10-K 1 eaco10k2004.txt 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