CKE Restaurants, Inc. (Form: 8-K)

CKE RESTAURANTS^® MAINTAINS PROFITABILITY DESPITE CHALLENGING ENVIRONMENT AND
SOFTNESS IN SAME-STORE SALES
— Second Quarter Company-Operated Restaurant-Level Margin Remains Steady at 19.3%—

CARPINTERIA, Calif. — September 16, 2009 — CKE Restaurants, Inc. (NYSE:CKR) announced today second quarter results and the filing of its Report on Form 10-Q with the Securities and Exchange Commission (“SEC”) for the twelve weeks ended August 10, 2009.


	Second Quarter
($ in millions, except per share amounts)	FY 2010			FY 2009
Company-Operated Blended Same-Store Sales		-4.6	%		+ 3.6	%
Company-Operated Restaurant-Level Margin ⁽¹⁾		19.3	%		19.3	%
Total Revenue	$	336.0		$	352.5
Operating Income	$	22.2		$	22.9
Net Income	$	12.3		$	12.3
Diluted EPS	$	0.22		$	0.23
Adjusted EBITDA ⁽²⁾	$	43.0		$	41.0
Diluted EPS, excluding mark-to-market adjustments⁽³⁾	$	0.21		$	0.20
Effective Tax Rate		40.3	%		41.3	%

(1) We define company-operated restaurant-level margin as restaurant-level income divided by company-operated restaurants revenue. Restaurant-level income is company-operated restaurants revenue less restaurant operating costs, which are the expenses incurred directly by our company-operated restaurants in generating revenues and do not include advertising costs, general and administrative expenses or facility action charges. Restaurant-level margin is influenced by factors such as fluctuations in food and labor costs, price increases, the effectiveness of our advertising and marketing initiatives and product mix.
(2) Excludes interest expense, depreciation and amortization, facility action charges, share-based compensation expense, and income tax expense.
(3) Diluted earnings per share, excluding mark-to-market adjustments (and related income tax effect at our marginal tax rate of 38.3%) related to our interest rate swap agreements.

“I am pleased we held net income and restaurant level margins constant with the prior year in such a difficult sales environment, even as we absorbed a $2.1 million or 100 basis point increase in depreciation primarily as the result of our ongoing remodel program. We also increased Adjusted EBITDA by nearly $2 million, or approximately 5 percent. Our focus on premium quality products, our successful cost management and favorable commodity pricing drove our performance for the quarter,” said Andrew F. Puzder, chief executive officer. “We continue to take aggressive steps to drive same-store sales while maintaining profitability. We are particularly excited about our new advertising campaigns designed to change people’s misperceptions about our value-for-the-money, including our campaign in support of The Big Carl™ and, more recently, The Big Hardee™ introductions. These campaigns highlight to consumers the substantial value our brands offer in comparison to the competitor that many view as the value leader in the industry.”

•

The Company increased Adjusted EBITDA nearly $2 million, or 4.7%, to $43.0 million from $41.0 million in the prior year. For the trailing 13 periods ended August 10, 2009, the Company generated Adjusted EBITDA of $169.3 million.

•

Company-operated restaurants maintained their restaurant-level margin at 19.3% of company-operated restaurant revenue. Although depreciation increased 100 basis points, aggressive management of labor costs and decreased commodity costs offset the depreciation primarily associated with recent remodeling.

•

Operating income was $22.2 million, or 6.6% of total revenue compared to $22.9 million, or 6.5% of revenue in the same quarter of the prior year.

•

The Company remodeled 8 Carl’s Jr.^® and 25 Hardee’s^® restaurants and completed a combined 6 dual-branded Green Burrito^® and Red Burrito^® restaurant conversions during the quarter.

•

Despite the capital expenditures required for our ongoing remodel program, the company reduced its bank and other long-term debt by $25.0 million on a year-to-date basis to $289.8 million. As of August 10, 2009 the Company’s leverage ratio was 2.14.

•

Carl’s Jr. and Hardee’s increased their system-wide unit count by 24 restaurants year-to-date for a consolidated total of 3,140.

