UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

þ		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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

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)

Title of each class		Name of each exchange on which registered
Common Stock, par value $2.50 per share		New York Stock Exchange

     Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o   No þ

     Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No þ

     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 þ   No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o   No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Large accelerated Filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

     The aggregate market value of voting stock held by non-affiliates of the Registrant as of August 31, 2009 was approximately $309 million. Shares of voting stock held by executive officers, directors and holders of more than 10% of the outstanding voting stock have been excluded from this calculation because such persons may be deemed to be affiliates. Exclusion of such shares should not be construed to indicate that any of such persons possesses the power, direct or indirect, to control the Registrant, or that any such person is controlled by or under common control with the Registrant.

     The number of shares of the Registrant’s Common Stock, par value $2.50, outstanding at April 30, 2010 was 25,896,934.

Portions of the Registrant’s Proxy Statement for the 2010 Annual Meeting of Shareholders are incorporated by reference into Part III of this Report.

 

 

ENNIS, INC. AND SUBSIDIARIES
FORM 10-K
FOR THE PERIOD ENDED FEBRUARY 28, 2010

TABLE OF CONTENTS

PART I:
Item 1 Business			3
Item 1A Risk Factors			6
Item 1B Unresolved Staff Comments			11
Item 2 Properties			11
Item 3 Legal Proceedings			13
Item 4 Submission of Matters to a Vote of Security Holders			13
PART II:
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			13
Item 6 Selected Financial Data			15
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 7A Quantitative and Qualitative Disclosures about Market Risk			25
Item 8 Consolidated Financial Statements and Supplementary Data			26
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.			26
Item 9A Controls and Procedures			26
Item 9B Other Information			27
PART III:
Item 10 Directors, Executive Officers and Corporate Governance			27
Item 11 Executive Compensation			28
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			28
Item 13 Certain Relationships and Related Transactions, and Director Independence			28
Item 14 Principal Accountant Fees and Services			28
PART IV:
Item 15 Exhibits and Financial Statement Schedules			28
Signatures			29
EX-21
EX-23
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

ITEM 1.		BUSINESS

Overview

     Ennis, Inc. (formerly Ennis Business Forms, Inc.) was organized under the laws of Texas in 1909. Ennis, Inc. and its subsidiaries (collectively known as the “Company,” “Registrant,” “Ennis,” “we,” “us,” or “our”) print and manufacture a broad line of business forms and other business products (the “Print Segment”) and also manufacture a line of activewear (the “Apparel Segment”) for distribution throughout North America. Distribution of business products and forms throughout the United States and Canada is primarily through independent dealers. This distributor channel encompasses print distributors, stationers, quick printers, computer software developers, and advertising agencies, among others. The company’s apparel business was acquired on November 19, 2004. The Apparel Segment produces and sells activewear, including t-shirts, fleece goods and other wearables. Distribution of our activewear throughout the United States is primarily through sales representatives. The distributor channel encompasses activewear wholesalers and screen printers. We offer a selection of high-quality activewear apparel and hats with a wide variety of styles and colors in sizes ranging from toddler to 6XL. The apparel line features a wide variety of tees, fleece, shorts and yoga pants, and two headwear brands.

Business Segment Overview

     We operate in two business segments, the Print Segment and the Apparel Segment. For additional financial information concerning segment reporting, please see note 14 of the notes to our consolidated financial statements beginning on page F-25 included elsewhere herein, which information is incorporated herein by reference.

Print Segment

     The Print Segment, which represented approximately 55%, 56%, and 57% of our consolidated net sales for the fiscal years ended February 28, 2010, February 28, 2009, and February 29, 2008, respectively, is in the business of manufacturing, designing and selling business forms and other printed business products primarily to distributors located in the United States. The Print Segment operates 37 manufacturing locations throughout the United States in 16 strategically located domestic states. Approximately 95% of the business products manufactured by the Print Segment are custom and semi-custom products, constructed in a wide variety of sizes, colors, and quantities on an individual job basis depending upon the customers’ specifications.

     The products sold 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^SM, Block Graphics^®, Specialized Printed Forms^SM, 360º Custom Labels^SM, Enfusion^®, Uncompromised Check Solutions^®, Witt Printing^SM, B&D Litho of Arizona^SM, Genforms^® and Calibrated Forms^®. The Print Segment also sells 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^® brand (which provides presentation folders and document folders); Ennis Tag & Label^SM (which provides tags and labels, promotional products and advertising concept products); Trade Envelopes^® and Block Graphics^® (which provide custom and imprinted envelopes) and Northstar^® and GFS^® (which provide financial and security documents).

     The Print Segment sells predominantly through private printers and independent distributors. Northstar and GFS also sell to a small number of direct customers. Northstar has continued its focus with large banking organizations on a direct basis (where a distributor is not acceptable or available to the end-user), and has acquired several of the top 25 banks in the United States as customers, and is actively working on other large banks within the top 25 tier of banks in the United States. Adams-McClure sales are generally provided through advertising agencies.

     The printing industry generally sells its products in two ways. One market direction is to sell predominately to end users, and is dominated by a few large manufacturers, such as Moore Wallace (a subsidiary of R.R. Donnelly), Standard Register, and Cenveo. The other market direction, which the Company primarily serves, sells forms and other business products through a variety of independent distributors and distributor groups. While it is not possible, because of the lack of adequate statistical information, to determine Ennis’ share of the total business products market, management believes Ennis is one of the largest producers of business forms in the United States distributing primarily through independent dealers, and that its business forms offering is more diversified than that of most companies in the business forms industry.

     There are a number of competitors that operate in this segment, ranging in size from single employee-owner operations to multi-plant organizations, such as Cenveo and their resale brand known as: PrintXcel, Discount Label, and Printegra. 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 dealers, including business forms distributors, stationers, printers, computer software developers, and advertising agencies.

     Raw materials of the Print Segment principally consist of a wide variety of weights, widths, colors, sizes, and qualities of paper for business products purchased from a number of major suppliers at prevailing market prices.

     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 factor in quarterly volume fluctuations.

Apparel Segment

     The Apparel Segment represented approximately 45%, 44%, and 43% of our consolidated net sales for the fiscal years ended February 28, 2010, February 28, 2009, and February 29, 2008, respectively, and operates under the name of Alstyle Apparel (“Alstyle”). Alstyle markets high quality knit basic activewear (t-shirts, tank tops and fleece) across all market segments. The products of Alstyle are standardized shirts manufactured in a variety of sizes and colors. Approximately 97% of Alstyle’s revenues are derived from t-shirt sales, and 92% of those are domestic sales. Alstyle’s branded product lines are sold under the AAA label, Murina^® and Hyland^® Headwear brands.

     The Apparel Segment operates six manufacturing facilities, one in California, and five in Mexico. Alstyle is headquartered in Anaheim, California, where it knits domestic cotton yarn and some polyester fibers into tubular material. The material is dyed at that facility and then shipped to its plants in Ensenada or Hermosillo, Mexico, where it is cut and sewn into finished goods. Alstyle also ships their dyed fabric to outsourced manufacturers in El Salvador and Nicaragua for sewing. After sewing and packaging is completed, the product is shipped to one of Alstyle’s eight distribution centers located across the United States, Canada, and Mexico.

     Alstyle utilizes a customer-focused internal sales team comprised of 26 sales representatives assigned to specific geographic territories in the United States, Canada, and Mexico. Sales representatives are allocated performance objectives for their respective territories and are provided financial incentives for achievement of their target objectives. Sales representatives are responsible for developing business with large accounts and spend approximately 60% of their time in the field.

     Alstyle employs a staff of customer service representatives that handle call-in orders from smaller customers. Sales personnel sell directly to Alstyle’s customer base, which consists primarily of screen printers, embellishers, retailers, and mass marketers.

     A majority of Alstyle’s sales are branded products, with the remainder customer private label products. Generally, sales to screen printers and mass marketers are driven by price and the availability of products, which directly impacts inventory level requirements. Sales in the private label business are characterized by slightly higher customer loyalty.

     Alstyle’s most popular styles are produced based on demand management forecasts to permit quick shipment and to level production schedules. Alstyle offers same-day shipping and uses third party carriers to ship products to its customers.

     Alstyle’s sales are seasonal, with sales in the first and second fiscal quarters generally being the highest. The apparel industry is characterized by rapid shifts in fashion, consumer demand and competitive pressures, resulting in both price and demand volatility. However, the imprinted activewear market to which Alstyle sells is generally “event” driven. Blank t-shirts can be thought of as “walking billboards” promoting movies, concerts, sports teams, and “image” brands. Still, the demand for any particular product varies from time to time based largely upon changes in consumer preferences and general economic conditions affecting the apparel industry.

     The apparel industry is comprised of numerous companies who manufacture and sell a wide range of products. Alstyle is primarily involved in the activewear market and produces t-shirts, and outsources such products as fleece, hats, shorts, pants and other such activewear apparel from China, Thailand, Pakistan, and other foreign sources to

sell to its customers through its sales representatives. Alstyle competes with many branded and private label manufacturers of knit apparel in the United States, Canada, and Mexico, some of which are larger in size and have greater financial resources than Alstyle. Alstyle competes on the basis of price, quality, service, and delivery. Alstyle’s strategy is to provide the best value to its customers by delivering a consistent, high-quality product at a competitive price. Alstyle’s competitive disadvantage is that its brand name, Alstyle Apparel, is not as well known as the brand names of its largest competitors, such as Gildan Activewear, Delta Apparel, Hanes brands, and Russell. While it is not possible to calculate precisely, based on public information available, management believes that Alstyle is one of the top three providers of blank t-shirts in North America.

     Raw materials of the Apparel Segment principally consist of cotton and polyester yarn purchased from a number of major suppliers at prevailing market prices, although we purchase more than 75% of our cotton and yarn from one supplier.

Patents, Licenses, Franchises and Concessions

     We do not have any significant patents, licenses, franchises, or concessions.

Intellectual Property

     We market our products under a number of trademarks and tradenames. We have registered trademarks in the United States for Ennis^®, EnnisOnline^SM, A Alstyle Apparel, AA Alstyle Apparel & Activewear, AAA Alstyle Apparel & Activewear^®, American Diamond, Block Graphics^®, Classic by Alstyle Apparel, Diamond Star^®, Enfusion^®, Executive by Alstyle, Gaziani^®, Gaziani Fashions, Hyland, Hyland^® Headwear by Alstyle, Murina^®, Tennessee River^®, 360º Custom Labels^SM, Admore^®, CashManagementSupply.com, Securestar, Northstar^®, MICRLink^®, MICR Connection, Ennisstores.com, General Financial Supply^®, Calibrated Forms^®, Trade Envelopes^®, Witt Printing^SM, GenForms^®, Royal Business Forms^®, Crabar/GBF, Adams McClure^®, Advertising Concepts, ColorWorx^®, Uncompromised Check Solutions^®, Star Award Ribbon, Canu^SM, Platinum Canoe^SM, and Printersmall.com^SM, and variations of these brands as well as other trademarks. We have similar trademark registrations internationally. The protection of our trademarks is important to our business. We believe that our registered and common law trademarks have significant value and these trademarks are instrumental to our ability to create and sustain demand for our products.

