##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended August 11, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from to.
 Commission file number 1-11313
 
 CKE RESTAURANTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    33-0602639
(I.R.S. Employer
Identification No.)6307 Carpinteria Avenue, Ste. A, Carpinteria, California
    
    93013(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (805) 745-7500
 Former Name, Former Address and Former Fiscal Year, if changed since last report.
 þ o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



CKE RESTAURANTS, INC. AND SUBSIDIARIES
INDEX
 Page NoPart I. Financial InformationItem 1 Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of August 11, 2008 and January 31, 2008
    
    
    3Condensed Consolidated Statements of Income for the twelve and twenty-eight weeks ended
August 11, 2008 and August 13, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended August
11, 2008 and August 13, 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4 Controls and Procedures
    
    
    29Part II. Other InformationItem 1 Legal Proceedings
    
    
    30Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 4 Submission of Matters to a Vote of Security Holders
    
    
    31Item 6 Exhibits
    
    
    32Signatures
    
    
    33EXHIBIT 3.3EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)
(Unaudited)
 August 11, 2008
    
    
    January 31, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,380
    
    
    $
    19,993Accounts receivable, net of allowance for doubtful accounts of $277 as of August
11, 2008 and $755 as of January 31, 2008
    
    
    40,941
    
    
    
    51,394Related party trade receivables
    
    
    7,345
    
    
    
    5,179Inventories, net
    
    
    27,354
    
    
    
    26,030Prepaid expenses
    
    
    11,831
    
    
    
    12,509Assets held for sale
    
    
    3,058
    
    
    
    1,038Advertising fund assets, restricted
    
    
    18,495
    
    
    
    18,207Deferred income tax assets, net
    
    
    12,596
    
    
    
    23,768Other current assets
    
    
    2,376
    
    
    
    2,887Total current assets
    
    
    142,376
    
    
    
    161,005Notes receivable, net of allowance for doubtful accounts of $589 as of August 11, 2008
and $608 as of January 31, 2008
    
    
    209
    
    
    
    298Property and equipment, net of accumulated depreciation and amortization of $417,825
as of August 11, 2008 and $422,192 as of January 31, 2008
    
    
    507,887
    
    
    
    503,774Property under capital leases, net of accumulated amortization of $47,378 as of August
11, 2008 and $46,390 as of January 31, 2008
    
    
    19,189
    
    
    
    21,104Deferred income tax assets, net
    
    
    72,878
    
    
    
    72,878Goodwill
    
    
    22,649
    
    
    
    22,649Other assets, net
    
    
    10,878
    
    
    
    10,003Total assets
    
    $
    776,066
    
    
    $
    791,711LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of bank indebtedness and other long-term debt
    
    $
    17,936
    
    
    $
    18,024Current portion of capital lease obligations
    
    
    5,905
    
    
    
    5,774Accounts payable
    
    
    60,070
    
    
    
    80,697Advertising fund liabilities
    
    
    18,495
    
    
    
    18,207Other current liabilities
    
    
    92,989
    
    
    
    86,678Total current liabilities
    
    
    195,395
    
    
    
    209,380Bank indebtedness and other long-term debt, less current portion
    
    
    310,427
    
    
    
    333,082Capital lease obligations, less current portion
    
    
    31,967
    
    
    
    35,156Other long-term liabilities
    
    
    63,209
    
    
    
    68,851Total liabilities
    
    
    600,998
    
    
    
    646,469Commitments and contingencies (Notes 4 and 6)Subsequent events (Notes 3, 4, 7 and 14)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; 52,578 shares issued and
outstanding as of August 11, 2008; 52,504 shares issued and 52,476 shares
outstanding as of January 31, 2008
    
    
    526
    
    
    
    525Common stock held in treasury, at cost; none as of August 11, 2008 and 28 shares as
of January 31, 2008
    
    
    
    
    
    
    (359
    )Additional paid-in capital
    
    
    258,325
    
    
    
    251,524Accumulated deficit
    
    
    (83,783
    )
    
    
    (106,448
    )Total stockholders equity
    
    
    175,068
    
    
    
    145,242Total liabilities and stockholders equity
    
    $
    776,066
    
    
    $
    791,711
 See Accompanying Notes to Condensed Consolidated Financial Statements
 3




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
 Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Revenue:Company-operated restaurants
    
    $
    267,075
    
    
    $
    287,796
    
    
    $
    625,313
    
    
    $
    668,320Franchised and licensed restaurants and other
    
    
    85,415
    
    
    
    75,295
    
    
    
    193,348
    
    
    
    176,573Total revenue
    
    
    352,490
    
    
    
    363,091
    
    
    
    818,661
    
    
    
    844,893Operating costs and expenses:Restaurant operating costs:Food and packaging
    
    
    80,355
    
    
    
    86,028
    
    
    
    185,429
    
    
    
    197,463Payroll and other employee benefits
    
    
    75,429
    
    
    
    85,159
    
    
    
    179,112
    
    
    
    195,640Occupancy and other
    
    
    59,811
    
    
    
    63,373
    
    
    
    137,846
    
    
    
    145,247Total restaurant operating costs
    
    
    215,595
    
    
    
    234,560
    
    
    
    502,387
    
    
    
    538,350Franchised and licensed restaurants and other
    
    
    65,590
    
    
    
    57,821
    
    
    
    148,657
    
    
    
    137,312Advertising
    
    
    15,699
    
    
    
    17,271
    
    
    
    36,797
    
    
    
    40,032General and administrative
    
    
    32,370
    
    
    
    31,615
    
    
    
    76,881
    
    
    
    77,642Facility action charges, net
    
    
    351
    
    
    
    (1,546
    )
    
    
    1,424
    
    
    
    (1,800
    )Total operating costs and expenses
    
    
    329,605
    
    
    
    339,721
    
    
    
