<PAGE>   1

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                ----------------

                                    FORM 10-K

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

                   FOR THE FISCAL YEAR ENDED JANUARY 29, 2001

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 1-13192

                              CKE RESTAURANTS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                   33-0602639
  (STATE OR OTHER JURISDICTION OF           (I.R.S. EMPLOYER IDENTIFICATION NO.)
   INCORPORATION OR ORGANIZATION)

               401 W. CARL KARCHER WAY, ANAHEIM, CALIFORNIA 92801
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (714) 774-5796
               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

      TITLE OF EACH CLASS              NAME OF EACH EXCHANGE ON WHICH REGISTERED
  Common Stock, $.01 par value                   New York Stock Exchange

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

                                ----------------


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 30, 2001 was $104,110,276.

     The number of outstanding shares of the registrant's common stock was
50,501,421 as of March 30, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's Proxy Statement for the 2001 Annual Meeting of
Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after January 29, 2001, are incorporated by reference into Part
III of this Report.

================================================================================


<PAGE>   2




                     CKE RESTAURANTS, INC. AND SUBSIDIARIES
                       INDEX TO ANNUAL REPORT ON FORM 10-K

                   FOR THE FISCAL YEAR ENDED JANUARY 29, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                    PAGE NO.
                                                                                                    --------
<S>         <C>                                                                                     <C>
                                                  PART I
  Item 1.   Business                                                                                    3
  Item 2.   Properties                                                                                 16
  Item 3.   Legal Proceedings                                                                          16
  Item 4.   Submission of Matters to a Vote of Security Holders                                        16

                                                  PART II

  Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters                      17
  Item 6.   Selected Financial and Operating Data                                                      17
  Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations      19
  Item 7a.  Quantitative and Qualitative Disclosure About Market Risk                                  29
  Item 8.   Financial Statements and Supplementary Data                                                29
  Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure       29


                                                 PART III

  Item 10.  Directors and Executive Officers of the Registrant                                         29
  Item 11.  Executive Compensation                                                                     29
  Item 12.  Security Ownership of Certain Beneficial Owners and Management                             29
  Item 13.  Certain Relationships and Related Transactions                                             30

                                                  PART IV

  Item 14.  Exhibits, Financial Statements, Schedules and Reports on Form 8-K                          32
</TABLE>



                                       2
<PAGE>   3

                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     CKE Restaurants, Inc. (the "Company") owns, operates and franchises 3,783
quick-service restaurants, primarily under the Carl's Jr., Hardee's and Taco
Bueno brand names. Our Hardee's and Carl's Jr. chains are the fourth and seventh
largest quick-service hamburger restaurant chains in the United States,
respectively, based on domestic systemwide sales. Based on publicly available
data, our company-operated Carl's Jr. and Taco Bueno restaurants have
historically generated restaurant-level operating margins that have been among
the highest of the major quick-service restaurant chains.

        Carl's Jr.(R) -- Carl's Jr. was founded in 1956 and is located primarily
        in the Western United States, with a leading market presence in
        California. The Carl's Jr. menu features several charbroiled hamburgers,
        chicken sandwiches, steak sandwiches and other signature items,
        including the Famous Star, Western Bacon Cheeseburger(R), Super Star(R),
        Charbroiler Chicken Sandwiches(R), Crispy Chicken Sandwiches(R), the
        Charbroiled Sirloin Steak Sandwich, the Sourdough Bacon Cheeseburger and
        the Spicy Chicken Sandwich. Carl's Jr. differentiates itself from its
        competitors by offering menu items that are generally made-to-order,
        meet exacting quality standards and have a strong reputation for quality
        and taste. As of January 29, 2001, our Carl's Jr. system included 977
        restaurants, of which we operated 491 restaurants and our franchisees
        and licensees operated 486 restaurants.

        Hardee's(R) -- We acquired Hardee's in July 1997. This initial
        acquisition consisted of 808 Hardee's restaurants. In April 1998, we
        acquired 557 additional stores from the largest franchisee of Hardee's,
        Flagstar Enterprises, Inc. ("FEI"). Subsequent to that, we acquired
        approximately 100 more restaurants in various transactions with certain
        franchisees. Many of the restaurants that we acquired were in immediate
        need of a remodel. This prompted us to aggressively remodel these units
        to Star Hardee's, as explained below. Although these acquisitions
        enabled us to expand the scope of our operations and become one of the
        leading nationwide operators of quick-service hamburger restaurants, the
        capital requirements were intense and required us to incur significant
        borrowings. Given this debt level and declining same-store sales and
        restaurant margins at Hardee's we ultimately turned to our refranchising
        strategy discussed below. Hardee's was founded in 1961 and has
        significant market presence in the Southeastern and Midwestern United
        States. We believe there is significant value in Hardee's and Carl's
        Jr.'s complementary geographic markets and relative menu strengths.
        Hardee's strength is in its breakfast menu, which generates
        approximately 40% of its overall revenues. This represents one of the
        highest percentages in the quick-service hamburger restaurant industry.
        Since late fiscal 2000, we have been engaged in an effort to refranchise
        our system by selling existing Hardee's restaurants to new and existing
        franchisees. As of January 29, 2001, our Hardee's system included 2,660
        restaurants, of which we operated 923 restaurants and our franchisees
        and licensees operated 1,737 restaurants.

        Taco Bueno(R) -- As of January 29, 2001, we owned and operated 125 Taco
        Bueno quick-service Mexican restaurants located in Texas and Oklahoma.
        Taco Bueno differentiates itself from its competitors by offering a
        diverse menu featuring generous portions of freshly prepared,
        high-quality food items. In addition to typical quick-service Mexican
        offerings, such as burritos, tacos, tostadas and combination meals, Taco
        Bueno features a number of signature menu items, such as its Mexidips &
        Chips, Muchaco, Bueno Chilada Platter, Two-handed Taco and BOB ("Big Ol'
        Burrito"). In March 2001, the Company entered into a definitive purchase
        agreement to sell Taco Bueno for approximately $70 million, subject to
        certain adjustments.

        Bank Relations -- As a result of the poor operating performance at
        Hardee's, we were not in compliance with certain covenants governing our
        senior credit facility as of January 29, 2001. We have received waivers
        of this non-compliance through January 31, 2002. In accordance with the
        terms of the amendments to our senior credit facility, we have been
        reducing our total commitment and total debt outstanding on the facility
        through the proceeds from our refranchising strategy as well as other
        asset sales. This refranchising strategy was initiated to 1) reduce our
        leverage by using the cash from the restaurant sales to reduce
        outstanding borrowings on our senior credit facility and 2) achieve a
        better mix of franchise-operated to company-operated restaurants.



                                       3
<PAGE>   4

STRATEGY

In years past, we embarked on a growth strategy primarily involving the
development and operations of restaurants directly under our control. Our
strategy is also to provide effective management for our Hardee's and Carl's Jr.
brands and move to a well-balanced system of nationwide restaurant concepts that
are mainly franchise-operated. We will accomplish this by selling restaurants to
new and existing franchisees and use the resulting cash flow to reduce leverage.
We believe that our ability to deliver high-quality food with superior service
in a clean and friendly environment is critical to our operating success. When
we acquired Hardee's in July 1997, and subsequently grew the base of
company-operated restaurants by acquiring a number of franchised restaurants,
including the Hardee's restaurants owned by the largest franchisee, Flagstar
Enterprises, Inc., we had a solid history of developing food, labor and customer
service management practices that allowed us to effectively monitor
restaurant-level operations, control costs, benchmark restaurant performance
statistics and communicate systemwide best practices throughout our Carl's Jr.
chain. As a result of these strategies, we were able to improve the average unit
sales of Carl's Jr. from $966,000 in fiscal 1995 to $1,078,000 in fiscal 2001
and average unit sales of Taco Bueno from $600,000 during fiscal 1997 to
$786,000 in fiscal 2001. We attempted to employ the same strategies in our newly
acquired Hardee's chain, hoping to achieve the same results. After some time and
after a number of advertising campaigns, it became apparent to us that the
strategies that made Carl's Jr. and Taco Bueno successful would not work at
Hardee's. We realized that we needed to make some changes and embarked on an
operating and advertising strategy that is more appropriate for the typical
Hardee's guest. Two of the most important changes that we made in our strategy
for Hardee's over the last year and a half were to reduce the number of
company-operated restaurants by selling them to new and existing franchisees and
to implement a new quality service program. Both of these initiatives are
discussed in greater detail below.

     The revitalization of the Hardee's brand is clearly the most important
element of our overall strategy. Through our revised approach to Hardee's
operations, and through our refranchising strategy discussed below, we continue
to believe that the Hardee's brand is capable of generating meaningful profits
and positive same-store sales. The key elements of our overall strategy are to:

        Revitalize the Hardee's Brand to Grow Same-Store Sales. We are
        continuing our focus on revitalizing the Hardee's brand to generate
        same-store sales growth by appealing to the traditional Hardee's
        consumer. This revitalization focuses on reintroducing several products
        that Hardee's is known for and that made the brand successful years ago,
        such as the Roast Beef Sandwich, which is sliced and prepared in the
        restaurant and a popular product from the past, the Big Shef. We also
        are implementing the Carl's Jr.-style limited table service and added
        "all-you-can-drink" beverage bars in all of our Hardee's restaurants.
        Additionally, we are remodeling many of our Hardee's restaurants into a
        new "Star Hardee's" format, which we designed to revitalize the Hardee's
        brand with certain menu items from Carl's Jr., a clean, distinctive
        appearance and certain other operating qualities. In addition to the
        menu enhancements, a Star Hardee's remodel involves installing
        charbroilers in the kitchens, remodeling the interior and exterior of
        the restaurant and installing new signage that accents the Hardee's name
        with a Star logo. Over the past year, we, along with some franchisees,
        have been able to scale down the remodel, which still includes the
        addition of a charbroiler, signage and less interior and exterior
        enhancements, and thus significantly reduce the cost. Due to our debt
        reduction strategy discussed below, recently we have significantly
        scaled back the Star Hardee's remodel program for company-operated
        restaurants. If cash flows from operations permits, we plan to remodel
        up to 90 Hardee's units during fiscal 2002. As of January 29, 2001, 341
        company-operated and 481 franchise-operated Hardee's had been remodeled
        to Star Hardee's. As previously noted, certain aspects of the Carl's Jr.
        philosophy did not work at Hardee's and prompted us to make some changes
        in our operating and advertising strategies. Therefore, during the past
        six months, Hardee's restaurant operators have been focusing on
        "Operation QSC" -- Quality, Service, Cleanliness. This push has been in
        anticipation of the new Hardee's advertising campaign which debuted in
        February 2001. This campaign invites our audience to "Come on Home" to
        Hardee's and takes Hardee's back to its roots and the hometown cooking
        and hospitality that made the brand famous years ago. The reason for
        implementing QSC well ahead of this exciting new advertising campaign is
        based on the premise that a new advertising campaign will likely bring
        in new guests, but that if the staff is not prepared to please those new
        guests the likelihood of a return visit is severely diminished. We
        believe that the focus on QSC and the influence of this new ad campaign
        will improve Hardee's overall performance. Finally, during the fourth
        quarter of fiscal 2001, we decided to close certain underperforming
        Hardee's restaurants that we believe are in locations where the
        population or demographics have changed so significantly that there is
        minimal likelihood for material improvement. During fiscal 2001, of the
        105 Hardee's restaurants for which we provided a reserve in fiscal 2000
        we closed 74 restaurants, and during fiscal 2001 we have provided a
        reserve to close an additional 72 Hardee's restaurants over the next 12
        months.


                                       4
<PAGE>   5

        Keep Carl's Jr. on a Positive Track. Carl's Jr. is, and continues to be,
        a strong brand. This strong sales performance was driven in fiscal 2001
        by the introduction of two new sourdough products, the Sourdough Ranch
        Cheeseburger and the Sourdough Pepperjack Cheeseburger. Attribute
        ratings for Carl's Jr., including brand awareness, advertising recall,
        top of mind awareness and share of visits are at their highest levels in
        the past two years. We have several new products ready to introduce and
        have refocused our advertising on our target audience. Most recently, we
        featured ads with the taglines "Without Us, Some Guys Would Starve" and
        "Don't Bother Me, I'm Eating." With the focus on new products and
        superior service, we believe that the Carl's Jr. brand will continue the
        success it has enjoyed over the last half-century. The Carl's Jr.
        restaurants we operate in Oklahoma and Texas continue to present us with
        our biggest challenge. In fiscal 1999, we converted the existing
        Hardee's restaurants in those states to Carl's Jr. During the fourth
        quarter of fiscal 2001, we decided to close 17 underperforming Carl's
        Jr. restaurants in Oklahoma and are continuing to work on improving the
        performance of the remaining units.

        Refranchise Company-Operated Restaurants to New and Existing
        Franchisees. It is our intention to rebalance our company so that we
        will have a larger proportion of franchise-operated restaurants rather
        than company-operated restaurants. During fiscal 2001 we sold
        approximately 90 Carl's Jr. restaurants to franchisees generating net
        cash proceeds (as defined in our senior credit facility) of
        approximately $49.3 million and approximately 300 Hardee's restaurants
        to franchisees generating net cash proceeds (as defined in our senior
        credit facility) of approximately $88.5 million. This strategy is
        intended to increase the number and quality of our Hardee's franchisees
        to help us turn around those restaurants, to generate cash to pay down
        borrowings under our senior credit facility, and to allow us to focus on
        running and remodeling the balance of our Hardee's system with a smaller
        number of company-operated restaurants.

        Sell Taco Bueno. As discussed previously, we have entered into a
        definitive purchase agreement to sell Taco Bueno. We believe that this
        sale will help us reduce our debt and will allow our management to focus
        on our Carl's Jr. and Hardee's brands.

        Reduce Leverage. We will use the proceeds from the refranchising
        strategy discussed above to significantly reduce the amount of
        borrowings outstanding on our senior credit facility. We made
        significant progress during the current fiscal year, reducing our
        outstanding borrowings from nearly $300 million in March 2000 to $168.5
        million at the end of fiscal 2001 and, as of April 24, 2001, to
        approximately $135 million. As a result of the poor operating
        performance at Hardee's, we were not in compliance with certain
        covenants governing our senior credit facility as of January 29, 2001.
        We have received waivers of this non-compliance through January 31,
        2002. In accordance with the terms of the amendments to our senior
        credit facility, we have been reducing our total commitment and total
        debt outstanding on the facility through the proceeds from our
        refranchising strategy as well as other asset sales discussed above.
        This refranchising strategy was initiated to 1) reduce our leverage by
        using the cash from the restaurant sales to reduce outstanding
        borrowings on our senior credit facility and 2) achieve a better mix of
        franchise-operated to company-operated restaurants. This reduction in
        debt has enabled us to shift our focus to revitalizing the Hardee's
        brand as discussed above.

        Expand Our Concepts. We, along with our franchisees, intend to continue
        expanding our Carl's Jr. chain by opening new restaurants and continuing
        to improve our innovative advertising campaigns. Although capital
        expenditures were limited by our cash constraints as well as a covenant
        in our senior credit facility, in fiscal 2001 the Carl's Jr. system
        still grew by a total of 43 new restaurants. In fiscal 2002, if cash
        flows from operations permit, we plan to open approximately 10 new
        Carl's Jr. restaurants in established markets and our Carl's Jr.
        franchisees plan to open approximately 20 new restaurants. Additionally,
        we plan to open two or three new Hardee's restaurants during fiscal
        2002.

RESTAURANT OPERATIONS

CARL'S JR.

     Concept. We believe that our Carl's Jr. restaurants offer superior food
quality, a diverse menu and attentive customer service which differentiate
Carl's Jr. from its competitors and are critical to its success. Unlike many
quick-service restaurants that emphasize lower prices, Carl's Jr. restaurants
focus on offering customers a quality dining experience at a reasonable price.
Carl's Jr.'s menu features freshly prepared food items that appeal to a broad
audience. We generally make Carl's Jr. charbroiled hamburgers, chicken
sandwiches and signature items at the time of the customer's order, applying
exacting quality standards and offering them in generous portions. By providing
partial table service, unlimited drink refills and an attractive restaurant
decor, Carl's Jr. restaurants offer a pleasant, customer-friendly environment.
We believe that our focus on our customers and customer service, superior food
quality and generous portions enables Carl's Jr. restaurants to maintain a
strong price-value image with customers.


                                       5
<PAGE>   6


     Menu and Restaurant Design. Carl's Jr. restaurants offer a variety of
products that have a strong reputation for quality and taste. The Carl's Jr.
menu is relatively uniform throughout the chain and features several charbroiled
hamburgers and chicken sandwiches, including the Famous Star, Western Bacon
Cheeseburger, Super Star, Charbroiler Chicken Sandwiches, Crispy Chicken
Sandwiches, the Charbroiled Sirloin Steak Sandwich, the Sourdough Bacon
Cheeseburger and the Spicy Chicken Sandwich. We also offer a fish sandwich,
stuffed baked potatoes, prepackaged salads, french fries, onion rings and fried
zucchini. Most restaurants also have self-service salad bars and a breakfast
menu including eggs, bacon, sausage, French Toast Dips(R), the Sunrise
Sandwich(R) and a breakfast burrito. In addition, the restaurants sell a variety
of promotional products on a limited basis. Carl's Jr. also was among the first
to offer self-service salad bars and all-you-can-drink beverage bars.

     Most Carl's Jr. restaurants are freestanding, ranging in size from 2,500 to
4,000 square feet, with a seating capacity of 65 to 115 persons and drive-thru
facilities. Some restaurants are located in shopping malls and other in-line
facilities. Currently, several building designs and floor plans are in use
system-wide, depending upon operational needs, local zoning requirements and
real estate availability.

     Substantially all of our Carl's Jr. restaurants have bright colored
exteriors, red awnings and a large, tilted Happy Star(R) logo. The interiors
feature the same bright colors, food murals, display cases for salads and
desserts and accent lighting throughout the dining area. We believe that Carl's
Jr.'s new restaurant design further increases consumer awareness of the Carl's
Jr. brand.

     Operations. We strive to maintain high standards in all products and
equipment used by our restaurants, as well as our operations related to food
preparation, service and cleanliness. We generally prepare or assemble
hamburgers and chicken and steak sandwiches at Carl's Jr. restaurants after the
customer has placed an order and serve them promptly. We charbroil hamburger
patties, chicken breasts and sirloin steaks in a gas-fired double broiler that
sears the meat on both sides in a uniform heating and cooking time.

     Each company-operated Carl's Jr. restaurant is operated by a general
manager who has received nine to 13 weeks of management training. This training
program involves a combination of classroom instruction and on-the-job training
in specially designated training restaurants. The restaurant manager trains
other employees in accordance with our guidelines. District managers, who are
responsible for 11 to 14 restaurants, also supervise restaurant managers.
Approximately 50 district managers are under the supervision of five regional
vice presidents, all of whom regularly inspect the operations in their
respective districts and regions.

     Dual-Branding. Dual-branding allows a single restaurant to offer consumers
two distinct brand menus. In May 1995, we entered into an initial agreement with
Santa Barbara Restaurant Group, Inc. ("SBRG") to offer The Green Burrito menu at
selected Carl's Jr. locations. In July 2000, this agreement was terminated and
was replaced by a new master franchise agreement, which was subsequently amended
in December 2000. We believe The Green Burrito's position in the popular Mexican
food segment and its dinner menu orientation complement the Carl's Jr. menu.
Customers of the Carl's Jr./Green Burrito dual- brand restaurants are able to
order items from both Carl's Jr.'s and The Green Burrito's menu boards located
at the same counter. Both menus are also available to customers utilizing the
drive-thru. The Green Burrito menu offered at the dual-brand restaurants
features a wide variety of traditional Mexican food items, including burritos,
tostadas, enchiladas, tacos, taquitos and nachos as well as combination meals
which are served with rice and beans. A variety of condiments such as jalapeno
peppers, hot sauce and mild and hot salsa are available at self-serve salsa bars
so that customers can spice and garnish their meals according to individual
taste. In order to convert an existing Carl's Jr. restaurant to a Carl's
Jr./Green Burrito restaurant, the additional equipment necessary to offer The
Green Burrito menu is added to the Carl's Jr. restaurant, as well as new menu
boards and new signage, both inside and outside, indicating the offering of both
brands. In most cases, changes to the seating area or other parts of the
physical structure of the restaurant are unnecessary. We believe that this
dual-branding program has attracted new customers, while increasing the
frequency of customer visits at converted restaurants.

     Our agreement with SBRG, as amended, provides for a new conversion schedule
which requires the conversion of a total of 233 Carl's Jr. restaurants to Carl's
Jr./Green Burrito dual-brand restaurants by the end of calendar 2002.
Additionally, we now directly manage the Green Burrito menu in our dual-branded
stores and our franchise fee and royalties payable to SBRG has been reduced. As
of January 29, 2001, 116 Carl's Jr. company-operated locations have been
converted to Carl's Jr./Green Burrito dual concept restaurants. We are required
to pay an initial franchise fee for each restaurant opened and remit royalties
on The Green Burrito food sales to SBRG. At the end of fiscal 1996, we elected
to sub-franchise, and shortly thereafter began offering, the Carl's Jr./Green
Burrito dual-brand to our franchise community. As of January 29, 2001, 80
franchised Carl's Jr. restaurants have been converted to the Carl's Jr./Green
Burrito concept. We receive a portion of the fee for each franchise conversion
and royalties from our franchisees' Green Burrito food sales.


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<PAGE>   7

     Franchised and Licensed Operations. Our franchise strategy is designed to
further the development of the Carl's Jr. chain and reduce the total capital we
need to develop new Carl's Jr. restaurants. Franchise arrangements with Carl's
Jr. franchisees, who operate in Arizona, California, Colorado, Hawaii, Idaho,
Nevada, New Mexico, Oklahoma, Oregon, Texas and Utah, generally provide for
initial fees and continuing royalty payments to us based upon a percentage of
sales and provide for a minimum percentage of sales each month for advertising.
Additionally, most franchisees purchase food, paper and other supplies from us.
Franchisees may also be obligated to remit lease payments for the use of
company-owned or leased restaurant facilities and to pay related occupancy
costs, which include maintenance, insurance and property taxes. We also plan to
continue to pursue non-traditional franchise development opportunities through
innovative formats, including gasoline stations, convenience stores and
institutional food service outlets.

     Our international licensed operations continued to be a bright spot for us
in fiscal 2001. Our Carl's Jr. restaurants in Mexico reached average unit
volumes of $1,820,000 in fiscal 2001, well in excess of our domestic units.

     Our franchising and licensing philosophy is that only candidates with
appropriate operational experience and financial stability are considered for
the program. Specific net worth and liquidity requirements must be satisfied.
Area development agreements generally require franchisees to open a specified
number of Carl's Jr. restaurants in a designated geographic area within a
specified time period.

     As of January 29, 2001, 486 Carl's Jr. restaurants were operated by our
Carl's Jr. franchisees and licensees. The majority of our Carl's Jr. franchisees
own more than one restaurant, with 24 franchisees owning seven or more
restaurants. We presently anticipate that our Carl's Jr. franchisees and
licensees will open approximately 20 new Carl's Jr. restaurants during fiscal
2002.

HARDEE'S

     Concept. Hardee's has a leading market presence in the Southeastern and
Midwestern United States. The Hardee's restaurant chain offers a variety of menu
items targeted at a broad audience in a quick-service, uniform format. Hardee's
restaurants emphasize hometown hospitality by providing generous portions at
reasonable prices in a friendly environment. Hardee's restaurant promotions
often include "two-for-two" campaigns, which offer two menu items for two
dollars.

     Menu and Restaurant Design. Hardee's restaurants currently offer
hamburgers, chicken sandwiches, roast beef sandwiches and fish sandwiches for
lunch and dinner, as well as fried chicken in our restaurants located in certain
markets. Unlike many quick-service hamburger restaurants, Hardee's strength has
been in its breakfast sales, which generate approximately 40% of its overall
operating revenue, one of the highest in the quick-service hamburger industry.
Hardee's breakfast menu features "made-from-scratch" biscuits, biscuit breakfast
sandwiches and other items such as hash rounds and breakfast platters.
Substantially all of Hardee's restaurants have drive-thru facilities, and
selected restaurants are open 24 hours a day, primarily on the weekends. Most
Hardee's restaurants are freestanding, ranging in size from 3,000 to 3,500
square feet, with a seating capacity of 75 to 100 persons. Currently, several
building designs and floor plans are in use system-wide, depending upon
operational needs, local zoning requirements and real estate availability.

     Since our acquisition of Hardee's, we introduced certain made-to-order
lunch and dinner menu items that are currently served in our Carl's Jr.
restaurants, such as the Famous Star, and eliminated unprofitable product
offerings. We are continuing our focus on revitalizing the Hardee's brand to
generate same-store sales growth by appealing to the traditional Hardee's
consumer. This revitalization focuses on reintroducing several products that
Hardee's is known for and that made the brand successful years ago such as the
Roast Beef Sandwich, which is sliced and prepared in the restaurant, and a
popular product from the past, the Big Shef. We also are implementing the Carl's
Jr.-style limited table service and added "all-you-can-drink" beverage bars in
all of our Hardee's restaurants. Additionally, we are remodeling our Hardee's
restaurants to a new "Star Hardee's" format, which we designed to revitalize the
Hardee's brand with the menu and certain operating qualities of Carl's Jr. In
addition to the menu enhancements, a Star Hardee's remodel involves installing
charbroilers in the kitchens, remodeling the interior and exterior of the
restaurant and installing new signage that accents the Hardee's name with a Star
logo. Over the past year, we, along with some franchisees, have been able to
scale down the remodel which still includes the addition of a charbroiler,
signage and less interior and exterior enhancements, and thus significantly
reduce the cost. However, due to our debt reduction strategy, recently we have
significantly scaled back the Star Hardee's remodel program for company-operated
restaurants.

     As of January 29, 2001, we had remodeled 341 company restaurants and
installed "all-you-can-drink" beverage bars in all of our Hardee's restaurants.


