##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended May 19, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from  to.
 Commission file number 1-11313
 
 CKE RESTAURANTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    33-0602639(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)6307 Carpinteria Avenue, Ste. A, Carpinteria, California
    
    93013(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (805) 745-7500
 Former Name, Former Address and Former Fiscal Year, if changed since last report.
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



CKE RESTAURANTS, INC. AND SUBSIDIARIES
INDEX
 Page NoPart I. Financial InformationItem 1 Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of May 19, 2008 and January 31, 2008
    
    
    3Condensed Consolidated Statements of Income for the sixteen weeks ended May 19, 2008 and
May 21, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the sixteen weeks ended May 19,
2008 and May 21, 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4 Controls and Procedures
    
    
    25Part II. Other InformationItem 1 Legal Proceedings
    
    
    26Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 6 Exhibits
    
    
    27Signatures
    
    
    28EXHIBIT 10.2EXHIBIT 10.3EXHIBIT 10.4EXHIBIT 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)
 May 19, 2008
    
    
    January 31, 2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    18,868
    
    
    $
    19,993Accounts receivable, net of allowance for doubtful accounts
of $409 as of May 19, 2008 and $755 as of January 31, 2008
    
    
    38,893
    
    
    
    51,394Related party trade receivables
    
    
    6,101
    
    
    
    5,179Inventories, net
    
    
    25,131
    
    
    
    26,030Prepaid expenses
    
    
    11,047
    
    
    
    12,509Assets held for sale
    
    
    1,238
    
    
    
    1,038Advertising fund assets, restricted
    
    
    17,364
    
    
    
    18,207Deferred income tax assets, net
    
    
    19,407
    
    
    
    23,768Other current assets
    
    
    2,716
    
    
    
    2,887Total current assets
    
    
    140,765
    
    
    
    161,005Notes receivable, net of allowance for doubtful accounts of
$632 as of May 19, 2008 and $608 as of January 31, 2008
    
    
    253
    
    
    
    298Property and equipment, net of accumulated depreciation and
amortization of $414,719 as of May 19, 2008 and $422,192 as of
January 31, 2008
    
    
    495,223
    
    
    
    503,774Property under capital leases, net of accumulated amortization
of $47,021 as of May 19, 2008 and $46,390 as of January 31,
2008
    
    
    19,905
    
    
    
    21,104Deferred income tax assets, net
    
    
    72,878
    
    
    
    72,878Goodwill
    
    
    22,649
    
    
    
    22,649Other assets, net
    
    
    9,861
    
    
    
    10,003Total assets
    
    $
    761,534
    
    
    $
    791,711LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of bank indebtedness and other long-term debt
    
    $
    17,975
    
    
    $
    18,024Current portion of capital lease obligations
    
    
    5,876
    
    
    
    5,774Accounts payable
    
    
    56,619
    
    
    
    80,697Advertising fund liabilities
    
    
    17,364
    
    
    
    18,207Other current liabilities
    
    
    91,319
    
    
    
    85,813Total current liabilities
    
    
    189,153
    
    
    
    208,515Bank indebtedness and other long-term debt, less current portion
    
    
    313,108
    
    
    
    333,082Capital lease obligations, less current portion
    
    
    33,339
    
    
    
    35,156Other long-term liabilities
    
    
    64,319
    
    
    
    69,716Total liabilities
    
    
    599,919
    
    
    
    646,469Commitments and contingencies (Notes 4 and 6)Subsequent events (Notes 4, 7, 8 and 14)Stockholders equity:Preferred stock, $.01 par value; 5,000 shares authorized;
none issued or outstanding
    
    
    
    
    
    
    Series A Junior Participating Preferred stock, $.01 par
value; 1,500 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 100,000 shares authorized;
52,437 shares issued and outstanding as of May 19, 2008;
52,504 shares issued and 52,476 shares outstanding as of
January 31, 2008
    
    
    524
    
    
    
    525Common stock held in treasury, at cost; none as of May 19,
2008 and 28 shares as of January 31, 2008
    
    
    
    
    
    
    (359
    )Additional paid-in capital
    
    
    254,062
    
    
    
    251,524Accumulated deficit
    
    
    (92,971
    )
    
    
    (106,448
    )Total stockholders equity
    
    
    161,615
    
    
    
    145,242Total liabilities and stockholders equity
    
    $
    761,534
    
    
    $
    791,711
 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 INCOME
(In thousands, except per share amounts)
(Unaudited)
 Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Revenue:Company-operated restaurants
    