    766,146
    
    
    
    791,536Operating income
    
    
    22,885
    
    
    
    23,370
    
    
    
    52,515
    
    
    
    53,357Interest expense
    
    
    (2,399
    )
    
    
    (4,461
    )
    
    
    (6,967
    )
    
    
    (9,756
    )Other income, net
    
    
    529
    
    
    
    588
    
    
    
    1,521
    
    
    
    2,212Income before income taxes and discontinued
operations
    
    
    21,015
    
    
    
    19,497
    
    
    
    47,069
    
    
    
    45,813Income tax expense
    
    
    8,675
    
    
    
    7,846
    
    
    
    18,109
    
    
    
    18,463Income from continuing operations
    
    
    12,340
    
    
    
    11,651
    
    
    
    28,960
    
    
    
    27,350Loss 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
    
    
    $
    24,776Basic income per common share:Continuing operations
    
    $
    0.24
    
    
    $
    0.19
    
    
    $
    0.56
    
    
    $
    0.42Discontinued operations
    
    
    
    
    
    
    (0.04
    )
    
    
    
    
    
    
    (0.04
    )Net income
    
    $
    0.24
    
    
    $
    0.15
    
    
    $
    0.56
    
    
    $
    0.38Diluted income per common share:Continuing operations
    
    $
    0.23
    
    
    $
    0.18
    
    
    $
    0.54
    
    
    $
    0.41Discontinued operations
    
    
    
    
    
    
    (0.03
    )
    
    
    
    
    
    
    (0.04
    )Net income
    
    $
    0.23
    
    
    $
    0.15
    
    
    $
    0.54
    
    
    $
    0.37Dividends per common share
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.12
    
    
    $
    0.12Weighted-average common shares outstanding:Basic
    
    
    51,654
    
    
    
    62,041
    
    
    
    51,613
    
    
    
    64,645Diluted
    
    
    54,382
    
    
    
    65,342
    
    
    
    54,297
    
    
    
    67,961
 See Accompanying Notes to Condensed Consolidated Financial Statements
 4




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007Cash flows from operating activities:Net income
    
    $
    28,960
    
    
    $
    24,776Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    33,306
    
    
    
    34,910Amortization of deferred loan fees
    
    
    701
    
    
    
    495Share-based compensation expense
    
    
    6,860
    
    
    
    4,832Change in fair value of interest rate swap agreements
    
    
    (4,253
    )
    
    
    Recovery of losses on accounts and notes receivable
    
    
    (26
    )
    
    
    (695
    )Loss on sale of property and equipment and capital leases
    
    
    946
    
    
    
    1,707Facility action charges, net
    
    
    1,424
    
    
    
    (2,505
    )Deferred income taxes
    
    
    9,474
    
    
    
    10,471Other non-cash charges
    
    
    19
    
    
    
    34Net changes in operating assets and liabilities:Receivables, inventories, prepaid expenses and other
current and non-current assets
    
    
    5,385
    
    
    
    2,794Estimated liability for closed restaurants and estimated
liability for self-insurance
    
    
    (3,306
    )
    
    
    (2,047
    )Accounts payable and other current and long-term liabilities
    
    
    (2,761
    )
    
    
    2,301Net cash provided by operating activities
    
    
    76,729
    
    
    
    77,073Cash flows from investing activities:Purchases of property and equipment
    
    
    (48,451
    )
    
    
    (71,098
    )Proceeds from sale of property and equipment
    
    
    16,770
    
    
    
    24,636Collections of non-trade notes receivable
    
    
    2,730
    
    
    
    856Disposition of La Salsa, net of cash surrendered
    
    
    
    
    
    
    5,720Other investing activities
    
    
    47
    
    
    
    40Net cash used in investing activities
    
    
    (28,904
    )
    
    
    (39,846
    )Cash flows from financing activities:Net change in bank overdraft
    
    
    (17,085
    )
    
    
    (6,279
    )Borrowings under revolving credit facility
    
    
    100,500
    
    
    
    168,500Repayments of borrowings under revolving credit facility
    
    
    (108,000
    )
    
    
    (155,000
    )Borrowings under credit facility term loan
    
    
    
    
    
    
    100,179Repayments of credit facility term loan
    
    
    (15,140
    )
    
    
    (425
    )Repayments of other long-term debt
    
    
    (103
    )
    
    
    (92
    )Repayments of capital lease obligations
    
    
    (3,038
    )
    
    
    (2,857
    )Payment of deferred loan fees
    
    
    (399
    )
    
    
    (1,029
    )Repurchase of common stock
    
    
    (1,621
    )
    
    
    (136,982
    )Exercise of stock options
    
    
    1,580
    
    
    
    2,605Excess tax benefits from exercise of stock options
    
    
    163
    
    
    
    1,567Dividends paid on common stock
    
    
    (6,295
    )
    
    
    (6,483
    )Net cash used in financing activities
    
    
    (49,438
    )
    
    
    (36,296
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,613
    )
    
    
    931Cash and cash equivalents at beginning of period
    
    
    19,993
    
    
    
    18,680Cash and cash equivalents at end of period
    
    $
    18,380
    
    
    $
    19,611
 See Accompanying Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 1  Basis of Presentation and Description of Business
 ® ® ®
  Carls Jr.
    
