##### 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, 2011
 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(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 TABLE OF CONTENTS
 PART I: FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets at May 31, 2011 (unaudited) and February 28, 2011
    
    
    3Unaudited Consolidated Statements of Earnings for the three months ended May 31, 2011 and 2010
    
    
    5Unaudited Consolidated Statements of Cash Flows for the three months ended May 31, 2011 and 2010
    
    
    6Notes to the Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35PART II: OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    35Item 1A. Risk Factors
    
    
    35Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    35Item 3. Defaults Upon Senior Securities
    
    
    35Item 4. Removed and Reserved
    
    
    35Item 5. Other Information
    
    
    35Item 6. Exhibits
    
    
    36SIGNATURES
    
    
    37EX-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 28,2011
    
    
    2011(unaudited)AssetsCurrent assetsCash
    
    $
    17,853
    
    
    $
    12,305Accounts receivable, net of allowance for doubtful receivables
of $4,882 at May 31, 2011 and $4,814 at February 28, 2011
    
    
    53,818
    
    
    
    58,359Prepaid expenses
    
    
    5,447
    
    
    
    5,335Inventories
    
    
    115,274
    
    
    
    100,363Deferred income taxes
    
    
    6,036
    
    
    
    6,036Total current assets
    
    
    198,428
    
    
    
    182,398Property, plant and equipment, at costPlant, machinery and equipment
    
    
    157,869
    
    
    
    156,356Land and buildings
    
    
    74,923
    
    
    
    73,482Other
    
    
    22,705
    
    
    
    22,646Total property, plant and equipment
    
    
    255,497
    
    
    
    252,484Less accumulated depreciation
    
    
    160,827
    
    
    
    158,823Net property, plant and equipment
    
    
    94,670
    
    
    
    93,661Goodwill
    
    
    117,341
    
    
    
    117,341Trademarks and tradenames, net
    
    
    58,732
    
    
    
    58,765Customer lists, net
    
    
    16,983
    
    
    
    17,547Deferred finance charges, net
    
    
    540
    
    
    
    648Other assets
    
    
    3,469
    
    
    
    3,368Total assets
    
    $
    490,163
    
    
    $
    473,728
 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 28,2011
    
    
    2011(unaudited)Liabilities and Shareholders EquityCurrent liabilitiesAccounts payable
    
    $
    24,970
    
    
    $
    18,868Accrued expensesEmployee compensation and benefits
    
    
    14,628
    
    
    
    16,503Taxes other than income
    
    
    601
    
    
    
    585Federal and state income taxes payable
    
    
    5,806
    
    
    
    2,935Other
    
    
    7,409
    
    
    
    7,621Current installments of long-term debt
    
    
    240
    
    
    
    586Total current liabilities
    
    
    53,654
    
    
    
    47,098Long-term debt
    
    
    50,000
    
    
    
    50,000Liability for pension benefits
    
    
    2,458
    
    
    
    2,048Deferred income taxes
    
    
    26,196
    
    
    
    25,379Other liabilities
    
    
    1,209
    
    
    
    1,520Total liabilities
    
    
    133,517
    
    
    
    126,045Commitments 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, 2011
    
    
    75,134
    
    
    
    75,134Additional paid in capital
    
    
    120,840
    
    
    
    121,306Retained earnings
    
    
    242,040
    
    
    
    234,636Accumulated other comprehensive income (loss):Foreign currency translation, net of taxes
    
    
    2,685
    
    
    
    1,727Unrealized loss on derivative instruments, net of taxes
    
    
    (154
    )
    
    
    (372
    )Minimum pension liability, net of taxes
    
    
    (9,803
    )
    
    
    (9,803
    )Total accumulated other comprehensive income (loss)
    
    
    (7,272
    )
    
    
    (8,448
    )Treasury stockCost of 4,149,968 shares at May 31, 2011 and
4,197,567 shares at February 28, 2011
    
    
    (74,096
    )
    
    
    (74,945
    )Total shareholders equity
    
    
    356,646
    
    
    
    347,683Total liabilities and shareholders equity
    
    $
    490,163
    
    
    $
    473,728
 See accompanying notes to consolidated financial statements.
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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 31,2011
    
