UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): | June 28, 2011 |
CKE Restaurants, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)
Delaware | 1-11313 and 333-169977 | 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) |
Registrants telephone number, including area code: | (805) 745-7500 |
Not Applicable
______________________________________________
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On June 28, 2011, CKE Restaurants, Inc. (the "Company") issued a press release announcing the Company's results for the first fiscal quarter ended May 23, 2011. The press release is attached as Exhibit 99.1 hereto.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release, dated June 28, 2011, issued by CKE Restaurants, Inc.
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 hereunto duly authorized.
CKE Restaurants, Inc. | ||||
June 29, 2011 | By: |
/s/ Theodore Abajian
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Name: Theodore Abajian | ||||
Title: Executive Vice President and Chief Financial Officer |
Exhibit Index
Exhibit No. | Description | |
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99.1
|
Press release, dated June 28, 2011, issued by CKE Restaurants, Inc. |
NEWS RELEASE
CKE RESTAURANTS, INC. REPORTS FIRST QUARTER FISCAL 2012 RESULTS
CARPINTERIA, Calif. June 28, 2011 CKE Restaurants, Inc. (CKE) announced today its first fiscal quarter financial results for the sixteen weeks ended May 23, 2011. The Company expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission (SEC) on Wednesday, June 29, 2011 after the close of the financial markets.
As previously reported, on July 12, 2010, CKE Holdings, Inc., an affiliate of Apollo Management VII, L.P., acquired all of the outstanding shares of the Company (the Merger). As of May 23, 2011, the purchase price allocation related to the Merger remains preliminary and is subject to change. Any subsequent changes to the purchase price allocation that result in material changes to the consolidated financial results will be adjusted retrospectively. The final purchase price allocation is expected to be completed within a one year time period following the acquisition date.
All references to Predecessor relate to CKE and its consolidated subsidiaries for periods prior to the Merger and references to Successor relate to CKE and its consolidated subsidiaries for periods subsequent to the Merger. The discussion of the Companys first quarter results compares the results of operations for the Successor sixteen weeks ended May 23, 2011 to the Predecessor sixteen weeks ended May 17, 2010.
Company-Operated Same-Store Sales and Average Unit Volumes
Blended same-store sales increased 5.5% in the first quarter of fiscal 2012. Hardees same-store sales increased 9.6% and Carls Jr. same-store sales increased 2.1%.
Q1 | ||||
Brand
|
FY12 | FY11 | ||
Carls Jr.
|
2.1% | -6.1% | ||
Hardees
|
9.6% | -1.2% | ||
Blended
|
5.5% | -3.9% |
At the end of the first quarter, the blended fifty-two week average unit volume for Carls Jr. and Hardees was $1,231,000. The fifty-two week average unit volumes for Carls Jr. and Hardees were $1,389,000 and $1,088,000, respectively.
To date, the Companys blended same-store sales for the second quarter of fiscal 2012 are positive in the low single digit range.
First Quarter Results
The Company reported total revenue of $400.6 million for the fiscal 2012 first quarter, a decrease of $34.6 million, or 8.0%, compared to the fiscal 2011 first quarter. The decrease was attributable to the sale of the Carls Jr. distribution business on July 2, 2010. Total revenue, excluding the Carls Jr. distribution center revenue in the prior year quarter, increased by $27.3 million, or 7.3%.
Hardees continued to generate strong same-store sales results during the first quarter. The 9.6% increase is Hardees best quarterly same-store sales result in seven years. Including period four, Hardees has now had sixteen consecutive periods of positive same-store sales. Carls Jr. also performed well, posting a 2.1% increase in same-store sales for the quarter, said Andrew F. Puzder, Chief Executive Officer.
Company-operated restaurant-level adjusted EBITDA margin was flat when compared to the prior year quarter at 17.0%. Food and packaging costs increased 130 basis points as a result of higher commodity costs for beef, cheese, pork and oil. This increase was offset by an 80 basis point decrease in labor costs primarily due to the impact of sales leverage as well as 30 basis point decreases in both occupancy and other expense and advertising expense. Refer to the further discussion of company-operated restaurant-level adjusted EBITDA margin under the heading Non-GAAP Measures below.
