EACO Corporation Reports Record Quarterly Net Sales

ANAHEIM, Calif.--(BUSINESS WIRE)--

EACO Corporation EACO today reported the results for its quarter ended May 31, 2015.

Net sales, net income and earnings per share were as follows for the three months ended May 31, 2015 as compared to the comparable prior year quarter (dollars in thousands, except per share information):

		Three Months Ended May 31,				%
		2015		2014		Change
		(unaudited)
Net sales		$36,900		$36,253		1.8%
Net income		$1,174		$2,297		(48.9)%
Basic and diluted earnings per common share		$0.24		$0.47		(48.9)%

The Company's productivity gain from operations contributed to the Company's net sales growth for the quarter vs. the same quarter a year ago, while the sales team numbered 310, a decrease of 4% from the 323 employees on May 31, 2014. The Company's sales force is divided into Sales Focus Teams (SFTs). The Company had 91 SFTs as of May 31st, 2015, a decrease of 6% from 97 SFTs on May 31st, 2014. The Company continues to gain market share through its local presence business model. The decrease in headcount is a short term adjustment, but management anticipates continued growth in both our headcount and SFTs in the future. Provision for income taxes increased in the current quarter by $1.1 million and is primarily attributed to an income tax benefit received in the prior year quarter related to utilizing capital loss carry forwards to offset gains from the sale of property.

The Company estimates that the annual North American market for our product is approximately $7.2 billion. The Company's current estimated market share is 2.3% as compared to 2.2% in the prior year quarter.

EACO Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share information)
(unaudited)
		May 31,			August 31,
		2015			2014*
ASSETS
Current Assets:
Cash and cash equivalents		$	4,596		$	3,480
Restricted cash, current			2,001			642
Trade accounts receivable, net			17,786			17,795
Inventory, net			16,076			14,863
Marketable securities, trading			-			73
Prepaid expenses and other current assets			1,004			1,104
Total current assets			41,463			37,957
Non-current Assets:
Restricted cash, non-current			203			322
Equipment and leasehold improvements, net			1,520			1,603
Other assets			1,010			1,001
Total assets		$	44,196		$	40,883
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable		$	11,987		$	11,192
Accrued expenses and other current liabilities			3,700			3,508
Liabilities of discontinued operations – short-term			48			48
Liability for short sales of trading securities			2,001			642
Total current liabilities			17,736			15,390
Non-current Liabilities:
Liabilities of discontinued operations – long-term			155			274
Long-term debt			336			1,728
Total liabilities			18,227			17,392
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			921			1,065
Retained earnings			12,620			9,998
Total shareholders' equity			25,969			23,491
Total liabilities and shareholders' equity		$	44,196		$	40,883
* Derived from the Company's audited financial statements included in its Form 10-K for the year ended August 31, 2014 filed with the U.S. Securities and Exchange Commission on November 28, 2014.

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,
			2015				2014				2015				2014
Revenues		$	36,900			$	36,253			$	104,561			$	98,210
Cost of revenues			26,112				26,014				73,696				70,555
Gross margin			10,788				10,239				30,865				27,655
Operating expenses:
Selling, general and administrative expenses			8,780				8,021				26,312				23,827
Income from operations			2,008				2,218				4,553				3,828
Other income (expense):
Net gain (loss) on trading securities			93				8				37				(49	)
Gain on sale of property			-				-				-				535
Interest and other (expense)			(9	)			(85	)			(3	)			(296	)
Total other income (expense)			84				(77	)			34				190
Income before income taxes			2,092				2,141				4,587				4,018
Provision for income taxes			918				(156	)			1,899				548
Net income			1,174				2,297				2,688				3,470
Cumulative preferred stock dividend			(19	)			(19	)			(57	)			(57	)
Net income attributable to common shareholders		$	1,155			$	2,278			$	2,631			$	3,413
Basic and diluted earnings per share:		$	0.24			$	0.47			$	0.54			$	0.70
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,
			2015				2014
Operating activities:
Net income		$	2,688			$	3,470
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			409				406
Bad debt expense			-				14
Change in inventory reserve			48				76
Gain on sale of property			-				(535	)
Net (gain) loss on investments			(37	)			49
(Increase) decrease in:
Trade accounts receivable			9				(2,972	)
Inventory			(1,261	)			(843	)
Prepaid expenses and other assets			91				390
Deferred tax asset			-				(889	)
Increase (decrease) in:
Trade accounts payable			526				941
Accrued expenses and other current liabilities			183				675
Deposit liability			-				(24	)
Liabilities of discontinued operations			(121	)			(146	)
Net cash provided by operating activities			2,535				612
Investing activities:
Purchase of property and equipment			(326	)			(458	)
Sale (purchase) of marketable securities, trading			110				(5,137	)
Proceeds from securities sold short			1,359				-
Proceeds from sale of marketable securities, trading			-				4,648
Proceeds from sale of property			-				1,139
Change in restricted cash			(1,240	)			-
Net cash (used in) provided by investing activities			(97	)			192
Financing activities:
Payments on revolving credit facility			(1,400	)			(1,366	)
Payment of preferred dividend			(57	)			(57	)
Bank overdraft			271				1,251
Payments on long-term debt - real estate held for sale			-				(396	)
Borrowings (payments) on long-term debt			8				(126	)
Net cash used in financing activities			(1,178	)			(694	)
Effect of foreign currency exchange rate changes on cash and cash equivalents			(144	)			71
Net increase in cash and cash equivalents			1,116				181
Cash and cash equivalents - beginning of period			3,480				1,507
Cash and cash equivalents - end of period		$	4,596			$	1,688
Supplemental disclosures of cash flow information:
Cash paid for interest		$	13			$	299
Cash paid for taxes		$	1,071			$	666

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