##### 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 August 13, 2007
 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
  þ o o
 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 August 13, 2007 and January 31, 2007
    
    
    3Condensed Consolidated Statements of Income for the twelve and twenty-eight weeks
ended August 13, 2007 and August 14, 2006
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the twenty-eight
weeks ended August 13, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended
August 13, 2007 and August 14, 2006
    
    
    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
    
    
    47Item 4 Controls and Procedures
    
    
    47Part II. Other InformationItem 1 Legal Proceedings
    
    
    48Item 1A Risk Factors
    
    
    48Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    48Item 3 Defaults Upon Senior Securities
    
    
    49Item 4 Submission of Matters to a Vote of Security Holders
    
    
    49Item 5 Other Information
    
    
    49Item 6 Exhibits
    
    
    50Signatures
    
    
    51EXHIBIT 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 13, 2007
    
    
    January 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,611
    
    
    $
    18,620Accounts receivable, net of allowance for doubtful accounts of $1,064 as of August
13, 2007 and $821 as of January 31, 2007
    
    
    45,645
    
    
    
    42,485Related party trade receivables
    
    
    4,696
    
    
    
    4,644Inventories, net
    
    
    26,308
    
    
    
    21,708Prepaid expenses
    
    
    11,531
    
    
    
    13,548Assets held for sale
    
    
    9,745
    
    
    
    3,949Advertising fund assets, restricted
    
    
    18,770
    
    
    
    17,896Deferred income tax assets, net
    
    
    14,837
    
    
    
    25,450Current assets of discontinued operations
    
    
    
    
    
    
    2,007Other current assets
    
    
    3,264
    
    
    
    1,971Total current assets
    
    
    154,407
    
    
    
    152,278Notes receivable, net of allowance for doubtful accounts of $659 as of August 13, 2007
and $2,786 as of January 31, 2007
    
    
    273
    
    
    
    775Property and equipment, net of accumulated depreciation and amortization of $451,028
as of August 13, 2007 and $441,447 as of January 31, 2007
    
    
    489,541
    
    
    
    482,388Property under capital leases, net of accumulated amortization of $45,396 as of August
13, 2007 and $44,885 as of January 31, 2007
    
    
    22,882
    
    
    
    25,153Deferred income tax assets, net
    
    
    86,317
    
    
    
    85,997Goodwill
    
    
    22,649
    
    
    
    22,649Long-term assets of discontinued operations
    
    
    
    
    
    
    18,859Other assets, net
    
    
    9,564
    
    
    
    8,539Total assets
    
    $
    785,633
    
    
    $
    796,638LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of bank indebtedness and other long-term debt
    
    $
    2,907
    
    
    $
    1,500Current portion of capital lease obligations
    
    
    5,532
    
    
    
    5,323Accounts payable
    
    
    66,456
    
    
    
    63,994Advertising fund liabilities
    
    
    18,770
    
    
    
    17,896Current liabilities of discontinued operations
    
    
    
    
    
    
    1,749Other current liabilities
    
    
    102,487
    
    
    
    94,677Total current liabilities
    
    
    196,152
    
    
    
    185,139Bank indebtedness and other long-term debt, less current portion
    
    
    226,698
    
    
    
    114,942Convertible subordinated notes due 2023
    
    
    15,167
    
    
    
    15,167Capital lease obligations, less current portion
    
    
    37,883
    
    
    
    41,123Long-term liabilities of discontinued operations
    
    
    
    
    
    
    5,746Other long-term liabilities
    
    
    58,329
    
    
    
    55,675Total liabilities
    
    
    534,229
    
    
    
    417,792Commitments and contingencies (Notes 6 and 14)Subsequent events (Notes 12, 13, 15 and 17)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; 60,543 shares issued and
59,213 shares outstanding as of August 13, 2007; 67,247 shares issued and 67,229
shares outstanding as of January 31, 2007
    
    
    606
    
    
    
    672Common stock held in treasury, at cost; 1,330 shares as of August 13, 2007 and 18
shares as of January 31, 2007
    
