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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended October 31, 2004
Commission File Number: 0-11514
Max & Erma's Restaurants, Inc.
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(Exact name of registrant as specified in its charter)
Delaware No. 31-1041397
-------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4849 Evanswood Drive, Columbus, Ohio 43229
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 431-5800
----------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $.10 Par Value
-----------------------------
(title of class)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to the filing requirements for
at least the past 90 days. YES [X] NO [ ]
Indicate by checkmark 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 checkmark whether the registrant is an accelerated filed (as defined
in Exchange Act Rule 12b-2). YES [ ] NO [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates, computed by reference to the price at which the common equity
was last sold, or the closing bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second
quarter. The aggregate market value of Max & Erma's Common Stock held by
non-affiliates was approximately $32,288,000 on May 9, 2004.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
2,508,829 Common Shares
were outstanding at December 31, 2004
DOCUMENTS INCORPORATED BY REFERENCE
1. Annual Report to Shareholders for the Fiscal Year Ended October 31, 2004
(in pertinent parts, as indicated).....Parts II and IV.
2. Proxy Statement for 2005 Annual Meeting of Shareholders (in pertinent
parts, as indicated).....Part III.
PART I
Item 1. BUSINESS
Max & Erma's Restaurants, Inc. owns and operates (78) and franchises (20)
a chain of 98 Max & Erma's restaurants at December 31, 2004. We are a Delaware
corporation organized in 1982, as the successor to a restaurant business founded
in 1971. We have registered the phrase "Max & Erma's - The Hometown Favorite"
and its associated logo as a service mark with the United States Patent and
Trademark Office.
Our executive offices are located at 4849 Evanswood Drive, Columbus, Ohio
43229, and our telephone number is (614) 431-5800.
Description of Business
Our restaurants are famous for gourmet burgers, overstuffed sandwiches,
homemade pasta dishes, chargrilled steak and chicken specialties, super salads
and taste-tempting munchies. Unique to the Max & Erma's concept is the
Build-Your-Own-Sundae Bar, a bathtub filled with vanilla ice cream, special
sauces and lots of toppings along with fresh baked chocolate chip cookies. In
addition, the restaurants offer a full complement of alcoholic and non-alcoholic
beverages. We believe that the decor and theme of our restaurants allows the
introduction of a broad range of menu items, thus permitting rapid adjustment to
changing customer preferences.
Antique artifacts and local paraphernalia make Max & Erma's a fun, unique
place to take friends and family. The use of brick, a combination of light and
dark colors, and dropped lighting creates a roomy, yet cozy feel for customers
to enjoy while dining. The neighborhood atmosphere of each restaurant is
enhanced by inclusion of local items in each restaurant's decor, including
sports team paraphernalia and historical artifacts. Additional decor items
include a giant bubble gum machine, a three-dimensional burger, an antique love
tester and many other things. Giant murals, both inside and outside the
restaurant, combine the history and tradition of each market with the Max &
Erma's story.
Our restaurants are open for both lunch and dinner seven days a week.
Hours of operation are generally 11:00 a.m. to midnight. During fiscal 2004, the
average check was approximately $11.14 at lunch and $11.96 at dinner. The lunch
and dinner meal periods accounted for approximately 39% and 61% of net sales,
respectively. Alcoholic beverages constituted approximately 9.6 % of net sales
in fiscal 2004. Generally, our business does not experience seasonal
fluctuations of sales.
Our strategy is to compete in the casual dining segment of the restaurant
industry by offering a variety of high quality food in a casual, comfortable and
fun atmosphere and with a uniquely personable service style. Our philosophy is
to focus on the details of the customer experience that instill customer loyalty
and promote repeat business. The purpose of every associate is to "help our
guests enjoy their total dining experiences so they can't wait to come back." We
believe the dining experience starts with the food and therefore we use only the
freshest and highest quality ingredients in every menu item.