    Hardees
    
    Other
    
    TotalCompany-operated
    
    
    408
    
    
    
    519
    
    
    
    1
    
    
    
    928Franchised and licensed
    
    
    762
    
    
    
    1,398
    
    
    
    12
    
    
    
    2,172Total
    
    
    1,170
    
    
    
    1,917
    
    
    
    13
    
    
    
    3,100
    Note 2  Accounting Pronouncements Not Yet Adopted and Adoption of New Accounting Pronouncements
 Fair Value Measurements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements  an amendment
of ARB No. 51
 6




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Disclosures about Derivative Instruments and Hedging
Activities Accounting for Derivative Instruments and Hedging Activities
 Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles
 Accounting by
Lessees for Maintenance Deposits
 Determining Whether Instruments Granted in
Share-Based Payment Transactions are Participating Securities
 Note 3  Assets Held For Sale
  Note 4  Indebtedness and Interest Expense
  7




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
      8




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Facility
    
    $
    2,668
    
    
    $
    2,714
    
    
    $
    7,352
    
    
    $
    5,652Interest rate swaps
    
    
    (1,894
    )
    
    
    
    
    
    
    (4,253
    )
    
    
    Capital lease obligations
    
    
    1,017
    
    
    
    1,171
    
    
    
    2,379
    
    
    
    2,7322023 Convertible Notes
    
    
    140
    
    
    
    140
    
    
    
    323
    
    
    
    326Amortization of loan fees
    
    
    261
    
    
    
    227
    
    
    
    603
    
    
    
    492Letter of credit fees and other
    
    
    207
    
    
    
    209
    
    
    
    563
    
    
    
    554$
    2,399
    
    
    $
    4,461
    
    
    $
    6,967
    
    
    $
    9,756
 Note 5  Fair Value Measurement
  Level 1 
    
    Quoted prices in active markets for identical assets or liabilities;Level 2 
    

    Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities; andLevel 3 
    

    Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
  Quoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Interest rate swap agreements
    
    $
    6,911
    
    
    $
    
    
    
    $
    6,911
    
    
    $
    
  Note 6  Commitments and Contingent Liabilities
  9




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
      Accounting for Contingencies
 Note 7  Stockholders Equity
  Note 8  Share-Based Compensation
  10




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Share-based compensation expense related
to performance-vested restricted stock
awards
    
    $
    976
    
    
    $
    199
    
    
    $
    2,278
    
    
    $
    905All other share-based compensation expense
    
    
    1,953
    
    
    
    1,568
    
    
    
    4,588
    
    
    
    4,000Total share-based compensation expense
    
    $
    2,929
    
    
    $
    1,767
    
    
    $
    6,866
    
    
    $
    4,905Associated tax benefits
    
    $
    864
    
    
    $
    506
    
    
    $
    2,034
    
    
    $
    1,316
 Note 9  Facility Action Charges, Net
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Estimated
liability for
new restaurant
closures
    
    $
    579
    
    
    $
    119
    
    
    $
    591
    
    
    $
    170Adjustments to
estimated
liability for
closed
restaurants
    
    
    (195
    )
    
    
    112
    
    
    
    (297
    )
    
    
    584Impairment of
assets to be
disposed of
    
    
    805
    
    
    
    363
    
    
    
    1,115
    
    
    
    380Impairment of
assets to be
held and used
    
    
    780
    
    
    
    494
    
    
    
    780
    
    
    
    496Gain on sales of
restaurants and
surplus
properties, net
    
    
    (1,727
    )
    
    
    (2,754
    )
    
    
    (1,020
    )
    
    
    (3,733
    )Amortization of
discount related
to estimated
liability for
closed
restaurants
    
    
    109
    
    
    
    120
    
    
    
    255
    
    
    
    303$
    351
    
    
    $
    (1,546
    )
    
    $
    1,424
    
    
    $
    (1,800
    )
 Note 10  Income Taxes
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Federal and state income taxes
    
    $
    8,304
    
    
    $
    7,565
    
    
    $
    17,258
    
    
    $
    17,866Foreign income taxes
    
    
    371
    
    
    
    281
    
    
    
    851
    
    
    
    597Income tax expense
    
    $
    8,675
    
    
    $
    7,846
    
    
    $
    18,109
    
    
    $
    18,463Effective income tax rate
    
    
    41.3
    %
    
    
    40.2
    %
    
    
    38.5
    %
    
    
    40.3
    %
   11




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 11  Income Per Share
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007(In thousands except per share amounts)Numerator:Income from continuing operations
    
    $
    12,340
    
    
    $
    11,651
    
    
    $
    28,960
    
    
    $
    27,350Loss from discontinued operations
    
    
    
    
    
    
    (2,226
    )
    
    
    
    
    
    
    (2,574
    )Net income for computation of
basic earnings per share
    
    $
    12,340
    
    
    $
    9,425
    
    
    $
    28,960
    
    
    $
    24,776Adjustment for interest and
amortization costs for 2023
Convertible Notes, net of related
tax effect
    
    
    102
    
    
    
    101
    
    
    
    236
    
    
    
    238Income from continuing operations
for computation of diluted
earnings per share
    
    $
    12,442
    
    
    $
    11,752
    
    
    $
    29,196
    
    
    $
    27,588Net income for computation of
diluted earnings per share
    
    $
    12,442
    
    
    $
    9,526
    
    
    $
    29,196
    
    
    $
    25,014Denominator:Weighted-average shares for
computation of basic earnings per
share
    
    
    51,654
    
    
    
    62,041
    
    
    
    51,613
    
    
    
    64,645Dilutive effect of stock options
and restricted stock
    
    
    941
    
    
    
    1,554
    
    
    
    907
    
    
    
    1,569Dilutive effect of 2023
Convertible Notes
    
    
    1,787
    
    
    
    1,747
    
    
    
    1,777
    
    
    
    1,747Weighted-average shares for
computation of diluted earnings
per share
    
    
    54,382
    
    
    
    65,342
    
    
    
    54,297
    
    
    
    67,961Basic earnings per share:Basic income per share from
continuing operations
    
    $
    0.24
    
    
    $
    0.19
    
    
    $
    0.56
    
    
    $
    0.42Basic loss per share from
discontinued operations
    
    
    
    
    
    
    (0.04
    )
    
    
    
    
    