    
    (22,635
    )
    
    
    (360
    )Additional paid-in capital
    
    
    379,677
    
    
    
    501,437Accumulated deficit
    
    
    (106,244
    )
    
    
    (122,903
    )Total stockholders equity
    
    
    251,404
    
    
    
    378,846Total liabilities and stockholders equity
    
    $
    785,633
    
    
    $
    796,638
 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)
 Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Revenue:Company-operated restaurants
    
    $
    287,796
    
    
    $
    289,114
    
    
    $
    668,320
    
    
    $
    666,258Franchised and licensed restaurants and other
    
    
    75,295
    
    
    
    75,290
    
    
    
    176,573
    
    
    
    172,194Total revenue
    
    
    363,091
    
    
    
    364,404
    
    
    
    844,893
    
    
    
    838,452Operating costs and expenses:Restaurant operating costs:Food and packaging
    
    
    86,028
    
    
    
    82,741
    
    
    
    197,463
    
    
    
    191,075Payroll and employee benefits
    
    
    85,159
    
    
    
    83,778
    
    
    
    195,640
    
    
    
    193,268Occupancy and other
    
    
    63,373
    
    
    
    60,521
    
    
    
    145,247
    
    
    
    139,012Total restaurant operating costs
    
    
    234,560
    
    
    
    227,040
    
    
    
    538,350
    
    
    
    523,355Franchised and licensed restaurants and other
    
    
    57,821
    
    
    
    54,909
    
    
    
    137,312
    
    
    
    129,256Advertising
    
    
    17,271
    
    
    
    16,802
    
    
    
    40,032
    
    
    
    39,205General and administrative
    
    
    31,615
    
    
    
    31,987
    
    
    
    77,642
    
    
    
    76,800Facility action charges, net
    
    
    (1,546
    )
    
    
    (198
    )
    
    
    (1,800
    )
    
    
    2,333Total operating costs and expenses
    
    
    339,721
    
    
    
    330,540
    
    
    
    791,536
    
    
    
    770,949Operating income
    
    
    23,370
    
    
    
    33,864
    
    
    
    53,357
    
    
    
    67,503Interest expense
    
    
    (4,461
    )
    
    
    (5,064
    )
    
    
    (9,756
    )
    
    
    (12,106
    )Conversion inducement expense
    
    
    
    
    
    
    (3,599
    )
    
    
    
    
    
    
    (3,599
    )Other income, net
    
    
    588
    
    
    
    1,190
    
    
    
    2,212
    
    
    
    1,555Income before income taxes and discontinued
operations
    
    
    19,497
    
    
    
    26,391
    
    
    
    45,813
    
    
    
    53,353Income tax expense
    
    
    7,846
    
    
    
    11,739
    
    
    
    18,463
    
    
    
    22,495Income from continuing operations
    
    
    11,651
    
    
    
    14,652
    
    
    
    27,350
    
    
    
    30,858Loss from discontinued operations (net of income
tax expense of $2,501 and $2,341 for the twelve
and twenty-eight weeks ended August 13, 2007,
respectively, and income tax benefit of $131 and
$99 for the twelve and twenty-eight weeks ended
August 14, 2006, respectively)
    
    
    (2,226
    )
    
    
    (436
    )
    
    
    (2,574
    )
    
    
    (474
    )Net income
    
    $
    9,425
    
    
    $
    14,216
    
    
    $
    24,776
    
    
    $
    30,384Basic income per common share:Continuing operations
    
    $
    0.19
    
    
    $
    0.25
    
    
    $
    0.42
    
    
    $
    0.52Discontinued operations
    
    
    (0.04
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    (0.01
    )Net income
    
    $
    0.15
    
    
    $
    0.24
    
    
    $
    0.38
    
    
    $
    0.51Diluted income per common share:Continuing operations
    
    $
    0.18
    
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.44Discontinued operations
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    Net income
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.37
    
    
    $
    0.44Dividends per common share
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.12
    
    
    $
    0.08Weighted-average common shares outstanding:Basic
    
    
    62,041
    
    
    
