Ennis(EBF) - 2026 Q2 - Quarterly Report

PART I: FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements of Ennis, Inc. for the period ended August 31, 2025, including balance sheets, statements of operations, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes on significant accounting policies, revenue recognition, investments, receivables, inventories, property, acquisitions, leases, goodwill, intangible assets, accrued expenses, credit facilities, shareholders' equity, stock-based compensation, pension plans, earnings per share, concentrations of risk, related party transactions, income taxes, other contingencies, segment reporting, and subsequent events Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific dates | Metric (in thousands) | August 31, 2025 | February 28, 2025 | Change | | :-------------------- | :-------------- | :---------------- | :----- | | Cash | $31,886 | $67,000 | $(35,114) | | Short-term investments | $— | $5,475 | $(5,475) | | Inventories, net | $62,078 | $38,797 | $23,281 | | Goodwill | $106,906 | $94,349 | $12,557 | | Intangible assets, net | $40,645 | $33,270 | $7,375 | | Total assets | $361,833 | $348,935 | $12,898 | | Accounts payable | $19,641 | $13,799 | $5,842 | | Accrued expenses | $17,262 | $15,339 | $1,923 | | Total liabilities | $56,453 | $46,955 | $9,498 | | Total shareholders' equity | $305,380 | $301,980 | $3,400 | - Total Assets increased to $361.8 million at August 31, 2025, from $348.9 million at February 28, 2025, primarily driven by increases in inventories, goodwill, and intangible assets[10] - Current Assets decreased to $138.9 million at August 31, 2025, from $152.7 million at February 28, 2025, mainly due to a significant reduction in cash and the absence of short-term investments[10] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, including net sales, expenses, and net earnings | Metric (in thousands, except per share) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $98,676 | $99,038 | $195,872 | $202,146 |\n| Cost of goods sold | $68,574 | $69,259 | $135,541 | $141,463 |\n| Gross profit | $30,102 | $29,779 | $60,331 | $60,683 |\n| Selling, general and administrative | $17,719 | $16,557 | $34,665 | $33,727 |\n| Income from operations | $12,383 | $13,183 | $25,666 | $26,913 |\n| Other income (expense) | $5,761 | $1,034 | $5,993 | $2,045 |\n| Earnings before income taxes | $18,144 | $14,217 | $31,659 | $28,958 |\n| Income tax expense | $4,989 | $3,909 | $8,706 | $7,963 |\n| Net earnings | $13,155 | $10,308 | $22,953 | $20,995 |\n| Basic EPS | $0.51 | $0.40 | $0.89 | $0.81 |\n| Diluted EPS | $0.51 | $0.40 | $0.89 | $0.80 | - Net sales for the three months ended August 31, 2025, decreased by 0.3% year-over-year to $98.7 million, while net sales for the six months decreased by 3.1% to $195.9 million[12] - Net earnings for the three months ended August 31, 2025, increased by 27.6% year-over-year to $13.2 million, and for the six months, increased by 9.3% to $23.0 million[12] Condensed Consolidated Statements of Comprehensive Income This section presents net earnings and other comprehensive income items, reflecting the total change in equity from non-owner sources | Metric (in thousands) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net earnings | $13,155 | $10,308 | $22,953 | $20,995 |\n| Adjustment to pension, net of taxes | $343 | $(528) | $686 | $(156) |\n| Comprehensive income | $13,498 | $9,780 | $23,639 | $20,839 | - Comprehensive income for the three months ended August 31, 2025, increased by 38.0% year-over-year to $13.5 million, and for the six months, increased by 13.4% to $23.6 million[14] Condensed Consolidated Statements of Changes in Shareholders' Equity This section details the changes in the company's shareholders' equity over time, including net earnings, dividends, and stock repurchases - Total Shareholders' Equity increased to $305.4 million at August 31, 2025, from $302.0 million at February 28, 2025[16] - Common stock repurchases for the six months ended August 31, 2025, amounted to $8.6 million, a significant increase from $1.8 million in the prior year[16] - Dividends paid for the six months ended August 31, 2025, were $13.1 million, consistent with $13.0 million in the prior year[16] Condensed Consolidated Statements of Cash Flows This section reports the cash generated and used by the company across operating, investing, and financing activities | Metric (in thousands) | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $18,425 | $34,941 |\n| Net cash used in investing activities | $(31,954) | $(1,777) |\n| Net cash used in financing activities | $(21,585) | $(14,784) |\n| Net change in cash and cash equivalents | $(35,114) | $18,380 |\n| Cash and cash equivalents at end of period | $31,886 | $99,977 | - Net cash provided by operating activities decreased to $18.4 million for the six