##### 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 31, 2005                                                  
|          
|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                  

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


None


þ o


o


þ o






DOCUMENTS INCORPORATED BY REFERENCE:












---










CKE RESTAURANTS, INC. AND SUBSIDIARIES


INDEX TO ANNUAL REPORT ON FORM 10-K


For the Fiscal Year Ended January 31, 2005


TABLE OF CONTENTS


|              |  |                                                                                                                      |  |      |    | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|              |  |                                                                                                                      |  | Page |   
|              |  |                                                                                                                      |  | No.  |   
|              |  |                                                                                                                      |  |      |   
|Part I       
|Item 1.       |  | Business                                                                                                             |  |      | 1  | 
|Item 2.       |  | Properties                                                                                                           |  |      | 17 | 
|Item 3.       |  | Legal Proceedings                                                                                                    |  |      | 18 | 
|Item 4.       |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 19 | 
|             
|Part II      
|Item 5.       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 20 | 
|Item 6.       |  | Selected Financial Data                                                                                              |  |      | 21 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 25 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 62 | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 62 | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 62 | 
|Item 9A.      |  | Controls and Procedures                                                                                              |  |      | 62 | 
|             
|Part III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 67 | 
|Item 11.      |  | Executive Compensation                                                                                               |  |      | 67 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 67 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 68 | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                               |  |      | 69 | 
|             
|Part IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 70 | 
|EXHIBIT 10.60
|EXHIBIT 10.61
|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 in each
year. In this Annual Report, we refer to the fiscal years by
reference to the calendar year in which they end (e.g., the
fiscal year ended January 31, 2005, is referred to as
fiscal 2005 and the fiscal year ended
January 26, 2004, is referred to as fiscal
2004). Fiscal 2005 includes 53 weeks, and fiscal 2004
and 2003 each include 52 weeks. All dollar amounts used in
the text of this Annual Report are in thousands, unless
otherwise noted.


Company Overview




|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |    |    |  |  |       |       | 
|----------------------- | ----- | ---------- | --- | ----- | -------- |  | ----- | -------- |  |  | ------------- | --- |  | ----- | -- | -- |  |  | ----- | ----- | 
|                        |       | Carls Jr. |     |       | Hardees |  |       | La Salsa |  |  | Green Burrito |     |  | Total |   
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|Company-operated        |       |            | 428 |       |          |  | 677   |          |  |  | 62            |     |  |       | 2  |    |  |  | 1,169 |      
|Franchised and licensed |       |            | 586 |       |          |  | 1,357 |          |  |  | 39            |     |  |       | 15 |    |  |  | 1,997 |      
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|                        | Total |            |     | 1,014 |          |  |       | 2,034    |  |  |               | 101 |  |       |    | 17 |  |  |       | 3,166 | 
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   

Carls Jr.


Hardees. tm


La Salsa.


Recent Developments


Restatement of Prior Period Financial Results. Managements Discussion and Analysis of Financial
Condition and Results of Operations  Restatement


1



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of Previously Issued Financial Statements Notes to Consolidated Financial
Statements  Note 1  Significant
Accounting Policies  Restatement of Previously Issued
Financial Statements


Amendment to Credit Facility.


Divestiture of Timber Lodge.


Adoption of New Accounting Pronouncements.


Use of Non-GAAP Financial Measurements




Contact Information; Obtaining Copies of this Annual
Report


www.ckr.com


www.ckr.com


www.ckr.com




Competitive Strengths




2



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| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | promotion of premium, great tasting products such as
    Carls Jr.s The Six Dollar
    Burgertm,
    Pastrami
    Burgertm
    and Breakfast
    Burgertm;
    as well as Hardees Monster
    Thickburgertmand
    Loaded Biscuit and Gravy Breakfast
    Bowltm;
|
| |  | 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.                                                                                                                                                



Carls Jr. tm tm 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




3



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La Salsa.




Business Strategy






| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | remain focused on restaurant fundamentals  quality,
    service and cleanliness;                           
|
| |  | offer premium products that compete on quality and
    taste  not price;                                   
|
| |  | 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;                                         
|
| |  | 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.


4



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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 2005,
    approximately 58% and 67% of Carls Jr. and
    Hardees restaurants, respectively, were franchised.
|
| |  | We closed many unprofitable operations, which has improved our
    gross margin percentage and AUV in our Hardees restaurants.                                                                                                   
|
| |  | We believe we have improved the quality, service and cleanliness
    of 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 2004 |                |            |  |      |          |  |  |          |    |  |  |     
|            | First Quarter  |            |  | (0.4 | )%       |  |  | (3.8     | )% |  |  | (1.9 | )%
|            | Second Quarter |            |  | 2.3  | %        |  |  | 1.0      | %  |  |  | (2.0 | )%
|            | Third Quarter  |            |  | 5.4  | %        |  |  | 6.7      | %  |  |  | (2.6 | )%
|            | Fourth Quarter |            |  | 5.3  | %        |  |  | 9.2      | %  |  |  | 2.0  | % 

5



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| |   |                                                                
| | - | ---------------------------------------------------------------
| |  | Quarterly net income (loss) by segment has been (in thousands):

|            |                |            |   |        |          |  |   |                  |   |  |            |         |   |          |   |        |   |  |   |         |  
|----------- | -------------- | ---------- | - | ------ | -------- |  | - | ---------------- | - |  | ---------- | ------- | - | -------- | - | ------ | - |  | - | ------- | -
|            |                |            |   |        |          |  |   | Other, Including |   |  | Net Income |        
|            |                |            |   |        |          |  |   | Discontinued     |   |  | (Loss) As  |        
|            |                | Carls Jr. |   |        | Hardees |  |   | La Salsa         |   |  | Operations |         |   | Reported |  
|            |                |            |   |        |          |  |   |                  |   |  |            |         |   |          |  
|Fiscal 2005 |                |            |   |        |          |  |   |                  |   |  |            |         |   |          |   |        |   |  |   |        
|            | First Quarter  |            | $ | 19,704 |          |  | $ | (6,513           | ) |  | $          | (2,532  | ) |          | $ | (155   | ) |  | $ | 10,504  |  
|            | Second Quarter |            |   | 5,648  |          |  |   | (16,403          | ) |  |            | (2,002  | ) |          |   | 68     |   |  |   | (12,689 | )
|            | Third Quarter  |            |   | 15,661 |          |  |   | (1,131           | ) |  |            | (1,466  | ) |          |   | 68     |   |  |   | 13,132  |  
|            | Fourth Quarter |            |   | 17,477 |          |  |   | (8,703           | ) |  |            | (4,314  | ) |          |   | 2,609  |   |  |   | 7,069   |  
|Fiscal 2004 |                |            |   |        |          |  |   |                  |   |  |            |         |   |          |   |        |   |  |   |        
|            | First Quarter  |            | $ | 16,299 |          |  | $ | (21,899          | ) |  | $          | (414    | ) |          | $ | (1,688 | ) |  | $ | (7,702  | )
|            | Second Quarter |            |   | 13,992 |          |  |   | (8,744           | ) |  |            | (18     | ) |          |   | (7     | ) |  |   | 5,223   |  
|            | Third Quarter  |            |   | 10,515 |          |  |   | (9,132           | ) |  |            | (703    | ) |          |   | 258    |   |  |   | 938     |  
|            | Fourth Quarter |            |   | 8,513  |          |  |   | (22,511          | ) |  |            | (36,118 | ) |          |   | (1,563 | ) |  |   | (51,679 | )







Financial Information about Operating Segments




Investments in Other Restaurant Concepts






Restaurant Development




6



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|                         |  |                           |       |  |          |   |       |          |  |   |       | 
|------------------------ |  | ------------------------- | ----- |  | -------- | - | ----- | -------- |  | - | ----- | 
|                         |  | Average per restaurant(1) |      
|                         |  |                           |      
|                         |  | Carls Jr.                |       |  | Hardees |   |       | La Salsa | 
|                         |  |                           |       |  |          |   |       |          | 
|Land                     |  | $                         |      |  |          | $ | 434   |          |  | $ |      | 
|Building                 |  |                           | 718   |  |          |   | 796   |          |  |   | 478   | 
|Equipment                |  |                           | 283   |  |          |   | 280   |          |  |   | 197   | 
|Capitalization of leases |  |                           | 854   |  |          |   |      |          |  |   | 913   | 
|                         |  |                           |       |  |          |   |       |          | 
|Total                    |  | $                         | 1,855 |  |          | $ | 1,510 |          |  | $ | 1,588 | 
|                         |  |                           |       |  |          |   |       |          | 






|    |                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The averages above are contingent upon a number of factors
    including, but not limited to, restaurant prototype,
    geographical area, and local zoning requirements.

Restaurant Operations and Support






Marketing and Advertising










7



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Purchasing




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




Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Long-Term Obligations,


Competition and Markets






Trademarks and Service Marks




Government Regulation




8



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Environmental Matters






Seasonality






9



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Government Contracts




Research and Development




Employees




Working Capital Practices




Disclosure Regarding Forward-Looking Statements






Risk Factors






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



10



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| |                                                                        
| | -----------------------------------------------------------------------
| | 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.







| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | 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.



11



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| |                                                                            
| | ---------------------------------------------------------------------------
| | 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.





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





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



12



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





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





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





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





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



13



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| |                                                               
| | --------------------------------------------------------------
| | Our business may be impacted by increased 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.





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





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



14



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| |                                         
| | ----------------------------------------
| | 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 Accounting Research
Bulletin No. 51


Goodwill
and Other Intangible Assets


Share-Based
Payment




Executive Officers of the Registrant




|                   |  |     |    |  |          |                                                                  
|------------------ |  | --- | -- |  | -------- | -----------------------------------------------------------------
|Name               |  | Age |    |  | Position
|                   |  |     |    |  |         
|Andrew F. Puzder   |  |     | 54 |  |          | Chief Executive Officer and President                            
|Theodore Abajian   |  |     | 40 |  |          | Executive Vice President, Chief Financial Officer                
|John J. Dunion     |  |     | 46 |  |          | Executive Vice President, Supply Chain Management                
|Brad Haley         |  |     | 46 |  |          | Executive Vice President, Marketing 
    Carls Jr. and Hardees
|Renea S. Hutchings |  |     | 47 |  |          | Executive Vice President, Development                            
|E. Michael Murphy  |  |     | 53 |  |          | Executive Vice President, General Counsel and Secretary          

Andrew F. Puzder


15



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Theodore Abajian


John J. Dunion


Brad Haley


Renea S. Hutchings


E. Michael Murphy


16



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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               |          |  | 38  |              |  |  | 109      |     |  |       | 281 |     |  |  | 428   |      
|            | Franchise-operated(1)          |          |  | 6   |              |  |  | 40       |     |  |       | 178 |     |  |  | 224   |      
|            | Third party-operated/vacant(2) |          |  | 5   |              |  |  | 6        |     |  |       | 26  |     |  |  | 37    |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     | 49           |  |  |          | 155 |  |       |     | 485 |  |  |       | 689   | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Hardees:   |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  | 315 |              |  |  | 148      |     |  |       | 214 |     |  |  | 677   |      
|            | Franchise-operated(1)          |          |  | 34  |              |  |  | 60       |     |  |       | 118 |     |  |  | 212   |      
|            | Third party-operated/vacant(2) |          |  | 20  |              |  |  | 15       |     |  |       | 65  |     |  |  | 100   |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     | 369          |  |  |          | 223 |  |       |     | 397 |  |  |       | 989   | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|La Salsa:   |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  |    |              |  |  | 4        |     |  |       | 58  |     |  |  | 62    |      
|            | Third party-operated/vacant(2) |          |  |    |              |  |  |         |     |  |       | 6   |     |  |  | 6     |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     |             |  |  |          | 4   |  |       |     | 64  |  |  |       | 68    | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Other:      |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  |    |              |  |  |         |     |  |       | 2   |     |  |  | 2     |      
|            | Third party-operated/vacant(2) |          |  |    |              |  |  | 2        |     |  |       | 1   |     |  |  | 3     |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Subtotal |  |     |             |  |  |          | 2   |  |       |     | 3   |  |  |       | 5     | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|Total:      |                                |          |  |     |              |  |  |          |     |  |       |     |     |  |  |      
|            | Company-operated               |          |  | 353 |              |  |  | 261      |     |  |       | 555 |     |  |  | 1,169 |      
|            | Franchise-operated(1)          |          |  | 40  |              |  |  | 100      |     |  |       | 296 |     |  |  | 436   |      
|            | Third party-operated/vacant(2) |          |  | 25  |              |  |  | 23       |     |  |       | 98  |     |  |  | 146   |      
|            |                                |          |  |     |              |  |  |          |     |  |       |    
|            |                                | Total    |  |     | 418          |  |  |          | 384 |  |       |     | 949 |  |  |       | 1,751 | 
|            |                                |          |  |     |              |  |  |          |     |  |       |    






|    |                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.





17



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



Employees




Customers




Suppliers




Franchising




Intellectual Property




Summary of Significant Litigation




18



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##### Table of Contents










|        |                                                    
|------- | ---------------------------------------------------
|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 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 | 
|Fiscal 2004 |                       |      |   |       |     |  |   |      
|            | First Fiscal Quarter  |      | $ | 6.01  |     |  | $ | 3.05  | 
|            | Second Fiscal Quarter |      |   | 7.04  |     |  |   | 4.75  | 
|            | Third Fiscal Quarter  |      |   | 7.95  |     |  |   | 5.81  | 
|            | Fourth Fiscal Quarter |      |   | 7.69  |     |  |   | 5.74  | 







|                                      |  |            |   |  |           |                 |   |                   |                  |  |                   |  |  |   |        | 
|------------------------------------- |  | ---------- | - |  | --------- | --------------- | - | ----------------- | ---------------- |  | ----------------- |  |  | - | ------ | 
|                                      |  | (a)        |   |  | (b)       |                 |   | (c)               |                  |  | (d)               | 
|                                      |  |            |   |  |           |                 |   |                   |                  |  |                   | 
|                                      |  |            |   |  |           |                 |   | Maximum Number    |                 
|                                      |  |            |   |  |           |                 |   | (or Approximate   |                 
|                                      |  |            |   |  |           | Total Number of |   |                   | Dollar Value) of | 
|                                      |  | Total      |   |  | Average   |                 |   | Shares (or Units) |                  |  | Shares (or Units) | 
|                                      |  | Number of  |   |  | Price     |                 |   | Purchased as Part |                  |  | that May Yet Be   | 
|                                      |  | Shares (or |   |  | Paid per  |                 |   | of Publicly       |                  |  | Purchased Under   | 
|                                      |  | Units)     |   |  | Share     |                 |   | Announced Plans   |                  |  | the Plans or      | 
|Period                                |  | Purchased  |   |  | (or Unit) |                 |   | or Programs       |                  |  | Programs          | 
|                                      |  |            |   |  |           |                 |   |                   |                  |  |                   | 
|November 2, 2004  November 29, 2004  |  |            |  |  |           |                 |  |                   |                  |  |                  |  |  | $ | 14,441 | 
|November 30, 2004  December 27, 2004 |  |            |  |  |           |                 |  |                   |                  |  |                  |  |  |   | 14,441 | 
|December 28, 2004  January 31, 2005  |  |            |  |  |           |                 |  |                   |                  |  |                  |  |  |   | 14,441 | 
|                                      |  |            |   |  |           |                 |   |                   |                  |  |                   | 
|Total                                 |  |            |  |  |           |                 |  |                   |                  |  |                  |  |  | $ | 14,441 | 
|                                      |  |            |   |  |           |                 |   |                   |                  |  |                   | 

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



Selected Financial and Operating Data


|                                            |                                                                                     |                                                                                    |   |           |           |  |   |            |           |  |      |           |           |      |   |           |           |  |   |           |           | 
|------------------------------------------- | ----------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | - | --------- | --------- |  | - | ---------- | --------- |  | ---- | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                            |                                                                                     | Fiscal Year Ended January 31,(1)(2)(3)(8)                                          |  
|                                            |                                                                                     |                                                                                    |  
|                                            |                                                                                     | 2005                                                                               |   |           | 2004(7)   |  |   | 2003(5)(6) |           |  | 2002 |           |           | 2001 |  
|                                            |                                                                                     |                                                                                    |   |           |           |  |   |            |           |  |      |           |           |      |  
|                                            |                                                                                     | (In thousands except per share amounts, restaurant counts, ratios and percentages) |  
|Consolidated Statements of Operations Data: |                                                                                     |                                                                                    |   |           |           |  |   |            |           |  |      |           |           |      |   |           |           |  |   |          
|                                            | Revenue:                                                                            |                                                                                    |   |           |           |  |   |            |           |  |      |           |           |      |   |           |           |  |   |           |          
|                                            | Company-operated restaurants                                                        |                                                                                    | $ | 1,217,273 |           |  | $ | 1,142,929  |           |  | $    | 1,109,646 |           |      | $ | 1,174,384 |           |  | $ | 1,569,504 |          
|                                            | Franchised and licensed restaurants and other                                       |                                                                                    |   | 302,608   |           |  |   | 270,491    |           |  |      | 253,715   |           |      |   | 263,727   |           |  |   | 215,623   |          
|                                            |                                                                                     |                                                                                    |   |           |           |  |   |            |           |  |      |           |           |      |  
|                                            |                                                                                     | Total revenue                                                                      |   |           | 1,519,881 |  |   |            | 1,413,420 |  |      |           | 1,363,361 |      |   |           | 1,438,111 |  |   |           | 1,785,127 | 
|                                            |                                                                                     |                                                                                    |   |           |           |  |   |            |           |  |      |           |           |      |  
|                                            | Operating income (loss)                                                             |                                                                                    |   | 56,780    |           |  |   | (8,268     | )         |  |      | 35,617    |           |      |   | (31,163   | )         |  |   | (140,980  | )        
|                                            | Interest expense                                                                    |                                                                                    |   | 36,748    |           |  |   | 39,962     |           |  |      | 39,924    |           |      |   | 53,906    |           |  |   | 70,509    |          
|                                            | Income (loss) from continuing operations                                            |                                                                                    |   | 18,662    |           |  |   | (50,430    | )         |  |      | 19,214    |           |      |   | (84,724   | )         |  |   | (203,790  | )        
|                                            | Loss from discontinued operations                                                   |                                                                                    |   | (646      | )         |  |   | (2,790     | )         |  |      | (53       | )         |      |   |          |           |  |   |          |          
|                                            | Income (loss) before cumulative effect of accounting change                         |                                                                                    |   | 18,016    |           |  |   | (53,220    | )         |  |      | 19,161    |           |      |   | (84,724   | )         |  |   | (203,790  | )        
|                                            | Cumulative effect of accounting change(6)                                           |                                                                                    |   |          |           |  |   |           |           |  |      | (175,780  | )         |      |   |          |           |  |   |          |          
|                                            | Net income (loss)                                                                   |                                                                                    |   | 18,016    |           |  |   | (53,220    | )         |  |      | (156,619  | )         |      |   | (84,724   | )         |  |   | (203,790  | )        
|                                            | Net income (loss) per share  basic                                                 |                                                                                    |   | 0.31      |           |  |   | (0.92      | )         |  |      | (2.76     | )         |      |   | (1.68     | )         |  |   | (4.04     | )        
|                                            | Income (loss) from continuing operations per share 
    diluted                    |                                                                                    |   | 0.31      |           |  |   | (0.88      | )         |  |      | 0.33      |           |      |   | (1.68     | )         |  |   | (4.04     | )        
|                                            | Loss from discontinued operations per share  diluted                               |                                                                                    |   | (0.01     | )         |  |   | (0.04      | )         |  |      |          |           |      |   |          |           |  |   |          |          
|                                            | Income (loss) before cumulative effect of accounting change per
    share  diluted |                                                                                    |   | 0.30      |           |  |   | (0.92      | )         |  |      | 0.33      |           |      |   | (1.68     | )         |  |   | (4.04     | )        
|                                            | Cumulative effect of accounting change per share 
    diluted(6)                   |                                                                                    |   |          |           |  |   |           |           |  |      | (3.02     | )         |      |   |          |           |  |   |          |          
|                                            | Net income (loss) per share  diluted                                               |                                                                                    |   | 0.30      |           |  |   | (0.92      | )         |  |      | (2.69     | )         |      |   | (1.68     | )         |  |   | (4.04     | )        
|                                            | Weighted-average shares outstanding  diluted                                       |                                                                                    |   | 59,583    |           |  |   | 57,536     |           |  |      | 58,124    |           |      |   | 50,507    |           |  |   | 50,501    |          
|                                            | Cash dividends paid per common share                                                |                                                                                    |   |          |           |  |   |           |           |  |      |          |           |      |   |          |           |  |   | 0.04      |          
|                                            | Ratio of earnings to fixed charges(4)                                               |                                                                                    |   | 1.2       | x         |  |   |           |           |  |      | 1.2       | x         |      |   |          |           |  |   |          |          

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|                                 |                                                                                   |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |   |         |         |   |   |           |          |  
|-------------------------------- | --------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | - | ------- | ------- | - | - | ---------- | ------- | - | ---- | ------- | ------- | ---- | - | ------- | ------- | - | - | --------- | -------- | -
|                                 |                                                                                   | Fiscal Year Ended January 31,(1)(2)(3)(8)                                          |  
|                                 |                                                                                   |                                                                                    |  
|                                 |                                                                                   | 2005                                                                               |   |         | 2004(7) |   |   | 2003(5)(6) |         |   | 2002 |         |         | 2001 |  
|                                 |                                                                                   |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |  
|                                 |                                                                                   | (In thousands except per share amounts, restaurant counts, ratios and percentages) |  
|Segment Operating Data:          |                                                                                   |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |   |         |         |   |   |          
|                                 | Carls Jr.:                                                                       |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |   |         |         |   |   |           |         
|                                 |                                                                                   | Total revenue                                                                      |   | $       | 792,829 |   |   | $          | 725,055 |   |      | $       | 693,692 |      |   | $       | 704,557 |   |   | $         | 733,487  |  
|                                 |                                                                                   | Operating income                                                                   |   |         | 61,658  |   |   |            | 55,109  |   |      |         | 52,577  |      |   |         | 49,728  |   |   |           | 59,275   |  
|                                 | Hardees:                                                                         |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |   |         |         |   |   |           |         
|                                 |                                                                                   | Total revenue                                                                      |   |         | 673,172 |   |   |            | 642,694 |   |      |         | 627,785 |      |   |         | 690,459 |   |   |           | 942,123  |  
|                                 |                                                                                   | Operating income (loss)                                                            |   |         | 5,291   |   |   |            | (26,336 | ) |      |         | (16,361 | )    |   |         | (80,561 | ) |   |           | (203,526 | )
|                                 | La Salsa:                                                                         |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |   |         |         |   |   |           |         
|                                 |                                                                                   | Total revenue                                                                      |   |         | 48,794  |   |   |            | 43,933  |   |      |         | 39,959  |      |   |         |        |   |   |           |         |  
|                                 |                                                                                   | Operating loss(7)                                                                  |   |         | (10,269 | ) |   |            | (37,304 | ) |      |         | (397    | )    |   |         |        |   |   |           |         |  
|Consolidated Balance Sheet Data: |                                                                                   |                                                                                    |   |         |         |   |   |            |         |   |      |         |         |      |   |         |         |   |   |          
|                                 | Cash and cash equivalents                                                         |                                                                                    | $ | 18,432  |         |   | $ | 54,355     |         |   | $    | 18,440  |         |      | $ | 24,642  |         |   | $ | 16,860    |         
|                                 | Working capital deficit (as restated)                                             |                                                                                    |   | (74,907 | )       |   |   | (43,820    | )       |   |      | (69,586 | )       |      |   | (50,676 | )       |   |   | (25,983   | )       
|                                 | Total assets (as restated)                                                        |                                                                                    |   | 668,883 |         |   |   | 730,404    |         |   |      | 804,937 |         |      |   | 898,516 |         |   |   | 1,175,662 |         
|                                 | Total long-term debt and capital lease obligations, including
    current portion |                                                                                    |   | 317,048 |         |   |   | 418,176    |         |   |      | 423,275 |         |      |   | 444,847 |         |   |   | 624,055   |         
|                                 | Stockholders equity (as restated)                                                |                                                                                    |   | 119,668 |         |   |   | 100,658    |         |   |      | 152,660 |         |      |   | 227,348 |         |   |   | 316,007   |         






