DEFA14A 1 a77743dadefa14a.txt DEFINITIVE ADDITIONAL PROXY MATERIAL SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No.) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [X] Soliciting Material Under Rule 14a-12 CKE Restaurants, Inc. -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 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Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: -------------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: -------------------------------------------------------------------------------- (3) Filing Party: -------------------------------------------------------------------------------- (4) Date Filed: -------------------------------------------------------------------------------- NEWS RELEASE CONTACT: Kathy Polson Sr. VP Finance Dennis Lacey EVP and CFO 714.778.7109 CKE RESTAURANTS, INC.'S THIRD QUARTER RESULTS NEAR BREAK-EVEN SANTA BARBARA, Calif. -- December 6, 2001 -- CKE Restaurants, Inc. ("CKE" or the "Company") (NYSE:CKR) today announced results for the 12- and 40-weeks ended November 5, 2001. HIGHLIGHTS FOR THE QUARTER - Net loss for the period is $1.7 million versus $29.4 million for the prior year period - Excluding repositioning activities, pro forma income is $400,000 versus a pro forma loss of $8.8 million in the prior year period - Excluding repositioning activities and the operating results of Taco Bueno, and stores sold, closed or to be closed, pro forma net income is $2.3 million versus a pro forma loss of $11.8 million in the prior year period - Same-store sales increased 6.1% at Carl's Jr. and 1.0% at Hardee's - Carl's Jr. margins increased to 21.0% versus 17.6% in the prior year period - Hardee's margins increased to 9.4% versus 5.7% in the prior year period - Letter of Intent signed to acquire Santa Barbara Restaurant Group, Inc. (NASDAQ: SBRG) in a transaction expected to be accretive. For the 40-week period ended October 1, 2001, SBRG reported revenue of $67.8 million, net income of $2.6 million and EBITDA of $7.2 million. 2 EXECUTIVE COMMENTARY "The reported net loss of $1.7 million, which is almost break-even and a significant improvement from recent quarters, along with Hardee's posting positive same-store sales for two consecutive quarters, supports our contention that we are on our way to returning CKE to profitability," said Chief Executive Officer, Andrew F. Puzder. "We recognize that there is still work to be done with the Hardee's brand, but the results show we are making progress. We attribute this success to (i) our operations improvement program at Hardee's emphasizing quality, service and cleanliness, (ii) new products, (iii) charbroiler installations (now in 48% of the company-operated system) and (iv) remodeled restaurants (46% of the company-operated system). We completed the system-wide rollout of the Six-Dollar Burger(TM) at Carl's Jr. and introduced the sandwich at the beginning of the 4th quarter at Hardee's. "We are pleased with our progress toward returning to profitability. However, given the seasonality traditionally experienced by Hardee's during December and January, we may report an operating loss in the fourth quarter," Puzder said. "Looking forward to next fiscal year, we hope to make a profit in the first quarter, as well as next fiscal year, absent adjustments, if any, that may be required as a result of adopting required new accounting rules. Such results would occur irrespective of the acquisition of Santa Barbara Restaurant Group, Inc., which we expect to be immediately accretive to earnings. We are very excited about our pending acquisition of Santa Barbara Restaurant Group, Inc. We believe the addition of the La Salsa and Green Burrito brands to CKE provides us with an additional economical and profitable opportunity for long-term development. "As this quarter's results show, we have made substantial progress in repositioning the Company and we are now focusing on longer-term plans for both brands," Puzder said. "The next steps on our road to growing profits is (i) building new restaurants for all brands, (ii) defining and developing Hardee's brand identity with an emphasis on premium products and less use of discounting and (iii) implementing new marketing strategies. These efforts will allow us to grow our average unit volumes, which we hope will result in increased profit margins. Improving shareholder value remains our primary focus and we believe we are making steady and significant progress toward that goal." SUMMARY OF REPORTED AND PRO FORMA RESULTS CKE's results for its third quarter of fiscal 2002, its last fiscal quarter (second quarter fiscal 2002, referred to as the "link quarter") and its third quarter of the prior fiscal year, as well as its 3 year-to-date results, are summarized below. Pro forma amounts are shown after applicable income taxes as if the Company (i) had not recorded net losses from its repositioning activities and (ii) was able to record a deferred tax asset for all periods presented. SUMMARY OF REPORTED AND PRO FORMA RESULTS FOR THE QUARTER
(Dollars in millions, except Third quarter FY Second quarter FY Third quarter FY per share data) 2002 2002 2001 (Current quarter) (Last quarter) (Prior year quarter) ---------------- ---------------- ---------------- Dollars EPS Dollars EPS Dollars EPS ------- ------ ------- ------ ------- ------ Reported net loss under generally accepted accounting principles $(1.7) $(0.03) $(36.8) $(0.73) $(29.4) $(0.58) Less: repositioning activities and (2.1) (0.04) (34.4) (0.68) (20.6) (0.41) taxes ----- ------ ------ ------ ------ ------ Pro forma net income/(loss) $ 0.4 $ 0.01 $ (2.4) $(0.05) $ (8.8) $(0.17) ===== ====== ====== ====== ====== ======
SUMMARY OF REPORTED AND PRO FORMA RESULTS FOR THE YEAR-TO-DATE