months ended August 31, 2025, from $34.9 million in the prior year, primarily due to increased inventories and changes in receivables[19] - Net cash used in investing activities significantly increased to $32.0 million in 2025 from $1.8 million in 2024, driven by business acquisitions[19] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Significant Accounting Policies and General Matters This note describes the key accounting principles and general considerations used in preparing the financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules for interim statements, relying on management estimates and assumptions[22] - ASU 2023-09 (Income Tax Disclosures), effective fiscal 2026, will expand income tax disclosures but is not expected to materially impact financial statements[23] - ASU 2024-03 (Expense Disaggregation), effective fiscal 2028, will require additional income statement expense disclosures but is not expected to materially impact financial statements[24] 2. Revenue This note details the company's revenue recognition policies and sources - Substantially all revenue is derived from the sale of printed products in the continental U.S., recognized at a point in time upon transfer of control (generally shipment)[27] - Revenue from print-and-store arrangements was $6.1 million for the six months ended August 31, 2025, a decrease from $6.9 million in the prior year[28] - The Company operates in one reportable segment, 'Print,' and does not have material contract assets or liabilities[30] 3. Short-term Investments and Fair Value Measurements This note explains the company's short-term investment holdings and fair value measurement practices - Short-term investments, classified as held-to-maturity U.S. Treasury Bills, were $0 at August 31, 2025, down from $5.5 million at February 28, 2025[36][37] - These investments were stated at amortized cost with a zero credit loss allowance due to their high credit rating and risk-free nature[36] 4. Receivables This note provides information on the company's accounts and other receivables, including credit policies and allowances - Accounts receivable are primarily from North American customers, with credit extended based on financial condition, requested amount, and payment history[38] | Metric | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $1,758 | $1,720 | $1,713 | $1,707 |\n| Bad debt expense, net of recoveries | $28 | $67 | $118 | $177 |\n| Accounts written off | $(127) | $(11) | $(172) | $(108) |\n| Balance at end of period | $1,659 | $1,776 | $1,659 | $1,776 | - Other receivables mainly consist of vendor rebate receivables, recognized as a reduction in cost of inventory when related inventory is sold[42] 5. Inventories This note details the valuation methods and composition of the company's inventories - Inventories are valued at the lower of FIFO cost or market, with 11.1% (August 31, 2025) and 7.1% (February 28, 2025) valued at LIFO[43] - Reserves for excess and obsolete inventory were $1.9 million at August 31, 2025, up from $1.8 million at February 28, 2025[43] | Component (in thousands) | August 31, 2025 | February 28, 2025 | | :-------- | :-------------- | :---------------- | | Raw material | $35,231 | $20,862 |\n| Work-in-process | $5,545 | $4,919 |\n| Finished goods | $21,302 | $13,016 |\n| Total | $62,078 | $38,797 | 6. Property, Plant and Equipment This note outlines the company's property, plant, and equipment, including depreciation policies and net carrying amounts | Component (in thousands) | August 31, 2025 | February 28, 2025 | | :----------------------- | :-------------- | :---------------- | | Plant, machinery and equipment | $160,324 | $158,730 |\n| Land and buildings | $72,472 | $67,946 |\n| Computer equipment and software | $10,350 | $10,597 |\n| Other | $3,946 | $3,995 |\n| Property, plant and equipment | $247,092 | $241,268 |\n| Less accumulated depreciation | $189,128 | $188,682 |\n| Property, plant and equipment, net | $57,964 | $52,586 | - Property, plant and equipment, net, increased to $58.0 million at August 31, 2025, from $52.6 million at February 28, 2025[45] 7. Acquisitions This note describes recent business acquisitions, including purchase prices, goodwill, and intangible assets recognized - On April 11, 2025, the Company acquired Northeastern Envelope Company (NEC) and Envelope Superstore (ESS) for approximately $34.9 million in cash, strengthening production capabilities in the Northeast and Southeast U.S[48] - The NEC and ESS acquisition resulted in $12.6 million in goodwill and $11.3 million in definite-lived intangible assets (2-13 years), both tax-deductible[48] - On June 26, 2024, the Company acquired Printing Technologies (PTI) for approximately $5.5 million in cash, adding $2.0 million in tax-deductible intangible assets and diversifying product offerings[50] 8. Leases This note details