CKE RESTAURANTS®ANNOUNCES THIRD QUARTER FISCAL 2010 RESULTS — Third Quarter Company-Operated Restaurant-Level Margin Increases from Prior Year to 18.1%—
CARPINTERIA, Calif. — December 8, 2009 — CKE Restaurants, Inc. (NYSE:CKR) 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 November 2, 2009.
(1) We define company-operated restaurant-level margin as restaurant-level income divided by company-operated restaurants revenue. Restaurant-level income is company-operated restaurants revenue less restaurant operating costs, which are the expenses incurred directly by our company-operated restaurants in generating revenues and do not include advertising costs, general and administrative expenses or facility action charges. (2) Excludes interest expense, depreciation and amortization, facility action charges, share-based compensation expense, and income tax expense. (3) Diluted earnings per share, excluding mark-to-market adjustments (and related income tax effect at our marginal tax rate of 38.3%) related to our interest rate swap agreements.
Executive Statement “The U.S. economic downturn and particularly high unemployment rates in California and among our core target audience of young men, continued to impact same-store sales at Carl’s Jr.® and Hardee’s®. I am, however, pleased by our increase in company-operated restaurant-level margins and our attractive overall profitability despite these same-store sales headwinds,” said Andrew F. Puzder, chief executive officer. “Our profitability remained strong as we avoided the competition’s deep-discounting tactics and due to favorable commodity costs. We were able to improve our margins despite an 80 basis point increase in depreciation expense for the quarter primarily due to our remodel programs at both brands.
We will continue to emphasize the excellent value-for-the money of our premium products in our advertising while also pursuing new initiatives to improve same-store sales results in these challenging times. Those new initiatives include: the launch of new premium products, such as the Hardee’s Portobello Mushroom Melt Thickburger®; promoting our healthier menu options using cost-effective digital media; and the kick-off later this month of a new line of premium entrée salads at Carl’s Jr. with an attention-getting advertising campaign starring popular celebrity, Kim Kardashian.”
Third Quarter Financial Details
•
Company-operated restaurant-level margin increased 20 basis points to 18.1% of company-operated restaurant revenue despite an 80 basis point increase in depreciation costs, primarily associated with recent remodeling activities. Favorable commodity costs more than offset a 100 basis point increase in labor costs and the increase in depreciation costs.
•
Operating income was $16.3 million, or 5.0% of total revenue compared to $17.8 million, or 5.3% of revenue in the same quarter of the prior year.
•
The Company’s Adjusted EBITDA remained strong at $36.0 million, or 11.1% of total revenue, compared to $37.3 million, or 11.1% in the prior year quarter. For the trailing 13 periods ended November 2, 2009, the Company generated Adjusted EBITDA of $168.1 million.
•
Total quarterly revenue was $324.2 million, a decline of 3.7%.
•
The Company remodeled 15 Carl’s Jr. and 16 Hardee’s restaurants and completed a combined 12 dual-branded Green Burrito® and Red Burrito® restaurant conversions during the quarter.
•
Year-to-date, net cash provided by operations was $118.5 million as compared to $108.4 million in the comparable prior year period.
•
Despite capital expenditures required for the ongoing remodel program, the company reduced its bank and other long-term debt by $37.2 million on a year-to-date basis to $277.6 million. As of November 2, 2009 the Company’s leverage ratio was 2.08.
•
Carl’s Jr. and Hardee’s increased their system-wide unit count by 31 restaurants year-to-date for a consolidated total of 3,147.
Third Quarter Concept Details
Carl’s Jr.
