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 FOURTH QUARTER AND FULL YEAR RESULTS
COMPANY PROVIDES OUTLOOK FOR 2006 FISCAL YEAR
NASHVILLE, Tenn. (February 2, 2006) -- 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 52-week periods ended December 25, 2005, as well
as its outlook for the current quarter and the 2006 fiscal year.
FINANCIAL AND OPERATING HIGHLIGHTS
- Revenue for the fourth quarter of fiscal 2005 increased 5.7% to $213.7
million from $202.2 million in the fourth quarter of fiscal 2004. For
fiscal 2005, revenue rose 6.7% to $930.2 million from $871.4 million
in the prior year period.
- For the fourth quarter of 2005, same store sales decreased by 0.8% at
O'Charley's Restaurants, and increased by 1.9% at Ninety Nine
Restaurant and Pub, and 7.0% at Stoney River Legendary Steaks. For the
2005 fiscal year, same store sales were flat at O'Charley's
Restaurants, and increased by 0.7% at Ninety Nine Restaurant and Pub,
and 3.7% at Stoney River Legendary Steaks.
- Income from operations in the fourth quarter of 2005 was $4.8 million,
or 2.2% of revenue, compared with $11.2 million, or 5.5% of revenue in
the fourth quarter of last year. Expressed as a percentage of
restaurant sales, cost of food and beverage, payroll and benefits
costs, and restaurant operating costs were all higher than in the
fourth quarter of 2004. For fiscal 2005, income from operations was
$29.2 million, or 3.1% of revenue, compared with $46.2 million, or
5.3% of revenue in the prior fiscal year. Full year results for 2005
include an asset impairment and disposal charge of $7.3 million, or
0.8% of revenue.
- The Company reported fourth quarter earnings before cumulative effect
of a change in accounting principle of $1.6 million, or $0.07 per
diluted share, compared with net earnings of $6.5 million, or $0.29
per diluted share, in the prior-year period. Results for the fourth
quarter of 2005 include a charge of $0.02 per diluted share for
severance and other costs relating to previously announced
organizational and management changes, and $0.01 per diluted share for
severance and project-related expenses associated with the Company's
previously announced financial systems conversion project. The Company
adopted FIN-47, "Accounting for Conditional Asset Retirement
Obligations- an interpretation of FASB Statement No. 143" in the
fourth quarter of 2005. The cumulative effect of this change in
accounting principle on net earnings was $0.2 million, or $0.01 per
diluted share.
3038 Sidco Drive - Nashville, TN 37204 - (615) 256-8500
CHUX Reports Fourth Quarter and Full Year Results for 2005
Page 2
February 2, 2006
- The Company reported earnings before the cumulative effect of a change
in accounting principle of $12.0 million, or $0.52 per diluted share
for fiscal 2005, compared with net earnings of $23.3 million, or $1.03
per diluted share in fiscal 2004. Full year results for 2005 include
charges of $0.20 per diluted share for asset impairment and disposal,
$0.02 per diluted share for the direct impact of Hurricane Katrina,
and $0.05 per diluted share for the financial systems conversion
project.
- For the fourth quarter of 2005, the Company recognized an income tax
benefit of $0.4 million. Based upon the Company's full year results,
the effective tax rate applied to pretax profit for fiscal 2005 was
14.3%. Since this is lower than the estimated rate applied to the
first three quarters of the year, the fourth quarter income tax
benefit includes a change in estimate of $0.6 million, or $0.02 per
diluted share to adjust the year-to-date amount.
Gregory L. Burns, chairman and chief executive officer of O'Charley's
Inc., stated, "The recently completed fiscal year was a challenging one for
O'Charley's. I am pleased that our financial results for the quarter were at the
high end of the guidance that we offered on October 27. However, everyone on the
O'Charley's management team and throughout the organization understands that our
performance must improve in 2006 and beyond, and we are approaching this
turnaround effort with a sense of urgency. I want to emphasize that it is not
'business as usual' at O'Charley's.
"Our objective is clear: to improve the performance of the business to
enhance shareholder value. In order to accomplish this, we are focusing our
efforts in the following areas:
- Strengthen the organization with a new core of talent, and build a
winning team;
- Improve our execution of product and labor cost management;
- Focus the organization on our commitment to greater profitability,
with incentives for success, and consequences for failing to meet our
targets;
- Enhance guest satisfaction and intent to return by instilling 'A
Passion to Serve'(TM) throughout the organization, which represents
our guest-centric approach to the dining experience; and
- Drive same store sales through new product offerings, new marketing,
and a new, more analytical approach to menu pricing
"We have made progress on a number fronts. For example, Jeff Warne,
who we recently announced as the new President of the O'Charley's concept, is a
great addition to the leadership of the Company. While our primary focus in 2006
will be on improving the operating performance of our business, we will also
consider opportunities to use our real estate and other assets to enhance
shareholder value as well."
