RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the federal securities laws, which are intended to be covered by the safe harbors created thereby. Those statements include, but may not be limited to, all statements regarding our intent, belief and expectations such as statements concerning our estimated results in future periods, operating and growth strategy, and financing plans. These forward-looking statements may be affected by certain risks and uncertainties, including, but not limited to, the continued deterioration in the United States economy and the related adverse effect on our results from operations of decreases in consumer spending; our ability to hire a new Chief Executive Officer; our ability to maintain or increase same store sales and operating margins at our restaurants; the effect that increases in food, labor, energy, interest costs and other expenses have on our results of operations; our ability to successfully implement changes to our supply chain; our ability to sell closed restaurants and other surplus assets; our ability to comply with the terms and conditions of our financing agreements; the effect of increased competition; our ability to realize projected returns on investment from our re-branding and concept repositioning efforts; the resolution of outstanding legal proceedings; and the other risks described in our Annual Report on Form 10-K for the fiscal year ended December 28, 2008 under the caption "Risk Factors" and in our other filings with the Securities and Exchange Commission ("the Commission"). Although we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to publicly release any revisions to any forward-looking statements contained herein to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We are a leading casual dining restaurant company headquartered in Nashville, Tennessee. We own and operate three restaurant concepts under the "O'Charley's," "Ninety Nine" and "Stoney River Legendary Steaks" trade names. As of April 19, 2009, we operated 232 O'Charley's restaurants in 16 states in the Southeast and Midwest regions, 116 Ninety Nine restaurants in nine states throughout New England and the Mid-Atlantic, and 11 Stoney River restaurants in seven states in the Southeast and Midwest. As of April 19, 2009, we had ten franchised O'Charley's restaurants, including four in Michigan, two in Ohio, and one of each in Iowa, Pennsylvania, Florida, and Tennessee. As of April 19, 2009, we had two joint venture O'Charley's restaurants in Louisiana and one joint venture O'Charley's restaurant in Wisconsin. Our fiscal year ends on the last Sunday of the calendar year. We have one reportable segment.

Our strategic plan over the recent years focused on the following key elements:
strengthening the organization with a new core of talent and building a winning team, improving box economics through the execution of product and labor cost management and increasing same store sales through our re-branding initiatives, new product offerings, new marketing, and a more analytical approach to menu pricing, and achieving high guest satisfaction and intent to return by instilling "A Passion to Serve" SM. While this remains our long term strategy, in response to the current economic environment, we are focused on driving profitable sales, controlling margins and maintaining our financial flexibility. We believe our strategy can be accomplished by:

Improving sales by differentiating our brands through innovative food and beverage offerings. We are committed to serving the best food in the varied menu casual and polished casual dining segments with high value perception. By offering unique and innovative menu items, we believe we can differentiate ourselves from our competitors, build brand loyalty and stimulate return visits.

To that end, during the first quarter, our promotions featured a number of high quality items at attractive price points. For example, at O'Charley's we featured Southern Fried Chicken Tacos and a Made-From-Scratch Strawberry Lemonade that has become our signature non-alcoholic beverage. At Ninety Nine restaurants we featured promotions with four entrees starting at $9.99, also allowing guests to upgrade to a three-course meal for an additional $3.00. We have also taken our first steps to reposition our Stoney River Legendary Steaks brand by providing the same great guest experience with lower menu prices, new menu offerings, and a new menu format. We implemented this new Stoney River concept positioning at our restaurant in Louisville, Kentucky and plan to expand our test of this repositioning into additional Stoney River restaurants later in fiscal 2009.

Controlling margins and aligning our cost structure to the current environment. We believe that our recent financial performance reflects the results of our food cost reduction initiatives, the implementation of a theoretical labor cost system, and tight control over our general and administrative costs. We also believe that the roll-out of our new, integrated back-of-house system later this year will facilitate even greater control over labor and food expenses. We continue to review every menu item with an eye to reducing costs through changes in portion size, recipe, or specifications, without negatively affecting the guest experience. We also expect year-over-year savings from changes to our health care plans for our hourly team members. We also have established a company-wide salary freeze and reduced staffing levels in our support centers, both of which have resulted in lower overhead costs through the first quarter of fiscal 2009.

