-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GpLXplBpnOAZr3ehBXrXIsFiU9VR1FneiDAmgJZmDG3OU7ld86DfZubgfO5WnQhB PpSUP28sIbrIQ+m4LbFcFw== /in/edgar/work/0001095811-00-003654/0001095811-00-003654.txt : 20000930 0001095811-00-003654.hdr.sgml : 20000930 ACCESSION NUMBER: 0001095811-00-003654 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000814 FILED AS OF DATE: 20000928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CKE RESTAURANTS INC CENTRAL INDEX KEY: 0000919628 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] IRS NUMBER: 330602639 STATE OF INCORPORATION: DE FISCAL YEAR END: 0125 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11313 FILM NUMBER: 730975 BUSINESS ADDRESS: STREET 1: 401 WEST CARL KARCHER WAY CITY: ANAHEIM STATE: CA ZIP: 92801 BUSINESS PHONE: 7147745796 MAIL ADDRESS: STREET 1: 401 WEST CARL KARCHER WAY CITY: ANAHEIM STATE: CA ZIP: 92801 10-Q 1 a65883e10-q.txt FORM 10-Q QUARTERLY PERIOD ENDED AUGUST 14, 2000 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended August 14, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. for the transition period from ____________ to ____________ Commission file number 1-13192 CKE RESTAURANTS, INC. ------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 33-0602639 - -------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 401 W. Carl Karcher Way, Anaheim, CA 92801 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (714) 774-5796 Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of September 14, 2000, 50,501,421 shares of the Registrant's Common Stock were outstanding. 2 CKE RESTAURANTS, INC. AND SUBSIDIARIES INDEX
Page ---- Part I. Financial Information Item 1. Consolidated Financial Statements: Consolidated Balance Sheets as of August 14, 2000 and January 31, 2000.......... 2 Consolidated Statements of Operations for the twelve and twenty-eight weeks ended August 14, 2000 and August 9, 1999.................................... 3 Consolidated Statements of Cash Flows for the twenty-eight weeks ended August 14, 2000 and August 9, 1999.......................................... 4 Notes to Consolidated Financial Statements...................................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk............... 15 Part II. Other Information Item 4. Submission of Matters to a Vote of Security Holders....................... 16 Item 6. Exhibits and Reports on Form 8-K.......................................... 17
1 3 PART 1. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
(Unaudited) August 14, January 31, 2000 2000 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 24,834 $ 36,505 Accounts receivable, net 54,024 42,928 Related party receivables 4,389 5,006 Inventories 23,313 26,463 Prepaid expenses 14,149 14,717 Other current assets 1,903 2,454 ----------- ----------- Total current assets 122,612 128,073 Property and equipment, net 971,188 1,051,480 Property under capital leases, net 80,017 84,482 Long-term investments 5,796 3,002 Notes receivable 15,177 7,383 Related party receivables -- 583 Deferred income taxes, net 15,006 15,006 Costs in excess of assets acquired, net 240,012 243,304 Other assets 32,624 35,201 ----------- ----------- $ 1,482,432 $ 1,568,514 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 253,470 $ 5,532 Current portion of capital lease obligations 9,979 9,603 Accounts payable 71,617 99,204 Other current liabilities 84,899 97,582 ----------- ----------- Total current liabilities 419,965 211,921 ----------- ----------- Long-term debt 5,627 274,996 Senior subordinated notes 200,000 200,000 Convertible subordinated notes 159,225 159,225 Capital lease obligations 87,156 92,063 Other long-term liabilities 83,167 84,552 Stockholders' equity: Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued or outstanding -- -- Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding 52,086,421 shares 521 521 Additional paid-in capital 383,016 383,016 Retained earnings 154,161 172,626 Treasury stock, at cost, 1,585,000 shares (10,406) (10,406) ----------- ----------- Total stockholders' equity 527,292 545,757 ----------- ----------- $ 1,482,432 $ 1,568,514 =========== ===========
See Accompanying Notes to Consolidated Financial Statements. 2 4 CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited)
Twelve Weeks Ended Twenty-eight Weeks Ended --------------------------- --------------------------- August 14, August 9, August 14, August 9, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Revenues: Company-operated restaurants $ 386,851 $ 423,424 $ 914,225 $ 970,168 Franchised and licensed restaurants and other 51,645 41,835 108,601 90,814 ----------- ----------- ----------- ----------- Total revenues 438,496 465,259 1,022,826 1,060,982 ----------- ----------- ----------- ----------- Operating costs and expenses: Restaurant operations: Food and packaging 120,825 126,498 283,343 290,230 Payroll and other employee benefits 123,699 132,295 289,262 297,874 Occupancy and other operating expenses 91,060 84,180 207,903 195,015 ----------- ----------- ----------- ----------- 335,584 342,973 780,508 783,119 Franchised and licensed restaurants and other 35,816 31,197 79,568 66,725 Advertising expenses 23,362 28,614 57,035 61,293 General and administrative expenses 32,953 31,328 78,630 71,093 ----------- ----------- ----------- ----------- Total operating costs and expenses 427,715 434,112 995,741 982,230 ----------- ----------- ----------- ----------- Operating income 10,781 31,147 27,085 78,752 Interest expense (16,550) (13,492) (37,245) (29,170) Other expense, net (16,988) (811) (16,558) (1,077) ----------- ----------- ----------- ----------- Income (loss) before income taxes and extraordinary item (22,757) 16,844 (26,718) 48,505 Income tax expense (benefit) (8,827) 6,546 (10,337) 19,077 ----------- ----------- ----------- ----------- Income (loss) before extraordinary item (13,930) 10,298 (16,381) 29,428 Extraordinary item - gain on early retirement of debt, net of applicable income taxes of $186 -- -- -- 290 ----------- ----------- ----------- ----------- Net income (loss) $ (13,930) $ 10,298 $ (16,381) $ 29,718 =========== =========== =========== =========== Basic income (loss) per share before extraordinary item $ (0.28) $ 0.20 $ (0.32) $ 0.56 Extraordinary item - gain on early retirement of debt, net of income taxes - basic -- -- -- .01 ----------- ----------- ----------- ----------- Net income (loss) per share - basic $ (0.28) $ 0.20 $ (0.32) $ 0.57 ----------- ----------- ----------- ----------- Weighted average shares outstanding - basic 50,501 52,009 50,501 51,934 =========== =========== =========== =========== Diluted income (loss) per share before extraordinary item $ (0.28) $ 0.20 $ (0.32) $ 0.56 Extraordinary item - gain on early retirement of debt, net of applicable taxes - diluted -- -- -- .01 ----------- ----------- ----------- ----------- Net income (loss) per share - diluted $ (0.28) $ 0.20 $ (0.32) $ 0.57 ----------- ----------- ----------- ----------- Weighted average shares outstanding - diluted 50,501 56,186 50,501 56,263 =========== =========== =========== ===========
See Accompanying Notes to Consolidated Financial Statements. 3 5 CKE RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Twenty-eight Weeks Ended ------------------------- August 14, August 9, 2000 1999 ---------- --------- Net cash flow from operating activities: Net income (loss) $ (16,381) $ 29,718 Adjustments to reconcile net income to net cash provided by operating activities, excluding the effect of acquisitions and dispositions: Extraordinary gain on early retirement of debt -- (476) Depreciation and amortization 61,687 50,674 Loss on sale of property and equipment and capital leases 20,562 2,133 Noncash litigation settlement -- 722 Net noncash investment and dividend income -- (140) Loss (gain) on noncurrent asset and liability transactions (399) 555 Net change in receivables, inventories and other current assets and prepaid expenses (12,797) (6,025) Net change in accounts payable and other current liabilities (35,429) (20,513) --------- --------- Net cash provided by operating activities 17,243 56,648 --------- --------- Cash flow from investing activities: Purchases of: Property and equipment (58,047) (126,169) Long term investments (2,782) -- Proceeds from sale of property and equipment 66,709 9,948 Increase in notes receivable and related party receivables (10,593) (737) Collections on notes receivable and related party receivables 10,356 1,757 Net change in other assets 1,581 (1,638) Acquisitions, net of cash acquired -- (1,303) --------- --------- Net cash provided by (used in) investing activities 7,224 (118,142) --------- --------- Cash flow from financing activities: Net change in bank overdraft (4,841) 15,973 Long-term borrowings 177,000 274,000 Repayments of long-term debt (198,431) (215,004) Repayments of capital lease obligations (5,493) (3,744) Deferred financing costs (904) (10,686) Net change in other long-term liabilities (1,385) (1,179) Payment of dividends (2,084) (2,074) Exercise of stock options -- 1,459 --------- --------- Net cash provided by (used in) financing activities (36,138) 58,745 --------- --------- Net decrease in cash and cash equivalents (11,671) (2,749) Cash and cash equivalents at beginning of period 36,505 46,297 --------- --------- Cash and cash equivalents at end of period $ 24,834 $ 43,548 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 37,052 $ 22,862 Income taxes -- 14,786