(Dollars in millions, except 40-weeks ended 40-weeks ended per share data) November 5, 2001 November 6, 2000 ----------------- ---------------- Dollars EPS Dollars EPS ------- ------ ------- ------ Reported net loss under generally accepted accounting principles $(75.6) $(1.50) $(45.8) $(0.91) Less: repositioning activities and tax benefit (71.1) (1.41) (31.3) (0.62) ------ ------ ------ ------ Pro forma net loss $(4.5) $(0.09) $(14.5) $(0.29) ====== ====== ====== ======
FACTORS AFFECTING COMPARABILITY OF PRO FORMA QUARTERLY RESULTS The pro forma results shown above reflect the fact that, excluding certain repositioning activities described further below, the Company would have reported a small pro forma profit. This pro forma profit reflects an improvement over the link quarter and the prior year third quarter. For all periods presented, repositioning activities have been restated to include only facility action charges, severance and write-offs of deferred loan costs. Although earnings are impacted by many factors, the following table is a condensed presentation of the pro forma results from period to period. All amounts are approximate and in thousands: 4
Increase (decrease) to Increase (decrease) to the pro forma the pro forma income/(loss)for the income/(loss) for the current quarter vs. the current quarter vs. the Category link quarter prior year third quarter ------------------------------------------------------------ ----------------------- ------------------------ Self-insurance program reserves $ 4,900 $ 2,700 Provision for doubtful accounts 2,900 0 Interest expense 700 4,000 Corporate overhead and marketing (2,800) 800 Store repair and maintenance expense (1,400) (1,100) Approximate net impact of product discounting at Hardee's (700) (600) Approximate operating (income) losses of stores involved in (700) 5,000 facility actions Taco Bueno operations (1,100) (3,200) Supplier rebate relating to prior periods at Carl's Jr 800 800 Approximate store margin improvement, exclusive of items identified separately above -- 2,700 Carl's Jr. franchising -- 1,700 Hardee's franchise agreement termination settlement fee 1,800 1,800 All other, net (700) 2,300 -------- -------- Subtotal $ 4,400 $ 15,300 Approximate tax effect of above items 1,600 6,100 -------- -------- Change in reported quarterly pro forma net income (loss) $ 2,800 $ 9,200 ======== ========
Comments regarding these changes are included in the discussions below regarding each Brand and the Repositioning Activities. CARL'S JR. BRAND - Nearly 80 Six-Dollar Burgers(TM) have been sold, on average, in each restaurant each day during the quarter. - During the third quarter 2002, the Company sold 4 restaurants to franchisees and opened one new restaurant. Carl's Jr. franchisees and licensees opened 4 restaurants, acquired 4 from the Company and closed 2. Table 1 reconciles the activity in restaurant count for the quarter. - For the 12-week period ended November 5, 2001, Carl's Jr. company-operated restaurant revenue decreased 15.5% from the prior year comparable period. The decrease in Carl's Jr. revenue is primarily due to the sale of company-operated stores to franchisees as well as the closure of company-operated stores, offset by a 6.1% increase in same-store sales. While 5 revenue from company-operated stores are down, franchising income has increased nearly 50%, due to the increase in the number of franchisee-operated restaurants. Company-operated restaurant margins for Carl's Jr. for the third quarter 2002, the link quarter and third quarter 2001 were 21.0%, 17.4% and 17.6%, respectively. The increase in margins for the third quarter 2002 is due to (i) the fact that the current quarter did not require an increase in self-insurance reserves, (ii) reduced restaurant operating costs primarily as a result of renegotiating several service contracts, (iii) reduced depreciation levels, due to cumulative asset impairment charges reducing the depreciable base of stores and (iv) the supplier rebate identified above. These improvements were partially offset by increased repair and maintenance costs. - For the 40-week period ended November 5, 2001, Carl's Jr. company-operated restaurant revenue decreased 15.5% from the prior year comparable period. The decrease in Carl's Jr. revenue is primarily due to the sale of company-operated stores to franchisees as well as the closure of company-operated stores. While revenue from company-operated stores is down, franchising income has increased more than 50%, as described above. Although there were variations in the individual components of operating costs, restaurant margins remained relatively consistent at 19.6% and 20.2% for the third quarter year-to-date 2001 and 2002, respectively. 6 HARDEE'S BRAND - During the third quarter 2002, Hardee's introduced the Six-Dollar Burger(TM) in certain test markets and the French Dip sandwich. Additionally, Hardee's began offering The Hillshire Farms(TM) Smoked Sausage Biscuit as part of its breakfast menu. - During the third quarter 2002, the Company sold 11 restaurants to franchisees, closed two restaurants and acquired four restaurants from franchisees. Hardee's franchisees and licensees opened 4 restaurants, acquired 11 from the Company and closed 37. During the quarter, Hardee's added 42 charbroilers and remodeled 34 restaurants to the Star Hardee's format. Hardee's franchisees remodeled 3 Hardee's restaurants to the Star Hardee's format. Table 1 reconciles the activity in restaurant count for the quarter. - For the 12-week period ended November 5, 2001, Hardee's company-operated revenue decreased 26.2% from the prior year comparable period. The decrease in Hardee's revenue is primarily due to the sale of company-operated restaurants to franchisees and the closure of company-operated restaurants. Company-operated restaurant margins for Hardee's for the third