Bernard2222

Casual Dining Sector Offers Up Compelling Plays Like Ruby Tuesday

Paul, I agree that excessive debt isn't a good thing but debt repayment can be a great way to gain value though.. equity rises and so do earnings. RT's debt is only due to the bad share repurchases they made over the last two years but with the annual cash flows they collect, liquidity won't be an issue. This is probably why the banks don't mind restructuring the covenants even though the economy is tough. Free cach flows repay the debt, not EPS..

Casual Dining Sector Offers Up Compelling Plays Like Ruby Tuesday

CEO talked about it in the last two calls and the Bear Stearns conference

Casual Dining Sector Offers Up Compelling Plays Like Ruby Tuesday

To Eric.. $20M CapEx is for the 2009 FY starting in June

Casual Dining Sector Offers Up Compelling Plays Like Ruby Tuesday

Well done Daniel, I agree with your thesis. What's interesting to see also is that although it hasn't always been reflected in earnings, RT accumulates a lot of cash from operations every year.

Now that they've finished renovating their restaurants and that their strategy will be to stop growth expenditures (no new restaurants) for the next 3 years, there will be a lot of free cash flow coming in. The CapEx per year is projected to go down from $150M to $20M! This will leave them with a lot of cash to repay their debt, which is probably the market's main concern at this point.