<PAGE> 1
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 Quarterly Period Ended April 18, 1999
Commission file number O-18629
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O'Charley's Inc.
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(Exact name of registrant as specified in its charter)
Tennessee 62-1192475
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3038 Sidco Drive, Nashville, Tennessee 37204
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(Address of principal executive offices) (Zip Code)
(615)256-8500
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(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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Class Outstanding as of May 24, 1999
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Common Stock, no par value 15,434,725 shares
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O'Charley's Inc.
Form 10-Q
For Quarter Ended April 18, 1999
Index
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I - Financial Statements
Item 1. Financial statements:
Balance sheets as of April 18, 1999 and
December 27, 1998 3
Statements of earnings for the sixteen weeks
ended April 18, 1999 and April 19, 1998 4
Statements of cash flows for the sixteen weeks
ended April 18, 1999 and April 19, 1998 6
Notes to unaudited financial statements 7
Item 2. Management's discussion and analysis of
financial condition and results of operations 9
Item 3. Quantitative and qualitative disclosures about market risk 15
Part II - Other Information
Item 6. Exhibits and reports on Form 8-K 16
Signatures 17
</TABLE>
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O'Charley's Inc.
Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
April 18, December 27,
1999 1998
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<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 1,662 $ 3,068
Accounts receivable 2,330 2,371
Inventories 9,924 7,029
Preopening costs -- 2,074
Deferred income taxes 869 143
Other current assets 2,983 2,553
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Total current assets 17,768 17,238
Property and Equipment, net 187,279 174,196
Other Assets 2,190 2,348
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$ 207,237 $ 193,782
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 6,910 $ 6,941
Accrued payroll and related expenses 6,490 5,104
Accrued expenses 6,929 7,351
Federal, state and local taxes 5,004 3,984
Current portion of long-term debt and capitalized leases 5,404 5,429
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Total current liabilities 30,737 28,809
Deferred Income Taxes 4,290 4,290
Long-Term Debt 45,525 35,566
Capitalized Lease Obligations 14,698 16,343
Shareholders' Equity:
Common stock - No par value; authorized, 50,000,000
shares; issued and outstanding, 15,419,762 in 1999
and 15,394,128 in 1998 66,077 65,986
Additional paid-in capital 509 509
Accumulated other comprehensive loss, net of tax (103) (103)
Retained earnings 45,504 42,382
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111,987 108,774
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$ 207,237 $ 193,782
========= =========
</TABLE>
See notes to financial statements.
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O'Charley's Inc.
Statements of Earnings
Sixteen Weeks Ended April 18, 1999 and April 19, 1998
<TABLE>
<CAPTION>
1999 1998
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(in thousands)
<S> <C> <C>
Revenues:
Restaurant sales $ 86,855 $70,057
Commissary sales 994 893
Franchise revenue -- 11
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87,849 70,961
Costs and Expenses:
Cost of restaurant sales:
Cost of food, beverage and supplies 29,059 24,351
Payroll and benefits 26,534 21,440
Restaurant operating costs 12,285 9,878
Cost of commissary sales 936 837
Advertising, general and administrative expenses 5,805 4,645
Depreciation and amortization 3,852 3,688
Preopening costs 1,294 --
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79,765 64,839
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Income from Operations 8,084 6,122
Other (Income) Expense:
Interest expense, net 1,175 777
Other, net 32 17
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1,207 794
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Earnings Before Income Taxes and Cumulative
Effect of Change in Accounting Principle 6,877 5,328
Income Taxes 2,407 1,865
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Earnings Before Cumulative Effect of
Change in Accounting Principle $ 4,470 $ 3,463
Cumulative Effect of Change in Accounting
Principle (Net of Tax Benefit) $ (1,348) --
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Net Earnings $ 3,122 $ 3,463
======== =======
</TABLE>
See notes to financial statements.
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O'Charley's Inc.
Statements of Earnings (Continued)
Sixteen Weeks Ended April 18, 1999 and April 19, 1998
<TABLE>
<CAPTION>
1999 1998
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(in thousands, except per share data)
<S> <C> <C>
Basic Earnings per Share:
Earnings per Common Share Before Cumulative
Effect of Change in Accounting Principle $ 0.29 $ 0.23
Cumulative Effect of Change in Accounting
Principle $ (0.09) --
-------- -------
Basic Earnings per Common Share $ 0.20 $ 0.23
======== =======
Weighted Average Common Shares Outstanding 15,398 15,286
======== =======
Diluted Earnings per Share:
Earnings per Common Share Before Cumulative
Effect of Change in Accounting Principle $ 0.27 $ 0.21
Cumulative Effect of Change in Accounting
Principle $ (0.08) --
-------- -------
Diluted Earnings per Common Share $ 0.19 $ 0.21
======== =======
Weighted Average Common Shares Outstanding 16,624 16,354
======== =======
</TABLE>
See notes to financial statements.
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O'Charley's Inc.
Statements of Cash Flows
Sixteen Weeks Ended April 18, 1999 and April 19, 1998
<TABLE>
<CAPTION>
1999 1998
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(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 3,122 $ 3,463
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Cumulative effect of accounting change, net of tax 1,348 --
Depreciation and amortization 3,852 2,906
Amortization of preopening costs -- 782
Loss on the sale of assets -- 22
Changes in assets and liabilities:
Accounts receivable 41 (134)
Inventories (2,895) (3,303)
Additions to preopening costs -- (968)
Other current assets (430) (80)
Accounts payable (31) 1,734
Accrued payroll and other accrued expenses 1,984 972
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Net cash provided by operating activities 6,991 5,394
Cash Flows from Investing Activities:
Additions to property and equipment (16,965) (11,387)
Proceeds from the sale of assets -- 400
Other, net 188 (1,093)
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Net cash used by investing activities (16,777) (12,080)
Cash Flows from Financing Activities:
Proceeds from long-term debt 10,000 8,300
Payments on long-term debt and capitalized
lease obligations (1,711) (1,464)
Exercise of employee incentive stock options 91 259
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Net cash provided by financing activities 8,380 7,095
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(Decrease) Increase in Cash (1,406) 409
Cash at Beginning of the Period 3,068 1,965
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Cash at End of the Period $ 1,662 $ 2,374
======== ========
</TABLE>
See notes to financial statements.
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O'Charley's Inc.
Notes To Unaudited Financial Statements
Sixteen Weeks Ended April 18, 1999 and April 19, 1998
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. The Company's
fiscal year ends on the last Sunday in December with its first quarter
consisting of sixteen weeks and the remaining three quarters consisting of
twelve weeks each.
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 27, 1998.
B. Earnings Per Common Share
The Board of Directors of the Company approved a 3-for-2 stock split
effected as a 50% stock dividend for shareholders of record on May 20, 1998. The
new shares were distributed on June 1, 1998. On May 20, 1998, the total number
of outstanding shares of common stock increased 5,114,762 shares from 10,229,524
shares to 15,344,286 shares as a result of the stock split. All share and per
share information in the financial statements have been adjusted for the stock
split.
The Company follows Statement of Financial Accounting Standards No. 128
("FAS 128"), Earnings Per Share. FAS 128 establishes standards for both the
computing and presentation of basic and diluted EPS on the face of the
statements of earnings. Basic earnings per common share have been computed on
the basis of the weighted average number of common shares outstanding, and
diluted earnings per common share have been computed on the basis of the
weighted average number of common shares outstanding plus the dilutive effect of
options outstanding.
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Following is a reconciliation of the Company's basic and diluted earnings per
share in accordance with FAS 128.
