ENNIS, INC. — Form 10-Q Summary
Reporting period: Quarter and six months ended August 31, 2026; comparisons are to the corresponding 2025 periods. Ennis manufactures printed business products, primarily for U.S. independent distributors, and reports one operating segment. Results are unaudited.
Financial performance
| Metric | Three months ended Aug. 31 | Six months ended Aug. 31 |
|---|---|---|
| Net sales | $102.0 million, up 3.3% | $200.6 million, up 2.4% |
| Gross profit / margin | $30.5 million / 29.9%, versus $30.1 million / 30.5% | $61.6 million / 30.7%, versus $60.3 million / 30.8% |
| Operating income / margin | $13.6 million / 13.3%, up 9.7% | $27.2 million / 13.5%, up 5.8% |
| Net earnings | $9.4 million, versus $13.2 million | $19.3 million, versus $23.0 million |
| Diluted EPS | $0.37, versus $0.51 | $0.76, versus $0.89 |
| Operating cash flow | Not presented separately for the quarter | $34.1 million, versus $18.4 million |
Quarterly SG&A fell 4.5% to $16.9 million; six-month SG&A declined 0.9% to $34.4 million. Cost of goods sold increased faster than quarterly sales, and management attributed the lower quarterly gross margin primarily to higher carbonless-paper costs. Six-month gross margin was nearly unchanged year over year.
Financial position and capital allocation
- At August 31, cash and cash equivalents were $54.0 million, up from $34.6 million at February 28, 2026. Ennis reported no long-term debt.
- Working capital was $109.6 million; the current ratio was 3.8:1. Total liabilities were $50.9 million and total assets were $365.1 million.
- Six-month investing cash use was $1.9 million, including $1.9 million of capital expenditures and no acquisitions. Financing cash use was $12.8 million, primarily dividends; no shares were repurchased in the period.
- Dividends paid in the first six months totaled $12.8 million, or $0.50 per share. After quarter-end, the board declared a $0.2625-per-share dividend, payable November 6, 2026.
- The company had $7.2 million remaining under its $60 million share-repurchase authorization. Capital expenditures are expected to be $4–$7 million over the next 12 months.
Changes, outlook and risks
- Acquisitions contributed approximately $2.3 million of quarterly sales and $6.8 million of six-month sales for periods not included in the prior-year comparisons. Sales from the remaining business rose about $1.0 million in the quarter but declined about $2.1 million over six months, reflecting weaker demand and industry pressure.
- Net earnings were lower despite higher operating income, principally because the prior-year periods included a favorable litigation judgment: approximately $5.3 million in the statements of operations. The current period included a $0.7 million litigation charge. Interest income was also lower.
- Operating cash flow improved year over year mainly because less cash was used for inventory; the prior-year period included a strategic inventory build. Management says current liquidity and expected operating cash flows should cover operating and capital needs for at least 12 months, including potential acquisition opportunities. No earnings or revenue guidance was provided.
- Following the closure of the only U.S. mill producing rolls of carbonless paper, Ennis built buffer inventory and is transitioning to alternative suppliers. Management reports receiving alternative-source shipments and expects no disruption to customer service, product availability or quality. It cites ongoing exposure to input costs, tariffs, freight, labor costs, price competition, weak market volumes, customer consolidation and substitution of printed products by digital alternatives.
- Arizona lease litigation: On September 9, 2026, after the reporting date, the trial court issued preliminary findings indicating a potential $2.3 million recovery for the landlord. Ennis disputes the findings and plans to seek further review. Management says the $2.3 million is not its best estimate of probable loss; it added approximately $0.7 million to the reserve during the quarter, bringing the reserve to approximately $1.2 million.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. The filing reports no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether operating performance can offset carbonless-paper costs and weak demand, particularly in the company’s existing businesses apart from acquisitions.
- How the Arizona litigation develops, including the difference between the court’s preliminary $2.3 million finding and the company’s $1.2 million reserve.
- Whether the alternative carbonless-paper supply proves reliable and competitively priced, and whether inventory levels remain adequate.
- Whether operating cash generation, planned capital spending and dividends remain consistent with management’s liquidity expectations.
- The significance of the year-over-year earnings comparison: prior-year litigation gains and current-period litigation expense materially affect reported net earnings.