<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO.1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended July 14, 1996
Commission file number 0-18629
-----------------------
O'Charley's Inc.
---------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 62-1192475
- - --------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3038 Sidco Drive, Nashville, Tennessee 37204
- - --------------------------------------- ------
(Address of principal executive offices) (Zip Code)
(615) 256-8500
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
<TABLE>
<CAPTION>
Class Outstanding as of August 21, 1996
----- ----------------------------------
<S> <C>
Common Stock, no par value 7,798,444 shares
</TABLE>
<PAGE> 2
O'Charley's Inc.
Form 10-Q/A
For Quarter Ended July 14, 1996
Index
<TABLE>
Page No.
--------
<S> <C>
Part I - Financial Information
Item 1. Financial statements:
Balance sheets as of July 14, 1996 and
December 31, 1995 3
Statements of earnings for the twelve weeks 4
ended July 14, 1996 and July 9, 1995
Statements of earnings for the twenty-eight weeks
ended July 14, 1996 and July 9, 1995 5
Statements of cash flows for the twenty-eight weeks
ended July 14, 1996 and July 9, 1995 6
Notes to unaudited financial statements 7
Item 2. Management's discussion and analysis of
financial condition and results of operations 8 - 11
Part II - Other Information
Item 1. Legal proceedings 12
Item 6. Exhibits and reports on form 8-K 12
Signatures 13
</TABLE>
<PAGE> 3
O'Charley's Inc.
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
July 14, December 31,
1996 1995
Assets ----------- -------------
<S> <C> <C>
Current Assets:
Cash $ 1,674 $ 2,576
Accounts receivable 1,510 1,244
Due from related parties 15 108
Inventories 6,157 3,780
Preopening costs 1,175 1,045
Deferred income taxes 839 925
Other current assets 2,284 971
-------- -------
Total current assets 13,654 10,649
Property and Equipment, net 91,181 81,512
Other Assets 998 1,276
-------- -------
$105,833 $93,437
======== =======
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 5,165 $ 4,424
Accrued payroll and related expenses 3,490 3,435
Accrued expenses 12,400 4,650
Federal, state and local taxes 559 2,606
Current portion of long-term debt and capitalized leases 2,858 2,793
-------- -------
Total current liabilities 24,472 17,908
Deferred Income Taxes 733 2,619
Long-Term Debt 24,816 11,990
Capitalized Lease Obligations 10,282 9,272
Shareholders' Equity:
Common stock - No par value;authorized, 50,000,000
shares; issued and outstanding, 7,798,744 in 1996
and 7,770,967 in 1995 29,615 29,819
Retained earnings 15,915 21,829
-------- -------
45,530 51,648
-------- -------
$105,833 $93,437
======== =======
</TABLE>
See notes to financial statements.
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<PAGE> 4
O'Charley's Inc.
Statements of Earnings
Twelve Weeks Ended July 14, 1996 and July 9, 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(in thousands, except per share data)
<S> <C> <C>
Revenues:
Restaurant sales $37,926 $31,152
Commissary sales 551 2,518
Franchise revenue 8 6
------- -------
38,485 33,676
Costs and Expenses:
Cost of restaurant sales:
Cost of food, beverage and supplies 13,652 11,465
Payroll and benefits 11,908 9,374
Restaurant operating costs 5,783 4,676
Cost of commissary sales 527 2,409
Advertising, general and administrative expenses 2,099 1,845
Depreciation and amortization 1,831 1,387
Asset revaluation 5,110 -
------- -------
40,910 31,156
------- -------
Income (loss) from Operations (2,425) 2,520
Other(Income)Expense:
Interest expense, net 641 531
Litigation 8,500 -
Other, net (16) (308)
------- -------
9,125 223
------- -------
Earnings (Loss) Before Income Taxes (11,550) 2,297
Income Tax Expense (Benefit) (4,067) 804
------- -------
Net Earnings (Loss) $(7,483) $ 1,493
======= =======
Earnings (Loss) per Common Share $ (0.96) $ 0.18
======= =======
Weighted Average Common Shares Outstanding 7,786 8,356
======= =======
</TABLE>
See notes to financial statements.
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<PAGE> 5
O'Charley's Inc.