1
Freshness and quality are truly the foundations upon which Max & Erma's
was built. We strive to do things the right way, not the easy way. We believe
this dedication makes us better and that our guests return more often. Market
research indicates that customers often know what they are going to order before
they get to our restaurants because they crave certain signature items.
Being a "purpose-driven" company requires an ability to understand what
guests want, and a dedication to focus all associates' energies on exceeding
those expectations. We believe that the best expressions of guests' desires can
be translated to a phrase that captures Max & Erma's character. Specifically,
the concept of the "Hometown Favorite" evokes images of trust, friendliness and
wholesomeness. This means that associates treat guests with respect, like
friends or neighbors, and provide them with the kind of food, service and
atmosphere that will make them want to return often.
We believe that our reputation is built every day with every customer
served and that a key to customer loyalty is the server. Food is delivered to
the table by the server instead of a food runner, and servers are required to
recheck the table two minutes after delivering the meal. Moreover, the wait
staff is empowered to address customer problems without the assistance of
restaurant management.
Max & Erma's restaurants have always been known for gourmet hamburgers and
specialty sandwiches; however, one part of our focus on the customer is an
evolving menu that changes to meet consumer tastes. We believe our menu should
be fun as well as innovative. We review and revise the menu twice each year, and
in addition offer seasonal menu inserts at various times of the year. By
periodically modifying our menu through the introduction of a broad range of
appealing new menu items we have achieved a more diversified sales mix.
We make use of consumer focus groups to conduct marketing research. We
incorporate the findings of this market research in our advertising, menu
development, employee training, and building design and decor. According to
customers, the major point of difference between us and our competitors is that
Max & Erma's restaurants are perceived as being more of a "fun place," an image
we try to foster in our advertising. We spent approximately 2.25% of sales on
advertising in 2004. We primarily use special events and localized store
marketing designed to increase customer awareness and repeat business, and to a
lesser extent billboards, direct mail, radio and television.
We own the business, exclusive of the real estate, for 77 of the Max &
Erma's restaurants in operation at December 31, 2004. The business and real
estate for one restaurant is owned by a separate affiliated partnership. In
addition to a 60% interest in the profits and losses of the affiliated
partnership, we are paid an annual fee equal to 6% of gross revenues for
managing the Max & Erma's restaurant owned by the partnership. The management
contract provides for monthly payments to us for an initial term of two years
and renewal terms aggregating 20 additional years upon the mutual agreement of
the parties. As general partner we are potentially liable for 100% of the
partnership losses.
We franchise twenty restaurants to unaffiliated franchisees at December
31, 2004. The first two franchised restaurants opened in 1998 in the Columbus
and Cleveland, Ohio airports. Beginning in fiscal 2000, and each year
thereafter, three to four franchised restaurants have opened annually. In fiscal
2004 franchised locations opened in Philadelphia, Pennsylvania; Seymore,
Indiana; Chillicothe, Ohio and the Cincinnati, Ohio airport. Terms of the
agreements call for an initial franchise fee plus a monthly royalty generally
equal to 4% of sales.
2
At December 31, 2004 two franchised restaurants were approved and in the
final stages of permitting. In addition to these two restaurants, we anticipate
the opening of two to three additional franchised restaurants during fiscal
2005. At December 31, 2004, we had eight multi-unit franchised agreements
signed, requiring the total development of an additional 34 restaurants over the
next eight years.
Competition
The restaurant business, particularly in the casual dining segment, is
highly competitive in terms of quality and value of products served, type and
variety of menu offered, quality and efficiency of service, ambiance and
attractiveness of facilities and site location. Max & Erma's restaurants compete
with food service operations of various types within their respective locations,
including national and regional chains as well as locally-owned and operated
restaurants. Many of our competitors are substantially larger than us and have
greater financial resources.
