<PAGE> 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 9, 1999
--------------------------------
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
Incorporation or Organization) Identification No.)
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 17, 1999, 52,085,513 shares of the Registrant's Common Stock
were outstanding
<PAGE> 2
CKE RESTAURANTS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of August 9, 1999 and January 25, 1999.................. 2
Consolidated Statements of Income for the twelve and twenty-eight weeks
ended August 9, 1999 and August 10, 1998........................................... 3
Consolidated Statements of Cash Flows for the twenty-eight weeks ended
August 9, 1999 and August 10, 1998................................................. 4
Notes to Consolidated Financial Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk......................... 14
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds.......................................... 15
Item 4. Submission of Matters to a Vote of Security Holders............................... 15
Item 6. Exhibits and Reports on Form 8-K.................................................. 16
</TABLE>
1
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
August 9, January 25,
1999 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 43,548 $ 46,297
Accounts receivable 44,550 46,820
Related party receivables 1,124 1,474
Inventories 25,951 22,507
Prepaid expenses 18,853 12,349
Other current assets 2,991 4,845
---------- ----------
Total current assets 137,017 134,292
Property and equipment, net 1,014,445 940,178
Property under capital leases, net 84,717 81,895
Long-term investments 32,888 34,119
Notes receivable 6,868 7,898
Related party receivables 7,697 7,020
Costs in excess of assets acquired, net 251,971 252,035
Other assets 46,945 39,477
---------- ----------
$1,582,548 $1,496,914
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,303 $ 4,273
Current portion of capital lease obligations 8,747 7,838
Accounts payable 86,253 88,462
Other current liabilities 98,114 101,074
---------- ----------
Total current liabilities 197,417 201,647
---------- ----------
Long-term debt 222,175 360,684
Senior subordinated notes 200,000 --
Convertible subordinated notes 159,225 162,225
Capital lease obligations 93,239 90,373
Deferred income taxes, net 15,029 15,029
Other long-term liabilities 78,935 80,114
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
52,075,513 and 51,850,249 shares 521 519
Additional paid-in capital 382,464 380,423
Retained earnings 233,543 205,900
---------- ----------
Total stockholders' equity 616,528 586,842
---------- ----------
$1,582,548 $1,496,914
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 4
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-eight Weeks Ended
--------------------------- ---------------------------
August 9, August 10, August 9, August 10,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Company-operated restaurants $ 423,424 $ 438,910 $ 970,168 $ 917,517
Franchised and licensed restaurants and other 41,835 35,931 90,814 85,535
----------- ----------- ----------- -----------
Total revenues 465,259 474,841 1,060,982 1,003,052
----------- ----------- ----------- -----------
Operating costs and expenses:
Restaurant operations:
Food and packaging 126,498 133,548 290,230 278,398
Payroll and other employee benefits 132,295 134,090 297,874 282,793
Occupancy and other operating expenses 84,180 83,396 195,015 174,286
----------- ----------- ----------- -----------
342,973 351,034 783,119 735,477
Franchised and licensed restaurants and other 31,197 24,526 66,725 57,827
Advertising expenses 28,614 24,772 61,293 52,221
General and administrative expenses 31,328 25,371 71,093 62,755
----------- ----------- ----------- -----------
Total operating costs and expenses 434,112 425,703 982,230 908,280
----------- ----------- ----------- -----------
Operating income 31,147 49,138 78,752 94,772
Interest expense (13,492) (12,605) (29,170) (21,842)
Other income (expense), net (811) 1,207 (1,077) 2,603
----------- ----------- ----------- -----------
Income before income taxes and extraordinary item 16,844 37,740 48,505 75,533
Income tax expense 6,546 15,136 19,077 30,197
----------- ----------- ----------- -----------
Income before extraordinary item 10,298 22,604 29,428 45,336
Extraordinary item - gain on early retirement of
debt, net of applicable income taxes of $186 -- -- 290 --
----------- ----------- ----------- -----------
Net income $ 10,298 $ 22,604 $ 29,718 $ 45,336
=========== =========== =========== ===========
Basic income per share before extraordinary item $ 0.20 $ 0.44 $ 0.56 $ 0.88
Extraordinary item - gain on early retirement of
debt, net of income taxes - basic -- -- .01 --
----------- ----------- ----------- -----------
Net income per share - basic $ 0.20 $ 0.44 $ 0.57 $ 0.88
=========== =========== =========== ===========
Weighted average shares outstanding - basic 52,009 51,503 51,934 51,366
=========== =========== =========== ===========
Diluted income per share before extraordinary item $ 0.20 $ 0.42 $ 0.56 $ 0.84
Extraordinary item - gain on early retirement of
debt, net of applicable taxes - diluted -- -- .01 --
----------- ----------- ----------- -----------
Net income per share - diluted $ 0.20 $ 0.42 $ 0.57 $ 0.84
=========== =========== =========== ===========
