Press release

EACO Corporation Reports Record 2nd Quarter Net Sales & Record 2nd Quarter Net Income

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EACO Corporation (OTCQB:EACO) today reported the results for its quarter ended February 29, 2020.

Net sales, net income and earnings per share were as follows for the three months ended February 29, 2020 (dollars in thousands, except per share information):

 

Three Months Ended

 

 

February 29,

 

February 28,

%

 

2020

 

2019

Change

 

(unaudited)

 

(unaudited)

 

 

 

 

Net sales

$

56,828

 

$

52,559

8.1

%

 

 

 

 

 

Net income

$

2,598

 

$

1,961

32.5

%

 

 

 

 

 

Basic and diluted earnings per common share

$

0.53

 

$

0.40

32.5

%

The Company had 351 sales employees at February 29, 2020, an increase of 11 or 3.2%, 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 February 29, 2020 the same amount of SFT’s 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 net sales by 8% and bookings by 7.1% 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)

 

 

 

 

 

 

 

February 29,

 

August 31,

 

 

2020

 

2019*

ASSETS

 

 

 

 

Current Assets:

Cash and cash equivalents

$

5,900

$

4,692

Restricted cash

2,386

655

Trade accounts receivable, net

 

30,710

 

31,655

Inventory, net

40,043

37,259

Marketable securities, trading

 

894

 

1,873

Prepaid expenses and other current assets

5,097

4,234

Total current assets

 

85,030

 

80,368

Property, equipment and leasehold improvements:

Held for use, net

7,480

3,717

Held for sale, net

 

 

6,855

Total property, equipment and leasehold improvements, net

 

7,480

 

10,572

Other assets:

 

 

 

 

Operating lease right-of-use assets

 

13,003

 

Other assets, net

 

2,101

 

1,938

Total assets

$

107,614

$

92,878

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current Liabilities:

Trade accounts payable

$

18,625

$

21,138

Accrued expenses and other current liabilities

5,052

8,297

Liability for short sales of trading securities

2,386

655

Current portion of operating lease liabilities

 

2,464

 

Current portion of long-term debt

 

 

5,484

Total current liabilities

 

28,538

 

35,574

Non-current Liabilities:

Long-term debt

13,007

6,114

Operating lease liabilities

 

10,662

 

Total liabilities

 

52,207

 

41,688

Commitments and Contingencies

 

 

 

 

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

627

876

Retained earnings

 

42,363

 

37,886

Total shareholders’ equity

55,418

51,190

Total liabilities and shareholders’ equity

$

107,614

$

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

 

Six Months Ended

 

February 29,

 

February 28,

 

February 29,

 

February 28,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

$

 

56,828

 

$

 

52,559

 

$

 

112,868

 

$

 

103,345

 

Cost of sales

 

41,029

 

 

38,047

 

81,173

 

 

74,724

 

Gross margin

 

15,799

 

 

14,512

 

 

31,695

 

 

28,621

 

Operating expenses:

 

 

 

 

 

 

Selling, general and administrative expenses

12,673

 

 

11,720

 

25,275

 

 

23,210

 

Income from operations

 

3,179

 

 

2,792

 

 

6,420

 

 

5,411

 

 

Other income (expense):

Net gain (loss) on trading securities

 

471

 

 

(126

)

 

391

 

 

102

 

Loss on sale of property

 

 

 

(102

)

 

Interest and other (expense)

(65

)

 

(125

)

(184

)

 

(202

)

Other income (expense), net

 

406

 

 

(251

)

 

105

 

 

(100

)

Income before income taxes

3,532

 

2,541

 

6,525

 

5,311

 

Provision for income taxes

 

934

 

 

580

 

 

2,010

 

 

1,425

 

Net income

2,598

 

1,961

 

4,515

 

3,886

 

Cumulative preferred stock dividend

 

(19

)

 

(19

)

 

(38

)

 

(38

)

Net income attributable to common

shareholders

$

 

2,579

 

$

 

1,942

 

$

 

4,477

 

$

 

3,848

 

Basic and diluted earnings per share:

$

 

0.53

 

$

 

0.40

 

$

 

0.92

 

$

 

0.79

 

Basic and diluted weighted average common

shares outstanding

4,861,590

 

4,861,590

 

4,861,590

 

4,861,590

 

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended

 

February 29,

2020

 

February 28,

2019

Operating activities:

 

 

Net income

$

4,515

$

3,886

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

Depreciation and amortization

506

503

Bad debt expense

14

 

 

18

Change in inventory provision

68

107

Loss on sale of real property

 

102

 

 

Net gain on trading securities

(391)

(102)

(Increase) decrease in:

 

 

 

Trade accounts receivable

931

(1,889)

Inventory

(2,852)

 

 

(5,033)

Prepaid expenses and other assets

(1,026)

(524)

Increase (decrease) in:

 

 

 

Trade accounts payable

(2,243)

2,206

Accrued expenses and other current liabilities

(3,245)

 

 

(3,853)

Net cash used in operating activities

(3,621)

 

 

(4,681)

Investing activities:

Purchase of property, equipment, and leasehold improvements

(4,591)

 

 

(330)

Proceeds from sale of real property

 

7,075

 

 

Net sales of marketable securities, trading

1,370

1,071

Net change in liabilities for short sales of trading securities

1,731

 

 

(115)

Net cash provided by investing activities

5,585

 

 

626

Financing activities:

Borrowings on revolving credit facility, net

3,192

 

 

4,593

Borrowings on construction loan

 

3,342

 

 

Repayments on long-term debt

 

(5,125)

 

 

(72)

Preferred stock dividend

(38)

(38)

Bank overdraft

(147)

 

 

457

Net cash provided by financing activities

1,224

 

 

4,940

Effect of foreign currency exchange rate changes on cash and cash equivalents

(249)

 

277

Net increase in cash, cash equivalents, and restricted cash

2,939

 

 

1,162

Cash, cash equivalents, and restricted cash – beginning of period

5,347

 

3,638

Cash, cash equivalents, and restricted cash – end of period

$

8,286

 

$

4,800

Supplemental disclosures of cash flow information:

Cash paid for interest

$

178

 

$

201

Cash paid for income taxes

$

3,395

$

3,059