EXHIBIT 99.1
(O'CHARLEY'S INC. LOGO)
NEWS RELEASE
CONTACTS Lawrence E. Hyatt Gene Marbach
Chief Financial Officer Investor Relations
O'Charley's Inc. Makovsky + Company
(615) 782-8818 (212) 508-9600
O'CHARLEY'S INC. REPORTS RESULTS FOR THIRD QUARTER OF FISCAL 2005
COMPANY ANNOUNCES PLANS TO CLOSE SIX UNDER-PERFORMING O'CHARLEY'S RESTAURANTS
AND REDUCE NEW RESTAURANT DEVELOPMENT IN 2006
NASHVILLE, Tenn. (October 27, 2005) -- O'Charley's Inc. (NASDAQ/NM: CHUX), a
leading casual dining restaurant company, today reported revenues and earnings
per share for the 12-week and 40-week periods ended October 2, 2005 as well as
its outlook for the fourth quarter. The Company also announced plans to close
six underperforming O'Charley's restaurants, and to reduce development of new
Company-operated restaurants in 2006.
FINANCIAL AND OPERATING HIGHLIGHTS
o Revenue for the third quarter of fiscal 2005 increased 5.7% to $211.8
million from $200.3 million in the third quarter of fiscal 2004. Same
store sales for the third quarter declined by 1.5% at O'Charley's
Restaurants, were flat at Ninety Nine Restaurant and Pub, and
increased by 1.5% at Stoney River Legendary Steaks.
o Subsequent to the end of the third quarter, the Company decided to
close six underperforming O'Charley's restaurants by the end of the
year and to sell a corporate aircraft. The Company also recorded
impairment charges for two O'Charley's restaurants that will remain
open, and for the O'Charley's restaurant in Biloxi, Mississippi that
was destroyed by Hurricane Katrina. Total charges relating to asset
impairment and disposals in the third quarter reduced earnings by
$0.20 per diluted share.
o For the fiscal third quarter, the loss from operations was $4.9
million, or 2.3% of revenue, and included charges of $7.1 million, or
3.4% of revenue for asset impairment and disposals. In comparison,
income from operations in the third quarter of 2004 was $9.1 million,
or 4.5% of revenue. Expressed as a percentage of restaurant sales,
cost of food and beverage in the quarter was flat with the prior-year
period, while payroll and benefits costs and restaurant operating
costs were higher. Results for the third quarter reflect a
year-over-year increase in hourly benefit plan costs of $0.04 per
diluted share.
o The Company reported a third quarter net loss of $4.7 million, or
$0.20 per diluted share, compared with net earnings of $4.1 million,
or $0.18 per diluted share, in the prior-year period. The results for
the third quarter of 2005 include the impact of $0.20 per diluted
share for asset impairment and disposal charges; and $0.02 per diluted
share for the direct impact of Hurricane Katrina, including estimated
lost sales at the 13 directly-impacted O'Charley's restaurants,
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3038 Sidco Drive o Nashville, TN 37204 o (615) 256-8500
CHUX Reports Results for Third Quarter of 2005
Page 2
October 27, 2005
uninsured property losses, and the cost of providing assistance to
impacted employees and communities. Results for the quarter also
reflect $0.02 per diluted share for severance and project-related
expenses associated with the Company's previously announced financial
systems conversion project. Increased interest rates impacted
year-over-year comparisons in the third quarter by $0.01 per diluted
share.
o The effective tax rate applied to the pretax loss in the third quarter
of 2005 was 44.6%, compared with a tax rate of 30.6% in the prior-year
period. Based upon its year-to-date and anticipated fourth quarter
results, the Company estimates that its effective tax rate for the
2005 fiscal year will be 18.7%. Since this is lower than the estimated
tax rate of 29.0% applied to pretax profit in the first and second
quarters, the income tax provision for the third quarter includes a
change in estimate of $1.1 million, or $0.05 per diluted share to
adjust the year-to-date amount.
o For the 40-week period ended October 2, 2005, revenue increased 7.1%
to $716.5 million from $669.2 million in the same period last year.
