CKE Restaurants posts fiscal Q4 net loss of US$5.6M, versus net income of US$15.4M a year ago, as total revenue fell 4.7% to US$297M on sale of Carl's Jr. distribution business; blended same-store sales up 2.3%, boosted by Hardee's

CARPINTERIA, California , April 15, 2011 (press release) – CKE Restaurants, Inc. announced today its financial results for the fourth quarter and fiscal year ended January 31, 2011. The Company expects to file its Annual Report on Form 10-K for fiscal 2011 with the Securities and Exchange Commission (“SEC”) on Friday, April 15, 2011 after the close of the financial markets.

The fourth quarter and fiscal year ended January 31, 2011, included 13 weeks and 53 weeks, respectively, as compared to 12 weeks and 52 weeks in the fourth quarter and fiscal year ended January 25, 2010. As previously reported, on July 12, 2010, CKE Holdings, Inc., formerly known as Columbia Lake Acquisition Holdings, Inc., an affiliate of Apollo Management VII, L.P., acquired all of the outstanding shares of the Company (the “Merger”). As of January 31, 2011, the purchase price allocation related to the Merger remains preliminary and could change materially in subsequent periods. Any subsequent changes to the purchase price allocation that result in material changes to the consolidated financial results will be adjusted retrospectively.

The Company’s results of operations for fiscal 2011 and related information have been prepared by adding the results of operations for the twenty-nine weeks ended January 31, 2011 (the “Successor” period) and the twenty-four weeks ended July 12, 2010, which precedes the Merger (the “Predecessor” period), and are compared to the Predecessor results for fiscal 2010. This combined presentation does not comply with generally accepted accounting principles; however, the Company believes that it provides a meaningful method of comparison. The discussion of the Company’s fourth quarter results compares the results of operations for the Successor thirteen weeks ended January 31, 2011 to the Predecessor twelve weeks ended January 25, 2010.

Company-Operated Same-Store Sales and Average Unit Volumes

Blended same-store sales increased 2.3% in the fourth quarter of fiscal 2011. Hardee’s® same-store sales increased 5.7%, and Carl’s Jr.® same-store sales declined 0.4%.

Fiscal 2011 blended same-store sales declined 0.8%. Hardee’s same-store sales increased 4.4%, and Carl’s Jr. same-store sales declined 4.8%.

                                     
                        Q4           Fiscal Year
                Brand       FY11       FY10           FY11       FY10
                Carl's Jr.       -0.4 %       -8.7 %           -4.8 %       -6.2 %
                Hardee's       5.7 %       -2.5 %           4.4 %       -0.9 %
                Blended       2.3 %       -6.0 %           -0.8 %       -3.9 %
                                                             

At the end of fiscal 2011, the fifty-two week average unit volumes for Carl’s Jr. and Hardee’s were $1,375,000 and $1,054,000, respectively.

To date, the Company’s first quarter of fiscal 2012 blended same-store sales are tracking positive in the low- to mid- single digit range.

Fourth Quarter Results

The Company reported total revenue of $297.0 million for the fiscal 2011 fourth quarter, a decrease of $14.7 million, or 4.7%, compared to the fiscal 2010 fourth quarter. The decrease was attributable to the sale of the Carl’s Jr. distribution business on July 2, 2010, partially offset by the impact of an additional week in the fiscal 2011 fourth quarter. Total revenue, excluding both the Carl’s Jr. distribution center revenue in the prior year quarter and the impact of the additional week, increased by $7.2 million, or 2.7%. The Company estimates the additional week in the fiscal 2011 fourth quarter added approximately $22 million to revenue and approximately $2 million to Adjusted EBITDA.

“Hardee’s continued to generate strong same-store sales results during the fourth quarter. Including period 13, Hardee’s has now had twelve consecutive periods of positive same-store sales. Carl’s Jr. fourth quarter same-store sales results showed significant sequential improvement over the third quarter. We are pleased to have generated $37.1 million of Adjusted EBITDA in the fourth 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 17.1%. Food and packaging costs increased 50 basis points as a result of higher commodity costs for beef, pork and cheese, and there were slight increases in advertising and in occupancy and other costs (excluding depreciation and amortization). These increases were offset by a 60 basis point decrease in labor costs primarily due to the impact of sales leverage at Hardee’s restaurants and lower employer payroll taxes due to favorable payroll tax legislation which expired on December 31, 2010. Refer to the further discussion of company-operated restaurant-level adjusted EBITDA margin under the heading “Non-GAAP Measures” below.