    59,850
    
    
    
    64,645
    
    
    
    59,754Dilutive effect of stock options, convertible
notes and restricted stock
    
    
    3,301
    
    
    
    12,941
    
    
    
    3,316
    
    
    
    13,257Diluted
    
    
    65,342
    
    
    
    72,791
    
    
    
    67,961
    
    
    
    73,011
 See Accompanying Notes to Condensed Consolidated Financial Statements
 4




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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)
 Twenty-Eight Weeks Ended August 13, 2007Common Stock
    
    
    Additional
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Held in Treasury
    
    
    Paid-In
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    EquityBalance at January 31, 2007
    
    
    67,247
    
    
    $
    672
    
    
    
    (18
    )
    
    $
    (360
    )
    
    $
    501,437
    
    
    $
    (122,903
    )
    
    $
    378,846Cash dividends declared
($0.12 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,346
    )
    
    
    (7,346
    )Issuance of restricted stock
awards
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    385
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2,601
    
    
    
    
    
    
    
    2,605Tax benefit from exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,090
    
    
    
    
    
    
    
    2,090Share-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,832
    
    
    
    
    
    
    
    4,832Repurchase and retirement of
common stock
    
    
    (7,090
    )
    
    
    (70
    )
    
    
    (1,312
    )
    
    
    (22,275
    )
    
    
    (131,283
    )
    
    
    
    
    
    
    (153,628
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,776
    
    
    
    24,776FIN 48 transition amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (771
    )
    
    
    (771
    )Balance at August 13, 2007
    
    
    60,543
    
    
    $
    606
    
    
    
    (1,330
    )
    
    $
    (22,635
    )
    
    $
    379,677
    
    
    $
    (106,244
    )
    
    $
    251,404
 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 13, 2007
    
    
    August 14, 2006Cash flows from operating activities:Net income
    
    $
    24,776
    
    
    $
    30,384Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    34,910
    
    
    
    32,700Amortization of loan fees
    
    
    495
    
    
    
    1,778Share-based compensation expense
    
    
    4,832
    
    
    
    2,925(Recovery of) provision for losses on accounts and notes receivable
    
    
    (695
    )
    
    
    294Loss on sales of property and equipment, capital leases and extinguishment
of debt
    
    
    1,707
    
    
    
    989Facility action charges, net
    
    
    (2,505
    )
    
    
    3,536Deferred income taxes
    
    
    10,471
    
    
    
    21,271Other non-cash charges (credits)
    
    
    34
    
    
    
    (47
    )Net change in estimated liability for closing restaurants and estimated
liability for self-insurance
    
    
    (2,047
    )
    
    
    (2,073
    )Net change in receivables, inventories, prepaid expenses and other
current and non-current assets
    
    
    2,794
    
    
    
    (2,608
    )Net change in accounts payable and other current and long-term liabilities
    
    
    2,301
    
    
    
    8,512Net cash provided by operating activities
    
    
    77,073
    
    
    
    97,661Cash flows from investing activities:Purchases of property and equipment
    
    
    (71,098
    )
    
    
    (56,089
    )Proceeds from sales of property and equipment
    
    
    24,636
    
    
    
    13,475Collections on notes receivable
    
    
    856
    
    
    
    1,112Disposition of La Salsa, net of cash surrendered
    
    
    5,720
    
    
    
    Other investing activities
    
    
    40
    
    
    
    35Net cash used in investing activities
    
    
    (39,846
    )
    
    
    (41,467
    )Cash flows from financing activities:Net change in bank overdraft
    
    
    (6,279
    )
    
    
    (5,164
    )Borrowings under revolving credit facility
    
    
    168,500
    
    
    
    52,500Repayments of borrowings under revolving credit facility
    
    
    (155,000
    )
    
    
    (54,500
    )Borrowings under credit facility term loan
    
    
    100,179
    
    
    
    Repayment of credit facility term loan
    
    
    (425
    )
    
    
    (19,454
    )Repayment of other long-term debt
    
    
    (92
    )
    
