O’Charley’s Inc. (NASDAQ: CHUX) today reported operating results for the 16-week period ended April 17, 2011.

Financial and Operating Highlights
  • Comparable sales and guest counts increased in all three restaurant concepts:
    • O’Charley’s comparable sales and guest counts for company-operated restaurants increased by 0.4 percent and 0.9 percent, respectively.
    • Ninety Nine Restaurants’ comparable sales and guest counts increased 3.1 percent and 0.9 percent, respectively.
    • Stoney River Legendary Steaks’ comparable sales and guest counts increased by 8.4 percent and 13.9 percent, respectively.
  • First quarter revenue decreased by 0.8 percent to $265.0 million from $267.1 million in the first quarter of 2010 as a 1.5 percent increase in blended comparable restaurant sales was offset by a 2.2 percent decrease in restaurant sales resulting from restaurant closures in the prior year.
  • The calendar shift of Easter into the second quarter of 2011 positively impacted first quarter restaurant sales by 0.4 percent.
  • Restaurant-level margins declined to 14.7 percent of restaurant sales from 15.8 percent of restaurant sales in the same prior year quarter.
  • Income from operations was $5.3 million, or 2.0 percent of revenue, compared to income from operations of $3.2 million, or 1.2 percent of revenue in the same prior year quarter. The company recognized impairment charges of $0.2 million and $3.1 million during the first quarters of 2011 and 2010, respectively.
  • Income from continuing operations was $1.9 million, or $0.09 per diluted share, in the first quarter of 2011 compared to a loss from continuing operations of $1.6 million, or $0.08 per diluted share, in the same prior year quarter.
  • Net income for the first quarter of 2011 was $1.8 million, or $0.08 per diluted share, compared to a net loss in the same prior year quarter of $4.3 million, or $0.21 per diluted share.
  • The Company finished the quarter with $36.5 million of cash on the balance sheet and over $33 million remaining availability on its revolving credit facility.

“During the first quarter, we saw comparable sales increase at the O’Charley’s concept for the first time in 5 years. Our Ninety Nine and Stoney River concepts each had their third consecutive quarter of comparable sales improvement. Stoney River also had their sixth consecutive quarter of guest count increases,” said David W. Head, president and chief executive officer of O’Charley’s Inc.

“We believe that our improved sales performance was driven by our focus on these key points of our turnaround plan: (1) lead with food and win with food: serving a menu of memorable offerings priced to provide a compelling value for our guests; (2) operate great restaurants: consistently delivering a quality dining experience; (3) drive guest visits through effective messages: clearly communicating the attributes of our concepts; and (4) provide attractive and comfortable restaurants: delivering a great environment for our guests every day at each O’Charley’s, Ninety Nine and Stoney River restaurant.”

“While we are encouraged by the improvement in comparable sales and our improvements in our guest satisfaction metrics, we recognize that this is but the first step in strengthening guest loyalty in all three of our concepts. We are focused on translating this progress into long-term sustainable growth in sales and profitability. We are following a disciplined plan, with a highly-dedicated management team focused on executing our plan. Every team member understands that our work has just begun and we do not equate one quarter of positive sales and guest counts with success.”

Outlook for the Second Quarter of 2011

For the second quarter of 2011, the Company is forecasting total revenue of between $190 million and $195 million, loss/income from operations of between a loss of $1 million and income of $2 million, and adjusted EBITDA of between $9 million and $12 million. The Company’s second quarter is a 12-week quarter, whereas its first quarter was a 16-week quarter. Based upon historical seasonal patterns, average weekly sales per restaurant and restaurant level margins are higher in the first quarter than in the subsequent three quarters. Adjusted EBITDA is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to income from operations is included with the supplementary information to this release.

Investor Conference Call and Web Simulcast

O’Charley’s Inc. will conduct a conference call on its 2011 first quarter earnings release on May 17, 2011, at 9:00 a.m. Eastern Time. The number to call for this interactive teleconference is (800) 762-8779, and the confirmation passcode is 4436705. Please dial in 10 minutes prior to the beginning of the call. A replay of the conference call will be available through May 31, 2011, by dialing (800) 406-7325 and entering passcode 4436705.

The live broadcast of O’Charley’s conference call will be available online:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=82565&eventID=3987671.

If you are unable to participate during the live Webcast, the call will be archived on the Company’s Web site at www.ocharleysinc.com, as well as www.streetevents.com and www.earnings.com, and will be available through May 31, 2011.

About O’Charley’s Inc.