Adjusted EBITDA was $51.5 million in the first quarter of fiscal 2012, a $4.4 million improvement over the prior year quarter, which represents a 9.3% increase. Refer to the further discussion of Adjusted EBITDA under the heading Non-GAAP Measures below, which includes a reconciliation of net loss to Adjusted EBITDA.
As of May 23, 2011, cash and cash equivalents were $75.9 million and the Company had $65.2 million available under its credit facility.
On June 14, 2011, the Company announced that it will redeem $40.0 million aggregate principal amount of its outstanding 11.375% Senior Secured Second Lien Notes due 2018 (the Notes) on July 15, 2011 at a price equal to 103.0% of the principal amount of the Notes. Upon completion of the redemption, $560.0 million aggregate principal amount of the Notes will remain outstanding.
Capital expenditures for the fiscal 2012 first quarter were $13.6 million, of which $8.0 million related to new store openings, dual-branding and remodeling projects. For fiscal 2012, the Company expects capital expenditures to be between $60.0 million and $70.0 million.
As of May 23, 2011, the Companys system-wide restaurant portfolio consisted of:
Carls Jr. | Hardees | Other | Total | |||||||||||||
Company-operated |
424 | 470 | 1 | 895 | ||||||||||||
Franchised |
680 | 1,225 | 10 | 1,915 | ||||||||||||
Licensed |
158 | 214 | | 372 | ||||||||||||
Total |
1,262 | 1,909 | 11 | 3,182 | ||||||||||||
Conference Call Information
The Company will host its first quarter fiscal 2012 conference call on Wednesday, June 29, 2011, at 7:00 a.m. (PDT). The dial in information is as follows: (973) 500-2164 U.S. and international. The conference ID is 77005579.
Company Overview
CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, Calif. As of the end of the first quarter of fiscal 2012, the Company, through its subsidiaries, had a total of 3,182 franchised, licensed or company-operated restaurants in 42 states and in 20 countries. For more information about CKE, please visit www.ckr.com.
Forward-looking Statements
Matters discussed in this press release contain forward-looking statements, including those relating to expected capital expenditures, redemption of a portion of the Notes and the filing of the Companys periodic reports with the SEC, which are based on managements current beliefs and assumptions. These statements constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Companys control and which may cause results to differ materially from expectations. Factors that could cause the Companys results to differ materially from those described include, but are not limited to, the Companys ability to compete with other restaurants, supermarkets and convenience stores for customers, employees, restaurant locations and franchisees; changes in consumer preferences, perceptions and spending patterns; changes in food, packaging and supply costs; the ability of the Companys key suppliers to continue to deliver premium-quality products to the Company at moderate prices; the Companys ability to successfully enter new markets, complete construction of new restaurants and complete remodels of existing restaurants; changes in general economic conditions and the geographic concentration of the Companys restaurants, which may affect the Companys business; the Companys ability to attract and retain key personnel; the Companys franchisees willingness to participate in the Companys strategy; the operational and financial success of the Companys franchisees; the willingness of the Companys vendors and service providers to supply goods and services pursuant to customary credit arrangements; risks associated with operating in international locations; the effect of the medias reports regarding food-borne illnesses, food tampering and other health-related issues on the Companys reputation and its ability to procure or sell food products; the seasonality of the Companys operations; the effect of increasing labor costs including healthcare related costs; the Companys ability to comply with existing and future health, employment, environmental and other government regulations; the Companys ability to adequately protect its intellectual property; the potentially conflicting interests of the Companys sole stockholder and the Companys creditors, the Companys substantial leverage which could limit its ability to raise capital, react to economic changes or meet obligations under its indebtedness; the effect of restrictive covenants in the Companys indenture and credit facility on the Companys business; and other factors as discussed in the Companys filings with the SEC.
You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this press release. We undertake 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.
