Industry News | July 22, 2002

Moody's Revises CKE Outlook to Stable from Negative

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Friday afternoon, Moody's Investors Service issued a release revising its outlook for CKE Restaurants, Inc. from negative to stable. Moody's also confirmed all ratings for the approximate $350 million of CKE Restaurants debt securities.

In the release, Moody's stated, "The stable outlook reflects our expectation that [CKE Restaurants] will continue improving operations (using measurements such as comparable store sales and segment margins) and reducing leverage. Moody's expects that cash flow from operations will cover capital expenditures, including the Hardee's store remodel program, and debt service obligations. Over the medium term, ratings could move upward as the company improves free cash flow, the 2004 convertible notes are successfully refinanced, and the system profitably expands."

On the same day, CKE Restaurants, Inc. announced period 6 same-store sales, for the four weeks ended July 15th for each of its major brands—Carl's Jr., Hardee's and La Salsa.

Commenting on the performance for the period, Andrew F. Puzder, President and Chief Executive Officer, said, "Following same-store sales increases in the prior-year period at all three brands, sales at Carl's Jr. and La Salsa were modestly higher for the period while sales at Hardee's were down."

Continued Puzder, "Heavy promotions and discounting contributed to an increase of 3.1% in same-store sales performance at Hardee's in the prior year. However, such practices have historically been at the expense of operating margins. Over the past year, we began transitioning the brand from one that relied heavily on variety and discounting to one that focused on a limited number of premium products. While the near-term result has been flat same-store sales for the year and quarter to date, our operating margins - and opportunity for increased profitability -- have expanded. These and other efforts at the operating level lay the foundation for future marketing programs and products intended to drive sales."

The Company expects to report same-store sales for period 7 on August 19, 2002.

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