    $
    358,238
    
    
    $
    380,524Franchised and licensed restaurants and other
    
    
    107,933
    
    
    
    101,278Total revenue
    
    
    466,171
    
    
    
    481,802Operating costs and expenses:Restaurant operating costs:Food and packaging
    
    
    105,074
    
    
    
    111,435Payroll and other employee benefits
    
    
    103,683
    
    
    
    110,479Occupancy and other
    
    
    78,035
    
    
    
    81,874Total restaurant operating costs
    
    
    286,792
    
    
    
    303,788Franchised and licensed restaurants and other
    
    
    83,067
    
    
    
    79,492Advertising
    
    
    21,098
    
    
    
    22,762General and administrative
    
    
    44,511
    
    
    
    46,027Facility action charges, net
    
    
    1,073
    
    
    
    (254
    )Total operating costs and expenses
    
    
    436,541
    
    
    
    451,815Operating income
    
    
    29,630
    
    
    
    29,987Interest expense
    
    
    (4,568
    )
    
    
    (5,295
    )Other income, net
    
    
    992
    
    
    
    1,624Income before income taxes and discontinued operations
    
    
    26,054
    
    
    
    26,316Income tax expense
    
    
    9,434
    
    
    
    10,617Income from continuing operations
    
    
    16,620
    
    
    
    15,699Loss from discontinued operations (net of income tax
benefit of $160 for the sixteen weeks ended May 21,
2007)
    
    
    
    
    
    (348
    )Net income
    
    $
    16,620
    
    
    $
    15,351Basic income per common share:Continuing operations
    
    $
    0.32
    
    
    $
    0.24Discontinued operations
    
    
    
    
    
    
    Net income
    
    $
    0.32
    
    
    $
    0.24Diluted income per common share:Continuing operations
    
    $
    0.31
    
    
    $
    0.23Discontinued operations
    
    
    
    
    
    
    Net income
    
    $
    0.31
    
    
    $
    0.23Dividends per common share
    
    $
    0.06
    
    
    $
    0.06Weighted-average common shares outstanding:Basic
    
    
    51,582
    
    
    
    64,823Diluted
    
    
    54,232
    
    
    
    68,150
 See Accompanying Notes to Condensed Consolidated Financial Statements
 4




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Cash flows from operating activities:Net income
    
    $
    16,620
    
    
    $
    15,351Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    18,982
    
    
    
    19,884Amortization of deferred loan fees
    
    
    436
    
    
    
    265Share-based compensation expense
    
    
    3,934
    
    
    
    3,101Change in fair value of interest rate swap agreements
    
    
    (2,359
    )
    
    
    Recovery of losses on accounts and notes receivable
    
    
    (44
    )
    
    
    (665
    )Loss on sale of property and equipment, capital leases and
extinguishment of debt
    
    
    206
    
    
    
    618Facility action charges, net
    
    
    1,073
    
    
    
    (463
    )Deferred income taxes
    
    
    4,064
    
    
    
    4,639Other non-cash charges
    
    
    11
    
    
    
    24Net changes in operating assets and liabilities:Receivables, inventories, prepaid expenses and other
current and non-current assets
    
    
    11,566
    
    
    
    (3,247
    )Estimated liability for closed restaurants and estimated
liability for self-insurance
    
    
    (3,473
    )
    
    
    (2,518
    )Accounts payable and other current and long-term liabilities
    
    
    (2,238
    )
    
    
    2,146Net cash provided by operating activities
    
    
    48,778
    
    
    
    39,135Cash flows from investing activities:Purchases of property and equipment
    
    
    (20,093
    )
    
    
    (35,495
    )Proceeds from sale of property and equipment
    
    
    12,085
    
    
    
    12,118Collections of non-trade notes receivable
    
    
    2,658
    
    
    
    67Other investing activities
    
    
    22
    
    
    
    23Net cash used in investing activities
    
    
    (5,328
    )
    
    
    (23,287
    )Cash flows from financing activities:Net change in bank overdraft
    
    
    (18,144
    )
    
    
    479Borrowings under revolving credit facility
    
    
    57,500
    
    
    
    94,000Repayments of borrowings under revolving credit facility
    
    
    (63,000
    )
    
    
    (117,000
    )Borrowings under credit facility term loan
    
    
    
    
    
    
    100,179Repayments of credit facility term loan
    
    
    (14,465
    )
    
    
    Repayments of other long-term debt
    
    
    (58
    )
    
