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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-14311
EACO CORPORATION
(exact name of Registrant as specified in its charter)
Florida No. 59-2597349
(State of Incorporation) (I.R.S. Employer Identification)
2113 Florida Boulevard
Neptune Beach, Florida 32266
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (904) 249-4197
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of Class)
______________
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
Indicate by check mark whether Registrant is an accelerated filer
(as defined by Rule 12b-2 of the Act.
YES [ ] NO [ X ]
As of March 3, 2005, 3,881,901 shares of Common Stock of the
Registrant were outstanding. The aggregate market value of such
voting Common Stock (based upon the closing sale price of the
registrant's Common Stock on the Over the Counter Bulletin Board
on March 3, 2005, as reported in The Wall Street Journal) held by
non-affiliates of the Registrant was approximately $1,561,500.
Documents Incorporated by Reference
Portions of the Registrant's 2004 Annual Report to Shareholders
are incorporated by reference into Part II. Portions of the Proxy
Statement for the Registrant's 2005 Annual Meeting of Shareholders
are incorporated by reference into Part III.
PART I
Item 1: Business
Overview
EACO Corporation (the "Company") was incorporated under the laws
of the State of Florida in September of 1985. In 1986, the Company
completed its initial public offering of 900,000 shares of its
common stock, par value $.01 per share ("Common Stock") resulting
in net proceeds to the Company of approximately $4,145,000.
In April 1986, the Company issued 853,200 shares of Common Stock
in exchange for the assets and liabilities of six limited
partnerships each of which owned and operated a restaurant
pursuant to a franchise agreement with Ryan's and 1,134,000 shares
of Common Stock to Eddie L. Ervin, Jr., in consideration for Mr.
Ervin assigning to the Company all of his rights under such
franchise agreement.
Currently, the Company operates seventeen restaurants in the state
of Florida. The restaurants are family-oriented buffet restaurants
serving high-quality, reasonably priced food in a casual
atmosphere with server-assisted service. The restaurants feature
self-service scatter bars with a variety of over 100 fruit,
vegetable and meat entree items, bakery and dessert bar, drink
refills and table service. Several restaurants feature a display
cooking area, where guests can have grilled-to-order steaks,
chicken, pork chops and other items, all of which is included in
the price of the all-you-can-eat buffet.
Since the beginning of its operations, the Company has been the
sole franchisee for Ryan's Family Steak House restaurants in the
state of Florida. In December 2003, the Company entered into an
agreement with Ryan's Family Steakhouses, Inc. ("Ryan's" or
"Franchisor") to convert all of the restaurants operated by the
Company into a different name and concept by June 2005. Prior to
June 2005 the Company plans to convert all of its restaurants into
one of two new names and concepts, either "Whistle Junction" or
"Florida Buffet," based on a variety of relevant factors. The
operations of all converted restaurants will maintain the current
buffet format, but after the conversion will include enhancements
to each restaurant's building, service and menu. Whistle Junction
restaurants will also feature several high-quality "signature
dish" items, and offer beer and wine.
Franchise Agreement
Since beginning operations, the Company has operated its
restaurants under a franchise agreement with Ryan's dated
September 16, 1987, which amended and consolidated all previous
franchise agreements (as amended, the "Franchise Agreement"). In
December 2003, the Company entered into an amendment (the
"Amendment") to the Franchise Agreement providing for the
termination of the Franchise Agreement by June 2005 and requiring
the Company to convert a specific number of its restaurants to a
new name and concept each quarter beginning in the first quarter
of 2004 and ending in June 2005. The Company's obligation to pay
franchise fees to Ryan's pursuant to the Franchise Agreement ends
on completion of the conversion of a restaurant to the new name
and concept. (See Note 4 to the Financial Statements in the
Company's 2004 Annual Report to Shareholders.)
The Amendment requires the Company to pay a monthly franchise fee
of 4.0% of the gross receipts of each restaurant operating under
the name of Ryan's. Total franchise fee expenses were $1,112,000,
$1,494,400 and $1,681,600 for fiscal years 2004, 2003 and 2002,
respectively.
Pursuant to the Amendment, the Company plans to convert the Ryan's
restaurants to one of two new names and concepts, "Florida Buffet"
or "Whistle Junction." The Whistle Junction concept entails a
substantial redesigning of each restaurant's exterior to resemble
an old-time train station. The interior of such restaurants will
continue the old-time train station theme, including operating
model trains running throughout the dining room and other train
memorabilia. The operation of restaurants converted to the Whistle
Junction concept will continue to be a buffet format, but with an
upgraded menu and improved service levels. As of December 29,
2004, the Company had converted three Ryan's to Whistle Junction
and opened one new Whistle Junction.
