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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended November 30, 2020

OR

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

For the Transition Period from to

Commission File Number 1-5807

ENNIS, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

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

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

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

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

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

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

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

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

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

As of December 30, 2020, there were 26,069,543 shares of the Registrant’s common stock outstanding.

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION |  |
| Item 1. Financial Statements |  | 3
| Unaudited Consolidated Balance Sheets at November 30, 2020 and February 29, 2020 |  | 3
| Unaudited Consolidated Statements of Operations for the three and nine months ended November 30, 2020 and November 30, 2019 |  | 5
| Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended November 30, 2020 and November 30, 2019 |  | 6
| Unaudited Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended November 30, 2020 and November 30, 2019 |  | 7
| U naudited Consolidated Statements of Cash Flows for the nine months ended November 30, 2020 and November 30, 2019 |  | 8
| Notes to Unaudited Consolidated Financial Statements |  | 9
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |  | 21
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |  | 30
| Item 4. Controls and Procedures |  | 30
PART II: OTHER INFORMATION |  |
| Item 1. Legal Proceedings |  | 30
| Item 1A. Risk Factors |  | 30
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |  | 30
| Item 3. Defaults Upon Senior Securities |  | 31
| Item 4. Mine Safety Disclosures |  | 31
| Item 5. Other Information |  | 31
| Item 6. Exhibits |  | 31
SIGNATURES |  | 32

2

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)

|  | November 30, |  |  | February 29, |
|  | 2020 |  |  | 2020 |
Assets |  |  |  |  |  |  |  |
Current assets |  |  |  |  |  |  |  |
Cash |  | $ | 89,358 |  |  | $ | 68,258 |
Accounts receivable, net of allowance for doubtful receivables of $951 at November 30, 2020 and $715 at February 29, 2020 |  |  | 33,799 |  |  |  | 43,086 |
Prepaid expenses |  |  | 1,600 |  |  |  | 1,541 |
Prepaid income taxes |  |  | 3,076 |  |  |  | 2,164 |
Inventories |  |  | 31,999 |  |  |  | 34,835 |
Assets held for sale |  |  | 482 |  |  |  | — |
Total current assets |  |  | 160,314 |  |  |  | 149,884 |
Property, plant and equipment |  |  |  |  |  |  |  |
Plant, machinery and equipment |  |  | 150,203 |  |  |  | 155,744 |
Land and buildings |  |  | 56,245 |  |  |  | 57,887 |
Computer equipment and software |  |  | 19,185 |  |  |  | 19,312 |
Other |  |  | 4,808 |  |  |  | 4,873 |
Total property, plant and equipment |  |  | 230,441 |  |  |  | 237,816 |
Less accumulated depreciation |  |  | 180,396 |  |  |  | 181,414 |
Net property, plant and equipment |  |  | 50,045 |  |  |  | 56,402 |
Operating lease right-of-use assets |  |  | 16,066 |  |  |  | 20,068 |
Goodwill |  |  | 82,527 |  |  |  | 82,527 |
Intangible assets, net |  |  | 50,579 |  |  |  | 56,557 |
Other assets |  |  | 260 |  |  |  | 261 |
Total assets |  | $ | 359,791 |  |  | $ | 365,699 |

See accompanying notes to consolidated financial statements.

3

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS-Continued

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

|  | November 30, |  |  | February 29, |
|  | 2020 |  |  | 2020 |
Liabilities and Shareholders’ Equity |  |  |  |  |  |  |  |
Current liabilities |  |  |  |  |  |  |  |
Accounts payable |  | $ | 12,293 |  |  | $ | 17,235 |
Accrued expenses |  |  | 15,450 |  |  |  | 15,069 |
Current portion of operating lease liabilities |  |  | 5,057 |  |  |  | 5,665 |
Total current liabilities |  |  | 32,800 |  |  |  | 37,969 |
Liability for pension benefits |  |  | 8,936 |  |  |  | 8,936 |
Deferred income taxes |  |  | 9,182 |  |  |  | 8,749 |
Operating lease liabilities, net of current portion |  |  | 10,781 |  |  |  | 14,200 |
Other liabilities |  |  | 1,398 |  |  |  | 1,516 |
Total liabilities |  |  | 63,097 |  |  |  | 71,370 |
Commitments and contingencies |  |  |  |  |  |  |  |
Shareholders’ equity |  |  |  |  |  |  |  |
Preferred stock $10 par value, authorized 1,000,000 shares; none issued |  |  | — |  |  |  | — |
Common stock $2.50 par value, authorized 40,000,000 shares; issued 30,053,443 shares at November 30, 2020 and February 29, 2020 |  |  | 75,134 |  |  |  | 75,134 |
Additional paid-in capital |  |  | 122,699 |  |  |  | 123,052 |
Retained earnings |  |  | 195,177 |  |  |  | 193,809 |
Accumulated other comprehensive loss: |  |  |  |  |  |  |  |
Minimum pension liability, net of taxes |  |  | (23,907 | ) |  |  | (25,206 | )
Treasury stock |  |  | (72,409 | ) |  |  | (72,460 | )
Total shareholders’ equity |  |  | 296,694 |  |  |  | 294,329 |
Total liabilities and shareholders' equity |  | $ | 359,791 |  |  | $ | 365,699 |

See accompanying notes to consolidated financial statements.

4

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

|  | Three months ended |  |  | Nine months ended |
|  | November 30, |  |  | November 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net sales |  | $ | 92,443 |  |  | $ | 114,860 |  |  | $ | 268,051 |  |  | $ | 331,709 |
Cost of goods sold |  |  | 64,355 |  |  |  | 81,024 |  |  |  | 190,901 |  |  |  | 232,719 |
Gross profit margin |  |  | 28,088 |  |  |  | 33,836 |  |  |  | 77,150 |  |  |  | 98,990 |
Selling, general and administrative |  |  | 16,690 |  |  |  | 19,751 |  |  |  | 51,348 |  |  |  | 59,098 |
(Gain) loss from disposal of assets |  |  | (159 | ) |  |  | 4 |  |  |  | (571 | ) |  |  | 4 |
Income from operations |  |  | 11,557 |  |  |  | 14,081 |  |  |  | 26,373 |  |  |  | 39,888 |
Other income (expense) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  |  | (2 | ) |  |  | (5 | ) |  |  | (8 | ) |  |  | (602 | )
Other, net |  |  | (253 | ) |  |  | 185 |  |  |  | (731 | ) |  |  | 873 |
Total other income (expense) |  |  | (255 | ) |  |  | 180 |  |  |  | (739 | ) |  |  | 271 |
Earnings before income taxes |  |  | 11,302 |  |  |  | 14,261 |  |  |  | 25,634 |  |  |  | 40,159 |
Income tax expense |  |  | 2,939 |  |  |  | 3,708 |  |  |  | 6,665 |  |  |  | 10,441 |
Net earnings |  | $ | 8,363 |  |  | $ | 10,553 |  |  | $ | 18,969 |  |  | $ | 29,718 |
Weighted average common shares outstanding |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 25,974,006 |  |  |  | 26,010,571 |  |  |  | 25,978,461 |  |  |  | 26,034,617 |
Diluted |  |  | 25,974,006 |  |  |  | 26,010,571 |  |  |  | 25,978,461 |  |  |  | 26,034,617 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.32 |  |  | $ | 0.41 |  |  | $ | 0.73 |  |  | $ | 1.14 |
Diluted |  | $ | 0.32 |  |  | $ | 0.41 |  |  | $ | 0.73 |  |  | $ | 1.14 |
Cash dividends per share |  | $ | 0.225 |  |  | $ | 0.225 |  |  | $ | 0.675 |  |  | $ | 0.675 |

See accompanying notes to consolidated financial statements.

5

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

|  | Three months ended |  |  | Nine months ended |
|  | November 30, |  |  | November 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net earnings |  | $ | 8,363 |  |  | $ | 10,553 |  |  | $ | 18,969 |  |  | $ | 29,718 |
Adjustment to pension, net of taxes |  |  | 433 |  |  |  | 221 |  |  |  | 1,299 |  |  |  | 677 |
Comprehensive income |  | $ | 8,796 |  |  | $ | 10,774 |  |  | $ | 20,268 |  |  | $ | 30,395 |

See accompanying notes to consolidated financial statements.