    
    (52
    )Borrowing by consolidated variable interest entity
    
    
    
    
    
    
    5Repayments of capital lease obligations
    
    
    (1,618
    )
    
    
    (1,539
    )Payment of deferred loan fees
    
    
    (399
    )
    
    
    (1,022
    )Repurchase of common stock
    
    
    (1,612
    )
    
    
    (83,467
    )Exercise of stock options
    
    
    207
    
    
    
    1,557Excess tax benefits from exercise of stock options
    
    
    162
    
    
    
    1,457Dividends paid on common stock
    
    
    (3,148
    )
    
    
    (2,694
    )Net cash used in financing activities
    
    
    (44,575
    )
    
    
    (8,097
    )Net (decrease) increase in cash and cash equivalents
    
    
    (1,125
    )
    
    
    7,751Cash and cash equivalents at beginning of period
    
    
    19,993
    
    
    
    18,680Cash and cash equivalents at end of period
    
    $
    18,868
    
    
    $
    26,431
 See Accompanying Notes to Condensed Consolidated Financial Statements
 5




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 1  Basis of Presentation and Description of Business
 ® ® ®
  Carls Jr.
    
    Hardees
    
    Other
    
    TotalCompany-operated
    
    
    410
    
    
    
    495
    
    
    
    1
    
    
    
    906Franchised and licensed
    
    
    752
    
    
    
    1,428
    
    
    
    15
    
    
    
    2,195Total
    
    
    1,162
    
    
    
    1,923
    
    
    
    16
    
    
    
    3,101
   Note 2  Accounting Pronouncements Not Yet Adopted and Adoption of New Accounting Pronouncements
 Fair Value Measurements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements  an
amendment of ARB No. 51
 6




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Disclosures about Derivative Instruments and Hedging
Activities Accounting for Derivative Instruments and Hedging Activities
 Note 3  Assets Held For Sale
  Note 4  Indebtedness and Interest Expense
      7




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
   Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Facility
    
    $
    4,684
    
    
    $
    2,943Interest rate swaps
    
    
    (2,359
    )
    
    
    Capital lease obligations
    
    
    1,362
    
    
    
    1,561Amortization of deferred loan fees
    
    
    342
    
    
    
    2652023 Convertible Notes
    
    
    183
    
    
    
    187Letter of credit fees and other
    
    
    356
    
    
    
    339$
    4,568
    
    
    $
    5,295
 Note 5  Fair Value Measurement
  Level 1
    
    Quoted prices in active markets for identical assets or liabilities;Level 2
    
    Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities; andLevel 3
    
    Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  Quoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable InputsTotal
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Interest rate swap agreements
    
    $
    9,751
    
    
    $
    
    
    
    $
    9,751
    
    
    $
    
  Note 6  Commitments and Contingent Liabilities
  8




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
      Accounting for Contingencies
 Note 7  Stockholders Equity
  Note 8  Share-Based Compensation
  9




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Share-based compensation expense related to
performance-vested restricted stock awards
    
    $
    1,302
    
    
    $
    706All other share-based compensation expense
    
    
    2,635
    
    
    
    2,432Total share-based compensation expense
    
    $
    3,937
    
    
    $
    3,138Associated tax benefits
    
    $
    1,170
    
    
    $
    867
 Note 9  Facility Action Charges, Net
  Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Estimated liability for new restaurant closures
    
    $
    12
    
    
    $
    51Adjustments to estimated liability for closed restaurants
    
    
    (102
    )
    
    
    472Impairment of assets to be disposed of
    
    
    310
    
    
    
    17Impairment of assets to be held and used
    
    
    
    
    
    
    2Loss (gain) on sales of restaurants and surplus properties, net
    
    
    707
    
    
    
    (979
    )Amortization of discount related to estimated liability for
closed restaurants
    
    
    146
    
    
    
    183$
    1,073
    
    
    $
    (254
    )
 Note 10  Income Taxes
  Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Federal and state income taxes
    
    $
    8,954
    
    
    $
    10,301Foreign income taxes
    
    
    480
    
    
    
    316Income tax expense
    
    $
    9,434
    
    
    $
    10,617Effective income tax rate
    
    
    36.2
    %
    
    
    40.4
    %
   10




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 11  Income Per Share
  Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007(In thousands except per share amounts)Numerator:Income from continuing operations
    
    $
    16,620
    
    
    $
    15,699Loss from discontinued operations
    
    
    
    
    
