##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended January 30, 2006                                                  
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-11313





CKE Restaurants, Inc.


(Exact name of registrant as specified in its charter)


|                                                                                                        |  |                                         
|------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                                |  | 33-0602639                              
|(State or other jurisdiction of
     incorporation or organization)                                     |  | (I.R.S. Employer
    Identification No.)
|6307 Carpinteria Ave., Ste. A
    Carpinteria, California 93013(Address of principal executive offices)

Registrants telephone number, including area code


(805) 745-7500


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                  
|4% Convertible Subordinated Notes due 2023      |  | New York Stock Exchange                  
|Preferred Share Purchase Rights, $.01 per share |  | New York Stock Exchange                  

Securities Registered Pursuant to Section 12(g) of the
Act:


None


þ o


o þ


þ o


S-K 10-K 10-K. o


12b-2 þ o o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE:












---



##### 










CKE RESTAURANTS, INC. AND SUBSIDIARIES


INDEX TO ANNUAL REPORT ON
FORM 10-K


For the Fiscal Year Ended January 30, 2006


TABLE OF CONTENTS


|              |  |                                                                                                                      |  |      |    | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|              |  |                                                                                                                      |  | Page |   
|              |  |                                                                                                                      |  | No.  |   
|              |  |                                                                                                                      |  |      |   
|Part I       
|Item 1.       |  | Business                                                                                                             |  |      | 1  | 
|Item 1A.      |  | Risk Factors                                                                                                         |  |      | 12 | 
|Item 1B.      |  | Unresolved Staff Comments                                                                                            |  |      | 17 | 
|Item 2.       |  | Properties                                                                                                           |  |      | 18 | 
|Item 3.       |  | Legal Proceedings                                                                                                    |  |      | 19 | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 20 | 
|             
|Part II      
|Item 5.       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 21 | 
|Item 6.       |  | Selected Financial Data                                                                                              |  |      | 23 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 27 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 65 | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 65 | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 65 | 
|Item 9A.      |  | Controls and Procedures                                                                                              |  |      | 65 | 
|Item 9B.      |  | Other Information                                                                                                    |  |      | 67 | 
|             
|Part III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 68 | 
|Item 11.      |  | Executive Compensation                                                                                               |  |      | 68 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 68 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 69 | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                               |  |      | 69 | 
|             
|Part IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 70 | 
|EXHIBIT 10.71
|EXHIBIT 10.72
|EXHIBIT 10.73
|EXHIBIT 10.74
|EXHIBIT 12.1 
|EXHIBIT 21.1 
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 
|EXHIBIT 32.2 



i



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PART I







|        |         
|------- | --------
|Item 1. | Business

Our fiscal year ends on the last Monday in January each year.
In this Annual Report on
Form 10-K, we
refer to the fiscal years by reference to the calendar year in
which they end (e.g., the fiscal year ended January 30,
2006, is referred to as fiscal 2006, and the fiscal
year ended January 31, 2005, is referred to as fiscal
2005). Fiscal 2006 includes 52 weeks, fiscal 2005
includes 53 weeks, and fiscal 2004 includes 52 weeks.
For clarity of presentation, we generally label all fiscal years
presented as if the fiscal year ended January 31. All dollar
amounts, except per share amounts, presented in this Annual
Report on
Form 10-K are in
thousands, unless otherwise noted.


Company Overview


® ® ®


|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |    |    |  |  |       |       | 
|----------------------- | ----- | ---------- | --- | ----- | -------- |  | ----- | -------- |  |  | ------------- | --- |  | ----- | -- | -- |  |  | ----- | ----- | 
|                        |       | Carls Jr. |     |       | Hardees |  |       | La Salsa |  |  | Green Burrito |     |  | Total |   
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|Company-operated        |       |            | 428 |       |          |  | 663   |          |  |  | 59            |     |  |       | 1  |    |  |  | 1,151 |      
|Franchised and licensed |       |            | 621 |       |          |  | 1,330 |          |  |  | 43            |     |  |       | 15 |    |  |  | 2,009 |      
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|                        | Total |            |     | 1,049 |          |  |       | 1,993    |  |  |               | 102 |  |       |    | 16 |  |  |       | 3,160 | 
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   

Carls Jr. burger-based company-operated ®


Hardees. 1 3 1 2 2 3 tm best-in ®


La Salsa.


Recent Developments


Amendment to Credit Facility.


1



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Purchase and Cancellation of Stock Options.


Repurchase of Common Stock. 10b5-1 10b5-1


Adoption of a Stockholder Rights Plan.




Adjustment of Conversion Rate for Convertible Debt.


Termination of Franchise Agreement.


2



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Purchase of Restaurant Assets.


Adoption of New Accounting Pronouncements.


Use of Non-GAAP Financial Measurements


10-K, non-GAAP 10-K.


Contact Information; Obtaining Copies of this Annual
Report


www.ckr.com.


10-K, 10-Q 8-K, www.ckr.com.


www.ckr.com




Competitive Strengths






| |   |                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | promotion of distinctive, premium, great tasting products such
    as the Carls Jr. line of Six Dollar
    Burgerstm,
    Hand-Scooped Ice Cream Shakes and
    Maltstm
    and Breakfast
    Burgerstm
    and Burritos; as well as Hardees line of
    1/3-,
    1/2-
    and
    2/3-lb.
    Thickburgers, Hand-Scooped Ice Cream Shakes and
    Maltstm,
    and Made From Scratch breakfast biscuits;
|
| |  | installation of gas-fired charbroilers in all of our Carls
    Jr. and Hardees restaurants to improve taste, operations
    and food safety;                                                                                                                                                                                                                                                              
|
| |  | implementation of a program to focus on the essentials of
    restaurant operations  quality, service and
    cleanliness; and                                                                                                                                                                                                                                                                             
|
| |  | initiation of a program to elevate customer service at
    Carls Jr. and Hardees to an industry-leading level.                                                                                                                                                                                                                                                                                            

3



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Carls Jr. ® tm tm


Hardees.




| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | improve restaurant operations by streamlining the menu and
    returning to restaurant fundamentals  quality,
    service and cleanliness;                                                                        
|
| |  | remodel Hardees restaurants to the Star
    Hardees format and upgrade the condition of the
    facilities so that our customers enjoy comfortable surroundings
    and a pleasant dining experience;          
|
| |  | transform Hardees from a discount variety brand to a
    premium product brand that appeals to what we believe to be our
    industrys most attractive demographic segment, 18- to
    35-year old
    males; and
|
| |  | grow the lunch and dinner portion of Hardees business
    while maintaining Hardees already strong breakfast
    business.                                                                                       

1 3 1 2 2 3 35-year


Same-store tm 1 4


La Salsa.


4



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Business Strategy






| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | remain focused on restaurant fundamentals  quality,
    service and cleanliness;                                                               
|
| |  | offer premium products that compete based on quality and taste;                                                                                 
|
| |  | build on the strength of the Carls Jr. brand, including
    dual-branding opportunities with Green Burrito;                                    
|
| |  | continue to execute and refine the Hardees turnaround
    program, including testing of dual-branding opportunities with
    Red
    Burritotm;
|
| |  | control costs while increasing revenues;                                                                                                        
|
| |  | leverage our infrastructure and marketing presence to build out
    existing core markets; and                                                  
|
| |  | strengthen our franchise system and pursue further franchising
    opportunities.                                                               



Franchise Strategy




Carls Jr.


Hardees.


5



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La Salsa.






| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We evolved the system-wide mix of restaurants to one that is
    primarily franchise-operated. At the end of fiscal 2006,
    approximately 64% of Carls Jr. and Hardees
    restaurants combined were franchised.
|
| |  | We closed many unprofitable Hardees restaurants and
    increased our AUV for the brand.                                                                                                                           
|
| |  | We believe we have improved the food quality, service and
    cleanliness at our Hardees restaurants.                                                                                                              
|
| |  | Our same-store sales trends for company-operated restaurants,
    for each brand by quarter are:                                                                                                                    

|            |                |            |  |      |          |  |  |          |    |  |  |     |  
|----------- | -------------- | ---------- |  | ---- | -------- |  |  | -------- | -- |  |  | --- | -
|            |                | Carls Jr. |  |      | Hardees |  |  | La Salsa |   
|            |                |            |  |      |          |  |  |          |   
|Fiscal 2005 |                |            |  |      |          |  |  |          |    |  |  |    
|            | First Quarter  |            |  | 9.8  | %        |  |  | 11.9     | %  |  |  | 6.0 | %
|            | Second Quarter |            |  | 8.1  | %        |  |  | 6.2      | %  |  |  | 4.6 | %
|            | Third Quarter  |            |  | 7.9  | %        |  |  | 4.5      | %  |  |  | 5.6 | %
|            | Fourth Quarter |            |  | 4.9  | %        |  |  | 4.4      | %  |  |  | 4.3 | %
|Fiscal 2006 |                |            |  |      |          |  |  |          |    |  |  |    
|            | First Quarter  |            |  | 2.4  | %        |  |  | (0.1     | )% |  |  | 2.0 | %
|            | Second Quarter |            |  | 1.0  | %        |  |  | 0.0      | %  |  |  | 2.6 | %
|            | Third Quarter  |            |  | (0.1 | )%       |  |  | (3.5     | )% |  |  | 2.6 | %
|            | Fourth Quarter |            |  | 5.3  | %        |  |  | 2.9      | %  |  |  | 3.7 | %



| |   |                                                       
| | - | ------------------------------------------------------
| |  | Quarterly operating income (loss) by segment has been:

|            |                |            |   |        |          |  |   |                  |   |  |              |        |   |               |   |         |   |  |   |        | 
|----------- | -------------- | ---------- | - | ------ | -------- |  | - | ---------------- | - |  | ------------ | ------ | - | ------------- | - | ------- | - |  | - | ------ | 
|            |                |            |   |        |          |  |   | Other, Including |   |  | Consolidated |       
|            |                |            |   |        |          |  |   | Discontinued     |   |  | Operating    |       
|            |                | Carls Jr. |   |        | Hardees |  |   | La Salsa         |   |  | Operations   |        |   | Income (Loss) |  
|            |                |            |   |        |          |  |   |                  |   |  |              |        |   |               |  
|Fiscal 2005 |                |            |   |        |          |  |   |                  |   |  |              |        |   |               |   |         |   |  |   |       
|            | First Quarter  |            | $ | 21,049 |          |  | $ | 3,295            |   |  | $            | (2,491 | ) |               | $ | 156     |   |  | $ | 22,009 | 
|            | Second Quarter |            |   | 6,516  |          |  |   | 2,535            |   |  |              | (1,973 | ) |               |   | 33      |   |  |   | 7,111  | 
|            | Third Quarter  |            |   | 16,334 |          |  |   | 4,186            |   |  |              | (1,484 | ) |               |   | (73     | ) |  |   | 18,963 | 
|            | Fourth Quarter |            |   | 17,757 |          |  |   | (4,723           | ) |  |              | (4,322 | ) |               |   | (15     | ) |  |   | 8,697  | 
|Fiscal 2006 |                |            |   |        |          |  |   |                  |   |  |              |        |   |               |   |         |   |  |   |       
|            | First Quarter  |            | $ | 21,265 |          |  | $ | 4,168            |   |  | $            | (2,233 | ) |               | $ | (52     | ) |  | $ | 23,148 | 
|            | Second Quarter |            |   | 18,635 |          |  |   | 6,903            |   |  |              | (1,242 | ) |               |   | (11,087 | ) |  |   | 13,209 | 
|            | Third Quarter  |            |   | 17,754 |          |  |   | 4,275            |   |  |              | (904   | ) |               |   | (141    | ) |  |   | 20,984 | 
|            | Fourth Quarter |            |   | 25,119 |          |  |   | (1,953           | ) |  |              | (2,628 | ) |               |   | 1       |   |  |   | 20,539 | 



6



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Financial Information about Operating Segments


10-K


Investments in Other Restaurant Concepts




Restaurant Development


company-operated company-operated company-operated


|          |  |                           |       |  |          |   |       |          |  |   |     | 
|--------- |  | ------------------------- | ----- |  | -------- | - | ----- | -------- |  | - | --- | 
|          |  | Average per restaurant(1) |      
|          |  |                           |      
|          |  | Carls Jr.                |       |  | Hardees |   |       | La Salsa | 
|          |  |                           |       |  |          |   |       |          | 
|Land(2)   |  | $                         |      |  |          | $ | 472   |          |  | $ |    | 
|Building  |  |                           | 935   |  |          |   | 858   |          |  |   | 525 | 
|Equipment |  |                           | 313   |  |          |   | 385   |          |  |   | 257 | 
|          |  |                           |       |  |          |   |       |          | 
|Total     |  | $                         | 1,248 |  |          | $ | 1,715 |          |  | $ | 782 | 
|          |  |                           |       |  |          |   |       |          | 






|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The averages above are contingent upon a number of factors
    including, but not limited to, restaurant prototype,
    geographical area and local zoning requirements.
|   
|(2) | The majority of Carls Jr. and La Salsa restaurants
    are constructed on leased land.                                                                                 

Restaurant Operations and Support


fresh-Mexican




7



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on-the


Marketing and Advertising








10-K.


Purchasing


mark-up


Risk Factors  We
depend on our suppliers to deliver quality products to us
timely




10-K.


8



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Competition and Markets






Trademarks and Service Marks




Government Regulation










Environmental Matters




9



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on-site


Seasonality






Government Contracts




Research and Development




Employees




Working Capital Practices


10-K


Disclosure Regarding Forward-Looking Statements


10-K


10



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Executive Officers of the Registrant




|                  |  |     |    |  |          |                                                                  
|----------------- |  | --- | -- |  | -------- | -----------------------------------------------------------------
|Name              |  | Age |    |  | Position
|                  |  |     |    |  |         
|Andrew F. Puzder  |  |     | 55 |  |          | Chief Executive Officer and President                            
|Theodore Abajian  |  |     | 42 |  |          | Executive Vice President, Chief Financial Officer                
|John J. Dunion    |  |     | 47 |  |          | Executive Vice President, Supply Chain Management                
|Brad Haley        |  |     | 47 |  |          | Executive Vice President, Marketing  Carls Jr.
    and Hardees
|E. Michael Murphy |  |     | 54 |  |          | Executive Vice President, General Counsel and Secretary          

Andrew F. Puzder


Theodore Abajian


John J. Dunion


Brad Haley


11



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E. Michael Murphy







|         |             
|-------- | ------------
|Item 1A. | Risk Factors





| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| | Our success depends on our ability to judge the impact of
    competitive products and pricing.





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





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | We may be unable to remain competitive or grow because we
    are a leveraged company.





12



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| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | Restrictive covenants in our credit facility and
    outstanding senior indebtedness could adversely affect our
    business.





| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Failure to continue our revitalization of Hardees
    would have a significant negative effect on our success.





| |                                                                            
| | ---------------------------------------------------------------------------
| | Our success depends on our ability to attract and retain
    key personnel.





| |                                                                           
| | --------------------------------------------------------------------------
| | Our success depends on our franchisees participation
    in our strategy.





| |                                                                                    
| | -----------------------------------------------------------------------------------
| | Our financial results are affected by the financial
    results of our franchisees.





| |                                                                                   
| | ----------------------------------------------------------------------------------
| | We may be unable to recover increased operating costs
    through price increases.



13



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| |                                                
| | -----------------------------------------------
| | We face commodity price and availability risks.





| |                                                                         
| | ------------------------------------------------------------------------
| | We depend on our suppliers to deliver quality products to
    us timely.





| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Adverse publicity regarding poultry or beef could
    negatively impact our business.





| |                                                                                       
| | --------------------------------------------------------------------------------------
| | Consumer preferences and perceptions may have significant
    effects on our business.

Multi-unit




| |                                                                              
| | -----------------------------------------------------------------------------
| | Our operations are seasonal and heavily influenced by
    weather conditions.

quarter-to


14



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| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Our business may suffer due to our inability to hire and
    retain qualified personnel and due to higher labor costs.

labor-intensive




| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Our sales and profits may be materially and adversely
    affected by our inability to integrate acquisitions
    successfully.





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Our business may be impacted by increased insurance and/or
    self-insurance costs.





| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our financial results may be impacted by our ability to
    select appropriate restaurant locations, construct new
    restaurants or complete remodels.





| |                                                                   
| | ------------------------------------------------------------------
| | The nature of our business exposes us to potential
    litigation.





| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | Governmental regulations may change and require us to
    incur substantial expenditures to comply.



15



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| |                                                                           
| | --------------------------------------------------------------------------
| | Compliance with environmental laws may affect our
    financial condition.





| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of our Certificate of Incorporation and Bylaws
    and our Stockholder Rights Plan could limit the ability of our
    stockholders to effect a change in control.









| |                                         
| | ----------------------------------------
| | We face risks related to interest rates.





| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Our financial results may be impacted by changes in
    accounting policies and practices.

Consolidation of Variable Interest
Entities  an Interpretation of ARB No. 51.


Share-Based
Payment,


16



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|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments



17



---



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|        |           
|------- | ----------
|Item 2. | Properties



|            |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |       |       | 
|----------- | ------------------------------ | -------- |  | --- | ------------ |  |  | -------- | --- |  | ----- | --- | --- |  |  | ----- | ----- | 
|            |                                | Land and |  |     | Land Leased  |  |  | Land and |     |  |      
|            |                                | Building |  |     | and Building |  |  | Building |     |  |      
|            |                                | Owned    |  |     | Owned        |  |  | Leased   |     |  | Total |    
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Carls Jr.: |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  | 39  |              |  |  | 112      |     |  |       | 277 |     |  |  | 428   |      
|            | Franchise-operated(1)          |          |  | 5   |              |  |  | 41       |     |  |       | 171 |     |  |  | 217   |      
|            | Third party-operated/vacant(2) |          |  | 3   |              |  |  | 5        |     |  |       | 18  |     |  |  | 26    |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     | 47           |  |  |          | 158 |  |       |     | 466 |  |  |       | 671   | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Hardees:   |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  | 317 |              |  |  | 145      |     |  |       | 201 |     |  |  | 663   |      
|            | Franchise-operated(1)          |          |  | 33  |              |  |  | 58       |     |  |       | 114 |     |  |  | 205   |      
|            | Third party-operated/vacant(2) |          |  | 15  |              |  |  | 13       |     |  |       | 53  |     |  |  | 81    |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     | 365          |  |  |          | 216 |  |       |     | 368 |  |  |       | 949   | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|La Salsa:   |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  |    |              |  |  | 4        |     |  |       | 55  |     |  |  | 59    |      
|            | Third party-operated/vacant(2) |          |  |    |              |  |  |         |     |  |       | 6   |     |  |  | 6     |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     |             |  |  |          | 4   |  |       |     | 61  |  |  |       | 65    | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Other:      |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  |    |              |  |  |         |     |  |       | 1   |     |  |  | 1     |      
|            | Third party-operated/vacant(2) |          |  |    |              |  |  | 2        |     |  |       | 2   |     |  |  | 4     |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     |             |  |  |          | 2   |  |       |     | 3   |  |  |       | 5     | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Total:      |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  | 356 |              |  |  | 261      |     |  |       | 534 |     |  |  | 1,151 |      
|            | Franchise-operated(1)          |          |  | 38  |              |  |  | 99       |     |  |       | 285 |     |  |  | 422   |      
|            | Third party-operated/vacant(2) |          |  | 18  |              |  |  | 20       |     |  |       | 79  |     |  |  | 117   |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Total    |  |     | 412          |  |  |          | 380 |  |       |     | 898 |  |  |       | 1,690 | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    






|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Franchise-operated properties are those which we own
    and lease to franchisees, or lease and sublease to franchisees.                           
|   
|(2) | Third party-operated/vacant properties are those we
    own or lease that are either operated by unaffiliated entities
    or are currently vacant.





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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



Employees




Customers




Suppliers




Franchising




Intellectual Property




Summary of Significant Litigation




19



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|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market For Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|            |                       |      |   |       |     |  |   |       | 
|----------- | --------------------- | ---- | - | ----- | --- |  | - | ----- | 
|            |                       | High |   |       | Low | 
|            |                       |      |   |       |     | 
|Fiscal 2006 |                       |      |   |       |     |  |   |      
|            | First Fiscal Quarter  |      | $ | 17.15 |     |  | $ | 14.53 | 
|            | Second Fiscal Quarter |      |   | 16.77 |     |  |   | 12.11 | 
|            | Third Fiscal Quarter  |      |   | 13.87 |     |  |   | 11.51 | 
|            | Fourth Fiscal Quarter |      |   | 15.69 |     |  |   | 12.45 | 
|Fiscal 2005 |                       |      |   |       |     |  |   |      
|            | First Fiscal Quarter  |      | $ | 11.68 |     |  | $ | 7.25  | 
|            | Second Fiscal Quarter |      |   | 14.54 |     |  |   | 9.39  | 
|            | Third Fiscal Quarter  |      |   | 13.64 |     |  |   | 10.40 | 
|            | Fourth Fiscal Quarter |      |   | 14.77 |     |  |   | 11.89 | 





10b5-1 10b5-1


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|                                    |  |           |         |  |          |                  |       |                 |                 |  |                 |  |  |   |        | 
|----------------------------------- |  | --------- | ------- |  | -------- | ---------------- | ----- | --------------- | --------------- |  | --------------- |  |  | - | ------ | 
|                                    |  | (a)       |         |  | (b)      |                  |       | (c)             |                 |  | (d)             | 
|                                    |  |           |         |  |          |                  |       |                 |                 |  |                 | 
|                                    |  |           |         |  |          | Total Number of  |       |                 | Maximum Dollar  | 
|                                    |  |           |         |  |          | Shares Purchased |       |                 | Value of Shares | 
|                                    |  | Total     |         |  | Average  |                  |       | as Part of      |                 |  | that May Yet Be | 
|                                    |  | Number of |         |  | Price    |                  |       | Publicly        |                 |  | Purchased Under | 
|                                    |  | Shares    |         |  | Paid per |                  |       | Announced Plans |                 |  | the Plans or    | 
|Period                              |  | Purchased |         |  | Share    |                  |       | or Programs     |                 |  | Programs        | 
|                                    |  |           |         |  |          |                  |       |                 |                 |  |                 | 
|November 8, 2005  December 5, 2005 |  |           | 51,400  |  |          | $                | 13.16 |                 |                 |  | 51,400          |  |  | $ | 11,764 | 
|December 6, 2005  January 2, 2006  |  |           | 47,500  |  |          |                  | 13.48 |                 |                 |  | 47,500          |  |  |   | 11,123 | 
|January 3, 2006  January 30, 2006  |  |           | 48,300  |  |          |                  | 14.03 |                 |                 |  | 48,300          |  |  |   | 10,443 | 
|                                    |  |           |         |  |          |                  |       |                 |                 |  |                 | 
|Total                               |  |           | 147,200 |  |          |                  | 13.55 |                 |                 |  | 147,200         |  |  |   | 10,443 | 
|                                    |  |           |         |  |          |                  |       |                 |                 |  |                 | 

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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

10-K.


Selected Financial and Operating Data


|                                            |                                                                                     |                                     |   |           |           |  |   |           |           |  |            |           |           |      |   |           |           |  |   |           |           | 
|------------------------------------------- | ----------------------------------------------------------------------------------- | ----------------------------------- | - | --------- | --------- |  | - | --------- | --------- |  | ---------- | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                            |                                                                                     | Fiscal Year Ended January 31,(1)(2) |  
|                                            |                                                                                     |                                     |  
|                                            |                                                                                     | 2006(7)                             |   |           | 2005      |  |   | 2004(6)   |           |  | 2003(4)(5) |           |           | 2002 |  
|                                            |                                                                                     |                                     |   |           |           |  |   |           |           |  |            |           |           |      |  
|Consolidated Statements of Operations Data: |                                                                                     |                                     |   |           |           |  |   |           |           |  |            |           |           |      |   |           |           |  |   |          
|                                            | Revenue:                                                                            |                                     |   |           |           |  |   |           |           |  |            |           |           |      |   |           |           |  |   |           |          
|                                            | Company-operated restaurants                                                        |                                     | $ | 1,209,456 |           |  | $ | 1,217,273 |           |  | $          | 1,142,929 |           |      | $ | 1,109,646 |           |  | $ | 1,174,384 |          
|                                            | Franchised and licensed restaurants and other                                       |                                     |   | 308,891   |           |  |   | 302,608   |           |  |            | 270,491   |           |      |   | 253,715   |           |  |   | 263,727   |          
|                                            |                                                                                     |                                     |   |           |           |  |   |           |           |  |            |           |           |      |  
|                                            |                                                                                     | Total revenue                       |   | $         | 1,518,347 |  |   | $         | 1,519,881 |  |            | $         | 1,413,420 |      |   | $         | 1,363,361 |  |   | $         | 1,438,111 | 
|                                            |                                                                                     |                                     |   |           |           |  |   |           |           |  |            |           |           |      |  
|                                            | Operating income (loss)                                                             |                                     | $ | 77,880    |           |  | $ | 56,780    |           |  | $          | (8,268    | )         |      | $ | 35,617    |           |  | $ | (31,163   | )        
|                                            | Interest expense                                                                    |                                     |   | 23,016    |           |  |   | 36,748    |           |  |            | 39,962    |           |      |   | 39,924    |           |  |   | 53,906    |          
|                                            | Income tax (benefit) expense                                                        |                                     |   | (137,331  | )         |  |   | (1,592    | )         |  |            | 2,417     |           |      |   | (7,093    | )         |  |   | (584      | )        
|                                            | Income (loss) from continuing operations                                            |                                     |   | 194,582   |           |  |   | 18,662    |           |  |            | (50,430   | )         |      |   | 19,214    |           |  |   | (84,724   | )        
|                                            | Loss from discontinued operations                                                   |                                     |   |          |           |  |   | (646      | )         |  |            | (2,790    | )         |      |   | (53       | )         |  |   |          |          
|                                            | Income (loss) before cumulative effect of accounting change                         |                                     |   | 194,582   |           |  |   | 18,016    |           |  |            | (53,220   | )         |      |   | 19,161    |           |  |   | (84,724   | )        
|                                            | Cumulative effect of accounting change(5)                                           |                                     |   |          |           |  |   |          |           |  |            |          |           |      |   | (175,780  | )         |  |   |          |          
|                                            | Net income (loss)                                                                   |                                     |   | 194,582   |           |  |   | 18,016    |           |  |            | (53,220   | )         |      |   | (156,619  | )         |  |   | (84,724   | )        
|                                            | Net income (loss) per share  basic                                                 |                                     |   | 3.29      |           |  |   | 0.31      |           |  |            | (0.92     | )         |      |   | (2.76     | )         |  |   | (1.68     | )        
|                                            | Income (loss) from continuing operations per share 
    diluted                    |                                     |   | 2.70      |           |  |   | 0.31      |           |  |            | (0.88     | )         |      |   | 0.33      |           |  |   | (1.68     | )        
|                                            | Loss from discontinued operations per share  diluted                               |                                     |   |          |           |  |   | (0.01     | )         |  |            | (0.04     | )         |      |   |          |           |  |   |          |          
|                                            | Income (loss) before cumulative effect of accounting change per
    share  diluted |                                     |   | 2.70      |           |  |   | 0.30      |           |  |            | (0.92     | )         |      |   | 0.33      |           |  |   | (1.68     | )        
|                                            | Cumulative effect of accounting change per share 
    diluted(5)                   |                                     |   |          |           |  |   |          |           |  |            |          |           |      |   | (3.02     | )         |  |   |          |          
|                                            | Net income (loss) per share  diluted                                               |                                     | $ | 2.70      |           |  | $ | 0.30      |           |  | $          | (0.92     | )         |      | $ | (2.69     | )         |  | $ | (1.68     | )        
|                                            | Weighted-average shares outstanding  diluted                                       |                                     |   | 73,250    |           |  |   | 59,583    |           |  |            | 57,536    |           |      |   | 58,124    |           |  |   | 50,507    |          
|                                            | Cash dividends paid per common share                                                |                                     | $ | 0.16      |           |  | $ |          |           |  | $          |          |           |      | $ |          |           |  | $ |          |          
|                                            | Ratio of earnings to fixed charges(3)                                               |                                     |   | 2.0       | x         |  |   | 1.2       | x         |  |            |          |           |      |   | 1.2       | x         |  |   |          |          