Customers

No single customer accounts for as much as five percent of our consolidated net sales.

Backlog

     At February 28, 2010, our backlog of orders was approximately $22,128,000 as compared to approximately $29,013,000 at February 28, 2009.

Research and Development

     While we continuously look for new products to sell through our distribution channel, there have been no material amounts spent on research and development in the fiscal year ended February 28, 2010.

Environment

     We are subject to various federal, state, and local environment laws and regulations concerning, among other things, wastewater discharges, air emissions and solid waste disposal. Our manufacturing processes do not emit substantial foreign substances into the environment. We do not believe that our compliance with federal, state, or local statutes or regulations relating to the protection of the environment has any material effect upon capital expenditures, earnings or our competitive position. There can be no assurance, however, that future changes in federal, state, or local regulations, interpretations of existing regulations or the discovery of currently unknown problems or conditions will not require substantial additional expenditures. Similarly, the extent of our liability, if any, for past failures to comply with laws, regulations, and permits applicable to our operations cannot be determined.

Employees

     At February 28, 2010, we had approximately 5,492 employees. Approximately 2,886 of the employees are in Mexico, and approximately 17 employees are in Canada. Of the USA employees, approximately 312 are represented by three unions, under seven separate contracts expiring at various times. Of the employees in Mexico, two unions represent substantially all employees with contracts expiring at various times.

Available Information

     We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 available free of charge under the Investors Relations page on our website, www.ennis.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Information on our website is not included as a part of, or incorporated by reference into, this report. Our SEC filings are also available through the SEC’s website, www.sec.gov. In addition, the public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

ITEM 1A.		RISK FACTORS

     You should carefully consider the risks described below, as well as the other information included or incorporated by reference in this Annual Report on Form 10-K, before making an investment in our common stock. The risks described below are not the only ones we face in our business. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. If any of the following risks occur, our business, financial condition or operating results could be materially harmed. In such an event, our common stock could decline in price and you may lose all or part of your investment.

Our results and financial condition are affected by global and local market conditions, and competitors’ pricing strategies, which can adversely affect our sales, margins, and net income.

     Our results of operations are substantially affected not only by global economic conditions, but also by local market conditions, and competitors’ pricing strategies, which can vary substantially by market. Unfavorable conditions can depress sales in a given market and may prompt promotional or other actions that adversely affect our margins, constrain our operating flexibility or result in charges. Certain macroeconomic events, such as the recent crisis in the financial markets, could have a more wide-ranging and prolonged impact on the general business environment, which could also adversely affect us. Whether we can manage these risks effectively depends mainly on the following:

	•		Our ability to manage upward pressure on commodity prices and the impact of government actions to manage national economic conditions such as consumer spending, inflation rates and unemployment levels, particularly given the current volatility in the global financial markets;
	•		The impact on our margins of labor costs given our labor-intensive business model, the trend toward higher wages in both mature and developing markets and the potential impact of union organizing efforts on day-to-day operations of our manufacturing facilities.

Declining economic conditions could negatively impact our business.

     Our operations are affected by local, national and worldwide economic conditions. Markets in the United States and elsewhere have been experiencing extreme volatility and disruption due in part to the financial stresses affecting the liquidity of the banking system and the financial markets generally. The consequences of a potential or prolonged recession may include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity markets. A lower level of economic activity might result in a decline in demand for our products, which may adversely affect our revenues and future growth. Instability in the financial markets, as a result of recession or otherwise, also may affect our cost of capital and our ability to raise capital.

     We have significant amounts of cash that are in excess of federally insured limits. With the current financial environment and the instability of financial institutions, we cannot be assured that we will not experience losses on our deposits.

The terms and conditions of our credit facility impose certain restrictions on our operations. We may not be able to raise additional capital, if needed, for proposed expansion projects.

     The terms and conditions of our credit facility impose certain restrictions on our ability to incur additional debt, make capital expenditures, acquisitions, asset dispositions, as well as other customary covenants, such as minimum equity level and total funded debt to EBITDA, as defined. Our ability to comply with the covenants may be affected by events beyond our control, such as distressed and volatile financial markets which could trigger an impairment charge to our recorded intangible assets. In fiscal year 2009, we were required to write down goodwill and other intangible assets, and we may have similar charges in the future, which could cause our financial condition and results of operations to be negatively affected in the future. A breach of any of these covenants could result in a default under our credit facility. In the event of a default, the bank could elect to declare the outstanding principal amount of our credit facility, all interest thereon, and all other amounts payable under our credit facility to be immediately due and payable. As of February 28, 2010, we were in compliance with all terms and conditions of our credit facility, which matures on August 18, 2012.

     We may be required to borrow under our credit facility to provide financing for our new manufacturing facility in Agua Prieta in the state of Sonora, Mexico. Our ability to access this facility for these funds will depend upon our future operating performance, which will be affected by prevailing economic, financial and business conditions and other factors, some of which are beyond our control. In the event that we aren’t able to access the facility for the funds needed and require additional capital, there can be no assurance that we will be able to raise such capital when needed or at all.

Declining financial market conditions could adversely impact the funding status of our pension plan.

     We maintain a defined-benefit pension plan covering approximately 14% of our employees. Included in our financial results are pension costs that are measured using actuarial valuations. The actuarial assumptions used may differ from actual results. In addition, as our pension assets are invested in marketable securities, severe fluctuations in market values could potentially negatively impact our funding status, recorded pension liability, and future required minimum contribution levels.

In fiscal year 2009, we were required to write down goodwill and other intangible assets and we may have similar charges in the future, which could cause our financial condition and results of operations to be negatively affected in the future.

     When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The amount of the purchase price which is allocated to goodwill and other intangible assets is the excess of the purchase price over the net identifiable tangible assets acquired. The annual impairment test is based on several factors requiring judgment. A decline in market conditions may indicate potential impairment of goodwill. In fiscal year 2009, we recorded a non-cash impairment charge of $63.2 million and $4.7 million to goodwill and trademarks, respectively. At February 28, 2010, our goodwill and other intangible assets were approximately $117.3 million and $78.7 million, respectively, with no impairment charge for fiscal year 2010 required.

Digital technologies will continue to erode the demand for our printed business documents.

     The increasing sophistication of software, internet technologies, and digital equipment combined with our customers’ general preference, as well as governmental influences, for paperless business environments will continue to reduce the number of printed documents sold. Moreover, the documents that will continue to coexist with software applications will likely contain less value-added print content.

     Many of our custom-printed documents help companies control their internal business processes and facilitate the flow of information. These applications will increasingly be conducted over the internet or through other electronic payment systems. The predominant method of our clients’ communication to their customers is by printed information. As their customers become more accepting of internet communications, our clients may increasingly opt for the less costly electronic option, which would reduce our revenue. The pace of these trends is difficult to predict. These factors will tend to reduce the industry-wide demand for printed documents and require us to gain market share to maintain or increase our current level of print-based revenue.

     In response to the gradual obsolescence of our standardized forms business, we continue to develop our capability to provide custom and full-color products. If new printing capabilities and new product introductions do not continue to offset the obsolescence of our standardized business forms products, and we aren’t able to increase

our market share, our sales and profits will be affected. Decreases in sales of our standardized business forms and products due to obsolescence could also reduce our gross margins. This reduction could in turn adversely impact our profits, unless we are able to offset the reduction through the introduction of new high margin products and services or realize cost savings in other areas.

Our distributors face increased competition from various sources, such as office supply superstores. Increased competition may require us to reduce prices or to offer other incentives in order to enable our distributors to attract new customers and retain existing customers.

     Low price, high value office supply chain stores offer standardized business forms, checks and related products. Because of their size, these superstores have the buying power to offer many of these products at competitive prices. These superstores also offer the convenience of “one-stop” shopping for a broad array of office supplies that our distributors do not offer. In addition, superstores have the financial strength to reduce prices or increase promotional discounts to expand market share. This could result in us reducing our prices or offering incentives in order to enable our distributors to attract new customers and retain existing customers.

Technological improvements may reduce our competitive advantage over some of our competitors, which could reduce our profits.

     Improvements in the cost and quality of printing technology are enabling some of our competitors to gain access to products of complex design and functionality at competitive costs. Increased competition from these competitors could force us to reduce our prices in order to attract and retain customers, which could reduce our profits.

We could experience labor disputes that could disrupt our business in the future.

     As of February 28, 2010, approximately 12% of our domestic employees are represented by labor unions under collective bargaining agreements, which are subject to periodic renegotiations. Two unions represent all of our hourly employees in Mexico. While we feel we have a good working relationship with all the unions, there can be no assurance that any future labor negotiations will prove successful, which may result in a significant increase in the cost of labor, or may break down and result in the disruption of our business or operations.

We obtain our raw materials from a limited number of suppliers, and any disruption in our relationships with these suppliers, or any substantial increase in the price of raw materials or material shortages could have a material adverse effect on us.

     Cotton yarn is the primary raw material used in Alstyle’s manufacturing processes. Cotton accounts for approximately 40% of the manufactured product cost. Alstyle acquires its yarn from three major sources that meet stringent quality and on-time delivery requirements. The largest supplier provides over 75% of Alstyle’s yarn requirements and has an entire yarn mill dedicated to Alstyle’s production. To maintain our high standard of color control associated with our apparel products, we purchase our dyeing chemicals from limited sources. If Alstyle’s relations with its suppliers are disrupted, Alstyle may not be able to enter into arrangements with substitute suppliers on terms as favorable as its current terms, and our results of operations could be materially adversely affected.

     We also purchase our paper products from a limited number of sources, which meet stringent quality and on-time delivery standards under long-term contracts. However, fluctuations in the quality of our paper, unexpected price increases or other factors that relate to our paper products could have a material adverse effect on our operating results.

     Both cotton and paper are commodities that are subject to periodic increases or decreases in price, sometimes quite significant. There is no effective market to cost-effectively insulate us against unexpected changes in price of paper, and corporate negotiated purchase contracts provide only limited protection against price increases. We generally acquire our cotton yarn under short-term purchase contracts with our suppliers. While we generally do not use derivative instruments, including cotton option contracts, to manage our exposure to movements in cotton market prices, we believe we are competitive with other companies in the United States apparel industry in negotiating the price of cotton. When cotton or paper prices are increased, we attempt to recover the higher costs by raising the prices of our products to our customers. In the price-competitive marketplaces in which we operate, we may not always be able to pass through any or all of the higher costs. As such, any significant increase in the price of paper or cotton or shortages in the availability of either, could have a material adverse effect on our results of operations.

We face intense competition to gain market share, which may lead some competitors to sell substantial amounts of goods at prices against which we cannot profitably compete.

     Demand for Alstyle’s products is dependent on the general demand for shirts and the availability of alternative sources of supply. Alstyle’s strategy in this market environment is to be a low cost producer and to differentiate itself by providing quality service and quality products to its customers. Even if this strategy is successful, its results may be offset by reductions in demand or price declines due to competitors’ pricing strategies. Our Print Segment also faces the risk of our competition following a strategy of selling their products at or below cost in order to cover some amount of fixed costs, especially in distressed economic times.

The apparel industry is heavily influenced by general economic cycles.

