479,722Diluted
    
    
    25,874,789
    
    
    
    25,790,687Per share amountsNet earnings  basic
    
    $
    0.42
    
    
    $
    0.44Net earnings  diluted
    
    $
    0.42
    
    
    $
    0.44Cash 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 31,2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    10,796
    
    
    $
    11,330Adjustments to reconcile net earnings to net cash provided
by operating activities:Depreciation
    
    
    3,301
    
    
    
    3,894Amortization of deferred finance charges
    
    
    112
    
    
    
    92Amortization of trademarks and customer lists
    
    
    466
    
    
    
    497Loss on the sale of equipment
    
    
    10
    
    
    
    3Bad debt expense
    
    
    373
    
    
    
    Stock based compensation
    
    
    124
    
    
    
    59Excess tax benefit of stock option exercises
    
    
    
    
    
    
    (3
    )Deferred income taxes
    
    
    3
    
    
    
    Changes in operating assets and liabilities, net of the
effects of acquisition:Accounts receivable
    
    
    (6,858
    )
    
    
    (4,150
    )Prepaid expenses
    
    
    622
    
    
    
    (2,011
    )Inventories
    
    
    (1,845
    )
    
    
    675Other current assets
    
    
    
    
    
    
    (1
    )Prepaid pension asset/liability for pension benefits
    
    
    404
    
    
    
    459Other liabilities
    
    
    (528
    )
    
    
    (501
    )Other assets
    
    
    21
    
    
    
    (517
    )Accounts payable and accrued expenses
    
    
    2,483
    
    
    
    2,352Net cash provided by operating activities
    
    
    9,484
    
    
    
    12,178Cash flows from investing activities:Capital expenditures
    
    
    (1,018
    )
    
    
    (636
    )Purchase of business, net of cash acquired
    
    
    
    
    
    
    (4,627
    )Proceeds from disposal of plant and property
    
    
    23
    
    
    
    3Net cash used in investing activities
    
    
    (995
    )
    
    
    (5,260
    )Cash flows from financing activities:Repayment of debt
    
    
    (5,705
    )
    
    
    (7,473
    )Dividends
    
    
    (3,967
    )
    
    
    (3,949
    )Proceeds from exercise of stock options
    
    
    3
    
    
    
    14Excess tax benefit of stock option exercises
    
    
    
    
    
    
    3Net cash used in financing activities
    
    
    (9,669
    )
    
    
    (11,405
    )Effect of exchange rate changes on cash
    
    
    149
    
    
    
    (51
    )Net change in cash and cash equivalents
    
    
    (1,031
    )
    
    
    (4,538
    )Cash and cash equivalents at beginning of period
    
    
    3,582
    
    
    
    13,860Cash and cash equivalents at end of period
    
    $
    2,551
    
    
    $
    9,322
 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, 2007
 1. Basis of Presentation
  Recent Accounting Pronouncements
 FIN 48
   FAS 157 .
 FAS 159 .
 7




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 1. Significant Accounting Policies and General Matters-continued
  2. Due From Factors
     May 31,
    
    
    February 28,2007
    
    
    2007Outstanding factored receivablesWithout recourse
    
    $
    13,389
    
    
    $
    18,766With recourse
    
    
    257
    
    
    
    405Advances from factors
    
    
    (11,070
    )
    
    
    (16,088
    )Due from factors
    
    $
    2,576
    
    
    $
    3,083
 3. Accounts Receivable and Allowance for Doubtful Receivables
   8




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 3. Accounts Receivable and Allowance for Doubtful Receivables- continued
  Three months endedMay 31,2007
    
    
    2006Balance at beginning of period
    
    $
    2,698
    
    
    $
    3,001Bad debt expense
    
    
    373
    
    
    
    Recoveries
    
    
    1
    
    
    
    91Accounts written off
    
    
    (99
    )
    
