Industry News | December 10, 2008

Income Down at CKE for Q3

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CKE Restaurants Inc. (NYSE:CKR - News) announced today third quarter results and the filing of its Report on Form 10-Q with the Securities and Exchange Commission (“SEC”) for the twelve weeks ended Nov. 3, 2008.

Third Quarter Highlights

* Third quarter income before income taxes and discontinued operations was $9.2 million versus $12.9 million in the prior year quarter. This year’s results include $4.9 million of interest expense to mark-to-market our interest rate swap agreements versus a $1.8 million expense in the prior year quarter. Absent these mark-to-market adjustments, third quarter income before taxes and discontinued operations would have been $14.1 million versus $14.7 million in the prior year quarter.

* Third quarter net income was $5.4 million, or $0.10 per diluted share, versus $6.2 million, or $0.11 per diluted share, in the prior year quarter. Income from continuing operations was $5.4 million, or $0.10 per diluted share, versus $7.5 million, or $0.13 per diluted share, in the prior year quarter. Absent the additional interest expense related to our interest rate swap agreements, income from continuing operations would have been $8.3 million, or $0.15 per diluted share, versus income from continuing operations of $8.6 million, or $0.15 per diluted share, in the prior year quarter.

* Blended company-operated same-store sales for the third quarter of fiscal 2009 increased 0.9 percent. Same-store sales increased 0.5 percent and 1.3 percent at Carl’s Jr. and Hardee’s company-operated restaurants, respectively.

* Blended average unit volume for the trailing-13 periods was $1,221,000 at company-operated restaurants. Average unit volumes for the trailing-13 periods increased to $1,529,000 and $982,000 at company-operated Carl’s Jr. and Hardee’s restaurants, respectively.

* Consolidated restaurant operating costs increased 50 basis points to 82.1 percent of company-operated restaurants revenue. Occupancy and other costs increased 130 basis points, primarily due to higher utility costs and depreciation expense increases mainly related to our remodel program at both brands. These increases more than offset a reduction in payroll and employee benefits costs (70 basis points). Food and packaging costs were 10 basis points below the prior year quarter.

* Restaurant operating costs at Carl’s Jr. company-operated restaurants increased 120 basis points, compared to the prior year quarter, to 80.0 percent of company-operated restaurants revenue. The increase was primarily attributable to higher utility costs (50 basis points) and rent (30 basis points) and increased depreciation expense (40 basis points) mainly related to our ongoing remodel program. Food and packaging costs increased 20 basis points over the prior year quarter.

* Restaurant operating costs at Hardee’s company-operated restaurants increased 40 basis points, compared to the prior year quarter, to 84.7 percent of company-operated restaurants revenue. An increase in asset disposal charges (60 basis points) mainly related to rebuilding two restaurants and higher depreciation expense (90 basis points) primarily related to our remodel program more than offset lower payroll and employee benefits expense (130 basis points). Food and packaging costs were 20 basis points lower than the prior year quarter.

* Consolidated revenue for the current year quarter was $336.6 million, a 4.3 percent decrease from the prior year quarter. Company-operated restaurants revenue for the current year quarter was $255.5 million, a 6.5 percent decrease from the prior year quarter, reflecting the refranchising of 118 Hardee’s restaurants partially offset by the opening of 25 new company-operated restaurants over the trailing-13 periods and positive same-store sales over the prior year quarter.

* For the twelve weeks ended Nov. 3, 2008, the Company generated earnings before interest, income taxes, depreciation and amortization, facility action charges and share-based compensation expense (“Adjusted EBITDA”) of $37.3 million, versus $36.7 million in the prior year quarter.

* For the forty weeks ended Nov. 3, 2008, the Company generated Adjusted EBITDA of $132.9 million, versus $129.4 million in the comparable prior year period. For the trailing-13 periods ended Nov. 3, 2008, the Company generated Adjusted EBITDA of $168.5 million.

* Fully diluted shares outstanding for both the twelve and forty weeks ended Nov. 3, 2008, were 54.3 million.

News and information presented in this release has not been corroborated by QSR, Food News Media, or Journalistic, Inc.