•

Carl’s Jr. company-operated same-store sales declined 6.1% as a result of the particularly weak economy in California. On a two-year basis, same-store sales decreased 2.3%. Restaurant-level margin remained flat to prior year at 20.7 percent of company-operated restaurants revenue despite an increase in occupancy and other expense, which includes an 80 basis point increase in depreciation related to the ongoing remodeling program, new restaurant openings and equipment upgrades. Reductions in commodity costs for beef, cheese, oil and produce products offset the increase in occupancy and other expense. Aggressive management of labor costs and a favorable adjustment to workers’ compensation reserves caused labor costs to be flat with the prior year.

•

Hardee’s same-store sales decreased 2.7% also due to weak economic conditions. On a two-year basis, same-store sales increased 0.6%. Company-operated restaurant-level margin was 17.6 percent of company-operated restaurants revenue and remained consistent with prior year despite an increase in depreciation expense of 120 basis points related to the ongoing remodeling program and equipment upgrades. Lower commodity costs for beef, cheese, flour and oil products offset the depreciation increases. Hardee’s also decreased labor costs by 30 basis points in the second quarter as compared to the same quarter of the prior year.

The Company will host a conference call and webcast on September 17, 2009, at 6:00 a.m. PDT/ 9:00a.m. EDT to review these results and discuss the Company’s growth plans. The Company invites investors to listen to the live webcast of the conference call at www.ckr.com under “Investors.” The dial in information is (617) 213-8838. The access code is 86163618.

The Company’s filings with the SEC are available to investors at www.ckr.com under “Investors/SEC Filings.”

Adjusted EBITDA is a non-GAAP measure used by our lenders as an indicator of earnings available to service debt, fund capital expenditures and for other corporate uses. Our maximum annual capital expenditures are limited by our senior credit facility, based on a sliding scale driven by our Adjusted EBITDA. Management internally utilizes various financial measures, excluding mark-to-market adjustments, to evaluate and compare our operating results between periods. We believe that diluted net income and earnings per share, excluding such adjustments, are important metrics to consider in evaluating company performance. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

Headquartered in Carpinteria, Calif., CKE Restaurants, Inc. is publicly traded on the New York Stock Exchange under the symbol “CKR.” As of the end of its fiscal 2010 second quarter, CKE Restaurants, Inc., through its subsidiaries, had a total of 3,140 franchised, licensed or company-operated restaurants in 42 states and in 14 countries, including 1,212 Carl’s Jr. restaurants and 1,915 Hardee’s restaurants. For more information about CKE Restaurants, please visit www.ckr.com.

Matters discussed in this press release contain forward-looking statements relating to future plans and developments, financial goals, and operating performance and are based on management’s current beliefs and assumptions. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control. Factors that could cause the Company’s results to differ materially from those described include, but are not limited to, the Company’s ability to compete with other restaurants, supermarkets and convenience stores; changes in economic conditions which may affect the Company’s business and stock price; the effect of restrictive covenants in the Company’s credit facility on the Company’s business; the Company’s ability to attract and retain key personnel; the Company’s franchisees’ willingness to participate in the Company’s strategy; the operational and financial success of the Company’s franchisees; changes in consumer preferences and perceptions; changes in the price or availability of commodities; changes in the Company’s suppliers’ ability to provide quality products to the Company in a timely manner; the effect of the media’s reports regarding food-borne illnesses and other health-related issues on the Company’s reputation and its ability to obtain products; the seasonality of the Company’s operations; increased insurance and/or self-insurance costs; the Company’s ability to select appropriate restaurant locations, construct new restaurants, complete remodels of existing restaurants and renew leases with favorable terms; the Company’s ability to comply with existing and future health, employment, environmental and other government regulations; 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. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law or the rules of the New York Stock Exchange.

CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 10, 2009 AND JANUARY 31, 2009
(In thousands, except par values)
(Unaudited)


	August 10, 2009			January 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	19,194		$	17,869
Accounts receivable, net of allowance for doubtful accounts of $471 as of August 10, 2009 and $720 as of January 31, 2009		31,567			40,738
Related party trade receivables		5,206			4,923
Inventories, net		22,708			24,215
Prepaid expenses		11,565			13,445
Assets held for sale		512			805
Advertising fund assets, restricted		19,242			16,340
Deferred income tax assets, net		18,000			20,781
Other current assets		2,864			1,843

Total current assets		130,858			140,959
Notes receivable, net of allowance for doubtful accounts of $408 as of August 10, 2009 and $529 as of January 31, 2009		1,465			3,259
Property and equipment, net of accumulated depreciation and amortization of $435,205 as of August 10, 2009 and $420,375 as of January 31, 2009		555,398			543,770
Property under capital leases, net of accumulated amortization of $45,296 as of August 10, 2009 and $48,341 as of January 31, 2009		34,198			23,403
Deferred income tax assets, net		51,423			57,832
Goodwill		24,106			23,688
Intangible assets, net		2,422			2,508
Other assets, net		8,832			9,268

Total assets	$	808,702		$	804,687

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of bank indebtedness and other long-term debt	$	2,709		$	4,341
Current portion of capital lease obligations		7,648			6,389
Accounts payable		43,501			60,903
Advertising fund liabilities		19,242			16,340
Other current liabilities		102,400			91,765

Total current liabilities		175,500			179,738
Bank indebtedness and other long-term debt, less current portion		287,107			310,447
Capital lease obligations, less current portion		44,992			36,273
Other long-term liabilities		83,325			83,953

Total liabilities		590,924			610,411

Stockholders’ equity:
Preferred stock, $.01 par value; 5,000 shares authorized; none issued or outstanding		—			—
Series A Junior Participating Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding		—			—
Common stock, $.01 par value; 100,000 shares authorized; 54,583 shares issued and outstanding as of August 10, 2009; 54,653 shares issued and outstanding as of January 31, 2009		546			546
Additional paid-in capital		279,471			276,068
Accumulated deficit		(62,239	)		(82,338	)

Total stockholders’ equity		217,778			194,276

Total liabilities and stockholders’ equity	$	808,702		$	804,687

CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)


	Twelve Weeks Ended						Twenty-Eight Weeks Ended
	August 10, 2009			August 11, 2008			August 10, 2009			August 11, 2008
Revenue:
Company-operated restaurants	$	257,794		$	267,075		$	600,958		$	625,313
Franchised and licensed restaurants and other		78,173			85,415			181,813			193,348

Total revenue		335,967			352,490			782,771			818,661

Operating costs and expenses:
Restaurant operating costs:
Food and packaging		73,899			80,355			172,401			185,429
Payroll and other employee benefits		72,387			75,429			169,756			179,112
Occupancy and other		61,750			59,811			140,587			137,846

Total restaurant operating costs		208,036			215,595			482,744			502,387
Franchised and licensed restaurants and other		58,333			65,590			137,826			148,657
Advertising		15,005			15,699			35,772			36,797
General and administrative		30,971			32,370			72,084			76,881
Facility action charges, net		1,454			351			2,502			1,424

Total operating costs and expenses		313,799			329,605			730,928			766,146

Operating income		22,168			22,885			51,843			52,515
Interest expense		(2,060	)		(2,399	)		(8,404	)		(6,967	)
Other income, net		425			529			1,287			1,521

Income before income taxes		20,533			21,015			44,726			47,069
Income tax expense		8,283			8,675			18,081			18,109

Net income	$	12,250		$	12,340		$	26,645		$	28,960

Dividends per common share	$	0.06		$	0.06		$	0.12		$	0.12

Income per common share:
Basic	$	0.22		$	0.24		$	0.49		$	0.55

Diluted	$	0.22		$	0.23		$	0.48		$	0.53

Weighted-average common shares outstanding:
Basic		54,584			52,507			54,602			52,467
Diluted		55,007			55,074			55,024			55,038

CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


	Twenty-Eight Weeks Ended
	August 10, 2009			August 11, 2008
Cash flows from operating activities:
Net income	$	26,645		$	28,960
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		37,812			33,306
Amortization of deferred loan fees		563			701
Share-based compensation expense		4,238			6,860
Recovery of losses on accounts and notes receivable		(303	)		(26	)
Loss on sale of property and equipment and capital leases		835			946
Facility action charges, net		2,502			1,424
Deferred income taxes		9,178			9,474
Other non-cash charges		19			19
Net changes in operating assets and liabilities:
Receivables, inventories, prepaid expenses and other current and non-current assets		11,330			5,385
Estimated liability for closed restaurants and estimated liability for self-insurance		(1,373	)		(3,306	)
Accounts payable and other current and long-term liabilities		(4,316	)		(7,014	)