    
    (348
    )Net income for computation of basic earnings per share
    
    $
    16,620
    
    
    $
    15,351Adjustment for interest and amortization costs for 2023 Convertible
Notes, net of related tax effect
    
    
    135
    
    
    
    137Income from continuing operations for computation of diluted
earnings per share
    
    $
    16,755
    
    
    $
    15,836Net income for computation of diluted earnings per share
    
    $
    16,755
    
    
    $
    15,488Denominator:Weighted-average shares for computation of basic earnings
per share
    
    
    51,582
    
    
    
    64,823Dilutive effect of stock options and restricted stock
    
    
    881
    
    
    
    1,580Dilutive effect of 2023 Convertible Notes
    
    
    1,769
    
    
    
    1,747Weighted-average shares for computation of diluted earnings per share
    
    
    54,232
    
    
    
    68,150Basic earnings per share:Basic income per share from continuing operations
    
    $
    0.32
    
    
    $
    0.24Basic loss per share from discontinued operations
    
    
    
    
    
    
    Basic net income per share
    
    $
    0.32
    
    
    $
    0.24Diluted earnings per share:Diluted income per share from continuing operations
    
    $
    0.31
    
    
    $
    0.23Diluted loss per share from discontinued operations
    
    
    
    
    
    
    Diluted net income per share
    
    $
    0.31
    
    
    $
    0.23
 Note 12  Segment Information
  Carls Jr.
    
    Hardees
    
    Other
    
    TotalSixteen Weeks Ended May 19, 2008Revenue
    
    $
    275,878
    
    
    $
    190,023
    
    
    $
    270
    
    
    $
    466,171Operating income
    
    
    24,051
    
    
    
    5,468
    
    
    
    111
    
    
    
    29,630Income (loss) before income taxes
    
    
    23,746
    
    
    
    3,860
    
    
    
    (1,552
    )
    
    
    26,054
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalSixteen Weeks Ended May 21, 2007Revenue
    
    $
    258,145
    
    
    $
    222,435
    
    
    $
    1,222
    
    
    $
    481,802Operating income (loss)
    
    
    21,427
    
    
    
    8,596
    
    
    
    (36
    )
    
    
    29,987Income (loss) before income
taxes and discontinued
operations
    
    
    21,231
    
    
    
    6,207
    
    
    
    (1,122
    )
    
    
    26,316
 11




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 13  Discontinued Operations
   Revenue
    
    $
    14,032Operating loss
    
    
    (502
    )Interest expense
    
    
    (15
    )Other income, net
    
    
    9Income tax benefit
    
    
    160Loss from discontinued operations
    
    $
    (348
    )
 Note 14  Purchase and Sale of Assets
  Note 15  Supplemental Cash Flow Information
 Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Cash paid for:Interest, net of amounts capitalized
    
    $
    4,479
    
    
    $
    5,259Income taxes, net of refunds received
    
    $
    329
    
    
    $
    525Non-cash investing and financing activities:Gain recognized on sale and leaseback transactions
    
    $
    106
    
    
    $
    107Dividends declared, not paid
    
    $
    3,146
    
    
    $
    3,750
 12




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction and Safe Harbor Disclosure
    New Accounting Pronouncements Not Yet Adopted and Adoption of New Accounting Pronouncements
  Critical Accounting Policies
  Impairment of Property and Equipment and Other Amortizable Long-Lived Assets Held and Used, Held
for Sale or To Be Disposed of Other Than By Sale
  13




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Impairment of Goodwill
  Estimated Liability for Closed Restaurants
  Estimated Liability for Self-Insurance
   Franchised and Licensed Operations
  Income Taxes
   14




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Significant Known Events, Trends, or Uncertainties Expected to Impact Fiscal 2009 Comparisons with
Fiscal 2008
  Fiscal Year and Seasonality
   Operating Review
  Sixteen Weeks EndedMay 19, 2008
    
    May 21, 2007Revenue:Company-operated restaurants
    
    
    76.8
    %
    
    
    79.0
    %Franchised and licensed restaurants and other
    
    
    23.2
    
    
    
    21.0Total revenue
    
    
    100.0
    
    
    
    100.0Operating costs and expenses:Restaurant operating costs (1):Food and packaging
    
    
    29.3
    
    
    
    29.3Payroll and other employee benefits
    
    
    28.9
    
    
    
    29.0Occupancy and other
    
    
    21.8
    
    
    
    21.5Total restaurant operating costs
    
    
    80.1
    
    
    
    79.8Franchised and licensed restaurants and other (2)
    
