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    Stock Alert for O’Charley’s Inc. (CHUX)

    O’Charley’s Inc. (CHUX) is a multi-concept restaurant company that operates or franchises a total of 342 restaurants under three brands: 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 six restaurants operated by franchisees. The Ninety Nine concept includes 105 restaurants throughout New England and upstate New York. The Stoney River Legendary Steaks concept includes 10 restaurants in six states in the Southeast and Midwest.

    Share Statistics (06-Feb-12)   FY

    2009

    FY

    2010

    %

    Chg

    Q4

    2010

    Q4

    2011

    %

    Chg

    Symbol CHUX Revenue, $Mn 866.27 830.11 -4.2% 188.64 186.59 -1.1%
    Current price $9.81 Gross marg. 15.8% 13.7% -13.3% 12.3% 11.6% -5.7%
    52wk Range: $4.51-$7.99 Oper. margin -2.1% -0.3%
    Avg Vol (3m): 87,329 Net margin -0.8% -4.2% 425.0% -3.9% -2.1% -46.2%
    Market Cap. 215.51M              
    Shares Outstanding 21.97M EPS, $ 0.13 -0.71 -646.2% -0.25 -0.16 -36.0%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    O’Charley’s Inc. (CHUX) saw an interesting spike in Monday trade following news the Company would be acquired by Fidelity National Financial Inc. (NYSE: FNF).  CHUX gained $2.89, or 41.76%, to close at $9.81, with close to 17.5 million shares exchanged. Yesterday’s trading volume was over 265 times the 10-day average.

    Shares of the Nashville, Tenn.-based restaurant operator have gained 50.0% in the last five days; 75.2% in the last month; and 51.2% year-to-date.

    According to the release, FNF will pay $9.85 a share to buy CHUX, which values the Company at $221 million. The proposed price represents a premium of 42% over CHUX’s closing price of $6.92 on February 3, 2012.

    Florida-based title insurer FNF said it has been seeking an investment in a larger, scalable, strategic restaurant operating company to complement its successful investment in American Blue Ribbons Holdings LLC (ABRH).  “There is a real opportunity to continue to improve the operating performance at O’Charley’s and to build on their current momentum. We look forward to having the ABRH and O’Charley’s teams working toward that end,” commented FNF chairman William P. Foley II.

    “This transaction provides a number of benefits, including, for our shareholders, a substantial and immediate cash value for their shares,” said CHUX CEO David Head. “We believe FNF’s expertise and commitment to long-term growth will enable O’Charley’s Inc. to complete its turnaround and achieve its growth objectives, benefiting our employees, guests, business partners and other stakeholders.”

    The deal is expected to close in the second quarter, assuming execution of the tender process and satisfaction of the conditions to closing.

    Source: http://phx.corporate-ir.net/phoenix.zhtml?c=82565&p=irol-newsArticle&ID=1656743&highlight=

    Financial Summary

    Also on Monday, CHUX reported its results for the fourth quarter and full year ended December 25, 2011.

    The Company posted revenue of $182.2 million, a decline of 0.7% from $183.5 million for the fourth quarter of 2010.  CHUX attributed the result to fewer restaurants in operation for the fourth quarter of 2011 compared to the fourth quarter of the prior year. Blended comparable sales increased 1.1%  for the quarter – the fourth consecutive quarterly increase. Blended comparable sales for full-year 2011 grew 1.7%, based on an increase of 0.3% for O’Charley’s, 3.9% for Ninety Nine Restaurants and 7.2% for Stoney River Legendary Steaks.

    CHUX realized a loss from continuing operations of $8.2 million, or $0.38 per diluted share, for the fourth quarter of 2011, an improvement from a loss of $16.4 million, or $0.77 per diluted share, for the fourth quarter of 2010.  The Company ended the year with a $12.1 million loss, narrowing from $34.9 million a year earlier.

    Net cash provided by operating activities was $19.0 million for fiscal 2011, and at the quarter’s end, the Company had $18.6 million of cash, no funded debt and its $30 million revolving credit facility remains undrawn.

    Source: http://phx.corporate-ir.net/phoenix.zhtml?c=82565&p=irol-newsArticle&ID=1656747&highlight=

    Financial Strength (06-Feb-2012)

    Company

    Industry

    Sector

    S&P 500

    Quick Ratio (MRQ) 0.86 0.97 1.09 0.59
    Current Ratio (MRQ) 0.99 1.10 1.34 0.92
    LT Debt to Equity (MRQ) 66.29 47.68 60.46 95.14
    Total Debt to Equity (MRQ) 66.42 73.40 100.71 134.19
    Interest Coverage (TTM) -0.82 2.98 0.32 27.37

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    CHUX is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    The MACD for CHUX currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Feb06-2012 symbol Share, $ $ Mn 2011 2012 2011 2012
    Brinker International Inc. EAT 27.12 2.17B 14.50 12.50 0.78 0.76
    DineEquity Inc. DIN 50.49 910.79M 11.91 12.23 0.85 1.03
    Darden Restaurants Inc. DRI 48.34 6.21B 13.66 12.02 0.78 0.73
    Restaurants Median       21.10 n/a 0.99 n/a
    O’Charley’s Inc. CHUX 9.81 215.51M n/a n/a 0.26 0.25

    Source: Thomson Financial

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