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TWST: Tell us how you view the health of the restaurant industry today and the outlook for the fundamentals over the next six months.

Mr. Hickok: Industry fundamentals have not been this positive in about 10 years, to the best of my recollection. We are particularly confident about the earnings prospects and stability of the group, and we have been very bullish about the price appreciation potential for these stocks for a while. We made comments at the very end of February, which we wanted to project to the Street about this point. Our caveat was that we might be early and that we needed the technology sector to soften, but our message was very simple.
The irony was that in spite of very strong fundamentals, the valuations had never been lower. Our conclusion was that if there was any softening in the technology sector, the restaurant sector was going to be a solid place to put money, and at minimum, a defensive place to invest. We are not prescient, but as it turns out, just about two or three weeks later we had the softening of tech that we needed. And since mid-March, the restaurant sector has significantly outperformed the market. The macro environment has never been as favorable as it is right now. We expect to have very solid, if not spectacular earnings coming out of the segment defining restaurant companies in the fourth quarter and in the first quarter.

TWST: The next company you mentioned was BUCA (Nasdaq:BUCA). Will you give us a brief profile of this company?

Mr. Hickok: BUCA is a smaller company, but it is one of the best new concepts in the restaurant industry. It’s family style southern Italian immigrant dining. That’s their concept positioning. What it has is just a really fun atmosphere and they serve great food. It’s designed for groups, families, and parties. BUCA really isn’t appropriate dining for, say, just two people. I mean, you could, but you would bring a lot of food home since the food is served family style on large platters. It’s really designed for four to six to 18 people to dine at once.

TWST: Have they announced new store rollouts for 2000, 2001?

Mr. Hickok: Yes, 17 this year and 17 next year. It has a very aggressive growth plan, but they’ve done an excellent job of managing that growth. The financial metrics are exceptional, including same-store sales growth, profitability, improvement at the unit level, cash flow margins at the unit level, and return on invested capital. The restaurants make economic sense all day long. It is growing rapidly, and it’s a great concept. It’s run by great people, and they’re getting the job done. That’s the bottom line.