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|                                 |                                                                                   |                                     |   |         |         |   |   |         |         |   |            |         |         |      |   |         |         |   |   |         |         |  
|-------------------------------- | --------------------------------------------------------------------------------- | ----------------------------------- | - | ------- | ------- | - | - | ------- | ------- | - | ---------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                 |                                                                                   | Fiscal Year Ended January 31,(1)(2) |  
|                                 |                                                                                   |                                     |  
|                                 |                                                                                   | 2006(7)                             |   |         | 2005    |   |   | 2004(6) |         |   | 2003(4)(5) |         |         | 2002 |  
|                                 |                                                                                   |                                     |   |         |         |   |   |         |         |   |            |         |         |      |  
|Segment Operating Data:          |                                                                                   |                                     |   |         |         |   |   |         |         |   |            |         |         |      |   |         |         |   |   |        
|                                 | Carls Jr.:                                                                       |                                     |   |         |         |   |   |         |         |   |            |         |         |      |   |         |         |   |   |         |        
|                                 |                                                                                   | Total revenue                       |   | $       | 802,761 |   |   | $       | 792,829 |   |            | $       | 725,055 |      |   | $       | 693,692 |   |   | $       | 704,557 |  
|                                 |                                                                                   | Operating income                    |   |         | 82,773  |   |   |         | 61,656  |   |            |         | 55,109  |      |   |         | 52,577  |   |   |         | 49,728  |  
|                                 | Hardees:                                                                         |                                     |   |         |         |   |   |         |         |   |            |         |         |      |   |         |         |   |   |         |        
|                                 |                                                                                   | Total revenue                       |   |         | 661,509 |   |   |         | 673,172 |   |            |         | 642,694 |      |   |         | 627,785 |   |   |         | 690,459 |  
|                                 |                                                                                   | Operating income (loss)             |   |         | 13,393  |   |   |         | 5,293   |   |            |         | (26,336 | )    |   |         | (16,361 | ) |   |         | (80,561 | )
|                                 | La Salsa:                                                                         |                                     |   |         |         |   |   |         |         |   |            |         |         |      |   |         |         |   |   |         |        
|                                 |                                                                                   | Total revenue                       |   |         | 49,156  |   |   |         | 48,794  |   |            |         | 43,933  |      |   |         | 39,959  |   |   |         |        |  
|                                 |                                                                                   | Operating loss(6)                   |   |         | (7,007  | ) |   |         | (10,270 | ) |            |         | (37,304 | )    |   |         | (397    | ) |   |         |        |  
|Consolidated Balance Sheet Data: |                                                                                   |                                     |   |         |         |   |   |         |         |   |            |         |         |      |   |         |         |   |   |        
|                                 | Cash and cash equivalents                                                         |                                     | $ | 21,343  |         |   | $ | 18,432  |         |   | $          | 54,355  |         |      | $ | 18,440  |         |   | $ | 24,642  |        
|                                 | Working capital deficit                                                           |                                     |   | (27,445 | )       |   |   | (74,907 | )       |   |            | (43,820 | )       |      |   | (69,586 | )       |   |   | (50,676 | )      
|                                 | Total assets                                                                      |                                     |   | 804,780 |         |   |   | 668,883 |         |   |            | 730,404 |         |      |   | 804,937 |         |   |   | 898,516 |        
|                                 | Total long-term debt and capital lease obligations, including
    current portion |                                     |   | 264,662 |         |   |   | 317,048 |         |   |            | 418,176 |         |      |   | 423,275 |         |   |   | 444,847 |        
|                                 | Stockholders equity                                                              |                                     |   | 322,381 |         |   |   | 119,668 |         |   |            | 100,658 |         |      |   | 152,660 |         |   |   | 227,348 |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our fiscal year is 52 or 53 weeks, ending the last Monday
    in January. For clarity of presentation, we generally label all
    fiscal years presented as if the fiscal year ended January 31.
    Fiscal 2006 includes 52 weeks. Fiscal 2005 includes
    53 weeks. Fiscal 2004, 2003 and 2002 include 52 weeks.                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | Fiscal 2006, 2005, 2004, 2003 and 2002, include $8,025, $14,320,
    $17,776, $5,194 and $70,908, respectively, of facility action
    charges, net.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) | For purposes of calculating the ratio of earnings to fixed
    charges (a) earnings represent income (loss) before income
    taxes, discontinued operations and cumulative effect of
    accounting change 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 were
    sufficient to cover fixed charges for fiscal 2006, 2005 and
    2003, and insufficient to cover fixed charges for fiscal 2004
    and 2002 by $48,013 and $85,308, respectively.
|   
|(4) | Fiscal 2003 includes operating results of SBRG from the date of
    acquisition, March 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(5) | During fiscal 2003, we adopted SFAS 142, Goodwill and
    Other Intangible Assets, resulting in a transitional
    impairment charge of $175,780 (or $3.02 per diluted common
    share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(6) | Fiscal 2004 includes a $34,059 impairment charge to reduce the
    carrying value of La Salsa goodwill to $0.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(7) | Fiscal 2006 includes an income tax benefit of $137,331
    attributable primarily to the reversal of a previously recorded
    valuation allowance against deferred tax assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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Selected Financial and Operating Data by Segment


|                       |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |       |           |       | 
|---------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----- | ----- | --------- | ----- |  | ----- | --------- | ----- | ------- | ----- | --------- | ----- |  | ----- | --------- | ----- |  | ----- | --------- | ----- | 
|                       |                                                                                       | Fiscal Year Ended January 31,(1)                                           |      
|                       |                                                                                       |                                                                            |      
|                       |                                                                                       | 2006                                                                       |       |       | 2005      |       |  | 2004  |           |       | 2003(4) |       |           | 2002  | 
|                       |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       | 
|Carls Jr. Restaurants |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |      
|                       | Restaurants open (at end of fiscal year):                                             |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated                                                           |       |       | 428       |       |  |       | 428       |       |         |       | 426       |       |  |       | 440       |       |  |       | 443       |      
|                       |                                                                                       | Franchised and licensed                                                    |       |       | 621       |       |  |       | 586       |       |         |       | 580       |       |  |       | 547       |       |  |       | 526       |      
|                       |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       | 
|                       |                                                                                       |                                                                            | Total |       |           | 1,049 |  |       |           | 1,014 |         |       |           | 1,006 |  |       |           | 987   |  |       |           | 969   | 
|                       |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       | 
|                       | Restaurant sales:                                                                     |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated restaurants                                               |       | $     | 574,663   |       |  | $     | 567,960   |       |         | $     | 523,945   |       |  | $     | 507,526   |       |  | $     | 516,998   |      
|                       |                                                                                       | Franchised and licensed restaurants(2)                                     |       |       | 700,590   |       |  |       | 679,734   |       |         |       | 596,318   |       |  |       | 567,048   |       |  |       | 586,144   |      
|                       | Average unit volume per company- operated restaurant                                  |                                                                            |       | 1,341 |           |       |  | 1,301 |           |       |         | 1,187 |           |       |  | 1,152 |           |       |  | 1,135 |          
|                       | Percentage increase in comparable company-operated restaurant
    sales(3)            |                                                                            |       | 2.2   | %         |       |  | 7.7   | %         |       |         | 2.9   | %         |       |  | 0.7   | %         |       |  | 2.9   | %        
|                       | Restaurant operating costs as a percentage of company-operated
    revenue            |                                                                            |       | 76.6  | %         |       |  | 78.9  | %         |       |         | 79.8  | %         |       |  | 79.2  | %         |       |  | 80.7  | %        
|Hardees Restaurants   |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |      
|                       | Restaurants open (at end of fiscal year):                                             |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated                                                           |       |       | 663       |       |  |       | 677       |       |         |       | 721       |       |  |       | 730       |       |  |       | 742       |      
|                       |                                                                                       | Franchised and licensed                                                    |       |       | 1,330     |       |  |       | 1,357     |       |         |       | 1,400     |       |  |       | 1,499     |       |  |       | 1,648     |      
|                       |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       | 
|                       |                                                                                       |                                                                            | Total |       |           | 1,993 |  |       |           | 2,034 |         |       |           | 2,121 |  |       |           | 2,229 |  |       |           | 2,390 | 
|                       |                                                                                       |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       | 
|                       | Restaurant sales:                                                                     |                                                                            |       |       |           |       |  |       |           |       |         |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated restaurants                                               |       | $     | 587,082   |       |  | $     | 601,068   |       |         | $     | 575,238   |       |  | $     | 562,010   |       |  | $     | 614,291   |      
|                       |                                                                                       | Franchised and licensed restaurants(2)                                     |       |       | 1,173,442 |       |  |       | 1,203,750 |       |         |       | 1,186,490 |       |  |       | 1,251,526 |       |  |       | 1,390,072 |      
|                       | Average unit volume per company- operated restaurant                                  |                                                                            |       | 874   |           |       |  | 862   |           |       |         | 792   |           |       |  | 763   |           |       |  | 763   |          
|                       | Percentage increase (decrease) in comparable company-operated
    restaurant sales(3) |                                                                            |       | (0.2  | )%        |       |  | 7.0   | %         |       |         | 2.5   | %         |       |  | (2.2  | )%        |       |  | 0.1   | %        
|                       |                                                                                       | Restaurant operating costs as a percentage of company-operated
    revenue |       |       | 84.5      | %     |  |       | 85.7      | %     |         |       | 90.7      | %     |  |       | 89.5      | %     |  |       | 90.9      | %    

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|                     |                                                                                       |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      |  |     |        |    |  |  |  |  | 
|-------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----- | --- | ------ | --- |  | ---- | ------ | --- | ------- | ---- | ------ | ---- |  | --- | ------ | -- |  |  |  |  | 
|                     |                                                                                       | Fiscal Year Ended January 31,(1)                                           |      
|                     |                                                                                       |                                                                            |      
|                     |                                                                                       | 2006                                                                       |       |     | 2005   |     |  | 2004 |        |     | 2003(4) |      |        | 2002 | 
|                     |                                                                                       |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      | 
|La Salsa Restaurants |                                                                                       |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      |  |     |        |    |  | 
|                     | Restaurants open (at end of fiscal year):                                             |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      |  |     |        |    |  |  | 
|                     |                                                                                       | Company-operated                                                           |       |     | 59     |     |  |      | 62     |     |         |      | 61     |      |  |     | 57     |    |  |  |  | 
|                     |                                                                                       | Franchised and licensed                                                    |       |     | 43     |     |  |      | 39     |     |         |      | 41     |      |  |     | 42     |    |  |  |  | 
|                     |                                                                                       |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      | 
|                     |                                                                                       |                                                                            | Total |     |        | 102 |  |      |        | 101 |         |      |        | 102  |  |     |        | 99 |  |  |  |  | 
|                     |                                                                                       |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      | 
|                     | Restaurant sales:                                                                     |                                                                            |       |     |        |     |  |      |        |     |         |      |        |      |  |     |        |    |  |  | 
|                     |                                                                                       | Company-operated restaurants                                               |       | $   | 47,277 |     |  | $    | 46,950 |     |         | $    | 42,310 |      |  | $   | 38,550 |    |  |  |  | 
|                     |                                                                                       | Franchised and licensed restaurants(2)                                     |       |     | 34,457 |     |  |      | 34,170 |     |         |      | 28,176 |      |  |     | 23,802 |    |  |  |  | 
|                     | Average unit volume per company- operated restaurant                                  |                                                                            |       | 772 |        |     |  | 748  |        |     |         | 723  |        |      |  | 751 |        |    |  |  | 
|                     | Percentage increase (decrease) in comparable company-operated
    restaurant sales(3) |                                                                            |       | 2.6 | %      |     |  | 5.2  | %      |     |         | (1.3 | )%     |      |  | 0.8 | %      |    |  |  | 
|                     |                                                                                       | Restaurant operating costs as a percentage of company-operated
    revenue |       |     | 95.0   | %   |  |      | 97.6   | %   |         |      | 94.7   | %    |  |     | 87.9   | %  |  |  |  | 






|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our fiscal year is 52 or 53 weeks, ending on the last
    Monday in January. For clarity of presentation, we generally
    label all fiscal years presented as if the fiscal year ended
    January 31. Fiscal 2006 includes 52 weeks. Fiscal 2005
    includes 53 weeks. Fiscal 2004, 2003 and 2002 include
    52 weeks.
|   
|(2) | Franchisee restaurant operations are not included in our
    Consolidated Financial Statements; however, franchisee sales
    result in royalties and rental income, which are included in
    franchised and licensed revenues.                                                                                          
|   
|(3) | Includes only restaurants open throughout the full years being
    compared.                                                                                                                                                                                                                                              
|   
|(4) | Fiscal 2003 includes operating results of La Salsa from the
    date of the SBRG acquisition, March 1, 2002.                                                                                                                                                                                                              

26



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

10-K.


Overview






| |   |                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Consolidated revenue decreased 0.1%, to $1,518,347 in fiscal
    2006 (a 52-week year)
    from $1,519,881 in fiscal 2005 (a
    53-week year).                                                                                                                                                                                                                                  
|
| |  | Carls Jr. same-store sales increased for the sixth
    consecutive year in fiscal 2006, growing 2.2% at
    company-operated restaurants, following a 7.7% increase in
    fiscal 2005.                                                                                                                                                                                         
|
| |  | Hardees same-store sales decreased 0.2% at
    company-operated restaurants in fiscal 2006, following a 7.0%
    increase in fiscal 2005.                                                                                                                                                                                                                                       
|
| |  | Annual average unit volume increased 3.1%, to $1,341, for
    Carls Jr. company-operated restaurants and increased 1.4%,
    to $874, for Hardees company-operated restaurants.                                                                                                                                                                                                
|
| |  | Carls Jr. total restaurant operating costs as a percentage
    of company-operated revenue decreased 230 basis points to
    76.6% in fiscal 2006, as compared to 78.9% in fiscal 2005.                                                                                                                                                                                         
|
| |  | Hardees total restaurant operating costs as a percentage
    of company-operated revenue decreased 120 basis points to
    84.5% in fiscal 2006, as compared to 85.7% in fiscal 2005.                                                                                                                                                                                           
|
| |  | Income before income taxes and discontinued operations increased
    $40,181, or 235.4%, reaching $57,251 in fiscal 2006.                                                                                                                                                                                                                                                        
|
| |  | Net income grew to $194,582, or $2.70 per diluted share.
    This represents an increase of $176,566 over the prior year net
    income of $18,016, or $0.30 per diluted share. Net income
    in fiscal 2006 includes an income tax benefit of $137,331
    attributable primarily to the reversal of a previously recorded
    valuation allowance against deferred tax assets.
|
| |  | During fiscal 2006, we repaid a total of $39,902 of the term
    loan portion of our credit facility.                                                                                                                                                                                                                                                                            
|
| |  | On April 21, 2005, we amended our credit facility to permit
    us to pay cash dividends, subject to certain limitations. This
    amendment to the Facility also resulted in a 0.50% decrease in
    the borrowing rate under our term loan, a 0.25% decrease in the
    borrowing rate on revolving loans and a 0.25% decrease in our
    letter of credit fee rate.           
|
| |  | During fiscal 2006, we declared cash dividends of $0.04 per
    share of our common stock each quarter for a total of
    $0.16 per share.                                                                                                                                                                                                                                       





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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








| |                             
| | ----------------------------
| | Critical Accounting Policies







| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimation of future cash flows used to assess the
    recoverability of long-lived assets, including goodwill, and to
    establish the estimated liability for closing restaurants and
    subsidizing lease payments of franchisees;      
|
| |  | estimation, using actuarially determined methods, of our
    self-insured claim losses under our workers compensation,
    general and auto liability insurance programs;                                                                   
|
| |  | determination of appropriate estimated liabilities for loss
    contingencies;                                                                                                                                                               
|
| |  | determination of appropriate assumptions to use in evaluating
    leases for capital versus operating lease treatment,
    establishing depreciable lives for leasehold improvements and
    establishing straight-line rent expense periods;
|
| |  | estimation of the appropriate allowances associated with
    franchise and license receivables and liabilities for franchise
    subleases;                                                                                                  
|
| |  | determination of the appropriate assumptions to use to estimate
    the fair value of stock-based compensation for purposes of
    disclosures of pro forma net income; and                                                                  
|
| |  | estimation of our net deferred income tax asset valuation
    allowance.                                                                                                                                                                     





| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | Impairment of Property and Equipment and Other Amortizable
    Long-Lived Assets Held and Used, Held for Sale or To Be Disposed
    of Other Than By Sale



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)












Impairment of Goodwill




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










| |                                            
| | -------------------------------------------
| | Estimated Liability for Closing Restaurants







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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




| |                                       
| | --------------------------------------
| | Estimated Liability for Self-Insurance







| |                   
| | ------------------
| | Loss Contingencies

Accounting for Contingencies,






| |                                 
| | --------------------------------
| | Accounting for Lease Obligations



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








| |                                   
| | ----------------------------------
| | Franchised and Licensed Operations









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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)
















| |                         
| | ------------------------
| | Stock-Based Compensation

stock-based Accounting for Stock Issued to


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Employees, Accounting for
Stock-Based Compensation


Share-Based Payment,




| |                                                
| | -----------------------------------------------
| | Valuation Allowance for Net Deferred Tax Assets







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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




Restaurant Portfolio Strategy




Business Strategy






| |   |                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | remain focused on restaurant fundamentals  quality,
    service and cleanliness;                                                         
|
| |  | offer premium products that compete on quality and taste;                                                                                 
|
| |  | build on the strength of the Carls Jr. brand, including
    dual-branding opportunities with Green Burrito;                              
|
| |  | continue to execute and refine the Hardees turnaround
    program, including testing of dual-branding opportunities with
    Red Burrito;
|
| |  | control costs while increasing revenues;                                                                                                  
|
| |  | leverage our infrastructure and marketing presence to build out
    existing core markets; and                                            
|
| |  | strengthen our franchise system and pursue further franchising
    opportunities.                                                         

Franchise Operations






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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




Operating Review




|                                                              |                                                  |                                     |      |      |       |  |      |      |       |  |      |      |       | 
|------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------- | ---- | ---- | ----- |  | ---- | ---- | ----- |  | ---- | ---- | ----- | 
|                                                              |                                                  | Fiscal Year Ended January 31,       |     
|                                                              |                                                  |                                     |     
|                                                              |                                                  | 2006                                |      |      | 2005  |  |      | 2004 |      
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|Revenue:                                                      |                                                  |                                     |      |      |       |  |      |      |       |  |      |     
|                                                              | Company-operated restaurants                     |                                     |      | 79.7 | %     |  |      | 80.1 | %     |  |      | 80.9 | %    
|                                                              | Franchised and licensed restaurants and other    |                                     |      | 20.3 |       |  |      | 19.9 |       |  |      | 19.1 |      
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|                                                              |                                                  | Total revenue                       |      |      | 100.0 |  |      |      | 100.0 |  |      |      | 100.0 | 
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|Operating costs and expenses:                                 |                                                  |                                     |      |      |       |  |      |      |       |  |      |     
|                                                              | Restaurant operating costs(1):                   |                                     |      |      |       |  |      |      |       |  |      |      |      
|                                                              |                                                  | Food and packaging                  |      |      | 29.3  |  |      |      | 29.6  |  |      |      | 29.8  | 
|                                                              |                                                  | Payroll and other employee benefits |      |      | 29.5  |  |      |      | 31.0  |  |      |      | 32.4  | 
|                                                              |                                                  | Occupancy and other                 |      |      | 22.4  |  |      |      | 22.5  |  |      |      | 23.6  | 
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|                                                              |                                                  | Total restaurant operating costs    |      |      | 81.2  |  |      |      | 83.0  |  |      |      | 85.8  | 
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|                                                              | Franchised and licensed restaurants and other(2) |                                     |      | 77.2 |       |  |      | 75.2 |       |  |      | 77.7 |      
|                                                              | Advertising(1)                                   |                                     |      | 5.9  |       |  |      | 5.9  |       |  |      | 6.2  |      
|                                                              | General and administrative                       |                                     |      | 9.3  |       |  |      | 9.1  |       |  |      | 7.6  |      
|                                                              | Facility action charges, net                     |                                     |      | 0.5  |       |  |      | 0.9  |       |  |      | 1.3  |      
|                                                              | Impairment of goodwill                           |                                     |      |     |       |  |      |     |       |  |      | 2.4  |      
|Operating income (loss)                                       |                                                  |                                     | 5.1  |      |       |  | 3.7  |      |       |  | (0.6 | )   
|Interest expense                                              |                                                  |                                     | (1.5 | )    |       |  | (2.4 | )    |       |  | (2.8 | )   
|Other income (expense), net                                   |                                                  |                                     | 0.2  |      |       |  | (0.2 | )    |       |  |     |     
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|Income (loss) before income taxes and discontinued operations |                                                  |                                     | 3.8  |      |       |  | 1.1  |      |       |  | (3.4 | )   
|Income tax (benefit) expense                                  |                                                  |                                     | (9.0 | )    |       |  | 0.1  |      |       |  | (0.2 | )   
|                                                              |                                                  |                                     |      |      |       |  |      |      |      
|Income (loss) from continuing operations                      |                                                  |                                     | 12.8 | %    |       |  | 1.2  | %    |       |  | (3.6 | )%  
|                                                              |                                                  |                                     |      |      |       |  |      |      |      






|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|(1) | As a percentage of revenue from company-operated restaurants.                     
|   
|(2) | As a percentage of revenue from franchised and licensed
    restaurants and other.

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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |   |    |      |      |   |           |         |         | 
|-------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------- | ------- | ------- | -------- | - | ------- | -------- | ------- | - | -------- | ------ | ------ | --------------- | ------- | ----- | ----- | - | -- | ---- | ---- | - | --------- | ------- | ------- | 
|                                                               |                                                            | Fiscal 2006                                                   |        
|                                                               |                                                            |                                                               |        
|                                                               |                                                            | Carls Jr.                                                    |         |         | Hardees |   |         | La Salsa |         |   | Other(A) |        |        | Eliminations(B) |         |       | Total |  
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Company-operated revenue                                       |                                                            | $                                                             | 574,663 |         |          | $ | 587,082 |          |         | $ | 47,277   |        |        | $               | 434     |       |       | $ |   |      |      | $ | 1,209,456 |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Restaurant operating costs:                                    |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |   |    |      |      |   |           |        
|                                                               | Food and packaging                                         |                                                               |         | 166,863 |          |   |         | 174,611  |         |   |          | 12,617 |        |                 |         | 148   |       |   |    |     |      |   |           | 354,239 |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 150,559 |          |   |         | 190,486  |         |   |          | 15,722 |        |                 |         | 193   |       |   |    |     |      |   |           | 356,960 |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 122,859 |          |   |         | 131,149  |         |   |          | 16,559 |        |                 |         | 149   |       |   |    |     |      |   |           | 270,716 |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|                                                               |                                                            | Total restaurant operating costs                              |         |         | 440,281  |   |         |          | 496,246 |   |          |        | 44,898 |                 |         |       | 490   |   |    |      |     |   |           |         | 981,915 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Franchising and licensed restaurants and other revenues:       |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |   |    |      |      |   |           |        
|                                                               | Royalties                                                  |                                                               |         | 26,224  |          |   |         | 42,050   |         |   |          | 1,754  |        |                 |         | 433   |       |   |    | (86  | )    |   |           | 70,375  |        
|                                                               | Distribution centers                                       |                                                               |         | 179,222 |          |   |         | 24,458   |         |   |          |       |        |                 |         |      |       |   |    | (139 | )    |   |           | 203,541 |        
|                                                               | Rent                                                       |                                                               |         | 20,968  |          |   |         | 7,121    |         |   |          |       |        |                 |         |      |       |   |    |     |      |   |           | 28,089  |        
|                                                               | Retail sales of variable interest entity                   |                                                               |         |        |          |   |         |         |         |   |          |       |        |                 |         | 4,279 |       |   |    |     |      |   |           | 4,279   |        
|                                                               | Other                                                      |                                                               |         | 1,684   |          |   |         | 798      |         |   |          | 125    |        |                 |         |      |       |   |    |     |      |   |           | 2,607   |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other revenues |         |         | 228,098  |   |         |          | 74,427  |   |          |        | 1,879  |                 |         |       | 4,712 |   |    |      | (225 | ) |           |         | 308,891 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Franchising and licensed restaurants and other expenses:       |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |   |    |      |      |   |           |        
|                                                               | Administrative expense (including provision for bad debts) |                                                               |         | 4,609   |          |   |         | 5,169    |         |   |          | 1,389  |        |                 |         |      |       |   |    |     |      |   |           | 11,167  |        
|                                                               | Distribution centers                                       |                                                               |         | 174,149 |          |   |         | 24,930   |         |   |          |       |        |                 |         |      |       |   |    |     |      |   |           | 199,079 |        
|                                                               | Rent and other occupancy                                   |                                                               |         | 18,213  |          |   |         | 5,959    |         |   |          |       |        |                 |         |      |       |   |    |     |      |   |           | 24,172  |        
|                                                               | Operating costs of variable interest entity                |                                                               |         |        |          |   |         |         |         |   |          |       |        |                 |         | 4,299 |       |   |    | (256 | )    |   |           | 4,043   |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other expenses |         |         | 196,971  |   |         |          | 36,058  |   |          |        | 1,389  |                 |         |       | 4,299 |   |    |      | (256 | ) |           |         | 238,461 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Advertising                                                    |                                                            |                                                               | 34,660  |         |          |   | 35,282  |          |         |   | 1,014    |        |        |                 | 8       |       |       |   |   |      |      |   | 70,964    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|General and administrative                                     |                                                            |                                                               | 46,284  |         |          |   | 75,877  |          |         |   | 7,318    |        |        |                 | 11,623  |       |       |   |   |      |      |   | 141,102   |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Facility action charges, net                                   |                                                            |                                                               | 1,792   |         |          |   | 4,653   |          |         |   | 1,544    |        |        |                 | 36      |       |       |   |   |      |      |   | 8,025     |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Operating income (loss)                                        |                                                            | $                                                             | 82,773  |         |          | $ | 13,393  |          |         | $ | (7,007   | )      |        | $               | (11,310 | )     |       | $ | 31 |      |      | $ | 77,880    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |  
|Company-operated average unit volume (trailing-13 periods)     |                                                            |                                                               | 1,341   |         |          |   | 874     |          |         |   | 772      |        |        |                 |         |       |       |   |    |      |      |   |           |        
|Franchise-operated average unit volume (trailing-13 periods)   |                                                            |                                                               | 1,160   |         |          |   | 897     |          |         |   | 897      |        |        |                 |         |       |       |   |    |      |      |   |           |        
|Average check (actual $)                                       |                                                            |                                                               | 6.22    |         |          |   | 4.76    |          |         |   | 10.15    |        |        |                 |         |       |       |   |    |      |      |   |           |        
|Company-operated same-store sales increase (decrease)          |                                                            |                                                               | 2.2     | %       |          |   | (0.2    | )%       |         |   | 2.6      | %      |        |                 |         |       |       |   |    |      |      |   |           |        
|Company-operated same-store transaction decrease               |                                                            |                                                               | (3.0    | )%      |          |   | (2.7    | )%       |         |   | (1.7     | )%     |        |                 |         |       |       |   |    |      |      |   |           |        
|Franchise-operated same-store sales increase (decrease)        |                                                            |                                                               | 0.7     | %       |          |   | (2.2    | )%       |         |   | 3.9      | %      |        |                 |         |       |       |   |    |      |      |   |           |        
|Restaurant operating costs as a % of company-operated revenue: |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |         |       |       |   |    |      |      |   |           |        
|                                                               | Food and packaging                                         |                                                               |         | 29.0    | %        |   |         | 29.7     | %       |   |          | 26.7   | %      |                 |         |       |       |   |    |      |      |   |           |         |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 26.2    | %        |   |         | 32.4     | %       |   |          | 33.3   | %      |                 |         |       |       |   |    |      |      |   |           |         |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 21.4    | %        |   |         | 22.4     | %       |   |          | 35.0   | %      |                 |         |       |       |   |    |      |      |   |           |         |        
|                                                               | Total restaurant operating costs                           |                                                               |         | 76.6    | %        |   |         | 84.5     | %       |   |          | 95.0   | %      |                 |         |       |       |   |    |      |      |   |           |         |        
|Advertising as a percentage of company- operated revenue       |                                                            |                                                               | 6.0     | %       |          |   | 6.0     | %        |         |   | 2.1      | %      |        |                 |         |       |       |   |    |      |      |   |           |        

