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

  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
bmansfield@ckr.com