-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I/qakRvD3Sknhir60nF4+sCI6quwuuffYde+E71GErQKDfmBhqdFabQ47gQsGX/9 +m1VTO6kAE5YVAYfXQ3Zmw== 0000784539-04-000047.txt : 20041115 0000784539-04-000047.hdr.sgml : 20041115 20041115113547 ACCESSION NUMBER: 0000784539-04-000047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040929 FILED AS OF DATE: 20041115 DATE AS OF CHANGE: 20041115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EACO CORP CENTRAL INDEX KEY: 0000784539 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 592597349 STATE OF INCORPORATION: FL FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14311 FILM NUMBER: 041142685 BUSINESS ADDRESS: STREET 1: 2113 FLORIDA BLVD STREET 2: STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 BUSINESS PHONE: 9042494197 MAIL ADDRESS: STREET 1: 2113 FLORIDA BLVD STE A CITY: NEPTUNE BEACH STATE: FL ZIP: 32266 FORMER COMPANY: FORMER CONFORMED NAME: FAMILY STEAK HOUSES OF FLORIDA INC DATE OF NAME CHANGE: 19920703 10-Q 1 eaco10q3rd04.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter ended September 29, 2004 Commission File No. 0-14311 EACO Corporation Incorporated under the laws of IRS Employer Identification Florida No. 59-2597349 2113 FLORIDA BOULEVARD NEPTUNE BEACH, FLORIDA 32266 Registrant's Telephone No. (904) 249-4197 Indicate by check mark whether the registrant 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 (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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes_____ No__X _ Title of each class Number of shares outstanding Common Stock 3,881,901 $.01 par value As of November 4, 2004 EACO Corporation Consolidated Results of Operations
(Unaudited) For The Quarters Ended For The Nine Months Ended --------------------------------------------------- September 29, October 1 September 29, October 1, 2004 2003 2004 2003 --------------------------------------------------- Revenues: Sales $8,710,800 $8,558,900 $28,929,300 $28,854,500 Vending revenue 40,600 53,600 136,800 160,900 ---------- ----------- ----------- ----------- Total revenues 8,751,400 8,612,500 29,066,100 29,015,400 ---------- ----------- ----------- ----------- Cost and expenses: Food and beverage 3,296,400 3,271,200 10,988,300 10,989,700 Payroll and benefits 2,811,700 2,707,300 8,905,700 8,697,300 Depreciation and amortization 494,300 488,300 1,476,200 1,511,900 Other operating expenses 1,536,500 1,628,000 4,849,900 5,013,200 General and administrative expenses 526,400 481,900 1,566,100 1,588,100 Franchise fees 245,200 341,800 912,100 1,153,400 Asset valuation charge --- --- 594,200 --- Loss on store closings and disposition of equipment 9,900 23,300 135,100 87,900 ---------- ----------- ----------- ----------- 8,920,400 8,941,800 29,427,600 29,011,500 ---------- ----------- ----------- ----------- (Loss) earnings from operation (169,000) (329,300) (361,500) 3,900 Investment gain (loss) 1,600 (78,300) 12,400 (105,800) Interest and other income 60,800 61,800 169,800 193,500 Interest expense (433,000) (422,700) (1,262,400) (1,309,900) ---------- ----------- ----------- ----------- Loss before income taxes (539,600) (768,500) (1,441,700) (1,218,300) Provision for income taxes -- -- -- -- ---------- ----------- ----------- ----------- Net loss ($539,600) ($768,500) ($1,441,700) ($1,218,300) Undeclared cumulative preferred stock dividend (6,300) --- (6,300) --- ---------- ----------- ----------- ----------- Net loss available for basic and diluted loss per share (545,900) (768,500) (1,448,000) (1,218,300) ========== =========== =========== =========== Basic loss per share ($0.14) ($0.21) ($0.38) ($0.33) ========== =========== =========== =========== Basic weighted average common shares outstanding 3,881,500 3,706,200 3,790,000 3,706,200 ========== =========== =========== =========== Diluted loss per share ($0.14) ($0.21) ($0.38) ($0.33) ========== =========== =========== =========== Diluted weighted average common shares outstanding 3,881,500 3,706,200 3,790,000 3,706,200 ========== =========== =========== ===========
2 EACO Corporation Consolidated Balance Sheets