     The apparel industry is cyclical and dependent upon the overall level of discretionary consumer spending, which changes as regional, domestic and international economic conditions change. These include, but are not limited to, employment levels, energy costs, interest rates, tax rates, personal debt levels, and uncertainty about the future. Any deterioration in general economic conditions that creates uncertainty or alters discretionary consumer spending habits could reduce our sales, increase our costs of goods sold or require us to significantly modify our current business practices, and consequently negatively impact our results of operations.

Our apparel foreign operations could be subject to unexpected changes in regulatory requirements, tariffs and other market barriers and political and economic instability in the countries where it operates, which could negatively impact our operating results.

     Alstyle operates cutting and sewing facilities in Mexico and sources certain product manufacturing and purchases in El Salvador, Nicaragua, Honduras, Pakistan and China. Alstyle’s foreign operations could be subject to unexpected changes in regulatory requirements, tariffs, and other market barriers and political and economic instability in the countries where it operates. The impact of any such events that may occur in the future could subject Alstyle to additional costs or loss of sales, which could adversely affect our operating results. In particular, Alstyle operates its facilities in Mexico pursuant to the “maquiladora” duty-free program established by the Mexican and United States governments. This program enables Alstyle to take advantage of generally lower costs in Mexico, without paying duty on inventory shipped into or out of Mexico. There can be no assurance that the governments of Mexico and the United States will continue the program currently in place or that Alstyle will continue to be able to benefit from this program. The loss of these benefits could have an adverse effect on our business.

Our apparel products are subject to foreign competition, which in the past have been faced with significant U.S. government import restrictions.

     Foreign producers of apparel often have significant labor cost advantages. Given the number of these foreign producers, the substantial elimination of import protections that protect domestic apparel producers could materially adversely affect Alstyle’s business. The extent of import protection afforded to domestic apparel producers has been, and is likely to remain, subject to considerable political considerations.

     The North American Free Trade Agreement (NAFTA) became effective on January 1, 1994 and has created a free-trade zone among Canada, Mexico, and the United States. NAFTA contains a rule of origin requirement that products be produced in one of the three countries in order to benefit from the agreement. NAFTA has phased out all trade restrictions and tariffs among the three countries on apparel products competitive with those of Alstyle. Alstyle performs substantially all of its cutting and sewing in five plants located in Mexico in order to take advantage of the NAFTA benefits. Subsequent repeal or alteration of NAFTA could adversely affect our business.

     The Central American Free Trade Agreement (CAFTA) became effective May 28, 2004 and retroactive to January 1, 2004 for textiles and apparel. It creates a free trade zone similar to NAFTA by and between the United States and Central American countries (El Salvador, Honduras, Costa Rica, Nicaragua, and Dominican Republic.) Textiles and apparel are duty-free and quota-free immediately if they meet the agreement’s rule of origin, promoting new opportunities for U.S. and Central American fiber, yarn, fabric and apparel manufacturing. The agreement gives duty-free benefits to some apparel made in Central America that contains certain fabrics from NAFTA partners Mexico and Canada. Alstyle outsourced approximately 6% of its sewing to a contract manufacturer in El Salvador, and we do not anticipate that alteration or subsequent repeal of CAFTA would have a material effect on our operations.

     The World Trade Organization (WTO), a multilateral trade organization, was formed in January 1995 and is the successor to the General Agreement on Tariffs and Trade (GATT). This multilateral trade organization has set forth mechanisms by which world trade in clothing is being progressively liberalized by phasing-out quotas and reducing duties over a period of time that began in January of 1995. As it implements the WTO mechanisms, the United States government is negotiating bilateral trade agreements with developing countries, which are generally exporters of textile and apparel products, that are members of the WTO to get them to reduce their tariffs on imports of textiles and apparel in exchange for reductions by the United States in tariffs on imports of textiles and apparel.

     In January 2005, United States import quotas were removed on knitted shirts from China. The elimination of quotas and the reduction of tariffs under the WTO may result in increased imports of certain apparel products into North America. In May 2005, quotas on three categories of clothing imports, including knitted shirts, from China were re-imposed. A reduction of import quotas and tariffs could make Alstyle’s products less competitive against low cost imports from developing countries.

Environmental regulations may impact our future operating results.

     We are subject to extensive and changing federal, state and foreign laws and regulations establishing health and environmental quality standards, and may be subject to liability or penalties for violations of those standards. We are also subject to laws and regulations governing remediation of contamination at facilities currently or formerly owned or operated by us or to which we have sent hazardous substances or wastes for treatment, recycling or disposal. We may be subject to future liabilities or obligations as a result of new or more stringent interpretations of existing laws and regulations. In addition, we may have liabilities or obligations in the future if we discover any environmental contamination or liability at any of our facilities, or at facilities we may acquire.

Our construction of a new apparel manufacturing facility in Mexico is subject to multiple approvals and uncertainties that could affect our ability to complete the project on schedule or at budgeted cost.

     The construction of our new apparel manufacturing facility in the town of Agua Prieta in the state of Sonora, Mexico is expected to be completed during fiscal year 2011. The construction of this new facility will involve numerous regulatory, environmental, political, and legal uncertainties beyond our control. The cost of the facility and the equipment required for the facility will require the expenditure of significant amounts of capital that will be financed through internal cash flows or alternatively through borrowings under our credit facility which are contingent on us continuing to meet certain financial covenants. Moreover, this facility is being built to capture anticipated future growth in demand and anticipated savings in production costs. Should such growth or production savings not materialize, or should the timeline for our transition be delayed, we may be unable to achieve our expected investment return, which could adversely affect our results of operations and financial condition.

We are exposed to the risk of non-payment by our customers on a significant amount of our sales.

     Our extension of credit involves considerable judgment and is based on an evaluation of each customer’s financial condition and payment history. We monitor our credit risk exposure by periodically obtaining credit reports and updated financials on our customers. We saw a heightened amount of bankruptcies by our customers, especially retailers, during the recent economic downturn. While we maintain an allowance for doubtful receivables for potential credit losses based upon our historical trends and other available information, in times of economic turmoil, there is heightened risk that our historical indicators may prove to be inaccurate. The inability to collect on sales to significant customers or a group of customers could have a material adverse effect on our results of operations.

Our business incurs significant freight and transportation costs.

     We incur significant freight costs to transport our goods, especially as it relates to our Apparel Segment where we transport our product from our domestic textile plant to foreign sewing facilities and then to bring our goods back into the United States. In addition, we incur transportation expenses to ship our products to our customers. Significant increases in the costs of freight and transportation could have a material adverse effect on our results of operations, as there can be no assurance that we could pass these increased costs to our customers.

The price of energy is prone to significant fluctuations and volatility.

     Our apparel manufacturing operations require high inputs of energy, and therefore changes in energy prices directly impact our gross profit margins. We are focusing on manufacturing methods that will reduce the amount of energy used in the production of our apparel products to mitigate the rising costs of energy. Significant increases in energy prices could have a material adverse effect on our results of operations, as there can be no assurance that we

could pass these increased costs to our customers given the competitive environment in which our Apparel segment operates.

We rely on independent contract production for a portion of our apparel production.

     We have historically relied on third party suppliers to provide approximately 10% of our cut and sew apparel production. Any shortage of supply, production disruptions, shipping delays, regulatory changes, significant price increases from our suppliers, could adversely affect our apparel operating results.

We depend upon the talents and contributions of a limited number of individuals, many of whom would be difficult to replace.

     The loss or interruption of the services of our Chief Executive Officer, Executive Vice President, Vice President of Apparel or Chief Financial Officer could have a material adverse effect on our business, financial condition or results of operations. Although we maintain employment agreements with these individuals, it cannot be assured that the services of such individuals will continue.

ITEM 1B.		UNRESOLVED STAFF COMMENTS

     There are no unresolved staff comments.

ITEM 2.		PROPERTIES

     Our corporate headquarters are located in Midlothian, Texas. We operate manufacturing and distribution facilities throughout the United States and in Mexico and Canada. See the table below for additional information on our locations.

     All of the Print Segment properties are used for the production, warehousing and shipping of the following: business forms, flexographic printing, advertising specialties and Post-it^® Notes (Wolfe City, Texas); presentation products (Macomb, Michigan and Anaheim, California); and printed and electronic promotional media (Denver, Colorado); envelopes (Portland, Oregon; Columbus, Kansas and Tullahoma, Tennessee); financial forms (Minneapolis/St. Paul, Minnesota; Nevada, Iowa and Bridgewater, Virginia) and other business products. The Apparel Segment properties are used for the manufacturing or distribution of t-shirts and other activewear apparel.

     Our plants are being operated at capacity levels to meet forecasted customer demands. Capacity fluctuates with market demands and depends upon the product mix at any given point in time. Equipment is added as existing machinery becomes obsolete or not repairable, and as new equipment becomes necessary to meet market demands; however, at any given time, these additions and replacements are not considered to be material additions to property, plant and equipment, although such additions or replacements may increase a plant’s efficiency or capacity.

     All of the foregoing facilities are considered to be in good condition. We do not anticipate that substantial expansion, refurbishing, or re-equipping will be required in the near future. We currently have one facility held-for-sale located in Bellville, Texas.

     All of the rented property is held under leases with original terms of one or more years, expiring at various times through March 2014. No difficulties are presently foreseen in maintaining or renewing such leases as they expire.

The accompanying list contains each of our owned and leased locations:

				Approximate Square Footage
Location		General Use		Owned				Leased
Print Segment
Ennis, Texas		Three Manufacturing Facilities			325,118				—
Chatham, Virginia		Two Manufacturing Facilities			127,956				—
Paso Robles, California		Manufacturing			94,120				—
DeWitt, Iowa		Two Manufacturing Facilities			95,000				—
Knoxville, Tennessee		Manufacturing			48,057				—
Ft, Scott, Kansas		Manufacturing			86,660				—
Portland, Oregon		Manufacturing			—				139,330

				Approximate Square Footage
Location		General Use		Owned				Leased
Wolfe City, Texas		Two Manufacturing Facilities			119,259				—
Moultrie, Georgia		Manufacturing			25,000				—
Coshocton, Ohio		Manufacturing			24,750				—
Macomb, Michigan		Manufacturing			56,350				—
Anaheim, California		Three Manufacturing Facilities			—				63,750
Bellville, Texas		Facility Held for Sale			70,196				—
Denver, Colorado		Four Manufacturing Facilities			60,000				101,600
Oklahoma City. Oklahoma		Sales Office			—				460
San Antonio, Texas		Manufacturing			47,426				—
Brooklyn Park, Minnesota		Manufacturing			94,800				—
Roseville, Minnesota		Manufacturing			—				42,500
Arden Hills, Minnesota		Warehouse			—				31,684
Nevada, Iowa		Manufacturing			232,000				—
Bridgewater, Virginia		Manufacturing			—				27,000
Columbus, Kansas		Manufacturing			201,000				—
Leipsic, Ohio		Manufacturing			83,216				—
El Dorado Springs, Missouri		Manufacturing			70,894				—
Princeton, Illinois		Two Manufacturing Facilities			—				74,340
Arlington, Texas		Manufacturing			69,935
Mechanicsburg, Pennsylvania		Warehouse			—				7,500
Rancho Cordova, California		Administrative Offices			—				108
Tullahoma, Tennessee		Manufacturing			24,950
Caledonia, New York		Manufacturing			138,730				—
Sun City, California		Manufacturing			52,617				—
Phoenix, Arizona		Manufacturing and Warehouse							59,000
					2,148,034				547,272
Apparel Segment
Anaheim, California		Office and Distribution Center			—				200,000
Anaheim, California		Manufacturing			—				304,536
Chicago, Illinois		Distribution Center			—				120,000
Atlanta, Georgia		Distribution Center			—				31,958
Carrollton, Texas		Distribution Center			—				26,136
Bensalem, Pennsylvania		Distribution Center			—				60,848
Mississauga, Canada		Distribution Center			—				53,982
Los Angeles, California		Distribution Center			—				31,600
Ensenada, Mexico		Two Manufacturing Facilities			112,622				53,820
Ensenada, Mexico		Car Parking			—				22,000
Ensenada, Mexico		Warehouse			—				2,583
Hermosillo, Mexico		Three Manufacturing Facilities			—				126,263
Hermosillo, Mexico		Yard Space			—				19,685

				Approximate Square Footage
Location		General Use		Owned				Leased
Hermosillo, Mexico		Vacant			—				8,432
Hermosillo, Mexico		Storage for Machines			—				1,640
					112,622				1,063,483
Corporate Offices
Ennis, Texas		Administrative Offices			9,300				—
Midlothian, Texas		Executive and Administrative Offices			28,000				—
					37,300				—
		Totals			2,297,956				1,610,755

ITEM 3.		LEGAL PROCEEDINGS

     From time to time we are involved in various litigation matters arising in the ordinary course of our business. We do not believe the disposition of any current matter will have a material adverse effect on our consolidated financial position or results of operations.