    
    (73
    )Borrowing by consolidated variable interest entity
    
    
    
    
    
    
    46Repayments of capital lease obligations
    
    
    (2,857
    )
    
    
    (2,649
    )Payment of deferred loan fees
    
    
    (1,029
    )
    
    
    Repurchase of common stock
    
    
    (136,982
    )
    
    
    (23,999
    )Exercise of stock options
    
    
    2,605
    
    
    
    2,387Tax benefit from exercise of stock options
    
    
    1,567
    
    
    
    223Dividends paid on common stock
    
    
    (6,483
    )
    
    
    (4,788
    )Net cash used in financing activities
    
    
    (36,296
    )
    
    
    (55,471
    )Net increase in cash and cash equivalents
    
    
    931
    
    
    
    723Cash and cash equivalents at beginning of period
    
    
    18,680
    
    
    
    21,343Cash and cash equivalents at end of period
    
    $
    19,611
    
    
    $
    22,066
 See Accompanying Notes to Condensed Consolidated Financial Statements
 6




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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)
 (Unaudited)
 Note 1  Basis of Presentation and Description of Business
 ® ® ®
  Carls Jr.
    
    Hardees
    
    Other
    
    TotalCompany-operated
    
    
    399
    
    
    
    646
    
    
    
    1
    
    
    
    1,046Franchised and licensed
    
    
    712
    
    
    
    1,263
    
    
    
    15
    
    
    
    1,990Total
    
    
    1,111
    
    
    
    1,909
    
    
    
    16
    
    
    
    3,036
   ®
 Variable Interest Entities
 Consolidation
of Variable Interest Entities  an interpretation of 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)
(Unaudited)
 Accounting for Franchise
Fee Revenue
  Note 2  Accounting Pronouncements Not Yet Adopted
 Fair Value Measurements.
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115 Accounting for Certain Investment in Debt and Equity Securities
 Note 3  Adoption of New Accounting Pronouncements
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140. Accounting for Derivative Instruments and Hedging
Activities Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities  a replacement of FASB Statement 125.
 Accounting for Servicing of Financial Assets  an
amendment of FASB Statement No. 140.
 Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109
 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)
(Unaudited)
 How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income
Statement (That Is, Gross versus Net Presentation).
 Note 4  Share-Based Compensation
 Share-Based Payment
 Stock Incentive Plans
    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)
(Unaudited)
     Stock options outstanding:
 Weighted-Average
    
    
    AggregateWeighted-Average
    
    
    Remaining
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Contractual Life
    
    
    ValueOutstanding at January 31, 2007
    
    
    5,374,306
    
    
    $
    13.36
    
    
    
    5.38Granted
    
    
    50,000
    
    
    
    17.53Exercised
    
    
    (386,828
    )
    
    
    6.61Forfeited
    
    
    (62,364
    )
    
    
    18.82Expired
    
    
    (450,803
    )
    
    
    23.63Outstanding at August 13, 2007
    
    
    4,524,311
    
    
    $
    12.89
    
    
    
    5.39
    
    
    $
    26,877Exercisable at August 13, 2007
    
    
    3,442,095
    
    
    $
    11.85
    
    
    
    4.36
    
    
    $
    24,514Expected to vest at August 13, 2007
    
    
    979,295
    
    
    $
    16.14
    
    
    
    8.66
    
    
    $
    2,158
 Restricted stock awards:
 Weighted-AverageGrant DateShares
    
    
    Fair ValueRestricted stock awards at January 31, 2007
    
    
    616,012
    
    
    $
    17.36Granted
    
    
    1,456
    
    
    $
    20.58Awards vested
    
    
    (10,001
    )
    
    $
    13.68Restricted stock awards at August 13, 2007
    
    
    607,467
    
    
    $
    17.43
  10




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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)
(Unaudited)
   Employee Stock Purchase Plan
  Note 5  Other Assets
  August 13,
    
    
    January 31,2007
    
    
    2007Intangible assets (see table below)
    