Weighted average shares outstanding - diluted 56,186 57,565 56,263 56,573
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 5
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
------------------------
August 9, August 10,
1999 1998
--------- ---------
<S> <C> <C>
Net cash flow from operating activities:
Net income $ 29,718 $ 45,336
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 50,674 39,036
Loss on sale of property and equipment and capital leases 2,133 1,015
Noncash litigation settlement 722 --
Net noncash investment and dividend income (140) (678)
Loss on noncurrent asset and liability transactions 555 462
Net change in receivables, inventories and other
current assets and prepaid expenses (6,025) (5,739)
Net change in accounts payable and other current liabilities (20,513) 33,943
--------- ---------
Net cash provided by operating activities 56,648 113,375
--------- ---------
Cash flow from investing activities:
Purchases of property and equipment (126,169) (45,210)
Proceeds from sale of property and equipment 9,948 7,165
Increase in notes receivable, related party receivables and leases receivable (737) (1,700)
Collections on notes receivable, related party receivables and leases receivable 1,757 4,522
Net change in other assets (1,638) 727
Acquisitions, net of cash acquired (1,303) (394,651)
Dispositions, net of cash surrendered -- 4,328
--------- ---------
Net cash used in investing activities (118,142) (424,819)
--------- ---------
Cash flow from financing activities:
Net change in bank overdraft 15,973 (9,780)
Long-term borrowings 274,000 221,220
Issuance of convertible subordinated notes -- 197,225
Repayments of long-term debt (215,004) (77,582)
Repayments of capital lease obligations (3,744) (4,000)
Deferred financing costs (10,686) (10,211)
Net change in other long-term liabilities (1,179) (2,095)
Payment of dividends (2,074) (1,895)
Exercise of stock options 1,459 6,230
--------- ---------
Net cash provided by financing activities 58,745 319,112
--------- ---------
Net increase (decrease) in cash and cash equivalents (2,749) 7,668
Cash and cash equivalents at beginning of period 46,297 30,382
--------- ---------
Cash and cash equivalents at end of period $ 43,548 $ 38,050
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 6
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
-------------------------
August 9, August 10,
1999 1998
--------- ---------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amounts capitalized) $ 22,862 $ 16,746
Income taxes 14,786 20,859
FEI Acquisition:
Tangible assets acquired at fair value $ -- $ 444,500
Costs in excess of net assets acquired -- 89,917
Liabilities assumed at fair value -- (153,780)
--------- ---------
Total purchase price $ -- $ 380,637
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE> 7
CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 9, 1999 AND AUGUST 10, 1998
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 1999 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. Certain
reclassifications have been made to the fiscal 1999 consolidated
financial statements to conform to the fiscal 2000 presentation.
Share and per share information has been retroactively adjusted to
reflect the ten percent stock dividend paid in January 1999.
NOTE (B) ACQUISITIONS
On April 1, 1998, the Company acquired Flagstar Enterprises,
Inc. ("FEI"), the largest franchisee in the Hardee's system,
previously operating 557 Hardee's restaurants located primarily in
the Southeastern United States. In connection with the acquisition,
which was accounted for as a purchase, the Company acquired all of
the issued and outstanding shares of common stock of FEI from
Advantica Restaurant Group, Inc. ("Advantica") for cash
consideration of $380.6 million (which included miscellaneous
expenses paid to Advantica) and the assumption of approximately
$45.6 million in capital lease obligations. The Company used the
majority of the net proceeds from the issuance of $197.2 million of
convertible subordinated notes together with borrowings of $213.2
million under its senior credit facility to finance the
acquisition.
Selected unaudited pro forma combined results of operations
for the 28-week period ended August 10, 1998, assuming the
acquisition occurred on January 27, 1998, using actual
restaurant-level margins and general and administrative expenses
prior to the acquisition, is as follows:
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
August 10, 1998
-----------------------
<S> <C>
Total revenues $1,124,249
Net income $ 43,857
Net income per share - basic $ 0.85
Net income per share - diluted $ 0.82
</TABLE>
NOTE (C) LONG TERM DEBT
On March 4, 1999, the Company amended its existing senior
credit facility, which consisted of a $250.0 million term loan
facility and a $250.0 million revolving credit facility. The senior
credit facility, as amended, consists of a $500.0 million revolving
credit facility and includes a $75.0 million letter of credit
sub-facility. The senior credit facility will be reduced beginning
in March 2001 by a minimum of $50.0 million each year, for the
three subsequent years. Additional borrowings under the senior
credit facility may be used for working capital or other general
corporate purposes, including permitted investments and
acquisitions, and any amounts outstanding thereunder will become
due in February 2004.