the company's lease arrangements, including right-of-use assets and lease liabilities - The Company leases facilities and equipment under operating leases, typically 1-5 years, recorded as right-of-use assets and lease liabilities[53] | Metric (in thousands) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $1,434 | $1,389 | $2,865 | $2,736 |\n| Operating cash flows from operating leases | $1,446 | $1,410 | $2,892 | $2,779 |\n| Right-of-use assets obtained | $1,793 | $847 | $4,092 | $1,495 | - Total future minimum lease payments under non-cancelable operating leases are $11.7 million, with a present value of lease liabilities of $11.0 million[59] 9. Goodwill and Intangible Assets This note provides information on the company's goodwill and other intangible assets, including amortization and impairment testing - Goodwill is not amortized and is tested for impairment annually as of December 1; no impairment charge was required as of August 31, 2025[60][62] | Intangible Asset | Weighted Average Remaining Life (years) | Gross Carrying Amount (Aug 31, 2025) | Accumulated Amortization (Aug 31, 2025) | Net (Aug 31, 2025) | Net (Feb 28, 2025) | | :--------------- | :------------------------------------ | :----------------------------------- | :-------------------------------------- | :----------------- | :----------------- | | Trademarks and trade names | 6.2 | $32,411 | $17,549 | $14,862 | $14,367 |\n| Customer lists | 7.5 | $93,133 | $67,791 | $25,342 | $18,413 |\n| Non-compete | 0.9 | $280 | $234 | $46 | $49 |\n| Technology | 4.3 | $650 | $255 | $395 | $441 |\n| Total | 7.0 | $126,474 | $85,829 | $40,645 | $33,270 | - Goodwill increased by $12.6 million to $106.9 million at August 31, 2025, primarily due to the acquisition of NEC and ESS[67][68] 10. Accrued Expenses This note details the composition of the company's accrued expenses | Component (in thousands) | August 31, 2025 | February 28, 2025 | | :----------------------- | :-------------- | :---------------- | | Employee compensation and benefits | $12,372 | $11,505 |\n| Taxes other than income | $2,430 | $1,440 |\n| Accrued legal and professional fees | $483 | $521 |\n| Accrued utilities | $118 | $108 |\n| Income taxes payable | $586 | $567 |\n| Other accrued expenses | $1,273 | $1,198 |\n| Total | $17,262 | $15,339 | - Total accrued expenses increased to $17.3 million at August 31, 2025, from $15.3 million at February 28, 2025, mainly due to higher employee compensation and benefits and taxes other than income[70] 11. Credit Facility This note describes the company's credit arrangements and outstanding balances - As of August 31, 2025, the Company had $0.2 million outstanding under a standby letter of credit arrangement, secured by a cash collateral bank account[71] 12. Shareholders' Equity This note provides details on the company's shareholders' equity, including stock repurchase programs and dividends - The Board authorized a stock repurchase program with cumulative funds up to $60.0 million[72] - During the six months ended August 31, 2025, the Company repurchased 456,671 shares of common stock at an average price of $18.54, with $13.1 million remaining available under the program[73] - Since the program's inception in October 2008, 2,791,015 common shares have been repurchased at an average price of $16.81 per share[73] 13. Stock Based Compensation This note explains the company's stock-based compensation plans and related expenses - The Company grants stock options, restricted stock, and RSUs to key executives, managerial employees, and non-employee directors under the 2021 Long-Term Incentive Plan[74] | Period | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock-based Compensation Expense (in thousands) | $0.8 | $0.7 | $1.3 | $2.5 | - As of August 31, 2025, there was $0.1 million of unrecognized compensation cost related to unvested stock options (0.6 years remaining service period) and $0.7 million for unvested restricted stock (2.4 years remaining service period)[78][79] 14. Pension Plan This note details the company's defined benefit pension plan, including costs and funding status - The Company has a noncontributory defined benefit pension plan covering approximately 12% of employees; new employees hired after January 1, 2009, are excluded[85] | Component (in thousands) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :----------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Service cost | $152 | $166 | $303 | $332 |\n| Interest cost | $648 | $649 | $1,298 | $1,298 |\n| Expected return on plan assets | $(710) | $(755) | $(1,420) | $(1,510) |\n| Amortization of unrecognized net loss | $366 | $436 | $732 | $872 |\n| Net periodic benefit cost | $456 | $496 | $913 | $992 | - The Company is not required to make a contribution to the pension plan for fiscal year 2026, but made a $1.2 million contribution in