quarter 2002, the link quarter and the third quarter 2001 were 9.4%, 10.0 % and 5.7%, respectively. The increase in margins in the third quarter 2002 versus the comparable prior year period was primarily due to the fact that the current quarter did not require an increase in self-insurance reserves, coupled with the closure of unprofitable stores. The slight decrease in margins compared to the link quarter was primarily due to increased use of product discounting and increased repair and maintenance expense, offset by the fact that the current quarter did not require an increase in self-insurance reserves. Franchising income increased during the current quarter due to (i) the settlement fee included in the above, (ii) the fact that the Company did not need to make any adjustments to the allowance for doubtful accounts this quarter and (iii) an increase in the number of franchise stores. 7 - For the 40-week period ended November 5, 2001, Hardee's company-operated revenue decreased 31.3% from the prior year comparable period. The decrease in Hardee's revenue is primarily due to the sale of company-operated restaurants to franchisees as well as the closure of company-operated restaurants. For the 40-week period, company-operated restaurant margins for Hardee's for the third 2002 and third quarter 2001 were 9.2% and 8.5%, respectively. This improvement is due to the closing of unprofitable stores, partially offset by higher utility and commodity costs during the first half of the year. Franchising income is less than the prior year due to decreased revenue from Hardee's Equipment Division as franchisees have completed fewer remodels in the current year. REPOSITIONING ACTIVITIES - During the third quarter of fiscal 2002, the Company recorded repositioning charges of $2.1 million, which were primarily non-cash facility action charges. The net facility action charges consisted of (i) an impairment charge of $400,000 for restaurants that the company plans to continue to operate, but for which the net book value is not supported by current estimated future cash flows, (ii) an impairment charge and store closure expense, principally for Hardees restaurants, that the Company has closed or plans to close, consisting of asset impairments of $1.7 million and $500,000 for additional store closure expense reserves, (iii) a Hardee's regional office closure charge of $900,000 and (iv) net gains on the sale of restaurants to franchisees and surplus properties of $1.4 million. During the third quarter of fiscal 2001, the Company recorded facility action charges of $34.3 million relating primarily to net losses on the sale of certain restaurants. For the 40-week period, the Company recorded repositioning charges of $65.7 million which consisted of (i) net facility action charges of $60.8 million, (ii) a charge of $3.9 million recorded as interest expense reflecting the write-off of deferred loan costs primarily as a result of the modification of the Company's senior credit facility and (iii) $1 million relating to severance payments. For the prior-year 40-week period, the Company's repositioning charges were $52.1 million. - The asset sales arising from the repositioning activities have resulted, and will continue to result, in a decline in restaurant revenue and costs simply because the Company operates fewer stores. In addition, the sale of the Taco Bueno brand has, and will continue to result in less operating income than reported in prior periods. As a result of these circumstances, general and administrative costs have declined $2.8 million or 9.5% and $20.2 million or 18.9% for the 12- and 40-week periods, respectively, compared to the prior year. This is primarily due to the Company's rebalancing effort to align its cost structure with its reduced portfolio of stores. General and administrative expenses for the current period compared to the link period are approximately flat, after adjusting for non-cash litigation reserves, which were materially decreased in the link quarter and modestly increased in the current quarter. - Exclusive of the write-off of deferred loan costs reflected in interest expense, interest expense was $11.8 million and $46.8 million for the 12-week and 40-week periods, respectively and $16.3 million and $53.5 million in the 12-week and 40-week prior-year periods, respectively. The revolver has generally not had a daily outstanding balance during the third quarter. However, due to the timing of rent payments and the semi-annual interest payment on senior debt, the Company did draw approximately $6 million dollars at the end of the third quarter. As of yesterday, the balance was $0. - During the first three quarters of fiscal 2001, the Company recorded a deferred tax asset for the tax benefit of operating losses, which served to reduce the net loss reflected in the Statement of Operations. Commencing with the fourth quarter of last fiscal year, the Company ceased 8 to record a deferred tax asset because of the Company's recurring operating losses. As such, the current year periods' Statement of Operations do not reflect a tax benefit from the operating loss, as was the case in the prior fiscal year. BUSINESS OUTLOOK The following table is based on current expectations for the remainder of the current fiscal year and initial expectations for next fiscal year. This table contains forward-looking information and actual results could differ materially (see "Safe Harbor Disclosure" below). The table does not include: (i) the impact of the Santa Barbara Restaurant Group acquisition, which is expected to close in the first quarter of fiscal 2003, (ii) adjustments that will arise from Enron's recently announced Chapter 11 filing and, (iii) adjustments, if any, from the adoption of FAS 141, 142 and 144 in the first quarter of fiscal 2003.