Borrowings and other obligations of the Company under the
senior credit facility are general unsubordinated obligations of
the Company and secured by a pledge of the capital stock of certain
of the Company's present and future subsidiaries, which
subsidiaries guarantee such borrowings and other
6
<PAGE> 8
CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 9, 1999 AND AUGUST 10, 1998
(Continued)
obligations, and are secured by certain franchise rights, contract
rights, general intangibles (including trademarks) and other assets
of the Company and such subsidiaries. The Company is required to
repay borrowings under the senior credit facility with the proceeds
from certain asset sales (unless the net proceeds of such sales are
reinvested in the Company's business), from the issuance of certain
equity securities and from the issuance of additional indebtedness.
Of the various options the Company has regarding interest rates, it
has selected LIBOR plus a margin, with future margin adjustments
dependent on certain financial ratios from time to time.
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. As of
August 9, 1999, the Company was in compliance with all of its
covenants related to its senior credit facility.
NOTE (D) 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
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 guarantee
the Company's 9.125% senior subordinated notes due 2009 on a joint
and several basis. Separate financial statements and other
disclosures concerning the Subsidiary Guarantors are not presented
because management has determined that such information is not
material to investors.
NOTE (E) CONVERTIBLE SUBORDINATED NOTES
During the first quarter of fiscal 2000, the Company
repurchased an additional $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.
7
<PAGE> 9
CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 9, 1999 AND AUGUST 10, 1998
(Continued)
NOTE (F) SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131") in its fiscal year ending January
25, 1999.
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 profit
before taxes. 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 ending January 25, 1999.
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 profit or loss, income and
expense not allocated to reportable segments. The amounts reported
for Hardee's reflect only the periods subsequent to the acquisition
date of April 1, 1998 for FEI.
<TABLE>
<CAPTION>
TWENTY-EIGHT WEEKS ENDED
CARL'S JR. HARDEE'S TACO BUENO OTHER TOTAL
---------- ---------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
AUGUST 9, 1999:
Revenues $370,591 $ 634,437 $48,861 $ 7,093 $1,060,982
Segment profit (loss) 37,244 15,775 4,725 (9,239) 48,505
Total assets 339,248 1,095,943 73,220 74,137 1,582,548
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
AUGUST 10, 1998:
Revenues $337,998 $ 578,713 $43,780 $42,561 $1,003,052
Segment profit (loss) 40,169 36,359 4,306 (5,301) 75,533
Total assets (as of
January 25, 1999) 280,201 1,072,594 62,539 81,580 1,496,914
Capital expenditures 18,424 17,803 2,455 6,528 45,210
Depreciation and amortization 12,158 20,655 1,468 4,755 39,036
</TABLE>
8
<PAGE> 10
CKE RESTAURANTS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Consolidated net income for the 12-week period ended August 9,
1999 decreased 54.4% to $10.3 million, or $0.20 per share on a
diluted basis, as compared with net income of $22.6 million, or
$0.42 per share on a diluted basis, for the prior year quarter. Net
income for the 28-week period ended August 9, 1999 decreased 34.4%
to $29.7 million, or $0.57 per share on a diluted basis, as
compared with net income of $45.3 million, or $0.84 per share on a
diluted basis for the comparable period of the prior year. Net
income, excluding the $0.3 million extraordinary gain on the early
retirement of debt, decreased 35.1% for the 28-week period ended
August 9, 1999 to $29.4 million, or $0.56 per share on a diluted
basis. The decrease in net income in the second quarter was
primarily due to declining sales levels at our Carl's Jr. and
Hardee's restaurants, combined with the fixed nature of certain of
our operating costs. On a year to date basis, increased interest
expense in connection with our recent financings also contributed
to the decrease in net income. Operating results for the prior-year
28 weeks ended August 10, 1998 include 19 weeks of operations for
the 557 Hardee's restaurants acquired with our acquisition of
Flagstar Enterprises, Inc. ("FEI") from Advantica Restaurant Group,
Inc. ("Advantica") on April 1, 1998. Operating results for Carl's
Jr. for the 12- and 28-week periods ended August 9, 1999 include
the results of 63 Hardee's-to-Carl's Jr. conversions in Oklahoma,
Texas and Kansas. These restaurants were included in Hardee's
results for the corresponding prior year periods.
During the second quarter of fiscal 2000, we opened ten new
Carl's Jr. restaurants and closed one restaurant. Our franchisees
opened four new restaurants and closed one restaurant. As of August
9, 1999, our Carl's Jr. system included 556 company-operated
restaurants, 310 franchised restaurants and 24 international
restaurants, for a system total of 890 Carl's Jr. restaurants. We
also opened two new Taco Bueno restaurants in the second quarter,
bringing the total of company-operated restaurants to 113, with one
licensed restaurant, for a system total of 114. We also grew our
Hardee's system by an additional seven restaurants. At the end of
the quarter, our Hardee's system consisted of 1,414
company-operated restaurants, 1,266 franchised restaurants and 106
international restaurants, for a system total of 2,786 Hardee's
restaurants.