fiscal year 2025[87] 15. Earnings Per Share This note outlines the calculation of basic and diluted earnings per share - Basic EPS is computed by dividing net earnings by weighted average common shares outstanding; diluted EPS reflects potential dilution from stock options and RSUs using the treasury stock method[88] | Metric | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic weighted average common shares outstanding | 25,718,068 | 26,009,876 | 25,836,670 | 26,015,195 |\n| Effect of dilutive securities | 73,579 | 44,623 | 68,955 | 140,966 |\n| Diluted weighted average common shares outstanding | 25,791,647 | 26,054,499 | 25,905,625 | 26,156,161 |\n| Net earnings - basic | $0.51 | $0.40 | $0.89 | $0.81 |\n| Net earnings - diluted | $0.51 | $0.40 | $0.89 | $0.80 |\n| Cash dividends per share | $0.25 | $0.25 | $0.50 | $0.50 | - Unvested share-based payment awards with non-forfeitable dividend rights are treated as participating securities in EPS computation[89] 16. Concentrations of Risk This note identifies significant concentrations of credit and supply chain risks faced by the company - The Company's credit risk is concentrated in cash and accounts receivable; $31.4 million of cash balances were not federally insured at August 31, 2025[92] - The Company purchases paper products from a limited number of suppliers, posing a risk if alternative sources are not available at comparable cost or quality[94] 17. Related Party Transactions This note discloses transactions with entities controlled by related parties - The Company leases a facility and sells products to entities controlled by a Board member, with a total right-of-use asset and related lease liability of $1.5 million at August 31, 2025[95] - For the six months ended August 31, 2025, total lease payments were approximately $0.3 million and product sales were $2.1 million to director-controlled entities[95] 18. Income Taxes This note provides information on the company's income tax expense, effective tax rate, and cash payments - The effective tax rate for the three and six months ended August 31, 2025 and 2024, remained flat at 27.5%[97] - Cash payments for income taxes (net of refunds) were $8.8 million for the six months ended August 31, 2025, down from $9.2 million in the prior year[97] - The Company is evaluating the tax provisions of the One Big Beautiful Bill Act (OBBBA) but does not expect a material impact on its financial statements[98] 19. Other Contingencies This note discusses other potential liabilities and legal matters - The Company does not believe the disposition of any current litigation matter will have a material adverse effect on its consolidated financial position or results of operations[101] - The Company recognized $5.7 million in cash proceeds from a legal settlement against Wright Printing Company, fully resolving the matter[102] - A liability reserve of approximately $0.4 million has been accrued related to a lawsuit concerning the lease of the former B&D Litho facility, with the case scheduled for trial in Q1 2026[103] 20. Segment Reporting This note details the company's operating segments and how performance is evaluated - The Company operates as a single reportable segment called 'Print,' manufacturing custom or semi-custom printed products primarily for independent distributors in the U.S[105] - The Chief Operating Decision Maker (CODM) evaluates performance and allocates resources on a consolidated basis using consolidated net income and total assets[104][107] | Metric (in thousands) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Segment operating net sales | $98,676 | $99,038 | $195,872 | $202,146 |\n| Segment cost of goods sold | $68,574 | $69,259 | $135,541 | $141,463 |\n| Segment SG&A expenses | $17,719 | $16,557 | $34,665 | $33,727 |\n| Consolidated net earnings | $13,155 | $10,308 | $22,953 | $20,995 | 21. Subsequent Events This note discloses significant events that occurred after the balance sheet date - On September 22, 2025, the Board declared a quarterly cash dividend of $0.25 per share, payable November 7, 2025, with an expected payout of approximately $6.5 million[110] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and operational results, highlighting key performance drivers, business challenges, and liquidity. It includes a cautionary statement regarding forward-looking information and detailed analysis of net sales, cost of goods sold, SG&A expenses, and other income for the three and six months ended August 31, 2025, compared to the prior year, along with a discussion of capital resources and future outlook Cautionary Statement Regarding Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements in the report - All statements in the report, other than historical facts, are forward-looking and subject to known and unknown risks, uncertainties, and other factors[113][114] - The