EACO Corporation Reports 2nd Quarter Net Sales and Net Income

EACO Corporation (OTCMKTS:EACO) today reported the results for its quarter ended February 28, 2021.

Net sales, net income and earnings per share were as follows for the three months ended February 28, 2021 (dollars in thousands, except per share information):

	Three Months Ended
	February 28,		February 29,		%
	2021		2020		Change
	(unaudited)		(unaudited)
Net sales	$	55,751	$	56,828	(1.9)%

Net income	$	1,394	$	2,598	(46.3)%

Basic and diluted earnings per common share	$	0.28	$	0.53	(47.2)%

The Company had 361 sales employees at February 28, 2021, an increase of 10 or 3%, from the prior year quarter. The Company’s sales force is divided into sales focus teams (SFT’s). The Company had 100 SFT’s as of February 28, 2021, two more than the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2021. 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)

		February 28,		August 31,
		2021			2020*
ASSETS
Current Assets:
Cash and cash equivalents	$	2,817	$		6,079
Restricted cash		1,304			2,916
Trade accounts receivable, net		28,746			29,667
Inventory, net		40,180			39,545
Marketable securities, trading		4,155			1,368
Prepaid expenses and other current assets		3,818			5,094
Total current assets		82,695			84,669
Non-current Assets:
Property, equipment and leasehold improvements, net		8,387			8,848
Other assets:
Operating lease right-of-use assets		11,963			12,810
Other assets, net		1,402			1,424
Total assets	$	102,772	$		107,751
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	19,622	$		16,535
Accrued expenses and other current liabilities		4,053			6,632
Liability for short sales of trading securities		1,294			2,916
Current portion of operating lease liabilities		2,609			2,653
Current portion of long-term debt		116			5,100
Total current liabilities		27,694			33,836
Non-current Liabilities:
Long-term debt		4,638			4,807
Operating lease liabilities		9,405			10,289
Total liabilities		41,737			48,932
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		797			788
Retained earnings		47,810			45,603
Total shareholders’ equity		61,065			58,819
Total liabilities and shareholders’ equity	$	102,772	$		107,751

* 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						Six Months Ended
		February 28,			February 29,			February 28,			February 29,
		2021			2020			2021			2020
Net sales	$	55,751		$	56,828		$	109,154		$	112,868
Cost of sales		40,727			41,029			79,678			81,173
Gross margin		15,024			15,799			29,476			31,695
Operating expenses:
Selling, general and administrative expenses		12,540			12,673			25,221			25,275
Income from operations		2,484			3,179			4,255			6,420

Other income (expense):
Net (loss) gain on trading securities		(506	)		471			(1,059	)		391
Loss on sale of property		–			–			–			(102	)
Interest and other (expense)		(60	)		(65	)		(129	)		(184	)
Other (expense) income, net		(566	)		406			(1,188	)		105
Income before income taxes		1,918			3,532			3,067			6,525
Provision for income taxes		524			934			822			2,010
Net income		1,394			2,598			2,245			4,515
Cumulative preferred stock dividend		(19	)		(19	)		(38	)		(38	)
Net income attributable to common shareholders	$	1,375		$	2,579		$	2,207		$	4,477
Basic and diluted earnings per share:	$	0.28		$	0.53		$	0.45		$	0.92
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, 2021			February 29, 2020
Operating activities:
Net income	$	2,245		$	4,515
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		751			506
Bad debt expense		55			14
Loss on sale of real property		–			102
Net (loss) gain on trading securities		1,059			(391	)
(Increase) decrease in:
Trade accounts receivable		866			931
Inventory		(635	)		(2,852	)
Prepaid expenses and other assets		1,279			(958	)
Operating lease right-of-use assets		856			–
Increase (decrease) in:
Trade accounts payable		561			(2,243	)
Accrued expenses and other current liabilities		(2,579	)		(3,245	)
Operating lease liabilities		(928	)		–
Net cash provided by (used in) operating activities		3,530			(3,621	)
Investing activities:
Purchase of property, equipment, and leasehold improvements		(290	)		(4,591	)
Proceeds from sale of real property		–			7,075
Net (purchases) sales of marketable securities, trading		(3,846	)		1,370
Net change in liabilities for short sales of trading securities		(1,622	)		1,731
Net cash (used in) provided by investing activities		(5,758	)		5,585
Financing activities:
(Repayment) borrowings on revolving credit facility, net		(5,100	)		3,192
Borrowings on construction loan		–			3,342
Repayments on long-term debt		(53	)		(5,125	)
Preferred stock dividend		(38	)		(38	)
Net change in bank overdraft		2,526			(147	)
Net cash (used in) provided by financing activities		(2,665	)		1,224
Effect of foreign currency exchange rate changes on cash and cash equivalents		9			(249	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(4,884	)		2,939
Cash, cash equivalents, and restricted cash – beginning of period		8,995			5,347
Cash, cash equivalents, and restricted cash – end of period	$	4,111		$	8,286
Supplemental disclosures of cash flow information:
Cash paid for interest	$	121		$	17
Cash paid for income taxes	$	2,509		$	3,395

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