Statements of Earnings
Twenty-Eight Weeks Ended July 14, 1996 and July 9, 1995
<TABLE>
<CAPTION>
1996 1995
-------- ---------
(in thousands, except per share data)
<S> <C> <C>
Revenues:
Restaurant sales $84,306 $69,716
Commissary sales 1,241 5,803
Franchise revenue 17 15
------- -------
85,564 75,534
Costs and Expenses:
Cost of restaurant sales:
Cost of food, beverage and supplies 30,242 25,677
Payroll and benefits 26,217 20,877
Restaurant operating costs 12,950 10,516
Cost of commissary sales 1,181 5,541
Advertising, general and administrative expenses 4,802 4,277
Depreciation and amortization 4,229 3,006
Asset revaluation 5,110 -
------- -------
84,731 69,894
------- -------
Income from Operations 833 5,640
Other(Income)Expense:
Interest expense, net 1,340 1,126
Litigation 8,500 1,000
Other, net 92 (694)
------- -------
9,932 1,432
------- -------
Earnings (Loss) Before Income Taxes (9,099) 4,208
Income Tax Expense (Benefit) (3,185) 1,473
------- -------
Net Earnings (Loss) $(5,914) $ 2,735
======= =======
Earnings (Loss) per Common Share $ (0.76) $ 0.33
======= =======
Weighted Average Common Shares Outstanding 7,779 8,274
======= =======
</TABLE>
See notes to financial statements.
-5-
<PAGE> 6
O'Charley's Inc.
Statements of Cash Flows
Twenty-Eight Weeks Ended July 14, 1996 and July 9, 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings (loss) $(5,914) $ 2,735
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 3,101 2,493
Amortization of preopening costs 1,128 513
Asset revaluation adjustment 5,110 -
Provision for deferred income taxes (1,800) 274
Gain on the sale of assets (171) -
Changes in assets and liabilities:
Accounts receivable (173) (387)
Inventories (2,377) 219
Additions to preopening costs (1,258) (1,064)
Other current assets (1,313) (12)
Accounts payable 741 1,786
Accrued payroll and other accrued expenses 5,758 672
-------- -------
Net cash provided by operating activities 2,832 7,229
Cash Flows from Investing Activities:
Additions to property and equipment (14,864) (12,694)
Proceeds from the sale of assets 171 -
Other, net 49 (240)
-------- -------
Net cash used by investing activities (14,644) (12,934)
Cash Flows from Financing Activities:
Proceeds from long-term debt 14,137 6,000
Payments on long-term debt and capitalized
lease obligations (3,023) (1,354)
Distribution to Shoex, Inc. shareholders (315) (317)
Exercise of employee incentive stock options 111 164
-------- -------
Net cash provided by financing activities 10,910 4,493
-------- -------
Decrease in Cash (902) (1,212)
Cash at Beginning of the Period 2,576 1,727
-------- -------
Cash at End of the Period $ 1,674 $ 515
======== =======
</TABLE>
See notes to financial statements.
-6-
<PAGE> 7
O'Charley's Inc.
Notes To Unaudited Financial Statements
Twelve and Twenty-Eight Weeks Ended July 14, 1996 and July 9, 1995
A. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and in accordance with Rule 10-01 of Regulation S-X.
In the opinion of management, the unaudited interim financial statements
contained in this report reflect all adjustments, consisting of only normal
recurring accruals which are necessary for a fair presentation of the financial
position and the results of operations for the interim periods presented. The
results of operations for any interim period are not necessarily indicative of
results for the full year.
These financial statements, footnote disclosures and other information
should be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
B. Litigation
On February 15, 1994, a purported class action suit was filed in the
United States District Court in the Western District of Tennessee against the
Company and certain of its current and previous officers. The suit alleged
racially discriminatory job selection, termination and work environment
practices in violation of federal law. In June 1996, the U.S. District Court
Judge ruled that the pending lawsuit would proceed provisionally as a class
action. On July 22, 1996, the Company agreed to a preliminary settlement. The
settlement is contingent upon execution of a definitive settlement agreement,
U.S. District Court approval and certain other conditions. Under the proposed
settlement, the Company will pay to members of the class and their counsel
$7.5 million, consisting of $6.1 million in cash and $1.4 million in
O'Charley's common stock. The Company charged to earnings the $7.5 million and
an additional $1.0 million for legal and related expenses incurred and
anticipated to be incurred in connection with the settlement. The settlement
and related reserves resulted in a second quarter charge to earnings of
approximately $5.5 million after-tax or $.71 per share.
C. Asset Revaluation
During the second quarter of 1996, losses at certain restaurant units
prompted an evaluation of net realizable value of certain assets in accordance
with Financial Accounting Standards Board Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("FASB 121"). Accordingly, the Company recorded a $5.1 million pre-tax charge
to earnings in the second quarter of 1996 for assets impaired under FASB 121.
