O'Charley's Inc. Reports Results for First Fiscal Quarter of 2006

Financial and Operating Highlights

-- First-quarter revenue rose 5.5 percent to $306.5 million from $290.5 million in last year's first quarter. Same-store sales for the first quarter increased 0.6 percent at O'Charley's Restaurants, 1.1 percent at Ninety Nine Restaurant and Pub, and 5.1 percent at Stoney River Legendary Steaks.

-- Income from operations in the quarter was $14.9 million, or 4.9 percent of revenues, compared with $18.8 million, or 6.5 percent of revenues, in the first quarter of last year. Payroll and benefits costs were flat versus last year as a percentage of sales. Cost of food and beverage, restaurant operating costs, and general and administrative costs were higher as a percentage of sales than in the first quarter of the prior year.

-- The Company reported first-quarter net income of $7.2 million, or $0.31 per diluted share, compared with net income of $10.1 million, or $0.44 per diluted share, for the same period in 2005, representing a decrease in earnings per diluted share of 29.5 percent. Interest expense in the first quarter of 2006 was $0.02 per diluted share higher than in the prior year quarter, due to the impact of higher interest rates on the Company's variable rate debt.

-- The Company stated that it expects to report net earnings per diluted share of between $0.15 and $0.20 for the 12-week period ending July 9, 2006. The Company affirmed its previously issued full-year earnings guidance, and stated that it expects to report net earnings per diluted share of between $0.90 and $1.00 for the fiscal year ending December 31, 2006. The 2006 fiscal year is a 53-week year. The Company's guidance for the full year reflects an estimated positive earnings impact from the 53rd week of between $0.08 and $0.10 per diluted share.

"Each of our concepts achieved positive same-store sales growth inthe quarter, generating financial results above the high end of theguidance offered on February 2," Gregory L. Burns, chairman and chiefexecutive officer of O'Charley's Inc., said. "I am pleased that we arein a position to affirm the full-year guidance offered at that time.However, everyone on the O'Charley's management team and throughoutthe organization understands that we are still in the early stages ofour turnaround effort, and that we must continue to improve theperformance of the business for the balance of 2006 and beyond. I wantto emphasize again that it is not 'business as usual' at O'Charley's.

"In February, the Company indicated that we would consideropportunities to use our real estate and other assets to enhanceshareholder value. Since that time, we have refined our business andstrategic plans, and our board of directors explored a number offinancial structuring alternatives with our financial advisors, takinginto account the restrictions in our existing bond indenture andcredit agreement. After full consideration, our board has decided thatwe will not pursue a financial structuring transaction at this time.Management and the board will continue on a regular basis to reviewthe opportunities to enhance shareholder value while maintainingfinancial flexibility for our anticipated future growth."

O'Charley's Restaurants

Restaurant sales for O'Charley's increased 2.5 percent to $200.2million for the first quarter, reflecting the addition of nine newcompany-operated restaurants and the closing of eight company-operatedrestaurants since the first quarter of 2005. The same-store salesincrease of 0.6 percent was comprised of a 1.2 percent increase inaverage check and a 0.6 percent decrease in guest counts. Averagecheck for company-operated stores in the first quarter was $11.80.There were 225 company-operated O'Charley's restaurants at the end ofthe quarter. One new franchised O'Charley's restaurant opened in thefirst quarter, bringing the total number of franchised and jointventure restaurants to seven at the end of the quarter.

Commenting on results for the O'Charley's concept, Burns said,"Given the challenging consumer environment, we are pleased with theincrease in average check and the positive same-store sales for thefirst quarter. The increase in average check was primarilyattributable to the success of the 'Winters on the Grill' promotion,featuring our Burgundy Bistro steak for $12.99, and 'Catch the Flavor'promotion, featuring our Jumbo Seafood Platter for $12.99. Asexpected, operating costs as a percentage of sales were higher in thefirst quarter of 2006 than in the prior year first quarter. Althoughfood and beverage costs increased compared to the first quarter of2005, we are beginning to see an impact from our theoretical food costsystem, as the gap between theoretical and actual food cost hasnarrowed. O'Charley's improved its payroll and benefits costs as apercentage of sales compared to the prior year, which reflects thechanges we made to our restaurant-level bonus plans, as well as ourincreased focus on total restaurant payroll costs.

