Bad Product

“A market is never saturated with a good product, but it is very quickly saturated with a bad one.”

-Henry Ford


On this day in 1981, the IBM Personal Computer was introduced. Don’t worry, Apple’s intermediate term TREND line of $257.93 may very well have broken yesterday on an accelerating volume and volatility study (bearish), but I’m not going to go there on Mick’s Cupertino versus PC.


I am going to take this puck right up the middle on American financial innovation however. Despite this industry being able to concoct gnarly synthetic securities for broker dealers to drive trading commissions over the last decade, conventional risk management products have gone by the way of horse and buggy whips. This poses systemic risk to the US financial system.


When I call them the 200-day Moving Monkeys, I’m not trying to be funny. I’m calling out a serious risk to all of your 201Ks. “Breaking the 200-day yesterday” is what I witnessed way too many people in the Manic Media citing yesterday as to why the market was going lower. If using a one-factor model (price of a moving average) is where risk management has evolved to in 2010… America, we have a problem.


The 200-day moving average was heralded in the 1970’s by the author of the “Telephone Switch Letter”, Richard Fabian (he used a 39-week moving average). Like Hedgeye’s Early Look, this was a successful newsletter product that charged a subscription fee. Unlike our Early Look, this one-dimensional trend following product was delivered by the mail man when there was no such thing as an internet connection.


Almost 40 years later, we have a multi-media platform on our desks with multiple trading screens, real-time media piping into our flat panel TVs and people pinging us via text, twitter, and email on our handhelds as our real-time quotes download across our risk management spreadsheets…


All the while, conventional wisdom is to take all of this technological innovation, set it aside, and react emotionally to the one line the monkeys are hanging on – the 200-day moving average for the SP500 at 1115…


Thank God for groupthink.


Since 1981, the asset management industry has obviously used things like personal computers to evolve. There are plenty of fantastic risk managers out there on the buy-side. Sure, we all make a living picking off the Manic Monkeys in both the media and on the sell side, but this doesn’t come without market risk. Conventional wisdom getting caught off-sides can cause collapse.


Yesterday’s -2.8% collapse in the SP500 can be explained using a multi-factor and multi-duration risk management model that spans countries, currencies, and commodities worldwide. So let’s get with 2010 this morning and use some computers and this great product called Excel to grind through the Real-Time Risk Management Early Look:


1.       Asia

-China closed down another -1.2% last night (taking its week-to-date loss to -3.1% and YTD loss to -21.4%) after the Chinese government reported more of the same in terms of what we’ve coined the Chinese Ox In a Box (Chinese demand has been slowing for 6 months as inflation has accelerated and the Chinese government tightens the screws on speculative borrowing). If you’d like our in depth note that we published on Chinese demand yesterday, please email .

-Japan closed down another -0.86% last night dropping the world’s 3rd largest economy back into the doldrums that are born out of quantitative easing. Japan’s Nikkei Index is now down -13% YTD.

-India’s industrial production slowed markedly in June to +7.1% versus 11.3% in May and the Bombay Stock Exchange closed flat on the news. The BSE Index remains in a bullish intermediate term TREND position, much like Indonesia and Singapore do (Hedgeye remains long both via the EWS and IDX etfs).


2.       Europe

-UK’s FTSE Index is breaking down below its intermediate term TREND line of 5252 this morning.

-Germany’s DAX is trading modestly lower, but holding its intermediate term TREND line of 6078 this morning.

-Switzerland, Netherlands, and Denmark are all flashing positive divergences versus both the European region and Asia/USA.

-Euro is down at $1.28, holding its bullish intermediate term TREND line of support of $1.26.

-British Pound (which we bought back yesterday on weakness) has stabilized at $1.56 and has no upside resistance up to $1.61.


3.       North and South America

-Mexico remains broken from an intermediate term TREND perspective, but we covered our short position in the Mexican etf (EWW) yesterday as it was oversold from an immediate term TRADE perspective (Mexican stocks have been down for 7 of the last 9 days).

-Brazilian currency and equities sold off hard yesterday and we took the -2.1% down move in the Bovespa as a buying opportunity in Brazil’s etf (EWZ) as the bullish intermediate term TREND line of support in the Bovespa continues to hold at 64,402.

-US Equities got wrecked yesterday, closing down for the 9th day out of the last 12, reminding the bulls that QE2, QE3, or QE4 is probably not what they should be begging Bernanke for. A disastrous US Dollar combined with structural unemployment and ominous bond yield signals are no recipe for long term American success.


