EACO Corporation Reports Record 3rd Quarter Net Sales

June 28, 2023 at 19:00 PM EDT

EACO Corporation (OTCMKTS:EACO) today reported the results for its quarter ended May 31, 2023.

Net sales, net income and earnings per share were as follows for the three months ended May 31, 2023 (dollars in thousands, except per share information):

	Three Months Ended May 31,		%
	2023	2022	Change
	(unaudited)	(unaudited)

Net sales	$80,249	$77,797	3.2%

Net income	$5,319	$5,330	(0.2%)

Basic and diluted earnings per common share	$1.09	$1.09	0.0%

The Company had 378 sales employees at May 31, 2023, an increase of 38 or 11.2% from the prior year quarter. The Company’s sales force is divided into Sales focus teams (SFT’s). The Company had 108 SFT’s as of May 31, 2023, an increase of 5 from the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2023. 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)

	May 31,		August 31,
	2023		2022*
ASSETS
Current Assets:
Cash and cash equivalents	$	1,348	$	17,386
Restricted cash		10		10
Trade accounts receivable, net		40,523		44,637
Inventory, net		56,464		48,808
Marketable securities, trading		28,447		3,925
Prepaid expenses and other current assets		3,755		5,008
Total current assets		130,547		119,774
Non-current Assets:
Property, equipment and leasehold improvements, net		8,073		8,479
Operating lease right-of-use assets		10,390		10,389
Other assets, net		1,141		1,039
Total assets	$	150,151	$	139,681
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	19,768	$	21,762
Accrued expenses and other current liabilities		12,623		15,020
Current portion of operating lease liabilities		3,801		3,375
Current portion of long-term debt		120		119
Total current liabilities		36,726		40,276
Non-current Liabilities:
Long-term debt		4,377		4,465
Operating lease liabilities		6,776		7,192
Total liabilities		47,465		51,933
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		39		174
Retained earnings		90,219		75,146
Total shareholders’ equity		102,686		87,748
Total liabilities and shareholders’ equity	$	150,151	$	139,681

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2022 filed with the U.S. Securities and Exchange Commission on November 4, 2022.

EACO Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except for share and per share information)
(unaudited)

	Three Months Ended May 31,						Nine Months Ended May 31,
	2023			2022			2023			2022
Net sales	$	80,249		$	77,797		$	233,493		$	208,206
Cost of sales		57,008			56,207			166,325			150,313
Gross margin		23,241			21,590			67,168			57,893
Operating expenses:
Selling, general and administrative expenses		16,277			14,547			47,568			36,881
Income from operations		6,964			7,043			19,600			21,012

Other income (expense):
Net gain on trading securities		163			213			784			135
Interest and other expense		(36	)		(48	)		(38	)		(153	)
Other income (expense), net		127			165			746			(18	)
Income before income taxes		7,091			7,208			20,346			20,994
Provision for income taxes		1,772			1,878			5,216			5,471
Net income		5,319			5,330			15,130			15,523
Cumulative preferred stock dividend		(19	)		(19	)		(57	)		(57	)
Net income attributable to common shareholders	$	5,300		$	5,311		$	15,073		$	15,466
Basic and diluted earnings per share:	$	1.09		$	1.09		$	3.10		$	3.18
Basic and diluted weighted average common shares outstanding		4,861,590			4,861,590			4,861,590			4,861,590
Diluted weighted average common shares outstanding		4,901,590			4,901,590			4,901,590			4,901,590

EACO Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Nine Months Ended May 31,
	2023			2022
Operating activities:
Net income	$	15,130		$	15,523
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,052			1,122
Bad debt expense		201			54
Net unrealized (gain) on trading securities		(784	)		(135	)
Increase (decrease) in cash from changes in:
Trade accounts receivable		3,913			(8,843	)
Inventory		(7,656	)		(7,045	)
Prepaid expenses and other assets		1,151			(462	)
Operating lease right-of-use assets		(1	)		416
Trade accounts payable		(1,885	)		3,959
Accrued expenses and other current liabilities		(2,397	)		230
Operating lease liabilities		10			(363	)
Net cash provided by operating activities		8,734			4,456
Investing activities:
Purchase of property, equipment, and leasehold improvements		(646	)		(827	)
Net (purchases) of marketable securities, trading		(23,738	)		(959	)
Net cash (used in) investing activities		(24,384	)		(1,786	)
Financing activities:
Repayments on long-term debt		(87	)		(87	)
Preferred stock dividend		(57	)		(57	)
Net change in bank overdraft		(109	)		(1,056	)
Net cash (used in) financing activities		(253	)		(1,200	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(135	)		(498	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(16,038	)		972
Cash, cash equivalents, and restricted cash - beginning of period		17,396			4,465
Cash, cash equivalents, and restricted cash - end of period	$	1,358		$	5,437
Supplemental disclosures of cash flow information:
Cash paid for interest	$	152		$	153
Cash paid for income taxes	$	7,217		$	3,979

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Michael Narikawa

EACO Corporation

(714) 876-2490

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EACO Corporation Reports Record 3rd Quarter Net Sales

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