<TABLE>
<CAPTION>
Sixteen Sixteen
(In Thousands, weeks ended weeks ended
Except Per Share Data) April 18, 1999 April 19, 1998
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<S> <C> <C>
Earnings Before Cumulative Effect of
Change in Accounting Principle $ 4,470 $ 3,463
Cumulative Effect of Change in
Accounting Principle (net of tax benefit) $ (1,348) --
-------- -------
Net Earnings $ 3,122 $ 3,463
=========================
Basic Earnings Per Share:
Weighted average shares outstanding 15,398 15,286
Earnings per share before cumulative
effect of change in accounting principle $ 0.29 $ 0.23
Cumulative effect of accounting change $ (0.09) --
Basic earnings per share $ 0.20 $ 0.23
=========================
Diluted Earnings Per Share:
Weighted average shares outstanding 15,398 15,286
Incremental stock option shares outstanding 1,226 1,068
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Weighted average diluted shares outstanding 16,624 16,354
Earnings per share before cumulative
effect of change in accounting principle $ 0.27 $ 0.21
Cumulative effect of accounting change $ (.08) --
Diluted earnings per share $ 0.19 $ 0.21
=========================
</TABLE>
Options for approximately 835,000 shares were excluded from the 1999 diluted
weighted average shares calculation due to these shares being anti-dilutive.
C. New Accounting Pronouncements
On April 3, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-up Activities (SOP
98-5) which is effective for financial statements issued for fiscal years
beginning after December 15, 1998. The SOP requires that costs incurred during a
start-up activity be expensed as incurred. The company adopted SOP 98-5
effective December 28, 1998. As a result, the company recognized as a cumulative
effect of the accounting change a charge of $1.3 million, net of tax, or $0.08
per diluted share. The effect of adopting SOP 98-5 on earnings before the
cumulative effect of the change in accounting principle was an additional
expense of $192,000, or $0.01 per diluted share.
D. Comprehensive Income
There were no components of other comprehensive income for the sixteen
week periods ended April 18, 1999 and April 19, 1998. Comprehensive income for
such periods was comprised solely of net earnings.
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O'Charley's Inc.
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
Sixteen Weeks Ended April 18, 1999 and April 19, 1998
RESULTS OF OPERATIONS
GENERAL
At April 18, 1999, we owned and operated 106 O'Charley's restaurants in Alabama,
Florida, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Ohio, South
Carolina, Tennessee and Virginia. O'Charley's are full service, casual dining
restaurants, which appeal to traditional casual dining customers as well as
value-oriented customers by offering high quality food at moderate pricing with
outstanding service. Our growth strategy is to continue fully penetrating
existing and new targeted major metropolitan areas while opening new units in
smaller secondary markets in close proximity to our major markets. We operate a
commissary for the primary purpose of providing our restaurants with consistent
quality food products, which meet our specifications while obtaining the best
possible prices for those items. The majority of the food products served in our
restaurants are distributed to the stores by the commissary. In addition to
purchasing food and supply products, the commissary manufactures certain
proprietary products and ages and cuts red meat into steaks in its USDA approved
meat facility. All sales from the commissary to the restaurants are eliminated
in the consolidated financial statements.
During the first quarter of 1999, we adopted Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activity", which requires that preopening
and start-up costs be expensed as incurred rather than capitalized. Before the
accounting change, preopening costs were amortized over one year. The cumulative
effect of the accounting change totaled $2.1 million pre-tax and $1.3 million
net of tax, or $0.08 per diluted share. Net earnings for the quarter were $3.1
million, or $0.19 per diluted share.
Earnings before the cumulative effect of the change in accounting principle were
$4.5 million, or $0.27 per diluted share as compared with $3.5 million, or $0.21
per diluted share for the first quarter of 1998.
The following table reflects changes in the number of Company-owned restaurants
for the first quarter of 1999 and 1998.
<TABLE>
<CAPTION>
Restaurants 1999 1998
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<S> <C> <C>
In operation, beginning of period 99 82
Restaurants opened 7 5
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In operation, end of period 106 87
================
</TABLE>
Revenues consist of restaurant sales and to a lesser extent commissary sales.
Restaurant sales include food and beverage sales and are net of applicable state
and local sales taxes. Commissary sales represent sales to outside parties
consisting primarily of sales of O'Charley's label food items, primarily salad
dressings, to retail grocery chains, mass merchandisers and wholesale clubs.
Consistent with industry trends, liquor sales as a percentage of restaurant
sales has declined in each of the last three fiscal years. We have historically
maintained a "kids eat free" program where we provide meals from a selected
menu to kids 10 years old and under. In selective markets, we are currently
testing a value oriented kids program where we provide a meal from a selective
kid's menu and we include a beverage and a dessert for a set price. It is too
premature to understand the impact of this test. Early results indicate that we
will realize a higher check average and a lower number of customers from the
reduced kids meals served.
Cost of food, beverage and supplies primarily consists of the costs of beef,
poultry, seafood, produce and alcoholic and non-alcoholic beverages. Various
factors beyond our control, including adverse weather, cause periodic
fluctuations in food costs. Generally, temporary increases are absorbed and are
not passed on to customers, however, we typically adjust menu prices to
compensate for increased costs of a more permanent nature.
Payroll and benefits include payroll and related costs and expenses directly
relating to restaurant level activities including restaurant management salaries
and bonuses, hourly wages for store level employees, payroll taxes, workers'
compensation, various health, life and dental insurance programs, vacation
expense and sick pay. We have an incentive bonus plan that compensates store
management for achieving and exceeding certain store level financial targets and
performance goals.
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Restaurant operating costs includes occupancy and other expenses at the
restaurant level, except property and equipment depreciation and amortization.
Rent, supervisory salaries, bonuses and expenses, management training salaries,
property insurance, property taxes, utilities, repairs and maintenance, outside
services and credit card fees account for the major expenses in this category.
Restaurant operating margin is defined as restaurant sales less cost of
restaurant sales. Cost of restaurant sales, for purposes of this discussion,
consists of cost of food, beverage and supplies, payroll and benefits and
restaurant operating costs.
Advertising, general and administrative expenses includes all advertising and
home office administrative functions that support the existing restaurant base
and provide the infrastructure for future growth. Advertising, executive
management and support staff salaries, bonuses and related expenses, data
processing, legal and accounting expenses and office expenses account for the
major expenses in this category.
Depreciation and amortization primarily includes depreciation on property and
equipment calculated on a straight-line basis over an estimated useful life and
amortization of preopening costs for new restaurants in 1998, which includes
costs of hiring and training the initial staff and certain other costs.
Depreciation and amortization as a percentage of total revenues may increase as
the number of new store openings increases.
Beginning in the first quarter of 1999, preopening costs are expensed as
incurred in accordance with SOP 98-5 rather than amortized over one year. This
new accounting method affects when preopening costs are expensed and may impact
earnings relative to the previous method from quarter to quarter and year to
year depending on when these costs are incurred. We will continue to capture
preopening costs and these costs, beginning in 1999, are recorded in a new line
item category on the statement of earnings. The depreciation and amortization
category, beginning in 1999, no longer includes any preopening costs or
amortization thereon.
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The following table highlights the operating results for the first quarter of
1999 and 1998, as a percentage of total revenues unless otherwise indicated.
Each quarter is comprised of 16 weeks.
<TABLE>
<CAPTION>
First Quarter
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1999 1998
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<S> <C> <C>
REVENUES:
Restaurant sales 98.9% 98.7%
Commissary sales 1.1% 1.3%
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100.0% 100.0%
COSTS AND EXPENSES:
Cost of restaurant sales:(1)
Cost of food, beverage and supplies 33.5% 34.8%
Payroll and benefits 30.6% 30.6%
Restaurant operating costs 14.1% 14.1%
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78.2% 79.5%
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Restaurant operating margin(2) 21.8% 20.5%
Cost of commissary sales(3) 94.2% 93.7%
Advertising, general and administrative expenses 6.6% 6.5%
Depreciation and amortization 4.4% 5.2%
Preopening costs 1.5% --
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INCOME FROM OPERATIONS 9.2% 8.6%
OTHER (INCOME) EXPENSE:
Interest expense, net 1.3% 1.1%
Other, net 0.0% 0.0%
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EARNINGS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 7.8% 7.5%
INCOME TAXES 2.7% 2.6%
-------------------------
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 5.1% 4.9%
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (1.5%) --
-------------------------
NET EARNINGS 3.6% 4.9%
=========================
</TABLE>
(1) As a percentage of restaurant sales.