Fourth Quarter, 2002 Fiscal 2003 -------------------- ----------------- Carl's Jr. Anticipated new company stores None 5 - 15 Anticipated new franchise stores 5 - 10 Up to 40 Same-store sales growth 1.0% - 2.0% 2.0% - 4.5% Restaurant-level margins Approx. 20.0% 20% - 21% Hardee's Anticipated new company stores None 5 - 15 Anticipated new franchise stores Up to 5 Up to 30 Same-store sales growth Approx. 1.0% 1.0% Restaurant-level margins Approx. 7.0% 10% - 13.5% Consolidated Interest expense Approx. $12 million $40 - $42 million Capital expenditures $10 - $18 million $40 - $60 million
9 FINANCIAL TABLES TABLE 1: SUMMARY OF SYSTEM-WIDE RESTAURANT ACTIVITY
Franchised/ Company Licensed Total ------ ------ ------ CARL'S JR.: Beginning of quarter 444 524 968 Opened 1 4 5 Acquired from franchisees/company 0 0 0 Sold to franchisees/company (4) 4 0 Closed (0) (2) (2) ------ ------ ------ End of quarter 441 530 971 ====== ====== Company stores scheduled to close 0 ------ Pro forma level 441 ====== HARDEE'S: Beginning of quarter 760 1,732 2,492 Opened 0 4 4 Acquired from franchisees/company 4 (4) 0 Sold to franchisees/company/mgmt. agmt. (11) 11 0 Closed (2) (37) (39) ------ ------ ------ End of quarter 751 1,706 2,457 ====== ====== Company stores scheduled to close 22 ------ Pro forma level 729 ====== TOTAL: Beginning of quarter 1,204 2,256 3,460 Opened 1 8 9 Acquired from franchisees/company 4 (4) 0 Sold to franchisees/company/mgmt. agmt. (15) 15 0 Closed (2) (39) (41) ------ ------ ------ End of quarter 1,192 2,236 3,428 ====== ====== Company stores scheduled to close 22 ------ Pro forma level 1,170 ======
10 TABLE 2: STATEMENTS OF OPERATIONS IN MANAGEMENT REPORTING FORMAT
(Dollars in thousands) Third quarter ------------------------------------------ FY 2002 FY 2001 Percent Percent ------------------------------------------ Dollars (Note 1) Dollars (Note 1) ------- -------- ------- -------- A. RESULTS OF OPERATIONS EXCLUDING REPOSITIONING ACTIVITIES AND STORES SOLD, CLOSED OR TO BE CLOSED AND TACO BUENO: Revenue from: Company-operated restaurants 255,471 244,750 Franchisee-operated restaurants 67,016 51,295 ------ ------ Total revenue 322,487 296,045 ------- ------- Restaurant operating costs: Food and packaging 78,314 30.7% 75,192 30.7% Payroll and other employee benefits 80,712 31.6% 79,234 32.4% Occupancy and other operating 56,894 22.3% 57,031 23.3% ------ ----- ------ ----- expenses Total operating costs 215,921 84.5% 211,457 86.4% Franchised and licensed restaurant expense 49,613 36,082 Advertising expense 15,451 6.0% 15,337 6.3% General and administrative expenses 26,990 8.4% 25,471 8.6% ------ ---- ------ ---- Total operating costs and expenses 307,975 288,347 ------- -------- Operating income 14,511 7,699 Interest expense (11,752) (16,266) Other income (expense), net (467) (3,302) ------- -------- INCOME (LOSS) EXCLUDING REPOSITIONING ACTIVITIES AND STORES SOLD, CLOSED OR 2,292 (11,869) TO BE CLOSED AND TACO BUENO (A) ------- -------- B. RESULTS OF BUSINESS REPOSITIONING ACTIVITY Net business repositioning activities $(2,121) $(34,343) Operating results of stores sold, closed or to be closed (1,565) (4,337) Operating results of Taco Bueno 0 964 ------- -------- INCOME (LOSS) FROM REPOSITIONING ACTIVITIES AND STORES SOLD, CLOSED AND TO BE CLOSED AND TACO BUENO (B) (3,686) (37,716) ------- -------- Loss before taxes (A)+(B) (1,394) (49,585) Income tax expense (benefit) 337 (20,161) ------- -------- LOSS REPORTED UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES $(1,731) $(29,424) ======== =========
(Dollars in thousands) Year-to-date ---------------------------------------- FY 2002 FY 2001 Percent Percent ---------------------------------------- Dollars (Note 1) Dollars (Note 1) ------- -------- ------- -------- A. RESULTS OF OPERATIONS EXCLUDING REPOSITIONING ACTIVITIES AND STORES SOLD, CLOSED OR TO BE CLOSED AND TACO BUENO: Revenue from: Company-operated restaurants 833,081 813,838 Franchisee-operated restaurants 205,845 159,895 ------- ------- Total revenue 1,038,926 973,733 ------- ------- Restaurant operating costs: Food and packaging 253,191 30.4% 249,702 30.7% Payroll and other employee benefits 267,331 32.1% 251,857 