Employees
At October 31, 2004, we had 5,297 employees, of which 1,874 were full-time
restaurant employees, 3,023 were part-time restaurant employees, 96 were
corporate staff personnel and 304 were restaurant managerial personnel. None of
our employees are represented by a labor union or a collective bargaining unit.
We consider relations with our employees to be good.
Restaurant Operations
We strive to maintain quality and uniformity in our restaurants through
careful training and supervision of personnel. All restaurants are operated in
accordance with uniform Company specifications, which are set forth in detailed
operating manuals relating to food and beverage preparation, maintenance of
premises and employee conduct. We utilize an independent shopping service to
monitor implementation of our operating standards. Along with the shopping
service, we have developed testing standards for the major aspects of restaurant
operation, including physical appearance, cleanliness, wait staff and food
quality. The shopping service has "mystery shoppers" visit each restaurant four
times each quarter to evaluate and grade the restaurant. A report is prepared by
the shopping service for each visit and is reviewed by our Vice President,
Operations and the respective regional and general managers. A portion of the
bonus for each regional and general manager is based on the scores received on
the shopping service reports.
Restaurant operations are administered by a management staff headed by the
Vice President, Operations. Two Regional Vice Presidents of Operations report
directly to the Vice President, Operations. Seventeen regional managers, each of
whom supervises the operations of four to five restaurants, report to either the
Vice President, Operations or to one of the Regional Vice President of
Operations. Each restaurant has a general manager, who is responsible for
training and supervising approximately 40 to 100 employees, and two or three
assistant managers. Regional managers are responsible for hiring their general
and assistant managers. General managers, with the assistance of the regional
manager, are responsible for hiring restaurant employees. We seek to hire
experienced restaurant personnel who must complete a 14-week training program
conducted by us before becoming an assistant manager. We have historically
promoted from within to fill our regional and general manager positions.
3
Both regional and general managers receive a base salary plus a bonus
based upon performance against budget and average independent shopping service
scores. General managers prepare quarterly budgets for their stores and regional
managers prepare quarterly budgets for their regions. Bonuses are based on
specific goals derived from these quarterly budgets. Both regional and general
managers are eligible for a cash bonus equal to one-half of the purchase price
of the first 250 shares of our common stock they purchase each quarter. We
believe that our bonus system and the ability to purchase common stock promotes
loyalty and highly motivates managers to meet our goals.
We believe that the combination of the authority delegated to our regional
and general managers, particularly with respect to hiring employees, together
with our goal-specific bonus plans, results in a positive work environment and
has contributed to relatively low management turnover.
Managing Partner Program
At the start of 1999 we introduced our Managing Partner Program. Under
this program we enter into a five-year agreement with an eligible general
manager in which the general manager places either 500 or 1,000 shares of Max &
Erma's common stock which he or she owns in escrow with us and agrees to manage
his or her restaurant for a five year period. The shares of stock are forfeited
if the general manager terminates their employment during the term of the
agreement. In return we agree to not relocate the general manager during the
term of the agreement. During the term of the agreement the general manager's
base salary is fixed. As additional compensation he or she receives 25% of the
increase in profit before fixed expenses over a pre-established base profit
(generally the average of profit before fixed expenses for the most recent three
fiscal years). We believe the program encourages the general manager to both
build sales and control margins, creates a sense of ownership, reduces
management turnover and promotes a longer-term perspective. At the end of fiscal
2004, we had a total of 19 Managing Partners. We also added two additional
Managing Partners at the start of fiscal 2005.
Purchasing and Inventory
Meat and most other food and restaurant supply items are purchased through
one major distributor in order to obtain favorable prices and to ensure
consistent quality and delivery. For major items, we typically negotiate prices
directly with producers. For other items, we provide the distributor with
specifications and receive monthly prices for such items, generally based upon a
"cost plus" formula. Restaurant managers purchase these items directly from the
distributor, and each restaurant is billed directly for its purchases. Although
most of our food and supplies are presently furnished by one distributor, we
believe alternate food suppliers are available and we have not experienced a
shortage of food or supplies. A daily inventory is taken for high cost items,
such as steaks, ground meat, seafood and liquor. A physical inventory of all
items is made at the end of each four-week accounting period.