ITEM 4.		SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2010.

PART II

ITEM 5.		MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     Our common stock is traded on the New York Stock Exchange (“NYSE”) under the trading symbol “EBF”. The following table sets forth the high and low sales prices, the common stock trading volume as reported by the New York Stock Exchange and dividends per share paid by the Company for the periods indicated:

										Common Stock				Dividends
										Trading Volume				per share of
		Common Stock Price Range								(number of shares				Common
		High				Low				in thousands)				Stock
Fiscal Year Ended February 28, 2010
First Quarter		$	11.17			$	6.91				3,844			$	0.155
Second Quarter			15.25				10.35				3,966			$	0.155
Third Quarter			17.34				13.33				2,766			$	0.155
Fourth Quarter			17.39				13.75				2,147			$	0.155
Fiscal Year Ended February 28, 2009
First Quarter		$	19.18			$	14.31				5,173			$	0.155
Second Quarter			19.92				13.55				4,324			$	0.155
Third Quarter			18.16				8.54				5,357			$	0.155
Fourth Quarter			13.37				8.01				4,412			$	0.155

The last reported sale price of our common stock on NYSE on April 30, 2010 was $18.49. As of that date, there were approximately 1,083 shareholders of record of our common stock. Cash dividends may be paid or repurchases of our common stock may be made from time to time, as our Board of Directors deems appropriate, after considering our growth rate, operating results, financial condition, cash requirements, restrictive lending covenants, and such other factors as the Board of Directors may deem appropriate.

On October 20, 2008, our Board of Directors authorized the repurchase of up to $5.0 million of our common stock through a stock repurchase program. Under the board-approved repurchase program, share 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, and 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 without prior notice. As of February 28, 2010, there were 96,000 shares of our common stock that had been purchased under the repurchase program at an average price per share of $10.45. For the year ended February 28, 2010, we purchased 43,300 shares of our common stock for an average purchase price of $9.33.

     See Item 12 — “Security Ownership of Beneficial Owners and Management and Related Stockholder Matters” section of this Report for information relating to our equity compensation plan.

Stock Performance Graph

     The graph below matches our cumulative 5-year total shareholder return on common stock with the cumulative total returns of the S & P 500 index and the Russell 2000 index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from February 28, 2005 to February 28, 2010.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Ennis, Inc., The S&P 500
Index And The Russell 2000 Index

		2005				2006				2007				2008				2009				2010
Ennis, Inc.			100.00				119.61				161.12				108.39				55.07				108.52
S&P 500			100.00				108.40				121.38				117.01				66.32				101.88
Russell 2000			100.00				116.59				128.10				112.16				64.62				105.95

     The stock price performance included in this graph is not necessarily indicative of future stock price performance.

ITEM 6. SELECTED FINANCIAL DATA

     The following selected financial data has been derived from our audited consolidated financial statements. Our consolidated financial statements and notes thereto as of February 28, 2010 and February 28, 2009, and for the three years in the period ended February 28, 2010, and the reports of Grant Thornton LLP are included in Item 15 of this Report. The selected financial data should be read in conjunction with Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included in Item 15 of this Report.

		Fiscal Years Ended
		2010				2009				2008				2007				2006
		(Dollars and shares in thousands, except per share amounts)
Operating results:
Net sales		$	517,738			$	584,029			$	610,610			$	584,713			$	559,397
Gross profit margin			135,319				143,476				163,874				156,322				151,961
SG&A expenses			76,738				86,217				88,851				83,121				79,824
Impairment of goodwill and trademarks			—				67,851				—				—				—
Net earnings (loss)			35,206				(32,768	)			44,590				41,601				40,537
Earnings (loss) and dividends per share:
Basic		$	1.37			$	(1.27	)		$	1.74			$	1.63			$	1.59
Diluted			1.36				(1.27	)			1.72				1.62				1.58
Dividends			0.62				0.62				0.62				0.62				0.62
Weighted average shares outstanding:
Basic			25,769				25,724				25,697				25,571				25,453
Diluted			25,797				25,790				25,860				25,759				25,728
Financial Position:
Working capital		$	116,638			$	138,374			$	133,993			$	102,269			$	94,494
Current assets			166,439				182,254				185,819				151,516				158,455
Total assets			432,699				436,380				513,131				478,228				494,401
Current liabilities			49,801				43,880				51,826				49,247				63,961
Long-term debt			41,817				76,185				90,710				88,971				102,916
Total liabilities			119,439				144,374				164,652				161,825				197,066
Equity			313,260				292,006				348,479				316,403				297,335
Current ratio			3.34 to 1.0				4.15 to 1.0				3.59 to 1.0				3.08 to 1.0				2.48 to 1.0
Long-term debt to equity			.13 to 1.0				.26 to 1.0				.26 to 1.0				.28 to 1.0				.35 to 1.0

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The Management’s Discussion and Analysis provides material historical and prospective disclosures intended to enable investors and other users to assess our financial condition and results of operations. Statements that are not historical are forward-looking and involve risk and uncertainties, including those discussed under the caption “Risk Factors” in Item 1A starting on page 6 of this Annual Report on Form 10-K and elsewhere in this Report. You should read this discussion and analysis in conjunction with our Consolidated Financial Statements and the related notes appearing elsewhere in this Report. While 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.

     In view of such uncertainties, investors should not place undue reliance on our forward-looking statements since such statements may prove to be inaccurate and speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

This Management’s Discussion and Analysis includes the following sections:

	•		Overview — An overall discussion on our Company, the business challenges and opportunities we believe are key to our success, and our plans for facing these challenges.
	•		Critical Accounting Policies and Estimates — A discussion of the accounting policies that require our most critical judgments and estimates. This discussion provides insight into the level of subjectivity, quality, and variability involved in these judgments and estimates. This section also provides a summary of recently adopted and recently issues accounting pronouncements that have or may materially affect our business.
	•		Results of Operations — An analysis of our consolidated results of operations and segment results for the three years presented in our consolidated financial statements. This analysis discusses material trends within our business and provides important information necessary for an understanding of our operating results.
	•		Liquidity and Capital Resources — An analysis of our cash flows and a discussion of our financial condition and contractual obligations. This section provides information necessary to evaluate our ability to generate cash and to meeting existing and known future cash requirements over both the short and long term.

References to 2010, 2009 and 2008 refer to the fiscal year ended February 28, 2010, February 29, 2009 and February 28, 2008, respectively.

Overview

The Company — We are one of the largest providers of business forms to independent distributors in the United States and are also one of the largest providers of blank t-shirts in North America to the active-wear market. We operate in two reportable segments — Print and Apparel.

Our Print Business Challenges — In our Print segment, we are engaged in an industry undergoing significant changes. 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. In addition, the downturn in the economy and turmoil in the credit markets in 2009 and 2010 have created highly competitive conditions in an already over-supplied, price-competitive industry. Thus, we believe we are facing the following challenges in the Print Segment of our business:

	•		Transformation of our portfolio of products
	•		Excess production capacity and price competition within our industry
	•		Economic uncertainties

The following is a discussion of these business challenges and our strategy for managing their effect on our print business.

Transformation of our portfolio of products — Traditional business documents are essential in order to conduct business. However, many are being replaced or devalued with advances in digital technologies, causing steady declines in demand for a large portion of our current product line. The same digital advances also introduce potential new opportunities for growth for us, such as print-on-demand services and product offerings that assist customers in their transition to digital business environments. We currently have many innovative products, such as our recently introduced healthcare wristbands, secure document solutions, and innovative in-mold label offerings, which address important business needs, and we feel are positioned for growth. In addition, we will continue to look for new market opportunities and niches, such as our addition of our envelope offerings, that provide us with an opportunity for growth and differentiate us from our competition. Transforming our product offerings to continue to provide innovative, valuable solutions 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.

Excess production capacity and price competition within our industry — Paper mills continue to adjust production capacity through downtime and closures to attempt to keep in line projected customer demand with the available supply. Due to the limited number of paper mills, paper prices have been and are expected to remain fairly volatile. In 2010, we saw our material prices stabilize due to the depressed economic conditions. However, we would expect paper mills to continue to increase paper prices, especially as the economy strengthens, and have already seen indications of paper price increases during the first quarter of fiscal 2011.

Despite a competitive marketplace, we have generally been able to pass through increased paper costs, although it can often take several quarters to push these through due to the custom nature of our products and/or contractual relationships with some of our customers. We expect this trend to continue; however, weak economic conditions may limit our ability to recover all these costs. In addition, poor economic conditions, have also resulted in increased price competition, due to an already over-supplied market, which continues to put pressure on selling prices. We attempt to effectively manage and control our product costs to minimize the effects of the foregoing on our operational results, through the use of forecasting models, production and costing models, etc. However, an inherent risk in this process is that our assumptions are off, which could have a negative impact on our reported profit margins.

Economic uncertainties — As a result of the recessionary conditions of 2009 and 2010, the economic climate has been volatile and challenging. Decreased demand and intense price competition resulted in significant declines in our revenue during the past fiscal year. Although, we have seen slight improvements in some economic indicators within our markets, unemployment rates and other leading indicators continue to be strained. A weak job market may continue to present a challenging environment for substantial revenue growth next fiscal year. As we cannot predict the pace of the economic recovery, we will be highly focused on customer retention, expanding our growth targeted products and continuing to develop our new market niches. In addition, we have proven a history of managing our costs and wouldn’t expect this trend to change in the future.