Income from operations was $24.4 million, or 3.4% of revenue, compared
with $35.0 million, or 5.2% of revenue, in the prior year. Net
earnings for the 40-week period were $10.4 million, or $0.45 per
diluted share, compared with $16.8 million, or $0.74 per diluted
share, in the same period last year.
o As part of its strategic planning process and its focus on improving
results in its existing restaurants, the Company announced that it
plans to develop and open fewer restaurants in 2006 than it will open
in 2005. The Company currently plans to open between 2 and 5 new
O'Charley's company-operated restaurants, between 7 and 10 new Ninety
Nine restaurants, and 2 or 3 new Stoney River restaurants. In
comparison, the Company expects to have opened 12 or 13 new
company-operated O'Charley's restaurants, 9 or 10 new Ninety Nine
restaurants, and one new Stoney River restaurant in 2005.
Gregory L. Burns, chairman and chief executive officer of O'Charley's
Inc. stated, "I am very disappointed by the results for the quarter. While there
were a number of factors beyond our control during the quarter, most notably the
disruptions caused by Hurricane Katrina and the impact of higher interest rates
and gasoline prices on consumers, we are devoting our efforts to fixing those
things that are within our control. We have three great concepts that when
properly executed should be able to overcome the kind of challenges we saw this
quarter. In the coming days and months I expect us to address our operational
issues and focus on improving profitability at our existing restaurants.
Therefore, I have decided to close six unprofitable restaurants that were a
distraction to our management, and to significantly decrease our O'Charley's new
restaurant development.
"As I have noted in the past, we are in the process of completing our
strategic planning process. Once finalized, the initiatives developed through
this process will be aimed at improving the productivity and operational aspects
of our restaurants, enhancing the guest experience and service, and
strengthening our management team. We have made considerable progress in a
number of those areas. For example, we are reviewing various plans to
reconfigure our restaurants to improve productivity. We have fully implemented
our guest satisfaction index system and have witnessed improvements in guest
responses. We recently hired Randy Harris as Chief Human Resources Officer, and
he is working closely with me to strengthen our management team, and improve our
recruiting, training, and compensation programs. The goals of these and the
other initiatives that come from our strategic planning process are to build
sales momentum and increase the frequency of guest visits."
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CHUX Reports Results for Third Quarter of 2005
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October 27, 2005
O'CHARLEY'S RESTAURANTS
Restaurant sales for O'Charley's increased 1.6% to $137.0 million for the third
quarter, reflecting the net addition of 9 new company-operated restaurants since
the third quarter of 2004. The same store sales decrease of 1.5% was comprised
of a 0.9% decline in customer counts and a 0.6% decrease in average check.
Average check for company-operated stores in the third quarter was $11.36. Three
new company-operated O'Charley's restaurants opened during the third quarter and
one store was completely destroyed by Hurricane Katrina, bringing the total
number of company-operated O'Charley's restaurants to 228 at the end of the
quarter. The O'Charley's franchising and joint venture program continued to show
momentum, with the opening of one new franchised restaurant and one new joint
venture restaurant in the quarter, bringing the total number of franchised and
joint venture restaurants to 6 at the end of the quarter.
Commenting on results for the O'Charley's concept, Mr. Burns stated,
"We are grateful that we did not lose any members of the O'Charley's team as a
result of Hurricane Katrina and we are quite proud of them for their efforts in
quickly reopening 12 of the 13 restaurants that were impacted by the storm. Like
many of our competitors, we continue to see particular softness in sales in our
Midwestern restaurants. During the third quarter, we also saw same store sales
increases at our Gulf Coast restaurants apparently due to post-Katrina activity.
The overall decline in same store sales put pressure on O'Charley's operating
margins. Increased payroll and benefits costs as a percent of sales were caused
by declines in productivity, and higher wage and benefit costs per hour.
Restaurant operating expenses increased as a percent of sales due to higher
packaging and utility costs, and higher repair and maintenance costs due to the
hurricane. The decision to close six underperforming stores, while difficult for
the team members involved, is necessary to focus our management efforts on
building sales and improving margins.
"We continue to enhance the guest experience at O'Charley's, and are
pleased with the improvement we have seen in guest satisfaction scores since the
beginning of the year. We do understand the challenges that consumers are facing
with higher energy and gasoline prices. During the fourth quarter we are going
to reinforce the great value we offer our guests by promoting a number of menu
items that have proven to be very popular. Our marketing message will highlight
the value in the O'Charley's menu, and selectively use value promotions in
certain markets."