    
    2010Net sales
    
    $
    143,258
    
    
    $
    140,741Cost of goods sold
    
    
    103,557
    
    
    
    98,561Gross profit margin
    
    
    39,701
    
    
    
    42,180Selling, general and administrative
    
    
    20,857
    
    
    
    21,247Income from operations
    
    
    18,844
    
    
    
    20,933Other income (expense)Interest expense
    
    
    (818
    )
    
    
    (437
    )Other, net
    
    
    (176
    )
    
    
    40(994
    )
    
    
    (397
    )Earnings before income taxes
    
    
    17,850
    
    
    
    20,536Provision for income taxes
    
    
    6,426
    
    
    
    7,496Net earnings
    
    $
    11,424
    
    
    $
    13,040Weighted average common shares outstandingBasic
    
    
    25,894,374
    
    
    
    25,800,647Diluted
    
    
    25,924,296
    
    
    
    25,849,937Per share amountsNet earnings  basic
    
    $
    0.44
    
    
    $
    0.51Net earnings  diluted
    
    $
    0.44
    
    
    $
    0.50Cash 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 31,2011
    
    
    2010Cash flows from operating activities:Net earnings
    
    $
    11,424
    
    
    $
    13,040Adjustments to reconcile net earnings to net cash provided
by operating activities:Depreciation
    
    
    2,492
    
    
    
    2,067Amortization of deferred finance charges
    
    
    108
    
    
    
    108Amortization of tradenames and customer lists
    
    
    599
    
    
    
    601Bad debt expense
    
    
    521
    
    
    
    989Stock based compensation
    
    
    232
    
    
    
    416Deferred income taxes
    
    
    (12
    )
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    4,036
    
    
    
    (3,651
    )Prepaid expenses
    
    
    29
    
    
    
    902Inventories
    
    
    (14,868
    )
    
    
    (2,761
    )Other assets
    
    
    (103
    )
    
    
    2Accounts payable and accrued expenses
    
    
    6,714
    
    
    
    (2,253
    )Other liabilities
    
    
    (311
    )
    
    
    (301
    )Prepaid pension asset/liability for pension benefits
    
    
    410
    
    
    
    492Net cash provided by operating activities
    
    
    11,271
    
    
    
    9,651Cash flows from investing activities:Capital expenditures
    
    
    (2,117
    )
    
    
    (13,158
    )Net cash used in investing activities
    
    
    (2,117
    )
    
    
    (13,158
    )Cash flows from financing activities:Dividends
    
    
    (4,020
    )
    
    
    (4,006
    )Purchase of treasury stock
    
    
    
    
    
    
    (2
    )Proceeds from exercise of stock options
    
    
    151
    
    
    
    Net cash used in financing activities
    
    
    (3,869
    )
    
    
    (4,008
    )Effect of exchange rate changes on cash
    
    
    263
    
    
    
    (50
    )Net change in cash
    
    
    5,548
    
    
    
    (7,565
    )Cash at beginning of period
    
    
    12,305
    
    
    
    21,063Cash at end of period
    
    $
    17,853
    
    
    $
    13,498
 See accompanying notes to consolidated financial statements.
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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 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, 2011
 2. Accounts Receivable and Allowance for Doubtful Receivables-continued
  Three months endedMay 31,2011
    
    
    2010Balance at beginning of period
    
    $
    4,814
    
    
    $
    4,446Bad debt expense
    
    
    521
    
    
    
    989Recoveries
    
    
    166
    
    
    
    12Accounts written off
    
    
    (619
    )
    
    
    (454
    )Balance at end of period
    
    $
    4,882
    
    
    $
    4,993
 3. Inventories
   May 31,
    
    
    February 28,2011
    
    
    2011Raw material
    
    $
    14,151
    
    
    $
    11,237Work-in-process
    
    
    20,915
    
    
    
    13,453Finished goods
    
    
    80,208
    
    
    
    75,673$
    115,274
    
    
    $
    100,363
 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, 2011
 4. Goodwill and Other Intangible Assets-continued
  GrossCarrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    NetAs of May 31, 2011Amortized intangible assets (in thousands)Tradenames
    