Maintaining our financial flexibility by maximizing cash flow and debt reduction. In the current economic environment it is critical to maintain our financial flexibility. The combination of positive operating cash flow and reduced levels of capital investment during the first quarter of 2009 allowed us to reduce debt by $26.5 million, including paying off the outstanding borrowings under our revolving line of credit. Our new restaurant development plan during fiscal 2009 is limited to one Ninety Nine restaurant, which opened during the first quarter, and one Stoney River Legendary Steaks restaurant, which is expected to open later this year.

Following is an explanation of certain items in our consolidated statements of earnings:

Revenues consist primarily of company-operated and joint venture restaurant sales and, to a lesser extent, royalty and franchise revenue. Restaurant sales include food and beverage sales and are net of applicable state and local sales taxes and discounts. Franchise revenue and other revenue consists of development fees, royalties on sales by franchised units, and royalties on sales of branded food items, particularly salad dressings. Our development fees for franchisees in which we do not have an ownership interest are between $25,000 and $50,000 per restaurant. The development fees are recognized during the reporting period in which the developed restaurant begins operation. The royalties are recognized as revenue in the period corresponding to the franchisees' sales.

Cost of Food and Beverage primarily consists of the costs of beef, poultry, seafood, produce and alcoholic and non-alcoholic beverages net of vendor discounts and rebates. The three most significant commodities that may affect our cost of food and beverage are beef, poultry and seafood which accounted for approximately 25 percent, 12 percent and 9 percent, respectively, of our overall cost of food and beverage in the first quarter of 2009. Generally, temporary increases in these costs are not passed on to guests; however, in the past, we have adjusted menu prices to compensate for increased costs of a more permanent nature.

Payroll and Benefits include payroll and related costs and expenses directly relating to restaurant level activities including restaurant management salaries, bonuses, share-based compensation, 401(k) compensation match, hourly wages for restaurant level team members, payroll taxes, workers' compensation, various health, life and dental insurance programs, vacation expense and sick pay. We have various incentive plans that compensate restaurant management for achieving certain restaurant level financial targets and performance goals.

Restaurant Operating Costs include occupancy and other expenses at the restaurant level, except property and equipment depreciation and amortization. In addition to occupancy costs, supplies, straight-line rent, supervisory salaries, bonuses, share-based compensation, 401(k) and deferred compensation match for multi-unit operational employees, and related expenses, management training salaries, general liability and property insurance, property taxes, utilities, repairs and maintenance, outside services and credit card fees account for the major expenses in this category.

Advertising and Marketing Expenses include all advertising and marketing-related expenses for the various programs that we utilize to promote traffic and brand recognition for our three restaurant concepts. This category also includes the administrative costs of our marketing departments.

General and Administrative Expenses include the costs of restaurant support center administrative functions that support the existing restaurant base and provide the infrastructure for future growth. Executive management and support staff salaries, bonuses, share-based compensation, 401(k) and deferred compensation match for support employees, benefits, and related expenses, data processing, legal and accounting expenses, changes in the liabilities associated with our non-qualified deferred compensation plan, and office expenses account for the major expenses in this category. This category also includes recruiting, relocation and most severance-related expenses.

Depreciation and Amortization, Property and Equipment primarily includes depreciation on property and equipment calculated on a straight-line basis over the estimated useful lives of the respective assets or the lease term plus one renewal term for leasehold improvements, if shorter. Based on the size of the investment that we make, the economic penalty incurred by discontinuing use of the leased facility, our historical experience with respect to the length of time a restaurant operates at a specific location, and leases that typically have multiple five-year renewal options that are exercised entirely at our discretion, we have concluded that one five-year renewal option is reasonably assured. During fiscal 2008, this also included accelerated depreciation expenses taken on assets to be disposed of during our 'Project RevO'lution' and 'Project Dressed to the Nines' re-branding activities.