                                       7
<PAGE>   8

     Operations. We strive to maintain high standards in all products and
equipment used by our Hardee's restaurants, as well as the operations related to
food preparation, service and cleanliness. As part of our plan to offer certain
items currently served in our Carl's Jr. restaurants at Hardee's, we are in the
process of installing gas-fired charbroilers in each existing company-operated
Hardee's restaurant. As previously noted, the Carl's Jr. philosophy has not yet
yielded improvements at Hardee's, which prompted us to make some changes in our
operating and advertising strategies in addition to the physical changes
discussed above. Therefore, the Hardee's operators have been focusing on
"Operation QSC" -- Quality, Service, Cleanliness. This push has been in
anticipation of the new Hardee's advertising campaign which debuted in February
2001. This campaign invites our audience to "Come on Home" to Hardee's and takes
Hardee's back to its roots and the hometown cooking and hospitality that made
the brand famous years ago. The reason for implementing QSC well ahead of this
exciting new advertising campaign is based on the idea that a new advertising
campaign will likely bring in new guests, but that if the staff is not prepared
to please those new guests, the likelihood of a return visit is severely
diminished.

     Franchised and Licensed Operations. Franchise agreements with Hardee's
franchisees, who operate in the Southeastern and Midwestern United States,
generally provide for initial fees and continuing royalty payments to us based
upon a percentage of sales. Most franchisees are required to purchase certain
inventory and supplies from approved suppliers and are required to spend a
minimum percentage of sales each month on advertising. In addition, most
franchisees are required to purchase and install all fixtures, furnishings,
signs and equipment specified in the approved site layout and plan. Prior to the
opening of a franchised restaurant, the general manager of each franchise is
required to attend and complete our company-sponsored training program.
Franchisees may also be required to remit lease payments for the use of our
company-owned or leased restaurant facilities and to pay related occupancy
costs.

     At Hardee's, average unit volumes for our international restaurants were
$853,000 in fiscal 2001 and total revenue from the Hardee's international
restaurants exceeded $100 million for the first time in Hardee's history.

     Since our acquisition of Hardee's, we have worked to enhance and develop a
productive relationship with our Hardee's franchisees. We have been supportive
in establishing a franchisee association and improved communications with
franchisees. As a result, our Hardee's franchisees have collectively increased
their level of royalty payment and advertising contribution compliance. Our
Hardee's franchisees have joined us in our Star Hardee's remodel program and, as
of January 29, 2001, had remodeled 481 franchised Hardee's restaurants.

     As of January 29, 2001, 1,737 Hardee's restaurants were operated by our
franchisees and licensees. The majority of our Hardee's franchisees own more
than one restaurant, with 29 franchisees owning 10 or more restaurants.

TACO BUENO

     Taco Bueno differentiates itself from its principal competitors by offering
a diverse menu featuring generous portions of freshly prepared, high-quality
food items. In addition to typical quick-service Mexican offerings, such as
burritos, tacos, tostadas and combination meals, Taco Bueno features a number of
signature menu items such as its Mexidips & Chips, Muchaco, Bueno Chilada
Platter, Two-handed Taco and BOB ("Big Ol' Burrito"). Taco Bueno's Mexican
platters include taco and burrito platters, beef and chicken taco salads and
nacho platters, each of which is accompanied by rice, beans, freshly prepared
guacamole and chips. The restaurants also feature a salsa bar which includes
sliced jalapenos, diced onions, pico de gallo and hot sauce.

     Taco Bueno restaurants generally feature a "Santa Fe/Pueblo" architecture
and exterior decor, which was designed for high visibility and consumer
recognition, and generally range in size from 2,400 square feet to 3,200 square
feet. Restaurant interiors include wooden tables and chairs, booth seating,
stucco walls, warm colors and a southwestern theme, all of which are intended to
create a distinctive atmosphere. In fiscal 2000, we began the roll-out of our
new Taco Bueno remodel program. The new design features contemporary Mexican
architecture, bright, eye-catching colors, serpentine stainless-steel counters
and black slate tile. As of January 29, 2001, 39 Taco Bueno restaurants had been
remodeled.

     In November 2000, we made a strategic decision to focus all of our efforts
on turning around our Hardee's operations and growing the Carl's Jr. brand, and
consequently, in March 2001, we entered into a definitive purchase agreement to
sell Taco Bueno for approximately $70 million, subject to certain adjustments.
We plan to use the net proceeds of the sale to repay indebtedness under our
senior credit facility.


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<PAGE>   9

INVESTMENTS IN OTHER RESTAURANT CONCEPTS

     In the past, we have selectively invested in other restaurant concepts, as
described below (see Note 8 of Notes to the Consolidated Financial Statements).
In fiscal 2001, in order to reduce our focus from multiple brands to our core
concepts, we began to divest our interest in the other restaurant concepts.

     Santa Barbara Restaurant Group, Inc. Santa Barbara Restaurant Group, Inc.
("SBRG") (formerly GB Foods Corporation) owns, operates and franchises The Green
Burrito and La Salsa quick-service Mexican food restaurants, and Timber Lodge
Steakhouse. Through our dual-branding relationship with The Green Burrito, we
are SBRG's largest franchisee.

     On September 1, 1998, we sold 14 company-operated JB's Restaurants and two
Galaxy Diner restaurants to Timber Lodge Steakhouse, Inc. ("Timber Lodge") for
687,890 shares of Timber Lodge common stock, which was converted into SBRG
common stock in connection with the merger of Timber Lodge and SBRG. That year,
we also sold our wholly owned subsidiary, JB's Restaurants, Inc. ("JB's"), which
consisted of the remaining 48 company-operated JB's Restaurants and the JB's
franchise system together with four Galaxy Diner restaurants, to SBRG for one
million shares of SBRG common stock. During fiscal 2001, we sold our shares of
SBRG to American National Financial, Inc., an affiliate of Fidelity National
Financial, Inc., and therefore no longer hold an ownership interest in SBRG.

     Rally's and Checkers. In August 1999, Rally's Hamburgers, Inc. ("Rally's")
merged with Checkers Drive-In Restaurants, Inc. ("Checkers") in a reverse
acquisition. Checkers operates and franchises approximately 427 Checkers and 427
Rally's double drive-thru quick-service hamburger restaurants, primarily in the
Southeastern and Midwestern United States. Pursuant to the terms of our
operating agreement with Rally's, we operate 21 Rally's restaurants in
California and Arizona. During fiscal 2001, we sold 657,000 shares of Checkers
in open market transactions. We currently have a 9.2% ownership interest in
Checkers and the right to acquire common shares representing an additional 7.4%
of Checkers.

     Boston Market. We held a minority interest in Boston West, LLC ("Boston
West"), which operates Boston Market restaurants in designated markets in
Southern California as a franchised area developer of Boston Chicken, Inc.
("BCI"), the franchisor of the Boston Market restaurant concept. BCI and its
Boston Market subsidiaries filed for protection under Chapter 11 of the Federal
Bankruptcy Code on October 5, 1998. In a separate action, on November 9, 1998,
Boston West filed a voluntary petition under Chapter 11 of the Federal
Bankruptcy Code in order to restructure its overall operations. During the third
quarter of fiscal 1999, we signed an agreement with Boston West to provide
administrative and management services to the Boston Market franchises operated
by Boston West. In April 2000, Boston Market Corporation ("BMC"), a wholly-owned
subsidiary of McDonald's Corp., acquired BCI's rights, claims and interests
relating to Boston West. As a result, Boston West and BMC filed a joint plan of
reorganization which was approved by the bankruptcy court. Under this plan we no
longer provide administrative or management services to Boston Market stores
operated by Boston West and we no longer have an ownership interest in Boston
West or any of the Boston Market stores operated by Boston West. Additionally,
under the plan, Boston West was dissolved.

     We intend to continue to review our investments in other restaurant
concepts. Although we have no present intention to acquire additional interests
in other restaurant concepts, we may do so in the future, depending on the
availability of financing at attractive terms, the business prospects of the
restaurant concept, alternative business opportunities available to us and
general economic conditions.

PURCHASING AND DISTRIBUTION

     We purchase most of the primary food products and packaging supplies used
in our Carl's Jr. restaurant system and warehouse and distribute such items to
both company-operated and franchised Carl's Jr. restaurants. Although not
required to do so, substantially all of our Carl's Jr. franchisees in California
purchase most of their supplies from us. Our Carl's Jr. restaurant chain is one
of the few businesses in the quick-service restaurant industry that has elected
not to outsource all of its distribution activities.

     We currently purchase substantially all of the food, packaging and cleaning
products sold or used in our Hardee's restaurants from Fast Food Merchandisers,
Inc. ("FFM") and MBM Corporation ("MBM"). MBM, which was the primary distributor
for FEI, acquired FFM in 1998, and consequently consolidated substantially all
of Hardee's distribution requirements. FFM and MBM currently distribute such
products to company-operated restaurants and to many of the Hardee's restaurants
operated by our Hardee's franchisees. Pursuant to the terms of the distribution
agreements, we are obligated to purchase substantially all of our specified


                                       9
<PAGE>   10

product requirements from FFM and MBM for remaining terms of four years each.
The prices we pay for FFM and MBM products, and the delivery fees we pay each
distribution service, are subject to adjustment in certain circumstances, which
may include increases resulting from changes in the distributor's cost
structure.

     We believe our mature procurement process allows us to effectively manage
food costs, provide adequate quantities of food and supplies at competitive
prices, and generate revenues from Carl's Jr. franchisees by adding a nominal
mark-up to cover direct costs and provide better overall service to our
restaurants. We seek competitive bids from suppliers on many of our products,
approve suppliers of those products and require them to adhere to our
established product specifications.

COMPETITION

     The foodservice industry is intensely competitive with respect to the
quality and value of food products offered, concept, service, price, dining
experience and location. We primarily compete with major restaurant chains, some
of which dominate the quick-service restaurant industry, and also compete with a
variety of other take-out foodservice companies and fast-food restaurants. Our
competitors also include a variety of mid-price, full-service casual-dining
restaurants, health and nutrition-oriented restaurants, delicatessens and
prepared food stores, as well as supermarkets and convenience stores. We believe
we can effectively compete in the markets in which we have restaurants. However,
many of our competitors have substantially greater financial, marketing and
other resources than we do, which may give them competitive advantages. Certain
of the major quick-service restaurant chains have increasingly offered selected
food items and combination meals at discounted prices. In recent years, our
restaurant sales were adversely affected by aggressive promotions and price
reductions by our competitors. Future changes in the pricing or other marketing
strategies of one or more of our competitors could have a material adverse
effect on our financial condition and results of operations. As our competitors
expand operations, we expect competition to intensify. Such increased
competition could have a material adverse effect on our financial condition and
results of operations. We also face competition from other quick-service
operators, retail chains and other companies and developers for desirable site
locations, which may adversely affect the cost, implementation and timing of our
expansion plans.

TRADEMARKS AND SERVICE MARKS

     We own numerous trademarks and service marks, and have registered many of
those marks, including Carl's Jr., the Happy Star logo, Hardee's and proprietary
names for a number of the Carl's Jr., Hardee's and Taco Bueno menu items, with
the United States Patent and Trademark Office. We believe our trademarks and
service marks have significant value and play an important role in our marketing
efforts. Green Burrito(R) is a registered trademark of SBRG.

GOVERNMENT REGULATIONS

     Each company-operated and franchised restaurant must comply with
regulations adopted by federal agencies and with licensing and other regulations
enforced by state and local health, sanitation, safety, fire and other
departments. In addition, these restaurants must comply with federal and state
environmental regulations, but those regulations have not had a material effect
on the restaurants' operations. More stringent and varied requirements of local
governmental bodies with respect to zoning, land use and environmental factors
can delay and sometimes prevent development of new restaurants and remodeling of
existing restaurants in particular locations.

     We are also subject to federal laws and a substantial number of state laws
regulating the offer and sale of franchises. Such laws impose registration and
disclosure requirements on franchisors in the offer and sale of franchises and
may also apply substantive standards to the relationship between franchisor and
franchisee, including limitations on the ability of franchisors to terminate
franchisees and alter franchise arrangements. We believe we are operating in
substantial compliance with applicable laws and regulations governing our
operations.

     We and our franchisees must comply with the Fair Labor Standards Act and
various federal and state laws governing employment matters, such as minimum
wages, overtime and other working conditions and citizenship requirements. Many
of our employees are paid hourly rates related to the federal and state minimum
wage laws, and, accordingly, increases in the minimum wage increase our labor
cost.


                                       10
<PAGE>   11

ENVIRONMENTAL MATTERS

     We are subject to various federal, state and local environmental laws.
These laws govern discharges to air and water from our restaurants, as well as
handling and disposal practices for solid and hazardous wastes. These laws may
impose liability for damages from and the costs of cleaning up sites of spills,
disposals or other releases of hazardous materials. We may be responsible for
environmental conditions relating to our restaurants and the land on which our
restaurants are located, regardless of whether we lease or own the restaurants
or land in question and regardless of whether such environmental conditions were
created by us or by a prior owner or tenant.

     Although we cannot assure you that all such environmental conditions have
been identified, these conditions include the presence of asbestos-containing
materials, leaking underground storage tanks and on-site spills. Further,
certain properties formerly had landfills, historic industrial use, gasoline
stations and/or dry cleaning businesses located on or near the premises.
Corrective action, as required by the regulatory agencies, has been undertaken
at some of the sites, although the majority of these sites are being remediated
by former landowners or tenants. The enforcement of our rights against third
parties for environmental conditions, such as off-site sources of contamination,
may result in additional transaction costs for us.

     We are not aware of any environmental conditions that would have a material
adverse effect on our businesses, assets or results of operations taken as a
whole. Although environmental site assessments prepared for certain properties
recommend limited further investigations or minor repairs, based on the
information currently available to us, we do not believe any of these
environmental issues would have a material adverse effect on these properties.
Nevertheless, we cannot assure you that environmental conditions relating to
prior, existing or future restaurants or restaurant sites will not have a
material adverse effect on us. Moreover, we cannot assure you that: (1) future
laws, ordinances or regulations will not impose any material environmental
liability; or (2) the current environmental condition of the properties will not
be adversely affected by tenants or other third parties or by the condition of
land or operations in the vicinity of the properties.

EMPLOYEES

     As of January 29, 2001, we employed approximately 35,500 persons, of whom
approximately 32,000 were hourly restaurant, distribution or clerical employees
and the remainder were managerial salaried employees engaged in administrative
and supervisory capacities. A majority of our hourly employees are employed on a
part-time basis to provide service necessary during peak periods of restaurant
operations. None of our employees are covered by a collective bargaining
agreement. We have never experienced a work stoppage attributable to labor
disputes, and we believe our employee relations are good.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     The information contained in this Form 10-K contains forward-looking
statements that involve a number of risks and uncertainties. Forward-looking
statements can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "seeks," "pro forma" or
"anticipates," or other variations thereof (including their use in the
negative), or by discussions of strategies, plans or intentions. A number of
factors could cause results to differ materially from those anticipated by such
forward-looking statements. Among these factors are the Risk Factors described
below and:

     -  our ability to turn around Hardee's and grow the core restaurant brands;

     -  increases in our food, labor, occupancy and other operating costs;

     -  availability of commodities;

     -  our ability to pay principal and interest on our substantial debt;

     -  our ability to borrow in the future;

     -  adverse legislation or regulation;

     -  adverse weather conditions;

     -  our ability to sustain or increase historical revenues and profit
        margins;


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<PAGE>   12


     -  continuation of certain trends and general economic conditions in our
        industry; and

     -  our ability to complete proposed sales of restaurants to qualified
        franchisees.

     In addition, such forward-looking statements are necessarily dependent upon
assumptions and estimates that may prove to be incorrect. Accordingly, while we
believe that the plans, intentions and expectations reflected in such
forward-looking statements are reasonable, we cannot assure you that such plans,
intentions or expectations will be achieved. The information contained in this
Form 10-K, including the Risk Factors section hereof, identifies important
factors that could cause such differences.

RISK FACTORS

Leverage and Ability to Service Debt -- To service our indebtedness, we will
require a significant amount of cash. Our ability to generate cash depends on
many factors beyond our control.

     We have a significant amount of indebtedness. As of January 29, 2001, we
had a total of $624.3 million of long-term debt and capital lease obligations,
including the current portion, and our debt to capitalization ratio was 0.64x.
While in the past we have been able to generate sufficient earnings to satisfy
our debt service obligations and other fixed charges, our substantial
indebtedness requires us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the availability of
our cash flow to fund working capital, capital expenditures, and other general
corporate purposes and could have important consequences to holders of our
common stock and other securities. For example, it could:

     -  make it more difficult for us to satisfy our obligations under our debt
        securities and other indebtedness;

     -  increase our vulnerability to general adverse economic and industry
        conditions;

     -  limit our flexibility in planning for, or reacting to, changes in our
        business and the industry in which we operate;

     -  place us at a competitive disadvantage compared to our competitors that
        have less debt; and

     -  limit, along with the financial and other restrictive covenants in our
        indebtedness, among other things, our ability to borrow additional
        funds. Failure to comply with those covenants could result in an event
        of default which, if not cured or waived, could have a material adverse
        effect on our business.

     Our ability to make payments on or to refinance our indebtedness and to
fund planned capital expenditures will depend on our ability to generate cash in
the future. Our ability to generate cash from our operations is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control, including seasonality. In addition, we
cannot assure you that our business will generate sufficient cash flow from
operations, that currently anticipated cost savings and operating improvements
will be realized on schedule, that we will generate proceeds from the sale of
restaurants at prices and terms considered by us to be appropriate, or that
future borrowings will be available to us under our senior credit facility in an
amount sufficient to enable us to service our indebtedness or to fund our other
liquidity needs.

     The sale of Taco Bueno is expected to generate a significant amount of cash
to repay indebtedness under our senior credit facility. Our ability to avoid
additional interest rate increases and to service our indebtedness may depend on
the completion of this sale. Although we have signed a definitive purchase
agreement to sell Taco Bueno for approximately $70 million, subject to certain
adjustments, there can be no assurances that this sale will be completed. If
this cash is not raised through the sale of Taco Bueno, we will have to pursue
alternative methods of raising cash to repay indebtedness such as the sale of
additional Carl's Jr. and Hardee's restaurants to new and existing franchisees
or sale-leaseback of the existing Taco Bueno properties.

     Additionally, we were not in compliance with certain covenants under our
senior credit facility as of January 29, 2001. Although we have received waivers
of this non-compliance through January 31, 2002, we are currently actively
pursuing strategies to refinance our senior credit facility as quickly as
possible involving mortgaging many of our existing real properties that may
reduce some of the capital restrictions that our current senior credit facility
imposes. Failure to economically effect a refinancing may have a material
adverse affect on our financial condition and results of operations.


                                       12
<PAGE>   13

Uncertainties Related to the Revitalization of Hardee's -- We will continue to
face challenges in our attempt to improve our Hardee's operations.

     Revitalizing Hardee's will continue to challenge our management team.
Hardee's is a well-established but underperforming brand. When we acquired
Hardee's, it was experiencing declining system-wide same-store sales and a
declining market share in the quick-service hamburger restaurant industry. Our
initial turnaround strategy for Hardee's focused on managing costs and realizing
purchasing synergies. These were the concepts and ideas that had worked for the
Carl's Jr. chain for many years. While those synergies initially enabled us to
improve our restaurant-level operating margins above their pre-acquisition
historical levels, Hardee's margins have decreased over the past fiscal year.
Hardee's operating margins for the fourth quarter of fiscal 2001 were below
fiscal 1997 levels. We have realized that the strategies that worked at Carl's
Jr. and Taco Bueno were not working. We had initially hoped that physical
changes to the restaurants would increase same-store sales and improve margins.
Therefore, in fiscal 2000, we invested large amounts of capital into
reconfiguring many of our Hardee's restaurants' kitchens, replacing equipment,
and remodeling restaurants to the Star Hardee's format. How, however, the cost
and pace of this remodeling effort has been significantly scaled back during
fiscal 2001 as we have been using cash flows to reduce indebtedness. As the
remodel program has not been as successful as we had planned at Hardee's, we
have launched the following initiatives during fiscal 2001; (1) during the
fourth quarter of fiscal 2001, we identified a number of Hardee's stores that
are considered to be underperforming. As of January 29, 2001, we have identified
an additional 72 underperforming Hardee's restaurants to be closed over the next
year (in addition to the 105 identified in fiscal 2000); (2) we have embarked on
our refranchising strategy whereby we intend to increase our proportion of
franchised restaurants to company-operated restaurants, which will allow us to
generate cash to pay down debt and to increase the number and quality of our
Hardee's franchisees to help turn around those restaurants; and, (3) we have
launched "Operation QSC" -Quality, Service, Cleanliness. This is designed to
prepare our restaurants and our staff for our new advertising campaign which
invites our audience to "Come on Home" to Hardee's and enjoy the traditional
products that they have grown up with. We cannot assure you that these
strategies will be successful. If we are unable to achieve anticipated sales
improvements and further improvements in restaurant-level operating margins in
our Hardee's restaurants on a timely basis, cash flows generated from Hardee's
operations may not be adequate to support our refinancing and growth plans. Our
success will also depend, in part, on our Hardee's franchisees. Hardee's
franchisees are not required to participate in implementing all of our
strategies and we cannot assure you that all Hardee's franchisees will
participate. If Hardee's franchisees do not implement our strategies we may not
achieve our goals in the desired timeframe or at all. Failure to implement our
strategies effectively could have a material adverse effect on our financial
condition and results of operations.

Brand Growth -- Our ability to expand our restaurant chains depends on factors
beyond our control.

     Our growth strategy includes, among other things, opening additional
company-operated and franchised restaurants, remodeling our restaurants and
dual-branding our restaurant concepts. The success of our growth strategy will
depend on numerous factors, many of which are beyond our control and the control
of our franchisees, including:

     -  the hiring, training and retention of qualified management and other
        restaurant personnel;

     -  the ability to obtain necessary governmental permits and approvals;

     -  competition for desirable site locations;

     -  the availability of appropriate financing; and

     -  general economic conditions.

     To manage our planned expansion, we must ensure the continuing adequacy of
our existing systems and procedures, including our supply and distribution
arrangements, restaurant management, financial controls and information systems.

     In recent years, we have realized improvements in the same-store sales
growth in our company-operated Carl's Jr. restaurants. However, we cannot assure
you that we will be able to maintain the historical level of same-store sales
growth. Although our Carl's Jr. company-operated restaurants experienced an
increase in same-store sales in the fourth quarter of fiscal 2000 and the first
three quarters of fiscal 2001, during the fourth quarter of fiscal 2001, our
company-operated Carl's Jr. restaurants reported a same-store sales decrease of
0.4%. As previously noted, the only area that Carl's Jr. has not been successful
is in Oklahoma and Texas. Without the restaurants in Oklahoma and Texas, our
fourth quarter company-operated Carl's Jr. same-store sales increased 0.2%.


                                       13
<PAGE>   14


Competition -- Our success depends on our ability to compete with our major
competitors.

     The foodservice industry is intensely competitive with respect to the
quality and value of food products offered, concept, service, price, dining
experience and location. We compete with major restaurant chains, some of which
dominate the quick-service restaurant industry. Our competitors also include a
variety of mid-price, full-service casual-dining restaurants, health and
nutrition-oriented restaurants, delicatessens and prepared food stores, as well
as supermarkets and convenience stores. Many of our competitors have
substantially greater financial, marketing and other resources than we have,
which may give them competitive advantages. Our competitors could also make
changes to pricing or other marketing strategies which may impact us. As our
competitors expand operations, we expect competition to intensify. Such
increased competition could have a material adverse effect on our financial
condition and results of operations.

The Foodservice Industry -- Consumer preferences and perceptions, seasonality
and general economic conditions may have significant effects on our business.

     Foodservice businesses are often affected by changes in consumer tastes,
national, regional and local economic conditions and demographic trends. The
performance of individual restaurants may be adversely affected by traffic
patterns, demographics and the type, number and locations of competing
restaurants. Restaurant performance may also be affected by adverse weather
conditions, particularly in our Hardee's restaurants, because a significant
number of them are located in areas which experience severe winter conditions.
Multi-unit foodservice businesses such as ours can also be materially and
adversely affected by publicity resulting from poor food quality, illness,
injury or other health concerns or operating issues stemming from one or a
limited number of restaurants. We can be similarly affected by consumer concerns
with respect to the nutritional value of quick-service food. In addition, our
dependence on frequent deliveries of food and paper products subjects our
restaurants to the risk that shortages or interruptions in supply, caused by
adverse weather or other conditions, could adversely affect the availability,
quality and cost of ingredients. Unfavorable trends or developments concerning
factors such as inflation, increased food, labor and employee benefit costs
(including increases in hourly wage and unemployment tax rates), increases in
the number and locations of competing quick-service restaurants, regional
weather conditions and the availability of experienced management and hourly
employees may also adversely affect our financial condition and results of
operations. Changes in economic conditions affecting our customers could reduce
traffic in some or all of our restaurants or impose practical limits on pricing,
either of which could have a material adverse effect on our financial condition
and results of operations. Our continued success will depend in part on our
management's ability to anticipate, identify and respond to changing conditions.

Government Regulations -- We must devote significant resources to comply with
extensive legal requirements applicable to our franchise and other business
operations.

     We are subject to federal regulation and certain state laws which govern
the offer and sale of franchises. Many state franchise laws impose substantive
requirements on franchise agreements, including limitations on noncompetition
provisions and on provisions concerning the termination or nonrenewal of a
franchise. Some states require that certain materials be registered before
franchises can be offered or sold in that state. The failure to obtain or retain
licenses or approvals to sell franchises could adversely affect us or our
franchisees. The restaurant industry is also subject to extensive federal, state
and local governmental regulations, including those relating to the preparation
and sale of food and those relating to building and zoning requirements. We and
our franchisees are also subject to laws governing relationships with employees,
including minimum wage requirements, overtime, working and safety conditions and
citizenship requirements. Many of our employees are paid hourly rates based upon
the federal and state minimum wage laws. Recent legislation increasing the
minimum wage has resulted in higher labor costs to us and our franchisees. We
anticipate that increases in the minimum wage may be offset through pricing and
other cost-control efforts; however, we cannot assure you that we or our
franchisees will be able to pass such additional costs on to customers in whole
or in part.