Contact Information
Beth Mansfield, Public Relations
Phone : (805) 745-7741, E-mail, bmansfield@ckr.com
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Successor | Predecessor | |||||||
Sixteen | Sixteen | |||||||
Weeks Ended | Weeks Ended | |||||||
May 23, 2011 | May 17, 2010 | |||||||
Revenue: |
||||||||
Company-operated restaurants |
$ | 351,604 | $ | 331,005 | ||||
Franchised and licensed restaurants and other |
48,979 | 104,180 | ||||||
Total revenue |
400,583 | 435,185 | ||||||
Operating costs and expenses: |
||||||||
Restaurant operating costs: |
||||||||
Food and packaging |
108,902 | 98,149 | ||||||
Payroll and other employee benefits |
101,663 | 98,255 | ||||||
Occupancy and other |
82,683 | 78,754 | ||||||
Total restaurant operating costs |
293,248 | 275,158 | ||||||
Franchised and licensed restaurants and other |
25,878 | 79,762 | ||||||
Advertising |
20,061 | 19,817 | ||||||
General and administrative |
40,960 | 39,471 | ||||||
Facility action charges, net |
511 | 863 | ||||||
Other operating expenses, net(1) |
351 | 6,568 | ||||||
Total operating costs and expenses |
381,009 | 421,639 | ||||||
Operating income |
19,574 | 13,546 | ||||||
Interest expense |
(24,395 | ) | (5,025 | ) | ||||
Other income (expense), net(2) |
799 | (13,883 | ) | |||||
Loss before income taxes |
(4,022 | ) | (5,362 | ) | ||||
Income tax benefit |
(1,421 | ) | (2,269 | ) | ||||
Net loss |
$ | (2,601 | ) | $ | (3,093 | ) | ||
(1) Other operating expenses, net includes transaction-related costs consisting of
accounting, investment banking, legal, and other costs.
(2) Other income (expense), net includes transaction-related costs related to the termination of a prior merger agreement of $14,283 for the Predecessor sixteen weeks ended May 17, 2010.
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except shares and par values)
(Unaudited)
Successor | ||||||||
May 23, 2011 | January 31, 2011 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 75,938 | $ | 42,586 | ||||
Accounts receivable, net of allowance for doubtful accounts of $162 as
of May 23, 2011 and $92 as of January 31, 2011 |
20,915 | 27,533 | ||||||
Related party trade receivables |
281 | 216 | ||||||
Inventories |
16,273 | 14,526 | ||||||
Prepaid expenses |
14,700 | 14,219 | ||||||
Assets held for sale |
440 | 196 | ||||||
Advertising fund assets, restricted |
17,883 | 18,464 | ||||||
Deferred income tax assets, net |
16,864 | 17,079 | ||||||
Other current assets |
3,914 | 4,065 | ||||||
Total current assets |
167,208 | 138,884 | ||||||
Notes receivable, net |
| 172 | ||||||
Property and equipment, net of accumulated depreciation and amortization
of $58,226 as of May 23, 2011 and $36,342 as of January 31, 2011 |
629,613 | 640,194 | ||||||
Property under capital leases, net of accumulated amortization of
$5,698 as
of May 23, 2011 and $3,638 as of January 31, 2011 |
35,622 | 36,156 | ||||||
Goodwill |
208,885 | 207,817 | ||||||
Intangible assets, net |
443,977 | 448,499 | ||||||
Other assets, net |
23,774 | 24,444 | ||||||
Total assets |
$ | 1,509,079 | $ | 1,496,166 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of bank indebtedness and other long-term debt |
$ | 30 | $ | 29 | ||||
Current portion of capital lease obligations |
7,821 | 7,434 | ||||||
Accounts payable |
38,998 | 41,442 | ||||||
Advertising fund liabilities |
17,883 | 18,464 | ||||||
Other current liabilities |
104,070 | 81,958 | ||||||
Total current liabilities |
168,802 | 149,327 | ||||||
Bank indebtedness and other long-term debt, less current portion |
590,272 | 589,987 | ||||||
Capital lease obligations, less current portion |
39,779 | 41,082 | ||||||
Deferred income tax liabilities, net |
149,700 | 151,828 | ||||||
Other long-term liabilities |
136,889 | 139,173 | ||||||
Total liabilities |