We have remodeled approximately 106 company-operated Hardee's
restaurants to the Star Hardee's format during the second quarter
and our franchisees have remodeled approximately 22 restaurants,
with approximately 435 Hardee's restaurants remodeled to the Star
Hardee's format as of August 9, 1999, representing approximately
16% of the Hardee's system. In addition to menu enhancements, a
Star Hardee's remodel involves installing charbroilers in the
kitchens, remodeling the interior and exterior of the restaurant,
introducing Carl's Jr.-style limited table service, adding
"all-you-can-drink" beverage bars, installing new signage and
adding updated computerized point of sale systems. We are currently
remodeling 10 to 12 company-operated restaurants per week and our
franchisees are remodeling 2 to 3 franchised restaurants per week.
On average, the restaurants that have already been converted are
seeing initial sales improvements of approximately 8% above
pre-conversion levels.
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 acquisitions of Hardee's and FEI; 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.
9
<PAGE> 11
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
RESULTS OF OPERATIONS
Revenues from company-operated restaurants decreased $15.5
million, or 3.5%, to $423.4 million for the 12-week period ended
August 9, 1999 while increasing $52.7 million, or 5.7%, to $970.2
million for 28-week period ended August 9, 1999 over the same prior
year periods. Carl's Jr. and Taco Bueno company-operated revenues
increased by $14.4 million and $2.0 million, respectively, while
Hardee's revenues from company-operated restaurants decreased by
$17.4 million in the 12-week period ended August 9, 1999. For the
28-week period ended August 9, 1999, Carl's Jr., Hardee's and Taco
Bueno contributed $30.9 million, $51.3 million and $5.1 million,
respectively, to the increase in revenues. Offsetting these
increases was the decrease in revenues from our JB's Restaurants
and Galaxy Diner restaurants which were sold to Santa Barbara
Restaurant Group, Inc. ("SBRG") in September 1998. On a same-store
sales basis, our Carl's Jr. sales decreased 4.3% in the 12-week
period ended August 9, 1999, which reflects strong comparisons in
the second quarter of the last two fiscal years. Same-store sales
for our company-operated Hardee's restaurants were down 4.9% for
the second quarter. Same-store sales for our company-operated Taco
Bueno restaurants increased 7.2%, marking the 17th consecutive
quarter of same-store sales increases for the chain. The increase
in company-operated revenue from our Carl's Jr. restaurants was
primarily attributable to an increase in the number of restaurants
open and operating in the second quarter of fiscal 2000 as compared
with the second quarter of the prior year and the inclusion of $9.2
million and $21.2 million of revenue from the 63 Hardee's-to-Carl's
Jr. converted restaurants for the 12- and 28-week periods ended
August 9, 1999, respectively. The increase in Hardee's
company-operated revenues for the 28-week period ended August 9,
1999 was primarily due to including in the current year a full 28
weeks of operations of the 557 Hardee's restaurants acquired from
Advantica in April 1998, as compared with 19 weeks of operations
for those restaurants included in the prior year period. Taco
Bueno's increase in revenues is due mainly to our advertising
campaign, which focuses on great-tasting food products, the image
enhancement program for our Taco Bueno restaurants, which was begun
in fiscal 1999, and the increase in the number of restaurants open
and operating. Average unit volumes for the trailing 52-week period
ending August 9, 1999 for our company-operated Carl's Jr. and
Hardee's restaurants were $1,095,000 and $788,000, respectively,
while Taco Bueno's average unit volumes continued to rise and
increased to $783,000.
Our revenues from franchised and licensed restaurants for the
12- and 28-week periods ended August 9, 1999 increased $5.9
million, or 16.4%, to $41.8 million and $5.3 million, or 6.2%, to
$90.8 million, respectively, over the same prior year periods.
These revenue increases were mainly due to increased royalties
from, and food purchases by, Carl's Jr. franchisees and licensees
as a result of an increase in the number of Carl's Jr. franchised
restaurants operating in fiscal 2000 as compared with fiscal 1999
and an increase in equipment sales to Hardee's franchisees in
connection with the remodeling of Hardee's restaurants to the Star
Hardee's format. Partially offsetting these increases were the
decrease in revenues due to the acquisition of previously
franchised Hardee's restaurants during fiscal 1999, including the
557 formerly franchised Hardee's restaurants we acquired in April
1998 and the loss of franchised revenues from our JB's restaurants,
which were sold to SBRG in September 1998.