(2) Reflects restaurant sales less cost of restaurant sales,
expressed as a percentage of restaurant sales.
(3) As a percentage of commissary sales.
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FIRST QUARTER 1999 VERSUS FIRST QUARTER 1998
TOTAL REVENUES in 1999 increased $16.9 million, or 23.8%, to $87.8 million from
$71.0 million in 1998 primarily as a result of an increase in restaurant sales
of $16.8 million, or 24.0%. The increase in restaurant sales was attributable to
19 additional units in operation in 1999 and to a 3.3% increase in same store
sales. We opened seven new units in the first quarter of 1999. The increase in
same store sales was the result of an increase in customer traffic of
approximately 1% and an increase in the average check of approximately 2%, which
was primarily the result of a menu price increase taken in March 1999.
COST OF FOOD, BEVERAGE AND SUPPLIES in 1999 increased $4.7 million, or 19.3%, to
$29.1 million from $24.4 million in 1998. As a percentage of restaurant sales,
cost of food, beverage and supplies decreased to 33.5% in 1999 from 34.8% in
1998. We attribute this lower food cost percentage primarily to three factors:
we took a menu price increase in March 1999 which increased the average check,
several food cost items decreased in the first quarter, and we improved our
purchasing and operating efficiencies. The above improvements were partially
offset by an increase in red meat costs. Currently, we expect nominal increases
in the cost of food items for the remainder of 1999 and expect to experience the
normal seasonal fluctuations for certain items including produce and poultry.
There can be no assurance that events outside our control will not result in
increased food costs.
PAYROLL AND BENEFITS in 1999 increased $5.1 million, or 23.8%, to $26.5 million
from $21.4 million in 1998. As a percentage of restaurant sales, payroll and
benefits remained at 30.6%. Wage rates and salaries for restaurant support staff
and management continued to increase in 1999 but did not increase at the same
percentage rates as we have experienced over the last three years. Those higher
wages and salaries were offset due to the economies achieved from higher average
unit sales volumes.
RESTAURANT OPERATING COSTS in 1999 increased $2.4 million, or 24.4%, to $12.3
million from $9.9 million in 1998. Restaurant operating costs, as a percentage
of restaurant sales, remained at 14.1%. We continued to see lower restaurant
operating costs for certain expense items as a percentage of restaurant sales
due to the economies generated from higher average unit volumes. These
improvements were offset by higher salary, bonus and training expenses.
Additionally, we entered a new major market in the first quarter of 1999,
Charlotte, North Carolina, which increased certain supervision costs. Typically,
we incur higher initial supervision and other operating costs when entering new
markets. We will enter the Columbus, Ohio market in the second quarter of 1999
which will be the only other major market in 1999.
RESTAURANT OPERATING MARGIN in 1999 increased $4.6 million, or 31.9%, to $19.0
million from $14.4 million in 1998. This improvement was the result of lower
food costs as a percentage of restaurant sales.
ADVERTISING, GENERAL AND ADMINISTRATIVE EXPENSES in 1999 increased $1.2 million,
or 25.0%, to $5.8 million from $4.6 million in 1998. As a percentage of total
revenue, advertising, general and administrative expenses increased to 6.6% from
6.5% in 1998. This increase is primarily attributable to an increase in the
amount of advertising expenditures to 2.8% of sales in 1999 from 2.7% of sales
in 1998. Overall advertising expenditures were $2.4 million in 1999, an increase
of 27.9% from the $1.9 million expended in 1998. General and administrative
expenses increased 22.9% to $3.4 million in 1999 from $2.7 million in 1998.
DEPRECIATION AND AMORTIZATION in 1999 increased $164,000 to $3.9 million from
$3.7 million in 1998. We adopted SOP 98-5 in the first quarter of 1999 which
requires preopening costs to be expensed as incurred. Previously, we capitalized
preopening costs and amortized these amounts over one year from the opening of
each store. The depreciation and amortization expense in 1998 included
preopening cost amortization of $782,000. Preopening costs are now recorded in a
separate line item category and the depreciation and amortization line,
beginning in 1999, no longer includes any preopening cost amortization.
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<PAGE> 13
Excluding the preopening amortization, depreciation expense increased $1.0
million, or 32.6%, to $3.9 million from $2.9 million in 1998. The increase in
depreciation expense is primarily attributable to additional capital
expenditures for the remodeling of certain existing stores.
PREOPENING COSTS, as measured under SOP 98-5, were $1.3 million in 1999 due to
the change in accounting principle in the first quarter of 1999. Preopening
costs includes operating costs and expenses incurred prior to a new restaurant
opening. This new accounting method affects when preopening costs are expensed
and may impact earnings relative to the previous method from quarter to quarter
and year to year depending on when these costs are incurred. We typically incur
average preopening costs of approximately $190,000 for each new store. The
amount of preopening costs incurred in any one quarter will include costs
associated with new stores opened during that particular quarter and most likely
will include costs associated with stores expected to open subsequent to the
current quarter. As a percentage of total revenue, preopening costs were 1.5% in
1999 as compared with preopening amortization of 1.1% of total revenue in 1998.
INCOME FROM OPERATIONS in 1999 increased $2.0 million, or 32.0%, to $8.1 million
from $6.1 million in 1998.
INTEREST EXPENSE in 1999 increased $398,000, or 51.2%, to $1.2 million from
$777,000 in 1998. This increase is primarily related to the increased borrowings
under our revolving line of credit. During the fourth quarter of 1997 we reduced
our long-term debt by $34.7 million from the net proceeds received from the sale
of common stock that reduced interest expense in the first quarter of 1998.
EARNINGS BEFORE THE CUMULATIVE EFFECT OF THE CHANGE IN ACCOUNTING PRINCIPLE
increased $1.0 million, or 29.1%, to $4.5 million from $3.5 million in 1998.
THE CUMULATIVE EFFECT OF THE CHANGE IN ACCOUNTING PRINCIPLE represented the
write off of unamoritized preopening costs in accordance with SOP 98-5. The $2.1
million of unamortized preopening costs remaining on our balance sheet at
December 28, 1998 was written off in this one-time adjustment. After adjusting
for the tax benefit, the net cumulative adjustment was $1.3 million
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of capital have historically been cash provided by
operations, borrowings under our bank credit facilities and capitalized lease
obligations. Our principal capital needs arise primarily from the purchase and
development of new restaurants, equipment replacement and improvements to
existing restaurants. Property and equipment expenditures were $17.0 million in
the first quarter of 1999. These expenditures were made primarily for new stores
opened during the quarter, stores under construction at April 18, 1999 and for
improvements to existing restaurants. Additionally, we repaid $1.7 million in
principal on our long-term debt and capitalized lease obligations. These cash
outlays were funded primarily by $7.0 million in cash provided by operations and
net borrowings of $10.0 million under our revolving credit agreement (the
"Revolver"). The above sources and uses of cash decreased available cash by $1.4
million in 1999.
During 1999 we believe we will need additional capital of approximately $53.0 to
$58.0 million to fund capital expenditures for the planned 17 to 19 new
restaurants and for improvements to existing units. As of April 18, 1999, we had
six restaurants under construction, five of which are expected to open during
the second quarter of 1999. In addition, we have plans for several new capital
projects in 1999 for our commissary including approximately $3.5 million for a
new freezer and the possible purchase of the existing commissary and home office
land and building facilities which are currently under an operating lease. The
purchase of the commissary and home office facilities is currently being
considered and, if purchased, we estimate the cost to be approximately $5.0 to
$6.0 million, however, we do have the option to continue leasing these
facilities. Financing to fund these projects is currently being evaluated and
may include borrowings under the Revolver and off balance sheet financing.
