##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended August 15, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from ___to ___.
 Commission file number 1-11313
 
 CKE RESTAURANTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
    
    33-0602639
(I.R.S. Employer
Identification No.)6307 Carpinteria Avenue, Ste. A, Carpinteria, California
(Address of Principal Executive Offices)
    
    93013
(Zip Code)
 Registrants telephone number, including area code: (805) 745-7500
 Former Name, Former Address and Former Fiscal Year, if changed since last report.
 
 þ o
 þ o
 o þ




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
 INDEX
 Page No.Part I. Financial InformationItem 1 Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of August 15, 2005 and January 31, 2005
    
    
    3Condensed Consolidated Statements of Operations for the twelve weeks and twenty-eight weeks ended August 15, 2005 and August 9, 2004
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the twenty-eight weeks ended August 15, 2005
    
    
    5Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended August 15, 2005 and August 9, 2004
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    50Item 4 Controls and Procedures
    
    
    50Part II. Other InformationItem 1 Legal Proceedings
    
    
    52Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52Item 3 Defaults Upon Senior Securities
    
    
    52Item 4 Submission of Matters to a Vote of Security Holders
    
    
    53Item 5 Other Information
    
    
    53Item 6 Exhibits
    
    
    54Signatures
    
    
    55EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except par values)
 (Unaudited)
 August 15, 2005
    
    
    January 31, 2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,797
    
    
    $
    18,432Accounts receivable, net of allowance for doubtful accounts
of $1,923 as of August 15, 2005 and $2,542 as of January 31,
2005
    
    
    33,850
    
    
    
    31,199Related party trade receivables
    
    
    5,401
    
    
    
    6,760Inventories, net
    
    
    20,169
    
    
    
    19,297Prepaid expenses
    
    
    10,826
    
    
    
    13,056Assets held for sale
    
    
    212
    
    
    
    1,058Advertising fund assets, restricted
    
    
    24,170
    
    
    
    21,951Other current assets
    
    
    2,405
    
    
    
    2,278Total current assets
    
    
    116,830
    
    
    
    114,031Notes receivable, net of allowance for doubtful accounts of
$6,679 as of August 15, 2005 and $7,081 as of January 31, 2005
    
    
    3,122
    
    
    
    3,328Property and equipment, net of accumulated depreciation and
amortization of $427,063 as of August 15, 2005 and $413,021 as
of January 31, 2005
    
    
    462,450
    
    
    
    461,286Property under capital leases, net of accumulated amortization
of $53,218 as of August 15, 2005 and $52,182 as of January 31,
2005
    
    
    32,492
    
    
    
    36,060Goodwill
    
    
    22,649
    
    
    
    22,649Other assets, net
    
    
    28,195
    
    
    
    31,529Total assets
    
    $
    665,738
    
    
    $
    668,883LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of bank indebtedness and other long-term debt
    
    $
    2,610
    
    
    $
    16,066Current portion of capital lease obligations
    
    
    4,896
    
    
    
    5,079Accounts payable
    
    
    57,047
    
    
    
    52,484Advertising fund liabilities
    
    
    24,170
    
    
    
    21,951Other current liabilities
    
    
    90,488
    
    
    
    93,358Total current liabilities
    
    
    179,211
    
    
    
    188,938Bank indebtedness and other long-term debt, less current portion
    
    
    122,185
    
    
    
    138,418Convertible subordinated notes due 2023
    
    
    105,000
    
    
    
    105,000Capital lease obligations, less current portion
    
    
    49,753
    
    
    
    52,485Other long-term liabilities
    
    
    63,238
    
    
    
    64,374Total liabilities
    
    
    519,387
    
    
    
    549,215Commitments and contingencies (Notes 5 and 10)Stockholders equity:Preferred stock, $.01 par value; 5,000 shares authorized; none
issued or outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 100,000 shares authorized;
59,529 shares issued and outstanding as of August 15, 2005;
58,082 shares issued and outstanding as of January 31, 2005
    
    
    595
    
    
    
    581Additional paid-in capital
    
    
    460,753
    
    
    
    453,391Unearned compensation on restricted stock
    
    
    (400
    )
    
    
    Accumulated deficit
    
    
    (314,597
    )
    
    
    (334,304
    )Total stockholders equity
    
    
    146,351
    
    
    
    119,668Total liabilities and stockholders equity
    
    $
    665,738
    
    
    $
    668,883
 See Accompanying Notes to Condensed Consolidated Financial Statements
 3




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share amounts)
 (Unaudited)
 Twelve Weeks Ended
    
    
    Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004
    
    
    August 15, 2005
    
    
    August 9, 2004Revenue:Company-operated restaurants
    
    $
    286,643
    
    
    $
    281,802
    
    
    $
    658,131
    
    
    $
    647,674Franchised and licensed restaurants and
other
    
    
    73,140
    
    
    
    71,932
    
    
    
    167,561
    
    
    
    161,372Total revenue
    
    
    359,783
    
    
    
    353,734
    
    
    
    825,692
    
    
    
    809,046Operating costs and expenses:Restaurant operations:Food and packaging
    
    
    84,800
    
    
    
    83,897
    
    
    
    192,815
    
    
    
    189,621Payroll and other employee benefits
    
    
    82,538
    
    
    
    89,213
    
    
    
    195,748
    
    
    
    201,808Occupancy and other
    
    
    63,443
    
    
    
    62,503
    
    
    
    148,624
    
    
    
    143,758230,781
    
    
    
    235,613
    
    
    
    537,187
    
    
    
    535,187Franchised and licensed restaurants and
other
    
    
    56,294
    
    
    
    52,564
    
    
    
    129,127
    
    
    
    119,556Advertising
    
    
    17,091
    
    
    
    17,410
    
    
    
    40,082
    
    
    
    39,674General and administrative
    
    
    39,914
    
    
    
    39,153
    
    
    
    79,885
    
    
    
    76,810Facility action charges, net
    
    
    2,494
    
    
    
    1,883
    
    
    
    3,054
    
    
    
    8,699Total operating costs and expenses
    
    
    346,574
    
    
    
    346,623
    
    
    
    789,335
    
    
    
    779,926Operating income
    
    
    13,209
    
    
    
    7,111
    
    
    
    36,357
    
    
    
    29,120Interest expense
    
    
    (5,223
    )
    
    
    (11,963
    )
    
    
    (12,596
    )
    
    
    (23,683
    )Other income (expense), net
    
    
    918
    
    
    
    (7,289
    )
    
    
    1,781
    
    
    
    (6,560
    )Income (loss) before income taxes and
discontinued operations
    
    
    8,904
    
    
    
    (12,141
    )
    
    
    25,542
    
    
    
    (1,123
    )Income tax expense
    
    
    456
    
    
    
    244
    
    
    
    1,095
    
    
    
    595Income (loss) from continuing operations
    
    
    8,448
    
    
    
    (12,385
    )
    
    
    24,447
    
    
    
    (1,718
    )Loss from operations of discontinued
segment (net of income tax expense of $0)
    
    
    
    
    
    
    (304
    )
    
    
    
    
    
    
    (467
    )Net income (loss)
    
    $
    8,448
    
    
    $
    (12,689
    )
    
    $
    24,447
    
    
    $
    (2,185
    )Basic income (loss) per common share:Continuing operations
    
    $
    0.14
    
    
    $
    (0.21
    )
    
    $
    0.41
    
    
    $
    (0.03
    )Discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )Net income (loss)
    
    $
    0.14
    
    
    $
    (0.22
    )
    
    $
    0.41
    
    
    $
    (0.04
    )Diluted income (loss) per common share:Continuing operations
    
    $
    0.13
    
    
    $
    (0.21
    )
    
    $
    0.37
    
    
    $
    (0.03
    )Discontinued operations
    
    
    
    
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )Net income (loss)
    
    $
    0.13
    
    
    $
    (0.22
    )
    
    $
    0.37
    
    
    $
    (0.04
    )Dividends per common share
    
    $
    0.04
    
    
    $
    0.00
    
    
    $
    0.08
    
    
    $
    0.00Weighted-average common shares
outstanding:Basic
    
    
    59,479
    
    
    
    57,575
    
    
    