Altogether, we covered 3 short positions in the Hedgeye Virtual Portfolio yesterday (Mexico (EWW), Blackstone (BX), and Royal Caribbean (RCL)) and we bought 3 long positions (British Pound (FXB), Brazil (EWZ), and Foot Locker (FL)).


We don’t think any of these moves have much correlation to the 200-day Moving Monkeys other than realizing that their bad risk management product gave us a behavioral buying opportunity.


My immediate term TRADE lines of support and resistance for the SP500 are now 1080 and 1110, respectively. Buy low, sell high.


Best of luck out there today,



Keith R. McCullough
Chief Executive Officer


Bad Product - mon2


Genting Singapore reports a blow out quarter





Resorts World Sentosa blew away numbers this quarter.  RWS reported revenues 18% above consensus while EBITDA beat the Street by 63%.  In USD, they reported $618.4MM of revenues and $361.7MM of EBITDA.



  • Group Results: 2Q2010 Revenue of S$979.3 million and EBITDA of S$513.9 million (52% margin)
  • Singapore IR Results: Revenue of S$860.8 million and EBITDA of S$503.5 million (58% margin)
    • "Universal Studio Singapore (“USS”) increased its daily maximum capacity to about 8,000 with an average visitor spend of S$84."
    • "RWS hotels‟ occupancy was 70% with an average room rate of S$263."


  • Had a higher than average win % in the quarter that helped them
  • Had over 3MM guest visits
  • Occupancy and rates continue to ramp up
  • USS Theme Park has already turned cash positive
  • Casino:
    • VIP/grind ratio - 64% (including the higher hold factor)
    • 100 VIP tables
    • Satisfied with win per table
    • 1,200 slots in operations, continued to exceed their operations
  • Launched Maxim casino for premium play
  • Also optioned a ladies only section in their casino
  • Have a slew of new offerings coming online this quarter (entertainment / F&B) which should help expand results


  • Impact of high hold in the quarter?
    • They won't quantify the impact
    • EBITDA margin would have been 48% in the 1Q excluding the pre-opening costs.  Normalized margins would have been between 48-58% if not for the high hold.
  • June vs. April was not a huge difference in trends for them  - because for the month of April they were still operating in mostly a monopoly environment. April was actually a peak for them.
  • Current rebates being offering to direct VIP 
    • Similar to Genting Highlands: 0.6%-1.4%
  • Junkets: Still waiting for approval.  Not sure that the approval will come this quarter.
  • No comment on the ramp up for the rest of the year
  • Phase 2 for RWS: 
    • Starting the construction of the Marine park a few weeks ago
    • Staged opening beginning in 2Q2011-4Q2011
  • Average Mass tables?
    • 380 tables (overall) so 280 Mass
    • Table count today - 410 tables on average
    • 450 by year end
    • Mix of Singaporeans coming to the resort? 
    • Quite a bit of people are coming to just the park. 2/3 of visitors to the resort are foreigners.
  • Casino entrance: 20-30k visitors per day on average
  • Number of hotel rooms open in the quarter?
    • A little over 1,000
    • Have 1,300 rooms open right now. Only have another 200 rooms to go for PH1.  PH2 is towards the end of 2011.
  • Mass market win rate?
    • Was also slightly higher than normal
  • Started tapping visitors from new markets like India and Thailand
  • They have 300 EDG's. They will increase the total number of machines by year end to 1,300-1,400 (including EDG's).
  • Tax rate?
    • When they took an impairment for the UK license - they had to release the deferred tax liability into the PNL - so the reported "tax" this quarter is not reflective of cash taxes. 
  • Baccarat tables as a % of total tables?
    • 60% to two-thirds or so
  • Ramp up of USS - plan to ramp up to 10,000-12,000 visitors by Jan 2011 and 18,000 -20,000 by Jan 2012
  • Spend per visitor at USS of S$84 includes F&B and merchandise
  • Expectation of the sale of the UK assets?
    • Expect that the shareholders to approve the sale
    • Holding their annual general meeting on the 18th of August and Genting Malaysia is holding theirs on 8/24
  • Casino revenues were still over 75-80% for the quarter
  • Use of proceeds from UK operations?
    • Too early to discuss
  • Have not written off any bad debt.  Without the junkets taking on the credit risk, they need to deal with the customers directly. They will likely be taking similar provisioning for bad debt next quarter as they are in this quarter - which by the way is similar to the level of provisioning that Macau casinos take.
    • In the UK casinos, they do not take bad debt provisions
    • Impairment on receivables is just their way of taking bad debt reserves - not a write off
  • Why didn't they take a tax provision in Singapore?
    • If you back out the $86MM of deferred tax (due to the UK impairment), you will get to the Singapore tax
  • What % of customers at RWS are existing Genting Highlands customers?
    • Don't know or won't tell
    • Genting Malaysia will announce results towards the end of the month
  • Average length of stay for foreign visitors?
    • 2-3 days
  • Is the revenue calculation just S$84 x 7,000 visitors x days in the Q?
    • Yes
  • Once the sale of the UK is complete, Genting Singapore will focus on gaming operations solely in Asia (but really sounds like just in Singapore)
  • Depreciation - is the current amount a good run rate?
    • Reflects total capitalization taken to date, so it will increase slightly as the rest of their project gets completed
  • What % of the Mass contribution was from slots?
    • Won't disclose on the call at least
  • Were the normalized gaming revenues per day higher or lower than 1Q2010? 
    • Higher
  • EBITDA margins for USS?
    • Ballpark 20%
  • Casinos numbers that they report are net of commissions (rebates)
  • Capex left to spend on Phase 2: S$600-700MM