See Accompanying Notes to Consolidated Financial Statements. 4 6 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 14, 2000 AND AUGUST 9, 1999 NOTE (A) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of CKE Restaurants, Inc. and its consolidated wholly-owned subsidiaries (the "Company" or "CKE") and have been prepared in accordance with generally accepted accounting principles, the instructions to Form 10-Q, and Article 10 of Regulation S-X. These statements should be read in conjunction with the audited consolidated financial statements presented in the Company's 2000 Annual Report to Stockholders. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. The results of operations for such interim periods are not necessarily indicative of results to be expected for the full year or for any other future periods. NOTE (B) LONG TERM DEBT The Company's senior credit facility, as amended, consists of a $400.0 million revolving credit facility and includes a $75.0 million letter of credit sub-facility and has a maturity date of February 2004. The facility has since been reduced, pursuant to asset sales, to approximately $312.0 million as of August 14, 2000. The senior credit facility contains a number of significant covenants that, among other things, (i) restrict the ability of the Company and its subsidiaries to incur additional indebtedness and incur liens on their assets, in each case subject to specified exceptions, (ii) impose specified financial tests as a precondition to the Company's and its subsidiaries' acquisition of other businesses and (iii) limit the Company and its subsidiaries from making capital expenditures and certain restricted payments (including dividends and repurchases of stock), subject in certain circumstances to specified financial tests. In addition, the Company is required to comply with specified financial ratios and tests, including minimum EBITDA requirements, minimum interest coverage and fixed charge coverage ratios, minimum consolidated tangible net worth requirements and maximum leverage ratios. In April 2000, the Company amended its senior credit facility effective January 31, 2000, to amend certain of the covenants contained therein and then further amended the credit facility effective August 14, 2000. The amended senior credit facility provides that the revolving commitments thereunder shall be reduced by the entire net proceeds from the sale of any of the Company's restaurants. The senior credit facility, as amended, also prohibits the Company from purchasing shares of its common stock, purchasing its senior subordinated notes or convertible notes, from prepaying subordinated indebtedness and from paying cash dividends. In addition, capital expenditures were reduced and construction of new restaurants is limited to construction already begun or committed to begin. The final maturity date remains unchanged; however, the interest rate payable on outstanding borrowings was increased. Failure to complete an asset sale or sales aggregating $150.0 million in net proceeds by the end of October 2000 will result in a further increase in the interest rate until such sales are completed. As of August 14, 2000, the Company was not in compliance with certain covenants governing its senior credit facility. The Company has received a waiver of this non-compliance through January 29, 2001. It is the Company's intention to repay outstanding borrowings on its senior credit facility with the net proceeds from its asset sales during the next twelve months. Accordingly, the total amount outstanding under the senior credit facility of $248 million as of August 14, 2000 has been classified as a current liability on the consolidated balance sheet. As of August 14, 2000, the Company had $14.7 million of borrowings available under its senior credit facility. In the event the senior credit facility is declared accelerated, the senior subordinated notes and the convertible subordinated notes may also become accelerated under certain circumstances and after all cure periods have expired. 5 7 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) NOTE (C) SENIOR SUBORDINATED NOTES On March 4, 1999, the Company completed a private placement of $200.0 million aggregate principal amount of senior subordinated notes, in which the Company received net proceeds of approximately $194.8 million, of which $190.0 million was used to repay indebtedness under the senior credit facility. The senior subordinated notes are due in May 2009, carry a 9.125% coupon rate, payable semi-annually, and are redeemable by the Company beginning on May 1, 2004. The indenture relating to the senior subordinated notes imposes restrictions on the Company's ability (and the ability of its subsidiaries) to incur additional indebtedness, pay dividends on, redeem or repurchase its capital stock, make investments, incur liens on its assets, sell assets other than in the ordinary course of business, and enter into certain transactions with its affiliates. The senior subordinated notes represent unsecured general obligations subordinate in right of payment to the Company's senior indebtedness including its senior credit facility. The Company's senior credit facility is guaranteed on a secured basis by the Company's direct and indirect subsidiaries (the "Subsidiary Guarantors"), other than non-guarantor subsidiaries which conduct no material operations, have no significant assets on a consolidated basis and account for only an insignificant share of the Company's consolidated revenues. Each of the Subsidiary Guarantors also fully and unconditionally guarantees the Company's 9.125% senior subordinated notes due 2009 on a joint and several basis. NOTE (D) CONVERTIBLE SUBORDINATED NOTES During the first quarter of fiscal 2000, the Company repurchased $3.0 million aggregate principal amount of convertible subordinated notes for $2.5 million in cash, including accrued interest thereon. The Company recognized an extraordinary gain on the early retirement of debt of $0.3 million, net of applicable income taxes of $0.2 million. To date, the Company has repurchased a total of $38.0 million aggregate principal amount of convertible subordinated notes. 6 8 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) NOTE (E) EARNINGS (LOSS) PER SHARE The Company presents "basic" earnings (loss) per share which represents net earnings (loss) divided by the weighted average shares outstanding excluding all potentially dilutive common shares and "diluted" earnings (loss) per share reflecting the dilutive effect of all potentially dilutive common shares. The following table illustrates the computation of basic and diluted earnings (loss) per share:
(In thousands except per share amounts) Twelve Weeks Ended Twenty-eight Weeks Ended ------------------------- ------------------------- August 14, August 9, August 14, August 9, 2000 1999 2000 1999 ---------- --------- ---------- --------- Basic Earnings (Loss) Per Share Income (loss) before extraordinary item $(13,930) $ 10,298 $(16,381) $ 29,428 Extraordinary item - gain on early retirement of debt, net of applicable income taxes of $186 -- -- -- 290 -------- -------- -------- -------- Net income (loss) $(13,930) $ 10,298 $(16,381) $ 29,718 ======== ======== ======== ======== Weighted average number of common shares outstanding during the period 50,501 52,009 50,501 51,934 ======== ======== ======== ======== Basic income (loss) per share before extraordinary item $ (0.28) $ 0.20 $ (0.32) $ 0.56 Extraordinary item - gain on early retirement of debt, net of applicable income taxes - basic -- -- -- 0.01 -------- -------- -------- -------- Net income (loss) per share - basic $ (0.28) $ 0.20 $ (0.32) $ 0.57 ======== ======== ======== ======== Diluted Earnings (Loss) Per Share Income (loss) before extraordinary item $(13,930) $ 10,298 $(16,381) $ 29,428 Interest expense and amortization of debt issuance costs, net of income tax effect applicable to convertible subordinated notes -- 1,049 -- 2,464 -------- -------- -------- -------- Diluted income (loss) before extraordinary item (13,930) 11,347 (16,381) 31,892 Extraordinary item - gain on early retirement of debt, net of applicable income taxes of $186 -- -- -- 290 -------- -------- -------- -------- Diluted net income (loss) $(13,930) $ 11,347 $(16,381) $ 32,182 ======== ======== ======== ======== Weighted average number of common shares outstanding during the period 50,501 52,009 50,501 51,934 Incremental common shares attributable to: Exercise of outstanding options -- 544 -- 691 Conversion of convertible subordinated notes -- 3,633 -- 3,638 -------- -------- -------- -------- Total shares 50,501 56,186 50,501 56,263 ======== ======== ======== ======== Diluted net income (loss) per share before extraordinary item (0.28) 0.20 (0.32) 0.56 Extraordinary item - gain on early retirement of debt, net of applicable income taxes - diluted -- -- -- 0.01 -------- -------- -------- -------- Net income (loss) per share - diluted $ (0.28) $ 0.20 $ (0.32) $ 0.57 ======== ======== ======== ========
7 9 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) For the 12-week periods ended August 14, 2000 and August 9, 1999, 7.0 million shares and 6.4 million shares, respectively, relating to the possible exercise of outstanding stock options, and for the 12-week period ended August 14, 2000, 3.6 million shares issuable upon conversion of convertible subordinated notes, were not included in the computation of diluted earnings (loss) per share as their effect would have been anti-dilutive. For the 28-week periods ended August 14, 2000 and August 9, 1999, 7.0 million shares and 6.2 million shares, respectively, relating to the possible exercise of outstanding stock options, and for the 28-week period ended August 14, 2000, 3.6 million shares issuable upon conversion of convertible subordinated notes, were not included in the computation of diluted earnings (loss) per share as their effect would have been anti-dilutive. NOTE (F) SEGMENT INFORMATION The Company is engaged principally in developing, operating and franchising its Carl's Jr., Hardee's and Taco Bueno quick-service restaurants, each of which are considered strategic businesses that are managed and evaluated separately. As such, the Company considers its Carl's Jr., Hardee's and Taco Bueno chains to each be a reportable segment. Management evaluates the performance of its segments and allocates resources to them based on several factors, of which the primary financial measure is segment operating income or loss. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 of Notes to Consolidated Financial Statements for the fiscal year ended January 31, 2000. Summarized financial information concerning the Company's reportable segments is shown in the following table. The "other" column includes corporate related items, results of insignificant operations and, as it relates to segment operating income or loss, income and expense not allocated to reportable segments.
