CKE Restaurants, Inc. Reports Third Quarter Fiscal Year 2013 Results Business Wire CARPINTERIA, Calif. -- December 11, 2012 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 Quarter Year-to-date Brand FY13 FY12 FY13 FY12 Carl's Jr. 5.5 % 2.0 % 3.9 % 2.0 % Hardee's 3.6 % 1.8 % 2.6 % 5.0 % Consolidated 4.6 % 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 Hardee's Other Total Jr. Company-operated 423 470 0 893 Domestic franchised 700 1,230 7 1,937 International 226 236 0 462 franchised Total 1,349 1,936 7 3,292 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 ingeneral economic conditionsand 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 Ended Forty Weeks Ended November 5, November 7, November 5, November 7, 2012 2011 2012 2011 Revenue: Company-operated $ 268,588 $ 256,976 $ 900,788 $ 871,571 restaurants Franchised restaurants and 42,211 35,643 130,969 121,360 other Total revenue 310,799 292,619 1,031,757 992,931 Operating costs and expenses: Restaurant operating costs: Food and 80,310 78,763 268,925 267,896 packaging Payroll and other employee 75,659 72,485 254,657 249,458 benefits Occupancy and 61,324 62,926 204,801 209,002 other Total restaurant 217,293 214,174 728,383 726,356 operating costs Franchised restaurants and 21,564 17,907 66,047 62,225 other Advertising 15,582 15,698 52,450 51,158 General and 30,800 30,570 102,288 100,876 administrative Facility action 102 262 2,532 703 charges, net Other operating — — — 545 expenses Total operating costs and 285,341 278,611 951,700 941,863 expenses Operating income 25,458 14,008 80,057 51,068 Interest expense (17,381 ) (17,415 ) (59,014 ) (59,626 ) Other income 430 (252 ) (1,600 ) (1,668 ) (expense), net Income (loss) before income 8,507 (3,659 ) 19,443 (10,226 ) taxes Income tax expense 3,691 (2,142 ) 3,350 (3,877 ) (benefit) Net income $ 4,816 $ (1,517 ) $ 16,093 $ (6,349 ) (loss) CKE RESTAURANTS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par values) (Unaudited) November 5, 2012 January 31, 2012 ASSETS Current assets: Cash and cash $ 139,723 $ 64,555 equivalents Accounts receivable, net of allowance for doubtful accounts of 21,836 24,099 $62 as of November 5, 2012 and $38 as of January 31, 2012 Related party trade 389 252 receivables Inventories 14,217 16,144 Prepaid expenses 14,922 15,897 Advertising fund 23,214 18,407 assets, restricted Deferred income tax 24,023 25,140 assets, net Other current assets 3,922 3,695 Total current assets 242,246 168,189 Property and equipment, net of accumulated depreciation and amortization of 623,962 645,552 $173,459 as of November 5, 2012 and $117,010 as of January 31, 2012 Goodwill 208,923 208,885 Intangible assets, net of accumulated amortization of 421,684 433,139 $30,327 as of November 5, 2012 and $21,245 as of January 31, 2012 Other assets, net 26,487 24,373 Total assets $ 1,523,302 $ 1,480,138 LIABILITIES AND STOCKHOLDER’S EQUITY Current liabilities: Current portion of $ 4 $ 3 long-term debt Current portion of capital lease 8,034 7,988 obligations Accounts payable 33,040 40,790 Advertising fund 23,214 18,407 liabilities Other current 122,043 85,169 liabilities Total current 186,335 152,357 liabilities Long-term debt, less 465,297 523,638 current portion Capital lease obligations, less 30,535 34,981 current portion Deferred income tax 138,360 156,656 liabilities, net Other long-term 282,798 197,767 liabilities Total liabilities 1,103,325 1,065,399 Stockholder’s equity: Common stock, $0.01 par value; 100 shares authorized, issued and — — outstanding as of November 5, 2012 and January 31, 2012 Additional paid-in 460,797 457,252 capital Investment in CKE Inc. (8,362 ) (8,362 ) Toggle Notes Accumulated deficit (32,458 ) (34,151 ) Total stockholder’s 419,977 414,739 equity Total liabilities and $ 1,523,302 $ 1,480,138 stockholder’s equity Non-GAAP Measures Adjusted EBITDA and Adjusted EBITDAR 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. The Company calculates Adjusted EBITDAR by adjusting Adjusted EBITDA to exclude the Company’s aggregate cash rent expense, less rental income from franchisees and third parties, subject to certain adjustments and exclusions. Management uses Adjusted EBITDA and Adjusted EBITDAR because it believes that they are important measures of operating performance. In particular, management considers Adjusted EBITDA and Adjusted EBITDAR to be useful financial measures that highlight trends in the Company’s business and provide a comparable measure of profitability of similar enterprises. In addition, management believes that Adjusted EBITDA and Adjusted EBITDAR are effective, when used in conjunction with net income (loss) or income (loss) before income taxes, in evaluating asset performance, and differentiating efficient operators in the industry. Furthermore, management believes that Adjusted EBITDA and Adjusted EBITDAR provide useful information to noteholders because these measures provide insight into management’s evaluation of the Company’s results of operations. The calculations of Adjusted EBITDA and Adjusted EBITDAR may not be consistent with “EBITDA” and “EBITDAR” for the purpose of the covenants in the agreements governing the Company’s indebtedness. Adjusted EBITDA and Adjusted EBITDAR are not measures of financial performance under U.S. generally accepted accounting principles (“GAAP”), are not intended to represent cash flows from operations under U.S. GAAP and should not be used as alternatives to net loss, or loss before income taxes, as indicators of operating performance, or as alternatives to cash flow from operating, investing or financing activities as a measure of liquidity. Management compensates for the limitations of using Adjusted EBITDA and Adjusted EBITDAR by using them only to supplement the Company’s U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the Company’s business. Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analysis of the Company’s results as reported under U.S. GAAP. Some of the limitations of Adjusted EBITDA and Adjusted EBITDAR are: *Adjusted EBITDA and Adjusted EBITDAR do not reflect cash used for capital expenditures; *Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and Adjusted EBITDA and Adjusted EBITDAR do not reflect the cash requirements for such replacements; *Adjusted EBITDA and Adjusted EBITDAR do not reflect changes in, or cash requirements for, the Company’s working capital requirements; *Adjusted EBITDA and Adjusted EBITDAR do not reflect the cash necessary to make payments of interest or principal on the Company’s indebtedness; and *Adjusted EBITDAR does not reflect the cash necessary to make payments of rent under the Company’s lease obligations. While Adjusted EBITDA and Adjusted EBITDAR are frequently used as measures of operations and the ability to meet indebtedness service requirements, these measures as calculated by the Company are not necessarily directly comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. CKE RESTAURANTS, INC. ADJUSTED EBITDA AND ADJUSTED EBITDAR (In thousands) (Unaudited) Twelve Twelve Forty Forty Weeks Weeks Weeks Weeks ended ended ended ended November November November November 7, 5, 7, 5, 2012 2011 2012 2011 Net income (loss) $ 4,816 $ (1,517 ) $ 16,093 $ (6,349 ) Interest expense 17,381 17,415 59,014 59,626 Income tax expense 3,691 (2,142 ) 3,350 (3,877 ) (benefit) Depreciation and 17,042 19,030 60,954 62,873 amortization Facility action 102 262 2,532 703 charges, net Transaction-related - - - 545 costs^(1) Management fees^(2) 575 574 1,914 1,916 Share-based compensation 1,064 1,063 3,545 3,531 expense Losses on asset and 205 343 625 1,339 other disposals Difference between U.S. GAAP rent and 563 570 2,098 1,847 cash rent Other, net^(3) 446 2,256 5,032 8,071 Adjusted EBITDA $ 45,885 $ 37,854 $ 155,157 $ 130,225 Net Rent^(4) 12,296 11,650 41,017 38,933 Adjusted EBITDAR $ 58,181 $ 49,504 $ 196,174 $ 169,158 ^(1) Transaction-related costs include investment banking, legal, and other costs related to the merger that occurred on July 12, 2010. ^(2) Represents the amounts associated with the management services agreement with Apollo Management VII, L.P. for on-going investment banking, consulting and financial planning services, which are included in general and administrative expense. ^(3) Other, net includes interest income, the net impact of acquisition accounting, early extinguishment of debt, executive retention bonus, severance costs and disposition business expense. ^(4) Represents the Company’s aggregate cash rent expense less rental income from franchisees and third parties, subject to certain adjustments and exclusions. Company-Operated Restaurant-Level Non-GAAP Measures Company-operated restaurant-level adjusted EBITDA is expressed in dollars and defined as company-operated restaurants revenue (i) less restaurant operating costs excluding depreciation and amortization expense and (ii) less advertising expense. Restaurant operating costs are the expenses incurred directly by company-operated restaurants in generating revenues and do not include advertising costs, general and administrative expenses or facility action charges. Company-operated restaurant-level adjusted EBITDA margin is expressed as a percentage and defined as company-operated restaurant-level adjusted EBITDA divided by company-operated restaurants revenue. Company-operated restaurant-level adjusted EBITDA and company-operated restaurant-level adjusted EBITDA margin are non-GAAP measures utilized by management internally to evaluate and compare the Company’s operating performance for company-operated restaurants between periods. In addition, management believes that these financial measures provide useful information to potential investors and analysts because they provide insight into management’s evaluation of the Company’s results of operations. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measures. These non-GAAP measures have certain limitations including the following: *Because not all companies calculate these measures identically, the Company’s presentation of such measures may not be comparable to similarly titled measures of other companies; *These measures exclude certain general and administrative and other operating costs, which should also be considered when assessing the Company’s operating performance; and *These measures exclude depreciation and amortization, and although they are non-cash charges, the assets being depreciated or amortized will often have to be replaced and new investments made to support the operations of the Company’s restaurant portfolio. The following is a reconciliation of company-operated restaurant-level adjusted EBITDA and company-operated restaurant-level adjusted EBITDA margin (unaudited): Twelve Weeks Ended Forty Weeks Ended November 5, November 7, November 5, November 7, 2012 2011 2012 2011 (Dollars in thousands) Company-operated restaurant-level adjusted EBITDA: Company-operated restaurants $ 268,588 $ 256,976 $ 900,788 $ 871,571 revenue Less: restaurant (217,293 ) (214,174 ) (728,383 ) (726,356 ) operating costs Add: depreciation and 14,787 16,376 52,886 54,363 amortization expense Less: advertising (15,582 ) (15,698 ) (52,450 ) (51,158 ) expense Company-operated restaurant-level $ 50,500 $ 43,480 $ 172,841 $ 148,420 adjusted EBITDA Company-operated restaurant-level 18.8 % 16.9 % 19.2 % 17.0 % adjusted EBITDA margin Contact: CKE Restaurants, Inc. Beth Mansfield Public Relations (805) 745-7741 email@example.com
CKE Restaurants, Inc. Reports Third Quarter Fiscal Year 2013 Results
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