-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KVuojeppg5JQxL1miXJXMikvQL0o2ugwbqJFKOhpbuxDKF7QNNS0COQoJmr86p04 TGJ2dwFSDIBIqWTnRGHXmg== 0000950144-96-008526.txt : 19961121 0000950144-96-008526.hdr.sgml : 19961121 ACCESSION NUMBER: 0000950144-96-008526 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961006 FILED AS OF DATE: 19961119 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: O CHARLEYS INC CENTRAL INDEX KEY: 0000864233 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 621192475 STATE OF INCORPORATION: TN FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18629 FILM NUMBER: 96669369 BUSINESS ADDRESS: STREET 1: 3038 SIDCO DR CITY: NASHVILLE STATE: TN ZIP: 37204 BUSINESS PHONE: 6152568500 MAIL ADDRESS: STREET 1: 3038 SIDEO DR CITY: NASHVILLE STATE: TN ZIP: 37204 10-Q 1 O'CHARLEY'S, INC. FORM 10-Q 10/06/96 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 October 6, 1996 Commission file number O-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. Class Outstanding as of November 18, 1996 ----- ----------------------------------- Common Stock, no par value 7,845,368 shares 2 O'Charley's Inc. Form 10-Q For Quarter Ended October 6, 1996 Index Page No. Part I - Financial Information Item 1. Financial statements: Balance sheets as of October 6, 1996 and December 31, 1995 3 Statements of earnings for the twelve weeks 4 ended October 6, 1996 and October 1, 1995 Statements of earnings (loss) for the forty weeks ended October 6, 1996 and October 1, 1995 5 Statements of cash flows for the forty weeks ended October 6, 1996 and October 1, 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 3 O'Charley's Inc. Balance Sheets (dollars in thousands)
October 6, December 31, 1996 1995 ---------- ------------ Assets Current Assets: Cash $ 330 $ 2,576 Accounts receivable 1,615 1,244 Due from related parties - 108 Inventories 5,748 3,780 Preopening costs 1,219 1,045 Deferred income taxes 839 925 Other current assets 1,682 971 -------- ------- Total current assets 11,433 10,649 Property and Equipment, net 98,947 81,512 Other Assets 957 1,276 -------- ------- $111,337 $93,437 ======== ======= Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 5,907 $ 4,424 Accrued payroll and related expenses 3,500 3,435 Accrued expenses 11,828 4,650 Federal, state and local taxes 486 2,606 Current portion of long-term debt and capitalized leases 2,914 2,793 -------- ------- Total current liabilities 24,635 17,908 Deferred Income Taxes 733 2,619 Long-Term Debt 28,679 11,990 Capitalized Lease Obligations 10,227 9,272 Shareholders' Equity: Common stock - No par value;authorized, 50,000,000 shares; issued and outstanding, 7,821,938 in 1996 and 7,770,967 in 1995 29,651 29,819 Retained earnings 17,412 21,829 -------- ------- 47,063 51,648 -------- ------- $111,337 $93,437 ======== =======
See notes to financial statements. -3- 4 O'Charley's Inc. Statements of Earnings Twelve Weeks Ended October 6, 1996 and October 1, 1995
1996 1995 ----------------- ------------------ (in thousands, except per share data) Revenues: Restaurant sales $38,712 $31,739 Commissary sales 576 2,346 Franchise revenue 7 6 ------- ------- 39,295 34,091 Costs and Expenses: Cost of restaurant sales: Cost of food, beverage and supplies 13,986 11,728 Payroll and benefits 12,041 9,495 Restaurant operating costs 5,822 4,834 Cost of commissary sales 550 2,240 Advertising, general and administrative expenses 2,145 1,873 Depreciation and amortization 1,899 1,472 ------- ------- 36,443 31,642 ------- ------- Income from Operations 2,852 2,449 Other(Income)Expense: Interest expense, net 605 436 Other, net (56) (7,664) ------- ------- 549 (7,228) ------- ------- Earnings Before Income Taxes 2,303 9,677 Income Tax Expense 806 3,627 ------- ------- Net Earnings $ 1,497 $ 6,050 ======= ======= Earnings per Common Share $ 0.18 $ 0.72 ======= ======= Weighted Average Common Shares Outstanding 8,310 8,451 ======= =======
