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 28, 2005
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) 241-9798
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 if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
YES [ ] NO [ X ]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act.
YES [ ] NO [ X ]
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 ]
Indicate by check mark whether the registrant is a shell company
(as defined in Exchange Act Rule 12b-2).
YES [ ] NO [ X ]
The aggregate market value of the Registrant's Common Stock
(based upon the closing sale price of the registrant's Common
Stock on June 29, 2005,) held by non-affiliates of the Registrant
was approximately $1,822,000.
As of March 7, 2006, 3,906,801 shares of Common Stock of the
Registrant were outstanding.
Documents Incorporated by Reference
Portions of the Registrant's 2005 Annual Report to Shareholders
are incorporated by reference into Part II. Portions of the Proxy
Statement for the Registrant's 2006 Annual Meeting of Shareholders
are incorporated by reference into Part III.
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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.
The Company plans to move its corporate office in March 2006 from
Florida to Anaheim, California in order to reduce overhead. You
may contact the Company by writing to EACO Corporation, 1500 North
Lakeview Avenue, Anaheim, California 92807.
Operations
From the inception of the Company through June 2005, the Company's
business consisted of operating restaurants in the state of
Florida. On June 29, 2005, the Company sold all of its operating
restaurants (the "Asset Sale") to Banner Buffets LLC ("Banner").
These restaurant operations are presented as discontinued
operations in the accompanying financial statements. The
Company's remaining operations consist mainly of managing rental
properties it owns in Florida and California.
The Company still owns two restaurant properties, one of which is
leased to another operator, and one which is currently listed for
sale or lease. The Company is still obligated for leases of two
restaurants, one of which it subleases to another operator. In addition,
the Company owns an income-producing real estate property in
Sylmar, California with two industrial tenants which was purchased
in the fourth quarter of 2005. See "Liquidity and Capital
Resources" in the Company's annual report to shareholders for
additional information.
The Company is currently investigating various potential
strategies for its future business plan, and has hired an
investment banking firm to help identify potential acquisition or
investment opportunities. As of the date of this report, there
are no pending acquisitions and there is no defined timeline as to
when an acquisition or investment might take place.
Proprietary Trade Marks
The Company assigned its trademark for the Whistle Junction
concept to Banner in connection with the Asset Sale.
Employees
As of December 28, 2005, the Company employed four people in its
corporate office. 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.
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Government Regulation
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.
Working Capital Requirements
After the Asset Sale, the Company paid off most of its current
liabilities. Therefore, with the exception of debt service,
working capital requirements for continuing operations are not
significant.
Long-Term Debt
The Company has entered into a loan agreement with GE Capital for
two restaurant properties still owned by the Company. As of
December 28, 2005, the outstanding balance due under the Company's
loan with GE Capital was $1,806,200. The Company also assumed a
loan with Citizen's Bank of California in connection with the
California property purchase in November 2005. As of December 28,
2005, the outstanding balance due on this loan was $1,797,100.
The weighted average interest rate for the Company's loans is
7.63%.
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 room at 100F Street,
N.E., Room 1580, Washington, D.C. 20549. 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 1A. Risk Factors.
Investing in common stock of any company involves various risks.
Some of the risks associated with an investment in our common
stock are listed below. The list is not meant to be exclusive.
These risks include the lack of an actively traded market in the
Company's common stock, the amount of reliance on decisions
implemented by the Company's majority shareholder, the lack of a
comprehensive on-going business plan for the Company and risks
inherently associated with the Company's commercial real estate
properties, such as unexpected vacancies which could lead to
reduced revenue.
Item 1B. Unresolved Staff Comments.
None.
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Item 2. Properties
Locations Description
(1) Jacksonville, FL Leased property. Management plans to
sublease.
(1) Jacksonville, FL Leased property for executive offices
through March 2006.(4)
(2) Brandon, FL Restaurant building owned. Currently
vacant. Management plans to lease or
sell.
(2) Orange Park, FL Restaurant building leased to a
restaurant operator.
(3) Sylmar, CA Two properties leased to industrial
tenants.
(1) Brooksville, FL Leased restaurant. Currently operated by
Banner under a management agreement which
required Banner to assume the lease or
purchase the building in 2006.
_________________________
(1) Leased property.
(2) Property subject to mortgage securing GE Capital Notes.
(3) Property subject to mortgage securing Citizen's Bank Note.
(4) The Company is moving its offices to Anaheim, California in
March 2006.