Based on various factors including restaurant location, certain of
the restaurants operating under the Ryan's name will be converted
2
to an alternate concept and name which will be known as the
"Florida Buffet." Although the changes are not as significant as
those for the Whistle Junction concept, the Florida Buffet
conversions include interior and exterior changes to the building
design to incorporate a "Florida look" theme and menu and service
enhancements designed to attract and maintain increased customer
volumes. Through December 2004, eight restaurants operated under
the Ryan's name have been converted to the Florida Buffet concept,
two of which were subsequently closed.
The following schedule provides the number of restaurants operated
under the Ryan's name required to be converted at each quarter-end
pursuant to the Amendment. Failure to convert the cumulative
number of restaurants at any quarter-end date as required under
the Amendment results in a higher franchise fee being assessed on
the restaurants still using the Ryan's name. Failure to convert
all of the restaurants by June 30, 2005 is a default under the
Franchise Agreement which default will provide the Franchisor the
right to require the Company to immediately cease using the Ryan's
name.
No. of Restaurants
End of Fiscal Quarter to be Converted
- --------------------- -------------------
December 31, 2004 11
March 31, 2005 14
June 30, 2005 18
As of December 31, 2004, the Company has converted 11 restaurants
in compliance with the Amendment. However, the Company's ability
to convert the remaining restaurants in compliance with the above
schedule depends on factors that may be beyond management's
control, such as obtaining building permits, the operating results
of previously converted restaurants, and the resulting impact on
the Company's cash flow and other variable factors.
Operations of Restaurants
Format. As of March 3, 2005, all of the Company's restaurants are
located in free-standing buildings which vary in size from 7,500
to 12,000 square feet. Each restaurant is constructed of brick or
stucco walls, interior and exterior, with exposed woodwork. The
interior of each restaurant contains a dining room, a customer
ordering area, and a kitchen. The dining rooms seat between 270
and 500 persons and highlight centrally located, illuminated
scatter bars and a fresh bakery and dessert bar. Seven restaurants
include a display cooking area with a charcoal grill and a flat
grill for grilled-to-order steaks, pork chops and chicken items, a
rotisserie chicken broiler, a pizza oven and a wok for preparation
of Chinese food items. Each restaurant has parking for
approximately 100 to 175 cars on lots of overall size of
approximately 50,000 to 70,000 square feet.
The restaurants operate seven days a week. Typical hours of
operation are from 11:00 a.m. to 9:00 p.m., Sunday through
Thursday, and from 11:00 a.m. to 10:00 p.m., Friday and Saturday.
Restaurants serving breakfast open at 8:00 a.m. on Saturday and
Sunday. In each restaurant, the customer enters the restaurant,
orders from the menu, and then enters the dining room. Beverages
are brought to the customer at their table by our servers. Entrees
are cooked to order at most of our locations. Customers ordering
our buffet are given unlimited access to the restaurant's scatter
bars and the bakery and dessert bar. Customers receive table
service on their entrees and beverage refills except at stores
with display cooking, which offer buffet dining only. For the
fiscal year ended December 29, 2004, the average weekly customer
count per restaurant was approximately 5,300 and the average meal
price (including beverage) was approximately $7.75.
Restaurant Management and Supervision. The Company manages its
restaurants under a standardized operating and control system in
coordination with comprehensive recruiting and training of our
personnel to maintain food and service quality. The management
group at each restaurant consists of a general manager, a manager
and one to three assistant managers, depending on sales volume.
3
The Company requires that at least two members of the management
group be on duty during all peak serving periods. Management-level
personnel usually begin employment with the Company at the manager
trainee or assistant manager level, depending on the employee's
prior restaurant management experience. All new management-level
personnel must complete the Company's five-week training program
prior to being placed in a management position.
Each restaurant management group reports to a supervisor.
Presently, the supervisors each oversee the operations of three to
seven restaurants. The supervisors report directly to the Director
of Operations. Communication and support from all departments in
the Company are designed to assist the supervisors in responding
promptly to local problems and opportunities.
All restaurant managers and supervisors participate in Company
incentive programs based upon the profitability of their
restaurants and upon the achievement of certain pre-set goals. The
Company believes these incentive programs enable us to operate
more efficiently and to attract qualified managers. The Company
has an operating partner program for certain managers to provide
them with an additional career path and give them increased
incentive to maximize the profitability of their restaurants. The
Company currently has two operating partners participating in this
program.
Purchasing, Quality and Cost Control. The Company has a
centralized purchase control program which is designed to ensure
uniform product quality in all restaurants. The program also helps
to maintain reduced food, beverage, and supply costs. The Company
currently purchases approximately 80% of the products used by the
Company's restaurants from one food supplier. Pricing and quality
of USDA choice or select grain-fed beef, the Company's primary
commodity, are closely monitored by the Company for advantageous
purchasing and quality control. The Company purchases beef through
various producers and brokers both on a contract basis and on a
spot basis. Beef and other products are generally delivered
directly to the restaurants three times weekly. Produce is
purchased locally by store management, based on bids obtained from
local suppliers, and delivered to our restaurants four to five
times per week. In the past, the Company has been able to obtain
satisfactory sources of supply for all the items regularly used at
our restaurants and believes it will be able to continue to do so
in the future.