Government Regulation
We are subject to federal, state and local laws affecting the operation of
our restaurants, including zoning, health, sanitation and safety regulations and
alcoholic beverage licensing requirements. Each restaurant is operated in
accordance with standardized procedures designed to assure compliance with all
applicable codes and regulations. The suspension of a food service or liquor
license could cause an interruption of operations at affected restaurants.
4
Future Expansion
We intend to open two to three additional Max & Erma's restaurants during
fiscal 2005. All but four of the existing Max & Erma's restaurants are located
in suburban areas. Of the existing Company-owned Max & Erma's restaurants, 61
are freestanding and 17 are in-line shopping center/mall locations. The
following table sets forth the location of each Company-owned Max & Erma's
restaurant as of December 31, 2004 and the locations of restaurants currently
under negotiation or development and scheduled to open during fiscal 2005:
Max & Erma's
------------
Existing Under Development
-------- -----------------
GEORGIA
Atlanta 2 ---
ILLINOIS
Chicago 8 ---
INDIANA
Indianapolis 5 ---
KENTUCKY
Lexington 2 ---
Louisville 3 ---
MICHIGAN
Ann Arbor 1 ---
Detroit 9 1
Grand Rapids 2 ---
Lansing 1 ---
NORTH CAROLINA
Charlotte 2 ---
OHIO
Akron 1 ---
Canton 1 ---
Cincinnati 4 2
Cleveland 5 ---
Columbus 13 ---
Dayton 3 ---
Toledo 3 ---
Niles 1 ---
PENNSYLVANIA
Pittsburgh 9 ---
Erie 1 ---
VIRGINIA
Norfolk 1 ---
Virginia Beach 1 ---
TOTAL 78 3
Our preference is to acquire the land and build new freestanding
restaurants for Max & Erma's. However, in order to acquire suitable sites, we
will utilize ground leases, or lease and convert existing premises. All sites
under development are freestanding. We believe that the clustering of three or
more restaurants in markets of sufficient size increases customer awareness,
enhances the effectiveness of advertising and improves management efficiency.
5
Business Risks
We desire to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). Many of the
following important factors have been discussed in our prior filings with the
Securities and Exchange Commission.
In addition to the other information in this Report, readers should
carefully consider that the following important factors, among others, in some
cases have affected, and in the future could affect, our actual results and
could cause our actual results of operations for fiscal 2005 and beyond, to
differ materially from those expressed in any forward-looking statements made by
us.
1. Dependence on Senior Management. Our two senior management officials have
over 58 years combined experience with us. Although we have attempted to develop
additional management capabilities, the loss of one or both of the two senior
executives could have a material adverse effect on us.
2. Competition. The casual dining segment of the restaurant industry is highly
competitive with respect to price, service, food quality, location, and
employees, including restaurant managers. Many of our competitors are larger in
size, have greater financial and other resources, and have longer operating
histories.
3. Restaurant Industry Changes. The restaurant industry is affected by changes
in consumer tastes and attitudes, economic conditions, traffic patterns and
changes, and other factors, which requires regular changes it he operation of
restaurants to remain competitive. There is a risk that we will not effectively
adapt to changes in the industry.
4. Cost of Doing Business. The restaurant business is subject to sudden cost
changes, particularly for food, energy, labor and insurance. We may not be able
to recover cost increases by increasing prices for our menu items.
5. Legal. We may be exposed to various tort and other claims including notably
liability claims resulting from the sale of alcoholic beverages. While we
currently maintain insurance for such claims, there can be no assurance that
such insurance will be adequate or available in the future. An uninsured or
excess claim could have a material adverse effect on us.