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our fiscal year is 52 or 53 weeks, ending the last Monday
    in January. For clarity of presentation, all years are presented
    as if the fiscal year ended January 31. Fiscal 2005
    includes 53 weeks. Fiscal 2004, 2003, 2002, and 2001
    include 52 weeks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(2) | Fiscal 2002 and 2001 include $43.1 million and
    $219.0 million, respectively, of revenue generated from
    other restaurant concepts we acquired prior to fiscal 1998, and
    have since sold.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(3) | Fiscal 2005, 2004, 2003, 2002, and 2001 included
    $14.3 million, $17.8 million, $5.2 million,
    $70.9 million and $143.2 million, respectively, of
    facility action charges, net.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(4) | 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 2005 and 2003, and
    insufficient to cover fixed charges for fiscal 2004, 2002, and
    2001 by $48.0 million, $85.3 million and
    $214.9 million, respectively.
|   
|(5) | Fiscal 2003 includes operating results of SBRG from the date of
    acquisition, March 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(6) | During fiscal 2003, we adopted Statement of Financial Accounting
    Standards 142 (SFAS 142), Goodwill and
    Other Intangible Assets, resulting in a transitional
    impairment charge of $175.8 million (or $3.02 per
    diluted common share).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(7) | Fiscal 2004 included a $34.1 million impairment charge to
    reduce the carrying value of La Salsa goodwill to $0.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(8) | We have restated our beginning accumulated deficit for fiscal
    2001 to correct for our previous improper application of FASB
    Technical Bulletin 85-3, Accounting for Operating Leases
    with Scheduled Rent Increases. See Note 1 of Notes to
    Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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Selected Financial and Operating Data by Segment


|                       |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |       |           |       | 
|---------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------- | ----- | ----- | --------- | ----- |  | ------- | --------- | ----- | ---- | ----- | --------- | ----- |  | ----- | --------- | ----- |  | ----- | --------- | ----- | 
|                       |                                                                                       | Fiscal Year Ended January 31,(1)                         |      
|                       |                                                                                       |                                                          |      
|                       |                                                                                       | 2005                                                     |       |       | 2004      |       |  | 2003(4) |           |       | 2002 |       |           | 2001  | 
|                       |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       | 
|                       |                                                                                       | (In thousands, except restaurant counts and percentages) |      
|Carls Jr. Restaurants |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |      
|                       | Restaurants open (at end of fiscal year):                                             |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated                                         |       |       | 428       |       |  |         | 426       |       |      |       | 440       |       |  |       | 443       |       |  |       | 491       |      
|                       |                                                                                       | Franchised and licensed                                  |       |       | 586       |       |  |         | 580       |       |      |       | 547       |       |  |       | 526       |       |  |       | 486       |      
|                       |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       | 
|                       |                                                                                       |                                                          | Total |       |           | 1,014 |  |         |           | 1,006 |      |       |           | 987   |  |       |           | 969   |  |       |           | 977   | 
|                       |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       | 
|                       | Restaurant sales:                                                                     |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated restaurants                             |       | $     | 567,960   |       |  | $       | 523,945   |       |      | $     | 507,526   |       |  | $     | 516,998   |       |  | $     | 604,927   |      
|                       |                                                                                       | Franchised and licensed restaurants(2)                   |       |       | 679,734   |       |  |         | 596,318   |       |      |       | 567,048   |       |  |       | 586,144   |       |  |       | 432,387   |      
|                       | Average unit volume per company-operated restaurant                                   |                                                          |       | 1,301 |           |       |  | 1,187   |           |       |      | 1,152 |           |       |  | 1,135 |           |       |  | 1,078 |          
|                       | Percentage increase in comparable company-operated restaurant
    sales(3)            |                                                          |       | 7.7   | %         |       |  | 2.9     | %         |       |      | 0.7   | %         |       |  | 2.9   | %         |       |  | 1.8   | %        
|                       | Company-operated restaurant-level margins                                             |                                                          |       | 21.1  | %         |       |  | 20.2    | %         |       |      | 20.8  | %         |       |  | 19.3  | %         |       |  | 18.7  | %        
|Hardees Restaurants   |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |      
|                       | Restaurants open (at end of fiscal year):                                             |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated                                         |       |       | 677       |       |  |         | 721       |       |      |       | 730       |       |  |       | 742       |       |  |       | 923       |      
|                       |                                                                                       | Franchised and licensed                                  |       |       | 1,357     |       |  |         | 1,400     |       |      |       | 1,499     |       |  |       | 1,648     |       |  |       | 1,737     |      
|                       |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       | 
|                       |                                                                                       |                                                          | Total |       |           | 2,034 |  |         |           | 2,121 |      |       |           | 2,229 |  |       |           | 2,390 |  |       |           | 2,660 | 
|                       |                                                                                       |                                                          |       |       |           |       |  |         |           |       |      |       |           |       | 
|                       | Restaurant sales:                                                                     |                                                          |       |       |           |       |  |         |           |       |      |       |           |       |  |       |           |       |  |       |          
|                       |                                                                                       | Company-operated restaurants                             |       | $     | 601,068   |       |  | $       | 575,238   |       |      | $     | 562,010   |       |  | $     | 614,291   |       |  | $     | 855,060   |      
|                       |                                                                                       | Franchised and licensed restaurants(2)                   |       |       | 1,203,750 |       |  |         | 1,186,490 |       |      |       | 1,251,526 |       |  |       | 1,390,072 |       |  |       | 1,370,656 |      
|                       | Average unit volume per company-operated restaurant                                   |                                                          |       | 862   |           |       |  | 792     |           |       |      | 763   |           |       |  | 763   |           |       |  | 715   |          
|                       | Percentage increase (decrease) in comparable company-operated
    restaurant sales(3) |                                                          |       | 7.0   | %         |       |  | 2.5     | %         |       |      | (2.2  | )%        |       |  | 0.1   | %         |       |  | (7.6  | )%       
|                       | Company-operated restaurant-level margins                                             |                                                          |       | 14.3  | %         |       |  | 9.3     | %         |       |      | 10.5  | %         |       |  | 9.1   | %         |       |  | 7.1   | %        

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|                     |                                                                                       |                                                          |       |     |        |     |  |         |        |     |      |      |        |      |  |  |  |  |  |  |  |  | 
|-------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------- | ----- | --- | ------ | --- |  | ------- | ------ | --- | ---- | ---- | ------ | ---- |  |  |  |  |  |  |  |  | 
|                     |                                                                                       | Fiscal Year Ended January 31,(1)                         |      
|                     |                                                                                       |                                                          |      
|                     |                                                                                       | 2005                                                     |       |     | 2004   |     |  | 2003(4) |        |     | 2002 |      |        | 2001 | 
|                     |                                                                                       |                                                          |       |     |        |     |  |         |        |     |      |      |        |      | 
|                     |                                                                                       | (In thousands, except restaurant counts and percentages) |      
|La Salsa Restaurants |                                                                                       |                                                          |       |     |        |     |  |         |        |     |      |      |        |      |  |  |  |  |  | 
|                     | Restaurants open (at end of fiscal year):                                             |                                                          |       |     |        |     |  |         |        |     |      |      |        |      |  |  |  |  |  |  | 
|                     |                                                                                       | Company-operated                                         |       |     | 62     |     |  |         | 61     |     |      |      | 57     |      |  |  |  |  |  |  |  | 
|                     |                                                                                       | Franchised and licensed                                  |       |     | 39     |     |  |         | 41     |     |      |      | 42     |      |  |  |  |  |  |  |  | 
|                     |                                                                                       |                                                          |       |     |        |     |  |         |        |     |      |      |        |      | 
|                     |                                                                                       |                                                          | Total |     |        | 101 |  |         |        | 102 |      |      |        | 99   |  |  |  |  |  |  |  |  | 
|                     |                                                                                       |                                                          |       |     |        |     |  |         |        |     |      |      |        |      | 
|                     | Restaurant sales:                                                                     |                                                          |       |     |        |     |  |         |        |     |      |      |        |      |  |  |  |  |  |  | 
|                     |                                                                                       | Company-operated restaurants                             |       | $   | 46,950 |     |  | $       | 42,310 |     |      | $    | 38,550 |      |  |  |  |  |  |  |  | 
|                     |                                                                                       | Franchised and licensed restaurants(2)                   |       |     | 34,170 |     |  |         | 28,176 |     |      |      | 23,802 |      |  |  |  |  |  |  |  | 
|                     | Average unit volume per company-operated restaurant                                   |                                                          |       | 748 |        |     |  | 723     |        |     |      | 751  |        |      |  |  |  |  |  |  | 
|                     | Percentage increase (decrease) in comparable company-operated
    restaurant sales(3) |                                                          |       | 5.2 | %      |     |  | (1.3    | )%     |     |      | 0.8  | %      |      |  |  |  |  |  |  | 
|                     | Company-operated restaurant-level margins                                             |                                                          |       | 2.4 | %      |     |  | 5.3     | %      |     |      | 12.1 | %      |      |  |  |  |  |  |  | 






|    |                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Our fiscal year is 52 or 53 weeks, ending the last Monday
    in January. For clarity of presentation, all years are presented
    as if the fiscal year ended January 31. Fiscal 2005 includes
    53 weeks. Fiscal 2004, 2003, 2002 and 2001 include
    52 weeks.
|   
|(2) | Franchisee restaurant operations are not included in our
    Consolidated Financial Statements; however, franchisee sales
    result in royalties and some 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.                                                                                                                                                        

24



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##### Table of Contents








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



Overview






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Consolidated revenue increased 7.5%, to $1,519,881.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Through the end of fiscal 2005, Carls Jr. and
    Hardees had achieved 20 consecutive accounting periods
    (more than 18 months) of same-store sales increases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Same-store sales increased 7.7% and 7.0% at company-operated
    Carls Jr. and Hardees restaurants, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Annual average unit volume increased 9.6%, to $1,301, for
    Carls Jr. company-operated restaurants and increased 8.8%,
    to $862, for Hardees company-operated restaurants.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Same-store transactions increased 1.3% and 0.2% at
    company-operated Carls Jr. and Hardees restaurants,
    respectively, representing the first such increase for either
    brand in the last eight years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Carls Jr. restaurant-level margin increased 90 basis
    points to 21.1% in fiscal 2005, as compared to 20.2% in fiscal
    2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Hardees restaurant-level margin increased 500 basis
    points to 14.3% in fiscal 2005, as compared to 9.3% in fiscal
    2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Net income grew to $18,016, or $0.30 per diluted share.
    This represents an increase of $71,236 over the prior year net
    loss of $53,220, or $0.92 per diluted share. The fiscal
    2004 net loss included a $34,059 charge to fully impair the
    value of La Salsa goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | We amended and restated our credit facility on June 2,
    2004, which enabled us to redeem our 9.125% Senior
    Subordinated Notes due 2009. Through the end of fiscal 2005, we
    have voluntarily prepaid $90,074 of the term loan portion of the
    credit facility. On November 4, 2004, we amended our credit
    facility, resulting in a 0.25% decrease to all borrowing rates.
    Together, these items have resulted in a savings of $6,491 in
    interest expense in fiscal 2005 over fiscal 2004. On
    April 21, 2005 (subsequent to the end of fiscal 2005), we
    amended our credit facility to permit us to pay cash dividends
    on substantially the same terms as we were and are permitted to
    repurchase shares of our common stock. 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.
|
| |  | We sold Timber Lodge Steakhouse to T-Lodge Acquisition Corp. for
    $6,954 in cash and $1,862 in secured notes on September 3,
    2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         





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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








Restatement of Previously Issued Financial Statements


Accounting for Operating Leases with Scheduled Rent
Increases.




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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 lease terms for purposes of establishing
    depreciable lives for leasehold improvements, evaluating leases
    for capital versus operating lease treatment 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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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)














| |                       
| | ----------------------
| | Impairment of Goodwill



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










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







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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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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)








| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) we and the franchisee mutually decided to close a
    restaurant and we assumed the responsibility for the lease,
    usually after a franchise agreement was terminated or the
    franchisee declared bankruptcy; or
|
| | (2) we entered into a workout agreement with a financially
    troubled franchisee, wherein we agreed to make part or all of
    the lease payments for the franchisee.                                                   







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

Accounting for Stock Issued to Employees, Accounting for
Stock-Based Compensation


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




Share-Based Payment,




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



Restaurant Portfolio Strategy






Business Strategy






| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | remain focused on restaurant fundamentals  quality,
    service and cleanliness;                           
|
| |  | offer premium products that compete on quality and
    taste  not price;                                   
|
| |  | 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;                                         
|
| |  | control costs while increasing revenues;                                                                    

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | leverage our infrastructure and marketing presence to build out
    existing core markets; and
|
| |  | strengthen our franchise system and pursue further franchising
    opportunities.             



Franchisees 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,       |     
|                                                                                                                       |                                                  |                                     |     
|                                                                                                                       |                                                  | 2005                                |      |      | 2004  |  |      | 2003 |      
|                                                                                                                       |                                                  |                                     |      |      |       |  |      |      |      
|Revenue:                                                                                                               |                                                  |                                     |      |      |       |  |      |      |       |  |      |     
|                                                                                                                       | Company-operated restaurants                     |                                     |      | 80.1 | %     |  |      | 80.9 | %     |  |      | 81.4 | %    
|                                                                                                                       | Franchised and licensed restaurants and other    |                                     |      | 19.9 |       |  |      | 19.1 |       |  |      | 18.6 |      
|                                                                                                                       |                                                  |                                     |      |      |       |  |      |      |      
|                                                                                                                       |                                                  | Total revenue                       |      |      | 100.0 |  |      |      | 100.0 |  |      |      | 100.0 | 
|                                                                                                                       |                                                  |                                     |      |      |       |  |      |      |      
|Operating costs and expenses:                                                                                          |                                                  |                                     |      |      |       |  |      |      |       |  |      |     
|                                                                                                                       | Restaurant operations(1):                        |                                     |      |      |       |  |      |      |       |  |      |      |      
|                                                                                                                       |                                                  | Food and packaging                  |      |      | 29.6  |  |      |      | 29.8  |  |      |      | 28.9  | 
|                                                                                                                       |                                                  | Payroll and other employee benefits |      |      | 31.0  |  |      |      | 32.4  |  |      |      | 32.3  | 
|                                                                                                                       |                                                  | Occupancy and other                 |      |      | 22.5  |  |      |      | 23.6  |  |      |      | 23.6  | 
|                                                                                                                       | Franchised and licensed restaurants and other(2) |                                     |      | 75.2 |       |  |      | 77.7 |       |  |      | 76.8 |      
|                                                                                                                       | Advertising(1)                                   |                                     |      | 5.9  |       |  |      | 6.2  |       |  |      | 6.5  |      
|                                                                                                                       | General and administrative                       |                                     |      | 9.1  |       |  |      | 7.6  |       |  |      | 8.4  |      
|                                                                                                                       | Facility action charges, net                     |                                     |      | 0.9  |       |  |      | 1.3  |       |  |      | 0.4  |      
|                                                                                                                       | Impairment of goodwill                           |                                     |      |     |       |  |      | 2.4  |       |  |      |     |      
|Operating income (loss)                                                                                                |                                                  |                                     | 3.7  |      |       |  | (0.6 | )    |       |  | 2.6  |     
|Interest expense                                                                                                       |                                                  |                                     | (2.4 | )    |       |  | (2.8 | )    |       |  | (2.9 | )   
|Other income (expense), net                                                                                            |                                                  |                                     | (0.2 | )    |       |  |     |      |       |  | 1.2  |     
|                                                                                                                       |                                                  |                                     |      |      |       |  |      |      |      
|Income (loss) before income taxes, discontinued operations and
    cumulative effect of accounting change for goodwill |                                                  |                                     | 1.1  |      |       |  | (3.4 | )    |       |  | 0.9  |     
|Income tax benefit (expense)                                                                                           |                                                  |                                     | 0.1  |      |       |  | (0.2 | )    |       |  | 0.5  |     
|                                                                                                                       |                                                  |                                     |      |      |       |  |      |      |      
|Income (loss) from continuing operations                                                                               |                                                  |                                     | 1.2  | %    |       |  | (3.6 | )%   |       |  | 1.4  | %   
|                                                                                                                       |                                                  |                                     |      |      |       |  |      |      |      






|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|(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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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 |        
|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                                                |                                                            |                           | 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      | %     |       |                 |       |       |       |   |   |     |     |   |           |        
|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  | %     |                 |       |       |       |   |   |     |     |   |           |         |        
|                                                             | Restaurant-level margin                                    |                           |         | 21.1    | %        |   |         | 14.3     | %      |   |          | 2.4   | %     |                 |       |       |       |   |   |     |     |   |           |         |        
|Advertising as a percentage of company-operated revenue      |                                                            |                           | 6.1     | %       |          |   | 6.0     | %        |        |   | 2.9      | %     |       |                 |       |       |       |   |   |     |     |   |           |        
|Franchising revenue:                                         |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |                 |       |       |       |   |   |     |     |   |           |        
|                                                             | 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 revenue |         |         | 224,869  |   |         |          | 72,104 |   |          |       | 1,844 |                 |       |       | 3,857 |   |   |     | (66 | ) |           |         | 302,608 | 
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |                 |       |       |       |  
|Franchising expense:                                         |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |                 |       |       |       |   |   |     |     |   |           |        
|                                                             | 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 expense |         |         | 193,409  |   |         |          | 29,677 |   |          |       | 1,111 |                 |       |       | 3,457 |   |   |     | (66 | ) |           |         | 227,588 | 
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |                 |       |       |       |  
|Net franchising income                                       |                                                            |                           | 31,460  |         |          |   | 42,427  |          |        |   | 733      |       |       |                 | 400   |       |       |   |  |     |     |   | 75,020    |        
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |                 |       |       |       |  
|Facility action charges, net                                 |                                                            |                           | 2,794   |         |          |   | 7,088   |          |        |   | 4,344    |       |       |                 | 94    |       |       |   |  |     |     |   | 14,320    |        
|Operating income (loss)                                      |                                                            | $                         | 61,658  |         |          | $ | 5,291   |          |        | $ | (10,269  | )     |       | $               | 100   |       |       | $ |  |     |     | $ | 56,780    |        

36



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##### 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 |        
|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                                                |                                                            |                           | 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      | %     |       |       |       |     |     |   |           |        
|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  | %     |       |       |     |     |   |           |         |        
|                                                             | Restaurant-level margin                                    |                           |         | 20.2    | %        |   |         | 9.3      | %      |   |          | 5.3   | %     |       |       |     |     |   |           |         |        
|Advertising as a percentage of company-operated revenue      |                                                            |                           | 6.5     | %       |          |   | 6.2     | %        |        |   | 2.9      | %     |       |       |       |     |     |   |           |        
|Franchising revenue:                                         |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |       |     |     |   |           |        
|                                                             | 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 revenue |         |         | 201,110  |   |         |          | 67,456 |   |          |       | 1,623 |       |       |     | 302 |   |           |         | 270,491 | 
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|Franchising expense:                                         |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |       |     |     |   |           |        
|                                                             | 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 expense |         |         | 176,186  |   |         |          | 33,320 |   |          |       | 731   |       |       |     |    |   |           |         | 210,237 | 
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|Net franchising income                                       |                                                            |                           | 24,924  |         |          |   | 34,136  |          |        |   | 892      |       |       |       | 302   |     |     |   | 60,254    |        
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|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    | )      

37



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |       |     |     |   |           |         |         | 
|------------------------------------------------------------ | ---------------------------------------------------------- | ------------------------- | ------- | ------- | -------- | - | ------- | -------- | ------ | - | -------- | ----- | ----- | ----- | ----- | --- | --- | - | --------- | ------- | ------- | 
|                                                             |                                                            | Fiscal 2003               |        
|                                                             |                                                            |                           |        
|                                                             |                                                            | Carls Jr.                |         |         | Hardees |   |         | La Salsa |        |   | Other(A) |       |       | Total |      
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|Company-operated revenue                                     |                                                            | $                         | 507,526 |         |          | $ | 562,010 |          |        | $ | 38,550   |       |       | $     | 1,560 |     |     | $ | 1,109,646 |        
|Company-operated average unit volume (trailing-13 periods)   |                                                            |                           | 1,152   |         |          |   | 763     |          |        |   | 751      |       |       |       |       |     |     |   |           |        
|Franchise-operated average unit volume (trailing-13 periods) |                                                            |                           | 1,055   |         |          |   | 812     |          |        |   | 751      |       |       |       |       |     |     |   |           |        
|Average check                                                |                                                            |                           | 5.26    |         |          |   | 3.98    |          |        |   | 8.80     |       |       |       |       |     |     |   |           |        
|Company-operated same-store sales increase (decrease)        |                                                            |                           | 0.7     | %       |          |   | (2.2    | )%       |        |   | 0.8      | %     |       |       |       |     |     |   |           |        
|Company-operated same-store transaction increase (decrease)  |                                                            |                           | (3.4    | )%      |          |   | (7.4    | )%       |        |   | 0.1      | %     |       |       |       |     |     |   |           |        
|Franchise-operated same-store sales increase (decrease)      |                                                            |                           | 0.2     | %       |          |   | (2.6    | )%       |        |   | 0.9      | %     |       |       |       |     |     |   |           |        
|Operating costs as a % of company-operated revenue:          |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |       |     |     |   |           |        
|                                                             | Food and packaging                                         |                           |         | 27.9    | %        |   |         | 29.9     | %      |   |          | 26.9  | %     |       |       |     |     |   |           |         |        
|                                                             | Payroll and employee benefits                              |                           |         | 28.9    | %        |   |         | 35.5     | %      |   |          | 32.4  | %     |       |       |     |     |   |           |         |        
|                                                             | Occupancy and other operating costs                        |                           |         | 22.4    | %        |   |         | 24.1     | %      |   |          | 28.6  | %     |       |       |     |     |   |           |         |        
|                                                             | Restaurant-level margin                                    |                           |         | 20.8    | %        |   |         | 10.5     | %      |   |          | 12.1  | %     |       |       |     |     |   |           |         |        
|Advertising as a percentage of company-operated revenue      |                                                            |                           | 6.9     | %       |          |   | 6.5     | %        |        |   | 3.3      | %     |       |       |       |     |     |   |           |        
|Franchising revenue:                                         |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |       |     |     |   |           |        
|                                                             | Royalties                                                  |                           |         | 21,071  |          |   |         | 37,355   |        |   |          | 1,409 |       |       |       | 365 |     |   |           | 60,200  |        
|                                                             | Distribution centers                                       |                           |         | 145,055 |          |   |         | 18,155   |        |   |          |      |       |       |       |    |     |   |           | 163,210 |        
|                                                             | Rent                                                       |                           |         | 19,391  |          |   |         | 9,696    |        |   |          |      |       |       |       |    |     |   |           | 29,087  |        
|                                                             | Other                                                      |                           |         | 649     |          |   |         | 569      |        |   |          |      |       |       |       |    |     |   |           | 1,218   |        
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|                                                             |                                                            | Total franchising revenue |         |         | 186,166  |   |         |          | 65,775 |   |          |       | 1,409 |       |       |     | 365 |   |           |         | 253,715 | 
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|Franchising expense:                                         |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |       |     |     |   |           |        
|                                                             | Administrative expense (including provision for bad debts) |                           |         | 2,880   |          |   |         | 5,358    |        |   |          | 411   |       |       |       |    |     |   |           | 8,649   |        
|                                                             | Distribution centers                                       |                           |         | 141,429 |          |   |         | 18,310   |        |   |          |      |       |       |       |    |     |   |           | 159,739 |        
|                                                             | Rent and other occupancy                                   |                           |         | 17,569  |          |   |         | 8,830    |        |   |          |      |       |       |       |    |     |   |           | 26,399  |        
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|                                                             |                                                            | Total franchising expense |         |         | 161,878  |   |         |          | 32,498 |   |          |       | 411   |       |       |     |    |   |           |         | 194,787 | 
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|Net franchising income                                       |                                                            |                           | 24,288  |         |          |   | 33,277  |          |        |   | 998      |       |       |       | 365   |     |     |   | 58,928    |        
|                                                             |                                                            |                           |         |         |          |   |         |          |        |   |          |       |       |       |      
|Facility action charges, net                                 |                                                            |                           | 1,267   |         |          |   | 3,927   |          |        |   |         |       |       |       |      |     |     |   | 5,194     |        
|Operating income (loss)                                      |                                                            | $                         | 52,577  |         |          | $ | (16,361 | )        |        | $ | (397     | )     |       | $     | (202  | )   |     | $ | 35,617    |        

