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 Companys sales force is divided into Sales Focus Teams (SFTs). The Company had 98 SFTs as of May 31, 2019, an increase of 2 from the prior year quarter. Management anticipates continued growth in both our headcount and SFTs 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 EACOs 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 Companys 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

 

 

Marta Arciniega

EACO Corporation

(714) 876-2490