See notes to financial statements. -4- 5 O'Charley's Inc. Statements of Earnings Forty Weeks Ended October 6, 1996 and October 1, 1995
1996 1995 ---------------- ----------------- (in thousands, except per share data) Revenues: Restaurant sales $123,018 $101,455 Commissary sales 1,817 8,149 Franchise revenue 24 21 -------- -------- 124,859 109,625 Costs and Expenses: Cost of restaurant sales: Cost of food, beverage and supplies 44,228 37,405 Payroll and benefits 38,258 30,372 Restaurant operating costs 18,772 15,350 Cost of commissary sales 1,731 7,781 Advertising, general and administrative expenses 6,947 6,150 Depreciation and amortization 6,128 4,478 Asset revaluation 5,110 - -------- -------- 121,174 101,536 -------- -------- Income from Operations 3,685 8,089 Other(Income)Expense: Interest expense, net 1,945 1,562 Litigation 8,500 1,000 Other, net 36 (8,358) -------- -------- 10,481 (5,796) -------- -------- Earnings (Loss) Before Income Taxes (6,796) 13,885 Income Tax Expense (Benefit) (2,379) 5,100 -------- -------- Net Earnings (Loss) $ (4,417) $ 8,785 ======== ======== Earnings (Loss) per Common Share $ (0.53) $ 1.04 ======== ======== Weighted Average Common Shares Outstanding 8,374 8,450 ======== ========
See notes to financial statements. -5- 6 O'Charley's Inc. Statements of Cash Flows Forty Weeks Ended October 6, 1996 and October 1, 1995
1996 1995 ------ ------ (in thousands) Cash Flows from Operating Activities: Net earnings (loss) $(4,417) $ 8,785 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 4,479 3,638 Amortization of preopening costs 1,649 840 Asset revaluation adjustment 5,110 - Provision for deferred income taxes (1,800) - Gain on the sale of assets (171) (8,656) Changes in assets and liabilities: Accounts receivable (263) (290) Inventories (1,968) 41 Additions to preopening costs (1,824) (1,542) Other current assets (711) (58) Accounts payable 1,483 1,711 Accrued payroll and other accrued expenses 5,123 4,509 ------- ------- Net cash provided by operating activities 6,690 8,978 Cash Flows from Investing Activities: Additions to property and equipment (23,177) (18,528) Proceeds from the sale of assets 171 13,994 Other, net (53) (65) ------- ------- Net cash used by investing activities (23,059) (4,599) Cash Flows from Financing Activities: Proceeds from long-term debt 17,300 6,000 Payments on long-term debt and capitalized lease obligations (3,009) (10,278) Distribution to Shoex, Inc. shareholders (315) (317) Exercise of employee incentive stock options 147 445 ------- ------- Net cash provided by financing activities 14,123 (4,150) ------- ------- Increase (Decrease) in Cash (2,246) 229 Cash at Beginning of the Period 2,576 1,727 ------- ------- Cash at End of the Period $ 330 $ 1,956 ======= =======
See notes to financial statements. -6- 7 O'Charley's Inc. Notes To Unaudited Financial Statements Twelve and Forty Weeks Ended October 6, 1996 and October 1, 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 which was approved on November 15, 1996 by the U.S. District Court. Under the settlement, the Company will pay to members of the class and their counsel up to $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 $.66 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- 8 O'Charley's Inc. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Twelve and Forty Weeks Ended October 6, 1996 and October 1, 1995 Results of Operations The following table highlights the operating results for the third quarter and first three quarters of 1996 and 1995 as a percentage of total revenue unless otherwise indicated. Each of the third quarters is comprised of 12 weeks. Each of the first three quarters is comprised of 40 weeks. All comparisons included in management's discussion and analysis compares the respective third quarter and first three quarters of 1996 to the third quarter and first three quarters of 1995 unless otherwise indicated.
