CKE Restaurants, Inc. Reports Third Quarter Fiscal Year 2013 Results

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CKE Restaurants, Inc. Reports Third Quarter Fiscal Year 2013 Results

CARPINTERIA, Calif.--(BUSINESS WIRE)-- CKE Restaurants, Inc. ("CKE Restaurants") announced today its third fiscal quarter financial results for the twelve weeks ended November 5, 2012. The Company expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission ("SEC") on Wednesday, December 12, 2012 after the close of the financial markets.

Company-Operated Same-Store Sales and Average Unit Volumes


Company-operated same-store sales increased 4.6% in the third quarter of fiscal 2013. Carl's Jr. same-store sales increased 5.5% and Hardee's same-store sales increased 3.6% during the quarter.

             
Third QuarterYear-to-date
BrandFY13     FY12FY13     FY12
Carl's Jr.5.5%2.0%3.9%2.0%
Hardee's3.6%1.8%2.6%5.0%
Consolidated4.6%1.9%3.3%3.4%
 

At the end of the third quarter, the fifty-two week average unit volume for company-operated restaurants was $1,291,000. The fifty-two week average unit volumes for Carl's Jr. and Hardee's were $1,457,000 and $1,142,000, respectively.

To date, company-operated same-store sales for the fourth quarter of fiscal 2013 are positive in the low single digits.

Third Quarter Results

The Company reported total revenue of $310.8 million for the fiscal 2013 third quarter, an increase of $18.2 million, or 6.2%, compared to the fiscal 2012 third quarter.

"We are encouraged by the strong momentum of our business and the positive same-store sales results at both brands during the third quarter. We remain focused on maintaining our premium quality brands and improving same-store sales with innovative products and cutting edge advertising that focuses on the taste, quality, and value of our products. The Company has now had nine consecutive quarters of positive company-operated same-store sales," said Andrew F. Puzder, Chief Executive Officer.

For the fiscal 2013 third quarter, company-operated restaurant-level adjusted EBITDA margin was 18.8%, a 190 basis point increase over the prior year third quarter, primarily due to the increase in company-operated same-store sales. Food and packaging costs as a percentage of company-operated restaurants revenue decreased 70 basis points, primarily as a result of higher year over year restaurant pricing and changes in product mix. While beef prices were essentially flat compared to the prior year quarter, commodity costs were higher for flour, chicken and potato products and lower for pork, cheese and dairy products. Occupancy and other expense, excluding depreciation and amortization, as a percentage of company-operated restaurants revenue decreased 80 basis points, primarily as a result of sales leverage, lower utilities expense and reduced repairs and maintenance expense. Advertising expense as a percentage of company-operated restaurants revenue decreased 30 basis points. Refer to the further discussion of company-operated restaurant-level adjusted EBITDA margin under the heading "Non-GAAP Measures" below.

Adjusted EBITDA for the third quarter of fiscal 2013 increased by $8.0 million, or 21.2%, over the prior year third quarter. Adjusted EBITDA was $45.9 million in the third quarter of fiscal 2013 compared to $37.9 million in the prior year third quarter. Adjusted EBITDA represents net income (loss) adjusted to exclude income taxes, interest income and expense, asset impairments, facility action charges, depreciation and amortization, management fees, the effects of acquisition accounting adjustments, and certain non-cash and unusual items. Refer to the further discussion of Adjusted EBITDA under the heading "Non-GAAP Measures" below, which includes a reconciliation of net income (loss) to Adjusted EBITDA.

As of November 5, 2012, cash and cash equivalents were $139.7 million and the Company had $69.4 million available under its credit facility with no borrowings outstanding.

During the third quarter of fiscal 2013, the Company entered into agreements with independent third parties under which the Company sold and leased back 23 restaurant properties. The Company generated proceeds of $33.6 million in connection with these transactions.

Capital expenditures for the fiscal 2013 third quarter were $13.9 million, of which $7.9 million related to new store openings, dual-branding and remodeling projects. For fiscal 2013, the Company expects capital expenditures to be between $60.0 million and $70.0 million.

As of November 5, 2012, the Company's system-wide restaurant portfolio consisted of:

               
Carl's Jr.Hardee'sOtherTotal
Company-operated4234700893
Domestic franchised7001,23071,937
International franchised2262360462
Total1,3491,93673,292
 

Conference Call Information

The Company will host its third quarter fiscal 2013 conference call on Wednesday, December 12, 2012 at 8:00 a.m. (PST). The dial in information is as follows: (973) 500-2164 U.S. and international. The conference ID is 75796622.

A replay will be made available approximately two hours after the conclusion of the live event. The replay will be available for 7 days and can be accessed by calling (404) 537-3406. The conference ID is 75796622.