31.1% Occupancy and other operating 183,279 22.0% 182,028 22.5% ------- ----- ------- ----- expenses Total operating costs 703,801 84.5% 683,587 84.3% Franchised and licensed restaurant expense 158,028 115,649 Advertising expense 52,578 6.3% 50,427 6.2% General and administrative expenses 82,969 7.9% 95,216 9.5% ------ ---- ------ ---- Total operating costs and expenses 997,376 944,879 ------- ------- Operating income 41,550 28,854 Interest expense (42,644) (53,511) Other income (expense), net 360 (1,087) ------- ------- INCOME (LOSS) EXCLUDING REPOSITIONING ACTIVITIES AND STORES SOLD, CLOSED OR (734) (25,744) TO BE CLOSED AND TACO BUENO (A) ------- ------- B. RESULTS OF BUSINESS REPOSITIONING ACTIVITY Net business repositioning activities $(65,965) $(52,114) Operating results of stores sold, closed or to be closed (10,436) (3,977) Operating results of Taco Bueno 3,693 4,721 ------- ------- INCOME (LOSS) FROM REPOSITIONING ACTIVITIES AND STORES SOLD, CLOSED AND TO BE CLOSED AND TACO BUENO (B) (72,708) (51,370) -------- -------- Loss before taxes (A)+(B) (73,442) (77,114) Income tax expense (benefit) 2,204 (30,499) ------- ------- LOSS REPORTED UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES $(75,646) $(46,615) ========= =========
Note (1) Stated as a percentage of company-operated revenue except for general and administrative expenses, which are stated as a percentage of total revenue. 11 TABLE 3: RESULTS OF PRINCIPAL OPERATING SEGMENTS
(Dollars in thousands, except average check data) Third quarter FY 2002 --------------------------------------------- Carl's Jr. Hardee's Other Total ------- ------ ------- ------- Number of restaurants: Company-operated 441 751 1,192 Franchised domestic 490 1,564 2,054 Licensed international 40 142 182 ------- ------ ------- Total 971 2,457 3,428 ======= ====== ======= Company-operated restaurant sales $120,644 $138,968 $259,612 ======= ====== ======= Company-operated average unit volumes (trailing 13-periods) 1,175 741 ======= ====== Average check $5.13 $3.74 ======= ====== Company-operated same-store sales increase (decrease) 6.1% 1.0% Franchisee-operated same-store sales increase (decrease) 5.5% (1.2)% Co-oper. same-store sales increase (decrease) excluding stores sold, closed or to be closed 6.2% 1.0% Company-operated average unit volumes, excluding stores sold, closed or to be closed 1,131 756 Operating costs (as a % of co.-operated sales) Food and paper 28.76% 32.34% Payroll and other employee benefits 28.47% 34.57% Occupancy and other operating costs 21.77% 23.73% ------- ------ Gross margin 21.00% 9.36% Franchising revenue: Royalties $4,872 $8,932 $13,804 Distribution centers 33,543 3,754 37,297 Other 6,957 8,958 15,915 ------- ------ ------- Total $45,372 $21,644 $67,016 ======= ====== ======= Net franchising income $4,918 $6,669 $11,587 ======= ====== ======= Oper. income (loss) excluding facility action charges $15,787 $759 $(3,600) $12,946 Facility action charges (gains) (961) 3,082 0 2,121 ------- ------ ------- ------- Operating income (loss) $16,748 $(2,323) $(3,600) $10,825 ======= ======= ======= ======= EBITDA $21,534 $6,262 $(1,597) $26,199 Facility action charges (gains) (961) 3,082 0 2,121 ------- ------ ------- ------- EBITDA excluding facility action charges $20,573 $9,344 $(1,597) $28,320 ======= ====== ======== ======= EBITDA excl. stores sold, closed or to be closed and facility action charges $20,516 $10,593 $(1,597) $29,512 ======= ======= ======= =======
(Dollars in thousands, except average check data) Third quarter FY 2001 ------------------------------------------- Carl's Jr. Hardee's Other Total ------- ------- ------- ------- Number of restaurants: Company-operated 554 1,027 146 1,727 Franchised domestic 389 1,566 0 1,955 Licensed international 30 131 0 161 ------- ------- ------- ------- Total 973 2,724 146 3,843 ======= ======= ======== ======= Company-operated restaurant sales $142,686 $188,110 $25,458 $356,254 ======= ======= ======== ======= Company-operated average unit volumes (trailing 13-periods) 1,150 732 ======= ======= Average check $4.77 $4.08 ======= ======= Company-operated same-store sales increase (decrease) 1.1% (6.3)% Franchisee-operated same-store sales increase (decrease) 5.1% (3.14)% Co-oper. same-store sales increase (decrease) excluding stores sold, closed or to be closed 1.4% (4.3)% Company-operated average unit volumes, excluding stores sold, closed or to be closed 1,129 788 Operating costs (as a % of co.