    $
    1,234
    
    
    $
    1,040
    
    
    $
    194Customer lists
    
    
    29,957
    
    
    
    12,974
    
    
    
    16,983Noncompete
    
    
    500
    
    
    
    497
    
    
    
    3$
    31,691
    
    
    $
    14,511
    
    
    $
    17,180As of February 28, 2011Amortized intangible assets (in thousands)Tradenames
    
    $
    1,234
    
    
    $
    1,007
    
    
    $
    227Customer lists
    
    
    29,957
    
    
    
    12,410
    
    
    
    17,547Noncompete
    
    
    500
    
    
    
    495
    
    
    
    5$
    31,691
    
    
    $
    13,912
    
    
    $
    17,779
 May 31,
    
    
    February 28,2011
    
    
    2011Non-amortizing intangible assets (in thousands)Trademarks
    
    $
    58,538
    
    
    $
    58,538
   2012
    
    $
    2,3962013
    
    
    2,3522014
    
    
    2,2592015
    
    
    2,1412016
    
    
    2,0832017
    
    
    2,083
  Print
    
    
    ApparelSegment
    
    
    SegmentTotal
    
    
    Total
    
    
    TotalBalance as of March 1, 2010
    
    $
    42,792
    
    
    $
    74,549
    
    
    $
    117,341Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    Balance as of March 1, 2011
    
    
    42,792
    
    
    
    74,549
    
    
    
    117,341Goodwill acquired
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    Balance as of May 31, 2011
    
    $
    42,792
    
    
    $
    74,549
    
    
    $
    117,341
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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 5. Other Accrued Expenses
  May 31, 2011
    
    
    February 28, 2011Accrued taxes
    
    $
    250
    
    
    $
    229Accrued legal and professional fees
    
    
    338
    
    
    
    499Accrued interest
    
    
    188
    
    
    
    158Accrued utilities
    
    
    833
    
    
    
    1,038Accrued repairs and maintenance
    
    
    718
    
    
    
    684Accrued construction retainage
    
    
    1,811
    
    
    
    2,020Accrued phantom stock obligation
    
    
    512
    
    
    
    452Accrued acquisition related obligations
    
    
    239
    
    
    
    243Other accrued expenses
    
    
    2,520
    
    
    
    2,298$
    7,409
    
    
    $
    7,621
 6. Derivative Instruments and Hedging Activities
   7. Fair Value of 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 curvesLevel 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, 2011
 7. Fair Value of Financial Instruments-continued
  May 31,
    
    
    Fair Value MeasurementsDescription
    
    2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative liability (Swap)
    
    $
    (240
    )
    
    $
    
    
    
    $
    (240
    )
    
    $
    $
    (240
    )
    
    $
    
    
    
    $
    (240
    )
    
    $
    
 February 28,
    
    
    Fair Value MeasurementsDescription
    
    2011
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Derivative liability (Swap)
    
    $
    (586
    )
    
    $
    
    
    
    $
    (586
    )
    
    $
    $
    (586
    )
    
    $
    
    
    
    $
    (586
    )
    
    $
    
 8. Long-Term Debt
  May 31,
    
    
    February 28,2011
    
    
    2011Revolving credit facility
    
    $
    50,000
    
    
    $
    50,000Interest rate swap
    
    
    240
    
    
    
    586Long-term debt
    
    $
    50,240
    
    
    $
    50,586
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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 9. Shareholders Equity
  Three months endedMay 31,2011
    
    
    2010Net earnings
    
    $
    11,424
    
    
    $
    13,040Foreign currency translation adjustment,
net of deferred taxes
    
    
    958
    
    
    
    (160
    )Unrealized gain on derivative instruments,
net of deferred taxes
    
    
    218
    
    
    
    245Comprehensive income
    
    $
    12,600
    
    
    $
    13,125
  AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance February 28, 2011
    
    
    30,053,443
    
    
    $
    75,134
    
    
    $
    121,306
    
    
    $
    234,636
    
    
    $
    (8,448
    )
    
    
    (4,197,567
    )
    
    $
    (74,945
    )
    
    $
    347,683Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,424Foreign currency translation,
net of deferred tax of
$539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    958
    