    58,935
    
    
    
    57,590Dilutive effect of stock options,
warrants, convertible notes and
restricted stock
    
    
    14,107
    
    
    
    
    
    
    
    14,611
    
    
    
    Diluted
    
    
    73,586
    
    
    
    57,575
    
    
    
    73,546
    
    
    
    57,590
 See Accompanying Notes to Condensed Consolidated Financial Statements
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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 (In thousands, except per share amounts)
 (Unaudited)
 Common StockUnearnedAdditional
    
    
    Compensation
    
    
    
    
    
    
    TotalPaid-In
    
    
    on Restricted
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Stock
    
    
    Deficit
    
    
    EquityBalance at January 31, 2005
    
    
    58,082
    
    
    $
    581
    
    
    $
    453,391
    
    
    $
    
    
    
    $
    (334,304
    )
    
    $
    119,668Cash dividends declared ($0.08 per
share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,740
    )
    
    
    (4,740
    )Issuance of restricted stock awards
    
    
    30
    
    
    
    
    
    
    
    410
    
    
    
    (410
    )
    
    
    
    
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Exercise of stock options and warrants
    
    
    1,417
    
    
    
    14
    
    
    
    6,952
    
    
    
    
    
    
    
    
    
    
    
    6,966Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,447
    
    
    
    24,447Balance at August 15, 2005
    
    
    59,529
    
    
    $
    595
    
    
    $
    460,753
    
    
    $
    (400
    )
    
    $
    (314,597
    )
    
    $
    146,351
 See Accompanying Notes to Condensed Consolidated Financial Statements
 5




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004Cash flow from operating activities:Net income (loss)
    
    $
    24,447
    
    
    $
    (2,185
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    35,909
    
    
    
    36,818Amortization of loan fees
    
    
    1,885
    
    
    
    1,945Recovery of losses on accounts and notes receivable
    
    
    (499
    )
    
    
    (1,792
    )Loss on sales of property and equipment, capital leases and
extinguishment of debts
    
    
    1,821
    
    
    
    6,316Facility action charges, net
    
    
    3,054
    
    
    
    8,699Deferred income taxes
    
    
    97
    
    
    
    144Other non-cash charges
    
    
    62
    
    
    
    67Change in estimated liability for closing restaurants and
estimated liability for self-insurance
    
    
    (3,278
    )
    
    
    (3,297
    )Net change in refundable income taxes
    
    
    644
    
    
    
    (421
    )Net change in receivables, inventories, prepaid expenses and
other current assets
    
    
    (1,219
    )
    
    
    6,673Net change in accounts payable and other current and
long-term liabilities
    
    
    4,018
    
    
    
    14,427Loss from operations of discontinued segment
    
    
    
    
    
    
    467Net cash provided to discontinued segment
    
    
    
    
    
    
    (252
    )Net cash provided by operating activities
    
    
    66,941
    
    
    
    67,609Cash flow from investing activities:Purchases of property and equipment
    
    
    (39,608
    )
    
    
    (28,727
    )Proceeds from sales of property and equipment
    
    
    5,382
    
    
    
    7,722Collections on notes receivable
    
    
    1,219
    
    
    
    1,968Increase in cash upon consolidation of variable interest entity
    
    
    
    
    
    
    100Net change in other assets
    
    
    193
    
    
    
    (198
    )Net cash used in investing activities
    
    
    (32,814
    )
    
    
    (19,135
    )Cash flow from financing activities:Net change in bank overdraft
    
    
    (4,706
    )
    
    
    (9,293
    )Borrowings under revolving credit facility
    
    
    105,000
    
    
    
    Repayments of borrowings under revolving credit facility
    
    
    (118,500
    )
    
    
    Proceeds from credit facility term loan
    
    
    
    
    
    
    230,000Repayment of credit facility term loan
    
    
    (16,139
    )
    
    
    (54,588
    )Repayment of senior subordinated notes due 2009
    
    
    
    
    
    
    (200,000
    )Repayment of convertible subordinated notes due 2004
    
    
    
    
    
    
    (22,319
    )Repayment of other long-term debt
    
    
    (102
    )
    
    
    (147
    )Borrowing by consolidated variable interest entity
    
    
    53
    
    
    
    Repayments of capital lease obligations
    
    
    (2,873
    )
    
    
    (4,451
    )Collections on officer and non-employee director notes receivable
    
    
    
    
    
    
    1,954Payment of deferred loan fees
    
    
    (100
    )
    
    
    (6,000
    )Repurchase of common stock
    
    
    
    
    
    
    (3,354
    )Exercise of stock options and warrants
    
    
    6,966
    
    
    
    1,947Dividends paid on common stock
    
    
    (2,361
    )
    
    
    Net cash used in financing activities
    
    
    (32,762
    )
    
    
    (66,251
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,365
    
    
    
    (17,777
    )Cash and cash equivalents at beginning of period
    
    
    18,432
    
    
    
    54,355Cash and cash equivalents at end of period
    
    $
    19,797
    
    
    $
    36,578Supplemental disclosures of cash flow information:Cash paid during the period for:Interest
    
    $
    10,959
    
    
    $
    22,336Income taxes, net of refunds received
    
    $
    1,120
    
    
    $
    402Non-cash investing and financing activities:Gain recognized on sale and leaseback transactions
    
    $
    199
    
    
    $
    187Dividends declared, not paid
    
    $
    2,379
    
    
    $
    Capital lease obligations incurred to acquire assets
    
    $
    344
    
    
    $
    
 See Accompanying Notes to Condensed Consolidated Financial Statements
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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands, except per share amounts)
 Note 1  Basis Of Presentation And Description Of Business
   Carls Jr.
    
    Hardees
    
    La Salsa
    
    Other
    
    TotalCompany-operated
    
    
    429
    
    
    
    667
    
    
    
    61
    
    
    
    1
    
    
    
    1,158Franchised and licensed
    
    
    603
    
    
    
    1,344
    
    
    
    39
    
    
    
    15
    
    
    
    2,001Total
    
    
    1,032
    
    
    
    2,011
    
    
    
    100
    
    
    
    16
    
    
    
    3,159
     Consolidation of Variable Interest Entities
 Consolidation of Variable Interest Entities  an interpretation of Accounting Research Bulletin
(ARB) No. 51
  7




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
   Stock-Based Compensation
 Accounting for Stock Issued to Employees
 Accounting for Stock-Based Compensation  Transition and
Disclosure, Accounting for Stock-Based Compensation
 8




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
  August 15, 2005
    
    
    August 9, 2004Annual dividend yield
    
    
    1.26
    %
    
    
    Expected volatility
    
    
    65.4
    %
    
    
    72.6
    %Risk-free interest rate (matched to the expected
term of the outstanding option)
    
    
    4.15
    %
    
    
    3.45
    %Expected life of all options outstanding (years)
    
    
    5.22
    
    
    
    5.43Weighted-average fair value of each option granted
    
    $
    7.14
    
    
    $
    7.15
  Increase (Decrease) in
    
    
    Increase (Decrease) inFair Value of Options Granted
    
    
    Fair Value of Options GrantedTwenty-eight Weeks Ended
    
    
    Twenty-eight Weeks EndedChange in Assumption
    
    August 15, 2005
    
    
    August 9, 200410% increase in expected volatility
    
    $
    0.85
    
    
    $
    0.631% increase in risk-free interest rate
    
    
    0.15
    
    
    
    0.111 year increase in expected life of all options
outstanding
    
    
    0.50
    
    
    
    0.4710% decrease in expected volatility
    
    
    (0.92
    )
    
    
    (0.69
    )1% decrease in risk-free interest rate
    
    
    (0.15
    )
    
    
    (0.12
    )1 year decrease in expected life of all options
outstanding
    
    
    (0.61
    )
    
    
    (0.56
    )
  Twelve Weeks EndedAugust 15, 2005
    
    
    August 9, 2004Net income (loss), as reported
    
    $
    8,448
    
    
    $
    (12,689
    )Add: Stock-based employee
compensation expense included in
reported net income (loss), net of related tax effects
    
    
    10
    
    
    
    Deduct: Total stock-based employee
compensation expense determined
under fair value based method, net
of related tax effects
    