38



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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 |       
|Average check                                               |                                                            |                            | 6.03    |        |          |   | 4.71    |          |        |   | 9.77     |      |     |                 |     |     |       |   |   |     |     |   |         |       
|Company-operated same-store sales increase                  |                                                            |                            | 4.9     | %      |          |   | 4.4     | %        |        |   | 4.3      | %    |     |                 |     |     |       |   |   |     |     |   |         |       
|Company-operated same-store transaction increase (decrease) |                                                            |                            | (0.4    | )%     |          |   | 0.8     | %        |        |   | (1.2     | )%   |     |                 |     |     |       |   |   |     |     |   |         |       
|Franchise-operated same-store sales increase (decrease)     |                                                            |                            | 3.7     | %      |          |   | (1.1    | )%       |        |   | 3.8      | %    |     |                 |     |     |       |   |   |     |     |   |         |       
|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 | %   |                 |     |     |       |   |   |     |     |   |         |        |       
|                                                            | Restaurant-level margin                                    |                            |         | 21.0   | %        |   |         | 11.8     | %      |   |          | (1.2 | )%  |                 |     |     |       |   |   |     |     |   |         |        |       
|Advertising as a percentage of company-operated revenue     |                                                            |                            | 5.0     | %      |          |   | 6.1     | %        |        |   | 3.0      | %    |     |                 |     |     |       |   |   |     |     |   |         |       
|Franchising revenue:                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |                 |     |     |       |   |   |     |     |   |         |       
|                                                            | 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 revenue  |         |        | 54,693   |   |         |          | 16,855 |   |          |      | 387 |                 |     |     | 1,039 |   |   |     | (66 | ) |         |        | 72,908 | 
|                                                            |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |                 |     |     |       |  
|Franchising expense:                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |                 |     |     |       |   |   |     |     |   |         |       
|                                                            | 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 expense  |         |        | 46,816   |   |         |          | 8,089  |   |          |      | 266 |                 |     |     | 951   |   |   |     | (66 | ) |         |        | 56,056 | 
|                                                            |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |                 |     |     |       |  
|Net franchising income                                      |                                                            |                            | 7,877   |        |          |   | 8,766   |          |        |   | 121      |      |     |                 | 88  |     |       |   |  |     |     |   | 16,852  |       
|                                                            |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |                 |     |     |       |  
|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   |       

39



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |     |    |    |   |         |        |        | 
|------------------------------------------------------- | ---------------------------------------------------------- | -------------------------- | ------- | ------ | -------- | - | ------- | -------- | ------ | - | -------- | ---- | --- | ----- | --- | -- | -- | - | ------- | ------ | ------ | 
|                                                        |                                                            | Fourth Quarter Fiscal 2004 |        
|                                                        |                                                            |                            |        
|                                                        |                                                            | Carls Jr.                 |         |        | Hardees |   |         | La Salsa |        |   | Other(A) |      |     | Total |    
|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |    
|Company-operated revenue                                |                                                            | $                          | 122,944 |        |          | $ | 129,070 |          |        | $ | 9,348    |      |     | $     | 330 |    |    | $ | 261,692 |       
|Average check                                           |                                                            |                            | 5.74    |        |          |   | 4.55    |          |        |   | 9.10     |      |     |       |     |    |    |   |         |       
|Company-operated same-store sales increase              |                                                            |                            | 5.3     | %      |          |   | 9.2     | %        |        |   | 2.0      | %    |     |       |     |    |    |   |         |       
|Company-operated same-store transaction decrease        |                                                            |                            | (2.4    | )%     |          |   | (2.1    | )%       |        |   | (2.1     | )%   |     |       |     |    |    |   |         |       
|Franchise-operated same-store sales increase            |                                                            |                            | 3.4     | %      |          |   | 6.3     | %        |        |   | 2.6      | %    |     |       |     |    |    |   |         |       
|Operating costs as a % of company-operated revenue:     |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |     |    |    |   |         |       
|                                                        | Food and packaging                                         |                            |         | 29.7   | %        |   |         | 30.2     | %      |   |          | 27.7 | %   |       |     |    |    |   |         |        |       
|                                                        | Payroll and employee benefits                              |                            |         | 30.0   | %        |   |         | 35.6     | %      |   |          | 36.6 | %   |       |     |    |    |   |         |        |       
|                                                        | Occupancy and other operating costs                        |                            |         | 20.3   | %        |   |         | 25.8     | %      |   |          | 43.0 | %   |       |     |    |    |   |         |        |       
|                                                        | Restaurant-level margin                                    |                            |         | 20.0   | %        |   |         | 8.4      | %      |   |          | (7.3 | )%  |       |     |    |    |   |         |        |       
|Advertising as a percentage of company-operated revenue |                                                            |                            | 7.0     | %      |          |   | 6.2     | %        |        |   | 2.8      | %    |     |       |     |    |    |   |         |       
|Franchising revenue:                                    |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |     |    |    |   |         |       
|                                                        | Royalties                                                  |                            |         | 5,093  |          |   |         | 9,411    |        |   |          | 428  |     |       |     | 58 |    |   |         | 14,990 |       
|                                                        | Distribution centers                                       |                            |         | 37,165 |          |   |         | 3,167    |        |   |          |     |     |       |     |   |    |   |         | 40,332 |       
|                                                        | Rent                                                       |                            |         | 5,446  |          |   |         | 2,121    |        |   |          |     |     |       |     |   |    |   |         | 7,567  |       
|                                                        | Other                                                      |                            |         | 660    |          |   |         | 138      |        |   |          |     |     |       |     |   |    |   |         | 798    |       
|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |    
|                                                        |                                                            | Total franchising revenue  |         |        | 48,364   |   |         |          | 14,837 |   |          |      | 428 |       |     |    | 58 |   |         |        | 63,687 | 
|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |    
|Franchising expense:                                    |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |     |    |    |   |         |       
|                                                        | Administrative expense (including provision for bad debts) |                            |         | 835    |          |   |         | 1,311    |        |   |          | 157  |     |       |     |   |    |   |         | 2,303  |       
|                                                        | Distribution centers                                       |                            |         | 36,258 |          |   |         | 3,052    |        |   |          |     |     |       |     |   |    |   |         | 39,310 |       
|                                                        | Rent and other occupancy                                   |                            |         | 5,002  |          |   |         | 1,596    |        |   |          |     |     |       |     |   |    |   |         | 6,598  |       
|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |    
|                                                        |                                                            | Total franchising expense  |         |        | 42,095   |   |         |          | 5,959  |   |          |      | 157 |       |     |    |   |   |         |        | 48,211 | 
|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |    
|Net franchising income                                  |                                                            |                            | 6,269   |        |          |   | 8,878   |          |        |   | 271      |      |     |       | 58  |    |    |   | 15,476  |       
|                                                        |                                                            |                            |         |        |          |   |         |          |        |   |          |      |     |       |    
|Facility action charges, net                            |                                                            |                            | 2,852   |        |          |   | 12,274  |          |        |   | 370      |      |     |       |    |    |    |   | 15,496  |       
|Impairment of goodwill                                  |                                                            |                            |        |        |          |   |        |          |        |   | 34,059   |      |     |       |    |    |    |   | 34,059  |       
|Operating income (loss)                                 |                                                            | $                          | 9,737   |        |          | $ | (15,158 | )        |        | $ | (36,179  | )    |     | $     | (38 | )  |    | $ | (41,638 | )     






|    |  |                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Other consists of Green Burrito in fiscal 2005 and
    2004. Additionally, amounts that we do not believe would be
    proper to allocate to the operating segments are included in
    Other.             
|   
|(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.

40



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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




| |       
| | ------
| | EBITDA



|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |        |   |  |   |         |  
|--------------------------------------------- |  | ---------- | ------ |  | -------- | - | ------- | -------- |  | - | ------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                              |  | 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                              |  |            | 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     |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       
|EBITDA                                        |  | $          | 90,728 |  |          | $ | 53,829  |          |  | $ | (2,030  | ) |  | $     | 1,530  |   |  | $ | 144,057 |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       

|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |        |   |  |   |         |  
|--------------------------------------------- |  | ---------- | ------ |  | -------- | - | ------- | -------- |  | - | ------- | - |  | ----- | ------ | - |  | - | ------- | -
|                                              |  | 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                              |  |            | 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   |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       
|EBITDA                                        |  | $          | 85,272 |  |          | $ | 28,331  |          |  | $ | 1,023   |   |  | $     | 1,232  |   |  | $ | 115,858 |  
|                                              |  |            |        |  |          |   |         |          |  |   |         |   |  |       |       

41



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


|                                                    |  |            |        |   |          |   |          |          |  |   |       |   |  |       |       |  |  |   |          |  
|--------------------------------------------------- |  | ---------- | ------ | - | -------- | - | -------- | -------- |  | - | ----- | - |  | ----- | ----- |  |  | - | -------- | -
|                                                    |  | 2003       |       
|                                                    |  |            |       
|                                                    |  | Carls Jr. |        |   | Hardees |   |          | La Salsa |  |   | Other |   |  | Total |      
|                                                    |  |            |        |   |          |   |          |          |  |   |       |   |  |       |      
|Net income (loss)                                   |  | $          | 50,731 |   |          | $ | (215,821 | )        |  | $ | (429  | ) |  | $     | 8,900 |  |  | $ | (156,619 | )
|Cumulative effect of accounting change for goodwill |  |            |       |   |          |   | 175,780  |          |  |   |      |   |  |       |      |  |  |   | 175,780  |  
|Discontinued operations                             |  |            |       |   |          |   |         |          |  |   |      |   |  |       | 53    |  |  |   | 53       |  
|Interest expense                                    |  |            | 6,219  |   |          |   | 33,657   |          |  |   | 32    |   |  |       | 16    |  |  |   | 39,924   |  
|Income tax expense (benefit)                        |  |            | (1,597 | ) |          |   | (5,702   | )        |  |   |      |   |  |       | 206   |  |  |   | (7,093   | )
|Depreciation and amortization                       |  |            | 28,335 |   |          |   | 36,871   |          |  |   | 3,083 |   |  |       |      |  |  |   | 68,289   |  
|Facility action charges, net                        |  |            | 1,267  |   |          |   | 3,927    |          |  |   |      |   |  |       |      |  |  |   | 5,194    |  
|                                                    |  |            |        |   |          |   |          |          |  |   |       |   |  |       |      
|EBITDA                                              |  | $          | 84,955 |   |          | $ | 28,712   |          |  | $ | 2,686 |   |  | $     | 9,175 |  |  | $ | 125,528  |  
|                                                    |  |            |        |   |          |   |          |          |  |   |       |   |  |       |      



|                                                                                                          |  |      |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                          |  | 2005 |         |   | 2004 |   |         | 2003 | 
|                                                                                                          |  |      |         |   |      |   |         |      | 
|Cash flow provided by operating activities                                                                |  | $    | 111,509 |   |      | $ | 74,165  |      |  | $ | 56,128  |  
|Interest expense                                                                                          |  |      | 36,748  |   |      |   | 39,962  |      |  |   | 39,924  |  
|Income tax expense (benefit)                                                                              |  |      | (1,592  | ) |      |   | 2,417   |      |  |   | (7,093  | )
|Premium on early redemption of Senior Notes                                                               |  |      | 9,126   |   |      |   |        |      |  |   |        |  
|Amortization of loan fees                                                                                 |  |      | (3,637  | ) |      |   | (4,451  | )    |  |   | (4,238  | )
|(Provision for) recovery of losses on accounts and notes
    receivable                                   |  |      | 1,940   |   |      |   | (2,260  | )    |  |   | 1,198   |  
|Gain (loss) on investments, sale of property and equipment,
    capital leases and extinguishment of debt |  |      | (9,676  | ) |      |   | (3,598  | )    |  |   | 10,560  |  
|Deferred income taxes                                                                                     |  |      | (295    | ) |      |   | (574    | )    |  |   | (839    | )
|Other non-cash items                                                                                      |  |      | (450    | ) |      |   | 284     |      |  |   | (13     | )
|Change in estimated liability for closing restaurants and
    estimated liability for self-insurance      |  |      | 4,877   |   |      |   | 10,304  |      |  |   | 16,678  |  
|Net change in refundable income taxes                                                                     |  |      | 3,366   |   |      |   | (643    | )    |  |   | (3,262  | )
|Net change in receivables, inventories, prepaid expenses and
    other current assets                     |  |      | (1,058  | ) |      |   | (3,542  | )    |  |   | 11,138  |  
|Net change in accounts payable and other current liabilities                                              |  |      | (7,058  | ) |      |   | 3,550   |      |  |   | 2,243   |  
|EBITDA from discontinued operations                                                                       |  |      | 262     |   |      |   | 108     |      |  |   | 35      |  
|Net cash provided to discontinued operations                                                              |  |      | 257     |   |      |   | 244     |      |  |   | 3,104   |  
|                                                                                                          |  |      |         |   |      |   |         |      | 
|EBITDA, including discontinued operations                                                                 |  |      | 144,319 |   |      |   | 115,966 |      |  |   | 125,563 |  
|Less: EBITDA from discontinued operations                                                                 |  |      | (262    | ) |      |   | (108    | )    |  |   | (35     | )
|                                                                                                          |  |      |         |   |      |   |         |      | 
|EBITDA                                                                                                    |  | $    | 144,057 |   |      | $ | 115,858 |      |  | $ | 125,528 |  
|                                                                                                          |  |      |         |   |      |   |         |      | 

42



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)


Fiscal 2005 Compared with Fiscal 2004 and Fiscal 2004
Compared with Fiscal 2003




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



|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |   |      |  |     |      |  |   |         |         |  |        |         |         |        |   |         |         |  |   |        |        |  |   |        |        | 
|-------------------------- | ----- | -------------------- | --- | --------- | ------------------- |  | --------- | ----- |  |  | ------ | --------- |  | ------ | --------- | - | ---- |  | --- | ---- |  | - | ------- | ------- |  | ------ | ------- | ------- | ------ | - | ------- | ------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                           |       | Restaurant Portfolio |     |           | Fiscal Year Revenue | 
|                           |       |                      |     |           |                     | 
|                           |       |                      |     | 2005-2004 |                     |  | 2004-2003 |       |  |  |        | 2005-2004 |  |        | 2004-2003 |  
|                           |       | 2005                 |     |           | 2004                |  |           | 2003  |  |  | Change |           |  | Change |           |   | 2005 |  |     | 2004 |  |   | 2003    |         |  | Change |         |         | Change |  
|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |   |      |  |     |      |  |   |         |         |  |        |         |         |        |  
|Company                    |       |                      | 428 |           |                     |  | 426       |       |  |  | 440    |           |  |        | 2         |   |      |  | (14 | )    |  | $ | 567,960 |         |  | $      | 523,945 |         |        | $ | 507,526 |         |  | $ | 44,015 |        |  | $ | 16,419 |       
|Franchised and licensed(a) |       |                      | 586 |           |                     |  | 580       |       |  |  | 547    |           |  |        | 6         |   |      |  | 33  |      |  |   | 224,869 |         |  |        | 201,110 |         |        |   | 186,166 |         |  |   | 23,759 |        |  |   | 14,944 |       
|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |   |      |  |     |      |  |   |         |         |  |        |         |         |        |  
|                           | Total |                      |     | 1,014     |                     |  |           | 1,006 |  |  |        | 987       |  |        |           | 8 |      |  |     | 19   |  |   | $       | 792,829 |  |        | $       | 725,055 |        |   | $       | 693,692 |  |   | $      | 67,774 |  |   | $      | 31,363 | 
|                           |       |                      |     |           |                     |  |           |       |  |  |        |           |  |        |           |   |      |  |     |      |  |   |         |         |  |        |         |         |        |  






|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes $176,304, $155,945, and $145,055 of revenues from
    distribution of food, packaging and supplies to franchised and
    licensed restaurants in fiscal 2005, 2004 and 2003, respectively.



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

tm tm tm tm tm tm




43



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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




|                                              |                                                          |      |      |      |      |  |      |      |  
|--------------------------------------------- | -------------------------------------------------------- | ---- | ---- | ---- | ---- |  | ---- | ---- | -
|                                              |                                                          | 2005 |      |      | 2004 | 
|                                              |                                                          |      |      |      |      | 
|Restaurant-level margins for the prior year   |                                                          |      | 20.2 | %    |      |  | 20.8 | %   
|                                              | Decrease in labor costs, excluding workers compensation |      |      | 0.7  |      |  |      | 0.1  |  
|                                              | Increase in food and packaging costs                     |      |      | (0.5 | )    |  |      | (0.9 | )
|                                              | (Increase) decrease in workers compensation expense     |      |      | 0.2  |      |  |      | (0.3 | )
|                                              | Decrease in repair and maintenance expense               |      |      | 0.2  |      |  |      | 0.1  |  
|                                              | Increase in cost of promotional items                    |      |      | (0.2 | )    |  |      |     |  
|                                              | Decrease in rent expense, property taxes and licenses    |      |      | 0.1  |      |  |      |     |  
|                                              | Decrease in depreciation expense                         |      |      | 0.1  |      |  |      | 0.3  |  
|                                              | Decrease in equipment lease expense                      |      |      | 0.1  |      |  |      | 0.3  |  
|                                              | Increase in general liability insurance expense          |      |      | (0.1 | )    |  |      | (0.2 | )
|                                              | Other, net                                               |      |      | 0.3  |      |  |      |     |  
|                                              |                                                          |      |      |      |      | 
|Restaurant-level margins for the current year |                                                          |      | 21.1 | %    |      |  | 20.2 | %   
|                                              |                                                          |      |      |      |      | 

















44



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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



|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |   |         |         |  |   |        |        |  |   |        |        | 
|----------------------- | ----- | -------------------- | ----- | --------- | ------------------- |  | --------- | ----- |  |  | ------ | --------- |  | ------ | --------- | --- | ---- |  | --- | ---- | - | - | ------- | ------- |  | ------ | ------- | ------- | ------ | - | ------- | ------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                        |       | Restaurant Portfolio |       |           | Fiscal Year Revenue | 
|                        |       |                      |       |           |                     | 
|                        |       |                      |       | 2005-2004 |                     |  | 2004-2003 |       |  |  |        | 2005-2004 |  |        | 2004-2003 |    
|                        |       | 2005                 |       |           | 2004                |  |           | 2003  |  |  | Change |           |  | Change |           |     | 2005 |  |     | 2004 |   |   | 2003    |         |  | Change |         |         | Change |  
|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |  
|Company                 |       |                      | 677   |           |                     |  | 721       |       |  |  | 730    |           |  |        | (44       | )   |      |  | (9  | )    |   | $ | 601,068 |         |  | $      | 575,238 |         |        | $ | 562,010 |         |  | $ | 25,830 |        |  | $ | 13,228 |       
|Franchised and licensed |       |                      | 1,357 |           |                     |  | 1,400     |       |  |  | 1,499  |           |  |        | (43       | )   |      |  | (99 | )    |   |   | 72,104  |         |  |        | 67,456  |         |        |   | 65,775  |         |  |   | 4,648  |        |  |   | 1,681  |       
|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |  
|                        | Total |                      |       | 2,034     |                     |  |           | 2,121 |  |  |        | 2,229     |  |        |           | (87 | )    |  |     | (108 | ) |   | $       | 673,172 |  |        | $       | 642,694 |        |   | $       | 627,785 |  |   | $      | 30,478 |  |   | $      | 14,909 | 
|                        |       |                      |       |           |                     |  |           |       |  |  |        |           |  |        |           |     |      |  |     |      |   |   |         |         |  |        |         |         |        |  



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

tm tm tm tm tm


45



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)








|                                              |                                                          |      |      |      |      |  |      |      |  
|--------------------------------------------- | -------------------------------------------------------- | ---- | ---- | ---- | ---- |  | ---- | ---- | -
|                                              |                                                          | 2005 |      |      | 2004 | 
|                                              |                                                          |      |      |      |      | 
|Restaurant-level margins for the prior year   |                                                          |      | 9.3  | %    |      |  | 10.5 | %   
|                                              | Decrease in labor costs, excluding workers compensation |      |      | 2.2  |      |  |      | 0.4  |  
|                                              | (Increase) decrease in food and packaging costs          |      |      | 1.0  |      |  |      | (1.1 | )
|                                              | (Increase) decrease in depreciation expense              |      |      | 0.7  |      |  |      | (0.7 | )
|                                              | (Increase) decrease in utilities expense                 |      |      | 0.3  |      |  |      | (0.1 | )
|                                              | (Increase) decrease in rent expense, taxes and licenses  |      |      | 0.3  |      |  |      | (0.1 | )
|                                              | Decrease in cost of promotional items                    |      |      | 0.3  |      |  |      |     |  
|                                              | Decrease in general liability insurance expense          |      |      | 0.2  |      |  |      |     |  
|                                              | (Increase) decrease in repair and maintenance expenses   |      |      | (0.1 | )    |  |      | 0.4  |  
|                                              | Decrease in restaurant opening costs                     |      |      | 0.1  |      |  |      | 0.1  |  
|                                              | Increase in workers compensation expense                |      |      | (0.1 | )    |  |      | (0.3 | )
|                                              | Other, net                                               |      |      | 0.1  |      |  |      | 0.2  |  
|                                              |                                                          |      |      |      |      | 
|Restaurant-level margins for the current year |                                                          |      | 14.3 | %    |      |  | 9.3  | %   
|                                              |                                                          |      |      |      |      | 







46



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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







47



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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 | 
|                        |  |                      |     |           |                     | 
|                        |  |                      |     | 2005-2004 |                     |  | 2004-2003 |      |  |  |        | 2005-2004 |  |        | 2004-2003 |  
|                        |  | 2005                 |     |           | 2004                |  |           | 2003 |  |  | Change |           |  | Change |           |   | 2005 |  |    | 2004 |  |   | 2003(1) |  |  | Change |        |  | Change |  
|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |         |  |  |        |        |  |        |  
|Company                 |  |                      | 62  |           |                     |  | 61        |      |  |  | 57     |           |  |        | 1         |   |      |  | 4  |      |  | $ | 46,950  |  |  | $      | 42,310 |  |        | $ | 38,550 |  |  | $ | 4,640 |  |  | $ | 3,760 | 
|Franchised and licensed |  |                      | 39  |           |                     |  | 41        |      |  |  | 42     |           |  |        | (2        | ) |      |  | (1 | )    |  |   | 1,844   |  |  |        | 1,623  |  |        |   | 1,409  |  |  |   | 221   |  |  |   | 214   | 
|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |         |  |  |        |        |  |        |  
|Total                   |  |                      | 101 |           |                     |  | 102       |      |  |  | 99     |           |  |        | (1        | ) |      |  | 3  |      |  | $ | 48,794  |  |  | $      | 43,933 |  |        | $ | 39,959 |  |  | $ | 4,861 |  |  | $ | 3,974 | 
|                        |  |                      |     |           |                     |  |           |      |  |  |        |           |  |        |           |   |      |  |    |      |  |   |         |  |  |        |        |  |        |  






|    |                                                       
|--- | ------------------------------------------------------
|(1) | For the period March 1, 2002 through January 31, 2003.