37



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |   |   |     |     |   |           |         |           | 
|-------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------- | ------- | ------- | -------- | - | ------- | -------- | ------- | - | -------- | ------ | ------ | --------------- | ----- | ----- | ----- | - | - | --- | --- | - | --------- | ------- | --------- | 
|                                                               |                                                            | Fiscal 2005                                                   |        
|                                                               |                                                            |                                                               |        
|                                                               |                                                            | Carls Jr.                                                    |         |         | Hardees |   |         | La Salsa |         |   | Other(A) |        |        | Eliminations(B) |       |       | Total |  
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Company-operated revenue                                       |                                                            | $                                                             | 567,960 |         |          | $ | 601,068 |          |         | $ | 46,950   |        |        | $               | 1,295 |       |       | $ |  |     |     | $ | 1,217,273 |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Restaurant operating costs:                                    |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |   |   |     |     |   |           |        
|                                                               | Food and packaging                                         |                                                               |         | 166,120 |          |   |         | 180,515  |         |   |          | 12,848 |        |                 |       | 456   |       |   |   |    |     |   |           | 359,939 |          
|                                                               | Payroll and employee benefits                              |                                                               |         | 160,240 |          |   |         | 200,349  |         |   |          | 16,285 |        |                 |       | 531   |       |   |   |    |     |   |           | 377,405 |          
|                                                               | Occupancy and other operating costs                        |                                                               |         | 121,779 |          |   |         | 134,387  |         |   |          | 16,711 |        |                 |       | 417   |       |   |   |    |     |   |           | 273,294 |          
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|                                                               |                                                            | Total restaurant operating costs                              |         |         | 448,139  |   |         |          | 515,251 |   |          |        | 45,844 |                 |       |       | 1,404 |   |   |     |    |   |           |         | 1,010,638 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Franchising and licensed restaurants and other revenues:       |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |   |   |     |     |   |           |        
|                                                               | Royalties                                                  |                                                               |         | 25,426  |          |   |         | 43,414   |         |   |          | 1,732  |        |                 |       | 351   |       |   |   | (66 | )   |   |           | 70,857  |          
|                                                               | Distribution centers                                       |                                                               |         | 176,304 |          |   |         | 18,181   |         |   |          |       |        |                 |       |      |       |   |   |    |     |   |           | 194,485 |          
|                                                               | Rent                                                       |                                                               |         | 22,172  |          |   |         | 9,985    |         |   |          |       |        |                 |       |      |       |   |   |    |     |   |           | 32,157  |          
|                                                               | Retail sales of variable interest entity                   |                                                               |         |        |          |   |         |         |         |   |          |       |        |                 |       | 3,506 |       |   |   |    |     |   |           | 3,506   |          
|                                                               | Other                                                      |                                                               |         | 967     |          |   |         | 524      |         |   |          | 112    |        |                 |       |      |       |   |   |    |     |   |           | 1,603   |          
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other revenues |         |         | 224,869  |   |         |          | 72,104  |   |          |        | 1,844  |                 |       |       | 3,857 |   |   |     | (66 | ) |           |         | 302,608   | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Franchising and licensed restaurants and other expenses:       |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |   |   |     |     |   |           |        
|                                                               | Administrative expense (including provision for bad debts) |                                                               |         | 4,006   |          |   |         | 4,758    |         |   |          | 1,111  |        |                 |       |      |       |   |   |    |     |   |           | 9,875   |          
|                                                               | Distribution centers                                       |                                                               |         | 171,363 |          |   |         | 18,379   |         |   |          |       |        |                 |       |      |       |   |   |    |     |   |           | 189,742 |          
|                                                               | Rent and other occupancy                                   |                                                               |         | 18,040  |          |   |         | 6,540    |         |   |          |       |        |                 |       |      |       |   |   |    |     |   |           | 24,580  |          
|                                                               | Operating costs of variable interest entity                |                                                               |         |        |          |   |         |         |         |   |          |       |        |                 |       | 3,457 |       |   |   | (66 | )   |   |           | 3,391   |          
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other expenses |         |         | 193,409  |   |         |          | 29,677  |   |          |        | 1,111  |                 |       |       | 3,457 |   |   |     | (66 | ) |           |         | 227,588   | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Advertising                                                    |                                                            |                                                               | 34,413  |         |          |   | 36,023  |          |         |   | 1,377    |        |        |                 | 26    |       |       |   |  |     |     |   | 71,839    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|General and administrative                                     |                                                            |                                                               | 52,418  |         |          |   | 79,840  |          |         |   | 6,388    |        |        |                 | 70    |       |       |   |  |     |     |   | 138,716   |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Facility action charges, net                                   |                                                            |                                                               | 2,794   |         |          |   | 7,088   |          |         |   | 4,344    |        |        |                 | 94    |       |       |   |  |     |     |   | 14,320    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Operating income (loss)                                        |                                                            | $                                                             | 61,656  |         |          | $ | 5,293   |          |         | $ | (10,270  | )      |        | $               | 101   |       |       | $ |  |     |     | $ | 56,780    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |  
|Company-operated average unit volume (trailing-13 periods)     |                                                            |                                                               | 1,301   |         |          |   | 862     |          |         |   | 748      |        |        |                 |       |       |       |   |   |     |     |   |           |        
|Franchise-operated average unit volume (trailing-13 periods)   |                                                            |                                                               | 1,146   |         |          |   | 891     |          |         |   | 823      |        |        |                 |       |       |       |   |   |     |     |   |           |        
|Average check (actual $)                                       |                                                            |                                                               | 5.89    |         |          |   | 4.63    |          |         |   | 9.65     |        |        |                 |       |       |       |   |   |     |     |   |           |        
|Company-operated same-store sales increase                     |                                                            |                                                               | 7.7     | %       |          |   | 7.0     | %        |         |   | 5.2      | %      |        |                 |       |       |       |   |   |     |     |   |           |        
|Company-operated same-store transaction increase               |                                                            |                                                               | 1.3     | %       |          |   | 0.2     | %        |         |   | 1.0      | %      |        |                 |       |       |       |   |   |     |     |   |           |        
|Franchise-operated same-store sales increase                   |                                                            |                                                               | 6.6     | %       |          |   | 3.6     | %        |         |   | 3.7      | %      |        |                 |       |       |       |   |   |     |     |   |           |        
|Restaurant operating costs as a % of company-operated revenue: |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |                 |       |       |       |   |   |     |     |   |           |        
|                                                               | Food and packaging                                         |                                                               |         | 29.3    | %        |   |         | 30.0     | %       |   |          | 27.4   | %      |                 |       |       |       |   |   |     |     |   |           |         |          
|                                                               | Payroll and employee benefits                              |                                                               |         | 28.2    | %        |   |         | 33.3     | %       |   |          | 34.6   | %      |                 |       |       |       |   |   |     |     |   |           |         |          
|                                                               | Occupancy and other operating costs                        |                                                               |         | 21.4    | %        |   |         | 22.4     | %       |   |          | 35.6   | %      |                 |       |       |       |   |   |     |     |   |           |         |          
|                                                               | Total restaurant operating costs                           |                                                               |         | 78.9    | %        |   |         | 85.7     | %       |   |          | 97.6   | %      |                 |       |       |       |   |   |     |     |   |           |         |          
|Advertising as a percentage of company-operated revenue        |                                                            |                                                               | 6.1     | %       |          |   | 6.0     | %        |         |   | 2.9      | %      |        |                 |       |       |       |   |   |     |     |   |           |        

38



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |       |     |       |   |           |         |         | 
|-------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------- | ------- | ------- | -------- | - | ------- | -------- | ------- | - | -------- | ------ | ------ | ----- | ----- | --- | ----- | - | --------- | ------- | ------- | 
|                                                               |                                                            | Fiscal 2004                                                   |        
|                                                               |                                                            |                                                               |        
|                                                               |                                                            | Carls Jr.                                                    |         |         | Hardees |   |         | La Salsa |         |   | Other(A) |        |        | Total |      
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Company-operated revenue                                       |                                                            | $                                                             | 523,945 |         |          | $ | 575,238 |          |         | $ | 42,310   |        |        | $     | 1,436 |     |       | $ | 1,142,929 |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Restaurant operating costs:                                    |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |       |     |       |   |           |        
|                                                               | Food and packaging                                         |                                                               |         | 150,732 |          |   |         | 178,137  |         |   |          | 11,340 |        |       |       | 467 |       |   |           | 340,676 |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 152,488 |          |   |         | 203,815  |         |   |          | 13,861 |        |       |       | 536 |       |   |           | 370,700 |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 114,673 |          |   |         | 139,638  |         |   |          | 14,850 |        |       |       | 445 |       |   |           | 269,606 |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|                                                               |                                                            | Total restaurant operating costs                              |         |         | 417,893  |   |         |          | 521,590 |   |          |        | 40,051 |       |       |     | 1,448 |   |           |         | 980,982 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Franchising and licensed restaurants and other revenues:       |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |       |     |       |   |           |        
|                                                               | Royalties                                                  |                                                               |         | 21,794  |          |   |         | 38,348   |         |   |          | 1,623  |        |       |       | 302 |       |   |           | 62,067  |        
|                                                               | Distribution centers                                       |                                                               |         | 155,945 |          |   |         | 20,693   |         |   |          |       |        |       |       |    |       |   |           | 176,638 |        
|                                                               | Rent                                                       |                                                               |         | 22,059  |          |   |         | 7,988    |         |   |          |       |        |       |       |    |       |   |           | 30,047  |        
|                                                               | Other                                                      |                                                               |         | 1,312   |          |   |         | 427      |         |   |          |       |        |       |       |    |       |   |           | 1,739   |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|                                                               |                                                            | Total franchising and licensed restaurants and other revenues |         |         | 201,110  |   |         |          | 67,456  |   |          |        | 1,623  |       |       |     | 302   |   |           |         | 270,491 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Franchising and licensed restaurants and other expenses:       |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |       |     |       |   |           |        
|                                                               | Administrative expense (including provision for bad debts) |                                                               |         | 3,720   |          |   |         | 5,917    |         |   |          | 731    |        |       |       |    |       |   |           | 10,368  |        
|                                                               | Distribution centers                                       |                                                               |         | 152,285 |          |   |         | 20,336   |         |   |          |       |        |       |       |    |       |   |           | 172,621 |        
|                                                               | Rent and other occupancy                                   |                                                               |         | 20,181  |          |   |         | 7,067    |         |   |          |       |        |       |       |    |       |   |           | 27,248  |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|                                                               |                                                            | Total franchising and licensed restaurants and other expenses |         |         | 176,186  |   |         |          | 33,320  |   |          |        | 731    |       |       |     |      |   |           |         | 210,237 | 
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Advertising                                                    |                                                            |                                                               | 34,157  |         |          |   | 35,734  |          |         |   | 1,233    |        |        |       | 30    |     |       |   | 71,154    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|General and administrative                                     |                                                            |                                                               | 39,518  |         |          |   | 62,693  |          |         |   | 4,599    |        |        |       | 670   |     |       |   | 107,480   |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Facility action charges, net                                   |                                                            |                                                               | 2,192   |         |          |   | 15,693  |          |         |   | 564      |        |        |       | (673  | )   |       |   | 17,776    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Impairment of goodwill                                         |                                                            |                                                               |        |         |          |   |        |          |         |   | 34,059   |        |        |       |      |     |       |   | 34,059    |        
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Operating income (loss)                                        |                                                            | $                                                             | 55,109  |         |          | $ | (26,336 | )        |         | $ | (37,304  | )      |        | $     | 263   |     |       | $ | (8,268    | )      
|                                                               |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |      
|Company-operated average unit volume (trailing-13 periods)     |                                                            |                                                               | 1,187   |         |          |   | 792     |          |         |   | 723      |        |        |       |       |     |       |   |           |        
|Franchise-operated average unit volume (trailing-13 periods)   |                                                            |                                                               | 1,074   |         |          |   | 845     |          |         |   | 711      |        |        |       |       |     |       |   |           |        
|Average check (actual $)                                       |                                                            |                                                               | 5.53    |         |          |   | 4.34    |          |         |   | 9.20     |        |        |       |       |     |       |   |           |        
|Company-operated same-store sales increase (decrease)          |                                                            |                                                               | 2.9     | %       |          |   | 2.5     | %        |         |   | (1.3     | )%     |        |       |       |     |       |   |           |        
|Company-operated same-store transaction decrease               |                                                            |                                                               | (1.7    | )%      |          |   | (6.1    | )%       |         |   | (4.9     | )%     |        |       |       |     |       |   |           |        
|Franchise-operated same-store sales increase                   |                                                            |                                                               | 0.6     | %       |          |   | 1.2     | %        |         |   | 1.7      | %      |        |       |       |     |       |   |           |        
|Restaurant operating costs as a % of company-operated revenue: |                                                            |                                                               |         |         |          |   |         |          |         |   |          |        |        |       |       |     |       |   |           |        
|                                                               | Food and packaging                                         |                                                               |         | 28.8    | %        |   |         | 31.0     | %       |   |          | 26.8   | %      |       |       |     |       |   |           |         |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 29.1    | %        |   |         | 35.4     | %       |   |          | 32.8   | %      |       |       |     |       |   |           |         |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 21.9    | %        |   |         | 24.3     | %       |   |          | 35.1   | %      |       |       |     |       |   |           |         |        
|                                                               | Total restaurant operating costs                           |                                                               |         | 79.8    | %        |   |         | 90.7     | %       |   |          | 94.7   | %      |       |       |     |       |   |           |         |        
|Advertising as a percentage of company-operated revenue        |                                                            |                                                               | 6.5     | %       |          |   | 6.2     | %        |         |   | 2.9      | %      |        |       |       |     |       |   |           |        

39



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |   |     |     |     |   |         |        |         | 
|-------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------- | ------- | ------ | -------- | - | ------- | -------- | ------- | - | -------- | ----- | ------ | --------------- | -- | --- | ----- | - | --- | --- | --- | - | ------- | ------ | ------- | 
|                                                               |                                                            | Fourth Quarter Fiscal 2006                                    |        
|                                                               |                                                            |                                                               |        
|                                                               |                                                            | Carls Jr.                                                    |         |        | Hardees |   |         | La Salsa |         |   | Other(A) |       |        | Eliminations(B) |    |     | Total |  
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Company-operated revenue                                       |                                                            | $                                                             | 135,133 |        |          | $ | 131,025 |          |         | $ | 10,265   |       |        | $               | 80 |     |       | $ |    |     |     | $ | 276,503 |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Restaurant operating costs:                                    |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |   |     |     |     |   |         |       
|                                                               | Food and packaging                                         |                                                               |         | 39,403 |          |   |         | 38,899   |         |   |          | 2,795 |        |                 |    | 26  |       |   |     |    |     |   |         | 81,123 |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 32,334 |          |   |         | 43,391   |         |   |          | 3,501 |        |                 |    | 34  |       |   |     |    |     |   |         | 79,260 |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 27,895 |          |   |         | 28,333   |         |   |          | 3,772 |        |                 |    | 24  |       |   |     |    |     |   |         | 60,024 |        
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|                                                               |                                                            | Total restaurant operating costs                              |         |        | 99,632   |   |         |          | 110,623 |   |          |       | 10,068 |                 |    |     | 84    |   |     |     |    |   |         |        | 220,407 | 
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Franchising and licensed restaurants and other revenues:       |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |   |     |     |     |   |         |       
|                                                               | Royalties                                                  |                                                               |         | 6,464  |          |   |         | 9,101    |         |   |          | 405   |        |                 |    | 95  |       |   |     | (18 | )   |   |         | 16,047 |        
|                                                               | Distribution centers                                       |                                                               |         | 43,021 |          |   |         | 4,845    |         |   |          |      |        |                 |    |    |       |   |     | (6  | )   |   |         | 47,860 |        
|                                                               | Rent                                                       |                                                               |         | 5,094  |          |   |         | 1,301    |         |   |          |      |        |                 |    |    |       |   |     |    |     |   |         | 6,395  |        
|                                                               | Retail sales of variable interest entity                   |                                                               |         |       |          |   |         |         |         |   |          |      |        |                 |    | 883 |       |   |     |    |     |   |         | 883    |        
|                                                               | Other                                                      |                                                               |         | 606    |          |   |         | 154      |         |   |          | 94    |        |                 |    |    |       |   |     |    |     |   |         | 854    |        
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other revenues |         |        | 55,185   |   |         |          | 15,401  |   |          |       | 499    |                 |    |     | 978   |   |     |     | (24 | ) |         |        | 72,039  | 
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Franchising and licensed restaurants and other expenses:       |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |   |     |     |     |   |         |       
|                                                               | Administrative expense (including provision for bad debts) |                                                               |         | 998    |          |   |         | 1,407    |         |   |          | 381   |        |                 |    |    |       |   |     |    |     |   |         | 2,786  |        
|                                                               | Distribution centers                                       |                                                               |         | 41,546 |          |   |         | 4,883    |         |   |          |      |        |                 |    |    |       |   |     |    |     |   |         | 46,429 |        
|                                                               | Rent and other occupancy                                   |                                                               |         | 4,418  |          |   |         | 1,308    |         |   |          |      |        |                 |    |    |       |   |     |    |     |   |         | 5,726  |        
|                                                               | Operating costs of variable interest entity                |                                                               |         |       |          |   |         |         |         |   |          |      |        |                 |    | 878 |       |   |     | (6  | )   |   |         | 872    |        
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other expenses |         |        | 46,962   |   |         |          | 7,598   |   |          |       | 381    |                 |    |     | 878   |   |     |     | (6  | ) |         |        | 55,813  | 
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Advertising                                                    |                                                            |                                                               | 6,433   |        |          |   | 8,141   |          |         |   | (30      | )     |        |                 | 4  |     |       |   |    |     |     |   | 14,548  |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|General and administrative                                     |                                                            |                                                               | 11,625  |        |          |   | 19,465  |          |         |   | 1,840    |       |        |                 | 67 |     |       |   |    |     |     |   | 32,997  |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Facility action charges, net                                   |                                                            |                                                               | 547     |        |          |   | 2,552   |          |         |   | 1,133    |       |        |                 | 6  |     |       |   |    |     |     |   | 4,238   |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Operating income (loss)                                        |                                                            | $                                                             | 25,119  |        |          | $ | (1,953  | )        |         | $ | (2,628   | )     |        | $               | 19 |     |       | $ | (18 | )   |     | $ | 20,539  |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |  
|Average check (actual $)                                       |                                                            |                                                               | 6.41    |        |          |   | 4.83    |          |         |   | 10.16    |       |        |                 |    |     |       |   |     |     |     |   |         |       
|Company-operated same-store sales increase                     |                                                            |                                                               | 5.3     | %      |          |   | 2.9     | %        |         |   | 3.7      | %     |        |                 |    |     |       |   |     |     |     |   |         |       
|Company-operated same-store transaction (decrease) increase    |                                                            |                                                               | (0.4    | )%     |          |   | 0.4     | %        |         |   | (0.5     | )%    |        |                 |    |     |       |   |     |     |     |   |         |       
|Franchise-operated same-store sales increase                   |                                                            |                                                               | 4.3     | %      |          |   | 2.9     | %        |         |   | 5.1      | %     |        |                 |    |     |       |   |     |     |     |   |         |       
|Restaurant operating costs as a % of company-operated revenue: |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |    |     |       |   |     |     |     |   |         |       
|                                                               | Food and packaging                                         |                                                               |         | 29.2   | %        |   |         | 29.7     | %       |   |          | 27.2  | %      |                 |    |     |       |   |     |     |     |   |         |        |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 23.9   | %        |   |         | 33.1     | %       |   |          | 34.1  | %      |                 |    |     |       |   |     |     |     |   |         |        |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 20.6   | %        |   |         | 21.6     | %       |   |          | 36.8  | %      |                 |    |     |       |   |     |     |     |   |         |        |        
|                                                               | Total restaurant operating costs                           |                                                               |         | 73.7   | %        |   |         | 84.4     | %       |   |          | 98.1  | %      |                 |    |     |       |   |     |     |     |   |         |        |        
|Advertising as a percentage of company-operated revenue        |                                                            |                                                               | 4.8     | %      |          |   | 6.2     | %        |         |   | (0.3     | )%    |        |                 |    |     |       |   |     |     |     |   |         |       

40



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |   |   |     |     |   |         |        |         | 
|-------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------------------------------------------- | ------- | ------ | -------- | - | ------- | -------- | ------- | - | -------- | ----- | ------ | --------------- | --- | --- | ----- | - | - | --- | --- | - | ------- | ------ | ------- | 
|                                                               |                                                            | Fourth Quarter Fiscal 2005                                    |        
|                                                               |                                                            |                                                               |        
|                                                               |                                                            | Carls Jr.                                                    |         |        | Hardees |   |         | La Salsa |         |   | Other(A) |       |        | Eliminations(B) |     |     | Total |  
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Company-operated revenue                                       |                                                            | $                                                             | 138,821 |        |          | $ | 139,213 |          |         | $ | 10,688   |       |        | $               | 260 |     |       | $ |  |     |     | $ | 288,982 |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Restaurant operating costs:                                    |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |   |   |     |     |   |         |       
|                                                               | Food and packaging                                         |                                                               |         | 40,796 |          |   |         | 42,205   |         |   |          | 3,006 |        |                 |     | 98  |       |   |   |    |     |   |         | 86,105 |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 38,932 |          |   |         | 47,727   |         |   |          | 3,664 |        |                 |     | 112 |       |   |   |    |     |   |         | 90,435 |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 29,895 |          |   |         | 32,920   |         |   |          | 4,145 |        |                 |     | 86  |       |   |   |    |     |   |         | 67,046 |        
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|                                                               |                                                            | Total restaurant operating costs                              |         |        | 109,623  |   |         |          | 122,852 |   |          |       | 10,815 |                 |     |     | 296   |   |   |     |    |   |         |        | 243,586 | 
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Franchising and licensed restaurants and other revenues:       |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |   |   |     |     |   |         |       
|                                                               | Royalties                                                  |                                                               |         | 6,277  |          |   |         | 9,032    |         |   |          | 387   |        |                 |     | 96  |       |   |   | (66 | )   |   |         | 15,726 |        
|                                                               | Distribution centers                                       |                                                               |         | 42,948 |          |   |         | 5,132    |         |   |          |      |        |                 |     |    |       |   |   |    |     |   |         | 48,080 |        
|                                                               | Rent                                                       |                                                               |         | 5,288  |          |   |         | 2,549    |         |   |          |      |        |                 |     |    |       |   |   |    |     |   |         | 7,837  |        
|                                                               | Retail sales of variable interest entity                   |                                                               |         |       |          |   |         |         |         |   |          |      |        |                 |     | 943 |       |   |   |    |     |   |         | 943    |        
|                                                               | Other                                                      |                                                               |         | 180    |          |   |         | 142      |         |   |          |      |        |                 |     |    |       |   |   |    |     |   |         | 322    |        
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other revenues |         |        | 54,693   |   |         |          | 16,855  |   |          |       | 387    |                 |     |     | 1,039 |   |   |     | (66 | ) |         |        | 72,908  | 
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Franchising and licensed restaurants and other expenses:       |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |   |   |     |     |   |         |       
|                                                               | Administrative expense (including provision for bad debts) |                                                               |         | 966    |          |   |         | 1,491    |         |   |          | 266   |        |                 |     |    |       |   |   |    |     |   |         | 2,723  |        
|                                                               | Distribution centers                                       |                                                               |         | 41,661 |          |   |         | 5,244    |         |   |          |      |        |                 |     |    |       |   |   |    |     |   |         | 46,905 |        
|                                                               | Rent and other occupancy                                   |                                                               |         | 4,189  |          |   |         | 1,354    |         |   |          |      |        |                 |     |    |       |   |   |    |     |   |         | 5,543  |        
|                                                               | Operating costs of variable interest entity                |                                                               |         |       |          |   |         |         |         |   |          |      |        |                 |     | 951 |       |   |   | (66 | )   |   |         | 885    |        
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|                                                               |                                                            | Total franchising and licensed restaurants and other expenses |         |        | 46,816   |   |         |          | 8,089   |   |          |       | 266    |                 |     |     | 951   |   |   |     | (66 | ) |         |        | 56,056  | 
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Advertising                                                    |                                                            |                                                               | 6,918   |        |          |   | 8,451   |          |         |   | 325      |       |        |                 | 5   |     |       |   |  |     |     |   | 15,699  |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|General and administrative                                     |                                                            |                                                               | 11,056  |        |          |   | 20,107  |          |         |   | 2,054    |       |        |                 | 60  |     |       |   |  |     |     |   | 33,277  |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Facility action charges, net                                   |                                                            |                                                               | 1,344   |        |          |   | 1,292   |          |         |   | 1,937    |       |        |                 | 2   |     |       |   |  |     |     |   | 4,575   |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Operating income (loss)                                        |                                                            | $                                                             | 17,757  |        |          | $ | (4,723  | )        |         | $ | (4,322   | )     |        | $               | (15 | )   |       | $ |  |     |     | $ | 8,697   |       
|                                                               |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |  
|Average check (actual $)                                       |                                                            |                                                               | 6.03    |        |          |   | 4.71    |          |         |   | 9.77     |       |        |                 |     |     |       |   |   |     |     |   |         |       
|Company-operated same-store sales increase                     |                                                            |                                                               | 4.9     | %      |          |   | 4.4     | %        |         |   | 4.3      | %     |        |                 |     |     |       |   |   |     |     |   |         |       
|Company-operated same-store transaction (decrease) increase    |                                                            |                                                               | (0.4    | )%     |          |   | 0.8     | %        |         |   | (1.2     | )%    |        |                 |     |     |       |   |   |     |     |   |         |       
|Franchise-operated same-store sales increase (decrease)        |                                                            |                                                               | 3.7     | %      |          |   | (1.1    | )%       |         |   | 3.8      | %     |        |                 |     |     |       |   |   |     |     |   |         |       
|Restaurant operating costs as a % of company-operated revenue: |                                                            |                                                               |         |        |          |   |         |          |         |   |          |       |        |                 |     |     |       |   |   |     |     |   |         |       
|                                                               | Food and packaging                                         |                                                               |         | 29.5   | %        |   |         | 30.3     | %       |   |          | 28.1  | %      |                 |     |     |       |   |   |     |     |   |         |        |        
|                                                               | Payroll and employee benefits                              |                                                               |         | 28.0   | %        |   |         | 34.3     | %       |   |          | 34.3  | %      |                 |     |     |       |   |   |     |     |   |         |        |        
|                                                               | Occupancy and other operating costs                        |                                                               |         | 21.5   | %        |   |         | 23.6     | %       |   |          | 38.8  | %      |                 |     |     |       |   |   |     |     |   |         |        |        
|                                                               | Total restaurant operating costs                           |                                                               |         | 79.0   | %        |   |         | 88.2     | %       |   |          | 101.2 | %      |                 |     |     |       |   |   |     |     |   |         |        |        
|Advertising as a percentage of company- operated revenue       |                                                            |                                                               | 5.0     | %      |          |   | 6.1     | %        |         |   | 3.0      | %     |        |                 |     |     |       |   |   |     |     |   |         |       






|    |                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------
|(A) | Other consists of Green Burrito and amounts that we
    do not believe would be proper to allocate to the operating
    segments.



|    |  |                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) |  | Eliminations consists of the elimination of royalty
    revenues and expenses generated between Hardees and a
    variable interest entity franchisee included in our Consolidated
    Financial Statements.