Pursuant to the Franchise Agreement, all suppliers of restaurants
operated under the Ryan's name must be approved by the Franchisor.
Through its relationship with the Franchisor, the Company has
obtained favorable pricing on the purchase of food products from
several suppliers. After the termination of the Franchise
Agreement, there can be no assurance that these favorable pricing
terms will be maintained on all products. In 2004, the Company
entered into an agreement with Performance Food Group ("PFG")
changing the primary supplier to our restaurants. The agreement
with PFG is cancelable at any time by either party with 90 days
notice.
The Company maintains centralized financial and accounting
controls for its restaurants. On a daily basis, restaurant
managers forward customer counts, sales information and supplier
invoices to Company headquarters. On a weekly basis, restaurant
managers forward summarized sales reports and payroll data.
Physical inventories of all food and supply items, other than
meat, are taken weekly, and meat is inventoried daily.
Development
General. As of March 10, 2005, the Company operated five
restaurants under the Ryan's name, five restaurants under the
Whistle Junction name and seven restaurants under the Florida
Buffet name. Pursuant to the Amendment, the Company plans to
convert their remaining restaurants operating under the Ryan's
name to either Whistle Junction or Florida Buffet locations by
June 30, 2005.
Site Location and Construction. The Company considers the
specific location of a restaurant to be important to its
long-term success. The Company's site selection process for its
restaurants focuses on a variety of factors including trade area
demographics (such as population density and household income
level), site characteristics (such as visibility, accessibility,
and traffic volume), proximity to large retailers and potential
competition. In addition, site selection is influenced by the
general proximity of a site to other Company restaurants to
improve the efficiency of the Company's field supervisors and
potential marketing programs. The Company generally locates its
restaurants near or adjacent to residential areas in an effort to
capitalize on repeat business from such areas as opposed to
relying solely upon transient business.
4
The Company used a general contractor selected from several
solicited bids, for most of the Company's restaurants
built in recent years. In the past, the Company has sometimes used
its construction subsidiary as the general contractor to expedite
the process of obtaining building permits and reduce construction
cost. New restaurants are usually completed within five months of
the date on which construction is commenced.
Management of New Restaurants. When a new restaurant is opened,
the principal restaurant management positions are staffed
primarily with management personnel who have prior experience in a
management position at another of the Company's restaurants and
who have undergone specialized training. Prior to opening, all
staff personnel at the new location complete one week of intensive
training conducted by a training team. Such training includes pre-
opening drills in which test meals are served to the invited
public. Both the staff at the new location and personnel
experienced in store openings at other locations participate in
the training and drills.
Proprietary Trade Marks
The name "Ryan's Family Steak House" along with all ancillary
signs, building design and other symbols used in conjunction with
the name, are the primary trademarks and service marks of the
Franchisor. Such marks are registered in the United States. The
Company has applied for a trademark for its new Whistle Junction
concept.
Competition
The food service business in Florida is highly competitive and is
often affected by changes in the taste and eating habits of the
public, economic conditions affecting spending habits, local
demographics, traffic patterns and local and national economic
conditions. The principal bases of competition in the industry are
the quality and price of the food products offered. Location,
speed of service and attractiveness of the facilities are also
important factors. The Company's restaurants are in competition
with restaurants operated or franchised by national, regional and
local restaurant companies offering a similar menu, many of which
have greater resources than the Company. The Company is also in
competition with specialty food outlets and other vendors of food.
With the termination of the Franchise Agreement, the Company could
experience competition from its former Franchisor.
The amount of new competition near Company restaurants has
increased significantly in the past few years. In some cases,
competitors have opened new restaurants with superior facilities
close to the Company's restaurants. In addition, in the past
several years, many restaurants have remodeled to incorporate a
scatter bar format similar to that used by the Company. Management
has developed strategies to attempt to reduce the negative impact
on sales from new competition, but there can be no assurance that
sales trends will improve.
Employees
As of December 29, 2004, the Company employed approximately 960
persons, of whom approximately 40% are considered by management as
part-time employees. No labor unions currently represent any of
the Company's employees. The Company has not experienced any work
stoppages attributable to labor disputes and considers employee
relations to be good.
Government Regulation
The Company is subject to the Fair Labor Standards Act which
governs such matters as minimum wage requirements, overtime and
other working conditions. A large number of the Company's
restaurant personnel are paid at or slightly above the federal
statutory minimum wage level and, accordingly, any change in such
minimum wage will affect the Company's labor costs. Costs of food,
beverage, and labor are the expenses most affected by inflation in
the Company's business. Although inflation in recent years has
been low and accordingly has not had a significant impact on the
Company, there can be no assurance that inflation will not
increase and impact the Company in the future.