6

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  | Additional |  |  |  |  |  |  | Other |  |  |  |  |  |  |  |  |  |  |  |  |
| Common Stock |  |  | Paid-in |  |  | Retained |  |  | Comprehensive |  |  | Treasury Stock |  |  |  |  |
| Shares |  |  | Amount |  |  | Capital |  |  | Earnings |  |  | Income (Loss) |  |  | Shares |  |  | Amount |  |  | Total |
Balance August 31, 2020 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 122,430 |  |  | $ | 192,685 |  |  | $ | (24,340 | ) |  |  | (4,089,345 | ) |  | $ | (71,597 | ) |  | $ | 294,312 |
Net earnings |  | — |  |  |  | — |  |  |  | — |  |  |  | 8,363 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8,363 |
Adjustment to pension, net of deferred tax of $144 |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 433 |  |  |  | — |  |  |  | — |  |  |  | 433 |
Dividends paid ($0.225 per share) |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,871 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,871 | )
Stock based compensation |  | — |  |  |  | — |  |  |  | 269 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 269 |
Exercise of stock options and restricted stock |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Common stock repurchases |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (51,524 | ) |  |  | (812 | ) |  |  | (812 | )
Balance November 30, 2020 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 122,699 |  |  | $ | 195,177 |  |  | $ | (23,907 | ) |  |  | (4,140,869 | ) |  | $ | (72,409 | ) |  | $ | 296,694 |
Balance February 29, 2020 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 123,052 |  |  | $ | 193,809 |  |  | $ | (25,206 | ) |  |  | (4,136,286 | ) |  | $ | (72,460 | ) |  | $ | 294,329 |
Net earnings |  | — |  |  |  | — |  |  |  | — |  |  |  | 18,969 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 18,969 |
Adjustment to pension, net of deferred tax of $433 |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,299 |  |  |  | — |  |  |  | — |  |  |  | 1,299 |
Dividends paid ($0.675 per share) |  | — |  |  |  | — |  |  |  | — |  |  |  | (17,601 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (17,601 | )
Stock based compensation |  | — |  |  |  | — |  |  |  | 933 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 933 |
Exercise of stock options and restricted stock |  | — |  |  |  | — |  |  |  | (1,286 | ) |  |  | — |  |  |  | — |  |  |  | 73,413 |  |  |  | 1,286 |  |  |  | — |
Common stock repurchases |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (77,996 | ) |  |  | (1,235 | ) |  |  | (1,235 | )
Balance November 30, 2020 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 122,699 |  |  | $ | 195,177 |  |  | $ | (23,907 | ) |  |  | (4,140,869 | ) |  | $ | (72,409 | ) |  | $ | 296,694 |
Balance August 31, 2019 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 122,359 |  |  | $ | 186,417 |  |  | $ | (16,248 | ) |  |  | (4,094,674 | ) |  | $ | (71,645 | ) |  | $ | 296,017 |
Net earnings |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,553 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,553 |
Adjustment to pension, net of deferred tax of $74 |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 221 |  |  |  | — |  |  |  | — |  |  |  | 221 |
Dividends paid ($0.225 per share) |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,871 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (5,871 | )
Stock based compensation |  | — |  |  |  | — |  |  |  | 353 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 353 |
Exercise of stock options and restricted stock |  | — |  |  |  | — |  |  |  | (11 | ) |  |  | — |  |  |  | — |  |  |  | 667 |  |  |  | 11 |  |  |  | — |
Common stock repurchases |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (42,279 | ) |  |  | (826 | ) |  |  | (826 | )
Balance November 30, 2019 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 122,701 |  |  | $ | 191,099 |  |  | $ | (16,027 | ) |  |  | (4,136,286 | ) |  | $ | (72,460 | ) |  | $ | 300,447 |
Balance February 28, 2019 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 123,065 |  |  | $ | 179,003 |  |  | $ | (16,704 | ) |  |  | (4,097,099 | ) |  | $ | (71,371 | ) |  | $ | 289,127 |
Net earnings |  | — |  |  |  | — |  |  |  | — |  |  |  | 29,718 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 29,718 |
Adjustment to pension, net of deferred tax of $226 |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 677 |  |  |  | — |  |  |  | — |  |  |  | 677 |
Dividends paid ($0.675 per share) |  | — |  |  |  | — |  |  |  | — |  |  |  | (17,622 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (17,622 | )
Stock based compensation |  | — |  |  |  | — |  |  |  | 1,018 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,018 |
Exercise of stock options and restricted stock |  | — |  |  |  | — |  |  |  | (1,382 | ) |  |  | — |  |  |  | — |  |  |  | 87,143 |  |  |  | 1,382 |  |  |  | — |
Common stock repurchases |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (126,330 | ) |  |  | (2,471 | ) |  |  | (2,471 | )
Balance November 30, 2019 |  | 30,053,443 |  |  | $ | 75,134 |  |  | $ | 122,701 |  |  | $ | 191,099 |  |  | $ | (16,027 | ) |  |  | (4,136,286 | ) |  | $ | (72,460 | ) |  | $ | 300,447 |

See accompanying notes to consolidated financial statements.

7

ENNIS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

|  | Nine months ended |
|  | November 30, |
|  |  | 2020 |  |  |  | 2019 |
Cash flows from operating activities: |  |  |  |  |  |  |  |
Net earnings |  | $ | 18,969 |  |  | $ | 29,718 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation |  |  | 7,289 |  |  |  | 7,834 |
Amortization of deferred finance charges |  |  | — |  |  |  | 47 |
Amortization of intangible assets |  |  | 5,978 |  |  |  | 5,798 |
(Gain) Loss from disposal of assets |  |  | (571 | ) |  |  | 4 |
Bad debt expense, net of recoveries |  |  | 933 |  |  |  | (68 | )
Stock based compensation |  |  | 933 |  |  |  | 1,018 |
Net pension expense |  |  | 1,732 |  |  |  | 886 |
Changes in operating assets and liabilities, net of the effects of acquisitions: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 8,354 |  |  |  | (151 | )
Prepaid expenses and income taxes |  |  | (971 | ) |  |  | 256 |
Inventories |  |  | 2,836 |  |  |  | 1,535 |
Other assets |  |  | 1 |  |  |  | 42 |
Accounts payable and accrued expenses |  |  | (4,561 | ) |  |  | (2,387 | )
Other liabilities |  |  | (143 | ) |  |  | (99 | )
Net cash provided by operating activities |  |  | 40,779 |  |  |  | 44,433 |
Cash flows from investing activities: |  |  |  |  |  |  |  |
Capital expenditures |  |  | (2,541 | ) |  |  | (2,738 | )
Purchase of businesses, net of cash acquired |  |  | — |  |  |  | (18,733 | )
Proceeds from disposal of plant and property |  |  | 1,698 |  |  |  | 2 |
Net cash used in investing activities |  |  | (843 | ) |  |  | (21,469 | )
Cash flows from financing activities: |  |  |  |  |  |  |  |
Repayment of debt |  |  | — |  |  |  | (30,000 | )
Dividends paid |  |  | (17,601 | ) |  |  | (17,622 | )
Common stock repurchases |  |  | (1,235 | ) |  |  | (2,471 | )
Net cash used in financing activities |  |  | (18,836 | ) |  |  | (50,093 | )
Net change in cash |  |  | 21,100 |  |  |  | (27,129 | )
Cash at beginning of period |  |  | 68,258 |  |  |  | 88,442 |
Cash at end of period |  | $ | 89,358 |  |  | $ | 61,313 |

See accompanying notes to consolidated financial statements.

8

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

1. Significant Accounting Policies and General Matters

Basis of Presentation

These unaudited consolidated financial statements of Ennis, Inc. and its subsidiaries (collectively referred to as the “Company,” “Registrant,” “Ennis,” or “we,” “us,” or “our”) for the period ended November 30, 2020 have been prepared in accordance with generally accepted accounting principles for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 29, 2020, from which the accompanying consolidated balance sheet at February 29, 2020 was derived. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim financial information have been included and are of a normal recurring nature. In preparing the financial statements, the Company is required to make estimates and assumptions that affect the disclosure and reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company evaluates these estimates and judgments on an ongoing basis, including those related to bad debts, inventory valuations, property, plant and equipment, intangible assets, pension plan, accrued liabilities, and income taxes. The Company bases estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The results of operations for any interim period are not necessarily indicative of the results of operations for a full year, especially in light of the uncertainties surrounding the impact of the novel coronavirus (COVID-19) pandemic.

Recent Accounting Pronouncements

Recently Adopted Accounting Updates

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-13, Fair Value Measurement (Topic 820) (“ASU 2018-13”). The standard is effective for public business entities in fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted, including during an interim period. This new standard requires changes to disclosure requirements for fair value measurements for certain Level 3 items, and specifies that some of the changes must be applied prospectively, while others should be applied retrospectively. The Company adopted ASU 2018-13 as of March 1, 2020 and the adoption of this standard had no impact on the Company’s financial statement disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments. Unlike the new guidance, entities will be required to measure expected credit losses for financial instruments, including trade receivables, based on historical experience, current conditions and reasonable forecasts. The Company adopted ASU 2016-13 as of March 1, 2020 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Updates

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), which provides companies with optional guidance, including expedients and exceptions for applying generally accepted accounting principles to contracts and other transaction affected by reference rate reform, such as the London Interbank Offered Rate (“LIBOR”). This new standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company is currently evaluating the impact of ASU 2020-04 on its consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Amendments include removal of certain exceptions to the general principles of Topic 740, Income Taxes, and simplification in several other areas. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, and interim periods therein. The Company is currently evaluating the impact of ASU 2019-12 on the consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans (“ASU 2018-14”), which removes

9

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

certain disclosures that are no longer cost beneficial and also includes additional disclosures to improve the overall usefulness of the disclosure requirements to financial statement users. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, and earlier adoption is permitted. The Company is currently evaluating the impact of ASU 2018-14 on the consolidated financial statements.

2. Revenue

Nature of Revenues

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

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

The Company does not disaggregate revenue and operates in one sales category consisting of commercial printed product revenue, which is reported as net sales on the consolidated statements of operations. The Company does not have material contract assets and contract liabilities as of November 30, 2020.

Significant Judgments

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

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

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

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

10

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

3. Accounts Receivable and Allowance for Doubtful Receivables

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

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

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

|  | Three months ended |  |  | Nine months ended |
|  | November 30, |  |  | November 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Balance at beginning of period |  | $ | 874 |  |  | $ | 937 |  |  | $ | 715 |  |  | $ | 1,020 |
Bad debt expense, net of recoveries |  |  | 153 |  |  |  | (90 | ) |  |  | 933 |  |  |  | (68 | )
Accounts written off |  |  | (76 | ) |  |  | (85 | ) |  |  | (697 | ) |  |  | (190 | )
Balance at end of period |  | $ | 951 |  |  | $ | 762 |  |  | $ | 951 |  |  | $ | 762 |

4. Inventories

With the exception of approximately 11.0% and 9.4% of its inventories valued at the lower of last-in, first-out (“LIFO”) for the periods ended November 30, 2020 and February 29, 2020, respectively, the Company values its inventories at the lower of first-in, first-out (“FIFO”) cost or net realizable value. The Company regularly reviews inventories on hand, using specific aging categories, and writes down the carrying value of its inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage. In assessing the ultimate realization of its inventories, the Company is required to make judgments as to future demand requirements. As actual future demand or market conditions may vary from those projected by the Company, adjustments to inventories may be required.

The following table summarizes the components of inventories at the different stages of production as of the dates indicated (in thousands):

|  | November 30, |  |  | February 29, |
|  | 2020 |  |  | 2020 |
Raw material |  | $ | 19,659 |  |  | $ | 20,267 |
Work-in-process |  |  | 3,397 |  |  |  | 4,557 |
Finished goods |  |  | 8,943 |  |  |  | 10,011 |
|  | $ | 31,999 |  |  | $ | 34,835 |

11

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

5. Acquisitions

The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity in a business combination recognizes 100% of the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes valuation techniques appropriate for the asset or liability being measured in determining these fair values. Any excess of the purchase price over amounts allocated to assets acquired, including identifiable intangible assets and liabilities assumed, is recorded as goodwill. Where amounts allocated to assets acquired and liabilities assumed is greater than the purchase price, a bargain purchase gain is recognized. Acquisition-related costs are expensed as incurred.