41



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Presentation of Non-GAAP Measurements




| |                
| | ---------------
| | Adjusted EBITDA





|                              |  |            |         |  |          |   |        |          |  |   |        |   |  |       |          |   |  |   |          |  
|----------------------------- |  | ---------- | ------- |  | -------- | - | ------ | -------- |  | - | ------ | - |  | ----- | -------- | - |  | - | -------- | -
|                              |  | 2006       |        
|                              |  |            |        
|                              |  | Carls Jr. |         |  | Hardees |   |        | La Salsa |  |   | Other  |   |  | Total |         
|                              |  |            |         |  |          |   |        |          |  |   |        |   |  |       |         
|Net income (loss)             |  | $          | 77,065  |  |          | $ | (3,782 | )        |  | $ | (6,855 | ) |  | $     | 128,154  |   |  | $ | 194,582  |  
|Interest expense              |  |            | 4,255   |  |          |   | 18,641 |          |  |   | 28     |   |  |       | 92       |   |  |   | 23,016   |  
|Income tax expense (benefit)  |  |            | 1,955   |  |          |   |       |          |  |   | (138   | ) |  |       | (139,148 | ) |  |   | (137,331 | )
|Depreciation and amortization |  |            | 24,958  |  |          |   | 35,473 |          |  |   | 3,558  |   |  |       | 166      |   |  |   | 64,155   |  
|Facility action charges, net  |  |            | 1,792   |  |          |   | 4,653  |          |  |   | 1,544  |   |  |       | 36       |   |  |   | 8,025    |  
|                              |  |            |         |  |          |   |        |          |  |   |        |   |  |       |         
|Adjusted EBITDA               |  | $          | 110,025 |  |          | $ | 54,985 |          |  | $ | (1,863 | ) |  | $     | (10,700  | ) |  | $ | 152,447  |  
|                              |  |            |         |  |          |   |        |          |  |   |        |   |  |       |         

|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |        |   |  |   |         |  
|--------------------------------------------- |  | ---------- | ------ |  | -------- | - | ------- | -------- |  | - | ------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                              |  | 2005       |       
|                                              |  |            |       
|                                              |  | Carls Jr. |        |  | Hardees |   |         | La Salsa |  |   | Other   |   |  | Total |       
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       
|Net income (loss)                             |  | $          | 58,490 |  |          | $ | (32,750 | )        |  | $ | (10,314 | ) |  | $     | 2,590  |   |  | $ | 18,016  |  
|Discontinued operations, excluding impairment |  |            |       |  |          |   |        |          |  |   |        |   |  |       | (252   | ) |  |   | (252    | )
|Interest expense (benefit)                    |  |            | 5,071  |  |          |   | 31,510  |          |  |   | (27     | ) |  |       | 194    |   |  |   | 36,748  |  
|Income tax expense (benefit)                  |  |            | 498    |  |          |   | 73      |          |  |   | 2       |   |  |       | (2,165 | ) |  |   | (1,592  | )
|Depreciation and amortization                 |  |            | 23,875 |  |          |   | 38,782  |          |  |   | 3,965   |   |  |       | 171    |   |  |   | 66,793  |  
|Facility action charges, net                  |  |            | 2,794  |  |          |   | 7,088   |          |  |   | 4,344   |   |  |       | 94     |   |  |   | 14,320  |  
|Premium on early redemption of Senior Notes   |  |            |       |  |          |   | 9,126   |          |  |   |        |   |  |       |       |   |  |   | 9,126   |  
|Impairment of Timber Lodge                    |  |            |       |  |          |   |        |          |  |   |        |   |  |       | 898    |   |  |   | 898     |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       
|Adjusted EBITDA                               |  | $          | 90,728 |  |          | $ | 53,829  |          |  | $ | (2,030  | ) |  | $     | 1,530  |   |  | $ | 144,057 |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       

42



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |        |   |  |   |         |  
|--------------------------------------------- |  | ---------- | ------ |  | -------- | - | ------- | -------- |  | - | ------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                              |  | 2004       |       
|                                              |  |            |       
|                                              |  | Carls Jr. |        |  | Hardees |   |         | La Salsa |  |   | Other   |   |  | Total |       
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       
|Net income (loss)                             |  | $          | 49,319 |  |          | $ | (62,286 | )        |  | $ | (37,253 | ) |  | $     | (3,000 | ) |  | $ | (53,220 | )
|Discontinued operations, excluding impairment |  |            |       |  |          |   |        |          |  |   |        |   |  |       | (89    | ) |  |   | (89     | )
|Interest expense (benefit)                    |  |            | 6,263  |  |          |   | 33,787  |          |  |   | (81     | ) |  |       | (7     | ) |  |   | 39,962  |  
|Income tax expense (benefit)                  |  |            | 721    |  |          |   | (19     | )        |  |   |        |   |  |       | 1,715  |   |  |   | 2,417   |  
|Depreciation and amortization                 |  |            | 26,777 |  |          |   | 41,156  |          |  |   | 3,734   |   |  |       | 407    |   |  |   | 72,074  |  
|Facility action charges, net                  |  |            | 2,192  |  |          |   | 15,693  |          |  |   | 564     |   |  |       | (673   | ) |  |   | 17,776  |  
|Impairment of goodwill                        |  |            |       |  |          |   |        |          |  |   | 34,059  |   |  |       |       |   |  |   | 34,059  |  
|Impairment of Timber Lodge                    |  |            |       |  |          |   |        |          |  |   |        |   |  |       | 2,879  |   |  |   | 2,879   |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       
|Adjusted EBITDA                               |  | $          | 85,272 |  |          | $ | 28,331  |          |  | $ | 1,023   |   |  | $     | 1,232  |   |  | $ | 115,858 |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       



|                                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                     |  | 2006 |          |   | 2005 |   |         | 2004 | 
|                                                                                                     |  |      |          |   |      |   |         |      | 
|Cash flows provided by operating activities                                                          |  | $    | 116,173  |   |      | $ | 112,222 |      |  | $ | 79,764  |  
|Interest expense                                                                                     |  |      | 23,016   |   |      |   | 36,748  |      |  |   | 39,962  |  
|Income tax (benefit) expense                                                                         |  |      | (137,331 | ) |      |   | (1,592  | )    |  |   | 2,417   |  
|Premium on early redemption of Senior Notes                                                          |  |      |         |   |      |   | 9,126   |      |  |   |        |  
|Amortization of loan fees                                                                            |  |      | (3,312   | ) |      |   | (3,637  | )    |  |   | (4,451  | )
|(Provision for) recovery of losses on accounts and notes
    receivable                              |  |      | (176     | ) |      |   | 1,940   |      |  |   | (2,260  | )
|Loss on investments, sale of property and equipment, capital
    leases and extinguishment of debt   |  |      | (3,180   | ) |      |   | (9,676  | )    |  |   | (3,598  | )
|Deferred income taxes                                                                                |  |      | 138,921  |   |      |   | (295    | )    |  |   | (574    | )
|Other non-cash (charges) credits                                                                     |  |      | (276     | ) |      |   | (79     | )    |  |   | 284     |  
|Change in estimated liability for closing restaurants and
    estimated liability for self-insurance |  |      | 13,894   |   |      |   | 4,877   |      |  |   | 10,304  |  
|Net change in refundable income taxes                                                                |  |      | (612     | ) |      |   | 3,366   |      |  |   | (643    | )
|Net change in receivables, inventories, prepaid expenses and
    other current assets                |  |      | 5,002    |   |      |   | (1,766  | )    |  |   | (8,325  | )
|Net change in accounts payable and other current liabilities                                         |  |      | 328      |   |      |   | (7,058  | )    |  |   | 3,550   |  
|Adjusted EBITDA from discontinued operations                                                         |  |      |         |   |      |   | 262     |      |  |   | 108     |  
|Net cash flows from discontinued operations                                                          |  |      |         |   |      |   | (119    | )    |  |   | (572    | )
|                                                                                                     |  |      |          |   |      |   |         |      | 
|Adjusted EBITDA, including discontinued operations                                                   |  |      | 152,447  |   |      |   | 144,319 |      |  |   | 115,966 |  
|Less: Adjusted EBITDA from discontinued operations                                                   |  |      |         |   |      |   | (262    | )    |  |   | (108    | )
|                                                                                                     |  |      |          |   |      |   |         |      | 
|Adjusted EBITDA                                                                                      |  | $    | 152,447  |   |      | $ | 144,057 |      |  | $ | 115,858 |  
|                                                                                                     |  |      |          |   |      |   |         |      | 

43



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Fiscal 2006 Compared with Fiscal 2005 and Fiscal 2005
Compared with Fiscal 2004




| |           
| | ----------
| | Carls Jr.



|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |    |      |  |   |      |  |   |         |         |  |        |         |         |        |   |         |         |  |   |       |       |  |   |        |        | 
|-------------------------- | ----- | -------------------- | --- | --------- | ------------------- |  | --------- | ----- |  |  | ------ | --------- |  | ------ | --------- | -- | ---- |  | - | ---- |  | - | ------- | ------- |  | ------ | ------- | ------- | ------ | - | ------- | ------- |  | - | ----- | ----- |  | - | ------ | ------ | 
|                           |       | Restaurant Portfolio |     |           | Fiscal Year Revenue | 
|                           |       |                      |     |           |                     | 
|                           |       |                      |     | 2006-2005 |                     |  | 2005-2004 |       |  |  |        | 2006-2005 |  |        | 2005-2004 |   
|                           |       | 2006                 |     |           | 2005                |  |           | 2004  |  |  | Change |           |  | Change |           |    | 2006 |  |   | 2005 |  |   | 2004    |         |  | Change |         |         | Change |  
|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |    |      |  |   |      |  |   |         |         |  |        |         |         |        |  
|Company                    |       |                      | 428 |           |                     |  | 428       |       |  |  | 426    |           |  |        |          |    |      |  | 2 |      |  | $ | 574,663 |         |  | $      | 567,960 |         |        | $ | 523,945 |         |  | $ | 6,703 |       |  | $ | 44,015 |       
|Franchised and licensed(a) |       |                      | 621 |           |                     |  | 586       |       |  |  | 580    |           |  |        | 35        |    |      |  | 6 |      |  |   | 228,098 |         |  |        | 224,869 |         |        |   | 201,110 |         |  |   | 3,229 |       |  |   | 23,759 |       
|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |    |      |  |   |      |  |   |         |         |  |        |         |         |        |  
|                           | Total |                      |     | 1,049     |                     |  |           | 1,014 |  |  |        | 1,006     |  |        |           | 35 |      |  |   | 8    |  |   | $       | 802,761 |  |        | $       | 792,829 |        |   | $       | 725,055 |  |   | $     | 9,932 |  |   | $      | 67,774 | 
|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |    |      |  |   |      |  |   |         |         |  |        |         |         |        |  






|    |                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes $179,222, $176,304 and $155,945 of revenues from
    distribution of food, packaging and supplies to franchised and
    licensed restaurants in fiscal 2006, 2005 and 2004, respectively.



| |                             
| | ----------------------------
| | Company-Operated Restaurants

tm tm tm Hand-Scooped same-store




44



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




|                                                                                                |                                                                  |      |      |      |      |  |      |      |  
|----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---- | ---- | ---- | ---- |  | ---- | ---- | -
|                                                                                                |                                                                  | 2006 |      |      | 2005 | 
|                                                                                                |                                                                  |      |      |      |      | 
|Restaurant operating costs as a percentage of company-operated
    revenue for the prior year   |                                                                  |      | 78.9 | %    |      |  | 79.8 | %   
|                                                                                                | Decrease in workers compensation expense                        |      |      | (1.6 | )    |  |      | (0.2 | )
|                                                                                                | Decrease in labor costs, excluding workers compensation         |      |      | (0.4 | )    |  |      | (0.7 | )
|                                                                                                | (Decrease) increase in general liability expense                 |      |      | (0.3 | )    |  |      | 0.1  |  
|                                                                                                | (Decrease) increase in food and packaging costs                  |      |      | (0.3 | )    |  |      | 0.5  |  
|                                                                                                | Decrease in equipment lease expense                              |      |      | (0.2 | )    |  |      | (0.1 | )
|                                                                                                | Increase in utilities expense                                    |      |      | 0.2  |      |  |      |     |  
|                                                                                                | Increase (decrease) in repair and maintenance expense            |      |      | 0.1  |      |  |      | (0.2 | )
|                                                                                                | Increase (decrease) in rent expense, property taxes and licenses |      |      | 0.1  |      |  |      | (0.1 | )
|                                                                                                | Increase (decrease) in depreciation and amortization expense     |      |      | 0.1  |      |  |      | (0.1 | )
|                                                                                                | Increase in cost of promotional items                            |      |      |     |      |  |      | 0.2  |  
|                                                                                                | Increase in asset retirement expense                             |      |      | 0.1  |      |  |      |     |  
|                                                                                                | Other, net                                                       |      |      | (0.1 | )    |  |      | (0.3 | )
|                                                                                                |                                                                  |      |      |      |      | 
|Restaurant operating costs as a percentage of company-operated
    revenue for the current year |                                                                  |      | 76.6 | %    |      |  | 78.9 | %   
|                                                                                                |                                                                  |      |      |      |      | 









point-of


45



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










| |                                    
| | -----------------------------------
| | Franchised and Licensed Restaurants













| |         
| | --------
| | Hardees



46



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |   |         |         |  |   |         |         |   |   |        |        | 
|----------------------- | ----- | -------------------- | ----- | --------- | ------------------- |  | --------- | ----- |  |  | ------ | --------- |  | ------ | --------- | --- | ---- |  | --- | ---- | - | - | ------- | ------- |  | ------ | ------- | ------- | ------ | - | ------- | ------- |  | - | ------- | ------- | - | - | ------ | ------ | 
|                        |       | Restaurant Portfolio |       |           | Fiscal Year Revenue | 
|                        |       |                      |       |           |                     | 
|                        |       |                      |       | 2005-2004 |                     |  | 2005-2004 |       |  |  |        | 2006-2005 |  |        | 2005-2004 |    
|                        |       | 2006                 |       |           | 2005                |  |           | 2004  |  |  | Change |           |  | Change |           |     | 2006 |  |     | 2005 |   |   | 2004    |         |  | Change |         |         | Change |  
|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |  
|Company                 |       |                      | 663   |           |                     |  | 677       |       |  |  | 721    |           |  |        | (14       | )   |      |  | (44 | )    |   | $ | 587,082 |         |  | $      | 601,068 |         |        | $ | 575,238 |         |  | $ | (13,986 | )       |   | $ | 25,830 |       
|Franchised and licensed |       |                      | 1,330 |           |                     |  | 1,357     |       |  |  | 1,400  |           |  |        | (27       | )   |      |  | (43 | )    |   |   | 74,427  |         |  |        | 72,104  |         |        |   | 67,456  |         |  |   | 2,323   |         |   |   | 4,648  |       
|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |  
|                        | Total |                      |       | 1,993     |                     |  |           | 2,034 |  |  |        | 2,121     |  |        |           | (41 | )    |  |     | (87  | ) |   | $       | 661,509 |  |        | $       | 673,172 |        |   | $       | 642,694 |  |   | $       | (11,663 | ) |   | $      | 30,478 | 
|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |  



| |                             
| | ----------------------------
| | Company-Operated Restaurants

tm tm tm tm tm.






|                                                                                                |                                                                  |      |      |      |      |  |      |      |  
|----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---- | ---- | ---- | ---- |  | ---- | ---- | -
|                                                                                                |                                                                  | 2006 |      |      | 2005 | 
|                                                                                                |                                                                  |      |      |      |      | 
|Restaurant operating costs as a percentage of company-operated
    revenue for the prior year   |                                                                  |      | 85.7 | %    |      |  | 90.7 | %   
|                                                                                                | (Decrease) increase in workers compensation expense             |      |      | (0.7 | )    |  |      | 0.1  |  
|                                                                                                | Decrease in general liability expense                            |      |      | (0.4 | )    |  |      | (0.2 | )
|                                                                                                | Increase (decrease) in utilities expense                         |      |      | 0.4  |      |  |      | (0.3 | )
|                                                                                                | Decrease in food and packaging costs                             |      |      | (0.3 | )    |  |      | (1.0 | )
|                                                                                                | Decrease in depreciation and amortization expense                |      |      | (0.3 | )    |  |      | (0.7 | )
|                                                                                                | Decrease in labor costs, excluding workers compensation         |      |      | (0.2 | )    |  |      | (2.2 | )
|                                                                                                | Increase (decrease) in rent expense, property taxes and licenses |      |      | 0.1  |      |  |      | (0.3 | )
|                                                                                                | Decrease in cost of promotional items                            |      |      |     |      |  |      | (0.3 | )
|                                                                                                | Other, net                                                       |      |      | 0.2  |      |  |      | (0.1 | )
|                                                                                                |                                                                  |      |      |      |      | 
|Restaurant operating costs as a percentage of company-operated
    revenue for the current year |                                                                  |      | 84.5 | %    |      |  | 85.7 | %   
|                                                                                                |                                                                  |      |      |      |      | 

47



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










point-of point-of










| |                                    
| | -----------------------------------
| | Franchised and Licensed Restaurants



48



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)












| |         
| | --------
| | La Salsa



|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |        |  |  |        |        |  |        |   |        |  |  |   |     |  |  |   |       | 
|----------------------- |  | -------------------- | --- | --------- | ------------------- |  | --------- | ---- |  |  | ------ | --------- |  | ------ | --------- | - | ---- |  | -- | ---- |  | - | ------ |  |  | ------ | ------ |  | ------ | - | ------ |  |  | - | --- |  |  | - | ----- | 
|                        |  | Restaurant Portfolio |     |           | Fiscal Year Revenue | 
|                        |  |                      |     |           |                     | 
|                        |  |                      |     | 2006-2005 |                     |  | 2005-2004 |      |  |  |        | 2006-2005 |  |        | 2005-2004 |  
|                        |  | 2006                 |     |           | 2005                |  |           | 2004 |  |  | Change |           |  | Change |           |   | 2006 |  |    | 2005 |  |   | 2004   |  |  | Change |        |  | Change |  
|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |        |  |  |        |        |  |        |  
|Company                 |  |                      | 59  |           |                     |  | 62        |      |  |  | 61     |           |  |        | (3        | ) |      |  | 1  |      |  | $ | 47,277 |  |  | $      | 46,950 |  |        | $ | 42,310 |  |  | $ | 327 |  |  | $ | 4,640 | 
|Franchised and licensed |  |                      | 43  |           |                     |  | 39        |      |  |  | 41     |           |  |        | 4         |   |      |  | (2 | )    |  |   | 1,879  |  |  |        | 1,844  |  |        |   | 1,623  |  |  |   | 35  |  |  |   | 221   | 
|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |        |  |  |        |        |  |        |  
|Total                   |  |                      | 102 |           |                     |  | 101       |      |  |  | 102    |           |  |        | 1         |   |      |  | (1 | )    |  | $ | 49,156 |  |  | $      | 48,794 |  |        | $ | 43,933 |  |  | $ | 362 |  |  | $ | 4,861 | 
|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |        |  |  |        |        |  |        |  







49



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)






Consolidated Expenses


Consolidated Variable
Interest Entities






Advertising Expense




50



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




General and
Administrative Expense


















Facility Action
Charges






51



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








Interest Expense




|                                                                           |                        |      |       |        |      |   |       |        |  |   |        |        | 
|-------------------------------------------------------------------------- | ---------------------- | ---- | ----- | ------ | ---- | - | ----- | ------ |  | - | ------ | ------ | 
|                                                                           |                        | 2006 |       |        | 2005 |   |       | 2004   | 
|                                                                           |                        |      |       |        |      |   |       |        | 
|Facility                                                                   |                        | $    | 7,522 |        |      | $ | 6,310 |        |  | $ | 1,146  |       
|Senior subordinated notes due 2009                                         |                        |      |      |        |      |   | 7,855 |        |  |   | 18,250 |       
|Capital lease obligations                                                  |                        |      | 6,257 |        |      |   | 6,950 |        |  |   | 8,503  |       
|2004 convertible subordinated notes                                        |                        |      |      |        |      |   | 73    |        |  |   | 4,206  |       
|2023 convertible subordinated notes                                        |                        |      | 4,200 |        |      |   | 4,258 |        |  |   | 1,385  |       
|Amortization of loan fees                                                  |                        |      | 3,312 |        |      |   | 3,637 |        |  |   | 4,451  |       
|Write-off of unamortized loan fees, term loan due July 2,
    2008         |                        |      | 500   |        |      |   | 1,452 |        |  |   |       |       
|Write-off of unamortized loan fees, term loan repaid
    June 2, 2004      |                        |      |      |        |      |   | 664   |        |  |   |       |       
|Write-off of unamortized loan fees, senior subordinated notes
    due 2009 |                        |      |      |        |      |   | 3,068 |        |  |   |       |       
|Letter of credit fees and other                                            |                        |      | 1,225 |        |      |   | 2,481 |        |  |   | 2,021  |       
|                                                                           |                        |      |       |        |      |   |       |        | 
|                                                                           | Total interest expense |      | $     | 23,016 |      |   | $     | 36,748 |  |   | $      | 39,962 | 
|                                                                           |                        |      |       |        |      |   |       |        | 





52



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Other Income (Expense),
Net




|                                                                                                    |  |                               |       |   |      |   |        |      |  |   |       |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------------- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                                                                    |  | Fiscal Year Ended January 31, |      
|                                                                                                    |  |                               |      
|                                                                                                    |  | 2006                          |       |   | 2005 |   |        | 2004 | 
|                                                                                                    |  |                               |       |   |      |   |        |      | 
|Premium incurred upon early redemption of debt                                                      |  | $                             |      |   |      | $ | (9,126 | )    |  | $ |      |  
|Interest income on notes receivable from franchisees,
    disposition properties and capital leases |  |                               | 1,116 |   |      |   | 1,784  |      |  |   | 1,147 |  
|Rental income from properties leased to third parties, net                                          |  |                               | 1,352 |   |      |   | 2,060  |      |  |   | 655   |  
|Gains (losses) on the repurchase of convertible subordinated
    notes                              |  |                               |      |   |      |   |       |      |  |   | (708  | )
|Other, net                                                                                          |  |                               | (81   | ) |      |   | 2,320  |      |  |   | (877  | )
|                                                                                                    |  |                               |       |   |      |   |        |      | 
|Total other income (expense), net                                                                   |  | $                             | 2,387 |   |      | $ | (2,962 | )    |  | $ | 217   |  
|                                                                                                    |  |                               |       |   |      |   |        |      | 

point-of


Income Taxes








53



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








Discontinued
Operations




54



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Fiscal Fourth Quarter 2006 Compared with Fiscal Fourth
Quarter 2005


Carls Jr.


Company-Operated
Restaurants




|                                                                                                |                                                          |  |      |      |  
|----------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  | ---- | ---- | -
|Restaurant operating costs as a percentage of company-operated
    revenue for the prior year   |                                                          |  | 79.0 | %   
|                                                                                                | Decrease in workers compensation expense                |  |      | (3.3 | )
|                                                                                                | Decrease in labor costs, excluding workers compensation |  |      | (0.8 | )
|                                                                                                | Decrease in general liability insurance expense          |  |      | (0.7 | )
|                                                                                                | Decrease in rent and property taxes                      |  |      | (0.3 | )
|                                                                                                | Increase in banking expenses                             |  |      | 0.3  |  
|                                                                                                | Increase in utilities expense                            |  |      | 0.3  |  
|                                                                                                | Decrease in equipment lease expense                      |  |      | (0.3 | )
|                                                                                                | Decrease in repairs and maintenance expense              |  |      | (0.2 | )
|                                                                                                | Increase in depreciation and amortization expense        |  |      | 0.2  |  
|                                                                                                | Decrease in food and packaging costs                     |  |      | (0.2 | )
|                                                                                                | Increase in asset retirement expense                     |  |      | 0.2  |  
|                                                                                                | Decrease in training material expense                    |  |      | (0.2 | )
|                                                                                                | Other, net                                               |  |      | (0.3 | )
|                                                                                                |                                                          |  |     
|Restaurant operating costs as a percentage of company-operated
    revenue for the current year |                                                          |  | 73.7 | %   
|                                                                                                |                                                          |  |     











55



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




point-of










Franchised and Licensed
Restaurants




Hardees


Company-Operated
Restaurants




|                                                                                                |                                                          |  |      |      |  
|----------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  | ---- | ---- | -
|Restaurant operating costs as a percentage of company-operated
    revenue                      |                                                          |  | 88.2 | %   
|                                                                                                | Decrease in general liability insurance expense          |  |      | (1.6 | )
|                                                                                                | Decrease in workers compensation expense                |  |      | (0.7 | )
|                                                                                                | Decrease in repair and maintenance expense               |  |      | (0.7 | )
|                                                                                                | Decrease in food and packaging costs                     |  |      | (0.6 | )
|                                                                                                | Increase in utilities expense                            |  |      | 0.6  |  
|                                                                                                | Decrease in labor costs, excluding workers compensation |  |      | (0.5 | )
|                                                                                                | Decrease in depreciation and amortization expense        |  |      | (0.3 | )
|                                                                                                | Decrease in equipment lease expense                      |  |      | (0.3 | )
|                                                                                                | Other, net                                               |  |      | 0.3  |  
|                                                                                                |                                                          |  |     
|Restaurant operating costs as a percentage of company-operated
    revenue for the current year |                                                          |  | 84.4 | %   
|                                                                                                |                                                          |  |     

56



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)














point-of


point-of


Franchised and Licensed
Restaurants






La Salsa




57



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Accounting Pronouncements Not Yet Adopted


Share-Based Payment Statement of Cash
Flows


modified-retrospective




Inventory
Costs


Accounting
Changes and Error Corrections


13-1, Accounting for Rental Costs Incurred during a Construction
Period


58



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




Impact of Inflation




Seasonality




Competition


10-K,


Liquidity and Capital Resources










59



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








Accounting for Derivative Instruments and
Hedging Activities






10b5-1 10b5-1


60



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)






10-K.








61



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










|                                                            |            |      |        |        |      |   |        |        | 
|----------------------------------------------------------- | ---------- | ---- | ------ | ------ | ---- | - | ------ | ------ | 
|                                                            |            | 2006 |        |        | 2005 |  
|                                                            |            |      |        |        |      |  
|New restaurants (including restaurants under development)   |            |      |        |        |      |   |        |       
|                                                            | Carls Jr. |      | $      | 8,739  |      |   | $      | 8,945  | 
|                                                            | Hardees   |      |        | 13,118 |      |   |        | 4,318  | 
|                                                            | La Salsa   |      |        | 173    |      |   |        | 1,417  | 
|Remodels/ Dual-branding (including construction in process) |            |      |        |        |      |   |        |       
|                                                            | Carls Jr. |      |        | 3,417  |      |   |        | 1,047  | 
|                                                            | Hardees   |      |        | 5,251  |      |   |        | 9,303  | 
|                                                            | La Salsa   |      |        | 131    |      |   |        | 27     | 
|Other restaurant additions                                  |            |      |        |        |      |   |        |       
|                                                            | Carls Jr. |      |        | 11,712 |      |   |        | 9,821  | 
|                                                            | Hardees   |      |        | 19,889 |      |   |        | 16,162 | 
|                                                            | La Salsa   |      |        | 588    |      |   |        | 2,260  | 
|Corporate/other                                             |            |      | 5,458  |        |      |   | 5,321  |       
|                                                            |            |      |        |        |      |  
|Total                                                       |            | $    | 68,476 |        |      | $ | 58,621 |       
|                                                            |            |      |        |        |      |  

point-of


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)






Long-Term Obligations


Contractual Cash
Obligations




|                                      |                                    |                         |         |           |          |   |        |           |       |   |           |         |  |         |         |         |  |   |         |         | 
|------------------------------------- | ---------------------------------- | ----------------------- | ------- | --------- | -------- | - | ------ | --------- | ----- | - | --------- | ------- |  | ------- | ------- | ------- |  | - | ------- | ------- | 
|                                      |                                    | Payments Due by Periods |        
|                                      |                                    |                         |        
|                                      |                                    |                         |         | Less Than |          |   |        |           | After |  
|                                      |                                    | Total                   |         |           | One Year |   |        | 1-3 Years |       |   | 3-5 Years |         |  | 5 Years |        
|                                      |                                    |                         |         |           |          |   |        |           |       |   |           |         |  |         |        
|Long-term debt(1)                     |                                    | $                       | 212,978 |           |          | $ | 9,247  |           |       | $ | 98,058    |         |  | $       | 73      |         |  | $ | 105,600 |        
|Capital lease obligations(2)(3)       |                                    |                         | 82,413  |           |          |   | 10,584 |           |       |   | 20,672    |         |  |         | 18,840  |         |  |   | 32,317  |        
|Operating leases(2)                   |                                    |                         | 594,157 |           |          |   | 85,729 |           |       |   | 151,189   |         |  |         | 109,871 |         |  |   | 247,368 |        
|Unconditional purchase obligations(4) |                                    |                         | 54,376  |           |          |   | 51,678 |           |       |   | 2,133     |         |  |         | 470     |         |  |   | 95      |        
|                                      |                                    |                         |         |           |          |   |        |           |       |   |           |         |  |         |        
|                                      | Total contractual cash obligations |                         | $       | 943,924   |          |   | $      | 157,238   |       |   | $         | 272,052 |  |         | $       | 129,254 |  |   | $       | 385,380 | 
|                                      |                                    |                         |         |           |          |   |        |           |       |   |           |         |  |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Assumes holders of the 2023 Convertible Notes do not exercise
    redemption rights in October 2008.                                                                                                                                                                                                                                                                                                                             
|   
|(2) | The amounts reported above as operating leases and capital lease
    obligations include leases contained in the estimated liability
    for closing restaurants and leases for which we are the obligee
    to the property owner and sublease to franchisees. Additional
    information regarding operating leases and capital lease
    obligations can be found in Note 9 of Notes to Consolidated
    Financial Statements.
|   
|(3) | Represents the undiscounted value of capital lease payments.                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Unconditional purchase obligations include contracts for goods
    and services, primarily related to system restaurant operations
    and contractual commitments for marketing and sponsorship
    arrangements.                                                                                                                                                                                                               

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




Other Commercial
Commitments


|                                                           |                                    |                                             |        |        |           |   |        |        |  |   |        |        |  |   |     |     | 
|---------------------------------------------------------- | ---------------------------------- | ------------------------------------------- | ------ | ------ | --------- | - | ------ | ------ |  | - | ------ | ------ |  | - | --- | --- | 
|                                                           |                                    | Amount of Commitment Expirations Per Period |       
|                                                           |                                    |                                             |       
|                                                           |                                    | Total                                       |        |        |          
|                                                           |                                    | Amounts                                     |        |        | Less Than |   |        | 1-3    |  |   | 3-5    |       
|                                                           |                                    | Committed                                   |        |        | One Year  |   |        | Years  |  |   | Years  |       
|                                                           |                                    |                                             |        |        |           |   |        |        |  |   |        |       
|Standby letters of credit under our Senior Credit Facility |                                    | $                                           | 61,607 |        |           | $ | 48,384 |        |  | $ | 13,223 |        |  | $ |    |    
|Guarantees                                                 |                                    |                                             | 785    |        |           |   | 42     |        |  |   | 442    |        |  |   | 301 |    
|                                                           |                                    |                                             |        |        |           |   |        |        |  |   |        |       
|                                                           | Total other commercial commitments |                                             | $      | 62,392 |           |   | $      | 48,426 |  |   | $      | 13,665 |  |   | $   | 301 | 
|                                                           |                                    |                                             |        |        |           |   |        |        |  |   |        |       

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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk

Interest Rate Risk






Commodity Price Risk









|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



|    |                                                 
|--- | ------------------------------------------------
|(a) | Evaluation of Disclosure Controls and Procedures



10-K,


65



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##### Table of Contents



13a-15(e) 10-K




|    |                                                                     
|--- | --------------------------------------------------------------------
|(b) | Managements Report on Internal Control over
    Financial Reporting

13a-15(f)


Internal
Control  Integrated Framework








|    |                                                         
|--- | --------------------------------------------------------
|(c) | Changes in Internal Control over Financial
    Reporting





|    |                                                            
|--- | -----------------------------------------------------------
|(d) | Report of Independent Registered Public Accounting
    Firm





Managements Report on Internal Control
over Financial Reporting , Internal Control 
Integrated Framework




66



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##### Table of Contents









Internal
Control  Integrated Framework Internal Control  Integrated
Framework















|         |                  
|-------- | -----------------
|Item 9B. | Other Information



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##### Table of Contents






PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant

10-K.


