EACO Corporation Reports Record Third Quarter Sales

ANAHEIM, Calif.--(BUSINESS WIRE)--EACO Corporation (OTCQB:EACO) today reported the results for the quarter ended May 31, 2012.

Net sales, net income and earnings per share were as follows for the three month periods ended May 31, 2012 (dollars in thousands, except per share information):

	Three Months Ended
	May 31, 2012	May 31, 2011	Change
	(unaudited)
Net sales/revenue	$ 30,333	$ 26,785	13%
Net income	$ 957	$ 621	54%
Basic and diluted earnings per common share	$ 0.19	$ 0.12	58%

As of May 31, 2012, the Company’s sales team numbered 296 employees an increase of 11% from the 267 employees on May 31, 2011. The Company’s sales force is divided into Sales Focus Teams (SFT). The Company had 84 SFT’s as of May 31, 2012, an increase of 12% from 75 SFT’s on May 31, 2011.

EACO Corporation and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except share and per share information)
	May 31, 2012		August 31, 2011
ASSETS	(unaudited)
Current Assets:
Cash and cash equivalents	$	3,856	$	1,368
Restricted cash, current		637		--
Trade accounts receivable, net		13,893		12,348
Inventory, net		12,206		11,389
Marketable securities, trading		267		892
Prepaid expenses and other current assets		323		320
Deferred tax asset, current		1,034		1,062
Total current assets		32,216		27,379
Non-current Assets:
Restricted cash, non-current		548		632
Real estate properties held for leasing, net		9,852		10,085
Equipment and leasehold improvements, net		971		972
Deferred tax asset		1,784		2,623
Other assets, principally deferred charges, net of accumulated amortization		1,130		1,187
Total assets	$	46,501	$	42,878
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	10,561	$	8,541
Accrued expenses and other current liabilities		2,040		2,325
Liability for short sales of trading securities		637		--
Liabilities of discontinued operations – short-term		147		147
Current portion of long-term debt		705		778
Total current liabilities		14,090		11,791
Non-current Liabilities:
Liabilities of discontinued operations – long-term		2,588		2,708
Deposit liability		147		147
Long-term debt		15,216		15,626
Total liabilities		32,041		30,272
Shareholders’ Equity:
Convertible preferred stock, $0.01 par value per share; authorized 10,000,000 shares; 36,000 shares outstanding at May 31, 2012 and August 31, 2011 (liquidation value $900)		1		1
Common stock, $0.01 par value per share; authorized 8,000,000 shares; 4,861,590 shares outstanding at May 31, 2012 and August 31, 2011		49		49
Additional paid-in capital		12,378		12,378
Accumulated other comprehensive income		480		554
Retained earnings (accumulated deficit)		1,552		(376	)
Total shareholders’ equity		14,460		12,606
Total liabilities and shareholders’ equity	$	46,501	$	42,878

EACO Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited)
	Nine Months Ended
	May 31, 2012			May 31, 2011
Operating activities:
Net income	$	1,985		$	1,754
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		638			585
Bad debt expense		111			29
Change in inventory reserve		(66	)		(39	)
Net gain on trading securities		(398	)		(342	)
(Increase) decrease in:
Trade accounts receivable		(1,656	)		(826	)
Inventory		(751	)		(1,892	)
Prepaid expenses and other assets		(3	)		(167	)
Deferred tax asset		867			(194	)
Increase (decrease) in:
Trade accounts payable		759			(901	)
Accrued expenses and other current liabilities		(287	)		553
Liabilities of discontinued operations		(120	)		(165	)
Net cash provided by (used in) operating activities		1,079			(1,605	)
Investing activities:
Purchase of property and equipment		(347	)		(252	)
Sale of marketable securities, trading		1,023			450
Short sales of marketable securities, trading		637			--
Change in restricted cash		(553	)		234
Net cash provided by investing activities		760			432
Financing activities:
Net borrowings on revolving credit facility		100			578
Bank overdraft		1,261			1,323
Payment of preferred dividend		(57	)		--
Payments on long-term debt		(583	)		(307	)
Net cash provided by financing activities		721			1,594
Effect of foreign currency exchange rate changes on cash and cash equivalents		(72	)		(20	)
Net increase in cash and cash equivalents		2,488			401
Cash and cash equivalents - beginning of period		1,368			1,260
Cash and cash equivalents - end of period	$	3,856		$	1,661
Supplemental disclosures of cash flow information:
Cash paid for interest	$	564		$	580
Cash paid for taxes	$	451		$	159

EACO Corporation and Subsidiaries Condensed Consolidated Statements of Income (in thousands, except for share and per share information) (Unaudited)
	Three Months Ended						Nine Months Ended
	May 31, 2012			May 31, 2011			May 31, 2012			May 31, 2011
Gross sales	$	30,333		$	26,785		$	84,220		$	77,446
Cost of goods sold		21,605			19,374			60,678			56,293
Gross profit		8,728			7,411			23,542			21,153
Operating expenses:
Selling, general and administrative expenses		6,826			6,032			20,150			18,168
Total operating expenses		6,826			6,032			20,150			18,168
Income from operations		1,902			1,379			3,392			2,985
Non-operating expense:
Gain (loss) on sale of trading securities		(17	)		69			45			322
Unrealized gain (loss) on trading securities		68			(120	)		353			20
Interest expense, net		(185	)		(188	)		(544	)		(575	)
Total non-operating expense		(134	)		(239	)		(146	)		(233	)
Net income before income taxes		1,768			1,140			3,246			2,752
Provision for income taxes		811			519			1,261			998
Net income		957			621			1,985			1,754
Undeclared cumulative preferred stock dividend		(19	)		(19	)		(57	)		(57	)
Net income attributable to common shareholders	$	938		$	602		$	1,928		$	1,697
Basic and diluted earnings per share	$	0.19		$	0.12		$	0.40		$	0.35
Basic and diluted weighted average common shares outstanding		4,861,590			4,861,590			4,861,590			4,861,590