Actual capital expenditures in 1999 may vary from the above estimate based on a
number of factors, including the timing of additional purchases of future
restaurant sites. We intend to continue financing the furniture, fixtures and
equipment for our new stores with capitalized lease obligations.
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<PAGE> 14
The Revolver provides for a maximum borrowing capacity of $100 million. As of
April 18, 1999, $45.0 million was outstanding under the Revolver and bore
interest at an average rate of 5.8%. The Revolver matures on November 30, 2000,
which may be extended annually by one year, at the participating banks' option,
beginning on each anniversary of the Revolver. The Revolver imposes restrictions
on us with respect to the maintenance of certain financial ratios, the
incurrence of indebtedness, the sale of assets, mergers and the payment of
dividends.
Our working capital historically has had current liabilities in excess of
current assets due to cash reinvestments in long-term assets, mostly property
and equipment additions. At April 18, 1999, the working capital deficiency and
the current ratio were $13.0 million and 0.6 to 1, respectively.
On September 2, 1998, the Board of Directors of the Company approved the
repurchase of up to 5.0% of our outstanding common stock. As of April 18, 1999
approximately 14,000 shares had been repurchased. While we do not anticipate
repurchasing any additional shares at this time, we continually evaluate the
best uses of our capital and may buy back additional shares in the future.
During 1999, we believe that available cash, cash generated from operations and
borrowings under the Revolver and capitalized lease obligations will be
sufficient to finance our operations and expected capital outlays.
YEAR 2000
A business issue exists with regard to existing software applications and the
ability of these applications to process date values. Specifically, many
computer applications are written in two digits rather than four to define the
applicable year. Beginning in the year 2000, these applications will need to be
capable of recognizing four digit dates in order to properly distinguish the
year 2000 from prior periods.
We are considering the impact of the year 2000 issues on our business and
operations, and we have a remediation plan. We have completed testing of our
information technology ("IT") systems, and we are compliant. We are currently
testing our non-IT systems and anticipate completing such testing by June 30,
1999. We are currently making inquiries to our suppliers and other third-party
entities with which we have business relations as to their own year 2000 issues.
We expect to complete such inquires by June 30, 1999. We are in the process of
developing contingency plans to be implemented in the event any IT system,
non-IT system, third party or supplier is not year 2000 compliant by January 1,
2000. We expense all costs associated with system changes as the costs are
incurred. A significant portion of our year 2000-related costs are already
included in our software support agreements; therefore, we do not believe the
year 2000 issues will have a significant impact on our operations or liquidity.
However, the malfunction or complete failure of our systems would likely have a
material adverse effect on the results of operations and financial condition of
the Company. Should the remaining review of our year 2000 risks reveal
potentially non-compliant systems or material third-party risks, contingency
plans will be developed to address the deficiencies revealed at that time. Our
statements regarding year 2000 issues are dependent on many factors, some of
which are beyond our control. Due to the general uncertainty inherent in the
year 2000 problem, resulting in part from the uncertainty of the year 2000
readiness of third-party suppliers and customers, we are unable to determine at
this time whether the consequences of year 2000 failures will have a material
impact on our operations, liquidity or financial condition.
IMPACT OF INFLATION
The impact of inflation on the cost of food, labor, equipment, land and
construction costs could adversely affect the Company's operations. A majority
of the Company's employees are paid hourly rates related to federal and state
minimum wage laws. As a result of increased competition and the low unemployment
rates in the markets in which the Company's restaurants are located, the Company
has continued to increase wages and benefits in order to attract and retain
management personnel and hourly coworkers. In addition, most of the Company's
leases require the Company to pay taxes, insurance, maintenance, repairs and
utility costs, and these costs are subject to inflationary pressures. The
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Company may attempt to offset the effect of inflation through periodic menu
price increases, economies of scale in purchasing and cost controls and
efficiencies at existing restaurants.
NOTE REGARDING FORWARD LOOKING INFORMATION
This report contains certain forward-looking statements within the meaning of
the federal securities laws, which are intended to be covered by the safe
harbors created thereby. Those statements include, but may not be limited to,
all statements regarding our intent, belief and expectations such as statements
concerning our future profitability and our operating growth strategy. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, those set forth under the caption
"Forward-Looking Statements/Risk Factors" in our Annual Report on Form 10-K for
the fiscal year ended December 27, 1998. Although we believe that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate and, therefore, there can
be no assurance that the forward-looking statements included in this report will
prove to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by us or any other person that the
objectives and plans of the Company will be achieved. We undertake no obligation
to publicly release any revisions to any forward-looking statements contained
herein to reflect events and circumstances occurring after the date hereof or to
reflect the occurrence of unanticipated events.
Item 3. QUANTITATIVE AND QUALITATIVE MARKET RISK
The Company is subject to market risk form exposure to changes in
interest rates based on its financing, investing, and cash management
activities. The Company utilizes a balanced mix of debt maturities along with
both fixed-rate and variable-rate debt to manage its exposures to changes in
interest rates. The Company does not expect changes in interest rates to have a
material effect on income or cash flows in fiscal 1999, although there can be no
assurances that interest rates will not significantly change.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 - Amended and Restated Bylaws of the Company
27.1 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the sixteen
weeks ended April 18, 1999.
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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.
O'Charley's Inc.
(Registrant)
Date: 06/02/99 By: /s/ Gregory L. Burns
------------------------- ------------------------------
Gregory L. Burns
Chief Executive Officer
Date: 06/02/99 By: /s/ A. Chad Fitzhugh
------------------------- ------------------------------
A. Chad Fitzhugh
Chief Financial Officer
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AMENDED AND RESTATED BYLAWS OF
O'CHARLEY'S INC.
(As Amended Through February 17, 1999)
ARTICLE I.
OFFICES
The Corporation may have such offices, either within or without the
State of Tennessee, as the Board of Directors may designate or as the business
of the Corporation may require from time to time.
ARTICLE II.
SHAREHOLDERS
2.1 Annual Meeting.
An annual meeting of the shareholders of the Corporation shall be held
on such date as may be determined by the Board of Directors. The business to be
transacted at such meeting shall be the election of directors and such other
business as shall be properly brought before the meeting.
2.2 Special Meetings.
Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by law, may be called by the President or the Board
of Directors and shall be called by the President or the Secretary at the
written request of persons holding of record not less than one-tenth (l/l0th) of
all the outstanding shares of the Corporation entitled to vote at such meeting,
which written request shall state with specificity the purpose or purposes of
such meeting, including all statements necessary to make any statement of such
purpose not incomplete, false or misleading, and include any other information
specified in Schedule 14A, Rule 14a-3, Rule 14a-8 or Rule 14a-11 of the Rules
and Regulations of the Securities and Exchange Commission, and
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which written request shall be accompanied by a certified check for fifty
thousand dollars ($50,000) payable to the Corporation to cover the Corporation's
expenses in connection with such meeting, including the preparation of proxy
materials or information statements and the mailing of notices and proxy
materials to shareholders. Business transacted at all special meetings shall be
confined to the purpose or purposes stated in the notice of meeting. In the case
of a written request for a meeting by shareholders, the Corporation shall mail
notice of the meeting pursuant to Section 2.4(a) below within thirty (30) days
of the receipt of a written request complying with this Section 2.2.
2.3 Place of Meetings.
The Board of Directors may designate any place, either within or
without the State of Tennessee, as the place of meeting for any annual meeting
or for any special meeting. If no place is fixed by the Board of Directors, the
meeting shall be held at the principal office of the Corporation.