6. Government Regulation. The restaurant industry is subject to extensive
government regulations relating to the sale of food and alcoholic beverages, and
sanitation, fire and building codes. Changes in regulations or the suspension or
inability to renew any of the related licenses and permits could adversely
affect our operations. Also, government actions affecting minimum wages, payroll
tarates, and mandated benefits could adversely affect operating results.
7. Franchising. We intend to expand the franchising of the Max Erma's concept.
Failure to properly select, train, and supervise franchisees could have a
detrimental effect on the overall reputation and results of operations of the
restaurants owned by us.
6
8. Unfavorable Publicity. Adverse publicity resulting from poor food quality,
illness, injury or other health concerns or operations at one or a limited
number of our restaurants or franchisee's restaurants could have material
adverse effect on our business, results of operations and financial condition.
9. Acts of God, Terrorism. Our business could be materially adversely affected
by acts of God, including extremely harsh weather or natural disasters, and by
terrorist acts such as the events of September 11, 2001.
10. Consumer Perceptions of Food Safety. Our business could be materially
adversely affected by consumer perceptions of food safety in the United States
or in the market areas in which we operate, whether such perceptions are based
on fact or not and whether such perceptions are caused by acts of terrorism or
other events.
11. Leverage; Interest Rate Risk. Our business is relatively highly leveraged,
resulting in long term indebtedness (including current maturities) of
approximately $31.1 million as of October 31, 2004, which represents the balance
due under our revolving credit agreement and bears interest at variable rates. A
one percentage point increase of decrease in interest rates could increase or
decrease our pre-tax income by approximately $311,000. Although we have entered
in a $20 million partial interest rate protection agreement, as required under
our revolving credit agreement, a change in interest rates will likely have a
significant impact on our earnings. In addition, as a result of our substantial
leverage, we are restricted by loan covenants that may impact our ability to
grow in the future.
Item 2. PROPERTIES
All but one of our restaurants are occupied under leases expiring from
2005 to 2025, with most leases having renewal options for five to twenty
additional years. Restaurant leases are generally collateralized by liens on
leasehold improvements, equipment, furniture and fixtures. We lease our
executive offices (30,000 square feet) and general warehouse and storage
facilities (17,000 square feet) in Columbus, Ohio under an operating lease
expiring in January 2009.
The last 60 Max & Erma's restaurants to open are based on one of three
similar prototype designs. The prototype gives our restaurants a distinct
identity and emphasizes an unpretentious neighborhood ambiance. The prototype
design downplays the use of brass, Tiffany lamps and other design features
common to many other casual dining restaurants. Our restaurants established
prior to the introduction of the prototype vary in design and appearance, but
average 6,000 square feet and seat an average of 160 customers. Most of our
older restaurants have been remodeled or redecorated to the prototype look. The
majority of the freestanding prototypes are approximately 6,800 or 5,500 square
feet depending on the size of the site and its sales potential and seat 210 or
175 patrons, respectively, for dining in addition to the bar area. A 30 to 40
seat seasonal patio area is optional depending on the site and location. The
prototype design is readily adaptable to a variety of sites including shopping
center and mall locations. During 2002, a third version of the prototype
building was designed. It is approximately 5,700 square feet, and seats
approximately 190. Thirteen prototype buildings of this design were built from
2002 through 2004. It is anticipated that this design will be used for all
future restaurants.
7
We believe that our focus on selecting high profile restaurant sites is
critical to our success. Our present site selection strategy is to locate our
restaurants in prime, high visibility, high traffic suburban locations. We
believe that selection of high profile sites along with the implementation of
our prototype restaurant will result in improved unit economics.
Item 3. LEGAL PROCEEDINGS
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information contained under the captions "SELECTED QUARTERLY FINANCIAL
DATA" and "SHAREHOLDER INFORMATION" is incorporated herein by reference from the
inside back cover of our Annual Report to Shareholders for the fiscal year ended
October 31, 2004.