Code of Ethics and Corporate Governance Information


www.ckr.com 8-K, S-K)


www.ckr.com







|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



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##### Table of Contents



Equity Compensation Plan Information




|                                                              |       |                      |           |           |                   |                      |       |                      |  |  |           |           | 
|------------------------------------------------------------- | ----- | -------------------- | --------- | --------- | ----------------- | -------------------- | ----- | -------------------- |  |  | --------- | --------- | 
|                                                              |       |                      |           |           |                   | Number of Securities |      
|                                                              |       |                      |           |           |                   | Remaining Available  |      
|                                                              |       |                      |           |           |                   | for Future Issuance  |      
|                                                              |       | Number of Securities |           |           | Weighted-Average  |                      |       | Under Equity         | 
|                                                              |       | to be Issued Upon    |           |           | Exercise Price of |                      |       | Compensation Plans   | 
|                                                              |       | Exercise of          |           |           | Outstanding       |                      |       | (Excluding           | 
|                                                              |       | Outstanding Options, |           |           | Options, Warrants |                      |       | Securities Reflected | 
|Plan Category                                                 |       | Warrants and Rights  |           |           | and Rights        |                      |       | in Column (a))       | 
|                                                              |       |                      |           |           |                   |                      |       |                      | 
|                                                              |       | (a)                  |           |           | (b)               |                      |       | (c)                  | 
|Equity compensation plans approved by security holders        |       |                      | 5,592,461 |           |                   | $                    | 12.49 |                      |  |  | 2,733,031 |          
|Equity compensation plans not approved by security holders(1) |       |                      | 569,621   |           |                   |                      | 8.06  |                      |  |  | 77,551    |          
|                                                              |       |                      |           |           |                   |                      |       |                      | 
|                                                              | Total |                      |           | 6,162,082 |                   |                      | $     | 12.08                |  |  |           | 2,810,582 | 
|                                                              |       |                      |           |           |                   |                      |       |                      | 






|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents options that are part of a broad-based
    plan as then defined by the New York Stock Exchange. See
    Note 24 of Notes to Consolidated Financial Statements.






|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



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PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules

|       |  |                                                                                                                                                                                                                                                                 |  |      |    | 
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|       |  |                                                                                                                                                                                                                                                                 |  | Page |   
|       |  |                                                                                                                                                                                                                                                                 |  |      |   
|(a)(1) |  | Index to Consolidated Financial Statements:                                                                                                                                                                                                                     |  |      |    | 
|       |  | Report of Independent Registered Public
    Accounting Firm                                                                                                                                                                                                     |  |      | 72 | 
|       |  | Consolidated Balance Sheets  as
    of January 31, 2006 and 2005                                                                                                                                                                                               |  |      | 73 | 
|       |  | Consolidated Statements of
    Operations  for the fiscal years ended
    January 31, 2006, 2005 and 2004                                                                                                                                                      |  |      | 74 | 
|       |  | Consolidated Statements of
    Stockholders Equity  for the fiscal years ended
    January 31, 2006, 2005 and 2004                                                                                                                                            |  |      | 75 | 
|       |  | Consolidated Statements of Cash
    Flows  for the fiscal years ended January 31,
    2006, 2005 and 2004                                                                                                                                                      |  |      | 76 | 
|       |  | Notes to Consolidated Financial
    Statements                                                                                                                                                                                                                  |  |      | 77 | 
|       |  | All 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)(2) |  | Exhibits:An
    Exhibit Index has been filed as a part of this
    Annual Report on Form 10-K beginning on page 116
    hereof and is incorporated herein by reference.                                                                                       |  |      |    | 

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SIGNATURES






| |                      
| | ---------------------
| | CKE Restaurants, Inc.



| |     |                     
| | --- | --------------------
| | By: | /s/ Andrew F. Puzder

| |                                      
| | -------------------------------------
| |                                      
| | Andrew F. Puzder,                    
| | President and Chief Executive Officer





|                                       |  |                                                                                                    |  |               |  | 
|-------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ------------- |  | 
|Signature                              |  | Title                                                                                              |  | Date         
|                                       |  |                                                                                                    |  |              
|                                      
|/s/ Byron AllumbaughByron Allumbaugh   |  | Chairman of the Board                                                                              |  | April 6, 2006
|                                      
|/s/ Andrew F. PuzderAndrew F. Puzder   |  | President and Chief Executive Officer (Principal Executive
    Officer)                            |  | April 6, 2006
|                                      
|/s/ Theodore AbajianTheodore Abajian   |  | Executive Vice President, Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | April 6, 2006
|                                      
|/s/ Peter ChurmPeter Churm             |  | Director                                                                                           |  | April 6, 2006
|                                      
|/s/ Carl L. KarcherCarl L. Karcher     |  | Director                                                                                           |  | April 6, 2006
|                                      
|/s/ Janet E. KerrJanet E. Kerr         |  | Director                                                                                           |  | April 6, 2006
|                                      
|/s/ Daniel D. LaneDaniel D. Lane       |  | Director                                                                                           |  | April 6, 2006
|                                      
|/s/ Ronald B. MaggardRonald B. Maggard |  | Director                                                                                           |  | April 6, 2006
|                                      
|/s/ Daniel PonderDaniel Ponder         |  | Director                                                                                           |  | April 6, 2006
|                                      
|/s/ Frank P. WilleyFrank P. Willey     |  | Director                                                                                           |  | April 6, 2006

71



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












Internal Control 
Integrated Framework g.








72



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             |  |         |          |         | 
|---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------- | -------- | ----------- |  | ------- | -------- | ------- | 
|                                                                 |                                                                                                                                                                                                  | January 31,                                |         |          | January 31, | 
|                                                                 |                                                                                                                                                                                                  | 2006                                       |         |          | 2005        | 
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | (In thousands, except                      |        
|                                                                 |                                                                                                                                                                                                  | par values)                                |        
|ASSETS                                                          
|Current assets:                                                  |                                                                                                                                                                                                  |                                            |         |          |             |  |         |         
|                                                                 | Cash and cash equivalents                                                                                                                                                                        |                                            | $       | 21,343   |             |  | $       | 18,432   |        
|                                                                 | Accounts receivable, net                                                                                                                                                                         |                                            |         | 36,153   |             |  |         | 31,199   |        
|                                                                 | Related party trade receivables                                                                                                                                                                  |                                            |         | 4,987    |             |  |         | 6,760    |        
|                                                                 | Inventories, net                                                                                                                                                                                 |                                            |         | 20,953   |             |  |         | 19,297   |        
|                                                                 | Prepaid expenses                                                                                                                                                                                 |                                            |         | 13,101   |             |  |         | 13,056   |        
|                                                                 | Assets held for sale                                                                                                                                                                             |                                            |         |         |             |  |         | 1,058    |        
|                                                                 | Advertising fund assets, restricted                                                                                                                                                              |                                            |         | 17,226   |             |  |         | 21,951   |        
|                                                                 | Deferred income tax assets, net                                                                                                                                                                  |                                            |         | 31,413   |             |  |         |         |        
|                                                                 | Other current assets                                                                                                                                                                             |                                            |         | 2,251    |             |  |         | 2,278    |        
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | Total current assets                       |         |          | 147,427     |  |         |          | 114,031 | 
|Notes receivable, net                                            |                                                                                                                                                                                                  |                                            | 1,968   |          |             |  | 3,328   |         
|Property and equipment, net                                      |                                                                                                                                                                                                  |                                            | 460,083 |          |             |  | 461,286 |         
|Property under capital leases, net                               |                                                                                                                                                                                                  |                                            | 29,364  |          |             |  | 36,060  |         
|Deferred income tax assets, net                                  |                                                                                                                                                                                                  |                                            | 117,770 |          |             |  |        |         
|Goodwill                                                         |                                                                                                                                                                                                  |                                            | 22,649  |          |             |  | 22,649  |         
|Other assets, net                                                |                                                                                                                                                                                                  |                                            | 25,519  |          |             |  | 31,529  |         
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | Total assets                               |         | $        | 804,780     |  |         | $        | 668,883 | 
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                            
|Current liabilities:                                             |                                                                                                                                                                                                  |                                            |         |          |             |  |         |         
|                                                                 | Current portion of bank indebtedness and other long-term debt                                                                                                                                    |                                            | $       | 9,247    |             |  | $       | 16,066   |        
|                                                                 | Current portion of capital lease obligations                                                                                                                                                     |                                            |         | 4,960    |             |  |         | 5,079    |        
|                                                                 | Accounts payable                                                                                                                                                                                 |                                            |         | 53,883   |             |  |         | 52,484   |        
|                                                                 | Advertising fund liabilities                                                                                                                                                                     |                                            |         | 17,226   |             |  |         | 21,951   |        
|                                                                 | Other current liabilities                                                                                                                                                                        |                                            |         | 89,556   |             |  |         | 93,358   |        
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | Total current liabilities                  |         |          | 174,872     |  |         |          | 188,938 | 
|Bank indebtedness and other long-term debt, less current portion |                                                                                                                                                                                                  |                                            | 98,731  |          |             |  | 138,418 |         
|Convertible subordinated notes due 2023                          |                                                                                                                                                                                                  |                                            | 105,000 |          |             |  | 105,000 |         
|Capital lease obligations, less current portion                  |                                                                                                                                                                                                  |                                            | 46,724  |          |             |  | 52,485  |         
|Other long-term liabilities                                      |                                                                                                                                                                                                  |                                            | 57,072  |          |             |  | 64,374  |         
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | Total liabilities                          |         |          | 482,399     |  |         |          | 549,215 | 
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|Commitments and contingencies (Notes 9, 12, 13 and
    27)       |                                                                                                                                                                                                  |                                            |         |          |             |  |         |         
|Stockholders equity:                                            |                                                                                                                                                                                                  |                                            |         |          |             |  |         |         
|                                                                 | Preferred stock, $.01 par value; authorized
    5,000 shares; none issued or outstanding                                                                                                         |                                            |         |         |             |  |         |         |        
|                                                                 | Series A Junior Participating Preferred stock,
    $.01 par value; 1,500 shares authorized; none issued
    or outstanding                                                                       |                                            |         |         |             |  |         |         |        
|                                                                 | Common stock, $.01 par value; authorized
    100,000 shares; 59,803 shares issued and outstanding
    as of January 31, 2006 and 58,082 shares issued and
    outstanding as of January 31, 2005 |                                            |         | 598      |             |  |         | 581      |        
|                                                                 | Additional paid-in capital                                                                                                                                                                       |                                            |         | 472,834  |             |  |         | 453,391  |        
|                                                                 | Unearned compensation on restricted stock                                                                                                                                                        |                                            |         | (1,816   | )           |  |         |         |        
|                                                                 | Accumulated deficit                                                                                                                                                                              |                                            |         | (149,235 | )           |  |         | (334,304 | )      
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | Total stockholders equity                 |         |          | 322,381     |  |         |          | 119,668 | 
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 
|                                                                 |                                                                                                                                                                                                  | Total liabilities and stockholders equity |         | $        | 804,780     |  |         | $        | 668,883 | 
|                                                                 |                                                                                                                                                                                                  |                                            |         |          |             | 



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |           |           |         | 
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------------- | --------- | --------- | ------- | ------- | --------- | --------- | --------- | ------- | --------- | --------- | ------- | 
|                                                              |                                                                                           | Fiscal Years Ended January 31,           |                                 
|                                                              |                                                                                           |                                          |                                 
|                                                              |                                                                                           | 2006                                     |                                  |           | 2005      |         |         | 2004      |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              |                                                                                           | (In thousands, except per share amounts) |                                 
|Revenue:                                                      |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |          
|                                                              | Company-operated restaurants                                                              |                                          | $                                | 1,209,456 |           |         | $       | 1,217,273 |           |           | $       | 1,142,929 |          
|                                                              | Franchised and licensed restaurants and other                                             |                                          |                                  | 308,891   |           |         |         | 302,608   |           |           |         | 270,491   |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              |                                                                                           | Total revenue                            |                                  |           | 1,518,347 |         |         |           | 1,519,881 |           |         |           | 1,413,420 |        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Operating costs and expenses:                                 |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |          
|                                                              | Restaurant operating costs:                                                               |                                          |                                  |           |           |         |         |           |           |           |         |           |          
|                                                              |                                                                                           | Food and packaging                       |                                  |           | 354,239   |         |         |           | 359,939   |           |         |           | 340,676   |        
|                                                              |                                                                                           | Payroll and other employee benefits      |                                  |           | 356,960   |         |         |           | 377,405   |           |         |           | 370,700   |        
|                                                              |                                                                                           | Occupancy and other                      |                                  |           | 270,716   |         |         |           | 273,294   |           |         |           | 269,606   |        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              |                                                                                           |                                          | Total restaurant operating costs |           |           | 981,915 |         |           |           | 1,010,638 |         |           |           | 980,982 | 
|                                                              | Franchised and licensed restaurants and other                                             |                                          |                                  | 238,461   |           |         |         | 227,588   |           |           |         | 210,237   |          
|                                                              | Advertising                                                                               |                                          |                                  | 70,964    |           |         |         | 71,839    |           |           |         | 71,154    |          
|                                                              | General and administrative                                                                |                                          |                                  | 141,102   |           |         |         | 138,716   |           |           |         | 107,480   |          
|                                                              | Facility action charges, net                                                              |                                          |                                  | 8,025     |           |         |         | 14,320    |           |           |         | 17,776    |          
|                                                              | Impairment of goodwill                                                                    |                                          |                                  |          |           |         |         |          |           |           |         | 34,059    |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              |                                                                                           | Total operating costs and expenses       |                                  |           | 1,440,467 |         |         |           | 1,463,101 |           |         |           | 1,421,688 |        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Operating income (loss)                                       |                                                                                           |                                          | 77,880                           |           |           |         | 56,780  |           |           |           | (8,268  | )        
|Interest expense                                              |                                                                                           |                                          | (23,016                          | )         |           |         | (36,748 | )         |           |           | (39,962 | )        
|Other income (expense), net                                   |                                                                                           |                                          | 2,387                            |           |           |         | (2,962  | )         |           |           | 217     |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Income (loss) before income taxes and discontinued operations |                                                                                           |                                          | 57,251                           |           |           |         | 17,070  |           |           |           | (48,013 | )        
|Income tax (benefit) expense                                  |                                                                                           |                                          | (137,331                         | )         |           |         | (1,592  | )         |           |           | 2,417   |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Income (loss) from continuing operations                      |                                                                                           |                                          | 194,582                          |           |           |         | 18,662  |           |           |           | (50,430 | )        
|Discontinued operations:                                      |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |          
|                                                              | Loss from discontinued operations (net of income tax benefit of
    $0 for 2005 and 2004) |                                          |                                  |          |           |         |         | (646      | )         |           |         | (2,790    | )        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Net income (loss)                                             |                                                                                           | $                                        | 194,582                          |           |           | $       | 18,016  |           |           | $         | (53,220 | )        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Basic income (loss) per common share:                         |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |          
|                                                              | Continuing operations                                                                     |                                          | $                                | 3.29      |           |         | $       | 0.32      |           |           | $       | (0.88     | )        
|                                                              | Discontinued operations                                                                   |                                          |                                  |          |           |         |         | (0.01     | )         |           |         | (0.04     | )        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              | Net income (loss)                                                                         |                                          | $                                | 3.29      |           |         | $       | 0.31      |           |           | $       | (0.92     | )        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Diluted income (loss) per common share:                       |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |          
|                                                              | Continuing operations                                                                     |                                          | $                                | 2.70      |           |         | $       | 0.31      |           |           | $       | (0.88     | )        
|                                                              | Discontinued operations                                                                   |                                          |                                  |          |           |         |         | (0.01     | )         |           |         | (0.04     | )        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              | Net income (loss)                                                                         |                                          | $                                | 2.70      |           |         | $       | 0.30      |           |           | $       | (0.92     | )        
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Dividends per common share                                    |                                                                                           | $                                        | 0.16                             |           |           | $       |        |           |           | $         |        |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|Weighted-average common shares outstanding:                   |                                                                                           |                                          |                                  |           |           |         |         |           |           |           |         |          
|                                                              | Basic                                                                                     |                                          |                                  | 59,226    |           |         |         | 57,615    |           |           |         | 57,536    |          
|                                                              | Dilutive effect of stock options, warrants, convertible notes
    and restricted stock    |                                          |                                  | 14,024    |           |         |         | 1,968     |           |           |         |          |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          
|                                                              | Diluted                                                                                   |                                          |                                  | 73,250    |           |         |         | 59,583    |           |           |         | 57,536    |          
|                                                              |                                                                                           |                                          |                                  |           |           |         |         |           |          



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


FISCAL YEARS ENDED JANUARY 31, 2006, 2005 AND 2004


|                            |                                                                   |                                          |        |        |            |          |     |               |          |             |          |         |   |             |        |                |         |   |        |               |  |   |          |         |   |        |        |       |   |   |         |        |   |   |         |         |  
|--------------------------- | ----------------------------------------------------------------- | ---------------------------------------- | ------ | ------ | ---------- | -------- | --- | ------------- | -------- | ----------- | -------- | ------- | - | ----------- | ------ | -------------- | ------- | - | ------ | ------------- |  | - | -------- | ------- | - | ------ | ------ | ----- | - | - | ------- | ------ | - | - | ------- | ------- | -
|                            |                                                                   |                                          |        |        |            |          |     |               |          | Officer and |          |         |   |             |        |                |         |   |       
|                            |                                                                   |                                          |        |        |            |          |     |               |          | Non-        |          |         |   |             |        |                |         |   |       
|                            |                                                                   |                                          |        |        |            | Unearned |     |               | employee |             |          |         |   |             |        |               
|                            |                                                                   | Common Stock                             |        |        | Additional |          |     | Compensation  |          |             | Director |         |   |             |        | Treasury Stock |         |   | Total  |              
|                            |                                                                   |                                          |        |        | Paid-In    |          |     | On Restricted |          |             | Notes    |         |   | Accumulated |        |                |         |   |        | Stockholders | 
|                            |                                                                   | Shares                                   |        |        | Amount     |          |     | Capital       |          |             | Stock    |         |   | Receivable  |        |                | Deficit |   |        | Shares        |  |   | Amount   |         |   | Equity |       
|                            |                                                                   |                                          |        |        |            |          |     |               |          |             |          |         |   |             |        |                |         |   |        |               |  |   |          |         |   |        |       
|                            |                                                                   | (In thousands, except per share amounts) |       
|Balance at January 31, 2003 |                                                                   |                                          | 58,868 |        |            | $        | 589 |               |          | $           | 463,474  |         |   | $           |       |                |         | $ | (2,530 | )             |  | $ | (298,467 | )       |   |        | (1,585 | )     |   | $ | (10,406 | )      |   | $ | 152,660 |        
|                            | Exercise of stock options                                         |                                          |        | 348    |            |          |     | 3             |          |             |          | 1,215   |   |             |        |               |         |   |        |              |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         | 1,218   |  
|                            | Net loss                                                          |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        |              |  |   |          | (53,220 | ) |        |        |      |   |   |         |       |   |   |         | (53,220 | )
|                            |                                                                   |                                          |        |        |            |          |     |               |          |             |          |         |   |             |        |                |         |   |        |               |  |   |          |         |   |        |       
|Balance at January 31, 2004 |                                                                   |                                          | 59,216 |        |            |          | 592 |               |          |             | 464,689  |         |   |             |       |                |         |   | (2,530 | )             |  |   | (351,687 | )       |   |        | (1,585 | )     |   |   | (10,406 | )      |   |   | 100,658 |        
|                            | Exercise of stock options                                         |                                          |        | 970    |            |          |     | 10            |          |             |          | 4,013   |   |             |        |               |         |   |        |              |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         | 4,023   |  
|                            | Collection of officer and non- employee director notes receivable |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        | 2,530         |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         | 2,530   |  
|                            | Repurchase of common stock                                        |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        |              |  |   |          |        |   |        |        | (519  | ) |   |         | (5,559 | ) |   |         | (5,559  | )
|                            | Retirement of treasury stock                                      |                                          |        | (2,104 | )          |          |     | (21           | )        |             |          | (15,311 | ) |             |        |               |         |   |        |              |  |   |          | (633    | ) |        |        | 2,104 |   |   |         | 15,965 |   |   |         |        |  
|                            | Net income                                                        |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        |              |  |   |          | 18,016  |   |        |        |      |   |   |         |       |   |   |         | 18,016  |  
|                            |                                                                   |                                          |        |        |            |          |     |               |          |             |          |         |   |             |        |                |         |   |        |               |  |   |          |         |   |        |       
|Balance at January 31, 2005 |                                                                   |                                          | 58,082 |        |            |          | 581 |               |          |             | 453,391  |         |   |             |       |                |         |   |       |               |  |   | (334,304 | )       |   |        |       |       |   |   |        |        |   |   | 119,668 |        
|                            | Cash dividends declared ($0.16 per share)                         |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        |              |  |   |          | (9,513  | ) |        |        |      |   |   |         |       |   |   |         | (9,513  | )
|                            | Issuance of restricted stock awards                               |                                          |        | 150    |            |          |     | 1             |          |             |          | 2,003   |   |             |        | (2,004         | )       |   |        |              |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         |        |  
|                            | Amortization of unearned compensation                             |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        | 188            |         |   |        |              |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         | 188     |  
|                            | Exercise of stock options and warrants                            |                                          |        | 1,868  |            |          |     | 19            |          |             |          | 9,464   |   |             |        |               |         |   |        |              |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         | 9,483   |  
|                            | Tax benefit from exercise of stock options                        |                                          |        |       |            |          |     |              |          |             |          | 11,971  |   |             |        |               |         |   |        |              |  |   |          |        |   |        |        |      |   |   |         |       |   |   |         | 11,971  |  
|                            | Repurchase of common stock                                        |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        |              |  |   |          |        |   |        |        | (297  | ) |   |         | (3,998 | ) |   |         | (3,998  | )
|                            | Retirement of treasury stock                                      |                                          |        | (297   | )          |          |     | (3            | )        |             |          | (3,995  | ) |             |        |               |         |   |        |              |  |   |          |        |   |        |        | 297   |   |   |         | 3,998  |   |   |         |        |  
|                            | Net income                                                        |                                          |        |       |            |          |     |              |          |             |          |        |   |             |        |               |         |   |        |              |  |   |          | 194,582 |   |        |        |      |   |   |         |       |   |   |         | 194,582 |  
|                            |                                                                   |                                          |        |        |            |          |     |               |          |             |          |         |   |             |        |                |         |   |        |               |  |   |          |         |   |        |       
|Balance at January 31, 2006 |                                                                   |                                          | 59,803 |        |            | $        | 598 |               |          | $           | 472,834  |         |   | $           | (1,816 | )              |         | $ |       |               |  | $ | (149,235 | )       |   |        |       |       |   | $ |        |        |   | $ | 322,381 |        
|                            |                                                                   |                                          |        |        |            |          |     |               |          |             |          |         |   |             |        |                |         |   |        |               |  |   |          |         |   |        |       