5
In November 2004, Florida voters approved an increase in the
State's minimum wage from $5.15 to $6.15 per hour effective April
2005. This will significantly impact the Company's payroll and
benefits costs. The Company is typically able to increase its menu
prices to cover most of the payroll rate increases; however, there
can be no assurance that menu price increases will be able to
offset labor cost increases resulting from this minimum wage
increase. Annual sales price increases have consistently ranged
from 1.0% to 3.0%.
The Company is also subject to the Equal Employment Opportunity
Act and a variety of federal and state statutes and regulations.
Any new legislation or regulation that may require the Company to
pay more in health insurance premiums may adversely affect the
Company's labor costs.
The Company's restaurants are constructed to meet local and state
building requirements and are operated in accordance with state
and local regulations relating to the preparation and service of
food. More stringent and varied requirements of local governments
with respect to land use, zoning and environmental factors may in
some cases delay the Company's construction of new restaurants or
remodels of existing ones.
The Company believes that it is in substantial compliance with all
applicable federal, state and local statutes, regulations and
ordinances including those related to protection of the
environment and that compliance has had no material effect on the
Company's capital expenditures, earnings or competitive position,
and such compliance is not expected to have a material adverse
effect upon the Company's operations. The Company, however, cannot
predict the impact of possible future legislation or regulation on
its operations.
Sources and Availability of Raw Materials
The Company procures its food and other products from a variety of
suppliers, and follows a policy of obtaining its food and products
from several major suppliers under competitive terms. To ensure
against interruption in the flow of food supplies due to
unforeseen or catastrophic events, to take advantage of favorable
purchasing opportunities, and to ensure that meat received by the
Company is properly aged, the Company maintains a two to six-week
supply of beef.
Working Capital Requirements
Substantially all of the Company's revenues are derived from cash
sales. Inventories are purchased on credit and are converted
rapidly to cash. The Company does not maintain significant
receivables or inventories. Therefore, with the exception of debt
service, working capital requirements for continuing operations
are not significant.
Long-Term Debt
Beginning in December 1996, the Company entered into a series of
loan agreements with FFCA Mortgage Corporation, (now know as GE
Capital Franchise Finance Corporation) ("GE Capital"). As of
December 29, 2004, the outstanding balance due under the Company's
various loans with GE Capital was $15,691,200. The weighted
average interest rate for the GE Capital loans is 7.47% at
December 29, 2004. The Company used the proceeds of the GE Capital
loans primarily to refinance its debt and to fund construction of
new restaurants.
Seasonality
The Company's operations are subject to seasonal fluctuations.
Revenues per restaurant generally increase from January through
April and decline from September through December.
Research
The Company has relied primarily on the Franchisor to maintain
ongoing research programs relating to the development of new
products. As a result of the upcoming termination of the Franchise
Agreement, after June 2005, the Company will have to conduct its
own research and development efforts. Management believes such
efforts can be accomplished by working with various product
6
manufacturers, who actively research and test products and make
regular presentations to the Company. In 2003, the Company entered
into an agreement with the Brown Group, an organization
experienced with design and development of restaurant concepts,
for a total fee of $100,000 for the purpose of developing its new
Whistle Junction concept.
Availability of Reports and Other Information
The Company files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange
Commission (the "SEC"). You may read and copy any document the
Company files at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the
SEC at 1-800-SEC-0330 for further information on the public
reference rooms. The Company's SEC filings are also available to
the public at the SEC's website at http://www.sec.gov.
Item 2. Properties
Restaurant Restaurant Concept
Locations Date Opened as of March 10, 2005
(2)Ocala September 1986 Florida Buffet
(2)Lakeland February 1987 Ryan's
(2)Lakeland March 1987 Florida Buffet
(2)Winter Haven August 1987 Ryan's
(2)Gainesville December 1987 Florida Buffet
(2)Tampa June 1988 Florida Buffet
(2)Daytona Beach September 1988 Florida Buffet
(1)Tampa November 1988 Whistle Junction
(2)Orlando February 1989 Ryan's
(2)Melbourne October 1989 Florida Buffet
(2)Lake City March 1991 Florida Buffet
(1)Brooksville January 1997 Whistle Junction
(3)Deland April 1999 Whistle Junction
(2)St. Cloud December 2000 Ryan's
(2)Titusville May 2001 Ryan's
(2)Jacksonville December 2001 Whistle Junction
(1)Orlando May 2004 Whistle Junction
_________________________
(1) Leased property
(2) Property subject to mortgage securing GE Capital Notes
(3) Refinanced GE Capital Mortgage by new sale leaseback financing
on December 30, 2004.
The Company also leases two buildings in Jacksonville, Florida for
its executive offices.