On July 15, 2019, the Company acquired all the outstanding stock of The Flesh Company (“Flesh”) for approximately $9.9 million (which includes a potential earn-out consideration of up to $500,000) plus the assumption of trade payables, subject to certain other adjustments. The earn-out consideration is capped at $500,000 and is payable over the four years following the closing if certain minimum operating income levels are achieved. Since the acquisition, the Company has incurred approximately $0.3 million of costs (including legal and accounting fees) related to the acquisition. The Company recorded intangible assets with definite lives of approximately $1.2 million in connection with the transaction. Flesh, together with its wholly owned subsidiary, Impressions Direct, Inc. (“Impressions Direct”), is a printing company with two locations, with the St. Louis, Missouri location containing Flesh’s corporate office and the direct mail operations of Impressions Direct, and the Parsons, Kansas location containing Flesh’s main manufacturing facility and warehouse. The acquisition of Flesh expanded the Company’s operations with respect to business forms, checks, direct mail services, integrated products and labels.

The following is a summary of the purchase price allocation for Flesh (in thousands):

Accounts receivable |  | $ | 2,480 |
Inventories |  |  | 1,343 |
Other assets |  |  | 191 |
Right-of-use asset |  |  | 715 |
Property, plant & equipment |  |  | 7,065 |
Customer lists |  |  | 337 |
Trademarks |  |  | 880 |
Non-compete |  |  | 20 |
Accounts payable and accrued liabilities |  |  | (2,251 | )
Operating lease liability |  |  | (700 | )
Deferred income taxes |  |  | (206 | )
|  | $ | 9,874 |

On March 16, 2019, the Company acquired the assets of Integrated Print & Graphics (“Integrated”), which is based in South Elgin, Illinois, for $8.9 million in cash plus the assumption of trade payables, subject to certain adjustments. Since the acquisition, the Company has incurred approximately $29,000 of costs (including legal and accounting fees) related to the acquisition. Goodwill of $893,000 recognized as a part of the acquisition is deductible for tax purposes. The Company also recorded intangible assets with definite lives of approximately $1.8 million in connection with the transaction. The acquisition of Integrated created additional capabilities within the Company’s high color commercial print product line.

The following is a summary of the purchase price allocation for Integrated (in thousands):

Accounts receivable |  | $ | 1,971 |
Inventories |  |  | 1,322 |
Other assets |  |  | 72 |
Property, plant & equipment |  |  | 3,828 |
Right-of-use asset |  |  | 2,041 |
Customer lists |  |  | 896 |
Trademarks |  |  | 896 |
Non-compete |  |  | 25 |
Goodwill |  |  | 893 |
Accounts payable and accrued liabilities |  |  | (1,044 | )
Operating lease liability |  |  | (2,041 | )
|  | $ | 8,859 |

12

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

The results of operations for Integrated and Flesh are included in the Company’s consolidated financial statements from the respective dates of acquisition. The following table sets forth certain operating information on a pro forma basis as though all Integrated and Flesh operations had been acquired as of March 1, 2019, after the estimated impact of adjustments such as amortization of intangible assets, depreciation expense and interest expense and related tax effects (in thousands, except per share amounts).

|  | Three months ended |  |  | Nine months ended |
|  | November 30, 2019 |  |  | November 30, 2019 |
Pro forma net sales |  | $ | 114,860 |  |  | $ | 343,138 |
Pro forma net earnings |  |  | 10,553 |  |  |  | 28,805 |
Pro forma earnings per share - diluted |  |  | 0.41 |  |  |  | 1.11 |

The pro forma results are not necessarily indicative of what would have occurred if the acquisitions had been in effect for the period presented.

6. Leases

The Company leases certain of its facilities and equipment under operating leases, which are recorded as right-of-use assets and lease liabilities. The Company’s leases generally have terms of 1 – 5 years, with certain leases including renewal options to extend the leases for additional periods at the Company’s discretion. At lease inception, all renewal options reasonably certain to be exercised are considered when determining the lease term. The Company currently does not have leases that include options to purchase or provisions that would automatically transfer ownership of the leased property to the Company.

Operating lease expense is recognized on a straight-line basis over the lease term, and variable lease payments are expensed as incurred. The Company had no variable lease costs for the nine months ended November 30, 2020.

The Company determines whether a contract is or contains a lease at the inception of the contract. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment.

Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date as rates are not implicitly stated in most leases.

13

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Components of lease expense for the three and nine months ended November 30, 2020 and November 30, 2019 were as follows (in thousands):

|  | Three months ended |  |  | Nine months ended |
|  | November 30, 2020 |  |  | November 30, 2019 |  |  | November 30, 2020 |  |  | November 30, 2019 |
Operating lease cost |  | $ | 1,572 |  |  | $ | 1,675 |  |  | $ | 4,773 |  |  | $ | 4,874 |
Supplemental cash flow information related to leases was as follows: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 1,568 |  |  | $ | 1,663 |  |  | $ | 4,743 |  |  | $ | 4,849 |
Right-of-use assets obtained in exchange for lease obligations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating leases |  | $ | 138 |  |  | $ | 1,494 |  |  | $ | 194 |  |  | $ | 4,359 |

Weighted Average Remaining Lease Terms |  |  |  |
Operating leases |  | 4 Years |
Weighted Average Discount Rate |  |  |  |
Operating leases |  |  | 4.32 | %

Future minimum lease commitments under non-cancelable operating leases for each of the fiscal years ending are as follows (in thousands):

|  | Operating |
|  | Lease |
|  | Commitments |
2021 (remaining 3 months) |  | $ | 1,021 |
2022 |  |  | 5,299 |
2023 |  |  | 4,251 |
2024 |  |  | 2,952 |
2025 |  |  | 2,160 |
2026 |  |  | 883 |
Thereafter |  |  | 660 |
Total future minimum lease payments |  | $ | 17,226 |
Less imputed interest |  |  | 1,388 |
Present value of lease liabilities |  | $ | 15,838 |

7. Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets of acquired businesses and is not amortized. Goodwill and other intangible assets are tested for impairment at a reporting unit level. Historically, the Company has performed its annual impairment test as of November 30, the last day of the third quarter, but beginning in fiscal year 2020, the Company performed its annual impairment test as of December 1, the first day of the fourth quarter. Accordingly, the annual impairment test was performed as of November 30 and updated as of December 1 of fiscal year 2020, in each case with no impact on the financial statements. The change to the Company’s impairment testing date did not accelerate, delay, avoid or cause an impairment charge, nor

14

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

did the change result in adjustments to the Company’s previously issued financial statements. The Company’s impairment tests indicated significant cushion between its carrying value and fair market value.

Subsequent to the December 1, 2019 assessment, the novel coronavirus (COVID-19) pandemic began to cause major economic disruption and significant volatility in the stock market. As a result, the Company updated the assessment performed for fiscal year 2020 through February 29, 2020. No impairment charge to the Company’s recorded goodwill was deemed required as a result of this updated assessment. For the nine months ended November 30, 2020, given the continued economic impact of COVID-19, the Company reviewed the assumptions used in the previous assessment and found them to still be materially accurate.

The Company uses qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit exceeds its carrying amount, including goodwill. Some of the qualitative factors used in applying this test include consideration of macroeconomic conditions, industry and market conditions, cost factors affecting the business, overall financial performance of the business, and performance of the share price of the Company.

If qualitative factors are not deemed sufficient to conclude that the fair value of the reporting unit more likely than not exceeds its carrying value, then a one-step approach is applied in making an evaluation. The evaluation utilizes multiple valuation methodologies, including a market approach (market price multiples of comparable companies) and an income approach (discounted cash flow analysis). The computations require management to make significant estimates and assumptions, including, among other things, selection of comparable publicly traded companies, the discount rate applied to future earnings reflecting a weighted average cost of capital, and earnings growth assumptions. A discounted cash flow analysis requires management to make various assumptions about future sales, operating margins, capital expenditures, working capital, and growth rates. If the evaluation results in the fair value of the goodwill for the reporting unit being lower than the carrying value, an impairment charge is recorded.

The carrying amount and accumulated amortization of the Company’s intangible assets at each balance sheet date are as follows (in thousands):

|  | Weighted |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Average |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Remaining |  |  | Gross |  |  |  |  |  |  |  |  |
|  | Life |  |  | Carrying |  |  | Accumulated |  |  |  |  |
As of November 30, 2020 |  | (in years) |  |  | Amount |  |  | Amortization |  |  | Net |
Amortized intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trademarks and trade names |  |  | 11.9 |  |  | $ | 26,161 |  |  | $ | 7,485 |  |  | $ | 18,676 |
Customer lists |  |  | 6.7 |  |  |  | 73,102 |  |  |  | 41,334 |  |  |  | 31,768 |
Non-compete |  |  | 1.3 |  |  |  | 767 |  |  |  | 632 |  |  |  | 135 |
Patent |  |  | — |  |  |  | 783 |  |  |  | 783 |  |  |  | — |
Total |  |  | 8.6 |  |  | $ | 100,813 |  |  | $ | 50,234 |  |  | $ | 50,579 |
As of February 29, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amortized intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Trademarks and trade names |  |  | 12.6 |  |  | $ | 26,161 |  |  | $ | 5,811 |  |  | $ | 20,350 |
Customer lists |  |  | 7.4 |  |  |  | 73,102 |  |  |  | 37,161 |  |  |  | 35,941 |
Non-compete |  |  | 1.8 |  |  |  | 767 |  |  |  | 501 |  |  |  | 266 |
Patent |  |  | — |  |  |  | 783 |  |  |  | 783 |  |  |  | — |
Total |  |  | 9.2 |  |  | $ | 100,813 |  |  | $ | 44,256 |  |  | $ | 56,557 |

Aggregate amortization expense for the nine months ended November 30, 2020 and November 30, 2019 was $6.0 million and $5.8 million, respectively.

The Company’s estimated amortization expense for the current and next four fiscal years is as follows (in thousands):

2021 |  | $ | 8,081 |
2022 |  |  | 7,568 |
2023 |  |  | 6,541 |
2024 |  |  | 6,504 |
2025 |  |  | 6,329 |

15

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Changes in the net carrying amount of goodwill as of the dates indicated are as follows (in thousands):

Balance as of March 1, 2019 |  | $ | 81,634 |
Goodwill acquired |  |  | 893 |
Balance as of February 29, 2020 |  |  | 82,527 |
Balance as of November 30, 2020 |  | $ | 82,527 |

During the nine months ended November 30, 2019, $0.9 million was added to goodwill related to the acquisition of Integrated.