Company disclaims any duty to update these statements, which are based on current views and assumptions[115] - Key risks include general economic conditions, inflation, supply chain disruptions, ability to control operational costs, dependence on key suppliers, rising raw material costs, cybersecurity, and ability to integrate acquisitions[116] Overview This section provides a brief introduction to Ennis, Inc.'s business and product distribution - Ennis, Inc. (organized in 1909) prints and manufactures a broad line of business forms and other business products[117] - Products are distributed throughout the United States primarily through independent distributors, including commercial printers, direct mail, and software companies[117] Business Overview This section details Ennis, Inc.'s market position, operational footprint, and raw material sourcing - Ennis is believed to be the largest provider of business forms, pressure-seal forms, labels, tags, envelopes, and presentation folders to independent distributors in the United States[119][122] - The Company operates 55 manufacturing plants across 20 states, with approximately 96% of products being custom or semi-custom[120] - Raw materials, primarily paper, are purchased from a limited number of major suppliers at favorable prices due to high volume[124] Recent Acquisitions This section describes the company's recent strategic acquisitions and their impact - On April 11, 2025, the Company acquired Northeastern Envelope Company (NEC) and Envelope Superstore (ESS) for approximately $34.9 million in cash[48][126] - NEC and ESS generated approximately $26.0 million in sales for their fiscal year ended December 31, 2024, and the acquisition strengthens production capabilities in the Northeast U.S[126] Our Business Challenges This section discusses the industry trends and operational challenges facing the company - The industry faces consolidation of traditional supply channels, product obsolescence, paper supplier capacity adjustments, and increased pricing due to demand/supply imbalance[128] - The Company is transforming its product portfolio to address declining demand for traditional documents by investing in new technology, developing strategic relationships, and pursuing acquisitions in niche markets[128] - Recent mill closures and consolidations could lead to paper price fluctuations; the Company invested in buffer stock for carbonless paper due to the closure of the sole U.S. producer[129] Critical Accounting Estimates This section addresses the key accounting estimates that require significant management judgment - No material changes to critical accounting estimates (pension plan, goodwill/intangible impairment, credit losses, inventory allowances) occurred during the quarter ended August 31, 2025, as described in the Annual Report on Form 10-K[132] Recent Accounting Pronouncements This section refers to new accounting standards and their potential impact on the financial statements - Refer to Note 1 of the accompanying unaudited condensed consolidated financial statements for a discussion of recent accounting pronouncements[133] Results of Operations This section analyzes the company's financial performance over specific periods Consolidated Summary This section provides a high-level overview of key financial metrics for the periods presented | Metric | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | 6 Months Ended Aug 31, 2025 | 6 Months Ended Aug 31, 2024 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $98,676 | $99,038 | $195,872 | $202,146 |\n| Cost of goods sold | $68,574 | $69,259 | $135,541 | $141,463 |\n| Gross profit margin | 30.5% | 30.1% | 30.8% | 30.0% |\n| Selling, general and administrative | $17,719 | $16,557 | $34,665 | $33,727 |\n| Income from operations | $12,383 | $13,183 | $25,666 | $26,913 |\n| Other income | $5,761 | $1,034 | $5,993 | $2,045 |\n| Net earnings | $13,155 | $10,308 | $22,953 | $20,995 | Three months ended August 31, 2025 vs. 2024 This section compares the company's financial performance for the three-month periods - Net Sales decreased by $0.3 million (-0.3%) to $98.7 million, with weaker volume demand ($5.9 million decrease) partially offset by recent acquisitions ($5.5 million increase)[138] - Gross Profit increased to $30.1 million (30.5% of revenue) from $29.8 million (30.1% of revenue), reflecting cost management and pricing actions[139] - Other Income significantly increased to $5.8 million from $1.0 million, primarily due to $5.7 million in legal settlement proceeds[143] - Net Earnings increased to $13.2 million from $10.3 million, with diluted EPS of $0.51, positively impacted by $0.03 from acquisitions and $0.14 from the lawsuit settlement[145] Six months ended August 31, 2025 vs. 2024 This section compares the company's financial performance for the six-month