2.4 Notice of Meetings; Waiver.
(a) Notice. Notice of the date, time and place of each annual and
special shareholders' meeting and, in the case of a special meeting, a
description of the purpose or purposes for which the meeting is called, shall be
given no fewer than ten (10) days nor more than two (2) months before the date
of the meeting. Such notice shall comply with the requirements of Article XI of
these Bylaws.
(b) Waiver. A shareholder may waive any notice required by law, the
Charter or these Bylaws before or after the date and time stated in such notice.
The waiver must be in writing, be
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signed by the shareholder entitled to the notice and be delivered to the
Corporation for inclusion in the minutes or filing with the corporate records. A
shareholder's attendance at a meeting: (1) waives objection to lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of the
meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting; and (2) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
2.5 Record Date.
The Board of Directors shall fix as the record date for the
determination of shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote or to take any other action, a date not more
than seventy (70) days before the meeting or action requiring a determination of
shareholders.
A record date fixed for a shareholders' meeting is effective for any
adjournment of such meeting unless the Board of Directors fixes a new record
date, which it must do if the meeting is adjourned to a date more than four (4)
months after the date fixed for the original meeting.
2.6 Shareholders' List.
After the record date for a meeting has been fixed, the Corporation
shall prepare an alphabetical list of the names of all shareholders who are
entitled to notice of a shareholders' meeting. Such list will be arranged by
voting group (and within each voting group by class or series of shares), and
will show the address of and number of shares held by each shareholder. The
shareholders' list will be available for inspection by any shareholder,
beginning two (2) business days after notice of the meeting is given for which
the list was prepared and continuing through
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the meeting, at the Corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A shareholder,
his agent or attorney is entitled on written demand to inspect and, subject to
the requirements of the Tennessee Business Corporation Act (the "Act"), to copy
the list, during regular business hours and at his expense, during the period it
is available for inspection.
2.7 Voting Groups; Quorum; Adjournment.
All shares entitled to vote and be counted together collectively on a
matter at a meeting of shareholders shall be a "voting group." Shares entitled
to vote as a separate voting group may take action on a matter at a meeting only
if a quorum of those shares exists with respect to that matter. Except as
otherwise required by the Act or provided in the Charter, a majority of the
votes entitled to be cast on a matter by a voting group constitutes a quorum of
that voting group for action on that matter.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
If a quorum of a voting group shall not be present or represented at
any meeting, the shares entitled to vote thereat shall have power to adjourn the
meeting to a different date, time or place without notice other than
announcement at the meeting of the new time, date or place to which the meeting
is adjourned. At any adjourned meeting at which a quorum of any voting group
shall be present or represented, any business may be transacted by such voting
group which might have been transacted at the meeting as originally called.
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2.8 Voting of Shares.
Unless otherwise provided by the Act or the Charter, each outstanding
share is entitled to one (1) vote on each matter voted on at a shareholders'
meeting. Only shares are entitled to vote.
If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
Charter or the Act requires a greater number of affirmative votes. Unless
otherwise provided in the Charter, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
2.9 Proxies.
A shareholder may vote his shares in person or by proxy. A shareholder
may appoint a proxy to vote or otherwise act for him by signing an appointment
either personally or by his attorney-in-fact. An appointment of a proxy is
effective when received by the Secretary or other officer or agent authorized to
tabulate votes. An appointment is valid for eleven (11) months unless another
period is expressly provided in the appointment form. An appointment of a proxy
is revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest.
2.10 Acceptance of Shareholder Documents.
If the name signed on a shareholder document (a vote, consent, waiver,
or proxy appointment) corresponds to the name of a shareholder, the Corporation,
if acting in good faith, is entitled to accept such shareholder document and
give it effect as the act of the shareholder. If the name signed on such
shareholder document does not correspond to the name of a shareholder, the
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Corporation, if acting in good faith, is nevertheless entitled to accept such
shareholder document and to give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports
to be that of an officer or agent of the entity;
(ii) the name signed purports to be that of a fiduciary
representing the shareholder and, if the Corporation requests, evidence
of fiduciary status acceptable to the Corporation has been presented
with respect to such shareholder document;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder, and, if the Corporation
requests, evidence of this status acceptable to the Corporation has
been presented with respect to the shareholder document;
(iv) the name signed purports to be that of a pledgee,
beneficial owner or attorney-in-fact of the shareholder, and, if the
Corporation requests, evidence acceptable to the Corporation of the
signatory's authority to sign for the shareholder has been presented
with respect to such shareholder document; or
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one
(1) of the co-owners and the person signing appears to be acting on
behalf of all the co-owners.
The Corporation is entitled to reject a shareholder document if the
Secretary or other officer or agent authorized to tabulate votes, acting in good
faith, has a reasonable basis for doubt about the validity of the signature on
such shareholder document or about the signatory's authority to sign for the
shareholder.
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2.11 Action Without Meeting.
Action required or permitted by the Act to be taken at a shareholders'
meeting may be taken without a meeting. If all shareholders entitled to vote on
the action consent to taking such action without a meeting, the affirmative vote
of the number of shares that would be necessary to authorize or take such action
at a meeting is the act of the shareholder.
The action must be evidenced by one (1) or more written consents
describing the action taken, signed by each shareholder entitled to vote on the
action in one (1) or more counterparts, indicating such signing shareholder's
vote or abstention on the action and delivered to the Corporation for inclusion
in the minutes or for filing with the corporate records.
If the Act or the Charter requires that notice of a proposed action be
given to nonvoting shareholders and the action is to be taken by consent of the
voting shareholders, then the Corporation will give its nonvoting shareholders
written notice of the proposed action at least ten (10) days before such action
is taken. Such notice will contain or be accompanied by the same material that
would have been required to be sent to nonvoting shareholders in a notice of a
meeting at which the proposed action would have been submitted to the
shareholders for action.
2.12 Presiding Officer and Secretary.
Meetings of the shareholders shall be presided over by the President,
or if he is not present, by a chairman to be chosen by a majority of the
shareholders entitled to vote at such meeting. The Secretary or, in his absence,
an Assistant Secretary shall act as secretary of every meeting, but if neither
the Secretary nor an Assistant Secretary is present, the shareholders entitled
to vote at such meeting shall choose any person present to act as secretary of
the meeting.
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2.13 Notice of Nominations.
Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors authorized to make
such nominations or by any shareholder entitled to vote in the election of
directors generally. However, any such shareholder nomination may be made only
if written notice of such nomination has been given, either by personal delivery
or the United States mail, postage prepaid, to the Secretary of the Corporation
not later than (a) with respect to an election to be held at an annual meeting
of shareholders, one hundred twenty (120) days in advance of such meeting, and
(b) with respect to an election to be held at a special meeting of shareholders
for the election of directors called other than by written request from a
shareholder, the close of business on the tenth day following the date on which
notice of such meeting is first given to shareholders, and (c) in the case of a
special meeting of shareholders duly called upon the written request of a
shareholder to fill a vacancy or vacancies (then existing or proposed to be
created by removal at such meeting), within ten (10) business days of such
written request. In the case of any nomination by the Board of Directors or a
committee appointed by the Board of Directors authorized to make such
nominations, compliance with the proxy rules of the Securities and Exchange
Commission shall constitute compliance with the notice provisions of the
preceding sentence.
In the case of any nomination by a shareholder, each such notice shall
set forth: (a) as to each person whom the shareholder proposes to nominate for
election or re-election as a director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such
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person that is required to be disclosed in solicitations of proxies with respect
to nominees for election as directors, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
persons' written consent to being named in the proxy statement as a nominee and
to serving as a director, if elected); and (b) as to the shareholder giving the
notice (i) the name and address, as they appear on the Corporation's books, of
such shareholder, and (ii) the class and number of shares of the Corporation
which are beneficially owned by such shareholder; and (c) a description of all
arrangements or understandings between the shareholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder. The President or
chairman of the meeting may refuse to acknowledge the nomination of any person
not made in compliance with the foregoing procedure.