Restaurant-level margins for our company-operated Carl's Jr.
restaurants decreased 1.0% to 24.8% and 1.6% to 24.2%,
respectively, for the 12- and 28-week periods ended August 9, 1999,
from the comparable periods of fiscal 1999, mainly due to increases
in occupancy and other operating expenses. As a percentage of
revenues from Carl's Jr. restaurants, food and packaging costs
remained relatively consistent during the second quarter of fiscal
2000 at 28.7%, while reflecting a decrease for the 28-week period
ended August 9, 1999 of 0.4% to 28.5% of revenues from
company-operated Carl's
10
<PAGE> 12
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
Jr. restaurants. This decrease was primarily attributable to
continued purchasing economies achieved as a result of the
consolidated buying power directly realized from our addition of
the Hardee's restaurants. Payroll and other employee benefits for
our Carl's Jr. restaurant chain, as a percentage of revenues from
company-operated Carl's Jr. restaurants, increased 0.3% to 26.6%
and 0.5% to 26.5%, respectively, for the 12- and 28-week periods
ended August 9, 1999, as compared with the comparable periods in
the prior year. The increase in the number of our Carl's
Jr./Green Burrito dual-brand restaurants contributed to the rise
in payroll and employee benefit costs for the 28-week period
ended August 9, 1999 due to the more labor intensive nature of
the Green Burrito system. Carl's Jr. occupancy and other
operating expenses, as a percentage of revenues from
company-operated Carl's Jr. restaurants, increased 0.6% to 19.9%
and 1.5% to 20.8%, respectively, for the 12- and 28-week periods
as compared with the same periods of the prior year, primarily
due to the fixed nature of these costs, combined with a decrease
in the same-store revenue base as well as increased repair and
maintenance costs and increased rent expense as a result of
scheduled increases in long-term lease contracts.
Hardee's restaurant-level margins for the 12- and 28-week
periods ended August 9, 1999 decreased 2.5% to 15.5% and 1.0% to
16.2%, respectively. Hardee's food and packaging costs continued to
decrease during the 12- and 28-week periods ended August 9, 1999,
down 0.7% to 30.6% and down 0.4% to 30.8% of revenues from
company-operated restaurants, respectively. This decrease was
mainly due to a reduction in food waste and theft tolerance levels
and continued purchasing economies achieved as a result of our
increased consolidated buying power, partially offset by special
promotional discounts. Payroll and other employee benefits, as a
percentage of revenues from company-operated Hardee's restaurants,
increased 1.7% to 33.7% in the 12-week period ended August 9, 1999
from the same prior year period, while remaining consistent at
32.9% as a percentage of company-operated revenues for the 28-week
period ended August 9, 1999 as compared with the equivalent period
of fiscal 1999. This increase in labor in the current 12-week
period is a result of the initial increased labor required to
implement the Star Hardee's conversions and the operational changes
required in the converted restaurants. As a percentage of revenues
from Hardee's company-operated restaurants, occupancy and other
operating expenses increased 1.5% to 20.2% for the 12-week period
and 1.4% to 20.1% for the 28-week period ended August 9, 1999 over
the comparable prior year periods. The increase in occupancy and
other operating expenses is due to the fixed nature of the costs
combined with a decrease in the same-store revenue base, as well as
increased depreciation costs in connection with the remodeling
program of the Hardee's restaurants to the Star Hardee's format.
Taco Bueno's restaurant-level operating margins decreased 0.3%
to 25.0% and 0.1% to 26.2% for the 12 and 28 weeks ended August 9,
1999. While overall Taco Bueno restaurant-level margins reflected a
modest decrease, food and packaging costs as a percentage of sales
increased by 0.3% and 0.6% to 28.4% and 28.3%, respectively, and
payroll and other employee benefit costs increased 1.2% to 32.2%
and 0.5% to 31.2%, respectively, as a percentage of sales for the
12- and 28- week periods ended August 9, 1999. These increases were
offset by a decrease in occupancy and other operating expenses of
1.2% and 1.0% to 14.4% and 14.3%, respectively, as a percentage of
sales for the 12- and 28-week periods ended August 9, 1999 over the
similar prior year periods. The increases in food and packaging
costs were mainly attributable to higher commodity costs and a
change in packaging materials used, while the increase in payroll
and other employee benefit costs was primarily due to an increase
in workers compensation costs as a result of a reevaluation of our
historical workers compensation experience rating. The offsetting
decrease in occupancy and other expenses was a result of the fixed
nature of these costs combined with the increase in revenues.
Franchised and licensed restaurant and other costs increased
27.2% to $31.2 million and 15.4% to $66.7 million for the 12 and 28
weeks ended August 9, 1999, respectively, over the prior year.