    $
    2,780
    
    
    $
    2,922Deferred financing costs
    
    
    4,217
    
    
    
    3,697Net investment in lease receivables, less current portion
    
    
    570
    
    
    
    610Other
    
    
    1,997
    
    
    
    1,310$
    9,564
    
    
    $
    8,539
   Weighted-
    
    
    August 13, 2007
    
    
    January 31, 2007Average
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetLife
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingIntangible Assets
    
    (Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountTrademarks
    
    
    20
    
    
    $
    3,166
    
    
    $
    (862
    )
    
    $
    2,304
    
    
    $
    3,166
    
    
    $
    (776
    )
    
    $
    2,390Favorable lease agreements
    
    
    21
    
    
    
    1,121
    
    
    
    (645
    )
    
    
    476
    
    
    
    1,491
    
    
    
    (959
    )
    
    
    532$
    4,287
    
    
    $
    (1,507
    )
    
    $
    2,780
    
    
    $
    4,657
    
    
    $
    (1,735
    )
    
    $
    2,922
  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)
(Unaudited)
 Note 6  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)
(Unaudited)
      Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Facility
    
    $
    2,714
    
    
    $
    1,404
    
    
    $
    5,652
    
    
    $
    3,529Capital lease obligations
    
    
    1,171
    
    
    
    1,301
    
    
    
    2,732
    
    
    
    3,0392023 Convertible Notes
    
    
    140
    
    
    
    934
    
    
    
    326
    
    
    
    2,226Amortization of loan fees
    
    
    227
    
    
    
    762
    
    
    
    492
    
    
    
    1,778Letter of credit fees and other
    
    
    209
    
    
    
    663
    
    
    
    554
    
    
    
    1,534$
    4,461
    
    
    $
    5,064
    
    
    $
    9,756
    
    
    $
    12,106
 Note 7  Facility Action Charges, Net
  (i)
    
    impairment of long-lived assets for under-performing restaurants to be disposed of or held
and used;(ii)
    
    store closure costs, including sublease of closed facilities at amounts below our primary lease obligation;(iii)
    
    gain (loss) on the sale of restaurants and refranchising transactions; and(iv)
    
    amortization of discount related to estimated liability for closing restaurants.
 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)
(Unaudited)
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Carls Jr.Unfavorable dispositions of leased and fee
surplus properties, net
    
    $
    45
    
    
    $
    445
    
    
    $
    365
    
    
    $
    1,112Impairment of assets to be held and used
    
    
    54
    
    
    
    8
    
    
    
    54
    
    
    
    44Loss (gain) on sales of restaurants and
surplus properties, net
    
    
    206
    
    
    
    (838
    )
    
    
    210
    
    
    
    (829
    )Amortization of discount related to
estimated liability for closing
restaurants
    
    
    36
    
    
    
    53
    
    
    
    87
    
    
    
    131341
    
    
    
    (332
    )
    
    
    716
    
    
    
    458HardeesNew decisions regarding closing restaurants
    
    
    223
    
    
    
    145
    
    
    
    274
    
    
    
    1,921Unfavorable (favorable) dispositions of
leased and fee surplus properties, net
    
    
    67
    
    
    
    (189
    )
    
    
    219
    
    
    
    (123
    )Impairment of assets to be disposed of
    
    
    363
    
    
    
    266
    
    
    
    380
    
    
    
    452Impairment of assets to be held and used
    
    
    440
    
    
    
    232
    
    
    
    442
    
    
    
    236Gain on sales of restaurants and surplus
properties, net
    
    
    (3,112
    )
    
    
    (497
    )
    
    
    (4,229
    )
    
    
    (1,098
    )Amortization of discount related to
estimated liability for closing
restaurants
    
    
    84
    
    
    
    127
    
    
    
    216
    
    
    
    279(1,935
    )
    
    
    84
    
    
    
    (2,698
    )
    
    
    1,667OtherLoss on sales of restaurants and surplus
properties, net
    
    
    48
    
    
    
    50
    
    
    
    182
    
    
    
    208TotalNew decisions regarding closing restaurants
    
    
    223
    
    
    
