CKE Restaurants' fiscal Q1 loss narrows to US$2.6M from US$3.1M a year ago as revenue fell 8% to US$400.6M due to sale of Carl's Jr. distribution business; excluding distribution center sale, revenue increased 7.3%
June 29, 2011
– CKE Restaurants, Inc. (“CKE”) announced today its first fiscal quarter financial results for the sixteen weeks ended May 23, 2011. The Company expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”) on Wednesday, June 29, 2011 after the close of the financial markets.
May 23, 2011
May 17, 2010
As previously reported, on July 12, 2010, CKE Holdings, Inc., an affiliate of Apollo Management VII, L.P., acquired all of the outstanding shares of the Company (the “Merger”). As of May 23, 2011, the purchase price allocation related to the Merger remains preliminary and is subject to change. Any subsequent changes to the purchase price allocation that result in material changes to the consolidated financial results will be adjusted retrospectively. The final purchase price allocation is expected to be completed within a one year time period following the acquisition date.
All references to “Predecessor” relate to CKE and its consolidated subsidiaries for periods prior to the Merger and references to “Successor” relate to CKE and its consolidated subsidiaries for periods subsequent to the Merger. The discussion of the Company’s first quarter results compares the results of operations for the Successor sixteen weeks ended May 23, 2011 to the Predecessor sixteen weeks ended May 17, 2010.
Company-Operated Same-Store Sales and Average Unit Volumes
Blended same-store sales increased 5.5% in the first quarter of fiscal 2012. Hardee’s® same-store sales increased 9.6% and Carl’s Jr.® same-store sales increased 2.1%.
At the end of the first quarter, the blended fifty-two week average unit volume for Carl’s Jr. and Hardee’s was $1,231,000. The fifty-two week average unit volumes for Carl’s Jr. and Hardee’s were $1,389,000 and $1,088,000, respectively.
To date, the Company’s blended same-store sales for the second quarter of fiscal 2012 are positive in the low single digit range.
First Quarter Results
The Company reported total revenue of $400.6 million for the fiscal 2012 first quarter, a decrease of $34.6 million, or 8.0%, compared to the fiscal 2011 first quarter. The decrease was attributable to the sale of the Carl’s Jr. distribution business on July 2, 2010. Total revenue, excluding the Carl’s Jr. distribution center revenue in the prior year quarter, increased by $27.3 million, or 7.3%.
“Hardee’s continued to generate strong same-store sales results during the first quarter. The 9.6% increase is Hardee’s best quarterly same-store sales result in seven years. Including period four, Hardee’s has now had sixteen consecutive periods of positive same-store sales. Carl’s Jr. also performed well, posting a 2.1% increase in same-store sales for the 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 17.0%. Food and packaging costs increased 130 basis points as a result of higher commodity costs for beef, cheese, pork and oil. This increase was offset by an 80 basis point decrease in labor costs primarily due to the impact of sales leverage as well as 30 basis point decreases in both occupancy and other expense and advertising expense. Refer to the further discussion of company-operated restaurant-level adjusted EBITDA margin under the heading “Non-GAAP Measures” below.
Adjusted EBITDA was $51.5 million in the first quarter of fiscal 2012, a $4.4 million improvement over the prior year quarter, which represents a 9.3% increase. Refer to the further discussion of Adjusted EBITDA under the heading “Non-GAAP Measures” below, which includes a reconciliation of net loss to Adjusted EBITDA.
As of May 23, 2011, cash and cash equivalents were $75.9 million and the Company had $65.2 million available under its credit facility.
On June 14, 2011, the Company announced that it will redeem $40.0 million aggregate principal amount of its outstanding 11.375% Senior Secured Second Lien Notes due 2018 (the “Notes”) on July 15, 2011 at a price equal to 103.0% of the principal amount of the Notes. Upon completion of the redemption, $560.0 million aggregate principal amount of the Notes will remain outstanding.
Capital expenditures for the fiscal 2012 first quarter were $13.6 million, of which $8.0 million related to new store openings, dual-branding and remodeling projects. For fiscal 2012, the Company expects capital expenditures to be between $60.0 million and $70.0 million.
Conference Call Information
The Company will host its first quarter fiscal 2012 conference call on Wednesday, June 29, 2011, at 7:00 a.m. (PDT). The dial in information is as follows: (973) 500-2164 U.S. and international. The conference ID is 77005579.
CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, Calif. As of the end of the first quarter of fiscal 2012, the Company, through its subsidiaries, had a total of 3,182 franchised, licensed or company-operated restaurants in 42 states and in 20 countries. For more information about CKE, please visit www.ckr.com.
Matters discussed in this press release contain forward-looking statements, including those relating to expected capital expenditures, redemption of a portion of the Notes and the filing of the Company’s periodic reports with the SEC, which are based on management’s current beliefs and assumptions. These statements constitute “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control and which may cause results to differ materially from expectations. Factors that could cause the Company’s results to differ materially from those described include, but are not limited to, the Company’s ability to compete with other restaurants, supermarkets and convenience stores for customers, employees, restaurant locations and franchisees; changes in consumer preferences, perceptions and spending patterns; changes in food, packaging and supply costs; the ability of the Company’s key suppliers to continue to deliver premium-quality products to the Company at moderate prices; the Company’s ability to successfully enter new markets, complete construction of new restaurants and complete remodels of existing restaurants; changes in general economic conditions and the geographic concentration of the Company’s restaurants, which may affect the Company’s business; the Company’s ability to attract and retain key personnel; the Company’s franchisees’ willingness to participate in the Company’s strategy; the operational and financial success of the Company’s franchisees; the willingness of the Company’s vendors and service providers to supply goods and services pursuant to customary credit arrangements; risks associated with operating in international locations; the effect of the media’s reports regarding food-borne illnesses, food tampering and other health-related issues on the Company’s reputation and its ability to procure or sell food products; the seasonality of the Company’s operations; the effect of increasing labor costs including healthcare related costs; the Company’s ability to comply with existing and future health, employment, environmental and other government regulations; the Company’s ability to adequately protect its intellectual property; the potentially conflicting interests of the Company’s sole stockholder and the Company’s creditors, the Company’s substantial leverage which could limit its ability to raise capital, react to economic changes or meet obligations under its indebtedness; the effect of restrictive covenants in the Company’s indenture and credit facility on the Company’s business; and other factors as discussed in the Company’s filings with the SEC.
You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date of this press release. We undertake no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise, except as required by law.
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Franchised and licensed restaurants and other
Operating costs and expenses:
Restaurant operating costs:
Food and packaging
Payroll and other employee benefits
Occupancy and other
Total restaurant operating costs
Franchised and licensed restaurants and other
General and administrative
Facility action charges, net
Other operating expenses, net(1)
Total operating costs and expenses
Other income (expense), net(2)
Loss before income taxes
Income tax benefit
(1) Other operating expenses, net includes transaction-related costs consisting of accounting, investment banking, legal, and other costs.
May 23, 2011
May 17, 2010
(2) Other income (expense), net includes transaction-related costs related to the termination of a prior merger agreement of $14,283 for the Predecessor sixteen weeks ended May 17, 2010.
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