O'CHARLEY'S RESTAURANTS
Restaurant sales for O'Charley's increased 2.2% to $137.6 million for
the fourth quarter, reflecting the addition of 13 new company-operated
restaurants and the closing of 9 company-operated restaurants since the fourth
quarter of 2004. The same store sales decrease of 0.8% was comprised of a 0.4%
increase in customer counts and a 1.2% decrease in average check. Average check
for company-operated stores in the fourth quarter was $11.48. Three new
company-operated O'Charley's restaurants
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CHUX Reports Fourth Quarter and Full Year Results for 2005
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February 2, 2006
opened during the fourth quarter and, as previously announced by the Company,
six O'Charley's restaurants were closed, bringing the total number of
company-operated O'Charley's restaurants to 225 at the end of the quarter. The
O'Charley's franchising and joint venture program continued to show momentum,
with the opening of 3 new franchised restaurants and one new joint venture
restaurant during fiscal 2005, bringing the total number of franchised and joint
venture restaurants to 6 at year end.
Commenting on results for the O'Charley's concept, Mr. Burns stated,
"Given the challenging consumer environment in 2005, particularly in the second
half of the year, we are pleased to end the year with positive guest counts.
Like many of our competitors, we continue to see particular softness in sales in
our Midwestern restaurants. We also saw same store sales increases at our Gulf
Coast restaurants apparently due to post-Katrina activity. While operating costs
as a percentage of sales were higher in the fourth quarter of 2005 than in the
fourth quarter of 2004, we did see improvements in margin performance from the
third quarter of 2005. As previously announced, we closed underperforming
restaurants and have significantly reduced new restaurant development for 2006.
While these decisions were difficult for the team members involved, they will
allow us to refocus the organization in 2006 on improving the performance of our
existing restaurants.
"We continue to enhance the guest experience at O'Charley's and are
pleased with the improvement we have seen in guest satisfaction scores during
2005. For 2006, we have new promotional menus, new menu items, and new
advertising, all of which highlight the good food and good times that our guests
have come to expect at O'Charley's. Our guests also expect great service, which
is why we are instilling "A Passion To Serve"(TM) throughout the organization
along with a series of programs to emphasize our guest-centric approach to the
dining experience."
NINETY NINE RESTAURANT & PUB RESTAURANTS
Restaurant sales for Ninety Nine increased 10.6% to $66.4 million in
the fourth quarter, reflecting the addition of 10 new restaurants since the
fourth quarter of 2004. Same store sales increased by 1.9% in the quarter, and
consisted of a 3.1% increase in customer counts and a 1.2% decrease in average
check. Average check for Ninety Nine in the fourth quarter was $13.92. Two new
Ninety Nine restaurants opened during the fourth quarter bringing the total
number of Ninety Nine restaurants to 109 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. Based upon industry data, we
believe that Ninety Nine has recently realized the highest increases of customer
counts of any casual dining restaurant chain in the New England market.
Operating costs as a percentage of sales were higher in the fourth quarter of
2005 than in the fourth quarter of 2004, due primarily to higher food and
beverage, employee benefit, utility and packaging costs.
"What we are doing in 2006 with menu, promotions, pricing and
advertising are designed to improve the reputation Ninety Nine has as a
friendly, comfortable place to gather and enjoy great American food and drink at
a terrific price. We are pleased by the strong performance of the new Ninety
Nine restaurant in Bensalem, Pennsylvania, the first opening in the Philadelphia
market, and look forward to continued development of that market in 2006."
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CHUX Reports Fourth Quarter and Full Year Results for 2005
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February 2, 2006
STONEY RIVER LEGENDARY STEAKS RESTAURANTS
Fourth quarter sales for Stoney River Legendary Steaks increased 16.2%
to $6.6 million, which reflects increases of 7.0% at the six restaurants
included in the same store sales base, and sales at the new Dublin, Ohio
restaurant. The same store sales increase consisted of a 5.6% increase in
customer counts and a 1.3% increase in average check. Average check for Stoney
River in the fourth quarter was $41.73. The Company opened the Dublin restaurant
in the fourth quarter, and expects to open a new location in the West End area
of Nashville, Tennessee in early 2006.
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 reception we have already received at both restaurants, we believe
these are excellent markets that are demonstrating a good start to the continued
development of our Stoney River concept."
OUTLOOK FOR FIRST QUARTER AND FULL YEAR 2006
The Company stated that it expects to report net earnings per diluted
share of between $0.25 and $0.30 for the 16-week period ending April 16, 2006,
and net earnings per diluted share of between $0.90 and $1.00 for the fiscal
year ending December 31, 2006. The 2006 fiscal year is a 53-week year. The
Company's guidance for the full year reflects an estimated positive earnings
impact from the 53rd week of between $0.08 and $0.10 per diluted share.