    145
    
    
    
    274
    
    
    
    1,921Unfavorable dispositions of leased and fee
surplus properties, net
    
    
    112
    
    
    
    256
    
    
    
    584
    
    
    
    989Impairment of assets to be disposed of
    
    
    363
    
    
    
    266
    
    
    
    380
    
    
    
    452Impairment of assets to be held and used
    
    
    494
    
    
    
    240
    
    
    
    496
    
    
    
    280Gain on sales of restaurants and surplus
properties, net
    
    
    (2,858
    )
    
    
    (1,285
    )
    
    
    (3,837
    )
    
    
    (1,719
    )Amortization of discount related to
estimated liability for closing
restaurants
    
    
    120
    
    
    
    180
    
    
    
    303
    
    
    
    410$
    (1,546
    )
    
    $
    (198
    )
    
    $
    (1,800
    )
    
    $
    2,333
  Carls Jr.
    
    
    Hardees
    
    
    TotalBalance at January 31, 2007
    
    $
    3,186
    
    
    $
    9,173
    
    
    $
    12,359New decisions regarding closing restaurants
    
    
    
    
    
    
    274
    
    
    
    274Usage
    
    
    (733
    )
    
    
    (1,814
    )
    
    
    (2,547
    )Unfavorable dispositions of leased and fee surplus properties, net
    
    
    365
    
    
    
    219
    
    
    
    584Amortization of discount
    
    
    87
    
    
    
    216
    
    
    
    303Balance at August 13, 2007
    
    
    2,905
    
    
    
    8,068
    
    
    
    10,973Less current portion
    
    
    870
    
    
    
    2,565
    
    
    
    3,435Long-term portion
    
    $
    2,035
    
    
    $
    5,503
    
    
    $
    7,538
  14




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 8  Income Taxes
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Federal and state income taxes
    
    $
    7,565
    
    
    $
    11,442
    
    
    $
    17,866
    
    
    $
    21,873Foreign income taxes
    
    
    281
    
    
    
    297
    
    
    
    597
    
    
    
    622Income tax expense
    
    $
    7,846
    
    
    $
    11,739
    
    
    $
    18,463
    
    
    $
    22,495Effective income tax rate
    
    
    40.2
    %
    
    
    44.5
    %
    
    
    40.3
    %
    
    
    42.2
    %
       Note 9  Income Per Share
   15




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006(In thousands except per share amounts)Basic earnings per share:Income from continuing operations
    
    $
    11,651
    
    
    $
    14,652
    
    
    $
    27,350
    
    
    $
    30,858Loss from discontinued operations
    
    
    (2,226
    )
    
    
    (436
    )
    
    
    (2,574
    )
    
    
    (474
    )Net income
    
    $
    9,425
    
    
    $
    14,216
    
    
    $
    24,776
    
    
    $
    30,384Weighted-average shares for
computation of basic earnings
per share
    
    
    62,041
    
    
    
    59,850
    
    
    
    64,645
    
    
    
    59,754Basic income per share from
continuing operations
    
    $
    0.19
    
    
    $
    0.25
    
    
    $
    0.42
    
    
    $
    0.52Basic loss per share from
discontinued operations
    
    
    (0.04
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    (0.01
    )Basic net income per share
    
    $
    0.15
    
    
    $
    0.24
    
    
    $
    0.38
    
    
    $
    0.51Diluted earnings per share:Income from continuing operations
    
    $
    11,651
    
    
    $
    14,652
    
    
    $
    27,350
    
    
    $
    30,858Add: Interest and amortization
costs for 2023 Convertible
Notes, net of related tax effect
    
    
    101
    
    
    
    670
    
    
    
    238
    
    
    
    1,592Income from continuing
operations for computation of
diluted earnings per share
    
    $
    11,752
    
    
    $
    15,322
    
    
    $
    27,588
    
    
    $
    32,450Loss from discontinued operations
    
    $
    (2,226
    )
    
    $
    (436
    )
    
    $
    (2,574
    )
    
