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EACO Corporation Reports Record Quarterly Net Income and Record 1st Quarter Net Sales

EACO Corporation (OTCQB:EACO) today reported the results for three months ended November 30, 2021.

Net sales, net income and earnings per share were as follows for the three months ended November 30, 2021 (dollars in thousands, except per share information):

 

Three Months Ended

November 30,

%

 

2021

2020

Change

 

(unaudited)

(unaudited)

 

 

 

Net sales

$

63,822

$

53,403

19.5

%

 

 

 

 

Net income

$

6,786*

$

851

697.4

%

 

 

 

 

Basic and diluted earnings per common share

$

1.39

$

0.17

717.6

%

*Includes an income benefit of $3.4 million as a result of qualified federal tax credits related to the Employee Retention Credit.

The Company had 328 sales employees at November 30, 2021, a decrease of 29 or 8.7% from the prior year quarter. The Company’s sales force is divided into Sales focus teams (SFT’s). The Company had 101 SFT’s as of November 30, 2021, the same as the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2022. The Company believes it continues to gain market share through its local presence business model.

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, the impact of products offered by our competitors from time to time, and the impact of the Covid-19 pandemic. 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)

 

November 30,

 

August 31,

2021

2021*

ASSETS

 

 

 

 

Current Assets:

Cash and cash equivalents

$

5,583

$

4,455

Restricted cash

10

10

Trade accounts receivable, net

 

34,168

 

33,939

Inventory, net

42,542

40,448

Marketable securities, trading

 

3,684

 

3,741

Prepaid expenses and other current assets

11,395

6,780

Total current assets

 

97,382

 

89,363

Non-current Assets:

 

 

 

 

Property, equipment and leasehold improvements, net

8,173

8,269

Operating lease right-of-use assets

 

11,304

 

11,084

Other assets, net

 

1,404

 

1,669

Total assets

$

118,263

$

110,385

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Current Liabilities:

Trade accounts payable

$

17,047

$

16,413

Accrued expenses and other current liabilities

11,708

10,964

Current portion of operating lease liabilities

 

3,301

 

3,096

Current portion of long-term debt

 

119

 

113

Total current liabilities

 

32,175

 

30,586

Non-current Liabilities:

Long-term debt

4,552

4,585

Operating lease liabilities

 

8,127

 

8,092

Total liabilities

 

44,854

 

43,263

Commitments and Contingencies (Note 8)

 

 

 

 

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

300

780

Retained earnings

 

60,681

 

53,914

Total shareholders’ equity

73,409

67,122

Total liabilities and shareholders’ equity

$

118,263

$

110,385

 

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2020 filed with the U.S. Securities and Exchange Commission on November 30, 2020.

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(in thousands, except for share and per share information)

(unaudited)

 

 

Three Months Ended

November 30,

 

 

2021

 

 

2020

 

Net sales

$

63,822

 

$

53,403

 

Cost of sales

 

45,644

 

38,951

 

Gross margin

 

18,178

 

14,452

 

Operating expenses:

Selling, general and administrative expenses

8,895

 

12,681

 

Income from operations

 

9,283

 

1,771

 

 

Other (expense):

Net loss on trading securities

 

(56

)

(553

)

Interest and other expense, net

(52

)

(69

)

Other (expense), net

 

(108

)

(622

)

Income before income taxes

9,175

 

1,149

 

Provision for income taxes

 

2,389

 

298

 

Net income

 

6,786

 

851

 

Cumulative preferred stock dividend

(19

)

(19

)

Net income attributable to common shareholders

$

6,767

 

$

832

 

 

Basic and diluted earnings per common share:

$

1.39

 

$

0.17

 

Basic and diluted weighted average common shares outstanding

 

4,861,590

 

4,861,590

 

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

Three Months Ended

November 30,

2021

 

2020

 

Operating activities:

 

 

Net income

$

6,786

 

$

851

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

Depreciation and amortization

382

 

377

 

Bad debt expense

9

 

 

 

––

 

Net gain on trading securities

56

 

553

 

Increase (decrease) in cash from changes in

 

 

Trade accounts receivable

(248

)

1,634

 

Inventory

(2,094

)

 

 

(71

)

Prepaid expenses and other assets

(4,350

)

716

 

Operating lease right-of-use assets

 

(220

)

 

 

417

 

Trade accounts payable

1,642

 

666

 

Accrued expenses and other current liabilities

744

 

 

 

(723

)

Operating lease liabilities

 

240

 

 

 

(524

)

Net cash provided by operating activities

2,947

 

 

 

3,896

 

Investing activities:

Additions to property, equipment, and leasehold improvements

(286

)

 

 

(179

)

Sale of marketable securities, trading

1

 

24

 

Net change in liabilities for short sales of trading securities

––

 

 

 

286

 

Net cash (used in) provided by investing activities

(285

)

 

 

131

 

Financing activities:

Payments on revolving credit facility, net

––

 

 

 

(2,187

)

Payments on long-term debt

 

(27

)

 

 

––

 

Preferred stock dividend

(19

)

(19

)

Bank overdraft

(1,008

)

 

 

(867

)

Net cash used in financing activities

(1,054

)

 

 

(3,073

)

Effect of foreign currency exchange rate changes on cash and cash equivalents

(480

)

 

(82

)

Net increase in cash, cash equivalents, and restricted cash

1,128

 

 

 

872

 

Cash, cash equivalents, and restricted cash - beginning of period

4,465

 

 

8,995

 

Cash, cash equivalents, and restricted cash - end of period

$

5,593

 

 

$

9,867

 

Supplemental disclosures of cash flow information:

Cash paid for interest

$

52

 

 

$

48

 

 

Contacts

Michael Narikawa

EACO Corporation

(714) 876-2490

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