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Five analysts and top management from fourteen sector firms examine the Restaurant Industry sector in this special 91-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info404.htm

TWST: What has been driving the performance of the casual dining stocks?

Mr. Brundage: Investors, in my opinion, have been using a lot of these names as safe havens. With the collapse in the technology sector, investors have focused on companies with somewhat more stable business models. One portfolio manager with whom I spoke recently and who has largely agreed with our cautious stance on casual dining, but who still owns a fair number of casual dining stocks, summed it up this way: “I don’t mind if a casual dining stock misses its numbers by a penny or two since I’ve recently owned stuff that has missed by a buck.” The theory has been that even if the economy does slow a bit, people are still going to continue to eat out. And until recently, the same-store sales growth numbers generally have been strong. However, during the last month or two, comps have begun to weaken across the sector.

TWST: Is it going to take an economic recovery to bring same-store sales growth up again?

Mr. Brundage: I think that’s right. Near term, a lot of people are emphasizing the potentially beneficial effect that the tax rebates could have upon same-store sales growth rates in this sector. However, I think this view is, quite honestly, silly. I’ve seen several surveys, including one by the Gallup organization, that suggest that consumers are likely to spend a relatively small portion, less than 25%, of their tax rebates. So I don’t think that the tax rebates are going to have a major impact on same-store sales growth rates in the casual dining sector. Frankly, if I had a nickel for every consumer-oriented company —- restaurant, gaming, lodging or retail company — that believed the tax rebates were going to help it in the second half of 2001, I could probably retire now. Our view is that, with corporate layoffs rising and consumer confidence waning, growth in consumer spending is likely to level off during the next six to 12 months. Today, real people are losing real jobs and I think that the individuals who are left behind at companies that are laying off sizable numbers of people may be a little more restrained in their spending behavior, as the realization that the party’s over finally begins to sink in.

TWST: What is your thinking about Brinker (NYSE:EAT)?

Mr. Brundage: Brinker is probably the best casual dining company in America. But they get most of their earnings from one core concept, Chili’s, and customer traffic growth at Chili’s has been leveling off recently. If the best that Brinker can do at Chili’s is flat customer traffic growth, then it doesn’t necessarily bode well for Brinker or for the casual dining category, in my opinion. They are the best operators in the business, and if they can only generate modest same-store sales growth, which is largely driven by price increases and favorable mix shifts, I think it will be difficult for companies that are less gifted operationally to deliver solid comp gains.

This special conference issue includes:

1) Restaurant Industry - In an in-depth (13,000 words) Analyst Roundtable, Andrew Barish, Managing Director at Banc of America Securities, Joseph Buckley, Senior Managing Director at Bear, Stearns & Company, Mark Kalinowski, Vice President at Salomon Smith Barney and Janice Meyer, Managing Director at Credit Suisse First Boston, examine the outlook for the sector including, economic outlook, new restaurant concepts and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at nineteen sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Restaurant Stocks - In an in-depth (3,500 words) Analyst Interview, Damon Brundage, Vice President of Equity Research at Raymond James & Associates examines the outlook for the sector and shares specific stock recommendations.

4) CEO and Sponsored interviews (average 2,500 words). Top management of fourteen sector firms examine the outlook for their firm and the sector.