periods - Net Sales decreased by $6.2 million (-3.1%) to $195.9 million, with weaker volume demand ($17.3 million decrease) partially offset by recent acquisitions ($11.0 million increase)[147] - Gross Profit decreased slightly to $60.3 million from $60.7 million, but gross profit margin increased to 30.8% from 30.0%[148] - Other Income significantly increased to $6.0 million from $2.0 million, primarily due to $5.7 million in legal settlement proceeds[152] - Net Earnings increased by $2.0 million to $23.0 million, with diluted EPS of $0.89, positively impacted by $0.03 from acquisitions and $0.14 from the lawsuit settlement[154] Liquidity and Capital Resources This section discusses the company's ability to generate and manage cash, including working capital and cash flows Working Capital This section analyzes the company's short-term assets and liabilities, indicating its operational liquidity | Metric (in thousands) | August 31, 2025 | February 28, 2025 | | :-------------------- | :-------------- | :---------------- | | Working capital | $97,760 | $119,436 |\n| Cash | $31,886 | $67,000 |\n| Short-term investments | $— | $5,475 | - Working capital decreased by $21.6 million (-18.1%) to $97.8 million at August 31, 2025, primarily due to the $34.9 million acquisition of NEC and ESS and a strategic increase in inventory levels[156] - The current ratio decreased from 4.6:1.0 at February 28, 2025, to 3.4:1.0 at August 31, 2025[156] Cash flows from operating activities This section details the cash generated or used by the company's primary business operations - Net cash provided by operating activities decreased to $18.4 million for the six months ended August 31, 2025, from $34.9 million in the prior year, primarily due to increased inventories and changes in receivables[157] - This decrease was mainly due to an increase in inventories ($20.8 million cash used) and an increase in accounts receivable ($2.0 million cash used), partially offset by an increase in accounts payable and accrued expenses ($7.3 million cash provided)[157] Cash flows from investing activities This section outlines the cash used for or generated from investment-related activities, such as acquisitions and capital expenditures - Net cash used in investing activities significantly increased to $32.0 million for the six months ended August 31, 2025, from $1.8 million in the prior year, primarily driven by $34.9 million used for business acquisitions[158] - Capital expenditures were $2.8 million in 2025, down from $3.6 million in 2024[158] Cash flows from financing activities This section describes the cash flows related to debt, equity, and dividend payments - Net cash used in financing activities increased by $6.8 million to $21.6 million for the six months ended August 31, 2025, compared to $14.8 million in the prior year[159] - This increase was mainly due to higher common stock repurchases ($8.6 million in 2025 vs. $1.8 million in 2024), while dividend payments remained consistent at approximately $13.1 million[159] Credit Facility This section provides information on the company's available credit lines and their utilization - As of August 31, 2025, $0.2 million was outstanding under a standby letter of credit arrangement[160] - The Company anticipates sufficient cash, short-term investments, and operating cash flows to fund future expenditures, including acquisitions[160] Pension Plan This section discusses the funding and obligations related to the company's defined benefit pension plan - The Company is not required to make a contribution to the pension plan for fiscal year 2026, but made a $1.2 million contribution in fiscal year 2025[161] - At August 31, 2025, the Company had a funded pension asset of $1.4 million[161] Inventories This section explains the company's inventory management strategy and its impact on liquidity - The Company strategically increased inventory levels to mitigate risks from paper industry consolidation and the closure of the sole U.S. carbonless paper mill[165] - Long-term supply agreements with key paper vendors establish pricing but do not impose minimum purchase obligations, though rebate programs are contingent on minimum purchase volumes[165] Capital Expenditures This section details the company's spending on property, plant, and equipment - Capital expenditures for operational maintenance are expected to range between $4.0 million and $7.0 million over the next twelve months, consistent with historical levels[155][166] - For the six months ended August 31, 2025, $2.8 million was spent on capital expenditures, funded from the cash balance[166] Contractual Obligations This section outlines the company's long-term commitments and liabilities - No significant changes in contractual obligations since February 28, 2025, that would materially impact results or financial condition[167] - The