    
    (933
    )
    
    
    (1,096
    )Net income (loss)  pro forma
    
    $
    7,525
    
    
    $
    (13,785
    )Net income (loss) per common share:Basic  as reported
    
    $
    0.14
    
    
    $
    (0.22
    )Basic  pro forma
    
    
    0.13
    
    
    
    (0.24
    )Diluted  as reported
    
    
    0.13
    
    
    
    (0.22
    )Diluted  pro forma
    
    
    0.12
    
    
    
    (0.24
    )
 9




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004Net income (loss), as reported
    
    $
    24,447
    
    
    $
    (2,185
    )Add: Stock-based employee
compensation expense included in
reported net income (loss), net of related tax effects
    
    
    10
    
    
    
    Deduct: Total stock-based employee
compensation expense determined
under fair value based method, net
of related tax effects
    
    
    (2,442
    )
    
    
    (2,208
    )Net income (loss)  pro forma
    
    $
    22,015
    
    
    $
    (4,393
    )Net income (loss) per common share:Basic  as reported
    
    $
    0.41
    
    
    $
    (0.04
    )Basic  pro forma
    
    
    0.37
    
    
    
    (0.08
    )Diluted  as reported
    
    
    0.37
    
    
    
    (0.04
    )Diluted  pro forma
    
    
    0.34
    
    
    
    (0.08
    )
 Note 2  Accounting Pronouncements Not Yet Adopted
 Share-Based Payment Statement of Cash Flows
 modified-retrospective
  Accounting Changes and Error
Corrections
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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
  Note 3  Adoption Of New Accounting Pronouncements
 Accounting for Preexisting Relationships between the Parties to a Business
Combination
  Determining the Amortization Period for
Leasehold Improvements Purchased after Lease Inception or Acquired in a Business Combination.
 11




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 Note 4  Intangible Assets
  August 15, 2005
    
    
    January 31, 2005Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetIntangible
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAsset
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountTrademarks
    
    $
    17,171
    
    
    $
    (2,969
    )
    
    $
    14,202
    
    
    $
    17,171
    
    
    $
    (2,487
    )
    
    $
    14,684Franchise agreements
    
    
    1,780
    
    
    
    (287
    )
    
    
    1,493
    
    
    
    1,780
    
    
    
    (258
    )
    
    
    1,522Favorable lease agreements
    
    
    5,861
    
    
    
    (3,329
    )
    
    
    2,532
    
    
    
    6,265
    
    
    
    (3,369
    )
    
    
    2,896$
    24,812
    
    
    $
    (6,585
    )
    
    $
    18,227
    
    
    $
    25,216
    
    
    $
    (6,114
    )
    
    $
    19,102
  Note 5  Indebtedness And Interest Expense
      12




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 Accounting for Derivative
Instruments and Hedging Activities
       13




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
   Twelve Weeks Ended
    
    
    Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004
    
    
    August 15, 2005
    
    
    August 9, 2004Facility
    
    $
    1,650
    
    
    $
    1,936
    
    
    $
    3,919
    
    
    $
    2,362Senior subordinated notes due
2009
    
    
    
    
    
    
    2,240
    
    
    
    
    
    
    
    7,855Capital lease obligations
    
    
    1,450
    
    
    
    1,595
    
    
    
    3,381
    
    
    
    3,7982004 Convertible Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    732023 Convertible Notes
    
    
    969
    
    
    
    969
    
    
    
    2,261
    
    
    
    2,262Amortization of loan fees
    
    
    795
    
    
    
    903
    
    
    
    1,885
    
    
    
    1,945Write-off of unamortized loan
fees, term loan due July 2, 2008
    
    
    4
    
    
    
    410
    
    
    
    229
    
    
    
    803Write-off of unamortized loan fees, term loan repaid June 2, 2004
    
    
    
    
    
    
    339
    
    
    
    
    
    
    
    339Write-off of unamortized loan
fees, senior subordinated
notes due 2009
    
    
    
    
    
    
    3,068
    
    
    
    
    
    
    
    3,068Letter of credit fees and other
    
    
    355
    
    
    
    503
    
    
    
    921
    
    
    
    1,178$
    5,223
    
    
    $
    11,963
    
    
    $
    12,596
    
    
    $
    23,683
 Note 6  Facility Action Charges, Net
  (i)
    
    impairment of long-lived assets for under-performing restaurants;(ii)
    
    store closure costs, including sublease of closed facilities at amounts below our primary lease obligation;(iii)
    
    gains (losses) on the sale of restaurants; and(iv)
    
    amortization of discount related to estimated liability for closing restaurants.
 14




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
  Twelve Weeks Ended
    
    
    Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004
    
    
    August 15, 2005
    
    
    August 9, 2004Carls Jr.New decisions regarding closing restaurants
    
    $
    
    
    
    $
    7
    
    
    $
    
    
    
    $
    7Unfavorable (favorable) dispositions of
leased and fee surplus properties, net
    
    
    415
    
    
    
    (130
    )
    
    
    491
    
    
    
    (155
    )Impairment of assets to be disposed of
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4Impairment of assets to be held and used
    
    
    394
    
    
    
    198
    
    
    
    775
    
    
    
    1,624(Gain) loss on sales of restaurants and
surplus properties, net
    
    
    (6
    )
    
    
    123
    
    
    
    (512
    )
    
    
    (193
    )Amortization of discount related to
estimated liability for closing
restaurants
    
    
    51
    
    
    
    67
    
    
    
    124
    
    
    
    182854
    
    
    
    269
    
    
    
    878
    
    
    
    1,469HardeesNew decisions regarding closing restaurants
    
    
    567
    
    
    
    227
    
    
    
    744
    
    
    
    4,305Favorable dispositions of leased and fee
surplus properties, net
    
    
    (345
    )
    
    
    (576
    )
    
    
    (544
    )
    
    
    (422
    )Impairment of assets to be disposed of
    
    
    
    
    
    
    366
    
    
    
    8
    
    
    
    427Impairment of assets to be held and used
    
    
    537
    
    
    
    935
    
    
    
    641
    
    
    
    1,705Loss (gain) on sales of restaurants and
surplus properties, net
    
    
    425
    
    
    
    (169
    )
    
    
    227
    
    
    
    (1,203
    )Amortization of discount related to
estimated liability for closing
restaurants
    
    
    140
    
    
    
    259
    
    
    
    395
    
    
    
    5951,324
    
    
    
    1,042
    
    
    
    1,471
    
    
    
    5,407La Salsa and OtherNew decisions regarding closing restaurants
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    800Unfavorable (favorable) dispositions of
leased and fee surplus properties, net
    
    
    11
    
    
    
    (15
    )
    
    
    80
    
    
    
    25Impairment of assets to be held and used
    
    
    167
    
    
    
    588
    
    
    
    243
    
    
    
    992Loss (gain) on sales of restaurants and
surplus properties, net
    
    
    136
    
    
    
    (2
    )
    
    
    217
    
    
    
    3Amortization of discount related to
estimated liability for closing
restaurants
    
    
    2
    
    
    
    1
    
    
    
    8
    
    
    
    3316
    
    
    
    572
    
    
    
    705
    
    
    
    1,823TotalNew decisions regarding closing restaurants
    
    
    567
    
    
    
    234
    
    
    
    901
    
    
    
    5,112Unfavorable (favorable) dispositions of
leased and fee surplus properties, net
    
    
    81
    
    
    
    (721
    )
    
    
    27
    
    
    
    (552
    )Impairment of assets to be disposed of
    
    
    
    
    
    
    370
    
    
    
    8
    
    
    
    431Impairment of assets to be held and used
    
    
    1,098
    
    
    
    1,721
    
    
    
    1,659
    
    
    
    4,321Loss (gain) on sales of restaurants and
surplus properties, net
    
    
    555
    
    
    
    (48
    )
    
    
    (68
    )
    
    
    (1,393
    )Amortization of discount related to
estimated liability for closing
restaurants
    
    
    193
    
    
    
    327
    
    
    
    527
    
    
    
    780$
    2,494
    
    
    $
    1,883
    
    
    $
    3,054
    
    
    $
    8,699
 15




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 La SalsaCarls Jr.
    