8. Accrued Expenses

The following table summarizes the components of accrued expenses as of the dates indicated (in thousands):

|  | November 30, |  |  | February 29, |
|  |  | 2020 |  |  |  | 2020 |
Employee compensation and benefits |  | $ | 13,010 |  |  | $ | 13,171 |
Taxes other than income |  |  | 973 |  |  |  | 464 |
Accrued legal and professional fees |  |  | 256 |  |  |  | 190 |
Accrued interest |  |  | 92 |  |  |  | 78 |
Accrued utilities |  |  | 90 |  |  |  | 90 |
Accrued acquisition related obligations |  |  | 179 |  |  |  | 240 |
Accrued credit card fees |  |  | — |  |  |  | 195 |
Income taxes payable |  |  | — |  |  |  | — |
Other accrued expenses |  |  | 850 |  |  |  | 641 |
|  | $ | 15,450 |  |  | $ | 15,069 |

9. Long-Term Debt

The Company is party to a Second Amended and Restated Credit Agreement, which has been amended from time to time, pursuant to which a credit facility has been extended to the Company until November 11, 2021 (the “Credit Facility”). The Credit Facility provides the Company and its subsidiaries with up to $100.0 million in revolving credit, as well as a $20.0 million sublimit for the issuance of letters of credit and a $15.0 million sublimit for swing-line loans. Under the Credit Facility, the Company or any of its subsidiaries can request up to three increases in the aggregate commitments in an aggregate amount not to exceed $50.0 million. Under the Credit Facility: (i) the Company’s consolidated net leverage ratio may not exceed 3.00:1.00, (ii) the Company’s fixed charge coverage ratio may not be less than 1.25:1.00, and (iii) the Company may make dividends or distributions to shareholders so long as (A) no event of default has occurred and is continuing and (B) the Company’s net leverage ratio both before and after giving effect to any such dividend or distribution is equal to or less than 2.50:1.00. All calculations are made based on U.S. Generally Accepted Accounting Principles existing at the time the Credit Facility was entered into. As of November 30, 2020, the Company was in compliance with all terms and conditions of the Credit Facility.

The Credit Facility bears interest at LIBOR plus a spread ranging from 1.85% to 2.5%. The Company had no outstanding long-term debt under the revolving credit line as of November 30, 2020. The rate is determined by the Company’s fixed charge coverage ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). As of November 30, 2020, the Company had $0.6 million outstanding under standby letters of credit arrangements, leaving approximately $99.4 million in available borrowing capacity. The Credit Facility is secured by substantially all of the Company’s assets (other than real property), as well as all capital securities of each of the Company’s subsidiaries.

10. Shareholders’ Equity

The Company’s board of directors (the “Board”) has authorized the repurchase of the Company’s outstanding common stock through a stock repurchase program, which authorized amount is currently up to $40.0 million in the aggregate. Under the repurchase program, purchases may be made from time to time in the open market or through privately negotiated transactions depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be made in accordance with applicable insider trading and other securities laws and regulations. These repurchases may be commenced or suspended at any time or from time to time without prior notice.

16

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

During the nine months ended November 30, 2020 the Company repurchased 77,996 shares of common stock under the program at an average price of $15.84 per share. Since the program’s inception in October 2008, there have been 1,894,350 common shares repurchased at an average price of $15.91 per share. As of November 30, 2020, $9.9 million remained available to repurchase shares of the Company’s common stock under the program.

11. Stock Option Plan and Stock Based Compensation

The Company grants stock options and restricted stock to key executives, managerial employees and non-employee directors. At November 30, 2020, the Company had one stock option plan, the 2004 Long-Term Incentive Plan of Ennis, Inc., as amended and restated as of June 30, 2011 (the “Plan”). The Company has 470,888 shares of unissued common stock reserved under the Plan for issuance as of November 30, 2020. The exercise price of each stock option granted under the Plan equals a referenced price of the Company’s common stock as reported on the New York Stock Exchange on the date of grant, and an option’s maximum term is ten years. Stock options and restricted stock may be granted at different times during the year and vest ratably over various periods, from grant date up to five years. The Company uses treasury stock to satisfy option exercises and restricted stock awards.

The Company recognizes compensation expense for stock options and restricted stock grants on a straight-line basis over the requisite service period. For the three months ended November 30, 2020 and November 30, 2019, the Company included in selling, general and administrative expenses, compensation expense related to share-based compensation of $0.2 million and $0.3 million, respectively. For the nine months ended November 30, 2020 and November 30, 2019, the Company included in selling, general and administrative expenses, compensation expense related to share-based compensation of $0.9 million and $1.0 million, respectively.

Stock Options

As of November 30, 2020, the Company had no outstanding vested or unvested stock options. The Company had no stock option activity for the nine months ended November 30, 2020.

No stock options were granted during the nine months ended November 30, 2020 and November 30, 2019.

The Company had no unvested stock options outstanding at any time during the nine months ended November 30, 2020.

Restricted Stock

The following activity occurred with respect to the Company’s restricted stock awards for the nine months ended November 30, 2020:

|  |  |  |  | Weighted |
|  |  |  |  | Average |
| Number of |  |  | Grant Date |
| Shares |  |  | Fair Value |
Outstanding at March 1, 2020 |  | 143,926 |  |  | $ | 19.79 |
Granted |  | 59,315 |  |  |  | 17.09 |
Terminated |  | (10,099 | ) |  |  | 19 |
Vested |  | (73,413 | ) |  |  | 19.16 |
Outstanding at November 30, 2020 |  | 119,729 |  |  | $ | 18.90 |

As of November 30, 2020, the total remaining unrecognized compensation cost related to unvested restricted stock granted under the Plan was approximately $1.6 million. The weighted average remaining requisite service period of the unvested restricted stock awards was 1.7 years.

12. Pension Plan

The Company and certain subsidiaries have a noncontributory defined benefit retirement plan (the “Pension Plan”), covering approximately 19% of the Company’s aggregate employees. Benefits are based on years of service and the employee’s average compensation for the highest five compensation years preceding retirement or termination.

17

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Pension expense is composed of the following components included in cost of goods sold and selling, general, and administrative expenses in the Company’s consolidated statements of earnings (in thousands):

|  | Three months ended |  |  | Nine months ended |
|  | November 30, |  |  | November 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Components of net periodic benefit cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service cost |  | $ | 318 |  |  | $ | 272 |  |  | $ | 954 |  |  | $ | 816 |
Interest cost |  |  | 438 |  |  |  | 564 |  |  |  | 1,315 |  |  |  | 1,691 |
Expected return on plan assets |  |  | (1,019 | ) |  |  | (1,049 | ) |  |  | (3,056 | ) |  |  | (3,148 | )
Amortization of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unrecognized net loss |  |  | 840 |  |  |  | 509 |  |  |  | 2,519 |  |  |  | 1,527 |
Net periodic benefit cost |  | $ | 577 |  |  | $ | 296 |  |  | $ | 1,732 |  |  | $ | 886 |

The Company is required to make contributions to the Pension Plan. These contributions are required under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Due to the enactment of the Highway and Transportation Funding Act (HATFA) in August 2014, plan sponsors can calculate the discount rate used to measure the Pension Plan liability using a 25-year average of interest rates plus or minus a corridor. The Company’s minimum required contribution to the Pension Plan is zero for the Pension Plan year ending February 28, 2021. Assuming a stable funding status, the Company would expect to make a cash contribution to the Pension Plan of between $1.5 million and $3.0 million per year. However, changes in actual investment returns or in discount rates could change this amount significantly. At November 30, 2020, we had an unfunded pension liability recorded on our balance sheet of $8.9 million.

13. Earnings Per Share

Basic earnings per share have been computed by dividing net earnings by the weighted average number of common shares outstanding during the applicable period. Diluted earnings per share reflect the potential dilution that could occur if stock options or other contracts to issue common shares were exercised or converted into common stock.

As of November 30, 2020 and November 30, 2019, no options were outstanding. The following table sets forth the computation for basic and diluted earnings per share for the periods indicated:

|  | Three months ended |  |  | Nine months ended |
|  | November 30, |  |  | November 30, |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Basic weighted average common shares outstanding |  |  | 25,974,006 |  |  |  | 26,010,571 |  |  |  | 25,978,461 |  |  |  | 26,034,617 |
Effect of dilutive options |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Diluted weighted average common shares outstanding |  |  | 25,974,006 |  |  |  | 26,010,571 |  |  |  | 25,978,461 |  |  |  | 26,034,617 |
Earnings (loss) per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net earnings - basic |  | $ | 0.32 |  |  | $ | 0.41 |  |  | $ | 0.73 |  |  | $ | 1.14 |
Net earnings - diluted |  | $ | 0.32 |  |  | $ | 0.41 |  |  | $ | 0.73 |  |  | $ | 1.14 |
Cash dividends |  | $ | 0.225 |  |  | $ | 0.225 |  |  | $ | 0.675 |  |  | $ | 0.675 |

18

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

14. Concentrations of Risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and trade receivables. Cash is placed with high-credit quality financial institutions. Although bad debt expense increased during the quarter due to the economic impact of COVID-19, the Company believes its credit risk with respect to trade receivables is limited due to industry and geographic diversification. As disclosed on the consolidated balance sheets, the Company maintains an allowance for doubtful receivables to cover the Company’s estimate of credit losses associated with accounts receivable.

The Company, for quality and pricing reasons, purchases its paper products from a limited number of suppliers. While other sources may be available to the Company to purchase these products, they may not be available at the cost or at the quality the Company has come to expect.

For the purposes of the consolidated statements of cash flows, the Company considers cash to include cash on hand and in bank accounts. The Federal Deposit Insurance Corporation insures accounts up to $250,000. At November 30, 2020, cash balances included $88.2 million that was not federally insured because it represented amounts in individual accounts above the federally insured limit for each such account. This at-risk amount is subject to fluctuation on a daily basis. While management does not believe there is significant risk with respect to such deposits, no assurance can be made that the Company will not experience losses on the Company’s deposits.

15. Related Party Transactions

The Company leases a facility and sells product to an entity controlled by a member of the Board who was the former owner of Integrated, a business that the Company acquired. The total right-of-use asset and related lease liability as of November 30, 2020 was $1.5 million and $1.5 million, respectively. During the nine months ended November 30, 2020, total lease payments made to, and sales made to, the related party were approximately $0.3 million and $1.8 million, respectively.

16. COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the ongoing COVID-19 outbreak to be a global pandemic. In response to the rapid spread of COVID-19 within the United States, federal, state and local governments have imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness. Due to the Company’s involvement in healthcare, government, food and beverage and banking, the Company’s plants have been deemed “essential” and, as such, the Company has continued to operate most of its manufacturing facilities, albeit at reduced production levels. Due to reduced demand for our products during the pandemic, particularly in our transactional forms, the Company has furloughed approximately 300 employees, ceased operating in two of its owned under-utilized facilities and exited two facilities with expiring leases.

While economic activity remains depressed due to the pandemic, the Company will continue to monitor projected sales and proactively adjust costs as necessary. The Company believes the cost cutting measures it has implemented thus far will not impact its ability to service increased customer demand when economic conditions improve. The U.S. economy continues to be significantly impacted by the COVID-19 pandemic and parts of the economy have started to re-open, but remain subject to ongoing surges and local shutdowns, creating a very fluid economic environment. As a recent indicator, according to the Bureau of Labor Statistics (“BLS”), total nonfarm payroll employment rose by 245,000 in November, reflecting a degree of resumption of economic activity that had previously been curtailed due to the COVID-19 pandemic and efforts to contain it. According to the BLS report, in November notable job gains occurred in transportation and warehousing, professional and business services, and health care, whereas employment levels declined in government and retail trade. These BLS statistics provide evidence that various sectors continue to improve, while others have not, which we believe was reflected in our sequential sales increase.

17. Subsequent Events

On December 17, 2020, the Board declared a quarterly dividend on the Company’s common stock of 22.5 cents per share, which will be paid on February 4, 2021 to shareholders of record as of January 7, 2021. The expected payout for this dividend is approximately $5.9 million.

19

ENNIS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED NOVEMBER 30, 2020

On December 29, 2020, the Company issued a press release announcing that one of its wholly-owned subsidiaries entered into a Letter of Intent to acquire the assets of Infoseal LLC in Roanoke, Virginia, with a closing expected effective close of business December 31, 2020. The contemplated transaction was in fact signed and closed as of December 31, 2020.

20

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read together with the unaudited consolidated financial statements and related notes of Ennis, Inc. (collectively with its subsidiaries, the “Company,” “Registrant,” “Ennis,” or “we,” “us,” or “our”), included in Part 1, Item 1 of this report, and with the audited consolidated financial statements and the related notes of the Company included in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020.

All of the statements in this report, other than historical facts, are forward-looking statements, including, without limitation, the statements made in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations, and beliefs relating to matters that are not historical in nature. The words “could,” “should,” “feel,” “anticipate,” “aim,” “preliminary,” “expect,” “believe,” “estimate,” “intend,” “intent,” “plan,” “will,” “foresee,” “project,” “forecast,” or the negative thereof or variations thereon, and similar expressions identify forward-looking statements.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other factors relating to its operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements.

These statements reflect the current views and assumptions of management with respect to future events. The Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

We believe these forward-looking statements are based upon reasonable assumptions. All such statements involve risks and uncertainties, and as a result, actual results could differ materially from those projected, anticipated or implied by these statements. Such forward-looking statements involve known and unknown risks, including but not limited to: general economic, business and labor conditions and the potential impact on our operations; our ability to implement our strategic initiatives and control our operational costs; dependence on a limited number of key suppliers; our ability to recover the rising cost of raw materials and other costs (i.e., energy, freight, labor, benefit costs, etc.) in markets that are highly price competitive and volatile; the impact of the novel coronavirus (COVID-19) pandemic or future pandemics on the U.S. and local economies, our business operations, our workforce, our supply chain and our customer base; our ability to timely or adequately respond to technological changes in the industry; the impact of the Internet and other electronic media on the demand for forms and printed materials; the impact of foreign competition, tariffs, trade regulations and import restrictions; changes in economic conditions; customer credit risk; competitors’ pricing strategies; a decline in business volume and profitability could result in an impairment in our reported goodwill negatively impacting our operational results; our ability to retain key management personnel; our ability to identify, manage or integrate acquisitions; our ability to protect our information systems from cybercrime or other disruptions; and changes in government regulations. In addition to the factors indicated above, you should carefully consider the risks described in and incorporated by reference herein and in the risk factors in our Annual Report on Form 10-K for the fiscal year ended February 29, 2020 and our Quarterly Report on Form 10-Q for the quarter ended May 31, 2020 before making an investment in our common stock.

Overview

Ennis, Inc. (formerly Ennis Business Forms, Inc.) was organized under the laws of Texas in 1909. The Company and its subsidiaries print and manufacture a broad line of business forms and other business products. We distribute business products and forms throughout the United States primarily through independent distributors. This distributor channel encompasses independent print distributors, commercial printers, direct mail, fulfillment companies, payroll and accounts payable software companies, and advertising agencies, among others. We also sell products to our competitors, from time to time, to satisfy their customers’ needs.

For a discussion regarding the impact of the ongoing novel coronavirus (COVID-19) pandemic on our business, please see Business Challenges—COVID-19 Pandemic and Results of Operations, below.

21

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Business Overview

Our management believes we are the largest provider of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders to independent distributors in the United States.

We are in the business of manufacturing, designing, and selling business forms and other printed business products primarily to distributors located in the United States. We operate 57 manufacturing plants throughout the United States in 20 strategically located states. Approximately 94% of the business products we manufacture are custom and semi-custom products, constructed in a wide variety of sizes, colors, number of parts, and quantities on an individual job basis, depending upon the customers’ specifications.

The products we sell include snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls and pressure sensitive products in short, medium and long runs under the following labels: Ennis®, Royal Business Forms®, Block Graphics®, Specialized Printed Forms®, 360º Custom LabelsSM, ColorWorx®, Enfusion®, Uncompromised Check Solutions®, VersaSeal®, Ad ConceptsSM, FormSource LimitedSM, Star Award Ribbon Company®, Witt Printing®, B&D Litho®, Genforms®, PrintGraphics®, Calibrated Forms®, PrintXcel®, Printegra®, Falcon Business FormsSM, Forms ManufacturersSM, Mutual Graphics®, TRI-C Business FormsSM, Major Business SystemsSM, Independent PrintingSM, Hoosier Data Forms®, Hayes Graphics®, Wright Business GraphicsSM, Wright 360SM, Integrated Print & GraphicsSM, the Flesh CompanySM, Impressions DirectSM, and Ace FormsSM. We also sell the Adams McClure® brand (which provides Point of Purchase advertising for large franchise and fast food chains, as well as kitting and fulfillment); the Admore®, Folder Express®, and Independent Folders® brands (which provide presentation folders and document folders); Ennis Tag & LabelSM (which provides custom printed, high performance labels and custom and stock tags); Allen-Bailey Tag & LabelSM, Atlas Tag & Label®, Kay Toledo Tag®, and Special Service Partners® (SSP) (which provides custom and stock tags and labels); Trade Envelopes®, Block Graphics®, Wisco®, and National Imprint Corporation® (which provide custom and imprinted envelopes) and Northstar® and General Financial Supply® (which provide financial and security documents). We sell predominantly through independent distributors, as well as occasional sales of our products to our competitors. Northstar Computer Forms, Inc., one of our wholly-owned subsidiaries, also sells direct to a small number of customers, generally large banking organizations (where a distributor is not acceptable or available to the end-user). Adams McClure, LP, a wholly-owned subsidiary, also sells direct to a small number of customers, where sales are generally through advertising agencies.

The printing industry generally sells its products either predominantly to end users, a market dominated by a few large manufacturers, such as R.R. Donnelley and Sons, Staples, Inc., Standard Register Co. (a subsidiary of Taylor Corporation), and Cenveo, Inc., or, like the Company, through a variety of independent distributors and distributor groups. While it is not possible, because of the lack of adequate public statistical information, to determine the Company’s share of the total business products market, management believes the Company is the largest producer of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders in the United States distributing primarily through independent distributors.

There are a number of competitors that operate in this segment, ranging in size from single employee-owned operations to multi-plant organizations. We believe our strategic locations and buying power permit us to compete on a favorable basis within the distributor market on competitive factors, such as service, quality, and price.

Distribution of business forms and other business products throughout the United States is primarily done through independent distributors, including business forms distributors, resellers, direct mail, commercial printers, payroll and accounts payable software companies, and advertising agencies.

Raw materials principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for business products purchased primarily from one major supplier at favorable prices based on the volume of business.

Business products usage in the printing industry is generally not seasonal. General economic conditions and contraction of the traditional business forms industry are the predominant factors in quarterly volume fluctuations.

Recent Acquisitions

We completed two acquisitions in fiscal year 2020. On July 15, 2019, we acquired all the outstanding stock of The Flesh Company (“Flesh”) for approximately $9.9 million (which includes potential earn-out consideration of up to $500,000) plus the assumption of trade payables, subject to final working capital and certain other adjustments. The earn-out consideration is capped at $500,000 and is payable over the four years following the closing if certain minimum operating income levels are achieved. We recorded intangible assets with definite lives of approximately $1.2 million in connection with the transaction. Flesh, together with its

22

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

wholly owned subsidiary, Impressions Direct, Inc. (“Impressions Direct”), is a printing company with two locations, with the St. Louis, Missouri location containing Flesh’s corporate office and the direct mail operations of Impressions Direct, and the Parsons, Kansas location containing Flesh’s main manufacturing facility and warehouse. The acquisition of Flesh, which prior to the acquisition generated approximately $31.0 million in sales for its fiscal year ended September 30, 2018, expanded our operations with respect to business forms, checks, direct mail services, integrated products and labels.

On March 16, 2019, we acquired the assets of Integrated Print & Graphics (“Integrated”), which is based in South Elgin, Illinois, for $8.9 million in cash plus the assumption of trade payables, subject to certain adjustments. Goodwill of $893,000 recognized as a part of the acquisition is deductible for tax purposes. We also recorded intangible assets with definite lives of approximately $1.8 million in connection with the transaction. The acquisition of Integrated, which prior to the acquisition generated approximately $20.0 million in sales for its fiscal year ended December 31, 2018, created additional capabilities within our high color commercial print product line.

