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

ANAHEIM, Calif.--()--EACO Corporation (OTCQB:EACO) today reported the results for its quarter ended February 28, 2018.

Net sales, net income and earnings per share were as follows for the three months ended February 28, 2018 (dollars in thousands, except per share information):

 

Three Months Ended

February 28,

  %
2018   2017 Change
(unaudited)
 
Net sales $45,041 $37,284 20.8%
 
Net income $1,319 $748 76.3%
 
Basic and diluted earnings per common share $0.27 $0.15 80.0%

The Company had 326 sales employees at February 28, 2018, an increase of 6 from the prior year quarter. The Company’s sales force is divided into Sales focus teams (SFTs). The Company had 96 SFTs as of February 28, 2018 an increase of 2 from the prior year quarter. Management anticipates continued growth in both our headcount and SFTs in fiscal year 2018. The Company believes it continues to gain market share through its local presence business model, increasing net sales by 21% and bookings by 30% 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 28,   August 31,
2018 2017*
ASSETS
Current Assets:
Cash and cash equivalents $ 3,286 $ 3,870
Restricted cash, current 617 707
Trade accounts receivable, net 24,483 21,339
Inventory, net 28,428 26,791
Marketable securities, trading 2,185 1,596
Prepaid expenses and other current assets   1,370   1,354
Total current assets 60,369 55,657
Non-current Assets:
Property, equipment and leasehold improvements, net 9,972 9,256
Other assets   1,881   867
Total assets $ 72,222 $ 65,780
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable $ 17,024 $ 13,364
Accrued expenses and other current liabilities 3,348 4,545
Liability for short sales of trading securities 617 707
Current portion of long-term debt   139   139
Total current liabilities 21,128 18,755
Non-current Liabilities:
Long-term debt 13,683 12,193
Other non-current liabilities   36  
Total liabilities 34,847 30,948
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 814 747
Retained earnings   24,133   21,657
Total shareholders’ equity   37,375   34,832
Total liabilities and shareholders’ equity $ 72,222 $ 65,780
 

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2017 filed with the U.S. Securities and Exchange Commission on November 22, 2017.

 

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 28, February 28,
  2018       2017     2018       2017  
Revenues $ 45,041   $ 37,284 $ 87,212   $ 74,491
Cost of revenues   32,592       26,713     62,584       53,364  
Gross margin   12,449       10,571     24,628       21,127  
Operating expenses:
Selling, general and administrative expenses   10,477       9,310     20,817       18,697  
Income from operations 1,972 1,261 3,811 2,430
 
Other (expense) income:
Net gain (loss) on trading securities 48 (23 ) 251 (126 )
Interest and other income (expense)   (130 )     (31 )   (231 )     (35 )
Total other (expense) income   (82 )     (54 )   20       (161 )
Income before income taxes 1,890 1,207 3,831 2,269
Provision for income taxes   571       459     1,317       861  
Net income 1,319 748 2,514 1,408
Cumulative preferred stock dividend   (19 )     (19 )   (38 )     (38 )

Net income attributable to common shareholders

$ 1,300 $ 729 $ 2,476 $ 1,370
Basic and diluted earnings per share: $ 0.27 $ 0.15 $ 0.51 $ 0.28

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)
 
  Six Months Ended
February 28,
  2018       2017  
Operating activities:
Net income $ 2,514 $ 1,408
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 498 359
Bad debt expense 44 62
Change in inventory reserve 123 81
Net (gain) loss on trading securities (251 ) 102
(Increase) decrease in:
Trade accounts receivable (3,188 ) 266
Inventory (1,760 ) (3,135 )
Prepaid expenses and other assets (1,030 ) (3 )
Increase (decrease) in:
Trade accounts payable 2,515 (672 )
Accrued expenses and other current liabilities   (1,161 )   (2,431 )
Net cash used in operating activities   (1,696 )   (4,495 )
Investing activities:
Purchase of property, equipment and leasehold improvements (1,214 ) (898 )
(Purchase) sale of marketable securities, trading (338 ) 212
Net change in securities sold short (90 ) 1,041
Change in restricted cash   90     (1,041 )
Net cash used in investing activities   (1,552 )   (686 )
Financing activities:
Borrowings on revolving credit facility 1,525 4,016
Preferred dividend (38 ) (38 )
Bank overdraft 1,145 1,445
Payments on long-term debt   (35 )   -  
Net cash provided by financing activities   2,597     5,423  
Effect of foreign currency exchange rate changes on cash and cash equivalents   67     (119 )
Net (decrease) increase in cash and cash equivalents (584 ) 123
Cash and cash equivalents - beginning of period   3,870     4,878  
Cash and cash equivalents - end of period $ 3,286   $ 5,001  
Supplemental disclosures of cash flow information:
Cash paid for income taxes $ 2,241   $ 2,627  

Contacts

Marta Arciniega
EACO Corporation
(714) 876-2490

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