    
    Hardees
    
    
    and Other
    
    
    TotalBalance at January 31, 2005
    
    $
    4,214
    
    
    $
    13,075
    
    
    $
    586
    
    
    $
    17,875New decisions regarding closing restaurants
    
    
    
    
    
    
    744
    
    
    
    157
    
    
    
    901Usage
    
    
    (1,029
    )
    
    
    (2,348
    )
    
    
    (270
    )
    
    
    (3,647
    )Unfavorable
(favorable) dispositions of leased and fee surplus
properties, net
    
    
    491
    
    
    
    (544
    )
    
    
    80
    
    
    
    27Amortization of discount
    
    
    124
    
    
    
    395
    
    
    
    8
    
    
    
    527Balance at August 15, 2005
    
    
    3,800
    
    
    
    11,322
    
    
    
    561
    
    
    
    15,683Less current portion, included in other current liabilities
    
    
    1,100
    
    
    
    3,445
    
    
    
    220
    
    
    
    4,765Long-term portion, included in other long-term liabilities
    
    $
    2,700
    
    
    $
    7,877
    
    
    $
    341
    
    
    $
    10,918
 Note 7
 Income (Loss) Per Share
    16




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
  Twelve Weeks Ended
    
    
    Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004
    
    
    August 15, 2005
    
    
    August 9, 2004(In thousands except per share amounts)Net income (loss) for computation
of basic earnings per share
    
    $
    8,448
    
    
    $
    (12,689
    )
    
    $
    24,447
    
    
    $
    (2,185
    )Weighted-average shares for computation
of basic earnings per share
    
    
    59,479
    
    
    
    57,575
    
    
    
    58,935
    
    
    
    57,590Basic net income (loss) per share
    
    $
    0.14
    
    
    $
    (0.22
    )
    
    $
    0.41
    
    
    $
    (0.04
    )Net income (loss) for computation of
basic earnings per share
    
    $
    8,448
    
    
    $
    (12,689
    )
    
    $
    24,447
    
    
    $
    (2,185
    )Add: Interest and amortization costs for
Convertible Notes due 2023
    
    
    1,125
    
    
    
    
    
    
    
    2,625
    
    
    
    Net income (loss) for computation of
diluted earnings per share
    
    $
    9,573
    
    
    $
    (12,689
    )
    
    $
    27,072
    
    
    $
    (2,185
    )Weighted-average shares for computation
of basic earnings per share
    
    
    59,479
    
    
    
    57,575
    
    
    
    58,935
    
    
    
    57,590Dilutive effect of stock options and
restricted stock
    
    
    2,296
    
    
    
    
    
    
    
    2,800
    
    
    
    Dilutive effect of 2023 convertible notes
    
    
    11,811
    
    
    
    
    
    
    
    11,811
    
    
    
    Weighted-average shares for computation
of diluted earnings per share
    
    
    73,586
    
    
    
    57,575
    
    
    
    73,546
    
    
    
    57,590Diluted net income (loss) per share
    
    $
    0.13
    
    
    $
    (0.22
    )
    
    $
    0.37
    
    
    $
    (0.04
    )
  Twelve Weeks Ended
    
    Twenty-eight Weeks EndedAugust 15, 2005
    
    August 9, 2004
    
    August 15, 2005
    
    August 9, 20042004 Convertible Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1252023 Convertible Notes
    
    
    
    
    
    
    11,811
    
    
    
    
    
    
    
    11,811Stock Options
    
    
    2,499
    
    
    
    5,017
    
    
    
    2,115
    
    
    
    5,425Warrants
    
    
    
    
    
    
    982
    
    
    
    
    
    
    
    982
 Note 8
 Segment Information
 fast-casual
 17




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
 Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalTwelve Weeks Ended August 15, 2005Revenue
    
    $
    185,363
    
    
    $
    161,115
    
    
    $
    12,060
    
    
    $
    1,245
    
    
    $
    359,783Operating income (loss)
    
    
    18,635
    
    
    
    6,903
    
    
    
    (1,242
    )
    
    
    (11,087
    )
    
    
    13,209Income (loss) before income taxes
    
    
    17,923
    
    
    
    3,094
    
    
    
    (1,236
    )
    
    
    (10,877
    )
    
    
    8,904Goodwill (as of August 15, 2005)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalTwelve Weeks Ended August 9, 2004Revenue
    
    $
    181,340
    
    
    $
    158,611
    
    
    $
    11,898
    
    
    $
    1,885
    
    
    $
    353,734Operating income (loss)
    
    
    6,516
    
    
    
    2,535
    
    
    
    (1,973
    )
    
    
    33
    
    
    
    7,111Income (loss) before income taxes and discontinued operations
    
    
    5,753
    
    
    
    (16,389
    )
    
    
    (2,002
    )
    
    
    497
    
    
    
    (12,141
    )Goodwill (as of August 9, 2004)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalTwenty-eight Weeks Ended August 15, 2005Revenue
    
    $
    431,402
    
    
    $
    364,261
    
    
    $
    27,192
    
    
    $
    2,837
    
    
    $
    825,692Operating income (loss)
    
    
    39,900
    
    
    
    11,071
    
    
    
    (3,475
    )
    
    
    (11,139
    )
    
    
    36,357Income (loss) before income taxes
    
    
    38,156
    
    
    
    1,665
    
    
    
    (3,455
    )
    
    
    (10,824
    )
    
    
    25,542Goodwill (as of August 15, 2005)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalTwenty-eight Weeks Ended August 9, 2004Revenue
    
    $
    418,425
    
    
    $
    361,532
    
    
    $
    26,657
    
    
    $
    2,432
    
    
    $
    809,046Operating income (loss)
    
    
    27,565
    
    
    
    5,829
    
    
    
    (4,463
    )
    
    
    189
    
    
    
    29,120Income (loss) before income
taxes and discontinued
operations
    
    
    25,598
    
    
    
    (22,877
    )
    
    
    (4,533
    )
    
    
    689
    
    
    
    (1,123
    )Goodwill (as of August 9, 2004)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Note 9
 Net Assets Held For Sale
  18




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
  Twelve Weeks
    
    
    Twenty-eight WeeksEnded
    
    
    EndedAugust 9, 2004
    
    
    August 9, 2004Revenue
    
    $
    8,061
    
    
    $
    21,429Operating loss
    
    $
    (300
    )
    
    $
    (457
    )Interest expense
    
    
    4
    
    
    
    10Net loss
    
    $
    (304
    )
    
    $
    (467
    )
     Note
10  Commitments And Contingent Liabilities
    19




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
   , Accounting for Contingencies
   Note
11  New Employee Benefit Plans
 2005 Omnibus Incentive Compensation Plan
   20




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
  Deferred Compensation Plan
   Note
12  Purchase and Cancellation of Stock Options
  21




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction and Safe Harbor Disclosure
    New Accounting Pronouncements Not Yet Adopted
  Adoption of New Accounting Pronouncements
  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;
 22




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
 
    
    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 evaluating leases for capital versus operating lease treatment, establishing
depreciable lives for leasehold improvements and establishing straight-line rent expense periods;
    
    estimation of the appropriate allowances associated with franchise and license receivables and liabilities for franchise
subleases;
    
    determination of the appropriate assumptions to use to estimate the fair value of stock-based compensation for purposes of
disclosures of pro forma net income; and
    
    estimation of our net deferred income tax asset valuation allowance.Descriptions of these critical accounting policies follow.
 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
     23




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
   Impairment of Goodwill
    Estimated Liability for Closing Restaurants
   24




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
   Estimated Liability for Self-Insurance
  self-insurance
 Loss Contingencies
 Accounting for Contingencies
 25




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
   Accounting for Lease Obligations
   Franchised and Licensed Operations
   26




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
      Stock-Based Compensation
 Accounting for Stock Issued to Employees,
 27




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
 Accounting for Stock-Based Compensation
 Share-Based Payment,
 Valuation Allowance for Net Deferred Tax Assets
     28




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
 Significant Known Events, Trends, or Uncertainties Expected to Impact Fiscal 2006 Comparisons with
Fiscal 2005
  Divestiture of Timber Lodge
  Twelve Weeks
    