Business Challenges

Our industry is currently experiencing consolidation of traditional supply channels, product obsolescence, paper supplier capacity adjustments, and increased pricing and potential supply allocations due to demand/supply curve imbalance. Technology advances have made electronic distribution of documents, internet hosting, digital printing and print-on-demand valid, cost-effective alternatives to traditional custom-printed documents and customer communications. Improved equipment has become more accessible to our competitors due to the continued low interest rate environment. We face highly competitive conditions throughout our supply chain in an already over-supplied, price-competitive print industry. The challenges of our business include the following:

COVID-19 Pandemic – The global spread of the novel strain of COVID-19 has significantly impacted health and economic conditions throughout the United States and the world, including the markets in which we operate. In response to COVID-19, federal, state and local authorities have recommended social distancing and have imposed various restrictions, including quarantine and isolation measures, mandatory closures of businesses deemed “non-essential” in certain jurisdictions. As of the date of this report, our plants continue to be deemed “essential,” largely due to our business’s support of many important sectors of the economy, including healthcare, government, food and beverage and banking. The U.S. economy continues to be significantly impacted by the COVID-19 pandemic and parts of the economy have started to re-open, but remain subject to ongoing surges and local shutdowns, creating a very fluid economic environment. As a recent indicator, according to the Bureau of Labor Statistics (“BLS”), total nonfarm payroll employment rose by 245,000 in November, reflecting a degree of resumption of economic activity that had previously been curtailed due to the COVID-19 pandemic and efforts to contain it. According to the BLS report, in November notable job gains occurred in transportation and warehousing, professional and business services, and health care, whereas employment levels declined in government and retail trade. These BLS statistics provide evidence that various sectors continue to improve, while others have not, which we believe was reflected in our sequential sales increase and improvements in our gross profit margin and operational margin during the third quarter. Even so, we expect the pandemic to continue to have a negative impact on our financial condition and operational results, on a comparative basis, until at least the end of this fiscal year. While the impacts of the pandemic have been significant, they were within our forecasted parameters for the period ended November 30, 2020.

The following is a summary of our recent and anticipated actions in response to COVID-19 and its impact on our business.

| ➣ | Cash/Liquidity:

We believe our strong liquidity position will help us mitigate the ongoing adverse impacts of COVID-19. On November 30, 2020 we had $89.4 million in cash, in addition to $99.4 million available under our credit facility, if needed. During the period, our cash position increased by $21.1 million ($5.5 million from August 31, 2020), and our working capital position increased by $15.6 million from February 29, 2020 ($6.9 million from August 31, 2020). In addition, our liquidity and debt ratios have all improved since the start of the pandemic, with our current ratio (calculated by dividing our current assets by our current liabilities) increasing from 3.95 to 4.89, our quick ratio (calculated by dividing our current assets less inventories by our current liabilities) increasing from 3.03 to 3.91, and our net debt to equity ratio (after application of cash) decreasing from .01 to -.09.

| ➣ | Receivable and Inventory Management:

We continue to closely monitor and manage our outstanding trade receivables and inventories. During the third quarter, our days’ sales in our receivables remained fairly constant at about 35 days, and while our days’ sales of inventory (33 days)

23

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

increased slightly from February 29, 2020 (30 days), it decreased from August 31, 2020 (35 days). The Company continues to monitor incoming orders and is adjusting its raw material purchases accordingly.

| ➣ | Supply Chain:

To date, COVID-19 has not impacted, nor do we expect it to materially impact, the supply chain for the products we sell. Most of our products are sourced domestically from suppliers deemed “essential” by the government, and therefore currently in operation, and we have been able to switch from impacted suppliers to non-impacted suppliers in several instances since the outbreak. However, if one or more of our major suppliers are negatively impacted by the COVID-19 pandemic, through plant closures, deteriorating financial condition, or otherwise, it could adversely affect our operational results and financial condition.

| ➣ | Cost Savings:

COVID-19 has severely impacted global economic activity, including the printing industry in the United States. To date, our traditional tag and folder operations, have been impacted more severely than our specialty products operations, including those that service the medical, banking and other related industries. We will continue to monitor incoming order volume so that we can proactively adjust our costs accordingly. While economic activity remains depressed due to the pandemic, we will continue to monitor projected sales and our cost structure. We believe the modifications to our cost structure in response to the sales impact of the COVID-19 pandemic will not impact our ability to service increased customer demand when economic conditions improve. During the third quarter, our gross profit margin improved to 30.4% from our sequential quarter of 29.0% and from the prior year’s third quarter of 29.5%. and our operating margin improved to 12.5% from our sequential quarter of 10.3% and from the prior year’s third quarter of 12.3%.

| ➣ | Capital Expenditures:

We continue to make capital expenditures for operational maintenance purposes, as may be required. Additionally, we will carefully review and make new capital expenditures for equipment to the extent such expenditures make economic sense by improving our operations and not jeopardizing our strong liquidity position.

There continues to be many uncertainties regarding the impact of the COVID-19 pandemic, including the scope of scientific and health issues. The recent approval of two vaccines in the U.S. have improved the likelihood that there is a solution to improve or resolve the pandemic, but the logistics of immunizing the U.S. population appear to be challenging amount the many lockdowns occurring in parts of the country. It is likely that the anticipated duration of the pandemic may not be as long as previously feared with the arrival of viable vaccines, but that benefit might be delayed due to the extent of local, regional and economic, social, and political disruption occurring as the confirmed cases grow. For further information, please see “Cautionary Note Regarding Forward Looking Statements,” above and “Risk Factors” contained within our Annual Report on Form 10-K for the fiscal year ended February 29, 2020 and Quarterly Report on Form 10-Q for the quarter ended May 31, 2020.

24

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Transformation of our portfolio of products – While traditional business documents are essential in order to conduct business, many are being replaced through the use of cheaper paper grades or imported paper, or devalued with advances in digital technologies, causing steady declines in demand for a portion of our current product line. In addition, the impact of COVID-19 on the speed of this transformation is unknown, but it is expected to accelerate the decline for some of our products. Transforming our product offerings in order to continue to provide innovative, valuable solutions through lower labor and fixed charges to our customers on a proactive basis will require us to make investments in new and existing technology and to develop key strategic business relationships, such as print-on-demand services and product offerings that assist customers in their transition to digital business environments. In addition, we will continue to look for new market opportunities and niches through acquisitions, such as the addition of our envelope offerings, tag offerings, folder offerings, healthcare wristbands, specialty packaging, direct mail, pressure seal products, secure document solutions, innovative in-mold label offerings and long-run integrated products with high color web printing, which provide us with an opportunity for growth and differentiate us from our competition. The ability to make investments in new and existing technology and/or to acquire new market opportunities through acquisitions is dependent on the Company’s liquidity and operational results. While currently the pandemic has not materially impacted our liquidity and it is not expected to, a protracted delay in the economy recovering could have a negative impact on our continued ability to make the aforementioned investments or to do acquisitions.

Production capacity and price competition within our industry – Changes in the value of the U.S. dollar can have a significant impact on the pricing and supply of paper. The weakening of the U.S. dollar will usually result in the dissipation of any pricing advantage that foreign imports have over domestic suppliers, which typically results in lower levels of imported papers and an increase in domestic exports. With increased pricing power, domestic paper producers can better control the supply of paper by eliminating capacity or changing the products produced on their large paper machines. The strengthening of the U.S. dollar usually has the opposite effect: more cheap imported paper; less domestic exports; and lower pricing power in the hands of domestic paper producers. Domestic paper suppliers typically seek to balance supply and demand, including by (if possible) taking capacity out of the market, whether by taking production off-line or switching production to alternative paper products. Generally, if mills are running at high capacity, suppliers are able to raise prices. For the latter part of fiscal year 2020, with the strengthening of the U.S. dollar, imports began to flow back into the domestic marketplace. This development, along with continued slowing of domestic demand, resulted in renewed marketing of certain paper grades that previously had been placed on allocation. Consequently, spot pricing had become very competitive earlier this year. The uncoated paper market was relatively balanced this quarter as overall capacity reductions has improved operating rates, and inventories have declined. U.S. mills have moved back to more normal operating levels. Coated paper has shown some improvement due to several major closures, causing operating rates to climb. As such, pricing during the second half of fiscal 2021 and into the beginning of fiscal 2022 was expected to be relatively stable.

The COVID-19 pandemic has reduced the demand for both coated and uncoated papers faster than previously expected in the first quarter of fiscal 2021 and paper companies have idled some of their mills or converted to linerboard products to adjust supply and reduce inventory levels. As the economy has begun to improve, demand has increased in the third quarter for coated and uncoated freesheet papers which has reduced the excess inventory in the market. It is unclear whether this is a temporary situation or not. Regardless of these factors, many of which are cyclical, we continue to believe paper pricing will remain in a range which will not unfavorably impact our margins. Additionally, the possibility of paper shortages in the market is not a concern due to our primary material supplier’s commitment to the Company. Consistent with our historical practice, we intend to continue to focus on effectively managing and controlling our product costs through the use of forecasting, production and costing models, as well as working closely with our domestic suppliers to reduce our procurement costs, in order to minimize effects on our operational results. In addition, we will continue to look for ways to reduce and leverage our fixed costs.

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

25

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements, we are required to make estimates and assumptions that affect the disclosures and reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and judgments on an ongoing basis, including those related to allowance for doubtful receivables, inventory valuations, property, plant and equipment, intangible assets, pension plan obligations, accrued liabilities and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We believe our accounting policies related to the aforementioned items are the most critical due to their effect on our more significant estimates and judgments used in preparation of our consolidated financial statements. For additional information, reference is made to the Critical Accounting Policies and Estimates section of our Annual Report on Form 10-K for the fiscal year ended February 29, 2020.

Results of Operations

The discussion that follows provides information which we believe is relevant to an understanding of our results of operations and financial condition. The discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto, which are incorporated herein by reference. The operating results of the Company for the three and nine months ended November 30, 2020 and the comparative period for 2019 are set forth in the unaudited consolidated financial information included in the tables below.