(Unaudited) September 29, December 31, 2004 2003 ----------- ------------ ASSETS Current assets: Cash and cash equivalents $282,500 $2,287,800 Investments 200 32,600 Receivables 147,600 110,600 Inventories 240,100 300,400 Prepaid and other current assets 571,800 500,500 ----------- ----------- Total current assets 1,242,200 3,231,900 Certificate of deposit 300,000 10,000 Property and equipment: Land 7,310,100 7,310,000 Buildings and improvements 25,368,800 22,858,000 Equipment 12,308,600 11,509,200 Construction in progress 162,000 388,300 ----------- ----------- 45,149,500 42,065,500 Accumulated depreciation (18,667,700) (17,713,500) ----------- ----------- Net property and equipment 26,481,800 24,352,000 Property held for sale --- 2,288,800 Other assets, principally deferred charges, net of accumulated amortization 775,400 924,000 ----------- ----------- $28,799,400 $30,806,700 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $1,157,400 $1,121,900 Securities sold, not yet purchased -- 1,187,400 Accrued liabilities 1,476,500 1,801,700 Current of workers compensation liability 646,000 646,000 Current portion of long-term debt 993,200 718,400 Current portion of obligation under capital lease 75,200 30,900 ----------- ----------- Total current liabilities 4,348,300 5,506,300 Deferred rent 71,300 47,500 Deposit liability 23,300 31,300 Workers compensation benefit liability 467,000 469,800 Long-term debt 15,364,100 17,470,700 Deferred gain 1,187,100 1,240,300 Obligation under capital lease 3,973,200 2,279,800 ----------- ----------- Total liabilities 25,434,300 27,045,700 Shareholders' equity: Preferred stock of $.01 par; authorized 10,000,000 shares; 36,000 shares issued 400 --- Common stock of $.01 par; authorized 4,000,000 shares; outstanding 3,881,900 shares 38,800 37,100 Additional paid-in capital 10,928,800 9,869,600 Accumulated deficit (7,602,900) (6,159,100) Accumulated other comprehensive income --- 13,400 ----------- ----------- Total shareholders' equity 3,365,100 3,761,000 ----------- ----------- $28,799,400 $30,806,700 =========== =========== See accompanying notes to consolidated financial statements.
3
Consolidated Statements of Cash Flows (Unaudited) For the Nine Months Ended ------------------------ September 29, October 1, 2004 2003 ---------- ----------- Operating activities: Net loss ($1,441,700) ($1,218,300) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,476,200 1,511,900 Asset valuation charge 594,200 -- Directors' fees in the form of stock options 20,000 -- Net realized losses on investments 300 105,800 Amortization of loan fees 59,400 46,200 Amortization of deferred gain (53,200) (53,100) Gain (loss) on disposition of property and equipment 90,800 (132,700) Increase (decrease) in: Receivables (37,000) (7,200) Inventories 60,300 200 Prepaids and other current assets (71,300) (125,600) Other assets (5,300) (44,600) Increase (increase) in: Accounts payable 35,500 (208,800) Accrued liabilities (327,200) (39,600) Deferred rent 23,800 23,800 Deposit liability (8,000) 16,500 Workers compensation benefit liability (2,800) 6,100 ---------- ----------- Net cash provided by (used in) operating activities 416,000 (119,400) ---------- ----------- Investing activities: Purchase of investments (1,699,900) (284,900) Principal receipts on mortgages receivable --- 342,000 Proceeds from sale of investments 184,600 272,000 Proceeds from securities sold not yet purchased 57,000 727,600 Proceeds from sale of property held for sale 2,260,100 335,000 Proceeds from sale of property and equipment --- 1,796,000 Capital expenditures (2,406,000) (608,500) ---------- ----------- Net cash (used in) provided by investing activities (1,604,200) 2,579,200 ---------- ----------- Financing activities: Payments on long-term debt and obligations under capital leases (1,858,400) (1,963,800) Proceeds from the issuance of common stock 175,300 -- Proceeds from the issuance of preferred stock 900,000 -- Expenses of the issuance of preferred stock (36,000) -- ---------- ----------- Net cash used in financing activities (817,100) (1,963,800) ---------- ----------- Net (decrease) increase in cash and cash equivalents (2,005,300) 496,000 Cash and cash equivalents - beginning of period 2,287,800 1,679,600 ---------- ----------- Cash and cash equivalents - end of period $282,500 $2,175,600 ========== =========== Noncash investing and financing activities: Net change in unrealized gain (2,100) ($15,800) ========== =========== Supplemental disclosures of cash flow information: Cash paid during the nine months for interest $1,227,100 $1,390,300 ========== =========== Building acquired under capital lease $1,762,300 -- ========== =========== See accompanying notes to consolidated financial statements.