Item 3: Legal Proceedings
The Company, in the normal course of business, is subject to
occasional legal proceedings. However, there are no material
pending legal proceedings to which the Company, or any of its
subsidiaries, is a party or to which any of their properties are
subject; nor are there material proceedings known to be
contemplated by any governmental authority; nor are there material
proceedings known to the Company, pending or contemplated, in
which any director, officer, affiliate or any principal security
holder of the Company or any associate of the foregoing is a party
or has an interest adverse to the Company.
Item 4: Submission of Matters To A Vote Of Security Holders
None.
7
PART II
Item 5: Market For The Registrant's Common Equity And Related
Stockholder Matters
The information contained under the caption "Common Stock Data" in
the Company's 2004 Annual Report to Shareholders is incorporated
herein by reference. The information required by Item 201(d) of
Regulation S-K is contained under the caption "Equity Compensation
Plans" in the Company's Definitive Proxy Statement for its 2005
Annual Meeting of Shareholders (the "Proxy Statement") which will
be filed with the Securities and Exchange Commission no later than
120 days after the end of the fiscal year covered by this report
and is incorporated herein by reference.
Item 6: Selected Financial Data
The information contained under the caption "Five Year Financial
Summary" in the Company's 2004 Annual Report to Shareholders is
incorporated herein by reference.
Item 7: Management's Discussion And Analysis Of Financial
Condition And Results Of Operations
The information contained under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 2004 Annual Report to Shareholders is
incorporated herein by reference.
Item 7A: Quantitative And Qualitative Disclosures About Market
Risk
The information contained under the caption "Quantitative and
Qualitative Disclosure About Market Risk" in the Company's 2004
Annual Report to Shareholders is incorporated herein by reference.
Item 8: Financial Statements And Supplementary Data
Financial Statements
The Consolidated Financial Statements of the Company and
Independent Auditors' Report as contained in the Company's 2004
Annual Report to Shareholders are incorporated herein by
reference.
Supplementary Data
The information contained under the caption "Quarterly
Consolidated Financial Data" in the Company's 2004 Annual Report
to Shareholders is incorporated herein by reference.
Item 9: Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure
None.
Item 9A: Controls and Procedures
(a) Evaluation of disclosure controls and procedures. As
required by Rule 13a-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act"), as of the end of the period covered by
this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures. This evaluation was carried
out under the supervision and with the participation of the
Company's management, including the President and the Director of
Finance. Based upon that evaluation, the Company's President and
Director of Finance have concluded that the Company's disclosure
controls and procedures are effective in alerting them to material
information regarding the Company's financial statements and
disclosure obligation in order to allow the Company to meet its
reporting requirements under the Exchange Act in a timely manner.
8
(b) Changes in internal control. There have been no changes in
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART III
Item 10: Directors And Executive Officers
The information required by this Item is incorporated by reference
to the section entitled "Election of Directors" in the Company's
Proxy Statement.
Item 11: Executive Compensation
The information required by this Item is incorporated by reference
to the section entitled "Executive Pay" in the Proxy Statement
which will be filed with the Securities and Exchange Commission no
later than 120 days after the end of the fiscal year covered by
this report.
Item 12: Security Ownership of Certain Beneficial Owners And
Management
The information required by this Item is incorporated by reference
to the section entitled "Security Ownership of Certain Beneficial
Owners and Management" in the Proxy Statement which will be filed
with the Securities and Exchange Commission no later than 120 days
after the end of the fiscal year covered by this report.
Item 13: Certain Relationships And Related Transactions
The information required by this Item is incorporated by reference
to the section entitled "Election of Directors - Certain
Relationships and Related Transactions" and "Compensation
Committee Interlocks and Insider Participation" in the Proxy
Statement which will be filed with the Securities and Exchange
Commission no later than 120 days after the end of the fiscal year
covered by this report.
Item 14: Principal Accounting Fees And Services
The information required by this Item is incorporated by reference
to the section entitled "Principal Accounting Fees and Services"
in the Proxy Statement which will be filed with the Securities and
Exchange Commission no later than 120 days after the end of the
fiscal year covered by this report.
PART IV
Item 15: Exhibits and Financial Statements
(a) The financial statements listed below are incorporated by
reference from the Company's 2004 Annual Report to Shareholders.
Consolidated Statements of Operations for the years ended December
29, 2004 and December 31, 2003.
Consolidated Balance Sheets as of December 29, 2004 and December 31, 2003.
Consolidated Statements of Shareholders' Equity for the years
ended December 29, 2004 and December 31, 2003.
Consolidated Statements of Cash Flows for the years ended December
29, 2004 and December 31, 2003.
Notes to the Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm.
Consent of Independent Registered Public Accounting Firm.
9
(b) The following exhibits are filed as part of this report on
Form 10-K as required by Item 601 Regulation S-K.
No. Exhibit
3.01 Articles of Incorporation of Family Steak Houses of Florida,
Inc. (Exhibit 3.01 to the Company's Registration Statement
on Form S-1, Registration No. 33-1887, is incorporated
herein by reference.)
