EACO Corporation Reports Fourth Consecutive Quarter of Double Digit Sales Growth

ANAHEIM, Calif.--(BUSINESS WIRE)--EACO Corporation (OTCQB:EACO) today reported the results for the first quarter ending November 30, 2012.

Net sales, net income and earnings per share were as follows for the three months ended November 30, 2012 (dollars in thousands, except per share information):

	Three Months Ended November 30,
	2012		2011		Change
	(unaudited)
Net sales/revenue	$	29,260	$	26,461	11	%
Net income	$	383	$	625	(39	)%
Basic and diluted earnings per common share	$	0.08	$	0.12	(33	)%

As of November 30, 2012, the Company’s sales team numbered 304 employees an increase of 12% from 272 employees on November 30, 2011. The Company’s sales force is divided into Sales Focus Teams (SFTs). The Company had 85 SFTs as of November 30, 2012, an increase of 4% from 82 SFTs on November 30, 2011, with the average size going from 3.3 employees to 3.7 employees per SFT.

The current annual estimated North American market for the products the Company distributes is $6.7 billion. The Company’s current estimated market share is 1.7%.

EACO Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share information)
	November 30,		August 31,
	2012		2012
ASSETS	(unaudited)
Current Assets:
Cash and cash equivalents	$	2,139	$	2,568
Restricted cash, current		831		--
Trade accounts receivable, net		14,046		13,972
Inventory, net		13,074		12,189
Marketable securities, trading		398		197
Prepaid expenses and other current assets		472		464
Assets held for sale		1,521		1,521
Deferred tax asset, current		265		290
Total current assets		32,746		31,201
Non-current Assets:
Restricted cash, non-current		549		548
Real estate properties held for leasing, net		8,201		8,253
Equipment and leasehold improvements, net		1,332		1,106
Deferred tax asset		2,053		2,111
Other assets, principally deferred charges, net of accumulated amortization		788		1,110
Total assets	$	45,669	$	44,329
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	10,352	$	9,519
Accrued expenses and other current liabilities		1,850		2,482
Liability for short sales of trading securities		831		--
Liabilities of discontinued operations – short-term		146		146
Liabilities of assets held for sale		1,163		1,113
Current portion of long-term debt		430		555
Total current liabilities		14,772		13,815
Non-current Liabilities:
Liabilities of discontinued operations – long-term		2,528		2,567
Deposit liability		73		147
Long-term debt		12,939		12,907
Total liabilities		30,312		29,436
Shareholders’ Equity:
Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding at November 30, 2012 and August 31, 2012 (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, 2012 and August 31, 2012		49		49
Additional paid-in capital		12,378		12,378
Accumulated other comprehensive income		557		478
Retained earnings		2,372		1,987
Total shareholders’ equity		15,357		14,893
Total liabilities and shareholders’ equity	$	45,669	$	44,329

EACO Corporation and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except for share and per share information)
(Unaudited)
	Three Months Ended
	November 30,
	2012			2011
Sales	$	29,260		$	26,461
Cost of goods sold		21,159			19,071
Gross profit		8,101			7,390
Operating expenses:
Selling, general and administrative expenses		7,260			6,530
Total operating expenses		7,260			6,530
Income from operations		841			860
Non-operating income (expense):
Gain on sale of trading securities		33			--
Unrealized (loss) gain on trading securities		(55	)		193
Interest expense, net		(167	)		(181	)
Total non-operating (expense) income		(189	)		12
Net income before income taxes		652			872
Provision for income taxes		269			247
Net income		383			625
Cumulative preferred stock dividend		(19	)		(19	)
Net income attributable to common shareholders	$	364		$	606
Basic and diluted earnings per share	$	0.08		$	0.12
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,
	2012			2011
Operating activities:
Net income	$	383		$	625
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		180			188
Bad debt recovery		(18	)		--
Change in inventory reserve		(62	)		(15	)
Net gain on trading securities		(22	)		(193	)
(Increase) decrease in:
Trade accounts receivable		(56	)		6
Inventory		(823	)		(1,291	)
Prepaid expenses and other assets		305			108
Deferred tax asset		83			152
Increase (decrease) in:
Trade accounts payable		142			298
Accrued expenses and other current liabilities		(582	)		(815	)
Deposit liability		(74	)		--
Liabilities of discontinued operations		(39	)		(27	)
Net cash used in operating activities		(583	)		(964	)
Investing activities:
Purchase of property and equipment		(345	)		(155	)
Purchase of marketable securities, trading		(179	)		(86	)
Short sales of marketable securities		831			--
Change in restricted cash		(832	)		(4	)
Net cash used in investing activities		(525	)		(245	)
Financing activities:
Net borrowings (payments) on revolving credit facility		150			(700	)
Bank overdraft		691			261
Preferred dividend		(19	)		--
Borrowing of long-term debt		--			1,600
Payments on long-term debt		(243	)		(192	)
Net cash provided by financing activities		579			969
Effect of foreign currency exchange rate changes on cash and cash equivalents		100			224
Net decrease in cash and cash equivalents		(429	)		(16	)
Cash and cash equivalents - beginning of period		2,568			1,368
Cash and cash equivalents - end of period	$	2,139		$	1,352
Supplemental disclosures of cash flow information:
Cash paid for interest	$	169		$	186
Cash paid for taxes	$	196		$	415