Our Apparel Business Challenges — In our Apparel segment, our market niche is highly competitive, commodity driven and is generally dominated by a limited number of players. The downturn in the economy and turmoil in the credit markets in 2009 and 2010 created an over-supply situation which further increased competitive pressures in this market. Cotton, which represents 40% of our costs, is a commodity product and subject to volatile fluctuations in price, due to general market conditions, domestic and international demand, perceived availability, international actions, etc. As such, our operational costs are subject to significant swings, which we may or may not be passed on to the marketplace due to competitive or economic conditions, competitors’ pricing strategies, etc. Thus, we believe we are facing the following challenges in our Apparel Segment business in fiscal 2011:

	•		Cotton prices
	•		Completion of our new manufacturing facility
	•		Economic uncertainties

Cotton prices — Due to shortage of supply and other international factors, domestic cotton prices are at levels not seen in years, if ever. Whether or not prices will stay at this level for a sustained period of time is unknown. However, as most manufacturers have already locked in a significant portion of their cotton buys for next year, a decline in spot cotton prices later this year would only have a marginal impact on overall calendar year 2010 blended costs. We believe we are competitive with other companies in the United States apparel industry in negotiating the price of cotton and as such we do not feel we are at a competitive disadvantage from a cotton perspective. However, it is unknown at this time whether the market will allow the manufacturers to pass these costs through and whether our competitors will in fact attempt to pass through these costs.

Completion of new manufacturing facility — We are building a state-of-the art manufacturing facility in Agua Prieta, Mexico (the “Project”) and expect construction to be completed during the 2^nd quarter of fiscal 2011, with production to start during the 3^rd quarter of fiscal 2011. After the successful implementation of Phase 1 of the Project, this facility will be able to process 1 million pounds of fabric per week, with the eventual capacity, after Phase 2 implementation, being between 2.6 million to 3.0 million pounds per week.

During the initial ramp up of this facility, there will be considerable duplicate costs, inefficiencies, moving costs, etc. that will have a negative impact on the apparel segment’s fiscal year 2011 operating results. Our plan is to contain these costs to a large extent to fiscal year 2011 through an accelerated ramp up schedule. We would expect the negative impact of the start-up and ramp up costs of this facility will be approximately $6 million to $8 million. However, the success of our plan is dependent on meeting key targets and a delayed start-up/wind-down schedule could add significantly to these costs. Once fully operational, with sell-through levels of 2.6 million pounds to 3.0 million pounds per week, and with anticipated manufacturing efficiency factors being realized, this facility is expected to generate between $10 million to $15 million in annualized cost savings per year.

Economic uncertainties — As a result of the recessionary conditions of 2009 and 2010, the economic climate has been volatile and challenging. Decreased demand and intense price competition resulted in significant declines in our revenue during the past fiscal year. Although we saw a significant increase in our revenues during our fourth quarter, and would expect such to continue during the first couple quarters of fiscal 2011, continued high

unemployment rates and continued weakness in the housing sector, along with international crisis could undermine the fragile state of the current economic recovery. As we cannot predict the pace of the economic recovery, we will be highly focused on customer retention, expanding our growth targeted markets and managing our costs (both the start-up and operational costs).

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 the following accounting policies are the most critical due to their affect on our more significant estimates and judgments used in preparation of our consolidated financial statements.

     We maintain a defined-benefit pension plan for employees. Included in our financial results are pension costs that are measured using actuarial valuations. The actuarial assumptions used may differ from actual results. As our pension assets are invested in marketable securities, fluctuations in market values could potentially impact our funding status and associated liability recorded.

     Amounts allocated to amortizable intangibles are determined based on valuation analysis for our acquisitions and are amortized over their expected useful lives. We evaluate these amounts periodically (at least once a year) to determine whether a triggering event has occurred during the year that would indicate potential impairment.

     We exercise judgment in evaluating our long-lived assets for impairment. We assess the impairment of long-lived assets that include other intangible assets, goodwill, and property, plant, and equipment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In performing tests of impairment, we must make assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets in assessing the recoverability of our long lived assets. If these estimates or the related assumptions change, we may be required to record impairment charges for these assets in the future. Actual results could differ from assumptions made by management. For example, in fiscal year 2009, we recorded a non-cash impairment charge of $63.2 million and $4.7 million of goodwill and trademarks, respectively. At February 28, 2010, our goodwill and other intangible assets were approximately $117.3 million and $78.7 million, respectively. No impairment charge was required for the year ended February 28, 2010 based on the results of our annual impairment test. The carrying value of invested capital for each reporting unit as compared to their fair value at February 28, 2010 was as follows:

		Carrying Value of				Fair Value of
Reporting Unit		Invested Capital				Invested Capital
Apparel		$	237,675,000			$	256,000,000
Print		$	140,212,000			$	252,000,000

We believe our businesses will generate sufficient undiscounted cash flow to more than recover the investments we have made in property, plant and equipment, as well as the goodwill and other intangibles recorded as a result of our acquisitions. However, we cannot predict the occurrence of future impairments or specific triggering events nor the impact such events might have on our reported asset values.

     Revenue is generally recognized upon shipment of products. Net sales consist of gross sales invoiced to customers, less certain related charges, including discounts, returns and other allowances. Returns, discounts and other allowances have historically been insignificant. In some cases and upon customer request, we print and store custom print product for customer specified future delivery, generally within twelve months. In this case, risk of loss from obsolescence passes to the customer, the customer is invoiced under normal credit terms and revenue is recognized when manufacturing is complete. Approximately $12.4 million, $18.3 million, and $20.2 million of revenue were recognized under these agreements during fiscal years ended February 28, 2010, February 28, 2009, and February 29, 2008, respectively.

     We maintain an allowance for doubtful receivables to reflect estimated losses resulting from the inability of customers to make required payments. On an on-going basis, we evaluate the collectability of accounts receivable

based upon historical collection trends, current economic factors, and the assessment of the collectability of specific accounts. We evaluate the collectability of specific accounts using a combination of factors, including the age of the outstanding balances, evaluation of customers’ current and past financial condition and credit scores, recent payment history, current economic environment, discussions with our project managers, and discussions with the customers directly.

     Our inventories are valued at the lower of cost or market. We regularly review inventory values on hand, using specific aging categories, and write down inventory deemed obsolete and/or slow-moving based on historical usage and estimated future usage to its estimated market value. As actual future demand or market conditions may vary from those projected by management, adjustments to inventory valuations may be required.

     As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each jurisdiction in which we operate. This process involves estimating our actual current tax exposure together with assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income. To the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance we must include an expense within the tax provision in the consolidated statements of earnings. In the event that actual results differ from these estimates, our provision for income taxes could be materially impacted.

     In addition to the above, we also have to make assessments as to the adequacy of our accrued liabilities, more specifically our liabilities recorded in connection with our workers compensation and health insurance, as these plans are self funded. To help us in this evaluation process, we routinely get outside third party assessments of our potential liabilities under each plan.

     In view of such uncertainties, investors should not place undue reliance on our forward-looking statements since such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) amended authoritative guidance for improving disclosures about fair-value measurements. The updated guidance requires new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. The guidance also clarified existing fair-value measurement disclosure guidance about the level of disaggregation, inputs, and valuation techniques. The guidance became effective for interim and annual reporting periods beginning on or after December 15, 2009, with an exception for the disclosures of purchases, sales, issuances and settlements on the roll-forward of activity in Level 3 fair-value measurements. Those disclosures will be effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company does not expect that the adoption of this guidance will have a material impact on the consolidated financial statements.

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. This analysis is presented in the following sections:

	•		Consolidated Summary — this section provides an overview of our consolidated results of operations for fiscal years 2010, 2009 and 2008.
	•		Segment Operating Results — this section provides an analysis of our net sales, gross profit margin and operating income by segment.

Consolidated Summary

		Fiscal Years Ended
Consolidated Statements of Earnings - Data		2010								2009								2008
Net sales		$	517,738				100.0	%		$	584,029				100.0	%		$	610,610				100.0	%
Cost of goods sold			382,419				73.9				440,553				75.4				446,736				73.2
Gross profit margin			135,319				26.1				143,476				24.6				163,874				26.8
Selling, general and administrative			76,738				14.8				86,217				14.8				88,851				14.5
Impairment of goodwill and trademarks			—				0.0				67,851				11.6				—				0.0
Gain from disposal of assets			(1	)			0.0				(514	)			(0.1	)			(757	)			(0.1	)
Income (loss) from operations			58,582				11.3				(10,078	)			(1.7	)			75,780				12.4
Other expense, net			(2,913	)			(0.5	)			(2,981	)			(0.5	)			(5,995	)			(1.0	)
Earnings (loss) before income taxes			55,669				10.8				(13,059	)			(2.2	)			69,785				11.4
Provision for income taxes			20,463				4.0				19,709				3.4				25,195				4.1
Net earnings (loss)		$	35,206				6.8	%		$	(32,768	)			-5.6	%		$	44,590				7.3	%

     Net Sales. Our sales during the periods continued to be impacted by the significant economic downturn which began during the later part of our third quarter of fiscal year 2009. The volatile economic conditions of 2009 and 2010 and the resulting lower demand lead an already competitive market environment to a weaker selling price environment, as manufacturers tried to maintain their production levels/market share. While we competed based on price on a selected basis where it was deemed to be of strategic value, we decided to be much more cost-side focused and bottom-line driven, As a result, our sales declined by $66.3 million, or 11.4% during fiscal year ended 2010 and $26.6 million or 4.4% during fiscal year ended 2009.

     Cost of Goods Sold. Due to our cost-side focused approach during fiscal year 2010 and some favorable cotton pricing during the fourth quarter ended February 28, 2010, we were able to reduce our cost of goods sold by 13.2% during fiscal year 2010. This resulted in our consolidated gross profit margin (net sales less cost of goods sold) increasing by 150 basis points, from 24.6% in fiscal 2009 to 26.1% in fiscal 2010. Our apparel margins increased from 22.6% to 24.4%, while our print margins increased from 26.1% to 27.6%, for fiscal years 2009 and 2010, respectively.

     During the later part of our third quarter of fiscal 2009, the United States economy went into a severe economic downturn, which impacted both our apparel and print sales. While the Company adjusted its cost structure to be in-line with its current run-rate, it took a quarter or so to implement these costs reduction strategies and to fully understand the depths of the economic downturn. This timing impacted the Company’s reported gross profit margins during this period. In addition, our Apparel Segment experienced significant cost side pressures relating to material, freight, chemical and utilities during the period, as well as sell side pressures due to retail inventory reduction strategies and excess inventory levels at manufacturers. As a result, our overall gross profit margin (net sales less cost of goods sold), as a percentage of sales, decreased from 26.8% in fiscal year 2008 to 24.6% in fiscal year 2009. Our apparel margins decreased from 26.4% to 22.6%, while our print margins decreased from 27.2% to 26.1%, for fiscal years 2008 and 2009, respectively.

     Selling, general, and administrative expenses. For fiscal year 2010, our selling, general and administrative expenses decreased approximately $9.5 million, or 11.0% from $86.2 million, or 14.8% of sales for fiscal year 2009 to $76.7 million, or 14.8% of sales for fiscal year 2010. As a percentage of sales these expenses remained the same for both years, while on a dollar basis, these expenses decreased primarily as a result of our continual cost control initiatives and the focus of being cost-side driven during these difficult economic times.