3.02 Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.02
to the Company's Registration Statement on Form S-1,
Registration No. 33-1887, is incorporated herein by
reference.)
3.03 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.03 to the
Company's Registration Statement on Form S-1, Registration
No. 33-1887, is incorporated herein by reference.)
3.04 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.04 to the
Company's Registration Statement on Form S-1, Registration
No. 33-1887, is incorporated herein by reference.)
3.05 Amended and Restated Bylaws of Family Steak Houses of
Florida, Inc. (Exhibit 4 to the Company's Form 8-A, filed
with the Commission on March 19, 1997, is incorporated
herein by reference.)
3.06 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3 to the
Company's Form 8-A filed with the Commission on March 19,
1997, is incorporated herein by reference.)
3.07 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.08 to the
Company's Annual Report on Form 10-K filed with the
Commission on March 31, 1998, is incorporated herein by
reference.)
3.08 Amendment to Bylaws of Family Steak Houses of Florida, Inc.
(Exhibit 3.08 to the Company's Annual Report on Form 10-K
filed with the Commission on March 15, 2000, is incorporated
herein by reference.)
3.09 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc. (Exhibit 3.09 to the
Company's Annual Report on Form 10-K filed with the
Commission on March 29, 2004 is incorporated herein by
reference.)
3.10 Articles of Amendment to the Articles of Incorporation of
Family Steak Houses of Florida, Inc., changing the name of
the corporation to EACO Corporation. (Exhibit 3.10 to the
Company's Quarterly Report on Form 10-Q filed with the
Commission on September 3, 2004, is incorporated herein by
reference.)
3.11 Amendment of Articles of Incorporation of EACO Corporation
for the purpose of issuance of Preferred Stock to Glen
Ceiley, its Chairman and CEO. (Form 8-K filed with the
Commission September 8, 2004 is incorporated herein by
reference.)
10.01 Amended Franchise Agreement between Family Steak Houses of
Florida, Inc. and Ryan's Family Steak Houses, Inc., dated
September 16, 1987. (Exhibit 10.01 to the Company's
Registration Statement on Form S-1, filed with the
Commission on October 2, 1987, Registration No. 33-17620,
is incorporated herein by reference.)
10.02 Lease regarding the restaurant located at 3549 Blanding
Boulevard, Jacksonville, Florida (Exhibit 10.03 to the
Company's Registration Statement on Form S-1,
Registration No. 33-1887, is incorporated herein by
reference.)
10
10.03 Amendment of Franchise Agreement between Ryan's Family Steak
Houses, Inc. and the Company dated July 11, 1994. (Exhibit
10.17 to the Company's Annual Report on Form 10-K, filed
with the Commission on March 28, 1995, is incorporated
herein by reference.)
10.04 Lease Agreement between the Company and CNL American
Properties Fund, Inc., dated as of September 18, 1996.
(Exhibit 10.02 to the Company's Quarterly Report on Form 10-
Q, filed with the Commission on November 18, 1996 is hereby
incorporated by reference.)
10.05 Rent Addendum to Lease Agreement between the Company and CNL
American Properties Fund, Inc., dated as of September 18,
1996. (Exhibit 10.04 to the Company's Quarterly Report on
Form 10-Q, filed with the Commission on November 18, 1996 is
hereby incorporated by reference.)
10.06 Amendment of Franchise Agreement between the Company and
Ryan's Family Steak Houses, Inc. dated October 3, 1996.
(Exhibit 10.15 to the Company's Annual Report on Form 10-K,
filed with the Commission on April 1, 1997 is hereby
incorporated by reference.)
10.07 $15.36m Loan Agreement, between the Company and FFCA
Mortgage Corporation, dated December 18, 1996. (Exhibit
10.18 to the Company's Annual Report on Form 10-K, filed
with the Commission on April 1, 1997 is hereby incorporated
by reference.)
10.08 $4.64m Loan Agreement, between the Company and FFCA Mortgage
Corporation, dated December 18, 1996. (Exhibit 10.19 to the
Company's Annual Report on Form 10-K, filed with the
Commission on April 1, 1997 is hereby incorporated by
reference.)
10.09 Form of Promissory Note between the Company and FFCA
Mortgage Corporation, dated December 18, 1996. (Exhibit
10.20 to the Company's Annual Report on Form 10-K, filed
with the Commission on April 1, 1997 is hereby incorporated
by reference.)
10.10 Form of Mortgage between the Company and FFCA Mortgage
Corporation, dated December 18, 1996 (Exhibit 5 to the
Company's Schedule 14D-9, filed with the Commission on March
19, 1997 is hereby incorporated by reference.)
10.11 Form of Mortgage between the Company and FFCA Mortgage
Corporation, dated March 18, 1996. (Exhibit 10.22 to the
Company's Annual Report on Form 10-K, filed with the
Commission on April 1, 1997 is hereby incorporated by
reference.)