Company does not have off-balance sheet arrangements or special-purpose entities[167] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, primarily focusing on interest rate risk. It notes that while there was no outstanding debt as of August 31, 2025, future borrowings would expose the Company to interest rate fluctuations, which may be managed through interest rate swaps Market Risk This section details the company's exposure to financial market fluctuations, particularly interest rate changes - The Company is exposed to interest rate risk on short-term and long-term financial instruments with variable interest rates[170] - Interest rate swaps may be utilized to manage overall borrowing costs and reduce exposure to adverse fluctuations in interest rates, but derivative instruments are not used for trading purposes[170] - As of August 31, 2025, the Company had no outstanding debt, but would be exposed to interest rate risk if it borrows in the future[170] Item 4. Controls and Procedures This section details the Company's disclosure controls and procedures, affirming their effectiveness as of August 31, 2025, based on evaluation by the CEO and CFO. It also states that there have been no material changes in internal control over financial reporting during the period Evaluation of Disclosure Controls and Procedures This section describes the assessment of the effectiveness of the company's disclosure controls - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of August 31, 2025[172] - Based on this evaluation, disclosure controls and procedures are concluded to be effective in providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[172] Changes in Internal Control Over Financial Reporting This section reports any material changes in the company's internal control over financial reporting - No changes in internal control over financial reporting occurred during the three and six months ended August 31, 2025, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[173] PART II: OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section addresses the Company's involvement in legal matters, stating that ongoing litigation is not expected to have a material adverse effect on its financial position or operations. It specifically mentions a lawsuit regarding the former B&D Litho facility, for which a liability reserve of $0.4 million has been accrued - The Company is involved in various litigation matters in the ordinary course of business, but does not believe any current matter will have a material adverse effect on its consolidated financial position or results of operations[175] - A lawsuit in Arizona concerning the lease of the former B&D Litho facility has resulted in a preliminary ruling against the Company for failure to maintain certain equipment and surfaces[176] - A liability reserve of approximately $0.4 million has been accrued for this claim, with the case scheduled for trial in Q1 2026[176] Item 1A. Risk Factors This section states that there have been no material changes to the Company's risk factors since those discussed in its Annual Report on Form 10-K for the fiscal year ended February 28, 2025 - No material changes in Risk Factors have occurred since those previously discussed in the Annual Report on Form 10-K for the fiscal year ended February 28, 2025[177] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's stock repurchase program, including the latest funding authorization and the number of shares repurchased during the period, as well as the remaining authorized amount - The Board authorized an additional $20.0 million for the share repurchase program in July 2022, bringing the cumulative authorized funds to $60.0 million[179] - During the six months ended August 31, 2025, the Company repurchased 456,671 shares of common stock at an average price of $18.54, with $13.1 million remaining available under the program[180] - As of August 31, 2025, $13.1 million remained available for repurchases under the program[180] Item 6. Exhibits This section lists the exhibits filed as part of the 10-Q report, including corporate organizational documents, certifications from the CEO and CFO, and XBRL-formatted financial data - Exhibits include Restated Articles of Incorporation, Amendment to Articles of Incorporation, and Fourth Amended and Restated Bylaws[182] - Certifications pursuant to Rule 13a-14(a) from the Chief Executive Officer and Chief Financial Officer are filed herewith[182][183] - The report includes Inline XBRL formatted financial information for the quarter ended August 31, 2025[182] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers - The report is signed by Keith S. Walters, Chairman, Chief Executive Officer and President, and Vera Burnett, Chief Financial Officer, Treasurer and Principal Financial and Accounting Officer, on October 3, 2025[187]