    $
    (474
    )Net income
    
    $
    9,425
    
    
    $
    14,216
    
    
    $
    24,776
    
    
    $
    30,384Add: Interest and amortization
costs for 2023 Convertible
Notes, net of related tax effect
    
    
    101
    
    
    
    670
    
    
    
    238
    
    
    
    1,592Net income for computation of
diluted earnings per share
    
    $
    9,526
    
    
    $
    14,886
    
    
    $
    25,014
    
    
    $
    31,976Weighted-average shares for
computation of basic earnings
per share
    
    
    62,041
    
    
    
    59,850
    
    
    
    64,645
    
    
    
    59,754Dilutive effect of stock options
and restricted stock
    
    
    1,554
    
    
    
    1,432
    
    
    
    1,569
    
    
    
    1,495Dilutive effect of 2023
Convertible Notes
    
    
    1,747
    
    
    
    11,509
    
    
    
    1,747
    
    
    
    11,762Weighted-average shares for
computation of diluted earnings
per share
    
    
    65,342
    
    
    
    72,791
    
    
    
    67,961
    
    
    
    73,011Diluted income per share from
continuing operations
    
    $
    0.18
    
    
    $
    0.21
    
    
    $
    0.41
    
    
    $
    0.44Diluted loss per share from
discontinued operations
    
    
    (0.03
    )
    
    
    (0.01
    )
    
    
    (0.04
    )
    
    
    Diluted net income per share
    
    $
    0.15
    
    
    $
    0.20
    
    
    $
    0.37
    
    
    $
    0.44
 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)
(Unaudited)
  Twelve Weeks Ended
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    August 14, 2006
    
    August 13, 2007
    
    August 14, 2006Stock options and restricted stock
    
    
    896
    
    
    
    2,442
    
    
    
    1,075
    
    
    
    2,154
 Note 10  Segment Information
  Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwelve Weeks Ended August 13, 2007Revenue
    
    $
    197,229
    
    
    $
    164,856
    
    
    $
    1,006
    
    
    $
    363,091Operating income
    
    
    15,060
    
    
    
    8,271
    
    
    
    39
    
    
    
    23,370Income (loss) before income taxes and discontinued
operations
    
    
    14,735
    
    
    
    6,610
    
    
    
    (1,848
    )
    
    
    19,497Goodwill (as of August 13, 2007)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwelve Weeks Ended August 14, 2006Revenue
    
    $
    194,681
    
    
    $
    168,706
    
    
    $
    1,017
    
    
    $
    364,404Operating income
    
    
    20,973
    
    
    
    12,848
    
    
    
    43
    
    
    
    33,864Income before income taxes and discontinued
operations
    
    
    20,420
    
    
    
    5,606
    
    
    
    365
    
    
    
    26,391Goodwill (as of August 14, 2006)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwenty-Eight Weeks Ended August 13, 2007Revenue
    
    $
    455,374
    
    
    $
    387,291
    
    
    $
    2,228
    
    
    $
    844,893Operating income
    
    
    36,488
    
    
    
    16,869
    
    
    
    
    
    
    
    53,357Income (loss) before income taxes and discontinued
operations
    
    
    35,967
    
    
    
    12,819
    
    
    
    (2,973
    )
    
    
    45,813Goodwill (as of August 13, 2007)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwenty-Eight Weeks Ended August 14, 2006Revenue
    
    $
    454,795
    
    
    $
    381,336
    
    
    $
    2,321
    
    
    $
    838,452Operating income (loss)
    
    
    47,705
    
    
    
    19,885
    
    
    
    (87
    )
    
    
    67,503Income (loss) before income taxes and discontinued
operations
    
    
    46,268
    
    
    
    7,569
    
    
    
    (484
    )
    
    
    53,353Goodwill (as of August 14, 2006)
    
    
    22,649
    
    
    
    
    
    
    
    
    
    
    
    22,649
 Note 11  Assets Held For Sale
  17




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Note 12  Discontinued Operations
   Accounting for the Impairment or Disposal of Long-Lived Assets
  Cash and cash equivalents
    