Hardee’s
Blended
Q3
Q3
Q3
Q3
Q3
Q3
FY 2010
FY 2009
FY 2010
FY 2009
FY 2010
FY 2009
Company-Operated Same-Store Sales
-5.2
%
+ 0.5
%
-1.8
%
+ 1.3
%
-3.7
%
+ 0.9
%
Company-Operated Restaurant-Level Margin
19.4
%
20.0
%
16.6
%
15.3
%
18.1
%
17.9
%
Company-Operated Average Unit Volume-Trailing 13 Periods (000)
$
1,468
$
1,529
$
1,004
$
982
$
1,221
$
1,221
•
Carl’s Jr. company-operated same-store sales declined 5.2% as a result of the particularly weak economy in California. On a two-year basis, same-store sales decreased 4.7%. Restaurant-level margin declined to 19.4% compared to the prior year quarter at 20.0% of company-operated restaurants revenue. Increased depreciation of 80 basis points related to the ongoing remodeling program and equipment upgrades and increased labor costs due to sales deleveraging were largely offset by reductions in commodity costs for beef, cheese and oil products, and reduced distribution costs related to lower fuel and administrative costs.
•
Hardee’s company-operated same-store sales decreased 1.8% also due to weak economic conditions. On a two-year basis, same-store sales decreased 0.5%. Company-operated restaurant-level margin increased to 16.6% of company-operated restaurants revenue compared to 15.3% in the prior year quarter despite a 90 basis point increase in depreciation costs, primarily related to recent remodeling activity and equipment upgrades. Lower commodity costs for beef, pork, cheese, and oil products more than offset the increase in depreciation costs as well as a 110 basis point increase in labor costs due primarily to an increase in the federal minimum wage rate.
Conference Call The Company will host a conference call and webcast on December 9, 2009, at 6:00 a.m. PST (9:00a.m. EST) to review these results and discuss the Company’s growth plans. The Company invites investors to listen to the live webcast of the conference call atwww.ckr.com under “Investors.” The dial in information is (617) 213-8059. The access code is 84437428.
SEC Filings The Company’s filings with the SEC are available to investors atwww.ckr.com under “Investors/SEC Filings.”
Non-GAAP Financial Measures Adjusted EBITDA is a non-GAAP measure used by our lenders as an indicator of earnings available to service debt, fund capital expenditures and for other corporate uses. Our maximum annual capital expenditures are limited by our senior credit facility, based on a sliding scale driven by our Adjusted EBITDA. Management internally utilizes various financial measures, excluding mark-to-market adjustments, to evaluate and compare our operating results between periods. We believe that diluted net income and earnings per share, excluding such adjustments, are important metrics to consider in evaluating company performance. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.
CKE Restaurants, Inc. Headquartered in Carpinteria, Calif., CKE Restaurants, Inc. is publicly traded on the New York Stock Exchange under the symbol “CKR.” As of the end of its fiscal 2010 third quarter, CKE Restaurants, Inc., through its subsidiaries, had a total of 3,147 franchised, licensed or company-operated restaurants in 42 states and in 14 countries, including 1,221 Carl’s Jr. restaurants and 1,913 Hardee’s restaurants. For more information about CKE Restaurants, please visitwww.ckr.com.
Safe Harbor Disclosure Matters discussed in this press release contain forward-looking statements relating to the effect of the Company’s future brand strategies, and the impact of the Company’s sales and marketing initiatives, on profitability and future operating results, and are based on management’s current beliefs and assumptions. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control. 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; changes in economic conditions which may affect the Company’s business and stock price; the effect of restrictive covenants in the Company’s credit facility on 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; changes in consumer preferences and perceptions; changes in the price or availability of commodities; changes in the Company’s suppliers’ ability to provide quality products to the Company in a timely manner; the effect of the media’s reports regarding food-borne illnesses and other health-related issues on the Company’s reputation and its ability to obtain products; the seasonality of the Company’s operations; increased insurance and/or self-insurance costs; the Company’s ability to select appropriate restaurant locations, construct new restaurants, complete remodels of existing restaurants and renew leases with favorable terms; the Company’s ability to comply with existing and future health, employment, environmental and other government regulations; and other factors as discussed in the Company’s filings with the Securities and Exchange Commission.
Forward-looking statements speak only as of the date they are made. The Company undertakes 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 or the rules of the New York Stock Exchange.
Source: CKE Restaurants, Inc.
