CARPINTERIA, Calif. — CKE Restaurants, Inc. (“CKE”) announced today its second fiscal quarter financial results for the twelve weeks ended August 15, 2011. The Company expects to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”) on Wednesday, September 21, 2011 after the close of the financial markets.
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 August 15, 2011, the purchase price allocation related to the Merger has been completed.
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 second quarter results compares the results of operations for the Successor twelve weeks ended August 15, 2011 to the combined Predecessor eight weeks ended July 12, 2010 and the Successor four weeks ended August 9, 2010. This discussion does not comply with U.S. GAAP; however, the Company believes this provides a more meaningful method of comparison.
Company-Operated Same-Store Sales and Average Unit Volumes
Blended same-store sales increased 2.2% in the second quarter of fiscal 2012. Hardee’s® same-store sales increased 2.5% and Carl’s Jr.® same-store sales increased 2.0%.
[Table Omitted]
At the end of the second quarter, the blended fifty-two week average unit volume for Carl’s Jr. and Hardee’s was $1,238,000. The fifty-two week average unit volumes for Carl’s Jr. and Hardee’s were $1,396,000 and $1,096,000, respectively.
To date, the Company’s blended same-store sales for the third quarter of fiscal 2012 are flat to slightly positive.
Second Quarter Results
The Company reported total revenue of $299.7 million for the fiscal 2012 second quarter, a decrease of $14.2 million, or 4.5%, compared to the fiscal 2011 second 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 $10.8 million, or 3.7%.
“Hardee’s continued to generate positive same-store sales results during the second quarter. Including period seven, Hardee’s has now had nineteen consecutive periods of positive same-store sales. Carl’s Jr. also performed well, posting its second consecutive quarter of positive same-store sales,” said Andrew F. Puzder, Chief Executive Officer.
For the fiscal 2012 second quarter, company-operated restaurant-level adjusted EBITDA margin was 17.1%, a 120 basis point decrease compared to the prior year quarter. Food and packaging costs increased 90 basis points as a result of higher commodity costs for beef, ingredients containing cooking oil and dairy products. Occupancy and other expense, excluding depreciation and amortization, increased 30 basis points and advertising increased 10 basis points. These increases were offset by a 10 basis point decrease in labor costs. Refer to the further discussion of company-operated restaurant-level adjusted EBITDA margin under the heading “Non-GAAP Measures” below.
Adjusted EBITDA was $40.9 million in the second quarter of fiscal 2012, $1.4 million lower than the prior year quarter. 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 August 15, 2011, cash and cash equivalents were $38.3 million and the Company had $68.1 million available under its credit facility.
On July 15, 2011, the Company redeemed $40.0 million aggregate principal amount of its outstanding 11.375% Senior Secured Second Lien Notes due 2018 (the “Notes”) at a price equal to 103.0% of the principal amount of the Notes. Subsequent to the redemption, the remaining aggregate principal amount of the Notes was $560.0 million.
Capital expenditures for the fiscal 2012 second quarter were $14.5 million, of which $7.9 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 $65.0 million.
As of August 15, 2011, the Company’s system-wide restaurant portfolio consisted of:
Conference Call Information
The Company will host its second quarter fiscal 2012 conference call on Wednesday, September 21, 2011, at 8:00 a.m. (PDT). The dial in information is as follows: (973) 500-2164 U.S. and international. The conference ID is 98508045.
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 98508045.
Company Overview
CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, Calif. As of the end of the second quarter of fiscal 2012, the Company, through its subsidiaries, had a total of 3,202 franchised, licensed or company-operated restaurants in 42 states and in 23 countries. For more information about CKE, please visit www.ckr.com.
Forward-looking Statements
Matters discussed in this press release contain forward-looking statements, including those relating to expected capital expenditures 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.