-operated sales) Food and paper 29.58% 32.49% Payroll and other employee benefits 30.10% 35.70% Occupancy and other operating costs 22.77% 26.10% ------- ------- Gross margin 17.55% 5.71% Franchising revenue: Royalties $3,173 $10,292 $13,465 Distribution centers 21,673 5,931 27,604 Other 5,568 4,658 10,226 ------- ------- ------- Total $30,414 $20,881 $51,295 ======= ======= ======= Net franchising income $7,711 $12,101 $19,812 ======= ======= ======= Oper. income (loss) excluding facility action charges $8,294 $(2.467) $(3,311) $2,516 Facility action charges (gains) (2,098) 36,441 0 34,343 ------- ------- ------- ------- Operating income (loss) $10,392 $(38,908) $(3,311) $(31,827) ======= ======== ======= ======== EBITDA $17,632 $(24,991) $(1,321) $(8,680) Facility action charges (gains) (2,098) 36,441 0 34,343 ------- ------- ------- ------- EBITDA excluding facility action charges $15,534 $11,450 $(1,321) $25,663 ======= ======= ======== ======= EBITDA excl. stores sold, closed or to be closed and facility action charges $11,363 $14,922 $(3,339) $22,496 ======= ======= ======= =======
12 TABLE 3: RESULTS OF PRINCIPAL OPERATING SEGMENTS (CONTINUED)
(Dollars in thousands, except average check data) Year-to-date third quarter FY 2002 ------------------------------------------------------------- Carl's Jr. Hardee's Other Total ----------- ----------- ----------- ----------- Company-operated restaurant sales $ 402,619 $ 486,229 $ 43,095 $ 931,943 =========== =========== =========== =========== Operating costs (as a % of co.-operated sales) Food and paper 29.06% 31.79% Payroll and other employee benefits 29.39% 35.20% Occupancy and other operating costs 22.00% 23.76% ----------- ----------- Gross margin 19.55% 9.24% Franchising revenue: Royalties $ 15,281 $ 33,631 $ 48,912 Distribution center 105,065 11,184 116,249 Other 23,855 16,829 40,684 ----------- ----------- ----------- Total $ 144,201 $ 61,644 $ 205,845 =========== =========== =========== Net franchising income $ 16,602 $ 31,215 $ 47,817 =========== =========== =========== Operating income (loss) $ 44,245 $ (58,686) $ (12,581) $ (27,022) Facility action charges (gains) 710 55,410 4,707 60,827 ----------- ----------- ----------- ----------- Oper. income (loss) excluding facility action charges $ 44,955 $ (3,276) $ (7,874) $ 33,805 =========== =========== =========== =========== EBITDA $ 60,866 $ (26,221) $ (4,075) $ 30,570 Facility action charges (gains) 710 55,410 4,707 60,827 ----------- ----------- ----------- ----------- EBITDA excluding facility action charges $ 61,576 $ 29,189 $ 632 $ 91,397 =========== =========== =========== =========== EBITDA excluding stores sold, closed or to be closed and facility action charges $ 61,022 $ 37,003 $ (3,061) $ 94,964 =========== =========== =========== ===========
(Dollars in thousands, except average check data) Year-to-date third quarter FY 2001 ----------------------------------------------------------- Carl's Jr. Hardee's Other Total ----------- ----------- ----------- ----------- Company-operated restaurant sales $ 476,655 $ 708,419 $ 85,404 $ 1,270,478 =========== =========== =========== =========== Operating costs (as a % of co.-operated sales) Food and paper 29.54% 32.23% Payroll and other employee benefits 28.39% 34.59% Occupancy and other operating costs 21.86% 24.64% ----------- ----------- Gross margin 20.21% 8.54% Franchising revenue: Royalties $ 10,083 $ 32,388 $ 42,471 Distribution center 69,002 18,776 87,778 Other 16,571 13,075 29,646 ----------- ----------- ----------- Total $ 95,656 $ 64,239 $ 159,895 =========== =========== =========== Net franchising income $ 8,524 $ 35,722 $ 44,246 =========== =========== =========== Operating income (loss) $ 42,620 $ (58,825) $ (5,504) $ (21,709) Facility action charges (gains) (4,272) 55,582 0 51,310 ----------- ----------- ----------- ----------- Oper. income (loss) excluding facility action charges $ 38,348 $ (3,243) $ (5,504) $ 29,601 =========== =========== =========== =========== EBITDA $ 65,517 $ (5,797) $ 4,028 $ 63,748 Facility action charges (gains) (4,272) 55,582 0 51,310 ----------- ----------- ----------- ----------- EBITDA excluding facility action charges $ 61,245 $ 49,785 $ 4,028 $ 115,058 =========== =========== =========== =========== EBITDA excluding stores sold, closed or to be closed and facility action charges $ 46,159 $ 47,116 $ (4,165) $ 89,110 =========== =========== =========== ===========