Impairment, Disposal and Restructuring Charges, net includes asset impairments, asset disposals and gains and losses incurred upon the sale of assets. Impairment charges are taken for land, buildings and equipment and certain other assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future undiscounted net cash flows expected to be generated by the assets. The impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Impairment charges for assets that are held for sale represents the difference between their current book value and the estimated net sales proceeds. Disposal charges include the costs incurred to prepare the asset or assets for sale, including repair and maintenance; clean up costs; broker commissions; and independent appraisals. Gains and/or losses associated with the sale of assets are also included in this category.

We evaluate restaurant closures for potential disclosure as discontinued operations based on an assessment of quantitative and qualitative factors, including the nature of the closure, potential for revenue migration to other company-operated and franchised restaurants, planned market development in the area of the closed restaurant and the significance of the impact on the related consolidated financial statement line items.

Pre-opening Costs represent costs associated with our store opening teams, as well as other costs associated with opening a new restaurant. These costs are expensed as incurred. These costs also include straight-line rent related to leased properties from the period of time between when we have waived any contingencies regarding use of the leased property and the date on which the restaurant opens. The amount of pre-opening costs incurred in any one period includes costs incurred during the period for restaurants opened and under development. Our pre-opening costs may vary significantly from period to period primarily due to the timing of restaurant development and openings. Pre-opening costs also include training, supply, and other incremental costs necessary to prepare for the re-opening of an existing restaurant as part of 'Project RevO'lution' and 'Project Dressed to the Nines' re-brandings.

Interest Expense, net represents the sum of the following: interest on our credit facility; interest on our 9 percent Senior Subordinated Notes due 2013 (the "Notes"); impact of the interest rate swaps that were terminated in December 2008; amortization of prepaid interest and finance charges; changes in the value of the assets associated with our non-qualified deferred compensation plan resulting from gains and losses in the underlying funds; interest on capital lease obligations; fees for certain unused credit facilities; and interest income from our investments in overnight repurchase agreements.

Income Tax Expense (Benefit) represents the provision for income taxes, including the impact of permanent tax differences on our income tax provision.

The following section should be read in conjunction with our unaudited consolidated financial statements and the related notes thereto included elsewhere herein. The following table highlights the operating results for the 16 week periods ended April 19, 2009 and April 20, 2008 as a percentage of total revenues unless specified otherwise.

                                                            16 Weeks Ended
                                                       April 19,       April 20,
                                                         2009            2008

Revenues:
Restaurant sales                                             99.9 %          99.9 %
Franchise and other revenue                                   0.1             0.1
                                                            100.0 %         100.0 %

Costs and Expenses:
Cost of restaurant sales: (1)
Cost of food and beverage                                    29.2            29.5
Payroll and benefits                                         34.1            34.2
Restaurant operating costs                                   19.4            19.7
Cost of restaurant sales (2)                                 82.7            83.4

Advertising and marketing expenses                            3.6             3.8
General and administrative expenses                           4.4             4.6
Depreciation and amortization                                 5.2             5.2
Impairment, disposal and restructuring charges, net           0.1            (0.1 )
Pre-opening costs                                             0.1             0.3

Income from Operations                                        4.1             2.9

Other Expense:
Interest expense, net                                         1.4             1.3
Earnings before Income Taxes                                  2.7             1.6
Income Tax Expense (Benefit)                                  0.3            (1.9 )
Net Earnings                                                  2.4 %           3.5 %

(1) Percentages calculated as a percentage of restaurant sales.

(2) Exclusive of depreciation and amortization shown separately.

The following table reflects margin performance of each of our concepts for the 16 week periods ended April 19, 2009 and April 20, 2008.

                                                  16 Weeks Ended
                                                  April    April
                                                   19,      20,
                                                   2009     2008
                                                 ($ in millions)
O'Charley's Concept: (1)
Restaurant Sales                                 $  188.6 $  190.8

Cost and expenses: (2)
Cost of food and beverage                        28.9%    29.2%
Payroll and benefits                             33.7%    33.9%
Restaurant operating costs (3)                   18.3%    19.1%
Cost of restaurant sales (4)                     80.9%    82.2%

Ninety Nine Concept:
Restaurant Sales                                 $   91.7 $   94.3

Cost and expenses: (2)
Cost of food and beverage                        28.8%    29.1%
Payroll and benefits                             35.5%    35.5%
Restaurant operating costs (3)                   21.5%    21.1%
Cost of restaurant sales (4)                     85.8%    85.7%