Projected results for the full year are based upon anticipated same store sales
increases of between 1% and 3% for the O'Charley's and Ninety Nine concepts,
with same store sales increases expected to be higher in the second half of the
year than in the first half. The Company expects improvement in its income from
operations as a percentage of sales during 2006. The operating margin for the
first quarter of 2006 is expected to be below the prior year quarter, while the
operating margin for subsequent quarters is expected to show improvement
compared with the prior year quarters. The Company projects an effective tax
rate of approximately 29% for the full fiscal year, compared with 14.3% in 2005,
and interest expense between $16.0 million and $17.0 million for the year,
compared with $15.1 million in the 2005 fiscal year. The Company's guidance does
not reflect any impact for restructuring or other charges relating to decisions
that the Company may make during fiscal 2006 as part of its turnaround efforts.
Mr. Burns concluded, "Our management team understands the need to turn
around our performance in 2006, and we believe that we are taking the
appropriate actions to generate profitable and sustainable growth while
enhancing shareholder value. We have a conservative fiscal policy, strong asset
base and strong balance sheet which provide us with financial flexibility."
INVESTOR CONFERENCE CALL AND WEB SIMULCAST
O'Charley's Inc. will conduct a conference call on its 2005 fourth
quarter and year-end earnings release on February 2, 2006, 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 February 9, 2006, by
dialing (973) 341-3080 and entering the confirmation number 6967421.
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CHUX Reports Fourth Quarter and Full Year Results for 2005
Page 5
February 2, 2006
The live broadcast of O'Charley's conference call will be available
online:
http://phx.corporate-ir.net/phoenix.zhtml?c=82565&p=irol-irhome
If you are unable to participate during the live Webcast, the call
will be archived on the company's Web site at www.ocharleysinc.com, as well as
www.streetevents.com and www.earnings.com, shortly after the call on February 2,
2006 and continuing through February 9, 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 348 restaurants under
three brands: O'Charley's, Ninety Nine Restaurant and Pub, and Stoney River
Legendary Steaks. The Company operates 225 company-owned O'Charley's restaurants
in 16 states in the Southeast and Midwest, and has five 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 109 locations throughout Connecticut, Maine, Massachusetts,
New Hampshire, New York, Rhode Island, Vermont and Pennsylvania. Ninety Nine has
earned a strong reputation as a friendly, comfortable place to gather and enjoy
great American food and drink at a terrific price. 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
The forward looking statements in this press release and statements made by or
on behalf of the Company relating hereto, including those containing words like
"expect," "project,""believe", "may," "could," "anticipate," and "estimate," are
subject 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 fourth fiscal quarter and full fiscal year
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 decrease
in consumer spending; the effect of increased competition; the impact on our
results of operations of restarting development of our Stoney River 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.
# # #
(Tables to Follow)
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O'CHARLEY'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
12 WEEKS ENDED DECEMBER 25, 2005 AND DECEMBER 26, 2004
2005 2004
---------------- ----------------
(in thousands, except per share data)
Revenues:
Restaurant sales $211,857 99.1% $200,915 99.4%
Commissary sales 1,761 0.8% 1,269 0.6%
Franchise revenue 71 0.1% 27 0.0%
-------- ----- -------- -----
213,689 100.0% 202,211 100.0%
Costs and expenses:
Cost of restaurant sales:
Cost of food and beverage 64,066 30.2% 58,699 29.2%
Payroll and benefits 73,177 34.5% 67,577 33.6%
Restaurant operating costs 41,139 19.4% 36,969 18.4%
Cost of commissary sales 1,891 0.9% 1,185 0.6%
Advertising expenses 5,419 2.5% 5,309 2.6%
General and administrative expenses 10,983 5.1% 10,517 5.2%
Depreciation and amortization 10,443 4.9% 9,691 4.8%
Asset impairment and disposals 125 0.1% -- 0.0%
Pre-opening costs 1,686 0.8% 1,086 0.5%
-------- --------