This amount represents the difference between fair value and net book value for
certain identifiable assets. The $5.1 charge is comprised of the following
impaired restaurant assets: $1.9 million for two units closed subsequent to
the end of the second quarter; $1.0 million for an additional three units
expected to be closed or relocated within one-year; and $2.2 million for other
assets expected to be held. The fair market value for the assets of stores
expected to remain open was primarily measured by discounting the future
expected cash flows for those units.
D. Business Acquisitions
On January 5, 1996, the shareholders of the Company approved an Agreement
and Plan of Merger, dated October 9, 1995, to merge with Shoex, Inc. (Shoex), a
franchisee of the Company which owned and operated six O'Charley's restaurants
in Alabama. The transaction was accounted for as a pooling of interests. The
Company exchanged 666,666 shares of company stock valued at approximately $9.5
million. The Company assumed approximately $1.9 million in net obligations of
Shoex, Inc. (defined as long-term debt, capitalized lease obligations and
working capital deficit). As a result of the merger, O'Charley's owns the six
restaurants and the rights to develop other O'Charley's restaurants in Alabama,
Mississippi and specific locations in Florida and Georgia. The accompanying
1996 financial statements include the transactions and balances of Shoex. Each
of the previously reported financial statements have been restated to reflect
the combined results of the Company and Shoex.
-7-
<PAGE> 8
O'Charley's Inc.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations
Twelve and Twenty-Eight Weeks Ended July 14, 1996 and July 9, 1995
Results of Operations
The following table highlights the operating results for the second quarter
and first half of 1996 and 1995 as a percentage of total revenue unless
otherwise indicated. Each of the second quarters is comprised of 12 weeks.
Each of the first halves is comprised of 28 weeks. All comparisons included in
management's discussion and analysis compares the respective second quarter and
first half of 1996 to the second quarter and first half of 1995 unless
otherwise indicated.
- - -------------------------------------------------------------------------------
Second Quarter Year To Date
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
Revenues:
Restuarant sales 98.6% 92.5% 98.5% 92.3%
Commissary sales 1.4% 7.5% 1.5% 7.7%
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
Costs and Expenses:
Cost of restaurant sales: (1)
Cost of food, beverage and supplies 36.0% 36.8% 35.9% 36.8%
Payroll and benefits 31.4% 30.1% 31.1% 29.9%
Restaurant operating costs 15.2% 15.0% 15.4% 15.1%
------ ------ ------ ------
82.6% 81.9% 82.4% 81.8%
Restaurant operating margin 17.4% 18.1% 17.6% 18.2%
Cost of commissary sales (2) 95.6% 95.7% 95.2% 95.5%
Advertising, general and
administrative expenses 5.5% 5.5% 5.6% 5.7%
Asset revaluation 13.3% - 6.0% -
Depreciation and amortization 4.8% 4.1% 4.9% 4.0%
Other(Income)Expense:
Interest expense, net 1.7% 1.6% 1.6% 1.5%
Litigation 22.1% - 9.9% 1.3%
Other, net -0.0% -0.9% 0.1% -0.9%
Earnings (Loss) Before Income Taxes -30.0% 6.8% -10.6% 5.6%
Net Earnings (Loss) -19.4% 4.4% -6.9% 3.6%
====== ====== ====== ======
(1) As a percentage of restaurant sales.
(2) As a percentage of commissary sales.
- - -------------------------------------------------------------------------------
-8-
<PAGE> 9
TOTAL REVENUES increased $4,809,000 or 14.3% for the second quarter of 1996
and $10,030,000 or 13.3% for the first twenty-eight weeks of 1996. Restaurant
sales increased $6,774,000 or 21.7% and $14,590,000 or 20.9% for the second
quarter and first half of 1996, respectively. These increases are primarily
due to additional Company owned restaurants operated in 1996. The following
table presents the number of restaurants in operation for each of the first two
quarters in 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Company Restaurants:
Number of restaurants at beginning of year 61 50
Opened during first quarter 5 3
Opened during second quarter 3 3
-- --
Number of restaurants at end of second quarter 69 56
== ==
Franchised Restaurants: 1 1
-- --
Total Restaurants: 70 57
== ==
</TABLE>
In addition, restaurant sales were positively affected from higher average
unit volumes of newly opened stores. Same store sales increased .5% and
decreased .1% in the second quarter and first half of 1996, respectively. From
mid-April 1996 through mid-June 1996, the Company experienced a decrease in same
store sales. These decreases were more than offset by same store sales
increases for the remainder of the second quarter. The lost operating days due
to the impact of winter stores in the midwest and southeast during January and
February contributed to the year-to-date decrease in same store sales. For each
of the first two quarters of 1996, same store sales were positively affected by
an increase in the overall check average due primarily to a menu price increase
of 1.5% taken in the fourth quarter of 1995. In the first two quarters of 1996,
the Company experienced declines in same store customer counts.