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(In thousands)


|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |        |          |   |          |         |         |  
|------------------------------------- | -------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------------ | -------- | ------- | ------------ | -------- | ------ | -------- | - | -------- | ------- | ------- | -
|                                      |                                                                                              | Fiscal Years Ended January 31,                                                                             |                                          
|                                      |                                                                                              |                                                                                                            |                                          
|                                      |                                                                                              | 2006                                                                                                       |                                           |              | 2005     |         |              | 2004     |       
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|                                      |                                                                                              |                                                                                                            |                                           | (Revised    |          |         | (Revised    |         
|                                      |                                                                                              |                                                                                                            |                                           | See Note 25) |          |         | See Note 25) |         
|Cash flows from operating activities: |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |        |          |   |         
|                                      | Net income (loss)                                                                            |                                                                                                            | $                                         | 194,582      |          |         | $            | 18,016   |        |          | $ | (53,220  | )      
|                                      | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                                                                            |                                           |              |          |         |              |          |        |          |   |          |        
|                                      |                                                                                              | Impairment of goodwill                                                                                     |                                           |              |         |         |              |          |       |          |   |          | 34,059  |        
|                                      |                                                                                              | Depreciation and amortization                                                                              |                                           |              | 64,155   |         |              |          | 66,793 |          |   |          | 72,074  |        
|                                      |                                                                                              | Amortization of loan fees                                                                                  |                                           |              | 3,312    |         |              |          | 3,637  |          |   |          | 4,451   |        
|                                      |                                                                                              | Provision for (recovery of) losses on accounts and notes
    receivable                                    |                                           |              | 176      |         |              |          | (1,940 | )        |   |          | 2,260   |        
|                                      |                                                                                              | (Gain) loss on investments, sale of property and equipment,
    capital leases and extinguishment of debts |                                           |              | 3,180    |         |              |          | 9,676  |          |   |          | 3,598   |        
|                                      |                                                                                              | Facility action charges, net                                                                               |                                           |              | 8,025    |         |              |          | 14,320 |          |   |          | 17,776  |        
|                                      |                                                                                              | Deferred income taxes                                                                                      |                                           |              | (138,921 | )       |              |          | 295    |          |   |          | 574     |        
|                                      |                                                                                              | Other non-cash charges (credits)                                                                           |                                           |              | 276      |         |              |          | 79     |          |   |          | (284    | )      
|                                      |                                                                                              | Change in estimated liability for closing restaurants and
    estimated liability for self-insurance       |                                           |              | (13,894  | )       |              |          | (4,877 | )        |   |          | (10,304 | )      
|                                      |                                                                                              | Net change in refundable income taxes                                                                      |                                           |              | 612      |         |              |          | (3,366 | )        |   |          | 643     |        
|                                      |                                                                                              | Net change in receivables, inventories, prepaid expenses and
    other current assets                      |                                           |              | (5,002   | )       |              |          | 1,766  |          |   |          | 8,325   |        
|                                      |                                                                                              | Net change in accounts payable and other current and long-term
    liabilities                             |                                           |              | (328     | )       |              |          | 7,058  |          |   |          | (3,550  | )      
|                                      |                                                                                              | Operating cash flows of discontinued operations                                                            |                                           |              |         |         |              |          | 765    |          |   |          | 3,362   |        
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|                                      |                                                                                              |                                                                                                            | Net cash provided by operating activities |              |          | 116,173 |              |          |        | 112,222  |   |          |         | 79,764  |  
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|Cash flows from investing activities: |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |        |          |   |         
|                                      | Purchase of property and equipment                                                           |                                                                                                            |                                           | (68,476      | )        |         |              | (58,621  | )      |          |   | (47,613  | )      
|                                      | Proceeds from sales of property and equipment                                                |                                                                                                            |                                           | 7,993        |          |         |              | 12,881   |        |          |   | 18,827   |        
|                                      | Collection of notes receivable                                                               |                                                                                                            |                                           | 898          |          |         |              | 1,527    |        |          |   | 350      |        
|                                      | Increase in cash upon consolidation of variable interest entity                              |                                                                                                            |                                           |             |          |         |              | 100      |        |          |   |         |        
|                                      | Disposition of brand, net of cash surrendered                                                |                                                                                                            |                                           |             |          |         |              | 6,954    |        |          |   |         |        
|                                      | Other investing activities                                                                   |                                                                                                            |                                           | (454         | )        |         |              | 132      |        |          |   | 4,116    |        
|                                      | Investing cash flows of discontinued operations                                              |                                                                                                            |                                           |             |          |         |              | (269     | )      |          |   | (392     | )      
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|                                      |                                                                                              |                                                                                                            | Net cash used in investing activities     |              |          | (60,039 | )            |          |        | (37,296  | ) |          |         | (24,712 | )
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|Cash flows from financing activities: |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |        |          |   |         
|                                      | Net change in bank overdraft                                                                 |                                                                                                            |                                           | 108          |          |         |              | (5,018   | )      |          |   | (2,613   | )      
|                                      | Borrowings under revolving credit facility                                                   |                                                                                                            |                                           | 136,500      |          |         |              | 55,000   |        |          |   | 149,500  |        
|                                      | Repayments of borrowings under revolving credit facility                                     |                                                                                                            |                                           | (143,000     | )        |         |              | (40,500  | )      |          |   | (174,500 | )      
|                                      | Proceeds from credit facility term loan                                                      |                                                                                                            |                                           |             |          |         |              | 230,000  |        |          |   | 25,000   |        
|                                      | Repayment of credit facility term loan                                                       |                                                                                                            |                                           | (39,902      | )        |         |              | (115,411 | )      |          |   | (938     | )      
|                                      | Repayment of senior subordinated notes due 2009                                              |                                                                                                            |                                           |             |          |         |              | (200,000 | )      |          |   |         |        
|                                      | Proceeds from issuance of convertible debt due 2023                                          |                                                                                                            |                                           |             |          |         |              |         |        |          |   | 101,588  |        
|                                      | Repayment of convertible subordinated notes due 2004                                         |                                                                                                            |                                           |             |          |         |              | (22,319  | )      |          |   | (100,000 | )      
|                                      | Repayment of other long-term debt                                                            |                                                                                                            |                                           | (179         | )        |         |              | (152     | )      |          |   | (1,026   | )      
|                                      | Borrowings by consolidated variable interest entity                                          |                                                                                                            |                                           | 75           |          |         |              |         |        |          |   |         |        
|                                      | Repayment of capital lease obligations                                                       |                                                                                                            |                                           | (5,089       | )        |         |              | (7,143   | )      |          |   | (10,715  | )      
|                                      | Collections on officer and non-employee director notes receivable                            |                                                                                                            |                                           |             |          |         |              | 2,530    |        |          |   |         |        
|                                      | Payment of deferred loan fees                                                                |                                                                                                            |                                           | (102         | )        |         |              | (6,193   | )      |          |   | (6,227   | )      
|                                      | Repurchase of common stock                                                                   |                                                                                                            |                                           | (3,998       | )        |         |              | (5,559   | )      |          |   |         |        
|                                      | Exercise of stock options and warrants                                                       |                                                                                                            |                                           | 9,483        |          |         |              | 4,023    |        |          |   | 1,218    |        
|                                      | Dividends paid on common stock                                                               |                                                                                                            |                                           | (7,119       | )        |         |              |         |        |          |   |         |        
|                                      | Financing cash flows of discontinued operations                                              |                                                                                                            |                                           |             |          |         |              | (107     | )      |          |   | (424     | )      
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|                                      |                                                                                              |                                                                                                            | Net cash used in financing activities     |              |          | (53,223 | )            |          |        | (110,849 | ) |          |         | (19,137 | )
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|                                      | Net increase (decrease) in cash and cash equivalents                                         |                                                                                                            |                                           | 2,911        |          |         |              | (35,923  | )      |          |   | 35,915   |        
|                                      | Cash and cash equivalents at beginning of year                                               |                                                                                                            |                                           | 18,432       |          |         |              | 54,355   |        |          |   | 18,440   |        
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       
|                                      | Cash and cash equivalents at end of year                                                     |                                                                                                            | $                                         | 21,343       |          |         | $            | 18,432   |        |          | $ | 54,355   |        
|                                      |                                                                                              |                                                                                                            |                                           |              |          |         |              |          |       



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Fiscal Years Ended January 31, 2005, 2004 and 2003


(Dollars in thousands, except per share amounts)


Note 1  Significant Accounting Policies






| |                        
| | -----------------------
| | Description of Business



Carls Jr.


|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |    |    |  |  |       |       | 
|----------------------- | ----- | ---------- | --- | ----- | -------- |  | ----- | -------- |  |  | ------------- | --- |  | ----- | -- | -- |  |  | ----- | ----- | 
|                        |       | Carls Jr. |     |       | Hardees |  |       | La Salsa |  |  | Green Burrito |     |  | Total |   
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|Company-operated        |       |            | 428 |       |          |  | 663   |          |  |  | 59            |     |  |       | 1  |    |  |  | 1,151 |      
|Franchised and licensed |       |            | 621 |       |          |  | 1,330 |          |  |  | 43            |     |  |       | 15 |    |  |  | 2,009 |      
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|                        | Total |            |     | 1,049 |          |  |       | 1,993    |  |  |               | 102 |  |       |    | 16 |  |  |       | 3,160 | 
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   



| |                                      
| | -------------------------------------
| | Basis of Presentation and Fiscal Year





| |                           
| | --------------------------
| | Variable Interest Entities

Consolidation of Variable Interest Entities,


Accounting
for Franchise Fee Revenue,


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                 
| | ----------------
| | Cash Equivalents





| |            
| | -----------
| | Inventories

first-in,




| |                         
| | ------------------------
| | Deferred Financing Costs

Debtors Accounting for Changes in Line of Credit
or Revolving-Debt Arrangements Debtors Accounting for a Modification or Exchange of
Debt Instruments




| |                     
| | --------------------
| | Assets Held for Sale

Accounting for the Impairment or Disposal of
Long-Lived Assets




| |                       
| | ----------------------
| | Property and Equipment

Accounting for
Leases




| |                  
| | -----------------
| | Capitalized Costs

Accounting for Costs and Initial
Rental Operations of Real Estate Projects


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |         
| | --------
| | Goodwill

Goodwill and Other
Intangible Assets Business Combinations




| |                        
| | -----------------------
| | Facility Action Charges















| |                                    
| | -----------------------------------
| | (i) Impairment of Long-Lived Assets



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                         
| | ------------------------
| | (ii) Store Closure Costs



Accounting for Costs
Associated with Exit or Disposal Activities


.




| |                                                
| | -----------------------------------------------
| | (iii) Gains (Losses) on the Sale of Restaurants





| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | (iv) Amortization of Discount Related to Estimated
    Liability for Closing Restaurants





| |           
| | ----------
| | Guarantees

Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of
SFAS 5, SFAS 57 and SFAS 107 and a rescission of
FASB Interpretation 34


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                   
| | ------------------
| | Loss Contingencies

Accounting for Contingencies




| |               
| | --------------
| | Self-insurance







| |                                  
| | ---------------------------------
| | Leases and Leasehold Improvements







| |                                  
| | ---------------------------------
| | Franchise and Licensed Operations



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












| |                    
| | -------------------
| | Revenue Recognition





| |            
| | -----------
| | Advertising





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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |             
| | ------------
| | Income Taxes





| |            
| | -----------
| | Estimations







| |   |                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimation of future cash flows used to assess the
    recoverability of long-lived assets, including goodwill, and to
    establish the estimated liability for closing restaurants and
    subsidizing lease payments of franchisees;      
|
| |  | estimation, using actuarially determined methods, of our
    self-insured claim losses under our workers compensation,
    general and auto liability insurance programs;                                                                   
|
| |  | determination of appropriate estimated liabilities for loss
    contingencies;                                                                                                                                                               
|
| |  | determination of appropriate assumptions to use in evaluating
    leases for capital versus operating lease treatment,
    establishing depreciable lives for leasehold improvements and
    establishing straight-line rent expense periods;
|
| |  | estimation of the appropriate allowances associated with
    franchise and license receivables and liabilities for franchise
    subleases;                                                                                                  
|
| |  | determination of the appropriate assumptions to use to estimate
    the fair value of stock-based compensation for purposes of
    disclosures of pro forma net income; and                                                                  
|
| |  | estimation of our net deferred income tax asset valuation
    allowance.                                                                                                                                                                     



| |                        
| | -----------------------
| | Income (Loss) Per Share



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                                                    |  |      |         |  |      |   |        |      |  |   |         |  
|--------------------------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                                    |  | 2006 |         |  | 2005 |   |        | 2004 | 
|                                                                                                    |  |      |         |  |      |   |        |      | 
|Net income (loss)                                                                                   |  | $    | 194,582 |  |      | $ | 18,016 |      |  | $ | (53,220 | )
|Weighted-average shares for computation of basic earnings per
    share                             |  |      | 59,226  |  |      |   | 57,615 |      |  |   | 57,536  |  
|Basic net income (loss) per share                                                                   |  | $    | 3.29    |  |      | $ | 0.31   |      |  | $ | (0.92   | )
|                                                                                                    |  |      |         |  |      |   |        |      | 
|Net income (loss)                                                                                   |  | $    | 194,582 |  |      | $ | 18,016 |      |  | $ | (53,220 | )
|Add: Interest and amortization costs for Convertible Notes due
    2023, net of related tax effects |  |      | 3,070   |  |      |   |       |      |  |   |        |  
|                                                                                                    |  |      |         |  |      |   |        |      | 
|Net income (loss) for computation of diluted earnings per share                                     |  | $    | 197,652 |  |      | $ | 18,016 |      |  | $ | (53,220 | )
|                                                                                                    |  |      |         |  |      |   |        |      | 
|Weighted-average shares for computation of basic earnings per
    share                             |  |      | 59,226  |  |      |   | 57,615 |      |  |   | 57,536  |  
|Dilutive effect of stock options, warrants and restricted stock                                     |  |      | 2,181   |  |      |   | 1,968  |      |  |   |        |  
|Dilutive effect of Convertible Notes due 2023                                                       |  |      | 11,843  |  |      |   |       |      |  |   |        |  
|                                                                                                    |  |      |         |  |      |   |        |      | 
|Weighted-average shares for computation of diluted earnings per
    share                           |  |      | 73,250  |  |      |   | 59,583 |      |  |   | 57,536  |  
|Diluted net income (loss) per share                                                                 |  | $    | 2.70    |  |      | $ | 0.30   |      |  | $ | (0.92   | )
|                                                                                                    |  |      |         |  |      |   |        |      | 



|                                   |  |      |       |  |      |  |        |      |  |  |       | 
|---------------------------------- |  | ---- | ----- |  | ---- |  | ------ | ---- |  |  | ----- | 
|                                   |  | 2006 |       |  | 2005 |  |        | 2004 | 
|                                   |  |      |       |  |      |  |        |      | 
|2004 Convertible Notes             |  |      |      |  |      |  |       |      |  |  | 2,258 | 
|2023 Convertible Notes             |  |      |      |  |      |  | 11,811 |      |  |  | 1,112 | 
|Stock Options and Restricted Stock |  |      | 2,175 |  |      |  | 2,813  |      |  |  | 4,860 | 
|Warrants                           |  |      |      |  |      |  | 982    |      |  |  | 982   | 



| |                         
| | ------------------------
| | Stock-Based Compensation



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Stock Issued to Employees


Accounting for Stock-Based Compensation,




|                                                   |  |      |      |   |      |   |      |      |  |   |       |  
|-------------------------------------------------- |  | ---- | ---- | - | ---- | - | ---- | ---- |  | - | ----- | -
|                                                   |  | 2006 |      |   | 2005 |   |      | 2004 | 
|                                                   |  |      |      |   |      |   |      |      | 
|Annual dividends                                   |  |      | 1.13 | % |      |   |     |      |  |   |      |  
|Expected volatility                                |  |      | 63.6 | % |      |   | 72.6 | %    |  |   | 140.8 | %
|Risk-free interest rate                            |  |      | 4.39 | % |      |   | 3.46 | %    |  |   | 2.12  | %
|Expected life of all options outstanding (years)   |  |      | 5.29 |   |      |   | 5.43 |      |  |   | 5.45  |  
|Weighted-average fair value of each option granted |  | $    | 7.14 |   |      | $ | 7.15 |      |  | $ | 5.20  |  



|                                                            |  |                             |       |   |      |   |       |      |  |   |       |  
|----------------------------------------------------------- |  | --------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                            |  | Increase/(Decrease) in Fair |      
|                                                            |  | Value of Options Granted    |      
|                                                            |  |                             |      
|Change in Assumption                                        |  | 2006                        |       |   | 2005 |   |       | 2004 | 
|                                                            |  |                             |       |   |      |   |       |      | 
|10% increase in expected volatility                         |  | $                           | 0.79  |   |      | $ | 0.63  |      |  | $ | 0.11  |  
|1% increase in risk-free interest rate                      |  |                             | 0.15  |   |      |   | 0.11  |      |  |   | 0.01  |  
|1 year increase in expected life of all options outstanding |  |                             | 0.46  |   |      |   | 0.47  |      |  |   | 0.14  |  
|10% decrease in expected volatility                         |  |                             | (0.86 | ) |      |   | (0.69 | )    |  |   | (0.15 | )
|1% decrease in risk-free interest rate                      |  |                             | (0.15 | ) |      |   | (0.12 | )    |  |   | (0.02 | )
|1 year decrease in expected life of all options outstanding |  |                             | (0.56 | ) |      |   | (0.56 | )    |  |   | (0.21 | )

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                     |                       |      |         |      |      |   |        |      |  |   |         |       |  
|------------------------------------------------------------------------------------------------------------------------------------ | --------------------- | ---- | ------- | ---- | ---- | - | ------ | ---- |  | - | ------- | ----- | -
|                                                                                                                                     |                       | 2006 |         |      | 2005 |   |        | 2004 | 
|                                                                                                                                     |                       |      |         |      |      |   |        |      | 
|Net income (loss), as reported                                                                                                       |                       | $    | 194,582 |      |      | $ | 18,016 |      |  | $ | (53,220 | )    
|Add: Stock-based employee compensation expense included in
    reported net income, net of related tax effects                       |                       |      | 116     |      |      |   |       |      |  |   |        |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method, net of related tax
    effects |                       |      | (2,933  | )    |      |   | (4,651 | )    |  |   | (2,956  | )    
|                                                                                                                                     |                       |      |         |      |      |   |        |      | 
|Net income (loss)  pro forma                                                                                                        |                       | $    | 191,765 |      |      | $ | 13,365 |      |  | $ | (56,176 | )    
|                                                                                                                                     |                       |      |         |      |      |   |        |      | 
|Net income (loss) per common share:                                                                                                  |                       |      |         |      |      |   |        |      |  |   |         |      
|                                                                                                                                     | Basic  as reported   |      | $       | 3.29 |      |   | $      | 0.31 |  |   | $       | (0.92 | )
|                                                                                                                                     | Basic  pro forma     |      |         | 3.24 |      |   |        | 0.23 |  |   |         | (0.98 | )
|                                                                                                                                     | Diluted  as reported |      |         | 2.70 |      |   |        | 0.30 |  |   |         | (0.92 | )
|                                                                                                                                     | Diluted  pro forma   |      |         | 2.66 |      |   |        | 0.22 |  |   |         | (0.98 | )



| |                                 
| | --------------------------------
| | Derivative Financial Instruments



Accounting for Derivative
Instruments and Hedging Activities,




| |             
| | ------------
| | Credit Risks







| |                     
| | --------------------
| | Comprehensive Income

Reporting
Comprehensive Income.


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                    
| | -------------------
| | Segment Information





| |                  
| | -----------------
| | Reclassifications



Note 2  Accounting Pronouncements Not Yet
Adopted


Share-Based Payment Statement of Cash
Flows






Inventory
Costs


Accounting
Changes and Error Corrections


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




13-1, Accounting for Rental Costs Incurred during a Construction
Period,


Note 3  Adoption of New Accounting
Pronouncements


04-01, Accounting for Preexisting Relationships between the Parties
to a Business Combination 04-01 04-01 04-01


04-01 04-01


Accounting for
Conditional Asset Retirement Obligations  an
interpretation of FASB Statement No. 143


05-06, Determining the Amortization Period for Leasehold
Improvements Purchased after Lease Inception or Acquired in a
Business Combination


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note 4  Goodwill


Goodwill and Other Intangible
Assets,










|                                                |  |        |         |  
|----------------------------------------------- |  | ------ | ------- | -
|                                                |  | Amount |        
|                                                |  |        |        
|Balance as of January 31, 2003                  |  | $      | 56,708  |  
|Impairment of goodwill associated with La Salsa |  |        | (34,059 | )
|                                                |  |        |        
|Balance as of January 31, 2004                  |  |        | 22,649  |  
|No activity in fiscal 2005                      |  |        |        |  
|                                                |  |        |        
|Balance as of January 31, 2005                  |  |        | 22,649  |  
|No activity in fiscal 2006                      |  |        |        |  
|                                                |  |        |        
|Balance as of January 31, 2006                  |  | $      | 22,649  |  
|                                                |  |        |        

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 5  Facility Action Charges, Net




|                   |                                                                                     |      |       |       |      |  |       |        |   |  |        |        |  
|------------------ | ----------------------------------------------------------------------------------- | ---- | ----- | ----- | ---- |  | ----- | ------ | - |  | ------ | ------ | -
|                   |                                                                                     | 2006 |       |       | 2005 |  |       | 2004   |  
|                   |                                                                                     |      |       |       |      |  |       |        |  
|Carls Jr.         |                                                                                     |      |       |       |      |  |       |        |   |  |        |       
|                   | New decisions regarding closing restaurants                                         |      | $     |      |      |  | $     | 269    |   |  | $      | 3,075  |  
|                   | Unfavorable (favorable) dispositions of leased and fee
    surplus properties, net  |      |       | 846   |      |  |       | 120    |   |  |        | (767   | )
|                   | Impairment of assets to be disposed of                                              |      |       |      |      |  |       | 28     |   |  |        |       |  
|                   | Impairment of assets to be held and used                                            |      |       | 1,431 |      |  |       | 2,693  |   |  |        | 1,228  |  
|                   | Gain on sales of restaurants and surplus property, net                              |      |       | (732  | )    |  |       | (611   | ) |  |        | (1,667 | )
|                   | Amortization of discount related to estimated liability for
    closing restaurants |      |       | 247   |      |  |       | 295    |   |  |        | 323    |  
|                   |                                                                                     |      |       |       |      |  |       |        |  
|                   |                                                                                     |      | 1,792 |       |      |  | 2,794 |        |   |  | 2,192  |       
|                   |                                                                                     |      |       |       |      |  |       |        |  
|Hardees           |                                                                                     |      |       |       |      |  |       |        |   |  |        |       
|                   | New decisions regarding closing restaurants                                         |      |       | 957   |      |  |       | 5,247  |   |  |        | 2,631  |  
|                   | Favorable dispositions of leased and fee surplus properties, net                    |      |       | (29   | )    |  |       | (1,364 | ) |  |        | (6,952 | )
|                   | Impairment of assets to be disposed of                                              |      |       | 23    |      |  |       | 683    |   |  |        | 11,365 |  
|                   | Impairment of assets to be held and used                                            |      |       | 2,521 |      |  |       | 2,428  |   |  |        | 4,942  |  
|                   | Loss (gain) on sales of restaurants and surplus property,
    net                   |      |       | 504   |      |  |       | (917   | ) |  |        | 1,459  |  
|                   | Amortization of discount related to estimated liability for
    closing restaurants |      |       | 677   |      |  |       | 1,011  |   |  |        | 2,248  |  
|                   |                                                                                     |      |       |       |      |  |       |        |  
|                   |                                                                                     |      | 4,653 |       |      |  | 7,088 |        |   |  | 15,693 |       
|                   |                                                                                     |      |       |       |      |  |       |        |  
|La Salsa and Other |                                                                                     |      |       |       |      |  |       |        |   |  |        |       
|                   | New decisions regarding closing restaurants                                         |      |       | 157   |      |  |       | 1,074  |   |  |        | 121    |  
|                   | (Favorable) unfavorable dispositions of leased and fee surplus
    properties, net  |      |       | (268  | )    |  |       | 172    |   |  |        | (846   | )
|                   | Impairment of assets to be disposed of                                              |      |       |      |      |  |       | 755    |   |  |        | 1      |  
|                   | Impairment of assets to be held and used                                            |      |       | 1,338 |      |  |       | 2,434  |   |  |        | 429    |  
|                   | Loss (gain) on sales of restaurants and surplus properties,
    net                 |      |       | 347   |      |  |       | (3     | ) |  |        | 185    |  
|                   | Amortization of discount related to estimated liability for
    closing restaurants |      |       | 6     |      |  |       | 6      |   |  |        | 1      |  
|                   |                                                                                     |      |       |       |      |  |       |        |  
|                   |                                                                                     |      | 1,580 |       |      |  | 4,438 |        |   |  | (109   | )     
|                   |                                                                                     |      |       |       |      |  |       |        |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|      |                                                                                     |      |       |       |      |   |        |        |   |   |        |        |  
|----- | ----------------------------------------------------------------------------------- | ---- | ----- | ----- | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|      |                                                                                     | 2006 |       |       | 2005 |   |        | 2004   |  
|      |                                                                                     |      |       |       |      |   |        |        |  
|Total |                                                                                     |      |       |       |      |   |        |        |   |   |        |       
|      | New decisions regarding closing restaurants                                         |      |       | 1,114 |      |   |        | 6,590  |   |   |        | 5,827  |  
|      | Unfavorable (favorable) dispositions of leased and fee
    surplus properties, net  |      |       | 549   |      |   |        | (1,072 | ) |   |        | (8,565 | )
|      | Impairment of assets to be disposed of                                              |      |       | 23    |      |   |        | 1,466  |   |   |        | 11,366 |  
|      | Impairment of assets to be held and used                                            |      |       | 5,290 |      |   |        | 7,555  |   |   |        | 6,599  |  
|      | Loss (gain) on sales of restaurants and surplus property,
    net                   |      |       | 119   |      |   |        | (1,531 | ) |   |        | (23    | )
|      | Amortization of discount related to estimated liability for
    closing restaurants |      |       | 930   |      |   |        | 1,312  |   |   |        | 2,572  |  
|      |                                                                                     |      |       |       |      |   |        |        |  
|      |                                                                                     | $    | 8,025 |       |      | $ | 14,320 |        |   | $ | 17,776 |       
|      |                                                                                     |      |       |       |      |   |        |        |  



|                              |                    |      |       |       |      |   |       |       |  |   |        |        | 
|----------------------------- | ------------------ | ---- | ----- | ----- | ---- | - | ----- | ----- |  | - | ------ | ------ | 
|                              |                    | 2006 |       |       | 2005 |   |       | 2004  | 
|                              |                    |      |       |       |      |   |       |       | 
|Property and equipment        |                    |      |       |       |      |   |       |       |  |   |        |       
|                              | Carls Jr.         |      | $     | 980   |      |   | $     | 2,721 |  |   | $      | 657    | 
|                              | Hardees           |      |       | 2,382 |      |   |       | 2,868 |  |   |        | 13,292 | 
|                              | La Salsa and Other |      |       | 658   |      |   |       | 3,189 |  |   |        | 430    | 
|                              |                    |      |       |       |      |   |       |       | 
|                              |                    |      | 4,020 |       |      |   | 8,778 |       |  |   | 14,379 |       
|                              |                    |      |       |       |      |   |       |       | 
|Property under capital leases |                    |      |       |       |      |   |       |       |  |   |        |       
|                              | Carls Jr.         |      |       | 451   |      |   |       |      |  |   |        | 571    | 
|                              | Hardees           |      |       | 162   |      |   |       | 225   |  |   |        | 2,536  | 
|                              |                    |      |       |       |      |   |       |       | 
|                              |                    |      | 613   |       |      |   | 225   |       |  |   | 3,107  |       
|                              |                    |      |       |       |      |   |       |       | 
|Favorable lease rights        |                    |      |       |       |      |   |       |       |  |   |        |       
|                              | Hardees           |      |       |      |      |   |       | 18    |  |   |        | 479    | 
|                              | La Salsa           |      |       | 680   |      |   |       |      |  |   |        |       | 
|                              |                    |      |       |       |      |   |       |       | 
|                              |                    |      | 680   |       |      |   | 18    |       |  |   | 479    |       
|                              |                    |      |       |       |      |   |       |       | 
|Total                         |                    |      |       |       |      |   |       |       |  |   |        |       
|                              | Carls Jr.         |      |       | 1,431 |      |   |       | 2,721 |  |   |        | 1,228  | 
|                              | Hardees           |      |       | 2,544 |      |   |       | 3,111 |  |   |        | 16,307 | 
|                              | La Salsa and Other |      |       | 1,338 |      |   |       | 3,189 |  |   |        | 430    | 
|                              |                    |      |       |       |      |   |       |       | 
|                              |                    | $    | 5,313 |       |      | $ | 9,021 |       |  | $ | 17,965 |       
|                              |                    |      |       |       |      |   |       |       | 

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |       |   |   |        |         |  
|----------------------------------------------------------- | ---------------------------------------------------------------------------------- | ---------- | ----- | ------ | -------- | -------- | ------ | --------- | - | - | ----- | ----- | - | - | ------ | ------- | -
|                                                            |                                                                                    |            |       |        |          | La Salsa |        |           |  
|                                                            |                                                                                    | Carls Jr. |       |        | Hardees |          |        | and Other |   |   | Total |      
|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |      
|Balance at January 31, 2003                                 |                                                                                    | $          | 3,435 |        |          | $        | 31,223 |           |   | $ | 1,732 |       |   | $ | 36,390 |        
|                                                            | New decisions regarding closing restaurants                                        |            |       | 3,075  |          |          |        | 2,631     |   |   |       | 121   |   |   |        | 5,827   |  
|                                                            | Usage                                                                              |            |       | (1,058 | )        |          |        | (12,035   | ) |   |       | (806  | ) |   |        | (13,899 | )
|                                                            | Favorable dispositions of leased and fee surplus properties, net                   |            |       | (767   | )        |          |        | (6,952    | ) |   |       | (846  | ) |   |        | (8,565  | )
|                                                            | Amortization of discount                                                           |            |       | 323    |          |          |        | 2,248     |   |   |       | 1     |   |   |        | 2,572   |  
|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |      
|Balance at January 31, 2004                                 |                                                                                    |            | 5,008 |        |          |          | 17,115 |           |   |   | 202   |       |   |   | 22,325 |        
|                                                            | New decisions regarding closing restaurants                                        |            |       | 269    |          |          |        | 5,247     |   |   |       | 1,074 |   |   |        | 6,590   |  
|                                                            | Usage                                                                              |            |       | (1,478 | )        |          |        | (8,934    | ) |   |       | (868  | ) |   |        | (11,280 | )
|                                                            | Unfavorable (favorable) dispositions of leased and fee
    surplus properties, net |            |       | 120    |          |          |        | (1,364    | ) |   |       | 172   |   |   |        | (1,072  | )
|                                                            | Amortization of discount                                                           |            |       | 295    |          |          |        | 1,011     |   |   |       | 6     |   |   |        | 1,312   |  
|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |      
|Balance at January 31, 2005                                 |                                                                                    |            | 4,214 |        |          |          | 13,075 |           |   |   | 586   |       |   |   | 17,875 |        
|                                                            | New decisions regarding closing restaurants                                        |            |       |       |          |          |        | 957       |   |   |       | 157   |   |   |        | 1,114   |  
|                                                            | Usage                                                                              |            |       | (1,692 | )        |          |        | (4,815    | ) |   |       | (361  | ) |   |        | (6,868  | )
|                                                            | Unfavorable (favorable) dispositions of leased and fee
    surplus properties, net |            |       | 846    |          |          |        | (29       | ) |   |       | (268  | ) |   |        | 549     |  
|                                                            | Amortization of discount                                                           |            |       | 247    |          |          |        | 677       |   |   |       | 6     |   |   |        | 930     |  
|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |      
|Balance at January 31, 2006                                 |                                                                                    |            | 3,615 |        |          |          | 9,865  |           |   |   | 120   |       |   |   | 13,600 |        
|Less current portion, included in other current liabilities |                                                                                    |            | 1,185 |        |          |          | 3,205  |           |   |   | 27    |       |   |   | 4,417  |        
|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |      
|Long-term portion, included in other long-term liabilities  |                                                                                    | $          | 2,430 |        |          | $        | 6,660  |           |   | $ | 93    |       |   | $ | 9,183  |        
|                                                            |                                                                                    |            |       |        |          |          |        |           |   |   |       |      