Consolidated Summary

Unaudited Consolidated Statements of |  | Three Months Ended November 30, |  |  | Nine Months Ended November 30, |
Operations - Data (in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net sales |  | $ | 92,443 |  |  |  | 100.0 | % |  | $ | 114,860 |  |  |  | 100.0 | % |  | $ | 268,051 |  |  |  | 100.0 | % |  | $ | 331,709 |  |  |  | 100.0 | %
Cost of goods sold |  |  | 64,355 |  |  |  | 69.6 |  |  |  | 81,024 |  |  |  | 70.5 |  |  |  | 190,901 |  |  |  | 71.2 |  |  |  | 232,719 |  |  |  | 70.2 |
Gross profit margin |  |  | 28,088 |  |  |  | 30.4 |  |  |  | 33,836 |  |  |  | 29.5 |  |  |  | 77,150 |  |  |  | 28.8 |  |  |  | 98,990 |  |  |  | 29.8 |
Selling, general and administrative |  |  | 16,690 |  |  |  | 18.1 |  |  |  | 19,751 |  |  |  | 17.2 |  |  |  | 51,348 |  |  |  | 19.2 |  |  |  | 59,098 |  |  |  | 17.8 |
(Gain) loss from disposal of assets |  |  | (159 | ) |  |  | (0.2 | ) |  |  | 4.0 |  |  |  | — |  |  |  | (571 | ) |  |  | (0.2 | ) |  |  | 4.0 |  |  |  | — |
Income from operations |  |  | 11,557 |  |  |  | 12.5 |  |  |  | 14,081 |  |  |  | 12.3 |  |  |  | 26,373 |  |  |  | 9.8 |  |  |  | 39,888 |  |  |  | 12.0 |
Other income (expense) |  |  | (255 | ) |  |  | (0.3 | ) |  |  | 180 |  |  |  | 0.1 |  |  |  | (739 | ) |  |  | (0.2 | ) |  |  | 271 |  |  |  | 0.1 |
Earnings before income taxes |  |  | 11,302 |  |  |  | 12.2 |  |  |  | 14,261 |  |  |  | 12.4 |  |  |  | 25,634 |  |  |  | 9.6 |  |  |  | 40,159 |  |  |  | 12.1 |
Provision for income taxes |  |  | 2,939 |  |  |  | 3.2 |  |  |  | 3,708 |  |  |  | 3.2 |  |  |  | 6,665 |  |  |  | 2.5 |  |  |  | 10,441 |  |  |  | 3.1 |
Net earnings |  | $ | 8,363 |  |  |  | 9.0 | % |  | $ | 10,553 |  |  |  | 9.2 | % |  | $ | 18,969 |  |  |  | 7.1 | % |  | $ | 29,718 |  |  |  | 9.0 | %

Three months ended November 30, 2020 compared to three months ended November 30, 2019

Net Sales. Our net sales were $92.4 million for the quarter ended November 30, 2020, compared to $114.9 million for the same quarter in the prior year, a decrease of $22.5 million, or 19.6%. Our sales for the quarter were significantly impacted by economic conditions driven by the COVID-19 pandemic While down versus prior year, third quarter sales increased 6.7% from the second quarter 2020. As indicated earlier, various segments of the economy were trending up and that growth impact was reflected in the sequential quarter sales growth.

Cost of Goods Sold and Gross Profit Margin. Our cost of goods sold decreased $16.6 million, or 20.5%, from $81.0 million for the three months ended November 30, 2019 to $64.4 million for the three months ended November 30, 2020. While our plants were deemed “essential” and as such have remained open, our sales for the quarter continued to be significantly impacted by reduced economic activity due to COVID-19 resulting in a $5.7 decrease of our gross profit margin. Our gross profit margin was $28.1 million for the quarter ended November 30, 2020 compared to $33.8 million for the same quarter in the prior year. Our modification to our cost structure in response to the sales impact of the COVID-19 pandemic and the integration of our recent acquisitions resulted in improvements in our gross profit margin as a percentage of sales. During the third quarter, our gross profit margin percentage improved to 30.4% from our sequential quarter of 29.0% and from the prior year’s third quarter of 29.5%.

Selling, general, and administrative expense. For the three months ended November 30, 2020, our selling, general, and administrative (“SG&A”) expenses were $16.7 million compared to $19.8 million for the three months ended November 30, 2019, a

26

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

decrease of $3.1 million, or 15.7%. As a percentage of net sales, SG&A expenses for the current quarter were 18.1% and 17.2% for the three months ended November 30, 2020 and November 30, 2019, respectively. As part of our on-going corporate strategy, we continue to look for ways to reduce and more fully leverage our SG&A expenses.

Gain from disposal of assets. The $0.2 million net gain from disposal of assets during the current quarter is primarily attributed to the sale of underutilized land and buildings. Remaining product from these facilities has been transitioned to another Company facility.

Income from operations. Our income from operations during the quarter was significantly impacted by the decline in demand in our products due to COVID-19. For the three months ended November 30, 2020 our income from operations was $11.6 million, or 12.5% of net sales, as compared to $14.1 million, or 12.3% of net sales, for the three months ended November 30, 2019. While down on a comparable basis, our operating income is up significantly on a sequential basis from $8.9 million, or 10.3% for the three months ended August 31, 2020.

Other income (expense). Other expense was $255,000 for the three months ended November 30, 2020 compared to income of $180,000 for the three months ended November 30, 2019. This increase was primarily due to a decrease in our interest income of $200,000 and an increase in our pension expense of $235,000 over the comparable quarter. Our interest expense for the current quarter was negligible due to the payoff of amounts borrowed under our credit facility during the 2020 fiscal year.

Provision for income taxes. Our effective tax rate was 26.0% for the three months ended November 30, 2020 and the three months ended November 30, 2019.

Net earnings. Net earnings, due to the factors above, were $8.4 million for the three months ended November 30, 2020 as compared to $10.6 million for the comparable quarter in the prior year, a decrease of $2.2 million. Net earnings per diluted share for the three months ended November 30, 2020 was $0.32, compared to $0.41 for the same quarter in the prior year. While our comparable earnings continue to be impacted by the COVID-19 pandemic, we did increase our earnings in the current quarter by $0.07 per diluted share, or 28% over our sequential quarter’s result of $0.25 per diluted share.

Nine months ended November 30, 2020 compared to nine months ended November 30, 2019

Net Sales. Our net sales were $268.1 million for the nine-month period ended November 30, 2020, compared to $331.7 million for same period last year, or a decrease of 19.2%. Our sales for the period were significantly impacted by economic conditions driven by the COVID-19 pandemic and resulted in a decrease in sales volume. Our previous year acquisitions impacted our comparable net sales by approximately $10.2 million during the nine months ended November 30, 2020.

Cost of Goods Sold. Our cost of goods sold was $190.9 million for the nine months ended November 30, 2020, compared to $232.7 million for the same period last year, a decrease of $41.8 million, or 18.0%. Our gross profit margin was $77.2 million for the nine-month period ended November 30, 2020, or 28.8%. This compares to 29.8% for the same nine-month period last year. While our plants have been deemed “essential” and as such have remained open, our sales for the period were significantly impacted by reduced economic activity due to COVID-19. As such, our reduced production levels adversely impacted our factory utilization and efficiency factors during the first and second quarter. Our modification to our cost structure in response to the sales impact of the COVID-19 pandemic and the integration of our recent acquisitions resulted in improvements in our gross profit margin as a percentage of sales during the third quarter.

Selling, general, and administrative expense. Our SG&A expenses were $51.3 million for the nine months ended November 30, 2020, compared to $59.1 million for the same period last year, or a decrease of 13.2%. As a percentage of sales, the SG&A expenses were 19.2% and 17.8% for the nine months ended November 30, 2020 and November 30, 2019, respectively. As part of our on-going corporate strategy, we continue to look for ways to reduce and more fully leverage our SG&A expenses.

Gain from disposal of assets. The $0.6 million net gain from disposal of assets during the nine months ended November 30, 2020 is primarily attributed to the sale of manufacturing underutilized equipment, land and buildings.

Income from operations. Our income from continuing operations for the nine months ended November 30, 2020 was $26.4 million, or 9.8% of sales, as compared to $39.9 million, or 12.0% of sales, for the nine months ended November 30, 2019.

27

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Other income (expense). Other expense for the nine months ended November 30, 2020 was $0.7 million as compared to income of $0.3 million for the nine months ended November 30, 2019. This increase was primarily due to the increase in pension expense of $0.7 million and a decrease in interest income of $0.9 million offset by a decrease in interest expense of $0.6 million for the current fiscal year. Interest expense for the current quarter was negligible due to the payoff of amounts borrowed under our credit facility during the 2020 fiscal year.

Provision for income taxes. Our effective tax rate was 26.0% for the nine months ended November 30, 2020 and the nine months ended November 30, 2019.

Net earnings. Net earnings, which continue to be significantly impacted by COVID-19 pandemic, were $19.0 million for the nine months ended November 30, 2020 as compared to $29.7 million for the comparable period last year, a decrease of $10.7 million. Net earnings per diluted share for the nine months ended November 30, 2020 was $0.73, compared to $1.14 for the same nine-month period last year.

Liquidity and Capital Resources

We rely on our cash flows generated from operations and the borrowing capacity under our credit facility extended pursuant to our Second Amended and Restated Credit Agreement, as amended from time to time (the “Credit Facility”), to meet cash requirements of our business. The primary cash requirements of our business are payments to vendors in the normal course of business, capital expenditures, debt repayments and related interest payments, contributions to our noncontributory defined benefit retirement plan, which covers approximately 19% of our aggregate employees (the “Pension Plan”), and the payment of dividends to our shareholders. We expect to generate sufficient cash flows from operations, supplemented by our Credit Facility as necessary, to cover our operating and capital requirements for the foreseeable future.

|  | November 30, |  |  | February 29, |
(Dollars in thousands) |  | 2020 |  |  | 2020 |
Working capital |  | $ | 127,514 |  |  | $ | 111,915 |
Cash |  | $ | 89,358 |  |  | $ | 68,258 |

We are unable to estimate the full impact of COVID-19 on our financial condition and results of operations given numerous uncertainties associated with the pandemic, including the prolonged shutdown of business activity. The recent enactment, however, of additional funds from the U.S. Congress may provide additional stimulus to artificially support the economy. The vaccinations currently being initiated may provide for earlier improvement of conditions and stimulate an ongoing and growing economy as we move into our 2022 fiscal year. Although, the Company believes it is unlikely, if our cash flows from operations and our funds available under the Credit Facility are insufficient to meet our capital requirements, we could pursue debt or equity financings. There can be no assurance that any such financings, if deemed necessary, will be available on terms not unduly dilutive to our shareholders and otherwise satisfactory to us.