4 EACO CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 29, 2004 (Unaudited) Note 1. Basis of Presentation The consolidated financial statements include the accounts of EACO Corporation (the "Company"), (formerly Family Steak Houses of Florida, Inc.) and its wholly-owned subsidiary. All significant intercompany profits, transactions and balances have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the interim financial information instructions to Form 10-Q, and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the interim periods have been included. Operating results for the quarter and nine months ended September 29, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2004. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of certain estimates by management in determining the amount of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. There are risks inherent in estimating and therefore, actual results could differ from those estimates. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Note 2. Loss Per Share Basic loss per share for the quarter and nine months ended September 29, 2004 and October 1, 2003 were computed based on the weighted average number of common shares outstanding. Diluted loss per share for those periods have been computed 5 based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive shares are represented by shares under option. Due to the Company's net losses for the quarters ended September 29, 2004, and October 1, 2003, and for the nine months ended September 29, 2004 and October 1, 2003, all potentially dilutive securities are antidilutive and have been excluded from the computation of diluted earnings per share for those periods. Note 3. Other Assets Other assets consist principally of deferred charges, which are amortized on a straight-line basis. Deferred charges and related amortization periods are as follows: financing costs - term of the related loan, and initial franchise rights - 18 months beginning January 1, 2004 in connection with the Company's decision to terminate its franchise agreement. The gross carrying amount of the deferred financing costs was $888,900 and $924,000 as of September 29, 2004 and December 31, 2003, respectively. Accumulated amortization related to deferred financing costs was $232,700 and $216,200 as of September 29, 2004 and December 31, 2003, respectively. Amortization expense was $18,800 and $12,000 for the three-month periods ended September 29, 2004 and October 1, 2003, respectively. Amortization expense was $59,400 and $46,200 for the nine-month periods ended September 29, 2004 and October 1, 2003, respectively. Amortization expense for each of the next five years is expected to be $45,500. The gross carrying amount of the initial franchise rights was $354,700 as of September 29, 2004 and December 31, 2003. Accumulated amortization related to initial franchise rights was $279,900 and $179,800 as of September 29, 2004 and December 31, 2003, respectively. Amortization expense was $27,600 and $2,500 for the three-month periods ended September 29, 2004 and October 1, 2003, respectively. Amortization expense was $94,100 and $7,900 for the nine-month periods ended September 29, 2004 and October 1, 2003, respectively. Franchise rights will be fully amortized by June 30, 2005. Note 4. Reclassifications Certain items in the prior interim financial statements have been reclassified to conform to the 2004 presentation. 6 Note 5. Stock Based Compensation The Company accounts for stock-based compensation utilizing the intrinsic value method per Accounting Principles Board No. 25 (APB 25), "Accounting for Stock Issued to Employees". The Company's long-term incentive plan provides for the grant of stock options and restricted stock. The exercise price of each option equals the market price of the Company's stock on the date of the grant. Options vest in one-quarter increments over a four-year period starting on the date of the grant. An option's maximum term is ten years. See Note 9 "Common Shareholders' Equity" in the Company's Annual Report for the year ended December 31, 2003 for additional information regarding the Company's stock options. Pursuant to the disclosure requirements of Statement of Financial Accounting Standards "SFAS" 148, "Accounting for Stock-Based Compensation - Transition and Disclosure"the following table provides an expanded reconciliation for all periods presented:
Three Months Ended Nine Months Ended Sept. 29, 2004 Oct. 1, 2003 Sept. 29, 2004 Oct. 1, 2003 ---------------------------- --------------------------- Net loss, as reported $(539,600) $(768,500) $(1,441,700) $(1,218,300) Add: Stock based compensation expense included in net income, net of tax --- --- --- --- Deduct: Total stock-based compensation expense determined under fair value, net of tax (800) (1,400) (2,400) (4,500) --------- ---------- ---------- -------- Pro forma net loss $(540,400) $(769,900) $(1,444,100) $(1,222,800) Undeclared cumulative preferred stock dividend (6,300) --- (6,300) --- --------- --------- ---------- --------- $(546,700) $(769,900) $(1,459,400) $(1,222,800) Loss per share - basic and diluted as reported $(0.14) (0.21) $(0.38) $(0.33) Pro forma $(0.14) $(0.21) $(0.38) $(0.33)
Note 6. Shareholders' Equity The following summarizes shareholders' equity transactions from January 1, 2003 through September 29, 2004. 7