     For fiscal year 2009, our selling, general and administrative expenses decreased approximately $2.7 million, or 3.0% from $88.9 million, or 14.6% of sales for fiscal year 2008 to $86.2 million, or 14.8% of sales for fiscal year 2009. On a dollar basis, these expenses decreased primarily as a result of our cost reduction initiatives, lower employment and factoring expenses, offset by higher bad debt expense, associated with the bankruptcy filing of a large apparel customer and higher health insurance expense. On a percentage basis, these expenses increased only slightly due to the timing impact of cost control initiative programs implemented.

     Impairment of goodwill and trademarks. After conducting our fiscal year 2009 impairment testing, we determined $63.2 million of goodwill and $4.7 million trademarks associated with our Apparel Segment was impaired. The impairment charge was primarily the result of the then current adverse economic conditions and the resulting impact on the financial market valuation multiples. No impairment was required for the year ended February 28, 2010 based on the results of our annual impairment test.

     Gain from disposal of assets. The gain from disposal of assets of $1,000 for fiscal year ended February 28, 2010 resulted from sale of equipment. The gain from disposal of assets of $514,000 for the fiscal year ended February 28, 2009 resulted from $334,000 gain from sale of vacant facilities and $180,000 gain from sale of equipment.

     Income from operations. Our income from operations for fiscal year 2010 increased from an operational loss of $10.1 million, or -1.7% of sales for fiscal year 2009, to operational earnings of $58.6 million, or 11.3% of sales for fiscal year 2010. The dollar increase in our operational earnings during fiscal year 2010, related primarily to our improved consolidated gross profit margin, reduced selling, general and administrative costs, and the lack of a comparable non-cash impairment charge in 2010 like we incurred in fiscal year 2009.

     Our income from operations for fiscal year 2009 decreased from operational earnings of $75.8 million, or 12.4% of sales for fiscal year 2008, to an operational loss of $10.1 million, or —1.7% of sales for fiscal year 2009. The dollar decrease in our operational earnings during fiscal year 2009, related primarily to the non-cash impairment charge of $67.9 million and decrease in our consolidated gross profit margin due to conditions discussed earlier.

     Other income and expense. Our interest expense was $2.6 million, $3.4 million and $5.7 million for fiscal years 2010, 2009 and 2008, respectively. Our interest expense decreased in fiscal year 2010 and 2009 due to less outstanding debt on average as compared to each prior fiscal year and a lower effective borrowing rate during fiscal years 2010 and 2009.

     Provision for income taxes. Our effective tax rates for fiscal years 2010, 2009 and 2008 were 36.8%, -150.9% and 36.1%, respectively. The Company’s effective income tax rate for fiscal year 2009 was impacted by the non-deductible goodwill impairment charge of $63.2 million.

     Net earnings. Our net earnings increased from a loss of $32.8 million, or -5.6% of sales for fiscal year 2009 to earnings of $35.2 million, or 6.8% of sales for fiscal year 2010. Basic earnings per share increased from a loss of $1.27 per share for fiscal year 2009 to earnings of $1.37 per share for fiscal year 2010. Diluted earnings per share increased from a loss of $1.27 per share for fiscal year 2009 to earnings of $1.36 per share for fiscal year 2010. The increase in net earnings during the period related primarily to the lack of a non-cash impairment charge as was incurred in fiscal year 2009.

     Our net earnings decreased from $44.6 million, or 7.3% of sales for fiscal year 2008 to a loss of $32.8 million, or -5.6% of sales for fiscal year 2009. Basic earnings per share decreased from earnings of $1.74 per share for fiscal year 2008 to a loss of $1.27 per share for fiscal year 2009. Diluted earnings per share decreased from earnings of $1.72 per share for fiscal year 2008 to a loss of $1.27 per share for fiscal year 2009. The decrease in net earnings during the period related primarily to our decrease in sales and non-cash impairment charge of $67.9 million, as previously discussed.

Segment

Operating Results

		Fiscal Years Ended
Net Sales by Segment (in thousands)		2010				2009				2008
Print		$	282,308			$	327,034			$	345,042
Apparel			235,430				256,995				265,568
Total		$	517,738			$	584,029			$	610,610

     Print Segment. The print segment net sales represented 54.5%, 56.0%, and 56.5% of our consolidated net sales for fiscal years 2010, 2009, and 2008, respectively.

     Our print sales declined by $44.7 million, or 13.7% during the fiscal year 2010 and $18.0 million or 5.2% during fiscal year 2009, when compared to the preceding fiscal year. The decline in our print sales was primarily due to the severe economic recession which started during the later part of our third quarter of the fiscal year 2009. In addition to the general impact of the economic recession on our sales, the adoption of digital technologies continues

to erode revenues from our traditional print. The evolution to digital technology has been transpiring for some time now, and we would expect this continue into the future. The turbulent economy also led to weaker pricing in an already competitive industry as our customers sought cost savings to improve their own profitability in the light of declining sales. Our decline in sales during fiscal year 2009 as compared to fiscal year 2008 was partially offset by increased sales from our acquisition of B&D, Skyline and Trade which were acquired October 5, 2007 and September 17, 2007, respectively. The positive impact of these acquired entities on sales was $17.4 million for the fiscal year ended February 28, 2009.

     Apparel Segment. The Apparel Segment net sales represented 45.5% , 44.0%, and 43.5% of our consolidated net sales for fiscal years 2010, 2009 and 2008, respectively.

     Our fiscal year 2010 net sales for the Apparel Segment decreased by $21.6 million, or 8.4% over fiscal year 2009, which in turn decreased by $8.6 million or 3.2% over fiscal 2008. The decrease in our fiscal year 2010 sales was generally contained to the first three quarters where we saw our apparel sales decline by $33.3 million, or 15.6%. As the economy started to improve and retailers started to experience some comparable sales growth, we were able to partially offset this sales decline with a fourth quarter sales gain of $11.7 million, or 26.9%. The decline in our apparel sales during fiscal year 2009 related primarily to the decline in our fourth quarter apparel sales, where apparel sales were down $18.3 million, or 29.6%. Due to the economic downturn which started around October or November of 2009, our apparel sales were impacted by a sluggish retail landscape which contributed to inventory levels being reduced at the retail level and correspondingly increased at the manufacturers’ level. This resulted in intensified pricing pressures in the marketplace, from both domestic and international competitors during the fourth quarter of fiscal year 2009 and fiscal year 2010, which placed additional pressures on top lines and on operational margins.

		Fiscal Years Ended
Gross Profit by Segment (in thousands)		2010				2009				2008
Print		$	77,789			$	85,295			$	93,767
Apparel			57,530				58,181				70,107
Total		$	135,319			$	143,476			$	163,874

     Print Segment. Our print gross profit margin (“margin”), as a percent of sales, was 27.6%, 26.1% and 27.2% for fiscal years 2010, 2009 and 2008, respectively. In fiscal 2010 we saw our material prices stabilize due to depressed economic conditions. As such, we were able to fully realize the benefits associated with our costs control initiatives started during fiscal 2009. While this was a favorable factor during fiscal 2010, going forward we would expect paper mills to continue to increase prices whenever possible, especially as the economy strengthens, and have already seen indications of paper price increases during the first quarter of fiscal 2011. The decrease in our 2009 print gross profit margin, as a percentage of sales, related primarily to increased material and freight costs which had not been fully passed on to our customers because of contractual obligations and/or timing of the increases, product mix changes, and lower absorption due to our lower volume. While costs increases impacted our margins, we were able, for the most part, to effectively offset these costs increases during the period through improved operational efficiencies.

     Apparel Segment. Our apparel margin, as a percent of sales, was 24.4%, 22.6% and 26.4%, for fiscal years 2010, 2009 and 2008, respectively. We were able to increase our margin by 180 basis points during fiscal year 2010 through focusing on the cost-side of the equation.

     Cost control was a major factor in the improvement of our margin for 2010. Gas prices were more favorable in 2010 as compared to 2009 and, combined with lower chemical and other input costs, helped to partially offset the reduction in sales for the year. In addition all non-essential overtime was eliminated and a period of 4 day manufacturing was implemented in our main fabric producing plant in Anaheim for a portion of the year without impacting our reported margin. We were also able to take advantage, during the fourth quarter, of lower cotton prices which we had locked in at previously contracted prices earlier in the year when cotton was selling at a much lower price per pound.

     Our margins during fiscal year 2009 were significantly impacted by the severe economic downturn experienced which started during the later part of our third fiscal quarter, and the resulting impact on inventory levels and competitors’ pricing strategies. In addition, our margins were negatively impacted by significant raw material price increases, as well as freight, chemical and energy costs increases during the period. While several price increases occurred during the first six months of fiscal year 2009, these increases only partially covered the actual costs

increases incurred during this period. In addition, customer mix changes (i.e., more sales to larger lower pricing tiered customers), and product mix changes (i.e., shift in sales to lower profit margin items) also impacted the reported margin during this period. During the second half of the year, due to the severe economic downturn, retailers significantly reduced their on-hand inventory levels, which in turn resulted in increased inventory at the manufacturing level. This resulted in increased pricing pressures in the market place, at a time when manufacturers were still trying to recoup their material/production cost increases experienced during the first six months of the year. As a result, manufacturers’ top lines were impacted two-fold: 1) by a reduction in units sold, and 2) by a reduction in selling price, which placed additional strains on manufacturers’ margins during the fourth quarter. In addition, margins were further impacted during the period by lower manufacturing levels as manufacturers adjusted their production to demand levels which decreased their manufacturing absorption factors. Our Apparel Segment wasn’t immune to this, as we saw our margins decline from 24.2% to 19.3% on a comparable 4th quarter basis.

		Fiscal Years Ended
Profit by Segment (in thousands)		2010				2009				2008
Print		$	46,047			$	51,553			$	56,012
Apparel			24,778				(49,416	)			29,367
Total			70,825				2,137				85,379
Less corporate expenses			15,156				15,196				15,594
Earnings (loss) before income taxes		$	55,669			$	(13,059	)		$	69,785

     Print Segment. As a percent of sales, our Print Segment’s profits were 16.3%, 15.8%, and 16.2% for fiscal years 2010, 2009 and 2008, respectively. Our Print Segment’s profit for fiscal year 2010 decreased by approximately $5.5 million, or 10.7%, from $51.6 million for the fiscal year 2009, to $46.0 million for the fiscal year ended February 28, 2010. The decrease in our Print profit during fiscal year 2010 on a dollar basis as compared to fiscal year 2009 is related to the decline in our sales, as previously discussed.

     Our Print Segment’s profit for fiscal year 2009 decreased by approximately $4.5 million, or 8.0%, from $56.0 million for the fiscal year 2008, to $51.6 million for the fiscal year ended February 28, 2010. The decrease in our Print profit during fiscal year 2009 on a dollar basis and as a percent of sales as compared to fiscal year 2008 is related to the decline in our sales and our gross profit margin, as previously discussed.