    
    Twenty-eight WeeksEnded
    
    
    EndedAugust 9, 2004
    
    
    August 9, 2004Revenue
    
    $
    8,061
    
    
    $
    21,429Operating loss
    
    $
    (300
    )
    
    $
    (457
    )Interest expense
    
    
    4
    
    
    
    10Net loss
    
    $
    (304
    )
    
    $
    (467
    )
  Fiscal Year and Seasonality
   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;
 29




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##### Table of Contents



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.
 Franchise Operations
    30




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
 Managements
Discussion and Analysis  (Continued)
(Dollars in thousands)
 Operating Review
  Twelve Weeks Ended August 15, 2005Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other(A)
    
    
    Elimination(B)
    
    
    TotalCompany-operated revenue
    
    $
    133,026
    
    
    $
    141,866
    
    
    $
    11,669
    
    
    $
    82
    
    
    $
    
    
    
    $
    286,643Company-operated average weekly
unit volume (actual $- not in
thousands)
    
    
    25,842
    
    
    
    17,441
    
    
    
    15,938Company-operated average unit
volume (trailing-13 periods)
    
    
    1,323
    
    
    
    872
    
    
    
    761Franchise-operated average unit
volume (trailing-13 periods)
    
    
    1,151
    
    
    
    880
    
    
    
    870Average check (actual $- not
in thousands)
    
    
    6.23
    
    
    
    4.85
    
    
    
    10.30Company-operated same-store
sales increase
    
    
    1.0
    %
    
    
    0.0
    %
    
    
    2.6
    %Company-operated same-store
transaction decrease
    
    
    (3.4
    )%
    
    
    (2.8
    )%
    
    
    (1.8
    )%Franchise-operated same-store
sales (decrease) increase
    
    
    (0.6
    )%
    
    
    (3.6
    )%
    
    
    2.2
    %Operating costs as a % of
company-operated revenue:Food and packaging
    
    
    29.3
    %
    
    
    30.1
    %
    
    
    26.5
    %Payroll and employee benefits
    
    
    26.3
    %
    
    
    30.9
    %
    
    
    31.5
    %Occupancy and other
operating costs
    
    
    20.9
    %
    
    
    22.3
    %
    
    
    34.6
    %Restaurant-level margin
    
    
    23.5
    %
    
    
    16.7
    %
    
    
    7.4
    %Advertising as a percentage of
company-operated revenue
    
    
    6.5
    %
    
    
    5.7
    %
    
    
    3.0
    %Franchising revenue:Royalties
    
    $
    6,056
    
    
    $
    10,347
    
    
    $
    390
    
    
    $
    100
    
    
    $
    (22
    )
    
    $
    16,871Distribution centers
    
    
    41,261
    
    
    
    6,813
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,074Rent
    
    
    4,631
    
    
    
    1,899
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,530Retail sales of variable
interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,085
    
    
    
    
    
    
    
    1,085Other
    
    
    389
    
    
    
    190
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    580Total franchising revenue
    
    
    52,337
    
    
    
    19,249
    
    
    
    391
    
    
    
    1,185
    
    
    
    (22
    )
    
    
    73,140Franchising expense:Administrative expense
(including provision for bad
debts)
    
    
    1,168
    
    
    
    1,188
    
    
    
    340
    
    
    
    
    
    
    
    
    
    
    
    2,696Distribution centers
    
    
    40,069
    
    
    
    6,941
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,010Rent and other occupancy
    
    
    4,061
    
    
    
    1,447
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,508Operating costs of variable
interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,102
    
    
    
    (22
    )
    
    
    1,080Total franchising expense
    
    
    45,298
    
    
    
    9,576
    
    
    
    340
    
    
    
    1,102
    
    
    
    (22
    )
    
    
    56,294Net franchising income
    
    $
    7,039
    
    
    $
    9,673
    
    
    $
    51
    
    
    $
    83
    
    
    $
    
    
    
    $
    16,846Facility action charges, net
    
    $
    854
    
    
    $
    1,324
    
    
    $
    328
    
    
    $
    (12
    )
    
    $
    
    
    
    $
    2,494Operating income (loss)
    
    $
    18,635
    
    
    $
    6,903
    
    
    $
    (1,242
    )
    
    $
    (11,087
    )
    
    $
    
    
    
    $
    13,209
 31




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 Managements
Discussion and Analysis  (Continued)
(Dollars in thousands)
 Twelve Weeks Ended August 9, 2004Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other (A)
    
    
    TotalCompany-operated revenue
    
    $
    129,412
    
    
    $
    140,569
    
    
    $
    11,498
    
    
    $
    323
    
    
    $
    281,802Company-operated average weekly unit volume
(actual $- not in thousands)
    
    
    25,195
    
    
    
    17,089
    
    
    
    15,527Company-operated average unit volume (trailing 13
periods)
    
    
    1,255
    
    
    
    838
    
    
    
    736Franchise-operated average unit volume (trailing
13 periods)
    
    
    1,120
    
    
    
    900
    
    
    
    780Average check (actual $- not in thousands)
    
    
    5.92
    
    
    
    4.68
    
    
    
    9.76Company-operated same-store sales increase
    
    
    8.1
    %
    
    
    6.2
    %
    
    
    4.6
    %Company-operated same-store transactions increase
(decrease)
    
    
    1.6
    %
    
    
    (0.7
    )%
    
    
    0.8
    %Franchise-operated same-store sales increase
    
    
    7.6
    %
    
    
    5.1
    %
    
    
    2.7
    %Operating costs as a % of company-operated revenue:Food and packaging
    
    
    29.5
    %
    
    
    30.2
    %
    
    
    27.0
    %Payroll and employee benefits
    
    
    28.9
    %
    
    
    33.7
    %
    
    
    37.2
    %Occupancy and other operating costs
    
    
    21.2
    %
    
    
    22.1
    %
    
    
    34.2
    %Restaurant level margin
    
    
    20.4
    %
    
    
    14.0
    %
    
    
    1.6
    %Advertising as a percentage of company-operated
revenue
    
    
    6.8
    %
    
    
    5.9
    %
    
    
    2.7
    %Franchising revenue:Royalties
    
    $
    5,764
    
    
    $
    10,833
    
    
    $
    400
    
    
    $
    79
    
    
    $
    17,076Distribution centers
    
    
    41,129
    
    
    
    4,416
    
    
    
    
    
    
    
    
    
    
    
    45,545Rent
    
    
    4,818
    
    
    
    2,640
    
    
    
    
    
    
    
    
    
    
    
    7,458Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    1,483Other
    
    
    217
    
    
    
    153
    
    
    
    
    
    
    
    
    
    
    
    370Total franchising revenue
    
    
    51,928
    
    
    
    18,042
    
    
    
    400
    
    
    
    1,562
    
    
    
    71,932Franchising expense:Administrative expense (including provision
for bad debts)
    
    
    644
    
    
    
    208
    
    
    
    202
    
    
    
    
    
    
    
    1,054Distribution centers
    
    
    39,778
    
    
    
    4,318
    
    
    
    
    
    
    
    
    
    
    
    44,096Rent and other occupancy
    
    
    4,147
    
    
    
    1,804
    
    
    
    
    
    
    
    
    
    
    
    5,951Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,463
    
    
    
    1,463Total franchising expense
    
    
    44,569
    
    
    
    6,330
    
    
    
    202
    
    
    
    1,463
    
    
    
    52,564Net franchising income
    
    $
    7,359
    
    
    $
    11,712
    
    
    $
    198
    
    
    $
    99
    
    
    $
    19,368Facility action charges, net
    
    $
    269
    
    
    $
    1,042
    
    
    $
    567
    
    
    $
    5
    
    
    $
    1,883Operating income (loss)
    
    $
    6,516
    
    
    $
    2,535
    
    
    $
    (1,973
    )
    
    $
    33
    
    
    $
    7,111
 32




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 Managements
Discussion and Analysis  (Continued)
(Dollars in thousands)
 Twenty-eight Weeks Ended August 15, 2005Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other(A)
    
    
    Elimination(B)
    