TWELVE WEEKS ENDED - ------------------ CARL'S JR. HARDEE'S TACO BUENO OTHER TOTAL ----------- ----------- ----------- ----------- ----------- AUGUST 14, 2000: Revenues ................................... $ 174,497 $ 237,985 $ 23,117 $ 2,897 $ 438,496 Segment operating income (loss) ............ 12,661 (26) 1,704 (3,558) 10,781 Capital expenditures ....................... 12,798 10,634 1,310 2,283 27,025 Depreciation and amortization .............. 6,491 15,197 1,053 3,119 25,860 AUGUST 9, 1999: Revenues ................................... $ 162,740 $ 278,207 $ 21,245 $ 3,067 $ 465,259 Segment operating income (loss) ............ 17,974 13,835 2,001 (2,663) 31,147 Capital expenditures ....................... 13,788 35,953 4,936 4,309 58,986 Depreciation and amortization .............. 5,570 14,028 924 2,229 22,751
8 10 CKE RESTAURANTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued)
TWENTY-EIGHT WEEKS ENDED - ------------------------ CARL'S JR. HARDEE'S TACO BUENO OTHER TOTAL ----------- ----------- ----------- ----------- ----------- AUGUST 14, 2000: Revenues ................................... $ 399,212 $ 563,668 $ 53,388 $ 6,558 $ 1,022,826 Segment operating income (loss) ............ 30,056 1,027 3,757 (7,755) 27,085 Capital expenditures ....................... 27,112 20,271 5,369 5,295 58,047 Depreciation and amortization .............. 15,043 37,403 2,416 6,825 61,687 Total assets ............................... 372,654 1,011,540 81,723 16,515 1,482,432 AUGUST 9, 1999: Revenues ................................... $ 370,591 $ 634,437 $ 48,861 $ 7,093 $ 1,060,982 Segment operating income (loss) ............ 41,060 39,615 5,273 (7,196) 78,752 Capital expenditures ....................... 22,975 83,135 10,354 9,705 126,169 Depreciation and amortization .............. 13,355 31,247 1,946 4,126 50,674 Total assets (as of January 31, 2000) ...... 383,124 1,089,867 77,507 18,016 1,568,514
NOTE (G) STOCK REPURCHASES During the third quarter of fiscal 2000, the Company's Board of Directors authorized the re-purchase of up to five million shares of the Company's common stock on the public market. As of August 14, 2000, the Company had repurchased 1,585,000 shares of common stock for $10.4 million, at an average price of $6.53 per share. These shares are reflected as treasury stock on the consolidated balance sheet as of August 14, 2000. NOTE (H) RECENT DEVELOPMENTS In the fourth quarter of fiscal 2000, the Company recorded a store closure accrual at Hardee's of $16.3 million for 105 Hardee's restaurants to be closed during fiscal 2001. The store closure accrual relates primarily to the net present value of any remaining lease obligations after the expected closure date, net of estimated sublease income. Through the second quarter, the Company has utilized $0.5 million of this accrual. As of August 14, 2000, approximately $15.8 million remained accrued for the store closure accrual. Through the second quarter, the Company has completed the sale of 191 Hardee's restaurants, generating net cash proceeds of approximately $55.1 million. In addition, the Company has completed the sale of nine Carl's Jr. restaurants during the current fiscal year, generating net cash proceeds of approximately $5.2 million. The Company also has entered into a letter of intent to sell its Taco Bueno chain for an amount in excess of $90 million. On September 7, 2000, the Company announced the resignation of C. Thomas Thompson as President and Chief Executive Officer and the appointment of Andrew F. Puzder to replace Mr. Thompson as President and Chief Executive Officer, effective as of that date. 9 11 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENTS DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Since the end of the prior fiscal year, we have been addressing our leverage, having reduced our senior credit facility from nearly $300 million to $248 million as of the end of the second quarter. In addition, we have signed a letter of intent to sell our Taco Bueno chain for an amount in excess of $90 million. We are also progressing with our refranchising strategy whereby we are selling Hardee's restaurants to new and existing franchisees to rebalance the system to a more predominantly franchised system. These actions reinforce our strategy and intention to recover cash to reduce outstanding borrowings on the senior credit facility. This debt reduction strategy is, and will continue to be, our main focus over the next twelve months. Consolidated net income for the 12-week period ended August 14, 2000 decreased to a net loss of $13.9 million, or $(0.28) per share on a diluted basis, as compared with net income of $10.3 million, or $0.20 per share on a diluted basis, for the prior year quarter. Net income for the 28-week period ended August 14, 2000 decreased to a net loss of $16.4 million, or $(0.32) per share on a diluted basis, as compared with net income of $29.7 million, or $0.57 per share on a diluted basis for the comparable period of the prior year. Excluding the losses on restaurant sales, the net loss would have been $3.0 million, or $(0.06) per share on a diluted basis and $6.0 million, or $(0.12) per share on a diluted basis, for the 12- and 28-week periods ended August 14, 2000, respectively. The decrease in net income in the second quarter was primarily due to declining sales levels at our Hardee's restaurants, combined with the fixed nature of certain of our operating costs as well as losses on restaurant sales. On a year to date basis, increased interest expense due to higher overall debt levels also contributed to the decrease in net income. On a diluted basis, for the 12- and 28-week periods, the number of shares outstanding decreased 10.1% and 10.2%, respectively. The decrease is due primarily to reflecting our convertible subordinated notes as if they were converted into shares of our common stock in the calculation of diluted shares outstanding in the prior year periods. These shares were not included in the diluted shares outstanding calculation in the current year periods due to their anti-dilutive nature. During the second quarter of fiscal 2001, we opened seven new Carl's Jr. restaurants, sold seven to franchisees and closed one restaurant. Our franchisees opened four new restaurants. As of August 14, 2000, our Carl's Jr. system included 569 company-operated restaurants, 364 franchised restaurants and 29 international restaurants, for a system total of 962 Carl's Jr. restaurants. We also opened one new Taco Bueno restaurant in the second quarter, bringing the total of company-operated restaurants to 125. At the end of the quarter, our Hardee's system consisted of 1,132 company-operated restaurants (reflecting the closure of 16 restaurants and the sale of 191 restaurants to franchisees), 1,503 franchised restaurants (reflecting four new restaurants, 191 acquisitions from the Company and the closure of six restaurants) and 127 international restaurants, for a system total of 2,762 Hardee's restaurants. We remodeled nine company-operated Hardee's restaurants to the Star Hardee's format during the second quarter and our franchisees remodeled 36 restaurants, for a total of 772 Hardee's restaurants remodeled to the Star Hardee's format as of August 14, 2000, representing approximately 29% of the Hardee's domestic system. Star Hardee's is designed to showcase the new and improved Hardee's menu and to bring customers back to Hardee's. After testing various combinations of both brands in certain markets, we are now remodeling Hardee's restaurants to the new Star Hardee's format by installing charbroilers in the kitchens, remodeling the interior and exterior of the restaurants and installing new signage that retains the Hardee's name but shares space with the Carl's Jr. Star logo. In addition, we, along with some franchisees, are developing a limited remodel which consists primarily of the addition of a charbroiler, signage and certain interior and exterior enhancements. 10 12 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) This Quarterly Report on Form 10-Q contains forward-looking statements, which are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions; the impact of competitive products and pricing; success of operating initiatives; advertising and promotional efforts; adverse publicity; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; changes in prevailing interest rates and the availability of financing; food, labor, and employee benefit costs; changes in, or the failure to comply with, government regulations; weather conditions; construction schedules; demands placed on management and capital resources by the substantial increase in our size resulting from the acquisition of our Hardee's restaurants; changes in our integration plans for Hardee's and our expansion plans; risks that sales growth resulting from our current and future remodeling and dual-branding of restaurants and other operating strategies can be sustained at the current levels experienced; and other risks detailed in our filings with the Securities and Exchange Commission. RESULTS OF OPERATIONS Revenues from company-operated restaurants decreased $36.6 million, or 8.6%, to $386.9 million for the 12-week period ended August 14, 2000 and $55.9 million, or 5.8%, to $914.2 million for the 28-week period then ended. Carl's Jr. and Taco Bueno company-operated restaurant revenues increased by $4.6 million and $1.9 million, respectively, while Hardee's revenues from company-operated restaurants decreased by $42.9 million in the 12-week period ended August 14, 2000 as compared to the comparable prior year period. For the 28-week period ended August 14, 2000, Carl's Jr. revenues increased $15.5 million, Taco Bueno revenues increased $4.5 million and Hardee's revenues decreased $75.5 million when compared to the prior year-to-date period. The increase in the Taco Bueno and Carl's Jr. revenues was due mainly to an increase in the number of company-operated restaurants in the current year as opposed to the prior year. The decrease in Hardee's revenues for