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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




| |                      
| | ---------------------
| | Consolidated Expenses



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





| |                    
| | -------------------
| | Advertising Expense





| |                                   
| | ----------------------------------
| | General and Administrative Expense









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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










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









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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




| |                 
| | ----------------
| | Interest Expense



|                                                                           |                        |      |       |        |      |   |        |        |  |   |        |        | 
|-------------------------------------------------------------------------- | ---------------------- | ---- | ----- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                           |                        | 2005 |       |        | 2004 |   |        | 2003   | 
|                                                                           |                        |      |       |        |      |   |        |        | 
|Bank credit facility                                                       |                        | $    | 6,310 |        |      | $ | 1,146  |        |  | $ | 631    |       
|Senior subordinated notes due 2009                                         |                        |      | 7,855 |        |      |   | 18,250 |        |  |   | 18,150 |       
|Capital lease obligations                                                  |                        |      | 6,950 |        |      |   | 8,503  |        |  |   | 9,134  |       
|2004 convertible subordinated notes                                        |                        |      | 73    |        |      |   | 4,206  |        |  |   | 6,032  |       
|2023 convertible subordinated notes                                        |                        |      | 4,258 |        |      |   | 1,385  |        |  |   |       |       
|Amortization of loan fees                                                  |                        |      | 3,637 |        |      |   | 4,451  |        |  |   | 4,238  |       
|Write-off of unamortized loan fees, term loan                              |                        |      | 2,116 |        |      |   |       |        |  |   |       |       
|Write-off of unamortized loan fees, senior subordinated notes
    due 2009 |                        |      | 3,068 |        |      |   |       |        |  |   |       |       
|Letter of credit fees and other                                            |                        |      | 2,481 |        |      |   | 2,021  |        |  |   | 1,739  |       
|                                                                           |                        |      |       |        |      |   |        |        | 
|                                                                           | Total interest expense |      | $     | 36,748 |      |   | $      | 39,962 |  |   | $      | 39,924 | 
|                                                                           |                        |      |       |        |      |   |        |        | 







| |                            
| | ---------------------------
| | Other Income (Expense), Net



|                                                                                                    |  |                               |        |   |      |   |       |      |  |   |        | 
|--------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | 
|                                                                                                    |  | Fiscal Year Ended January 31, |       
|                                                                                                    |  |                               |       
|                                                                                                    |  | 2005                          |        |   | 2004 |   |       | 2003 | 
|                                                                                                    |  |                               |        |   |      |   |       |      | 
|Premium incurred upon early redemption of debt                                                      |  | $                             | (9,126 | ) |      | $ |      |      |  | $ |       | 
|Interest income on notes receivable from franchisees,
    disposition properties and capital leases |  |                               | 1,784  |   |      |   | 1,147 |      |  |   | 1,267  | 
|Rental income from properties leased to third parties                                               |  |                               | 2,060  |   |      |   | 655   |      |  |   | 986    | 
|Gains on the sale of Checkers stock                                                                 |  |                               |       |   |      |   |      |      |  |   | 9,248  | 
|Gains (losses) on the repurchase of convertible subordinated
    notes                              |  |                               |       |   |      |   | (708  | )    |  |   | 2,800  | 
|Other, net                                                                                          |  |                               | 2,320  |   |      |   | (877  | )    |  |   | 2,127  | 
|                                                                                                    |  |                               |        |   |      |   |       |      | 
|Total other income (expense), net                                                                   |  | $                             | (2,962 | ) |      | $ | 217   |      |  | $ | 16,428 | 
|                                                                                                    |  |                               |        |   |      |   |       |      | 



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




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













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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)






| |                        
| | -----------------------
| | Discontinued Operations



Fiscal Fourth Quarter 2005 Compared with Fiscal Fourth
Quarter 2004




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



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



|                                              |                                                          |  |      |      |  
|--------------------------------------------- | -------------------------------------------------------- |  | ---- | ---- | -
|Restaurant-level margins for the prior year   |                                                          |  | 20.0 | %   
|                                              | Decrease in workers compensation expense                |  |      | 1.5  |  
|                                              | Increase in rent and property taxes                      |  |      | (0.8 | )
|                                              | Decrease in labor costs, excluding workers compensation |  |      | 0.5  |  
|                                              | Decrease in depreciation expense                         |  |      | 0.2  |  
|                                              | Decrease in food and packaging costs                     |  |      | 0.2  |  
|                                              | Increase in general liability insurance expense          |  |      | (0.2 | )
|                                              | Increase in asset retirement expense                     |  |      | (0.2 | )
|                                              | Other, net                                               |  |      | (0.2 | )
|                                              |                                                          |  |     
|Restaurant-level margins for the current year |                                                          |  | 21.0 | %   
|                                              |                                                          |  |     





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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)










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





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



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



|                                              |                                                          |  |      |      |  
|--------------------------------------------- | -------------------------------------------------------- |  | ---- | ---- | -
|Restaurant-level margins for the prior year   |                                                          |  | 8.4  | %   
|                                              | Decrease in depreciation expense                         |  |      | 2.8  |  
|                                              | Decrease in labor costs, excluding workers compensation |  |      | 1.0  |  
|                                              | Increase in general liability insurance expense          |  |      | (1.0 | )
|                                              | Decrease in fixed asset retirements expense              |  |      | 0.8  |  
|                                              | Decrease in write-down of promotional items              |  |      | 0.7  |  
|                                              | Increase in repair and maintenance expense               |  |      | (0.7 | )
|                                              | Increase in equipment lease expense                      |  |      | (0.5 | )
|                                              | Decrease in rent expense                                 |  |      | 0.4  |  
|                                              | Decrease in workers compensation expense                |  |      | 0.3  |  
|                                              | Increase in utilities expense                            |  |      | (0.3 | )
|                                              | Other, net                                               |  |      | (0.1 | )
|                                              |                                                          |  |     
|Restaurant-level margins for the current year |                                                          |  | 11.8 | %   
|                                              |                                                          |  |     



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)
















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







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



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)






Accounting Pronouncements Not Yet Adopted


Share-Based Payment


Impact of Inflation




Seasonality




Competition




Liquidity and Capital Resources




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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)












Accounting for Derivative Instruments
and Hedging Activities


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)
















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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)












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CKE RESTAURANTS, INC. AND SUBSIDIARIES


Managements Discussion and
Analysis  (Continued)


(Dollars in thousands)




|                                                                |            |      |        |        |      |   |        |        | 
|--------------------------------------------------------------- | ---------- | ---- | ------ | ------ | ---- | - | ------ | ------ | 
|                                                                |            | 2005 |        |        | 2004 |  
|                                                                |            |      |        |        |      |  
|New restaurants (including restaurants under development)       |            |      |        |        |      |   |        |       
|                                                                | Carls Jr. |      | $      | 8,945  |      |   | $      | 6,432  | 
|                                                                | Hardees   |      |        | 4,318  |      |   |        | 3,743  | 
|                                                                | La Salsa   |      |        | 1,417  |      |   |        | 4,033  | 
|Remodels, Dual-branding (including construction in
    process) |            |      |        |        |      |   |        |       
|                                                                | Carls Jr. |      |        | 1,047  |      |   |        | 2,485  | 
|                                                                | Hardees   |      |        | 9,303  |      |   |        | 11,192 | 
|                                                                | La Salsa   |      |        | 27     |      |   |        | 107    | 
|Other restaurant additions                                      |            |      |        |        |      |   |        |       
|                                                                | Carls Jr. |      |        | 9,821  |      |   |        | 4,890  | 
|                                                                | Hardees   |      |        | 16,162 |      |   |        | 6,284  | 
|                                                                | La Salsa   |      |        | 2,260  |      |   |        | 2,602  | 
|Corporate                                                       |            |      | 5,321  |        |      |   | 5,845  |       
|                                                                |            |      |        |        |      |  
|Total                                                           |            | $    | 58,621 |        |      | $ | 47,613 |       
|                                                                |            |      |        |        |      |  



Long-Term Obligations




| |                             
| | ----------------------------
| | Contractual Cash Obligations



|                                      |                                    |                         |         |           |          |   |        |         |  |     |         |         |       |         |         |         |  |   |         |         | 
|------------------------------------- | ---------------------------------- | ----------------------- | ------- | --------- | -------- | - | ------ | ------- |  | --- | ------- | ------- | ----- | ------- | ------- | ------- |  | - | ------- | ------- | 
|                                      |                                    | Payments Due by Periods |        
|                                      |                                    |                         |        
|                                      |                                    |                         |         | Less Than |          |   | 1-3    |         |  | 3-5 |         |         | After |        
|                                      |                                    | Total                   |         |           | One Year |   |        | Years   |  |     | Years   |         |       | 5 Years |        
|                                      |                                    |                         |         |           |          |   |        |         |  |     |         |         |       |         |        
|Long-term debt(1)                     |                                    | $                       | 259,484 |           |          | $ | 16,066 |         |  | $   | 3,101   |         |       | $       | 134,646 |         |  | $ | 105,671 |        
|Capital lease obligations(2)(3)       |                                    |                         | 94,835  |           |          |   | 11,320 |         |  |     | 21,252  |         |       |         | 20,301  |         |  |   | 41,962  |        
|Operating leases(2)                   |                                    |                         | 587,974 |           |          |   | 86,139 |         |  |     | 151,508 |         |       |         | 105,466 |         |  |   | 244,861 |        
|Unconditional purchase obligations(4) |                                    |                         | 55,123  |           |          |   | 50,975 |         |  |     | 3,626   |         |       |         | 302     |         |  |   | 220     |        
|                                      |                                    |                         |         |           |          |   |        |         |  |     |         |         |       |         |        
|                                      | Total contractual cash obligations |                         | $       | 997,416   |          |   | $      | 164,500 |  |     | $       | 179,487 |       |         | $       | 260,715 |  |   | $       | 392,714 | 
|                                      |                                    |                         |         |           |          |   |        |         |  |     |         |         |       |         |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 8 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.                                                                                                                                                                                                                                                                                              

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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    | 
|                                                                         |                                    | Committed              |        |        | One Year  |   |        | Years  | 
|                                                                         |                                    |                        |        |        |           |   |        |        | 
|Standby letters of credit under the Companys Senior Credit
    Facility |                                    | $                      | 65,868 |        |           | $ | 65,868 |        |  | $ |      |      
|Guarantees                                                               |                                    |                        | 1,618  |        |           |   |       |        |  |   | 1,618 |      
|                                                                         |                                    |                        |        |        |           |   |        |        | 
|                                                                         | Total other commercial commitments |                        | $      | 67,486 |           |   | $      | 65,868 |  |   | $     | 1,618 | 
|                                                                         |                                    |                        |        |        |           |   |        |        | 

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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





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Managements Report on
Internal Control over Financial Reporting.






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



Internal Control 
Integrated Framework






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|    |                                              
|--- | ---------------------------------------------
|(c) | Managements Remediation of Material Weakness

Managements Report on Internal
Control over Financial Reporting,




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





| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | revised lease accounting policies to conform with U.S. generally
    accepted accounting principles, trained accounting staff
    regarding these new policies and established management
    oversight thereof;
|
| |  | improved internal communication and documentation practices to
    ensure timely and complete accounting for restaurant sales,
    closures and lease/sublease modifications and other asset
    disposals; and 
|
| |  | enhanced property tax accrual preparation and management review
    within the Companys corporate tax department.                                                                                              

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





Internal Control  Integrated Framework












65



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Internal
Control  Integrated Framework Internal ControlIntegrated Framework




| |             
| | ------------
| | /s/ KPMG LLP





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##### Table of Contents






PART III







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



Code of Ethics and Corporate Governance Information


www.ckr.com


www.ckr.com







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








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



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        |       |                      | 8,993,347 |           |                   | $                    | 11.14 |                      |  |  | 847,736 | (1)    
|Equity compensation plans not approved by security holders(2) |       |                      | 673,871   |           |                   |                      | 7.90  |                      |  |  | 57,669  |        
|                                                              |       |                      |           |           |                   |                      |       |                      | 
|                                                              | Total |                      |           | 9,667,218 |                   |                      | $     | 10.92                |  |  |         | 905,405 | 
|                                                              |       |                      |           |           |                   |                      |       |                      | 

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|    |                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A total of 5.3 million shares of common stock are available
    for grants of options or other awards under the 1999 stock
    incentive plan, with the amount of available shares increased by
    350,000 shares on the date of each annual meeting of
    stockholders.
|   
|(2) | Represents options that are part of a broad-based
    plan as then defined by the New York Stock Exchange. See
    Note 22 of Notes to Consolidated Financial Statements.                                                                                               






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







|                                                                                         |  |                                                                                                                                 |  |                                                                                                                                                                       |  |                                                                         |  |                   |       |  |      |   |       |      |  |   |       | 
|---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------- |  | ----------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                                                                         |  |                                                                                                                                 |  |                                                                                                                                                                       |  |                                                                         |  | Fiscal Year Ended |      
|                                                                                         |  |                                                                                                                                 |  |                                                                                                                                                                       |  | On-Going                                                                |  | January 31,       |      
|                                                                                         |  |                                                                                                                                 |  | How Transaction Prices                                                                                                                                                |  | Contractual                                                             |  |                   |      
|Involved Party                                                                           |  | Business Purpose                                                                                                                |  | are Determined                                                                                                                                                        |  | Commitments                                                             |  | 2005              |       |  | 2004 |   |       | 2003 | 
|                                                                                         |  |                                                                                                                                 |  |                                                                                                                                                                       |  |                                                                         |  |                   |       |  |      |   |       |      | 
|Carl N. Karcher (Chairman Emeritus)                                                      |  | Leased property for Anaheim, CA office, distribution facility
    and three restaurants                                         |  | Lease based upon the prevailing market for similar space within
    the area.                                                                                         |  | Several leases with varying expiration dates through 2010.              |  | $                 | 1,756 |  |      | $ | 1,828 |      |  | $ | 1,534 | 
|Fidelity National Financial, Inc. (FNF) (our
    Chairman is also the Chairman of FNF) |  | Title and escrow work on sale of restaurant properties and
    mortgages on properties for collateral on Senior Credit Facility |  | Escrow and title fees are determined per transaction based upon
    the stated standard rates as set by FNF to the general public at
    the time of each transaction |  | None                                                                    |  |                   |      |  |      |   |      |      |  |   | 10    | 
|Fidelity National Financial, Inc. (FNF) (our
    Chairman is also the Chairman of FNF) |  | Loss on sale of a G-IV airplane that was leased jointly with FNF                                                                |  | (B)                                                                                                                                                                   |  | None                                                                    |  |                   | 1,479 |  |      |   |      |      |  |   |      | 
|FNF Capital, Inc. (100% owned subsidiary of FNF)                                         |  | Leased equipment                                                                                                                |  | Bids for the lease of equipment were submitted and most
    favorable terms were selected                                                                             |  | Several leases with varying expiration dates through 2005.              |  |                   | 3,258 |  |      |   | 4,364 |      |  |   | 7,445 | 
|Kensington Development (100% owned subsidiary of FNF)                                    |  | Lease of Santa Barbara, CA office                                                                                               |  | Lease based upon the prevailing market for similar space within
    the area.                                                                                         |  | Lease agreement expires September 2007                                  |  |                   | 425   |  |      |   | 548   |      |  |   | 598   | 
|Orion Realty Corp. (100% owned subsidiary of FNF)                                        |  | Sale of surplus properties and termination of leases                                                                            |  | (A)                                                                                                                                                                   |  | Contractual arrangement                                                 |  |                   | 652   |  |      |   | 816   |      |  |   | 494   | 
|Rocky Mountain Aviation (100% owned subsidiary of FNF)                                   |  | Expenses associated with Companys two leased aircraft                                                                          |  | (B)                                                                                                                                                                   |  | Lease agreement one continuing aircraft lease expires December
    2010 |  |                   | 785   |  |      |   | 1,190 |      |  |   | 784   | 

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|                                                                                               |  |                                                               |  |                                                                                                                                                                                           |  |                                                                                              |  |                   |   |  |      |  |       |      |  |  |        | 
|---------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------- |  | ----------------- | - |  | ---- |  | ----- | ---- |  |  | ------ | 
|                                                                                               |  |                                                               |  |                                                                                                                                                                                           |  |                                                                                              |  | Fiscal Year Ended |  
|                                                                                               |  |                                                               |  |                                                                                                                                                                                           |  | On-Going                                                                                     |  | January 31,       |  
|                                                                                               |  |                                                               |  | How Transaction Prices                                                                                                                                                                    |  | Contractual                                                                                  |  |                   |  
|Involved Party                                                                                 |  | Business Purpose                                              |  | are Determined                                                                                                                                                                            |  | Commitments                                                                                  |  | 2005              |   |  | 2004 |  |       | 2003 | 
|                                                                                               |  |                                                               |  |                                                                                                                                                                                           |  |                                                                                              |  |                   |   |  |      |  |       |      | 
|Santa Barbara Restaurant Group, Inc. (SBRG)
    (our Chairman was also the Chairman of SBRG) |  | Merged with restaurants company for strategic growth purposes |  | Based on relative market values and expected accretive value of
    SBRG to CKE. Transaction was evaluated for fairness by Morgan
    Keegan & Company, Inc., an investment banking firm. |  | None                                                                                         |  |                   |  |  |      |  |      |      |  |  | 80,280 | 
|CLK, Inc. (affiliate of a current board member)                                                |  | Sale of Carls Jr. restaurants to franchisee                  |  | (C)                                                                                                                                                                                       |  | None, other than those contained in the franchise agreement and
    asset purchase agreement |  |                   |  |  |      |  |      |      |  |  | 983    | 
|MJKL Enterprises, Inc. (affiliate of a current board member)                                   |  | Sale of Carls Jr. restaurants to franchisee                  |  | (D)                                                                                                                                                                                       |  | None, other than those contained in the franchise agreement and
    asset purchase agreement |  |                   |  |  |      |  | 4,535 |      |  |  |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | During fiscal 2000, we were in a workout situation with our
    lenders and we had to immediately begin to dispose of a
    significant number of assets to raise cash to repay our bank
    indebtedness. Also, during this time we began closing a
    significant number of under-performing restaurants, which
    resulted in a significant number of surplus properties that
    needed to be converted to cash. Under these circumstances, we
    determined that it was impractical under the time constraints to
    develop an internal real estate sales competency and,
    accordingly, we retained the services of this affiliate that
    possessed the requisite real estate competency, and we continue
    to use those services.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) | For first leased aircraft, based on contracted lease rates,
    partially offset by use by others of contracted planes.
    Contracted lease rates depend on number of passengers, distance,
    weights, airport fees and other factors to determine the cost
    for each specific trip. For second leased aircraft, based upon
    the prevailing market for similar aircraft. In July 2004, we
    terminated our lease of the first of these aircraft.
|   
|(C) | Purchase price based on a multiple of cash flow from operations
    as achieved in other sales of Carls Jr. restaurants to
    other franchisees.                                                                                                                                                                                                                                                                                                         



|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(D) | Purchase price was established by using the greater of
    CKEs carrying value or a multiple of cash flow from
    operations as achieved in other sales of Carls Jr.
    restaurants to other franchisees.






|         |                                       
|-------- | --------------------------------------
|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                                                                                                                                                                                                     |  |      | 73 | 
|       |  | Consolidated Balance Sheets  as
    of January 31, 2005 and 2004                                                                                                                                                                                               |  |      | 74 | 
|       |  | Consolidated Statements of
    Operations  for the fiscal years ended
    January 31, 2005, 2004 and 2003                                                                                                                                                      |  |      | 75 | 
|       |  | Consolidated Statements of
    Stockholders Equity  for the fiscal years ended
    January 31, 2005, 2004 and 2003                                                                                                                                            |  |      | 76 | 
|       |  | Consolidated Statements of Cash
    Flows  for the fiscal years ended January 31,
    2005, 2004 and 2003                                                                                                                                                      |  |      | 77 | 
|       |  | Notes to Consolidated Financial
    Statements                                                                                                                                                                                                                  |  |      | 78 | 
|       |  | 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 Form 10-K beginning on
    page 122 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/ William P.
    Foley, IIWilliam
    P. Foley, II |  | Chairman of the Board                                                                              |  | April 21, 2005
|                                                    
|/s/ Andrew F. PuzderAndrew
    F. Puzder             |  | President and Chief Executive Officer (Principal Executive
    Officer)                            |  | April 21, 2005
|                                                    
|/s/ Theodore AbajianTheodore
    Abajian             |  | Executive Vice President, Chief Financial Officer (Principal
    Financial and Accounting Officer) |  | April 21, 2005
|                                                    
|/s/ Byron AllumbaughByron
    Allumbaugh             |  | Vice Chairman of the Board                                                                         |  | April 21, 2005
|                                                    
|/s/ Doug AmmermanDoug
    Ammerman                   |  | Director                                                                                           |  | April 21, 2005
|                                                    
|/s/ Peter ChurmPeter
    Churm                       |  | Director                                                                                           |  | April 21, 2005
|                                                    
|/s/ Carl L. KarcherCarl
    L. Karcher               |  | Director                                                                                           |  | April 21, 2005
|                                                    
|/s/ Janet E. KerrJanet
    E. Kerr                   |  | Director                                                                                           |  | April 21, 2005
|                                                    
|/s/ Daniel D. LaneDaniel
    D. Lane                 |  | Director                                                                                           |  | April 21, 2005
|                                                    
|/s/ Ronald B. MaggardRonald
    B. Maggard           |  | Director                                                                                           |  | April 21, 2005

71



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|                                       |  |          |  |                |  | 
|-------------------------------------- |  | -------- |  | -------------- |  | 
|Signature                              |  | Title    |  | Date          
|                                       |  |          |  |               
|                                      
|/s/ Daniel PonderDaniel
    Ponder     |  | Director |  | April 21, 2005
|                                      
|/s/ Frank P. WilleyFrank
    P. Willey |  | Director |  | April 21, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM














Goodwill and Other
Intangible Assets Accounting for Costs Associated with
Exit or Disposal Activities