13 TABLE 4: CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) Third quarter Fourth Quarter Fiscal 2002 Fiscal 2001 ----------- ----------- Cash $14,179 $16,860 Other current assets 69,279 173,813 -------- ---------- Total current assets 83,458 190,673 Property, plant & equipment 551,529 700,698 Costs in excess of net assets acquired, net 190,658 203,900 All other assets 123,019 118,758 -------- ---------- Total assets $948,664 $1,214,029 ======== ========== Senior credit facility $6,750 $67,000 All other current liabilities 142,836 146,981 -------- ---------- Total current liabilities 149,586 213,981 Notes, senior credit facility and capital lease obligations 437,180 547,158 All other liabilities 87,734 103,333 -------- ---------- Total liabilities 674,500 864,472 Stockholders' equity 274,164 349,557 -------- ---------- Liabilities and stockholders' equity $948,664 $1,214,029 ======== ==========
TABLE 5: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) Year-to-Date Year-to-Date Fiscal 2002 Fiscal 2001 ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES: Net loss $(75,644) $(45,810) Depreciation and amortization 61,367 86,255 All other additions/subtractions to income 97,130 (34,789) --------- -------- Cash flow from operating activities 82,853 5,656 --------- -------- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures (16,012) (37,588) Proceeds from repositioning activities 124,932 79,206 All other investing cash flow (8,088) 4,513 --------- -------- Cash flow from investing activities 100,832 46,131 --------- -------- CASH FLOW FROM FINANCING ACTIVITIES: Net debt repayment (169,904) (59,599) All other financing activities (16,462) (2,919) --------- -------- Cash flow used in financing activities (186,366) (62,518) --------- -------- Decrease in cash (2,681) (10,731) Cash at beginning of year 16,860 36,505 --------- -------- Cash at end of quarter $14,179 $25,744 ========= ========
14 TABLE 6 - STATEMENTS OF OPERATIONS IN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FORMAT
Twelve Weeks Ended Forty Weeks Ended (Dollars in thousands, except per share data) November 5, November 6, November 5, November 6, 2001 2000 2001 2000 ---- ---- ---- ---- Revenue: Company-operated restaurants $ 259,612 $ 356,254 $ 931,943 $ 1,270,478 Franchised and licensed restaurants 67,016 51,295 205,845 159,895 ----------- ----------- ----------- ----------- Total revenue 326,628 407,549 1,137,788 1,430,373 ----------- ----------- ----------- ----------- Operating costs and expenses: Restaurant operations: Food and packaging 79,629 110,564 284,392 393,906 Payroll and other employee benefits 82,389 118,728 303,545 407,990 Occupancy and other operating expenses 59,266 86,507 212,226 294,410 ----------- ----------- ----------- ----------- 221,284 315,799 800,163 1,096,306 Franchised and licensed restaurants 49,613 36,082 158,028 115,650 Advertising expenses 15,696 22,305 59,022 79,340 General and administrative expenses 27,089 30,847 86,770 109,476 Facility action charges, net 2,121 34,343 60,827 51,310 ----------- ----------- ----------- ----------- Total operating costs and expenses 315,803 439,376 1,164,810 1,452,082 ----------- ----------- ----------- ----------- Operating income (loss) 10,825 (31,827) (27,022) (21,709) Interest expense (11,752) (16,265) (46,783) (53,510) Other income (expense), net (467) (1,494) 362 1,084 ----------- ----------- ----------- ----------- Loss before income taxes (1,394) (49,586) (73,443) (76,303) Income tax expense (benefit) 337 (20,157) 2,204 (30,493) ----------- ----------- ----------- ----------- Net loss ($ 1,731) ($ 29,429) ($ 75,647) ($ 45,810) =========== =========== =========== =========== Basic and diluted net loss per common share ($ 0.03) ($ 0.58) ($ 1.50) ($ 0.91) =========== =========== =========== =========== Basic and diluted weighted average shares outstanding 50,505 50,501 50,503 50,501 =========== =========== =========== ===========