These increases are primarily due to increased food and other
products purchased from us by Carl's Jr. franchisees and licensees
and increased equipment purchases from us by Hardee's franchisees
and licensees. While royalties from Hardee's franchised and
licensed restaurants decreased during the fiscal 2000 periods from
the appropriate prior year periods, revenues from equipment sales
to Hardee's franchised and licensed restaurants increased. The cost
structure associated with equipment sales is much higher than that
associated with the royalty stream of income. As a result,
franchised and licensed restaurant and other costs increased 6.3%
and 5.9% as a percentage of revenue from franchised and licensed
restaurants for the second quarter of fiscal 2000 and the 28 weeks
ended August 9, 1999, respectively, over the comparable prior year
periods.
Advertising expenses increased $3.8 million and $9.1 million,
respectively, from the 12- and 28-week periods ended August 10,
1998, mainly due to increased advertising support for Hardee's.
Advertising has become increasingly important in the current
competitive environment and, as a result, advertising expenses have
increased in terms of both dollars spent in the current fiscal year
as compared with the prior fiscal year and as a percentage of
company-operated revenues.
General and administrative expenses increased $6.0 million, or
1.4% of total revenues, and $8.3 million, or 0.4% of total
revenues, to $31.3 million and $71.1 million, respectively, for the
12- and 28-week
11
<PAGE> 13
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
periods ended August 9, 1999 over the same periods of the prior
year. This increase in general and administrative expenses reflects
the planned addition of regional general and administrative
expenses in the FEI markets that did not exist in the prior year,
including additional quality assurance and regional human resources
support; higher training expenses for the accelerated Star Hardee's
remodel rollout; and an increase in information technology costs
associated with the implementation of PeopleSoft and Year 2000
compliance. Lower revenue levels combined with the planned increase
in general and administrative costs resulted in higher general and
administrative expenses as a percentage of total revenues.
Interest expense for the 12- and 28-week periods ended August
9, 1999 increased $0.9 million and $7.3 million, respectively, as
compared with the prior year periods due to higher levels of
borrowings outstanding under our senior credit facility and the
issuance of convertible subordinated notes in March 1998 and senior
subordinated notes in March 1999.
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 $2.0 million and $3.7
million, respectively, for the 12- and 28-week periods ended August
9, 1999 over the corresponding prior year periods. The decrease was
due in large part to a reduction in interest income as a result of
our reduced note receivable from Checkers Drive-In Restaurants,
Inc., reduced notes receivable from our franchisees, reduced
interest income on cash and cash equivalents and recognition of
income in the prior year from our investment in Star Buffet, Inc.,
which was subsequently sold in October 1998. Additionally, during
the 12-week period ended August 9, 1999, we issued 54,501 shares of
our common stock in connection with the release of certain claims
asserted against us relating to the operations of Boston West, LLC
as a result of which we recognized an expense of $0.7 million.
During the third quarter of fiscal 1999, our 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 convertible
subordinated 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 taxes of $0.2 million, in the 28-week
period ended August 9, 1999.
FINANCIAL CONDITION
Cash and cash equivalents decreased $2.7 million to $43.5
million in the 28-week period ended August 9, 1999. Investing
activities absorbed $118.1 million of our cash to fund capital
additions of $126.2 million. Partially generating some of the funds
necessary for our investing activities were $9.9 million from the
sale of property and equipment to our franchisees and $1.8 million
from collections on and sale of notes receivable, related party
receivables and leases receivable. Financing activities provided us
with $58.7 million in cash, primarily from the net proceeds of the
issuance of our senior subordinated notes and additional borrowings
under our senior credit facility. Cash flows from operating and
financing activities were mainly used to repay existing
indebtedness of $215.0 million, to fund the remodeling of our
Hardee's restaurants to the new Star Hardee's format and to convert
certain Carl's Jr. restaurants to the Carl's Jr./Green Burrito
dual-brand concepts, to pay $10.7 million of deferred financing
costs associated with our issuance of the senior subordinated
notes, to repay $3.7 million in capital lease obligations and to
pay dividends 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.
12
<PAGE> 14
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(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. Commitments
under the amended senior credit facility will be reduced, beginning
in March 2001, by a minimum of $50.0 million each year. 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.
Additional borrowings under the senior credit facility may be used
for working capital and other general corporate purposes, including
permitted investments and acquisitions. We will be required to
repay borrowings under the senior credit facility with the proceeds
from (1) certain asset sales (unless the net proceeds of such sales
are reinvested in our business), (2) the issuance of certain equity
securities and (3) 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:
o restrictions on our ability to incur additional indebtedness
and incur liens on our assets, subject to specified exceptions;
o requirements that we satisfy specified financial tests as a
precondition to our acquisition of other businesses; and
o limitations on making capital expenditures and certain
restricted payments (including dividends and repurchases of
stock) subject in certain circumstances to specified financial
tests.
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. As of August 9, 1999, we were in
compliance with all of our debt covenants.