Item 3: Legal Proceedings
From time to time we may be named in claims arising in the
ordinary course of business. Currently, no legal proceedings or
claims are pending against us or involve us that, in the opinion
of our management, could reasonably be expected to have a material
adverse effect on our business or financial condition, except as
discussed below. In connection with the Asset Sale, a broker has
demanded a commission payment of $3.5 million. The Company filed
suit against the broker on July 11, 2005 in Duval County Circuit
Court in an effort to expedite a resolution of the claim. The
Company agreed to place $400,000 in escrow in connection with the
lawsuit. In addition, in August 2005, the Company was sued in
Miami-Dade County Circuit Court by another broker who claims that
a commission of $749,000 is payable to him as a result of the
Asset Sale. The Company plans to vigorously defend both of these
claims. Due to the fact that management cannot predict the
outcome or the possible payments awarded under these legal
proceedings, no charge to earnings has been made in the 2005
financial statements.
Item 4: Submission of Matters To A Vote Of Security Holders
None.
PART II
Item 5: Market For The Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities
The information contained under the caption "Common Stock Data" in
the Company's 2005 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 2006
Annual Meeting of Shareholders (the "Proxy Statement") which will
be filed with the Securities and Exchange Commission (SEC) no
later than 120 days after the end of the fiscal year covered by
this report and is incorporated herein by reference.
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Item 6: Selected Financial Data
The information contained under the caption "Five Year Financial
Summary" in the Company's 2005 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 2005 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 2005
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 2005
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 2005 Annual Report
to Shareholders is incorporated herein by reference.
Item 9: Changes In And Disagreements With Accountants On
Accounting And Financial Disclosure
The information contained under the caption "Changes In and
Disagreements with Accountants on Accounting and Financial
Disclosure" in the Company's 2005 Annual Report to Shareholders is
incorporated herein by reference.
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, who also serves as
the Company's principal financial officer. Based upon that
evaluation, the Company's President has 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.
(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.
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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
2006 Definitive Proxy Statement, which will be filed with the SEC
no later than 120 days after the end of the fiscal year covered by
this report.
Item 11: Executive Compensation
The information required by this Item is incorporated by reference
to the section entitled "Executive Pay" in the Company's 2006
Definitive Proxy Statement which will be filed with the SEC 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 Company's
2006 Definitive Proxy Statement which will be filed with the SEC
no later than 120 days after the end of the fiscal year covered by
this report.
Item 14: Principal Accountant Fees And Services
The information required by this Item is incorporated by reference
to the section entitled "Principal Accounting Fees and Services"
in the Company's 2006 Definitive Proxy Statement which will be
filed with the SEC 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 2005 Annual Report to Shareholders.
Consolidated Statements of Operations for the years ended December
28, 2005, December 29, 2004, and December 31, 2003.
Consolidated Balance Sheets as of December 28, 2005 and December
29, 2004.
Consolidated Statements of Shareholders' Equity for the years
ended December 28, 2005, December 29, 2004, and December 31, 2003.
Consolidated Statements of Cash Flows for the years ended December
28, 2005, December 29, 2004, and December 31, 2003.
Notes to the Consolidated Financial Statements.
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Report of Independent Registered Public Accounting Firm.
Report of Independent Registered Public Accounting Firm.
Consent of Independent Registered Public Accounting Firm.
Consent of Independent Registered Public Accounting Firm.
(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 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.)
3.03 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.)
3.04 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.)
3.05 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.)
3.06 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.)
3.07 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.)
3.08 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.)
3.09 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.)
3.10 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.
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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.)
10.03 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.)
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10.14 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.)
10.15 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.)
10.16 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.)
10.17 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.)
10.18 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.)
10.19 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.)
10.20 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 2005 Annual Report to Shareholders.
14.01 Code of Ethics.
16.01 Letter re Change in Certifying Accountant from Deloitte &
Touche LLP. (Exhibit 16 to the Company's Form 8-K filed
with the Commission September 9, 2005 is incorporated
herein by reference.)
21.01 Subsidiaries of the Company.
23.01 Consent of Squar, Milner, Reehl & Williamson LLP.
23.02 Consent of Deloitte & Touche LLP.
31.01 Certification of Chief Operating Officer and Principal
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.
32.01 Certification of Chief Operating Officer and Principal
Financial Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
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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 27, 2006 /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 3/27/06
Edward B. Alexander Chief Operating Officer
/s/ Glen F. Ceiley Chairman of the Board 3/27/06
Glen F. Ceiley
/s/ Steve Catanzaro Director 3/27/06
Steve Catanzaro
/s/ Jay Conzen Director 3/27/06
Jay Conzen
/s/ William Means Director 3/27/06
William Means
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