    
    (0.04
    )Basic net income per share
    
    $
    0.24
    
    
    $
    0.15
    
    
    $
    0.56
    
    
    $
    0.38Diluted earnings per share:Diluted income per share from
continuing operations
    
    $
    0.23
    
    
    $
    0.18
    
    
    $
    0.54
    
    
    $
    0.41Diluted loss per share from
discontinued operations
    
    
    
    
    
    
    (0.03
    )
    
    
    
    
    
    
    (0.04
    )Diluted net income per share
    
    $
    0.23
    
    
    $
    0.15
    
    
    $
    0.54
    
    
    $
    0.37
 Note 12  Segment Information
  12




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwelve Weeks Ended August 11, 2008Revenue
    
    $
    211,188
    
    
    $
    141,106
    
    
    $
    196
    
    
    $
    352,490Operating income
    
    
    16,672
    
    
    
    6,125
    
    
    
    88
    
    
    
    22,885Income (loss) before income
taxes and discontinued
operations
    
    
    16,397
    
    
    
    5,059
    
    
    
    (441
    )
    
    
    21,015Goodwill (as of August 11, 2008)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwelve Weeks Ended August 13, 2007Revenue
    
    $
    197,229
    
    
    $
    164,856
    
    
    $
    1,006
    
    
    $
    363,091Operating income
    
    
    15,060
    
    
    
    8,271
    
    
    
    39
    
    
    
    23,370Income (loss) before income
taxes and discontinued
operations
    
    
    14,735
    
    
    
    6,610
    
    
    
    (1,848
    )
    
    
    19,497Goodwill (as of August 13, 2007)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwenty-Eight Weeks Ended August 11, 2008Revenue
    
    $
    487,066
    
    
    $
    331,129
    
    
    $
    466
    
    
    $
    818,661Operating income
    
    
    40,723
    
    
    
    11,593
    
    
    
    199
    
    
    
    52,515Income (loss) before income taxes
and discontinued operations
    
    
    40,143
    
    
    
    8,919
    
    
    
    (1,993
    )
    
    
    47,069
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwenty-Eight Weeks Ended August 13, 2007Revenue
    
    $
    455,374
    
    
    $
    387,291
    
    
    $
    2,228
    
    
    $
    844,893Operating income
    
    
    36,488
    
    
    
    16,869
    
    
    
    
    
    
    
    53,357Income (loss) before income taxes
and discontinued operations
    
    
    35,967
    
    
    
    12,819
    
    
    
    (2,973
    )
    
    
    45,813
 Note 13  Discontinued Operations
   Twelve Weeks
    
    
    Twenty-EightEnded
    
    
    Weeks EndedRevenue
    
    $
    6,874
    
    
    $
    20,907Operating loss
    
    
    (222
    )
    
    
    (724
    )Interest expense
    
    
    (7
    )
    
    
    (22
    )Other income, net
    
    
    83
    
    
    
    92Income tax benefit
    
    
    13
    
    
    
    173(133
    )
    
    
    (481
    )Gain on disposal of La Salsa
    
    
    421
    
    
    
    421Income tax expense related to disposal of La Salsa
    
    
    (2,514
    )
    
    
    (2,514
    )Net loss on disposal of La Salsa
    
    
    (2,093
    )
    
    
    (2,093
    )Loss from discontinued operations
    
    $
    (2,226
    )
    
    $
    (2,574
    )
 13




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 14  Purchase and Sale of Assets
 Hardees Refranchising Program
  Related Party Transaction
  Note 15  Termination of a Franchise Agreement
  Note 16  Supplemental Cash Flow Information
 Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007Cash paid for:Interest, net of amounts capitalized
    
    $
    10,252
    
    
    $
    10,212Income taxes, net of refunds received
    
    $
    1,406
    
    
    $
    3,809Non-cash investing and financing activities:Gain recognized on sale and leaseback transactions
    
    $
    185
    
    
    $
    187Dividends declared, not paid
    
    $
    3,155
    
    
    $
    3,633
 14




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction and Safe Harbor Disclosure
    New Accounting Pronouncements Not Yet Adopted and Adoption of New Accounting Pronouncements
  Critical Accounting Policies
  Impairment of Property and Equipment and Other Amortizable Long-Lived Assets Held and Used, Held
for Sale or To Be Disposed of Other Than By Sale
  15




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Impairment of Goodwill
  Estimated Liability for Closed Restaurants
  Estimated Liability for Self-Insurance
   Franchised and Licensed Operations
  Income Taxes
   16




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Significant Known Events, Trends, or Uncertainties Expected to Impact Fiscal 2009 Comparisons with
Fiscal 2008
  Fiscal Year and Seasonality
   Operating Review
  Twelve Weeks Ended
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    August 13, 2007
    
    August 11, 2008
    
    August 13, 2007Revenue:Company-operated restaurants
    
    
    75.8
    %
    
    
    79.3
    %
    
    
    76.4
    %
    
    
    79.1
    %Franchised and licensed restaurants and other
    
    
    24.2
    
    
    
    20.7
    
    
    
    23.6
    
    
    
    20.9Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating costs and expenses:Restaurant operating costs (1):Food and packaging
    
    
    30.1
    
    
    
    29.9
    
    
    
    29.7
    
    
    
    29.5Payroll and other employee benefits
    
    
    28.2
    
    
    
    29.6
    
    
    
    28.6
    
    
    
    29.3Occupancy and other
    
    
    22.4
    
    
    
    22.0
    
    
    
    22.0
    
    
    
    21.7Total restaurant operating costs
    
    
    80.7
    
    
    
    81.5
    
    
    
    80.3
    
    
    
    80.6Franchised and licensed restaurants and other (2)
    
    
    76.8
    
    
    
    76.8
    
    
    
    76.9
    
    
    
    77.8Advertising (1)
    