     Apparel Segment. During the fourth quarter of fiscal year 2009 we recorded a non-cash impairment charge of $63.2 million and $4.7 million to goodwill and trademarks, respectively. Excluding the fiscal year 2009 impairment charge and certain other unusual charges (bankruptcy of customer ($2.5 million) and higher than normal inventory reserve charge ($2.0 million) associated with our fleece and junior products), the Apparel Segments profits and percentage of sales were $24.8 million (10.5%), $23.0 million (8.9%) and $29.4 million (11.1%) for fiscal years 2010, 2009 and 2008, respectively. In addition to the significant improvement in our gross profits margins as noted earlier, during fiscal year 2010 cost cutting in selling, general, and administrative expenses were achieved following a review of our advertising and marketing activities. Apparel profit decreased during fiscal year 2009 primarily as a result of decreased sales and gross profit margins, as previously discussed.

Liquidity and Capital Resources

		Fiscal Years Ended
(Dollars in thousands)		2010				2009				Change
Working Capital		$	116,638			$	138,374				-15.7	%
Cash		$	21,063			$	9,286				126.8	%

     Working Capital. Our working capital decreased by approximately $21.7 million, or 15.7% from $138.4 million at February 28, 2009 to $116.6 million at February 28, 2010. The decrease in our working capital during the period related primarily to the decrease in our inventories on hand. Our current ratio, calculated by dividing our current assets by our current liabilities decreased from 4.2-to-1.0 at February 28, 2009 to 3.3-to-1.0 at February 28, 2010, due to the cash generated from the reduction in our inventories being used to pay-down long-term debt. As a result, our debt-to-equity ratio decreased from .26-to-1.0 at February 28, 2009 to .13-to-1.0 at February 28, 2010.

		Fiscal Years Ended
(Dollars in thousands)		2010				2009				Change
Net Cash provided by operating activities		$	82,567			$	44,216				86.7	%
Net Cash used in investing activities		$	(20,244	)		$	(5,350	)			278.4	%
Net Cash used in financing activities		$	(50,488	)		$	(32,464	)			55.5	%

     Cash flows from operating activities. Cash flows from operations during fiscal 2010 increased by $38.4 million, or 86.7% over fiscal year 2009, which had increased by $13.8 million, or 45.2% over fiscal year 2008. During fiscal year 2010, we provided cash primarily through the reduction of our inventories by $27.1 million, $23.4 million in the Apparel segment alone, and $6.1 million through the increase in our accounts payable and other associated accrued expenses. During fiscal year 2009, we collected the build-up in receivables associated with our transition away from factoring, improved our receivable turnover ratio, and used less operational cash during the period to build our apparel inventory. As a result we generated approximately $39.5 million in cash from these activities. This was offset by our lower pre-impairment operational results, an increase in our prepaid expenses relating to an over-payment of taxes, and reduction in our payables, which impacted our operational cash by $9.6 million, $7.5 million and $10.1 million, respectively.

     Cash flows from investing activities. Cash used for our investing activities, which relates primarily to capital expenditures, increased by $14.9 million, or 278.4% from $5.4 million for fiscal year 2009 to $20.2 million for fiscal year 2010. The increase in our capital expenditures relates primarily to our new Apparel manufacturing facility located in Agua Prieta, Mexico. For contractual commitments remaining in connection with the construction of this facility — see “Contractual Obligations & Off-Balance Sheet Arrangements” section following in this Report.

     Cash flows from financing activities. We used $18.0 million more in cash associated with our financing activities in fiscal year 2010 when compared to the same period last year. We repaid debt in the amount of $34.2 million during the fiscal year ended 2010, as compared to $21.8 million during fiscal year ended 2009. We borrowed no additional funds in fiscal year 2010 as compared to $5.0 million in fiscal year 2009.

     Stock Repurchase — On October 20, 2008, our Board of Directors authorized the repurchase of up to $5 million of our common stock through a stock repurchase program. Under the board-approved repurchase program, share 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, and 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. As of February 28, 2010, there were 96,000 shares of our common stock that had been purchased under the repurchase program at a cost of $1.0 million and an average price per share of $10.45.

     Credit Facility — On August 18, 2009, we entered into a Second Amended and Restated Credit Agreement (the “Facility”) with a group of lenders led by Bank of America, N.A. (the “Lenders”). The Facility provides us access to $150.0 million in revolving credit, which we may increase to $200.0 million in certain circumstances, and matures on August 18, 2012. The Facility bears interest at the London Interbank Offered Rate (“LIBOR”) plus a spread ranging from 2.0% to 3.5% (currently LIBOR + 2.25% or 2.48% at February 28, 2010), depending on our total funded debt to EBITDA ratio, as defined. As of February 28, 2010, we had $40.0 million of borrowings under the revolving credit line and $2.6 million outstanding under standby letters of credit arrangements, leaving us availability of approximately $107.4 million. The Facility contains financial covenants, restrictions on capital expenditures, acquisitions, asset dispositions, and additional debt, as well as other customary covenants, such as total funded debt to EBITDA ratio, as defined. We are in compliance with all these covenants as of February 28, 2010. The Facility is secured by substantially all of our domestic assets as well as all capital securities of each Domestic Subsidiary and 65% of all capital securities of each direct Foreign Subsidiary.

     During fiscal year 2010, we repaid $34.0 million on the revolver and $0.2 million on other debt. It is anticipated that the available line of credit is sufficient to cover, should it be required, working capital required for the foreseeable future.

     We use derivative financial instruments to manage our exposures to interest rate fluctuations on our floating rate $150.0 million revolving credit maturing August 18, 2012. We account for our derivatives as cash flow hedges and record them as either assets or liabilities in the balance sheet, measure those instruments at fair value and recognize changes in the fair value of derivatives in earnings in the period of change, unless the derivative qualifies as an effective hedge that offsets certain exposures, at which time the changes in fair value would be recorded in Accumulated Other Comprehensive Income.

     On July 7, 2008, we entered into a three-year Interest Rate Swap Agreement (“Swap”) for a notional amount of $40.0 million. The Swap effectively fixes the LIBOR rate at 3.79%. The Swap was designated as a cash flow hedge, and the fair value at February 28, 2010 was $(1.8) million, $(1.2) million net of deferred taxes. The Swap was reported on the Consolidated Balance Sheet in long-term debt with a related deferred charge recorded as a component of other comprehensive income.

     Pension — We are required to make contributions to our defined benefit pension plan. These contributions are required under the minimum funding requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). We anticipate that we will contribute from $2.0 million to $3.0 million during our next fiscal year. We made contributions of $3.0 million to our pension plan during each of our last 2 fiscal years. As our pension 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 February 28, 2010 we had an unfunded pension liability recorded on our balance sheet of $7.1 million.

     Inventories — We believe our current 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 (that govern prices, but do not require minimum volume) with paper and yarn suppliers. Certain of our rebate programs do, however, require minimum purchase volumes. Management anticipates meeting the required volumes.

     Capital Expenditures — We expect our capital requirements for 2011, exclusive of capital required for possible acquisitions and the development of our new manufacturing facility, will be between $3.0 million and $5.0 million. We would expect to fund these expenditures through existing cash flows.

     On June 26, 2008, we announced plans to build a new manufacturing facility in the town of Agua Prieta in the state of Sonora, Mexico. We estimate the total capital expenditures of $45 million to $50 million ($20 million — $25 million for building and $20 million — $25 million for machinery and equipment), with funding to be provided by internal cash flow and, as required, our existing credit facilities. We incurred expenditures of approximately $17.9 million during the current fiscal year 2010. The facility is expected to be operational in fiscal year 2011.

     Contractual Obligations & Off-Balance Sheet Arrangements — There have been no significant changes in our contractual obligations since February 28, 2010 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 February 28, 2010 (in thousands).

		Fiscal Years
																						2015 to
		Total				2011				2012				2013				2014				2020
Debt:
Revolving credit facility		$	40,000			$	—			$	—			$	40,000			$	—			$	—
Interest rate swap			1,817				—				1,817				—				—				—
Debt and interest rate swap total			41,817				—				1,817				40,000				—				—
Other contractual commitments:
Estimated pension benefit payments			36,155				1,575				3,240				3,510				4,460				23,370
Letters of credit			5,296				5,296				—				—				—				—
Operating leases			13,056				7,131				3,519				1,799				582				25
Construction contract — Agua Prieta			21,342				21,342				—				—				—				—
Total other contractual commitments			75,849				35,344				6,759				5,309				5,042				23,395
Total		$	117,666			$	35,344			$	8,576			$	45,309			$	5,042			$	23,395

Subsequent to February 28, 2010 and through April 30, 2010, we made no additional repayments on our revolving credit facility. We expect future interest payments of $2.5 million for fiscal year 2011, $1.6 million for fiscal year 2012, and $0.5 million for fiscal year 2013 assuming interest rates and debt levels remain the same throughout the remaining term of the facility.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Cash

     We have significant amounts of cash at financial institutions that are in excess of federally insured limits. With the current financial environment and the instability of financial institutions, we cannot be assured that we will not experience losses on our deposits.

Interest Rates

     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. Our variable rate financial instruments, including the outstanding credit facilities, totaled $40.0 million at February 28, 2010. We entered into a $40.0 million interest rate swap designated as a cash flow hedge related to this debt. The LIBOR rate on $40.0 million of debt is fixed through this interest rate swap agreement. There would be no impact on our results of operations of a one-point interest rate change on the outstanding balance of the variable rate financial instruments as of February 28, 2010.

Foreign Exchange

     We have global operations and thus make investments and enter into transactions in various foreign currencies. The value of our consolidated assets and liabilities located outside the United States (translated at period end exchange rates) and income and expenses (translated using average rates prevailing during the period), generally denominated in Pesos and Canadian Dollars, are affected by the translation into our reporting currency (the U.S. Dollar). Such translation adjustments are reported as a separate component of shareholders’ equity. In future periods, foreign exchange rate fluctuations could have an increased impact on our reported results of operations.

     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 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our Consolidated Financial Statements and Supplementary Data required by this Item 8 are set forth following the signature page of this report and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     No matter requires disclosure.

ITEM 9A. CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures. An evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of February 28, 2010, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures as of February 28, 2010 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 SEC’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 were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     The financial statements, financial analysis and all other information in this Annual Report on Form 10-K were prepared by management, who is responsible for their integrity and objectivity and for establishing and maintaining adequate internal controls over financial reporting.

     The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that:

	i.		Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company;
	ii.		Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
	iii.		Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or dispositions of the Company’s assets that could have a material effect on the financial statements.

     There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.

     Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of February 28, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework. Based on management’s assessment using those criteria, we believe that, as of February 28, 2010, the Company’s internal control over financial reporting is effective.

     Grant Thornton, LLP, an independent registered public accounting firm, has audited the consolidated financial statements of the Company for the fiscal year ended February 28, 2010 and has attested to the effectiveness of the Company’s internal control over financial reporting as of February 28, 2010. Their report on the effectiveness of internal control over financial reporting is presented on page F-3 of this Report.

ITEM 9B. OTHER INFORMATION

     No matter requires disclosure.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     Except as set forth below, the information required by Item 10 is incorporated herein by reference to the definitive Proxy Statement for our 2010 Annual Meeting of Shareholders.