Third Quarter Year To Date --------------- --------------- 1996 1995 1996 1995 ------ ------ ------ ------ Revenues: Restuarant sales 98.5% 93.1% 98.5% 92.6% Commissary sales 1.5% 6.9% 1.5% 7.4% ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% Costs and Expenses: Cost of restaurant sales: (1) Cost of food, beverage and supplies 36.2% 37.0% 36.0% 36.9% Payroll and benefits 31.1% 29.9% 31.1% 29.9% Restaurant operating costs 15.0% 15.2% 15.2% 15.1% ----- ----- ----- ----- 82.3% 82.1% 82.3% 81.9% Restaurant operating margin 17.7% 17.9% 17.7% 18.1% Cost of commissary sales (2) 95.5% 95.5% 95.3% 95.5% Advertising, general and administrative expenses 5.5% 5.5% 5.6% 5.6% Asset revaluation - - 4.1% - Depreciation and amortization 4.8% 4.3% 4.9% 4.1% Other(Income)Expense: Interest expense, net 1.5% 1.3% 1.6% 1.4% Litigation - - 6.8% 0.9% Other, net (0.1)% (22.5)% 0.0% (7.6)% Earnings (Loss) Before Income Taxes 5.9% 28.4% (5.4)% 12.7% Net Earnings (Loss) 3.8% 17.7% (3.5)% 8.0% ===== ===== ===== =====
- ---------------------- (1) As a percentage of restaurant sales. (2) As a percentage of commissary sales. -8- 9 TOTAL REVENUES increased $5,204,000 or 15.3% for the third quarter of 1996 and $15,234,000 or 13.9% for the first forty weeks of 1996. Restaurant sales increased $6,973,000 or 22.0% and $21,563,000 or 21.3% for the third quarter and first three quarters 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 three quarters in 1996 and 1995: 1996 1995 ---- ---- Company Restaurants: Number of restaurants at beginning of year 61 50 Opened during first quarter 5 3 Opened during second quarter 3 3 Opened during third quarter 3 2 Closed during third quarter (4) - ---- ---- Number of restaurants at end of third quarter 68 58 ==== ==== Franchised Restaurants 1 1 ---- ---- Total Restaurants 69 59 ==== ====
In addition, restaurant sales for the third quarter of 1996 were positively affected from higher average unit volumes of newly opened stores. Same store sales increased .2% in the third quarter of 1996. Same store sales did not change for the first forty weeks of 1996. For each of the first three 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 three quarters of 1996, the Company experienced declines in same store customer counts. Commissary sales decreased in each of the first three 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 $1.2 million or 20.8% in the third quarter of 1996 and $3.4 million or 18.7% in the first three quarters of 1996. As a percentage of restaurant sales, the restaurant operating margin decreased .2% to 17.7% in the third quarter and decreased .4% to 17.7% in the first three quarters. In each of the first three quarters of 1996, the percentage margin decrease was primarily due to an increase in the percentage cost of payroll and benefits 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 third quarter and first three quarters of 1996, respectively. The percentage cost decrease in the third quarter was primarily due to cost reductions in produce and poultry. For the first three quarters, the decrease in the cost of food was due primarily to a reduction in produce cost, primarily lettuce, and to an overall reduction in red meat cost. PAYROLL AND BENEFITS as a percentage of restaurant sales increased 1.2% in the third quarter and first three quarters of 1996. 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 employee benefit costs, primarily vacation pay in 1996. A decrease in workers compensation expense partially offset the above mentioned increases. The federal minimum wage rate increased by $.50 to $4.75 per hour on October 1, 1996 and an additional increase of $.40 to $5.15 per hour will occur on September 1, 1997. The base wage rate paid to directly tipped employees has remained 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 has, however, experienced a minimal increase in labor costs as a result of the minimum wage increase. The inflationary effects of the minimum wage increase is currently unknown and may increase the cost of payroll and benefits in the future. ADVERTISING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of total revenue did not change in the third quarter and the first three quarters of 1996. In the third quarter and first three quarters of 1996, the Company increased its percentage cost of advertising. Additionally, the Company incurred higher salary and related payroll cost -9- 10 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. Subsequent to the Company's new menu introduced near the end of the third quarter of 1996, the Company began a new radio and television advertising campaign. Management expects to increase advertising expense as a percentage of sales during the fourth quarter of 1996. DEPRECIATION AND AMORTIZATION EXPENSE as a percentage of total revenues increased .5% and .8% in the third quarter and first three quarters of 1996. Pre-opening amortization expense has increased due to the increased number of new stores opened for less than one year. 