Additional Accumulated Other Preferred Stock Common Stock Paid-in Accumulated Comprehensive Shares Amount Shares Amount Capital Deficit Income (loss) Total Balance, January 1, 2003 3,706,218 37,100 9,869,600 (3,758,100) (4,100) 6,144,500 Comprehensive loss: Net loss (2,401,000) (2,401,000) Other comprehensive income: Unrealized losses on securities: Net unrealized holding losses arising during the period 17,500 17,500 Less: reclassification adjustment for net losses included in net loss -- ---------- Total comprehensive loss (2,383,500) ----------------------------------------------------------------------------------- Balance, December 31, 2003 3,706,218 $37,100 $9,869,600 ($6,159,100) $13,400 $3,761,000 Director fees in the form of stock options 300 19,700 20,000 Proceeds from common stock 175,682 1,400 173,600 175,000 Proceeds from Preferred Stock 36,000 $400 899,600 900,000 Expense of Preferred Stock sale (33,700) (33,700) Net unrealized gains (2,100) (13,400) (15,500) Net loss (1,441,700) (1,441,700) ------- ---- ---------- ------- ---------- ------------ -------- ----------- Balance, September 29, 2004 36,000 $400 3,881,900 $38,800 $10,928,800 ($7,602,900) $0 ($3,365,100) ======= ==== ========= ======= =========== ============ ======== ===========
Note 7. Employee Benefit Plans In conjunction with the Financial Accounting Standards Board "FASB" revision of SFAS No. 132, Employer's Disclosures about Pensions and Other Post-retirement Benefits, issued in December 2003, the following describes the Company's benefit plan. Employees of the Company participate in a profit sharing and retirement plan covering substantially all full-time employees at least twenty-one years of age and with more than 1,000 hours of service within the year. The plan was established in August 1991. Contributions are made to the plan at the discretion of the Company's Board of Directors. No profit-sharing contributions have been made since the inception of the plan. The profit sharing plan includes a 401(k) feature by which employees can contribute, by payroll deduction only, a portion of their annual compensation not to exceed $13,000 in 2004. The plan provides for a Company matching contribution of $.25 per dollar of the first 6% of employee contributions. The Company's accrued matching contribution was $9,000 and $10,500 for the quarters ended June 30, 2004 and 2003 respectively and 8 $27,000 and $31,500 for the nine months ended September 29, 2004 and 2003 respectively. Note 8. Preferred Stock The Company has sold and issued 36,000 shares of Series A Cumulative Convertible Preferred Stock to the Company's Chairman. The Preferred Stock bears a stated dividend of 8-1/2% of the liquidation preference payable quarterly in arrears in cash when and as declared by the Board of Directors. The liquidation preference of the Preferred Stock is $25 per share and the Preferred Stock issued was sold at that price for a total purchase price of $900,000. The stock is convertible into Common Stock of the Company at the option of the holder initially at the rate of 27.778 shares of Common Stock for each share of Preferred Stock. The conversion ratio is subject to anti-dilution provisions. Note 9. Subsequent Event On October 27, 2004, the Company sold its operating location in Tallahassee, Florida. The sale resulted in cash proceeds to the Company of approximately $310,000, after payment of debt of approximately $500,000 and closing costs associated with the sale. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policy and Use of Estimates The Company's accounting policy for the recognition of impairment losses on long-lived assets is considered critical. The Company's policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of the impairment review, assets are grouped on a restaurant-by-restaurant basis. The recoverability of the assets is measured by a comparison of the carrying value of each restaurant's assets to future net cash flows expected to be generated by such restaurant's assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. 9 The preparation of EACO Corporation's consolidated financial statements requires the Company to make estimates, assumptions and judgments that affect the Company's assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The Company bases these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information it believes are reasonable. Actual results may differ from these estimates under different conditions. For a full description of the Company's critical accounting policy, see Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2003 Annual Report on Form 10-K. Results of Operations Quarter Ended September 29, 2004 versus October 1, 2003 The Company experienced an increase in total sales during the third quarter of 2004 compared to the third quarter of 2003. Total sales increased 1.8%, due primarily to a new restaurant opened in 2004 and increases in same-store sales, offset by losses in sales from three hurricanes estimated at $660,000 and the closure of one restaurant. Same-store sales (average unit sales in restaurants that have been open for at least 18 months and operating during comparable weeks during the current and prior year) in the third quarter of 2004 increased 3.8% from