O’Charley’s Inc., headquartered in Nashville, Tennessee, is a multi-concept restaurant company that operates or franchises a total of 343 restaurants under three concepts: O’Charley’s, Ninety Nine Restaurant, and Stoney River Legendary Steaks. The O’Charley’s concept includes 227 restaurants in 18 states in the Southeast and Midwest, including 221 company-owned and operated O’Charley’s restaurants, and 6 restaurants operated by franchisees. The menu, with an emphasis on fresh preparation, features several specialty items, such as hand-cut and aged USDA choice steaks, a variety of seafood and chicken, freshly baked yeast rolls, fresh salads with special-recipe salad dressings and signature caramel pie. The Company operates Ninety Nine restaurants in 106 locations throughout New England and upstate New York. Ninety Nine has earned a strong reputation as a friendly, comfortable place to gather and enjoy great American food and drink at a terrific price. The menu features a wide selection of appetizers, salads, sandwiches, burgers, entrees and desserts. The Company operates 10 Stoney River Legendary Steaks restaurants in six states in the Southeast and Midwest. This steakhouse concept appeals to both upscale casual-dining and fine-dining guests by offering high-quality food and attentive customer service typical of high-end steakhouses, but at more moderate prices.

Forward Looking Statement

The forward looking statements in this press release and statements made by or on behalf of the Company relating hereto, including those containing words like “forecast,” “expect,” “project,” “believe,” “may,” “could,” “anticipate,” and “estimate,” are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the finalization of the Company’s first quarter financial and accounting procedures, and may be affected by certain risks and uncertainties, including, but not limited to, the deterioration in the United States economy and the related adverse effect on our sales of decreased consumer spending; the Company’s ability to comply with the terms and conditions of its financing agreements; the Company’s ability to maintain or increase operating margins and comparable store sales at its restaurants; the effect that increases in food, labor, energy, interest costs and other expenses have on our results; the effect of increased competition; the Company’s ability to sell or sublease closed restaurants and other surplus assets; and the other risks described in the Company’s filings with the Securities and Exchange Commission. In light of the significant uncertainties inherent in the forward-looking statements included herein, you should not regard the inclusion of such information as a representation by us that our objectives, plans and projected results of operations will be achieved and the Company’s actual results could differ materially from such forward-looking statements. The Company does not undertake any obligation to publicly release any revisions to the forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.
 
 
O'Charley's Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
16 Weeks Ended April 17, 2011 and April 18, 2010
All percentages shown as a percentage of total revenue unless indicated otherwise
            (2)
2011 2010
(in thousands, except per share data)
Revenues:  
Restaurant sales $ 264,725 99.9% $ 266,767 99.9%
Franchise and other revenue   321   0.1%   333   0.1%
265,046 100.0% 267,100 100.0%
Costs and expenses:
Cost of food and beverage 82,527 31.2% 78,148 29.3%
Payroll and benefits 90,866 34.3% 92,837 34.8%
Restaurant operating costs   52,469   19.8%   53,683   20.1%
Cost of restaurant sales (1), excluding depreciation and 225,862 85.3% 224,668 84.2%
amortization shown below
 
Advertising and marketing 11,105 4.2% 11,673 4.4%
General and administrative 11,049 4.2% 10,949 4.1%
Depreciation and amortization of property and equipment 11,602 4.4% 13,443 5.0%
Impairment and disposal charges, net 162 0.1% 3,129 1.2%
Pre-opening costs   0   0.0%   7   0.0%
  259,780   98.0%   263,869   98.8%
 
Income from operations 5,266 2.0% 3,231 1.2%
 
Other expense:
Interest expense, net 3,338 1.3% 4,043 1.5%
Other, net   4   0.0%   2   0.0%
  3,342   1.3%   4,045   1.5%
 
Income (Loss) from continuing operations before income taxes 1,924 0.7% (814) -0.3%
 
Income tax expense   38   0.0%   775   0.3%
 
Income (Loss) from continuing operations 1,886 0.7% (1,589) -0.6%
 
Loss from discontinued operations, net   (104)   0.0%   (2,755)   -1.0%
 
Net Income (Loss) $ 1,782   0.7% $ (4,344)   -1.6%
 

Net Income (Loss) per share - basic
Income (Loss) from continuing operations $ 0.09 $ (0.08)
Loss from discontinued operations, net $ (0.01) $ (0.13)
Net Income (Loss) $ 0.08 $ (0.21)
Weighted-average common shares outstanding   21,397   21,066
 

Net Income (Loss) per share - diluted
Income (Loss) from continuing operations $ 0.09 $ (0.08)
Loss from discontinued operations, net $ (0.01) $ (0.13)
Net Income (Loss) $ 0.08 $ (0.21)
Weighted-average common shares outstanding   21,778   21,066
(1) Percentages calculated as a percentage of restaurant sales.
(2) Prior year results have been adjusted to reflect results from discontinued operations.
 
