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O'Charley's Inc. (



Q3 2010 Earnings Call

November 5, 2010 11:00 am ET


Gene Marbach - IR

Phil Hickey - Chairman

David Head - President and CEO

Larry Hyatt - CFO


Jeff Omohundro - Wells Fargo Securities

Bryan Hunt - Wells Fargo Securities

Bryan Elliott - Raymond James

Robert Derrington - Morgan Keegan


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Welcome to the O'Charley's Inc. Third Quarter 2010 Conference Call. (Operator Instructions) This conference is being recorded today Friday, November 05, 2010. I would now like the turn the conference over to Mr. Gene Marbach. Please go ahead sir.

Gene Marbach

Good morning all and thank you for joining O'Charley's fiscal 2010 third quarter conference call. On the call today are Phil Hickey, Chairman of the company’s Board of Directors; David Head, the company’s President and Chief Executive Officer; and Larry Hyatt, the company’s Chief Financial Officer.

The order of business this morning will be some brief remarks from Phil, David and Larry about the third quarter. We will then open the call to questions. In the time allotted we will take as many questions as possible.

Before we begin, I would like to note that certain statements made by O'Charley's management on this call may be deemed to constitute forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements may be affected by certain risks and uncertainties including risks described in the company's filing with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included in the company's comments, you should not regard the inclusion of such information as a representation that its objectives planned and projected results will be achieved and the company's actual results could differ materially from such forward-looking statements.

I would now like to turn the call over to Phil Hickey, Chairman of the Board of Directors of O'Charley's. Please go ahead.

Phil Hickey

Thanks Gene and good morning everyone. In our second quarter conference call back in August, I noted that Ninety Nine and Stoney River had experienced a positive shift in momentum. We are pleased to see this positive momentum continue in the third quarter as both concepts reported same-store sales increase for the first time in three years.

We are also pleased to see this momentum extend to the O'Charley's concept where quarterly guest counts increased for only the second time in five years. And same-store sales show substantial improvement versus recent trends.

While we are encouraged by progress of our efforts to drive guest counts and sales, we know that we have a lot more work to do translating this progress into long-term, sustainable growth in sales and profitability.

During the third quarter David Head joined us as President and CEO. I planned this transition so that future earnings calls will be handled by David.

I also plan to continue to work closely with him to find strategic direction of the company as its now Executive Chairman. I continue to believe in the potential of each of our three concepts and our company’s best days lie ahead of us.

Speaking of David Head, it’s my pleasure to introducing him to you. David joined the company in the beginning of September, as proven restaurant leader whom I have known for 15 years. He has substantial experience in both casual dining and as quick-service. I look forward to working with him as we continue our efforts to revitalize our company. David?

David Head

Phil, thanks for the introduction. Good morning everyone. Since joining the company in early September, I had been all around the country, spending a lot time in many of our restaurants, actually working in kitchens in all three of our concepts, sat down and met with many of our managers and team members and have a develop a clear understanding of what we do well and where we need to improve.

My initial focus is really the foundation of the turnaround plan. This is going to be on improving the execution of the basics, making sure that every guest experience is great food, great service, strong value, while we managed costs to improved profitability.

Although we clearly face many challenges in turning around our company’s performance, I strongly believe in the potential on each of our three concepts and absolutely share Phil’s belief that our company’s days lie ahead of us. I look forward to working closely with our management team and our Board.

So, let me begin my discussion of third quarter results with Ninety Nine where we continue to strengthen the concepts place to our core guests, who appreciate a friendly neighborhood environment that offers very generous portions of high-quality traditional fare at moderate prices.

Ninety Nine outperformed its relevant Knapp-Track averages in the quarter, and had its first quarter of same-stores sales growth in three years. We believe that this quarter’s growth in average check demonstrate that we can provide value for our guests without being overly aggressive with discounts or promotion. The Nine Real-Sized Entrees for $9.99 continues to prove very popular with our guest and profitable for us. We continuously refresh the nine items recently added eggplant [sauté] and Balsamic Chicken.

Our guests at Caption 99 continue to respond favorably to the opportunity to upgrade our Entrees into a full meal for an additional $3 and our Red Sox Win/Kids Eat Free promotion continue to be popular throughout the end of the season.

Now, during the quarter 99 improved its guest satisfaction scores by 200 basis points versus the prior year’s quarter. And through the first four weeks of the current quarter same-store sales and same-store guest counts were positive.

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