Company Overview

CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, Calif. As of the end of the third quarter of fiscal 2013, the Company, through its subsidiaries, had a total of 3,292 franchised or company-operated restaurants in 42 states and 27 foreign countries. For more information about CKE Restaurants, please visit www.ckr.com.

Forward-looking Statements

Matters discussed in this press release contain forward-looking statements, including those relating to the Company's fourth quarter financial results, the Company's strategic objectives to maintain its premium quality brands and improve same-store sales, the Company's expected capital expenditures, the timing of the Company's earnings conference call, and the filing of the Company's periodic reports with the SEC, which are based on management's current beliefs and assumptions. Although the Company does not make forward-looking statements unless it has a reasonable basis for doing so, the Company cannot guarantee their accuracy. Such statements are subject to risks and uncertainties that are often difficult to predict, are 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 interest rates, commodity prices, labor costs, energy costs and other expenses; 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; risks associated with implementing the Company's growth strategy, including opening new domestic and international restaurants; 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 effectiveness of our marketing and advertising programs; the seasonality of the Company's operations; the effect of increasing labor costs including health care related costs; increased insurance and/or self-insurance 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 adverse effect of litigation in the ordinary course of business; a significant failure, interruption or security breach of the Company's computer systems or information technology; catastrophic events including war, terrorism and other international conflicts, public health issues or natural causes; 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.

As a result of these risks and uncertainties, or as a result of other risks and uncertainties of which the Company's management is currently unaware or that the Company's management does not presently believe to be material, the Company cannot assure readers that the forward-looking statements in this press release will prove to be accurate. Furthermore, if the Company's forward-looking statements prove to be inaccurate, the impact may be material. In light of the significant uncertainties in these forward-looking statements, readers should not regard these statements as a representation or warranty by the Company or any other person that the Company will achieve its objectives and plans in any specified time frame, or at all. The forward-looking statements in this press release speak only as of the date of this press release.

The Company expressly disclaims any obligation to publicly update or revise any forward-looking statement, whether to conform such statement to actual results or as a result of changes in the opinions or expectations of the Company's management, new information, future events or otherwise, in each case except as required by law.

        

CKE RESTAURANTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)


(Unaudited)

 
Twelve Weeks EndedForty Weeks Ended

November 5,

2012

   

November 7,

2011

November 5,

2012

   

November 7,

2011

Revenue:
Company-operated restaurants$268,588$256,976$900,788$871,571
Franchised restaurants and other42,211 35,643 130,969 121,360 
Total revenue310,799 292,619 1,031,757 992,931 
Operating costs and expenses:
Restaurant operating costs:
Food and packaging80,31078,763268,925267,896
Payroll and other employee benefits75,65972,485254,657249,458
Occupancy and other61,324 62,926 204,801 209,002 
Total restaurant operating costs217,293214,174728,383726,356
Franchised restaurants and other21,56417,90766,04762,225
Advertising15,58215,69852,45051,158
General and administrative30,80030,570102,288100,876
Facility action charges, net1022622,532703
Other operating expenses   545 
Total operating costs and expenses285,341 278,611 951,700 941,863 
Operating income25,45814,00880,05751,068
Interest expense(17,381)(17,415)(59,014)(59,626)
Other income (expense), net430 (252)(1,600)(1,668)
Income (loss) before income taxes8,507(3,659)19,443(10,226)
Income tax expense (benefit)3,691 (2,142)3,350 (3,877)
Net income (loss)$4,816 $(1,517)$16,093 $(6,349)
 
           

CKE RESTAURANTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except shares and par values)


(Unaudited)

 
November 5, 2012January 31, 2012
ASSETS
Current assets:
Cash and cash equivalents$139,723$64,555
Accounts receivable, net of allowance for doubtful accounts of $62 as of November 5, 2012 and $38 as of January 31, 201221,83624,099
Related party trade receivables389252
Inventories14,21716,144
Prepaid expenses14,92215,897
Advertising fund assets, restricted23,21418,407
Deferred income tax assets, net24,02325,140
Other current assets3,922 3,695 
Total current assets242,246168,189
Property and equipment, net of accumulated depreciation and amortization of $173,459 as of November 5, 2012 and $117,010 as of January 31, 2012623,962645,552
Goodwill208,923208,885
Intangible assets, net of accumulated amortization of $30,327 as of November 5, 2012 and $21,245 as of January 31, 2012421,684433,139
Other assets, net26,487 24,373 
Total assets$1,523,302 $1,480,138 
 
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt$4$3
Current portion of capital lease obligations8,0347,988
Accounts payable33,04040,790
Advertising fund liabilities23,21418,407
Other current liabilities122,043 85,169 
Total current liabilities186,335152,357
Long-term debt, less current portion465,297523,638
Capital lease obligations, less current portion30,53534,981
Deferred income tax liabilities, net
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