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

EACO Corporation (OTCQB:EACO) today reported the results for its quarter ended May 31, 2019.

Net sales, net income and earnings per share were as follows for the three months ended May 31, 2019 and 2018 (dollars in thousands, except per share information):

Three Months Ended
May 31,

 

% 

 

2019

 

2018

 

Change

 

(unaudited)

 

 

 

 

Net sales

$57,840

 

$51,723

 

11.8

%

 

 

 

 

 

 

Net income

$2,944

 

$2,253

 

30.7

%

 

 

 

 

 

 

Basic and diluted earnings per common share

$0.60

 

$0.46

 

30.4

%

The Company had 340 sales employees at May 31, 2019, an increase of 12 sales employees 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 May 31, 2019, an increase of 2 from the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2019. The Company believes it continues to gain market share through its local presence business model, increasing net sales by 12% and bookings by 14% 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)
			May 31,			August 31,
			2019			2018*
ASSETS
Current Assets:
Cash and cash equivalents	$		5,582	$		2,705
Restricted cash, current			2,334			933
Trade accounts receivable, net			28,583			26,277
Inventory, net			36,540			30,531
Marketable securities, trading			968			2,846
Prepaid expenses and other current assets			3,185			1,590
Total current assets			77,192			64,882
Non-current Assets:
Property, equipment and leasehold improvements, net			9,900			9,847
Other assets			1,673			1,570
Total assets	$		88,765	$		76,299
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$		20,171	$		17,678
Accrued expenses and other current liabilities			5,601			7,452
Current portion of long-term debt			5,166			146
Liability for short sales of trading securities			2,334			933
Total current liabilities			33,272			26,209
Non-current Liabilities:
Long-term debt			6,872			8,204
Total liabilities			40,144			34,413
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			890			928
Retained earnings			35,303			28,530
Total shareholders’ equity			48,621			41,886
Total liabilities and shareholders’ equity	$		88,765	$		76,299
* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2018 filed with the U.S. Securities and Exchange Commission on November 28, 2018.

 

 

EACO Corporation and Subsidiaries Condensed Consolidated Statements of Income (in thousands, except for share and per share information) (Unaudited)
			Three Months Ended								Nine Months Ended
			May 31,								May 31,
			2019				2018				2019				2018
Revenues	$		57,840		$		51,723		$		161,185		$		138,935
Cost of revenues			41,715				36,647				116,439				99,231
Gross margin			16,125				15,076				44,746				39,704
Operating expenses:
Selling, general and administrative expenses			12,353				11,643				35,563				32,460
Income from operations			3,772				3,433				9,183				7,244
Other income (expense):
Net (loss) gain on trading securities			413				(65	)			515				186
Interest and other (expense), net			(128	)			(122	)			(330	)			(353	)
Total other income (expense)			285				(187	)			185				(167	)
Income before income taxes			4,057				3,246				9,368				7,077
Provision for income taxes			1,113				993				2,538				2,310
Net income			2,944				2,253				6,830				4,767
Cumulative preferred stock dividend			(19	)			(19	)			(57	)			(57	)
Net income attributable to common shareholders	$		2,925		$		2,234		$		6,773		$		4,710
Basic and diluted earnings per share:	$		0.60		$		0.46		$		1.39		$		0.97
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,
	2019						2018
Operating activities:
Net income	$			6,830			$			4,767
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization				772						752
Bad debt expense				193						70
Change in inventory reserve				116						157
Net gain on trading securities				(515	)					(186	)
(Increase) decrease in:
Trade accounts receivable				(2,499	)					(3,078	)
Inventory				(6,125	)					(3,141	)
Prepaid expenses and other assets				(1,698	)					(1,231	)
Increase (decrease) in:
Trade accounts payable				2,960						3,084
Accrued expenses and other current liabilities				(1,851	)					328
Net cash (used in) provided by operating activities				(1,817	)					1,522
Investing activities:
Purchase of property, equipment and leasehold improvements				(825	)					(1,423	)
Sale (purchase) of marketable securities, trading				2,393						(896	)
Net change in securities sold short				1,401						116
Net cash provided by (used in) investing activities				2,969						(2,203	)
Financing activities:
Net borrowings (payments) on revolving credit facility				3,797						(260	)
Preferred dividends				(57	)					(57	)
Net change in bank overdraft				(467	)					166
Payments on long-term debt				(109	)					(105	)
Net cash provided by (used in) financing activities				3,164						(256	)
Effect of foreign currency exchange rate changes on cash and cash equivalents				(38	)					160
Net increase (decrease) in cash, cash equivalents, and restricted cash				4,278						(777	)
Cash, cash equivalents, and restricted cash - beginning of period				3,638						4,577
Cash, cash equivalents, and restricted cash - end of period	$			7,916			$			3,800
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$			3,059			$			2,241
Cash paid for interest	$			325			$			375

 

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