Key Distributors -- Disruption in deliveries may adversely affect our
restaurants.

     Our profitability is dependent on, among other things, our continuing
ability to offer fresh, high quality food at moderate prices. While we continue
to operate our own distribution business for most of our Carl's Jr. system, we
rely upon independent distributors for our Hardee's and Taco Bueno restaurants.
In particular, our Hardee's restaurants depend on the distribution services of
two distributors, MBM, an independent supplier and distributor of food and other
products, and FFM, which was recently acquired by MBM. MBM and FFM are
responsible for delivering food, paper and other products from our vendors to
our Hardee's restaurants on a regular basis. MBM and FFM also provide
distribution services to a large number of our Hardee's franchisees. Any
disruption in these distribution services could have a material adverse effect
on our business.


                                       14
<PAGE>   15

     Given the recent events regarding certain afflictions affecting livestock
in various parts of the world, it is possible that the production and supply of
beef could be negatively impacted during the next several years. A reduction in
the supply of beef could have a material effect on the price at which it could
be obtained. Failure to procure beef at reasonable terms and prices could have a
material impact to our financial condition and results of operations.

Environmental Matters -- Compliance with environmental laws may adversely affect
our financial health.

     We are subject to various federal, state and local environmental laws.
These laws govern discharges to air and water, as well as handling and disposal
practices for solid and hazardous wastes. These laws may also impose liability
for damages from and the costs of cleaning up sites of spills, disposals or
other releases of hazardous materials. We may be responsible for environmental
conditions relating to our restaurants and the land on which our restaurants are
located, regardless of whether we lease or own the restaurant or land in
question and regardless of whether such environmental conditions were created by
us or by a prior owner or tenant. Although we cannot assure you that all such
environmental conditions have been identified, these conditions include the
presence of asbestos containing materials, leaks from chemical storage tanks and
on-site spills.

     We are not aware of any environmental conditions that would have a material
adverse effect on our businesses, assets or results of operations taken as a
whole. Although environmental site assessments prepared for certain properties
recommend limited further investigations or minor repairs, based on the
information currently available to us, we do not believe any of these
environmental issues would have a material adverse effect on these properties.
Nevertheless, we cannot assure you that environmental conditions relating to
prior, existing or future restaurants or restaurant sites will not have a
material adverse effect on us. Moreover, we cannot assure you that: (1) future
laws, ordinances or regulations will not impose any material environmental
liability; or (2) the current environmental condition of the properties will not
be adversely affected by tenants or other third parties or by the condition of
land or operations in the vicinity of the properties (such as underground
storage tanks).

EXECUTIVE OFFICERS OF THE REGISTRANT

    Our executive officers are as follows:

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       ----                                     ---      --------
<S>                                             <C>      <C>
       Andrew F. Puzder                         50       Chief Executive Officer and President
       John J. Dunion                           43       Executive Vice President, Chief Administrative Officer
       Renea M. S. Hutchings                    43       Executive Vice President, Real Estate and Development
       Dennis J. Lacey                          47       Executive Vice President, Chief Financial Officer
       E. Michael Murphy                        49       Executive Vice President, General Counsel and Secretary
       Carl A. Strunk                           63       Executive Vice President, Finance
       Robert W. Wisely                         55       Executive Vice President, Marketing
</TABLE>

     Andrew F. Puzder became Chief Executive Officer and President in September
2000. Since June 2000 he served as President of Hardee's and since February 1997
he served as Executive Vice President, General Counsel and Secretary of the
Company. Mr. Puzder also served as Chief Executive Officer of SBRG from August
1997 to June 2000 and Executive Vice President of Fidelity National Financial,
Inc. from January 1995 to June 2000. From March 1994 to December 1994, he was a
partner with the law firm of Stradling Yocca Carlson & Rauth. Prior to that, he
was a partner with the law firm of Lewis, D'Amato, Brisbois & Bisgard, from
September 1991 through March 1994, and he was a partner of the Stolar
Partnership from February 1984 through September 1991. Mr. Puzder is a member of
the Board of Directors of SBRG and Javelin Systems, Inc.

     John J. Dunion was appointed Executive Vice President, Chief Administrative
Officer in February 1999. Mr. Dunion served as Senior Vice President, Purchasing
since April 1998 and Vice President, Purchasing since September 1996. Prior to
that, he served as Vice President, Purchasing at Unigate Restaurants, Inc. from
1993 to September 1996.

     Renea M.S. Hutchings became Executive Vice President, Real Estate and
Development in February 2001. Ms. Hutchings served as Vice President, Franchise
Operations for Carl's Jr. since December 1997. Ms. Hutchings has held a number
of positions at the Company since 1982.

     Dennis J. Lacey was appointed Executive Vice President and Chief Financial
Officer in April 2001. From April 1998 to April 2001, he was Executive Vice
President and Chief Financial Officer of Imperial Bancorp. From 1989 to April
1998, he was employed in various executive level positions at Capital
Associates, Inc. and, since 1991, as its President and Chief Executive Officer.
Prior to that, Mr. Lacey was an audit partner at Coopers & Lybrand.


                                       15
<PAGE>   16

     E. Michael Murphy became Executive Vice President, General Counsel and
Secretary in February 2001. Since August 1998 he served as Senior Vice
President, General Counsel of Hardee's. From March 1987 to August 1998 Mr.
Murphy was a partner of the Stolar Partnership.

     Carl A. Strunk became Executive Vice President, Finance in April 2001.
Since February 1997, Mr. Strunk served as Executive Vice President and Chief
Financial Officer. Mr. Strunk also serves as Executive Vice President and Chief
Financial Officer of American National Financial, Inc. ("ANF") since August
1998. Mr. Strunk previously served as Executive Vice President of Fidelity
National Financial, Inc. from 1992 to 1998. Mr. Strunk is a Certified Public
Accountant and is also a member of the Board of Directors of Micro General
Corporation and ANF.

     Robert W. Wisely was appointed Executive Vice President, Marketing in
August 1997. Prior to that, he served as Senior Vice President, Marketing from
January 1995. Mr. Wisely has been a Carl's Jr. franchisee since 1990. Prior to
1990, Mr. Wisely served as Senior Vice President, Marketing from 1985 to 1990.

ITEM 2. PROPERTIES

     The following table sets forth information regarding our restaurant
properties at January 29, 2001:

<TABLE>
<CAPTION>
                                       LAND AND      LAND LEASED      LAND AND
                                       BUILDING      AND BUILDING     BUILDING
                                        OWNED           OWNED          LEASED           TOTAL
                                      ----------      ----------      ----------      ----------
<S>                                   <C>            <C>              <C>             <C>
CARL'S JR.:
  Company-operated                            76             100             315             491
  Franchise-operated(1)                       13              27             172             212
  Third party-operated/vacant(2)              10               5              48              63
                                      ----------      ----------      ----------      ----------
    Subtotal                                  99             132             535             766
                                      ----------      ----------      ----------      ----------
HARDEE'S:
  Company-operated                           373             173             377             923
  Franchise-operated(1)                       68              80             165             313
  Third party-operated/vacant(2)             105              40             109             254
                                      ----------      ----------      ----------      ----------
    Subtotal                                 546             293             651           1,490
                                      ----------      ----------      ----------      ----------
TACO BUENO:
  Company-operated                            85              17              23             125
                                      ----------      ----------      ----------      ----------
    Total                                    730             442           1,209           2,381
                                      ----------      ----------      ----------      ----------
</TABLE>

(1)  "Franchise-operated" properties are those which we own or lease and lease
     or sublease to franchisee operators.

(2)  "Third party-operated/vacant" are properties we own that are either
     operated by unaffiliated entities or are currently vacant.

     The terms of our leases or subleases vary in length expiring on various
dates through 2062. We do not expect the expiration of these leases to have a
material impact on our operations in any particular year, as the expiration
dates are staggered over a number of years and many of the leases contain
renewal options. Our corporate headquarters and primary distribution center,
located in Anaheim, California, are leased and contain approximately 78,000 and
102,000 square feet, respectively. Additionally we lease our Hardee's corporate
facility in St. Louis, Missouri.

ITEM 3. LEGAL PROCEEDINGS

     We are from time to time the subject of complaints or litigation from
customers alleging illness, injury or other food quality, health or operational
concerns. Adverse publicity resulting from such allegations may materially
adversely affect us and our restaurants, regardless of whether such allegations
are valid or whether we are liable. We are also the subject of complaints or
allegations from employees, former employees and franchisees from time to time.
We believe that the lawsuits, claims and other legal matters to which we have
become subject in the course of our business are not material to our financial
condition or results of operations,

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.


                                       16
<PAGE>   17

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     Our common stock is listed on the New York Stock Exchange under the symbol
"CKR". As of March 30, 2001, there were approximately 1,900 record holders of
our common stock. The following table sets forth, for the periods indicated, the
high and low closing sales prices of our common stock, as reported on the New
York Stock Exchange Composite Tape:

<TABLE>
<CAPTION>
                                                     HIGH       LOW
                                                     ----       ---
<S>                                                  <C>        <C>
         FISCAL 2001
           First Quarter                              $7.00     $3.25
           Second Quarter                              3.63      2.63
           Third Quarter                               4.56      2.06
           Fourth Quarter                              3.44      2.00
         FISCAL 2000
           First Quarter                             $26.56    $13.00
           Second Quarter                             18.94     12.50
           Third Quarter                              13.75      6.50
           Fourth Quarter                              8.19      5.69
</TABLE>

     We had historically followed a policy of paying semiannual cash dividends.
During fiscal 1999, we paid dividends at the annual rate of $0.07 per share
(adjusted to give retroactive effect to 10% stock dividends in February 1998 and
January 1999) and at a semi-annual rate of $0.04 per share during fiscal 2000.
In fiscal 2001, we paid the first semi-annual cash dividend of $0.04 per share
in May 2000. In September 2000, our Board of Directors announced that we would
not be making the second semi-annual cash dividend payment, scheduled for
November 2000. In accordance with our senior credit facility, as amended, we are
now prohibited from making any cash dividend payments to our shareholders and,
accordingly, have not declared any cash dividends for fiscal 2002 to date.

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

     The information set forth below should be read in conjunction with the
consolidated financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Form 10-K. Per share data has been retroactively adjusted for
stock splits and stock dividends since our inception.

SELECTED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
                                                                  FISCAL-YEAR-ENDED-OR-AS-OF-JANUARY 31,(1)
                                                    ---------------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS,
 RESTAURANT COUNTS, AND PERCENTAGES)                   2001           2000         1999(2)        1998(3)        1997(4)
                                                    ---------      ---------      ---------      ---------      ---------
<S>                                                 <C>            <C>            <C>            <C>            <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
  Total revenues(5)                                 $1,784,582     $1,990,073     $1,892,044     $1,149,659      $ 613,380
  Operating income (loss)                             (133,015)        63,055        168,220         86,191         44,139
  Interest expense                                      69,762         63,283         43,453         16,914          9,877
  Net income (loss)(6)                                (194,116)       (29,117)        77,712         46,757         22,302
  Net income (loss) per share -- diluted            $    (3.84)     $   (0.56)     $    1.45      $    0.97      $    0.61
  Weighted average shares outstanding -- diluted        50,501         51,668         56,714         48,121         36,603
  Cash dividends paid per common share              $     0.04      $    0.08      $    0.07      $    0.07      $    0.04
  Ratio of earnings to fixed charges(7)                   (1.0)x         0.5x           2.8x           3.2x           2.9x
CONSOLIDATED BALANCE SHEET DATA:
  Total assets                                      $1,214,029     $1,568,514     $1,496,914      $ 957,144      $ 410,367
  Total long-term debt and capital lease
     obligations, Including current portion            624,335        741,419        625,393        216,905         86,993
  Stockholders' equity                              $  349,557      $ 545,757      $ 586,842      $ 498,512      $ 214,804
</TABLE>

(1)  Our fiscal year is 52 or 53 weeks, ending the last Monday in January. For
     clarity of presentation, all years are presented as if the fiscal year
     ended January 31. Fiscal 2000 includes 53 weeks. Fiscal 2001, 1999, 1998
     and 1997 include 52 weeks.

(2)  Fiscal 1999 includes operating results of FEI from and after April 1, 1998.


                                       17
<PAGE>   18

(3)  Fiscal 1998 includes operating results of Hardee's from and after July 15,
     1997. Share and per share data were also affected during fiscal 1998 by a
     public offering of 10,088,375 shares of common stock, completed in July
     1997.

(4)  Share and per share data were affected during fiscal 1997 by a public
     offering of 5,218,125 shares of common stock, completed in November 1996.

(5)  Fiscal 2001, 2000, 1999 and 1998 include $109.5 million, $104.7 million,
     $135.1 million and $195.2 million, respectively, of revenues generated from
     other restaurant concepts we acquired during fiscal 1997. See Item 7.
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations."

(6)  Net income (loss) for fiscal 2000 and 1999 includes an extraordinary gain
     of $0.3 million and $3.3 million, respectively, net of applicable income
     tax expense, on early retirement of debt. Fiscal 2001 and 2000 also include
     special charges of $161.6 million after-tax and $49.3 million after-tax,
     respectively. See Item 7. "Management's Discussion and Analysis of
     Financial Condition and Results of Operations."

(7)  For purposes of calculating the ratio of earnings to fixed charges (a)
     earnings represent income (loss) before income taxes and extraordinary item
     and fixed charges, and (b) fixed charges consist of interest on all
     indebtedness, interest related to capital lease obligations, amortization
     of debt issuance costs and a portion of rental expense that is
     representative of the interest factor (deemed by us to be one-third).
     Earnings are insufficient to cover fixed charges for the year ended January
     31, 2001 by $205.3 million.

<TABLE>
<CAPTION>
                                                                      FISCAL YEAR ENDED JANUARY 31,(1)
                                             -----------------------------------------------------------------------------------
                                                2001              2000(2)             1999(2)           1998            1997
                                             ----------         ----------          ----------       ----------       ----------
<S>                                          <C>                <C>                 <C>              <C>              <C>
CARL'S JR. RESTAURANTS
Restaurants open (at end of fiscal year):
  Company-operated                                  491                563                 539              443              415
  Franchised and licensed                           486                371                 322              265              258
                                             ----------         ----------          ----------       ----------       ----------
      Total                                         977                934                 861              708              673
                                             ----------         ----------          ----------       ----------       ----------
Systemwide restaurant revenues:
  Company-operated restaurants               $  604,928         $  613,155          $  535,038       $  488,495       $  443,304
  Franchised and licensed restaurants           432,387            306,564             261,341          214,534          204,700
                                             ----------         ----------          ----------       ----------       ----------
      Total systemwide revenues              $1,037,315         $  919,719          $  796,379       $  703,029       $  648,004
                                             ----------         ----------          ----------       ----------       ----------
Average annual sales per company-
  Operated restaurant(3)                     $    1,078         $    1,086          $    1,185       $    1,157       $    1,114
Percentage increase (decrease) in
  Comparable company-operated
  Restaurant sales(4)                               1.8%              (3.0)%               3.0%             4.8%            10.7%
Company-operated restaurant-level
  Operating margins(5):
      With special charges                         17.6%              22.8%               25.9%            24.2%            23.1%
      Without special charges                      20.4%              22.8%               25.9%            24.2%            23.1%
</TABLE>


<TABLE>
<CAPTION>
                                            FISCAL             FISCAL             FISCAL           28 WEEKS            28 WEEKS
                                           YEAR ENDED        YEAR ENDED         YEAR ENDED           ENDED               ENDED
                                          JANUARY 31,        JANUARY 31,        JANUARY 31,       JANUARY 31,           JULY 15,
                                           2001(1)(2)         2000(1)(2)       1999(1)(2)(6)       1998(2)(7)           1997(2)
                                          -----------        -----------        -----------        -----------        -----------
<S>                                       <C>                <C>               <C>                <C>                 <C>
HARDEE'S RESTAURANTS(8)
Restaurants open (at end of period):
  Company-operated                                923              1,354              1,403                863                782
  Franchised and licensed                       1,737              1,434              1,401              2,175              2,329
                                          -----------        -----------        -----------        -----------        -----------
      Total                                     2,660              2,788              2,804              3,038              3,111
                                          -----------        -----------        -----------        -----------        -----------
Systemwide restaurant revenues:
  Company-operated restaurants                855,060        $ 1,096,805        $ 1,063,075        $   339,942        $   346,481
  Franchised and licensed restaurants       1,272,540          1,219,229          1,412,929          1,123,034          1,152,442
                                          -----------        -----------        -----------        -----------        -----------
      Total systemwide revenues           $ 2,127,600        $ 2,316,034        $ 2,476,004        $ 1,462,976        $ 1,498,923
                                          -----------        -----------        -----------        -----------        -----------
Average annual sales per company-
  Operated restaurant(3)                  $       715        $       769        $       793        $       803        $       831
Percentage decrease in comparable
  Company-operated restaurant sales(4)           (7.6)%             (5.0)%             (7.5)%             (7.2)%             (0.4)%
Company-operated restaurant-level
 operating margins(9):
      With special charges                       (2.7)%              9.7%              16.7%              12.9%               7.8%
      Without special charges                     7.6%              13.6%              16.7%              12.9%               7.8%

</TABLE>


                                       18
<PAGE>   19

(1)  Our fiscal year is 52 or 53 weeks, ending the last Monday in January. For
     clarity of presentation, all years are presented as if the fiscal year
     ended January 31. Fiscal 2000 includes 53 weeks. Fiscal 2001, 1999, 1998
     and 1997 include 52 weeks.

(2)  The Hardee's-to-Carl's Jr. converted restaurants operating in Oklahoma,
     Kansas and Texas are included in the number of Carl's Jr. restaurants open
     at January 31, 2001, 2000 and 1999. The operating results of these
     restaurants, however, are included in the Carl's Jr. financial information
     beginning in fiscal 2000. In fiscal 1999 and prior, these operating results
     are included as part of Hardee's financial results. There were 63
     company-operated and nine franchised restaurants open during fiscal 1999
     and 64 company-operated and eight franchised restaurants open during fiscal
     2000 in these markets. Carl's Jr.'s average annual sales per
     company-operated restaurant, percentage increase (decrease) in comparable
     company-operated restaurant sales and company-operated restaurant-level
     margins were $1,147, 2.4% and 20.7% respectively, in fiscal 2001 and
     $1,150, (2.1%) and 24.1%, respectively, in fiscal 2000 excluding the
     Hardee's-to-Carl's Jr. converted restaurants.

(3)  Calculated on a 52- or 53-week trailing basis for all years presented.

(4)  Includes only restaurants open throughout the full years being compared.

(5)  Restaurant-level margins for Carl's Jr. in fiscal 2001 were 20.4% after
     excluding a $10.9 million store closure reserve and asset impairment charge
     recorded in the fourth quarter of fiscal 2001 and a $6.4 million increase
     to our self-insurance reserves recorded in fiscal 2001.

(6)  Fiscal 1999 includes operating results of FEI from and after April 1, 1998.

(7)  Includes results of operations for Hardee's from and after July 15, 1997.

(8)  Except as otherwise noted, company-operated Hardee's restaurant data for
     the fiscal year ending December 31, 1996 and for the 28 weeks ended July
     15, 1997 excludes the results of Hardee's restaurants sold or closed prior
     to December 31, 1996 and July 15, 1997, respectively.

(9)  Restaurant-level margins for Hardee's in fiscal 2001 were 7.6% after
     excluding a $87.4 million store closure reserve and asset impairment charge
     recorded in fiscal 2001. In fiscal 2000, margins were 13.6% after excluding
     a store closure reserve and asset impairment charge of $42.0 million.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion should be read in conjunction with the
consolidated financial statements and related notes and "Selected Financial and
Operating Data" included elsewhere in this Form 10-K.

OVERVIEW

     We are a leading nationwide owner, operator and franchisor of quick-service
restaurants, operating principally under the Carl's Jr., Taco Bueno and Hardee's
brand names. Based on domestic systemwide sales, our Hardee's and Carl's Jr.
chains are the fourth and seventh largest quick-service hamburger restaurant
chains in the United States, respectively. As of January 31, 2001, the Carl's
Jr. system included 977 restaurants, of which we operated 491 restaurants and
our franchisees and licensees operated 486 restaurants. The


                                       19
<PAGE>   20

Carl's Jr. restaurants are located in the Western United States, predominantly
in California. As of January 31, 2001, the Hardee's system consisted of 2,660
restaurants, of which we operated 923 restaurants and our franchisees and
licensees operated 1,737 restaurants. Hardee's are located throughout the
Eastern and Midwestern United States, predominantly in the Southeast. As of
January 31, 2001, our Taco Bueno chain consisted of 125 company-operated
quick-service Mexican restaurants in Texas and Oklahoma.

     We derive our revenues primarily from sales by company-operated restaurants
and revenues from franchisees, including franchise and royalty fees, sales to
Carl's Jr. franchisees and licensees of food and packaging products, rentals
under real property leases and revenues from the sale of equipment to our
franchisees. Restaurant operating expenses consist primarily of food and
packaging costs, payroll and other employee benefits and occupancy and other
operating expenses of company-operated restaurants. Operating costs of our
franchised and licensed restaurants include the cost of food and packaging
products sold to Carl's Jr.'s franchisees and licensees, lease payments on
properties subleased to our franchisees and the costs of equipment purchases.
Other operating expenses, including advertising expenses and general and
administrative expenses, relate to company-operated restaurants as well as
franchisee and licensee operations. Our revenues and expenses are directly
affected by the number and sales volume of company-operated restaurants and, to
a lesser extent, of franchised and licensed restaurants.

   Factors Affecting Comparability of Fiscal Years 2001, 2000 and 1999

     Our fiscal year results in a fifty-third week every fifth or sixth year.
Fiscal 2000 includes 53 weeks of operations. Fiscal 2001 and 1999 include 52
weeks of operations.

     During fiscal 1999, we recorded a $15.0 million charge to write-down our
investment in Boston West and recognized a gain of $10.3 million on the sale of
our Star Buffet, Inc. ("Star Buffet") investment. In addition, in fiscal 1999,
we reversed approximately $9.7 million of allowances for certain Hardee's
franchisee note receivables as the previously established amounts proved to be
unnecessary.

     We currently operate 64 Hardee's-to-Carl's Jr. converted restaurants in
Texas, Oklahoma and Kansas and our franchisees operate eight Hardee's-to-Carl's
Jr. converted restaurants in Oklahoma. Operating results for these restaurants
for fiscal 2001 and 2000 are included in the Carl's Jr. financial information.
In fiscal 1999 and prior, these restaurants' operating results are included in
the Hardee's financial information.

     Because of the significant effect of the acquisitions of Hardee's and FEI
on our results of operations as well as our recent restaurant sales and
closures, our historical results of operations and year-to-year comparisons will
not be indicative of future results and may not be meaningful. Operating results
of Hardee's and FEI are included in our results of operations from July 15, 1997
and April 1, 1998, respectively. We acquired Taco Bueno and certain other
restaurant concepts in fiscal 1997, and our results of operations for fiscal
2001, 2000 and 1999 include $109.5 million, $104.7 million and $135.1 million,
respectively, of revenues generated by these restaurants.

   Fourth Quarter Adjustments

     During the fourth quarter of fiscal 2001, we recorded a special pre-tax net
charge of $97.0 million. The special charge, which was primarily non-cash in
nature, consisted of (a) a $19.1 million store closure reserve for approximately
80 Hardee's and approximately 20 Carl's Jr. restaurants that the we have closed
or plan to close, (b) an impairment charge of $76.8 million for certain
restaurants that that we will close or for restaurants that we plan to continue
to operate but for which the net book value is not supported by future estimated
cash flows, (c) a $3.7 million strengthening to the Carl's Jr. self insurance
reserves, (d) a credit for a net $11.3 million gain on the sale of restaurants
sold to franchisees and (e) a loss of $8.7 million on the sale of Taco Bueno.

     During the fourth quarter of fiscal 2000, we recorded a special pre-tax net
charge of $80.3 million. The charge, which was primarily non-cash in nature,
consisted of (a) $42.0 million for a store-closure reserve and asset impairment
charge for approximately 105 Hardee's restaurants, (b) an impairment charge of
$37.3 million to write-down our various long-term investments in other
restaurant concepts to fair market value, (c) $2.1 million of restructuring
charges in connection with consolidating certain administrative functions from
Rocky Mount, North Carolina to Anaheim, California, (d) writing-off $3.6 million
of deferred financing costs as of result of a commitment decrease in our senior
credit facility, (e) $2.6 million of Y2K expenses associated with restaurant
computer systems, (f) writing-off $6.6 million in charges related to software
that will not be implemented, (g) an additional $1.7 million in vacation expense


                                       20
<PAGE>   21

in connection with a change in vacation policy, (h) writing-off $0.9 million in
site costs for restaurants that will not be developed (I) a gain on the sale of
Carl's Jr. and Hardee's restaurants of $19.5 and (j) other miscellaneous
adjustments of $3.0 million.

RESULTS OF OPERATIONS

The following table sets forth the percentage relationship to total revenues,
unless otherwise indicated, of certain items included in our consolidated
statements of operations for the years indicated:

<TABLE>
<CAPTION>
                                                                          FISCAL YEAR ENDED JANUARY 31,
                                                                  ----------------------------------------------
                                                                      2001              2000              1999
                                                                  ----------        ----------        ----------
<S>                                                               <C>               <C>               <C>
Revenues:
  Company-operated restaurants                                          87.9%             91.2%             91.6%
  Franchised and licensed restaurants and other                         12.1               8.8               8.4
                                                                  ----------        ----------        ----------
      Total revenues                                                   100.0%            100.0%            100.0%
                                                                  ----------        ----------        ----------
Operating costs and expenses:
  Restaurant operations(1):
    Food and packaging                                                  30.9%             30.5%             30.0%
    Payroll and other employee benefits                                 32.8              31.2              30.9
    Occupancy and other operating expenses                              23.4              21.1              19.5
    Store closure expense and provision for asset impairment             6.3               2.3                --
                                                                  ----------        ----------        ----------
                                                                        93.4              85.1              80.4
  Franchised and licensed restaurants and other(2)                      74.9              73.1              67.0
  Advertising expenses(1)                                                6.4               6.7               6.1
  General and administrative expenses                                    8.2               7.4               6.3
  Loss (gain) on property sold or held for sale                          2.6              (0.9)               --
Operating income (loss)                                                 (7.5)              3.2               8.9
Interest expense                                                        (3.9)             (3.2)             (2.3)
Other expense, net                                                      (0.1)             (2.4)               --
                                                                  ----------        ----------        ----------
Income (loss) before income taxes and extraordinary item               (11.5)             (2.4)              6.6
Income tax expense (benefit)                                            (0.6)             (0.9)              2.7
                                                                  ----------        ----------        ----------
Income (loss) before extraordinary item                                (10.9)             (1.5)              3.9
Extraordinary item -- gain on early retirement of debt                   0.0               0.0               0.2
                                                                  ----------        ----------        ----------
Net income (loss)                                                      (10.9)%            (1.5)%             4.1%
                                                                  ----------        ----------        ----------
</TABLE>

(1)  As a percentage of revenues from company-operated restaurants.

