EACO Corporation Reports Q2 Results

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

EACO Corporation EACO today reported the results for its quarter ended February 29, 2016.

Net sales, net income and earnings per share were as follows for the three months ended February 29, 2016 (dollars in thousands, except per share information):

	Three Months Ended								%
	February 29, 2016				February 28, 2015				Change
	(unaudited)
Net sales	$	34,589			$	34,427			0.5	%
Net income	$	731			$	1,119			(34.7	)%
Basic and diluted earnings per common share	$	0.15			$	0.23			(34.8	)%

We had 319 sales employees on February 29, 2016. Our 319 sales employees is an increase of 2.2% from the 312 as of February 28, 2015. The sales force is divided into Sales focus teams (SFT's) and we had 95 SFT's as of February 29, 2016 and 91 SFT's on February 28, 2015. We anticipate continued growth in both our headcount and SFT's in fiscal year 2016. We estimate that the annual North American market for our product is approximately $7.2 billion and our current market share is 1.9%.

EACO Corporation and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share information)
		February 29, 2016			August 31, 2015
		(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	4,374		$	5,269
Restricted cash, current		1,054			1,781
Trade accounts receivable, net		16,578			15,485
Inventory, net		17,634			16,733
Marketable securities, trading		1,084			-
Prepaid expenses and other current assets		827			591
Total current assets		41,551			39,859
Non-current Assets:
Restricted cash, non-current		74			83
Equipment and leasehold improvements, net		1,450			1,569
Other assets		1,011			1,005
Total assets	$	44,086		$	42,516
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable	$	11,528		$	9,318
Accrued expenses and other current liabilities		2,335			4,349
Liabilities of discontinued operations – short-term		49			49
Liability for short sales of trading securities		1,054			1,781
Total current liabilities		14,966			15,497
Non-current Liabilities:
Liabilities of discontinued operations – long-term		25			35
Long-term debt		1,018			33
Total liabilities		16,009			15,565
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		793			860
Retained earnings		14,856			13,663
Total shareholders' equity		28,077			26,951
Total liabilities and shareholders' equity	$	44,086		$	42,516

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,
				2016			2015					2016			2015
Revenues			$	34,589		$	34,427				$	68,882		$	67,661
Cost of revenues				24,469			23,795					48,793			47,584
Gross margin				10,120			10,632					20,089			20,077
Operating expenses:
Selling, general and administrative expenses				9,087			8,778					18,221			17,532
Income from operations				1,033			1,854					1,868			2,545
Other income(expense):
Net gain (loss) on trading securities				180			(13	)				171			(56	)
Interest and other income (expense)				2			6					(4	)		6
Total other income (expense)				182			(7	)				167			(50	)
Income before income taxes				1,215			1,847					2,035			2,495
Provision for income taxes				484			728					804			981
Net income				731			1,119					1,231			1,514
Cumulative preferred stock dividend				(19	)		(19	)				(38	)		(38	)
Net income attributable to common shareholders			$	712		$	1,100				$	1,193		$	1,476
Basic and diluted earnings per share:			$	0.15		$	0.23				$	0.25		$	0.30
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,				February 28,
	2016				2015
Operating activities:
Net income	$	1,231			$	1,514
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		287				268
Bad debt expense		24				-
Change in inventory reserve		118				1
Net (gain) loss on investments		(171	)			56
(Increase) decrease in:
Trade accounts receivable		(1,117	)			143
Inventory		(1,019	)			(708	)
Prepaid expenses and other assets		(242	)			51
Increase (decrease) in:
Trade accounts payable		962				34
Accrued expenses and other current liabilities		(2,014	)			(900	)
Liabilities of discontinued operations		(10	)			(115	)
Net cash (used in) provided by operating activities		(1,951	)			344
Investing activities:
Purchase of property and equipment		(168	)			(164	)
(Purchase) sale of marketable securities, trading		(913	)			16
Net change in securities sold short		(727	)			1,286
Change in restricted cash		736				(1,173	)
Net cash used in investing activities		(1,072	)			(35	)
Financing activities:
Borrowings on revolving credit facility		987				382
Preferred stock dividend		(38	)			(38	)
Bank overdraft		1,248				247
Payments on long-term debt		(2	)			5
Net cash provided by financing activities		2,195				596
Effect of foreign currency exchange rate changes on cash and cash equivalents		(67	)			(81	)
Net (decrease) increase in cash and cash equivalents		(895	)			824
Cash and cash equivalents - beginning of period		5,269				3,480
Cash and cash equivalents - end of period	$	4,374			$	4,304
Supplemental disclosures of cash flow information:
Cash paid for interest	$	14			$	10
Cash paid for taxes	$	2,194			$	1,342

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