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 income of $56,000 in the third quarter of 1996 compared with a net income of $7.7 million in the same period of 1995. On a year to date basis, other, net decreased $8.3 million in 1996. During the first three 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 and recorded a gain of approximately $7.4 million. 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 forty weeks of 1996, the Company expended approximately $26,652,000 in capital expenditures for new stores and improvements to existing facilities. Additionally, the Company incurred approximately $1.8 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 $17.3 million on the Company's line of credit facility, borrowings under capitalized lease obligations of $3.5 million and $6.7 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 October 6, 1996, $27.8 million was outstanding under this facility compared with $10.5 million at December 31, 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 -10- 11 required quarterly based on a seven-year amortization. At July 14, 1996, the Company had available $2.2 million under this credit facility. The Company has received a commitment (the "Commitment") from its bank group to restructure its existing line of credit facility to increase the amount available under its line of credit to $70 million, and to extend the maturity to November 1999. The anticipated agreement will require monthly interest payments at a floating rate based on the bank's prime rate (plus or minus a certain percentage spread) or the LIBOR rate plus a certain percentage spread. The amount of the interest rate spread on the restructured facility may vary and will be dependent on certain financial ratios achieved by the Company. The anticipated new facility will contain provisions to extend its term by an additional one year at the end of each anniversary period. The Company opened 11 restaurants in the first three quarters of 1996. As of October 6, 1996, the Company had five additional restaurants under construction, one of which is expected to open in the fourth quarter of 1996. For fiscal 1996, the Company expects to open 12 new Company-owned restaurants. Management estimates that the Company will spend approximately $5.5 million in capital expenditures for the remainder of 1996 and approximately $34 million in 1997. Actual capital expenditures 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. In June 1996, the U.S. District Court Judge ruled that the pending lawsuit would 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 which was approved on November 15, 1996 by the U.S. District Court. Under the settlement, the Company will pay up to $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 $.66 per share. The Company anticipates having to borrow funds from its revolving credit facility to pay for this settlement. The Company has received the consent of its bank group for the proposed settlement amount. -11- 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. In June 1996, the U.S. District Court Judge ruled that the pending lawsuit would 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 which was approved on November 15, 1996 by the U.S. District Court. Under the settlement, the Company will pay up to $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 $.66 per share. The Company anticipates having to borrow funds from its revolving credit facility to pay for this settlement. The Company has received the consent of its bank group for the proposed settlement amount. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 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 October 6, 1996 -12- 13 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: 11/18/96 By: /s/ Gregory L. Burns ----------------------- -------------------------- Gregory L. Burns President and Chief Executive Officer Date: 11/18/96 By: /s/ A. Chad Fitzhugh ----------------------- -------------------------- A. Chad Fitzhugh Chief Financial Officer -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF O'CHARLEY'S, INC. FOR THE 12 WEEKS ENDED OCTOBER 6, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 OTHER DEC-29-1996 JUL-15-1996 OCT-06-1996 330 0 1,615 0 5,748 11,433 98,947 0 111,337 24,635 0 0 0 29,651 17,412 111,337 123,018 124,859 101,258 121,174 8,536 0 1,945 (6,796) (2,379) 0 0 0 0 (4,417) (.53) 0
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