Internal Control 
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO)




| |             
| | ------------
| | /s/ KPMG LLP





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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             |  |         |          |         | 
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------- | ----------- |  | ------- | -------- | ------- | 
|                                                                 |                                                                                                                                                                                                                                    | January 31,                                |         |               | January 31, | 
|                                                                 |                                                                                                                                                                                                                                    | 2005                                       |         |               | 2004        | 
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | (Dollars in thousands                      |        
|                                                                 |                                                                                                                                                                                                                                    | except par values)                         |        
|                                                                 |                                                                                                                                                                                                                                    |                                            |         | (as restated) |            
|ASSETS                                                          
|Current assets:                                                  |                                                                                                                                                                                                                                    |                                            |         |               |             |  |         |         
|                                                                 | Cash and cash equivalents                                                                                                                                                                                                          |                                            | $       | 18,432        |             |  | $       | 54,355   |        
|                                                                 | Accounts receivable, net                                                                                                                                                                                                           |                                            |         | 31,199        |             |  |         | 26,562   |        
|                                                                 | Related party trade receivables                                                                                                                                                                                                    |                                            |         | 6,760         |             |  |         | 7,991    |        
|                                                                 | Inventories, net                                                                                                                                                                                                                   |                                            |         | 19,297        |             |  |         | 17,972   |        
|                                                                 | Prepaid expenses                                                                                                                                                                                                                   |                                            |         | 13,056        |             |  |         | 15,766   |        
|                                                                 | Assets held for sale                                                                                                                                                                                                               |                                            |         | 1,058         |             |  |         | 18,760   |        
|                                                                 | Advertising fund assets, restricted                                                                                                                                                                                                |                                            |         | 21,951        |             |  |         |         |        
|                                                                 | Other current assets                                                                                                                                                                                                               |                                            |         | 2,278         |             |  |         | 1,656    |        
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | Total current assets                       |         |               | 114,031     |  |         |          | 143,062 | 
|Notes receivable, net                                            |                                                                                                                                                                                                                                    |                                            | 3,328   |               |             |  | 2,317   |         
|Property and equipment, net                                      |                                                                                                                                                                                                                                    |                                            | 461,286 |               |             |  | 479,660 |         
|Property under capital leases, net                               |                                                                                                                                                                                                                                    |                                            | 36,060  |               |             |  | 44,895  |         
|Goodwill                                                         |                                                                                                                                                                                                                                    |                                            | 22,649  |               |             |  | 22,649  |         
|Other assets, net                                                |                                                                                                                                                                                                                                    |                                            | 31,529  |               |             |  | 37,821  |         
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | Total assets                               |         | $             | 668,883     |  |         | $        | 730,404 | 
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                            
|Current liabilities:                                             |                                                                                                                                                                                                                                    |                                            |         |               |             |  |         |         
|                                                                 | Current portion of bank indebtedness and other long-term debt                                                                                                                                                                      |                                            | $       | 16,066        |             |  | $       | 26,843   |        
|                                                                 | Current portion of capital lease obligations                                                                                                                                                                                       |                                            |         | 5,079         |             |  |         | 7,028    |        
|                                                                 | Accounts payable                                                                                                                                                                                                                   |                                            |         | 52,484        |             |  |         | 47,592   |        
|                                                                 | Advertising fund liabilities                                                                                                                                                                                                       |                                            |         | 21,951        |             |  |         |         |        
|                                                                 | Other current liabilities                                                                                                                                                                                                          |                                            |         | 93,358        |             |  |         | 105,419  |        
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | Total current liabilities                  |         |               | 188,938     |  |         |          | 186,882 | 
|Bank indebtedness and other long-term debt, less current portion |                                                                                                                                                                                                                                    |                                            | 138,418 |               |             |  | 22,428  |         
|Senior subordinated notes                                        |                                                                                                                                                                                                                                    |                                            |        |               |             |  | 200,000 |         
|Convertible subordinated notes due 2023                          |                                                                                                                                                                                                                                    |                                            | 105,000 |               |             |  | 105,000 |         
|Capital lease obligations, less current portion                  |                                                                                                                                                                                                                                    |                                            | 52,485  |               |             |  | 56,877  |         
|Other long-term liabilities                                      |                                                                                                                                                                                                                                    |                                            | 64,374  |               |             |  | 58,559  |         
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | Total liabilities                          |         |               | 549,215     |  |         |          | 629,746 | 
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|Commitments and contingencies (Notes 8, 12, 13 and 25)           |                                                                                                                                                                                                                                    |                                            |         |               |             |  |         |         
|Stockholders equity:                                            |                                                                                                                                                                                                                                    |                                            |         |               |             |  |         |         
|                                                                 | Preferred stock, $.01 par value; authorized
    5,000,000 shares; none issued or outstanding                                                                                                                                       |                                            |         |              |             |  |         |         |        
|                                                                 | Common stock, $.01 par value; authorized
    100,000,000 shares; 58,082,000 shares issued and
    outstanding as of January 31, 2005 and
    59,216,000 shares issued and 57,631,000 shares
    outstanding as of January 31, 2004 |                                            |         | 581           |             |  |         | 592      |        
|                                                                 | Additional paid-in capital                                                                                                                                                                                                         |                                            |         | 453,391       |             |  |         | 464,689  |        
|                                                                 | Officer and non-employee director notes receivable                                                                                                                                                                                 |                                            |         |              |             |  |         | (2,530   | )      
|                                                                 | Accumulated deficit                                                                                                                                                                                                                |                                            |         | (334,304      | )           |  |         | (351,687 | )      
|                                                                 | Treasury stock at cost, 0 and 1,585,000 shares as of
    January 31, 2005 and 2004, respectively                                                                                                                                   |                                            |         |              |             |  |         | (10,406  | )      
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | Total stockholders equity                 |         |               | 119,668     |  |         |          | 100,658 | 
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 
|                                                                 |                                                                                                                                                                                                                                    | Total liabilities and stockholders equity |         | $             | 668,883     |  |         | $        | 730,404 | 
|                                                                 |                                                                                                                                                                                                                                    |                                            |         |               |             | 



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |           |           | 
|---------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | --------- | --------- | --------- | - | ------- | --------- | --------- | - | -------- | --------- | --------- | 
|                                                                                                                       |                                                                                                                                                                             | Fiscal Years Ended January 31,          |          
|                                                                                                                       |                                                                                                                                                                             |                                         |          
|                                                                                                                       |                                                                                                                                                                             | 2005                                    |           |           | 2004      |   |         | 2003      |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       |                                                                                                                                                                             | (In thousands except per share amounts) |          
|Revenue:                                                                                                               |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |          
|                                                                                                                       | Company-operated restaurants                                                                                                                                                |                                         | $         | 1,217,273 |           |   | $       | 1,142,929 |           |   | $        | 1,109,646 |          
|                                                                                                                       | Franchised and licensed restaurants and other                                                                                                                               |                                         |           | 302,608   |           |   |         | 270,491   |           |   |          | 253,715   |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       |                                                                                                                                                                             | Total revenue                           |           |           | 1,519,881 |   |         |           | 1,413,420 |   |          |           | 1,363,361 | 
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Operating costs and expenses:                                                                                          |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |          
|                                                                                                                       | Restaurant operations:                                                                                                                                                      |                                         |           |           |           |   |         |           |           |   |          |           |          
|                                                                                                                       |                                                                                                                                                                             | Food and packaging                      |           |           | 359,939   |   |         |           | 340,676   |   |          |           | 320,217   | 
|                                                                                                                       |                                                                                                                                                                             | Payroll and other employee benefits     |           |           | 377,405   |   |         |           | 370,700   |   |          |           | 358,827   | 
|                                                                                                                       |                                                                                                                                                                             | Occupancy and other                     |           |           | 273,294   |   |         |           | 269,606   |   |          |           | 261,405   | 
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       |                                                                                                                                                                             |                                         | 1,010,638 |           |           |   | 980,982 |           |           |   | 940,449  |          
|                                                                                                                       | Franchised and licensed restaurants and other                                                                                                                               |                                         |           | 227,588   |           |   |         | 210,237   |           |   |          | 194,787   |          
|                                                                                                                       | Advertising                                                                                                                                                                 |                                         |           | 71,839    |           |   |         | 71,154    |           |   |          | 72,382    |          
|                                                                                                                       | General and administrative                                                                                                                                                  |                                         |           | 138,716   |           |   |         | 107,480   |           |   |          | 114,932   |          
|                                                                                                                       | Facility action charges, net                                                                                                                                                |                                         |           | 14,320    |           |   |         | 17,776    |           |   |          | 5,194     |          
|                                                                                                                       | Impairment of goodwill                                                                                                                                                      |                                         |           |          |           |   |         | 34,059    |           |   |          |          |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       |                                                                                                                                                                             | Total operating costs and expenses      |           |           | 1,463,101 |   |         |           | 1,421,688 |   |          |           | 1,327,744 | 
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Operating income (loss)                                                                                                |                                                                                                                                                                             |                                         | 56,780    |           |           |   | (8,268  | )         |           |   | 35,617   |          
|Interest expense                                                                                                       |                                                                                                                                                                             |                                         | (36,748   | )         |           |   | (39,962 | )         |           |   | (39,924  | )        
|Other income (expense), net                                                                                            |                                                                                                                                                                             |                                         | (2,962    | )         |           |   | 217     |           |           |   | 16,428   |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Income (loss) before income taxes, discontinued operations and
    cumulative effect of accounting change for goodwill |                                                                                                                                                                             |                                         | 17,070    |           |           |   | (48,013 | )         |           |   | 12,121   |          
|Income tax expense (benefit)                                                                                           |                                                                                                                                                                             |                                         | (1,592    | )         |           |   | 2,417   |           |           |   | (7,093   | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Income (loss) from continuing operations                                                                               |                                                                                                                                                                             |                                         | 18,662    |           |           |   | (50,430 | )         |           |   | 19,214   |          
|Discontinued operations:                                                                                               |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |          
|                                                                                                                       | Loss from operations of discontinued segment (net of income tax
    benefit of $0, $0 and $31 for the fiscal years ended
    January 31, 2005, 2004 and 2003, respectively) |                                         |           | (646      | )         |   |         | (2,790    | )         |   |          | (53       | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Income (loss) before cumulative effect of accounting change for
    goodwill                                           |                                                                                                                                                                             |                                         | 18,016    |           |           |   | (53,220 | )         |           |   | 19,161   |          
|Cumulative effect of accounting change for goodwill                                                                    |                                                                                                                                                                             |                                         |          |           |           |   |        |           |           |   | (175,780 | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Net income (loss)                                                                                                      |                                                                                                                                                                             | $                                       | 18,016    |           |           | $ | (53,220 | )         |           | $ | (156,619 | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Basic income (loss) per common share:                                                                                  |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |          
|                                                                                                                       | Continuing operations                                                                                                                                                       |                                         | $         | 0.32      |           |   | $       | (0.88     | )         |   | $        | 0.34      |          
|                                                                                                                       | Discontinued operations                                                                                                                                                     |                                         |           | (0.01     | )         |   |         | (0.04     | )         |   |          |          |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       | Income (loss) before cumulative effect of accounting change                                                                                                                 |                                         |           | 0.31      |           |   |         | (0.92     | )         |   |          | 0.34      |          
|                                                                                                                       | Cumulative effect of accounting change for goodwill                                                                                                                         |                                         |           |          |           |   |         |          |           |   |          | (3.10     | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       | Net income (loss)                                                                                                                                                           |                                         | $         | 0.31      |           |   | $       | (0.92     | )         |   | $        | (2.76     | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Diluted income (loss) per common share:                                                                                |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |          
|                                                                                                                       | Continuing operations                                                                                                                                                       |                                         | $         | 0.31      |           |   | $       | (0.88     | )         |   | $        | 0.33      |          
|                                                                                                                       | Discontinued operations                                                                                                                                                     |                                         |           | (0.01     | )         |   |         | (0.04     | )         |   |          |          |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       | Income (loss) before cumulative effect of accounting change                                                                                                                 |                                         |           | 0.30      |           |   |         | (0.92     | )         |   |          | 0.33      |          
|                                                                                                                       | Cumulative effect of accounting change for goodwill                                                                                                                         |                                         |           |          |           |   |         |          |           |   |          | (3.02     | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       | Net income (loss)                                                                                                                                                           |                                         | $         | 0.30      |           |   | $       | (0.92     | )         |   | $        | (2.69     | )        
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|Weighted-average common shares outstanding:                                                                            |                                                                                                                                                                             |                                         |           |           |           |   |         |           |           |   |          |          
|                                                                                                                       | Basic                                                                                                                                                                       |                                         |           | 57,615    |           |   |         | 57,536    |           |   |          | 56,649    |          
|                                                                                                                       | Dilutive effect of stock options, warrants and convertible notes                                                                                                            |                                         |           | 1,968     |           |   |         |          |           |   |          | 1,475     |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          
|                                                                                                                       | Diluted                                                                                                                                                                     |                                         |           | 59,583    |           |   |         | 57,536    |           |   |          | 58,124    |          
|                                                                                                                       |                                                                                                                                                                             |                                         |           |           |           |   |         |           |          



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


FISCAL YEARS ENDED JANUARY 31, 2005, 2004, AND 2003


|                                                     |                                                                  |                |        |        |            |             |     |                |   |   |             |         |                |         |        |       |               |   |          |          |   |  |        |       |   |   |         |        |   |   |         |          |  
|---------------------------------------------------- | ---------------------------------------------------------------- | -------------- | ------ | ------ | ---------- | ----------- | --- | -------------- | - | - | ----------- | ------- | -------------- | ------- | ------ | ----- | ------------- | - | -------- | -------- | - |  | ------ | ----- | - | - | ------- | ------ | - | - | ------- | -------- | -
|                                                     |                                                                  |                |        |        |            | Officer and |     |                |   |   |             |         |               
|                                                     |                                                                  | Common Stock   |        |        | Additional |             |     | Non-employee   |   |   |             |         | Treasury Stock |         |        | Total |              
|                                                     |                                                                  |                |        |        | Paid-In    |             |     | Director Notes |   |   | Accumulated |         |                |         |        |       | Stockholders |  
|                                                     |                                                                  | Shares         |        |        | Amount     |             |     | Capital        |   |   | Receivable  |         |                | Deficit |        |       | Shares        |   |          | Amount   |   |  | Equity |      
|                                                     |                                                                  |                |        |        |            |             |     |                |   |   |             |         |                |         |        |       |               |   |          |          |   |  |        |      
|                                                     |                                                                  | (In thousands) |       
|Balance at January 31, 2002 (as previously reported) |                                                                  |                | 52,162 |        |            | $           | 522 |                |   | $ | 383,319     |         |                | $       | (4,239 | )     |               | $ | (139,467 | )        |   |  | (1,585 | )     |   | $ | (10,406 | )      |   | $ | 229,729 |         
|                                                     | Restatement adjustments                                          |                |        |       |            |             |     |               |   |   |             |        |                |         |        |      |               |   |          | (2,381   | ) |  |        |      |   |   |         |       |   |   |         | (2,381   | )
|                                                     |                                                                  |                |        |        |            |             |     |                |   |   |             |         |                |         |        |       |               |   |          |          |   |  |        |      
|Balance at January 31, 2002 (as restated)            |                                                                  |                | 52,162 |        |            |             | 522 |                |   |   | 383,319     |         |                |         | (4,239 | )     |               |   | (141,848 | )        |   |  | (1,585 | )     |   |   | (10,406 | )      |   |   | 227,348 |         
|                                                     | Exercise of stock options                                        |                |        | 353    |            |             |     | 3              |   |   |             | 1,270   |                |         |        |      |               |   |          |         |   |  |        |      |   |   |         |       |   |   |         | 1,273    |  
|                                                     | Conversion of convertible subordinated notes                     |                |        | 1      |            |             |     |               |   |   |             | 134     |                |         |        |      |               |   |          |         |   |  |        |      |   |   |         |       |   |   |         | 134      |  
|                                                     | Collection of officer and non-employee director notes receivable |                |        |       |            |             |     |               |   |   |             |        |                |         |        | 1,709 |               |   |          |         |   |  |        |      |   |   |         |       |   |   |         | 1,709    |  
|                                                     | Issuance of stock in conjunction with acquisition                |                |        | 6,352  |            |             |     | 64             |   |   |             | 78,751  |                |         |        |      |               |   |          |         |   |  |        |      |   |   |         |       |   |   |         | 78,815   |  
|                                                     | Net loss                                                         |                |        |       |            |             |     |               |   |   |             |        |                |         |        |      |               |   |          | (156,619 | ) |  |        |      |   |   |         |       |   |   |         | (156,619 | )
|                                                     |                                                                  |                |        |        |            |             |     |                |   |   |             |         |                |         |        |       |               |   |          |          |   |  |        |      
|Balance at January 31, 2003 (as restated)            |                                                                  |                | 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 (as restated)            |                                                                  |                | 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 |         
|                                                     |                                                                  |                |        |        |            |             |     |                |   |   |             |         |                |         |        |       |               |   |          |          |   |  |        |      



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |         |         |   |          |         |         |  
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------- | ----------------------------------------- | -------- | ------ | -------- | - | -------- | ------- | ------- | - | -------- | ------- | ------- | -
|                                     |                                                                                                                                | Fiscal Years Ended January 31,                                                                             |                                          
|                                     |                                                                                                                                |                                                                                                            |                                          
|                                     |                                                                                                                                | 2005                                                                                                       |                                           |          | 2004   |          |   | 2003     |        
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     |                                                                                                                                | (In thousands)                                                                                             |                                          
|Cash flow from operating activities: |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |         |         |   |         
|                                     | Net income (loss)                                                                                                              |                                                                                                            | $                                         | 18,016   |        |          | $ | (53,220  | )       |         | $ | (156,619 | )      
|                                     | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities, excluding effects of acquisition: |                                                                                                            |                                           |          |        |          |   |          |         |         |   |          |        
|                                     |                                                                                                                                | Cumulative effect of accounting change                                                                     |                                           |          |       |          |   |          |        |         |   |          | 175,780 |        
|                                     |                                                                                                                                | Impairment of goodwill                                                                                     |                                           |          |       |          |   |          | 34,059  |         |   |          |        |        
|                                     |                                                                                                                                | Depreciation and amortization                                                                              |                                           |          | 66,793 |          |   |          | 72,074  |         |   |          | 68,289  |        
|                                     |                                                                                                                                | Amortization of loan fees                                                                                  |                                           |          | 3,637  |          |   |          | 4,451   |         |   |          | 4,238   |        
|                                     |                                                                                                                                | Provision for (recovery of) losses on accounts and notes
    receivable                                    |                                           |          | (1,940 | )        |   |          | 2,260   |         |   |          | (1,198  | )      
|                                     |                                                                                                                                | (Gain) loss on investments, sale of property and equipment,
    capital leases and extinguishment of debts |                                           |          | 9,676  |          |   |          | 3,598   |         |   |          | (10,560 | )      
|                                     |                                                                                                                                | Facility action charges, net                                                                               |                                           |          | 14,320 |          |   |          | 17,776  |         |   |          | 5,194   |        
|                                     |                                                                                                                                | Deferred income taxes                                                                                      |                                           |          | 295    |          |   |          | 574     |         |   |          | 839     |        
|                                     |                                                                                                                                | Other, non cash charges (credits)                                                                          |                                           |          | 450    |          |   |          | (284    | )       |   |          | 13      |        
|                                     |                                                                                                                                | Change in estimated liability for closing restaurants and
    estimated liability for self-insurance       |                                           |          | (4,877 | )        |   |          | (10,304 | )       |   |          | (16,678 | )      
|                                     |                                                                                                                                | Net change in refundable income taxes                                                                      |                                           |          | (3,366 | )        |   |          | 643     |         |   |          | 3,262   |        
|                                     |                                                                                                                                | Net change in receivables, inventories, prepaid expenses and
    other current assets                      |                                           |          | 1,058  |          |   |          | 3,542   |         |   |          | (11,138 | )      
|                                     |                                                                                                                                | Net change in accounts payable and other current and long-term
    liabilities                             |                                           |          | 7,058  |          |   |          | (3,550  | )       |   |          | (2,243  | )      
|                                     |                                                                                                                                | Loss from operations of discontinued segment                                                               |                                           |          | 646    |          |   |          | 2,790   |         |   |          | 53      |        
|                                     |                                                                                                                                | Net cash provided to discontinued segment                                                                  |                                           |          | (257   | )        |   |          | (244    | )       |   |          | (3,104  | )      
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     |                                                                                                                                |                                                                                                            | Net cash provided by operating activities |          |        | 111,509  |   |          |         | 74,165  |   |          |         | 56,128  |  
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     | Cash flow from investing activities:                                                                                           |                                                                                                            |                                           |          |        |          |   |          |         |         |   |          |        
|                                     | Purchase of property and equipment                                                                                             |                                                                                                            |                                           | (58,621  | )      |          |   | (47,613  | )       |         |   | (76,548  | )      
|                                     | Proceeds from sale of:                                                                                                         |                                                                                                            |                                           |          |        |          |   |          |         |         |   |          |        
|                                     |                                                                                                                                | Marketable securities and long-term investments                                                            |                                           |          |       |          |   |          |        |         |   |          | 9,248   |        
|                                     |                                                                                                                                | Property and equipment                                                                                     |                                           |          | 12,881 |          |   |          | 18,827  |         |   |          | 23,781  |        
|                                     | Collections on notes receivable                                                                                                |                                                                                                            |                                           | 2,235    |        |          |   | 5,133    |         |         |   | 2,884    |        
|                                     | Acquisition of SBRG, net of payments made to acquire SBRG                                                                      |                                                                                                            |                                           |         |        |          |   |         |         |         |   | 1,670    |        
|                                     | Increase in cash upon consolidation of variable interest entity                                                                |                                                                                                            |                                           | 100      |        |          |   |         |         |         |   |         |        
|                                     | Disposition of brand, net of cash surrendered                                                                                  |                                                                                                            |                                           | 6,954    |        |          |   |         |         |         |   |         |        
|                                     | Net change in other assets                                                                                                     |                                                                                                            |                                           | (239     | )      |          |   | 4,116    |         |         |   | 2,614    |        
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     |                                                                                                                                |                                                                                                            | Net cash used in investing activities     |          |        | (36,690  | ) |          |         | (19,537 | ) |          |         | (36,351 | )
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|Cash flow from financing activities: |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |         |         |   |         
|                                     | Net change in bank overdraft                                                                                                   |                                                                                                            |                                           | (5,018   | )      |          |   | (2,613   | )       |         |   | 3,387    |        
|                                     | Borrowings under revolving credit facility                                                                                     |                                                                                                            |                                           | 55,000   |        |          |   | 149,500  |         |         |   | 114,500  |        
|                                     | Repayments of borrowings under revolving credit facility                                                                       |                                                                                                            |                                           | (40,500  | )      |          |   | (174,500 | )       |         |   | (89,500  | )      
|                                     | Proceeds from credit facility term loan                                                                                        |                                                                                                            |                                           | 230,000  |        |          |   | 25,000   |         |         |   |         |        
|                                     | Repayment of credit facility term loan                                                                                         |                                                                                                            |                                           | (115,411 | )      |          |   | (938     | )       |         |   |         |        
|                                     | Repayment of senior subordinated notes due 2009                                                                                |                                                                                                            |                                           | (200,000 | )      |          |   |         |         |         |   |         |        
|                                     | Proceeds from issuance of convertible debt                                                                                     |                                                                                                            |                                           |         |        |          |   | 101,588  |         |         |   |         |        
|                                     | Repayment of convertible subordinated notes due 2004                                                                           |                                                                                                            |                                           | (22,319  | )      |          |   | (100,000 | )       |         |   | (33,597  | )      
|                                     | Repayment of other long-term debt                                                                                              |                                                                                                            |                                           | (152     | )      |          |   | (1,026   | )       |         |   | (8,124   | )      
|                                     | Repayment of capital lease obligations                                                                                         |                                                                                                            |                                           | (7,143   | )      |          |   | (10,715  | )       |         |   | (10,329  | )      
|                                     | Collections on officer and non-employee director notes receivable                                                              |                                                                                                            |                                           | 2,530    |        |          |   |         |         |         |   | 1,709    |        
|                                     | Payment of deferred loan fees                                                                                                  |                                                                                                            |                                           | (6,193   | )      |          |   | (6,227   | )       |         |   | (5,432   | )      
|                                     | Repurchase of common stock                                                                                                     |                                                                                                            |                                           | (5,559   | )      |          |   |         |         |         |   |         |        
|                                     | Exercise of stock options and conversion of convertible
    subordinated notes                                                 |                                                                                                            |                                           | 4,023    |        |          |   | 1,218    |         |         |   | 1,407    |        
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     |                                                                                                                                |                                                                                                            | Net cash used in financing activities     |          |        | (110,742 | ) |          |         | (18,713 | ) |          |         | (25,979 | )
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     | Net increase (decrease) in cash and cash equivalents                                                                           |                                                                                                            |                                           | (35,923  | )      |          |   | 35,915   |         |         |   | (6,202   | )      
|                                     | Cash and cash equivalents at beginning of year                                                                                 |                                                                                                            |                                           | 54,355   |        |          |   | 18,440   |         |         |   | 24,642   |        
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        
|                                     | Cash and cash equivalents at end of year                                                                                       |                                                                                                            | $                                         | 18,432   |        |          | $ | 54,355   |         |         | $ | 18,440   |        
|                                     |                                                                                                                                |                                                                                                            |                                           |          |        |          |   |          |        



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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. |     |       | Hardees |  |       | La Salsa |  |  | Green Burrito |     |  | Total |   
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|Company-operated        |       |            | 428 |       |          |  | 677   |          |  |  | 62            |     |  |       | 2  |    |  |  | 1,169 |      
|Franchised and licensed |       |            | 586 |       |          |  | 1,357 |          |  |  | 39            |     |  |       | 15 |    |  |  | 1,997 |      
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   
|                        | Total |            |     | 1,014 |          |  |       | 2,034    |  |  |               | 101 |  |       |    | 17 |  |  |       | 3,166 | 
|                        |       |            |     |       |          |  |       |          |  |  |               |     |  |       |   





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



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                          
| | ---------------------------------------------------------
| | Restatement of Previously Issued Financial
    Statements

Accounting for Operating Leases with
Scheduled Rent Increases.








|                                           |  |             |          |   |             |   |        |             |  |   |          |  
|------------------------------------------ |  | ----------- | -------- | - | ----------- | - | ------ | ----------- |  | - | -------- | -
|                                           |  | Previously  |          |   |             |   |       
|                                           |  | Reported(1) |          |   | Adjustments |   |        | As Restated | 
|                                           |  |             |          |   |             |   |        |             | 
|Prepaid expenses                           |  | $           | 15,665   |   |             | $ | 101    |             |  | $ | 15,766   |  
|Total current assets                       |  |             | 142,961  |   |             |   | 101    |             |  |   | 143,062  |  
|Total assets                               |  |             | 730,303  |   |             |   | 101    |             |  |   | 730,404  |  
|Other long-term liabilities                |  |             | 56,077   |   |             |   | 2,482  |             |  |   | 58,559   |  
|Total liabilities                          |  |             | 627,264  |   |             |   | 2,482  |             |  |   | 629,746  |  
|Accumulated deficit                        |  |             | (349,306 | ) |             |   | (2,381 | )           |  |   | (351,687 | )
|Total stockholders equity                 |  |             | 103,039  |   |             |   | (2,381 | )           |  |   | 100,658  |  
|Total liabilities and stockholders equity |  |             | 730,303  |   |             |   | 101    |             |  |   | 730,404  |  






| |     |                                                                                   
| | --- | ----------------------------------------------------------------------------------
| | (1) | Certain amounts have been reclassified to conform to current
    year presentation

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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





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





| |                         
| | ------------------------
| | 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.