NINETY NINE RESTAURANT & PUB RESTAURANTS
Restaurant sales for Ninety Nine increased 13.0% to $66.2 million in
the third quarter, reflecting the addition of 12 new restaurants since the third
quarter of 2004. Same store sales were flat in the quarter, and consisted of a
1.9% increase in customer counts offset by a 1.9% decrease in average check.
Average check for Ninety Nine in the third quarter was $13.65. Five new Ninety
Nine restaurants opened during the third quarter bringing the total number of
Ninety Nine restaurants to 107 at the end of the quarter.
Mr. Burns stated, "Generating positive guest counts at Ninety Nine was
a primary focus for us this year, and we are pleased with the increases achieved
at Ninety Nine in a difficult consumer environment. In fact, we believe Ninety
Nine had the highest customer count increases of any casual dining restaurant
chain in the New England market. Average check declined for a number of reasons,
including a
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CHUX Reports Results for Third Quarter of 2005
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October 27, 2005
continued decline in alcoholic beverage mix, the elimination of higher-priced
promotions from the prior year, and the popularity of new, lower-priced items on
Ninety-Nine's new menu. The decline in average check put pressure on Ninety
Nine's operating margins, particularly wage and benefit and restaurant operating
expenses."
"We understand that the New England consumer is faced with the
prospect of significantly higher utility costs. Therefore, for the balance of
the year, similar to O'Charley's, we intend to focus on the great value in the
Ninety Nine menu through limited time promotions, family value meals and
customer incentives."
STONEY RIVER LEGENDARY STEAKS RESTAURANTS
Third quarter sales for Stoney River Legendary Steaks increased 1.5%
to $5.2 million with all six restaurants in operation included in the same store
sales base for the quarter. The sales increase consisted of a 1.0% decrease in
customer counts and a 2.5% increase in average check to $40.18. The Company
opened a new Stoney River restaurant in suburban Columbus, Ohio after the end of
the quarter, and has broken ground on a new location in the West End area of
Nashville, Tennessee, which is projected to open in early 2006. The new Stoney
River restaurants are the first additions to the concept since 2002. The Company
expects that the restarting of Stoney River restaurant development will require
preopening, training, and other expenses of approximately $1.0 million in fiscal
2005, of which $0.3 million was incurred in the third quarter.
Mr. Burns added, "We continue to be pleased with Stoney River's
performance in terms of same store sales and operational improvements, and
believe that the concept has established a unique position in the upscale
steakhouse segment. We are excited about the recent opening of the Dublin, Ohio,
restaurant and our second location in Nashville planned for early 2006. Based on
the local market reception we have already received for both stores, we believe
these will be excellent markets for Stoney River and a good start for continued
development of the concept."
OUTLOOK FOR FOURTH QUARTER AND FULL YEAR
The Company stated that it expects to report net earnings per diluted
share of between $0.02 and $0.07 for the 12 weeks ending December 25, 2005, and
net earnings per diluted share of between $0.47 and $0.52 for the full fiscal
year ending December 25, 2005. Projected results for the fourth quarter are
based upon anticipated same store sales declines of between 0% and 2% for the
O'Charley's concept, same store sales increases of between 0% and 2% for the
Ninety Nine concept, and continued pressure on operating margins. The Company
projects an effective tax rate of 18.7% for the full fiscal year, compared with
28.6% in 2004, and interest expense between $15.0 million and $16.0 million for
the year, compared with $13.5 million in the 2004 fiscal year. The Company's
guidance does not reflect any impact for restructuring or other charges relating
to decisions that the Company may make in the fourth quarter as part of its
turnaround efforts.