    
    (135
    )Balance at end of period
    
    $
    2,973
    
    
    $
    2,957
 4. Inventories
   May 31,
    
    
    February 28,2007
    
    
    2007Raw material
    
    $
    12,678
    
    
    $
    11,074Work-in-process
    
    
    18,486
    
    
    
    16,694Finished goods
    
    
    56,674
    
    
    
    57,928$
    87,838
    
    
    $
    85,696
 5. Acquisitions
   Accounts receivable
    
    $
    2,492Inventories
    
    
    1,864Property, plant & equipment
    
    
    7,398Other assets
    
    
    152Deferred tax asset
    
    
    2,166Trademarks
    
    
    1,260Accounts payable and accrued liabilities
    
    
    (2,292
    )$
    13,040
 9




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 5. Acquisitions-continued
   Accounts receivable
    
    $
    826Inventories
    
    
    579Property, plant & equipment
    
    
    3,689Other assets
    
    
    5Deferred tax asset
    
    
    1,780Noncompete
    
    
    25Accounts payable and accrued liabilities
    
    
    (2,316
    )$
    4,588
  Three months endedMay 31,2006Pro forma net sales
    
    $
    156,035Pro forma net earnings
    
    
    11,050Pro forma earnings per share  diluted
    
    
    0.43
  6. Goodwill and Other Intangible Assets
   10




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 6. Goodwill and Other Intangible Assets-continued
  GrossCarrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    NetAs of May 31, 2007Amortized intangible assets (in thousands)Tradenames
    
    $
    1,234
    
    
    $
    479
    
    
    $
    755Purchased customer lists
    
    
    24,057
    
    
    
    4,189
    
    
    
    19,868Noncompete
    
    
    467
    
    
    
    427
    
    
    
    40$
    25,758
    
    
    $
    5,095
    
    
    $
    20,663As of February 28, 2007Amortized intangible assets (in thousands)Tradenames
    
    $
    1,234
    
    
    $
    442
    
    
    $
    792Purchased customer lists
    
    
    24,057
    
    
    
    3,770
    
    
    
    20,287Noncompete
    
    
    467
    
    
    
    417
    
    
    
    50$
    25,758
    
    
    $
    4,629
    
    
    $
    21,129
 May 31, 2007
    
    
    February 28, 2007Unamortized intangible assets (in thousands)Trademarks
    
    $
    62,260
    
    
    $
    62,260
   2008
    
    $
    1,852,0002009
    
    
    1,827,0002010
    
    
    1,811,0002011
    
    
    1,810,0002012
    
    
    1,810,0002013
    
    
    1,766,000
  Print
    
    
    ApparelSegment
    
    
    SegmentTotal
    
    
    Total
    
    
    TotalBalance as of March 1, 2006
    
    $
    40,580
    
    
    $
    137,700
    
    
    $
    178,280Goodwill adjusted during year
    
    
    34
    
    
    
    
    
    
    
    34Impairment losses
    
    
    
    
    
    
    
    
    
    
    Balance as of March 1, 2007
    
    
    40,614
    
    
    
    137,700
    
    
    
    178,314Goodwill adjusted during period
    
    
    74
    
    
    
    
    
    
    
    74Impairment losses
    
    
    
    
    
    
    
    
    
    
    Balance as of May 31, 2007
    
    $
    40,688
    
    
    $
    137,700
    
    
    $
    178,388
 11




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 6. Goodwill and Other Intangible Assets-continued
  7. Other Accrued Expenses
  May 31, 2007
    
    
    February 28, 2007Accrued interest
    
    $
    873
    
    
    $
    975Accrued taxes
    
    
    362
    
    
    
    424Accrued legal and professional fees
    
    
    69
    
    
    
    267Accrued utilities
    
    
    676
    
    
    
    786Factored receivables with recourse
    
    
    869
    
    
    
    772Other accrued expenses
    
    
    2,304
    
    
    