Item 6. SELECTED FINANCIAL DATA
Information required under this Item is incorporated herein by reference
from our Annual Report to Shareholders for the fiscal year ended October 31,
2004, page 4.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required under this Item is incorporated herein by reference
from our Annual Report to Shareholders for the fiscal year ended October 31,
2004, pages 5 through 9.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As of October 31, 2004, our total long-term indebtedness (including
current maturities) was approximately $31.1 million, which represents the
balance due under our revolving credit agreement and bears interest at variable
rates. A one percentage point increase or decrease in interest rates could
increase or decrease our pre-tax income by approximately $311,000. Based upon
quarter ending balances, the average borrowings under our revolving credit
agreement during 2004 was $30.9 million. The high and low balance outstanding
under the revolving credit agreement during 2004 was $32.0 million and $30.0
million, respectively. As required under our revolving credit agreement, we have
entered into a $20.0 million partial interest rate protection agreement. The
agreement converts $20.0 million ($8.6 million at October 31, 2004) of our
borrowings from variable rate to fixed rate beginning November 1, 2001, unless
LIBOR exceeds 7.0%. If LIBOR exceeds 7.0%, then the interest rate is increased
by the excess. For a further description of our indebtedness, see Item 8,
Financial Statements and Supplementary Data - Notes 3 and 4 to the Consolidated
Financial Statements.
8
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated balance sheets as of October 31, 2004 and October 26,
2003, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended October 31, 2004,
and the related notes to the consolidated financial statements together with the
independent registered public accountants' report thereon and the Selected
Quarterly Financial Data are incorporated by reference to our Annual Report to
Shareholders for the fiscal year ended October 31, 2004, pages 10 through 20 and
the inside back cover.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures. As of the end of the period covered by
this report, our management, with the participation of our chief executive
officer and chief financial officer, carried out an evaluation of the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15
promulgated under the securities Exchange Act of 1934, as amended (the "Exchange
Act"). Based upon this evaluation, our chief executive officer and our chief
financial officer concluded that our disclosure controls and procedures were (1)
designed to ensure that material information relating to our company is
accumulated and made known to our management, including our chief executive
officer and chief financial officer, in a timely manner, particularly during the
period in which this report was being prepared and (2) effective, in that they
provide reasonable assurance that information we are required to disclose in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.
Management believes, however, that a controls systems, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of
the controls system are met, and no evaluation of controls can provide absolute
assurance that all control and instances of fraud, if any, within a company have
been detected.
Internal Controls. There has been no change in our internal control over
financial reporting (as defined in Rules 13a-15 (f) and 15d-15 (f) promulgated
under the Exchange Act) During our fiscal quarter ended October 31, 2004, that
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information
None.
9
PART III
Items 10, 11, 12 and 13 and 14. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT; EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTTERS;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND PRINCIPLE ACCOUNTING
FEES AND SERVICES
Information required under these Items is incorporated herein by reference
from our Proxy Statement for our 2005 Annual Meeting of Stockholders to be
held on or about April 29, 2005, pursuant to Regulation 14A.
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) and (2) and (c): Financial Statements
The financial statements listed in the accompanying index to
financial statements on page 12 are filed as part of this
report.
(a)(3) and (b): Exhibits
The exhibits listed in the accompanying index to exhibits on
pages 13 through 14 are filed as part of this report.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amended Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: January 19, 2005 Max & Erma's Restaurants, Inc.
By: */s/Todd B. Barnum
------------------------------
Todd B. Barnum
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated and on the 19th day of January, 2005.