1,085,442 | 1,071,397 | ||||||
Stockholders equity: |
||||||||
Common stock, $0.01 par value; 100 shares authorized, issued and
outstanding as of May 23, 2011 and January 31, 2011 |
| | ||||||
Additional paid-in capital |
454,128 | 452,659 | ||||||
Accumulated deficit |
(30,491 | ) | (27,890 | ) | ||||
Total stockholders equity |
423,637 | 424,769 | ||||||
Total liabilities and stockholders equity |
$ | 1,509,079 | $ | 1,496,166 | ||||
Non-GAAP Measures
Adjusted EBITDA and Adjusted EBITDAR
Adjusted EBITDA represents income (loss) before income taxes, interest income and expense, asset impairments, facility action charges, depreciation and amortization, management fees, pro-forma cost savings as a result of becoming privately held, the effects of acquisition accounting adjustments, and certain non-cash and unusual items. The Company calculates Adjusted EBITDAR by adjusting Adjusted EBITDA to exclude the Companys aggregate cash rent expense, less rental income from franchisees and third parties, subject to certain adjustments and exclusions.
Management uses Adjusted EBITDA and Adjusted EBITDAR because it believes that they are important measures of operating performance. In particular, management considers Adjusted EBITDA and Adjusted EBITDAR to be useful financial measures that highlight trends in the Companys business and provide a comparable measure of profitability of similar enterprises. In addition, management believes that Adjusted EBITDA and Adjusted EBITDAR are effective, when used in conjunction with net loss or loss before income taxes, in evaluating asset performance, and differentiating efficient operators in the industry. Furthermore, management believes that Adjusted EBITDA and Adjusted EBITDAR provide useful information to potential investors and analysts because these measures provide insight into managements evaluation of the Companys results of operations. The calculations of Adjusted EBITDA and Adjusted EBITDAR may not be consistent with EBITDA and EBITDAR for the purpose of the covenants in the agreements governing the Companys indebtedness.
Adjusted EBITDA and Adjusted EBITDAR are not measures of financial performance under U.S. GAAP, are not intended to represent cash flows from operations under U.S. GAAP and should not be used as alternatives to net loss, or loss before income taxes, as indicators of operating performance, or as alternatives to cash flow from operating, investing or financing activities as a measure of liquidity. Management compensates for the limitations of using Adjusted EBITDA and Adjusted EBITDAR by using them only to supplement the Companys U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the Companys business. Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of the Companys results as reported under U.S. GAAP.
Some of the limitations of Adjusted EBITDA and Adjusted EBITDAR are:
| Adjusted EBITDA and Adjusted EBITDAR do not reflect cash used for capital expenditures; |
| Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and Adjusted EBITDA and Adjusted EBITDAR do not reflect the cash requirements for such replacements; |
| Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, the Companys working capital requirements; |
| Adjusted EBITDA and Adjusted EBITDAR do not reflect the cash necessary to make payments of interest or principal on the Companys indebtedness; and |
| Adjusted EBITDAR does not reflect the cash necessary to make payments of rent under the Companys lease obligations. |
While Adjusted EBITDA and Adjusted EBITDAR are frequently used as measures of operations and the ability to meet indebtedness service requirements, these measures as calculated by the Company are not necessarily directly comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.