both the 12-week period and the 28-week period was due primarily to a decrease in the number of company-operated restaurants in the current year as compared to the prior year and the continuing same-store sales declines at the Hardee's company-operated restaurants, which were down 8.4% for the second quarter. Taco Bueno also experienced negative same-store sales with a decline of 2.1% for the second quarter of fiscal 2001. The company-operated Carl's Jr. restaurants, however, experienced same-store sales increases of 2.3% for the second quarter, the second consecutive quarter of same-store sales increases for the Carl's Jr. chain. Average unit volumes for the trailing 52-week period ended August 14, 2000 for our company-operated Carl's Jr., Taco Bueno and Hardee's restaurants were $1,089,000, $795,000 and $740,000, respectively. Our revenues from franchised and licensed restaurants for the 12- and 28-week periods ended August 14, 2000 increased $9.8 million, or 23.4%, to $51.6 million and $17.8 million, or 19.6%, to $108.6 million from the comparable period in the prior year. This increase was primarily due to franchise fees of $4.3 million for restaurants sold in the second quarter, as well as an increase in royalties as a result of the significant increase in the number of Hardee's franchised restaurants open and operating during the current year as opposed to the prior year. In addition, an increase in the number of franchised Carl's Jr. restaurants in the current year periods as well as an increase in commodity costs has led to an increase in food purchases from our distribution center. Restaurant-level margins for our company-operated Carl's Jr. restaurants decreased 4.1%, to 20.7%, and 2.9% to 21.3%, respectively, for the 12- and 28-week periods ended August 14, 2000, from the comparable period of fiscal 2000. As a percentage of revenues from company-operated Carl's Jr. restaurants, food and 11 13 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) packaging costs increased 0.8% and 1.0% for the 12- and 28-week period, respectively. This increase was mostly due to an increase in beef commodity prices combined with the effect of a price discounting promotion for selected sandwiches, primarily the $0.99 Spicy Chicken Sandwich. Payroll and other employee benefits increased 1.5%, to 28.1%, and 1.2%, to 27.7%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the previous year periods. This increase was primarily due to the overall tighter labor market and the increased competitive pressures in attracting and retaining qualified employees, which has led to an increasing average wage rate. In addition, we made a conscious decision to increase labor in our restaurants in an effort to maintain quality guest service. Occupancy and other operating expenses increased 1.8%, to 21.7%, and 0.7%, to 21.5%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the prior year. This increase was primarily due to an increase in electricity expense in the California units and a new restaurant employee uniform rollout during the current year. Restaurant-level margins for our company-operated Hardee's restaurants decreased 8.1%, to 7.4%, and 6.6%, to 9.6%, respectively, for the 12- and 28-week periods ended August 14, 2000, from the comparable period of fiscal 2000, primarily due to increases in food and packaging costs and occupancy and other operating expenses. Food and packaging costs at the Hardee's chain increased 2.0%, to 32.6%, and 1.4%, to 32.1%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the comparable prior year periods. This increase was attributable to increased commodity costs, combined with the effect of the discounting program involving the $0.59 Big Burger during the current year periods. Payroll and other employee benefits increased 0.9%, to 34.6%, and 1.3%, to 34.2%, respectively, for the 12- and 28-week periods ended August 14, 2000, as compared to the same periods a year ago. This increase was due to an overall tighter labor market which led to higher average wages during the current year combined with the effect of declining same-store sales. Occupancy and other operating expenses at Hardee's increased 5.2%, to 25.4%, and 4.0%, to 24.1%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to fiscal 2000. This increase was primarily due to an increase in repair and maintenance expense during the current year periods as well as an increase in depreciation as a result of new equipment being installed in the Hardee's restaurants over the past year in conjunction with the Star Hardee's remodels. Taco Bueno's restaurant-level margins decreased 2.0%, to 23.0%, and 3.4%, to 22.8%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the same periods one year ago. The primary reason for the increase was an increase in occupancy and other operating expenses which increased 2.1%, to 16.5%, and 2.1%, to 16.4%, for the 12- and 28-week period ended August 14, 2000 as compared to fiscal 2000. This was due primarily to an increase in depreciation associated with the completion of several signage projects in the current year. Food and packaging costs also increased slightly from the prior year, primarily due to an increase in certain commodity costs. Franchised and licensed restaurant costs increased $4.6 million, or 14.8%, and $12.8 million, or 19.2%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the corresponding prior year periods. This increase was primarily due to an increase in the number of Carl's Jr. restaurants open and operating during the current year which has led to higher volume in our distribution center and an increase in the number of Hardee's franchisees and licensees purchasing equipment from us. Advertising expenses decreased $5.2 million, or 18.4%, and $4.3 million, or 6.9%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the comparable periods in the prior year. This decrease was due primarily to certain one time expenditures incurred in the prior year periods. General and administrative expenses increased $1.6 million, or 5.2%, and $7.5 million, or 10.6%, respectively, for the 12- and 28-week periods ended August 14, 2000 as compared to the prior year. As a percentage of total revenues, this represents an increase of 0.8% and 1.0%, respectively, for the 12- and 28- 12 14 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) week periods ended August 14, 2000. This increase is primarily due to an increase in information technology costs associated with the maintenance of computer systems installed during the prior year as well as depreciation on those systems. Interest expense for the 12- and 28-week periods ended August 14, 2000 increased $3.1 million, or 22.7%, and $8.1 million, or 27.7%, respectively, when compared to the same periods in the prior year. This increase was due to higher levels of borrowings outstanding under our senior credit facility as well as an overall increase in interest rates. As a result of the amendment to our senior credit facility subsequent to year-end, the applicable margin used to determine our interest rate payable on outstanding borrowings was increased. Given the current rise in interest rates, we would expect our interest expense to continue to rise in future quarters even if our borrowings outstanding under our senior credit facility remain unchanged. However, we plan to mitigate the effect of higher interest rates by reducing outstanding borrowings with proceeds from sales of restaurants, which is required by the senior credit facility, as amended. Also contributing to the rise in interest expense for the 28-week period ended August 14, 2000 was the $200.0 million aggregate principal amount of 9.125% senior subordinated notes due 2009. These notes were issued during the first quarter of fiscal 2000 and, as such, the prior year 28-week period included only a partial period of interest expense while the current year included a full 28-weeks. Other income (expense), net, mainly consists of interest income, lease income, dividend income, gains and losses on sales of restaurants, income and loss on long-term investments, property management expenses and other non-recurring income and expenses. Other income (expense), net decreased $16.2 million and $15.5 million for the 12- and 28-week period ended August 14, 2000, respectively. This decrease was primarily due to the inclusion of an approximately $18 million net loss on the sale of certain Hardee's and Carl's Jr. restaurants during the current year. During the third quarter of fiscal 1999, the Board of Directors approved the buyback of up to $50.0 million aggregate principal amount of convertible subordinated notes. In the first quarter of fiscal 2000, we repurchased $3.0 million of these notes for $2.5 million in cash, including accrued interest thereon. In connection with this repurchase, we recognized an extraordinary gain on the early retirement of debt of $0.3 million, net of applicable income taxes of $0.2 million. FINANCIAL CONDITION Cash and cash equivalents decreased $11.7 million to $24.8 million in the 28-week period ended August 14, 2000. Investing activities generated $7.2 million of cash flows, primarily as a result of the sale of company-operated restaurants, offset by capital additions of $58.0 million. Financing activities absorbed $36.1 million, primarily due to net repayments on the senior credit facility during the period. Cash flows from operating and investing activities were mainly used to fund the development of Carl's Jr. restaurants and to repay $5.5 million in capital lease obligations and to pay the first scheduled semi-annual dividend payment of $2.1 million. On March 4, 1999, we completed a private placement of $200.0 million aggregate principal amount of 9.125% senior subordinated notes due 2009. We received net proceeds of $194.8 million, of which $190.0 million was used to repay outstanding term loan balances under our senior credit facility. The indenture relating to the senior subordinated notes imposes certain restrictions on our ability (and the ability of our subsidiaries) to incur indebtedness, pay dividends on, redeem or repurchase our capital stock, make investments, incur liens on our assets, sell assets other than in the ordinary course of business, or enter into certain transactions with our affiliates. The senior subordinated notes represent unsecured general obligations subordinate in right of payment to our senior indebtedness, including our senior credit facility. 