    
    TotalCompany-operated revenue
    
    $
    309,982
    
    
    $
    321,637
    
    
    $
    26,242
    
    
    $
    270
    
    
    $
    
    
    
    $
    658,131Company-operated average weekly
unit volume (actual $- not in
thousands)
    
    
    25,824
    
    
    
    16,988
    
    
    
    15,261Average check (actual $- not
in thousands)
    
    
    6.19
    
    
    
    4.77
    
    
    
    10.17Company-operated same-store
sales increase
    
    
    1.8
    %
    
    
    0.0
    %
    
    
    2.2
    %Company-operated same-store
transaction decrease
    
    
    (3.3
    )%
    
    
    (2.8
    )%
    
    
    (2.4
    )%Franchise-operated same-store
sales (decrease) increase
    
    
    (0.1
    )%
    
    
    (3.3
    )%
    
    
    2.4
    %Operating costs as a % of
company-operated revenue:Food and packaging
    
    
    29.0
    %
    
    
    29.9
    %
    
    
    26.3
    %Payroll and employee benefits
    
    
    27.0
    %
    
    
    32.1
    %
    
    
    32.4
    %Occupancy and other
operating costs
    
    
    21.4
    %
    
    
    22.7
    %
    
    
    34.6
    %Restaurant-level margin
    
    
    22.6
    %
    
    
    15.3
    %
    
    
    6.7
    %Advertising as a percentage of
company-operated revenue
    
    
    6.6
    %
    
    
    5.9
    %
    
    
    2.7
    %Franchising revenue:Royalties
    
    $
    13,819
    
    
    $
    23,113
    
    
    $
    949
    
    
    $
    222
    
    
    $
    (48
    )
    
    $
    38,055Distribution centers
    
    
    96,173
    
    
    
    14,309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110,482Rent
    
    
    10,761
    
    
    
    4,739
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,500Retail sales of variable
interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,393
    
    
    
    
    
    
    
    2,393Other
    
    
    667
    
    
    
    463
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,131Total franchising revenue
    
    
    121,420
    
    
    
    42,624
    
    
    
    950
    
    
    
    2,615
    
    
    
    (48
    )
    
    
    167,561Franchising expense:Administrative expense
(including provision for bad
debts)
    
    
    2,615
    
    
    
    2,610
    
    
    
    717
    
    
    
    
    
    
    
    
    
    
    
    5,942Distribution centers
    
    
    93,393
    
    
    
    14,533
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,926Rent and other occupancy
    
    
    9,537
    
    
    
    3,344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,881Operating costs of variable
interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,426
    
    
    
    (48
    )
    
    
    2,378Total franchising expense
    
    
    105,545
    
    
    
    20,487
    
    
    
    717
    
    
    
    2,426
    
    
    
    (48
    )
    
    
    129,127Net franchising income
    
    $
    15,875
    
    
    $
    22,137
    
    
    $
    233
    
    
    $
    189
    
    
    $
    
    
    
    $
    38,434Facility action charges, net
    
    $
    878
    
    
    $
    1,471
    
    
    $
    689
    
    
    $
    16
    
    
    $
    
    
    
    $
    3,054Operating income (loss)
    
    $
    39,900
    
    
    $
    11,071
    
    
    $
    (3,475
    )
    
    $
    (11,139
    )
    
    $
    
    
    
    $
    36,357
 33




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 Managements
Discussion and Analysis  (Continued)
(Dollars in thousands)
 Twenty-eight Weeks Ended August 9, 2004Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other (A)
    
    
    TotalCompany-operated revenue
    
    $
    299,621
    
    
    $
    321,587
    
    
    $
    25,700
    
    
    $
    766
    
    
    $
    647,674Company-operated average weekly unit volume
(actual $- not in thousands)
    
    
    25,033
    
    
    
    16,625
    
    
    
    14,083Average check (actual $- not in thousands)
    
    
    5.85
    
    
    
    4.62
    
    
    
    9.62Company-operated same-store sales increase
    
    
    9.0
    %
    
    
    9.3
    %
    
    
    5.3
    %Company-operated same-store transactions increase
    
    
    1.7
    %
    
    
    0.6
    %
    
    
    1.8
    %Franchise-operated same-store sales increase
    
    
    8.0
    %
    
    
    7.9
    %
    
    
    3.5
    %Operating costs as a % of company-operated revenue:Food and packaging
    
    
    28.9
    %
    
    
    29.7
    %
    
    
    27.4
    %Payroll and employee benefits
    
    
    28.4
    %
    
    
    33.4
    %
    
    
    35.0
    %Occupancy and other operating costs
    
    
    21.5
    %
    
    
    22.0
    %
    
    
    34.0
    %Restaurant level margin
    
    
    21.2
    %
    
    
    14.9
    %
    
    
    3.6
    %Advertising as a percentage of company-operated
revenue
    
    
    6.6
    %
    
    
    5.9
    %
    
    
    2.8
    %Franchising revenue:Royalties
    
    $
    13,345
    
    
    $
    24,171
    
    
    $
    924
    
    
    $
    183
    
    
    $
    38,623Distribution centers
    
    
    93,386
    
    
    
    9,653
    
    
    
    
    
    
    
    
    
    
    
    103,039Rent
    
    
    11,491
    
    
    
    5,852
    
    
    
    
    
    
    
    
    
    
    
    17,343Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,483
    
    
    
    1,483Other
    
    
    582
    
    
    
    269
    
    
    
    33
    
    
    
    
    
    
    
    884Total franchising revenue
    
    
    118,804
    
    
    
    39,945
    
    
    
    957
    
    
    
    1,666
    
    
    
    161,372Franchising expense:Administrative expense (including provision
for bad debts)
    
    
    1,996
    
    
    
    1,243
    
    
    
    653
    
    
    
    
    
    
    
    3,892Distribution centers
    
    
    90,765
    
    
    
    9,728
    
    
    
    
    
    
    
    
    
    
    
    100,493Rent and other occupancy
    
    
    9,482
    
    
    
    4,226
    
    
    
    
    
    
    
    
    
    
    
    13,708Operating
costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,463
    
    
    
    1,463Total franchising expense
    
    
    102,243
    
    
    
    15,197
    
    
    
    653
    
    
    
    1,463
    
    
    
    119,556Net franchising income
    
    $
    16,561
    
    
    $
    24,748
    
    
    $
    304
    
    
    $
    203
    
    
    $
    41,816Facility action charges, net
    
    $
    1,469
    
    
    $
    5,407
    
    
    $
    1,766
    
    
    $
    57
    
    
    $
    8,699Operating income (loss)
    
    $
    27,565
    
    
    $
    5,829
    
    
    $
    (4,463
    )
    
    $
    189
    
    
    $
    29,120
 
 (A)
    
    Other consists of one company-operated and 15 franchised and licensed Green Burrito
restaurants that are not dual-branded and a consolidated variable interest Hardees franchise
entity over which we do not exercise decision-making authority. Additionally, amounts that we
do not believe would be proper to allocate to the operating segments are included in Other.(B)
    
    Elimination consists of the elimination of royalty revenues and expenses generated between
Hardees and a variable interest entity franchisee included in our Condensed Consolidated
Financial Statements. Presentation of Non-GAAP Measurements
 EBITDA
  34




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
  Twelve Weeks Ended August 15, 2005Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalNet income (loss)
    
    $
    17,469
    
    
    $
    3,003
    
    
    $
    (1,211
    )
    
    $
    (10,813
    )
    
    $
    8,448Interest expense
    
    
    970
    
    
    
    4,246
    
    
    
    6
    
    
    
    1
    
    
    
    5,223Income tax expense (benefit)
    
    
    454
    
    
    
    91
    
    
    
    (25
    )
    
    
    (64
    )
    
    
    456Depreciation and amortization
    
    
    5,815
    
    
    
    8,627
    
    
    
    824
    
    
    
    38
    
    
    
    15,304Facility action charges (gains), net
    
    
    854
    
    
    
    1,324
    
    
    
    328
    
    
    
    (12
    )
    
    
    2,494EBITDA
    
    $
    25,562
    
    
    $
    17,291
    
    
    $
    (78
    )
    
    $
    (10,850
    )
    