Stoney River Concept:
Restaurant Sales                                 $   11.0 $   12.1

Cost and expenses: (2)
Cost of food and beverage                        37.0%    37.0%
Payroll and benefits                             29.0%    28.5%
Restaurant operating costs (3)                   21.7%    17.6%
Cost of restaurant sales (4)                     87.7%    83.1%

(1) Includes restaurant sales from O'Charley's joint venture operations of $2.6 million and $2.4 million for the 16 weeks ended April 19, 2009 and April 20, 2008, but excludes revenue from franchised restaurants.
(2) Shown as a percentage of restaurant sales.
(3) Includes rent, where 100% of the Ninety Nine restaurant locations are leased (land or land and building) as compared to 58% for O'Charley's and 64% for Stoney River.
(4) Exclusive of depreciation and amortization.

The following table sets forth certain financial and other restaurant data for the quarters ended April 19, 2009 and April 20, 2008:

                                                         April 19,         April 20,
                                                           2009              2008
Number of Restaurants:
O'Charley's Restaurants:
In operation, beginning of quarter                               232              229
Restaurants opened                                                 -                -
Restaurant closed                                                  -               (1 )
In operation, end of quarter                                     232              228
Ninety Nine Restaurants:
In operation, beginning of quarter                               116              115
Restaurants opened                                                1                 -
Restaurants closed                                                (1 )             (1 )
In operation, end of quarter                                     116              114
Stoney River Restaurants:
In operation, beginning of quarter                                11               10
Restaurants opened                                                 -                -
Restaurants closed                                                 -                -
In operation, end of quarter                                      11               10
Franchised / Joint Venture Restaurants (O'Charley's)
In operation, beginning of quarter                                12               11
Restaurants opened                                                 1                1
Restaurants closed                                                 -                -
In operation, end of quarter                                      13               12
Average Weekly Sales per Store:
O'Charley's                                            $      50,110      $    51,538
Ninety Nine                                                   49,506           51,640
Stoney River                                                  62,706           75,436
Change in Same Store Sales (1):
O'Charley's                                                     (2.9 %)          (4.7 %)
Ninety Nine                                                     (4.5 %)          (2.2 %)
Stoney River                                                   (17.2 %)          (3.2 %)
Change in Same Store Guest Visits (1):
O'Charley's                                                     (4.4 %)          (8.0 %)
Ninety Nine                                                     (4.6 %)          (5.8 %)
Stoney River                                                   (12.8 %)         (10.7 %)
Change in Same Store Average Check per Guest (1):
O'Charley's                                                      1.6 %            3.6 %
Ninety Nine                                                      0.2 %            3.8 %
Stoney River                                                    (5.1 %)           8.3 %
Average Check per Guest (2):
O'Charley's                                            $       13.18      $     12.97
Ninety Nine                                                    14.94            15.00
Stoney River                                                   44.96            47.59

(1) When computing same store sales and guest visits, restaurants open for at least 78 weeks are compared from period to period.

(2) The average check per guest is computed using all restaurants open at the end of the quarter.

First Fiscal Quarter of 2009 Versus First Fiscal Quarter of 2008

Revenues

During the 16 weeks ended April 19, 2009, total revenues decreased 2.0 percent to $291.7 million from $297.5 million for the same prior year period. During the first fiscal quarter of 2009, gift card redemptions at our three restaurant concepts totaled $14.6 million, a 3.8 percent increase over our gift card redemptions in the first fiscal quarter of 2008.

Restaurant sales for company-operated O'Charley's decreased 1.3 percent to $186.0 million for the first fiscal quarter of 2009, reflecting a decline in same store sales of 2.9 percent, and the net addition of three new company-operated restaurants since the first fiscal quarter of 2008. The same-store sales decrease of 2.9 percent was comprised of a 1.6 percent increase in average check offset by a 4.4 percent decrease in guest counts.

Restaurant sales for Ninety Nine decreased 2.7 percent to $91.7 million in the first fiscal quarter of 2009, reflecting a decline in same store sales of 4.5 percent, and the addition of three new restaurants and the closing of one restaurant since the first fiscal quarter of 2008. The same-store sales decrease of 4.5 percent was comprised of a 0.2 percent increase in average check offset by a 4.6 percent decrease in guest counts.