    
    77.0
    
    
    
    78.5Advertising (1)
    
    
    5.9
    
    
    
    6.0General and administrative
    
    
    9.5
    
    
    
    9.6Facility action charges, net
    
    
    0.2
    
    
    
    (0.1
    )Operating income
    
    
    6.4
    
    
    
    6.2Interest expense
    
    
    (1.0
    )
    
    
    (1.1
    )Other income, net
    
    
    0.2
    
    
    
    0.3Income before income taxes and discontinued operations
    
    
    5.6
    
    
    
    5.5Income tax expense
    
    
    2.0
    
    
    
    2.2Income from continuing operations
    
    
    3.6
    %
    
    
    3.3
    %
 
 (1)
    
    As a percent of company-operated restaurants revenue.(2)
    
    As a percent of franchised and licensed restaurants and other revenue. 15




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Company-operated restaurants revenue
    
    $
    358,238
    
    
    $
    380,524Restaurant operating costs:Food and packaging
    
    
    105,074
    
    
    
    111,435Payroll and other employee benefits
    
    
    103,683
    
    
    
    110,479Occupancy and other
    
    
    78,035
    
    
    
    81,874Total restaurant operating costs
    
    
    286,792
    
    
    
    303,788Franchised and licensed restaurants and other revenue:Royalties
    
    
    25,003
    
    
    
    22,911Distribution centers
    
    
    70,690
    
    
    
    67,474Rent
    
    
    9,620
    
    
    
    9,345Retail sales of variable interest entity
    
    
    
    
    
    
    956Franchise fees
    
    
    2,620
    
    
    
    592Total franchised and licensed restaurants and other revenue
    
    
    107,933
    
    
    
    101,278Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad debts)
    
    
    4,581
    
    
    
    3,600Distribution centers
    
    
    70,545
    
    
    
    67,653Rent and other occupancy
    
    
    7,941
    
    
    
    7,293Operating costs of variable interest entity
    
    
    
    
    
    
    946Total franchised and licensed restaurants and other expenses
    
    
    83,067
    
    
    
    79,492Advertising
    
    
    21,098
    
    
    
    22,762General and administrative
    
    
    44,511
    
    
    
    46,027Facility action charges, net
    
    
    1,073
    
    
    
    (254
    )Operating income
    
    $
    29,630
    
    
    $
    29,987
  Company-operated
    
    Franchised and licensed
    
    TotalOpen at January 31, 2008
    
    
    967
    
    
    
    2,116
    
    
    
    3,083New
    
    
    4
    
    
    
    28
    
    
    
    32Closed
    
    
    (6
    )
    
    
    (8
    )
    
    
    (14
    )Divested
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Acquired
    
    
    
    
    
    
    59
    
    
    
    59Open at May 19, 2008
    
    
    906
    
    
    
    2,195
    
    
    
    3,101
 16




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Carls Jr.
 Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Company-operated restaurants revenue
    
    $
    195,228
    
    
    $
    181,229Restaurant operating costs:Food and packaging
    
    
    56,505
    
    
    
    52,923Payroll and other employee benefits
    
    
    51,919
    
    
    
    48,535Occupancy and other
    
    
    42,867
    
    
    
    38,898Total restaurant operating costs
    
    
    151,291
    
    
    
    140,356Franchised and licensed restaurants and other revenue:Royalties
    
    
    10,326
    
    
    
    9,753Distribution centers
    
    
    63,289
    
    
    
    59,770Rent
    
    
    6,355
    
    
    
    7,010Franchise fees
    
    
    680
    
    
    
    383Total franchised and licensed restaurants and other revenue
    
    
    80,650
    
    
    
    76,916Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad debts)
    
    
    2,160
    
    
    
    1,858Distribution centers
    
    
    62,897
    
    
    
    59,927Rent and other occupancy
    
    
    5,597
    
    
    
    5,900Total franchised and licensed restaurants and other expenses
    
    
    70,654
    
    
    
    67,685Advertising
    
    
    11,434
    
    
    
    10,601General and administrative
    
    
    18,817
    
    
    
    17,701Facility action charges, net
    
    
    (369
    )
    
    
    375Operating income
    
    $
    24,051
    
    
    $
    21,427Company-operated average unit volume (trailing-13 periods)
    
    $
    1,514
    
    
    $
    1,461Franchise-operated average unit volume (trailing-13 periods)
    