208,929 97.8% 191,033 94.5%
-------- ----- -------- -----
Income from operations 4,760 2.2% 11,178 5.5%
Other expense:
Interest expense, net 3,505 1.6% 3,226 1.6%
Other, net -- 0.0% 2 0.0%
-------- ----- -------- -----
3,505 1.6% 3,228 1.6%
-------- ----- -------- -----
Earnings before income taxes and cumulative effect of
accounting principle 1,255 0.6% 7,950 3.9%
Income taxes (383) (0.2%) 1,408 0.7%
-------- ----- -------- -----
Earnings before cumulative effect of change
in accounting principle $ 1,638 0.8% $ 6,542 3.2%
Cumulative effect of change in accounting principle (151) -0.1% -- 0.0%
-------- --------
Net earnings $ 1,487 0.7% $ 6,542 3.2%
======== ========
BASIC EARNINGS PER SHARE:
Earnings before cumulative effect of change
in accounting principle $ 0.07 $ 0.29
Cumulative effect of change in accounting principle (0.01) --
-------- --------
Net earnings $ 0.06 $ 0.29
======== ========
Weighted average common shares outstanding 22,970 22,432
======== ========
DILUTED EARNINGS PER SHARE:
Earnings before cumulative effect of change
in accounting principle $ 0.07 $ 0.29
Cumulative effect of change in accounting principle (0.01) --
-------- --------
Net earnings $ 0.06 $ 0.29
======== ========
Weighted average common shares outstanding 23,051 22,740
======== ========
3038 Sidco Drive - Nashville, TN 37204 - (615) 256-8500
O'CHARLEY'S INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
YEAR ENDED DECEMBER 25, 2005 AND DECEMBER 26, 2004
2005 2004
---------------- ----------------
(in thousands, except per share data)
Revenues:
Restaurant sales $921,329 99.0% $864,259 99.2%
Commissary sales 8,498 0.9% 7,035 0.8%
Franchise revenue 361 0.1% 92 0.0%
-------- ----- -------- -----
930,188 100.0% 871,386 100.0%
Costs and expenses:
Cost of restaurant sales:
Cost of food and beverage 277,788 30.2% 261,013 30.2%
Payroll and benefits 318,524 34.6% 290,514 33.6%
Restaurant operating costs 172,160 18.7% 157,491 18.2%
Cost of commissary sales 7,710 0.8% 6,631 0.8%
Advertising expenses 25,468 2.7% 25,621 2.9%
General and administrative expenses 41,945 4.5% 38,237 4.4%
Depreciation and amortization 43,806 4.7% 39,798 4.6%
Asset impairment and disposals 7,320 0.8% 16 0.0%
Pre-opening costs 6,271 0.7% 5,908 0.7%
-------- --------
900,992 96.9% 825,229 94.7%
-------- ----- -------- -----
Income from operations 29,196 3.1% 46,157 5.3%
Other expense:
Interest expense, net 15,124 1.6% 13,476 1.5%
Other, net 42 0.0% -- 0.0%
-------- ----- -------- -----
15,166 1.6% 13,476 1.5%
-------- ----- -------- -----
Earnings before income taxes and cumulative effect of
accounting principle 14,030 1.5% 32,681 3.8%
Income taxes 2,001 0.2% 9,362 1.1%
-------- ----- -------- -----
Earnings before cumulative effect of change
in accounting principle $ 12,029 1.3% $ 23,319 2.7%
Cumulative effect of change in accounting principle (151) 0.0% -- 0.0%
-------- --------
Net earnings $ 11,878 1.3% $ 23,319 2.7%
======== ========
BASIC EARNINGS PER SHARE:
Earnings before cumulative effect of change
in accounting principle $ 0.53 $ 1.05
Cumulative effect of change in accounting principle (0.01) --
-------- --------
Net earnings $ 0.52 $ 1.05
======== ========
Weighted average common shares outstanding 22,837 22,290
======== ========
DILUTED EARNINGS PER SHARE:
Earnings before cumulative effect of change
in accounting principle $ 0.52 $ 1.03
Cumulative effect of change in accounting principle (0.01) --
-------- --------
Net earnings $ 0.51 $ 1.03
======== ========
Weighted average common shares outstanding 23,096 22,647
======== ========
3038 Sidco Drive - Nashville, TN 37204 - (615) 256-8500
O'CHARLEY'S INC.
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AT DECEMBER 25, 2005 AND DECEMBER 26, 2004
2005 2004
-------- --------
(in thousands)
Cash $ 5,699 $ 10,772
Other current assets 78,239 53,626
Property and equipment, net 464,545 451,808
Goodwill and other intangible assets 118,995 118,995
Other assets 20,132 22,310
-------- --------
Total assets $687,610 $657,511
======== ========
Current portion of long-term debt and capital leases $ 10,975 $ 12,670
Other current liabilities 97,069 82,714
Deferred income taxes 7,407 7,884
Long-term debt, net of current portion 148,299 146,125
Capitalized lease obligations 26,408 32,344
Other liabilities 47,634 45,034
Shareholders' equity 349,818 330,740
-------- --------
Total liabilities and shareholders' equity $687,610 $657,511
======== ========
3038 Sidco Drive - Nashville, TN 37204 - (615) 256-8500