CKE Restaurants, Inc. Reports Second Quarter Net Income of $12.3 Million, or $0.23 Per Diluted Share
CARPINTERIA, Calif., Sept. 17 // PRNewswire-FirstCall // -- CKE Restaurants, Inc. (NYSE: CKR) announced today second quarter results and the filing of its Report on Form 10-Q with the Securities and Exchange Commission ("SEC") for the twelve weeks ended Aug. 11, 2008.
Second Quarter Highlights
- Second quarter net income was $12.3 million, or $0.23 per diluted share. Income from continuing operations in the prior year quarter was $11.7 million, or $0.18 per diluted share. The 27.8 percent increase in diluted earnings per share is in part attributable to the Company's share repurchase program which was the primary driver of the 11.0 million share reduction in weighted-average diluted shares outstanding versus the prior year quarter.
- Blended company-operated same-store sales for the second quarter of fiscal 2009 increased 3.6 percent. Same-store sales increased 3.8 percent and 3.3 percent at Carl's Jr.(R) and Hardee's(R) company-operated restaurants, respectively.
- Blended average unit volume for the trailing-13 periods was $1,207,000 at company-operated restaurants. Average unit volumes for the trailing-13 periods increased to $1,527,000 and $973,000 at company-operated Carl's Jr. and Hardee's restaurants, respectively.
- Consolidated restaurant operating costs decreased 80 basis points to 80.7 percent of company-operated restaurants revenue. Reduced payroll and employee benefits costs more than offset higher food and packaging costs and higher depreciation expense related to our remodel program at both brands.
- Restaurant operating costs at Carl's Jr. company-operated restaurants decreased 30 basis points, compared to the prior year quarter, to 79.3 percent of company-operated restaurants revenue. A reduction in payroll and employee benefits expense more than offset higher food and packaging costs.
- Restaurant operating costs at Hardee's company-operated restaurants decreased 90 basis points, compared to the prior year quarter, to 82.4 percent of company-operated restaurants revenue. Lower payroll and employee benefits expense more than offset an increase in occupancy and other expense. Food and packaging costs were 30 basis points lower than the prior year quarter.
- Consolidated revenue for the current year quarter was $352.5 million, a 2.9 percent decrease from the prior year quarter. Company-operated restaurants revenue for the current year quarter was $267.1 million, a 7.2 percent decrease from the prior year quarter, reflecting the refranchising of 155 Hardee's restaurants partially offset by the opening of 20 new company- operated restaurants over the trailing-13 periods and positive same-store sales over the prior year quarter.
- For the twenty-eight weeks ended Aug. 11, 2008, the Company generated earnings before interest, income taxes, depreciation and amortization, facility action charges and share-based compensation expense ("Adjusted EBITDA") of $95.6 million, versus $92.7 million in the comparable prior year period. For the trailing-13 periods ended Aug. 11, 2008, the Company generated Adjusted EBITDA of $167.9 million.
- Fully diluted shares outstanding for the twelve and twenty-eight weeks ended Aug. 11, 2008, were 54.4 million and 54.3 million, respectively.
Executive Commentary
Andrew F. Puzder, president and chief executive officer, said:
"Net income for the second quarter of fiscal 2009 was $12.3 million, or $0.23 per diluted share. Income from continuing operations in the prior year quarter was $11.7 million, or $0.18 per diluted share. The 27.8 percent increase in diluted earnings per share is in part attributable to a 16.8 percent decrease in diluted shares outstanding primarily as a result of our share repurchase activity in the prior fiscal year."
"Blended same-store sales increased 3.6 percent during the second quarter on top of a 2.4 percent increase in the prior year quarter. Both brands featured the Prime Rib Burger during the second quarter. The Six Dollar Burger(TM) and Thickburger(R) varieties of the burger include a charbroiled, 100 percent Black Angus beef patty topped with thinly-sliced prime rib, melted Swiss cheese, grilled onions and a horseradish sauce all on a Ciabatta roll. We believe this burger is a great example of our innovative, premium quality product strategy that carries a value message to our guests that extends beyond a price point."
"On a consolidated basis, restaurant-level operating expenses decreased 80 basis points versus the prior year quarter. This improvement is the result of the combination of price increases taken to offset increased food and labor costs as well as other cost control initiatives implemented over the past year."