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

Goodwill and Other
Intangible Assets,


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Business
Combinations.




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





| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | (i) Impairment of long-lived assets for under-performing
    restaurants;                
|
| | (ii) Store closure costs;                                                                
|
| | (iii) Gains (losses) on the sale of restaurants; and                                     
|
| | (iv) Amortization of discount related to estimated
    liability for closing restaurants.





|    |                                
|--- | -------------------------------
|(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 recission 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

Accounting for Leases




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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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











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





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



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Accounting for Franchisee Fee Revenue.






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

Accounting for
Income Taxes.




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







| |   |                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | estimation of future cash flows used to assess the
    recoverability of long-lived assets, including goodwill, and
    establish the estimated liability for closing restaurants;                                                                                
|
| |  | determination of the appropriate allowances associated with
    franchise and license receivables;                                                                                                                                                                
|
| |  | estimation, using actuarially determined methods, of its
    self-insured claim losses under its workers compensation,
    auto and general liability insurance programs;                                                                                        
|
| |  | determination of the appropriate estimated liabilities for loss
    contingencies;                                                                                                                                                                                
|
| |  | 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;                                                                                           
|
| |  | estimation of its net deferred income tax asset valuation
    allowance; and                                                                                                                                                                                      
|
| |  | estimation of the fair value of subordinated financial support
    provided to variable interest entities in which the Company has
    an interest for purposes of determining whether the Company is
    the primary beneficiary of the variable interest entity.

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                        
| | -----------------------
| | Income (loss) per share





|                                                                          |  |                                         |        |  |      |   |         |      |  |   |          |  
|------------------------------------------------------------------------- |  | --------------------------------------- | ------ |  | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                          |  | 2005                                    |        |  | 2004 |   |         | 2003 | 
|                                                                          |  |                                         |        |  |      |   |         |      | 
|                                                                          |  | (In thousands except per share amounts) |       
|Net income (loss) for computation of basic earnings per share             |  | $                                       | 18,016 |  |      | $ | (53,220 | )    |  | $ | (156,619 | )
|Weighted average shares for computation of basic earnings per
    share   |  |                                         | 57,615 |  |      |   | 57,536  |      |  |   | 56,649   |  
|Basic net income (loss) per share                                         |  | $                                       | 0.31   |  |      | $ | (0.92   | )    |  | $ | (2.76    | )
|Net income (loss) for computation of diluted earnings per share           |  | $                                       | 18,016 |  |      | $ | (53,220 | )    |  | $ | (156,619 | )
|Weighted average shares for computation of basic earnings per
    share   |  |                                         | 57,615 |  |      |   | 57,536  |      |  |   | 56,649   |  
|Dilutive effect of stock options                                          |  |                                         | 1,968  |  |      |   |        |      |  |   | 1,475    |  
|                                                                          |  |                                         |        |  |      |   |         |      | 
|Weighted average shares for computation of diluted earnings per
    share |  |                                         | 59,583 |  |      |   | 57,536  |      |  |   | 58,124   |  
|Diluted net income (loss) per share                                       |  | $                                       | 0.30   |  |      | $ | (0.92   | )    |  | $ | (2.69    | )



|                       |  |      |        |  |      |  |       |      |  |  |       | 
|---------------------- |  | ---- | ------ |  | ---- |  | ----- | ---- |  |  | ----- | 
|                       |  | 2005 |        |  | 2004 |  |       | 2003 | 
|                       |  |      |        |  |      |  |       |      | 
|2004 Convertible Notes |  |      |       |  |      |  | 2,258 |      |  |  | 3,191 | 
|2023 Convertible Notes |  |      | 11,811 |  |      |  | 1,112 |      |  |  |      | 
|Stock Options          |  |      | 2,813  |  |      |  | 4,860 |      |  |  | 4,658 | 
|Warrants               |  |      | 982    |  |      |  | 982   |      |  |  | 982   | 



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

Accounting for Stock Issued
to Employees


Accounting for Stock-Based
Compensation  Transition and Disclosure Accounting for
Stock-Based Compensation


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                                                                                |  |      |      |   |      |   |       |      |  |   |      |  
|------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- | - | ----- | ---- |  | - | ---- | -
|                                                                                                                                |  | 2005 |      |   | 2004 |   |       | 2003 | 
|                                                                                                                                |  |      |      |   |      |   |       |      | 
|Annual dividends                                                                                                                |  | $    |     |   |      | $ |      |      |  | $ |     |  
|Expected volatility (based on the historical volatility for a
    term matched to the expected life of all options outstanding) |  |      | 68.0 | % |      |   | 140.8 | %    |  |   | 29.5 | %
|Risk-free interest rate (matched to the expected term of the
    outstanding option)                                            |  |      | 3.71 | % |      |   | 2.12  | %    |  |   | 2.97 | %
|Expected life of all options outstanding (years)                                                                                |  |      | 5.34 |   |      |   | 5.45  |      |  |   | 5.30 |  
|Weighted-average fair value of each option granted                                                                              |  | $    | 7.15 |   |      | $ | 5.20  |      |  | $ | 6.33 |  



|                                                            |  |                               |       |   |      |   |       |      |  |   |       |  
|----------------------------------------------------------- |  | ----------------------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                            |  | Increase/(Decrease) in        |      
|                                                            |  | Fair Value of Options Granted |      
|                                                            |  |                               |      
|Change in Assumption                                        |  | 2005                          |       |   | 2004 |   |       | 2003 | 
|                                                            |  |                               |       |   |      |   |       |      | 
|10% increase in expected volatility                         |  | $                             | 0.63  |   |      | $ | 0.11  |      |  | $ | 0.15  |  
|1% increase in risk-free interest rate                      |  |                               | 0.11  |   |      |   | 0.01  |      |  |   | 0.02  |  
|1 year increase in expected life of all options outstanding |  |                               | 0.47  |   |      |   | 0.14  |      |  |   | 0.19  |  
|10% decrease in expected volatility                         |  |                               | (0.69 | ) |      |   | (0.15 | )    |  |   | (0.17 | )
|1% decrease in risk-free interest rate                      |  |                               | (0.12 | ) |      |   | (0.02 | )    |  |   | (0.02 | )
|1 year decrease in expected life of all options outstanding |  |                               | (0.56 | ) |      |   | (0.21 | )    |  |   | (0.27 | )

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                     |                       |      |        |      |      |   |         |       |   |   |          |       |  
|---------------------------------------------------------------------------------------------------- | --------------------- | ---- | ------ | ---- | ---- | - | ------- | ----- | - | - | -------- | ----- | -
|                                                                                                     |                       | 2005 |        |      | 2004 |   |         | 2003  |  
|                                                                                                     |                       |      |        |      |      |   |         |       |  
|Net income (loss), as reported                                                                       |                       | $    | 18,016 |      |      | $ | (53,220 | )     |   | $ | (156,619 | )    
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method |                       |      | (4,651 | )    |      |   | (2,956  | )     |   |   | (2,496   | )    
|                                                                                                     |                       |      |        |      |      |   |         |       |  
|Net income (loss)  pro forma                                                                        |                       | $    | 13,365 |      |      | $ | (56,176 | )     |   | $ | (159,115 | )    
|                                                                                                     |                       |      |        |      |      |   |         |       |  
|Net income (loss) per common share:                                                                  |                       |      |        |      |      |   |         |       |   |   |          |      
|                                                                                                     | Basic  as reported   |      | $      | 0.31 |      |   | $       | (0.92 | ) |   | $        | (2.76 | )
|                                                                                                     | Basic  pro forma     |      |        | 0.23 |      |   |         | (0.98 | ) |   |          | (2.81 | )
|                                                                                                     | Diluted  as reported |      |        | 0.30 |      |   |         | (0.92 | ) |   |          | (2.69 | )
|                                                                                                     | Diluted  pro forma   |      |        | 0.22 |      |   |         | (0.98 | ) |   |          | (2.74 | )



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



Accounting for Derivative
Instruments and Hedging Activities Amendment of Statement 133 on Derivative Instruments and
Hedging Activities




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







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

Reporting
Comprehensive Income




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



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





| |                                          
| | -----------------------------------------
| | Accounting Pronouncements Not Yet Adopted

Share-Based Payment Statement of Cash
Flows








| |                                          
| | -----------------------------------------
| | Adoption of New Accounting Pronouncements

Consolidation of Variable Interest
Entities  an interpretation of Accounting Research
Bulletin (ARB) No. 51


Consolidated Financial
Statements


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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|                            |  |   |     | 
|--------------------------- |  | - | --- | 
|ASSETS:                     |  |   |     | 
|Cash                        |  | $ | 100 | 
|Accounts receivable         |  |   | 1   | 
|Inventories                 |  |   | 62  | 
|Prepaid expenses            |  |   | 19  | 
|Property and equipment, net |  |   | 86  | 
|Other assets                |  |   | 15  | 
|                            |  |   |    
|                            |  | $ | 283 | 
|                            |  |   |    
|LIABILITIES:                |  |   |     | 
|Accounts payable            |  | $ | 44  | 
|Other current liabilities   |  |   | 178 | 
|Other long-term debt        |  |   | 34  | 
|Other long-term liabilities |  |   | 27  | 
|                            |  |   |    
|                            |  | $ | 283 | 
|                            |  |   |    



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








Accounting for Franchisee Fee Revenue






|                                       |  |   |        | 
|-------------------------------------- |  | - | ------ | 
|ADVERTISING FUND ASSETS, RESTRICTED:   |  |   |        | 
|Cash                                   |  | $ | 17,294 | 
|Accounts and notes receivable, net(1)  |  |   | 4,126  | 
|Other assets                           |  |   | 531    | 
|                                       |  |   |       
|                                       |  | $ | 21,951 | 
|                                       |  |   |       
|ADVERTISING FUND LIABILITIES:          |  |   |        | 
|Accounts payable and other liabilities |  | $ | 9,412  | 
|Deferred obligations                   |  |   | 12,539 | 
|                                       |  |   |       
|                                       |  | $ | 21,951 | 
|                                       |  |   |       






|    |                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes $1,903 of accounts receivable from Hardees
    company-operated restaurants, which is eliminated in
    consolidation.

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Accounting for Preexisting Relationships between the Parties
to a Business Combination




Accounting for Costs Associated with Exit or
Disposal Activities Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring)




|                                                  |  |   |          |  
|------------------------------------------------- |  | - | -------- | -
|Reported net loss                                 |  | $ | (156,619 | )
|Net effect of retroactive application of SFAS 146 |  |   | (499     | )
|                                                  |  |   |         
|Pro forma net loss                                |  | $ | (157,118 | )
|                                                  |  |   |         



|         |             
|-------- | ------------
|Note 2  | Acquisitions



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                          |  |   |        | 
|----------------------------------------- |  | - | ------ | 
|Current assets                            |  | $ | 3,074  | 
|Property and equipment                    |  |   | 11,023 | 
|Goodwill                                  |  |   | 44,729 | 
|Net assets held for sale                  |  |   | 9,835  | 
|Other assets                              |  |   | 23,782 | 
|                                          |  |   |       
|Total assets acquired                     |  |   | 92,443 | 
|                                          |  |   |       
|Current liabilities                       |  |   | 5,471  | 
|Long-term debt, excluding current portion |  |   | 6,500  | 
|Other long-term liabilities               |  |   | 192    | 
|                                          |  |   |       
|Total liabilities assumed                 |  |   | 12,163 | 
|                                          |  |   |       
|Net assets acquired                       |  | $ | 80,280 | 
|                                          |  |   |       



|                                 |  |                     |               |  |  |   |        | 
|-------------------------------- |  | ------------------- | ------------- |  |  | - | ------ | 
|Intangible Asset                 |  | Amortization Period |               |  | 
|                                 |  |                     |               |  | 
|Trademarks                       |  |                     | 20 years      |  |  | $ | 17,171 | 
|Franchise agreements             |  |                     | 20 years      |  |  |   | 1,780  | 
|Favorable leases                 |  |                     | 3 to 18 years |  |  |   | 3,132  | 
|                                 |  |                     |               |  |  |  
|Total intangible assets acquired |  |                     |               |  |  | $ | 22,083 | 
|                                 |  |                     |               |  |  |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                  |                                                                   |   |           |        |  
|----------------------------------------------------------------- | ----------------------------------------------------------------- | - | --------- | ------ | -
|Total revenue                                                     |                                                                   | $ | 1,364,702 |       
|Income before cumulative effect of accounting change for goodwill |                                                                   |   | 17,952    |       
|Cumulative effect of accounting change for goodwill               |                                                                   |   | (175,780  | )     
|                                                                  |                                                                   |   |          
|Net loss                                                          |                                                                   | $ | (157,828  | )     
|                                                                  |                                                                   |   |          
|Basic income (loss) per common share:                             |                                                                   |   |           |       
|                                                                  | Income before cumulative effect of accounting change for goodwill |   | $         | 0.32   |  
|                                                                  | Cumulative effect of accounting change for goodwill               |   |           | (3.08  | )
|                                                                  |                                                                   |   |          
|                                                                  | Net loss                                                          |   | $         | (2.76  | )
|                                                                  |                                                                   |   |          
|Diluted income (loss) per common share:                           |                                                                   |   |           |       
|                                                                  | Income before cumulative effect of accounting change for goodwill |   | $         | 0.31   |  
|                                                                  | Cumulative effect of accounting change for goodwill               |   |           | (3.00  | )
|                                                                  |                                                                   |   |          
|                                                                  | Net loss                                                          |   | $         | (2.69  | )
|                                                                  |                                                                   |   |          
|Weighted-average common shares outstanding:                       |                                                                   |   |           |       
|                                                                  | Basic                                                             |   |           | 57,139 |  
|                                                                  | Dilutive effect of stock options                                  |   |           | 1,475  |  
|                                                                  |                                                                   |   |          
|                                                                  | Diluted                                                           |   |           | 58,614 |  
|                                                                  |                                                                   |   |          

Note 3  Goodwill


Goodwill and Other Intangible Assets, Intangible Assets, Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed Of.








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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                                                            |  |        |          |  
|--------------------------------------------------------------------------- |  | ------ | -------- | -
|                                                                            |  | Amount |         
|                                                                            |  |        |         
|Balance as of January 31, 2002                                              |  | $      | 186,868  |  
|Recording of goodwill related to acquisition of SBRG                        |  |        | 44,729   |  
|Recording of goodwill related to acquisitions of franchised
    restaurants |  |        | 891      |  
|Cumulative effect of accounting change for goodwill                         |  |        | (175,780 | )
|                                                                            |  |        |         
|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   |  
|                                                                            |  |        |         



|         |                             
|-------- | ----------------------------
|Note 4  | Facility Action Charges, Net



|       |       |            |   |   |          |  |    |          |  |  |            |   |  |          |    |    |          |  |    |            |  |  |          |   |  |          |   |   |  |  |    |    |  |  |   |   | 
|------ | ----- | ---------- | - | - | -------- |  | -- | -------- |  |  | ---------- | - |  | -------- | -- | -- | -------- |  | -- | ---------- |  |  | -------- | - |  | -------- | - | - |  |  | -- | -- |  |  | - | - | 
|       |       | 2005       |   |   | 2004     |  |    | 2003     | 
|       |       |            |   |   |          |  |    |          | 
|       |       | Carls Jr. |   |   | Hardees |  |    | La Salsa |  |  | Carls Jr. |   |  | Hardees |    |    | La Salsa |  |    | Carls Jr. |  |  | Hardees |   |  | La Salsa |  
|       |       |            |   |   |          |  |    |          |  |  |            |   |  |          |    |    |          |  |    |            |  |  |          |   |  |          |  
|Sold   |       |            |  |   |          |  |   |          |  |  |           |   |  |          | 15 |    |          |  |   |            |  |  |         |   |  |          | 2 |   |  |  | 1  |    |  |  |  |  
|Closed |       |            | 5 |   |          |  | 46 |          |  |  | 2          |   |  |          | 4  |    |          |  | 15 |            |  |  | 4        |   |  |          | 3 |   |  |  | 23 |    |  |  |  |  
|       |       |            |   |   |          |  |    |          |  |  |            |   |  |          |    |    |          |  |    |            |  |  |          |   |  |          |  
|       | Total |            |   | 5 |          |  |    | 46       |  |  |            | 2 |  |          |    | 19 |          |  |    | 15         |  |  |          | 4 |  |          |   | 5 |  |  |    | 24 |  |  |   |  | 
|       |       |            |   |   |          |  |    |          |  |  |            |   |  |          |    |    |          |  |    |            |  |  |          |   |  |          |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                   |                                                                                     |                                                               |        |        |      |   |        |        |       |   |       |        |        |  
|------------------ | ----------------------------------------------------------------------------------- | ------------------------------------------------------------- | ------ | ------ | ---- | - | ------ | ------ | ----- | - | ----- | ------ | ------ | -
|                   |                                                                                     | 2005                                                          |        |        | 2004 |   |        | 2003   |      
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|Carls Jr.         |                                                                                     |                                                               |        |        |      |   |        |        |       |   |       |       
|                   | New decisions regarding closing restaurants                                         |                                                               | $      | 269    |      |   | $      | 3,075  |       |   | $     | 194    |       
|                   | Unfavorable (favorable) dispositions of leased and fee
    surplus properties, net  |                                                               |        | 120    |      |   |        | (767   | )     |   |       | (273   | )     
|                   | Impairment of assets to be disposed of                                              |                                                               |        | 28     |      |   |        |       |       |   |       | 437    |       
|                   | Impairment of assets to be held and used                                            |                                                               |        | 2,693  |      |   |        | 1,228  |       |   |       | 850    |       
|                   | Gain on sales of restaurants and surplus property, net                              |                                                               |        | (611   | )    |   |        | (1,667 | )     |   |       | (422   | )     
|                   | Amortization of discount related to estimated liability for
    closing restaurants |                                                               |        | 295    |      |   |        | 323    |       |   |       | 481    |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|                   |                                                                                     |                                                               | 2,794  |        |      |   | 2,192  |        |       |   | 1,267 |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|Hardees           |                                                                                     |                                                               |        |        |      |   |        |        |       |   |       |       
|                   | New decisions regarding closing restaurants                                         |                                                               |        | 5,247  |      |   |        | 2,631  |       |   |       | 1,187  |       
|                   | Favorable dispositions of leased and fee surplus properties, net                    |                                                               |        | (1,364 | )    |   |        | (6,952 | )     |   |       | (2,416 | )     
|                   | Impairment of assets to be disposed of                                              |                                                               |        | 683    |      |   |        | 11,365 |       |   |       | 2,581  |       
|                   | Impairment of assets to be held and used                                            |                                                               |        | 2,428  |      |   |        | 4,942  |       |   |       | 3,855  |       
|                   |                                                                                     | (Gain) loss on sales of restaurants and surplus property, net |        |        | (917 | ) |        |        | 1,459 |   |       |        | (3,571 | )
|                   | Amortization of discount related to estimated liability for
    closing restaurants |                                                               |        | 1,011  |      |   |        | 2,248  |       |   |       | 2,291  |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|                   |                                                                                     |                                                               | 7,088  |        |      |   | 15,693 |        |       |   | 3,927 |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|La Salsa and Other |                                                                                     |                                                               |        |        |      |   |        |        |       |   |       |       
|                   | New decisions regarding closing restaurants                                         |                                                               |        | 1,074  |      |   |        | 121    |       |   |       |       |       
|                   | Unfavorable (favorable) dispositions of leased and fee
    surplus properties, net  |                                                               |        | 172    |      |   |        | (846   | )     |   |       |       |       
|                   | Impairment of assets to be disposed of                                              |                                                               |        | 755    |      |   |        | 1      |       |   |       |       |       
|                   | Impairment of assets to be held and used                                            |                                                               |        | 2,434  |      |   |        | 429    |       |   |       |       |       
|                   | (Gain) loss on sales of restaurants and surplus properties, net                     |                                                               |        | (3     | )    |   |        | 185    |       |   |       |       |       
|                   | Amortization of discount related to estimated liability for
    closing restaurants |                                                               |        | 6      |      |   |        | 1      |       |   |       |       |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|                   |                                                                                     |                                                               | 4,438  |        |      |   | (109   | )      |       |   |      |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|Total              |                                                                                     |                                                               |        |        |      |   |        |        |       |   |       |       
|                   | New decisions regarding closing restaurants                                         |                                                               |        | 6,590  |      |   |        | 5,827  |       |   |       | 1,381  |       
|                   | Favorable dispositions of leased and fee surplus properties, net                    |                                                               |        | (1,072 | )    |   |        | (8,565 | )     |   |       | (2,689 | )     
|                   | Impairment of assets to be disposed of                                              |                                                               |        | 1,466  |      |   |        | 11,366 |       |   |       | 3,018  |       
|                   | Impairment of assets to be held and used                                            |                                                               |        | 7,555  |      |   |        | 6,599  |       |   |       | 4,705  |       
|                   | Gain on sales of restaurants and surplus property, net                              |                                                               |        | (1,531 | )    |   |        | (23    | )     |   |       | (3,993 | )     
|                   | Amortization of discount related to estimated liability for
    closing restaurants |                                                               |        | 1,312  |      |   |        | 2,572  |       |   |       | 2,772  |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      
|                   |                                                                                     | $                                                             | 14,320 |        |      | $ | 17,776 |        |       | $ | 5,194 |       
|                   |                                                                                     |                                                               |        |        |      |   |        |        |      