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, the remodeling of existing Taco Bueno restaurants,
the conversion of restaurants to the Carl's Jr./Green Burrito
dual-brand concepts and capital expenditures to be incurred in
connection with our integration of Hardee's. In addition, we
recently announced plans to sell to existing or new franchisees at
least 350 company-operated Hardee's and Carl's Jr. units over the
next 12 months. The sale of these restaurants will help us raise
capital to use in our Star Hardee's remodel program and to help
build new Carl's Jr. and Taco Bueno restaurants.
The quick-service restaurant business generally receives
simultaneous cash payment for sales. We presently reinvest the
majority of the net cash flow from operations 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
concept operations, along with cash and cash equivalents on hand as
of August 9, 1999 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 9, 1999 we had $235.0 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, or if we determine to make any
significant acquisitions of or investments in other businesses, we
may be required to sell additional equity or debt securities or
obtain additional credit facilities. Any sales of additional equity
or debt securities could result in additional dilution to our
stockholders. 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.
13
<PAGE> 15
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
YEAR 2000
We are currently working to resolve the potential impact of
the Year 2000 ("Y2K") on the processing of data-sensitive
information by our computerized information systems. Y2K problems
are the result of computer programs being written using two-digits
(rather than four) to define the applicable year. Any of our
programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000, which could
result in miscalculations or system failures.
We have investigated the impact of a Y2K problem on our
business, including our operational, information and financial
systems. Based on this investigation, we do not expect a Y2K
problem, including the cost of making our computerized information
systems Y2K compliant, to have a material adverse impact on our
financial position or results of operations in future periods.
However, our inability to resolve all potential Y2K problems in a
timely manner could have a material adverse impact on us.
We have also initiated communications with significant
suppliers and vendors on whom we rely in an effort to determine the
extent to which our business is vulnerable to the failure by these
third parties to remediate their Y2K problems. While we have not
been informed of any material risks associated with a Y2K problem
for these entities, we cannot assure you that the computerized
information systems of these third parties will be Y2K compliant on
a timely basis. The inability of these third parties to remediate
their Y2K problems could have a material adverse impact on us.
We have completed a review of our information systems and are
involved in a comprehensive program to upgrade computer systems and
applications in connection with our effort to fully integrate our
recent restaurant acquisitions. In conjunction with this computer
upgrade process, we believe we will have addressed any potential
Y2K issues. Total expenditures related to the upgrade of the
information systems are expected to range from $25.0 million to
$30.0 million and will be capitalized or expensed in accordance
with generally accepted accounting principles. Through August 9,
1999, we have incurred approximately $20.5 million of expenditures
consisting of hardware and software purchases, internal staff costs
and outside consulting and other expenditures related to this
upgrade process. These costs are being funded through operating
cash flows.
We have developed or are in the process of developing
contingency plans to handle our most reasonably likely worst case
Y2K scenarios, which we have not yet identified fully. We intend to
complete our determination of worst case scenarios after we have
received and analyzed responses to substantially all of the
inquiries we have made of third-parties. Following this analysis,
which we expect to have completed by November 1999, we intend to
develop a timetable for completing our contingency plans.
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 $500.0 million senior
credit facility, of which $211.0 million remained outstanding as of
August 9, 1999. 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 6.5% in fiscal 2000).
A hypothetical increase of 100 basis points in short-term interest
rates would result in a reduction of approximately $2.1 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 9,
1999. 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.
14
<PAGE> 16
CKE RESTAURANTS, INC. AND SUBSIDIARIES
(Continued)
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) During the second quarter of fiscal 2000, the Company issued
54,501 shares of common stock in connection with the release of
certain claims asserted against the Company relating to the
operations of Boston West, LLC. The shares of common stock were
issued pursuant to Section 4 (2) of the Securities Act of 1933 as a
transaction by an issuer not involving any public offering. The
Company believes that all of the purchasers were familiar with and
had access to information concerning the operations and financial
condition of the Company and had the required investment intent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
The Annual Meeting of Stockholders of CKE Restaurants, Inc.
was held on June 15, 1999, for the purpose of electing certain
members of the board of directors and to approve the CKE
Restaurants, Inc. 1999 Stock Incentive Plan and ratification of
Stock Option Grants.
Management's nominees for directors, whose term expired as of
the date of the Annual Meeting, were elected by the following vote:
<TABLE>
<CAPTION>
Shares Voted Authority to Vote
"For" "Withheld"
------------ ------------------
<S> <C> <C>
Daniel D. Lane 44,699,689 399,858
Peter Churm 44,691,226 348,321
</TABLE>
The following individuals continue to serve on the board of
directors: Byron Allumbaugh, William P. Foley, Carl L. Karcher,
Carl N. Karcher, W. Howard Lester and Frank P. Willey.