Signature Title
- --------- -----
*/s/Todd B. Barnum Chairman of the Board, Chief Executive
- ------------------ Officer and President, Director (Principal
Todd B. Barnum Executive Officer)
*/s/William C. Niegsch, Jr. Executive Vice President and Chief
- --------------------------- Financial Officer, Director, (Principal Financial
William C. Niegsch, Jr. and Accounting Officer)
*/s/William E. Arthur Director
- ---------------------
William E. Arthur
*/s/Robert A. Rothman Director
- ---------------------
Robert A. Rothman
*/s/Michael D. Murphy Director
- ---------------------
Michael D. Murphy
*/s/Thomas R. Green Director
- -------------------
Thomas R. Green
*/s/Timothy C. Robinson Director
- -----------------------
Timothy C. Robinson
*/s/William C. Niegsch, Jr.
- --------------------------
William C. Niegsch, Jr.
Attorney-in-Fact
11
MAX & ERMA'S RESTAURANTS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
ITEMS 8, 14(a)(1)
REFERENCE PAGE
ANNUAL REPORT
TO SHAREHOLDERS
---------------
The following items are required to be included in Items 8 and 14(a)(1) and are
incorporated by reference from the attached Annual Report to Shareholders of Max
& Erma's Restaurants, Inc. for the fiscal year ended October 31, 2004:
- -Consolidated Balance Sheets as of
October 31, 2004 and October 26, 2003 10 - 11
- -For the years ended October 31, 2004,
October 26, 2003 and October 27, 2002
-Consolidated Statements of Income 12
-Consolidated Statements of Stockholders' Equity 13
-Consolidated Statements of Cash Flows 14
- -Notes to Consolidated Financial Statements 15 - 19
- -Report of Independent Registered Public Accountant 20
- -No financial statement schedules are required
to be filed because the conditions requiring
their filing do not exist or because the information is given
in the consolidated financial statements or
notes thereto.
12
REPORT ON FORM 10-K
MAX & ERMA'S RESTAURANTS, INC.
INDEX TO EXHIBITS
Exhibit
No. Description Page No.
--- ----------- --------
2 Plan and Agreement of Reorganization, as amended October 15, Reference is made to Exhibit 2 of
1991. Report on Form 10-K filed January 24, 1992.
3(a) Restated Certificate of Incorporation, as amended April 4, 1985. Reference is made to Exhibit 4(c) of
Report on Form 10-Q filed June 26,
1985.
3(b) Restated By-Laws, as amended April 4, 1985. Reference is made to Exhibit 4(d) of
Report on Form 10-Q filed June 26,
1985.
3(c) Certificate of Amendment of Certificate of Reference is made to Exhibit 3(c) of
Incorporation September 22, 1986. Report on Form 10-K filed January
23, 1987.
3(d) Certificate of Amendment of Certificate of Incorporation May Reference is made to Exhibit 3(d) of
30, 1990. Report on form 10-K filed January
25, 1991.
4 Form of Common Stock Certificate. Reference is made to Exhibit 4(a) of
Registration Statement on Form S-1
(Registration No. 2-85585).
10(a) Max & Erma's Ltd. Agreement of Limited Partnership, dated May Reference is made to Exhibit 10(b)
17, 1972. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(b) First Amendment to Agreement of Limited Partnership of Max & Reference is made to Exhibit 10(b)
Erma's Ltd., dated September 9, 1974. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(c) Letter Agreement between Nine Limited Leasing, Max & Reference is made to Exhibit 10(bb) Inc., and
Erma's, Max & Erma's Indianapolis, Ltd., dated April 24, 1977. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(d) Letter Agreement between Nine Limited Leasing, Max & Reference is made to Exhibit 10(dd) Inc., and
Erma's, Max & Erma's East, Ltd., dated May 27, 1977. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(e) Letter Agreement between Nine Limited Leasing, Max & Reference is made to Exhibit 10(ee) Inc., and
Erma's, Max & Erma's Dayton, Ltd., dated October 1, 1977. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(f) Letter Agreement between Nine Limited Leasing, Max & Erma's, Reference is made to Exhibit 10(gg)
Inc., and Max & Erma's North, Ltd., dated December 28, 1981. of Registration Statement on Form
S-1 (Registration No. 2-85585).