(2)  As a percentage of revenues from franchised and licensed restaurants and
     other.

     Fiscal 2001 Compared with Fiscal 2000 and Fiscal 2000 Compared with Fiscal
1999

REVENUES

     Company-operated Restaurants. Revenues from company-operated restaurants
decreased $245.2 million or 13.5% to $1.57 billion in fiscal 2001. Carl's Jr.
and Hardee's revenues decreased by $8.2 million and $241.7 million,
respectively, while Taco Bueno revenues from company-operated restaurants
increased by $5.4 million as compared to the prior-year period. The decrease in
Carl's Jr. company-operated restaurant revenues was due mainly to a decrease in
the number of company-operated restaurants during the current fiscal year while
the decrease in Hardee's company-operated restaurant revenues was due to the
continuing decline in same-store sales at the Hardee's chain and a decrease in
the number of company-operated restaurants during the current fiscal year when
compared to the prior year. Same-store sales for our company-operated Carl's Jr.
chain increased 1.8% from the prior year while same-store sales for our Hardee's
and Taco Bueno company-operated restaurants decreased 7.6% and 1.8%,
respectively.


                                       21
<PAGE>   22

     While the primary reason for the decrease in Hardee's company-operated
restaurant revenue is due to the sale of several company-operated restaurants to
new and existing franchisees as part of our strategy to refranchise our systems
and reduce our leverage, we are continuing to see same-store sales declines
between 7% and 10%. We have recently launched a new quality service program as
well as a new advertising campaign that we are hopeful will have positive
effects on our same-store sales during fiscal 2002. Average unit volumes of our
Carl's Jr., Hardee's and Taco Bueno chains during fiscal 2001 were $1,078,000,
$715,000 and $786,000 respectively.

     Revenues from company-operated restaurants increased $82.5 million or 4.8%
to $1.815 billion in fiscal 2000 as compared with fiscal 1999. A large part of
this increase in revenues is the inclusion in fiscal 2000 of an extra week of
operating results as compared with fiscal 1999. Carl's Jr., Hardee's and Taco
Bueno company-operated restaurant revenues for the year accounted for sales
increases of $78.1 million, $33.7 million and $10.8 million, respectively,
offset in part by the decrease in revenues from our JB's Restaurants and Galaxy
Diner restaurants which were sold to SBRG in September 1998. Same-store sales
for our company-operated Carl's Jr. restaurants decreased 3.0% for fiscal 2000,
but were positive 0.6% for the fourth quarter of fiscal 2000. Our
company-operated Hardee's restaurants experienced a same-store sales decrease of
5.0%, while same-store sales for our company-operated Taco Bueno restaurants
increased 7.1%. The increase in revenue from our company-operated Carl's Jr.
restaurants can be primarily attributed to an increase in the number of
restaurants open and operating in fiscal 2000, as compared with fiscal 1999,
offset in part by the decline in same-store sales, the continuation of our
conversion of existing Carl's Jr. locations into Carl's Jr./Green Burrito
dual-brand restaurants, the addition of several new sandwiches, including the
$0.99 Spicy Chicken Sandwich, the Sourdough Bacon Cheeseburger and the Sourdough
Breakfast Sandwich, and the inclusion of $39.2 million of revenue from the
Hardee's-to-Carl's Jr. converted restaurants in fiscal 2000 that had been
included in the Hardee's results of operations in fiscal 1999. Taco Bueno's
increase in revenues is primarily attributable to the addition of 12 new Taco
Bueno restaurants open and operating in fiscal 2000 and the image enhancement
program for the chain, which began in fiscal 1999. The revenue increase from our
Hardee's restaurants was driven by including a full year of operations of the
FEI restaurants and other franchised restaurants acquired during fiscal 1999,
offset, in part, by the revenues from the Hardee's-to-Carl's Jr. restaurants
that were included in Hardee's results for fiscal 1999, but are reflected in
Carl's Jr. results of operations beginning in fiscal 2000. We attribute much of
the decrease in same-store sales at Hardee's to our previous advertising
strategy, which was not successful in promoting the Hardee's brand. The harsh
weather experienced in the Southeast during the third quarter of fiscal 2000,
including the effects of Hurricane Floyd, and the January storms in the
Southeast during fourth quarter were also contributing factors. Average unit
volumes at our company-operated Carl's Jr. and Hardee's restaurants ended the
fiscal year 2000 at $1,086,000 and $769,000, respectively. Average unit volumes
at our company-operated Taco Bueno restaurants continue to rise and increased
8.0% to $807,000 as of fiscal 2000 year-end.

     Franchised and Licensed Restaurants. Our revenues from franchised and
licensed restaurants for fiscal 2001 increased $39.7 million or 22.6% to $215.1
million over fiscal 2000. This increase is due primarily to franchised fees
being recognized in connection with the sale of restaurants during the current
fiscal year, as well as an increase in royalties as a result of the increase in
the number of Hardee's and Carl's Jr. franchised restaurants open and operating
during the current year as compared to the prior year. In addition, an increase
in the number of franchised Carl's Jr. restaurants in the current year, as well
as an increase in certain commodity costs, has led to an increase in food
purchases by franchisees from our distribution center. Our revenues from
franchised and licensed restaurants for fiscal 2000 increased $15.6 million, or
9.7%, to $175.4 million over fiscal 1999. This revenue increase was mainly due
to increased royalties from, and food purchases by, Carl's Jr. franchisees and
licensees as a result of an increase in the number of Carl's Jr. franchised
restaurants operating in fiscal 2000 as compared with fiscal 1999 and an
increase in equipment sales to Hardee's franchisees in connection with the
remodeling of Hardee's restaurants to the Star Hardee's format. Also
contributing to the increase was the inclusion of $2.0 million in franchise fees
from the sale of company-operated Carl's Jr. and Hardee's restaurants to
franchisees in fiscal 2000. Offsetting this increase, in part, was the loss of
royalty revenue from our JB's franchised restaurants, which were sold to SBRG in
September 1998.

OPERATING COSTS AND EXPENSES

     Consolidated Restaurant Operations. Restaurant-level margins of our
consolidated restaurant operations decreased in fiscal 2001 by 8.2% to 6.7%, as
compared with fiscal 2000, primarily as a result of establishing a $98.3 million
store closure reserve and asset impairment charge for 72 of our Hardee's
restaurants and 17 of our Carl's Jr. restaurants which we plan to close during
the next 12 months. Additionally, the fixed nature of certain of our operating
costs, combined with lower sales, has caused an erosion of our consolidated
restaurant-level margins. Excluding the expense relating to the store closure
reserve and asset impairment charge, and $6.4 million of expenses related to an
increase in certain self-insurance reserves, consolidated restaurant-level
margins would have been 13.4% for fiscal 2001. Consolidated restaurant-level
margins decreased in fiscal 2000 as compared to fiscal 1999 by 4.7% to 14.9%,
primarily as a result of establishing a $42.0 million store closure reserve and
asset impairment charge for 105 Hardee's restaurants and an increase in
depreciation expense from our remodels that were completed during fiscal 2000.


                                       22
<PAGE>   23


     Carl's Jr. Restaurant-level margins at our company-operated Carl's Jr.
restaurants in fiscal 2001 decreased by 5.2% to 17.6% from fiscal 2000. Margins
at our company-operated Carl's Jr. restaurants were impacted in fiscal 2001
primarily by the establishment of a $10.9 million store closure reserve and
asset impairment charge. Additionally, higher average wage rates driven by an
overall tighter labor market contributed to the decline in margins during the
year, as well as an increase in the actuarially determined liability for our
worker's compensation self-insurance program. Excluding the $10.9 million store
closure reserve and asset impairment charge, as well as $6.4 million of expenses
relating to the increase in our workers' compensation and general liability
reserves, Carl's Jr. company-operated restaurant-level margins would have been
20.4%. The decrease in operating margins in fiscal 2000 as compared with fiscal
1999 was due to the combined pressures of increased commodity costs, labor costs
and the introduction of certain lower priced product offerings.

     Our Carl's Jr. food and packaging costs as a percentage of company-operated
revenues increased 0.4% to 29.6% in fiscal 2001 as compared to fiscal 2000. This
increase was mainly due to an increase in certain commodity prices during the
year, primarily beef and bacon. Additionally, we have recently introduced a new
plastic cup that has a higher cost than the traditional paper cup. These
increases were partially offset by a price increase that was put in place during
the last two periods of the fiscal year in anticipation of the increase in
minimum wage which occurred in January 2001. During fiscal 2000, food and
packaging costs increased when compared to fiscal 1999 due to a shift in the
product mix resulting from high sales levels of the $0.99 Spicy Chicken
Sandwich, which was introduced during the third quarter of fiscal 2000.

     Payroll and other employee benefits for our Carl's Jr. restaurants
increased 2.0% to 29.0% as a percentage of company-operated revenues in fiscal
2001. This increase was due primarily to an increase in the actuarially
determined liability for our workers' compensation self-insurance reserve.
Additionally, an overall tighter labor market and the increased competitive
pressures in attracting and retaining qualified employees, as well as a
conscious decision to increase labor in our restaurants to maintain quality
guest service, all contributed to this increase in fiscal 2001. The increase in
payroll and other employee benefits as a percentage of company-operated revenues
in fiscal 2000 as compared to fiscal 1999 was due primarily to an increase in
the number of labor intensive Green Burrito locations open and operating during
the year as well as an extremely competitive labor pool.

     Occupancy and other operating expenses, as a percentage of revenues from
our Carl's Jr. restaurants, increased 1.0% from 21.0% in fiscal 2000 to 22.0% in
fiscal 2001. This was attributable to an increase in electricity expense in the
California units, an increase in certain of our restaurant equipment leases and
increased rents on certain new units, many of which are on leased land. We also
incurred scheduled rent increases on a number of existing leases. During fiscal
2001, occupancy and other operating expenses were also negatively impacted by an
increase in the actuarially determined liability for our general liability
self-insurance reserve. The increase in fiscal 2000 occupancy and other
operating expenses as a percentage of company-operated revenues over fiscal 1999
was due mainly to additional depreciation expense on the new units built during
fiscal 2000 and increased repair and maintenance expense at the restaurants
which have not been recently remodeled.

     During fiscal 2001, we recorded a store closure reserve at Carl's Jr. of
$1.9 million in connection with the planned closure of 17 Carl's Jr. restaurants
over the next 12 months. The store closure reserve represents a liability for
the net present value of any remaining lease obligation after the expected
closure dates, net of estimated sublease income, if any. Additionally, a related
provision for asset impairment of $9.0 million was recorded to reduce the
carrying amount of these restaurants' assets to their estimated fair value. The
provision for restaurant asset impairment is net of amounts expected to be
recovered, if any, from the sale of such assets upon the closure of the store.
We will continue to evaluate our restaurants for potential impairment and may
record additional write-downs in the future.

     Hardee's. Hardee's restaurant-level margins for fiscal 2001, excluding the
$87.4 million charge for the store closure reserve and asset impairment charge,
were 7.6% as compared with 13.6% (when excluding the $42.0 million store closure
reserve and asset impairment charge) in fiscal 2000 and 16.7% in fiscal 1999.
The negative trend is due to the continuing declining same-store sales at the
Hardee's brand and the increased impact that fixed charges have to operating
margins as sales decline as well as increased staffing in our restaurants.
Margins were also impacted in the current year by increased depreciation as a
result of the Star Hardee's remodels that were done in fiscal 2000. We have
implemented "Operation QSC" -- Quality, Service and Cleanliness in our Hardee's
company-operated units in an effort to boost same store sales and improve our
operating margins.

     Food and packaging costs at our Hardee's company-operated restaurants as a
percentage of company-operated restaurant revenues increased 0.7% in fiscal 2001
to 32.1% as compared with 31.4% in fiscal 2000. This increase is due to a deep
discounting program during the year involving the $0.59 Big Burger as well as
the introduction of a new plastic cup that has a higher cost than the
traditional paper cup. Additionally, Hardee's company-operated restaurants have
experienced an increase in certain commodity costs


                                       23
<PAGE>   24

during the current year, primarily for beef. In fiscal 2000, the increase in
food and packaging costs as a percentage of company-operated revenues over
fiscal 1999 was due to several special promotional discounts. However,
offsetting this increase were the effects of a reduction in food waste and theft
tolerance levels and continued purchasing economies achieved as a result of our
increased consolidated buying power.

     Hardee's payroll and other employee benefits as a percentage of
company-operated restaurant revenues increased 2.0% in fiscal 2001 from fiscal
2000 and 0.3% in fiscal 2000 from fiscal 1999. The increase in both fiscal years
is due mainly to a conscious effort to increase labor in the restaurants in an
effort to improve guest service. Additionally, continued declining same-store
sales have increased the impact that this additional labor has on our margins at
Hardee's.

     Occupancy and other operating expenses as a percentage of company-operated
restaurant revenues at Hardee's increased 3.4% in fiscal 2001 when compared to
fiscal 2000. This increase is due to an increase in depreciation as a result of
new equipment being installed in the Hardee's restaurants over the past year in
conjunction with our Star Hardee's remodels. The decline in Hardee's average
unit volumes has also negatively impacted our occupancy and other operating
expenses as a large portion of these costs are fixed in nature. In fiscal 2000,
the increase in occupancy and other operating expenses is also due to the
continued declining same-store sales and an increased impact that the fixed
costs are having on our margins.

     During fiscal 2001, we recorded a store closure reserve at Hardee's of
$17.2 million in connection with the planned closure of 72 Hardee's restaurants
over the next 12 months. The store closure reserve represents a liability for
the net present value of any remaining lease obligation after the expected
closure dates, net of estimated sublease income, if any. Additionally, a related
provision for asset impairment of $70.2 million was recorded to reduce the
carrying amount of these restaurants' assets to their estimated fair value. The
provision for restaurant asset impairment is net of amounts expected to be
recovered, if any, from the sale of such assets upon the closure of the store.
In fiscal 2000, we recorded a similar charge related to the planned closure of
105 Hardee's restaurants. This reserve of $42.0 million consisted of a $16.3
million liability for the net present value of the remaining lease obligation
after the expected closure dates, net of estimated sublease income, if any and a
$25.7 million charge to reduce the carrying amount of these restaurants' assets.
We will continue to evaluate our restaurants for potential impairment and may
record additional write-downs in the future.

     Taco Bueno. Taco Bueno's restaurant-level operating margins were 21.2% in
fiscal 2001, a 3.3% decline over fiscal 2000. In fiscal 2000, restaurant-level
operating margins were 24.5%, a decrease of 0.7% from fiscal 1999. The decrease
in fiscal 2001 was primarily due to the tight labor market in Texas and Oklahoma
where it has become increasingly difficult to attract and retain qualified
employees. In addition, we have experienced an increase in depreciation in
fiscal 2001 as a result of several new signage packages in the current year
which are now being depreciated. We also recorded an increase to the Taco Bueno
workers' compensation self-insurance reserve in the current year due to an
increase in the actuarially determined liability. Operating margins decreased in
fiscal 2000 when compared to fiscal 1999 mainly due to an increase in meat and
cheese prices and a change in certain packing materials being used.

     Franchised and Licensed Restaurants. Franchised and licensed restaurant and
other costs increased 25.8% in fiscal 2001 when compared to fiscal 2000 and
19.7% in fiscal 2000 when compared to fiscal 1999. These increases are primarily
due to an increase in the number of franchised and licensed Carl's Jr.
restaurants open and operating during the current year, which as led to higher
volume in our distribution center and an increase in the number of Hardee's
franchisees and licensees purchasing equipment from us. As a percentage of
revenues from franchised and licensed restaurants, these costs decreased 1.9% in
fiscal 2001 when compared to fiscal 2000 and increased 6.1% in fiscal 2000 when
compared to fiscal 1999. This is due to the fact that in fiscal 2001, with the
increase in the number of franchised restaurants both at Hardee's and at Carl's
Jr., the mix of royalties and equipment purchases became more heavily weighted
towards royalties, which have a lower cost structure than equipment. Conversely,
in fiscal 2000, with a significant number of Star Hardee's remodels completed by
our franchisees, the mix was more heavily weighted towards equipment purchases,
thus there was an increase in franchise costs as a percentage of revenues from
franchised and licensed restaurants when compared to fiscal 1999.

     Advertising Expenses. Advertising expenses decreased $21.5 million or 17.7%
in fiscal 2001 as compared to fiscal 2000. This was due to the fact that in the
prior year we incurred significant expenditures for special advertising
campaigns that were not incurred in the current year. In fiscal 2000,
advertising expenses were $16.3 million higher than in fiscal 1999. This was
also due to the additional advertising campaigns in fiscal 2000. Although
advertising expenses in terms of dollars have fluctuated from year to year, the
amount spent as a percentage of revenues has remained relatively constant
between fiscal 1999 and fiscal 2001.


                                       24
<PAGE>   25

     General and Administrative Expenses. General and administrative expenses
decreased $2.0 million or 1.4% in fiscal 2001 as compared to fiscal 2000. In
fiscal 2001, general and administrative expenses were 8.2% of revenues, while in
fiscal 2000 these expenses represented 7.4% of revenues. This increase as a
percentage of total revenues is primarily due to a decline in our total
revenues. Our actual costs have not declined as much as our revenues. The
increase is primarily due to contract labor during the first two quarters of
fiscal 2001 relating to information technology support and depreciation on
computer systems that were installed in the prior year. Additionally, in the
early part of fiscal 2001, we incurred significant recruiting expenses to fill
open positions. Prior to filling these positions, temporary labor was used to
fill these vacancies, thus resulting in an added cost to us. In fiscal 2000 as
compared to fiscal 1999, general and administrative expenses increased $28.7
million. In fiscal 2000, general and administrative expenses were 7.4% of total
revenues and in fiscal 1999, they were 6.3% of total revenues. This increase in
general and administrative expenses in fiscal 2000 reflects the planned addition
of regional general and administrative expenses in the FEI markets that did not
exist in the prior year, including additional quality assurance and regional
human resources support; higher training expenses for the accelerated Star
Hardee's remodel rollout; a full year of FEI goodwill amortization expense; and
an increase in information technology costs associated with the implementation
of our new computer system. Also impacting general and administrative expenses
in fiscal 2000 are $8.5 million of charges, including: (a) $2.1 million of
restructuring charges in connection with consolidating certain administrative
functions from Rocky Mount, North Carolina to Anaheim, California; (b) $2.6
million of Y2K expenses associated with restaurant computer systems; (c) $6.6
million in capitalized software development costs which were written-off because
they will not be utilized; (d) $1.7 million in additional vacation expense in
connection with a change in our vacation policy; (e) $2.8 gain on the sale of an
aircraft that we acquired in connection with the original Hardee's acquisition;
and (f) $1.7 million in other miscellaneous credits. After adjusting for these
items, general and administrative expenses in fiscal 2000 were $138.9 million,
or 7.0% of total revenues.

     In November 1999, we announced that we would consolidate the majority of
the corporate functions of our Hardee's subsidiary, located in Rocky Mount,
North Carolina, within our corporate headquarters in Anaheim, California,
creating a single support and administration center for our Carl's Jr., Hardee's
and Taco Bueno restaurants. During the fourth quarter of fiscal 2000, we
incurred a charge of $2.1 million of termination benefits for approximately 150
employees that were laid off during fiscal 2001.

     Loss (gain) on property sold or held for sale. Loss (gain) on property sold
or held for sale consists of those gains and losses attributable to the sale of
company-operated restaurants to new and existing franchisees. Fiscal 2001
includes an $8.7 million loss on the anticipated sale of Taco Bueno as the net
assets exceeded the expected net proceeds by that amount.

INTEREST EXPENSE

     Interest expense for fiscal 2001 increased $6.5 million or 10.2% as
compared with fiscal 2000. This increase was due to higher levels of borrowings
outstanding under our senior credit facility throughout the fiscal year, as well
as an overall increase in interest rates. As a result of the recent amendments
to our senior credit facility, the interest rate payable under the senior credit
facility has been increased as well. Further, in fiscal 2001 we incurred an
entire year of interest expense on our $200.0 million, 9.125% senior
subordinated notes, while in fiscal 2000, we incurred only a partial year as the
notes were issued during fiscal 2000. Interest expense for fiscal 2000 increased
$19.8 million to $63.3 million as compared with fiscal 1999. The increase is due
to higher levels of borrowings outstanding and an increase in interest rates
under our senior credit facility, a full year of interest expense on our $159.2
million, 4.25% convertible subordinated notes in fiscal 2000 as compared with
fiscal 1999, and the issuance of our $200.0 million, 9.125% senior subordinated
notes in the first quarter of fiscal 2000, the net proceeds of which we used to
pay down our senior credit facility which carried a lower rate of interest. Also
increasing interest expense in fiscal 2000 was the write-off of $3.6 million of
deferred financing costs associated with a reduction in borrowing capacity of
our senior credit facility.

OTHER EXPENSE, NET

     Other expense, net, mainly consists of interest income, lease income,
dividend income, income and loss on long-term investments, property management
expenses and other non-recurring income and expenses. Other income (expense),
net was an expense of $2.5 million in fiscal 2001. Other income (expense), net
in fiscal 2000 was an expense of $47.2 million. In fiscal 2000, charges of $28.7
million were recorded during the fourth quarter. These charges include: (a)
recording an impairment charge and our equity in the operating losses of our
investments of $37.3 million to write-down our investments in Checkers (which
merged with Rally's in August 1999), SBRG, and Boston West to fair market value
based upon our conclusion that these investments have experienced an other than
temporary decline in value; and (b) writing-off approximately $10.9 million of
Hardee's acquisition-related assets which we believe to have no future benefit.


                                       25
<PAGE>   26

INCOME TAXES

     As a result of our net operating losses in fiscal 2001 and 2000, we have
recorded a valuation allowance of $66.4 million. While we were able to carryback
approximately $20 million of these losses, we have provided a valuation
allowance for the remaining net operating loss carryforward as well as the net
deferred tax asset that existed at the beginning of the fiscal year. Thus, we
have recorded income tax expense in the fourth quarter of fiscal 2001.

EXTRAORDINARY ITEM

     During the third quarter of fiscal 1999, our Board of Directors approved
the buyback of up to $50.0 million aggregate principal amount of convertible
subordinated notes. In fiscal 2000 and fiscal 1999, we repurchased $3.0 million
and $35.0 million, respectively, of such notes for $2.5 million and $28.8
million in cash, respectively, including accrued interest thereon. In connection
with this repurchase, we recognized an extraordinary gain on the early
retirement of debt of $0.3 and $3.3 million, net of applicable income taxes of
$0.2 million and $2.1 million for fiscal 2000 and 1999, respectively.

IMPACT OF INFLATION

     Inflation has an impact on food, construction, occupancy, labor and benefit
costs, all of which can significantly affect our operations. Historically, we
have been able to pass any higher costs due to these inflationary factors along
to our customers because those factors have affected nearly all restaurant
companies.

SEASONALITY

     Our business is affected by seasonality. Average restaurant sales are
normally higher in the summer months than during the winter months for each of
our restaurant concepts. In comparison with our other restaurant concepts, the
weather has a greater impact on average restaurant sales at our Hardee's
restaurants, because a significant number of them are located in rural areas
that experience severe winter conditions without the benefit of municipal storm
services typical of more urban areas.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents decreased $19.6 million to $16.9 million in
fiscal 2001. In fiscal 2001, we generated cash flows from operating activities
of $28.3 million, compared with $114.6 million in fiscal 2000. This decrease was
mainly due to the continued decrease in same-store sales at our Hardee's
restaurants, combined with a decreases in operating margins at all of our
restaurant concepts and increased interest expense.

     Investing activities generated $75.0 million, primarily as a result of the
sale of company-operated restaurants, offset by capital additions of $74.7
million. Additionally, we received $13.8 million from collections on and sale of
notes receivable, related party receivables and leases receivable.

     Financing activities used $123.0 million, primarily due to net repayments
on the senior credit facility during the year. The cash flows that were
generated by operating and investing activities were used mainly to fund
development of our Carl's Jr. restaurants, to repay $10.1 million in capital
lease obligations, to repay indebtedness under the senior credit facility and to
pay the first scheduled semi-annual dividend payment of $2.1 million.

     On March 13, 1998, we completed a private placement of $197.2 million
aggregate principal amount of convertible subordinated notes, in which we
received net proceeds of approximately $192.3 million, of which $24.1 million
was used to repay indebtedness under our then $300.0 million senior credit
facility. The convertible notes, which represent unsecured general obligations
subordinate in right of payment to certain other obligations, including the
senior credit facility and the senior subordinated notes, described below, are
due in 2004, are convertible into our common stock at a conversion price of
$43.82 (adjusted for the 10% stock dividend paid on January 11, 1999) and carry
a 4.25% coupon. The remaining net proceeds from the convertible notes, together
with borrowings under


                                       26
<PAGE>   27

the senior credit facility, were used to fund the acquisition of Flagstar
Enterprises, Inc. on April 1, 1998. In fiscal 2000 and fiscal 1999, we
repurchased $3.0 million and $35.0 million, respectively, aggregate principal
amount of convertible notes for $2.5 million and $28.8 million in cash,
respectively, including accrued interest thereon. We recognized an extraordinary
gain on the early retirement of debt of $0.3 million and $3.3 million, net of
applicable taxes of $0.2 million and $2.1 million for fiscal 2000 and fiscal
1999, respectively.