The proposal to approve the CKE Restaurants, Inc. 1999 Stock
Incentive Plan and ratification of Stock Option Grants received the
following votes:
<TABLE>
<CAPTION>
Votes Percentage
---------- ----------
<S> <C> <C>
Shares Voted "For" 21,889,935 57.16%
Shares Voted "Against" 16,247,485 42.43%
Shares Voted "Abstain" 156,669 .41%
</TABLE>
15
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 Calculation of Earnings Per Share.
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 22, 1999 /s/ Carl A. Strunk
------------------ ---------------------------
Date Executive Vice President,
Chief Financial Officer
16
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit # Description
--------- -----------
<S> <C>
11 Calculation of Earnings Per Share.
12-1 Computation of Ratios
27-1 Financial Data Schedule (included only with
electronic filing).
</TABLE>
17
<PAGE> 1
EXHIBIT 11
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-eight Weeks Ended
-------------------- ------------------------
August 9, August 10, August 9, August 10,
1999 1998 1999 1998
------- -------- ------- --------
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income before extraordinary item $10,298 $22,604 $29,428 $45,336
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes of $186 -- -- 290 --
------- ------- ------- -------
Net income $10,298 $22,604 $29,718 $45,336
======= ======= ======= =======
Weighted average number of common shares
outstanding during the period 52,009 51,503 51,934 51,366
======= ======= ======= =======
Basic earnings per share before extraordinary item $ 0.20 $ 0.44 $ 0.56 $ 0.88
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes - basic -- -- .01 --
------- ------- ------- -------
Basic net income per share $ 0.20 $ 0.44 $ 0.57 $ 0.88
======= ======= ======= =======
DILUTED EARNINGS PER SHARE
Income before extraordinary item $10,298 $22,604 $29,428 $45,336
Interest expense and amortization of debt issuance costs,
net of income tax effect applicable to convertible
subordinated notes 1,049 1,301 2,464 2,317
------- ------- ------- -------
Diluted income before extraordinary item $11,347 $23,905 $31,892 $47,653
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes of $186 -- -- 290 --
------- ------- ------- -------
Diluted net income $11,347 $23,905 $32,182 $47,653
======= ======= ======= =======
Weighted average number of common shares outstanding
during the period 52,009 51,503 51,934 51,366
Incremental common shares attributable to:
Exercise of outstanding options 544 1,562 691 1,631
Issuance of convertible subordinated notes 3,633 4,500 3,638 3,576
------- ------- ------- -------
Total shares 56,186 57,565 56,263 56,573
======= ======= ======= =======
Diluted net income per share before extraordinary item $ 0.20 $ 0.42 $ 0.56 $ 0.84
Extraordinary item - gain on early retirement of debt,
net of applicable income taxes - diluted -- -- .01 --
------- ------- ------- -------
Diluted earnings per share $ 0.20 $ 0.42 $ 0.57 $ 0.84
======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 12-1
CKE RESTAURANTS, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in thousands)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
-----------------------------
August 9, August 10,
1999 1998
---------- ----------
<S> <C> <C>
Earnings before fixed charges:
Income before income taxes and
extraordinary item.................................... $ 29,428 $ 45,336
Fixed charges................................................ 45,211 36,593
---------- ----------
$ 74,639 $ 81,929
========== ==========
Fixed charges:
Interest expense......................................... $ 29,170 $ 21,842
Interest component of rent expense (1)................... 16,041 14,751
---------- ----------
$ 45,211 $ 36,593
========== ==========
Ratio of earnings to fixed charges........................... 1.7x 2.2x
========== ==========
</TABLE>
- -----------
(1) Calculated as one-third of total rent expense
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) CKE
RESTAURANTS, INC. CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF
INCOME AS OF AND FOR THE 28-WEEKS ENDED AUGUST 9, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
AUGUST 9, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> JAN-26-1999
<PERIOD-END> AUG-09-1999
<CASH> 43,548
<SECURITIES> 0
<RECEIVABLES> 60,239
<ALLOWANCES> 0
<INVENTORY> 25,951
<CURRENT-ASSETS> 137,017
<PP&E> 1,308,360
<DEPRECIATION> 293,915
<TOTAL-ASSETS> 1,582,548
<CURRENT-LIABILITIES> 197,417
<BONDS> 0
521
0
<COMMON> 0
<OTHER-SE> 616,007
<TOTAL-LIABILITY-AND-EQUITY> 1,582,548
<SALES> 970,168
<TOTAL-REVENUES> 1,060,982
<CGS> 783,119
<TOTAL-COSTS> 982,230
<OTHER-EXPENSES> 1,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,170
<INCOME-PRETAX> 48,505
<INCOME-TAX> 19,707
<INCOME-CONTINUING> 29,428
<DISCONTINUED> 0
<EXTRAORDINARY> 290
<CHANGES> 0
<NET-INCOME> 29,718
<EPS-BASIC> .57
<EPS-DILUTED> .57
</TABLE>