the same period in 2003, compared to a decrease of 4.8% in the third quarter of 2003 as compared to 2002. The increase in same-store sales resulted primarily from increases at two stores remodeled to the Company's new Whistle Junction concept. The operating expenses of the Company's restaurants include food and beverage, payroll and benefits, depreciation and amortization, and other operating expenses, which include repairs, maintenance, utilities, supplies, advertising, insurance, property taxes and rents. In total, food and beverage, payroll and benefits, depreciation and amortization and other operating expenses as a percentage of sales decreased to 93.4% in the third quarter of 2004 from 93.8% in the same quarter of 2003, primarily as a result of lower food costs and other operating expenses, offset by higher payroll and benefits costs. Food and beverage costs as a percentage of sales decreased to 37.8% in the third quarter of 2004 from 38.2% in the same period of 2003 primarily as a result of price increases implemented by the Company since the same period in 2003. 10 Payroll and benefits as a percentage of sales increased to 32.3% in the third quarter of 2004 from 31.6% in the same quarter of 2003 due to an increase in initial payroll costs at converted and newly opened Whistle Junction restaurants. Other operating expenses as a percentage of sales decreased to 17.6% in the third quarter of 2004 from 18.3% in 2003 primarily due to reduced materials and supplies costs and efficiencies from the increased same-store sales. Depreciation and amortization were 5.7% in 2004 and 2003. General and administrative expenses as a percentage of sales decreased to 6.0% in the third quarter of 2004, as compared to 6.4% in the third quarter of 2003, primarily due to lower legal fee expenses. The effective income tax rate for the quarters ended September 29, 2004 and October 1, 2003 was 0.0%. Net loss for the third quarter of 2004 was $539,600, compared to net loss of $768,500 in the third quarter of 2003. Net loss per share was $.14 for 2004, compared to net loss per share of $.21 in 2003. Nine Months Ended September 29, 2004 versus October 1, 2003 For the nine months ended September 29, 2004, total sales increased 0.3% compared to the same period of 2003. Increases in same-store sales and sales from a new Whistle Junction restaurant opened in May 2004 were offset by the closure of two restaurants. Same-store sales increased 7.1% for the nine months ended September 29, 2004 from the same period in 2003, primarily due to sales increases from the converted Whistle Junction restaurants. Food and beverage costs as a percentage of sales for the nine month period ended September 29, 2004 decreased to 38.0% from 38.1% for the same period in 2003. Payroll and benefits as a percentage of sales increased to 30.8% in 2004 from 30.1% in 2003, due primarily to higher initial payroll costs at converted and newly opened Whistle Junction restaurants. For the nine months ended September 29, 2004, other operating expenses as a percentage of sales increased to 16.8% from 16.6% in 2003, primarily due to store opening expenses of approximately $262,000 from the Whistle Junction restaurants, offset by efficiencies gained from the increased same-store 11 sales. Depreciation and amortization decreased to 5.1% for the nine-month period ended September 29, 2004, compared to 5.2% in 2003. General and administrative expenses were 5.4% for the nine- month periods ended September 29, 2004 and October 1, 2003. Interest expense decreased for the first nine months to $1,262,400 from $1,309,900 for the same period in 2003 due to reductions in total debt. The effective income tax rate for the nine-month periods ended September 29, 2004 and October 1, 2003 was 0.0%. The Company sometimes invests a portion of its available cash in marketable securities. The Company maintains an investment account to effect these transactions. Investments are made based on a combination of fundamental and technical analysis primarily using a value-based investment approach. The holding period for investments usually ranges from 60 days to 24 months. Management occasionally purchases marketable securities using margin debt. In determining whether to engage in transactions on margin, management evaluates the risk of the proposed transaction and the relative returns offered thereby. If the market value of securities purchased on margin were to decline below certain levels, the Company would be required to use additional cash from its operating account to fund a margin call in its investment account. Management reviews the status of the investment account on a regular basis and analyzes such margin positions and adjusts purchase and sale transactions as necessary to ensure such margin calls are not likely. The results for the nine months of 2004 include realized gains from the sale of marketable securities of $12,400, compared to realized losses of $105,800 in 2003. The Company has no marketable securities or margin debt as of September 29, 2004. The Company recognized a non-cash asset valuation charge of $594,200 in 2004 in accordance with SFAS No. 144, "Accounting for the Impairment of or Disposal of Long-Lived Assets." The charge was based on the assessment of one under-performing restaurant as of March 31, 2004. The same impairment assessment performed in 2003 indicated no impairment charge was required in 2003. Net loss for the nine months ended September 29, 2004 was $1,441,700 or $.38 per share, compared to net loss of $1,218,300, or $.33 per share for the same period in 2003. 