    
    5.9
    
    
    
    6.0
    
    
    
    5.9
    
    
    
    6.0General and administrative
    
    
    9.2
    
    
    
    8.7
    
    
    
    9.4
    
    
    
    9.2Facility action charges, net
    
    
    0.1
    
    
    
    (0.4
    )
    
    
    0.2
    
    
    
    (0.2
    )Operating income
    
    
    6.5
    
    
    
    6.4
    
    
    
    6.4
    
    
    
    6.3Interest expense
    
    
    (0.7
    )
    
    
    (1.2
    )
    
    
    (0.9
    )
    
    
    (1.2
    )Other income, net
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.3Income before income taxes and discontinued operations
    
    
    6.0
    
    
    
    5.4
    
    
    
    5.7
    
    
    
    5.4Income tax expense
    
    
    2.5
    
    
    
    2.2
    
    
    
    2.2
    
    
    
    2.2Income from continuing operations
    
    
    3.5
    %
    
    
    3.2
    %
    
    
    3.5
    %
    
    
    3.2
    %
 
 (1)
    
    As a percent of company-operated restaurants revenue.(2)
    
    As a percent of franchised and licensed restaurants and other revenue. 17




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Company-operated restaurants revenue
    
    $
    267,075
    
    
    $
    287,796
    
    
    $
    625,313
    
    
    $
    668,320Restaurant operating costs:Food and packaging
    
    
    80,355
    
    
    
    86,028
    
    
    
    185,429
    
    
    
    197,463Payroll and other employee benefits
    
    
    75,429
    
    
    
    85,159
    
    
    
    179,112
    
    
    
    195,640Occupancy and other
    
    
    59,811
    
    
    
    63,373
    
    
    
    137,846
    
    
    
    145,247Total restaurant operating costs
    
    
    215,595
    
    
    
    234,560
    
    
    
    502,387
    
    
    
    538,350Franchised and licensed restaurants and other revenue:Royalties
    
    
    20,161
    
    
    
    17,735
    
    
    
    45,165
    
    
    
    40,645Distribution centers
    
    
    56,146
    
    
    
    49,066
    
    
    
    126,835
    
    
    
    116,541Rent
    
    
    8,228
    
    
    
    6,677
    
    
    
    17,848
    
    
    
    15,971Retail sales of variable interest entity
    
    
    
    
    
    
    831
    
    
    
    
    
    
    
    1,787Franchise fees
    
    
    880
    
    
    
    986
    
    
    
    3,500
    
    
    
    1,629Total franchised and licensed restaurants and
other revenue
    
    
    85,415
    
    
    
    75,295
    
    
    
    193,348
    
    
    
    176,573Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad
debts)
    
    
    3,328
    
    
    
    2,755
    
    
    
    7,909
    
    
    
    6,353Distribution centers
    
    
    56,017
    
    
    
    48,828
    
    
    
    126,563
    
    
    
    116,481Rent and other occupancy
    
    
    6,245
    
    
    
    5,444
    
    
    
    14,185
    
    
    
    12,738Operating costs of variable interest entity
    
    
    
    
    
    
    794
    
    
    
    
    
    
    
    1,740Total franchised and licensed restaurants and
other expenses
    
    
    65,590
    
    
    
    57,821
    
    
    
    148,657
    
    
    
    137,312Advertising
    
    
    15,699
    
    
    
    17,271
    
    
    
    36,797
    
    
    
    40,032General and administrative
    
    
    32,370
    
    
    
    31,615
    
    
    
    76,881
    
    
    
    77,642Facility action charges, net
    
    
    351
    
    
    
    (1,546
    )
    
    
    1,424
    
    
    
    (1,800
    )Operating income
    
    $
    22,885
    
    
    $
    23,370
    
    
    $
    52,515
    
    
    $
    53,357
  Twelve Weeks Ended
    
    Twenty-Eight Weeks EndedCompany-
    
    Franchised
    
    
    
    
    
    Company-
    
    Franchisedoperated
    
    and licensed
    
    Total
    
    operated
    
    and licensed
    
    TotalOpen at beginning of period
    
    
    906
    
    
    
    2,195
    
    
    
    3,101
    
    
    
    967
    
    
    
    2,116
    
    
    
    3,083New
    
    
    4
    
    
    
    18
    
    
    
    22
    
    
    
    8
    
    
    
    46
    
    
    
    54Closed
    
    
    (5
    )
    
    
    (18
    )
    
    
    (23
    )
    
    
    (11
    )
    
    
    (26
    )
    
    
    (37
    )Divested
    
    
    (9
    )
    
    
    (32
    )
    
    
    (41
    )
    
    
    (68
    )
    
    
    (32
    )
    
    
    (100
    )Acquired
    
    
    32
    
    
    
    9
    
    
    
    41
    
    
    
    32
    
    
    
    68
    
    
    
    100Open at August 11, 2008
    
    
    928
    
    
    
    2,172
    
    
    
    3,100
    
    
    
    928
    
    
    
    2,172
    
    
    
    3,100
 18




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Carls Jr.
 Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Company-operated restaurants revenue
    
    $
    147,134
    
    
    $
    138,893
    
    
    $
    342,362
    
    
    $
    320,122Restaurant operating costs:Food and packaging
    
    
    43,929
    
    
    
    40,256
    
    
    
    100,434
    
    
    
    93,178Payroll and other employee benefits
    
    
    39,582
    
    
    
    38,860
    
    
    
    91,501
    
    
    
    87,396Occupancy and other
    
    
    33,239
    
    
    
    31,445
    
    
    
    76,106
    
    
    
    70,343Total restaurant operating costs
    
    
    116,750
    
    
    
    110,561
    
    
    
    268,041
    
    
    
    250,917Franchised and licensed restaurants and other revenue:Royalties
    
    
    8,054
    
    
    