13 15 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) In connection with our private placement of senior subordinated notes, we also amended and restated our senior credit facility to increase the lenders' commitments under our revolving credit facility to $500.0 million from $250.0 million (the commitment has since been amended to $400 million, subject to further reduction from asset sales). We also increased our letter of credit sub-facility to $75.0 million from $65.0 million, and changed the maturity date of the senior credit facility to February 2004. The term loan component of the senior credit facility was eliminated as a result of these transactions. Borrowings under the senior credit facility may be used for working capital and other general corporate purposes, including permitted investments and acquisitions. We are required to repay borrowings under the senior credit facility with the proceeds from (i) certain asset sales, (ii) the issuance of certain equity securities, and (iii) the issuance of additional indebtedness. Of the various options we have regarding interest rates, we have selected LIBOR plus a margin, with future margin adjustments dependent on certain financial ratios from time to time. Our senior credit facility contains the following significant covenants: - - restrictions on our ability to incur additional indebtedness, repurchase stock, pay dividends and incur liens on our assets, subject to specified exceptions; - - requirements that we satisfy specified financial tests as a precondition to our acquisition of other businesses; and In addition, we are required to comply with minimum EBITDA requirements, minimum interest coverage and fixed charge coverage ratios, minimum consolidated tangible net worth requirements and maximum leverage ratios. In April 2000, the Company amended its senior credit facility effective January 31, 2000, to amend certain of the covenants contained therein and then further amended the credit facility effective August 14, 2000. The amended senior credit facility provides that the revolving commitments thereunder shall be reduced by the entire net proceeds from the sale of any of the Company's restaurants. The senior credit facility, as amended, also prohibits the Company from purchasing shares of its common stock, purchasing its senior subordinated notes or convertible notes, from prepaying subordinated indebtedness and from paying cash dividends. In addition, capital expenditures were reduced and construction of new restaurants is limited to construction already begun or committed to begin. The final maturity date remains unchanged; however, the interest rate payable on outstanding borrowings was increased. Failure to complete an asset sale or sales aggregating $150.0 million in net proceeds by the end of October 2000 will result in a further increase in the interest rate until such sales are completed. As of August 14, 2000, the Company was not in compliance with certain covenants governing its senior credit facility. The Company has received a waiver of this non-compliance through January 29, 2001. It is the Company's intention to repay outstanding borrowings on its senior credit facility with the net proceeds from its asset sales during the next twelve months. Accordingly, the total amount outstanding under the senior credit facility of $248 million as of August 14, 2000 has been classified as a current liability on the consolidated balance sheet. As of August 14, 2000, the Company had $14.7 million of borrowings available under its senior credit facility. Our primary source of liquidity is our revenues from company-operated restaurants, which are generated in cash. Future capital needs will arise primarily for the construction of new restaurants, the remodeling of our Hardee's restaurants to the Star Hardee's format and the conversion of restaurants to the Carl's Jr./Green Burrito dual-brand concepts. 14 16 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) It is our intention to rebalance our company so that we will have a larger proportion of franchised restaurants rather than company-operated restaurants. We are planning to sell up to 500 Hardee's restaurants to existing and new franchisees during fiscal 2001, which should generate net proceeds to the company of approximately $200.0 million. We intend to condition such sales upon the purchasers' agreement to perform additional development with respect to the purchased restaurants, including the Star Hardee's remodeling, and upon the execution of royalty agreements providing for full royalties at four percent of net sales. The net proceeds from these asset sales will be used to repay outstanding borrowings under our senior credit facility. In addition, we have significantly reduced our capital expenditures in the current year, a step which will help us accomplish our strategic goal of reducing our leverage. In the current fiscal year, the company has completed the sale of 191 Hardee's restaurants, generating net cash proceeds of approximately $55.1 million. The quick-service restaurant business generally receives simultaneous cash payment for sales. We presently use the net cash flow from operations to repay outstanding indebtedness and to reinvest in long-term assets, primarily for the remodeling and construction of restaurants. Normal operating expenses for inventories and current liabilities generally carry longer payment terms (usually 15 to 30 days). As a result, we typically maintain current liabilities in excess of current assets. We believe that cash generated from our various restaurant operations, along with cash and cash equivalents on hand as of August 14, 2000, and amounts available under our senior credit facility, will provide the funds necessary to meet all of our capital spending and working capital requirements for the foreseeable future. As of August 14, 2000, we had $14.7 million of borrowings available to us under our senior credit facility. If those sources of capital, together with net proceeds from sales of restaurants, are insufficient to satisfy our capital spending and working capital requirements, we may be required to sell additional restaurants or obtain additional credit facilities. In addition, substantially all of the real properties we own and use for our restaurant operations are unencumbered and could be used by us as collateral for additional debt financing or could be sold and subsequently leased back to us. In the event that our Hardee's restaurants continue to show declines in same-store sales or our Carl's Jr. restaurants begin to experience declines in same-store sales, and if we are unable to generate proceeds from the sale of restaurants at prices and on terms sufficient to service our senior credit facility, we may need to refinance all or a portion of our indebtedness on or before maturity in order to avoid a short and long term liquidity shortage. The availability of capital sources will depend upon prevailing market conditions, interest rates and our then-existing financial position. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and hedging activities. SFAS 133, as amended by SFAS 137 and SFAS 138, is effective for all fiscal quarters of fiscal years beginning after December 15, 2000. The Company has not determined whether the application of this accounting standard will have a material impact on its financial position, results of operations or liquidity. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB101"). This Staff Accounting Bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. SAB101, as amended, is effective for the fourth fiscal quarter of the fiscal year beginning after December 15, 1999. The adoption of SAB101 is not expected to have a material impact on the Company's consolidated financial position or results of operations. In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation - an Interpretation of APB Opinion No. 25" ("FIN 44"). This Interpretation clarifies the definition of employee for purpose of applying Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," the criteria for determining whether a plan qualifies as a noncompensatory plan, the accounting consequence of various modifications to the terms of a previously fixed stock option or award, and the accounting for an exchange of stock compensation awards in a business combination. This Interpretation is effective July 1, 2000, but certain conclusions in this Interpretation cover specific events that occur after either December 15, 1998, or January 12, 2000. The impact of FIN 44 is not expected to have a material effect on the Company's consolidated financial position or results of operations. YEAR 2000 We have addressed the potential business risks associated with the Year 2000. The Year 2000 issue involved the use of a two-digit year field instead of a four-digit year field in computer systems. If computer systems cannot distinguish between the year 1900 and the year 2000, system failures or other computer errors could result. To date, we are not aware of the occurrence of any significant Year 2000 problems being reported. Some business risks associated with the Year 2000 issue may remain throughout 2000. However, it is not anticipated that future Year 2000 issues, if any, will have a material adverse effect on us. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our principal exposure to financial market risks is the impact that interest rate changes could have on our $400.0 million senior credit facility, of which $248.0 million remained outstanding as of August 14, 2000. Borrowings under our senior credit facility bear interest at the prime rate or at LIBOR plus an applicable margin based on certain financial ratios (averaging 9.1% in fiscal 2001). A hypothetical increase 15 17 CKE RESTAURANTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS AUGUST 14, 2000 AND AUGUST 9, 1999 (Continued) of 100 basis points in short-term interest rates would result in a reduction of approximately $2.5 million in annual pre-tax earnings. The estimated reduction is based upon the outstanding balance of our senior credit facility and assumes no change in the volume, index or composition of debt at August 14, 2000. Substantially all of our business is transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations have never had a significant impact on us and are not expected to in the foreseeable future. Commodity Price Risk We purchase certain products which are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. Although many of the products purchased are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. Typically we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to address commodity cost increases which are significant and appear to be long-term in nature by adjusting our menu pricing or changing our product delivery strategy. However, increases in commodity prices could result in lower restaurant-level operating margins for our restaurant concepts. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders of CKE Restaurants, Inc. was held on June 13, 2000, for the purpose of electing certain members of the board of directors and approving an amendment to the CKE Restaurants, Inc. 1999 Stock Incentive Plan. Management's nominees for directors, whose term expired as of the date of the Annual Meeting, were elected by the following vote:
Shares Voted Authority to Vote "For" "Withheld" ------------ ----------------- William P. Foley II 33,332,259 13,856,157 Carl N. Karcher 33,426,358 13,762,058
The following individuals continue to serve on the board of directors: Byron Allumbaugh, Carl L. Karcher, Frank P. Willey, Peter Churm, Daniel D. Lane and C. Thomas Thompson. The proposal to approve an amendment to the CKE Restaurants, Inc. 1999 Stock Incentive Plan received the following votes:
Votes Percentage ---------- ------------ Shares Voted "For" 28,271,162 59.91% Shares Voted "Against" 18,718,722 39.67% Shares Voted "Abstain" 198,532 0.42%
16 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.34 Amendment to Employment Agreement dated as of September 6, 2000 by and between the Company and C. Thomas Thompson 10.35 Amendment No. 2 to Third Amended and Restated Credit Agreement and Limited Waiver dated September 28, 2000 by and between the Company and BNP Paribas, as Agent for the Lenders 12.1 Computation of Ratios 27.1 Financial Data Schedule (included only with electronic filing) (b) Current Reports on Form 8-K: None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CKE RESTAURANTS, INC. (Registrant) September 28, 2000 /s/ Carl A. Strunk ------------------ ----------------------------------- Date Executive Vice President, Chief Financial Officer 17 19 EXHIBIT INDEX
Exhibit # Description - --------- ----------- 10.34 Amendment to Employment Agreement dated as of September 6, 2000 by and between the Company and C. Thomas Thompson 10.35 Amendment No. 2 to Third Amended and Restated Credit Agreement and Limited Waiver dated September 28, 2000 by and between the Company and BNP Paribas, as Agent for the Lenders 12.1 Computation of Ratios 27.1 Financial Data Schedule (included only with electronic filing)
18 EX-10.34 2 a65883ex10-34.txt EXHIBIT 10.34 1 EXHIBIT 10.34 AMENDMENT TO EMPLOYMENT AGREEMENT This Amendment to Employment Agreement ("Amendment"), dated as of September 6, 2000, is entered into by and between CKE RESTAURANTS, INC., a Delaware corporation (the "Company") and C. THOMAS THOMPSON (the "Employee"). WITNESSETH: WHEREAS, the parties hereto made and entered into a written Employment Agreement effective as of April 9, 1999 (the "Agreement"); WHEREAS, the parties hereto desire, and it is in the best interest of each party, to amend the Agreement; NOW, THEREFORE, in consideration of the promises and the mutual covenants and obligations hereinafter set forth, the parties agree as follows: 1. Paragraph 1, Employment and Duties, is amended to change Employee's title to Assistant to the Chief Executive Officer. Employee is not required to devote full time to the business affairs of the Company. 2. Paragraph 2, Term, is amended to reduce the Employment Term. Employee's employment with the Company shall terminate on January 31, 2001. 3. Paragraph 3, Salary, is amended as follows: "Commencing September 6, 2000, and subject to the other provisions of this Amendment, the Company shall pay the Employee a minimum base annual salary of $250,000." 4. Except as specifically set forth above, the Agreement and the terms and conditions thereof, will remain in full force and effect. From and after the date of execution of this Amendment, all references to the Agreement shall be deemed to be references to the Agreement as amended hereby. IN WITNESS WHEREOF, the parties have executed this Amendment on the day and year first above written. CKE RESTAURANTS, INC. EMPLOYEE - ----------------------------------- ----------------------------------- By: C. Thomas Thompson Its: EX-10.35 3 a65883ex10-35.txt EXHIBIT 10.35 1 EXHIBIT 10.35 AMENDMENT NO. 2 --------------- TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT AND LIMITED WAIVER This AMENDMENT NO. 2 TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT AND LIMITED WAIVER (this "Amendment") is entered into as of September 28, 2000, among CKE Restaurants, Inc., the Lenders and BNP Paribas, a bank organized under the laws of France acting through its Chicago branch (as successor in interest to Paribas), as Agent. RECITALS CKE Restaurants, Inc., a Delaware corporation (the "Borrower"), certain financial institutions (the "Lenders") and Paribas, as agent for the Lenders (in such capacity, the "Agent") are parties to that certain Third Amended and Restated Credit Agreement, dated as of November 24, 1999, as amended by that certain Amendment No.1 to Third Amended and Restated Credit Agreement, dated as of April 26, 2000 (as heretofore amended or otherwise modified, the "Credit Agreement"). The Borrower has requested that the Agent and the Lenders amend and grant waivers with respect to certain provisions of the Credit Agreement, all as more fully described herein. The Agent and the Lenders have agreed to grant such amendments and waivers upon the terms and conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement, as amended hereby. 2 Section 2. Amendments to the Credit Agreement. Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as follows: (a) Section 1.1 of the Credit Agreement is hereby amended by: (1) deleting, in its entirety, each reference to "$125 million" contained in subsection (c) of the definition of "Applicable Margin" appearing in such Section and replacing each such reference with a reference to "$150 million," (2) deleting, in their entirety, the definitions of "50% Mandatory Prepayment," "Paydown Amount," "Paydown Condition" and "Reduction Amount" appearing in such Section, and (3) adding the following new definitions to such Section in proper alphabetical order: "Financial Advisor" has the meaning set forth in Section 10.11. "Retail Period" means any of the thirteen consecutive four week or five week periods used by the Borrower for accounting purposes which begin on or about the Tuesday after the last Monday in January of each year and ending on the last Monday in January of the next year. (b) Section 2.12 of the Credit Agreement is hereby amended by (1) amending and restating, in its entirety, subsection (a) thereof to read as follows: (a) Within ten (10) days of each date that any Loan Party receives any Liquidating Distribution and, subject to the provisos to Section 2.12(b), within ten (10) days of each date that the Borrower or any of its Subsidiaries receives any Net Sale Proceeds from consummation of any Asset Disposition (excluding any Sale and Leaseback Transaction of the Borrower or any of its Subsidiaries permitted pursuant to Section 2 3 7.13(a)), the Borrower shall prepay the outstanding Loans in an amount equal to 100% of the amount of such Liquidating Distribution or Net Sale Proceeds, as the case may be, in accordance with the provisions of Section 2.13. and (2) amending and restating, in its entirety, subsection (b) thereof to read as follows: (b) Within ten (10) days of each date that the Borrower or any of its Subsidiaries receives any Net Sale Proceeds from the consummation of any Asset Disposition that constitutes the sale portion of a Sale and Leaseback Transaction permitted pursuant to Section 7.13(a) ("Sale-Leaseback Proceeds"), which when combined with the Sale-Leaseback Proceeds from all such Asset Dispositions occurring after the date hereof exceeds $25,000,000, the Borrower shall prepay the outstanding Loans in an amount equal to 100% of the amount of such Sale-Leaseback Proceeds in accordance with the provisions of Section 2.13; provided, however, that (i) if the Borrower has chosen to apply any part of the first $25,000,000 of Sale-Leaseback Proceeds to permanently prepay the outstanding Loans and concurrently reduce the Revolving Commitments, then the Borrower or the applicable Subsidiary may, subject to clause (ii) of this provisio, retain a dollar for dollar amount of the next Net Sale Proceeds (including Sale-Leaseback Proceeds) received from any Asset Disposition up to $25,000,000 and (ii) any Net Sale Proceeds retained by the Borrower or any Subsidiary (whether constituting all or a portion of the first $25,000,000 of Sale-Leaseback Proceeds or all or a portion of the amounts referred to in clause (i) of this proviso) that are not used within three hundred sixty (360) days after receipt thereof by the Borrower or such Subsidiary to reinvest in its respective business in non-current assets as permitted by the terms of this Agreement shall be used to prepay the 3 4 outstanding Loans in accordance with Section 