O’Charley’s Inc. (NASDAQ:CHUX), a casual dining chain, recently reported disappointing first-quarter 2010 results. The company underperformed most of its peers. General economic condition and harsh winter weather conditions largely affected results in the quarter.

The quarterly loss of 21 cents a share missed the Zacks Consensus Estimate of earnings of 20 cents a share, and was down substantially from earnings of 34 cents delivered in the prior-year quarter.

O’Charley’s said that total revenue in first-quarter 2010 tumbled 6.9% year-over-year to $271.5 million. Management now expects total revenue for second-quarter 2010 in the range of $194-$200 million. 

The restaurant level margin contracted 180 basis points to 15.5%, reflecting an increase of 10 basis in cost of food and beverage, 80 basis points in payroll and benefits and 80 basis points in restaurant operating costs.

The Nashville-based O’Charley’s indicated that adjusted EBITDA in the quarter was $21.3 million compared with $28.8 million in the year before. The company now expects EBITDA for second-quarter 2010 to be in the range of $10-$13 million.

Income from operations came in at $0.5 million compared with $12 million in the prior-year quarter. The company now expects second-quarter 2010 income from operations in the range of negative $1 million to positive $2 million.

Segment Details

Same-store sales at the company’s O’Charley restaurants fell 6.7% year-over-year. Decline in guest count of 1.2% coupled with an average check decline of 5.6% was largely culpable for the weak same-store sales results. Restaurant level margin at O’Charley’s restaurants dropped 220 basis points, reflecting a 40 basis-point increase in cost of food and beverage.

Same-store sales at Ninety Nine slipped 6.0% due to a 3.8% fall in guest count and a 2.3% decline in average check. Restaurant level margin contracted 170 basis points to 12.5%.

Same-store sales at Stoney River decreased 8.3% in the quarter as a result of a 13.8% decline in average check, partially offset by a 6.4% increase in guest count. Restaurant level margin showed a year-over-year increase of 590 basis points.

Financial Aspects

O’Charley ended the quarter with cash and cash equivalents of $28.9 million, long-term debt of $117.7 million, and stockholder equity of $206.4 million. Capital expenditure for the quarter under review was $3 million. Capital expenditure for fiscal 2010 is expected in the range of $14-$16 million.

Management Outlook

Management plans to upgrade its menus at a more reasonable price to cater to the weak spending environment. The company plans to roll-out a new value menu, which will consist of 12 entree items to be priced between $7.99 and $9.99. Furthermore, to plug the falling sales, it introduced value priced appetizers and cocktails starting at $3.99.

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