    
    
    
    
    
    
    
    
    
    
    958Unrealized gain on
derivative instruments, net
of deferred tax benefit
of $123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218
    
    
    
    
    
    
    
    
    
    
    
    218Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,600Dividends declared
($.155 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,020
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,020
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    232
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232Exercise of stock options
and restricted stock
grants
    
    
    
    
    
    
    
    
    
    
    (698
    )
    
    
    
    
    
    
    
    
    
    
    47,599
    
    
    
    849
    
    
    
    151Balance May 31, 2011
    
    
    30,053,443
    
    
    $
    75,134
    
    
    $
    120,840
    
    
    $
    242,040
    
    
    $
    (7,272
    )
    
    
    (4,149,968
    )
    
    $
    (74,096
    )
    
    $
    356,646
  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, 2011
 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, 2011
    
    
    261,900
    
    
    $
    14.31
    
    
    
    6.5
    
    
    $
    757Granted
    
    
    82,743
    
    
    
    17.57Terminated
    
    
    
    
    
    
    Exercised
    
    
    (16,500
    )
    
    
    9.15Outstanding at May 31, 2011
    
    
    328,143
    
    
    $
    15.39
    
    
    
    7.1
    
    
    $
    1,233Exercisable at May 31, 2011
    
    
    158,732
    
    
    $
    15.28
    
    
    
    5.0
    
    
    $
    624
 
 (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 31,2011
    
    2010Expected volatility
    
    
    43.76
    %
    
    
    34.63
    %Expected term (years)
    
    
    3
    
    
    
    3Risk free interest rate
    
    
    1.16
    %
    
    
    1.58
    %Dividend yield
    
    
    3.66
    %
    
    
    4.24
    %Weighted average grant-date fair value
    
    $
    4.24
    
    
    $
    3.35
  Three months endedMay 31,2011
    
    2010Total cash received
    
    $
    151
    
    
    $
    Income tax benefits
    
    
    
    
    
    
    Total grant-date fair value
    
    
    26
    
    
    
    Intrinsic value
    
    
    134
    
    
    
    
 13




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 10. Stock Option Plan and Stock Based Compensation-continued
  WeightedAverageNumber
    
    Grant Dateof Options
    
    Fair ValueUnvested at February 28, 2011
    
    
    133,750
    
    
    $
    2.41New grants
    
    
    82,743
    
    
    
    4.24Vested
    
    
    (47,082
    )
    
    
    2.36Forfeited
    
    
    
    
    
    
    Unvested at May 31, 2011
    
    
    169,411
    
    
    $
    3.31
  Restricted Stock
  WeightedAverageNumber of
    
    Grant DateShares
    
    Fair ValueOutstanding at February 28, 2011
    
    
    80,823
    
    
    $
    15.59Granted
    
    
    93,959
    
    
    
    17.57Terminated
    
    
    
    
    
    
    Vested
    
    
    (31,099
    )
    
    
    15.23Outstanding at May 31, 2011
    
    
    143,683
    
    
    $
    16.96
  11. Employee Benefit Plans
   14




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 11. Employee Benefit Plans-continued
 Three months endedMay 31,2011
    
    
    2010Components of net periodic benefit costService cost
    
    $
    304
    
    
    $
    303Interest cost
    
    
    631
    
    
    
    654Expected return on plan assets
    
    
    (804
    )
    
    
    (765
    )Amortization of:Prior service cost
    
    
    (36
    )
    
    
    (36
    )Unrecognized net loss
    
    
    315
    
    
    
    336Net periodic benefit cost
    
    $
    410
    
    
    $
    492
  12. Earnings per share
   Three months endedMay 31,2011
    
    
    2010Basic weighted average common shares outstanding
    
    
    25,894,374
    
    
    
    25,800,647Effect of dilutive options
    
    
    29,922
    
    
    
    49,290Diluted weighted average common shares
outstanding
    
    
    25,924,296
    
    
    