2.13; provided, further, that if an Event of Default shall have occurred and be continuing on the date any Net Sale Proceeds referred to in this Section 2.12(b) are received by the Borrower or any of its Subsidiaries (or, in the case of the foregoing clause (ii), at any time during such three hundred sixty day period), then the Borrower shall prepay the outstanding Loans in an amount equal to 100% of such Net Sale Proceeds (or, if any portion of such proceeds shall have been reinvested prior to the occurrence of such Event of Default, 100% of such remaining amount of Net Sale Proceeds not so reinvested) on the later of the date such Net Sale Proceeds are received by the Borrower or any of its Subsidiaries or the date of the occurrence of such Event of Default in accordance with the provisions of Section 2.13. and (3) deleting, in its entirety, each reference to "this Section 2.12(b)" contained in subsection (c) thereof and replacing each such reference with a reference to "this Section 2.12(c)." (c) Section 2.13 of the Credit Agreement is hereby amended by deleting, in its entirety, each reference to "Section 2.12(a)(ii)(B)" contained in subsections (a) and (b) thereof and replacing each such reference with a reference to "Section 2.12." (d) Section 6.1 of the Credit Agreement is hereby amended by (1) renumbering subsection (l) thereof to be subsection (m) and (2) adding a new subsection (l) to read as follows: (l) Officer's Certificates and Income Statements relating to Retail Periods. Within 30 days after the close of each Retail Period of the Borrower, a certificate of the chief financial officer of the Borrower which certifies that such officer has reviewed the terms of the Loan Documents and has made, or caused to be made under his or her supervision, a review in reasonable detail of the business and condition of the Bor- rower and its Subsidiaries during such Retail Period, 4 5 and that as a result of such review such officer has concluded that no Default or Event of Default has occurred during the period commencing at the beginning of such Retail Period and ending on the date of such certificate or, if any Default or Event of Default has occurred, specifying the nature and extent thereof and, if continuing, the action the Borrower proposes to take in respect thereof. Such certificate shall set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Section 7.1(d) during and as at the end of such Retail Period (including, without limitation, calculations of Consolidated EBITDA, consolidated depreciation and consolidated amortization of the Borrower and its Subsidiaries for such Retail Period) and shall be accompanied by a consolidated statement of income for the Borrower and its Subsidiaries for such Retail Period. (e) Section 6.2 of the Credit Agreement is hereby amended by amending and restating, in its entirety, the second sentence of such Section to read as follows: The Borrower shall, and shall cause each of its Subsidiaries to, permit the officers and designated representatives of any Lender or the Financial Advisor to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, and to examine the books of record and account of the Borrower or any of its Subsidiaries and discuss the affairs, finances and accounts of the Borrower or any of its Subsidiaries, with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable notice and at such reasonable times as such Lender or, in the case of the Financial Advisor, the Agent may desire; provided that no such prior notice shall be required if an Event of Default has occurred and is continuing. 5 6 (f) Section 6.13 of the Credit Agreement is hereby amended by amending and restating, in its entirety, such Section to read as follows: Section 6.13 Additional Collateral. If the Borrower and its Subsidiaries have not received an aggregate amount of Net Sale Proceeds of (a) at least $30,000,000 for Asset Dispositions (including the sale portion of Sale and Leaseback Transactions permitted by Section 7.13(a), but only if the Borrower has used the Net Sale Proceeds therefrom to prepay outstanding Loans and concurrently reduce the Revolving Loan Commitments by a corresponding amount) consummated from September 20, 2000 through November 30, 2000 and (b) $90,000,000 for Asset Dispositions (including the sale portion of Sale and Leaseback Transactions permitted by Section 7.13(a), but only if the Borrower has used the Net Sale Proceeds therefrom to prepay outstanding Loans and concurrently reduce the Revolving Loan Commitments by a corresponding amount) consummated from September 20, 2000 through December 20, 2000 and (c) $150,000,000 for Asset Dispositions (including the sale portion of Sale and Leaseback Transactions permitted by Section 7.13(a), but only if the Borrower has used the Net Sale Proceeds therefrom to prepay outstanding Loans and concurrently reduce the Revolving Loan Commitments by a corresponding amount) consummated from September 20, 2000 through January 29, 2001, then, the Agent may (and shall at the direction of the Required Lenders) request, and the Borrower shall, and shall cause each of its Subsidiaries to, promptly use its best efforts to promptly execute and deliver to the Agent such security agreements, pledge agreements, mortgages, leasehold mortgages and other agreements, instruments, documents and opinions as the Agent shall request, each in form and substance satisfactory to the Agent, granting to the Agent, for the benefit of the Lenders, a valid and perfected, first priority secu- 6 7 rity interest in such assets and property of the Bor rower and such Subsidiaries. (g) Section 7.1 of the Credit Agreement is hereby amended by (1) amending and restating, in its entirety, subsection (d) thereof to read as follows: (d) Minimum Consolidated EBITDA. The Borrower shall not permit Adjusted Consolidated EBITDA of the Borrower for the period of four consecutive fiscal quarters (or, commencing on November 7, 2000, the period of thirteen consecutive Retail Periods) of the Borrower (taken as one accounting period) as determined on the last day of each fiscal quarter (or, commencing on November 7, 2000, the last day of each Retail Period) of the Borrower ending during each period set forth below, minus the amount of any EBITDA Adjustments as of the date of determination, to be less than the amount set forth opposite such period:
Period Amount ------ ------ Second A&R Closing Date through November 1, 1999 $200,000,000 November 2, 1999 through January 31, 2000 $175,000,000 February 1, 2000 through May 22, 2000 $155,000,000 May 23, 2000 through August 14, 2000 $160,000,000 August 15, 2000 through November 6, 2000 and each Retail Period thereafter $133,000,000
provided, however, that the amount set forth opposite such period shall be reduced by the EBITDA Adjustments as of the date of determination attributable to those Restaurants sold (excluding those sold during the period from November 2, 1999 through January 31, 2000) pursuant to which the Net Sale Proceeds from 7 8 such sales have been applied to permanently reduce the Commitments of the Lenders on or before the 45th calendar day following the end of the fiscal quarter in which such Restaurants were sold. and (2) deleting, in its entirety, the reference to "$120,000,000" contained in the first sentence of subsection (f) thereof and replacing such reference with a reference to "$90,000,000." (h) Section 7.5 (a) of the Credit Agreement is hereby amended by amending and restating, in its entirety, clause (ii) thereof to read as follows: (ii) the purchase price for such asset shall be paid to the Borrower or such Subsidiary solely in cash, Cash Equivalents or non-cash consideration in the form of promissory notes, provided that, in the case of non-cash consideration received in the form of promissory notes, (A) such consideration shall not exceed 10% of the aggregate purchase price for such asset (or 20% of the aggregate purchase price for such asset if such asset consists of the assets or business of one or more Restaurants being operated under the Hardee's concept), (B) such promissory notes shall mature no later than 3 years after the date of issuance, (C) such promissory notes shall be pledged to the Agent, for the benefit of the Lenders, pursuant to a pledge agreement in form and substance satisfactory to the Agent, (D) all payments of principal, interest and other amounts payable under such promissory notes and that are received by the Borrower or such Subsidiary shall be applied to prepay the outstanding Loans in accordance with Section 2.12(a) hereof and (E) the aggregate principal amount of all promissory notes received as consideration for all asset sales permitted under this Section 7.5(a) shall not exceed $50,000,000 at any one time outstanding. 