     In the wake of well-publicized corporate scandals, the Securities and Exchange Commission and the New York Stock Exchange have issued multiple new regulations, requiring the implementation of policies and procedures in the corporate governance area. In complying with new regulations requiring the institution of policies and procedures, it has been the goal of the Ennis Board of Directors and senior leadership to do so in a way which does not inhibit or constrain Ennis’ unique culture, and which does not unduly impose a bureaucracy of forms and checklists. Accordingly, formal, written policies and procedures have been adopted in the simplest possible way, consistent with legal requirements, including a Code of Ethics applicable to the Company’s principal executive officer, principal financial officer, and principal accounting officer or controller. The Company’s Corporate Governance Guidelines, its charters for each of its Audit, Compensation, Nominating and Corporate Governance Committees and its Code of Ethics covering all Employees are available on the Company’s website, www.ennis.com, and a copy will be mailed upon request to Ms. Sharlene Reagan at 2441 Presidential Parkway, Midlothian, TX 76065. If we make any substantive amendments to the Code, or grant any waivers to the Code for any of our senior officers or directors, we will disclose such amendment or waiver on our website and in a report on Form 8-K.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by Item 11 is hereby incorporated herein by reference to the definitive Proxy Statement for our 2010 Annual Meeting of Shareholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

     The information required by Item 12, as to certain beneficial owners and management, is hereby incorporated by reference to the definitive Proxy Statement for our 2010 Annual Meeting of Shareholders.

     The following table provides information about securities authorized for issuance under the Company’s equity compensation plan as of February 28, 2010.

Number of

securities

available for

future issuances

Number of

under equity

securities to be

Weighted

compensation

issued upon

average

plans (excluding

exercise of

exercise price

securities

outstanding

of outstanding

reflected in

options

options

column (a)

Plan Category

(a)

(b)

( c )

Equity compensation plan approved by the security holders (1)

341,670

$

12.09

370,213

Equity compensation plans not approved by security holders

—

—

—

Total

341,670

$

12.09

370,213

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

     The information required by Item 13 is hereby incorporated herein by reference to the definitive Proxy Statement for our 2010 Annual Meeting of Shareholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The information required by Item 14 is hereby incorporated herein by reference to the definitive Proxy Statement for our 2010 Annual Meeting of Shareholders.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     (a) Documents filed as a part of the report:

	(1)		Index to Consolidated Financial Statements of the Company
			An “Index to Consolidated Financial Statements” has been filed as a part of this Report beginning on page F-1 hereof.
	(2)		All schedules for which provision is made in the applicable accounting regulation of the SEC have been omitted because of the absence of the conditions under which they would be required or because the information required is included in the consolidated financial statements of the Registrant or the notes thereto.

	(3)		Exhibits
			An “Index to Exhibits” has been filed as a part of this Report beginning on page E-1 and is herein incorporated by reference.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

ENNIS, INC. AND SUBSIDIARIES
Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm.		F-2
Report of Independent Registered Public Accounting Firm.		F-3
Consolidated Balance Sheets — February 28, 2010 and February 28, 2009.		F-4
Consolidated Statements of Earnings — Fiscal years ended 2010, 2009 and 2008.		F-6
Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income — Fiscal years ended 2010, 2009 and 2008.		F-7
Consolidated Statements of Cash Flows — Fiscal years ended 2010, 2009 and 2008		F-8
Notes to Consolidated Financial Statements.		F-9

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Ennis, Inc.

We have audited the accompanying consolidated balance sheets of Ennis, Inc. (a Texas corporation) and subsidiaries as of February 28, 2010 and February 28, 2009, and the related consolidated statements of earnings, changes in shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended February 28, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ennis, Inc. as of February 28, 2010 and February 28, 2009, and the results of its operations and its cash flows for each of the three years in the period ended February 28, 2010 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Ennis, Inc. and subsidiaries’ internal control over financial reporting as of February 28, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated May 10, 2010 expressed an unqualified opinion on the effectiveness of Ennis, Inc.’s internal control over financial reporting.

/s/ Grant Thornton LLP

Dallas, Texas
May 10, 2010

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Ennis, Inc.

We have audited Ennis, Inc. (a Texas corporation) and subsidiaries’ internal control over financial reporting as of February 28, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ennis, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Ennis, Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Ennis, Inc. maintained, in all material respects, effective internal control over financial reporting as of February 28, 2010, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Ennis, Inc. and subsidiaries as of February 28, 2010 and 2009 and the related consolidated statements of earnings, changes in shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended February 28, 2010 and our report dated May 10, 2010 expressed an unqualified opinion on those financial statements.

/s/ Grant Thornton LLP

Dallas, Texas
May 10, 2010

ENNIS, INC. AND SUBSIDIARIES

		Fiscal Years Ended
		2010				2009
Assets
Current assets
Cash		$	21,063			$	9,286
Accounts receivable, net of allowance for doubtful receivables of $4,446 at February 28, 2010 and $3,561 at February 28, 2009			57,249				57,467
Prepaid expenses			6,867				3,780
Prepaid income taxes			—				4,826
Inventories			75,137				101,167
Deferred income taxes			5,319				5,728
Assets held for sale			804				—
Total current assets			166,439				182,254
Property, plant and equipment, at cost
Plant, machinery and equipment			138,419				133,300
Land and buildings			55,430				43,150
Other			22,402				22,679
Total property, plant and equipment			216,251				199,129
Less accumulated depreciation			150,531				144,457
Net property, plant and equipment			65,720				54,672
Goodwill			117,341				117,341
Trademarks and tradenames, net			58,897				59,030
Customer lists, net			19,753				22,007
Deferred finance charges, net			1,079				486
Other assets			3,470				590
Total assets		$	432,699			$	436,380

ENNIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for share amounts)

		Fiscal Years Ended
		2010				2009
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$	27,463			$	24,723
Accrued expenses
Employee compensation and benefits			14,374				12,919
Taxes other than income			1,539				1,322
Federal and state income taxes payable			705				—
Other			5,720				4,706
Current installments of long-term debt			—				210
Total current liabilities			49,801				43,880
Long-term debt, less current installments			41,817				76,185
Liability for pension benefits			7,132				6,988
Deferred income taxes			19,821				16,250
Other liabilities			868				1,071
Total liabilities			119,439				144,374
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 in 2010 and 2009			75,134				75,134
Additional paid in capital			121,978				122,448
Retained earnings			206,062				186,857
Accumulated other comprehensive income (loss):
Foreign currency translation, net of taxes			267				(1,016	)
Unrealized loss on derivative instruments, net of taxes			(1,154	)			(1,387	)
Minimum pension liability, net of taxes			(12,376	)			(12,107	)
			(13,263	)			(14,510	)
			389,911				369,929
Treasury stock
Cost of 4,292,080 shares in 2010 and 4,336,557 shares in 2009			(76,651	)			(77,923	)
Total shareholders’ equity			313,260				292,006
Total liabilities and shareholders’ equity		$	432,699			$	436,380

ENNIS, INC. AND SUBSIDIARIES

		Fiscal Years Ended
		2010				2009				2008
Net sales		$	517,738			$	584,029			$	610,610
Cost of goods sold			382,419				440,553				446,736
Gross profit margin			135,319				143,476				163,874
Selling, general and administrative			76,738				86,217				88,851
Impairment of goodwill			—				63,151				—
Impairment of trademarks			—				4,700				—
Gain from disposal of assets			(1	)			(514	)			(757	)
Income (loss) from operations			58,582				(10,078	)			75,780
Other income (expense)
Interest expense			(2,627	)			(3,363	)			(5,678	)
Other, net			(286	)			382				(317	)
			(2,913	)			(2,981	)			(5,995	)
Earnings (loss) before income taxes			55,669				(13,059	)			69,785
Provision for income taxes			20,463				19,709				25,195
Net earnings (loss)		$	35,206			$	(32,768	)		$	44,590
Weighted average common shares outstanding
Basic			25,768,632				25,724,150				25,696,745
Diluted			25,796,553				25,790,166				25,860,358
Per share amounts
Net earnings (loss) — basic		$	1.37			$	(1.27	)		$	1.74
Net earnings (loss) — diluted		$	1.36			$	(1.27	)		$	1.72
Cash dividends per share		$	0.62			$	0.62			$	0.62

ENNIS, INC. AND SUBSIDIARIES

(Dollars 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 March 1, 2007			30,053,443				75,134				122,305				207,190				(7,371	)			(4,475,962	)			(80,855	)			316,403
Net earnings			—				—				—				44,590				—				—				—				44,590
Foreign currency translation, net of deferred tax of $526			—				—				—				—				904				—				—				904
Adjustment to pension net of deferred tax of $584			—				—				—				—				946				—				—				946
Comprehensive income																															46,440
Cumulative impact of a change in accounting for income tax uncertainties pursuant to ASC 740			—				—				—				(240	)			—				—				—				(240	)
Dividends declared ($.62 per share)			—				—				—				(15,916	)			—				—				—				(15,916	)
Excess tax benefit of stock option exercises and restricted stock grants			—				—				385				—				—				—				—				385
Stock based compensation			—				—				734				—				—				—				—				734
Exercise of stock options and restricted stock grants			—				—				(858	)			—				—				84,769				1,531				673
Balance February 29, 2008			30,053,443				75,134				122,566				235,624				(5,521	)			(4,391,193	)			(79,324	)			348,479
Net earnings (loss)			—				—				—				(32,768	)			—				—				—				(32,768	)
Foreign currency translation, net of deferred tax of $1,142			—				—				—				—				(1,945	)			—				—				(1,945	)
Unrealized loss on derivative instruments, net of deferred tax of $797			—				—				—				—				(1,387	)			—				—				(1,387	)
Adjustment to pension net of deferred tax of $3,252			—				—				—				—				(5,657	)			—				—				(5,657	)
Comprehensive loss																															(41,757	)
Dividends declared ($.62 per share)			—				—				—				(15,999	)			—				—				—				(15,999	)
Excess tax benefit of stock option exercises and restricted stock grants			—				—				249				—				—				—				—				249
Stock based compensation			—				—				993				—				—				—				—				993
Exercise of stock options and restricted stock grants			—				—				(1,360	)			—				—				107,336				2,000				640
Stock repurchases			—				—				—				—				—				(52,700	)			(599	)			(599	)
Balance February 28, 2009			30,053,443			$	75,134			$	122,448			$	186,857			$	(14,510	)			(4,336,557	)		$	(77,923	)		$	292,006
Net earnings			—				—				—				35,206				—				—				—				35,206
Foreign currency translation, net of deferred tax of $754			—				—				—				—				1,283				—				—				1,283
Unrealized gain on derivative instruments, net of deferred tax benefit of $137			—				—				—				—				233				—				—				233
Adjustment to pension net of deferred tax of $158			—				—				—				—				(269	)			—				—				(269	)
Comprehensive income																															36,453
Dividends declared ($0.62 per share)			—				—				—				(16,001	)			—				—				—				(16,001	)
Excess tax benefit of stock option exercises and restricted
stock grants			—				—				101				—				—				—				—				101
Stock based compensation			—				—				1,079				—				—				—				—				1,079
Exercise of stock options and restricted stock grants			—				—				(1,650	)			—				—				93,034				1,758				108
Stock repurchases			—				—				—				—				—				(48,557	)			(486	)			(486	)
Balance February 28, 2010			30,053,443			$	75,134			$	121,978			$	206,062			$	(13,263	)			(4,292,080	)		$	(76,651	)		$	313,260