1
CKE RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS AS OF NOVEMBER 2, 2009 AND JANUARY 31, 2009 (In thousands, except par values) (Unaudited)
November 2,
January 31,
2009
2009
ASSETS
Current assets:
Cash and cash equivalents
$
20,068
$
17,869
Accounts receivable, net of allowance for doubtful accounts of $348 as of November 2, 2009 and $720 as of January 31, 2009
35,859
40,738
Related party trade receivables
5,220
4,923
Inventories, net
22,319
24,215
Prepaid expenses
14,041
13,445
Assets held for sale
232
805
Advertising fund assets, restricted
19,527
16,340
Deferred income tax assets, net
17,510
20,781
Other current assets
2,903
1,843
Total current assets
137,679
140,959
Notes receivable, net of allowance for doubtful accounts of $365 as of November 2, 2009 and $529 as of January 31, 2009
1,293
3,259
Property and equipment, net of accumulated depreciation and amortization of $439,999 as of November 2, 2009 and $420,375 as of January 31, 2009
559,964
543,770
Property under capital leases, net of accumulated amortization of $45,978 as of November 2, 2009 and $48,341 as of January 31, 2009
33,658
23,403
Deferred income tax assets, net
41,377
57,832
Goodwill
24,106
23,688
Intangible assets, net
2,369
2,508
Other assets, net
8,503
9,268
Total assets
$
808,949
$
804,687
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of bank indebtedness and other long-term debt
$
2,709
$
4,341
Current portion of capital lease obligations
7,696
6,389
Accounts payable
55,528
60,903
Advertising fund liabilities
19,527
16,340
Other current liabilities
100,727
91,765
Total current liabilities
186,187
179,738
Bank indebtedness and other long-term debt, less current portion
274,929
310,447
Capital lease obligations, less current portion
43,895
36,273
Other long-term liabilities
82,249
83,953
Total liabilities
587,260
610,411
Stockholders’ equity:
Preferred stock, $.01 par value; 5,000 shares authorized; none issued or outstanding
—
—
Series A Junior Participating Preferred stock, $.01 par value; 1,500 shares authorized; none issued or outstanding
—
—
Common stock, $.01 par value; 100,000 shares authorized; 55,179 shares issued and outstanding as of November 2, 2009; 54,653 shares issued and outstanding as of January 31, 2009
552
546
Additional paid-in capital
280,506
276,068
Accumulated deficit
(59,369
)
(82,338
)
Total stockholders’ equity
221,689
194,276
Total liabilities and stockholders’ equity
$
808,949
$
804,687
CKE RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
Twelve Weeks Ended
Forty Weeks Ended
November 2,
November 3,
November 2,
November 3,
2009
2008
2009
2008
Revenue:
Company-operated restaurants
$
246,696
$
255,545
$
847,654
$
880,858
Franchised and licensed restaurants and other
77,521
81,050
259,334
274,398
Total revenue
324,217
336,595
1,106,988
1,155,256
Operating costs and expenses:
Restaurant operating costs:
Food and packaging
69,665
76,785
242,066
262,214
Payroll and other employee benefits
71,386
71,237
241,142
250,349
Occupancy and other
60,874
61,841
201,461
199,687
Total restaurant operating costs
201,925
209,863
684,669
712,250
Franchised and licensed restaurants and other
58,854
61,474
196,680
210,131
Advertising
15,679
15,105
51,451
51,902
General and administrative
30,977
31,156
103,061
108,037
Facility action charges, net
520
1,242
3,022
2,666
Total operating costs and expenses
307,955
318,840
1,038,883
1,084,986
Operating income
16,262
17,755
68,105
70,270
Interest expense
(6,430
)
(9,363
)
(14,834
)
(16,330
)
Other income, net
704
769
1,991
2,290
Income before income taxes
10,536
9,161
55,262
56,230
Income tax expense
4,379
3,773
22,460
21,882
Net income
$
6,157
$
5,388
$
32,802
$
34,348
Income per common share:
Basic
$
0.11
$
0.10
$
0.60
$
0.65
Diluted
$
0.11
$
0.10
$
0.60
$
0.63
Dividends per common share
$
0.06
$
