CKE Restaurants, Inc. (NYSE: CKR) today announced the results for its third fiscal quarter, the 12 weeks ended November 6, 2000. Results for the quarter are as follows:
• Net loss for the third quarter was $29.4 million, or $(0.58) per share on a diluted basis, compared with net income of $3.0 million, or $0.06 per share on a diluted basis for the same prior-year period.
Excluding the impact of the net losses incurred on the sale of Company-operated restaurants during the quarter of $31.9 million (before income taxes), as well as certain non-recurring charges relating to increasing the Company’s self-insurance reserves and store closure reserves, the net loss would have been $7.4 million or $(0.15) per share on a diluted basis.
• Revenues for the 12 weeks decreased $46.1 million, or 10.2 percent, to $407.5 million as compared with the third quarter of the prior year. Revenues for Carl’s Jr. and Taco Bueno increased $7.7 million and $1.7 million, or 4.7 percent and 8.1 percent, respectively, while Hardee’s revenues decreased $55.4 million from the prior-year period. The decrease in Hardee’s revenues is primarily due to the divestiture
of Company-operated restaurants during the current fiscal year in connection with the Company’s previously announced refranchising
program.
• Company-operated restaurant-level margins for the quarter were
17.6 percent for Carl’s Jr., down 4.7 percent as compared with
the prior year. Hardee’s Company-operated restaurant-level margins
were 4.4 percent in the third quarter of fiscal year 2001 as compared
with 12.2 percent in the prior year. Taco Bueno’s restaurant-level
margins were 19.7 percent, down 4.1 percent from the prior year.
Excluding the impact of certain non-recurring charges relating to the
Company’s self-insurance reserves and store closure reserves occurring
during the third quarter, Carl’s Jr. and Hardee’s margins were 19.5%
and 5.7%, respectively.
• Company-operated Carl’s Jr. same-store sales increased 1.1 percent for
the third quarter and same-store sales for the Carl’s Jr. franchise
system were up 3.7 percent, for an overall system increase of
2.0 percent. Company-operated Hardee’s same-store sales were down
6.3 percent. Hardee’s franchise restaurants were down 5.7 percent for
the quarter, for systemwide same-store sales of negative 5.9 percent.
Same-store sales at Taco Bueno decreased 1.2 percent for the quarter.
• Excluding the impact of the net losses incurred on the sale of
Company-operated restaurants during the quarter of $31.9 million
(before income taxes), as well as certain non-recurring charges
relating to increasing the Company’s self-insurance reserves and store
closure reserves, EBITDA would have been $28.3 million for the
quarter, as compared to $43.9 million for the prior year quarter.
Year-to-date results are as follows:
• Net loss for the 40-week period was $45.8 million, or $(0.91) per
share on a diluted basis, compared with net income of $32.7 million,
or $0.62 per share on a diluted basis for the same period of the prior
year. Excluding the impact of the net losses incurred on the sale of
Company-operated restaurants during the year of $48.9 million (before
income taxes), as well as certain non-recurring charges relating to
increasing the Company’s self-insurance reserves and store closure
reserves, the net loss would have been $13.4 million or $(0.26) per
share on a diluted basis.
• Revenues for the 40 weeks decreased to $1.430 billion, down
$84.2 million, or 5.6 percent, from the prior year-to-date period.
Revenues increased $36.3 million, or 6.8 percent, for the Carl’s Jr.
chain and revenues for the Taco Bueno chain increased $6.2 million or
8.9 percent from the prior year-to-date period. Hardee’s revenues
decreased $126.2 million, or 14.0 percent, as compared to the prior
year-to-date period. The decrease in Hardee’s revenues is primarily
due to the divestiture of Company-operated restaurants during the
current fiscal year in connection with the Company’s previously
announced refranchising program.
• Company-operated restaurant-level margins for the Carl’s Jr. chain
decreased 3.4 percent to 20.2 percent for the 40 weeks. Restaurant-
level margins at Taco Bueno were 21.9 percent, a decrease of
3.6 percent as compared to the prior year-to-date period. Hardee’s
restaurant-level margins decreased to 8.2 percent from 15.0 percent in
the prior year-to-date period. Excluding the impact of certain
non-recurring charges relating to the Company’s self-insurance
reserves and store closure reserves occurring during the year,
Carl’s Jr. and Hardee’s margins were 20.8% and 8.5%, respectively.
• Excluding the impact of the net losses incurred on the sale of
Company-operated restaurants during the year to date period of
$48.9 million (before income taxes), as well as certain non-recurring
charges relating to increasing the Company’s self-insurance reserves
and store closure reserves, EBITDA would have been $117.5 million for
the year to date period, as compared to $172.2 million for the prior
year to date period.
“We will never be satisfied with a quarter in which we lose money and we are not satisfied with this one,” said Andrew F. Puzder, CKE’s president and chief executive officer. “However, our third quarter results have dulled neither our enthusiasm nor our excitement with respect to the steps we implemented during the third quarter to improve profitability, reduce our leverage and turn Hardee’s operations. Since the inception of our refranchising and debt reduction program, we have made significant progress in achieving our goals while reducing our senior debt to $208 million. We have now sold 341 Hardee’s restaurants and 43 Carl’s Jr. restaurants and, along with proceeds generated from the sale of other assets, have raised $123.6 million in after-tax net proceeds. With several transactions pending, we believe that our refranchising and debt reduction program will continue on course.”
“We are also focused on the Hardee’s concept like a laser beam—to improve operations and turn sales. We believe that Hardee’s must improve service and cleanliness before sales will improve. All of Hardee’s is focused on making these improvements,” said Puzder.
CKE also recently announced the appointment of a new advertising agency for Hardee’s. Cliff Freeman & Partners, based in New York, will be responsible for national creative duties for Hardee’s estimated $80 million advertising account. “We now believe we have one of the top creative agencies in the country focused on the Hardee’s account. It is hard not to be excited about the marketing opportunities we have before us with this agency and our focus on improved operations. We expect that this partnership will be successful at focusing on the qualities that made Hardee’s great, such as our made from scratch products and our hometown heritage,” Puzder said. Hardee’s new advertising campaign is expected to debut during the first quarter of 2001.
Carl’s Jr. reported its fourth consecutive quarter of same-store sales increases, up 2.0 percent systemwide. The chain also opened five new units during the quarter. “We continue to focus on guest service and have maintained the additional labor in the restaurants that we added earlier this year,” said Puzder. “This has reduced our margins but we feel the additional labor is necessary to continue the exemplary service our guests deserve and expect at Carl’s Jr.”
“While the letter of intent for Taco Bueno which we previously announced has not resulted in a definitive purchase agreement, we are in discussions with a number of potential purchasers for Taco Bueno,” said Puzder. “We are also actively pursuing a sale/leaseback transaction with respect to certain Taco Bueno real estate assets which could raise as much as $50 million without a sale of the underlying brand. We would then have the option of selling the Taco Bueno brand in a phase-two transaction.”
CKE Restaurants, Inc., through its subsidiaries, franchisees and licensees, operates more than 3,800 quick-service restaurants, including 973 Carl’s Jr. restaurants located in 13 Western states and Mexico; 2,724 Hardee’s restaurants in 32 states and 11 foreign countries; and 125 Taco Bueno restaurants in Texas and Oklahoma.