    2,391$
    5,153
    
    
    $
    5,615
 8. Long-Term Debt
  May 31, 2007
    
    
    February 28, 2007Revolving credit facility
    
    $
    83,000
    
    
    $
    88,500Capital lease obligations
    
    
    681
    
    
    
    784Note payable to finance company
    
    
    224
    
    
    
    314Other
    
    
    13
    
    
    
    2583,918
    
    
    
    89,623Less current installments
    
    
    532
    
    
    
    652Long-term debt
    
    $
    83,386
    
    
    $
    88,971
    12




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 9. Shareholders Equity
  Three months ended May 31,2007
    
    
    2006Net earnings
    
    $
    10,796
    
    
    $
    11,330Interest rate hedge
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    434
    
    
    
    12Comprehensive income
    
    $
    11,230
    
    
    $
    11,342
  AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance February 28,
2007
    
    
    30,053,443
    
    
    
    75,134
    
    
    
    122,305
    
    
    
    207,190
    
    
    
    (7,371
    )
    
    
    (4,475,962
    )
    
    
    (80,855
    )
    
    
    316,403Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,796
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,796Foreign currency
translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    434
    
    
    
    
    
    
    
    
    
    
    
    434Comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,230Cumulative impact
of a change
in accounting
for income tax
uncertainties
pursuant to
FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (240
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (240
    )Dividends declared
($.155 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,967
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,967
    )Stock based
compensation
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124Exercise of stock
options and
restricted
stock grants
    
    
    
    
    
    
    
    
    
    
    (146
    )
    
    
    
    
    
    
    
    
    
    
    8,220
    
    
    
    149
    
    
    
    3Balance May 31,
2007
    
    
    30,053,443
    
    
    $
    75,134
    
    
    $
    122,283
    
    
    $
    213,779
    
    
    $
    (6,937
    )
    
    
    (4,467,742
    )
    
    $
    (80,706
    )
    
    $
    323,553
 10. Stock Option Plans and Stock Based Compensation
  
 13




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 10. Stock Option Plans and Stock Based Compensation-continued
   WeightedNumber
    
    Weighted
    
    Average
    
    Aggregateof
    
    Average
    
    Remaining
    
    IntrinsicShares
    
    Exercise
    
    Contractual
    
    Value(a)(exact quantity)
    
    Price
    
    Life(in years)
    
    (in thousands)Outstanding at February 28, 2007
    
    
    553,513
    
    
    $
    11.08Granted
    
    
    
    
    
    
    Terminated
    
    
    (13,000
    )
    
    
    14.91Exercised
    
    
    (250
    )
    
    
    10.25Outstanding at May 31, 2007
    
    
    540,263
    
    
    $
    10.99
    
    
    
    3.6
    
    
    $
    6,977Exercisable at May 31, 2007
    
    
    481,238
    
    
    $
    10.42
    
    
    
    3.1
    
    
    $
    6,486
 
 (a)
    
    Value is calculated on the basis of the difference between the market value of the Companys
Common Stock as reported on the New York Stock Exchange on May 31, 2007 ($23.90) and the
weighted average exercise price, multiplied by the number of shares indicated.  Three months ended May 31,2007
    
    2006Total cash received
    
    $
    3
    
    
    $
    15Income tax benefits
    
    $
    
    
    
    $
    3Total grant-date fair value
    
    $
    
    
    
    $
    2Intrinsic value
    
    $
    4
    
    
    $
    14
  WeightedAverageNumber
    
    Grant Dateof Options
    
    Fair ValueUnvested at February 28, 2007
    
    
    99,025
    
    
    $
    2.52New grants
    
    
    
    
    
    
    Vested
    
    
    (27,500
    )
    
    
    2.33Forfeited
    
    
    (12,500
    )
    
    
    2.48Unvested at May 31, 2007
    
    
    59,025
    
    
    
    2.61
  14




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 10. Stock Option Plans and Stock Based Compensation-continued
  WeightedAverageNumber of
    
    Grant DateShares
    
    Fair ValueOutstanding at February 28, 2007
    
    
    39,919
    
    
    $
    19.67Granted
    
    
    40,600
    
    
    