    7,439
    
    
    
    18,380
    
    
    
    17,192Distribution centers
    
    
    50,603
    
    
    
    45,481
    
    
    
    113,892
    
    
    
    105,251Rent
    
    
    5,003
    
    
    
    5,048
    
    
    
    11,358
    
    
    
    12,007Franchise fees
    
    
    394
    
    
    
    368
    
    
    
    1,074
    
    
    
    802Total franchised and licensed restaurants and
other revenue
    
    
    64,054
    
    
    
    58,336
    
    
    
    144,704
    
    
    
    135,252Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad
debts)
    
    
    1,716
    
    
    
    1,348
    
    
    
    3,876
    
    
    
    3,206Distribution centers
    
    
    50,434
    
    
    
    45,162
    
    
    
    113,331
    
    
    
    105,089Rent and other occupancy
    
    
    4,268
    
    
    
    4,282
    
    
    
    9,865
    
    
    
    10,182Total franchised and licensed restaurants and
other expenses
    
    
    56,418
    
    
    
    50,792
    
    
    
    127,072
    
    
    
    118,477Advertising
    
    
    8,687
    
    
    
    8,206
    
    
    
    20,121
    
    
    
    18,806General and administrative
    
    
    13,461
    
    
    
    12,269
    
    
    
    32,278
    
    
    
    29,970Facility action charges, net
    
    
    (800
    )
    
    
    341
    
    
    
    (1,169
    )
    
    
    716Operating income
    
    $
    16,672
    
    
    $
    15,060
    
    
    $
    40,723
    
    
    $
    36,488Company-operated average unit volume (trailing-13
periods)
    
    $
    1,527
    
    
    $
    1,481Franchise-operated average unit volume (trailing-13
periods)
    
    $
    1,197
    
    
    $
    1,204Company-operated same-store sales increase
    
    
    3.8
    %
    
    
    2.0
    %
    
    
    3.9
    %
    
    
    0.8
    %Franchise-operated same-store sales (decrease) increase
    
    
    (0.3
    )%
    
    
    0.3
    %
    
    
    (0.5
    )%
    
    
    0.2
    %Company-operated same-store transaction (decrease)
increase
    
    
    (0.3
    )%
    
    
    (1.9
    )%
    
    
    0.9
    %
    
    
    (3.9
    )%Average check (actual $)
    
    $
    7.10
    
    
    $
    6.80
    
    
    $
    7.00
    
    
    $
    6.78Restaurant operating costs as a % of company-operated
restaurants revenue:Food and packaging
    
    
    29.9
    %
    
    
    29.0
    %
    
    
    29.3
    %
    
    
    29.1
    %Payroll and other employee benefits
    
    
    26.9
    %
    
    
    28.0
    %
    
    
    26.7
    %
    
    
    27.3
    %Occupancy and other
    
    
    22.6
    %
    
    
    22.6
    %
    
    
    22.2
    %
    
    
    22.0
    %Total restaurant operating costs
    
    
    79.3
    %
    
    
    79.6
    %
    
    
    78.3
    %
    
    
    78.4
    %Advertising as a percentage of company-operated
restaurants revenue
    
    
    5.9
    %
    
    
    5.9
    %
    
    
    5.9
    %
    
    
    5.9
    %
  Twelve Weeks Ended
    
    Twenty-Eight Weeks EndedCompany-
    
    Franchised
    
    
    
    
    
    Company-
    
    Franchisedoperated
    
    and licensed
    
    Total
    
    operated
    
    and licensed
    
    TotalOpen at beginning of period
    
    
    410
    
    
    
    752
    
    
    
    1,162
    
    
    
    406
    
    
    
    735
    
    
    
    1,141New
    
    
    1
    
    
    
    8
    
    
    
    9
    
    
    
    5
    
    
    
    25
    
    
    
    30Closed
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Divested
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Acquired
    
    
    
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    3Open at August 11, 2008
    
    
    408
    
    
    
    762
    
    
    
    1,170
    
    
    
    408
    
    
    
    762
    
    
    
    1,170
 19




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Company-Operated Restaurants
    Twelve
    
    Twenty-EightWeeks
    
    WeeksRestaurant operating costs as a percentage of
company-operated restaurants revenue for the period
ended August 13, 2007
    
    
    79.6
    %
    
    
    78.4
    %Decrease in workers compensation expense
    
    
    (1.0
    )
    
    
    (0.7
    )Increase in food and packaging costs
    
    
    0.9
    
    
    
    0.2Increase in utilities expense
    
    
    0.5
    
    
    
    0.3Increase in depreciation and amortization expense
    
    
    0.3
    
    
    
    0.4Decrease in repairs and maintenance
    
    
    (0.3
    )
    
    
    (0.3
    )Decrease in rent expense
    
    
    (0.2
    )
    
    
    Decrease in retirements expense
    
    
    (0.2
    )
    
    
    Other, net
    
    
    (0.3
    )
    
    
    Restaurant operating costs as a percentage of
company-operated restaurants revenue for the period
ended August 11, 2008
    
    
    79.3
    %
    
    
    78.3
    %
     20




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Franchised and Licensed Restaurants
      21




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Hardees
 Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007Company-operated restaurants revenue
    
    $
    119,873
    
    
    $
    148,832
    
    
    $
    282,796
    
    
    $
    348,024Restaurant operating costs:Food and packaging
    
    
    36,415
    
    
    
    45,750
    
    
    
    84,945
    
    
    
    104,228Payroll and other employee benefits
    
    
    35,815
    
    
    
    46,271
    
    
    
    87,539
    
    
    
    108,173Occupancy and other
    
    
    26,551
    
    
    
    31,897
    
    
    
    61,690
    
    
    
    74,840Total restaurant operating costs
    
    
    98,781
    
    
    