Commissary sales decreased in each of the first two quarters of 1996 primarily
as the result of discontinuing sales to Logan's Roadhouse Restaurants and to
certain unaffiliated restaurants. Following its initial public offering,
Logan's ceased purchasing products from the Commissary in October 1995.
RESTAURANT OPERATING MARGIN, defined as restaurant sales less cost of
restaurant sales, increased $946,000 or 16.8% in the second quarter of 1996 and
$2.3 million or 17.8% in the first half of 1996. As a percentage of restaurant
sales, the restaurant operating margin decreased .7% to 17.4% in the second
quarter and decreased .6% to 17.6% in the first half. In each of the first two
quarters of 1996, the percentage margin decrease was due to increases in the
percentage cost of payroll and benefits and restaurant operating cost partially
offset by a decrease in the percentage cost of food, beverage and supplies.
COST OF FOOD, BEVERAGE AND SUPPLIES as a percentage of restaurant sales
decreased .8% and .9% in the second quarter and first half of 1996,
respectively. These decreases are primarily attributable to a reduction in
overall meat cost and to the increased purchasing power of the Company's
Commissary. Additionally, cost reductions in produce, primarily lettuce, were
offset by increased poultry cost.
PAYROLL AND BENEFITS as a percentage of restaurant sales increased 1.3% and
1.2% in the second quarter and first half of 1996, respectively. The Company
is continuing to pay higher base salaries and hourly wage rates in order to
attract and retain management and hourly co-workers. Additionally, the Company
experienced higher bonus expense and vacation pay in 1996. A decrease in
workers compensation expense partially offset the above mentioned increases.
The federal minimum wage rate will increase by $.50 to $4.75 per hour on
October 1, 1996 and an additional increase of $.40 to $5.15 per hour on
September 1, 1997. The base wage rate paid to directly tipped employees will
remain at $2.13 per hour. The Company generally pays higher wage rates for its
hourly co-workers as compared to the expected increase in the minimum wage
rate. The Company will, however, experience a minimal increase in labor costs
as a result of the minimum wage increase. Management expects to raise menu
prices to offset the impact from the increased labor costs. The inflationary
effects of the minimum wage increase is currently unknown and may increase the
cost of payroll and benefits in the future.
RESTAURANT OPERATING COSTS as a percentage of restaurant sales increased
.2% and .3% in the second quarter and first half of 1996, respectively. The
increase was due primarily from an increase in outside services. A decrease in
supervisory cost and
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<PAGE> 10
rent expense as a percentage of restaurant sales mostly offset the above
mentioned increase.
ADVERTISING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of total
revenue did not change in the second quarter and decreased .1% in the first
half of 1996. The Company had previously expensed $1.0 million in the first
quarter of 1995 for legal fees expected to be incurred in defending a purported
class action alleging racial discrimination. This expense has been reclassed
to litigation for reporting purposes. In the second quarter and first half of
1996, the Company increased its percentage cost of advertising. Additionally,
the Company incurred higher salary and related payroll cost due to the hiring
of additional management personnel in the areas of information services,
advertising and real estate. These increases were partially offset by a
decrease in executive officers' bonus compensation which is based on a formula
of increased profits. Certain other cost percentages decreased as a result of
spreading certain general and administrative expenses over a greater volume of
total revenue.
DEPRECIATION AND AMORTIZATION EXPENSE as a percentage of total revenues
increased .7% and .9% in the second quarter and first half of 1996.
Pre-opening amortization expense has increased due to the increased number of
new stores opened for less than one year and to an increase in the average
amount of pre-opening cost capitalized per store. Depreciation expense as a
percentage of restaurant sales increased as the Company increased the amount of
building improvement costs due to the remodeling of certain existing
restaurants.
ASSET REVALUATION represents the write down of certain assets in accordance
with FASB Statement No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". See footnote C of the
accompanying notes to unaudited financial statements.
