Shells Seafood Restaurants, Inc. Reports Fourth Quarter and Fiscal Year 2007 Results

TAMPA, Fla., March 7  /PRNewswire-FirstCall/ -- Shells Seafood Restaurants, Inc. (OTC:SHLL) (BULLETIN BOARD: SHLL)  today reported financial results for its fourth quarter and the fiscal year ended December 30, 2007.

  Key metrics --
  Fourth quarter of 2007 compared to the fourth quarter of 2006:
  -- Revenues decreased 21.7% to $7.6 million.
  -- Comparable restaurant sales decreased 18.3%.
  -- Net loss of $2.3 million, was the same as in the fourth quarter of
     2006.  Excluding non-recurring items, net loss of $1.5 million,
     compared to a net loss of $1.0 million.
  -- Net loss per share of $0.10, compared to net loss per share of $0.13.
     Excluding non-recurring items, net loss per share of $0.06, same as in
     the fourth quarter of 2006.


  Fifty-two weeks of 2007 compared to the fifty-two weeks of 2006:
  -- Revenues decreased 13.3% to $41.5 million.
  -- Comparable restaurant sales decreased 11.4%.
  -- Net loss of $4.4 million, compared to a net loss of $3.0 million.
     Excluding non-recurring items, net loss of $3.2 million, compared to a
     net loss of $2.0 million.
  -- Net loss per share of $0.21, compared to a net loss per share of $0.18.
     Excluding non-recurring items, net loss per share of $0.15, compared to
     net loss per share of $0.12.




Warren Nelson, interim president, commented, "2007 has been a challenging year for casual dining restaurants in general, and the Florida economic environment has been difficult for Shells.  While we are disappointed with our results in 2007, we have worked diligently to reduce our expenses, while focusing on providing greater dining value for our guests."  Nelson further added, "Building guest traffic and sales, while holding expenses in-line, are both critical to our ability to persevere through this economic downturn and reposition our brand for future long-term success.  Our efforts are directed toward providing our guests with great quality seafood at price points which project a strong value statement."

Operating Results

Revenues for the fourth quarter of 2007 decreased 21.7% to $7,564,000 from $9,659,000 in the fourth quarter of 2006, predominantly due to a 18.3% decrease in same store sales, and to a lesser extent, the second and fourth quarter 2007 dispositions of two under performing restaurants. As of the end of the fourth quarter of 2007, the Company had 23 restaurants in operation, compared to 25 restaurants at the end of the fourth quarter of 2006.

Restaurant operating costs, consisting of food and beverage costs, labor, other operating costs, depreciation expense and provision for impairment expense, were $8,850,000, or 117.6% of sales, in the fourth quarter of 2007, compared to $11,001,000, or 114.2% of sales, in the fourth quarter of 2006. Excluding non-recurring items, restaurant operating costs were $8,192,000, or 108.8% of sales, in the fourth quarter of 2007, compared to $9,714,000, or 100.9% of sales.  The 7.9% increase in restaurant operating costs, as a percentage of sales, primarily resulted from a loss of operating leverage as reflected by the reduction in sales volume, and to a lesser extent, increases in commodity costs and minimum wage.

General & administrative expenses were $792,000, or 10.5% of revenues, in the fourth quarter of 2007 compared to $784,000, or 8.1% of revenues, in the fourth quarter of 2006.  The unfavorable variance as a percentage of revenues reflects the reduction in sales volume and incremental stock option expense of $71,000, or 1.0% of revenues.

The loss from operations in the fourth quarter of 2007 of $2,078,000 was $48,000 less than the loss from operations in the comparable period of 2006. Excluding non-recurring items in both periods, the loss from operations in the fourth quarter of 2007 of $1,420,000 was $581,000 greater than the comparable period of 2006.  The loss from operations in fiscal 2007 of $3,940,000 was $1,474,000 greater than the loss from operations in the comparable period of 2006. Excluding non-recurring items in both periods, the loss from operations in fiscal 2007 of $2,672,000 was $1,341,000 greater than the comparable period of 2006.

The net loss for the fourth quarter of 2007 was $2,274,000, or $0.10 per share based upon 23.5 million common shares outstanding, compared to a net loss in the fourth quarter of 2006 of $2,291,000, or $0.13 per share based upon 17.6 million common shares outstanding.  As adjusted for non-recurring items as summarized in the ensuing financial tables, the net loss for the fourth quarter of 2007 was $1,506,000, or $0.06 per share, compared to a net loss for the fourth quarter of 2006 of $1,004,000, or $0.06 per share.