10.12 Lease agreement dated January 29, 1998 between the Company
and Excel Realty Trust, Inc. (Exhibit 10.19 to the Company's
Annual Report on Form 10-K, filed with the Commission on
March 31, 1998 is hereby incorporated by reference.)
10.13 Amendment of Franchise Agreement between the Company and
Ryan's Family Steak Houses, Inc. dated August 31, 1999.
(Exhibit 10.19 to the Company's Annual Report on Form 10-K
filed with the Commission on March 15, 2000 is incorporated
herein by reference.)
10.14 Stock option agreement between the Company and director Jay
Conzen, dated November 3, 1999. (Exhibit 10.20 to the
Company's Annual Report on Form 10-K filed with the
Commission on March 15, 2000 is incorporated herein by
reference.)
10.15 Amendment to Franchise Agreement between the Company and
Ryan's Properties, Inc. dated January 30, 2002. (Exhibit
10.19 to the Company's Annual Report on Form 10-K filed with
the Commission on March 29, 2002 is incorporated herein by
reference.)
11
10.16 Contract for sale and leaseback of restaurant property
between the Company and After Ours, LLC, dated June 10,
2002. (Exhibit 10.01 to the Company's Quarterly Report on
Form 10-Q filed with the Commission on August 16, 2002 is
incorporated herein by reference.)
10.17 Lease agreement for restaurant property between the Company
and After Ours, LLC, dated July 12, 2002. (Exhibit 10.02 to
the Company's Quarterly Report on Form 10-Q filed with the
Commission on August 16, 2002 is incorporated herein by
reference.)
10.18 Lease Agreement between the Company and E.D.I. Investments,
Inc. for a restaurant property, dated August 5, 2002.
(Exhibit 10.03 to the Company's Quarterly Report on Form 10-
Q filed with the Commission on August 16, 2002 is
incorporated herein by reference.)
10.19 Form of Amended and Restated Mortgage Agreement between the
Company and GE Capital Franchise Finance Corporation dated
October 21, 2002. (Exhibit 10.01 to the Company's Quarterly
Report on Form 10-Q filed with the Commission on November
15, 2002 is incorporated herein by reference.)
10.20 Form of Promissory Note between the Company and GE Capital
Franchise Finance Corporation dated October 21, 2002.
(Exhibit 10.02 to the Company's Quarterly Report on Form 10-
Q filed with the Commission on November 15, 2002 is
incorporated herein by reference.)
10.21 Form of Loan Agreement between the Company and GE Capital
Franchise Finance Corporation dated October 21, 2002.
(Exhibit 10.03 to the Company's Quarterly Report on Form 10-
Q filed with the Commission on November 15, 2002 is
incorporated herein by reference.)
10.22 Lease Agreement between the Company and Barnhill's Buffet,
Inc. for a restaurant property in Orange Park, Florida.
(Exhibit 10.04 to the Company's Quarterly Report on Form 10-
Q filed with the Commission on November 15, 2002 is
incorporated herein by reference.)
10.23 Amendment to Franchise Agreement between the Company and
Ryan's Properties, Inc. dated December 17, 2003. (Exhibit
10.25 to the Company's Annual Report on Form 10-K filed with
the Commission on March 29, 2004 is incorporated herein by
reference.)
10.24 Distribution agreement between the Company and Performance
Food Group, Inc. dated July 30, 2003. (Exhibit 10.26 to the
Company's Annual Report on Form 10-K filed with the
Commission on March 29, 2004 is incorporated herein by
reference.)
10.25 Lease Agreement for a restaurant property between the
Company and Gottula Properties, LLC dated December 30, 2004.
10.26 Asset Purchase Agreement between the Company and Banner
Buffets, LLC ("Buyer") for the sale of 16 of the Company's
restaurants, subject to Buyer's due diligence and
shareholder approval, dated February 22, 2005. (Form 8-K
filed with the Commission on February 22, 2005 is
incorporated herein by reference.)
13.01 2004 Annual Report to Shareholders.
14 Code of Ethics.
21 Subsidiaries of the Company.
23 Consent of Deloitte & Touche LLP.
31.01 Certification of Chief Executive Officer pursuant to
Securities and Exchange Act Rules 13a-14(a) and 15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
12
31.02 Certification of Chief Financial Officer pursuant to
Securities and Exchange Act Rules 13a-14(a) and 15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32 Certification pursuant to section 18 U.S.C. ss ss 1350.
(b) Reports on Form 8-K
On November 5, 2004, the Company filed a report on Form 8-K
regarding the press release on the Company's financial
results as of and for the quarter ended September 29, 2004.
13
12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EACO Corporation
Date: March 31, 2005 /s/ Edward B. Alexander
By: Edward B. Alexander
Its: President/
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the Registrant in the capacities and on the date
indicated.