This insight was published on July 14, 2010. RISK MANAGER SUBSCRIBERS have access to SELECT MACRO content in real-time.




Position: Long the British Pound via the etf (FXB); Short US Dollar (UUP)
“Put your hand on a hot stove for a minute, and it seems like an hour. Sit with a pretty girl for an hour, and it seem like a minute. THAT’s relativity.”
-Albert Einstein
When discussing currencies it’s worth repeating that we’re betting on the “relative” strength of one currency versus another. Currently we are bullish on the British Pound (GBP) versus both the USD and EUR; we expressed this conviction by buying the etf FXB in our virtual portfolio on 7/12.
The Debt Road
Taking a step back, yesterday in the Early Look Keith wrote: “This morning’s run of global macro news reminds me of three things:
1.       Sovereign Debt issues are here to stay
2.       American Austerity is on the way
3.       Global growth is going to continue to slow”
In summary, these three points reflect much of what our macro team has focused on in our research over the last 6th months: unchecked government debt and deficit imbalances (globally) will come home to roost. Over the balance of this year the price action across global markets and multiple asset classes has swung considerably alongside fears of sovereign default in Europe, especially from those nations so affectionately named under the acronym “PIIGS” (Portugal, Italy, Ireland, Greece, and Spain) or “Club Med” states. We’ve track this fear in the form of bond yield spreads, CDS prices, currency moves, and equity market performance, and played Europe’s Sovereign Debt Dichotomy (our Q2 Theme) by shorting Spain (via the etf EWP) and being long Germany (EWG) in 1H10.
We now think that while Europe’s Sovereign debt issues are by no means rearview (Portugal’s debt was downgraded by Moody’s yesterday), the spotlight concerning the risk of a government piling debt up debt will move to the US, a position encapsulated by our Q3 macro theme of American Austerity.  (Note: this position is very quickly becoming consensus).
As it translates to our view of global currencies, we believe the USD is setting up to give back much of its gains YTD. Should this be the case, and in light of the continued sovereign debt fears in Europe, we could see the Pound as the relative beneficiary of this currency trade.






Our bullish positioning on the Pound follows two main threads:
1.)    The Austerity measures issued by the new UK government of PM Cameron and Chancellor of the Exchequer Osborne show their intention to rein in fiscal imbalances. We think fiscal austerity should boost investor sentiment and future growth in the UK despite meek growth prospects this year and next.
2.)    For the intermediate term TREND we see continued political and economic headwinds in the US and throughout certain Eurozone countries; we believe the Pound stands to benefit on a relative basis from the downward pressure on the USD and EUR.
Bullish on the UK
We’re bullish of PM Cameron’s conservative government that took office in early May. The new tide of “austerity” that his government has issued, with initial measures proposed in an Emergency Budget released on June 22nd by the Chancellor of the Exchequer, George Osborne, spell significant spending cuts and incremental consumption tax hikes to trim fat and boost revenue in Britain. With a budget deficit (as a % of GDP) of some 11% in 2010, Britain is proverbially biting the bullet (now) to shore up its fiscal house, a move we believe will better position itself for future growth and appreciate the value of the Pound.
The UK’s main austerity measures include:

  • A 25% cut in the budgets of government departments starting April 2011 through 2015 (a spending review is expected for released in October)
  • Tax on banks with liabilities greater than £20 Billion (the tax is expected to generate approx. £2 Billion annually)
  • Increase to the Value Added Tax (VAT) from 17.5% to 20% starting January 2011
  • Increase in capital gains tax for higher tax bracket earners, to 28%. No change (18%) for low to middle income earners
  • A 2 year wage freeze for all but the lowest paid among Britain’s 6 million public servants and a 3 year freeze on benefits paid to parents for rearing children
  • Cuts to the housing benefit and disability allowance
  • Decrease in corporate taxes, staggered over 4 years from 28% to 24%
  • We are by no means bullish on the UK economy across the board (it’s one of the main reasons we haven’t bought UK equities). The housing market is one particular area of concern. To the joy of many home sellers (and real estate agents), Cameron’s government did away with Home Information Packs (HIPs) in late May, documents required of homeowners to sell their properties that many complained simply increased the “cost and hassle of selling a home”. However, scrapping HIPs has increased the supply of homes on the market over the last months, and consequently dampened prices.  Recent surveys from Hometrack and Nationwide corroborate the recent turn in prices (see chart below). Should the housing market take a second dip, we’d expect to see significant downward pressure on the consumer.





Secondly, the government’s go-forward relationship to the country’s all-important banking sector is still unclear. Cameron’s policy will need to find the appropriate balance between levying a bank tax (which the UK has spearheaded ahead of global backing) and guarding against excessive risk taking by banks while not running banks (and financial professionals) to tax friendly havens, like Switzerland. Decreasing corporate taxes is a start.
Bottom Line
Growth: we don’t expect to see significant growth in the UK in the next year. GDP is projected at 1.2% in 2010 and 2.0% in 2011 by Bloomberg consensus, and we think that consenus is reasonable.
Unemployment: the UK’s nominal unemployment rate has shown improvement over the last two months, dropping 10bps to 7.8% in the latest reading.
Inflation: inflation pressures appear to be waning—CPI readings have come in over the last months, registering 3.2% in June Y/Y.
Currency: we’re bullish on the Pound outright because we think that capital and currency markets will favorably price the austerity measures Britain is taking to shave down the government’s budget deficit.  We think the Pound-USD can continue to trend higher from its near-term bottom of $1.43 on 5/20 (see chart below).
Our TRADE line of support for the Pound-USD is $1.48 with TRADE resistance at $1.53.





Matthew Hedrick

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EARLY LOOK: Get Dupe(d)

This note was originally published on June 29, 2010.  INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK in real-time, published by 8am every trading day.




“The US government has a technology, called a printing press, which allows it to produce as many US dollars as it wishes at essentially no cost.”
-Ben Bernanke