    25,849,937Per share amounts:Net earnings  basic
    
    $
    0.44
    
    
    $
    0.51Net earnings  diluted
    
    $
    0.44
    
    
    $
    0.50Cash dividends
    
    $
    0.155
    
    
    $
    0.155
 13. Segment Information and Geographic Information
   15




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 13. Segment Information and Geographic Information-continued
  ® ® ® SM SM ® ® SM SM ® ® ® ® SM SM ® ® ® ®
     Print
    
    Apparel
    
    
    
    
    
    ConsolidatedSegment
    
    Segment
    
    Corporate
    
    TotalsThree months ended May 31, 2011:Net sales
    
    $
    67,114
    
    
    $
    76,144
    
    
    $
    
    
    
    $
    143,258Depreciation
    
    
    1,235
    
    
    
    1,137
    
    
    
    120
    
    
    
    2,492Amortization of identifiable intangibles
    
    
    232
    
    
    
    367
    
    
    
    
    
    
    
    599Segment earnings (loss) before
income tax
    
    
    11,002
    
    
    
    10,915
    
    
    
    (4,067
    )
    
    
    17,850Segment assets
    
    
    134,981
    
    
    
    335,717
    
    
    
    19,465
    
    
    
    490,163Capital expenditures
    
    
    686
    
    
    
    1,425
    
    
    
    6
    
    
    
    2,117Three 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, 2011
 13. Segment Information and Geographic Information-continued
  United States
    
    
    Canada
    
    
    Mexico
    
    
    TotalThree months ended May 31, 2011:Net sales to unaffiliated customersPrint Segment
    
    $
    67,114
    
    
    $
    
    
    
    $
    
    
    
    $
    67,114Apparel Segment
    
    
    69,905
    
    
    
    6,003
    
    
    
    236
    
    
    
    76,144$
    137,019
    
    
    $
    6,003
    
    
    $
    236
    
    
    $
    143,258Identifiable long-lived assetsPrint Segment
    
    $
    35,317
    
    
    $
    
    
    
    $
    
    
    
    
    35,317Apparel Segment
    
    
    1,520
    
    
    
    32
    
    
    
    54,023
    
    
    
    55,575Corporate
    
    
    3,778
    
    
    
    
    
    
    
    
    
    
    
    3,778$
    40,615
    
    
    $
    32
    
    
    $
    54,023
    
    
    $
    94,670Three 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
    
    
    $
    76,593
 14. Supplemental Cash Flow Information
  Three months endedMay 31,2011
    
    2010Interest paid
    
    $
    788
    
    
    $
    417Income taxes paid
    
    $
    3,578
    
    
    $
    1,392
 15. Concentrations of Risk
   17




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ENNIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MAY 31, 2011
 15. Concentrations of Risk-continued
  
 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 SM ® ® ® ®
 18




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
       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
 19




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 Excess production capacity and price competition within our industry
  Economic uncertainties
 Apparel Segment
 ®
     20




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
      Our Apparel Business Challenges 
 
    
    Increased and volatile cotton prices
    
    Start-up of and transition to our new manufacturing facility
    
    Economic uncertainties
 Cotton prices
 21




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
  Completion of new manufacturing facility
  Economic uncertainties
 Risk Factors
  22




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 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.
  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.
  23




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
  Digital technologies will continue to erode the demand for our printed business documents.
    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.
  24




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 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.
    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.
  25




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 Our apparel foreign operations could be subject to unexpected changes in regulatory requirements,
tariffs and other market barriers, political and economic instability, and social unrest 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, 2011
  Environmental regulations may impact our future operating results.
  Our new manufacturing facility in Mexico is subject to certain risks regarding sales growth and
cost savings, as well as transition risks associated with moving the current production.
  We are exposed to the risk of non-payment by our customers on a significant amount of our sales.
  Our business incurs significant freight and transportation costs.
  The price of energy is prone to significant fluctuations and volatility.
  27




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ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 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.
  Increases in the cost of employee benefits could impact the Companys financial results and cash
flow.
  Cautionary Statements
   Critical Accounting Policies and Estimates
  28




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ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
         29




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
    Results of Operations
  
    
    Consolidated Summary this section provides an overview of our consolidated results of
operations for the three months ended May 31, 2011 and 2010.
    