"We continue to instill 'A Passion to Serve'(TM) throughout theorganization along with a series of programs to emphasize ourguest-centric approach to the dining experience. We believe that thisfocus contributed to the improvement in guest satisfaction scores atO'Charley's since the first quarter of 2005. For the remainder of2006, we have three exciting new limited-time promotions. Later thismonth, we plan to launch the O'Charley's branded steak program,featuring our aged USDA choice hand-cut steaks. We believe that thequality and presentation of these steaks differentiate the O'Charley'sconcept from its casual dining competitors. To support our promotionsand new menu items, we have introduced a new advertising campaign witha contemporary look emphasizing the good food and good times that ourguests have come to expect at O'Charley's. We plan to introduce newpricing at O'Charley's in late May, which will reflect our new moreanalytical approach to menu pricing."

Ninety Nine Restaurant & Pub Restaurants

Restaurant sales for Ninety Nine increased 9.2 percent to $92.4million in the first quarter, reflecting the addition of 10 newrestaurants since the first quarter of 2005. Same-store salesincreased by 1.1 percent in the quarter and consisted of a 0.7 percentincrease in guest counts and a 0.4 percent increase in average check.Average check for Ninety Nine in the first quarter was $13.74. Two newNinety Nine restaurants opened during the first quarter, bringing thetotal number of Ninety Nine restaurants to 111 at the end of thequarter.

"Ninety Nine continued to achieve sales and guest count increasesin the challenging New England market," Burns said. "Based uponindustry data, we believe that Ninety Nine realized the highest guestcount increases of any casual dining restaurant chain in that market.As expected, operating costs as a percentage of sales were higher inthe first quarter of 2006 than in the first quarter of 2005, dueprimarily to higher payroll, benefit and utility costs.

"During the quarter, the Ninety Nine management team introduced 'APassion to Serve'(TM) to all of their team members. Following thesuccess of our first-quarter promotion, which featured a three-coursemeal for $11.99, Ninety Nine recently introduced a newly designed menufeaturing nine new food and drink items. In connection with the newmenu, a new limited-time promotion began featuring the nine new menuitems as well as a combo meal. We have also begun a new radioadvertising campaign designed to reinforce Ninety Nine's brandpositioning as a friendly, comfortable place to gather and enjoy greatAmerican food and drink at a terrific price. We have now opened threerestaurants in the Philadelphia market, and look forward to continueddevelopment of that market in 2006."

Stoney River Legendary Steaks Restaurants

First-quarter sales for Stoney River Legendary Steaks increased17.0 percent to $8.8 million, which reflects increases of 5.1 percentat the six restaurants included in the same-store sales base, andsales at the new Dublin, Ohio restaurant. The same-store salesincrease consisted of a 2.9 percent increase in guest counts and a 2.2percent increase in average check. Average check for Stoney River inthe first quarter was $41.54. The Company opened the Dublin restaurantin the fourth quarter of 2005, and recently opened a new location inthe West End area of Nashville, Tenn.

Burns added, "We continue to be pleased with Stoney River'sperformance in terms of same-store sales and operational improvements,and believe that the concept has established a unique position in theupscale steakhouse segment. We recently opened a restaurant in theWest End area of Nashville, our second Stoney River in this growingmarket. We believe this will be an excellent market for us that willcontribute to the continued development of our Stoney River concept.We expect to open two additional Stoney River restaurants, in the St.Louis and Atlanta markets, later in 2006."