    $
    1,194
    
    
    $
    1,204Company-operated same-store sales increase
    
    
    3.9
    %
    
    
    Franchise-operated same-store sales (decrease) increase
    
    
    (1.2
    )%
    
    
    0.1
    %Company-operated same-store transaction increase (decrease)
    
    
    1.9
    %
    
    
    (5.3
    )%Average check (actual $)
    
    $
    6.92
    
    
    $
    6.77Restaurant operating costs as a % of company-operated restaurants
revenue:Food and packaging
    
    
    28.9
    %
    
    
    29.2
    %Payroll and other employee benefits
    
    
    26.6
    %
    
    
    26.8
    %Occupancy and other
    
    
    22.0
    %
    
    
    21.5
    %Total restaurant operating costs
    
    
    77.5
    %
    
    
    77.5
    %Advertising as a percentage of company-operated restaurants revenue
    
    
    5.9
    %
    
    
    5.9
    %
  Company-operated
    
    Franchised and licensed
    
    TotalOpen at January 31, 2008
    
    
    406
    
    
    
    735
    
    
    
    1,141New
    
    
    4
    
    
    
    17
    
    
    
    21Open at May 19, 2008
    
    
    410
    
    
    
    752
    
    
    
    1,162
 Company-Operated Restaurants
  17




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  SixteenWeeksRestaurant operating costs as a percentage of company-operated
restaurants revenue for the period ended May 21, 2007
    
    
    77.5
    %Increase in depreciation and amortization expense
    
    
    0.5Decrease in workers compensation expense
    
    
    (0.4
    )Increase in labor costs, excluding workers compensation
    
    
    0.3Decrease in food and packaging costs
    
    
    (0.3
    )Decrease in repairs and maintenance
    
    
    (0.3
    )Increase in utilities expense
    
    
    0.2Increase in banking expense
    
    
    0.2Other, net
    
    
    (0.2
    )Restaurant operating costs as a percentage of company-operated
restaurants revenue for the period ended May 19, 2008
    
    
    77.5
    %
      Franchised and Licensed Restaurants
  18




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
   Hardees
 Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Company-operated restaurants revenue
    
    $
    162,923
    
    
    $
    199,192Restaurant operating costs:Food and packaging
    
    
    48,530
    
    
    
    58,479Payroll and other employee benefits
    
    
    51,724
    
    
    
    61,902Occupancy and other
    
    
    35,139
    
    
    
    42,943Total restaurant operating costs
    
    
    135,393
    
    
    
    163,324Franchised and licensed restaurants and other revenue:Royalties
    
    
    14,495
    
    
    
    12,992Distribution centers
    
    
    7,400
    
    
    
    7,707Rent
    
    
    3,265
    
    
    
    2,335Franchise fees
    
    
    1,940
    
    
    
    209Total franchised and licensed restaurants and other revenue
    
    
    27,100
    
    
    
    23,243Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad debts)
    
    
    2,421
    
    
    
    1,742Distribution centers
    
    
    7,648
    
    
    
    7,726Rent and other occupancy
    
    
    2,344
    
    
    
    1,393Total franchised and licensed restaurants and other expenses
    
    
    12,413
    
    
    
    10,861Advertising
    
    
    9,664
    
    
    
    12,159General and administrative
    
    
    25,643
    
    
    
    28,258Facility action charges, net
    
    
    1,442
    
    
    
    (763
    )Operating income
    
    $
    5,468
    
    
    $
    8,596Company-operated average unit volume (trailing-13 periods)
    
    $
    959
    
    
    $
    923Franchise-operated average unit volume (trailing-13 periods)
    
    $
    957
    
    
    $
    961Company-operated same-store sales (decrease) increase
    
    
    (0.6
    )%
    
    
    1.8
    %Franchise-operated same-store sales (decrease) increase
    
    
    (0.1
    )%
    
    
    1.1
    %Company-operated same-store transaction (decrease) increase
    
    
    (3.4
    )%
    
    
    1.2
    %Average check (actual $)
    
    $
    5.07
    
    
    $
    4.93Restaurant operating costs as a % of company-operated restaurants
revenue:Food and packaging
    
    
    29.8
    %
    
    
    29.4
    %Payroll and other employee benefits
    
    
    31.7
    %
    
    
    31.0
    %Occupancy and other
    
    
    21.6
    %
    
    
    21.6
    %Total restaurant operating costs
    
    
    83.1
    %
    
    
    82.0
    %Advertising as a percentage of company-operated restaurants revenue
    
    
    5.9
    %
    
    
    6.1
    %
  Company-operated
    
    Franchised and licensed
    
    TotalOpen at January 31, 2008
    
    
    560
    
    
    