    27.71Terminated
    
    
    
    
    
    
    Exercised
    
    
    (7,970
    )
    
    
    19.69Outstanding at May 31, 2007
    
    
    72,549
    
    
    $
    24.17Exercisable at May 31, 2007
    
    
    
    
    
    $
    
  11. Employee Benefit Plans
   Three months endedMay 31,2007
    
    
    2006Components of net periodic benefit cost
Service cost
    
    $
    358
    
    
    $
    360Interest cost
    
    
    626
    
    
    
    610Expected return on plan assets
    
    
    (770
    )
    
    
    (712
    )Amortization of:Prior service cost
    
    
    (36
    )
    
    
    (36
    )Unrecognized net loss
    
    
    226
    
    
    
    239Net periodic benefit cost
    
    $
    404
    
    
    $
    461
  15




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 12. Earnings per share
  Three months ended May 31,2007
    
    
    2006Basic weighted average common shares outstanding
    
    
    25,585,449
    
    
    
    25,479,722Effect of dilutive options and restricted stock
    
    
    289,340
    
    
    
    310,965Diluted weighted average common shares outstanding
    
    
    25,874,789
    
    
    
    25,790,687Per share amounts:Net earnings  basic
    
    $
    0.42
    
    
    $
    0.44Net earnings  diluted
    
    $
    0.42
    
    
    $
    0.44Cash dividends
    
    $
    0.155
    
    
    $
    0.155
 13. Segment Information and Geographic Information
    ® ®
   16




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 13. Segment Information and Geographic Information-continued
   Print
    
    Apparel
    
    
    
    
    
    ConsolidatedSegment
    
    Segment
    
    Corporate
    
    TotalsThree months ended May 31, 2007:Net sales
    
    $
    85,135
    
    
    $
    67,639
    
    
    $
    
    
    
    $
    152,774Depreciation
    
    
    2,069
    
    
    
    1,008
    
    
    
    224
    
    
    
    3,301Amortization of identifiable intangibles
    
    
    99
    
    
    
    367
    
    
    
    
    
    
    
    466Segment earnings (loss) before
income tax
    
    
    13,037
    
    
    
    8,385
    
    
    
    (4,285
    )
    
    
    17,137Segment assets
    
    
    148,027
    
    
    
    324,197
    
    
    
    10,526
    
    
    
    482,750Capital expenditures
    
    
    602
    
    
    
    409
    
    
    
    7
    
    
    
    1,018Three months ended May 31, 2006:Net sales
    
    $
    77,096
    
    
    $
    68,017
    
    
    $
    
    
    
    $
    145,113Depreciation
    
    
    2,024
    
    
    
    1,719
    
    
    
    151
    
    
    
    3,894Amortization of identifiable intangibles
    
    
    93
    
    
    
    404
    
    
    
    
    
    
    
    497Segment earnings (loss) before
income tax
    
    
    11,271
    
    
    
    10,042
    
    
    
    (3,330
    )
    
    
    17,983Segment assets
    
    
    159,106
    
    
    
    320,754
    
    
    
    18,583
    
    
    
    498,443Capital expenditures
    
    
    371
    
    
    
    187
    
    
    
    78
    
    
    
    636
  United States
    
    
    Canada
    
    
    Mexico
    
    
    TotalThree months ended May 31, 2007:Net sales to unaffiliated customersCustomersPrint Segment
    
    $
    85,135
    
    
    $
    
    
    
    $
    
    
    
    $
    85,135Apparel Segment
    
    
    63,017
    
    
    
    4,622
    
    
    
    
    
    
    
    67,639$
    148,152
    
    
    $
    4,622
    
    
    $
    
    
    
    $
    152,774Identifiable long-lived assetsPrint Segment
    
    $
    42,789
    
    
    $
    
    
    
    $
    
    
    
    
    42,789Apparel Segment
    
    
    8,612
    
    
    