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                              |            |      |       |       |      |   |        |        |  |   |       |       | 
|----------------------------- | ---------- | ---- | ----- | ----- | ---- | - | ------ | ------ |  | - | ----- | ----- | 
|                              |            | 2005 |       |       | 2004 |   |        | 2003   | 
|                              |            |      |       |       |      |   |        |        | 
|Property and equipment        |            |      |       |       |      |   |        |        |  |   |       |      
|                              | Carls Jr. |      | $     | 2,721 |      |   | $      | 657    |  |   | $     | 1,287 | 
|                              | Hardees   |      |       | 2,868 |      |   |        | 13,292 |  |   |       | 6,436 | 
|                              | La Salsa   |      |       | 3,189 |      |   |        | 430    |  |   |       |      | 
|                              |            |      |       |       |      |   |        |        | 
|                              |            |      | 8,778 |       |      |   | 14,379 |        |  |   | 7,723 |      
|                              |            |      |       |       |      |   |        |        | 
|Property under capital leases |            |      |       |       |      |   |        |        |  |   |       |      
|                              | Carls Jr. |      |       |      |      |   |        | 571    |  |   |       |      | 
|                              | Hardees   |      |       | 225   |      |   |        | 2,536  |  |   |       |      | 
|                              |            |      |       |       |      |   |        |        | 
|                              |            |      | 225   |       |      |   | 3,107  |        |  |   |      |      
|                              |            |      |       |       |      |   |        |        | 
|Favorable lease rights        |            |      |       |       |      |   |        |        |  |   |       |      
|                              | Hardees   |      |       | 18    |      |   |        | 479    |  |   |       |      | 
|                              |            |      |       |       |      |   |        |        | 
|Total                         |            |      |       |       |      |   |        |        |  |   |       |      
|                              | Carls Jr. |      |       | 2,721 |      |   |        | 1,228  |  |   |       | 1,287 | 
|                              | Hardees   |      |       | 3,111 |      |   |        | 16,307 |  |   |       | 6,436 | 
|                              | La Salsa   |      |       | 3,189 |      |   |        | 430    |  |   |       |      | 
|                              |            |      |       |       |      |   |        |        | 
|                              |            | $    | 9,021 |       |      | $ | 17,965 |        |  | $ | 7,723 |      
|                              |            |      |       |       |      |   |        |        | 



|                            |                                                                 |   |        |         |  
|--------------------------- | --------------------------------------------------------------- | - | ------ | ------- | -
|Balance at January 31, 2002 |                                                                 | $ | 49,258 |        
|                            | New decisions regarding closing restaurants                     |   |        | 1,381   |  
|                            | Usage                                                           |   |        | (14,632 | )
|                            | Favorable disposition of leased and fee surplus properties, net |   |        | (2,689  | )
|                            | Amortization of discount and other                              |   |        | 3,072   |  
|                            |                                                                 |   |       
|Balance at January 31, 2003 |                                                                 |   | 36,390 |        
|                            | New decisions regarding closing restaurants                     |   |        | 5,827   |  
|                            | Usage                                                           |   |        | (13,899 | )
|                            | Favorable disposition of leased and fee surplus properties, net |   |        | (8,565  | )
|                            | Amortization of discount and other                              |   |        | 2,572   |  
|                            |                                                                 |   |       
|Balance at January 31, 2004 |                                                                 |   | 22,325 |        
|                            | New decisions regarding closing restaurants                     |   |        | 6,590   |  
|                            | Usage                                                           |   |        | (11,280 | )
|                            | Favorable disposition of leased and fee surplus properties, net |   |        | (1,072  | )
|                            | Amortization of discount                                        |   |        | 1,312   |  
|                            |                                                                 |   |       
|Balance at January 31, 2005 |                                                                 |   | 17,875 |        
|                            | Current portion                                                 |   |        | 5,261   |  
|                            |                                                                 |   |       
|                            | Long-term portion                                               |   | $      | 12,614  |  
|                            |                                                                 |   |       

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                         
|-------- | ------------------------
|Note 5  | Accounts Receivable, Net



|                                  |  |      |        |   |      |   |        |  
|--------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                  |  | 2005 |        |   | 2004 |  
|                                  |  |      |        |   |      |  
|Trade receivables                 |  | $    | 26,400 |   |      | $ | 27,092 |  
|Refundable income taxes           |  |      | 4,508  |   |      |   | 1,142  |  
|Notes receivable, current portion |  |      | 2,680  |   |      |   | 3,681  |  
|Other                             |  |      | 153    |   |      |   | 227    |  
|Allowance for doubtful accounts   |  |      | (2,542 | ) |      |   | (5,580 | )
|                                  |  |      |        |   |      |  
|                                  |  | $    | 31,199 |   |      | $ | 26,562 |  
|                                  |  |      |        |   |      |  



|                                |  |      |        |   |      |   |        |  
|------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                |  | 2005 |        |   | 2004 |  
|                                |  |      |        |   |      |  
|Franchisees                     |  | $    | 8,259  |   |      | $ | 6,299  |  
|Employees                       |  |      | 94     |   |      |   | 149    |  
|Other                           |  |      | 2,056  |   |      |   | 2,055  |  
|Allowance for doubtful accounts |  |      | (7,081 | ) |      |   | (6,186 | )
|                                |  |      |        |   |      |  
|                                |  | $    | 3,328  |   |      | $ | 2,317  |  
|                                |  |      |        |   |      |  



|                            |                                   |            |       |        |            |   |        |        |   |   |        |        |  
|--------------------------- | --------------------------------- | ---------- | ----- | ------ | ---------- | - | ------ | ------ | - | - | ------ | ------ | -
|                            |                                   | Accounts   |       |        | Notes      |   |        |       
|                            |                                   | Receivable |       |        | Receivable |   |        | Total  |  
|                            |                                   |            |       |        |            |   |        |        |  
|Balance at January 31, 2002 |                                   | $          | 6,702 |        |            | $ | 11,078 |        |   | $ | 17,780 |       
|                            | Recovery of provision             |            |       | (882   | )          |   |        | (316   | ) |   |        | (1,198 | )
|                            | Charge-offs                       |            |       | (1,110 | )          |   |        | (5,358 | ) |   |        | (6,468 | )
|                            | Recoveries                        |            |       | 313    |            |   |        |       |   |   |        | 313    |  
|                            |                                   |            |       |        |            |   |        |        |  
|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  |       
|                            |                                   |            |       |        |            |   |        |        |  



|         |                         
|-------- | ------------------------
|Note 6  | Net Assets Held for Sale



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                      |                               |      |       |       |      |   |        |        | 
|--------------------- | ----------------------------- | ---- | ----- | ----- | ---- | - | ------ | ------ | 
|                      |                               | 2005 |       |       | 2004 |  
|                      |                               |      |       |       |      |  
|Assets held for sale: |                               |      |       |       |      |   |        |       
|                      | Total assets of Timber Lodge  |      | $     |      |      |   | $      | 15,930 | 
|                      | Surplus restaurant properties |      |       | 1,058 |      |   |        | 2,830  | 
|                      |                               |      |       |       |      |  
|                      |                               | $    | 1,058 |       |      | $ | 18,760 |       
|                      |                               |      |       |       |      |  



|                            |                   |   |       |        | 
|--------------------------- | ----------------- | - | ----- | ------ | 
|ASSETS                      |                   |   |       |       
|Current assets              |                   | $ | 1,738 |       
|Property and equipment, net |                   |   | 7,786 |       
|Other assets                |                   |   | 6,406 |       
|                            |                   |   |      
|                            | Total assets      |   |       | 15,930 | 
|                            |                   |   |      
|                           
|LIABILITIES                 |                   |   |       |       
|Current liabilities         |                   |   | 5,560 |       
|Other long-term liabilities |                   |   | 1,687 |       
|                            |                   |   |      
|                            | Total liabilities |   |       | 7,247  | 
|                            |                   |   |      
|NET ASSETS                  |                   | $ | 8,683 |       
|                            |                   |   |      



|                        |  |      |        |   |      |   |        |      |  |   |        |  
|----------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                        |  | 2005 |        |   | 2004 |   |        | 2003 | 
|                        |  |      |        |   |      |   |        |      | 
|Revenue                 |  | $    | 24,129 |   |      | $ | 42,893 |      |  | $ | 41,915 |  
|                        |  |      |        |   |      |   |        |      | 
|Operating income (loss) |  |      | (636   | ) |      |   | (2,771 | )    |  |   | 35     |  
|Interest expense        |  |      | 10     |   |      |   | 19     |      |  |   | 119    |  
|Income tax benefit      |  |      |       |   |      |   |       |      |  |   | (31    | )
|                        |  |      |        |   |      |   |        |      | 
|Net loss                |  | $    | (646   | ) |      | $ | (2,790 | )    |  | $ | (53    | )
|                        |  |      |        |   |      |   |        |      | 

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|         |                       
|-------- | ----------------------
|Note 7  | Property and Equipment



|                                                |  |             |            |  |      |   |         |      |  |   |         | 
|----------------------------------------------- |  | ----------- | ---------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                |  | Estimated   |            |  |      |   |        
|                                                |  | Useful Life |            |  | 2005 |   |         | 2004 | 
|                                                |  |             |            |  |      |   |         |      | 
|Land                                            |  |             |            |  |      | $ | 127,633 |      |  | $ | 133,221 | 
|Leasehold improvements                          |  |             | 3-25 years |  |      |   | 200,013 |      |  |   | 197,812 | 
|Buildings and improvements                      |  |             | 7-40 years |  |      |   | 245,548 |      |  |   | 244,435 | 
|Equipment, furniture and fixtures               |  |             | 3-10 years |  |      |   | 301,113 |      |  |   | 308,102 | 
|                                                |  |             |            |  |      |   |         |      | 
|                                                |  |             |            |  |      |   | 874,307 |      |  |   | 883,570 | 
|Less: accumulated depreciation and amortization |  |             |            |  |      |   | 413,021 |      |  |   | 403,910 | 
|                                                |  |             |            |  |      |   |         |      | 
|                                                |  |             |            |  |      | $ | 461,286 |      |  | $ | 479,660 | 
|                                                |  |             |            |  |      |   |         |      | 





|         |       
|-------- | ------
|Note 8  | Leases





|                               |  |      |        |  |      |   |        | 
|------------------------------ |  | ---- | ------ |  | ---- | - | ------ | 
|                               |  | 2005 |        |  | 2004 |  
|                               |  |      |        |  |      |  
|Buildings                      |  | $    | 78,680 |  |      | $ | 89,043 | 
|Equipment                      |  |      | 9,562  |  |      |   | 13,654 | 
|Less: accumulated amortization |  |      | 52,182 |  |      |   | 57,802 | 
|                               |  |      |        |  |      |  
|                               |  | $    | 36,060 |  |      | $ | 44,895 | 
|                               |  |      |        |  |      |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                              |                              |         |        |        |           |   |         |         | 
|--------------------------------------------------------------------------------------------- | ---------------------------- | ------- | ------ | ------ | --------- | - | ------- | ------- | 
|                                                                                              |                              | Capital |        |        | Operating |  
|                                                                                              |                              |         |        |        |           |  
|Fiscal Year:                                                                                  |                              |         |        |        |           |   |         |        
|2006                                                                                          |                              | $       | 11,320 |        |           | $ | 86,139  |        
|2007                                                                                          |                              |         | 10,683 |        |           |   | 80,441  |        
|2008                                                                                          |                              |         | 10,569 |        |           |   | 71,067  |        
|2009                                                                                          |                              |         | 10,391 |        |           |   | 58,876  |        
|2010                                                                                          |                              |         | 9,910  |        |           |   | 46,590  |        
|Thereafter                                                                                    |                              |         | 41,962 |        |           |   | 244,861 |        
|                                                                                              |                              |         |        |        |           |  
|                                                                                              | Total minimum lease payments |         |        | 94,835 |           |   | $       | 587,974 | 
|                                                                                              |                              |         |        |        |           |  
|Less: amount representing interest                                                            |                              |         | 37,271 |        |           |   |         |        
|                                                                                              |                              |         |        |        |           |  
|Present value of minimum lease payments (interest rates
    primarily ranging from 8% to 14%) |                              |         | 57,564 |        |           |   |         |        
|Less: current portion                                                                         |                              |         | 5,079  |        |           |   |         |        
|                                                                                              |                              |         |        |        |           |  
|Capital lease obligations, excluding current portion                                          |                              | $       | 52,485 |        |           |   |         |        
|                                                                                              |                              |         |        |        |           |  





|                                      |  |      |       |  |      |   |       | 
|------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                      |  | 2005 |       |  | 2004 |  
|                                      |  |      |       |  |      |  
|Net minimum lease payments receivable |  | $    | 1,573 |  |      | $ | 1,774 | 
|Less: unearned income                 |  |      | 553   |  |      |   | 608   | 
|                                      |  |      |       |  |      |  
|Net investment                        |  | $    | 1,020 |  |      | $ | 1,166 | 
|                                      |  |      |       |  |      |  



|                                                |  |      |        |  |      |   |        | 
|----------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                |  | 2005 |        |  | 2004 |  
|                                                |  |      |        |  |      |  
|Land                                            |  | $    | 16,953 |  |      | $ | 18,063 | 
|Leasehold improvements                          |  |      | 7,529  |  |      |   | 7,650  | 
|Buildings and improvements                      |  |      | 21,183 |  |      |   | 21,876 | 
|Equipment, furniture and fixtures               |  |      | 2,698  |  |      |   | 4,149  | 
|                                                |  |      |        |  |      |  
|                                                |  |      | 48,363 |  |      |   | 51,738 | 
|Less: accumulated depreciation and amortization |  |      | 17,718 |  |      |   | 18,345 | 
|                                                |  |      |        |  |      |  
|                                                |  | $    | 30,645 |  |      | $ | 33,393 | 
|                                                |  |      |        |  |      |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                             |  |           |       |  |           |   |         | 
|---------------------------- |  | --------- | ----- |  | --------- | - | ------- | 
|                             |  | Capital   |       |  | Operating |  
|                             |  | Leases or |       |  | Lessor    |  
|                             |  | Subleases |       |  | Leases    |  
|                             |  |           |       |  |           |  
|Fiscal Year:                 |  |           |       |  |           |   |         | 
|2006                         |  | $         | 270   |  |           | $ | 31,397  | 
|2007                         |  |           | 210   |  |           |   | 27,994  | 
|2008                         |  |           | 142   |  |           |   | 25,041  | 
|2009                         |  |           | 142   |  |           |   | 22,448  | 
|2010                         |  |           | 142   |  |           |   | 18,126  | 
|Thereafter                   |  |           | 667   |  |           |   | 75,119  | 
|                             |  |           |       |  |           |  
|Total minimum future rentals |  | $         | 1,573 |  |           | $ | 200,125 | 
|                             |  |           |       |  |           |  





|                       |  |      |        |  |      |   |        |      |  |   |        | 
|---------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                       |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                       |  |      |        |  |      |   |        |      | 
|Minimum rentals        |  | $    | 90,820 |  |      | $ | 90,361 |      |  | $ | 84,042 | 
|Contingent rentals     |  |      | 5,013  |  |      |   | 4,789  |      |  |   | 4,811  | 
|Less: sublease rentals |  |      | 36,444 |  |      |   | 32,251 |      |  |   | 30,844 | 
|                       |  |      |        |  |      |   |        |      | 
|                       |  | $    | 59,389 |  |      | $ | 62,899 |      |  | $ | 58,009 | 
|                       |  |      |        |  |      |   |        |      | 





Note 9  Long-Term Investments






| |                                     
| | ------------------------------------
| | Santa Barbara Restaurant Group, Inc.





| |                                    
| | -----------------------------------
| | Checkers Drive-In Restaurants, Inc.



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|          |             
|--------- | ------------
|Note 10  | Other Assets



|                                                          |  |      |        |  |      |   |        | 
|--------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                          |  | 2005 |        |  | 2004 |  
|                                                          |  |      |        |  |      |  
|Intangible assets (see below)                             |  | $    | 19,102 |  |      | $ | 21,687 | 
|Deferred financing costs                                  |  |      | 9,470  |  |      |   | 12,390 | 
|Net investment in lease receivables, less current portion |  |      | 867    |  |      |   | 1,015  | 
|Other                                                     |  |      | 2,090  |  |      |   | 2,729  | 
|                                                          |  |      |        |  |      |  
|                                                          |  | $    | 31,529 |  |      | $ | 37,821 | 
|                                                          |  |      |        |  |      |  





|                           |  |                  |        |  |                  |   |        |          |  |       |          |  |  |              |        |  |          |   |         |   |  |   |        | 
|-------------------------- |  | ---------------- | ------ |  | ---------------- | - | ------ | -------- |  | ----- | -------- |  |  | ------------ | ------ |  | -------- | - | ------- | - |  | - | ------ | 
|                           |  | January 31, 2005 |        |  | January 31, 2004 |  
|                           |  |                  |        |  |                  |  
|                           |  | Gross            |        |  |                  |   | Net    |          |  | Gross |          |  |  |              | Net    | 
|                           |  | Carrying         |        |  | Accumulated      |   |        | Carrying |  |       | Carrying |  |  | Accumulated  |        |  | Carrying |  
|Intangible Asset           |  | Amount           |        |  | Amortization     |   |        | Amount   |  |       | Amount   |  |  | Amortization |        |  | Amount   |  
|                           |  |                  |        |  |                  |   |        |          |  |       |          |  |  |              |        |  |          |  
|Trademarks                 |  | $                | 17,171 |  |                  | $ | (2,487 | )        |  | $     | 14,684   |  |  | $            | 17,171 |  |          | $ | (1,628  | ) |  | $ | 15,543 | 
|Franchise agreements       |  |                  | 1,780  |  |                  |   | (258   | )        |  |       | 1,522    |  |  |              | 1,780  |  |          |   | (169    | ) |  |   | 1,611  | 
|Favorable lease agreements |  |                  | 6,265  |  |                  |   | (3,369 | )        |  |       | 2,896    |  |  |              | 16,693 |  |          |   | (12,160 | ) |  |   | 4,533  | 
|                           |  |                  |        |  |                  |   |        |          |  |       |          |  |  |              |        |  |          |  
|                           |  | $                | 25,216 |  |                  | $ | (6,114 | )        |  | $     | 19,102   |  |  | $            | 35,644 |  |          | $ | (13,957 | ) |  | $ | 21,687 | 
|                           |  |                  |        |  |                  |   |        |          |  |       |          |  |  |              |        |  |          |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                          
|--------- | -------------------------
|Note 11  | Other Current Liabilities



|                                                         |  |      |        |  |      |   |         | 
|-------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------- | 
|                                                         |  | 2005 |        |  | 2004 |  
|                                                         |  |      |        |  |      |  
|Salaries, wages and other benefits                       |  | $    | 31,461 |  |      | $ | 27,530  | 
|State sales taxes                                        |  |      | 7,380  |  |      |   | 15,008  | 
|Estimated liability for closing restaurants              |  |      | 5,261  |  |      |   | 8,593   | 
|Accrued interest                                         |  |      | 2,332  |  |      |   | 6,786   | 
|Estimated liability for property taxes                   |  |      | 4,579  |  |      |   | 4,350   | 
|Estimated liability for litigation                       |  |      | 4,335  |  |      |   | 3,670   | 
|Accrued utilities                                        |  |      | 3,731  |  |      |   | 2,307   | 
|Liabilities related to Timber Lodge assets held for sale |  |      |       |  |      |   | 7,247   | 
|Estimated liability for self-insurance, current portion  |  |      | 15,214 |  |      |   | 14,432  | 
|Other accrued liabilities                                |  |      | 19,065 |  |      |   | 15,496  | 
|                                                         |  |      |        |  |      |  
|                                                         |  | $    | 93,358 |  |      | $ | 105,419 | 
|                                                         |  |      |        |  |      |  



|          |                                     
|--------- | ------------------------------------
|Note 12  | Long-Term Debt and Bank Indebtedness



|                                                                             |  |      |         |  |      |   |         | 
|---------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                                                             |  | 2005 |         |  | 2004 |  
|                                                                             |  |      |         |  |      |  
|Borrowings under revolving portion of senior credit facility
    (see below) |  | $    | 14,500  |  |      | $ |        | 
|Term loan under senior credit facility (see below)                           |  |      | 138,651 |  |      |   | 24,062  | 
|Senior subordinated notes due 2009, interest at 9.125%                       |  |      |        |  |      |   | 200,000 | 
|Convertible subordinated notes due 2023, interest at 4.00%                   |  |      | 105,000 |  |      |   | 105,000 | 
|Convertible subordinated notes due 2004, interest at 4.25%                   |  |      |        |  |      |   | 22,319  | 
|Other long-term debt                                                         |  |      | 1,333   |  |      |   | 2,890   | 
|                                                                             |  |      |         |  |      |  
|                                                                             |  |      | 259,484 |  |      |   | 354,271 | 
|Less: current portion                                                        |  |      | 16,066  |  |      |   | 26,843  | 
|                                                                             |  |      |         |  |      |  
|                                                                             |  | $    | 243,418 |  |      | $ | 327,428 | 
|                                                                             |  |      |         |  |      |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










Accounting for Derivative
Instruments and Hedging Activities






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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Subsequent
Events








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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|             |  |   |         | 
|------------ |  | - | ------- | 
|Fiscal Year: |  |   |         | 
|2006         |  | $ | 16,066  | 
|2007         |  |   | 1,544   | 
|2008         |  |   | 1,557   | 
|2009         |  |   | 134,616 | 
|20010        |  |   | 30      | 
|Thereafter   |  |   | 105,671 | 
|             |  |   |        
|             |  | $ | 259,484 | 
|             |  |   |        



|          |                            
|--------- | ---------------------------
|Note 13  | Other Long-Term Liabilities



|                                            |  |      |        |               |      |   |        | 
|------------------------------------------- |  | ---- | ------ | ------------- | ---- | - | ------ | 
|                                            |  | 2005 |        |               | 2004 |  
|                                            |  |      |        |               |      |  
|                                            |  |      |        | (As restated) |     
|Estimated liability for closing restaurants |  | $    | 12,614 |               |      | $ | 13,732 | 
|Estimated liability for self-insurance      |  |      | 29,231 |               |      |   | 24,593 | 
|Other                                       |  |      | 22,529 |               |      |   | 20,234 | 
|                                            |  |      |        |               |      |  
|                                            |  | $    | 64,374 |               |      | $ | 58,559 | 
|                                            |  |      |        |               |      |  





|          |                     
|--------- | --------------------
|Note 14  | Stockholders Equity



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|          |                                    
|--------- | -----------------------------------
|Note 15  | Fair Value of Financial Instruments



|                       |                                                          |          |   |         |            |  |   |          |  |  |            |         |  |  |   |         | 
|---------------------- | -------------------------------------------------------- | -------- | - | ------- | ---------- |  | - | -------- |  |  | ---------- | ------- |  |  | - | ------- | 
|                       |                                                          | 2005     |   |         | 2004       | 
|                       |                                                          |          |   |         |            | 
|                       |                                                          | Carrying |   |         | Estimated  |  |   | Carrying |  |  | Estimated  |        
|                       |                                                          | Amount   |   |         | Fair Value |  |   | Amount   |  |  | Fair Value |        
|                       |                                                          |          |   |         |            |  |   |          |  |  |            |        
|Financial assets:      |                                                          |          |   |         |            |  |   |          |  |  |            |         |  |  |   |        
|                       | Cash and cash equivalents                                |          | $ | 18,432  |            |  | $ | 18,432   |  |  | $          | 54,355  |  |  | $ | 54,355  | 
|                       | Notes receivable, net of allowance for doubtful accounts |          |   | 4,865   |            |  |   | 4,941    |  |  |            | 3,250   |  |  |   | 3,780   | 
|                       | Interest rate cap agreements                             |          |   | 108     |            |  |   | 108      |  |  |            |        |  |  |   |        | 
|Financial liabilities: |                                                          |          |   |         |            |  |   |          |  |  |            |         |  |  |   |        
|                       | Long-term debt, including current portion                |          |   | 259,484 |            |  |   | 347,731  |  |  |            | 354,271 |  |  |   | 402,471 | 





|          |                           
|--------- | --------------------------
|Note 16  | Related Party Transactions







