EACO Corporation (OTCQB:EACO) today reported the results for its quarter ended November 30, 2013.

Net sales, net income and earnings per share were as follows for the three months ended November 30, 2013 (dollars in thousands, except per share information):

Three Months Ended November 30,  
2013   2012Change
(unaudited)
 
Net sales $31,035 $29,260 6%
 
Net income $1,064 $383 178%
 
Basic and diluted earnings per common share $0.21 $0.08 163%

As of November 30, 2013, the Company's sales team numbered 320 employees, an increase of 5% compared to 304 employees on November 30, 2012. The Company's sales force is divided into Sales Focus Teams (SFTs). The Company had 93 SFTs as of November 30, 2013, an increase of 9% from 85 SFTs on November 30, 2012, with the average size decreasing to 3.4 employees per SFT from 3.6 employees per SFT at November 30, 2012.

We estimate that the annual North American market for our products is approximately $6.7 billion. The Company's current estimated market share is 1.8% as compared to 1.7% in the prior year.

EACO Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share information)

     
November 30,

2013

August 31, 2013
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 2,788 $ 1,507
Restricted cash, current 1,519 --
Trade accounts receivable, net 15,206 14,438
Inventory, net 14,493 14,272
Marketable securities, trading 445 1,395
Assets held for sale -- 460
Prepaid expenses and other current assets 606 619
Total current assets 35,057 32,691
 
Non-current Assets:
Restricted cash, non-current 548 548
Real estate properties held for leasing, net 7,244 7,283
Equipment and leasehold improvements, net 1,395 1,396
Deferred tax asset 1,812 1,712
Other assets, principally deferred charges, net of accumulated amortization 722 850
Total assets $ 46,778 $ 44,480
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities:
Trade accounts payable $ 10,004 $ 9,315
Accrued expenses and other current liabilities 2,452 2,880
Securities sold short, at fair value 1,519 --
Liabilities of discontinued operations - short-term 153 146
Liabilities of assets held for sale -- 362
Current portion of long-term debt 138 172
Total current liabilities 14,266 12,875
 
Non-current Liabilities:
Liabilities of discontinued operations - long-term 2,349 2,410
Deposit liability 63 87
Long-term debt 11,274 11,397
Total liabilities 27,952 26,769
 
Shareholders' Equity:
Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding at November 30, 2013 and August 31, 2013 (liquidation value $900) 1 1
Common stock, $0.01 par value per share; 8,000,000 shares authorized; 4,861,590 shares outstanding at November 30, 2013 and August 31, 2013 49 49
Additional paid-in capital 12,378 12,378
Accumulated other comprehensive income 890 820
Retained earnings 5,508 4,463
Total shareholders' equity 18,826 17,711
Total liabilities and shareholders' equity $ 46,778 $ 44,480
 

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

(Unaudited)

 
Three Months Ended

November 30,

  2013     2012  
Revenues $ 31,035 $ 29,260
Cost of revenues   22,129     21,159  
Gross margin   8,906     8,101  
 
Selling, general and administrative expenses   7,779     7,260  
Income from operations 1,127 841
 
Non-operating income (expense):
Net gain (loss) on trading securities 91 (22 )
Gain on sale of property   535     --  
Interest expense, net   (99 )   (167 )
Total non-operating income (expense)   527     (189 )
Net income before income taxes 1,654 652
Provision for income taxes   590     269  
Net income 1,064 383
Cumulative preferred stock dividend   (19 )   (19 )
 
Net income attributable to common shareholders $ 1,045   $ 364  
 
Basic and diluted earnings per share $ 0.21 $ 0.08
 
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,
2013   2012
 
Operating activities:  
Net income $ 1,064 $ 383
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 148 180
Bad debt expense (recovery) 142 (18)
Change in inventory reserve 14 (62)
Gain on sale of building (535) --
Net (gain) loss on trading securities (91) 22
(Increase) decrease in:
Trade accounts receivable (910) (56)
Inventory (235) (823)
Prepaid expenses and other assets 141 330
Deferred tax asset (100) 58
Increase (decrease) in:
Trade accounts payable 346 142
Accrued expenses and other current liabilities (428) (582)
Deposit liability (24) (74)
Liabilities of discontinued operations   (54)   (39)
Net cash used in operating activities   (522)   (539)
 
Investing activities:
Purchase of property and equipment (252) (345)
Sale (purchase) of marketable securities, trading 1,041 (223)
Proceeds from sale of property 1,139 --
Proceeds from securities sold short 1,519 831
Increase in restricted cash   (1,519)   (832)
Net cash provided by (used in) investing activities   1,928   (569)
 
Financing activities:
Net (payments) borrowings on revolving credit facility (67) 150
Bank overdraft 343 691
Preferred dividend (19) (19)
Borrowing of long-term debt -- --
Payments on long-term debt for assets held for leasing and held for sale   (452)   (243)
Net cash (used in) provided by financing activities   (195)   579
Effect of foreign currency exchange rate changes on cash and cash equivalents   70   100
Net increase (decrease) in cash and cash equivalents 1,281 (429)
 
Cash and cash equivalents - beginning of period   1,507   2,568
Cash and cash equivalents - end of period $ 2,788 $ 2,139
 
Supplemental disclosures of cash flow information:
Cash paid for interest $ 100 $ 169
 
Cash paid for taxes $ 674 $ 196

EACO Corporation
Marta Arciniega, (714) 876-2490