The net loss for fiscal 2007 was $4,400,000, or $0.21 per share based upon 20.9 million common shares outstanding, compared to a net loss for fiscal 2006 of $3,002,000, or $0.18 per share based upon 16.7 million common shares outstanding.  As adjusted for non-recurring items as summarized in the ensuing financial tables, the net loss for fiscal 2007 was $3,154,000, or $0.15 per share, compared to a net loss for fiscal 2006 of $2,017,000, or $0.12 per share.

About the Company

The Company manages and operates 23 full-service, neighborhood seafood restaurants in Florida under the name "Shells".  Shells restaurants feature a wide selection of seafood items, including shrimp, oysters, clams, crawfish, mussels, scallops, lobster, crab and daily fresh fish specials, cooked to order in a variety of ways: steamed, sauteed, grilled, blackened and fried. Shells restaurants also offer a wide selection of signature pasta dishes, appetizers, salads, desserts and full bar service.

Forward-Looking Statements

In addition to seasonal fluctuations, the Company's quarterly and annual operating results are affected by a wide variety of other factors that could materially and adversely affect revenues and profitability, including changes in consumer preferences, tastes and eating habits; increases in food, labor costs and other operating expenses; the availability of food acceptable to our quality standards at acceptable prices; the availability of qualified labor; national, regional and local economic and weather conditions; international economic, cultural and political conditions; promotional timings and seasonality; demographic trends and traffic patterns; changes in travel and tourism tendencies, particularly in light of world events; competition from other restaurants and food service establishments; availability of third party financing to fund capital or operating activities, if required; and the timing, costs and charges relating to restaurant openings, closings and remodelings.  As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, financial condition and stock price.  Furthermore, this press release and other documents filed by the Company with the Securities and Exchange Commission ("SEC") contain certain forward-looking statements with respect to the business of the Company and the industry in which it operates.  These forward-looking statements are subject to certain risks and uncertainties, including those mentioned above, which may cause results to differ significantly from these forward-looking statements.  The Company undertakes no obligation to update these forward-looking statements on a regular basis. An investment in the Company involves various risks, including those mentioned above and those that are detailed from time-to-time in the Company's SEC filings.

                       SHELLS SEAFOOD RESTAURANTS, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)

                                                  (Unaudited)
                                           Thirteen Week Period Ended
                                       December 30, 2007  December 31, 2006
                                        Amount  Percent    Amount  Percent
  Revenues
    Restaurant sales                     $7,526   99.5%     $9,631   99.7%
    Management fees                          23    0.3%         28    0.3%
    International fees                       15    0.2%          0    0.0%
    Total Revenues                       $7,564  100.0%     $9,659  100.0%

  Costs and expenses:
    Cost of sales (1)                     2,485   33.0%      3,115   32.3%
    Labor and other related expenses (1)  2,528   33.6%      3,116   32.4%
    Other restaurant operating expenses
     (1)                                  2,760   36.7%      2,971   30.8%
    Depreciation and amortization (1)       417    5.5%        557    5.8%
    Provision for impairment of assets (1)  660    8.8%      1,242   12.9%
    Total restaurant operating costs (1)  8,850  117.6%     11,001  114.2%
  Restaurant operating (loss) income (1) (1,286) -17.1%     (1,342) -13.9%

    General and administrative expenses     792   10.5%        784    8.1%
  Loss from operations                   (2,078) -27.5%     (2,126) -22.0%

  Lease buy-out option                        -    0.0%          -    0.0%
  Interest expense, net                     (80)  -1.1%        (97)  -1.0%
  Other expense                            (104)  -1.4%        (15)  -0.2%

  Loss before elimination of minority
   partner interest                      (2,262) -29.9%     (2,238) -23.2%
  Elimination of minority partner
   interest                                 (12)  -0.2%        (53)  -0.5%
  Net loss                              $(2,274) -30.1%    $(2,291) -23.7%


  Net loss per share of common stock:
    Basic and diluted                    $(0.10)            $(0.13)

  Average number of weighted common
   shares outstanding:
    Basic and diluted                    23,538             17,582