Note 6  Accounts Receivable, Net




|                                  |  |      |        |   |      |   |        |  
|--------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                  |  | 2006 |        |   | 2005 |  
|                                  |  |      |        |   |      |  
|Trade receivables                 |  | $    | 31,296 |   |      | $ | 26,400 |  
|Refundable income taxes           |  |      | 3,896  |   |      |   | 4,508  |  
|Notes receivable, current portion |  |      | 3,676  |   |      |   | 2,680  |  
|Other                             |  |      | 118    |   |      |   | 153    |  
|Allowance for doubtful accounts   |  |      | (2,833 | ) |      |   | (2,542 | )
|                                  |  |      |        |   |      |  
|                                  |  | $    | 36,153 |   |      | $ | 31,199 |  
|                                  |  |      |        |   |      |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                |  |      |        |   |      |   |        |  
|------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                |  | 2006 |        |   | 2005 |  
|                                |  |      |        |   |      |  
|Franchisees                     |  | $    | 6,104  |   |      | $ | 8,259  |  
|Employees                       |  |      | 71     |   |      |   | 94     |  
|Other                           |  |      | 2,050  |   |      |   | 2,056  |  
|Allowance for doubtful accounts |  |      | (6,257 | ) |      |   | (7,081 | )
|                                |  |      |        |   |      |  
|                                |  | $    | 1,968  |   |      | $ | 3,328  |  
|                                |  |      |        |   |      |  



|                            |                                   |            |       |        |            |   |       |       |   |   |        |        |  
|--------------------------- | --------------------------------- | ---------- | ----- | ------ | ---------- | - | ----- | ----- | - | - | ------ | ------ | -
|                            |                                   | Accounts   |       |        | Notes      |   |       |      
|                            |                                   | Receivable |       |        | Receivable |   |       | Total |  
|                            |                                   |            |       |        |            |   |       |       |  
|Balance at January 31, 2003 |                                   | $          | 5,023 |        |            | $ | 5,404 |       |   | $ | 10,427 |       
|                            | Provision                         |            |       | 789    |            |   |       | 1,471 |   |   |        | 2,260  |  
|                            | Charge-offs                       |            |       | (552   | )          |   |       | (689  | ) |   |        | (1,241 | )
|                            | Recoveries                        |            |       | 320    |            |   |       |      |   |   |        | 320    |  
|                            |                                   |            |       |        |            |   |       |       |  
|Balance at January 31, 2004 |                                   |            | 5,580 |        |            |   | 6,186 |       |   |   | 11,766 |       
|                            | Provision (recovery of provision) |            |       | (2,835 | )          |   |       | 895   |   |   |        | (1,940 | )
|                            | Charge-offs                       |            |       | (334   | )          |   |       |      |   |   |        | (334   | )
|                            | Recoveries                        |            |       | 131    |            |   |       |      |   |   |        | 131    |  
|                            |                                   |            |       |        |            |   |       |       |  
|Balance at January 31, 2005 |                                   |            | 2,542 |        |            |   | 7,081 |       |   |   | 9,623  |       
|                            | Provision (recovery of provision) |            |       | 663    |            |   |       | (487  | ) |   |        | 176    |  
|                            | Charge-offs                       |            |       | (441   | )          |   |       | (337  | ) |   |        | (778   | )
|                            | Recoveries                        |            |       | 69     |            |   |       |      |   |   |        | 69     |  
|                            |                                   |            |       |        |            |   |       |       |  
|Balance at January 31, 2006 |                                   | $          | 2,833 |        |            | $ | 6,257 |       |   | $ | 9,090  |       
|                            |                                   |            |       |        |            |   |       |       |  

Note 7  Net Assets Held for Sale






|                 |  |      |        |   |      |   |        |  
|---------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                 |  | 2005 |        |   | 2004 |  
|                 |  |      |        |   |      |  
|Revenue          |  | $    | 24,129 |   |      | $ | 42,893 |  
|                 |  |      |        |   |      |  
|Operating loss   |  | $    | (636   | ) |      | $ | (2,771 | )
|Interest expense |  |      | 10     |   |      |   | 19     |  
|                 |  |      |        |   |      |  
|Net loss         |  | $    | (646   | ) |      | $ | (2,790 | )
|                 |  |      |        |   |      |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Note 8  Property and Equipment




|                                                |  |             |            |  |      |   |         |      |  |   |         | 
|----------------------------------------------- |  | ----------- | ---------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                |  | Estimated   |            |  |      |   |        
|                                                |  | Useful Life |            |  | 2006 |   |         | 2005 | 
|                                                |  |             |            |  |      |   |         |      | 
|Land                                            |  |             |            |  |      | $ | 129,635 |      |  | $ | 127,633 | 
|Leasehold improvements                          |  |             | 3-25 years |  |      |   | 198,982 |      |  |   | 200,013 | 
|Buildings and improvements                      |  |             | 7-40 years |  |      |   | 261,111 |      |  |   | 245,548 | 
|Equipment, furniture and fixtures               |  |             | 3-10 years |  |      |   | 301,357 |      |  |   | 301,113 | 
|                                                |  |             |            |  |      |   |         |      | 
|                                                |  |             |            |  |      |   | 891,085 |      |  |   | 874,307 | 
|Less: accumulated depreciation and amortization |  |             |            |  |      |   | 431,002 |      |  |   | 413,021 | 
|                                                |  |             |            |  |      |   |         |      | 
|                                                |  |             |            |  |      | $ | 460,083 |      |  | $ | 461,286 | 
|                                                |  |             |            |  |      |   |         |      | 



Note 9  Leases




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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |      |        |  |      |   |        | 
|------------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                               |  | 2006 |        |  | 2005 |  
|                               |  |      |        |  |      |  
|Buildings                      |  | $    | 72,203 |  |      | $ | 78,680 | 
|Equipment                      |  |      | 344    |  |      |   | 9,562  | 
|Less: accumulated amortization |  |      | 43,183 |  |      |   | 52,182 | 
|                               |  |      |        |  |      |  
|                               |  | $    | 29,364 |  |      | $ | 36,060 | 
|                               |  |      |        |  |      |  





|                                                                                              |                              |         |        |        |           |   |         |         | 
|--------------------------------------------------------------------------------------------- | ---------------------------- | ------- | ------ | ------ | --------- | - | ------- | ------- | 
|                                                                                              |                              | Capital |        |        | Operating |  
|                                                                                              |                              |         |        |        |           |  
|Fiscal Year:                                                                                  |                              |         |        |        |           |   |         |        
|2007                                                                                          |                              | $       | 10,584 |        |           | $ | 85,729  |        
|2008                                                                                          |                              |         | 10,425 |        |           |   | 79,716  |        
|2009                                                                                          |                              |         | 10,247 |        |           |   | 71,473  |        
|2010                                                                                          |                              |         | 9,766  |        |           |   | 60,587  |        
|2011                                                                                          |                              |         | 9,074  |        |           |   | 49,284  |        
|Thereafter                                                                                    |                              |         | 32,317 |        |           |   | 247,368 |        
|                                                                                              |                              |         |        |        |           |  
|                                                                                              | Total minimum lease payments |         |        | 82,413 |           |   | $       | 594,157 | 
|                                                                                              |                              |         |        |        |           |  
|Less: amount representing interest                                                            |                              |         | 30,729 |        |           |   |         |        
|                                                                                              |                              |         |        |        |           |  
|Present value of minimum lease payments (interest rates
    primarily ranging from 8% to 14%) |                              |         | 51,684 |        |           |   |         |        
|Less: current portion                                                                         |                              |         | 4,960  |        |           |   |         |        
|                                                                                              |                              |         |        |        |           |  
|Capital lease obligations, excluding current portion                                          |                              | $       | 46,724 |        |           |   |         |        
|                                                                                              |                              |         |        |        |           |  





|                                      |  |      |       |  |      |   |       | 
|------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                      |  | 2006 |       |  | 2005 |  
|                                      |  |      |       |  |      |  
|Net minimum lease payments receivable |  | $    | 1,227 |  |      | $ | 1,573 | 
|Less: unearned income                 |  |      | 436   |  |      |   | 553   | 
|                                      |  |      |       |  |      |  
|Net investment                        |  | $    | 791   |  |      | $ | 1,020 | 
|                                      |  |      |       |  |      |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |  |      |        |  |      |   |        | 
|----------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                |  | 2006 |        |  | 2005 |  
|                                                |  |      |        |  |      |  
|Land                                            |  | $    | 15,863 |  |      | $ | 16,953 | 
|Leasehold improvements                          |  |      | 6,577  |  |      |   | 7,529  | 
|Buildings and improvements                      |  |      | 17,909 |  |      |   | 21,183 | 
|Equipment, furniture and fixtures               |  |      | 1,102  |  |      |   | 2,698  | 
|                                                |  |      |        |  |      |  
|                                                |  |      | 41,451 |  |      |   | 48,363 | 
|Less: accumulated depreciation and amortization |  |      | 14,904 |  |      |   | 17,718 | 
|                                                |  |      |        |  |      |  
|                                                |  | $    | 26,547 |  |      | $ | 30,645 | 
|                                                |  |      |        |  |      |  



|                             |  |           |       |  |           |   |         | 
|---------------------------- |  | --------- | ----- |  | --------- | - | ------- | 
|                             |  | Capital   |       |  | Operating |  
|                             |  | Leases or |       |  | Lessor    |  
|                             |  | Subleases |       |  | Leases    |  
|                             |  |           |       |  |           |  
|Fiscal Year:                 |  |           |       |  |           |   |         | 
|2007                         |  | $         | 210   |  |           | $ | 30,329  | 
|2008                         |  |           | 142   |  |           |   | 27,673  | 
|2009                         |  |           | 142   |  |           |   | 24,926  | 
|2010                         |  |           | 142   |  |           |   | 20,702  | 
|2011                         |  |           | 142   |  |           |   | 16,900  | 
|Thereafter                   |  |           | 449   |  |           |   | 64,207  | 
|                             |  |           |       |  |           |  
|Total minimum future rentals |  | $         | 1,227 |  |           | $ | 184,737 | 
|                             |  |           |       |  |           |  





|                       |  |      |        |  |      |   |        |      |  |   |        | 
|---------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                       |  | 2006 |        |  | 2005 |   |        | 2004 | 
|                       |  |      |        |  |      |   |        |      | 
|Minimum rentals        |  | $    | 90,836 |  |      | $ | 90,820 |      |  | $ | 90,361 | 
|Contingent rentals     |  |      | 5,206  |  |      |   | 5,013  |      |  |   | 4,789  | 
|Less: sublease rentals |  |      | 33,221 |  |      |   | 36,444 |      |  |   | 32,251 | 
|                       |  |      |        |  |      |   |        |      | 
|                       |  | $    | 62,821 |  |      | $ | 59,389 |      |  | $ | 62,899 | 
|                       |  |      |        |  |      |   |        |      | 





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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 10  Other Assets




|                                                          |  |      |        |  |      |   |        | 
|--------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                          |  | 2006 |        |  | 2005 |  
|                                                          |  |      |        |  |      |  
|Intangible assets (see below)                             |  | $    | 16,836 |  |      | $ | 19,102 | 
|Deferred financing costs                                  |  |      | 5,708  |  |      |   | 9,470  | 
|Net investment in lease receivables, less current portion |  |      | 748    |  |      |   | 867    | 
|Other                                                     |  |      | 2,227  |  |      |   | 2,090  | 
|                                                          |  |      |        |  |      |  
|                                                          |  | $    | 25,519 |  |      | $ | 31,529 | 
|                                                          |  |      |        |  |      |  





|                           |  |           |    |                  |          |   |                  |              |  |     |          |   |       |          |        |  |              |     |        |          |  |   |        |   |  |   |        | 
|-------------------------- |  | --------- | -- | ---------------- | -------- | - | ---------------- | ------------ |  | --- | -------- | - | ----- | -------- | ------ |  | ------------ | --- | ------ | -------- |  | - | ------ | - |  | - | ------ | 
|                           |  |           |    | January 31, 2006 |          |   | January 31, 2005 |             
|                           |  | Weighted- |    |                  |          |   |                  |              | 
|                           |  | Average   |    |                  | Gross    |   |                  |              |  | Net |          |   | Gross |          |        |  |              | Net |       
|                           |  | Life      |    |                  | Carrying |   |                  | Accumulated  |  |     | Carrying |   |       | Carrying |        |  | Accumulated  |     |        | Carrying | 
|Intangible Asset           |  | (Years)   |    |                  | Amount   |   |                  | Amortization |  |     | Amount   |   |       | Amount   |        |  | Amortization |     |        | Amount   | 
|                           |  |           |    |                  |          |   |                  |              |  |     |          |   |       |          |        |  |              |     |        |          | 
|Trademarks                 |  |           | 20 |                  |          | $ | 17,171           |              |  | $   | (3,365   | ) |       | $        | 13,806 |  |              | $   | 17,171 |          |  | $ | (2,487 | ) |  | $ | 14,684 | 
|Franchise agreements       |  |           | 20 |                  |          |   | 1,780            |              |  |     | (328     | ) |       |          | 1,452  |  |              |     | 1,780  |          |  |   | (258   | ) |  |   | 1,522  | 
|Favorable lease agreements |  |           | 16 |                  |          |   | 4,034            |              |  |     | (2,456   | ) |       |          | 1,578  |  |              |     | 6,265  |          |  |   | (3,369 | ) |  |   | 2,896  | 
|                           |  |           |    |                  |          |   |                  |              |  |     |          |   |       |          |        |  |              |     |        |          | 
|                           |  |           |    |                  |          | $ | 22,985           |              |  | $   | (6,149   | ) |       | $        | 16,836 |  |              | $   | 25,216 |          |  | $ | (6,114 | ) |  | $ | 19,102 | 
|                           |  |           |    |                  |          |   |                  |              |  |     |          |   |       |          |        |  |              |     |        |          | 



Note 11  Other Current Liabilities




|                                                        |  |      |        |  |      |   |        | 
|------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                        |  | 2006 |        |  | 2005 |  
|                                                        |  |      |        |  |      |  
|Salaries, wages and other benefits                      |  | $    | 32,439 |  |      | $ | 31,461 | 
|State sales taxes                                       |  |      | 7,288  |  |      |   | 7,380  | 
|Estimated liability for closing restaurants             |  |      | 4,417  |  |      |   | 5,261  | 
|Accrued interest                                        |  |      | 1,924  |  |      |   | 2,332  | 
|Estimated liability for property taxes                  |  |      | 4,258  |  |      |   | 4,579  | 
|Estimated liability for litigation                      |  |      | 1,412  |  |      |   | 4,335  | 
|Accrued utilities                                       |  |      | 3,935  |  |      |   | 3,731  | 
|Estimated liability for self-insurance, current portion |  |      | 11,141 |  |      |   | 15,214 | 
|Other accrued liabilities                               |  |      | 22,742 |  |      |   | 19,065 | 
|                                                        |  |      |        |  |      |  
|                                                        |  | $    | 89,556 |  |      | $ | 93,358 | 
|                                                        |  |      |        |  |      |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 12  Long-Term Debt and Bank
Indebtedness




|                                                             |  |      |         |  |      |   |         | 
|------------------------------------------------------------ |  | ---- | ------- |  | ---- | - | ------- | 
|                                                             |  | 2006 |         |  | 2005 |  
|                                                             |  |      |         |  |      |  
|Borrowings under revolving portion of senior credit facility |  | $    | 8,000   |  |      | $ | 14,500  | 
|Term loan under senior credit facility                       |  |      | 98,749  |  |      |   | 138,651 | 
|Convertible subordinated notes due 2023, interest at 4.00%   |  |      | 105,000 |  |      |   | 105,000 | 
|Other long-term debt                                         |  |      | 1,229   |  |      |   | 1,333   | 
|                                                             |  |      |         |  |      |  
|                                                             |  |      | 212,978 |  |      |   | 259,484 | 
|Less: current portion                                        |  |      | 9,247   |  |      |   | 16,066  | 
|                                                             |  |      |         |  |      |  
|                                                             |  | $    | 203,731 |  |      | $ | 243,418 | 
|                                                             |  |      |         |  |      |  











Accounting for Derivative Instruments and Hedging
Activities


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)
















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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|              |  |   |         | 
|------------- |  | - | ------- | 
|Fiscal Year:  |  |   |         | 
|2007          |  | $ | 9,247   | 
|2008          |  |   | 1,165   | 
|2009          |  |   | 96,893  | 
|2010          |  |   | 47      | 
|2011          |  |   | 26      | 
|Thereafter(1) |  |   | 105,600 | 
|              |  |   |        
|              |  | $ | 212,978 | 
|              |  |   |        






|    |                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------
|(1) | Assumes holders of the 2023 Convertible Notes do not exercise
    redemption rights in October 2008.

Note 13  Other Long-Term Liabilities




|                                            |  |      |        |  |      |   |        | 
|------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                            |  | 2006 |        |  | 2005 |  
|                                            |  |      |        |  |      |  
|Estimated liability for closing restaurants |  | $    | 9,183  |  |      | $ | 12,614 | 
|Estimated liability for self-insurance      |  |      | 26,272 |  |      |   | 29,231 | 
|Estimated liability for deferred rent       |  |      | 10,068 |  |      |   | 9,047  | 
|Other                                       |  |      | 11,549 |  |      |   | 13,482 | 
|                                            |  |      |        |  |      |  
|                                            |  | $    | 57,072 |  |      | $ | 64,374 | 
|                                            |  |      |        |  |      |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 14  Stockholders Equity






10b5-1 10b5-1


Note 15  Purchase and Cancellation of Stock
Options




Note 16  Adoption of a Stockholder Rights
Plan






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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Note 17  Fair Value of Financial
Instruments




|                       |                                                          |          |   |         |            |  |   |          |  |  |            |         |  |  |   |         | 
|---------------------- | -------------------------------------------------------- | -------- | - | ------- | ---------- |  | - | -------- |  |  | ---------- | ------- |  |  | - | ------- | 
|                       |                                                          | 2006     |   |         | 2005       | 
|                       |                                                          |          |   |         |            | 
|                       |                                                          | Carrying |   |         | Estimated  |  |   | Carrying |  |  | Estimated  |        
|                       |                                                          | Amount   |   |         | Fair Value |  |   | Amount   |  |  | Fair Value |        
|                       |                                                          |          |   |         |            |  |   |          |  |  |            |        
|Financial assets:      |                                                          |          |   |         |            |  |   |          |  |  |            |         |  |  |   |        
|                       | Cash and cash equivalents                                |          | $ | 21,343  |            |  | $ | 21,343   |  |  | $          | 18,432  |  |  | $ | 18,432  | 
|                       | Notes receivable, net of allowance for doubtful accounts |          |   | 3,666   |            |  |   | 3,309    |  |  |            | 4,865   |  |  |   | 4,941   | 
|                       | Interest rate cap agreements                             |          |   | 56      |            |  |   | 56       |  |  |            | 108     |  |  |   | 108     | 
|Financial liabilities: |                                                          |          |   |         |            |  |   |          |  |  |            |         |  |  |   |        
|                       | Long-term debt, including current portion                |          |   | 212,978 |            |  |   | 316,090  |  |  |            | 259,484 |  |  |   | 347,731 | 



Note 18  Related Party Transactions






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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




point-of








|          |                                               |          |   |       |      |  |     
|--------- | --------------------------------------------- | -------- | - | ----- | ---- |  | ----
|          |                                               | 2004    
|          |                                               |         
|          |                                               | Proceeds |   |       | Gain
|          |                                               |          |   |       |     
|Affiliate |                                               |          |   |       |      | 
|          | Relatives of member of our Board of Directors |          | $ | 4,535 |      |  | $645



Note 19  Franchise and License Operations




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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                       |  |      |         |  |      |   |         |      |  |   |         | 
|---------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                       |  | 2006 |         |  | 2005 |   |         | 2004 | 
|                       |  |      |         |  |      |   |         |      | 
|Foodservice            |  | $    | 179,222 |  |      | $ | 176,304 |      |  | $ | 155,945 | 
|Royalties              |  |      | 70,375  |  |      |   | 70,857  |      |  |   | 62,067  | 
|Equipment sales        |  |      | 24,319  |  |      |   | 18,181  |      |  |   | 20,693  | 
|Rental income          |  |      | 28,089  |  |      |   | 32,157  |      |  |   | 30,047  | 
|Initial fees and other |  |      | 6,886   |  |      |   | 5,109   |      |  |   | 1,739   | 
|                       |  |      |         |  |      |   |         |      | 
|                       |  | $    | 308,891 |  |      | $ | 302,608 |      |  | $ | 270,491 | 
|                       |  |      |         |  |      |   |         |      | 



|                                                        |  |      |         |  |      |   |         |      |  |   |         | 
|------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                        |  | 2006 |         |  | 2005 |   |         | 2004 | 
|                                                        |  |      |         |  |      |   |         |      | 
|Foodservice costs of sales                              |  | $    | 174,149 |  |      | $ | 171,363 |      |  | $ | 152,285 | 
|Occupancy and other operating expenses                  |  |      | 39,382  |  |      |   | 37,846  |      |  |   | 37,616  | 
|Equipment division cost of sales and operating expenses |  |      | 24,930  |  |      |   | 18,379  |      |  |   | 20,336  | 
|                                                        |  |      |         |  |      |   |         |      | 
|                                                        |  | $    | 238,461 |  |      | $ | 227,588 |      |  | $ | 210,237 | 
|                                                        |  |      |         |  |      |   |         |      | 

Note 20  Interest Expense




|                                                                           |                        |      |       |        |      |   |       |        |  |   |        |        | 
|-------------------------------------------------------------------------- | ---------------------- | ---- | ----- | ------ | ---- | - | ----- | ------ |  | - | ------ | ------ | 
|                                                                           |                        | 2006 |       |        | 2005 |   |       | 2004   | 
|                                                                           |                        |      |       |        |      |   |       |        | 
|Facility                                                                   |                        | $    | 7,522 |        |      | $ | 6,310 |        |  | $ | 1,146  |       
|Senior subordinated notes due 2009                                         |                        |      |      |        |      |   | 7,855 |        |  |   | 18,250 |       
|Capital lease obligations                                                  |                        |      | 6,257 |        |      |   | 6,950 |        |  |   | 8,503  |       
|2004 convertible subordinated notes                                        |                        |      |      |        |      |   | 73    |        |  |   | 4,206  |       
|2023 convertible subordinated notes                                        |                        |      | 4,200 |        |      |   | 4,258 |        |  |   | 1,385  |       
|Amortization of loan fees                                                  |                        |      | 3,312 |        |      |   | 3,637 |        |  |   | 4,451  |       
|Write-off of unamortized loan fees, term loan due July 2,
    2008         |                        |      | 500   |        |      |   | 1,452 |        |  |   |       |       
|Write-off of unamortized loan fees, term loan repaid
    June 2, 2004      |                        |      |      |        |      |   | 664   |        |  |   |       |       
|Write-off of unamortized loan fees, senior subordinated notes
    due 2009 |                        |      |      |        |      |   | 3,068 |        |  |   |       |       
|Letter of credit fees and other                                            |                        |      | 1,225 |        |      |   | 2,481 |        |  |   | 2,021  |       
|                                                                           |                        |      |       |        |      |   |       |        | 
|                                                                           | Total interest expense |      | $     | 23,016 |      |   | $     | 36,748 |  |   | $      | 39,962 | 
|                                                                           |                        |      |       |        |      |   |       |        | 

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 21  Other Income (Expense), Net




|                                                                                                    |  |      |       |   |      |   |        |      |  |   |       |  
|--------------------------------------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                                                                                    |  | 2006 |       |   | 2005 |   |        | 2004 | 
|                                                                                                    |  |      |       |   |      |   |        |      | 
|Premium incurred upon early redemption of debt                                                      |  | $    |      |   |      | $ | (9,126 | )    |  | $ |      |  
|Interest income on notes receivable from franchisees,
    disposition properties and capital leases |  |      | 1,116 |   |      |   | 1,784  |      |  |   | 1,147 |  
|Rental income from properties leased to third parties, net                                          |  |      | 1,352 |   |      |   | 2,060  |      |  |   | 655   |  
|Gains (losses) on the repurchase of convertible subordinated
    notes                              |  |      |      |   |      |   |       |      |  |   | (708  | )
|Other, net                                                                                          |  |      | (81   | ) |      |   | 2,320  |      |  |   | (877  | )
|                                                                                                    |  |      |       |   |      |   |        |      | 
|Total other income (expense), net                                                                   |  | $    | 2,387 |   |      | $ | (2,962 | )    |  | $ | 217   |  
|                                                                                                    |  |      |       |   |      |   |        |      | 

point-of


Note 22  Income Taxes




|          |         |      |          |          |      |   |        |        |   |   |       |       |  
|--------- | ------- | ---- | -------- | -------- | ---- | - | ------ | ------ | - | - | ----- | ----- | -
|          |         | 2006 |          |          | 2005 |   |        | 2004   |  
|          |         |      |          |          |      |   |        |        |  
|Current:  |         |      |          |          |      |   |        |        |   |   |       |      
|          | Federal |      | $        | 502      |      |   | $      | (2,493 | ) |   | $     | 1,144 |  
|          | State   |      |          | 183      |      |   |        | (214   | ) |   |       | (119  | )
|          | Foreign |      |          | 905      |      |   |        | 820    |   |   |       | 818   |  
|          |         |      |          |          |      |   |        |        |  
|          |         |      | 1,590    |          |      |   | (1,887 | )      |   |   | 1,843 |      
|          |         |      |          |          |      |   |        |        |  
|Deferred: |         |      |          |          |      |   |        |        |   |   |       |      
|          | Federal |      |          | (121,558 | )    |   |        | 214    |   |   |       | 464   |  
|          | State   |      |          | (17,363  | )    |   |        | 81     |   |   |       | 110   |  
|          |         |      |          |          |      |   |        |        |  
|          |         |      | (138,921 | )        |      |   | 295    |        |   |   | 574   |      
|          |         |      |          |          |      |   |        |        |  
|Total     |         | $    | (137,331 | )        |      | $ | (1,592 | )      |   | $ | 2,417 |      
|          |         |      |          |          |      |   |        |        |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                      |  |      |          |   |      |   |        |      |  |   |         |  
|----------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                      |  | 2006 |          |   | 2005 |   |        | 2004 | 
|                                                      |  |      |          |   |      |   |        |      | 
|Income tax expense (benefit) at statutory rate        |  | $    | 20,038   |   |      | $ | 5,975  |      |  | $ | (16,805 | )
|State income taxes, net of federal income tax benefit |  |      | (11,167  | ) |      |   | (86    | )    |  |   | (1,687  | )
|Tax credits                                           |  |      | (442     | ) |      |   | (677   | )    |  |   | (971    | )
|Impairment of goodwill                                |  |      |         |   |      |   |       |      |  |   | 11,921  |  
|(Decrease) increase in valuation allowance, federal   |  |      | (148,566 | ) |      |   | (7,146 | )    |  |   | 8,776   |  
|Tax adjustments due to income tax audit               |  |      |         |   |      |   |       |      |  |   | 1,144   |  
|Nondeductible compensation                            |  |      | 1,793    |   |      |   | 20     |      |  |   |        |  
|Other, net                                            |  |      | 1,013    |   |      |   | 322    |      |  |   | 39      |  
|                                                      |  |      |          |   |      |   |        |      | 
|                                                      |  | $    | (137,331 | ) |      | $ | (1,592 | )    |  | $ | 2,417   |  
|                                                      |  |      |          |   |      |   |        |      | 



|                                                           |  |      |         |   |      |   |          |  
|---------------------------------------------------------- |  | ---- | ------- | - | ---- | - | -------- | -
|                                                           |  | 2006 |         |   | 2005 |  
|                                                           |  |      |         |   |      |  
|Impairment and estimated liability for closing restaurants |  | $    | 21,854  |   |      | $ | 25,581   |  
|Net operating loss carryforwards                           |  |      | 35,832  |   |      |   | 57,472   |  
|Basis difference in fixed assets                           |  |      | 20,547  |   |      |   | (13,076  | )
|Goodwill and other intangibles                             |  |      | 39,064  |   |      |   | 48,227   |  
|Reserves and allowances                                    |  |      | 32,701  |   |      |   | 37,887   |  
|Alternative minimum tax credits                            |  |      | 12,160  |   |      |   | 11,465   |  
|General business tax credits                               |  |      | 12,142  |   |      |   | 11,181   |  
|Foreign and state tax credits                              |  |      | 5,868   |   |      |   | 4,839    |  
|Other                                                      |  |      | (765    | ) |      |   | 4,895    |  
|                                                           |  |      |         |   |      |  
|                                                           |  |      | 179,403 |   |      |   | 188,471  |  
|Valuation allowance                                        |  |      | (30,220 | ) |      |   | (190,179 | )
|                                                           |  |      |         |   |      |  
|Net deferred tax asset (liability)                         |  | $    | 149,183 |   |      | $ | (1,708   | )
|                                                           |  |      |         |   |      |  