Adjusted EBITDA was $37.1 million in the fiscal 2011 fourth quarter compared to $32.8 million in the same quarter of the prior year. Excluding the estimated impact of the additional week, fourth quarter Adjusted EBITDA increased by $2.3 million over the prior year fourth quarter. Refer to the further discussion of Adjusted EBITDA under the heading “Non-GAAP Measures” below, which includes a reconciliation of net (loss) income to Adjusted EBITDA.

Fiscal 2011 Results

The Company reported total revenue of $1,330.6 million for fiscal 2011, a decrease of $88.1 million, or 6.2%, compared to fiscal 2010. The decrease was primarily attributable to the sale of the Carl’s Jr. distribution business on July 2, 2010, partially offset by the impact of a fifty-third week in fiscal 2011. Total revenue, excluding both the Carl’s Jr. distribution center revenue and the impact of the additional week, decreased by $5.2 million, or 0.4%. The Company estimates the additional week in fiscal 2011 added approximately $22 million to revenue.

Adjusted EBITDA for fiscal 2011 was $164.9 million, as compared to $167.0 million for fiscal 2010. Refer to the further discussion of Adjusted EBITDA under the heading “Non-GAAP Measures” below, which includes a reconciliation of net (loss) income to Adjusted EBITDA.

As of January 31, 2011, cash and cash equivalents were $42.6 million and the Company had $65.1 million available under its credit facility.

Capital expenditures for fiscal 2011 were $63.1 million, of which $35.8 million related to new store openings, dual-branding and remodeling projects. Capital expenditures for fiscal 2010 were $102.4 million. For fiscal 2012, the Company expects capital expenditures to be between $60.0 million and $70.0 million.

As of January 31, 2011, the Company’s system-wide restaurant portfolio consisted of:

                        Carl’s Jr.       Hardee’s       Other       Total
      Company-operated                 423       466       1       890
      Franchised                 674       1,226       10       1,910
      Licensed                 152       207             359
      Total                 1,249       1,899       11       3,159

Conference Call Information

The Company will host its fourth quarter and fiscal 2011 conference call on Friday, April 15, 2011, at 6:00 a.m. (PDT). The dial in information is as follows: 973-500-2164 U.S. and international. The conference ID is 58961164. You may also access the conference call via the Company's website at www.ckr.com under "Investors".

Company Overview

CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, Calif. As of the end of fiscal 2011, the Company, through its subsidiaries, had a total of 3,159 franchised, licensed or company-operated restaurants in 42 states and in 18 countries. For more information about CKE, please visit www.ckr.com.

Estimated Impact of Additional Week

The Company’s fiscal year ends on the last Monday in January in each year, which resulted in an extra week during fiscal 2011. As a result, the fourth quarter and fiscal year ended January 31, 2011, included 13 weeks and 53 weeks, respectively, as compared to 12 weeks and 52 weeks in the fourth quarter and fiscal year ended January 25, 2010.

Management has estimated the impact of the additional week on its operating results by analyzing the last accounting period of fiscal 2011, excluding the impact of certain year-end and quarter-end adjustments, and making various assumptions that were deemed reasonable and appropriate.
 

CKE RESTAURANTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

(Unaudited)

 
           

Successor

         

Predecessor

         

Thirteen Weeks Ended

         

Twelve Weeks Ended

         

January 31, 2011

         

January 25, 2010

Revenue:                        
Company-operated restaurants           $ 262,705             $ 236,820  
Franchised and licensed restaurants and other             34,338               74,925  
Total revenue             297,043               311,745  
Operating costs and expenses:                        
Restaurant operating costs:                        
Food and packaging             77,122               68,417  
Payroll and other employee benefits             77,557               71,429  
Occupancy and other             64,503               58,600  
Total restaurant operating costs             219,182               198,446  
Franchised and licensed restaurants and other             16,873               57,170  
Advertising             14,753               12,992  
General and administrative             34,829               30,074  
Facility action charges, net             590               1,673  
Other operating expenses, net (1)             174                
Total operating costs and expenses             286,401               300,355  
Operating income             10,642               11,390  
Interest expense             (19,650 )             (4,420 )
Other income, net             693               944  
(Loss) income before income taxes             (8,315 )             7,914  
Income tax benefit             (2,715 )             (7,482 )
Net (loss) income           $ (5,600 )           $ 15,396  
_______

(1) Other operating expenses, net includes transaction-related costs consisting of accounting, investment banking, legal, and other costs.

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