"We continued our strategic refranchising program of Hardee's restaurants originally announced in April 2007 and expanded by an additional 40 restaurants in June 2008. Six restaurants were refranchised during the quarter and an additional 23 restaurants were refranchised subsequent to the end of the second quarter. To date, we have completed the refranchising of 224 Hardee's restaurants in the Midwest and Southeast."
"During the first half of fiscal 2009, we and our franchisees opened 54 new units, including 23 internationally. We and our franchisees also completed 105 remodels as well as 19 Green Burrito and 19 Red Burrito dual-brand conversions."
"With respect to our individual brands:
Carl's Jr.
"Same-store sales at company-operated Carl's Jr. restaurants increased 3.8 percent during the second quarter. On a two-year cumulative basis, same-store sales at Carl's Jr. were up 5.8 percent for the second quarter. Revenues at company-operated Carl's Jr. restaurants increased $8.2 million, or 5.9 percent, over the prior year quarter due to the same-store sales gains and the addition of 14 company-operated restaurants over the past year," continued Puzder. "In addition to the Prime Rib Burger, Carl's Jr. also debuted Natural Cut French Fries during the quarter. Carl's Jr. also promoted the Jalapeno Chicken Sandwich and Chili Cheese Fries and introduced the latest flavor of its Hand-Scooped Ice Cream Shakes and Malts(TM) -- Banana Cream Pie. Average unit volume at company-operated Carl's Jr. restaurants increased to $1,527,000 -- a $34,000 increase since the end of fiscal 2008, and an all-time high for the brand."
"Restaurant operating costs at company-operated Carl's Jr. restaurants decreased by 30 basis points as compared with the prior year quarter, to 79.3 percent of company-operated restaurants revenue. Lower payroll and employee benefits costs in the quarter resulting from a decrease in workers' compensation claims expense more than offset higher food and packaging costs for commodities including beef, cheese and potatoes."
Hardee's
"Same-store sales at company-operated Hardee's restaurants increased 3.3 percent during the second quarter. On a two-year cumulative basis, Hardee's same-store sales were up 6.2 percent for the second quarter," added Puzder. "Revenue from company-operated Hardee's restaurants decreased $29.0 million, or 19.5 percent, from the prior year quarter due primarily to the refranchising of 155 Hardee's restaurants partially offset by the opening of six new company-operated restaurants over the trailing-13 periods and positive same-store sales over the prior year quarter. In addition to the Prime Rib Thickburger(R), Hardee's promoted the Red Burrito Taco Salad(TM) and debuted Strawberry Biscuits during the breakfast daypart. Hardee's company-operated restaurants average unit volume increased to $973,000, a $19,000 increase since the end of fiscal 2008 and the highest average unit volume for the brand as far back as we can check."
"Hardee's restaurant operating costs at its company-operated restaurants decreased 90 basis points as compared with the prior year quarter, to 82.4 percent of company-operated restaurants revenue. Lower payroll and employee benefits costs more than offset an increase in occupancy and other expense resulting from higher depreciation expense related to our ongoing remodel program. Food and packaging costs were 30 basis points lower than the prior year quarter."
"We will maintain our focus on the fundamentals of our business, including our premium product strategy, superior customer service, and effective, cutting-edge advertising. Further, we will continue to address rising restaurant operating costs and their potential impact on our business. Finally, we believe the remodeling and dual-branding of our existing restaurants, as well as our new restaurant growth, will permit us to attract new guests into our restaurants and drive same-store sales growth in the near- and long-term," Puzder concluded.
As of the end of its fiscal 2009 second quarter, CKE Restaurants, Inc., through its subsidiaries, had a total of 3,100 franchised, licensed or company-operated restaurants in 42 states and in 14 countries, including 1,170 Carl's Jr. restaurants and 1,917 Hardee's restaurants.
Conference Call
The Company will host a conference call and webcast on Sept. 18, 2008, at 9:00 a.m. (EDT) / 6:00 a.m. (PDT) 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 at http://www.ckr.com under "Investors."
SEC Filings
The Company's filings with the SEC are available to investors at http://www.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. Adjusted EBITDA is not intended to be a substitute for net income determined in accordance with GAAP.