2.14 Notice of New Business. At an annual meeting of the shareholders
only such new business shall be conducted, and only such proposals shall be
acted upon, as shall have been properly brought before the meeting. To be
properly brought before the annual meeting such new business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a shareholder. For a proposal to be
properly brought before an annual meeting by a shareholder, the shareholder must
have given timely notice thereof in writing to the Secretary of the Corporation
and the proposal and the shareholder must comply with Regulation 14A under the
Securities Exchange Act of 1934. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one
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hundred twenty calender days in advance of the anniversary date of the proxy
statement for the previous year's annual meeting. If the Corporation did not
hold an annual meeting the previous year, or if the date of the annual meeting
has been changed by more than thirty (30) calendar days from the date of the
previous year's annual meeting, then, in order to be timely, a shareholder's
notice must be received at the principal executive offices of the Corporation
not later than one hundred twenty calendar days before the date of such annual
meeting or the tenth day following the date on which public announcement of such
annual meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of a
shareholder's notice as described above.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (a) a brief
description of the proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the shareholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, and (d) any financial interest of the
shareholder in such proposal.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Section 2.14. The President or chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that new business or
any shareholder proposal was not properly brought before the meeting in
accordance with the provisions of this Section 2.14, and if he should so
determine, he shall so declare to the meeting and any such business or proposal
not properly brought before the
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meeting shall not be acted upon at the meeting. This provision shall not prevent
the consideration and approval or disapproval at the annual meeting of reports
of officers, directors and committees, but in connection with such reports to
new business shall be acted upon at such annual meeting unless stated and filed
as herein provided.
2.15 Conduct of Meetings. Meetings of the shareholders generally shall
follow accepted rules of parliamentary procedure subject to the following:
(a) The President or chairman of the meeting shall have absolute
authority over the matters of procedure, and there shall be no appeal from the
ruling of the President or chairman. If, in his absolute discretion, the
President or chairman deems it advisable to dispense with the rules of
parliamentary procedure as to any meeting of shareholders or part thereof, he
shall so state and shall state the rules under which the meeting or appropriate
part thereof shall be conducted.
(b) If disorder should arise which prevents the continuation of
the legitimate business of the meeting, the President or chairman may quit the
chair and announce the adjournment of the meeting; and upon so doing, the
meeting is immediately adjourned.
(c) The President or chairman may ask or require that anyone not
a bona fide shareholder or proxy leave the meeting.
(d) The resolution or motion shall be considered for vote only
if proposed by a shareholder or a duly authorized proxy and seconded by a
shareholder or duly authorized proxy other than the individual who proposed the
resolution or motion.
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(e) Except as the President or chairman may permit, no matter
shall be presented to the meeting which has not been submitted for inclusion in
the agenda at least thirty (30) days prior to the meeting.
ARTICLE III.
DIRECTORS
3.1 Powers and Duties.
All corporate powers shall be exercised by or under the authority of
and the business and affairs of the Corporation managed under the direction of
the Board of Directors.
3.2 Number and Term.
(a) Number. The Board of Directors shall consist of no fewer than
three (3) nor more than twelve (12) members. The exact number of directors,
within the minimum and maximum, or the range for the size of the Board, or
whether the size of the Board shall be fixed or variable-range may be fixed,
changed or determined from time to time by the Board of Directors.
(b) Term. The directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. Each class of directors shall be elected for a
three-year term. At the 1990 annual meeting of shareholders, Class I directors
shall be elected for a one-year term; at the 1991 annual meeting Class II
directors shall be elected for a two-year term; and at the 1992 annual meeting
Class III directors shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly
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equal as possible, and any additional director of any class elected to fill a
vacancy resulting from an increase in such class shall hold office for a term
that shall coincide with the remaining term of that class, but in no case will a
decrease in the number of directors shorten the term of any incumbent director.
A director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
3.3 Meetings; Notice.
The Board of Directors may hold regular and special meetings either
within or without the State of Tennessee. The Board of Directors may permit any
or all directors to participate in a regular or special meeting by, or conduct
the meeting through the use of, any means of communication by which all
directors participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
(a) Regular Meetings. Unless the Charter otherwise provides,
regular meetings of the Board of Directors may be held without notice of the
date, time, place or purpose of the meeting.
(b) Special Meetings. Special meetings of the Board of Directors
may be called by the President or any two (2) directors. Unless the Charter
otherwise provides, special meetings must be preceded by at least twenty-four
(24) hours' notice of the date, time and place of the meeting but need not
describe the purpose of such meeting. Such notice shall comply with the
requirements of Article XI of these Bylaws.
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(c) Adjourned Meetings. Notice of an adjourned meeting need not
be given if the time and place to which the meeting is adjourned are fixed at
the meeting at which the adjournment is taken, and if the period of adjournment
does not exceed one (1) month in any one (1) adjournment.
(d) Waiver of Notice. A director may waive any required notice
before or after the date and time stated in the notice. Except as provided in
the next sentence, the waiver must be in writing, signed by the director and
filed with the minutes or corporate records. A director's attendance at or
participating in a meeting waives any required notice to him of such meeting
unless the director at the beginning of the meeting (or promptly upon his
arrival) objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
3.4 Quorum.
Unless the Charter requires a greater number, a quorum of the Board of
Directors consists of a majority of the fixed number of directors if the
Corporation has a fixed board size or a majority of the number of directors
prescribed, or if no number is prescribed, the number in office immediately
before the meeting begins, if the Corporation has a variable range board.
3.5 Voting.
If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the Board of Directors, unless the
Charter or these Bylaws require the vote of a greater number of directors. A
director who is present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to such action unless:
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(i) he objects at the beginning of the meeting (or promptly upon
his arrival) to holding the meeting or transacting business at the
meeting;
(ii) his dissent or abstention from the action taken is entered
in the minutes of the meeting; or
(iii) he delivers written notice of his dissent or abstention
to the presiding officer of the meeting before its adjournment or to
the Corporation immediately after adjournment of the meeting. The right
of dissent or abstention is not available to a director who votes in
favor of the action taken.
3.6 Action Without Meeting.
Unless the Charter otherwise provides, any action required or permitted
by the Act to be taken at a Board of Directors' meeting may be taken without a
meeting. If all directors consent to taking such action without a meeting, the
affirmative vote of the number of directors that would be necessary to authorize
or take such action at a meeting is the act of the Board of Directors. Such
action must be evidenced by one or more written consents describing the action
taken, signed by each director in one (1) or more counterparts, indicating each
signing director's vote or abstention on the action, which consents shall be
included in the minutes or filed with the corporate records reflecting the
action taken. Action taken by consent is effective when the last director signs
the consent, unless the consent specified a different effective date.
3.7 Compensation.
Directors, and members of any committee created by the Board of
Directors, shall be entitled to such compensation for their services as
directors and members of such committee as shall be fixed from time to time by
the Board, and shall also be entitled to reimbursement for any
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reasonable expenses incurred in attending meetings of the Board or of any such
committee meetings. Any director receiving such compensation shall not be barred
from serving the Corporation in any other capacity and receiving reasonable
compensation for such other services.
3.8 Resignation.
A director may resign at any time by delivering written notice to the
Board of Directors, the President, or to the Corporation. A resignation is
effective when the notice is delivered unless the notice specifies a later
effective date.
3.9 Vacancies.
If a vacancy occurs on the Board of Directors, including a vacancy
resulting from an increase in the number of directors or a vacancy resulting
from the removal of a director, the Board of Directors may fill such vacancy by
an affirmative vote of a majority of the Board of Directors then in office, even
though the directors remaining in office may constitute fewer than a quorum of
the Board of Directors.
