EACO Corporation Reports Record 1st Quarter Net Sales

ANAHEIM, Calif.--(BUSINESS WIRE)--EACO Corporation (OTCQB:EACO) today reported the results for its quarter ended November 30, 2019.

Net sales, net income and earnings per share were as follows for the three months ended November 30, 2019 (dollars in thousands, except per share information):

	Three Months Ended November 30,				%
	2019		2018		Change
	(unaudited)		(unaudited)
Net sales	$	56,040	$	50,786	10.3	%
Net income	$	1,917	$	1,925	(0.4	)%
Basic and diluted earnings per common share	$	0.39	$	0.39	0.0	%

The Company had 349 sales employees at November 30, 2019, an increase of 13 or 4%, from the prior year quarter. The Company’s sales force is divided into sales focus teams (SFT’s). The Company had 98 SFT’s as of November 30, 2019, an increase of 2 from the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2020. The Company believes it continues to gain market share through its local presence business model, increasing quarterly net sales by 10% and bookings by 7% when comparing to the prior year quarter.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

Any statements set forth in this news release that are not entirely historical and factual in nature, including without limitation, statements related to our headcount expansion and future growth are forward-looking statements. These forward-looking statements are based on our current expectations and are inherently subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. The potential risks and uncertainties include, but are not limited to, our ability to hire and retain additional qualified employees, our ability to open additional sales offices, and to gain market acceptance for our products, the pricing and availability of our products, the success of our sales and marketing programs, and the impact of products offered by our competitors from time to time. In addition to these factors and any other factors mentioned elsewhere in this news release, the reader should refer as well to the factors, uncertainties or risks identified in EACO’s most recent Form 10-K and all subsequent Form 10-Q reports filed by us with the SEC. The forward-looking statements included in this release speak only as of the date hereof, and EACO does not undertake any obligation to update these forward-looking statements to reflect subsequent events or circumstances.

EACO Corporation and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share information) (unaudited)
	November 30,		August 31,
	2019		2019*
ASSETS
Current Assets:
Cash and cash equivalents	$	6,056	$	4,692
Restricted cash		2,822		655
Trade accounts receivable, net		29,477		31,655
Inventory, net		39,731		37,259
Marketable securities, trading		405		1,873
Prepaid expenses and other current assets		4,798		4,234
Total current assets		83,289		80,368
Property, equipment and leasehold improvements:
Held for use, net		5,529		3,717
Held for sale, net	—			6,855
Total property, equipment and leasehold improvements, net		5,529		10,572
Other assets:
Operating lease right-of-use assets		13,532	—
Other assets, net		2,103		1,938
Total assets	$	104,453	$	92,878
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	18,853	$	21,138
Accrued expenses and other current liabilities		7,653		8,297
Liability for short sales of trading securities		2,822		655
Current portion of operating lease liabilities		2,499	—
Current portion of long-term debt		2,152		5,484
Total current liabilities		33,979		35,574
Non-current Liabilities:
Long-term debt		6,442		6,114
Operating lease liabilities		11,156	—
Total liabilities		51,577		41,688
Commitments and Contingencies (Note 8)
Shareholders’ Equity:
Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding (liquidation value $900)		1		1
Common stock, $0.01 par value per share; 8,000,000 shares authorized; 4,861,590 shares outstanding		49		49
Additional paid-in capital		12,378		12,378
Accumulated other comprehensive income		664		876
Retained earnings		39,784		37,886
Total shareholders’ equity		52,876		51,190
Total liabilities and shareholders’ equity	$	104,453	$	92,878

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2019 filed with the U.S. Securities and Exchange Commission on November 27, 2019.

EACO Corporation and Subsidiaries Condensed Consolidated Statements of Income (in thousands, except for share and per share information) (unaudited)
	Three Months Ended November 30,
	2019			2018
Net sales	$	56,040		$	50,786
Cost of sales		40,144			36,677
Gross margin		15,896			14,109
Operating expenses:
Selling, general and administrative expenses		12,602			11,490
Income from operations		3,294			2,619
Other (expense) income:
Net (loss) gain on trading securities		(80	)		228
Loss on sale of property		(102	)		—
Interest and other expense		(119	)		(77	)
Other expense, net		(301	)		151
Income before income taxes		2,993			2,770
Provision for income taxes		1,076			845
Net income		1,917			1,925
Cumulative preferred stock dividend		(19	)		(19	)
Net income attributable to common shareholders	$	1,898		$	1,906
Basic and diluted earnings per common share:	$	0.39		$	0.39
Basic and diluted weighted average common shares outstanding		4,861,590			4,861,590

 

EACO Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
	Three Months Ended November 30,
	2019			2018
Operating activities:
Net income	$	1,917		$	1,925
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		259			247
Bad debt expense		3			10
Inventory write-downs		294			198
Loss on sale of real property		102			—
Net loss (gain) on trading securities		80			(228	)
(Increase) decrease in:
Trade accounts receivable		2,175			(144	)
Inventory		(2,766	)		(2,727	)
Prepaid expenses and other assets		(729	)		(911	)
Increase (decrease) in:
Trade accounts payable		(2,266	)		2,743
Accrued expenses and other current liabilities		(644	)		(1,669	)
Net cash used in operating activities		(1,575	)		(556	)
Investing activities:
Purchase of property, equipment, and leasehold improvements		(2,393	)		(188	)
Proceeds from sale of real property		7,075			—
Net sales of marketable securities, trading		1,388			550
Net change in liabilities for short sales of trading securities		2,167			(771	)
Net cash provided by (used in) investing activities		8,237			(409	)
Financing activities:
Borrowings on revolving credit facility, net		420			1,099
Borrowings on construction loan		1,701			—
Repayments on long-term debt		(5,125	)		(36	)
Preferred stock dividend		(19	)		(19	)
Bank overdraft		104			(385	)
Net cash (used in) provided by financing activities		(2,919	)		659
Effect of foreign currency exchange rate changes on cash and cash equivalents		(212	)		158
Net increase (decrease) in cash, cash equivalents, and restricted cash		3,531			(148	)
Cash, cash equivalents, and restricted cash - beginning of period		5,347			3,638
Cash, cash equivalents, and restricted cash - end of period	$	8,878		$	3,490
Supplemental disclosures of cash flow information:
Cash paid for interest	$	122		$	77
Cash paid for income taxes	$	—		$	—