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Stocks O / O'Charley's Inc.


Subject:  2002 Q4 Conference Call Notes Date:  2/20/2003  2:59 AM
Author:  kh Number:  25 of 35

The acquisition of Ninety-Nine Restaurants closed in January. Total long-term debt after the acquisition should be about $300 million.

Same store sales for O'Charley's in the quarter rose .1%. (SSS had been declining, slightly, in each of the last two quarters.) For all of 2002, SSS fell .1%, the first such decrease in 12 years.

For Ninety-Nine Restaurants, SSS fell .1% in the quarter, but was up 1.3% for all of 2002.

During the first few weeks of 2003, SSS is running slightly positive. But bad weather has hurt results somewhat, according to CEO Burns. (Note: Burn's comment was made a couple of weeks ago, i.e., before the recent weather in the northeast, where all the Ninety-Nine units are located.)

As for franchising the O'Charley's brand, Burns said the company continues to study the concept, but then he has been saying the same thing for about a year. Despite earlier suggestions that there would be franchises in 2002, there still are no signed franchise agreements in place at this time. I got the impression that the primary focus in 2003 will be to manage the Ninety-Nine acquisition successfully, with the franchising concept taking a back seat this year.

The average check increased 3-4% to $11.80 in the quarter. Customer traffic was down 3-4%.

Company expects to earn $1.55 to $1.60 a share in 2003, in line with analyst consensus of $1.58 a share.

The company will soon begin offering medical insurance to hourly employees. During Q4, as employees first became aware that the company would be providing this benefit, employee turnover fell significantly. The expected cost to the company is $3.2 million in the first year.

Based on employee feedback, restaurants will close on Thanksgiving day in the future.
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