10(g)* 1992 Stock Option Plan. Reference is made to Exhibit 10(q)
of Report on Form 10-K filed January
25, 1993.
10(h)* 1996 Stock Option Plan. Reference is made to Exhibit 10(p)
of Report on Form 10-K filed January
1996.
10(i)* 2002 Stock Option Plan. Reference is made to Exhibit 4(a) of
Form S-8 filed June 28, 2002.
10(j)* Indemnification Agreement (form) between Max & Erma's Reference is made to Exhibit 10(y)
Restaurants, Inc. and each of its directors dated as of June of Report on Form 10-K filed January
18, 1986. 23, 1987.
13
10(k)* Written description of split dollar life insurance program for Reference is made to footnote 3 to
officers. the Summary Compensation Table presented
in the Company's Proxy Statement for the
2003 Annual Meeting of Shareholders,
which is incorporated by Reference
herein.
10(l)* Board of Directors' Resolution adopted November 2, 1987 Reference is made to Exhibit 10(dd)
relating to split dollar life insurance program for officers. of Report on Form 10-K filed January
25, 1993.
10(m)* Board of Directors' Resolution adopted October 19, 1992 Reference is made to Exhibit 10(ee)
relating to split dollar life insurance program for officers. of Report on Form 10-K filed January
25, 1993.
10(n)* Form of Severance Agreement in Event of Change In Control for Reference is made to Exhibit 10(m)
Senior Executive Officers. of Report on Form 10-K filed January
18, 2000.
10(o)* List of Senior Executive Officers with Severance Agreements in Reference is made to Exhibit 10(o)
the form of Exhibit 10(n). of Report on Form 10-K filed January
16, 2004.
10(p)* Form of Severance Agreement in Event of Change In Control for Reference is made to Exhibit 10(o)
Officers. of Report on Form 10-K filed January
18, 2000.
10(q)* List of Officers with Severance Agreements in the form of Reference is made to Exhibit 10(q)
Exhibit 10(p). of Report on Form 10-K filed January
16, 2003.
10(r)* Severance Agreement between Max & Erma's Restaurants, Inc. and Reference is made to Exhibit 10(u)
Mark Emerson dated October 20, 2003. of Report on Form 10-K filed January
16, 2004.
10(s) Fifth Amended and Restated Revolving Credit Agreement dated Reference is made to Exhibit 10(t)
September 22, 2003, between Max & Erma's Restaurants, Inc. and of Report on Form 10-K filed January
The Provident Bank. 16, 2004.
10(t) Amendment No. 1 to Fifth Amended and Restated Revolving Credit
Agreement dated December 31, 2003, between Max & Erma's
Restaurants, Inc. and the Provident Bank.
10(u) Amendment No. 2 to Fifth Amended and Restated Revolving Credit
Agreement dated May 17, 2004, between Max & Erma's Restaurants,
Inc. and the Provident Bank.
10(v) Amendment No. 3 to Fifth Amended and Restated Revolving Credit
Agreement dated December 17, 2004, between Max & Erma's
Restaurants, Inc. and the Provident Bank.
13 Portions of the Annual Report to Stockholders for the Fiscal
Year ended October 31, 2004, incorporated herein by reference
(except for those pages which are specifically incorporated by
reference, the Company's Annual Report to stockholders is not
to be deemed as filed as part of this report).
23 Consent of Independent Registered Public Accounting Firm.
24 Power of Attorney.
31.1 Rule 13a-14(a) Certification of Chief Executive Officer.
31.2 Rule 13a-14(a) Certification of Chief Financial Officer.
32.1 Section 1350 Certification of Chief Executive Officer.
32.2 Section 1350 Certification of Chief Financial Officer.
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* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Report on Form 10-K pursuant to Item 15(a)(3) of the
Report on Form 10-K.
14