    123,918
    
    
    
    234,174
    
    
    
    287,241Franchised and licensed restaurants and other revenue:Royalties
    
    
    11,989
    
    
    
    10,190
    
    
    
    26,484
    
    
    
    23,182Distribution centers
    
    
    5,543
    
    
    
    3,587
    
    
    
    12,943
    
    
    
    11,294Rent
    
    
    3,225
    
    
    
    1,629
    
    
    
    6,490
    
    
    
    3,964Franchise fees
    
    
    476
    
    
    
    618
    
    
    
    2,416
    
    
    
    827Total franchised and licensed restaurants and
other revenue
    
    
    21,233
    
    
    
    16,024
    
    
    
    48,333
    
    
    
    39,267Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad
debts)
    
    
    1,611
    
    
    
    1,407
    
    
    
    4,032
    
    
    
    3,147Distribution centers
    
    
    5,583
    
    
    
    3,666
    
    
    
    13,232
    
    
    
    11,392Rent and other occupancy
    
    
    1,977
    
    
    
    1,162
    
    
    
    4,320
    
    
    
    2,556Total franchised and licensed restaurants and
other expenses
    
    
    9,171
    
    
    
    6,235
    
    
    
    21,584
    
    
    
    17,095Advertising
    
    
    7,011
    
    
    
    9,064
    
    
    
    16,675
    
    
    
    21,223General and administrative
    
    
    18,867
    
    
    
    19,303
    
    
    
    44,510
    
    
    
    47,561Facility action charges, net
    
    
    1,151
    
    
    
    (1,935
    )
    
    
    2,593
    
    
    
    (2,698
    )Operating income
    
    $
    6,125
    
    
    $
    8,271
    
    
    $
    11,593
    
    
    $
    16,869Company-operated average unit volume (trailing-13
periods)
    
    $
    973
    
    
    $
    934Franchise-operated average unit volume (trailing-13
periods)
    
    $
    961
    
    
    $
    964Company-operated same-store sales increase
    
    
    3.3
    %
    
    
    2.9
    %
    
    
    1.0
    %
    
    
    2.3
    %Franchise-operated same-store sales increase
    
    
    2.0
    %
    
    
    
    
    
    
    0.1
    %
    
    
    0.5
    %Company-operated same-store transaction (decrease)
increase
    
    
    (2.6
    )%
    
    
    2.7
    %
    
    
    (3.1
    )%
    
    
    1.8
    %Average check (actual $)
    
    $
    5.30
    
    
    $
    4.99
    
    
    $
    5.16
    
    
    $
    4.95Restaurant operating costs as a % of company-operated
restaurants revenue:Food and packaging
    
    
    30.4
    %
    
    
    30.7
    %
    
    
    30.0
    %
    
    
    29.9
    %Payroll and other employee benefits
    
    
    29.9
    %
    
    
    31.1
    %
    
    
    31.0
    %
    
    
    31.1
    %Occupancy and other
    
    
    22.1
    %
    
    
    21.4
    %
    
    
    21.8
    %
    
    
    21.5
    %Total restaurant operating costs
    
    
    82.4
    %
    
    
    83.3
    %
    
    
    82.8
    %
    
    
    82.5
    %Advertising as a percentage of company-operated
restaurants revenue
    
    
    5.8
    %
    
    
    6.1
    %
    
    
    5.9
    %
    
    
    6.1
    %
  Twelve Weeks Ended
    
    Twenty-Eight Weeks EndedCompany-
    
    Franchised
    
    
    
    
    
    Company-
    
    Franchisedoperated
    
    and licensed
    
    Total
    
    operated
    
    and licensed
    
    TotalOpen at beginning of period
    
    
    495
    
    
    
    1,428
    
    
    
    1,923
    
    
    
    560
    
    
    
    1,366
    
    
    
    1,926New
    
    
    3
    
    
    
    10
    
    
    
    13
    
    
    
    3
    
    
    
    21
    
    
    
    24Closed
    
    
    (5
    )
    
    
    (14
    )
    
    
    (19
    )
    
    
    (11
    )
    
    
    (22
    )
    
    
    (33
    )Divested
    
    
    (6
    )
    
    
    (32
    )
    
    
    (38
    )
    
    
    (65
    )
    
    
    (32
    )
    
    
    (97
    )Acquired
    
    
    32
    
    
    
    6
    
    
    
    38
    
    
    
    32
    
    
    
    65
    
    
    
    97Open at August 11, 2008
    
    
    519
    
    
    
    1,398
    
    
    
    1,917
    
    
    
    519
    
    
    
    1,398
    
    
    
    1,917
 22




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Company-Operated Restaurants
    Twelve
    
    Twenty-EightWeeks
    
    WeeksRestaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
August 13, 2007
    
    
    83.3
    %
    
    
    82.5
    %Decrease in labor costs, excluding workers compensation
    
    
    (1.0
    )
    
    
    Increase in depreciation and amortization expense
    
    
    0.7
    
    
    
    0.5Decrease in repairs and maintenance
    
    
    (0.2
    )
    
    
    (0.4
    )(Decrease) increase in food and packaging costs
    
    
    (0.3
    )
    
    
    0.1Increase in utilities expense
    
    
    0.2
    
    
    
    0.2Decrease in workers compensation expense
    
    
    (0.2
    )
    
    
    (0.1
    )Other, net
    
    
    (0.1
    )
    
    
    Restaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
August 11, 2008
    
    
    82.4
    %
    
    
    82.8
    %
     Franchised and Licensed Restaurants
  23




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 ,
   Consolidated Expenses
 General and Administrative Expense
    24




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Interest Expense
   Income Tax Expense
  Presentation of Non-GAAP Measurements
 Adjusted EBITDA
  Trailing-13Twelve Weeks Ended
    