One of the most poignant Hedgeye sayings is “austerity equals civil unrest” and it has become increasingly clear that Obama wants nothing to do with austerity.   It’s also clear, judging by developments at the G-20 weekend, that the US is going to try to go it alone with big fiscal imbalances; our submission is that the USA balance sheet can’t sustain the current trend and one of the biggest losers will be the American consumer.  As the Bernanke & Co printing press continues to roll on and on, piling debt upon debt upon debt, this can only end badly.
As of the close yesterday, Consumer Discretionary was one of only three sectors up year-to-date (XLY up 2.7%).  The other two are Industrials (XLI up 3.3%) and Financials (XLF up 0.7%).   While easy comparisons and “corporate” fiscal austerity have helped the performance of consumer stocks, the best days of this cycle are behind them.
I know everyone has a view on the consumer, but there are some changes on the margin that should be considered as we look toward 2H10.  One of our 1Q09 Macro Themes was “MEGA” – calling for a MEGA squeeze in consumer stocks with Mortgage Rates going down, the Employment picture turning around, Gas prices declining sharply year-over-year, and Asset prices re-flating.  Looking at the data as we emerge from 2Q10, it is clear that the American consumer is now going to get DUPE (d) and is not going to be happy.
Double-Dip:  The housing market and the broader economy are on the precipice of a double dip; housing prices have already started to decline and the economy has slowed significantly quarter-to-quarter in 1Q10.  The Hedgeye Risk Management Financials team recently presented a very strong case for why the housing market is in trouble.  We have high conviction that a double-dip in housing is underway and this will have a serious impact on consumer behavior.  Following a decade of out of control spending, the state of the USA’s balance sheet inhibits the country’s ability to navigate the structural issues still present in the economy.   A few points to keep in mind include:
(1)    The benefits from the current Obama stimulus peaked in the 1Q10 - Slowing GDP growth.
(2)    In 2011, taxes are going up and that will hamper economic growth  - Slowing GDP growth.
(3)    Real estate prices are estimated to decline 20% in the next twelve months - Slowing consumer spending.
Unemployment:  Weekly Jobless Claims have not shown any material improvement over the past six months.  Private sector job creation remains a concern; private-sector job creation in May decreased sequentially from April.   While private sector job creation had been growing for four straight months, it has now come to an impasse as businesses have become nervous about the state of the economy.   Unemployment is at an elevated level and indicates a continuing softness in the underlying economy.  As census workers are laid off, the rate could jump higher unless other sources of employment pick up hiring drastically.  Uncle Sam is running out of crutches (or the political will to supply them):
(1)    The Administration failed to get Congress to pony up an extra $50B for unemployment claims - our leveraged balance sheet inhibits the government’s ability to provide stimulus.
(2)    A strong dollar policy has proven to help job creation – Bill Clinton and Ronald Reagan were the last two presidents to oversee true job creation and both pursued strong dollar policies - to be sure Obama is debauching the US currency.
(3)    As the Double-dip scenario pays out, unemployment will remain elevated and may even go higher.
Prices Paid by the Consumer:  While reported inflation by the government looks to be under control, the Hedgeye Inflation Index tells a different story.  The Hedgeye Inflation Index focuses on the part of the economy showing inflation that impacts the consumer, specifically the spread between the prices of things they buy and what they earn.  Looking out over the next 6-12 months (and even longer) consumers will be paying more to drive their cars, or “bring home the bacon” and to make sure they have health insurance for their family.  The issues that arise from the disaster in the Gulf of Mexico will not be solved by the cash flow from BP.  The government has been sponsoring cheap gas prices in the US for years and that will come to an end.  Once again, the government cannot afford to manage through the issues the country faces due to the leveraged balance sheet.     
(1)    The Hedgeye Inflation Index turned ugly last week.
(2)    The disaster in the Gulf is inflationary and will be a drag on growth.
(3)    The prices paid by the US consumer for gas is far below the rest of the world and there is a possibility that the gap could close significantly under pending energy legislation – this would be a massive headwind for the consumer.  Some commentators are speculating that prices could rise to meet those paid at the pump in Western Europe – some 50% higher than where they are currently.
Equity and Real Estate deflation:  We believe that the debasing of any currency (even the Almighty Dollar) ends badly.  A lack of austerity in government policies and an aversion to facing facts among our professional politicians is not helping the long-term outlook for equities.  The VIX’s 19% up-move week-over-week, along with the move in the equity market, indicates that political summits are doing little to ease fears.  On Thursday the Macro Team is going through our Hedgeye Risk Management Q3 Themes.  If you would like access to that conference call, please email
(1)    U.S. equity markets have lost $1.78 trillion since April 23 on concern the European debt crisis will spread.
(2)    China declined 4.2% last night and is now down 26% year-to-date.
(3)    The S&P 500 is down 3.6% year-to-date.
Last week, the University of Michigan consumer confidence index improved for the month of May and yesterday, the government reported that the consumer is spending less than he/she earns.  In both cases the market ignored the data and has moved lower.  We don’t trust what the government is telling us nor the direction in which the country is headed.  The consumer is not stupid and Washington does not get it.
Function in disaster; finish in style
Howard Penney



EARLY LOOK: Get Dupe(d) - chart1

MACRO: The Daily Outlook

This insight (THE DAILY OUTLOOK) was published on August 11, 2010.  The Daily Outlook is published every trading morning.  RISK MANAGER SUBSCRIBERS have access to SELECT MACRO content in real-time.




As we look at today’s set up for the S&P 500, the range is 39 points or 2.0% (1,099) downside and 1.5% (1,138) upside. Equity futures are trading below fair value - disappointing data out of China and Japan has set the early tone and Europe is broadly lower. Today's focus will be trade and budget data for July.


