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Our Financial sector head, Josh Steiner, highlighted today some interesting comments from the American Express conference call that could negatively impact the outlook for some of the high-end restaurant companies that rely on corporate T&E for a significant part of their business.

Lower corporate spending and travel is a net negative for casual dining in general, but some of the specific companies that are levered to corporate T&E are: DFRG, RUTH and the Capital Grill which is owned by DRI.

Excerpts from the transcript:

Dan Henry, CFO: Each of the business segments is consistent with the fourth quarter of 2012, except for GCS, which is Global Corporate Services, that's the green line, and you can see here that the growth rate for that segment has moved down slightly, as T&E spending grew at a slower rate than total billings growth rate in the quarter.

Question: And finally as a follow up, can you give a little bit more color on what drove some of the weakness in GCS billed business?

Answer (CFO): So let me talk to GCS, so Corporate Services. So really across the board, we've seen lower spending in T&E categories.  And we're seeing better strength outside of the T&E categories. Corporate Services is primarily T&E type of spending, and so that's where you seeing it come down. And it's relatively broad geographically, so I think it's just lower T&E type of spending is what's causing them to be lower, and that actually ties into travel commissions and fees. So if T&E spending is lower, then that line is going to be impacted. Worldwide sales were down 3%; that's the main driver. Now travel – business travel, was down 4%, consumer was actually up 2%, but business travel is much larger than consumer travel, and so that's what's yielding the lower sales. So it's the activity in this particular category. 

Howard Penney

Managing Director

Rory Green

Senior Analyst