     On March 4, 1999, we completed a private placement of $200.0 million
aggregate principal amount of 9.125% senior subordinated notes due 2009. We
received net proceeds of $194.8 million, of which $190.0 million was used to
repay outstanding term loan balances under our senior credit facility. The
indenture relating to the senior subordinated notes imposes certain restrictions
on our ability (and the ability of our subsidiaries) to incur indebtedness, pay
dividends on, redeem or repurchase our capital stock, make investments, incur
liens on our assets, sell assets other than in the ordinary course of business,
or enter into certain transactions with our affiliates. The senior subordinated
notes represent unsecured general obligations subordinate in right of payment to
our senior indebtedness, including our senior credit facility.

     In connection with our private placement of senior subordinated notes in
fiscal 2000, we also amended and restated our senior credit facility to increase
the lenders' commitments under our revolving credit facility to $500.0 million
from $250.0 million (the commitment has since been amended to $400 million,
subject to further reduction from asset sales). We also increased our letter of
credit sub-facility to $75.0 million from $65.0 million, and changed the
maturity date of the senior credit facility to February 2004 (subsequently
amended to February 2002). The term loan component of the senior credit facility
was eliminated as a result of these transactions.

     Borrowings under the senior credit facility may be used for working capital
and other general corporate purposes, including permitted investments and
acquisitions. We are required to repay borrowings under the senior credit
facility with the proceeds from (i) certain asset sales, (ii) the issuance of
certain equity securities, and (iii) the issuance of additional indebtedness. Of
the various options we have regarding interest rates, we have selected LIBOR
plus a margin, with future margin adjustments dependent on certain financial
ratios from time to time.

     Our senior credit facility contains restrictions on our ability to incur
additional indebtedness, repurchase stock or subordinated debt, pay dividends
and incur liens on our assets, subject to specified exceptions and requirements
that we satisfy specified financial tests as a precondition to our acquisition
of other businesses. In addition, we were required to comply with minimum EBITDA
requirements, minimum interest coverage and fixed charge coverage ratios,
minimum consolidated tangible net worth requirements and maximum leverage
ratios.

     We have since amended our senior credit facility effective January 31,
2000, August 14, 2000, January 29, 2001 and April 13, 2001, to amend certain of
the covenants contained therein. The amended senior credit facility provides
that the revolving commitments thereunder shall be reduced by the entire net
proceeds from the sale of any of our restaurants. The senior credit facility, as
amended, also prohibits us from purchasing shares of our common stock,
repurchasing any of our senior subordinated notes or convertible notes, from
prepaying subordinated indebtedness and from paying cash dividends. In addition,
capital expenditures were reduced and construction of new restaurants is limited
to construction already begun or committed to begin.

     As a result of the amendments, the final maturity date of the senior credit
facility has been changed to February 1, 2002 and the interest rate payable on
outstanding borrowings was increased. As a result of not achieving certain asset
sale requirements, the applicable margin applied to our borrowings was increased
by 100 basis points. If we complete $25 million of asset sales between January
22, 2001 and June 30, 2001, the applicable margin will be decreased by 50 basis
points. As of June 30, 2001, we will be prohibited from borrowing funds under
the LIBOR option described above and will be charged a rate of interest equal to
the prime rate plus the applicable margin on all outstanding borrowings.

     The amended credit facility also required us to meet certain benchmarks
during the months of November 2000, December 2000 and January 2001 relating to
asset sales. The December benchmark was not met and thus enabled the lenders to
request additional specific collateral. Accordingly, we have agreed to provide
the lenders with specific collateral of our subsidiaries, consisting primarily
of mortgages on a portion of our real property, as well as the stock of the
subsidiaries, which was already held as collateral.

     As of the end of fiscal 2001, we were not in compliance with certain
covenants governing our senior credit facility. We have received a waiver of
this non-compliance through January 31, 2002. It is our intention to use the
proceeds from the sale of Taco Bueno (estimated to be approximately $67 million)
to repay a portion of the outstanding borrowings on our senior credit facility.
Accordingly, of the total amount outstanding under the senior credit facility of
$168.5 million as of January 31, 2001, $67 million has been classified


                                       27
<PAGE>   28

as a current liability on the consolidated balance sheet. As of January 31,
2001, we had $8.8 million of borrowings available under our senior credit
facility. As of April 24, 2001, we had increased our availability under our
senior credit facility to approximately $29 million. In the event the senior
credit facility is declared accelerated, the senior subordinated notes and the
convertible subordinated notes may also become accelerated under certain
circumstances and after all cure periods have expired.

     We are currently actively pursuing strategies to refinance our senior
credit facility as quickly as possible that may include mortgaging many of our
owned and ground leased properties. This refinancing, if completed, should
reduce or remove many of the restrictive covenants on our use of capital that
the current senior credit facility imposes and will allow us to continue with
our remodel plans. There can be no assurance that this refinancing will be
completed and failure to economically effect this refinancing may have a
material adverse affect on our financial statements and results of operations.

     Our primary source of liquidity is our revenues from company-operated
restaurants, which are generated in cash. Future capital needs will arise
primarily for the construction of new Carl's Jr. the remodeling of our Hardee's
restaurants to the Star Hardee's format and the conversion of restaurants to the
Carl's Jr./Green Burrito dual-brand concepts.

     We are pursuing several initiatives to improve our liquidity, including the
sale of our Taco Bueno subsidiary discussed below and the sale of
company-operated restaurants to new and existing franchisees.

     Sale of Taco Bueno. In November 2000, we made a strategic decision to focus
all of our efforts on turning around our Hardee's operations and growing the
Carl's Jr. brand, and consequently, in March 2001, we entered into a definitive
purchase agreement to sell our Taco Bueno subsidiary for approximately $70
million, subject to certain adjustments. The carrying value of the net assets
exceeded the expected net proceeds from the sale by $8.7 million and
accordingly, this loss is included in loss (gain) on property sold or held for
sale in fiscal 2001. The estimated net proceeds from this sale of approximately
$67 million will be used to repay indebtedness under the senior credit facility.
We believe that the sale of Taco Bueno will not only help to reduce indebtedness
but will allow our management to focus on our Carl's Jr. and Hardee's brands.

     Sale of company-operated restaurants to new and existing franchisees. It is
our intention to rebalance our Company so that we will have a larger proportion
of franchised restaurants rather than company-operated restaurants. During
fiscal 2001 we sold approximately 90 Carl's Jr. restaurants to franchisees
generating net cash proceeds (as defined in the Company's senior credit
facility) of approximately $49.3 million and approximately 300 Hardee's
restaurants to franchisees generating net cash proceeds (as defined in the
Company's senior credit facility) of approximately $88.5 million. This strategy
is intended to increase the number and quality of our Hardee's franchisees to
help us turn around those restaurants, to generate cash to pay down borrowings
under our senior credit facility, and to allow us to focus on running the
balance of our Hardee's system with a smaller number of company-operated
restaurants.

     The sale of Taco Bueno is expected to generate a significant amount of cash
to repay indebtedness under our senior credit facility. Our ability to service
our indebtedness may depend on the completion of this sale. Although we have
signed a definitive purchase agreement, there can be no assurances that this
sale will be completed. If this cash is not raised through the sale of Taco
Bueno, we may have to pursue alternative methods of raising cash to repay
indebtedness, such as the sale of additional Carl's Jr. and Hardee's restaurants
to new and existing franchisees or the mortgaging or sale-leaseback of the
existing Taco Bueno owned properties. Although we have received waivers of the
non-compliance of certain covenants of our senior credit facility through
January 31, 2002, we are currently pursuing a refinancing of our senior credit
facility involving mortgaging many of our existing properties that should reduce
some of the capital restrictions that our current senior credit facility
imposes.

     The quick-service restaurant business generally receives simultaneous cash
payment for sales. We presently use the net cash flow from operations to repay
outstanding indebtedness and to reinvest in long-term assets, primarily for the
remodeling and construction of restaurants. Normal operating expenses for
inventories and current liabilities generally carry longer payment terms
(usually 15 to 30 days). As a result, we typically maintain current liabilities
in excess of current assets.

     We believe that cash generated from our various restaurant concept
operations, the cash anticipated to be raised by the sale of Taco Bueno and the
sale of company-operated restaurants to new and existing franchisees, along with
cash and cash equivalents on hand as of January 31, 2001, and amounts available
under our senior credit facility, will provide the funds necessary to meet all
of our capital spending and working capital requirements for the foreseeable
future. As of January 31, 2001, we had $8.8 million of borrowings available to
us under our senior credit facility. As of April 24, 2001, we had increased our
availability to approximately $29 million. As noted above, we are currently
pursuing a refinancing of our senior credit facility that may involve mortgaging
many of our existing properties that should reduce some of the capital
restrictions that our current senior credit facility imposes.

New Accounting Pronouncements Not Yet Adopted

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and hedging activities. SFAS
133, as amended by SFAS 137 and SFAS 138, is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. The adoption of SFAS 133 did not
have a material impact on the Company's consolidated financial position or
results of operations.


                                       28
<PAGE>   29

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Interest Rate Risk

     Our principal exposure to financial market risks is the impact that
interest rate changes could have on our $400.0 million senior credit facility
(since reduced to $227.1 million pursuant to asset sales), of which $168.5
million remained outstanding as of January 31, 2001. Borrowings under our senior
credit facility bear interest at the prime rate or at LIBOR plus an applicable
margin based on certain financial ratios (averaging 10.1% in fiscal 2001). A
hypothetical increase of 100 basis points in short-term interest rates would
result in a reduction of approximately $1.7 million in annual pre-tax earnings.
The estimated reduction is based upon the outstanding balance of our senior
credit facility and assumes no change in the volume, index or composition of
debt at January 31, 2001. Substantially all of our business is transacted in
U.S. dollars. Accordingly, foreign exchange rate fluctuations have never had a
significant impact on us and are not expected to in the foreseeable future.

   Commodity Price Risk

     We purchase certain products which are affected by commodity prices and
are, therefore, subject to price volatility caused by weather, market conditions
and other factors which are not considered predictable or within our control.
Although many of the products purchased are subject to changes in commodity
prices, certain purchasing contracts or pricing arrangements contain risk
management techniques designed to minimize price volatility. Typically, we use
these types of purchasing techniques to control costs as an alternative to
directly managing financial instruments to hedge commodity prices. In many
cases, we believe we will be able to address commodity cost increases which are
significant and appear to be long-term in nature by adjusting our menu pricing
or changing our product delivery strategy. However, increases in commodity
prices could result in lower restaurant-level operating margins for our
restaurant concepts.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See the Index included at "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K."

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information pertaining to directors and executive officers of the
registrant is hereby incorporated by reference to our Proxy Statement to be used
in connection with our 2001 Annual Meeting of Stockholders, to be filed with the
Commission within 120 days of January 29, 2001. Information concerning the
current executive officers is contained in Item 1 of Part I of this Annual
Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     The information pertaining to executive compensation is hereby incorporated
by reference to our Proxy Statement to be used in connection with our 2001
Annual Meeting of Stockholders, to be filed with the Commission within 120 days
of January 29, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information pertaining to security ownership of certain beneficial
owners and management is hereby incorporated by reference to our Proxy Statement
to be used in connection with our 2001 Annual Meeting of Stockholders, to be
filed with the Commission within 120 days of January 29, 2001.


                                       29
<PAGE>   30


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information pertaining to certain relationships and related
transactions is hereby incorporated by reference to our Proxy Statement to be
used in connection with our 2001 Annual Meeting of Stockholders, to be filed
with the Commission within 120 days of January 29, 2001.


                                       30
<PAGE>   31


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    CKE RESTAURANTS, INC.

                                    By:         /s/ ANDREW F. PUZDER
                                       -----------------------------------------
                                                    Andrew F. Puzder


Date: April 30, 2001

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
                       SIGNATURE                                          TITLE                                   DATE
                       ---------                                          -----                                   ----
<S>                                                 <C>                                                      <C>
               /s/ ANDREW F. PUZDER                       Chief Executive Officer and President              April 30, 2001
      --------------------------------------                  (Principal Executive Officer)
                   Andrew F. Puzder

                /s/ DENNIS J. LACEY                 Executive Vice President, Chief Financial Officer        April 30, 2001
      --------------------------------------          (Principal Financial and Accounting Officer)
                    Dennis J. Lacey

               /s/ BYRON ALLUMBAUGH                                     Director                             April 30, 2001
      --------------------------------------
                   Byron Allumbaugh

                  /s/ PETER CHURM                                       Director                             April 30, 2001
      --------------------------------------
                      Peter Churm

              /s/ WILLIAM P. FOLEY II                             Chairman of the Board                      April 30, 2001
      --------------------------------------
                  William P. Foley II

                /s/ CARL L. KARCHER                                     Director                             April 30, 2001
      --------------------------------------
                    Carl L. Karcher

                /s/ CARL N. KARCHER                                     Director                             April 30, 2001
      --------------------------------------
                    Carl N. Karcher

                /s/ DANIEL D. LANE                             Vice Chairman of the Board                    April 30, 2001
      --------------------------------------
                    Daniel D. Lane

                 /s/ DANIEL PONDER                                      Director                             April 30, 2001
      --------------------------------------
                     Daniel Ponder

              /s/ C. THOMAS THOMPSON                                    Director                             April 30, 2001
      --------------------------------------
                  C. Thomas Thompson

                /s/ FRANK P. WILLEY                                     Director                             April 30, 2001
      --------------------------------------
                    Frank P. Willey
</TABLE>


                                       31
<PAGE>   32


                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
                                                                                   PAGE
                                                                                   ----
<S>           <C>                                                                  <C>
   (a)(1)     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:

              Independent Auditors' Report                                          33

              Consolidated Balance Sheets -- as of January 31, 2001 and 2000        34

              Consolidated Statements of Operations -- for the fiscal years
              ended January 31, 2001, 2000 and 1999                                 35

              Consolidated Statements of Stockholders' Equity -- for the fiscal
              years ended January 31, 2001, 2000 and 1999                           36

              Consolidated Statements of Cash Flows -- for the fiscal years
              ended January 31, 2001, 2000 and 1999                                 37

              Notes to Consolidated Financial Statements                            38

   (a)(2)     INDEX TO FINANCIAL STATEMENT SCHEDULES: Schedule II -- Valuation
               and Qualifying Accounts                                              59

              All other schedules are omitted since the required information is
              not present in amounts sufficient to require submission of the
              schedule, or because the information required is included in the
              consolidated financial statements or the notes thereto.

   (a)(3)     EXHIBITS: An "Exhibit Index" has been filed as a part of this Form
              10-K beginning on page 60 hereof and is incorporated herein
              by reference.

     (b)      CURRENT REPORTS ON FORM 8-K: None.
</TABLE>


                                       32
<PAGE>   33


                          INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND STOCKHOLDERS
CKE RESTAURANTS, INC.:

     We have audited the accompanying consolidated financial statements of CKE
Restaurants, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
audited the financial statement schedule as listed in the accompanying index.
These consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CKE
Restaurants, Inc. and subsidiaries as of January 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended January 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information shown therein.

                                    KPMG LLP

Orange County, California
April 23, 2001


                                       33
<PAGE>   34

                     CKE RESTAURANTS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)


                                                       ASSETS:
<TABLE>
<CAPTION>
                                                                               JANUARY 31, 2001   JANUARY 31, 2000
                                                                               ----------------   ----------------
<S>                                                                            <C>                <C>
Current assets:
  Cash and cash equivalents                                                        $    16,860       $    36,505
  Accounts receivable, net                                                              73,956            42,928
  Related party receivables                                                              2,505             5,006
  Inventories                                                                           17,694            26,463
  Prepaid expenses                                                                      10,212            14,717
  Other current assets                                                                   2,534             2,454
  Property held for sale                                                                66,912                --
                                                                                   -----------       -----------
    Total current assets                                                               190,673           128,073
Property and equipment, net                                                            700,698         1,051,480
Property under capital leases, net                                                      73,617            84,482
Long-term investments                                                                    3,461             3,002
Notes receivable                                                                        14,098             7,383
Related party receivables                                                                   --               583
Deferred income taxes, net                                                                  --            15,006
Costs in excess of net assets acquired, net                                            203,900           243,304
Other assets                                                                            27,582            35,201
                                                                                   -----------       -----------
                                                                                   $ 1,214,029       $ 1,568,514
                                                                                   ===========       ===========
                                        LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
  Current portion of long-term debt                                                $    67,332       $     5,532
  Current portion of capital lease obligations                                           9,845             9,603
  Accounts payable                                                                      53,759            99,204
  Other current liabilities                                                             83,045            97,582
                                                                                   -----------       -----------
    Total current liabilities                                                          213,981           211,921
Long-term debt                                                                         106,760           274,996
Senior subordinated notes                                                              200,000           200,000
Convertible subordinated notes                                                         159,225           159,225
Capital lease obligations                                                               81,173            92,063
Other long-term liabilities                                                            103,333            84,552
                                                                                   -----------       -----------
Total liabilities                                                                      864,472         1,022,757
                                                                                   -----------       -----------
Stockholders' equity:
  Preferred stock, $.01 par value; authorized 5,000,000
    shares; none issued or outstanding                                                      --                --
  Common stock, $.01 par value; authorized 100,000,000
    shares; issued and outstanding 52,086,421 shares                                       521               521
  Additional paid-in capital                                                           383,016           383,016
  Retained earnings (accumulated deficit)                                              (23,574)          172,626
  Treasury stock at cost; 1,585,000 shares                                             (10,406)          (10,406)
                                                                                   -----------       -----------
    Total stockholders' equity                                                         349,557           545,757
                                                                                   -----------       -----------
                                                                                   $ 1,214,029       $ 1,568,514
                                                                                   ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       34
<PAGE>   35


                     CKE RESTAURANTS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                          FISCAL YEAR ENDED JANUARY 31,
                                                                  -----------------------------------------------
                                                                      2001              2000              1999
                                                                  -----------       -----------       -----------
<S>                                                               <C>               <C>               <C>
Revenues:
  Company-operated restaurants                                    $ 1,569,504       $ 1,814,695       $ 1,732,221
  Franchised and licensed restaurants and other                       215,078           175,378           159,823
                                                                  -----------       -----------       -----------
    Total revenues                                                  1,784,582         1,990,073         1,892,044
                                                                  -----------       -----------       -----------
Operating costs and expenses:
  Restaurant operations:
    Food and packaging                                                484,440           553,451           519,443
    Payroll and other employee benefits                               514,535           566,394           535,638
    Occupancy and other operating expenses                            367,235           383,144           337,668
    Store closure expense and provision for asset impairment           98,285            41,988                --
                                                                  -----------       -----------       -----------
                                                                    1,464,495         1,544,977         1,392,749
  Franchised and licensed restaurants and other                       161,171           128,128           107,019
  Advertising expenses                                                100,199           121,727           105,397
  General and administrative expenses                                 145,376           147,372           118,659
  Loss (gain) on property sold or held for sale                        46,356           (15,186)               --
                                                                  -----------       -----------       -----------
    Total operating costs and expenses                              1,917,597         1,927,018         1,723,824
                                                                  -----------       -----------       -----------
Operating income (loss)                                              (133,015)           63,055           168,220
Interest expense                                                      (69,762)          (63,283)          (43,453)
Other expense, net                                                     (2,487)          (47,232)             (670)
                                                                  -----------       -----------       -----------
Income (loss) before income taxes and extraordinary item             (205,264)          (47,460)          124,097
Income tax expense (benefit)                                          (11,148)          (18,053)           49,645
                                                                  -----------       -----------       -----------
Income (loss) before extraordinary item                              (194,116)          (29,407)           74,452
Extraordinary item -- gain on early retirement of debt,
  net of applicable income taxes of $186 and $2,084                        --               290             3,260
                                                                  -----------       -----------       -----------
Net income (loss)                                                 $  (194,116)      $   (29,117)      $    77,712
                                                                  ===========       ===========       ===========

Basic income (loss) per share before extraordinary item                 (3.84)      $     (0.57)      $      1.44
Extraordinary item -- gain on early retirement of debt,
  net of applicable income taxes -- basic                                 .--              0.01              0.07
                                                                  -----------       -----------       -----------
Net income (loss) per share -- basic                                    (3.84)      $     (0.56)      $      1.51
                                                                  ===========       ===========       ===========
Weighted average shares outstanding -- basic                           50,501            51,668            51,599
                                                                  ===========       ===========       ===========

Diluted income (loss) per share before extraordinary item         $     (3.84)      $     (0.57)      $      1.39
Extraordinary item -- gain on early retirement of debt,
  net of applicable income taxes -- diluted                                --              0.01              0.06
                                                                  -----------       -----------       -----------
Net income (loss) per share -- diluted                            $     (3.84)      $     (0.56)      $      1.45
                                                                  ===========       ===========       ===========
Weighted average shares outstanding -- diluted                         50,501            51,668            56,714
                                                                  ===========       ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       35
<PAGE>   36

                     CKE RESTAURANTS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
               FISCAL YEARS ENDED JANUARY 31, 2001, 2000 AND 1999


<TABLE>
<CAPTION>
                                           COMMON STOCK             TREASURY STOCK
                                       --------------------      ---------------------      ADDITIONAL                   TOTAL
                                       NUMBER OF                 NUMBER OF                   PAID-IN     RETAINED    STOCKHOLDERS'
                                       SHARES       AMOUNT       SHARES        AMOUNT        CAPITAL     EARNINGS       EQUITY
                                       -------      -------      -------      --------      ----------   --------    -------------
<S>                                    <C>          <C>          <C>          <C>           <C>           <C>        <C>

BALANCE AT JANUARY 31, 1998             51,175      $   512           --      $     --      $366,063     $131,937      $ 498,512
  Cash dividends ($.07 per share)           --           --           --            --            --       (3,749)        (3,749)
  Exercise of stock options                624            6           --            --         6,068           --          6,074
  Repurchase of Hardee's
    franchised restaurants                  51            1           --            --         1,662           --          1,663
  Tax benefit associated with
    exercise of stock options               --           --           --            --         6,630           --          6,630
  Net income                                --           --           --            --            --       77,712         77,712
                                       -------      -------      -------      --------      --------     --------      ---------
BALANCE AT JANUARY 31, 1999             51,850          519           --            --       380,423      205,900        586,842
  Cash dividends ($.08 per share)           --           --           --            --            --       (4,157)        (4,157)
  Exercise of stock options                181            2           --            --         1,363           --          1,365
  Purchase of treasury shares               --           --       (1,585)      (10,406)           --           --        (10,406)
  Shares issued to third-party              55           --           --            --           722           --            722
  Tax benefit associated with
    exercise of stock options               --           --           --            --           508           --            508
  Net loss                                  --           --           --            --            --      (29,117)       (29,117)
                                        ------      -------       ------      --------      --------     --------      ---------
BALANCE AT JANUARY 31, 2000             52,086          521       (1,585)      (10,406)      383,016      172,626        545,757
  Cash dividends ($.04 per share)           --           --           --            --            --       (2,084)        (2,084)
  Net loss                                  --           --           --            --            --      (194,116)     (194,116)
                                        ------      -------       ------      --------      --------     --------      ---------
BALANCE AT JANUARY 31, 2001             52,086      $   521       (1,585)     $(10,406)     $383,016     $(23,574)     $ 349,557
                                        ======      =======       ======      ========      ========     ========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       36
<PAGE>   37

                     CKE RESTAURANTS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                FISCAL YEAR ENDED JANUARY 31,
                                                                                         -----------------------------------------
                                                                                            2001            2000            1999
                                                                                         ---------       ---------       ---------
<S>                                                                                      <C>             <C>             <C>
Net cash flows from operating activities:
Net income (loss)                                                                        $(194,116)      $ (29,117)      $  77,712
Adjustments to reconcile net income (loss) to net cash provided by operating
  activities, excluding the effect of acquisitions and dispositions:
  Extraordinary gain on early retirement of debt                                                --            (476)         (5,344)
  Depreciation and amortization                                                            106,981         104,450          77,119
  Provision for losses on accounts and notes receivable                                      8,602           1,485          (5,497)
  (Gain) loss on sale of property and equipment and capital leases                          49,403         (16,922)          1,941
  Shares issued for litigation settlement                                                       --             722              --
  Net non-cash charges                                                                     115,903         105,601          15,000
  Net non-cash investment and dividend income                                                   --              --          (1,259)
  Deferred income taxes                                                                     15,006         (30,035)          9,038
  (Gain) loss on non-current asset and liability transactions                               (2,104)          4,744          (8,818)
  Net change in receivables, inventories, prepaid expenses and other current assets        (27,879)        (12,457)        (16,009)
  Net change in accounts payable and other current liabilities                             (43,496)        (13,406)         34,787
                                                                                         ---------       ---------       ---------
  Net cash provided by operating activities                                                 28,300         114,589         178,670
                                                                                         ---------       ---------       ---------
Cash flows from investing activities:
Purchases of:
  Property and equipment                                                                   (74,680)       (263,589)       (124,288)
  Long-term investments and marketable securities                                           (2,957)             --             (27)
Proceeds from sale of:
  Marketable securities and long-term investments                                            4,210              --          12,500
  Property and equipment                                                                   154,132          52,753          10,723
Increases in notes receivable and related party receivables                                (18,305)         (5,544)         (2,930)
Collections on and sale of notes receivable, related party
  receivables and leases receivable                                                         13,791           7,725           8,457
Net change in other assets                                                                   2,653          (5,012)          1,295
Cash of subsidiaries in property held for sale                                              (3,827)             --              --
Acquisitions, net of cash acquired                                                              --          (2,491)       (406,376)
Dispositions, net of cash surrendered                                                           --              --             940
                                                                                         ---------       ---------       ---------
  Net cash provided by (used in) investing activities                                       75,017        (216,158)       (499,706)
                                                                                         ---------       ---------       ---------
Cash flows from financing activities:
Net change in bank overdraft                                                                (7,565)         14,210         (13,809)
Repayments of short-term debt                                                               (1,123)         (3,600)           (433)
Long-term borrowings                                                                       266,000         467,500         530,095
Repayments of long-term debt                                                              (371,313)       (350,853)       (151,650)
Repayments of capital lease obligations                                                    (10,095)         (7,689)         (8,698)
Deferred financing costs                                                                      (904)        (10,759)        (10,384)
Net change in other long-term liabilities                                                    4,122          (4,342)        (16,901)
Payment of dividends                                                                        (2,084)         (4,157)         (3,749)
Purchase of treasury stock                                                                      --         (10,406)             --
Exercise of stock options                                                                       --           1,365           6,074
Tax benefit associated with the exercise of stock options                                       --             508           6,630
                                                                                         ---------       ---------       ---------
  Net cash provided by (used in) financing activities                                     (122,962)         91,777         337,175
                                                                                         ---------       ---------       ---------
Net increase (decrease) in cash and cash equivalents                                       (19,645)         (9,792)         16,139
Cash and cash equivalents at beginning of year                                              36,505          46,297          30,158
                                                                                         ---------       ---------       ---------
Cash and cash equivalents at end of year                                                 $  16,860       $  36,505       $  46,297
                                                                                         =========       =========       =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       37
<PAGE>   38


                     CKE RESTAURANTS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES

     A summary of certain significant accounting policies not disclosed
elsewhere in the footnotes to the consolidated financial statements is set forth
below.