  (1) Percentage as a percent of restaurant sales



                                          Fifty-Two Week Period Ended
                                       December 30, 2007  December 31, 2006
                                         2006   Percent     2006   Percent

  Revenues
    Restaurant sales                    $41,305   99.6%    $47,673   99.7%
    Management fees                         139    0.3%        156    0.3%
    International fees                       15    0.0%          0    0.0%
    Total Revenues                      $41,459  100.0%    $47,829  100.0%

  Costs and expenses:
    Cost of sales (1)                    13,469   32.6%     15,363   32.2%
    Labor and other related expenses (1) 12,938   31.3%     14,722   30.9%
    Other restaurant operating expenses
     (1)                                 12,373   30.0%     12,948   27.2%
    Depreciation and amortization (1)     1,789    4.3%      2,199    4.6%
    Provision for impairment of assets
     (1)                                  1,270    3.1%      1,242    2.6%
    Total restaurant operating costs (1) 41,839  101.3%     46,474   97.5%
  Restaurant operating (loss) income (1)   (380)  -0.9%      1,355    2.8%

    General and administrative expenses   3,560    8.6%      3,821    8.0%
  Loss from operations                   (3,940)  -9.5%     (2,466)  -5.2%

  Lease buy-out option                        -    0.0%        212    0.4%
  Interest expense, net                    (296)  -0.7%       (332)  -0.7%
  Other expense                              (5)   0.0%       (173)  -0.4%

  Loss before elimination of minority
   partner interest                      (4,241) -10.2%     (2,759)  -5.8%
  Elimination of minority partner
   interest                                (159)  -0.4%       (243)  -0.5%
  Net loss                              $(4,400) -10.6%    $(3,002)  -6.3%


  Net loss per share of common stock:
    Basic and diluted                    $(0.21)            $(0.18)

  Average number of weighted common
   shares outstanding:
    Basic and diluted                    20,920             16,665

  (1) Percentage as a percent of restaurant sales



                       SHELLS SEAFOOD RESTAURANTS, INC.
                            (Dollars in thousands)

                                           52 Weeks           52 Weeks
                                             Ended              Ended
                                         December 30,       December 31,
                                             2007               2006

  Number of restaurants at end of
   period:
     Company-owned restaurants (1)                20                 22
     Licensed restaurants                          3                  3
     Total                                        23                 25

  Balance sheet data:
     Cash                                       $458               $734
     Working capital (deficiency)             (4,536)            (4,446)
     Total assets                             11,479             13,837
     Stockholders' equity                        361              4,339

  (1) Includes one joint venture restaurant in which the Company has a 51%
      equity interest.



  SUMMARY OF NON-RECURRING ITEMS:          (Unaudited)
                                          Thirteen Week      Fifty-Two Week
                                           Period Ended       Period Ended
                                        December  December December December
                                           30,      31,        30,     31,
                                          2007     2006       2007   2006
  Net loss, as reported                $(2,274)   $(2,291) $(4,400) $(3,002)

  Non-recurring (expense) income:
    Lease buy out option                     -          -        -      212
    Lease renewal / termination fee          -          -      (39)     (23)
    Workers compensation premium refund      -          -        -      152
    Workers compensation reserve
     adjustment                             20        (45)      20      (45)
    Credit card fee legal settlement
     proceeds                                -          -       85        -
    (Loss) gain on disposal or sale of
     assets                                (80)         -        6      (39)
    Closed store reserve adjustment        (30)         -      (30)       -
    Asset impairment charge               (660)    (1,242)  (1,270)  (1,242)
    Inventory write-down                   (18)         -      (18)       -
         Non-recurring expense, net       (768)    (1,287)  (1,246)    (985)
  Net loss, excluding non-recurring
   items                               $(1,506)   $(1,004) $(3,154) $(2,017)

  Net loss per share of common stock:
    Basic and diluted, as reported      $(0.10)    $(0.13)  $(0.21)  $(0.18)
    Basic and diluted, excluding non-
     recurring items                    $(0.06)    $(0.06)  $(0.15)  $(0.12)


DATASOURCE: Shells Seafood Restaurants, Inc.



CONTACT:  Warren Nelson of Shells Seafood Restaurants, Inc.,

[phone]



Web site:  http://www.shellsseafood.com/ 

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