 
O'Charley's Inc.
Condensed Consolidated Balance Sheets (unaudited)
At April 17, 2011 and December 26, 2010
     
 
 
2011 2010
(in thousands)
 
Cash $ 36,486 $ 29,693
 
Other current assets 32,913 33,050
 
Property and equipment, net 310,770 320,011
 
Trade names and other intangible assets 25,946 25,946
 
Other assets   12,466   14,041
 
Total assets $ 418,581 $ 422,741
 
 
Current portion of long-term debt and capital leases $ 1,139 $ 1,710
 
Other current liabilities 72,177 74,746
 
Long-term debt and capitalized lease obligations, net
of current portion 117,008 117,164
 
Other liabilities 47,181 50,887
 
Shareholders' equity   181,076   178,234
 
Total liabilities and shareholders' equity $ 418,581 $ 422,741
 
 
O'Charley's Inc. and Subsidiaries
Financial and Other Information (unaudited)
16 Weeks Ended April 17, 2011 and April 18, 2010
All percentages shown as percentage of restaurant sales
                     
16 weeks ended

O'Charley's Concept:
2011 2010
Number of restaurants open at period end (1) 221 234
Average check per guest (1) $ 12.42 $ 12.45
Average weekly sales per restaurant (1) $ 48,046 $ 46,757
 
Restaurant sales (millions) $ 169.9 $ 173.5
 
Costs and expenses:
Cost of food and beverage 31.8% 29.3%
Payroll and benefits 34.1% 34.4%
Restaurant operating costs (2)   18.9%   19.2%
 
Cost of restaurant sales   84.8%   82.9%
 
 

Ninety Nine Concept:
Number of restaurants open at period end 106 113
Average check per guest $ 14.94 $ 14.60
Average weekly sales per restaurant $ 49,552 $ 46,870
 
Restaurant sales (millions) $ 84.0 $ 82.7
 
Costs and expenses:
Cost of food and beverage 29.3% 28.5%
Payroll and benefits 35.6% 36.7%
Restaurant operating costs (2)   21.9%   22.0%
 
Cost of restaurant sales   86.8%   87.2%
 
 

Stoney River Concept:
Number of restaurants open at period end 10 11
Average check per guest $ 35.65 $ 37.54
Average weekly sales per restaurant $ 67,219 $ 59,994
 
Restaurant sales (millions) $ 10.8 $ 10.6
 
Costs and expenses:
Cost of food and beverage 36.4% 35.3%
Payroll and benefits 27.3% 26.1%
Restaurant operating costs (2)   18.9%   20.4%
 
Cost of restaurant sales   82.6%   81.8%
(1) Excludes franchised restaurants
(2) Includes rent: 100% of the Ninety Nine restaurant locations are leased (land or land and building) as compared to 57% for O’Charley’s and 70% for Stoney River.
 
 
O'Charley's Inc. and Subsidiaries
Calculation of Adjusted EBITDA (unaudited) (1)
A Non-GAAP Financial Measure
16 Weeks Ended April 17, 2011 and April 18, 2010
   
Quarter
2011 2010
Income from Operations $ 5,266 $ 3,231
 
Add:
Depreciation and amortization 11,602 13,443
 
Impairment and disposal charges, net (2) 162 3,129
 
Stock-based compensation expense (3) 895 1,434
 
Severance, recruiting and relocation expense (4) 373 -
 
Changes in deferred compensation balances (5)   201   280
 
Adjusted EBITDA $ 18,499 $ 21,517

Notes:
(1)  

We present Adjusted EBITDA as a supplemental measure which we believe is indicative of our ongoing performance. We define Adjusted EBITDA as Income from Operations plus (i) depreciation and amortization, (ii) impairment and disposal charges, net, (iii) stock-based compensation expense, (iv) severance, recruiting and relocation expense for management changes and (v) changes in deferred compensation balances. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Also, our credit agreement uses measures similar to Adjusted EBITDA to measure our compliance with certain covenants.
 
(2) Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Charges include the non-cash write-down of assets to their estimated recovery value as well as certain cash expenses related to the holding and disposition of assets no longer in service.
 
(3) Includes charges relating to the discount on the Company's Employee Stock Purchase Plan and stock-based compensation plans.
 
(4) Includes cash and non-cash charges relating to significant organizational changes.
 
(5) The Company sponsors a deferred compensation plan for certain management employees, which is fully funded with a "Rabbi Trust." Changes in the value of the employee's self-directed balances are reported in compensation expense, with an offsetting amount in interest expense, net.

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