   Description of Business

     CKE Restaurants, Inc. ("CKE" or the "Company") owns, operates, franchises
and licenses the Carl's Jr., Hardee's and Taco Bueno quick-service restaurant
concepts. As of January 31, 2001, the Carl's Jr. system included 977
restaurants, of which 491 were operated by the Company and 486 were operated by
the Company's franchisees and licensees. Carl's Jr. restaurants are located in
the Western United States, predominantly in California. As of January 31, 2001,
the Company's Hardee's system included 2,660 restaurants, of which 923 were
operated by the Company and 1,737 were operated by the Company's franchisees and
licensees. Hardee's restaurants are located throughout the Eastern and
Midwestern United States, predominantly in the Southeast. As of January 31,
2001, the Company also operated a total of 146 other restaurants, including 125
Taco Bueno quick-service Mexican restaurants in Texas and Oklahoma.

     The Company and Rally's Hamburgers, Inc. ("Rally's") entered into an
operating agreement, effective in July 1996, whereby the Company began operating
28 Rally's-owned restaurants located in California and Arizona. Rally's retains
ownership of the restaurants' assets and receives a percentage of the
restaurants' sales. The Company's results of operations include the revenue and
expenses of these Rally's restaurants. As of January 31, 2001, the Company
operated 21 Rally's restaurants under this operating agreement.

   Basis of Presentation and Fiscal Year

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany transactions are
eliminated. The Company's fiscal year is 52 or 53 weeks, ending the last Monday
in January each year. Fiscal year 2000 included 53 weeks of operations. Fiscal
years 2001 and 1999 each included 52 weeks of operations. For clarity of
presentation, the Company has labeled all years presented as fiscal year ended
January 31.

     The equity method of accounting is used for investments in which the
Company has the ability to exercise significant influence. Under the equity
method, the Company recognizes its share of the net earnings or losses of these
entities and adjusts the carrying value of its investment by the amount of net
earnings or losses recognized and by the amount of contributions made or
distributions received. The Company's share of net earnings or losses is
calculated based on the Company's expected share of the investment's estimated
profit or loss.

   Cash Equivalents

     For purposes of reporting cash flows, highly liquid investments purchased
with original maturities of three months or less are considered cash
equivalents. The carrying amounts reported in the consolidated balance sheets
for these instruments approximate their fair value.

   Inventories

     Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist primarily of restaurant food items and paper supplies.


                                       38
<PAGE>   39

   Deferred Financing Costs

Costs related to the issuance of debt are deferred and amortized on a
straight-line basis as a component of interest expense over the terms of the
respective debt issues. In accordance with Emerging Issues Task Force Bulletin
98-14, "Debtor's Accounting for Changes in Line of Credit or Revolving Debt
Arrangements" ("EITF 98-14"), the Company writes off a portion of these deferred
financing charges when the borrowing capacity of its senior credit facility is
reduced.

   Deferred Lease Costs

     Deferred lease costs arising from an acquisition represent the excess of
actual rent payments on an operating lease over the current market rate on the
date of the acquisition. Deferred lease costs are amortized over the remaining
lives of the related leases.

   Deferred Pre-opening Costs

     The Company adopted Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") in fiscal 1999. SOP 98-5 requires that costs
incurred during a start-up activity (including organization costs) be expensed
as incurred. The impact of the adoption of SOP 98-5 on the Company's
consolidated financial position and results of operations was not material.

   Property and Equipment

     Property and equipment are recorded at cost, less depreciation and
amortization. Depreciation is computed using the straight-line method based on
the assets' estimated useful lives, which range from three to 40 years.
Leasehold improvements are amortized on a straight-line basis over the lesser of
the estimated useful lives of the assets or the related lease terms.

   Impairment of Long-Lived Assets

     The Company assesses certain long-lived assets for possible impairment when
events or circumstances indicate carrying amounts may not be recoverable. The
Company generally uses the "three-year history of operating losses" at a
restaurant as the primary indicator of potential impairment. On certain
restaurants that do not have a three-year history, two-years were used. When the
carrying value exceeds the total estimated undiscounted cash flows expected to
be generated over the assets' estimated life, the assets are written down to
fair value. If the discounted cash flows of a restaurant were less than zero,
the asset was written down to the fair market value of the land associated with
the restaurant, if any. The fair value of the land is estimated based on recent
sales prices obtained by the Company in various transactions. (See Note 3.)

     The costs in excess of net assets acquired are allocated to stores on a
specific identification basis and are amortized on a straight-line basis,
principally over 40 years. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the balance over its
remaining life can be recovered through undiscounted future operating cash flows
of the acquired operation. The amount of impairment, if any, is measured based
on projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of the costs in excess of net assets acquired will be impacted if
estimated future operating cash flows are not achieved. The Company periodically
reviews the costs in excess of net assets acquired for impairment on a store by
store basis. Accumulated amortization of costs in excess of net assets acquired
was $23.4 million and $17.0 million at January 31, 2001 and 2000, respectively.

   Store Closure Costs

     The Company makes decisions to close stores based on their cash flows and
anticipated future profitability. If it is determined that these stores have a
minimal chance to be profitable, then the Company records losses associated with
the closure of restaurants in the same quarter that the decision to close these
restaurants is made. These store closure charges represent a liability for the
net present value of any remaining lease obligations including executory costs
after the expected closure dates, net of estimated sublease income, if any. (See
Note 3.)

   Advertising

     Production costs of commercials and programming are charged to operations
when first aired. The costs of other advertising, promotion and marketing
programs are charged to operations when incurred.


                                       39
<PAGE>   40

   Income Taxes

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

   Estimations

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

   Income (Loss) per Share

     The Company presents "basic" income (loss) per share which represents net
income (loss) divided by the weighted average shares outstanding excluding all
potentially dilutive common shares and "diluted" income (loss) per share
reflecting the dilutive effect of all potentially dilutive common shares. The
following table illustrates the computation of basic and diluted income (loss)
per share:

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                                                      2001            2000           1999
----------------------------------------                                                    ---------       --------       --------
<S>                                                                                          <C>            <C>            <C>

BASIC INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary item                                                     $(194,116)      $(29,407)      $ 74,452
Extraordinary item -- gain on early retirement of debt, net of applicable income taxes             --            290          3,260
                                                                                            ---------       --------       --------
Net income (loss)                                                                           $(194,116)      $(29,117)      $ 77,712
                                                                                            =========       ========       ========
Weighted average number of common shares outstanding during the year                           50,501         52,010         51,599
  Purchase of treasury shares                                                                      --           (342)            --
                                                                                            ---------       --------       --------
                                                                                               50,501         51,668         51,599
                                                                                            ---------       --------       --------
Basic income (loss) per share before extraordinary item                                     $   (3.84)      $  (0.57)      $   1.44
Extraordinary item -- gain on early retirement of debt, net of applicable income taxes
  -- basic                                                                                         --           0.01           0.07
                                                                                            ---------       --------       --------
Basic net income (loss) per share                                                           $   (3.84)      $  (0.56)      $   1.51
                                                                                            =========       ========       ========

DILUTED INCOME (LOSS) PER SHARE:
Income (loss) before extraordinary item                                                     $(194,116)      $(29,407)      $ 74,452
Interest expense and amortization of debt issuance costs,
  net of income tax effect, applicable to convertible subordinated notes                           --             --          4,635
                                                                                            ---------       --------       --------
Income (loss) before extraordinary item                                                      (194,116)       (29,407)        79,087
Extraordinary item -- again on early retirement of debt, net of applicable income taxes            --            290          3,260
                                                                                            ---------       --------       --------
Net income (loss)                                                                           $(194,116)      $(29,117)      $ 82,347
                                                                                            =========       ========       ========
Weighted average number of common shares outstanding during the year                           50,501         52,010         51,599
  Incremental common shares attributable to:
    Exercise of stock options                                                                      --             --          1,336
    Issuance of convertible subordinated notes                                                     --             --          3,779
    Purchase of treasury shares                                                                    --           (342)            --
                                                                                            ---------       --------       --------
                                                                                               50,501         51,668         56,714
                                                                                            =========       ========       ========
Diluted income (loss) per common share before extraordinary item                            $   (3.84)      $  (0.57)      $   1.39
Extraordinary item -- gain on early retirement of debt, net of applicable income taxes
  -- diluted                                                                                       --           0.01           0.06
                                                                                            ---------       --------       --------
Diluted net income (loss) per share                                                         $   (3.84)      $  (0.56)      $   1.45
                                                                                            =========       ========       ========
</TABLE>

     In fiscal 2001, 2000 and 1999, 8.1 million, 6.2 million and 4.0 million
shares, respectively, relating to the possible exercise of outstanding stock
options and in fiscal 2001 and 2000, 3.6 million shares issuable upon conversion
of convertible subordinated notes, were not included in the computation of
diluted earnings (loss) per share as their effect would have been anti-dilutive.


                                       40
<PAGE>   41

     On December 17, 1998, the Company declared a 10% stock dividend to
stockholders of record on December 28, 1998, distributed on January 11, 1999.

     All data with respect to income (loss) per share, dividends per share and
share information, including price per share where applicable, in the
consolidated financial statements and notes to consolidated financial statements
were retroactively adjusted to reflect the issuance of stock dividends.

   Comprehensive Income

     The Company did not have any other comprehensive income items requiring
reporting under Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income".

   Segment Information

     Operating segments are defined as components of an enterprise for which
separate financial information is available that is evaluated regularly by the
chief operating decision maker(s) in deciding how to allocate resources and in
assessing performance.

New Accounting Pronouncements Not Yet Adopted

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and hedging activities. SFAS
133, as amended by SFAS 137 and SFAS 138, is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. The adoption of SFAS 133 did not
have a material impact on the Company's consolidated financial position or
results of operations.

   Reclassifications

     Certain prior year amounts in the accompanying consolidated financial
statements have been reclassified to conform with the current year presentation.

NOTE 2 -- ACQUISITIONS

     On April 1, 1998, the Company acquired Flagstar Enterprises, Inc. ("FEI"),
the largest franchisee in the Hardee's system, previously operating 557 Hardee's
restaurants located primarily in the Southeastern United States. The Company
acquired all issued and outstanding shares of common stock of FEI from Advantica
Restaurant Group, Inc. ("Advantica") for cash consideration of $380.6 million
(which includes miscellaneous expenses paid to Advantica) and the assumption of
approximately $45.6 million in capital lease obligations. The Company used the
majority of the net proceeds from the issuance of $197.2 million of convertible
subordinated notes together with borrowings of $213.2 million under its senior
credit facility to finance the acquisition (see Note 11).

     The assets acquired under the purchase method of accounting, including the
costs in excess of net assets acquired, and liabilities assumed in the
acquisitions of FEI and Hardee's are as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S>                                         <C>
Tangible assets acquired at fair value      $    319,603
Costs in excess of net assets acquired           150,442
Liabilities assumed at fair value                (89,408)
                                            ------------
  Total purchase price                      $    380,637
                                            ============
</TABLE>

NOTE 3 -- STORE CLOSURE EXPENSE AND PROVISION FOR ASSET IMPAIRMENT

     The Company reviews the performance of company-operated stores under the
criteria described in Note 1. As a result of this review, in fiscal 2001 and
2000, the Company decided to close certain under-performing company-operated
restaurants that management believes are in locations where the population or
demographics have changed so significantly that there is minimal opportunity for
improvement. The Company provides store closures reserves for these assets under
the


                                       41
<PAGE>   42

criteria described in Note 1. Additionally, in fiscal 2001, the Company realized
there were several stores that it believed it should continue operating, but
whose cash flow from operations did not support their related net asset value
and accordingly an impairment provision was recorded based on the criteria
described in Note 1.

     On a historic basis, when the Company acquired Hardee's in July 1997, the
Company established a reserve for stores already closed and still owned or
leased by Hardee's. Additionally, a store closure reserve was established
several years ago for Carl's Jr. stores closed in Texas and Arizona.

     In late fiscal 2000, the Company embarked on a refranchising initiative to
move to a well-balanced system of nationwide restaurant concepts that are
primarily franchise-operated. As a result, the Company has sold several
restaurants to new and existing franchisees.

     The results of these strategies have caused the following transactions to
be recorded in the financial statements:

     -  Gains (losses) on the sale of restaurants,

     -  Store closure costs, and

     -  Impairment of long-lived assets for restaurants the Company intends to
        continue to operate and restaurants the Company intends to close beyond
        the quarter in which the closure decision is made.

The components of these actions for fiscal 2001, 2000, and 1999 were as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                               2001              2000             1999
---------------------                                           ------------      ------------     ------------
<S>                                                             <C>               <C>               <C>
Hardee's
    Store closure reserves                                      $     17,253      $     16,274     $          --
    Impairment on stores to be closed                                 53,453            25,331                --
    Impairment on stores that will continue to be operated            16,705               383                --
                                                                ------------      ------------      ------------
                                                                      87,411            41,988                --
                                                                ------------      ------------      ------------
Carl's Jr
    Store closure reserves                                             1,884                --                --
    Impairment on stores to be closed                                  5,955                --                --
    Impairment on stores that will continue to be operated             3,035                --                --
                                                                ------------      ------------      ------------
                                                                      10,874                --                --
                                                                ------------      ------------      ------------
Total
    Store closure reserves                                            19,137            16,274                --
    Impairment on stores to be closed                                 59,408            25,331                --
    Impairment on stores that will continue to be operated            19,740               383                --
                                                                ------------      ------------      ------------
                                                                $     98,285      $     41,988     $          --
                                                                ============      ============      ============
</TABLE>

Impairment charges for 2001 and 2000 were recorded against the following asset
categories:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                   2001              2000
---------------------                                ------------      ------------
<S>                                                  <C>               <C>
    Fixed assets:
       Hardee's                                      $     46,138      $     15,265
       Carl's Jr                                            8,990               383
                                                     ------------      ------------
                                                           55,128            15,648
                                                     ------------      ------------
    Costs in excess of net assets acquired, net
       Hardee's                                            24,020            10,066
       Carl's Jr                                               --                --
                                                     ------------      ------------
                                                           24,020            10,066
                                                     ------------      ------------
    Total                                            $     79,148      $     25,714
                                                     ============      ============
</TABLE>


                                       42
<PAGE>   43

     The following table summarizes the 2001 and 2000 activity in the store
closure reserves. The Company believes that the remaining carrying amounts are
adequate to complete its disposal actions. The remaining unamortized discount to
present value of the lease subsidies associated with these stores at January 31,
2001 was $2.7 million and is to be recorded as a component of interest expense
over the remaining sublease terms, which range up to 14 years, utilizing a
method approximating the effective interest method.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S>                                     <C>
Balance at January 31, 1998             $     42,532
   New decisions                                  --
   Usage                                     (11,905)
   Other                                          --
                                        ------------
Balance at January 31, 1999                   30,627
   New decisions                              16,274
   Usage                                      (3,594)
   Other                                          --
                                        ------------
Balance at January 31, 2000                   43,307
   New decisions                              19,137
   Usage                                      (6,367)
   Other                                       2,110
                                        ------------
Balance at January 31, 2001                   58,187
Less: Current portion                         (6,874)
                                        ------------
Long-term portion                       $     51,313
                                        ============
</TABLE>

     The following table summarizes average sales per restaurant and restaurant
margin related to stores the Company decided to close. Restaurant margin
represents Company sales less the cost of food and paper, payroll and employee
benefits and occupancy and other operating expenses.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)               2001             2000              1999
----------------------           ------------     ------------      ------------
<S>                              <C>              <C>               <C>
    Sales per restaurant
      Carl's Jr.                    $ 490             $ --              $ --
      Hardee's                      $ 495             $493              $ --

    Margins
      Carl's Jr.                    (15.2)%             --                --
      Hardee's                      (14.3)%           (8.0)%               --
</TABLE>


NOTE 4 -- ACCOUNTS RECEIVABLE, NET

    Details of accounts receivables, net are as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                    2001             2000
---------------------                  ----------       ----------
<S>                                    <C>              <C>
Trade receivables                      $   42,682       $   36,531
Allowance for doubtful accounts            (8,241)          (4,917)
Income tax receivable                      36,586            8,874
Notes receivable, current portion           2,651            2,203
Other                                         278              237
                                       ----------       ----------
                                       $   73,956       $   42,928
                                       ==========       ==========
</TABLE>

NOTE 5-- PROPERTY HELD FOR SALE

     In November 2000, the Company decided to sell Taco Bueno. Accordingly, for
financial reporting purposes, the assets and liabilities attributable to this
transaction have been classified on the consolidated balance sheet as property
held for sale. In March 2001, the Company entered into a definitive purchase
agreement to sell Taco Bueno to Jacobson Partners for approximately $70 million,
subject to certain adjustments. The carrying value of the net assets exceeded
the expected net proceeds from the sale by $8.7 million. Property held for sale
consists of the following at January 31, 2001:


                                       43
<PAGE>   44



<TABLE>
<CAPTION>
<S>                                                             <C>
             Current assets                                     $   6,540
             Property and equipment, net                           69,347
             Property under capital leases, net                     1,357
             Costs in excess of net assets acquired, net            8,959
             Other assets                                             975
                                                                ---------
             Total assets                                       $  87,178
                                                                ---------

             Current liabilities                                $   9,469
             Capital lease obligations                                970
             Other long-term liabilities                            1,127
                                                                ---------
             Total liabilities                                  $  11,566
                                                                 --------

             Gross property held for sale                       $  75,612
             Reduction to net sales contract value                 (8,700)
                                                                ---------
             Net property held for sale                         $  66,912
                                                                =========
</TABLE>


NOTE 6 -- PROPERTY AND EQUIPMENT

    Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                       ESTIMATED
      (DOLLARS IN THOUSANDS)                          USEFUL LIFE          2001              2000
      ----------------------                         ------------      ------------      ------------
<S>                                                  <C>               <C>               <C>
Land                                                                   $    199,296      $    269,211
Leasehold improvements                                 4-25 years           239,742           274,820
Buildings and improvements                             7-40 years           265,533           421,674
Equipment, furniture and fixtures                      3-10 years           289,585           412,818
                                                     ------------      ------------      ------------
                                                                            994,156         1,378,523
Less: Accumulated depreciation and amortization                             293,458           327,043
                                                                       ------------      ------------
                                                                       $    700,698      $  1,051,480
                                                                       ------------      ------------
</TABLE>

NOTE 7 -- LEASES

     The Company occupies land and buildings under lease agreements expiring on
dates through 2062. Many leases provide for future rent escalations and renewal
options. In addition, contingent rentals, determined as a percentage of sales in
excess of specified levels, are often stipulated. Most leases obligate the
Company to pay costs of maintenance, insurance and property taxes.

    Property under capital leases consists of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                 2001           2000
---------------------               ----------      ----------
<S>                                 <C>             <C>
Buildings                           $  110,314      $  113,510
Equipment                               15,260          17,523
Less: Accumulated amortization          51,957          46,551
                                    ----------      ----------
                                    $   73,617      $   84,482
                                    ----------      ----------
</TABLE>

     Amortization is calculated on a straight-line basis over the shorter of the
respective lease terms or the estimated useful lives of the related assets.

     Minimum lease payments for all leases and the present value of net minimum
lease payments for capital leases as of January 31, 2001 are as follows:


                                       44
<PAGE>   45

<TABLE>
<CAPTION>
  (DOLLARS IN THOUSANDS)                                    CAPITAL          OPERATING
  ---------------------                                   ------------      ------------
<S>                                                       <C>               <C>
  Fiscal Year:
  2002                                                    $     19,501      $     91,887
  2003                                                          18,941            86,043
  2004                                                          17,349            79,637
  2005                                                          14,115            68,455
  2006                                                          11,046            58,377
  Thereafter                                                    73,612           355,261
                                                          ------------      ------------
    Total minimum lease payments                               154,564      $    739,660
                                                          ------------      ============
Less: Amount representing interest                              63,546
                                                          ------------
Present value of minimum lease payments (interest
 rates ranging from 8% to 16%)                                  91,018
Less: Current portion                                            9,845
                                                          ------------
Capital lease obligations, excluding current portion      $     81,173
                                                          ============
</TABLE>

     Total minimum lease payments have not been reduced for future minimum
sublease rentals of $250.9 million under certain operating subleases.

     The Company has leased and subleased land and buildings to others,
primarily as a result of the franchising of certain restaurants. Many of these
leases provide for fixed payments with contingent rent when sales exceed certain
levels, while others provide for monthly rentals based on a percentage of sales.
Lessees generally bear the cost of maintenance, insurance and property taxes.
Components of the net investment in leases receivable, included in other current
assets and other assets, are as follows:

<TABLE>
<CAPTION>
   (DOLLARS IN THOUSANDS)                                    2001       2000
                                                           --------   --------
<S>                                                        <C>        <C>
   Net minimum lease payments receivable                   $  1,681   $  2,095
                                                           --------   --------
   Less: Unearned income                                        407        583
                                                           --------   --------
   Net investment                                          $  1,274   $  1,512
                                                           ========   ========
</TABLE>

    Minimum future rentals to be received as of January 31, 2001 are as follows:

<TABLE>
<CAPTION>
                                                            CAPITAL   OPERATING
                                                           LEASES OR    LESSOR
(DOLLARS IN THOUSANDS)                                     SUBLEASES    LEASES
---------------------                                      --------   ---------
<S>                                                        <C>        <C>
Fiscal Year:
   2002                                                    $    420   $ 30,126
   2003                                                         363     23,286
   2004                                                         302     22,078
   2005                                                         277     20,129
   2006                                                         251     17,959
   Thereafter                                                    68    137,362
                                                           --------   --------
        Total minimum future rentals                       $  1,681   $250,940
                                                           ========   ========
</TABLE>

     Total minimum future rentals do not include contingent rentals which may be
received under certain leases.

     Aggregate rents under noncancelable operating leases during fiscal 2001,
2000 and 1999 are as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)           2001              2000              1999
                            ------------      ------------      ------------
<S>                         <C>               <C>               <C>
Minimum rentals             $     82,478      $     92,107      $     81,809
Contingent rentals                 4,923             5,275             6,393
Less: Sublease rentals            19,115            10,064            12,033
                            ------------      ------------      ------------
                            $     68,286      $     87,318      $     76,169
                            ============      ============      ============
</TABLE>


                                       45
<PAGE>   46

NOTE 8 -- LONG-TERM INVESTMENTS

     The Company has selectively invested in other restaurant concepts, as
follows:

   Santa Barbara Restaurant Group, Inc.

     Santa Barbara Restaurant Group, Inc. ("SBRG") (formerly GB Foods
Corporation) owns, operates and franchises The Green Burrito and La Salsa
quick-service Mexican food restaurants, and Timber Lodge Steakhouse. Through the
Company's dual-branding relationship with The Green Burrito, the Company is
SBRG's largest franchisee.

     On September 1, 1998, the Company sold 14 company-operated JB's Restaurants
and two Galaxy Diner restaurants to Timber Lodge Steakhouse, Inc. ("Timber
Lodge") for 687,890 shares of Timber Lodge common stock, which was converted
into SBRG common stock in connection with the merger of Timber Lodge and SBRG.
The Company also sold its wholly owned subsidiary, JB's, which consisted of the
remaining 48 company-operated JB's Restaurants and the JB's franchise system
together with four Galaxy Diner restaurants, to SBRG for one million shares of
SBRG common stock. During fiscal 2001, the Company sold its shares of SBRG to a
American National Financial, Inc., an affiliate of Fidelity National Financial,
Inc., of which the chairman of the board of the Company is also chairman of the
board, for cash proceeds of $1.7 million and recorded a loss of $0.4 million,
which is included in other expense, net (see Note 18).



                                       46
<PAGE>   47

     Rally's Hamburgers, Inc. and Checkers Drive-In Restaurants, Inc.

     In August 1999, Rally's merged with Checkers Drive-In Restaurants, Inc.
("Checkers") in a reverse acquisition. Checkers operates and franchises
approximately 427 Checkers and 427 Rally's double drive-thru quick-service
hamburger restaurants, primarily in the Southeastern and Midwestern United
States. As a result of the August 1999 merger, each share of Rally's common
stock was converted into 1.99 shares of Checkers' common stock. Simultaneous
with the merger, Checkers declared a reverse one-for-twelve stock split. Prior
to the merger, the Company, through a series of transactions, owned
approximately 9.4 million shares, or 32.1% of Rally's common stock and held
warrants to purchase an additional 1.5 million shares of Rally's common stock.
The Company, also prior to the merger, held warrants to purchase 7.4 million
shares of Checkers' common stock. As a result of the merger, the Company held
approximately 1.6 million shares, or 16.6% of Checkers outstanding common stock.
During the fourth quarter of fiscal 2000, the Company wrote-down its investment
in Checkers by $16.6 million to its fair value upon its conclusion that the
investment had experienced an other than temporary decline in value. Further, as
a result of the Company recognizing its share of the net losses of Checkers, the
Company's investment in Checkers was zero as of January 31, 2000. During fiscal
2001, the Company sold 657,000 shares of Checkers in open market transactions
for $2.2 million and recorded a gain on sale of $2.2 million, As a result, as of
January 31, 2001, the Company owns 897,889 shares of Checkers, or approximately
9.2%. Assuming full exercise of the warrants, the Company would beneficially own
approximately 16.6% of Checkers' outstanding common stock.