    101
    
    
    
    2,572
    
    
    
    11,285Corporate
    
    
    6,725
    
    
    
    
    
    
    
    
    
    
    
    6,725$
    58,126
    
    
    $
    101
    
    
    $
    2,572
    
    
    $
    60,799
 17




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2007
 13. Segment Information and Geographic Information-continued
 United States
    
    
    Canada
    
    
    Mexico
    
    
    TotalThree months ended May 31, 2006:Net sales to unaffiliated customersCustomersPrint Segment
    
    $
    77,096
    
    
    $
    
    
    
    $
    
    
    
    $
    77,096Apparel Segment
    
    
    62,265
    
    
    
    5,752
    
    
    
    
    
    
    
    68,017$
    139,361
    
    
    $
    5,752
    
    
    $
    
    
    
    $
    145,113Identifiable long-lived assetsPrint Segment
    
    $
    44,683
    
    
    $
    
    
    
    $
    
    
    
    
    44,683Apparel Segment
    
    
    11,509
    
    
    
    97
    
    
    
    3,376
    
    
    
    14,982Corporate
    
    
    6,194
    
    
    
    
    
    
    
    
    
    
    
    6,194$
    62,386
    
    
    $
    97
    
    
    $
    3,376
    
    
    $
    65,859
 14. Supplemental Cash Flow Information
  Three months ended May 31,2007
    
    2006Interest paid
    
    $
    1,594
    
    
    $
    1,300Income taxes paid
    
    $
    1,315
    
    
    $
    1,264
 15. Assets Held for Sale
  16. Subsequent Event
  18




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 
 Item 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   Business Segment Overview
  Print Segment
  ® ® ®
   19




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
      Apparel Segment
 ® ® ® ® ® ®
      20




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
      Risk Factors
  We may be required to write down goodwill and other intangible assets in the future, which could
cause our financial condition and results of operations to be negatively affected
 .
 21




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 Printed business forms may be superceded over time by paperless business forms or otherwise
affected by technological obsolescence and changing customer preferences, which could reduce our
sales and profits.
  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,
material shortages, or an increase in transportation costs, could have a material adverse effect on
us.
  22
    Table of Contents   ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
    Alstyle faces 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.
  Apparel business is subject to cyclical trends.
  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.
  23
    Table of Contents   ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
     Environmental regulations may impact our future operating results.
  We depend upon the talents and contributions of a limited number of individuals, many of whom would
be difficult to replace.
  Cautionary Statements
 24
    Table of Contents   ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
   Result of Operations
 Consolidated Statements of Earnings  Data
 Three Months Ended May 31,2007
    
    
    2006Net sales
    
    $
    152,774
    
    
    
    100.0
    %
    
    $
    145,113
    
    
    
    100.0
    %Cost of goods sold
    
    
    114,207
    
    
    
    74.8
    
    
    
    107,298
    
    
    
    73.9Gross profit
    
    
    38,567
    
    
    
    25.2
    
    
    
    37,815
    
    
    
    26.1Selling, general and administrative
    
    
    18,987
    
    
    
    12.4
    
    
    
    18,078
    
    
    
    12.5Income from operations
    
    
    19,580
    
    
    
    12.8
    
    
    
    19,737
    
    
    
    13.6Other expense
    
    
    (2,443
    )
    
    
    (1.6
    )
    
    
    (1,754
    )
    
    
    (1.2
    )Earnings before income taxes
    
    
    17,137
    
    
    
    11.2
    
    
    
    17,983
    
    
    
    12.4Provision for income taxes
    
    
    6,341
    
    
    
    4.1
    
    
    
    6,653
    
    
    
    4.6Net earnings
    
    $
    10,796
    
    
    
    7.1
    %
    
    $
    11,330
    
    
    
    7.8
    %
 Critical Accounting Policies and Judgments
     25




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
        26




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
  Results of Operations  Consolidated
 Net Sales.
 Gross profit.
 Selling, general and administrative expenses.
 Income from operations.
 Other income and expense.
 Provision for income taxes.
 Net earnings.
 27