CKE RESTAURANTS, INC. | ||||||||
ADJUSTED EBITDA AND ADJUSTED EBITDAR | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Successor | Predecessor | |||||||
Sixteen | Sixteen | |||||||
Weeks Ended | Weeks Ended | |||||||
23-May-11 | 17-May-10 | |||||||
Net loss |
$ | (2,601 | ) | $ | (3,093 | ) | ||
Interest expense |
24,395 | 5,025 | ||||||
Income tax benefit |
(1,421 | ) | (2,269 | ) | ||||
Depreciation and amortization |
24,938 | 22,644 | ||||||
Facility action charges, net |
511 | 863 | ||||||
Transaction-related costs(1) |
351 | 20,851 | ||||||
Management fees(2) |
767 | | ||||||
Share-based compensation expense |
1,469 | 2,187 | ||||||
Losses on asset and other disposals |
713 | 1,280 | ||||||
Difference between U.S. GAAP rent and cash rent |
618 | 437 | ||||||
Cost savings(3) |
| 688 | ||||||
Other, net(4) |
1,760 | (1,479 | ) | |||||
Adjusted EBITDA |
$ | 51,500 | $ | 47,134 | ||||
Net Rent(5) |
15,360 | 14,900 | ||||||
Adjusted EBITDAR |
$ | 66,860 | $ | 62,034 |
(1) Transaction-related costs include investment banking, legal, and other costs related to the Merger, as well as costs related to the termination of a prior merger agreement. |
(2) Represents the amounts associated with the management services agreement with Apollo Management VII, L.P. for on-going investment banking, consulting, and financial planning services, which are included in general and administrative expense. |
(3) Cost savings reflects pro-forma cost savings amounts expected to be realized as a result of becoming a privately held company. |
(4) Other, net includes the net impact of purchase accounting, executive retention bonus and disposition business expense. For the Predecessor sixteen weeks ended May 17, 2010, other, net also included adjusted EBITDA from the Companys distribution business, which it no longer owns or operates. |
(5) Represents aggregate cash rent expense of the Company less rental income from franchisees and third parties, subject to certain adjustments and exclusions. |
Company-Operated Restaurant-Level Non-GAAP Measures
Company-operated restaurant-level adjusted EBITDA is expressed in dollars and defined as company-operated restaurants revenue less restaurant operating costs excluding depreciation and amortization expense and including advertising expense. Restaurant operating costs are the expenses incurred directly by company-operated restaurants in generating revenues and do not include advertising costs, general and administrative expenses or facility action charges. Company-operated restaurant-level adjusted EBITDA margin is expressed as a percentage and defined as company-operated restaurant-level adjusted EBITDA divided by company-operated restaurants revenue.
Company-operated restaurant-level adjusted EBITDA and company-operated restaurant-level adjusted EBITDA margin are non-GAAP measures utilized by management internally to evaluate and compare the Companys operating performance for company-operated restaurants between periods. In addition, management believes that these financial measures provide useful information to potential investors and analysts because they provide insight into managements evaluation of the Companys results of operations. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measures. These non-GAAP measures have certain limitations including the following:
| Because not all companies calculate these measures identically, the Companys presentation of such measures may not be comparable to similarly titled measures of other companies; |
| These measures exclude certain general and administrative and other operating costs, which should also be considered when assessing the Companys operating performance; and |
| These measures exclude depreciation and amortization, and although they are non-cash charges, the assets being depreciated or amortized will often have to be replaced and new investments made to support the operations of the Companys restaurant portfolio. |
The following is a reconciliation of company-operated restaurant-level adjusted EBITDA and company-operated restaurant-level adjusted EBITDA margin (unaudited):
Company-operated restaurant-level adjusted EBITDA |
Successor | Predecessor | ||||||
Sixteen Weeks Ended | Sixteen Weeks Ended | |||||||
May 23, 2011 | May 17, 2010 | |||||||
Company-operated restaurants revenue |
$ | 351,604 | $ | 331,005 | ||||
Less: restaurant operating costs |
(293,248 | ) | (275,158 | ) | ||||
Add: depreciation and amortization expense |
21,600 | 20,376 | ||||||
Less: advertising expense |
(20,061 | ) | (19,817 | ) | ||||
Company-operated restaurant-level adjusted EBITDA |
$ | 59,895 | $ | 56,406 | ||||
Company-operated restaurant-level adjusted EBITDA
margin |
17.0 | % | 17.0 | % |