    
    Twenty-Eight Weeks Ended
    
    
    Periods EndedAugust 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008
    
    
    August 13, 2007
    
    
    August 11, 2008Net income
    
    $
    12,340
    
    
    $
    9,425
    
    
    $
    28,960
    
    
    $
    24,776
    
    
    $
    35,260Interest expense
    
    
    2,399
    
    
    
    4,468
    
    
    
    6,967
    
    
    
    9,778
    
    
    
    30,244Income tax expense
    
    
    8,675
    
    
    
    10,347
    
    
    
    18,109
    
    
    
    20,804
    
    
    
    23,917Depreciation and amortization
    
    
    14,324
    
    
    
    15,026
    
    
    
    33,306
    
    
    
    34,910
    
    
    
    62,498Facility action charges, net
    
    
    351
    
    
    
    (2,042
    )
    
    
    1,424
    
    
    
    (2,505
    )
    
    
    2,647Share-based compensation expense
    
    
    2,929
    
    
    
    1,767
    
    
    
    6,866
    
    
    
    4,905
    
    
    
    13,339Adjusted EBITDA
    
    $
    41,018
    
    
    $
    38,991
    
    
    $
    95,632
    
    
    $
    92,668
    
    
    $
    167,905
 Liquidity and Capital Resources
  25




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
        26




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
         27




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
    Twenty-Eight Weeks EndedAugust 11, 2008
    
    
    August 13, 2007Non-discretionary:RemodelsCarls Jr.
    
    $
    5,787
    
    
    $
    13,283Hardees
    
    
    8,907
    
    
    
    10,381Capital MaintenanceCarls Jr.
    
    
    6,018
    
    
    
    5,780Hardees
    
    
    7,370
    
    
    
    9,216Corporate/other
    
    
    3,139
    
    
    
    3,928Total non-discretionary
    
    
    31,221
    
    
    
    42,588Discretionary:New restaurants/rebuildsCarls Jr.
    
    
    7,265
    
    
    
    7,647Hardees
    
    
    3,701
    
    
    
    6,612Dual-brandingCarls Jr.
    
    
    393
    
    
    
    856Hardees
    
    
    1,565
    
    
    
    1,657Real estate/franchise acquisitions
    
    
    3,813
    
    
    
    6,093Corporate/other
    
    
    493
    
    
    
    2,122Capital expenditures  discontinued operations
    
    
    
    
    
    
    3,523Total discretionary
    
    
    17,230
    
    
    
    28,510Total
    
    $
    48,451
    
    
    $
    71,098
   28




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
    Commodity Price Risk
  
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  29




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##### Table of Contents



(b) Changes in Internal Control
  
 Part II. Other Information.
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchase of Equity Securities
  (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)MaximumDollarValue ofTotal
    
    
    Shares thatNumber of Shares
    
    
    May Yet BeAverage
    
    
    Purchased as Part
    
    
    PurchasedTotal
    
    
    Price
    
    
    of Publicly
    
    
    Under theNumber of Shares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsMay 20, 2008  June 16, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    42,747June 17, 2008  July 14, 4008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,747July 15, 2008  August 11, 2008 (1)
    
    
    762
    
    
    
    11.64
    
    
    
    762
    
    
    
    41,395Total
    
    
    762
    
    
    $
    11.64
    
    
    
    762
    
    
    $
    41,395
 
 (1)
    
    We received and cancelled a total of 762 shares of our outstanding common stock in payment of
taxes owed on ordinary income recognized by one of our executives in connection with the
vesting of restricted stock awards issued under our stock incentive plans. 30




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
   Nominee
    
    Shares Voted For
    
    Against
    
    Abstentions
    
    Broker Non-VotesPeter Churm
    
    
    40,093,722
    
    
    
    7,225,395
    
    
    
    53,737
    
    
    
    Janet E. Kerr
    
    
    40,141,086
    
    
    
    7,189,247
    
    
    
    42,521
    
    
    
    Daniel D. (Ron) Lane
    
    
    45,321,749
    
    
    
    1,996,833
    
    
    
    54,272
    
    
    
    Andrew F. Puzder
    
    
    45,563,140
    
    
    
    1,760,585
    
    
    
    49,130
    
    
    
    
   Shares Voted For
    
    Against
    
    Abstentions
    
    Broker Non-Votes46,686,689
    
    653,891
    
    32,274
    
    
 31




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##### Table of Contents



Item 6. Exhibits.
 Exhibit #3.1
    
    
    Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Companys Registration Statement
Form S-4 filed with the Securities and Exchange Commission on
March 7, 1994).3.2
    
    
    Certificate of Amendment of Certificate of Incorporation of the
Company, as filed with the Delaware Secretary of State on
December 9, 1997 (incorporated by reference to Exhibit 3.2 to
the Companys Annual Report on Form 10-K for the fiscal year
ended January 26, 1998 filed with the Securities and Exchange
Commission on April 24, 1998).3.3
    
    
    Bylaws of the Company, as amended through September 4, 2008.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 32




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##### Table of Contents



SIGNATURES
  CKE RESTAURANTS, INC. 
(Registrant)Date: September 17, 2008
    /s/ Theodore AbajianTheodore AbajianExecutive Vice President
Chief Financial Officer 33




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##### Table of Contents



Exhibit Index
 Exhibit #3.1
    
    
    Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Companys Registration Statement Form S-4 filed with the Securities and Exchange Commission on March 7, 1994).3.2
    
    
    Certificate of Amendment of Certificate of Incorporation of the Company, as filed with the Delaware Secretary of State on December 9, 1997 (incorporated by reference to Exhibit 3.2 to the Companys Annual Report on Form 10-K for the fiscal year ended January 26, 1998 filed with the Securities and Exchange Commission on April 24, 1998).3.3
    
    
    Bylaws of the Company, as amended through September 4, 2008.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 34