    1,366
    
    
    
    1,926New
    
    
    
    
    
    
    11
    
    
    
    11Closed
    
    
    (6
    )
    
    
    (8
    )
    
    
    (14
    )Divested
    
    
    (59
    )
    
    
    
    
    
    
    (59
    )Acquired
    
    
    
    
    
    
    59
    
    
    
    59Open at May 19, 2008
    
    
    495
    
    
    
    1,428
    
    
    
    1,923
 19




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Company-Operated Restaurants
   SixteenWeeksRestaurant operating costs as a percentage of company-operated
restaurants revenue for the period ended May 21, 2007
    
    
    82.0
    %Increase in labor costs, excluding workers compensation
    
    
    0.7Decrease in repairs and maintenance
    
    
    (0.5
    )Increase in food and packaging costs
    
    
    0.4Increase in depreciation and amortization expense
    
    
    0.4Other, net
    
    
    0.1Restaurant operating costs as a percentage of company-operated
restaurants revenue for the period ended May 19, 2008
    
    
    83.1
    %
     Franchised and Licensed Restaurants
  20




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
   Consolidated Expenses
 General and Administrative Expense
  Interest Expense
  Income Tax Expense
  Presentation of Non-GAAP Measurements
 Adjusted EBITDA
  21




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Sixteen Weeks Ended
    
    
    Trailing-13 Periods EndedMay 19, 2008
    
    
    May 21, 2007
    
    
    May 19, 2008Net income
    
    $
    16,620
    
    
    $
    15,351
    
    
    $
    32,345Interest expense
    
    
    4,568
    
    
    
    5,310
    
    
    
    32,313Income tax expense
    
    
    9,434
    
    
    
    10,457
    
    
    
    25,589Depreciation and amortization
    
    
    18,982
    
    
    
    19,884
    
    
    
    63,200Facility action charges, net
    
    
    1,073
    
    
    
    (463
    )
    
    
    254Share-based compensation expense
    
    
    3,937
    
    
    
    3,138
    
    
    
    12,177Adjusted EBITDA
    
    $
    54,614
    
    
    $
    53,677
    
    
    $
    165,878
 Liquidity and Capital Resources
      22




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
        23




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Sixteen Weeks EndedMay 19, 2008
    
    
    May 21, 2007Non-discretionary:RemodelsCarls Jr.
    
    $
    3,042
    
    
    $
    6,369Hardees
    
    
    1,961
    
    
    
    2,066Capital MaintenanceCarls Jr.
    
    
    3,626
    
    
    
    2,862Hardees
    
    
    3,274
    
    
    
    4,861Corporate/other
    
    
    1,474
    
    
    
    2,421Total non-discretionary
    
    
    13,377
    
    
    
    18,579Discretionary:New restaurants/rebuildsCarls Jr.
    
    
    2,256
    
    
    
    4,722Hardees
    
    
    1,505
    
    
    
    4,971Dual-brandingCarls Jr.
    
    
    88
    
    
    
    275Hardees
    
    
    1,118
    
    
    
    983Real estate/franchise acquisitions
    
    
    1,654
    
    
    
    2,052Corporate/other
    
    
    95
    
    
    
    2,098Capital expenditures  discontinued operations
    
    
    
    
    
    
    1,815Total discretionary
    
    
    6,716
    
    
    
    16,916Total
    
    $
    20,093
    
    
    $
    35,495
   24




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
    Commodity Price Risk
  
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  25




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##### Table of Contents



(b) Changes in Internal Control
  
 Part II. Other Information.
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Issuer Purchase of Equity Securities
  (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)MaximumDollarValue ofTotal
    
    
    Shares thatNumber of Shares
    
    
    May Yet BeAverage
    
    
    Purchased as Part
    
    
    PurchasedTotal
    
    
    Price
    
    
    of Publicly
    
    
    Under theNumber of Shares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsJanuary 29, 2008  February 25, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    42,747February 26, 2008  March 24, 4008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,747March 25, 2008  April 21, 2008 (1)
    
    
    109,800
    
    
    
    12.23
    
    
    
    109,800
    
    
    
    41,404April 22, 2008  May 19, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,404Total
    
    
    109,800
    
    
    $
    12.23
    
    
    
    109,800
    
    
    $
    41,404
 
 (1)
    