INTEREST EXPENSE increased as a result of increased borrowings associated
primarily with the Company's expansion of new restaurants.
LITIGATION represents the proposed settlement of a purported class action
lawsuit alleging racial discrimination. These costs include anticipated
payments to the defendants, legal costs and other payments expected in
accordance with the proposed settlement. See footnote B of the accompanying
notes to unaudited financial statements and liquidity and capital resources.
OTHER (INCOME) EXPENSE, NET was a net expense of $92,000 for the
twenty-eight weeks ended July 14, 1996 and a net income of $694,000 for the
same period in 1995, a $786,000 increase in net expenses. During the first two
quarters of 1995, the Company recorded its equity earnings of Logan's Roadhouse
Restaurants and net rental income and guarantee fees related to its ownership
of the five Logan's restaurant sites in other income, net. In July 1995,
Logan's completed an initial public offering and the Company sold substantially
all of its interest in Logan's. Consequently, the Company no longer receives
any income from Logan's except that in the first quarter of 1996, the Company
sold its remaining 7,000 shares of Logan's common stock. On January 5, 1996,
the shareholders of the Company approved an Agreement and Plan of Merger to
merge with Shoex, Inc., a franchisee of the Company which owned and operated
six O'Charley's restaurants in Alabama. During the first quarter of 1996, the
Company expensed approximately $290,000 in acquisition cost associated with
this merger.
INCOME TAX EXPENSE for fiscal year 1995 was 36.5% of pre-tax income and
the expected rate for 1996 is approximately 35.0%. Due to the litigation
expense, the Company's federal income tax bracket in 1996 is expected to
decrease by 1.0%
Liquidity and Capital Resources
During the first twenty-eight weeks of 1996, the Company expended
approximately $17.7 million in capital expenditures for new stores and
improvements to existing facilities. Additionally, the Company incurred
approximately $1.3 million in pre-opening costs and made $3.0 million in
principal reductions in its capitalized lease obligations and long-term debt.
These cash outlays were funded primarily by borrowings of $14.1 million on the
Company's line of credit facility, borrowings under capitalized lease
obligations of $2.8 million and $2.8 million cash provided by operating
activities.
On April 21, 1994, the Company entered into a $30 million revolving line
of credit agreement with four banks (bank group) for a three-year term. At
July 14, 1996, $23.9 million was outstanding under this facility compared with
$10.5 million at December 31,
-10-
<PAGE> 11
1995. The credit facility requires quarterly interest payments at the lower of
the bank's prime rate or the LIBOR rate plus 1.5%. The credit facility contains
certain financial and other covenants, including restrictions on the sale of
certain assets and additional long-term debt facilities. The facility has a
term expiring in July 1997, but includes an option to extend the maturity for
an additional two years upon conversion of the facility to a term loan with
principal payments required quarterly based on a seven-year amortization. At
July 14, 1996, the Company had available $6.1 million under this credit
facility. As a result of the charge to earnings of $5.5 million after tax
incurred in the second quarter of 1996 in connection with the proposed
settlement of the discrimination litigation and the charge to earnings of $3.3
million after tax incurred in the second quarter of 1996 in connection with the
write down of certain assets in accordance with FASB 121, the Company and the
bank group amended the credit facility to exclude the litigation charge and the
FASB 121 charge from net earnings, total liabilities and shareholders equity.
In addition, an interest coverage ratio was amended. The Company anticipates
having to increase the amount of its available credit near the end of the
fourth quarter of 1996. The Company is currently in discussions with its bank
group to increase the amount available for borrowings under the credit facility
and to extend its term.
The Company opened eight restaurants in the first half of 1996. As of
July 14, 1996, the Company had five additional restaurants under construction,
of which three are expected to open in the third quarter of 1996. For fiscal
1996, the Company expects to open 12 new Company-owned restaurants. Management
estimates that the Company will spend approximately $32 million in capital
expenditures in 1996. Actual capital expenditures in 1996 may vary based on a
number of factors, including the timing of additional purchases of future
restaurant sites. The Company intends to continue to finance the furniture,
fixtures and equipment for its new stores with capitalized lease obligations.