Mr. Burns concluded, "During the third quarter, we saw the impact that
hurricanes, high gasoline prices and the resulting economic uncertainty can have
on consumer spending in our restaurants. We continue to be concerned about these
trends as we enter the fourth quarter and the holiday season. However, even
during challenging times I expect our company to execute all of our concepts at
the highest level, which means both growing sales and improving margins. We
remain committed to
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CHUX Reports Results for Third Quarter of 2005
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October 27, 2005
completing and implementing our strategic plan, which I believe will lead to a
turnaround in our performance. The steps we have announced today, including the
closing of six underperforming restaurants and the reduction of new restaurant
development in 2006, are evidence of our commitment to improve our core
business, drive sales and profitability and maximize shareholder value. We are
confident that the steps we are taking today as well as those we plan to take in
the future will make O'Charley's Inc. a better company for our team members,
guests and shareholders."
INVESTOR CONFERENCE CALL AND WEB SIMULCAST
O'Charley's Inc. will conduct a conference call on its third quarter
earnings release on October 27, 2005, at 11:00 a.m. EDT. The number to call for
this interactive teleconference is (973) 582-2952. A replay of the conference
call will be available through November 4, 2005, by dialing (973) 341-3080 and
entering the confirmation number 6605765.
The live broadcast of O'Charley's conference call will be available
online at the Company's website, www.ocharleysinc.com, as well as
www.streetevents.com and www.earnings.com on October 27, 2005, beginning at
11:00 a.m. EDT. The online replay will follow shortly after the call and
continue through November 4, 2005.
ABOUT O'CHARLEY'S INC.
O'Charley's Inc., headquartered in Nashville, Tenn., is a multi-concept
restaurant company that operates or franchises a total of 350 restaurants under
three brands: O'Charley's, Ninety Nine Restaurant and Pub, and Stoney River
Legendary Steaks. The Company operates 230 company-owned O'Charley's restaurants
in 16 states in the Southeast and Midwest, and has four franchised O'Charley's
restaurants in Michigan and two joint venture O'Charley's restaurants in
Louisiana. The menu, with an emphasis on fresh preparation, features several
specialty items such as hand-cut and aged steaks, a variety of seafood and
chicken, freshly baked yeast rolls, fresh-cut salads with special-recipe salad
dressings and signature caramel pie. The Company operates Ninety Nine Restaurant
& Pub restaurants in 107 locations throughout Connecticut, Maine, Massachusetts,
New Hampshire, New York, Rhode Island and Vermont. Ninety Nine has earned a
strong reputation for providing generous portions of high-quality food at
moderate prices in a comfortable, relaxed atmosphere. The menu features a wide
selection of appetizers, salads, sandwiches, burgers, entrees and desserts. The
Company operates seven Stoney River Legendary Steaks restaurants in Georgia,
Illinois, Kentucky, Ohio and Tennessee. The dinner-only steakhouse concept
appeals to both upscale casual dining and fine dining customers by offering
high-quality food and attentive customer service typical of high-end steakhouses
at more moderate prices.
FORWARD LOOKING STATEMENT
This press release and statements made by or on behalf of the Company
relating hereto may be deemed to constitute forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are subject to the
finalization of the Company's third fiscal quarter financial and accounting
procedures, and may be affected by certain risks and uncertainties, including,
but not limited to, the Company's ability to increase operating margins and
increase same store sales at its restaurants; the effect that increases in food,
labor, energy, interest costs and other expenses have on our results of
operations; the Company's ability to sell closed restaurants and other surplus
assets; the possible adverse effect on our sales of any
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CHUX Reports Results for Third Quarter of 2005
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October 27, 2005
decrease in consumer spending; the effect of increased competition; the impact
on our results of operations of restarting development of our StoneyRiver
concept, and the other risks described in the Company's filings with the
Securities and Exchange Commission. In light of the significant uncertainties
inherent in the forward-looking statements included herein, you should not
regard the inclusion of such information as a representation by us that our
objectives, plans and projected results of operations will be achieved and the
Company's actual results could differ materially from such forward-looking
statements. The Company does not undertake any obligation to publicly release
any revisions to the forward-looking statements contained herein to reflect
events and circumstances occurring after the date hereof or to reflect the
occurrence of unanticipated events.