Restaurant sales for Stoney River Legendary Steaks decreased 8.6 percent to $11.0 million, which reflects a same store sales decrease of 17.2 percent. The same-store sales decrease of 17.2 percent consisted of a 5.1 percent decrease in average check and a 12.8 percent decrease in guest counts. At the end of the first fiscal quarter of 2009, only 10 Stoney River restaurants were included in the same store sales base.

We continue to see sales at each of our concepts negatively impacted by the continuing effect on consumers of falling home values, rising unemployment rates, declining values of retirement savings accounts and declining consumer confidence.

Cost of Food and Beverage

During the first quarter of 2009, our cost of food and beverage was $85.0 million, or 29.2 percent of restaurant sales, compared with $87.7 million, or 29.5 percent of restaurant sales, in the first quarter of 2008. On a constant mix basis, commodity inflation in the first quarter was 2 percent versus the prior year quarter. This increase was more than offset by changes we made to our product specifications and recipes and also by the menu price increases we have taken since the end of the first quarter of 2008.

Payroll and Benefits

During the first quarter of 2009, payroll and benefits were $99.3 million, or 34.1 percent of restaurant sales, compared to $101.6 million, or 34.2 percent of restaurant sales, in the same prior-year period. This decrease in labor costs as a percentage of restaurant sales was primarily the result of leveraging our labor cost management system combined with reductions in our employee benefit plans and hourly labor costs, offset by higher workers compensation expense and restaurant manager bonus accruals, based upon our improved financial performance in the quarter versus the prior year quarter.

Restaurant Operating Costs

During the first quarter of 2009, restaurant operating costs were $56.6 million, or 19.4 percent of restaurant sales, compared to $58.5 million, or 19.7 percent of restaurant sales, in the same prior year period. This 30 basis point reduction was primarily from reductions in employee procurement and training costs, reduced levels of employee turnover, as well as reductions in our general liability insurance expense, offset by the deleveraging impact of reduced sales on rent and other fixed costs.

Advertising and Marketing Expenses

During the first quarter of 2009, advertising and marketing expenses were $10.5 million, or 3.6 percent of revenue, as compared to $11.3 million, or 3.8 percent of revenue, in the same prior year period. This reduction in advertising and marketing expense is primarily due to lower average costs in certain markets for media spots combined with a shift in the mix of media used.

General and Administrative Expenses

General and administrative expenses were $12.7 million, or 4.4 percent of revenue, in the first quarter of 2009, compared to $13.6 million, or 4.6 percent of revenue, in the first quarter of 2008. This reduction in spending is due to a reduction in support staffing late in 2008 and other reductions in spending, offset by increases in cash incentive compensation expense and lower valuation adjustments on deferred compensation balances, compared to the same period in the prior year.

Depreciation and Amortization, Property and Equipment

During the first quarter of 2009, depreciation and amortization was $15.0 million, or 5.2 percent of revenue, as compared to $15.6 million, or 5.2 percent of revenue, in the same prior year period. This reduction in expense is primarily due to lower carrying values of assets following the restaurant impairment charges recognized in the prior year.

Impairment, Disposal and Restructuring Charges, net

During the first quarter of 2009, impairment, disposal and restructuring charges, net were $0.3 million, or 0.1 percent of revenue, as compared to a net benefit of $0.2 million, or 0.1 percent of revenue, in the same prior year period. Impairment charges of $0.3 million were recorded to adjust the carrying value of our aircraft to fair value, less selling expenses.

Pre-opening Costs

Pre-opening costs in the first quarter of 2009 were $0.3 million, or 0.1 percent of revenue, compared to $0.8 million, or 0.3 percent of revenue, in the first quarter of 2008. This year-over-year reduction is the result of few new restaurant openings and the suspension of our re-branding initiatives. In the first quarter of 2009 we opened one new Ninety Nine restaurant and plan to open one new Stoney River restaurant later in 2009.

Interest Expense, Net

Interest expense for the first quarter of 2009 was $4.0 million, or 1.4 percent . . .