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 Results of Operations  Segments
 Three months endedMay 31,Net Sales by Segment (in thousands)
    
    2007
    
    
    2006Print
    
    $
    85,135
    
    
    $
    77,096Apparel
    
    
    67,639
    
    
    
    68,017Total
    
    $
    152,774
    
    
    $
    145,113
 Print Segment
 Apparel Segment
 May 31,Gross Profit Margin by Segment (in thousands)
    
    2007
    
    
    2006Print
    
    $
    22,529
    
    
    $
    19,366Apparel
    
    
    16,038
    
    
    
    18,449Total
    
    $
    38,567
    
    
    $
    37,815
 Print Segment
 Apparel Segment
 28




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
  Three months endedMay 31,Profit by Segment (in thousands)
    
    2007
    
    
    2006Print
    
    $
    13,037
    
    
    $
    11,271Apparel
    
    
    8,385
    
    
    
    10,042Total
    
    
    21,422
    
    
    
    21,313Less corporate expenses
    
    
    4,285
    
    
    
    3,330Earnings before income taxes
    
    $
    17,137
    
    
    $
    17,983
 Print Segment
 Apparel Segment
 Liquidity and Capital Resources
 May 31,
    
    February 28,(Dollars in thousands)
    
    2007
    
    2007
    
    ChangeWorking Capital
    
    $
    106,991
    
    
    $
    102,269
    
    
    
    4.6
    %Cash and cash equivalents
    
    $
    2,551
    
    
    $
    3,582
    
    
    
    -28.8
    %
 Working Capital.
 Cash and cash equivalents.
 Three months ended May 31,(Dollars in thousands)
    
    2007
    
    2006
    
    ChangeNet Cash provided by operating activities
    
    $
    9,484
    
    
    $
    12,178
    
    
    
    -22.1
    %Net Cash used in investing activities
    
    $
    (995
    )
    
    $
    (5,260
    )
    
    
    -81.1
    %Net Cash used in financing activities
    
    $
    (9,669
    )
    
    $
    (11,405
    )
    
    
    -15.2
    %
 Cash flows from operating activities.
 29




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
  Cash flows from investing activities.
 Cash flows from financing activities.
 Credit Facility 
   Pension 
 Inventories 
 Capital Expenditures 
 Contractual Obligations & Off-Balance Sheet Arrangements 
 30




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 Recent Accounting Pronouncements
 FIN 48
   FAS 157 .
 FAS 159 .
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
 Interest Rates
  31




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 Foreign Exchange
   
 Item 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures.
  32




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Items 2, 3 and 5 are not applicable and have been omitted
 
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
  Exhibit 3.1
    
    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 3.2
    
    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 3.3
    
    Articles of Amendment to the Articles of Incorporation of Ennis Business
Forms, Inc. filed on June 17, 2004 incorporated herein by reference to Exhibit
3.3 to the registrants Form 10-Q Quarterly Report for the quarter ended
November 30, 2004.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 33




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 
   ENNIS, INC.Date: July 3, 2007
    /s/ Keith S. WaltersKeith S. WaltersChairman, Chief Executive Officer and
PresidentDate: July 3, 2007
    /s/ Richard L. Travis, Jr.Richard L. Travis, Jr.V.P.  Finance and CFO, Secretary and
Principal Financial and Accounting Officer 34




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10Q
FOR THE PERIOD ENDED MAY 31, 2007
 
 INDEX TO EXHIBITS
 Exhibit Number
    
    DescriptionExhibit 3.1
    
    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 3.2
    
    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 3.3
    
    Articles of Amendment to the Articles of Incorporation of Ennis Business
Forms, Inc. filed on June 17, 2004 incorporated herein by reference to Exhibit
3.3 to the registrants Form 10-Q Quarterly Report for the quarter ended
November 30, 2004.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 35