8 9 (i) Section 7.7(b) of the Credit Agreement is hereby amended by deleting, in its entirety, clause (ii) thereof and renumbering clause (iii) thereof to be clause (ii). (j) Section 7.13(a) of the Credit Agreement is hereby amended by deleting, in their entirety, clauses (1) and (2) of the proviso to such Section and renumbering clauses (3), (4), (5) and (6) of such proviso to be clauses (1), (2), (3) and (4), respectively. (k) Section 10.1 of the Credit Agreement is hereby amended by inserting the phrase ", the Financial Advisor" immediately after the word "Agent" appearing in the first line of subsection (c) thereof. (l) Section 10.11 of the Credit Agreement is hereby amended by amending and restating, in its entirety, such Section to read as follows: Section 10.11 Financial Advisor. The Borrower and each Lender agrees and acknowledges that the Agent may, in its sole discretion, from time to time retain a financial advisor (the "Financial Advisor") for the purpose of advising the Agent and the Lenders as to the financial condition of the Borrower and its Subsidiaries and such other matters related to the facility provided and contemplated hereunder as the Agent and the Lenders may desire. The Borrower agrees to pay all reasonable fees, costs and out-of-pocket expenses of the Financial Advisor in connection with the performance of its duties under this Section 10.11 and to indemnify the Financial Advisor in accordance with Section 10.1(c) hereof. Section 3. Limited Waiver. Subject to the terms and conditions set forth herein, (i) the Agent and the Lenders hereby waive any Default or Event of Default arising solely as a result of the failure of the Borrower to comply with the terms of Section 7.1(d) of the Credit Agreement for the period commencing on May 23, 2000 and ending on August 14, 2000 and (ii) for the period commencing on August 14, 2000 and ending on January 29, 2001, the Agent and the Lenders hereby waive compliance by the Borrower with the requirements of subsections (a), (b), (c), (e) and (g) of Section 7.1 of the Credit Agreement; provided, however, that each of the foregoing 9 10 waivers shall cease to be effective (a) on November 30, 2000 if the Borrower and its Subsidiaries have not received an aggregate amount of Net Sale Proceeds (including Net Sale Proceeds received as a result of any Asset Disposition that constitutes the sale portion of a Sale and Leaseback Transaction permitted pursuant to Section 7.13(a) of the Credit Agreement but only if the Borrower has used the Net Sale Proceeds therefrom to prepay outstanding Loans and concurrently reduce the Revolving Loan Commitments by a corresponding amount) of at least $30,000,000 during the period from September 20, 2000 to November 30, 2000 and (b) in any event, on January 29, 2001. Upon expiration of the waiver provided in this Section 3, the Agent and the Lenders shall have the right to reinstate, as of the date of its first occurrence, any Default or Event of Default that arose or would have arisen but for such waiver as a result of the Borrower's failure to comply with the requirements of the Sections of the Credit Agreement referred to in this Section 3. Section 4. Representations and Warranties. The Borrower represents and warrants to the Agent and the Lenders, as of the date hereof, that after giving effect to this Amendment: (a) no Default or Event of Default has occurred and is continuing; and (b) all of the representations and warranties of the Borrower and each other Loan Party contained in the Transaction Documents are true and correct. Section 5. Conditions to Effectiveness of this Amendment. Upon satisfaction of the following conditions precedent, this Amendment shall immediately become effective as of August 14, 2000: (a) The Agent shall have received a counterpart to this Amendment, duly executed and delivered by the Borrower and each of the Required Lenders; (b) The Agent shall have received a certificate of a duly authorized officer of the Borrower certifying as to matters set forth in Section 4 of this Amendment; and (c) The Agent shall have received a side letter from the Borrower, duly executed and delivered by the Borrower and relating to the payment of an amendment fee. 10 11 Section 6. Miscellaneous. (a) Effect; Ratification. The amendments and waivers set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written, and shall not be deemed to (1) be a consent to any amendment, waiver or modification of any other term or condition of any Transaction Document or of any other instrument or agreement referred to therein, except as set forth herein, or (2) prejudice any right or remedy that the Agent or any Lender may now have or may have in the future under or in connection with the Credit Agreement, as amended hereby, or any other instrument or agreement referred to therein. Each reference in the Credit Agreement to "this Agreement," "herein," "hereof" and words of like import and each reference in the other Transaction Documents to the "Credit Agreement" shall mean the Credit Agreement as amended hereby. For the avoidance of doubt, each reference in the Credit Agreement, as amended hereby (including each reference contained in Section 2 of this Amendment) to "the date hereof" shall mean and be a reference to November 24, 1999. This Amendment shall be construed in connection with and as part of the Credit Agreement and all terms, conditions, representations, warranties, covenants and agreements set forth in the Credit Agreement and each other instrument or agreement referred to therein, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect. (b) Expenses and Fees. Notwithstanding anything contained in the Credit Agreement, as amended hereby, or any other Transaction Document and in addition to any fees and expenses required to be paid by the Borrower thereunder, the Borrower agrees to pay all costs, fees and expenses incurred by the Agent in connection with the preparation, execution and delivery of this Amendment (including the reasonable fees and expenses of counsel to the Agent). (c) Counterparts. This Amendment may be executed in any number of counterparts, each such counterpart constituting an original and all of which when taken together shall constitute one and the same instrument. (d) Severability. Any provision contained in this Amendment that is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the operation, enforceability or validity of the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of such provision in any other jurisdiction. 11 12 (e) GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS. [SIGNATURE PAGES FOLLOW] 12 13 IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written. CKE RESTAURANTS, INC. By: ------------------------------------ Print Name: Title: BNP PARIBAS (as successor in interest to PARIBAS), as Agent and as a Lender By: ------------------------------------ Print Name: Title: By: ------------------------------------ Print Name: Title: ARAB BANKING CORPORATION By: ------------------------------------ Print Name: Title: By: ------------------------------------ Print Name: Title: 14 BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. By: ------------------------------------ Print Name: Title: By: ------------------------------------ Print Name: Title: BANK LEUMI USA By: ------------------------------------ Print Name: Title: BANK UNITED By: ------------------------------------ Print Name: Title: FLEET NATIONAL BANK (f/k/a BANKBOSTON, N.A.) By: ------------------------------------ Print Name: Title: 15 CALIFORNIA BANK & TRUST (f/k/a SUMITOMO BANK OF CALIFORNIA) By: ------------------------------------ Print Name: Title: CENTURA BANK By: ------------------------------------ Print Name: Title: CHANG HWA COMMERCIAL BANK, LTD., NEW YORK BRANCH By: ------------------------------------ Print Name: Title: 16 CREDIT INDUSTRIEL ET COMMERCIAL(f/k/a COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE) By: ------------------------------------ Print Name: Title: AMSOUTH BANK (successor in interest by merger to FIRST AMERICAN NATIONAL BANK) By: ------------------------------------ Print Name: Title: FIRST BANK & TRUST By: ------------------------------------ Print Name: Title: FIRST UNION NATIONAL BANK By: ------------------------------------ Print Name: Title: 17 MANUFACTURERS BANK By: ------------------------------------ Print Name: Title: NATIONAL BANK OF KUWAIT By: ------------------------------------ Print Name: Title: By: ------------------------------------ Print Name: Title: THE SANWA BANK, LIMITED By: ------------------------------------ Print Name: Title: SUNTRUST BANK (f/k/a/ SUNTRUST BANK, NASHVILLE, N.A.) By: ------------------------------------ Print Name: Title: 18 UMB BANK, N.A. By: ------------------------------------ Print Name: Title: U.S. BANK NATIONAL ASSOCIATION By: ------------------------------------ Print Name: Title: WELLS FARGO BANK By: ------------------------------------ Print Name: Title: 19 OFFICER'S CERTIFICATE I,__________________, am the _________________ of CKE Restaurants, Inc. I execute and deliver this Officer's Certificate dated as of September ___, 2000, on behalf of the Borrower pursuant to Section 5 of the Amendment No. 2 and Limited Waiver to Third Amended and Restated Credit Agreement (the "Amendment") by and among CKE Restaurants, Inc. (the "Borrower"), the Lenders party thereto and Paribas, acting in its capacity as agent for the Lenders (the "Agent"). Capitalized terms used but not defined herein shall the respective meanings specified in the Amendment. I hereby certify, on behalf of the Borrower, after giving effect to the Amendment, that (a) no Default or Event of Default has occurred and is continuing and (b) all of the representations and warranties of the Borrower and each other Loan Party contained in the Transaction Documents are true and correct as of the date hereof. CKE RESTAURANTS, INC. By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- EX-12.1 4 a65883ex12-1.txt EXHIBIT 12.1 1 EXHIBIT 12.1 CKE RESTAURANTS, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in thousands)
Twenty-eight Weeks Ended ------------------------- August 14, August 9, 2000 1999 ---------- --------- Earnings before fixed charges: Income before income taxes and extraordinary item ......................... $(26,718) $ 48,405 Fixed charges .................................... 54,116 45,211 -------- -------- $ 27,398 $ 93,716 ======== ======== Fixed charges: Interest expense ............................. $ 37,245 $ 29,170 Interest component of rent expense (1) ....... 16,871 16,041 -------- -------- $ 54,116 $ 45,211 ======== ======== Ratio of earnings to fixed charges ............... 0.5x 2.1x ======== ========
- ---------- (1) Calculated as one-third of total rent expense 19 EX-27.1 5 a65883ex27-1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CKE RESTAURANTS, INC. CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AS OF AND FOR THE 28-WEEKS ENDED AUGUST 14, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED AUGUST 14, 2000. 1,000 6-MOS JAN-29-2001 FEB-1-2000 AUG-14-2000 24,834 0 58,413 0 23,313 122,612 1,328,193 357,005 1,482,432 419,965 359,225 0 0 521 526,771 1,482,432 914,225 1,022,826 780,508 995,741 (16,558) 0 37,245 (26,718) (10,337) (16,381) 0 0 0 (16,381) (0.32) (0.32)
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