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

EACO Corporation EACO today reported the results for its quarter ended February 29, 2020.

Net sales, net income and earnings per share were as follows for the three months ended February 29, 2020 (dollars in thousands, except per share information):

	Three Months Ended
	February 29,		February 28,		%
	2020		2019		Change
	(unaudited)		(unaudited)

Net sales	$	56,828	$	52,559	8.1	%

Net income	$	2,598	$	1,961	32.5	%

Basic and diluted earnings per common share	$	0.53	$	0.40	32.5	%

The Company had 351 sales employees at February 29, 2020, an increase of 11 or 3.2%, 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 February 29, 2020 the same amount of SFT's from the prior year quarter. Management anticipates continued growth in both our headcount and SFT's in fiscal year 2020. The Company believes it continues to gain market share through its local presence business model, increasing net sales by 8% and bookings by 7.1% 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 29,			August 31,
		2020		2019*
ASSETS
Current Assets:
Cash and cash equivalents	$	5,900	$	4,692
Restricted cash		2,386		655
Trade accounts receivable, net		30,710		31,655
Inventory, net		40,043		37,259
Marketable securities, trading		894		1,873
Prepaid expenses and other current assets		5,097		4,234
Total current assets		85,030		80,368
Property, equipment and leasehold improvements:
Held for use, net		7,480		3,717
Held for sale, net		–		6,855
Total property, equipment and leasehold improvements, net		7,480		10,572
Other assets:
Operating lease right-of-use assets		13,003		–
Other assets, net		2,101		1,938
Total assets	$	107,614	$	92,878
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable	$	18,625	$	21,138
Accrued expenses and other current liabilities		5,052		8,297
Liability for short sales of trading securities		2,386		655
Current portion of operating lease liabilities		2,464		–
Current portion of long-term debt		–		5,484
Total current liabilities		28,538		35,574
Non-current Liabilities:
Long-term debt		13,007		6,114
Operating lease liabilities		10,662		–
Total liabilities		52,207		41,688
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		627		876
Retained earnings		42,363		37,886
Total shareholders' equity		55,418		51,190
Total liabilities and shareholders' equity	$	107,614	$	92,878

* Derived from the Company's audited financial statements included in its Form 10-K for the year ended August 31, 2019 filed with the U.S. Securities and Exchange Commission on November 27, 2019.

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 29,			February 28,			February 29,			February 28,
		2020			2019			2020			2019
Net sales	$	56,828		$	52,559		$	112,868		$	103,345
Cost of sales		41,029			38,047			81,173			74,724
Gross margin		15,799			14,512			31,695			28,621
Operating expenses:
Selling, general and administrative expenses		12,673			11,720			25,275			23,210
Income from operations		3,179			2,792			6,420			5,411

Other income (expense):
Net gain (loss) on trading securities		471			(126	)		391			102
Loss on sale of property		–			–			(102	)		–
Interest and other (expense)		(65	)		(125	)		(184	)		(202	)
Other income (expense), net		406			(251	)		105			(100	)
Income before income taxes		3,532			2,541			6,525			5,311
Provision for income taxes		934			580			2,010			1,425
Net income		2,598			1,961			4,515			3,886
Cumulative preferred stock dividend		(19	)		(19	)		(38	)		(38	)
Net income attributable to common shareholders	$	2,579		$	1,942		$	4,477		$	3,848
Basic and diluted earnings per share:	$	0.53		$	0.40		$	0.92		$	0.79
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 29, 2020		February 28, 2019
Operating activities:
Net income	$	4,515	$	3,886
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		506		503
Bad debt expense		14		18
Change in inventory provision		68		107
Loss on sale of real property		102		–
Net gain on trading securities		(391)		(102)
(Increase) decrease in:
Trade accounts receivable		931		(1,889)
Inventory		(2,852)		(5,033)
Prepaid expenses and other assets		(1,026)		(524)
Increase (decrease) in:
Trade accounts payable		(2,243)		2,206
Accrued expenses and other current liabilities		(3,245)		(3,853)
Net cash used in operating activities		(3,621)		(4,681)
Investing activities:
Purchase of property, equipment, and leasehold improvements		(4,591)		(330)
Proceeds from sale of real property		7,075		–
Net sales of marketable securities, trading		1,370		1,071
Net change in liabilities for short sales of trading securities		1,731		(115)
Net cash provided by investing activities		5,585		626
Financing activities:
Borrowings on revolving credit facility, net		3,192		4,593
Borrowings on construction loan		3,342		—
Repayments on long-term debt		(5,125)		(72)
Preferred stock dividend		(38)		(38)
Bank overdraft		(147)		457
Net cash provided by financing activities		1,224		4,940
Effect of foreign currency exchange rate changes on cash and cash equivalents		(249)		277
Net increase in cash, cash equivalents, and restricted cash		2,939		1,162
Cash, cash equivalents, and restricted cash - beginning of period		5,347		3,638
Cash, cash equivalents, and restricted cash - end of period	$	8,286	$	4,800
Supplemental disclosures of cash flow information:
Cash paid for interest	$	178	$	201
Cash paid for income taxes	$	3,395	$	3,059

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