Working Capital. Our working capital increased $15.6 million or 13.9%, from $111.9 million at February 29, 2020 to $127.5 million at November 30, 2020. Our current ratio, calculated by dividing our current assets by our current liabilities, increased from 4.0 to 1.0 at February 29, 2020 to 4.9 to 1.0 at November 30, 2020. Our working capital and current ratio were positively impacted by a $21.1 million increase in cash and $5.1 million in reduction of accounts payable and employee compensation and benefits. These positive increases were offset by a $9.3 million reduction in receivables and $2.8 million reduction in inventories.

|  | Nine months ended November 30, |
(Dollars in thousands) |  | 2020 |  |  | 2019 |
Net cash provided by operating activities |  | $ | 40,779 |  |  | $ | 44,433 |
Net cash used in investing activities |  | $ | (843 | ) |  | $ | (21,469 | )
Net cash used in financing activities |  | $ | (18,836 | ) |  | $ | (50,093 | )

Cash flows from operating activities. Cash provided by operating activities decreased by $3.6 million from $44.4 million for the nine months ended November 30, 2019 to $40.8 million for the nine months ended November 30, 2020. Our decreased operational cash flows in comparison to the comparable period in the prior year was primarily the result of a $10.7 million decrease in operational earnings. This decrease was offset by a $11.2 million decrease in our accounts receivable and $4.5 million decrease in our inventories.

Cash flows from investing activities. Cash used in investing activities decreased $20.6 million from $21.5 million to $0.8 million used for the nine months ended November 30, 2019 and November 30, 2020, respectively. This was primarily due to

28

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

$18.7 million less used for purchase of businesses and $1.7 million from disposal of property, in addition to costs associated with the purchase of Integrated and Flesh in the first two quarters of fiscal year 2020.

Cash flows from financing activities. We used $31.3 million less in cash from financing activities during the nine months ended November 30, 2020 compared to the same period in the prior year. The decrease in our cash used during the nine months ended November 30, 2020 compared to the nine months ended November 30, 2019 resulted from two factors: (i) the pay-off of $30.0 million in long-term debt during the nine months ended November 30, 2019; and (ii) $2.5 million to repurchase our common stock under our stock repurchase program during the nine months ended November 30, 2019, compared to $1.2 million to repurchase shares of our common stock during the nine months ended November 30, 2020.

Credit Facility. The Company’s Credit Facility, pursuant to which a credit facility has been extended to the Company until November 11, 2021, provides the Company and its subsidiaries with up to $100.0 million in revolving credit, as well as a $20.0 million sublimit for the issuance of letters of credit and a $15.0 million sublimit for swing-line loans. Under the Credit Facility, the Company or any of its subsidiaries can request up to three increases in the aggregate commitments in an aggregate amount not to exceed $50.0 million. The terms and conditions of the Credit Facility impose certain restrictions on our ability to incur additional debt, make capital expenditures, acquisitions and asset dispositions, as well as impose other customary covenants, such as requiring that our fixed charge coverage ratio not be less than 1.25:1.00 and our total leverage ratio not exceed 3.00:1.00. The Company may make dividends or distributions to shareholders so long as (i) no event of default has occurred and is continuing and (ii) the Company’s net leverage ratio both before and after giving effect to any such dividend or distribution is equal to or less than 2.50:1.00. All calculations are made based on U.S. Generally Accepted Accounting Principles existing at the time the Credit Facility was entered into. As of November 30, 2020, the Company was in compliance with all terms and conditions of the Credit Facility.

The Credit Facility bears interest at the LIBOR rate plus a spread ranging from 1.85% to 2.5%. The rate is determined by our fixed charge coverage ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). As of November 30, 2020, the Company had no outstanding debt, and the Company had $0.6 million outstanding under standby letters of credit arrangements, leaving approximately $99.4 million available in borrowing capacity under the Credit Facility. The Credit Facility is secured by substantially all of our assets (other than real property), as well as all capital securities of each of our subsidiaries.

It is anticipated that availability under the Credit Facility is sufficient to cover the Company’s working capital requirements for the foreseeable future, should it be required.

Pension Plan – We are required to make contributions to our Pension Plan. These contributions are required under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Due to the enactment of the Highway and Transportation Funding Act (HATFA) in August 2014, which effectively raises the discount rates mandated for determining the value of a plan’s benefit liability and annual cost of accruals, our minimum required contribution to the Pension Plan is zero for the Pension Plan year ending February 28, 2021. Assuming a stable funding status, we would expect that our future contributions to be between $1.5 million and $3.0 million per year. However, changes in actual investment returns or in discount rates could change this amount significantly. We made contributions totaling $3.0 million to our Pension Plan during fiscal year 2020. As our Pension Plan assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status, associated liabilities recorded and future required minimum contributions. At November 30, 2020, we had an unfunded pension liability recorded on our balance sheet of $8.9 million.

Inventories – We believe our inventory levels are sufficient to satisfy our customer demands and we anticipate having adequate sources of raw materials to meet future business requirements. We have long-term contracts in effect with paper suppliers that govern prices, but do not require minimum purchase commitments. Certain of our rebate programs do, however, require minimum purchase volumes. Management anticipates meeting the required volumes or to be able to get the required volumes temporarily waived given the COVID-19 pandemic.

Capital Expenditures – We expect our capital requirements for our current fiscal year, exclusive of capital required for possible acquisitions, will be within our historical levels of between $3.0 million and $5.0 million. For the period, we have spent approximately $2.5 million on capital expenditures. We expect to fund these expenditures through existing cash flows.

Contractual Obligations & Off-Balance Sheet Arrangements – There have been no significant changes in our contractual obligations since February 29, 2020 that have, or are reasonably likely to have, a material impact on our results of operations or financial condition. We had no off-balance sheet arrangements in place as of November 30, 2020.

29

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Interest Rates

From time to time, we are exposed to interest rate risk on short-term and long-term financial instruments carrying variable interest rates. We may from time to time utilize interest rate swaps to manage overall borrowing costs and reduce exposure to adverse fluctuations in interest rates. We do not use derivative instruments for trading purposes. While we had no variable rate financial instruments outstanding at November 30, 2020 given no outstanding debt under the Credit Facility, we will be exposed to interest rate risk if we borrow under the Credit Facility in the future.

This market risk discussion contains forward-looking statements. Actual results may differ materially from this discussion based upon general market conditions and changes in domestic and global financial markets.

Item 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. A review and evaluation were carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Interim Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q, pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that review and evaluation, the Chief Executive Officer and the Interim Chief Financial Officer have concluded that our disclosure controls and procedures as of November 30, 2020 are effective to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive and financial officers as appropriate to allow timely decisions regarding required disclosure. Due to the inherent limitations of control systems, not all misstatements may be detected. Those inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls could be circumvented by the individual acts of some persons or by collusion of two or more people. Our controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a–15(f) or Rule 15d–15(f) of the Exchange Act) that occurred during the nine months ended November 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is subject.

Item 1A. Risk Factors

There have been no material changes in our Risk Factors as previously discussed in our Annual Report on Form 10-K for the year ended February 29, 2020 and our Quarterly Report on Form 10-Q for the quarter ended May 31, 2020.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In October 2008, the Board authorized the repurchase of the Company’s outstanding common stock through a stock repurchase program, which authorized amount is currently up to $40.0 million in the aggregate. Under the repurchase program, purchases may be made from time to time in the open market or through privately negotiated transactions depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be made in accordance with applicable insider trading rules and other securities laws and regulations. These repurchases may be commenced or suspended at any time or from time to time without prior notice.

30

ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

During the nine months ended November 30, 2020, the Company, under the program, repurchased 77,996 shares of common stock at an average price of $15.84 per share. As of November 30, 2020, $9.9 million remained available to repurchase shares of the Company’s common stock under the program.

|  |  |  |  |  |  |  |  |  | Total Number |  |  |  |  |
|  | Total |  |  |  |  |  |  | of Shares |  |  | Maximum Amount |
|  | Number |  |  | Average |  |  | Purchased as |  |  | that May Yet Be Used |
|  | of Shares |  |  | Price Paid |  |  | Part of Publicly |  |  | to Purchase Shares |
Period |  | Purchased |  |  | per Share |  |  | Announced Programs |  |  | Under the Program |
September 1, 2020 - September 30, 2020 |  |  | — |  |  | $ | — |  |  |  | — |  |  | $ | 10,671,106 |
October 1, 2020 - October 31, 2020 |  |  | 28,692 |  |  | $ | 15.76 |  |  |  | 28,692 |  |  | $ | 10,218,787 |
November 1, 2020 - November 30, 2020 |  |  | 22,832 |  |  | $ | 15.73 |  |  |  | 22,832 |  |  | $ | 9,859,644 |
Total |  |  | 51,524 |  |  | $ | 15.75 |  |  |  | 51,524 |  |  | $ | 9,859,644 |

Items 3, 4 and 5 are not applicable and have been omitted

Item 6. Exhibits

The following exhibits are filed as part of this report.

Exhibit Number |  | Description
Exhibit 3.1(a) |  | Restated Articles of Incorporation, as amended through June 23, 1983 with attached amendments dated June 20, 1985, July 31, 1985, June 16, 1988 and November 4, 1998, incorporated herein by reference to Exhibit 3.1(a) to the Registrant’s Form 10-Q filed on October 6, 2017 (File No. 001-05807).
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 Annual Report on Form 10-K for the fiscal year ended February 28, 2007 filed on May 9, 2007 (File No. 001-05807).
Exhibit 3.2 |  | Fourth Amended and Restated Bylaws of Ennis, Inc., dated July 10, 2017, incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on July 10, 2017 (File No. 001-05807).
Exhibit 31.1 |  | Certification Pursuant to Rule 13a-14(a) of Chief Executive Officer.*
Exhibit 31.2 |  | Certification Pursuant to Rule 13a-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.**
Exhibit 101 |  | The following information from Ennis, Inc.’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2020, filed on January 6, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.*
Exhibit 104 |  | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* | Filed herewith

** | Furnished herewith

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ENNIS, INC. AND SUBSIDIARIES

FORM 10-Q

FOR THE PERIOD ENDED NOVEMBER 30, 2020

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | ENNIS, INC.
Date: January 6, 2021 |  | /s/ Keith S. Walters
|  | Keith S. Walters
|  | Chairman, Chief Executive Officer and President
Date: January 6, 2021 |  | /s/ Vera Burnett
|  | Vera Burnett
|  | Interim CFO, Treasurer and
|  | Principal Financial and Accounting Officer

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