Safe Harbor Disclosure
Matters discussed in this news release contain forward-looking statements relating to future plans and developments, financial goals and operating performance that are based on management's current beliefs and assumptions. 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, whether or not restaurants will be closed and the number of restaurant closures, consumers' concerns or adverse publicity regarding the Company's products, the effectiveness of operating initiatives and advertising and promotional efforts (particularly at the Hardee's brand), changes in economic conditions or prevailing interest rates, changes in the price or availability of commodities, availability and cost of energy, workers' compensation and general liability premiums and claims experience, changes in the Company's suppliers' ability to provide quality and timely products to the Company, delays in opening new restaurants or completing remodels, severe weather conditions, the operational and financial success of the Company's franchisees, franchisees' willingness to participate in the Company's strategies, the availability of financing for the Company and its franchisees, unfavorable outcomes in litigation, changes in accounting policies and practices, effectiveness of internal control over financial reporting, new legislation or government regulation (including environmental laws), the availability of suitable locations and terms for the sites designated for development, 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.
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Twelve Twenty-Eight
Weeks Ended Weeks Ended
August 11, August 13, August 11, August 13,
2008 2007 2008 2007
Revenue:
Company-operated
restaurants $267,075 $287,796 $625,313 $668,320
Franchised and
licensed restaurants
and other 85,415 75,295 193,348 176,573
Total revenue 352,490 363,091 818,661 844,893
Operating costs and
expenses:
Restaurant operating
costs:
Food and packaging 80,355 86,028 185,429 197,463
Payroll and other
employee benefits 75,429 85,159 179,112 195,640
Occupancy and other 59,811 63,373 137,846 145,247
Total restaurant
operating costs 215,595 234,560 502,387 538,350
Franchised and
licensed restaurants
and other 65,590 57,821 148,657 137,312
Advertising 15,699 17,271 36,797 40,032
General and
administrative 32,370 31,615 76,881 77,642
Facility action
charges, net 351 (1,546) 1,424 (1,800)
Total operating
costs and expenses 329,605 339,721 766,146 791,536
Operating income 22,885 23,370 52,515 53,357
Interest expense (2,399) (4,461) (6,967) (9,756)
Other income, net 529 588 1,521 2,212
Income before income
taxes and discontinued
operations 21,015 19,497 47,069 45,813
Income tax expense 8,675 7,846 18,109 18,463
Income from continuing
operations 12,340 11,651 28,960 27,350
Loss from discontinued
operations (net of
income tax expense of
$2,501 and $2,341 for
the twelve and twenty-
eight weeks ended
August 13, 2007,
respectively) - (2,226) - (2,574)
Net income $12,340 $9,425 $28,960 $24,776
Basic income per
common share:
Continuing
operations $0.24 $0.19 $0.56 $0.42
Discontinued
operations - (0.04) - (0.04)
Net income $0.24 $0.15 $0.56 $0.38
Diluted income per
common share(1):
Continuing
operations $0.23 $0.18 $0.54 $0.41
Discontinued
operations - (0.03) - (0.04)
Net income $0.23 $0.15 $0.54 $0.37
Dividends per common
share $0.06 $0.06 $0.12 $0.12
Weighted-average
common shares
outstanding:
Basic 51,654 62,041 51,613 64,645
Dilutive effect of
stock options, 2023
Convertible Notes
and restricted stock 2,728 3,301 2,684 3,316
Diluted 54,382 65,342 54,297 67,961
(1) The interest expense adjustment for the 2023 Convertible Notes, net
of tax, which is added to the Company's net income for the diluted
earnings per share calculation, was $102 and $236 for the twelve and
twenty-eight weeks ended August 11, 2008, respectively, and was $101
and $238 for the twelve and twenty-eight weeks ended August 13, 2007,
respectively.
CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED PRESENTATION OF NON-GAAP MEASUREMENTS
(In thousands)
Twelve Twelve
Weeks Ended Weeks Ended
August 11, 2008 August 13, 2007
Net income $12,340 $9,425
Interest expense 2,399 4,468
Income tax expense 8,675 10,347
Depreciation and
amortization 14,324 15,026
Facility action
charges, net 351 (2,042)
Share-based
compensation expense 2,929 1,767
Adjusted EBITDA $41,018 $38,991
Twenty-Eight Twenty-Eight Trailing-13
Weeks Ended Weeks Ended Periods Ended
August 11, 2008 August 13, 2007 August 11, 2008
Net income $28,960 $24,776 $35,260
Interest expense 6,967 9,778 30,244
Income tax expense 18,109 20,804 23,917
Depreciation and
amortization 33,306 34,910 62,498
Facility action
charges, net 1,424 (2,505) 2,647
Share-based
compensation expense 6,866 4,905 13,339
Adjusted EBITDA $95,632 $92,668 $167,905
SOURCE CKE Restaurants, Inc.
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