    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
    
    2011
    
    
    2010Net sales
    
    $
    143,258
    
    
    
    100.0
    %
    
    $
    140,741
    
    
    
    100.0
    %Cost of goods sold
    
    
    103,557
    
    
    
    72.3
    
    
    
    98,561
    
    
    
    70.0Gross profit margin
    
    
    39,701
    
    
    
    27.7
    
    
    
    42,180
    
    
    
    30.0Selling, general and administrative
    
    
    20,857
    
    
    
    14.5
    
    
    
    21,247
    
    
    
    15.1Income from operations
    
    
    18,844
    
    
    
    13.2
    
    
    
    20,933
    
    
    
    14.9Other expense, net
    
    
    (994
    )
    
    
    (0.7
    )
    
    
    (397
    )
    
    
    (0.3
    )Earnings before income taxes
    
    
    17,850
    
    
    
    12.5
    
    
    
    20,536
    
    
    
    14.6Provision for income taxes
    
    
    6,426
    
    
    
    4.5
    
    
    
    7,496
    
    
    
    5.3Net earnings
    
    $
    11,424
    
    
    
    8.0
    %
    
    $
    13,040
    
    
    
    9.3
    %
 Net Sales.
 Cost of Goods Sold.
 30




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 Selling, general and administrative expense.
 Income from operations.
 Other income and expense.
 Provision for income taxes.
 Net earnings.
 Segment Operating Results
 Three months endedMay 31,Net Sales by Segment (in thousands)
    
    2011
    
    
    2010Print
    
    $
    67,114
    
    
    $
    67,790Apparel
    
    
    76,144
    
    
    
    72,951Total
    
    $
    143,258
    
    
    $
    140,741
 Print Segment
 Apparel
Segment.
 31




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 Three months endedMay 31,Gross Profit by Segment (in thousands)
    
    2011
    
    
    2010Print
    
    $
    19,330
    
    
    $
    20,536Apparel
    
    
    20,371
    
    
    
    21,644Total
    
    $
    39,701
    
    
    $
    42,180
 Print Segment
 Apparel Segment
 Three months endedMay 31,Profit by Segment (in thousands)
    
    2011
    
    
    2010Print
    
    $
    11,002
    
    
    $
    12,502Apparel
    
    
    10,915
    
    
    
    12,502Total
    
    
    21,917
    
    
    
    25,004Less corporate expenses
    
    
    4,067
    
    
    
    4,468Earnings before income taxes
    
    $
    17,850
    
    
    $
    20,536
 Print Segment
 Apparel Segment
 Liquidity and Capital Resources
 May 31,
    
    February 28,(Dollars in thousands)
    
    2011
    
    2011
    
    ChangeWorking Capital
    
    $
    144,774
    
    
    $
    135,300
    
    
    
    7.0
    %Cash
    
    $
    17,853
    
    
    $
    12,305
    
    
    
    45.1
    %
 Working Capital .
 32




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 Three months ended May 31,(Dollars in thousands)
    
    2011
    
    2010
    
    ChangeNet Cash provided by operating activities
    
    $
    11,271
    
    
    $
    9,651
    
    
    
    16.8
    %Net Cash used in investing activities
    
    $
    (2,117
    )
    
    $
    (13,158
    )
    
    
    -83.9
    %Net Cash used in financing activities
    
    $
    (3,869
    )
    
    $
    (4,008
    )
    
    
    -3.5
    %
 Cash flows from operating activities.
 Cash flows from investing activities.
 Cash flows from financing activities.
 Credit Facility.
    33




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 Pension 
 Inventories 
 Capital Expenditures 
  Contractual Obligations & Off-Balance Sheet Arrangements 
 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Market Risk
 Interest Rates
  Foreign Exchange
  34




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
   
 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, 4 and 5 are not applicable and have been omitted
 35




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 
 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 36




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##### Table of Contents



ENNIS, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE PERIOD ENDED MAY 31, 2011
 
   ENNIS, INC.Date: June 28, 2011
    /s/ Keith S. WaltersKeith S. WaltersChairman, Chief Executive Officer and
PresidentDate: June 28, 2011
    /s/ Richard L. Travis, Jr.Richard L. Travis, Jr.V.P.  Finance and CFO, Secretary and
Principal Financial and Accounting Officer 37




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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