    $
    31,925
 Twelve Weeks Ended August 9, 2004Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalNet income (loss)
    
    $
    5,648
    
    
    $
    (16,403
    )
    
    $
    (2,002
    )
    
    $
    68
    
    
    $
    (12,689
    )Net loss of discontinued segment,
excluding impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    23Interest expense (income)
    
    
    1,094
    
    
    
    10,857
    
    
    
    (2
    )
    
    
    14
    
    
    
    11,963Income tax expense
    
    
    106
    
    
    
    14
    
    
    
    
    
    
    
    124
    
    
    
    244Depreciation and amortization
    
    
    5,691
    
    
    
    9,052
    
    
    
    988
    
    
    
    41
    
    
    
    15,772Facility action charges, net
    
    
    269
    
    
    
    1,042
    
    
    
    567
    
    
    
    5
    
    
    
    1,883Premium on early redemption
of Senior Notes
    
    
    
    
    
    
    9,126
    
    
    
    
    
    
    
    
    
    
    
    9,126Impairment of Timber Lodge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    281
    
    
    
    281EBITDA
    
    $
    12,808
    
    
    $
    13,688
    
    
    $
    (449
    )
    
    $
    556
    
    
    $
    26,603
 Twenty-eight Weeks Ended August 15, 2005Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalNet income (loss)
    
    $
    37,202
    
    
    $
    1,599
    
    
    $
    (3,386
    )
    
    $
    (10,968
    )
    
    $
    24,447Interest expense
    
    
    2,299
    
    
    
    10,189
    
    
    
    16
    
    
    
    92
    
    
    
    12,596Income tax expense (benefit)
    
    
    954
    
    
    
    66
    
    
    
    (69
    )
    
    
    144
    
    
    
    1,095Depreciation and amortization
    
    
    13,634
    
    
    
    20,224
    
    
    
    1,962
    
    
    
    89
    
    
    
    35,909Facility action charges, net
    
    
    878
    
    
    
    1,471
    
    
    
    689
    
    
    
    16
    
    
    
    3,054EBITDA
    
    $
    54,967
    
    
    $
    33,549
    
    
    $
    (788
    )
    
    $
    (10,627
    )
    
    $
    77,101
 35




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
 Twenty-eight Weeks Ended August 9, 2004Carls Jr.
    
    
    Hardees
    
    
    La Salsa
    
    
    Other
    
    
    TotalNet income (loss)
    
    $
    25,351
    
    
    $
    (22,916
    )
    
    $
    (4,534
    )
    
    $
    (86
    )
    
    $
    (2,185
    )Net income of
discontinued segment,
excluding impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (431
    )
    
    
    (431
    )Interest expense (income)
    
    
    2,767
    
    
    
    20,927
    
    
    
    (25
    )
    
    
    14
    
    
    
    23,683Income tax expense
    
    
    247
    
    
    
    39
    
    
    
    1
    
    
    
    308
    
    
    
    595Depreciation and amortization
    
    
    13,121
    
    
    
    21,269
    
    
    
    2,333
    
    
    
    95
    
    
    
    36,818Facility action charges, net
    
    
    1,469
    
    
    
    5,407
    
    
    
    1,766
    
    
    
    57
    
    
    
    8,699Premium on early redemption
of Senior Notes
    
    
    
    
    
    
    9,126
    
    
    
    
    
    
    
    
    
    
    
    9,126Impairment of Timber Lodge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    898
    
    
    
    898EBITDA
    
    $
    42,955
    
    
    $
    33,852
    
    
    $
    (459
    )
    
    $
    855
    
    
    $
    77,203
  Twelve Weeks Ended
    
    
    Twenty-eight Weeks EndedAugust 15, 2005
    
    
    August 9, 2004
    
    
    August 15, 2005
    
    
    August 9, 2004Net cash provided by operating
activities
    
    $
    27,255
    
    
    $
    20,168
    
    
    $
    66,941
    
    
    $
    67,609Interest expense
    
    
    5,223
    
    
    
    11,963
    
    
    
    12,596
    
    
    
    23,683Income tax expense
    
    
    456
    
    
    
    244
    
    
    
    1,095
    
    
    
    595Premium on early redemption of
Senior Notes
    
    
    
    
    
    
    9,126
    
    
    
    
    
    
    
    9,126Amortization of loan fees
    
    
    (795
    )
    
    
    (903
    )
    
    
    (1,885
    )
    
    
    (1,945
    )Recovery of losses on accounts and
notes receivable
    
    
    113
    
    
    
    1,550
    
    
    
    499
    
    
    
    1,792Loss on sales of property and
equipment, capital leases and
extinguishment of debts
    
    
    (764
    )
    
    
    (5,032
    )
    
    
    (1,821
    )
    
    
    (6,316
    )Deferred income taxes
    
    
    (47
    )
    
    
    (62
    )
    
    
    (97
    )
    
    
    (144
    )Other non-cash items
    
    
    (6
    )
    
    
    (34
    )
    
    
    (62
    )
    
    
    (67
    )Net change in refundable income taxes
    
    
    (383
    )
    
    
    425
    
    
    
    (644
    )
    
    
    421Change in estimated liability for
closing restaurants and estimated
liability for self-insurance
    
    
    3,416
    
    
    
    (210
    )
    
    
    3,278
    
    
    
    3,297Net change in receivables,
inventories, prepaid expenses and
other current assets
    
    
    (4,169
    )
    
    
    3,318
    
    
    
    1,219
    
    
    
    (6,673
    )Net change in accounts payable and
other current and long-term
liabilities
    
    
    1,626
    
    
    
    (14,230
    )
    
    
    (4,018
    )
    
    
    (14,427
    )EBITDA from discontinued operations
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    441Net cash provided to discontinued
segment
    
    
    
    
    
    
    280
    
    
    
    
    
    
    
    252EBITDA, including discontinued
operations
    
    
    31,925
    
    
    
    26,584
    
    
    
    77,101
    
    
    
    77,644Less: EBITDA from discontinued
operations
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    (441
    )EBITDA
    
    $
    31,925
    
    
    $
    26,603
    
    
    $
    77,101
    
    
    $
    77,203
 36




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
 Carls Jr.
  Restaurant Portfolio
    
    
    RevenueSecond Fiscal Quarter
    
    
    Second Fiscal Quarter
    
    
    Year-To-Date2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeCompany-operated
    
    
    429
    
    
    
    429
    
    
    
    
    
    
    $
    133,026
    
    
    $
    129,412
    
    
    $
    3,614
    
    
    $
    309,982
    
    
    $
    299,621
    
    
    $
    10,361Franchised and
licensed(a)
    
    
    603
    
    
    
    587
    
    
    
    16
    
    
    
    52,337
    
    
    
    51,928
    
    
    
    409
    
    
    
    121,420
    
    
    
    118,804
    
    
    
    2,616Total
    
    
    1,032
    
    
    
    1,016
    
    
    
    16
    
    
    $
    185,363
    
    
    $
    181,340
    
    
    $
    4,023
    
    
    $
    431,402
    
    
    $
    418,425
    
    
    $
    12,977
 
  Company-Operated Restaurants
 company-operated
  37




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
  Twenty-Twelve
    
    
    eightWeeks
    
    
    WeeksRestaurant-level margin for the period ended August 9, 2004
    
    
    20.4
    %
    
    
    21.2
    %Decrease in workers compensation expense
    
    
    2.0
    
    
    
    1.1Decrease in labor costs, excluding workers compensation
    
    
    0.6
    
    
    
    0.3Decrease in general liability insurance expense
    
    
    0.4
    
    
    
    0.2Decrease (increase) in food and packaging costs
    
    
    0.2
    
    
    
    (0.1
    )Decrease in equipment lease expense
    
    
    0.2
    
    
    
    0.2Increase in repair and maintenance expense
    
    
    (0.2
    )
    
    
    Decrease (increase) in asset retirement expense
    
    
    0.1
    
    
    
    (0.1
    )Increase in banking/ATM fees
    
    
    (0.1
    )
    
    
    (0.1
    )Increase in depreciation and amortization expense
    
    
    (0.1
    )
    
    
    (0.1
    )Other, net
    
    
    
    
    