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Note 23  Segment Information


quick-service


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                |  |            |         |   |          |   |         |          |  |   |         |   |  |       |         |   |  |   |           |  
|------------------------------- |  | ---------- | ------- | - | -------- | - | ------- | -------- |  | - | ------- | - |  | ----- | ------- | - |  | - | --------- | -
|                                |  | Carls Jr. |         |   | Hardees |   |         | La Salsa |  |   | Other   |   |  | Total |        
|                                |  |            |         |   |          |   |         |          |  |   |         |   |  |       |        
|2006                            |  |            |         |   |          |   |         |          |  |   |         |   |  |       |         |   |  |   |           |  
|Revenue                         |  | $          | 802,761 |   |          | $ | 661,509 |          |  | $ | 49,156  |   |  | $     | 4,921   |   |  | $ | 1,518,347 |  
|Segment operating income (loss) |  |            | 82,773  |   |          |   | 13,393  |          |  |   | (7,007  | ) |  |       | (11,279 | ) |  |   | 77,880    |  
|Interest expense                |  |            | 4,255   |   |          |   | 18,641  |          |  |   | 28      |   |  |       | 92      |   |  |   | 23,016    |  
|Total assets                    |  |            | 195,729 |   |          |   | 359,342 |          |  |   | 24,966  |   |  |       | 224,743 |   |  |   | 804,780   |  
|Capital expenditures            |  |            | 28,754  |   |          |   | 38,601  |          |  |   | 910     |   |  |       | 211     |   |  |   | 68,476    |  
|Goodwill                        |  |            | 22,649  |   |          |   |        |          |  |   |        |   |  |       |        |   |  |   | 22,649    |  
|Depreciation and amortization   |  |            | 24,958  |   |          |   | 35,473  |          |  |   | 3,558   |   |  |       | 166     |   |  |   | 64,155    |  
|Income tax benefit (expense)    |  |            | (1,955  | ) |          |   |        |          |  |   | 138     |   |  |       | 139,148 |   |  |   | 137,331   |  
|2005                            |  |            |         |   |          |   |         |          |  |   |         |   |  |       |         |   |  |   |           |  
|Revenue                         |  | $          | 792,829 |   |          | $ | 673,172 |          |  | $ | 48,794  |   |  | $     | 5,086   |   |  | $ | 1,519,881 |  
|Segment operating income (loss) |  |            | 61,656  |   |          |   | 5,293   |          |  |   | (10,270 | ) |  |       | 101     |   |  |   | 56,780    |  
|Interest expense                |  |            | 5,071   |   |          |   | 31,510  |          |  |   | (27     | ) |  |       | 194     |   |  |   | 36,748    |  
|Total assets                    |  |            | 219,974 |   |          |   | 362,004 |          |  |   | 29,682  |   |  |       | 57,223  |   |  |   | 668,883   |  
|Capital expenditures            |  |            | 24,773  |   |          |   | 30,056  |          |  |   | 3,705   |   |  |       | 87      |   |  |   | 58,621    |  
|Goodwill                        |  |            | 22,649  |   |          |   |        |          |  |   |        |   |  |       |        |   |  |   | 22,649    |  
|Depreciation and amortization   |  |            | 23,875  |   |          |   | 38,782  |          |  |   | 3,965   |   |  |       | 171     |   |  |   | 66,793    |  
|Income tax benefit (expense)    |  |            | (498    | ) |          |   | (73     | )        |  |   | (2      | ) |  |       | 2,165   |   |  |   | 1,592     |  
|2004                            |  |            |         |   |          |   |         |          |  |   |         |   |  |       |         |   |  |   |           |  
|Revenue                         |  | $          | 725,055 |   |          | $ | 642,694 |          |  | $ | 43,933  |   |  | $     | 1,738   |   |  | $ | 1,413,420 |  
|Segment operating income (loss) |  |            | 55,109  |   |          |   | (26,336 | )        |  |   | (37,304 | ) |  |       | 263     |   |  |   | (8,268    | )
|Interest expense                |  |            | 6,263   |   |          |   | 33,787  |          |  |   | (81     | ) |  |       | (7      | ) |  |   | 39,962    |  
|Total assets                    |  |            | 257,304 |   |          |   | 389,498 |          |  |   | 33,682  |   |  |       | 49,920  |   |  |   | 730,404   |  
|Capital expenditures            |  |            | 13,807  |   |          |   | 21,219  |          |  |   | 6,742   |   |  |       | 5,845   |   |  |   | 47,613    |  
|Goodwill                        |  |            | 22,649  |   |          |   |        |          |  |   |        |   |  |       |        |   |  |   | 22,649    |  
|Depreciation and amortization   |  |            | 26,777  |   |          |   | 41,156  |          |  |   | 3,734   |   |  |       | 407     |   |  |   | 72,074    |  
|Income tax benefit (expense)    |  |            | (721    | ) |          |   | 19      |          |  |   |        |   |  |       | (1,715  | ) |  |   | (2,417    | )

Note 24  Employee Benefit and Retirement
Plans




| |                                
| | -------------------------------
| | Savings and Profit Sharing Plan





| |                             
| | ----------------------------
| | Employee Stock Purchase Plan



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                           
| | --------------------------
| | Deferred Compensation Plan







| |                      
| | ---------------------
| | Stock Incentive Plans



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








1 3






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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                          |           |        |           |                  |                |   |       |             |  |  |           |  | 
|------------------------- | --------- | ------ | --------- | ---------------- | -------------- | - | ----- | ----------- |  |  | --------- |  | 
|                          |           |        |           | Weighted-Average |                |   |      
|                          |           | Shares |           |                  | Exercise Price |   |       | Exercisable | 
|                          |           |        |           |                  |                |   |       |             | 
|Balance, January 31, 2003 |           |        | 9,931,310 |                  |                | $ | 10.60 |             |  |  | 8,318,801 | 
|                          | Granted   |        |           | 857,000          |                |   |       | 5.74        |  |  |           |  | 
|                          | Canceled  |        |           | (558,775         | )              |   |       | 13.48       |  |  |           |  | 
|                          | Exercised |        |           | (348,003         | )              |   |       | 3.50        |  |  |           |  | 
|                          |           |        |           |                  |                |   |       |             | 
|Balance, January 31, 2004 |           |        | 9,881,532 |                  |                |   | 10.26 |             |  |  | 8,442,512 | 
|                          | Granted   |        |           | 882,500          |                |   |       | 11.19       |  |  |           |  | 
|                          | Canceled  |        |           | (126,865         | )              |   |       | 13.84       |  |  |           |  | 
|                          | Exercised |        |           | (969,949         | )              |   |       | 4.15        |  |  |           |  | 
|                          |           |        |           |                  |                |   |       |             | 
|Balance, January 31, 2005 |           |        | 9,667,218 |                  |                |   | 10.92 |             |  |  | 8,117,498 | 
|                          | Granted   |        |           | 1,079,500        |                |   |       | 13.88       |  |  |           |  | 
|                          | Canceled  |        |           | (2,716,959       | )              |   |       | 8.73        |  |  |           |  | 
|                          | Exercised |        |           | (1,867,677       | )              |   |       | 4.13        |  |  |           |  | 
|                          |           |        |           |                  |                |   |       |             | 
|Balance, January 31, 2006 |           |        | 6,162,082 |                  |                | $ | 12.08 |             |  |  | 3,813,182 | 
|                          |           |        |           |                  |                |   |       |             | 



|                |       |         |             |    |  |                     |                  |  |                     |         |       |             |  |   |                  |  |  |  |      |  |  |  |       |  |  |   |       | 
|--------------- | ----- | ------- | ----------- | -- |  | ------------------- | ---------------- |  | ------------------- | ------- | ----- | ----------- |  | - | ---------------- |  |  |  | ---- |  |  |  | ----- |  |  | - | ----- | 
|                |       |         |             |    |  | Options Outstanding |                  |  | Options Exercisable |        
|                |       |         |             |    |  |                     |                  |  |                     |        
|                |       | (000s) |             |    |  |                     | Weighted-Average |  |                     | (000s) |       |             | 
|Range of        |       |         | Options     |    |  | Weighted-Average    |                  |  | Remaining           |         |       | Shares      |  |   | Weighted-Average | 
|Exercise Prices |       |         | Outstanding |    |  | Exercise Price      |                  |  | Contractual Life    |         |       | Exercisable |  |   | Exercise Price   | 
|                |       |         |             |    |  |                     |                  |  |                     |         |       |             |  |   |                  | 
|$               | 2.62  |         |             | to |  | $                   | 2.92             |  |                     |         | 472   |             |  | $ | 2.78             |  |  |  | 5.16 |  |  |  | 472   |  |  | $ | 2.78  | 
|                | 3.25  |         |             |    |  |                     | 4.40             |  |                     |         | 445   |             |  |   | 3.39             |  |  |  | 4.58 |  |  |  | 437   |  |  |   | 3.37  | 
|                | 5.18  |         |             |    |  |                     | 5.75             |  |                     |         | 1,156 |             |  |   | 5.49             |  |  |  | 6.25 |  |  |  | 928   |  |  |   | 5.49  | 
|                | 6.44  |         |             |    |  |                     | 8.73             |  |                     |         | 137   |             |  |   | 7.98             |  |  |  | 6.31 |  |  |  | 112   |  |  |   | 6.52  | 
|                | 11.10 |         |             |    |  |                     | 11.71            |  |                     |         | 1,139 |             |  |   | 11.23            |  |  |  | 7.48 |  |  |  | 639   |  |  |   | 11.20 | 
|                | 12.52 |         |             |    |  |                     | 12.88            |  |                     |         | 82    |             |  |   | 12.73            |  |  |  | 8.03 |  |  |  | 20    |  |  |   | 12.88 | 
|                | 13.09 |         |             |    |  |                     | 18.13            |  |                     |         | 2,024 |             |  |   | 15.20            |  |  |  | 5.90 |  |  |  | 1,030 |  |  |   | 16.39 | 
|                | 19.28 |         |             |    |  |                     | 36.65            |  |                     |         | 707   |             |  |   | 27.58            |  |  |  | 1.78 |  |  |  | 707   |  |  |   | 27.58 | 
|                |       |         |             |    |  |                     |                  |  |                     |         |       |             |  |   |                  |  |  |  |      |  | 
|$               | 2.62  |         |             |    |  | $                   | 36.65            |  |                     |         | 6,162 |             |  | $ | 12.08            |  |  |  | 5.67 |  |  |  | 4,345 |  |  | $ | 12.08 | 
|                |       |         |             |    |  |                     |                  |  |                     |         |       |             |  |   |                  |  |  |  |      |  | 

Note 25  Supplemental Cash Flow
Information




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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                         |                                                      |      |   |        |      |  |   |        |  |  |   |        | 
|-------------------------------------------------------- | ---------------------------------------------------- | ---- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                         |                                                      | 2006 |   |        | 2005 |  |   | 2004   | 
|                                                         |                                                      |      |   |        |      |  |   |        | 
|Cash paid for interest and income taxes are as follows:  |                                                      |      |   |        |      |  |   |        |  |  |   |       
|                                                         | Interest                                             |      | $ | 19,777 |      |  | $ | 32,099 |  |  | $ | 35,786 | 
|                                                         | Income taxes                                         |      |   | 1,362  |      |  |   | 5,482  |  |  |   | 1,925  | 
|Non-cash investing and financing charges are as follows: |                                                      |      |   |        |      |  |   |        |  |  |   |       
|                                                         | Gain recognized on sale and leaseback transactions   |      |   | 361    |      |  |   | 305    |  |  |   | 352    | 
|                                                         | Dividends declared, not paid                         |      |   | 2,394  |      |  |   |       |  |  |   |       | 
|                                                         | Capital lease obligations incurred to acquire assets |      |   | 344    |      |  |   |       |  |  |   |       | 

Note 26  Selected Quarterly Financial Data
(Unaudited)




|                                          |                   |         |         |        |     |   |         |         |   |   |         |        |  |   |         |       | 
|----------------------------------------- | ----------------- | ------- | ------- | ------ | --- | - | ------- | ------- | - | - | ------- | ------ |  | - | ------- | ----- | 
|                                          |                   | Quarter |        
|                                          |                   |         |        
|                                          |                   | 1st     |         |        | 2nd |   |         | 3rd     |   |   | 4th     |       
|                                          |                   |         |         |        |     |   |         |         |   |   |         |       
|Fiscal 2006                               |                   |         |         |        |     |   |         |         |   |   |         |        |  |   |         |      
|Total revenue                             |                   | $       | 465,909 |        |     | $ | 359,783 |         |   | $ | 344,113 |        |  | $ | 348,542 |      
|Operating income                          |                   |         | 23,148  |        |     |   | 13,209  |         |   |   | 20,984  |        |  |   | 20,539  |      
|Net income                                |                   |         | 15,999  |        |     |   | 8,448   |         |   |   | 15,823  |        |  |   | 154,312 |      
|Basic income per common share             |                   |         | 0.27    |        |     |   | 0.14    |         |   |   | 0.27    |        |  |   | 2.59    |      
|Diluted income per common share           |                   |         | 0.24    |        |     |   | 0.13    |         |   |   | 0.23    |        |  |   | 2.14    |      
|Fiscal 2005                               |                   |         |         |        |     |   |         |         |   |   |         |        |  |   |         |      
|Total revenue                             |                   | $       | 455,311 |        |     | $ | 353,734 |         |   | $ | 348,946 |        |  | $ | 361,890 |      
|Operating income                          |                   |         | 22,009  |        |     |   | 7,111   |         |   |   | 18,963  |        |  |   | 8,697   |      
|Income (loss) from continuing operations  |                   |         | 10,667  |        |     |   | (12,385 | )       |   |   | 13,311  |        |  |   | 7,069   |      
|Discontinued operations                   |                   |         | (163    | )      |     |   | (304    | )       |   |   | (179    | )      |  |   |        |      
|                                          | Net income (loss) |         |         | 10,504 |     |   |         | (12,689 | ) |   |         | 13,132 |  |   |         | 7,069 | 
|Basic income (loss) per common share      |                   |         | 0.18    |        |     |   | (0.22   | )       |   |   | 0.23    |        |  |   | 0.12    |      
|Diluted income (loss) per common share(1) |                   |         | 0.17    |        |     |   | (0.22   | )       |   |   | 0.20    |        |  |   | 0.12    |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In fiscal 2005, we retroactively applied
    EITF 04-8, The
    Effect of Contingently Convertible Debt on Diluted Earnings per
    Share, which requires the dilutive effect of contingently
    convertible debt, such as our Convertible Subordinated Notes due
    2023, which were issued September 29, 2003, be included in
    dilutive earnings per common share regardless of whether the
    contingency permitting holders to convert the debt into shares
    has been satisfied. This requirement has changed diluted income
    per common share for the first quarter of fiscal 2005 to
    $0.17 per share from the $0.18 per share that was
    reported in the quarterly report on
    Form 10-Q/A on
    December 20, 2004 for the quarter ended May 17, 2004.

12-week 16-week


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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Fourth Quarter Adjustments










Note 27  Commitments and Contingent
Liabilities








|              |  |   |        | 
|------------- |  | - | ------ | 
|February 2006 |  | $ | 13,816 | 
|March 2006    |  |   | 13,534 | 
|April 2006    |  |   | 1,003  | 
|July 2006     |  |   | 8,580  | 
|November 2006 |  |   | 10,898 | 
|December 2006 |  |   | 553    | 
|March 2007    |  |   | 13,223 | 
|              |  |   |       
|              |  | $ | 61,607 | 
|              |  |   |       





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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






, Accounting for
Contingencies,




Note 28  Subsequent Events




| |                                   
| | ----------------------------------
| | Termination of Franchise Agreement





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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Purchase of Restaurant Assets




115



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##### Table of Contents






EXHIBIT INDEX


|         |    |     |             |                                                                                                                                                                                                                                                                                                                                                                 
|-------- | -- | --- | ----------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |    |     | Description
|         |    |     |            
|         | 3  | .1  |             | Certificate of Incorporation of the Company, incorporated herein
    by reference to Exhibit 3.1 to the Companys
    Form S-4 Registration Statement Number 33-52523.                                                                                                                                                                                          
|        
|         | 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 Annual
    Report on Form 10-K for the fiscal year ended
    January 26, 1998, and is hereby incorporated by reference.                                                              
|        
|         | 3  | .3  |             | Bylaws of the Company, incorporated herein by reference to
    Exhibit 3.2 to the Companys Form S-4
    Registration Statement Number 33-52523.                                                                                                                                                                                                                
|        
|         | 3  | .4  |             | Certificate of Amendment of Bylaws, incorporated herein by
    reference to Exhibit 3.4 to the Companys Annual
    Report on Form 10-K for the fiscal year ended
    January 26, 2004.                                                                                                                                                                         
|        
|         | 4  | .1  |             | Rights Agreement, dated as of October 10, 2005, by and
    between the Company and Mellon Investor Services, LLC, filed as
    Exhibit 4.1 to the Companys Registration Statement on
    Form 8-A Number 1-11313, and is hereby incorporated by
    reference.                                                                                                 
|        
|         | 4  | .6  |             | Indenture, dated as of September 29, 2003, by and between
    the Company and J.P. Morgan Trust Company, National
    Association, as Trustee, filed as Exhibit 4.6 to the
    Companys Quarterly Report on Form 10-Q for the
    quarter ended November 3, 2003, and is hereby incorporated
    by reference.                                                 
|        
|         | 4  | .7  |             | Form of Notes (included in Exhibit 4.6).                                                                                                                                                                                                                                                                                                                        
|        
|         | 4  | .8  |             | Registration Rights Agreement, dated as of September 29,
    2003, by and among the Company and Citigroup Global Markets,
    Inc., for itself and the other initial purchasers, filed as
    Exhibit 4.8 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended November 3, 2003, and
    is hereby incorporated by reference.               
|        
|         | 10 | .1  |             | Carl Karcher Enterprises, Inc. Profit Sharing Plan, as amended,
    filed as Exhibit 10.21 to the Companys Form S-1
    Registration Statement Number 2-73695, and is hereby
    incorporated by reference.(1)                                                                                                                                                 
|        
|         | 10 | .4  |             | CKE Restaurants, Inc. 1994 Stock Incentive Plan, as amended,
    incorporated herein by reference to Exhibit 4.1 to the
    Companys Form S-8 Registration Statement
    Number 333-12399.(1)                                                                                                                                                                  
|        
|         | 10 | .5  |             | CKE Restaurants, Inc. 1999 Stock Incentive Plan, incorporated
    herein by reference to Exhibit 4.1 to the Companys
    Form S-8 Registration Statement Number 333-83601.(1)                                                                                                                                                                                  
|        
|         | 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 Annual Report on
    Form 10-K for fiscal year ended January 31, 1994, and
    is hereby incorporated by reference.(1)                                                                           
|        
|         | 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 Annual Report on Form 10-K for fiscal year
    ended January 26, 1998, and is hereby incorporated by
    reference.(1)                                                    
|        
|         | 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 Quarterly Report on
    Form 10-Q for the quarterly period ended May 17, 1999,
    and is hereby incorporated by reference.(1)                                                                                    
|        
|         | 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 Annual Report
    on Form 10-K for the fiscal year ended January 27,
    1997, and is hereby incorporated by reference.
|        
|         | 10 | .48 |             | CKE Restaurants, Inc. 2001 Stock Incentive Plan, Incorporated
    herein by reference to Exhibit 4.1 to the Companys
    Form S-8 Registration Statement Number 333-76884.(1)                                                                                                                                                                                  
|        
|         | 10 | .51 |             | Distribution Service Agreement, dated as of November 7,
    2003, by and between La Salsa, Inc. and McCabes
    Quality Foods, filed as Exhibit 10.51 to the Companys
    Quarterly Report on Form 10-Q for the quarter ended
    November 3, 2003, and is hereby incorporated by reference.                                                                  
|        
|         | 10 | .53 |             | Employment Agreement, effective as of January 27, 2004, by
    and between the Company and Theodore Abajian, incorporated
    herein by reference to the like-numbered exhibit to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended January 26, 2004.(1)                                                                               

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|         |    |     |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-------- | -- | --- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |    |     | Description
|         |    |     |            
|        
|         | 10 | .54 |             | Second Amendment to Employment Agreement, effective as of
    January 1, 2004, by and between the Company and Carl N.
    Karcher, incorporated herein by reference to the like-numbered
    exhibit to the Companys Annual Report on Form 10-K
    for the fiscal year ended January 26, 2004.(1)                                                                                                                                                                                                                                
|        
|         | 10 | .55 |             | Employment Agreement, effective as of April 4, 2004, by and
    between the Company and Andrew F. Puzder, incorporated herein by
    reference to the like-numbered exhibit to the Companys
    Annual Report on Form 10-K for the fiscal year ended
    January 26, 2004.(1)                                                                                                                                                                                                                                                     
|        
|         | 10 | .56 |             | Employment Agreement, effective as of January 27, 2004, by
    and between the Company and E. Michael Murphy, incorporated
    herein by reference to the like-numbered exhibit to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended January 26, 2004.(1)                                                                                                                                                                                                                                                 
|        
|         | 10 | .57 |             | Employment Agreement, effective as of January 27, 2004, by
    and between the Company and Brad R. Haley, incorporated herein
    by reference to the like-numbered exhibit to the Companys
    Quarterly Report on Form 10-Q for the quarter ended
    May 17, 2004.(1)                                                                                                                                                                                                                                                          
|        
|         | 10 | .58 |             | Sixth Amended and Restated Credit Agreement, dated as of
    June 2, 2004, by and among the Company, the Lenders party
    thereto, and BNP Paribas, a bank organized under the laws of
    France acting through its Chicago Branch (as successor in
    interest to Paribas), as Agent, incorporated herein by reference
    to the like-numbered exhibit to the Companys Quarterly
    Report on Form 10-Q for the quarter ended May 17, 2004.                                                                                 
|        
|         | 10 | .59 |             | Amendment No. 1 to Sixth Amended and Restated Credit
    Agreement, dated as of November 4, 2004, by and among the
    Company, BNP Paribas, a bank organized under the laws of France
    acting through its Chicago branch, as agent, and the lenders
    party to the Sixth Amended and Restated Credit Agreement, dated
    as of June 2, 2004, by and among those parties,
    incorporated herein by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    November 12, 2004.                  
|        
|         | 10 | .60 |             | Amendment to Employment Agreement between the Company and Andrew
    F. Puzder, effective as of February 1, 2005, incorporated
    herein by reference to Exhibit 10.60 to the Companys
    Annual Report on Form 10-K for the fiscal year ended
    January 31, 2005.(1)                                                                                                                                                                                                                                                         
|        
|         | 10 | .61 |             | Amendment No. 2 to Sixth Amended and Restated Credit
    Agreement, dated as of April 21, 2005, by and among the
    Company, BNP Paribas, a bank organized under the laws of France
    acting through its Chicago branch, as agent, and the lenders
    party to the Sixth Amended and Restated Credit Agreement, dated
    as of June 2, 2004, by and among those parties,
    incorporated herein by reference to Exhibit 10.61 to the
    Companys Annual Report on Form 10-K for the fiscal
    year ended January 31, 2005.
|        
|         | 10 | .62 |             | CKE Restaurants, Inc. 2005 Omnibus Incentive Compensation Plan,
    incorporated herein by reference to Annex A of the
    Companys Definitive Proxy Statement on Schedule 14A filed
    May 20, 2005.(1)                                                                                                                                                                                                                                                                                                                         
|         | 10 | .63 |             | CKE Restaurants, Inc. 1994 Employee Stock Purchase Plan, as
    amended, incorporated herein by reference to Annex B of the
    Companys Definitive Proxy Statement on Schedule 14A filed
    May 20, 2005.(1)                                                                                                                                                                                                                                                                                                                    
|        
|         | 10 | .64 |             | Form of Stock Option Agreement under the 2005 Omnibus Incentive
    Compensation Plan, incorporated herein by reference to
    Exhibit 10.2 to the Companys Current Report on
    Form 8-K filed June 30, 2005.(1)                                                                                                                                                                                                                                                                                                                
|        
|         | 10 | .65 |             | Form of Restricted Stock Award Agreement under the 2005 Omnibus
    Incentive Compensation Plan, incorporated herein by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K filed June 30, 2005.(1)                                                                                                                                                                                                                                                                                                      
|        
|         | 10 | .66 |             | Form of Stock Appreciation Rights Award Agreement under the 2005
    Omnibus Incentive Compensation Plan, incorporated herein by
    reference to Exhibit 10.4 to the Companys Current
    Report on Form 8-K filed June 30, 2005.(1)                                                                                                                                                                                                                                                                                             
|        
|         | 10 | .67 |             | Form of Restricted Stock Unit Award Agreement under the 2005
    Omnibus Incentive Compensation Plan, incorporated herein by
    reference to Exhibit 10.5 to the Companys Current
    Report on Form 8-K filed June 30, 2005.(1)                                                                                                                                                                                                                                                                                                 
|        
|         | 10 | .68 |             | Form of Stock Award Agreement under the 2005 Omnibus Incentive
    Compensation Plan, incorporated herein by reference to
    Exhibit 10.6 to the Companys Current Report on
    Form 8-K filed June 30, 2005.(1)                                                                                                                                                                                                                                                                                                                 

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|         |    |     |             |                                                                                                                                                                                                                                                                                                                        
|-------- | -- | --- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |    |     | Description
|         |    |     |            
|        
|         | 10 | .69 |             | CKE Restaurants, Inc. Deferred Compensation Plan, incorporated
    herein by reference to Exhibit 10.7 to the Companys
    Current Report on Form 8-K filed June 30, 2005.(1)                                                                                                                                         
|        
|         | 10 | .70 |             | Stock Option Purchase Agreement, dated as of July 19, 2005,
    by and between the Company and William P. Foley, II,
    incorporated herein by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K filed
    July 19, 2005.                                                                     
|        
|         | 10 | .71 |             | Amendment No. 2 to Employment Agreement between the Company
    and Andrew F. Puzder, effective as of December 6, 2005.(1)                                                                                                                                                                                             
|        
|         | 10 | .72 |             | Amendment No. 1 to Employment Agreement between the Company
    and E. Michael Murphy, effective as of December 6, 2005.(1)                                                                                                                                                                                            
|        
|         | 10 | .73 |             | Amendment No. 1 to Employment Agreement between the Company
    and Theodore Abajian, effective as of December 6, 2005.(1)                                                                                                                                                                                             
|        
|         | 10 | .74 |             | Amendment No. 1 to Employment Agreement between the Company
    and Brad R. Haley, effective as of December 6, 2005.(1)                                                                                                                                                                                                
|         | 11 | .1  |             | Computation of Per Share Earnings, included in Note 1 of
    Notes to Consolidated Financial Statements.                                                                                                                                                                                                               
|        
|         | 12 | .1  |             | Computation of Ratios.                                                                                                                                                                                                                                                                                                 
|        
|         | 14 | .1  |             | CKE Restaurants, Inc. Code of Ethics for CEO and Senior
    Financial Officers, as approved by the Companys Board of
    Directors on March 3, 2004, incorporated herein by
    reference to the like-numbered exhibit to the Companys
    Annual Report on Form 10-K for the fiscal year ended
    January 26, 2004.
|        
|         | 21 | .1  |             | Subsidiaries of Company.                                                                                                                                                                                                                                                                                               
|        
|         | 23 | .1  |             | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                              
|        
|         | 31 | .1  |             | Certification of Chief Executive Officer pursuant to
    Rule 13a-14(a)/15d-14(a), as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                           
|        
|         | 31 | .2  |             | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)/15d-14(a), as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                           
|        
|         | 32 | .1  |             | Certification of Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                             
|        
|         | 32 | .2  |             | Certification of Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                             






| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Schedules or exhibits omitted. The Company shall furnish
    supplementally to the Securities and Exchange Commission a copy
    of any omitted schedule or exhibit upon request.



|    |                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A management contract or compensatory plan or arrangement
    required to be filed as an exhibit to this report pursuant to
    Item 15(c) of
    Form 10-K.

118