     During fiscal 2001, a $3.2 million note receivable from Checkers, which was
entered into during fiscal 1997, was paid in full.

     Boston Market

     The Company, through its wholly owned subsidiary, Boston Pacific, Inc.
("BPI"), owned an 11% interest in Boston West, LLC ("Boston West"), which
operates Boston Market restaurants in designated markets in Southern California
as a franchised area developer of Boston Chicken, Inc. ("BCI"), the franchisor
of the Boston Market restaurant concept. BCI and its Boston Market subsidiaries
filed for protection under Chapter 11 of the Federal Bankruptcy Code on October
5, 1998. In a separate action, on November 9, 1998, Boston West filed a
voluntary petition under Chapter 11 of the Federal Bankruptcy Code to
restructure its overall operations. Pursuant to Boston West's plan of
organization, as filed with the bankruptcy court, it was anticipated that the
Company would own approximately 25% of Boston West after emergence from
bankruptcy. As a result, in fiscal 1999, the Company recorded a $15.0 million
charge to its Boston West investment to reflect its remaining value. In
addition, during fiscal 1999, the Company signed an agreement with Boston West
to provide administrative and management services to the Boston Market
franchises operated by Boston West and Boston West closed or sold 42 Boston
Market restaurants.

     In April 2000, Boston Market Corporation ("BMC"), a wholly-owned subsidiary
of McDonald's Corp., acquired BCI's rights, claims and interests relating to
Boston West. As a result, Boston West and BMC filed a joint plan of
reorganization which was approved by the bankruptcy court. Under this agreement
the Company no longer provides administrative or management services to Boston
Market stores operated by Boston West and the Company no longer has an ownership
interest in Boston West or any of the Boston Market Stores operated by Boston
West. In anticipation of this agreement, in the fourth quarter of fiscal 2000
the Company wrote down its investment in Boston West to zero by recording a $8.4
million charge which is included in other expense, net. Additionally, under the
plan, Boston West was dissolved.

NOTE 9 -- OTHER ASSETS

    Other assets consist of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                              2001         2000
----------------------                            ---------   ---------
<S>                                               <C>         <C>
Deferred financing costs                            $11,705     $15,521
Deferred lease costs                                 10,546      12,850
Leases receivable                                       963       1,274
Other assets                                          4,368       5,556
                                                    -------     -------
                                                    $27,582     $35,201
                                                    =======     =======
</TABLE>


                                       47
<PAGE>   48


NOTE 10 -- OTHER CURRENT LIABILITIES

    Other current liabilities consist of the following:

<TABLE>
<CAPTION>
        (DOLLARS IN THOUSANDS)                       2001       2000
        ----------------------                    ---------   --------
<S>                                               <C>         <C>
        Salaries, wages and other benefits          $28,444     $28,964
        State sales taxes                            14,016      12,136
        Accrued interest                              7,805      10,645
        Other accrued liabilities                    32,780      45,837
                                                    -------     -------
                                                    $83,045     $97,582
                                                    =======     =======
</TABLE>

NOTE 11 -- LONG-TERM DEBT

    Long-term debt consists of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                              2001              2000
---------------------                                           ------------      ------------
<S>                                                             <C>               <C>
Senior Credit Facility, interest based on LIBOR plus
  applicable margin, averaging 10.1% in fiscal 2001             $    168,500      $    269,000
Senior subordinated notes due 2009, interest at 9.125%               200,000           200,000
Convertible subordinated notes due 2004, interest at 4.25%           159,225           159,225
Secured note payable, principal payments in specified
  amounts monthly through 2001, interest at 8.17%                         --             4,261
Other                                                                  5,592             7,267
                                                                ------------      ------------
                                                                     533,317           639,753
Less: Current portion                                                 67,332             5,532
                                                                ------------      ------------
                                                                $    465,985      $    634,221
                                                                ============      ============
</TABLE>

On March 13, 1998, the Company completed a private placement of $197.2 million
aggregate principal amount of convertible subordinated notes (the "Convertible
Notes"), in which the Company received net proceeds of approximately $192.3
million, of which $24.1 million was used to repay indebtedness under our then
$300.0 million credit facility ("the Senior Credit Facility"). The Convertible
Notes, which represent unsecured general obligations subordinate in right of
payment to certain other obligations, including the Senior Credit Facility and
the senior subordinated notes, described below, are due in 2004, are convertible
into the Company's common stock at a conversion price of $43.82 (adjusted for
the 10% stock dividend paid on January 11, 1999) and carry a 4.25% coupon. The
remaining net proceeds from the Convertible Notes, together with borrowings
under the Senior Credit Facility, were used to fund the acquisition of Flagstar
Enterprises, Inc. on April 1, 1998. In fiscal 2000 and fiscal 1999, the Company
repurchased $3.0 million and $35.0 million, respectively, aggregate principal
amount of Convertible Notes for $2.5 million and $28.8 million in cash,
respectively, including accrued interest thereon. The Company recognized an
extraordinary gain on the early retirement of debt of $0.3 million and $3.3
million, net of applicable taxes of $0.2 million and $2.1 million for fiscal
2000 and fiscal 1999, respectively.

     On March 4, 1999, the Company completed a private placement of $200.0
million aggregate principal amount of 9.125% senior subordinated notes (the
"Senior Subordinated Notes") due 2009. The Company received net proceeds of
$194.8 million, of which $190.0 million was used to repay outstanding term loan
balances under its Senior Credit Facility. The indenture relating to the Senior
Subordinated Notes imposes certain restrictions on the Company's ability (and
the ability of its subsidiaries) to incur indebtedness, pay dividends on, redeem
or repurchase capital stock, make investments, incur liens on assets, sell
assets other than in the ordinary course of business, or enter into certain
transactions with affiliates. The Senior Subordinated Notes represent unsecured
general obligations subordinate in right of payment to the Company's senior
indebtedness, including its Senior Credit Facility.

     In connection with the private placement of Senior Subordinated Notes, the
Company also amended and restated its Senior Credit Facility to increase the
lenders' commitments under its revolving credit facility to $500.0 million from
$250.0 million (the commitment has since been amended to $400 million, subject
to further reduction from asset sales). The Company also increased its letter of
credit sub-facility to $75.0 million from $65.0 million, and changed the
maturity date of the Senior Credit Facility to February 2004 (subsequently
amended to February 2002). The term loan component of the Senior Credit Facility
was eliminated as a result of these transactions.


                                       48
<PAGE>   49

     Borrowings under the Senior Credit Facility may be used for working capital
and other general corporate purposes, including permitted investments and
acquisitions. The Company is required to repay borrowings under the Senior
Credit Facility with the proceeds from (i) certain asset sales, (ii) the
issuance of certain equity securities, and (iii) the issuance of additional
indebtedness. Of the various options the Company has regarding interest rates,
the Company has selected LIBOR plus a margin (9.69% at January 31, 2001), with
future margin adjustments dependent on certain financial ratios from time to
time.

     The Company's Senior Credit Facility contains restrictions on its ability
to incur additional indebtedness, repurchase stock or subordinated debt, pay
dividends and incur liens on its assets, subject to specified exceptions and
requirements that it satisfy specified financial tests as a precondition to
acquisition of other businesses. In addition, the Company was required to comply
with minimum EBITDA requirements, minimum interest coverage and fixed charge
coverage ratios, minimum consolidated tangible net worth requirements and
maximum leverage ratios.

     The Company has since amended its Senior Credit Facility effective January
31, 2000, August 14, 2000, January 29, 2001 and April 13, 2001 to amend certain
of the covenants contained therein. The amended Senior Credit Facility provides
that the revolving commitments thereunder shall be reduced by the entire net
proceeds from the sale of any of the Company's restaurants. The Senior Credit
Facility, as amended, also prohibits the Company from purchasing shares of its
common stock, repurchasing any of its senior subordinated notes or convertible
notes, from prepaying subordinated indebtedness and from paying cash dividends.
In addition, capital expenditures were reduced and construction of new
restaurants is limited to construction already begun or committed to begin.

     As a result of the amendments, the final maturity date of the Senior Credit
Facility has been changed to February 1, 2002 and the interest rate payable on
outstanding borrowings was increased. As a result of not achieving certain asset
sale requirements, the applicable margin applied to the Company's borrowings was
increased by a total of 100 basis points. If the Company completes $25 million
of asset sales between January 22, 2001 and June 30, 2001, the applicable margin
will be decreased by 50 basis points. As of June 30, 2001, the Company will be
prohibited from borrowing funds under the LIBOR option described above and will
be charged a rate of interest equal to the prime rate plus the applicable margin
on all outstanding borrowings.

     The amended credit facility also required the Company to meet certain
benchmarks during the months of November 2000, December 2000 and January 2001
relating to asset sales. The December benchmark was not met and thus enabled the
lenders to request additional specific collateral. Accordingly, the Company has
agreed to provide their lenders with specific collateral of its subsidiaries,
consisting primarily of mortgages on a portion of the Company's real property,
as well as the stock of the subsidiaries, which was already held as collateral.

     As of the end of fiscal 2001, the Company was not in compliance with
certain covenants governing its Senior Credit Facility. The Company has received
a waiver of this non-compliance through January 31, 2002. It is the Company's
intention to use the net proceeds from the sale of Taco Bueno (estimated to be
approximately $67 million) to repay a portion of the outstanding borrowings on
its Senior Credit Facility. Accordingly, of the total amount outstanding under
the Senior Credit Facility of $168.5 million as of January 31, 2001, $67 million
has been classified as a current liability on the consolidated balance sheet. As
of January 31, 2001, the Company had $8.8 million of borrowings available under
its Senior Credit Facility. In the event the Senior Credit Facility is declared
accelerated, the Senior Subordinated Notes and the Convertible Subordinated
Notes may also become accelerated under certain circumstances and after all cure
periods have expired.

     The Company is currently actively pursuing strategies to refinance its
Senior Credit Facility as quickly as possible that may include mortgaging many
of its owned and ground leased properties. This refinancing, if completed,
should reduce or remove many of the restrictive covenants on the Company's use
of capital that the current Senior Credit Facility imposes and will allow the
Company to continue with its remodel plans. There can be no assurance that this
refinancing will be completed.

     Secured notes payable are collateralized by certain restaurant property
deeds of trust, with a carrying value of $1.2 million as of January 31, 2001.



                                       49
<PAGE>   50

     Long-term debt matures in fiscal years ending after January 31, 2001 as
follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S>                                                    <C>
Fiscal Year:
   2002                                                 $67,332
   2003                                                 101,859
   2004                                                 159,626
   2005                                                     420
   2006                                                     433
   Thereafter                                           203,647
                                                       --------
                                                       $533,317
                                                       ========
</TABLE>

NOTE 12 -- OTHER LONG-TERM LIABILITIES

    Other long-term liabilities consist of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                            2001            2000
---------------------                         ----------      ----------
<S>                                           <C>             <C>
Closure reserves                              $   51,313      $   37,158
Other                                             52,020          47,394
                                              ----------      ----------
                                              $  103,333      $   84,552
                                              ==========      ==========
</TABLE>

     The Company presently self-insures for group insurance, workers'
compensation and fire and comprehensive protection on most equipment and certain
other assets. A total of $27.3 million and $23.8 million was accrued as of
January 31, 2001 and 2000, respectively, representing the current and long-term
portions of the net present value of an independent actuarial valuation of the
Company's workers' compensation claims. These amounts are net of a present value
discount of $4.7 million and $5.2 million in fiscal 2001 and 2000, respectively.

NOTE 13 -- STOCKHOLDERS' EQUITY

     During the third quarter of fiscal 1999, the Company's Board of Directors
authorized the purchase of up to five million shares of the Company's common
stock. As of January 31, 2001, the Company had repurchased 1,585,000 shares of
common stock for $10.4 million, at an average price of $6.53 per share.

NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following table presents information on the Company's financial
instruments:

<TABLE>
<CAPTION>
                                                                   2001                      2000
                                                          ----------------------    ----------------------
                                                          CARRYING    ESTIMATED     CARRYING     ESTIMATED
(DOLLARS IN THOUSANDS)                                     AMOUNT     FAIR VALUE     AMOUNT     FAIR VALUE
                                                          --------    ----------    --------    ----------
<S>                                                      <C>          <C>           <C>         <C>
Financial assets:
  Cash and cash equivalents                              $  16,860    $  16,860     $  36,505   $  36,505
  Notes receivable                                          17,069       14,247        13,498      14,501
Financial liabilities:
  Long-term debt, including current portion              $ 533,317    $ 358,189     $ 639,753   $ 526,906
</TABLE>

     The fair value of cash and cash equivalents approximates their carrying
amount due to their short maturity. The estimated fair values of notes
receivable were determined by discounting future cash flows using current rates
at which similar loans would be made to borrowers with similar credit ratings.
The estimated fair value of long-term debt was determined by discounting future
cash flows using rates currently available to the Company for debt with similar
terms and remaining maturities and using market quotes as of January 31, 2001
for the Company's Senior Subordinated Notes and Convertible Notes.

NOTE 15 -- RELATED PARTY TRANSACTIONS

     Certain members of management and the Karcher family are franchisees of the
Company. Additionally, these franchisees regularly purchase food and other
products from the Company on the same terms and conditions as other franchisees.


                                       50
<PAGE>   51

     In fiscal 1994, the Chairman Emeritus was granted future retirement
benefits for past services consisting principally of payments of $200,000 per
year for life and supplemental health benefits, which had a net present value of
$1.7 million as of that date. This amount was computed using certain actuarial
assumptions, including a discount rate of 7%. A total of $0.9 million remained
accrued in other long-term liabilities as of January 31, 2001. The Company
anticipates funding these obligations as they become due.

     The Company leases various properties, including its corporate
headquarters, a distribution facility and three restaurants from the Chairman
Emeritus. Included in capital lease obligations were $1.8 million and $2.4
million, representing the present value of lease obligations related to these
various properties at January 31, 2001 and 2000, respectively. Lease payments
under these leases for fiscal 2001, 2000 and 1999 amounted to $1.5 million, $1.5
million, and $1.2 million, respectively. This was net of sublease rentals of
$161,000, $161,000 and $157,000 in fiscal 2001, 2000 and 1999, respectively.

     In fiscal 2001, the Company sold nine restaurants to the former chief
executive officer and a new member of the board of directors for $4.9 million
and recorded a gain on the sale of $1.6 million. In fiscal 2000, the Company
sold 14 Carl's Jr. restaurants to a relative of a board of directors member for
$14.1 million and recorded a gain on the sale of these restaurants of $12.2
million.

     The Company has several leases with affiliates of Fidelity National
Financial, Inc. ("FNF"), of which the chairman of the board of the Company is
also chairman of the board, for point-of-sale equipment, a corporate office
facility and a corporate aircraft. During fiscal 2001, the Company paid $6.4
million to FNF under these lease agreements. Additionally, the Company paid
certain affiliates of FNF commissions of $7.0 million in fiscal 2001 relating to
the sale of certain restaurant properties during the year.

NOTE 16 -- FRANCHISE AND LICENSE OPERATIONS

     Franchise arrangements generally provide for initial fees and continuing
royalty payments to the Company based upon a percentage of sales. The Company
generally charges an initial franchise fee for each new franchised restaurant
that is added to its system, and in some cases, an area development fee, which
grants exclusive rights to develop a specified number of restaurants in a
designated geographic area within a specified time period. Similar fees are
charged in connection with the Company's international licensing operations.
These fees are recognized ratably when substantially all the services required
of the Company are complete and the restaurants covered by these agreements
commence operations.

     Certain franchisees may also purchase food, paper, supplies and equipment
from the Company. Additionally, franchisees may be obligated to remit lease
payments for the use of restaurant facilities owned or leased by the Company,
generally for a period of 20 years. Under the terms of these leases, they are
required to pay related occupancy costs which include maintenance, insurance and
property taxes.

     Revenues from franchised and licensed restaurants consist of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)        2001          2000          1999
---------------------       --------      --------      --------
<S>                         <C>           <C>           <C>
Foodservice                 $100,717      $ 80,094      $ 75,895
Royalties                     59,632        52,692        56,316
Equipment sales               23,461        27,876        14,038
Rental income                 20,445        10,916        11,644
Initial fees and other        10,823         3,800         1,930
                            --------      --------      --------
                            $215,078      $175,378      $159,823
                            ========      ========      ========
</TABLE>

    Operating costs and expenses for franchised and licensed restaurants consist
of the following:

<TABLE>
<CAPTION>
      (DOLLARS IN THOUSANDS)                  2001          2000          1999
      ---------------------                 --------      --------      --------
<S>                                         <C>           <C>           <C>
Foodservice                                 $ 98,439      $ 78,881      $ 74,230
Occupancy and other operating expenses        35,658        28,241        22,113
Equipment purchases                           27,074        21,006        10,676
                                            --------      --------      --------
                                            $161,171      $128,128      $107,019
                                            ========      ========      ========
</TABLE>


                                       51
<PAGE>   52

NOTE 17 -- INTEREST EXPENSE

    Interest expense consists of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                           2001             2000             1999
----------------------                        ----------       ----------       ----------
<S>                                           <C>              <C>              <C>
Notes payable and Senior Credit Facility      $  (30,848)      $  (26,674)      $  (23,013)
Senior Subordinated Notes                        (18,909)         (16,880)              --
Capital lease obligations                        (10,204)         (11,570)         (12,030)
Convertible Notes                                 (7,537)          (7,509)          (7,725)
Other                                             (2,264)            (650)            (685)
                                              ----------       ----------       ----------
                                              $  (69,762)      $  (63,283)      $  (43,453)
                                              ==========       ==========       ==========
</TABLE>

NOTE 18 -- OTHER EXPENSE, NET

    Other expense, net consists of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                           2001             2000             1999
----------------------                        ----------       ----------       ----------
<S>                                           <C>              <C>              <C>
Interest income                               $    1,452       $    2,615       $    4,916
Lease income (expense)                                --             (235)           1,101
Property management                                  (97)            (971)            (792)
Bad debt expense                                  (1,047)          (1,218)              50
Gain (loss) from long-term investments               510          (39,302)          (6,246)
Other                                             (3,305)          (8,121)             301
                                              ----------       ----------       ----------
                                              $   (2,487)      $  (47,232)      $     (670)
                                              ----------       ----------       ----------
</TABLE>

NOTE 19 -- INCOME TAXES

    Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                           2001             2000             1999
----------------------                        ----------       ----------       ----------
<S>                                           <C>              <C>              <C>
Current:
  Federal                                     $  (26,154)      $   10,883       $   34,433
  State                                               --            1,285            6,289
                                              ----------       ----------       ----------
                                                 (26,154)          12,168           40,722
                                              ----------       ----------       ----------
Deferred:
  Federal                                         11,445          (26,353)           8,607
  State                                            3,561           (3,682)           2,400
                                              ----------       ----------       ----------
                                                  15,006          (30,035)          11,007
                                              ----------       ----------       ----------
                                              $  (11,148)      $  (17,867)      $   51,729
                                              ----------       ----------       ----------
</TABLE>

Total income tax expense (benefit) for the years ended January 31, 2001, 2000
and 1999 was allocated as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                           2001             2000             1999
----------------------                        ----------       ----------       ----------
<S>                                           <C>              <C>              <C>
Income (loss) from continuing operations      $  (11,148)      $  (18,053)      $   49,645
Extraordinary gain                                    --              186            2,084
                                              ----------       ----------       ----------
                                              $  (11,148)      $  (17,867)      $   51,729
                                              ----------       ----------       ----------
</TABLE>

    A reconciliation of income tax expense (benefit) at the federal statutory
rate of 35% to the Company's provision for taxes on income is as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                           2001             2000             1999
----------------------                        ----------       ----------       ----------
<S>                                           <C>              <C>              <C>
Income taxes at statutory rate                $  (71,841)      $  (16,444)      $   45,305
State income taxes, net of federal
  income tax benefit                              (6,467)          (3,637)           5,637
Work opportunity tax credits                      (1,500)          (1,119)          (1,048)
Alternative minimum tax                            5,800               --               --
Increase in valuation allowance                   70,200            3,378              664
Other, net                                        (7,340)             (45)           1,171
                                              ----------       ----------       ----------
                                              $  (11,148)      $  (17,867)      $   51,729
                                              ----------       ----------       ----------
</TABLE>


                                       52
<PAGE>   53

    Temporary differences and carryforwards gave rise to a significant amount of
deferred tax assets and liabilities as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                     2001            2000
----------------------------------      ----------      ----------
<S>                                     <C>             <C>
Deferred tax assets:
   Impairment and closure reserves      $   32,573      $    9,011
   Workers' compensation reserve            10,928          10,182
   Federal net operating losses             10,463              --
   State net operating losses                9,674           2,971
   Capitalized leases                        9,135           9,024
   Long-term investments                     4,834           7,224
   Goodwill amortization                     4,494              --
   Bad debt reserves                         4,279              --
   Insurance reserves                        3,354           5,352
   Other reserves                            1,902           2,112
   Accrued payroll                             837           1,813
   Other                                     4,552           3,892
                                        ----------      ----------

                                            97,025          51,581
Alternative minimum tax credits              8,323           7,612
General business tax credits                 3,955           1,620
Less: Valuation allowance                   66,412           5,398
                                        ----------      ----------
Total deferred tax assets                   42,891          55,415
                                        ----------      ----------
Deferred tax liabilities:
   Depreciation                             42,891          40,362
   Other                                        --              47
                                        ----------      ----------
Total deferred tax liabilities              42,891          40,409
                                        ----------      ----------
Net deferred tax asset (liability)              --          15,006
                                        ==========      ==========
</TABLE>

     As a result of our net operating losses in fiscal 2001 and 2000, the
Company has recorded a valuation allowance of $66.4 million. While the Company
was able to carryback approximately $20 million of these losses, the Company has
provided a valuation allowance for the remaining net operating loss carryforward
as well as the net deferred tax asset that existed at the beginning of the
fiscal year. The Company bases its determination of whether it is more likely
than not that it will be able to realize its deferred tax assets based on
operating income or loss over the last two years.

NOTE 20 -- SEGMENT INFORMATION

     The Company is engaged principally in developing, operating and franchising
its Carl's Jr., Hardee's and Taco Bueno quick-service restaurants, each of which
are considered strategic businesses that are managed and evaluated separately.
As such, the Company considers its Carl's Jr., Hardee's and Taco Bueno chains to
each be a reportable segment. Management evaluates the performance of its
segments and allocates resources to them based on several factors, of which the
primary financial measure is segment operating income. General and
administrative expenses are attributed to each segment based on management's
estimate of the allocated resources to support each segment. Interest expense is
allocated based on debt, if any, assumed during acquisitions, operating cash
flows and capital expenditures. The accounting policies of the segments are the
same as those described in the summary of significant accounting policies in
Note 1.


                                       53
<PAGE>   54


    Summarized financial information concerning the Company's reportable
segments is shown in the following table. The "other" column includes corporate
related items and results of insignificant operations. The amounts reported for
Hardee's reflect only the periods subsequent to the acquisition date of April 1,
1998 for FEI.

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                CARL'S JR.        HARDEE'S        TACO BUENO           OTHER              TOTAL
---------------------                -----------      -----------       -----------       -----------       -----------
<S>                                  <C>              <C>               <C>               <C>               <C>
2001
  Revenues                           $   733,484      $   941,581       $    97,316       $    12,201       $ 1,784,582
  Segment operating income (loss)         73,869         (186,509)           (3,545)          (16,830)         (133,015)
  Total assets                           356,266          773,103            66,912            17,748         1,214,029
  Capital expenditures                    28,892           33,514             6,929             5,345            74,680
  Depreciation and amortization           28,317           63,495             4,880            10,289           106,981
2000
  Revenues                           $   714,495      $ 1,170,834       $    91,950       $    12,794       $ 1,990,073
  Segment operating income (loss)         61,157           10,266             8,136           (16,504)           63,055
  Total assets                           383,124        1,089,867            77,507            18,016         1,568,514
  Capital expenditures                    72,804          146,677            24,308            19,800           263,589
  Depreciation and amortization           26,873           63,398             4,119            10,060           104,450
1999
  Revenues                           $   629,837      $ 1,127,130       $    81,200       $    53,877       $ 1,892,044
  Segment operating income (loss)         76,960           95,110             8,717           (12,567)          168,220
  Capital expenditures                    46,527           56,424             7,077            14,260           124,288
  Depreciation and amortization           22,869           43,835             3,031             7,384            77,119
</TABLE>

NOTE 21 -- EMPLOYEE BENEFIT AND RETIREMENT PLANS

   Profit Sharing and Savings Plan

     The Company maintains a voluntary contributory profit sharing and savings
investment plan for all eligible employees other than operations hourly
employees. Annual contributions under the profit sharing portion of the plan are
determined at the discretion of the Company's Board of Directors. Under the
savings investment portion of the plan, participants may elect to contribute up
to 15% of their annual salaries to the plan.

   Post Retirement Benefits Other Than Pensions

     The Company provides an unfunded retiree medical benefit plan for
substantially all Hardee's employees (except restaurant hourly employees) who
retire on or after age 55 with at least five years of service. The retiree pays
the actual costs of the plan with a Company subsidy provided for retirees with
10 or more years of credited service. The dollar amount of this subsidy will be
capped by management in 2003. Such benefits provided by the Company are
immaterial.

   Stock Purchase Plan

     In fiscal 1995, the Board of Directors adopted, and stockholders
subsequently approved in fiscal 1996, an Employee Stock Purchase Plan ("ESPP").
Under the terms of the ESPP and subsequent amendments, eligible employees may
voluntarily purchase, at current market prices, up to 907,500 shares of the
Company's common stock through payroll deductions. Pursuant to the ESPP,
employees may contribute an amount between 3% and 15% of their base salaries.
The Company contributes varying amounts as specified in the ESPP. During fiscal
2001, 2000 and 1999, 524,660, 338,417 and 128,477 shares, respectively, were
purchased and allocated to employees, based upon their contributions, at an
average price of $3.49, $10.15 and $28.43 per share, respectively. The Company
contributed $1.1 million or an equivalent of 333,092 shares for the year ended
January 31, 2001, $1.2 million or an equivalent of 137,568 shares for the year
ended January 31, 2000 and $0.6 million or an equivalent of 22,496 shares for
the year ended January 31, 1999.