    
    Restaurant-level margin for the period ended August 15, 2005
    
    
    23.5
    %
    
    
    22.6
    %
      Franchised and Licensed Restaurants
  38




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
      Hardees
  Restaurant Portfolio
    
    
    RevenueSecond Fiscal Quarter
    
    
    Second Fiscal Quarter
    
    
    Year-To-Date2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeCompany-operated
    
    
    667
    
    
    
    690
    
    
    
    (23
    )
    
    $
    141,866
    
    
    $
    140,569
    
    
    $
    1,297
    
    
    $
    321,637
    
    
    $
    321,587
    
    
    $
    50Franchised and
licensed
    
    
    1,344
    
    
    
    1,377
    
    
    
    (33
    )
    
    
    19,249
    
    
    
    18,042
    
    
    
    1,207
    
    
    
    42,624
    
    
    
    39,945
    
    
    
    2,679Total
    
    
    2,011
    
    
    
    2,067
    
    
    
    (56
    )
    
    $
    161,115
    
    
    $
    158,611
    
    
    $
    2,504
    
    
    $
    364,261
    
    
    $
    361,532
    
    
    $
    2,729
 Company-Operated Restaurants
  39




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
    Twenty-Twelve
    
    
    eightWeeks
    
    
    WeeksRestaurant-level margin for the period ended August 9, 2004
    
    
    14.0
    %
    
    
    14.9
    %Decrease in workers compensation insurance expense
    
    
    1.9
    
    
    
    0.8Decrease in labor and incentive costs, excluding workers compensation
    
    
    0.9
    
    
    
    0.5Decrease in depreciation and amortization expense
    
    
    0.3
    
    
    
    0.2Decrease in asset retirement expense
    
    
    0.3
    
    
    
    0.2Increase in rent, property taxes and licenses
    
    
    (0.2
    )
    
    
    (0.2
    )Increase in utilities expense
    
    
    (0.2
    )
    
    
    (0.1
    )Decrease (increase) in food and packaging costs
    
    
    0.1
    
    
    
    (0.4
    )Decrease in general liability insurance expense
    
    
    0.1
    
    
    
    0.1Increase in uniform expense
    
    
    (0.1
    )
    
    
    (0.1
    )Increase in bank/ATM fees
    
    
    (0.1
    )
    
    
    (0.1
    )Increase in restaurant opening costs
    
    
    (0.1
    )
    
    
    (0.1
    )Increase in repair and maintenance expenses
    
    
    
    
    
    
    (0.3
    )Rebate received from primary distributor
    
    
    
    
    
    
    0.2Increase in equipment lease expense
    
    
    
    
    
    
    (0.2
    )Other, net
    
    
    (0.2
    )
    
    
    (0.1
    )Restaurant-level margin for the period ended August 15, 2005
    
    
    16.7
    %
    
    
    15.3
    %
    40




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
         Franchised and Licensed Restaurants
   41




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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
    
    
    RevenueSecond Fiscal Quarter
    
    
    Second Fiscal Quarter
    
    
    Year-To-Date2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    Change
    
    
    2006
    
    
    2005
    
    
    ChangeCompany-operated
    
    
    61
    
    
    
    62
    
    
    
    (1
    )
    
    $
    11,669
    
    
    $
    11,498
    
    
    $
    171
    
    
    $
    26,242
    
    
    $
    25,700
    
    
    $
    542Franchised and
licensed
    
    
    39
    
    
    
    43
    
    
    
    (4
    )
    
    
    391
    
    
    
    400
    
    
    
    (9
    )
    
    
    950
    
    
    
    957
    
    
    
    (7
    )Total
    
    
    100
    
    
    
    105
    
    
    
    (5
    )
    
    $
    12,060
    
    
    $
    11,898
    
    
    $
    162
    
    
    $
    27,192
    
    
    $
    26,657
    
    
    $
    535
 company-operated
  42




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
  Consolidated Variable Interest Entities
   Advertising Expense
   General and Administrative Expense
  43




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
    Facility Action Charges
     Interest Expense
   44




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
  Other Income (Expense), Net
  Twelve Weeks Ended
    
    
    Twenty-eight Weeks EndedAugust 15,
    
    
    August 9,
    
    
    August 15,
    
    
    August 9,2005
    
    
    2004
    
    
    2005
    
    
    2004Premium incurred upon early
redemption of debt
    
    $
    
    
    
    $
    (9,126
    )
    
    $
    
    
    
    $
    (9,126
    )Interest income on notes
receivable from franchisees,
disposition properties and
capital leases
    
    
    252
    
    
    
    709
    
    
    
    616
    
    
    
    951Rental income from properties
leased to third parties, net
    
    
    359
    
    
    
    299
    
    
    
    713
    
    
    
    687Lease termination
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    515Other, net
    
    
    307
    
    
    
    314
    
    
    
    452
    
    
    
    413Total other income (expense), net
    
    $
    918
    
    
    $
    (7,289
    )
    
    $
    1,781
    
    
    $
    (6,560
    )
  Income Taxes
    45




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
     Liquidity and Capital Resources
    46




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
     Accounting for Derivative
Instruments and Hedging Activities
    47




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
       48




---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
Managements Discussion and Analysis  (Continued)
(Dollars in thousands)
  August 15,
    
    
    August 9,2005
    
    
    2004New restaurants (including restaurants under development)Carls Jr.
    
    $
    5,535
    
    
    $
    4,679Hardees
    
    
    4,841
    
    
    
    2,075La Salsa
    
    
    261
    
    
    
    710Remodels/Dual-branding (including construction in process)Carls Jr.
    
    
    2,942
    
    
    
    324Hardees
    
    
    3,497
    
    
    
    3,386La Salsa
    
    
    93
    
    
    
    21Other restaurant additionsCarls Jr.
    
    
    5,253
    
    
    
    5,686Hardees
    
    
    12,132
    
    
    
    8,192La Salsa
    
    
    189
    
    
    
    1,140Corporate/other
    
    
    4,865
    
    
    
    2,514Total
    
    $
    39,608
    
    
    $
    28,727
   Contractual Obligations
  49




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
   Commodity Price Risk
  Derivative Financial Instruments
  
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  50




---



##### Table of Contents



(b) Changes in Internal Control and Remediation of Material Weakness
    
    
    implemented additional staff training and management review practices with respect to
assignment of appropriate depreciable lives to fixed assets subject to operating leases, and
    
    established internal communication and documentation procedures, and management review
practices related thereto, to ensure timely and complete accounting for straight-line rent
expense for the period from possession of leased property to the date of rent commencement.
  51




---



##### Table of Contents



Part II. Other Information.
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchase of Equity Securities
    (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)MaximumDollarValue ofTotal
    
    
    Shares thatNumber of Shares
    
    
    May Yet BeAverage
    
    
    Purchased as Part
    
    
    PurchasedTotal
    
    
    Price
    
    
    of Publicly
    
    
    Under theNumber of Shares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsMay 24,
2005  June 20, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,441June 21, 2005  July 18, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,441July 19, 2005  August 15, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,441Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    14,441
 
 Item 3. Defaults upon Senior Securities.
  52




---



##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders.
  Shares Voted For
    
    
    Authority to Vote WithheldPeter Churm
    
    
    52,275,280
    
    
    
    2,612,147Janet E. Kerr
    
    
    51,955,704
    
    
    
    2,931,723Daniel D. (Ron) Lane
    
    
    50,515,318
    
    
    
    4,372,109Andrew F. Puzder
    
    
    52,418,332
    
    
    
    2,469,095
     For
    
    Against
    
    Abstain33,948,093
    
    6,215,551
    
    2,561,690
  For
    
    Against
    
    Abstain26,172,897
    
    14,034,543
    
    2,517,894
 
 Item 5. Other Information.
  53




---



##### Table of Contents



Item 6.
Exhibits.
 Exhibit #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.
 54




---



##### Table of Contents



SIGNATURES
  CKE RESTAURANTS, INC.(Registrant)Date: September 20, 2005
    
    /s/ Theodore AbajianTheodore AbajianExecutive Vice PresidentChief Financial Officer
 55




---



##### Table of Contents



Exhibit Index
 Exhibit #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.
 56