3.10 Removal of Directors.
Any director may be removed from office but only for cause by the
affirmative vote of the holders of a majority of the voting power of the shares
entitled to vote for the election of directors, considered for this purpose as
one class.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Charter applicable thereto, and such directors so elected shall not
be divided into classes
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pursuant to Section 3.2(b) hereof unless expressly provided by such terms. In
the event of a vacancy among the directors so elected by the holders of
preferred stock, the remaining preferred directors may fill the vacancy for the
unexpired term.
A director may be removed by the shareholders only at a meeting called
for the purpose of removing him, and the meeting notice must state that the
purpose, or one of the purposes, of the meeting is removal of directors.
ARTICLE IV.
COMMITTEES
4.1 Committees;
Unless the Charter otherwise provides, the Board of Directors may
create one (1) or more committees, each consisting of one (1) or more members.
All members of committees of the Board of Directors that exercise powers of the
Board must be members of the Board and serve at the pleasure of the Board.
The creation of a committee and appointment of a member or members to
it must be approved by the greater of (i) a majority of all directors in office
when the action is taken or (ii) the number of directors required by the Charter
or these Bylaws to take action.
To the extent specified by the Board of Directors or in the Charter,
each committee may exercise the authority of the Board of Directors. A committee
may not, however:
(i) authorize distributions, except according to a formula or
method prescribed by the Board of Directors;
(ii) approve or propose to shareholders action that the Act
requires to be approved by shareholders;
17
<PAGE> 18
(iii) fill vacancies on the Board or on any committee thereof;
(iv) amend the Charter without shareholder action;
(v) adopt, amend or repeal Bylaws;
(vi) approve a plan of merger not requiring shareholder approval;
(vii) authorize or approve reacquisitions of shares, except
according to a formula or method prescribed by the Board of Directors;
or
(viii) authorize or approve the issuance or sale or contract
for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except that
the Board of Directors may authorize such committee to do so within
limits specifically prescribed by the Board.
All such committees and their members shall be governed by the same statutory
requirements regarding meetings, action without meetings, notice and waiver of
notice, quorum and voting requirements as are applicable to the Board of
Directors and its members.
ARTICLE V.
OFFICERS
5.1 Number.
The officers of the Corporation shall be a President, one or more
Vice-Presidents, a Secretary, a Treasurer and such other officers as may be from
time to time appointed by the Board of Directors or by the President with the
approval of the Board. One person may simultaneously hold more than one office
except the President may not simultaneously hold the office of Secretary.
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<PAGE> 19
5.2 Appointment.
The principal officers shall be appointed annually by the Board at the
first meeting of the Board following the annual meeting of the shareholders, or
as soon thereafter as is conveniently possible. Each officer shall serve at the
pleasure of the Board and until his successor shall have been appointed, or
until his death, resignation or removal.
5.3 Resignation and Removal.
An officer may resign at any time by delivering notice to the
Corporation. Such resignation is effective when such notice is delivered unless
such notice specifies a later effective date. An officer's resignation does not
affect the Corporation's contract rights, if any, with the officer.
The Board of Directors may remove any officer at any time with or
without cause, but such removal shall not prejudice the contract rights, if any,
of the person so removed.
5.4 Vacancies.
Any vacancy in an office from any cause may be filled for the unexpired
portion of the term by the Board of Directors.
5.5 Duties.
(a) President. The President shall preside at all meetings of the
shareholders and the Board of Directors, shall be the Chief Executive Officer of
the Corporation, shall see that all orders and resolutions of the Board of
Directors are carried into effect and shall have the general powers and duties
of supervision and management usually vested in the office of the President of a
corporation and shall perform such other duties as the Board of Directors may
from time to time prescribe.
19
<PAGE> 20
(b) Vice President. The Vice President or Vice Presidents (if
any) shall be active executive officers of the Corporation, shall assist the
President in the active management of the business, and shall perform such other
duties as the Board of Directors may from time to time prescribe. The Board may
designate a Vice President to be the chief financial officer of the Corporation,
in which event such authority shall preempt the duties and responsibilities set
forth herein for the Treasurer.
(c) Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and shall prepare and
record all votes and all minutes of all such meetings in a book to be kept for
that purpose; he shall perform like duties for any committee when required. The
Secretary shall give, or cause to be given, notice of all meetings of the
shareholders and of the Board of Directors when required, and unless directed
otherwise by the Board of Directors, shall keep a stock record containing the
names of all persons who are shareholders of the Corporation, showing their
place of residence and the number of shares held by them respectively. The
Secretary shall have the responsibility of authenticating records of the
Corporation. The Secretary shall perform such other duties as may be prescribed
from time to time by the Board of Directors.
(d) Treasurer. The Treasurer shall have the custody of the
Corporation's funds and securities, shall keep or cause to be kept full and
accurate account of receipts and disbursements in books belonging to the
Corporation, and shall deposit or cause to be deposited all moneys and other
valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
disburse or cause to be disbursed the funds of the Corporation as required in
the ordinary course of business
20
<PAGE> 21
or as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the President and directors at the regular
meetings of the Board, or whenever they may require it, an account of all of his
transactions as Treasurer and the financial condition of the Corporation. He
shall perform such other duties as may be incident to his office or as
prescribed from time to time by the Board of Directors. The Treasurer shall give
the Corporation a bond, if required by the Board of Directors, in a sum and with
one or more sureties satisfactory to the Board for the faithful performance of
the duties of his office and for the restoration to the Corporation in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
(e) Other Officers. Other officers appointed by the Board of
Directors shall exercise such powers and perform such duties as may be delegated
to them.
(f) Delegation of Duties. In case of the absence or disability
of any officer of the Corporation or of any person authorized to act in his
place, the Board of Directors may from time to time delegate the powers and
duties of such officer to any officer, or any director, or any other person whom
it may select, during such period of absence or disability.
5.6 Indemnification and Insurance.
(a) Indemnification. The Corporation shall indemnify and advance
expenses to each present and future director and officer of the Corporation, or
any person who may have served at its request as a director or officer of
another corporation (and, in either case, his heirs, executors and
administrators), to the full extent allowed by the laws of the State of
Tennessee, both as now in effect and as hereafter adopted. The Corporation may
indemnify and advance
21
<PAGE> 22
expenses to any employee or agent of the Corporation who is not a director or
officer (and his heirs, executors and administrators) to the same extent as to a
director or officer, if the Board of Directors determines that to do so is in
the best interests of the Corporation.
(b) Non-Exclusivity of Rights. The indemnification and
advancement of expenses provisions of subsection (a) of this Section 5.6 shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Charter, provision of these Bylaws,
resolution adopted by the shareholders, or resolution adopted by the Board of
Directors providing for such indemnification or advancement of expenses.
(c) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any individual who is or was a director, officer,
employee or agent of the Corporation, or who, while a director, officer,
employee or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Act.
ARTICLE VI.
SHARES OF STOCK
6.1 Shares with or without Certificates.
The Board of Directors may authorize that some or all of the shares of
any or all of the Corporation's class or series of stock be evidenced by a
certificate or certificates of stock. The Board of Directors may also authorize
the issue of some or all of the shares of any or all of the Corporation's
classes or series of stock without certificates. The rights and obligations of
22
<PAGE> 23
shareholders with the same class and/or series of stock shall be identical
whether or not their shares are represented by certificates.
(a) Shares with Certificates. If the Board of Directors chooses
to issue shares of stock evidenced by a certificate or certificates, each
individual certificate shall include the following on its face: (i) the
Corporation's name, (ii) the fact that the Corporation is organized under the
laws of the State of Tennessee, (iii) the name of the person to whom the
certificate is issued, (iv) the number of shares represented thereby, (v) the
class of shares and the designation of the series, if any, which the certificate
represents, and (vi) such other information as applicable law may require or as
may be lawful.