Outlook for Second Quarter and Full Year 2006

The Company stated that it expects to report net earnings perdiluted share of between $0.15 and $0.20 for the 12-week period endingJuly 9, 2006. The Company also reaffirmed its previously issuedearnings guidance for the full year and stated that it expects toreport net earnings per diluted share of between $0.90 and $1.00 forthe fiscal year ending December 31, 2006. The 2006 fiscal year is a53-week year. The Company's guidance for the full year reflects anestimated positive earnings impact from the 53rd week of between $0.08and $0.10 per diluted share. Projected results for the second quarterare based upon anticipated same-store sales increases of less than onepercent, reflecting the current uncertainty about consumer reactionsto gasoline price increases. Projected results for the full year arebased upon anticipated same-store sales increases of between 0 percentand 2 percent for the O'Charley's and Ninety Nine concepts. TheCompany expects its income from operations as a percentage of sales inthe second quarter of 2006 to be below the prior year quarter, andexpects year-over-year improvement in its operating margin in thesecond half of the year. The Company projects an effective tax rate ofapproximately 27 percent for the full fiscal year, compared with 14.3percent in 2005, and interest expense of between $16.5 million and$17.0 million for the year, compared with $15.1 million in the 2005fiscal year. The Company's guidance does not reflect any impact forrestructuring or other charges relating to decisions that the Companymay make during fiscal 2006 as part of its turnaround efforts.

Burns concluded, "While we have reaffirmed our earnings outlookfor the full fiscal year, we are concerned about high gasoline pricesand their impact on consumer spending in our restaurants. Like many ofour competitors, we experienced reductions in guest counts in April.In this challenging environment, we will continue to focus on thethings we can control, including improving the overall guestexperience in our restaurants and managing our margins.

"With the recent hiring of Larry Taylor as our chief supply chainofficer, our new senior executive team is now substantially complete.The hiring of Melissa Thomson as our vice president of communicationsand Colin Daly as our senior corporate counsel further demonstratesour ability to attract outstanding talent and build a winning team.This management team understands the need to turn around ourperformance in 2006 and beyond, and we believe that we are taking theappropriate actions to generate profitable and sustainable growthwhile enhancing shareholder value. We have a conservative fiscalpolicy, strong asset base and strong balance sheet, which provide uswith financial flexibility."

Investor Conference Call and Web Simulcast

O'Charley's Inc. will conduct a conference call on its 2006first-quarter earnings release on May 11, 2006, at 11:00 a.m. EDT. Thenumber to call for this interactive teleconference is (973) 582-2952.A replay of the conference call will be available through May 18,2006, by dialing (973) 341-3080 and entering the confirmation number7347603.

The live broadcast of O'Charley's conference call will beavailable online: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82565&eventID=1310771 (Due to the length of this URL,it may be necessary to copy and paste this hyperlink into yourInternet browser's URL address field. Remove the space if one exists.)

If you are unable to participate during the live Webcast, the callwill be archived on the company's Web site at www.ocharleysinc.com, aswell as www.streetevents.com and www.earnings.com, shortly after thecall on May 11, 2006 and continuing through May 18, 2006.

About O'Charley's Inc.

O'Charley's Inc., headquartered in Nashville, Tenn., is amulti-concept restaurant company that operates or franchises a totalof 352 restaurants under three brands: O'Charley's, Ninety NineRestaurant and Pub, and Stoney River Legendary Steaks. The O'Charley'sconcept includes 233 restaurants in 17 states in the Southeast andMidwest, including 225 company-owned and operated O'Charley'srestaurants in 16 states, five franchised O'Charley's restaurants inMichigan and three joint venture O'Charley's restaurants in Louisiana.The menu, with an emphasis on fresh preparation, features severalspecialty items such as hand-cut and aged steaks, a variety of seafoodand chicken, freshly baked yeast rolls, fresh-cut salads withspecial-recipe salad dressings and signature caramel pie. The Companyoperates Ninety Nine Restaurant & Pub restaurants in 111 locationsthroughout Connecticut, Maine, Massachusetts, New Hampshire, New York,Rhode Island, Vermont and Pennsylvania. Ninety Nine has earned astrong reputation as a friendly, comfortable place to gather and enjoygreat American food and drink at a terrific price. The menu features awide selection of appetizers, salads, sandwiches, burgers, entrees anddesserts. The Company operates eight Stoney River Legendary Steaksrestaurants in Georgia, Illinois, Kentucky, Ohio and Tennessee. Thedinner-only steakhouse concept appeals to both upscale casual diningand fine dining guests by offering high-quality food and attentivecustomer service typical of high-end steakhouses at more moderateprices.