Net cash provided by operating activities		87,130			76,729

Cash flows from investing activities:
Purchases of property and equipment		(49,513	)		(48,451	)
Proceeds from sale of property and equipment		3,401			16,770
Collections of non-trade notes receivable		2,018			2,730
Acquisition of restaurants, net of cash acquired		(485	)		—
Other investing activities		76			47

Net cash used in investing activities		(44,503	)		(28,904	)

Cash flows from financing activities:
Net change in bank overdraft		(5,170	)		(17,085	)
Borrowings under revolving credit facility		75,000			100,500
Repayments of borrowings under revolving credit facility		(97,000	)		(108,000	)
Repayments of credit facility term loan		(2,962	)		(15,140	)
Repayments of other long-term debt		(11	)		(103	)
Repayments of capital lease obligations		(3,812	)		(3,038	)
Payment of deferred loan fees		—			(399	)
Repurchase of common stock		(1,340	)		(1,621	)
Exercise of stock options		518			1,580
Excess tax benefits from exercise of stock options		29			163
Dividends paid on common stock		(6,554	)		(6,295	)

Net cash used in financing activities		(41,302	)		(49,438	)

Net increase (decrease) in cash and cash equivalents		1,325			(1,613	)
Cash and cash equivalents at beginning of period		17,869			19,993

Cash and cash equivalents at end of period	$	19,194		$	18,380

CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED PRESENTATION OF NON-GAAP MEASUREMENTS
(In thousands)
(Unaudited)


									Trailing-13
	Twelve Weeks Ended				Twenty-Eight Weeks Ended				Periods Ended
	August 10, 2009		August 11, 2008		August 10, 2009		August 11, 2008		August 10, 2009
Net income	$	12,250	$	12,340	$	26,645	$	28,960	$	34,641
Interest expense		2,060		2,399		8,404		6,967		30,046
Income tax expense		8,283		8,675		18,081		18,109		21,505
Depreciation and amortization		16,514		14,324		37,812		33,306		68,003
Facility action charges, net.		1,454		351		2,502		1,424		5,217
Share-based compensation expense		2,390		2,929		4,242		6,866		9,910

Adjusted EBITDA	$	42,951	$	41,018	$	97,686	$	95,632	$	169,322

Reconciliation of net income for computation of diluted income per share to net income for computation of diluted income per share, excluding mark-to-market adjustments:


Delaware	1-11313	33-0602639
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

6307 Carpinteria Ave., Ste. A, Carpinteria, California		93013
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	CKE Restaurants, Inc.

September 18, 2009	By:	/s/ Theodore Abajian

		Name: Theodore Abajian
		Title: Executive Vice President and Chief Financial Officer


Exhibit No.		Description

99.1		Press release, dated September 16, 2009, issued by CKE Restaurants, Inc.


	Carl’s Jr.						Hardee’s						Blended
	FY 2010			FY 2009			FY 2010			FY 2009			FY 2010			FY 2009
Company-Operated Same-Store Sales		-6.1	%		+3.8	%		-2.7	%		+3.3	%		-4.6	%		+3.6	%
Company-Operated Restaurant-Level Margin ⁽¹⁾		20.7	%		20.7	%		17.6	%		17.6	%		19.3	%		19.3	%
Average Unit Volume-Trailing 13 Periods (000)	$	1,486		$	1,527		$	1,006		$	973		$	1,228		$	1,207


	Twelve Weeks Ended
	August 10, 2009			August 11, 2008
Net income for computation of diluted income per share	$	12,250		$	12,442
Interest rate swap agreements mark-to-market adjustments		(1,079	)		(1,894	)
Income tax effect of mark-to-market adjustments		413			725

Net income for computation of diluted income per share, excluding mark-to-market adjustments	$	11,584		$	11,273


Date of Report (Date of Earliest Event Reported):		September 16, 2009


Registrant’s telephone number, including area code:		(805)745-7500