15 SAFE HARBOR DISCLOSURE Matters discussed in this news release contain certain forward-looking statements that are based on management's beliefs and assumptions derived from information currently known to the Company's management. Forward-looking statements may include, but are not limited to, descriptions of plans or objectives of the Company's management for future or past operations, products or services, earnings or other measures of economic performance including statements of profitability of business segments and subsidiaries, estimates of recoverability of long-lived assets, current bank relationships, and current repositioning activities including anticipated store closures. Such statements reflect the view of the Company's management with respect to future events and are subject to risks and uncertainties, such as changes in the fast food industry and changes to the Company's plans, objectives, expectations and intentions. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, the Company's actual results could differ materially from those discussed in this news release. Factors that could cause or contribute to such differences are consumers' concerns or adverse publicity regarding the Company's products, effectiveness of operating initiatives and advertising and promotional efforts, changes in economic conditions, changes in commodity prices, availability and cost of energy, workers' compensation and general liability claim experience, the impact of competitive products and pricing, changes in the Company's suppliers' ability to provide quality and timely products to the Company, delays in opening new restaurants or completing remodels, the operational success of the Company's franchisees, availability of financing for the Company and its franchisees, unfavorable outcomes on litigation, changes in accounting policies and practices, new legislation or government regulation and other factors as discussed in the Company's filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. CKE does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made. Without limiting the foregoing, CKE undertakes no obligation to update Business Outlook guidance including any of the factors that influence earnings. 16 DISCLOSURE RELATING TO THE UPCOMING PROXY SOLICITATION CKE Restaurants and Santa Barbara Restaurant Group will be jointly filing relevant documents concerning the merger of SBRG into CKE with the Securities and Exchange Commission. CKE URGES ITS AND SBRG'S STOCKHOLDERS TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Stockholders of either company will be able to obtain the documents free of charge at the SEC's website, www.sec.gov. In addition, documents filed with the Securities and Exchange Commission by CKE Restaurants and Santa Barbara Restaurant Group will be available free of charge from both the Corporate Secretary of CKE Restaurants at 3916 State St., Suite 300, Santa Barbara, California 93105, telephone (714) 774-5796, and the Corporate Secretary of Santa Barbara Restaurant Group at 3938 State Street, Suite 200, Santa Barbara, California 93105, telephone (805) 563-3644. The directors and executive officers of both companies may be deemed to be participants in the solicitation of proxies. The direct or indirect interests of such participants, by security holdings or otherwise, will be included in the joint proxy statement to be filed with the SEC. In addition, you can review related information set forth in CKE Restaurants' proxy statement for its Annual Meeting of Stockholders held June 12, 2001, as filed with the SEC on May 14, 2001, and in Santa Barbara Restaurant Group's proxy statement for its Annual Meeting of Stockholders held August 6, 2001, as filed with the SEC on July 13, 2001. STOCKHOLDERS OF BOTH CKE RESTAURANTS AND SANTA BARBARA RESTAURANT GROUP SHOULD READ CAREFULLY THESE PROXY STATEMENTS AND OTHER DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT INFORMATION. # # # 17