In a move expected for some time, O'Charley's Inc. said Friday that it has closed on the sale of its commissary facility in Nashville and announced other changes to its supply chain.
Approximately 250 employees will be affected by the sale, according to O'Charley's officials. Those who are not offered employment with the new supply chain companies will be given severance packages.
O’Charley’s has closed on the sale of its 185,000-square-foot commissary building, and approximately 12 acres of land to an affiliate of W.P. Carey & Co. LLC, a real estate investment company for $9 million.
O’Charley’s retained an adjacent parcel of approximately four acres, which includes its corporate headquarters and training facility.
WPC has leased the commissary building to Mountain City Meat Co., a meat processing company based in Denver. MCMC will serve as O’Charley’s meat processor, has purchased certain manufacturing equipment and will purchase O’Charley’s meat inventories at cost. MCMC has agreed to hire O’Charley’s existing meat plant employees, who number about 90, said Melissa Thompson, vice president for communications.
O’Charley’s has entered into an agreement with Performance Food Group under which PFG will be the exclusive master distributor for O'Charley's and Stoney River restaurants.
PFG will purchase O’Charley’s Nashville-based distribution inventories at cost, assume O’Charley’s tractor and trailer leases and interview current distribution employees for possible placement within the PFG system.
O’Charley’s expects to complete the transition of its Nashville-based distribution operations to PFG in the fourth quarter.
O’Charley’s has entered into an agreement with Cornerstone Baking to outsource the manufacture of the frozen dough used for O'Charley's signature yeast rolls. Cornerstone is a new company created by Cordia Harrington, who also founded the Tennessee Bun Company and Nashville Bun Company.
As part of this agreement, Cornerstone will acquire certain manufacturing equipment from O'Charley's, and has agreed to hire O’Charley’s existing bakery employees.
As previously disclosed, O’Charley’s has outsourced salad dressing manufacturing and poultry processing, and plans to close its manufacturing operations in Woburn, Mass. O’Charley’s continues to consider alternatives for its Bellingham, Mass. distribution center.
Not including impairment charges, severance and other transition costs, O’Charley’s expects the supply chain changes announced today to reduce its ongoing costs and expenses by between $1 million and $1.5 million per year. O’Charley’s does not expect to realize any of these savings in the current fiscal year.
Including the changes previously announced, O’Charley’s expects that the restructuring of its supply chain will reduce its ongoing costs and expenses by a total of between $2.5 million and $3.0 million per year, or between $0.08 and $0.10 per diluted share. As previously announced, O’Charley’s expects to realize between $0.02 and $0.03 per diluted share of these total savings in the current fiscal year.
O’Charley’s estimates that its total cash proceeds from the sale of manufacturing equipment and inventories will be between $16 million and $18 million, and that its accounts payable will decline by between $5 million and $6 million. O’Charley’s expects that non-cash charges for the impairment of the commissary building and related manufacturing equipment will reduce income from operations in the second quarter of 2007 by between $6 million and $7 million, and reduce net earnings by between $0.18 and $0.21 per diluted share.
O’Charley’s estimates that employee severance and retention costs, legal and transition costs relating to the supply chain changes announced today will reduce income from operations in the second quarter of 2007 by an additional $2 million, and reduce net earnings in the quarter by $0.06 per diluted share.
O’Charley’s expects to incur additional transition costs in the third and fourth quarters of 2007 of between $0.02 and $0.03 per diluted share.
O'Charley's Inc., headquartered in Nashville, is a multi-concept restaurant company that operates or franchises a total of 363 restaurants under three brands: O'Charley's, Ninety Nine Restaurant and Stoney River Legendary Steaks.