  • ADVANCE/DECLINE LINE: -1400 (-2766)
  • VOLUME: NYSE - 980.83 (+24.14%)
  • SECTOR PERFORMANCE: 3 sectors positive - XLU, XLV and XLP - flight to safety
  • MARKET LEADING/LOOSING STOCKS: Akami +4.86, XL Group +2.68 and ADV Micro (7.95%) and Western Digital (6.12%)



  • VIX - 22.37 1.04% - The VIX now up for 2 days and bearish for equities.
  • SPX PUT/CALL RATIO - 2.49 up from 2.01 trending up (not seen since March) (low on 07/15/10 of 0.87)



  • TED SPREAD - 24.87 -0.913 (-3.541%)
  • 3-MONTH T-BILL YIELD .15% Unchanged
  • YIELD CURVE - 2.2974 to 2.2359



  • CRB: 272.28 -0.84% (down for the last 4 days)
  • Oil: 79.35 1.51%
  • COPPER: 331.25 -1.24% (currently trading at 327.25 below 332 - BEARISH for growth expectations
  • GOLD: 1,196 -0.32% (trading down for 3 days)




  • EURO: 1.3117 -0.84%  - (trading down for 3 days)
  • DOLLAR: 80.799 +0.11%) - (trading up for 3 days)




  • ASIA - Asian markets fell after the Fed disappointed saying it would reinvest money from maturing mortgage bonds in government debt.  Japan fell (2.58%) broadly - The strong yen is hurting exporters and a slowdown in the US; worries about the domestic economy also dampened sentiment as core machinery orders came in below forecasts
  • EUROPE - European are trading sharply lower following weakness across Asian and in reaction to the Fed's comments that the US economy is slowing and took new step to aid the economy.
  • EASTERN EUROPE - Trading lower - Russia down another 1.23% and Hungary down 0.84%.
  • LATIN AMERICA - Lower but Peru trading higher for the 2nd day - Argentina down 1%
  • MIDDLE EAST/AFRICA - Mostly lower with Saudi Arabia down 1.46%


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Howard Penney
Managing Director


Here is a look at guidance and key focus points ahead of earnings on Thursday.


Following RRGB’s last earnings call on May 20th, I wrote a post titled, “RRGB – A LESSON ON HOW NOT TO RUN A RESTAURANT”.  As the title suggests, I was less-than-impressed by the extraordinary dependence on LTOs and advertising for transaction counts that RRGB had developed.   Below I have re-posted a chart that illustrates this point.  Whether the new menus they introduced in May have driven comps successfully or not remains to be seen.  To me it seems that they have trained the customer to only return with a coupon in hand.


RRGB: GLANCE AT THE 2Q10 MENU - rrgb sss1



  • To maintain or sequentially improve two-year average blended same-store sales, Red Robin will need to post +1.1% or better for 2Q10.
  • Per StreetAccount, the Street is expecting a company same-store sales number of 0%, which would imply a 55 bp sequential deceleration in quarterly top line trends. 



  •  Comparable restaurant sales of flat to +1%
  • Expecting revenue of $872 million to $880 million and EPS of $1.10 to $1.30.  1% change in comparable restaurant sales is approximately $0.21 in earnings per diluted share.  
  • Expecting deflation in our commodities for a large portion of basket: between -0.5% and -1% for 2010
  • Expecting some offset due to G&A savings.  Expecting 16.5 to $17 million per quarter for the remainder of the year
  • RRGB expects the average cash investment for new company restaurant development in 2010 to be ~$1.9 million per restaurant (less than the ~$2.5 million per restaurant of three years ago)
  • Four new company-owned restaurants are currently under construction.  12 to 13 openings expected during 2010 – remaining 8 to 9 scheduled for 2H10
  • Franchisees are expected to open between 3 and 4 restaurants this year
  • Continuing to expand our third party gift cards placement during the first quarter growing to about 8,000 retail locations, up from 7,400 at the end of 2009
  • Goal is to achieve 10,000 third party retailer locations for gift cards by the end of 2010.
  • 2010 effective tax rate is expected to be ~17%
  • 2010 CapEx is expected to be ~35 million to $40 million, which will be funded entirely out of operating cash flow
  • Debt payments of $18.7 million required by the term loan portion of the existing credit facility will be made from free cash flow after CapEx in 2010
  • Remaining free cash flow will be used to make payments on revolving credit facility


Howard Penney

Managing Director

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