On February 15, 1994, a purported class action suit was filed in the
United States District Court in the Western District of Tennessee against the
Company and certain of its current and previous officers. The suit alleged
racially discriminatory job selection, termination and work environment
practices in violation of federal law. The lawsuit was originally set for
trial in April 1995, however, on March 17, 1995 the Court continued the trial
until such time as the Court was able to resolve the motions pending before it,
including those relating to whether the litigation would proceed as a class
action. Anticipating an April trial, in the first quarter of 1995, the Company
reserved a total of $1.0 million for legal and other expenses expected to be
incurred in defending this litigation. Management has always believed that
this lawsuit was unwarranted and totally without merit and that the Company has
always been an equal opportunity employer. In June 1996, the U.S. District
Court Judge ruled that the pending lawsuit will proceed provisionally as a
class action. Due to the significant distraction this lawsuit has had on
management and the uncertainty it has caused in the market place, the Company,
on July 22, 1996, agreed to a preliminary settlement. The settlement is
contingent upon execution of a definitive settlement agreement, U.S. District
Court approval and certain other conditions. Under the proposed settlement,
the Company will pay $7.5 million to the members of the class and their
counsel, consisting of $6.1 million in cash and $1.4 million in O'Charley's
common stock. The Company charged to earnings in the second quarter the $7.5
million and an additional $1.0 million reserve for legal and related expenses
incurred and anticipated to be incurred in connection with the settlement. The
settlement and related reserves resulted in a second quarter charge to earnings
of approximately $5.5 million after-tax or $.71 per share. The Company
anticipates having to borrow funds from its revolving credit facility to pay
for this settlement. As previously mentioned, the Company has received the
consent of its lenders for the proposed settlement amount.
-11-
<PAGE> 12
Part II - Other Information
Item 1. Legal Proceedings
On February 15, 1994, a purported class action suit was filed in the United
States District Court in the Western District of Tennessee against the
Company and certain of its current and previous officers. The suit alleged
racially discriminatory job selection, termination and work environment
practices in violation of federal law. The lawsuit was originally set for
trial in April 1995, however, on March 17, 1995 the Court continued the
trial until such time as the Court was able to resolve the motions pending
before it, including those relating to whether the litigation would proceed
as a class action. Anticipating an April trial, in the first quarter of
1995, the Company reserved a total of $1.0 million for legal and other
expenses expected to be incurred in defending this litigation. Management
has always believed that this lawsuit was unwarranted and totally without
merit and that the Company has always been an equal opportunity employer.
In June 1996, the U.S. District Court Judge ruled that the pending lawsuit
will proceed provisionally as a class action. Due to the significant
distraction this lawsuit has had on management and the uncertainty it has
caused in the market place, the Company, on July 22, 1996, agreed to a
preliminary settlement. The settlement is contingent upon execution of a
definitive settlement agreement, U.S. District Court approval and certain
other conditions. Under the proposed settlement, the Company will pay $7.5
million to the members of the class and their counsel, consisting of $6.1
million in cash and $1.4 million in O'Charley's common stock. The Company
charged to earnings in the second quarter the $7.5 million and an
additional $1.0 million reserve for legal and related expenses incurred and
anticipated to be incurred in connection with the settlement. The
settlement and related reserves resulted in a second quarter charge to
earnings of approximately $5.5 million after-tax or $.71 per share.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10) Agreement and Amendment No. 1 to Revolving Credit Agreement*
(27) Financial Data Schedule (for SEC use only)
(a) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the twelve
weeks ended July 14, 1996.
- - ----------------
* Previously filed as an Exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended July 14, 1996.
-12-
<PAGE> 13
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
O'Charley's Inc.
(Registrant)
Date: August 13, 1997 By: /s/ Gregory L. Burns
---------------- -------------------------------------
Gregory L. Burns
President and Chief Executive Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF O'CHARLEYS INC. FOR THE PERIOD ENDED JULY 14, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUL-14-1996
<CASH> 1,674
<SECURITIES> 0
<RECEIVABLES> 1,510
<ALLOWANCES> 0
<INVENTORY> 6,157
<CURRENT-ASSETS> 13,654
<PP&E> 91,181
<DEPRECIATION> 0
<TOTAL-ASSETS> 105,833
<CURRENT-LIABILITIES> 24,472
<BONDS> 0
0
0
<COMMON> 29,615
<OTHER-SE> 15,915
<TOTAL-LIABILITY-AND-EQUITY> 105,833
<SALES> 84,306
<TOTAL-REVENUES> 85,564
<CGS> 69,409
<TOTAL-COSTS> 84,731
<OTHER-EXPENSES> 8,592
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,340
<INCOME-PRETAX> (9,099)
<INCOME-TAX> (3,185)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,914)
<EPS-PRIMARY> (.76)
<EPS-DILUTED> 0
</TABLE>