    We received and cancelled a total of 109,800 shares of our outstanding common stock in
payment of taxes owed on ordinary income recognized by three of our executives in connection
with the vesting of restricted stock awards issued under our stock incentive plans. 26




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##### Table of Contents



Item 6. Exhibits.
 Exhibit #3.1
    
    Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Companys Registration Statement
Form S-4 filed with the Securities and Exchange Commission on
March 7, 1994).3.2
    
    Certificate of Amendment of Certificate of Incorporation of the
Company, as filed with the Delaware Secretary of State on
December 9, 1997 (incorporated by reference to Exhibit 3.2 to
the Companys Annual Report on Form 10-K for the fiscal year
ended January 26, 1998 filed with the Securities and Exchange
Commission on April 24, 1998).3.3
    
    Bylaws of the Company (incorporated by reference to Exhibit 3.1
to the Companys Registration Statement Form S-4 filed with the
Securities and Exchange Commission on March 7, 1994).3.4
    
    Certificate of Amendment of Bylaws of the Company (incorporated
by reference to Exhibit 3.4 to the Companys Annual Report on
Form 10-K for the fiscal year ended January 26, 2004 filed with
the Securities and Exchange Commission on April 7, 2004).3.5
    
    Certificate of Amendment of Bylaws, incorporated herein by
reference to Exhibit 3.5 to the Companys Current Report on Form
8-K filed December 13,
2006.3.6
    
    Certificate of Amendment of Bylaws, incorporated herein by
reference to Exhibit 3.6 to the Companys Current Report on Form
8-K filed December 10,
2007.10.1
    
    Third Amendment to Seventh Amended and Restated Credit
Agreement, dated as of March 7, 2008, by and among the Company,
BNP Paribas, a bank organized under the laws of France acting
through its Chicago branch, as Administrative Agent, and the
subsidiaries of the Company, incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed
March 13, 2008.10.2
    
    Employment Agreement, effective January 2004, by and between the
Company and Richard E. Fortman.10.3
    
    Amendment No. 1 to Employment Agreement between the Company and
Richard E. Fortman, effective as of December 6, 2005.10.4
    
    Amendment No. 2 to Employment Agreement between the Company and
Richard E. Fortman, effective as of March 20, 2007.31.1
    
    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.
 27




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##### Table of Contents



SIGNATURES
  CKE RESTAURANTS, INC.
(Registrant)Date: June 25, 2008
    
    /s/ Theodore Abajian

Theodore AbajianExecutive Vice PresidentChief Financial Officer
 28




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##### Table of Contents



Exhibit Index
 Exhibit #3.1
    
    Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Companys Registration Statement
Form S-4 filed with the Securities and Exchange Commission on
March 7, 1994).3.2
    
    Certificate of Amendment of Certificate of Incorporation of the
Company, as filed with the Delaware Secretary of State on
December 9, 1997 (incorporated by reference to Exhibit 3.2 to
the Companys Annual Report on Form 10-K for the fiscal year
ended January 26, 1998 filed with the Securities and Exchange
Commission on April 24, 1998).3.3
    
    Bylaws of the Company (incorporated by reference to Exhibit 3.1
to the Companys Registration Statement Form S-4 filed with the
Securities and Exchange Commission on March 7, 1994).3.4
    
    Certificate of Amendment of Bylaws of the Company (incorporated
by reference to Exhibit 3.4 to the Companys Annual Report on
Form 10-K for the fiscal year ended January 26, 2004 filed with
the Securities and Exchange Commission on April 7, 2004).3.5
    
    Certificate of Amendment of Bylaws, incorporated herein by
reference to Exhibit 3.5 to the Companys Current Report on Form
8-K filed December 13,
2006.3.6
    
    Certificate of Amendment of Bylaws, incorporated herein by
reference to Exhibit 3.6 to the Companys Current Report on Form
8-K filed December 10,
2007.10.1
    
    Third Amendment to Seventh Amended and Restated Credit
Agreement, dated as of March 7, 2008, by and among the Company,
BNP Paribas, a bank organized under the laws of France acting
through its Chicago branch, as Administrative Agent, and the
subsidiaries of the Company, incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed
March 13, 2008.10.2
    
    Employment Agreement, effective January 2004, by and between the
Company and Richard E. Fortman.10.3
    
    Amendment No. 1 to Employment Agreement between the Company and
Richard E. Fortman, effective as of December 6, 2005.10.4
    
    Amendment No. 2 to Employment Agreement between the Company and
Richard E. Fortman, effective as of March 20, 2007.31.1
    
    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.
 29