EACO Corporation Reports Record Quarter Net Sales & 2nd Quarter Net Income - EACO (OTC:EACO)

EACO Corporation 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

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