Forward Looking Statement

The forward looking statements in this press release andstatements made by or on behalf of the Company relating hereto,including those containing words like "expect," "project,""believe","may," "could," "anticipate," and "estimate," are subject to the safeharbor provisions of the Private Securities Litigation Reform Act of1995, These forward-looking statements are subject to the finalizationof the Company's first fiscal quarter financial and accountingprocedures, and may be affected by certain risks and uncertainties,including, but not limited to, the Company's ability to increaseoperating margins and increase same-store sales at its restaurants;the effect that increases in food, labor, energy, interest costs andother expenses have on our results of operations; the Company'sability to successfully implement changes to its supply chain; theCompany's ability to sell closed restaurants and other surplus assets;the possible adverse effect on our sales of any decrease in consumerspending; the effect of increased competition; the impact on ourresults of operations of restarting development of our Stoney Riverconcept, and the other risks described in the Company's filings withthe Securities and Exchange Commission. In light of the significantuncertainties inherent in the forward-looking statements includedherein, you should not regard the inclusion of such information as arepresentation by us that our objectives, plans and projected resultsof operations will be achieved and the Company's actual results coulddiffer materially from such forward-looking statements. The Companydoes not undertake any obligation to publicly release any revisions tothe forward-looking statements contained herein to reflect events andcircumstances occurring after the date hereof or to reflect theoccurrence of unanticipated events.
O'Charley's Inc. and Subsidiaries
Consolidated Statements of Earnings (unaudited)
16 Weeks Ended April 16, 2006 and April 17, 2005

2006 2005
--------------- ---------------
(in thousands, except per share data)
Revenues:
Restaurant sales $303,217 98.9% $288,177 99.2%
Commissary sales 3,077 1.0% 2,208 0.8%
Franchise revenue 157 0.1% 106 0.0%
--------------- ---------------
306,451 100.0% 290,491 100.0%
Costs and Expenses:
Cost of restaurant sales:
Cost of food and beverage 90,961 30.0% 85,584 29.7%
Payroll and benefits 102,510 33.8% 97,285 33.8%
Restaurant operating costs 56,509 18.6% 51,475 17.9%
Cost of commissary sales 2,679 0.9% 1,913 0.7%
Advertising expenses 8,450 2.8% 8,011 2.8%
General and administrative expenses 15,258 5.0% 12,491 4.3%
Depreciation and amortization 13,998 4.6% 13,219 4.6%
Asset impairment and disposals 0 0.0% 335 0.1%
Pre-opening costs 1,174 0.4% 1,385 0.5%
--------- ---------
291,539 95.1% 271,698 93.5%
--------------- ---------------

Income from Operations 14,912 4.9% 18,793 6.5%

Other Expense:
Interest expense, net 5,087 1.7% 4,548 1.6%
Other, net 4 0.0% 0 0.0%
--------------- ---------------
5,091 1.7% 4,548 1.6%
--------------- ---------------

Earnings before income taxes 9,821 3.2% 14,245 4.9%

Income Taxes 2,622 0.9% 4,131 1.4%
--------------- ---------------

Net earnings $ 7,199 2.3% $ 10,114 3.5%
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Basic Earnings per Share:
-------------------------
Net Earnings $ 0.31 $ 0.45
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Weighted Average Common Shares
Outstanding 23,089 22,687
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Diluted Earnings per Share:
---------------------------
Net Earnings $ 0.31 $ 0.44
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Weighted Average Common Shares
Outstanding 23,345 23,067
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O'Charley's Inc.
Condensed Consolidated Balance Sheet (unaudited)
At April 16, 2006 and December 25, 2005

2006 2005
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(in thousands)

Cash $ 9,326 $ 5,699

Other current assets 76,442 78,426

Property and equipment, net 461,134 464,048

Goodwill and other intangible assets 118,995 118,995

Other assets 19,300 20,442
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Total assets $ 685,197 $687,610
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Current portion of long-term debt and capital
leases $ 10,691 $ 10,975

Other current liabilities 100,822 97,299

Deferred income taxes 6,766 7,407

Long-term debt, net of current portion 135,275 148,299

Capitalized lease obligations 23,392 26,408

Other liabilities 47,227 47,634

Shareholders' equity 361,024 349,588
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Total liabilities and shareholders' equity $ 685,197 $687,610
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