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O'CHARLEY'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
12 WEEKS ENDED OCTOBER 2, 2005 AND OCTOBER 3, 2004
<Table>
<Caption>
2005 2004
-------------------------- ----------------------
(in thousands, except per share data)
Revenues:
Restaurant sales $209,278 98.8% $198,694 99.2%
Commissary sales 2,381 1.1% 1,518 0.8%
Franchise revenue 100 0.1% 65 0.0%
-------------------------- ----------------------
211,759 100.0% 200,277 100.0%
Costs and Expenses:
Cost of restaurant sales:
Cost of food and beverage 63,991 30.6% 60,859 30.6%
Payroll and benefits 74,646 35.7% 65,798 33.1%
Restaurant operating costs 40,824 19.5% 37,224 18.7%
Cost of commissary sales 1,940 0.9% 1,435 0.7%
Advertising expenses 6,186 2.9% 6,083 3.0%
General and administrative expenses 9,539 4.5% 8,595 4.3%
Depreciation and amortization 10,192 4.8% 9,401 4.7%
Asset impairment and disposals 7,138 3.4% 65 0.0%
Pre-opening costs 2,188 1.0% 1,739 0.9%
------------- ------------
216,644 102.3% 191,199 95.5%
-------------------------- ----------------------
(Loss)/Income from Operations (4,885) (2.3%) 9,078 4.5%
Other (Income)/Expense:
Interest expense, net 3,580 1.7% 3,159 1.6%
Other, net (1) 0.0% 0 0.0%
-------------------------- ----------------------
3,579 1.7% 3,159 1.6%
-------------------------- ----------------------
(Loss)/Earnings Before Income Taxes (8,464) (4.0%) 5,919 3.0%
Income Tax (Benefit)/Expense (3,775) (1.8%) 1,812 0.9%
-------------------------- ----------------------
Net (Loss)/Earnings ($4,689) (2.2%) $4,107 2.1%
========================== ======================
Basic (Loss)/Earnings per Share:
(Loss)/Earnings per Common Share ($0.20) $0.18
============= ============
Weighted Average Common Shares Outstanding 22,909 22,347
============= ============
Diluted (Loss)/Earnings per Share:
(Loss)/Earnings per Common Share ($0.20) $0.18
============= ============
Weighted Average Common Shares Outstanding 22,909 22,636
============= ============
</Table>
O'CHARLEY'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
40 WEEKS ENDED OCTOBER 2, 2005 AND OCTOBER 3, 2004
<Table>
<Caption>
2005 2004
-------------------------- ----------------------
(in thousands, except per share data)
Revenues:
Restaurant sales $709,472 99.0% $663,344 99.1%
Commissary sales 6,737 0.9% 5,766 0.9%
Franchise revenue 290 0.1% 65 0.0%
-------------------------- ----------------------
716,499 100.0% 669,175 100.0%
Costs and Expenses:
Cost of restaurant sales:
Cost of food and beverage 213,722 30.1% 202,314 30.5%
Payroll and benefits 245,347 34.6% 222,937 33.6%
Restaurant operating costs 131,021 18.5% 120,522 18.2%
Cost of commissary sales 5,819 0.8% 5,446 0.8%
Advertising expenses 20,049 2.8% 20,312 3.0%
General and administrative expenses 30,962 4.3% 27,720 4.1%
Depreciation and amortization 33,363 4.7% 30,107 4.5%
Asset impairment and disposals 7,195 1.0% 16 0.0%
Pre-opening costs 4,585 0.6% 4,822 0.7%
------------- -----------
692,063 96.6% 634,196 94.8%
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Income from Operations 24,436 3.4% 34,979 5.2%
Other Expense/(Income):
Interest expense, net 11,619 1.6% 10,250 1.5%
Other, net 42 0.0% (2) 0.0%
-------------------------- ----------------------
11,661 1.6% 10,248 1.5%
-------------------------- ----------------------
Earnings Before Income Taxes 12,775 1.8% 24,731 3.7%
Income Taxes 2,384 0.3% 7,954 1.2%
-------------------------- ----------------------
Net Earnings $10,391 1.5% $16,777 2.5%
========================== ======================
Basic Earnings per Share:
Net Earnings $0.46 $0.75
===================== ============
Weighted Average Shares Outstanding 22,797 22,246
===================== ============
Diluted Earnings per Share:
Net Earnings $0.45 $0.74
===================== ============
Weighted Average Shares Outstanding 23,109 22,618
===================== ============
</Table>