If the Corporation is authorized to issue different classes of shares
or different series within a class, the designations, relative rights,
preferences and limitations determined for each series (and the authority of the
Board of Directors to determine variations for future series) shall be
summarized on the front or back of each certificate. Alternatively, each
certificate shall state on its front or back that the Corporation will furnish
the shareholder this information in writing, without charge, upon request.
Each certificate of stock issued by the Corporation shall be signed
(either manually or in facsimile) by the President or a Vice President, and by
the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer.
If the person who signed a certificate no longer holds office when the
certificate is issued, the certificate is nonetheless valid.
(b) Shares without Certificates. If the Board of Directors
chooses to issue shares of stock without certificates, the Corporation, if
required by the Act, shall, within a reasonable time after the issue or transfer
of shares without certificates, send the shareholder a
23
<PAGE> 24
written statement of the information required on certificates by Section 6.1(a)
of these Bylaws and any other information required by the Act.
6.2 Subscriptions for Shares.
Subscriptions for shares of the Corporation shall be valid only if they
are in writing. Unless the subscription agreement provides otherwise,
subscriptions for shares, regardless of the time when they are made, shall be
paid in full at such time, or in each installment and at such periods, as shall
be determined by the Board of Directors. All calls for payment on subscriptions
shall be uniform as to all shares of the same class or of the same series,
unless the subscription agreement specifies otherwise.
6.3 Transfers.
Transfers of shares of the capital stock of the Corporation shall be
made only on the books of the Corporation by (i) the holder of record thereof,
(ii) by his legal representative, who, upon request of the Corporation, shall
furnish proper evidence of authority to transfer, or (iii) his attorney,
authorized by a power of attorney duly executed and filed with the Secretary of
the Corporation or a duly appointed transfer agent. Such transfers shall be made
only upon surrender, if applicable, of the certificate or certificates for such
shares properly endorsed and with all taxes thereon paid.
6.4 Lost, Destroyed or Stolen Certificates.
No certificate for shares of stock of the Corporation shall be issued
in place of any certificate alleged to have been lost, destroyed or stolen
except on production of evidence, satisfactory to the Board of Directors or
Transfer Agent for the Corporation's stock, of such loss, destruction or theft,
and, if the Board of Directors or Transfer Agent for the Corporation's stock
24
<PAGE> 25
so requires, upon the furnishing of an indemnity bond in such amount and with
such terms and such surety as either the Board of Directors or Transfer Agent
for the Corporation's stock may in its discretion require.
ARTICLE VII.
CORPORATE ACTIONS
7.1 Contracts.
Unless otherwise required by the Board of Directors, the President or
any Vice President shall execute contracts or other instruments on behalf of and
in the name of the Corporation. The Board of Directors may from time to time
authorize any other officer, assistant officer or agent to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation as it may deem appropriate, and such authority may be general or
confined to specific instances.
7.2 Loans.
No loans shall be contracted on behalf of the Corporation and no
evidence of indebtedness shall be issued in its name unless authorized by the
President, Treasurer or the Board of Directors. Such authority may be general or
confined to specific instances.
7.3 Checks, Drafts, Etc.
Unless otherwise required by the Board of Directors, all checks,
drafts, bills of exchange and other negotiable instruments of the Corporation
shall be signed by either the President, Treasurer, a Vice President or such
other officer, assistant officer or agent of the Corporation as may be
authorized so to do by the Board of Directors, the chief financial officer or
the President. Such authority may be general or confined to specific business,
and, if so directed by the Board of
25
<PAGE> 26
Directors, the chief financial or the President, the signatures of two or more
such officers may be required.
7.4 Deposits.
All funds of the Company not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks or other
depositories as the Board of Directors may authorize.
7.5 Voting Securities Held by the Corporation.
Unless otherwise required by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend any
meeting of security holders, or to take action on written consent as a security
holder, of other corporations in which the Corporation may hold securities. In
connection therewith the President shall possess and may exercise any and all
rights and powers incident to the ownership of such securities which the
Corporation possesses. The Board of Directors may, from time to time, confer
like powers upon any other person or persons.
7.6 Dividends.
The Board of Directors may, from time to time, declare, and the
Corporation may pay, dividends on its outstanding shares of capital stock in the
manner and upon the terms and conditions provided by applicable law. The record
date for the determination of shareholders entitled to receive the payment of
any dividend shall be determined by the Board of Directors, but which in any
event shall not be less than ten (10) days prior to the date of such payment.
26
<PAGE> 27
ARTICLE VIII.
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the Board of
Directors, and in the absence of such determination, shall end on the Saturday
closest in time to December 31 of each year.
ARTICLE IX.
CORPORATE SEAL
The Corporation shall not have a corporate seal.
ARTICLE X.
AMENDMENT OF BYLAWS
These Bylaws may be altered, amended or repealed, and new Bylaws may be
adopted at any meeting of the shareholders by the affirmative vote of a majority
of the stock represented at such meeting, or by the affirmative vote of a
majority of the members of the Board of Directors who are present at any regular
or special meeting.
ARTICLE XI.
NOTICE
Unless otherwise provided for in these Bylaws, any notice required
shall be in writing except that oral notice is effective if it is reasonable
under the circumstances and not prohibited by the Charter or these Bylaws.
Notice may be communicated in person; by telephone, telegraph, teletype or other
form of wire or wireless communication; or by mail or private carrier. If these
forms of personal notice are impracticable, notice may be communicated by a
newspaper of general circulation in the area where published; or by radio,
television or other form of public
27
<PAGE> 28
broadcast communication. Written notice to a domestic or foreign corporation
authorized to transact business in Tennessee may be addressed to its registered
agent at its registered office or to the corporation or its secretary at its
principal office as shown in its most recent annual report or, in the case of a
foreign corporation that has not yet delivered an annual report, in its
application for a certificate of authority.
Written notice to shareholders, if in a comprehensible form, is
effective when mailed, if mailed postpaid and correctly addressed to the
shareholder's address shown in the Corporation's current record of shareholders.
Except as provided above, written notice, if in a comprehensible form, is
effective at the earliest of the following: (a) when received, (b) five (5) days
after its deposit in the United States mail, if mailed correctly addressed and
with first class postage affixed thereon; (c) on the date shown on the return
receipt, if sent by registered or certified mail, return receipt requested, and
the receipt is signed by or on behalf of the addressee; or (d) twenty (20) days
after its deposit in the United States mail, as evidenced by the postmark if
mailed correctly addressed, and with other than first class registered or
certified postage affixed. Oral notice is effective when communicated if
communicated in a comprehensible manner.
ARTICLE XII.
The Corporation expressly declares that control share acquisitions
respecting the shares of the Corporation are governed by and subject to the
provisions of Chapter 29 of the Act; and furthermore, Sections 15 and 16 of
Chapter 29 of the Act are explicitly declared to apply to this Corporation.
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF O'CHARLEY'S INC. FOR THE SIXTEEN WEEKS ENDED APRIL 18,
1999 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-27-1998
<PERIOD-START> DEC-28-1998
<PERIOD-END> APR-18-1999
<CASH> 1,662
<SECURITIES> 0
<RECEIVABLES> 2,330
<ALLOWANCES> 0
<INVENTORY> 9,924
<CURRENT-ASSETS> 17,768
<PP&E> 187,279
<DEPRECIATION> 0
<TOTAL-ASSETS> 207,237
<CURRENT-LIABILITIES> 30,737
<BONDS> 0
66,077
0
<COMMON> 0
<OTHER-SE> 45,910
<TOTAL-LIABILITY-AND-EQUITY> 207,237
<SALES> 86,855
<TOTAL-REVENUES> 87,849
<CGS> 67,878
<TOTAL-COSTS> 79,765
<OTHER-EXPENSES> 32
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,175
<INCOME-PRETAX> 6,877
<INCOME-TAX> 2,407
<INCOME-CONTINUING> 4,470
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,348
<NET-INCOME> 3,122
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.19
</TABLE>