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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Classification
of Assets Received In Exchange For Equity Instruments Granted to
Other Than Employees






|          |                                                              |          |   |       |      |  |   |          |  |  |      |     |  |  |   |     | 
|--------- | ------------------------------------------------------------ | -------- | - | ----- | ---- |  | - | -------- |  |  | ---- | --- |  |  | - | --- | 
|          |                                                              | 2004     |   |       | 2003 | 
|          |                                                              |          |   |       |      | 
|          |                                                              | Proceeds |   |       | Gain |  |   | Proceeds |  |  | Gain |    
|          |                                                              |          |   |       |      |  |   |          |  |  |      |    
|Affiliate |                                                              |          |   |       |      |  |   |          |  |  |      |     |  |  |   |    
|          | Relatives of member of the Board of Directors of the Company |          | $ | 4,535 |      |  | $ | 645      |  |  | $    |    |  |  | $ |    | 
|          | Member of the Board of Directors of the Company              |          |   |      |      |  |   |         |  |  |      | 983 |  |  |   | 479 | 

Note 17  Franchise and License Operations




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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                       |  |      |         |  |      |   |         |      |  |   |         | 
|---------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                       |  | 2005 |         |  | 2004 |   |         | 2003 | 
|                       |  |      |         |  |      |   |         |      | 
|Foodservice            |  | $    | 176,304 |  |      | $ | 155,945 |      |  | $ | 145,055 | 
|Royalties              |  |      | 70,857  |  |      |   | 62,067  |      |  |   | 60,200  | 
|Equipment sales        |  |      | 18,181  |  |      |   | 20,693  |      |  |   | 18,155  | 
|Rental income          |  |      | 32,157  |  |      |   | 30,047  |      |  |   | 29,087  | 
|Initial fees and other |  |      | 5,109   |  |      |   | 1,739   |      |  |   | 1,218   | 
|                       |  |      |         |  |      |   |         |      | 
|                       |  | $    | 302,608 |  |      | $ | 270,491 |      |  | $ | 253,715 | 
|                       |  |      |         |  |      |   |         |      | 



|                                       |  |      |         |  |      |   |         |      |  |   |         | 
|-------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                       |  | 2005 |         |  | 2004 |   |         | 2003 | 
|                                       |  |      |         |  |      |   |         |      | 
|Foodservice costs of sales             |  | $    | 171,363 |  |      | $ | 152,285 |      |  | $ | 141,429 | 
|Occupancy and other operating expenses |  |      | 37,846  |  |      |   | 37,616  |      |  |   | 35,048  | 
|Equipment cost of sales                |  |      | 18,379  |  |      |   | 20,336  |      |  |   | 18,310  | 
|                                       |  |      |         |  |      |   |         |      | 
|                                       |  | $    | 227,588 |  |      | $ | 210,237 |      |  | $ | 194,787 | 
|                                       |  |      |         |  |      |   |         |      | 



|          |                 
|--------- | ----------------
|Note 18  | Interest Expense



|                                                                           |  |      |        |  |      |   |        |      |  |   |        | 
|-------------------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                                           |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                                                           |  |      |        |  |      |   |        |      | 
|Facility                                                                   |  | $    | 6,310  |  |      | $ | 1,146  |      |  | $ | 631    | 
|Senior subordinated notes due 2009                                         |  |      | 7,855  |  |      |   | 18,250 |      |  |   | 18,150 | 
|Capital lease obligations                                                  |  |      | 6,950  |  |      |   | 8,503  |      |  |   | 9,134  | 
|2004 Convertible subordinated notes                                        |  |      | 73     |  |      |   | 4,206  |      |  |   | 6,032  | 
|2023 Convertible subordinated notes                                        |  |      | 4,258  |  |      |   | 1,385  |      |  |   |       | 
|Amortization of loan fees                                                  |  |      | 3,637  |  |      |   | 4,451  |      |  |   | 4,238  | 
|Write-off of unamortized loan fees, term loan                              |  |      | 2,116  |  |      |   |       |      |  |   |       | 
|Write-off of unamortized loan fees, senior subordinated notes
    due 2009 |  |      | 3,068  |  |      |   |       |      |  |   |       | 
|Letter of credit fees and other                                            |  |      | 2,481  |  |      |   | 2,021  |      |  |   | 1,739  | 
|                                                                           |  |      |        |  |      |   |        |      | 
|                                                                           |  | $    | 36,748 |  |      | $ | 39,962 |      |  | $ | 39,924 | 
|                                                                           |  |      |        |  |      |   |        |      | 



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 19  Other Income (Expense), Net




|                                                                                                    |  |      |        |   |      |   |       |      |  |   |        | 
|--------------------------------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ----- | ---- |  | - | ------ | 
|                                                                                                    |  | 2005 |        |   | 2004 |   |       | 2003 | 
|                                                                                                    |  |      |        |   |      |   |       |      | 
|Premium incurred upon early redemption of debt                                                      |  | $    | (9,126 | ) |      | $ |      |      |  | $ |       | 
|Interest income on notes receivable from franchisees,
    disposition properties and capital leases |  |      | 1,784  |   |      |   | 1,147 |      |  |   | 1,267  | 
|Rental income from properties leased to third parties                                               |  |      | 2,060  |   |      |   | 655   |      |  |   | 986    | 
|Gains on the sale of Checkers stock                                                                 |  |      |       |   |      |   |      |      |  |   | 9,248  | 
|Gains (losses) on the repurchase of convertible subordinated
    notes                              |  |      |       |   |      |   | (708  | )    |  |   | 2,800  | 
|Other, net                                                                                          |  |      | 2,320  |   |      |   | (877  | )    |  |   | 2,127  | 
|                                                                                                    |  |      |        |   |      |   |       |      | 
|Total other income (expense), net                                                                   |  | $    | (2,962 | ) |      | $ | 217   |      |  | $ | 16,428 | 
|                                                                                                    |  |      |        |   |      |   |       |      | 







Note 20  Income Taxes




|          |         |      |        |        |      |   |       |       |   |   |        |        |  
|--------- | ------- | ---- | ------ | ------ | ---- | - | ----- | ----- | - | - | ------ | ------ | -
|          |         | 2005 |        |        | 2004 |   |       | 2003  |  
|          |         |      |        |        |      |   |       |       |  
|Current:  |         |      |        |        |      |   |       |       |   |   |        |       
|          | Federal |      | $      | (2,493 | )    |   | $     | 1,144 |   |   | $      | (9,221 | )
|          | State   |      |        | (214   | )    |   |       | (119  | ) |   |        |       |  
|          | Foreign |      |        | 820    |      |   |       | 818   |   |   |        | 1,289  |  
|          |         |      |        |        |      |   |       |       |  
|          |         |      | (1,887 | )      |      |   | 1,843 |       |   |   | (7,932 | )     
|          |         |      |        |        |      |   |       |       |  
|Deferred: |         |      |        |        |      |   |       |       |   |   |        |       
|          | Federal |      |        | 214    |      |   |       | 464   |   |   |        | 678    |  
|          | State   |      |        | 81     |      |   |       | 110   |   |   |        | 161    |  
|          |         |      |        |        |      |   |       |       |  
|          |         |      | 295    |        |      |   | 574   |       |   |   | 839    |       
|          |         |      |        |        |      |   |       |       |  
|Total     |         | $    | (1,592 | )      |      | $ | 2,417 |       |   | $ | (7,093 | )     
|          |         |      |        |        |      |   |       |       |  



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                      |  |      |        |   |      |   |         |      |  |   |         |  
|----------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                      |  | 2005 |        |   | 2004 |   |         | 2003 | 
|                                                      |  |      |        |   |      |   |         |      | 
|Income tax expense (benefit) at statutory rate        |  | $    | 5,975  |   |      | $ | (16,805 | )    |  | $ | 4,243   |  
|State income taxes, net of federal income tax benefit |  |      | (86    | ) |      |   | (1,687  | )    |  |   | (2,975  | )
|Tax credits                                           |  |      | (677   | ) |      |   | (971    | )    |  |   | (1,874  | )
|Impairment of goodwill                                |  |      |       |   |      |   | 11,921  |      |  |   |        |  
|Change in accounting principle                        |  |      |       |   |      |   |        |      |  |   | (61,523 | )
|Increase (decrease) in valuation allowance            |  |      | (7,146 | ) |      |   | 8,776   |      |  |   | 55,081  |  
|Tax adjustments due to income tax audit               |  |      |       |   |      |   | 1,144   |      |  |   |        |  
|Other, net                                            |  |      | 342    |   |      |   | 39      |      |  |   | (45     | )
|                                                      |  |      |        |   |      |   |         |      | 
|                                                      |  | $    | (1,592 | ) |      | $ | 2,417   |      |  | $ | (7,093  | )
|                                                      |  |      |        |   |      |   |         |      | 



|                                                           |  |      |          |   |      |   |          |  
|---------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                           |  | 2005 |          |   | 2004 |  
|                                                           |  |      |          |   |      |  
|Impairment and estimated liability for closing restaurants |  | $    | 25,581   |   |      | $ | 31,650   |  
|Net operating loss carryforwards                           |  |      | 57,472   |   |      |   | 46,426   |  
|Basis difference in fixed assets                           |  |      | (13,076  | ) |      |   | (656     | )
|Goodwill and other intangibles                             |  |      | 48,227   |   |      |   | 53,481   |  
|Reserves and allowances                                    |  |      | 37,887   |   |      |   | 27,977   |  
|Alternative minimum tax credits                            |  |      | 11,465   |   |      |   | 10,691   |  
|General business tax credits                               |  |      | 11,181   |   |      |   | 10,952   |  
|Foreign and state tax credits                              |  |      | 4,839    |   |      |   | 2,829    |  
|Other                                                      |  |      | 4,895    |   |      |   | 4,870    |  
|                                                           |  |      |          |   |      |  
|                                                           |  |      | 188,471  |   |      |   | 188,220  |  
|Valuation allowance                                        |  |      | (190,179 | ) |      |   | (189,633 | )
|                                                           |  |      |          |   |      |  
|Net deferred tax liability                                 |  | $    | (1,708   | ) |      | $ | (1,413   | )
|                                                           |  |      |          |   |      |  







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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|          |                                                
|--------- | -----------------------------------------------
|Note 21  | Segment Information (2004 and 2003 as restated)



|                                |  |            |         |   |          |   |         |          |  |   |         |   |  |       |        |   |  |   |           |  
|------------------------------- |  | ---------- | ------- | - | -------- | - | ------- | -------- |  | - | ------- | - |  | ----- | ------ | - |  | - | --------- | -
|                                |  | Carls Jr. |         |   | Hardees |   |         | La Salsa |  |   | Other   |   |  | Total |       
|                                |  |            |         |   |          |   |         |          |  |   |         |   |  |       |       
|2005                            |  |            |         |   |          |   |         |          |  |   |         |   |  |       |        |   |  |   |           |  
|Revenue                         |  | $          | 792,829 |   |          | $ | 673,172 |          |  | $ | 48,794  |   |  | $     | 5,086  |   |  | $ | 1,519,881 |  
|Segment operating income (loss) |  |            | 61,658  |   |          |   | 5,291   |          |  |   | (10,269 | ) |  |       | 100    |   |  |   | 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 (as restated)      |  |            | 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    | )
|2003                            |  |            |         |   |          |   |         |          |  |   |         |   |  |       |        |   |  |   |           |  
|Revenue                         |  | $          | 693,692 |   |          | $ | 627,785 |          |  | $ | 39,959  |   |  | $     | 1,925  |   |  | $ | 1,363,361 |  
|Segment operating income (loss) |  |            | 52,577  |   |          |   | (16,361 | )        |  |   | (397    | ) |  |       | (202   | ) |  |   | 35,617    |  
|Interest expense                |  |            | 6,219   |   |          |   | 33,657  |          |  |   | 32      |   |  |       | 16     |   |  |   | 39,924    |  
|Total assets (as restated)      |  |            | 234,197 |   |          |   | 451,465 |          |  |   | 65,324  |   |  |       | 53,951 |   |  |   | 804,937   |  
|Capital expenditures            |  |            | 16,690  |   |          |   | 52,440  |          |  |   | 4,402   |   |  |       | 3,016  |   |  |   | 76,548    |  
|Goodwill                        |  |            | 22,649  |   |          |   |        |          |  |   | 34,059  |   |  |       |       |   |  |   | 56,708    |  
|Depreciation and amortization   |  |            | 28,335  |   |          |   | 36,871  |          |  |   | 3,083   |   |  |       |       |   |  |   | 68,289    |  
|Income tax benefit (expense)    |  |            | 1,597   |   |          |   | 5,702   |          |  |   |        |   |  |       | (206   | ) |  |   | 7,093     |  

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 22  Employee Benefit and Retirement
Plans




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





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







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





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CKE RESTAURANTS, INC. AND SUBSIDIARIES


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, 2002 |              |        | 7,739,525 |                  |                | $ | 11.37 |             |  |  | 5,436,230 | 
|                          | Granted      |        |           | 538,000          |                |   |       | 11.09       |  |  |           |  | 
|                          | Canceled     |        |           | (638,262         | )              |   |       | 15.87       |  |  |           |  | 
|                          | Exercised    |        |           | (352,955         | )              |   |       | 3.54        |  |  |           |  | 
|                          | Converted(1) |        |           | 2,645,002        |                |   |       | 8.53        |  |  |           |  | 
|                          |              |        |           |                  |                |   |       |             | 
|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 | 
|                          |              |        |           |                  |                |   |       |             | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Options and warrants assumed by CKE upon acquisition of SBRG.
    Under the terms of the merger agreement, each outstanding share
    of SBRG stock was converted into 0.491 shares of Company
    common stock. The purchase price was based on the average
    closing price of the Companys common stock for the ten
    trading days ending two days prior to the completion of the
    acquisition and the fair value of options granted. The Company
    also assumed warrants to purchase approximately
    982,000 shares of the Companys common stock.



|                |       |                                                     |  |           |                |   |           |                                 |  |  |       |  |                |   |       |  |  |  |      |  |  |  |       |  |  |   |       | 
|--------------- | ----- | --------------------------------------------------- |  | --------- | -------------- | - | --------- | ------------------------------- |  |  | ----- |  | -------------- | - | ----- |  |  |  | ---- |  |  |  | ----- |  |  | - | ----- | 
|Range of        |       |                                                     |  |           |                |   |           |                                 |  |  |      
|Exercise Prices |       |                                                     |  |           |                |   |           |                                 |  |  |      
|                |       |                                                     |  |           |                |   |           |                                 |  |  |      
|                |       |                                                     |  |           |                |   |           | Options and Warrants            | 
|                |       |                                                     |  |           |                |   |           | Exercisable                     | 
|                |       |                                                     |  |           |                |   |           | ------------------------------) | 
|                |       |                                                     |  |           |                |   |           | (000s                          |  |  |      
|                |       |                                                     |  |           |                |   |           |                                 |  |  |      
|                |       | Options and Warrants Outstanding                    |  |           |                |   |          
|                |       | --------------------------------------------------) |  |           |                |   |          
|                |       |                                                     |  | Weighted- |                |   | Weighted- |                                 |  |  |       | 
|                |       | and                                                 |  |           | Average        |   |           | Average                         |  |  |       |  | Weighted-      |  
|                |       | (000s                                              |  |           | Exercise Price |   |           | Remaining                       |  |  |       |  | Average        |  
|                |       |                                                     |  |           |                |   |           | Contractual Life                |  |  |       |  | Exercise Price |  
|                |       |                                                     |  |           |                |   |           |                                 |  |  |       | 
|$               | 2.00  |                                                     |  | to        |                | $ | 2.99      |                                 |  |  | 1,631 |  |                | $ | 2.68  |  |  |  | 5.22 |  |  |  | 1,631 |  |  | $ | 2.68  | 
|                | 3.00  |                                                     |  |           |                |   | 4.49      |                                 |  |  | 1,117 |  |                |   | 3.52  |  |  |  | 4.54 |  |  |  | 1,101 |  |  |   | 3.51  | 
|                | 4.50  |                                                     |  |           |                |   | 6.74      |                                 |  |  | 1,015 |  |                |   | 5.83  |  |  |  | 7.38 |  |  |  | 493   |  |  |   | 5.88  | 
|                | 6.75  |                                                     |  |           |                |   | 10.12     |                                 |  |  | 853   |  |                |   | 8.46  |  |  |  | 2.49 |  |  |  | 828   |  |  |   | 8.45  | 
|                | 10.13 |                                                     |  |           |                |   | 15.18     |                                 |  |  | 2,406 |  |                |   | 12.60 |  |  |  | 5.66 |  |  |  | 1,419 |  |  |   | 13.55 | 
|                | 15.19 |                                                     |  |           |                |   | 22.77     |                                 |  |  | 1,686 |  |                |   | 16.67 |  |  |  | 2.14 |  |  |  | 1,686 |  |  |   | 16.67 | 
|                | 22.78 |                                                     |  |           |                |   | 34.16     |                                 |  |  | 817   |  |                |   | 25.03 |  |  |  | 2.62 |  |  |  | 817   |  |  |   | 25.03 | 
|                | 34.17 |                                                     |  |           |                |   | 36.65     |                                 |  |  | 142   |  |                |   | 36.65 |  |  |  | 3.05 |  |  |  | 142   |  |  |   | 36.65 | 
|                |       |                                                     |  |           |                |   |           |                                 |  |  |       |  |                |   |       |  |  |  |      |  | 
|$               | 2.00  |                                                     |  |           |                | $ | 36.65     |                                 |  |  | 9,667 |  |                | $ | 10.92 |  |  |  | 4.59 |  |  |  | 8,117 |  |  | $ | 11.23 | 
|                |       |                                                     |  |           |                |   |           |                                 |  |  |       |  |                |   |       |  |  |  |      |  | 

116



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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Note 23  Supplemental Cash Flow
Information


|                                                                       |                                                     |      |   |        |      |  |   |        |  |  |   |         |  
|---------------------------------------------------------------------- | --------------------------------------------------- | ---- | - | ------ | ---- |  | - | ------ |  |  | - | ------- | -
|                                                                       |                                                     | 2005 |   |        | 2004 |  |   | 2003   | 
|                                                                       |                                                     |      |   |        |      |  |   |        | 
|Cash (received) paid for interest and income taxes are as
    follows: |                                                     |      |   |        |      |  |   |        |  |  |   |        
|                                                                       | Interest                                            |      | $ | 32,099 |      |  | $ | 35,786 |  |  | $ | 36,884  |  
|                                                                       |                                                     |      |   |        |      |  |   |        | 
|                                                                       | Income taxes paid (refunds received)                |      |   | 5,482  |      |  |   | 1,925  |  |  |   | (11,582 | )
|                                                                       |                                                     |      |   |        |      |  |   |        | 
|Non-cash operating charges are as follows:                             |                                                     |      |   |        |      |  |   |        |  |  |   |        
|                                                                       | Write-off of deferred financing costs               |      |   | 5,184  |      |  |   | 111    |  |  |   |        |  
|                                                                       |                                                     |      |   |        |      |  |   |        | 
|Non-cash investing and financing charges are as follows:               |                                                     |      |   |        |      |  |   |        |  |  |   |        
|                                                                       | Gain recognized on sale and leaseback transactions  |      |   | 305    |      |  |   | 352    |  |  |   | 358     |  
|                                                                       |                                                     |      |   |        |      |  |   |        | 
|                                                                       | Conversion of convertible notes                     |      |   |       |      |  |   |       |  |  |   | 134     |  
|                                                                       |                                                     |      |   |        |      |  |   |        | 
|                                                                       | Issuance of stock and stock options to acquire SBRG |      |   |       |      |  |   |       |  |  |   | 78,815  |  
|                                                                       |                                                     |      |   |        |      |  |   |        | 

Note 24  Selected Quarterly Financial Data
(Unaudited)




|                                          |                   |         |         |        |     |   |         |         |   |   |         |        |  |   |         |         |  
|----------------------------------------- | ----------------- | ------- | ------- | ------ | --- | - | ------- | ------- | - | - | ------- | ------ |  | - | ------- | ------- | -
|                                          |                   | Quarter |        
|                                          |                   |         |        
|                                          |                   | 1st     |         |        | 2nd |   |         | 3rd     |   |   | 4th     |       
|                                          |                   |         |         |        |     |   |         |         |   |   |         |       
|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    |        
|Fiscal 2004                               |                   |         |         |        |     |   |         |         |   |   |         |        |  |   |         |        
|Total revenue                             |                   | $       | 419,553 |        |     | $ | 333,715 |         |   | $ | 334,773 |        |  | $ | 325,379 |        
|Operating income (loss)                   |                   |         | 7,608   |        |     |   | 14,458  |         |   |   | 11,304  |        |  |   | (41,638 | )      
|Income (loss) from continuing operations  |                   |         | (5,590  | )      |     |   | 5,177   |         |   |   | 827     |        |  |   | (50,844 | )      
|Discontinued operations                   |                   |         | (2,112  | )      |     |   | 46      |         |   |   | 111     |        |  |   | (835    | )      
|                                          | Net income (loss) |         |         | (7,702 | )   |   |         | 5,223   |   |   |         | 938    |  |   |         | (51,679 | )
|Basic income (loss) per common share      |                   |         | (0.13   | )      |     |   | 0.09    |         |   |   | 0.02    |        |  |   | (0.90   | )      
|Diluted income (loss) per common share    |                   |         | (0.13   | )      |     |   | 0.09    |         |   |   | 0.02    |        |  |   | (0.90   | )      






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company has retroactively applied EITF Issue 04-8,
    The Effect of Contingently Convertible Debt on Diluted
    Earnings per Share, which requires that the dilutive effect
    of contingent convertible debt, such as the Companys
    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 (loss) 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.

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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                           
| | --------------------------
| | Fourth Quarter Adjustments







Restatement of Previously Issued Financial
Statements


Note 25  Commitments and Contingent
Liabilities






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CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|              |  |   |        | 
|------------- |  | - | ------ | 
|February 2005 |  | $ | 13,816 | 
|March 2005    |  |   | 27,107 | 
|April 2005    |  |   | 50     | 
|July 2005     |  |   | 10,073 | 
|November 2005 |  |   | 14,269 | 
|December 2005 |  |   | 553    | 
|              |  |   |       
|              |  | $ | 65,868 | 
|              |  |   |       







, Accounting for
Contingencies


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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Note 26  Subsequent Events




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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 333-05305.                                                                                                                                                                                         
|         | 3  | -2  |             | Certificate of Amendment of Certificate of Incorporation, as
    filed with the Delaware Secretary of State on December 9,
    1997, filed as Exhibit 3-2 to the Companys
    Form 10-K Annual Report for the fiscal year 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 333-05305.                                                                                                                                                                                                               
|         | 3  | -4  |             | Certificate of Amendment of Bylaws, incorporated herein by
    reference to Exhibit 3.4 to the Companys Annual
    Report of Form  10-K for the fiscal year ended
    January 26, 2004.                                                                                                                                                                        
|         | 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 Registration
    Statement on Form S-1, file No. 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 | -6  |             | CKE Restaurants, Inc. 1994 Employee Stock Purchase Plan, as
    amended, filed as Exhibit 10-22 to the Companys
    Annual Report on Form 10-K for fiscal year ended
    January 27, 1997, and is hereby incorporated by
    reference.(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 | -50 |             | Director Fee Agreement, effective as of April 1, 2003, by
    and between the Company and William P. Foley, II, filed as
    Exhibit 10.50 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended November 3, 2003, and
    is hereby incorporated by reference.(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.(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 10.1 to the
    Companys Current Report on Form 8-K filed
    November 12, 2004.  
|         | 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.

122