Signature Title Date
/s/ Edward B. Alexander President 3/31/05
Edward B. Alexander Chief Operating Officer
/s/ Stephen C. Travis Director of Finance 3/31/05
Stephen C. Travis (Principal Financial and
Accounting Officer)
/s/ Glen F. Ceiley Chairman of the Board 3/31/05
Glen F. Ceiley
/s/ Steve Catanzaro Director 3/31/05
Steve Catanzaro
/s/ Jay Conzen Director 3/31/05
Jay Conzen
/s/ William Means Director 3/31/05
William Means
14
Exhibit 14
EACO CORPORATION
FINANCIAL CODE OF ETHICAL CONDUCT
EACO Corporation (the "Company") is committed to adhering to
the highest ethical standards with respect to its financial
management and the disclosure of financial information in
connection with the business and operations of the Company. The
Company's Chief Executive Officer (the "Chief Executive Officer")
and the Chief Financial Officer and other financial managers of
the Company (the "Financial Managers") play a critical role in
assuring that the Company adheres to these high ethical standards.
This Financial Code of Ethical Conduct sets forth principles to
which the Chief Executive Officer and the Financial Managers are
expected to adhere and advocate. The Company intends to enforce
vigorously the provisions of this Code. Violations may lead to
disciplinary action, including dismissal, and may have other legal
consequences.
Accordingly, the Chief Executive Officer and all Financial
Managers, to the best of their knowledge and ability, are required
to:
1. Act with honesty and integrity and at all times avoid all
actual or apparent conflicts of interests between his or her
personal and business relationships.
2. Comply with the conflict of interest and other policies and
guidelines set forth in any other code of business conduct or
ethics code adopted by the Company.
3. Report all potential or apparent conflicts of interest to the
Corporate Secretary.
4. Provide full, fair, accurate, timely and understandable
disclosure to the President and Chief Financial Officer and the
Audit Committee of the Company's Board of Directors of all
material information known to them regarding the current or future
financial condition or financial performance or the business of
the Company.
5. Promote and help to assure full, fair, accurate, timely and
understandable disclosure in all reports and documents that the
Company files with the Securities and Exchange Commission and in
other public communications by the Company.
6. Comply with all laws, statutes, rules, regulations and stock
exchange listing standards, to the extent applicable to the
conduct of their duties and responsibilities.
15
7. In performing their duties and responsibilities, act in good
faith, with due care, competence and diligence, responsibly,
without misrepresenting any material fact, and without allowing
his or her independent judgment to be compromised or subordinated.
8. Respect the confidentiality of information acquired in the
course of their work except when authorized or otherwise legally
obligated to make disclosure and not use such confidential
information for personal advantage.
9. Promptly report all violations of this Code to the Corporate
Secretary.
All persons subject to this Financial Code of Ethical Conduct may
be required to execute a certification affirming that they have
read and agree to comply with the provisions of this Code.
16
EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Annual Report
of EACO Corporation on Form 10-K and in Registration Statement
Nos. 33-11684, 33-12556, 33-12556 and 333-98327 of EACO
Corporation on Forms S-8 of our report dated March 31, 2005 (which
report expresses an unqualified opinion), appearing in the 2004
Annual Report to Shareholders of EACO Corporation for the year
ended December 29, 2004.
Deloitte & Touche LLP
Jacksonville, Florida
March 31, 2005
17
EXHIBIT 31.01
I, Edward B. Alexander, certify that:
1. I have reviewed this annual report on Form 10-K of EACO
Corporation.
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officer and I am
responsible for establishing and maintaining disclosure controls
and procedures (as defined in exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the "Evaluation
Date"); and
18
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) All significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 31, 2005 /s/ Edward B. Alexander
By: Edward B. Alexander
Its: President and Chief Operating Officer
19
EXHIBIT 31.02
I, Stephen C. Travis, certify that:
1. I have reviewed this annual report on Form 10-K of EACO
Corporation.
2. Based on my knowledge, this annual report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officer and I am
responsible for establishing and maintaining disclosure controls
and procedures (as defined in exchange Act Rules 13a-14 and 15d-
14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this annual report (the "Evaluation
Date"); and
20
c) presented in this annual report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) All significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officer and I have
indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: March 31, 2005 /s/ Stephen C. Travis
By: Stephen C. Travis
Its: Director of Finance
21
EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the EACO Corporation's (the "Company") Annual
Report on Form 10-K for the period ending December 29, 2004, as
filed with the Securities and Exchange Commission on the date
hereof (the "Report"), we, Edward B. Alexander, Chief Operating
Officer/President of the Company, and Stephen C. Travis, Director
of Finance of the Company, certify pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
(1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Date: March 31, 2005 /s/ Edward B. Alexander
By: Edward B. Alexander
Its: President and
Chief Operating Officer
Date: March 31, 2005 /s/ Stephen C. Travis
By: Stephen C. Travis
Its: Director of Finance
22