EACO Corporation Reports 1st Quarter Net Sales and Net Income

Rhea-AI Summary

EACO Corporation (OTCQB:EACO) reported Q3 results for the period ending November 30, 2020. Net sales decreased by 4.7% to $53,403 from $56,040 in 2019. Net income fell 55.6% to $851 compared to $1,917 a year earlier, with earnings per share down 56.4% at $0.17. Despite these declines, the company expanded its sales force by 6.4% to 373 employees and increased sales focus teams to 101, indicating a strategy for future growth.

Positive

• Sales force increased by 24 employees (6.4%) to 373.
• Number of Sales Focus Teams (SFTs) rose to 101, up by 2.

Negative

• Net sales decreased by 4.7% from the prior year.
• Net income fell by 55.6%, indicating significant profitability pressure.
• Earnings per share dropped by 56.4%.

EACO Corporation (OTCQB:EACO) today reported the results for three months ended November 30, 2020.

Net sales, net income and earnings per share were as follows for the three months ended November 30, 2020 (dollars in thousands, except per share information):

	Three Months Ended November 30,			%
	2020		2019	Change
	(unaudited)		(unaudited)
Net sales	$53,403		$56,040	(4.7)%
Net income	$851		$1,917	(55.6)%
Basic and diluted earnings per common share	$0.17		$0.39	(56.4)%

The Company had 373 sales employees at November 30, 2020, an increase of 24 or 6.4% 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, 2020, an increase of 2 from 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)
		November 30,			August 31,
		2020			2020*
ASSETS
Current Assets:
Cash and cash equivalents	$	6,665		$	6,079
Restricted cash		3,202			2,916
Trade accounts receivable, net		28,033			29,667
Inventory, net		39,616			39,545
Marketable securities, trading		791			1,368
Prepaid expenses and other current assets		4,388			5,094
Total current assets		82,695			84,669
Non-current Assets:
Property, equipment and leasehold improvements, net		8,650			8,848
Other assets:
Operating lease right-of-use assets		12,393			12,810
Other assets, net		1,414			1,424
Total assets	$	105,152		$	107,751
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	16,334		$	16,535
Accrued expenses and other current liabilities		5,909			6,632
Liability for short sales of trading securities		3,202			2,916
Current portion of operating lease liabilities		2,585			2,653
Current portion of long-term debt		2,939			5,100
Total current liabilities		30,969			33,836
Non-current Liabilities:
Long-term debt		4,781			4,807
Operating lease liabilities		9,833			10,289
Total liabilities		45,583			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		706			788
Retained earnings		46,435			45,603
Total shareholders’ equity		59,569			58,819
Total liabilities and shareholders’ equity	$	105,152		$	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 November 30,
		2020		2019
Net sales	$	53,403	$	56,040
Cost of sales		38,951		40,144
Gross margin		14,452		15,896
Operating expenses:
Selling, general and administrative expenses		12,681		12,602
Income from operations		1,771		3,294
Other (expense):
Net loss on trading securities		(553)		(80)
Loss on sale of real property		–		(102)
Interest and other expense, net		(69)		(119)
Other (expense), net		(622)		(301)
Income before income taxes		1,149		2,993
Provision for income taxes		298		1,076
Net income		851		1,917
Cumulative preferred stock dividend		(19)		(19)
Net income attributable to common shareholders	$	832	$	1,898
Basic and diluted earnings per common share:	$	0.17	$	0.39
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,
	2020			2019
Operating activities:
Net income	$	851		$	1,917
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		377			259
Bad debt expense		–			3
Loss on sale of property		–			102
Net loss on trading securities		553			80
(Increase) decrease in:
Trade accounts receivable		1,634			2,175
Inventory		(71)			(2,472)
Prepaid expenses and other assets		716			(729)
Operating lease right-of-use assets		417			–
Increase (decrease) in:
Trade accounts payable		666			(2,266)
Accrued expenses and other current liabilities		(723)			(737)
Operating lease liabilities		(524)			–
Net cash provided by (used in) operating activities		3,896			(1,668)
Investing activities:
Additions to property, equipment, and leasehold improvements		(179)			(2,393)
Proceeds from sale of property		–			7,075
Sale of marketable securities, trading		24			1,388
Net change in liabilities for short sales of trading securities		286			2,167
Net cash provided by investing activities		131			8,237
Financing activities:
(Payments) borrowings on revolving credit facility, net		(2,187)			513
Borrowings on Construction Loan		–			1,701
Repayments on long-term debt		–			(5,125)
Preferred stock dividend		(19)			(19)
Bank overdraft		(867)			104
Net cash used in financing activities		(3,073)			(2,826)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(82)			(212)
Net increase in cash, cash equivalents, and restricted cash		872			3,531
Cash, cash equivalents, and restricted cash - beginning of period		8,995			5,347
Cash, cash equivalents, and restricted cash - end of period	$	9,867		$	8,878
Supplemental disclosures of cash flow information:
Cash paid for interest	$	48		$	122
Cash paid for income taxes	$	–		$	–

 

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FAQ

What were EACO Corporation's net sales for the three months ended November 30, 2020?

EACO Corporation reported net sales of $53,403 for the three months ended November 30, 2020.

How much did EACO Corporation's net income decline in Q3 2020?

EACO Corporation's net income declined by 55.6% to $851 in Q3 2020.

What is the change in EACO Corporation's earnings per share for the period ended November 30, 2020?

EACO Corporation's earnings per share decreased by 56.4% to $0.17 for the three months ended November 30, 2020.

How many sales employees did EACO Corporation have as of November 30, 2020?

EACO Corporation had 373 sales employees as of November 30, 2020.

What strategies is EACO Corporation implementing for growth in fiscal year 2021?

EACO Corporation plans to continue expanding its headcount and sales focus teams in fiscal year 2021.