EACO Corporation Reports Record Quarter Net Sales and Record Quarter Net Income

EACO Corporation (OTCMKTS:EACO) today reported the results for its quarter ended May 31, 2021.

Net sales, net income and earnings per share were as follows for the three months ended May 31, 2021 (dollars in thousands, except per share information):

	Three Months Ended May 31,		%
	2021	2020	Change
	(unaudited)	(unaudited)

Net sales	$62,676	$54,923	14.1%

Net income	$3,080	$1,755	75.5%

Basic and diluted earnings per common share	$0.63	$0.36	75.0%

The Company had 349 sales employees at May 31, 2021, a decrease of 8 or 2.2% from the prior year quarter. The Company’s sales force is divided into Sales focus teams (SFT’s). The Company had 103 SFT’s as of May 31, 2021, an increase of 5 or 5% from the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2021. The Company believes it continues to gain market share through its local presence business model.

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, the impact of products offered by our competitors from time to time, and the impact of the Covid-19 pandemic. 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)

		May 31,		August 31,
		2021		2020*
ASSETS
Current Assets:
Cash and cash equivalents	$	2,425	$	6,079
Restricted cash		10		2,916
Trade accounts receivable, net		32,844		29,667
Inventory, net		40,406		39,545
Marketable securities, trading		4,924		1,368
Prepaid expenses and other current assets		3,546		5,094
Total current assets		84,155		84,669
Non-current Assets:
Property, equipment and leasehold improvements, net		8,469		8,848
Other assets:
Operating lease right-of-use assets		11,410		12,810
Other assets, net		1,404		1,424
Total assets	$	105,438	$	107,751
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	19,574	$	16,535
Accrued expenses and other current liabilities		5,341		6,632
Liability for short sales of trading securities		–		2,916
Current portion of operating lease liabilities		2,501		2,653
Current portion of long-term debt		116		5,100
Total current liabilities		27,532		33,836
Non-current Liabilities:
Long-term debt		4,609		4,807
Operating lease liabilities		8,987		10,289
Total liabilities		41,128		48,932
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		1,011		788
Retained earnings		50,871		45,603
Total shareholders’ equity		64,310		58,819
Total liabilities and shareholders’ equity	$	105,438	$	107,751

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2020 filed with the U.S. Securities and Exchange Commission on November 30, 2020.


EACO Corporation and Subsidiaries Condensed Consolidated Statements of Income (in thousands, except for share and per share information) (unaudited)

		Three Months Ended May 31,						Nine Months Ended May 31,
		2021			2020			2021			2020
Net sales	$	62,676		$	54,923		$	171,830		$	167,791
Cost of sales		45,826			40,069			125,504			121,242
Gross margin		16,850			14,854			46,326			46,549
Operating expenses:
Selling, general and administrative expenses		12,800			12,732			38,021			38,007
Income from operations		4,050			2,122			8,305			8,452

Other income (expense):
Net gain on trading securities		196			384			(863	)		775
Loss on sale of property		–			(28	)		–			(130	)
Interest and other (expense)		(45	)		(40	)		(174	)		(224	)
Other income, net		151			316			(1,037	)		421
Income before income taxes		4,201			2,438			7,268			8,963
Provision for income taxes		1,121			683			1,943			2,693
Net income		3,080			1,755			5,325			6,270
Cumulative preferred stock dividend		(19	)		(19	)		(57	)		(57	)
Net income attributable to common shareholders	$	3,061		$	1,736		$	5,268		$	6,213
Basic and diluted earnings per share:	$	0.63		$	0.36		$	1.08		$	1.28
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)

	Nine Months Ended May 31,
	2021			2020
Operating activities:
Net income	$	5,325		$	6,270
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,136			860
Bad debt expense		62			33
Loss on sale of real property		–			130
Net loss (gain) on trading securities		863			(775	)
(Increase) decrease in:
Trade accounts receivable		(3,239	)		2,971
Inventory		(861	)		(4,538	)
Prepaid expenses and other assets		1,568			51
Operating lease right-of-use assets		1,400			(12,428	)
Increase (decrease) in:
Trade accounts payable		2,895			(3,781	)
Accrued expenses and other current liabilities		(1,291	)		(2,309	)
Operating lease liabilities		(1,454	)		12,562
Net cash provided by (used in) operating activities		6,404			(954	)
Investing activities:
Purchase of property, equipment, and leasehold improvements		(757	)		(6,032	)
Proceeds from sale of real property		–			7,075
Net (purchases) sales of marketable securities, trading		(4,419	)		2,648
Net change in liabilities for short sales of trading securities		(2,916	)		(586	)
Net cash (used in) provided by investing activities		(8,092	)		3,105
Financing activities:
(Repayment) borrowings on revolving credit facility, net		(5,100	)		1,042
Borrowings on construction loan		–			4,545
Repayments on long-term debt		(82	)		(5,125	)
Preferred stock dividend		(57	)		(57	)
Net change in bank overdraft		144			(433	)
Net cash (used in) provided by financing activities		(5,095	)		(28	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		223			(219	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(6,560	)		1,904
Cash, cash equivalents, and restricted cash – beginning of period		8,995			5,347
Cash, cash equivalents, and restricted cash – end of period	$	2,435		$	7,251
Supplemental disclosures of cash flow information:
Cash paid for interest	$	172		$	246
Cash paid for income taxes	$	2,509		$	3,405

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