0.06
$
0.18
$
0.18
CKE RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Forty Weeks Ended
November 2,
November 3,
2009
2008
Cash flows from operating activities:
Net income
$
32,802
$
34,348
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
54,317
48,141
Amortization of deferred loan fees
799
948
Share-based compensation expense
6,216
9,515
(Recovery of) provision for losses on accounts and notes receivable
(346
)
15
Loss on sale of property and equipment and capital leases
1,352
1,914
Facility action charges, net
3,022
2,666
Deferred income taxes
19,078
17,723
Other non-cash charges
24
28
Net changes in operating assets and liabilities:
Receivables, inventories, prepaid expenses and other current and non-current assets
4,859
6,226
Estimated liability for closed restaurants and estimated liability for self-insurance
(2,782
)
(4,470
)
Accounts payable and other current and long-term liabilities
(805
)
(8,680
)
Net cash provided by operating activities
118,536
108,374
Cash flows from investing activities:
Purchases of property and equipment
(69,399
)
(82,658
)
Proceeds from sale of property and equipment
3,836
21,042
Collections of non-trade notes receivable
2,330
2,799
Acquisition of restaurants, net of cash acquired
(485
)
—
Other investing activities
111
68
Net cash used in investing activities
(63,607
)
(58,749
)
Cash flows from financing activities:
Net change in bank overdraft
876
(13,911
)
Borrowings under revolving credit facility
98,000
133,500
Repayments of borrowings under revolving credit facility
(131,500
)
(135,000
)
Repayments of credit facility term loan
(3,633
)
(15,815
)
Repayments of other long-term debt
(17
)
(131
)
Repayments of capital lease obligations
(5,637
)
(4,493
)
Payment of deferred loan fees
—
(399
)
Repurchase of common stock
(1,690
)
(4,296
)
Exercise of stock options
569
1,626
Excess tax benefits from exercise of stock options and vesting of restricted stock awards
131
174
Dividends paid on common stock
(9,829
)
(9,449
)
Net cash used in financing activities
(52,730
)
(48,194
)
Net increase in cash and cash equivalents
2,199
1,431
Cash and cash equivalents at beginning of period
17,869
19,993
Cash and cash equivalents at end of period
$
20,068
$
21,424
CKE RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED PRESENTATION OF NON-GAAP MEASUREMENTS (In thousands) (Unaudited)
Reconciliation of net income to Adjusted EBITDA:
Trailing-13
Periods Ended
November 2,
Twelve Weeks Ended
Forty Weeks Ended
2009
November 2,
November 3,
November 2,
November 3,
2009
2008
2009
2008
Net income
$
6,157
$
5,388
$
32,802
$
34,348
$
35,410
Interest expense
6,430
9,363
14,834
16,330
27,113
Income tax expense
4,379
3,773
22,460
21,882
22,111
Depreciation and amortization
16,505
14,835
54,317
48,141
69,673
Facility action charges, net.
520
1,242
3,022
2,666
4,495
Share-based compensation expense
2,000
2,658
6,242
9,524
9,252
Adjusted EBITDA
$
35,991
$
37,259
$
133,677
$
132,891
$
168,054
Reconciliation of net income to net income for computation of diluted income per share, excluding mark-to-market adjustments, and weighted average shares for computation of diluted income per share:
Twelve Weeks Ended
November 2,
November 3,
2009
2008
Net income
$
6,157
$
5,388
Add: Interest and amortization costs for 2023 Convertible Notes, net of related tax effect
—
56
Less: Distributed and undistributed income attributable to unvested restricted stock awards
(103
)
(105
)
Income for computation of diluted income per share
Less: Income tax effect of mark-to-market adjustments
(1,391
)
(1,881
)
Net income for computation of diluted income per share, excluding mark-to- market adjustments
$
8,294
$
8,369
Weighted-average shares for computation of diluted income per share
54,217
54,062
2
We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.
