EACO Corporation Reports Record 1st Quarter Net Sales

EACO Corporation (OTC Pink:EACO) announced the results for its quarter ended November 30, 2023.

Net sales, net income and earnings per share were as follows for the quarter ended November 30, 2023 (dollars in thousands, except per share information):

	Three Months Ended November 30,		%
	2023	2022	Change
	(unaudited)	(unaudited)

Net sales	$80,255	$76,319	5.2%

Net income	$1,779	$4,711	(62.2%)

Basic and diluted earnings per common share	$0.36	$0.97	(62.3%)

The Company had 413 sales employees at November 30, 2023, an increase of 47 or 13% from the prior year quarter. The Company’s sales force is divided into sales focus teams (SFT’s). The Company had 109 SFT’s as of November 30, 2023, an increase of 8 from the prior year quarter. Management anticipates continued growth in both our headcount and SFT’s in fiscal year 2024. 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, and the impact of products offered by our competitors from time to time. 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,
	2023		2023
ASSETS
Current Assets:
Cash and cash equivalents	$	6,499	$	8,558
Restricted cash		10		10
Trade accounts receivable, net		46,051		46,654
Inventory, net		60,256		56,270
Marketable securities, trading		4,227		27,228
Prepaid expenses and other current assets		4,148		3,843
Total current assets		121,191		142,563
Non-current Assets:
Property, equipment and leasehold improvements, net		35,519		8,041
Operating lease right-of-use assets		4,216		9,988
Other assets, net		1,760		1,652
Total assets	$	162,686	$	162,244
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	26,345	$	22,505
Accrued expenses and other current liabilities		14,118		16,375
Current portion of operating lease liabilities		2,130		3,950
Current portion of debt		3,201		120
Total current liabilities		45,794		42,950
Non-current Liabilities:
Long-term debt		4,317		4,348
Operating lease liabilities		2,225		6,225
Total liabilities		52,336		53,523
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		(93)		38
Retained earnings		98,015		96,255
Total shareholders’ equity		110,350		108,721
Total liabilities and shareholders’ equity	$	162,686	$	162,244

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2023 filed with the U.S. Securities and Exchange Commission on November 22, 2023.

EACO Corporation and Subsidiaries Condensed Consolidated Statements of Income (in thousands, except for share and per share information) (unaudited)
	Three Months Ended
	November 30,
	2023		2022
Net sales	$	80,255	$	76,319
Cost of sales		56,683		54,656
Gross margin		23,572		21,663
Operating expenses:
Selling, general and administrative expenses		17,217		15,685
Impairment on termination of lease		3,906		––
Income from operations		2,449		5,978

Other (expense) income:
Net (loss) gain on trading securities		(44)		442
Interest and other expense, net		(9)		(48)
Other (expense) income, net		(53)		394
Income before income taxes		2,396		6,372
Provision for income taxes		617		1,661
Net income		1,779		4,711
Cumulative preferred stock dividend		(19)		(19)
Net income attributable to common shareholders	$	1,760	$	4,692
Basic and diluted earnings per common share:	$	0.36	$	0.97
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,
	2023		2022
Operating activities:
Net income	$	1,779	$	4,711
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		317		359
Bad debt expense		47		2
Deferred tax provision		(67)		—
Net unrealized loss (gain) on trading securities		210		(487)
Impairment on termination of lease		3,906		––
Increase (decrease) in cash from changes in
Trade accounts receivable		556		4,300
Inventory		(3,986)		(4,247)
Prepaid expenses and other assets		(346)		(272)
Operating lease right-of-use assets		5,772		(256)
Trade accounts payable		190		(407)
Accrued expenses and other current liabilities		(2,257)		(768)
Right of use liabilities		(5,820)		272
Net cash provided by operating activities		301		3,207
Investing activities:
Additions to property, equipment, and leasehold improvements		(31,701)		(86)
Proceeds (purchase) from sale of marketable securities, trading		22,791		(6,243)
Net cash used in investing activities		(8,910)		(6,329)
Financing activities:
Borrowing on revolving credit facility		3,081		—
Payments on long-term debt		(31)		(29)
Preferred stock dividend		(19)		(19)
Bank overdraft		3,650		(109)
Net cash provided (used) by financing activities		6,681		(157)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(131)		(86)
Net (decrease) in cash, cash equivalents, and restricted cash		(2,059)		(3,365)
Cash, cash equivalents, and restricted cash – beginning of period		8,568		17,396
Cash, cash equivalents, and restricted cash – end of period	$	6,509	$	14,031
Supplemental disclosures of cash flow information:
Cash paid for interest	$	296	$	51
Cash paid for income taxes	$	674	$	—

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