                                       54
<PAGE>   55


   Stock Incentive Plans

     The Company's 1999 stock incentive plan was approved by stockholders in
June 1999. Awards granted to eligible employees under the 1999 plan are not
restricted as to any specified form or structure, with such form, vesting and
pricing provision determined by the compensation committee of Board of
Directors. Options generally have a term of 10 years from the date of grant,
except for five years from the date of grant in the case of incentive stock
options granted to 10% or greater shareholders of the Company. Options are
generally granted at a price equal to or greater than the fair market value of
the underlying common stock on the date of grant, except that incentive stock
options granted to 10% or greater shareholders of the Company may not be granted
at less that 110% of the fair market value of the common stock on the date of
grant. A total of 1,500,000 shares are available for grants of options or other
awards under the 1999 plan, with such amount of available shares increased by
350,000 shares on the date of each annual meeting of shareholders. As of January
31, 2001, 3,491,100 options were outstanding under this plan with exercise
prices ranging from $2.63 per share to $18.13 per share.

     The Company's 1994 stock incentive plan expired in April 1999. Options
generally had a term of five years from the date of grant for the nonemployee
directors and 10 years from the date of grant for employees, became exercisable
at a rate of 33 1/3% per year following the grant date and were priced at the
fair market value of the shares on the date of grant. A total of 6,352,500
shares were available for grants of options or other awards under this plan, of
which 4,380,580 stock options were outstanding as of January 31, 2001, with
exercise prices ranging from $3.72 per share to $36.65 per share.

     The Company's 1993 stock incentive plan was superseded by the 1994 plan, as
discussed above. As of January 31, 2001, 194,149 stock options, with exercise
prices ranging from $3.99 per share to $6.27 per share, were outstanding under
the plan. No further awards may be granted under this plan.

     The Company's 1982 stock option plan expired in September 1992. Under this
plan, stock options were granted to key employees to purchase up to 5,445,000
shares of its common stock at a price equal to or greater than the fair market
value at the date of grant. The options generally had a term of 10 years from
the grant date and became exercisable at a rate of 25%, 35% and 40% per year
following the grant date. The exercise price of the 29,275 stock options
outstanding as of January 31, 2001 under this plan is $4.27 per share.

    Transactions under all plans are as follows:


<TABLE>
<CAPTION>
                                                WEIGHTED AVERAGE
                                  SHARES         EXERCISE PRICE      EXERCISABLE
                               ------------     ----------------    ------------
<S>                            <C>              <C>                  <C>
Balance, January 31, 1998         5,044,867       $      14.86         2,059,307
  Granted                         1,144,230              35.41
  Canceled                         (197,409)             25.83
  Exercised                        (624,502)              9.41
                               ------------
Balance, January 31, 1999         5,367,186       $      19.47         3,064,429
  Granted                         1,830,300              16.66
  Canceled                         (798,006)             33.38
  Exercised                        (181,671)              8.28
                               ------------
Balance, January 31, 2000         6,217,809       $      17.19         3,986,469
  Granted                         2,420,850               2.99
  Canceled                         (530,460)             18.92
  Exercised                              --                 --
                               ------------
Balance, January 31, 2001         8,108,199       $      12.83         5,550,408
                               ------------       ------------
</TABLE>



                                       55
<PAGE>   56


    The following table summarizes information related to stock options
outstanding and exercisable at January 31, 2001:

<TABLE>
<CAPTION>
                                   OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
   ------------------------------------------------------------------------------  ----------------------------
                                                    WEIGHTED     WEIGHTED AVERAGE                   WEIGHTED
             RANGE OF                SHARES         AVERAGE         REMAINING        SHARES         AVERAGE
         EXERCISE PRICES          OUTSTANDING    EXERCISE PRICE  CONTRACTUAL LIFE  EXERCISABLE   EXERCISE PRICE
   -------------------------      -----------    --------------  ----------------  -----------   --------------
<S>               <C>             <C>            <C>             <C>               <C>           <C>
$   2.63     to   $     3.25       1,339,600      $     2.63            9.93         750,000      $     2.63

    3.32                8.13       2,385,335            5.13            6.34       1,363,835            6.46

    9.30               14.50         833,410           14.07            7.79         586,749           13.93

   14.53               17.08         848,917           16.27            5.55         848,917           16.27

   17.54               17.67          77,442           17.66            5.88          77,442           17.66

   18.13               21.32         934,207           18.15            8.02         328,723           18.21

   23.66               36.65       1,689,288           26.28            6.30       1,594,742           25.70
                                  ----------                                      ----------

$   2.63          $    36.65       8,108,199      $    12.83            7.18       5,550,408      $    14.61
                                  ==========                                      ==========
</TABLE>

     For purposes of the following pro forma disclosures required by Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") the fair value of each option granted after fiscal
1995 has been estimated on the date of grant using the Black-Scholes
option-pricing model, with the following assumptions used for grants in fiscal
2001, 2000 and 1999: annual dividends consistent with the Company's current
dividend policy, which resulted in payments of $0.04 per share in fiscal 2001,
$0.08 per share in fiscal 2000 and $0.07 per share in fiscal 1999; expected
volatility of 52% in fiscal 2001, 50% in fiscal 2000 and 30% in fiscal 1999;
risk-free interest rates of 4.97% in fiscal 2001, 6.69% in fiscal 2000 and 4.55%
in fiscal 1999; and an expected life of 5.00 years in fiscal 2001, 5.40 years in
fiscal 2000 and 5.45 years in fiscal 1999. The weighted average fair value of
each option granted during fiscal 2001, 2000 and 1999 was $1.58, $8.07 and
$12.50, respectively. Had compensation expense been recognized for fiscal 2001,
2000 and 1999 grants for stock-based compensation plans in accordance with
provisions of SFAS 123, the Company would have recorded net income (loss) and
earnings (loss) per share of $(203.0) million, or $(4.02) per basic and diluted
share in fiscal 2001; $(35.2) million , or $(0.68) per basic and diluted share
in fiscal 2000; and $61.6 million, or $1.19 per basic share and $1.17 per
diluted share in fiscal 1999.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that do not have vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the value of an estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

NOTE 22 -- SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                               2001           2000             1999
----------------------                                            ----------      ----------      ----------
<S>                                                               <C>             <C>             <C>
Cash paid for interest and income taxes are as follows:
  Interest                                                        $   68,251      $   50,009      $   37,501
  Income taxes                                                           130          15,193          39,400
                                                                  ----------      ----------      ----------
Non-cash charges are as follows:
  Store closure expense and provision for asset impairment        $   98,285      $   41,998      $       --
  Provision for impairment of long-term investments                       --          34,431          15,000
  Write-off of Hardee's acquisition-related assets                        --          10,989              --
  Write-off of capitalized software development cost                      --           6,553              --
  Write-off of deferred financing costs                                1,807           3,565              --
  Restructuring charges                                                   --           2,058              --
  Other, net                                                          15,811           6,007              --
                                                                  ----------      ----------      ----------
                                                                     115,903         105,601          15,000
                                                                  ==========      ==========      ==========
Non-cash investing and financing activities are as follows:
  Common stock issued in connection with Hardee's franchisee
    Acquisitions                                                  $       --      $       --      $    1,663
</TABLE>


                                       56
<PAGE>   57

NOTE 23 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table presents summarized quarterly results:

<TABLE>
<CAPTION>
                                                                                 QUARTER
                                                        ---------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)           1ST             2ND             3RD             4TH
-----------------------------------------------         ---------       ---------       ---------       ---------
<S>                                                     <C>             <C>             <C>             <C>
FISCAL 2001
  Total revenues                                        $ 584,328       $ 438,496       $ 407,549       $ 354,209
  Operating income (loss)                                  17,221          (7,104)        (31,827)       (111,305)
  Loss before extraordinary item                           (2,451)        (13,930)        (29,429)       (148,306)
  Net loss                                                 (2,451)        (13,930)        (29,429)       (148,306)
  Net loss per share -- basic and diluted               $   (0.05)      $   (0.28)      $   (0.58)      $   (2.94)
                                                        ---------       ---------       ---------       ---------
FISCAL 2000
  Total revenues                                        $ 595,723       $ 465,259       $ 453,623       $ 475,468
  Operating income (loss)                                  47,605          31,147          15,028         (30,725)
  Income (loss) before extraordinary item                  19,130          10,298           3,007         (61,842)
  Extraordinary item                                          290              --              --              --
  Net income (loss)                                        19,420          10,298           3,007         (61,842)
  Net income (loss) per share -- basic and diluted      $    0.37       $    0.20       $    0.06       $   (1.22)
                                                        ---------       ---------       ---------       ---------
</TABLE>

     Quarterly operating results are not necessarily representative of
operations for a full year for various reasons, including the seasonal nature of
the quick-service restaurant industry and unpredictable adverse weather
conditions which may affect sales volume and food costs. In addition, all
quarters have 12-week accounting periods, except the first quarters of fiscal
2001 and 2000, which have 16-week accounting periods. Further, the fourth
quarter of fiscal 2001 includes 12 weeks, whereas the fourth quarter of fiscal
2000 includes 13 weeks.

   Fourth Quarter Adjustments

     During the fourth quarter of fiscal 2001, the Company recorded a special
pre-tax net charge of $97.0 million. The special charge, which was primarily
non-cash in nature, consisted of (a) a $19.1 million store closure reserve for
approximately 80 Hardee's and approximately 20 Carl's Jr. restaurants that the
Company has closed or plans to close, (b) an impairment charge of $76.8 million
for certain restaurants that that the Company will close or for restaurants that
the Company plans to continue to operate but for which the net book value is not
supported by future estimated cash flows, (c) a $3.7 million strengthening to
the Carl's Jr. self insurance reserves, (d) a credit for a net $11.3 million
gain on the sale of restaurants sold to franchisees and (e) a loss of $8.7
million on the sale of Taco Bueno.

     During the fourth quarter of fiscal 2000, the Company recorded a special
pre-tax net charge of $80.3 million. The charge, which was primarily non-cash in
nature, consisted of (a) $42.0 million for a store-closure reserve and asset
impairment charge for approximately 105 Hardee's, (b) an impairment charge of
$37.3 million to write-down the Company's various long-term investments in other
restaurant concepts to fair market value, (c) $2.1 million of restructuring
charges in connection with consolidating certain administrative functions from
Rocky Mount, N.C. to Anaheim, CA, (d) writing-off $3.6 million of deferred
financing costs as of result of a commitment decrease in the Company's senior
credit facility, (e) $2.6 million of Y2K expenses associated with restaurant
computer systems, (f) writing-off $6.6 million in charges related to software
that will not be implemented, (g) an additional $1.7 million in vacation expense
in connection with a change in vacation policy, (h) writing-off $0.9 million in
site costs for restaurants that will not be developed (I) a gain on the sale of
Carl's Jr. and Hardee's restaurants of $19.5 and (j) other miscellaneous
adjustments of $3.0 million.

NOTE 24 -- COMMITMENTS AND CONTINGENT LIABILITIES

     In conjunction with the Senior Credit Facility, a letter of credit
sub-facility in the amount of $75.0 million was established (see Note 11).
Several letters of credit are outstanding under this facility which secure the
Company's potential workers' compensation claims and general and health
liability claims. The Company is required to provide a letter of credit each
year based on its existing claims experience, or set aside a comparable amount
of cash or investment securities in a trust account.


                                       57
<PAGE>   58


    The Company's standby letter of credit agreements with various banks expire
as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S>                                            <C>
July 2001                                      $   8,110
November 2001                                     20,812
December 2001                                        100
February 2002                                      9,816
March 2002                                         6,651
April 2002                                         4,300
                                               ---------
                                               $  49,789
                                               =========
</TABLE>

     In fiscal 1996, the Company sold certain of its Carl's Jr. franchise notes
receivable, with recourse, to an independent third party. In addition, the
Company entered into a limited term guarantee with certain independent third
parties during fiscal 1997 on behalf of a Carl's Jr. franchisee and an
additional limited term guarantee in fiscal 1998 with an independent third party
on behalf of its Hardee's franchisees. The Company is contingently liable for an
aggregate of approximately $4.7 million under these guarantees as of January 31,
2001.

     The Company's Senior Credit Facility is guaranteed on a secured basis by
the Company's direct and indirect subsidiaries (the "Subsidiary Guarantors"),
other than non-guarantor subsidiaries which conduct no material operations, have
no significant assets on a consolidated basis and account for only an
insignificant share of the Company's consolidated revenues. Each of the
Subsidiary Guarantors also fully and unconditionally guarantee the Company's
9.125% Senior Subordinated Notes due 2009 on a joint and several basis.

     The Company is from time to time the subject of complaints or litigation
from customers alleging illness, injury or other food quality, health or
operational concerns. Adverse publicity resulting from such allegations may
materially adversely affect the Company and its restaurants, regardless of
whether such allegations are valid or whether the Company is liable. The Company
is also the subject of complaints or allegations from employees, former
employees and franchisees from time to time. The Company believes that, based in
part on advice of legal counsel, the lawsuits, claims and other legal matters to
which it has become subject in the course of its business are not material to
the Company's financial condition or results of operations.


                                       58
<PAGE>   59

                     CKE RESTAURANTS, INC. AND SUBSIDIARIES

                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

           For the fiscal years ended January 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                              ALLOWANCE FOR
(DOLLARS IN THOUSANDS)                      DOUBTFUL ACCOUNTS
                                            -----------------
<S>                                         <C>
Balance at January 31, 1998                   $     32,911
  Charges to operations                              4,192
  Deductions                                       (11,389)
  Adjustments                                       (9,689)
  Write-off from dispositions                         (471)
                                              ------------
Balance at January 31, 1999                         15,554
  Charges to operations                              1,485
  Deductions                                        (6,643)
                                              ------------
Balance at January 31, 2000                         10,396
  Charges to operations                              8,602
  Deductions                                        (2,876)
                                              ------------
Balance at January 31, 2001                   $     16,122(1)
                                              ============
</TABLE>

------------
(1) Consists of the following:

          Allowance on notes receivable       $      7,881
          Allowance on accounts receivable           8,241
                                              ------------
          Total                               $     16,122
                                              ============


                 See accompanying independent auditors' report.


                                       59
<PAGE>   60


                                  EXHIBIT INDEX


      EXHIBITS                     DESCRIPTION
      --------                     -----------

        3-1    Certificate of Incorporation of the Registrant, incorporated
               herein by reference to exhibit 3-1 to the Registrant's Form S-4
               Registration Statement Number 333-05305.

        3-2    Certificate of Amendment of Certificate of Incorporation, as
               filed with the Delaware Secretary of State on December 9, 1997,
               filed as exhibit 3-2 to the Company's Form 10-K Annual Report for
               the fiscal year ending January 26, 1998, and is hereby
               incorporated by reference.

        3-3    Bylaws of the Registrant, incorporated herein by reference to
               exhibit 3-2 to the Registrant's Form S-4 Registration Statement
               Number 333-05305.

        4-1    Indenture, dated as of March 14, 1998 for 4.25% Convertible
               Subordinated Notes due 2004 by and between CKE Restaurants, Inc.
               and Chase Manhattan Bank and Trust Company, National Association,
               as Trustee, filed as exhibit 4.1 to the Company's Form 10-K
               Annual Report for fiscal year ended January 26, 1998, and is
               hereby incorporated by reference.

        4-2    Form of Note (included in exhibit 4.1).

        4-4    Indenture, dated as of March 4, 1999, by and among the Company,
               its subsidiary guarantors and Chase Manhattan Bank and Trust
               Company, N.A., as Trustee, filed as exhibit 4.1 to the Company's
               Current Report on Form 8-K dated February 25, 1999, and is hereby
               incorporated by reference.

        4-5    Form of Note (included in exhibit 4.4).

        10-1   Carl Karcher Enterprises, Inc. Profit Sharing Plan, as amended,
               filed as exhibit 10-21 to the Company's Registration Statement on
               Form S-1, file No. 2-73695, and is hereby incorporated by
               reference.(2)

        10-2   Carl Karcher Enterprises, Inc. Key Employee Stock Option Plan,
               filed as exhibit 10-24 to the Company's Registration Statement on
               Form S-1, file No. 2-80283, and is hereby incorporated by
               reference.(2)

        10-3   Carl Karcher Enterprises, Inc. 1993 Employee Stock Incentive
               Plan, filed as exhibit 10-123 to the Company's Form 10-K Annual
               Report for fiscal year ended January 25, 1993, and is hereby
               incorporated by reference.(2)

        10-4   CKE Restaurants, Inc. 1994 Stock Incentive Plan, as amended,
               incorporated herein by reference to exhibit 4-1 to the
               Registrant's Form S-8 Registration Statement Number 333-12399.(2)

        10-5   CKE Restaurants, Inc. 1999 Stock Incentive Plan, incorporated
               herein by reference to exhibit 4-1 to the Registrant's Form S-8
               Registration Statement Number 333-83601.(2)

        10-6   CKE Restaurants, Inc. 1994 Employee Stock Purchase Plan, as
               amended, filed as exhibit 10-22 to the Company's Form 10-K Annual
               Report for fiscal year ended January 27, 1997, and is hereby
               incorporated by reference.(2)

        10-7   Employment Agreement dated January 1, 1994, by and between Carl
               Karcher Enterprises, Inc. and Carl N. Karcher, filed as exhibit
               10-89 to the Company's Form 10-K Annual Report for fiscal year
               ended January 31, 1994, and is hereby incorporated by
               reference.(2)

        10-8   First Amendment to Employment Agreement dated November 1, 1997,
               by and between Carl N. Karcher and Carl Karcher Enterprises,
               Inc., filed as exhibit 10-8 to the Company's Form 10-K Annual
               Report for fiscal year ended January 26, 1998, and is hereby
               incorporated by reference.(2)

        10-9   Employment Agreement dated as of April 9, 1999, by and between
               the Company and William P. Foley, II, filed as exhibit 10-1 to
               the Company's Form 10-Q Quarterly Report for the quarterly period
               ended May 17, 1999, and is hereby incorporated by reference.(2)

        10-10  Employment Agreement dated as of April 9, 1999, by and between
               the Company and C. Thomas Thompson, filed as exhibit 10-2 to the
               Company's Form 10-Q Quarterly Report for the quarterly period
               ended May 17, 1999, and is hereby incorporated by reference.(2)

        10-11  Employment Agreement dated as of April 9, 1999, by and between
               the Company and Rory J. Murphy, filed as exhibit 10-3 to the
               Company's Form 10-Q Quarterly Report for the quarterly period
               ended May 17, 1999, and is hereby incorporated by reference.(2)

        10-12  Employment Agreement dated as of April 9, 1999, by and between
               the Company and Robert W. Wisely, filed as exhibit 10-4 to the
               Company's Form 10-Q Quarterly Report for the quarterly period
               ended May 17, 1999, and is hereby incorporated by reference.(2)

        10-13  Employment Agreement dated as of April 9, 1999, by and between
               the Company and Carl A. Strunk, filed as

                                       60
<PAGE>   61
               exhibit 10-5 to the Company's Form 10-Q Quarterly Report for the
               quarterly period ended May 17, 1999, and is hereby incorporated
               by reference.(2)

        10-14  Employment Agreement dated as of April 9, 1999, by and between
               the Company and Andrew F. Puzder, filed as exhibit 10-6 to the
               Company's Form 10-Q Quarterly Report for the quarterly period
               ended May 17, 1999, and is hereby incorporated by reference.(2)

        10-15  Employment Agreement dated as of April 9, 1999, by and between
               the Company and John J. Dunion, filed as exhibit 10-7 to the
               Company's Form 10-Q Quarterly Report for the quarterly period
               ended May 17, 1999, and is hereby incorporated by reference.(2)

        10-16  Settlement Agreement and Release dated as of April 26, 1996, by
               and between Giant Group, Ltd; William P. Foley II; CKE
               Restaurants, Inc.; Fidelity National Financial, Inc.; and other
               parties, filed as exhibit 10-42 to the Company's Form 10-Q
               Quarterly Report for the quarterly period ended May 20, 1996, and
               is hereby incorporated by reference.

        10-17  Operating Agreement by and between Rally's Hamburgers, Inc. and
               Carl Karcher Enterprises, Inc. dated May 26, 1996, filed as
               exhibit 10-43 to the Company's Form 10-Q Quarterly Report for the
               quarterly period ended May 20, 1996, and is hereby incorporated
               by reference.*

        10-18  Settlement and Development Agreement by and between Carl Karcher
               Enterprises, Inc., CKE Restaurants, Inc. and GB Foods Corporation
               dated as of May 1995, filed as exhibit 10-31 to the Company's
               Form 10-K Annual Report for the fiscal year ended January 29,
               1996, and is hereby incorporated by reference.

        10-19  First Amendment to Settlement and Development Agreement by and
               between Carl Karcher Enterprises, Inc., CKE Restaurants, Inc. and
               GB Foods Corporation dated as of February 20, 1997, filed as
               exhibit 10-31 to the Company's Form 10-K Annual Report for the
               fiscal year ended January 27, 1997, and is hereby incorporated by
               reference.

        10-25  Supply Agreement, dated as of July 14, 1997, by and between
               Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
               (Forest City Division), filed as exhibit 99.3 to the Company's
               Current Report on Form 8-K dated April 27, 1997, and is hereby
               incorporated by reference.*

        10-26  Supply Agreement, dated as of July 14, 1997, by and between
               Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
               (Monterey Division), filed as exhibit 99.4 to the Company's
               Current Report on Form 8-K dated April 27, 1997, and is hereby
               incorporated by reference.*

        10-27  Supply Agreement, dated as of July 14, 1997, by and between
               Hardee's Food Systems, Inc. and QVS, Inc., filed as exhibit 99.5
               to the Company's Current Report on Form 8-K dated April 27, 1997,
               and is hereby incorporated by reference.*

        10-28  Distribution Agreement, dated as of July 14, 1997, by and among
               the Company, Hardee's Food Systems, Inc. and Fast Food
               Merchandisers, Inc., filed as exhibit 99.6 to the Company's
               Current Report on Form 8-K dated April 27, 1997, as is hereby
               incorporated by reference.*

        10-29  Exchange Agreement, dated as of December 8, 1997, by and between
               Rally's Hamburgers, Inc., CKE Restaurants, Inc., Fidelity
               National Financial, Inc., Giant Group, LTD and others, filed as
               exhibit 10-35 to the Company's Form 10-K Annual Report for the
               fiscal year ended January 26, 1998, and is hereby incorporated by
               reference.*

        10-30  Stock Purchase Agreement dated February 18, 1998, among CKE
               Restaurants, Inc., Advantica Restaurant Group, Inc., Spartan
               Holdings, Inc. and Flagstar Enterprises, Inc., filed as exhibit
               99.2 to the Company's Current Report on Form 8-K dated February
               19, 1998, and is hereby incorporated by reference.*

        10-31  Third Amended and Restated Credit Agreement, dated as of November
               24,1999, by and between the Company and Paribas, as agent, and
               the Lenders party thereto, filed as exhibit 10.8 to the Company's
               form 10-Q Quarterly Report for the quarterly period ended
               November 1, 1999, and is hereby incorporated by reference.*

        10-32  Amendment No. 1 to Third Amended and Restated Credit Agreement,
               dated as of April 26, 2000, by and between the Company and
               Paribas, as agent, and the Lenders party thereto.*

        10-33  Green Burrito Master Franchise Agreement dated June 5, 2000 by
               and among the Company and Green Burrito Grill Franchise
               Corporation and Santa Barbara Restaurant Group, Inc. and is
               hereby incorporated by reference.*

        10-34  Amendment to Employment Agreement dated as of September 6, 2000
               by and Between the Company and C. Thomas Thompson, and is hereby
               incorporated by reference.*(2)


                                       61
<PAGE>   62


        10-35  Amendment No. 2 to Third Amended and Restated Credit Agreement
               and Limited Waiver dated September 28, 2000 by and between the
               Company and BNP Paribas, as Agent for the Lenders, and is hereby
               incorporated by reference.*

        10-36  Amendment to Employment Agreement as of October 18, 2000 by and
               between the Company and Rory J. Murphy.(1)(2)

        10-37  Termination of Employment Agreement and Release as of December
               13, 2000 by and between the Company and Rory J. Murphy.(1)(2)

        10-38  First Amendment to Master Franchise Agreement dated December 29,
               2000 by and among the Company and Green Burrito Grill Franchise
               Corporation and Santa Barbara Restaurant Group, Inc.(1)

        10-39  Amendment to Employment Agreement as of January 3, 2001 by and
               between the Company and Andrew F. Puzder.(1)(2)

        10-40  Amendment No. 3 to Third Amended and Restated Credit Agreement
               and Limited Waiver dated January 29, 2001 by and between the
               Company and BNP Paribas, a bank organized under the laws of
               France acting through its Chicago branch (as successor in
               interest to Paribas), as Agent.(1)

        10-41  Stock Purchase Agreement dated March 13, 2001 by and among the
               Company and JP Acquisition Fund III.(1)

        10-42  Amendment No. 4 to Third Amended and Restated Credit Agreement
               and Limited Waiver dated April 13, 2001 by and between the
               Company and BNP Paribas, a bank organized under the laws of
               France acting through its Chicago branch (as successor in
               interest to Paribas), as Agent.(1)

        12-1   Computation of Ratios.(1)

        21-1   Subsidiaries of Registrant.(1)

        23-1   Consent of KPMG LLP independent auditors.(1)

*    Schedules omitted. The Registrant shall furnish supplementally to the
     Securities and Exchange Commission a copy of any omitted schedule upon
     request.

(1)  Filed herewith.

(2)  A management contract or compensatory plan or arrangement required to be
     filed as an exhibit to this report pursuant to Item 14(c) of Form 10-K.


                                       62