12 The Company's operations are subject to some seasonal fluctuations. Revenues per restaurant generally increase from January through April and decline from September through December. Operating results for the quarter or nine months ended September 29, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 29, 2004. Liquidity and Capital Resources The Company recently completed a preferred stock private Placement with Glen Ceiley, its Chairman and CEO, which provided $900,000 cash to the Company. Based on this, and the Company's continued positive same-store sales trends, the Company projects it does have sufficient cash flow to meet its obligations. Substantially all of the Company's revenues are derived from cash sales. Inventories are purchased on credit and are converted rapidly to cash. Therefore, the Company does not carry significant receivables or inventories and, other than repayment of debt, working capital requirements for continuing operations are not significant. At September 29, 2004, the Company had a working capital deficit of $3,106,100 compared to $2,274,400 at December 31, 2003. The increase was primarily due to lower cash balances resulting from capital expenditures for restaurant conversions. Cash provided by operating activities was $414,000 in the first nine months of 2004, compared to cash provided by operations of $369,200 in the first nine months of 2003. In June 2004, the Company sold 145,833 shares of its Common Stock directly to Bisco Industries, Inc. Profit Sharing and Savings Plan for a total purchase price of $175,000 cash. In September 2004, the Company sold 36,000 shares of the Company's newly authorized Series A Cumulative Convertible Preferred Stock at a price of $25 per share for a total purchase price of $900,000 cash. The Preferred Stock was sold to the Company's Chairman. During the nine month period ended September 29, 2004, the Company sold three of its previously closed locations for gross sale prices totaling $2,427,500. The three stores had an aggregate net book value of $2,288,800. Related debt of $1,327,400 was paid off. Net of expenses of the sales of $167,400, the Company recognized a loss of $28,700 on the sales. Total capital expenditures for 2004, based on present costs and plans for capital improvements, are estimated to be approximately $2.8 million. This amount is based on expenditures for building, leasehold improvements and equipment for one new restaurant opened in May 2004, the remodeling of three stores to the Whistle Junction concept, several remodels to the Company's 13 Florida Buffet concept and normal recurring equipment purchases and minor building improvements ("Capital Maintenance Items"). The Company spent approximately $2,406,000 in the first nine months of 2004 for property and equipment. The Company anticipates funding remaining 2004 capital expenditures from cash on hand and from operations. Current plans call for the Company to convert all of its remaining stores to either the Whistle Junction concept or the Florida Buffet concept by June 30, 2005. As of September 29, 2004, ten stores remain to be converted. Company management estimates that total funds required to accomplish the conversion of all ten restaurants to be approximately $2,050,000. As of September 29, 2004, management is pursuing various sources of capital to accomplish the conversions including traditional financing, sales leaseback transactions and refinancing existing restaurants. The Company currently has a contract for a sale leaseback financing for $3 million, which would net the Company approximately $1.7 million in cash after payment of debt and closing expenses. The transaction is subject to the buyer's due diligence review, which must be completed by November 30, 2004. In the event that the necessary conversion capital is not obtained, eight of the unconverted restaurants would likely be converted to the Florida Buffet concept for approximately $25,000 per store. Management estimates the cost of opening one new restaurant based on current average costs to be approximately $2,900,000. To the extent the Company decides to open new restaurants in 2005 and beyond, management plans to fund any new restaurant construction either by GE Capital funding, sales leaseback financing, developer-funded leases, refinancing existing restaurants, or attempting to get additional financing from other lenders. The Company's ability to open new restaurants is also dependent upon its ability to locate suitable locations at acceptable prices, and upon certain other factors beyond its control, such as obtaining building permits from various government agencies. The sufficiency of the Company's cash to fund operations and necessary Capital Maintenance Items will depend primarily on cash provided by operating activities. The Company has entered into a series of loan agreements with GE Capital Franchise Finance Corporation ("GE Capital"). As of September 29, 2004, the outstanding balance due under the Company's various loans with GE Capital was $16,357,300. The weighted average interest rate for the GE Capital loans is 7.4%. The Company used the proceeds of the GE Capital loans primarily 14 to refinance its debt and to fund construction of new restaurants. Forward-looking Statements The preceding discussion of liquidity and capital resources contains certain forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, and in addition to the factors discussed herein, among the other factors that could cause actual results to differ materially are the following: failure of facts to conform to necessary management estimates and assumptions; the willingness of GE Capital or other lenders to extend financing commitments; repairs or similar expenditures required for existing restaurants due to weather or acts of God; the Company's ability to identify and secure suitable locations on acceptable terms and open new restaurants in a timely manner; the Company's success in selling restaurants listed for sale; the economic conditions in the new markets into which the Company expands; changes in customer dining patterns; competitive pressure from other national and regional restaurant chains and other food vendors; business conditions, such as inflation or a recession, and growth in the restaurant industry and general economy; and other risks identified from time to time in the Company's SEC reports, registration statements and public announcements. Recent Developments On June 17, 2004, the shareholders of the Company voted to amend the Articles of Incorporation of the Company in order to change the name of the Company from Family Steak Houses of Florida, Inc. to EACO Corporation. Effective June 21, 2004, the Company was conducting business under the name "Eatery Concepts". In December 2003, the Company entered into an amendment to its franchise agreement with Ryan's Family Steak Houses, Inc. (the "Franchisor") to terminate the franchise agreement between the two companies by June 2005. This amendment requires the Company to convert a specific number of its Ryan's restaurants each quarter to a new name beginning the first quarter of 2004, and requires all of the Company's restaurants to be renamed by June 2005. As soon as each restaurant is converted, franchise fees are no longer payable to the Franchisor. The Company was in compliance with the requirement as of the quarter ended September 29, 2004. 15 The Company plans to convert a majority of its restaurants to a new concept called "Whistle Junction". These conversions entail a substantial remodel of the restaurant buildings designed to look like an old train station on the exterior. The interior of the restaurant will also feature the train theme, including an operating model railroad running through the dining room. The operation of the converted restaurants will continue to be a buffet format with an upgraded menu and improved service levels. A newly built Whistle Junction opened in May 2004 and two Whistle Junction remodels have opened as of September 2004, with a third scheduled to open in November 2004. The remainder of the Company's restaurants will be converted to an alternate concept called the "Florida Buffet", based on various factors including their location. As of September 2004, six restaurants have been converted to the Florida Buffet. Two additional restaurants will be converted to the Florida Buffet in the fourth quarter of 2004. The Florida Buffet conversions include interior and exterior changes to the building designed to incorporate a "Florida look" theme, although the changes are not as extensive as those for the Whistle Junction. Menu and service enhancements are also included in the Florida Buffet locations, designed to attract and maintain increased customer volumes. Item 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK There have been no significant changes in the Company's exposure to market risk during the first nine months of 2004. For discussion of the Company's exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Item 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. As required by Rule 13a-15 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 Company's Chairman (who serves as the principal executive officer), President (who serves as the principal operating officer), Director of Finance 16 (who serves as the principal financial and accounting officer) and another member of the Board of Directors. Based upon that evaluation, the Company's Chairman, 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 statement 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. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is party to, or threatened with, litigation from time to time, in the normal course of its business. Management, after reviewing all pending and threatened legal proceedings, considers that the aggregate liability or loss, if any, resulting from the final outcome of these proceedings will not have a material effect on the financial position or operation of the Company. The Company will, from time to time when appropriate in management's estimation, record adequate reserves in the Company's financial statements for pending litigation. Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. On September 1, 2004, the Company sold 36,000 shares of newly issued Series A Cumulative Convertible Preferred Stock to Glen F. Ceiley, the Company's Chairman. The Preferred Stock bears a stated dividend of 8-1/2% of the liquidation preference payable quarterly in arrears in cash when and as declared by the Board of Directors. The liquidation preference of the Preferred Stock is $25 per share and the Preferred Stock was sold at that price for a total purchase price of $900,000. The stock is convertible into Common Stock of the Company 17 at the option of the holder initially at the rate of 27.778 shares of Common Stock for each share of Preferred Stock. The conversion ratio is subject to anti-dilution provisions. The Preferred Stock was issued under the exemption from registration requirements provided by Section 4(2) of the Securities Act of 1933 as a transaction by an issuer not involving any public offering. The Preferred Stock was offered solely to Mr. Ceiley. The Company used the proceeds from the sale of the Preferred Stock to improve its cash position and for working capital. The Company received an opinion from an investment banking firm that the price received by the Company for the Preferred Stock was fair to the Company and its stockholders from a financial standpoint. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed as part of the report on Form 10-Q. No. Exhibit 3.01 Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibits 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.) 18 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.) 19 31.1 Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Chief Executive Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K On July 22, 2004, the Company filed a report on Form 8-K regarding the press release on the Company's name change to EACO Corporation. On August 9, 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 June 30, 2004. On September 1, 2004, the Company filed a report on Form 8-K announcing an amendment to its Articles of Incorporation, for the purpose of an issuance of preferred stock by the Company to Glen Ceiley, its Chairman and CEO. 20 SIGNATURES Pursuant to the requirements 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 (Registrant) /s/ Edward B.Alexander Date: November 12, 2004 Edward B.Alexander President / COO /s/ Stephen C. Travis Date: November 12, 2004 Stephen C. Travis Director of Finance 21 Exhibit 31.1 CERTIFICATIONS I, Edward B. Alexander, certify that: 1. I have reviewed this quarterly report on Form 10-Q of EACO Corporation. 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent 22 fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: November 12, 2004 /s/ Edward B. Alexander Edward B. Alexander President / COO 23 Exhibit 31.2 I, Stephen C. Travis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of EACO Corporation. 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially 24 affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: November 12, 2004 /s/ Stephen C. Travis Stephen C. Travis Director of Finance 25 Exhibit 32.1: Certification of Periodic Reports 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") Quarterly Report on Form 10-Q for the period ending September 29, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Edward B. Alexander, Chief Operating Officer/President 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: November 12, 2004 By:/s/ Edward B. Alexander Edward B. Alexander Chief Operating Officer/ President 26 Exhibit 32.2: Certification of Periodic Reports 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") Quarterly Report on Form 10-Q for the period ending September 29, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen C. Travis, Director of Finance for 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: November 12, 2004 By:/s/ Stephen C. Travis Stephen C. Travis Director of Finance 27 EX-31 2 exhibit311.txt Exhibit 31.1 CERTIFICATIONS I, Edward B. Alexander, certify that: 1. I have reviewed this quarterly report on Form 10-Q of EACO Corporation. 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: November 12, 2004 /s/ Edward B. Alexander Edward B. Alexander President / COO EX-31 3 exhibit312.txt Exhibit 31.2 I, Stephen C. Travis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of EACO Corporation. 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have; a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: November 12, 2004 /s/ Stephen C. Travis Stephen C. Travis Director of Finance EX-32 4 exhibit321.txt Exhibit 32.1: Certification of Periodic Reports 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") Quarterly Report on Form 10-Q for the period ending September 29, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Edward B. Alexander, Chief Operating Officer/President 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: November 12, 2004 By:/s/ Edward B. Alexander Edward B. Alexander Chief Operating Officer/ President EX-32 5 exhibit322.txt Exhibit 32.2: Certification of Periodic Reports 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") Quarterly Report on Form 10-Q for the period ending September 29, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Stephen C. Travis, Director of Finance for 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: November 12, 2004 By:/s/ Stephen C. Travis Stephen C. Travis Director of Finance -----END PRIVACY-ENHANCED MESSAGE-----