    $
    60Accounts receivable, net
    
    
    319Inventories, net
    
    
    257Prepaid expenses
    
    
    626Deferred income tax assets, net
    
    
    548Other current assets
    
    
    197Current assets of discontinued operations
    
    $
    2,007Property and equipment, net
    
    $
    6,202Other assets, net
    
    
    12,657Long-term assets of discontinued operations
    
    $
    18,859Accounts payable
    
    $
    293Other current liabilities
    
    
    1,456Current liabilities of discontinued operations
    
    $
    1,749Deferred income tax liabilities, net
    
    $
    2,216Other long-term liabilities
    
    
    3,530Long-term liabilities of discontinued operations
    
    $
    5,746
 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)
(Unaudited)
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Revenue
    
    $
    6,874
    
    
    $
    11,561
    
    
    $
    20,907
    
    
    $
    26,071Operating loss
    
    
    (222
    )
    
    
    (556
    )
    
    
    (724
    )
    
    
    (561
    )Interest (expense) income
    
    
    (7
    )
    
    
    1
    
    
    
    (22
    )
    
    
    (6
    )Other income (expense), net
    
    
    83
    
    
    
    (12
    )
    
    
    92
    
    
    
    (6
    )Income tax benefit
    
    
    13
    
    
    
    131
    
    
    
    173
    
    
    
    99(133
    )
    
    
    (436
    )
    
    
    (481
    )
    
    
    (474
    )Gain on disposal of La Salsa
    
    
    421
    
    
    
    
    
    
    
    421
    
    
    
    Income tax expense related to disposal of La Salsa
    
    
    (2,514
    )
    
    
    
    
    
    
    (2,514
    )
    
    
    Net loss on disposal of La Salsa
    
    
    (2,093
    )
    
    
    
    
    
    
    (2,093
    )
    
    
    Loss from discontinued operations
    
    $
    (2,226
    )
    
    $
    (436
    )
    
    $
    (2,574
    )
    
    $
    (474
    )
 Note 13  Purchase and Sale of Assets
  Note 14  Commitments and Contingent Liabilities
    19




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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 15  Stockholders Equity
 Repurchase of Common Stock
   Dividends
  20




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 16  Supplemental Cash Flow Information
 Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006Cash paid for:Interest, net of amounts capitalized
    
    $
    10,212
    
    
    $
    10,362Income taxes, net of refunds received
    
    $
    3,809
    
    
    $
    558Non-cash investing and financing activities:Gain recognized on sale and leaseback transactions
    
    $
    187
    
    
    $
    188Dividends declared, not paid
    
    $
    3,633
    
    
    $
    2,576
  Note 17  Subsequent Events
    21




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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
  Adoption of New Accounting Pronouncements
  Critical Accounting Policies
   
    
    estimation of future cash flows used to assess the recoverability of long-lived assets
and to establish the estimated liability for closing restaurants and subsidizing lease
payments of franchisees;
    
    estimation, using actuarially determined methods, of our self-insured claim losses
under our workers compensation, general and auto liability insurance programs;
 22




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 
    
    determination of appropriate estimated liabilities for loss contingencies;
    
    determination of appropriate assumptions to use in evaluating leases for capital versus
operating lease treatment, establishing depreciable lives for leasehold improvements and
establishing straight-line rent expense periods;
    
    estimation of the appropriate allowances associated with franchise and license
receivables and liabilities for franchise subleases;
    
    determination of the appropriate assumptions to use to estimate the fair value of
share-based compensation; and
    
    estimation of our net deferred income tax asset valuation allowance, liabilities
related to uncertain tax positions and effective tax rate.
  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
    Impairment of Goodwill
  23




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Business Combinations
  Estimated Liability for Closing Restaurants
    Estimated Liability for Self-Insurance
  24




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
   Loss Contingencies
   Accounting for Lease Obligations
   Franchised and Licensed Operations
  25




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
    Accounting for Costs Associated with Exit or Disposal Activities
  Share-Based Compensation
  26




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
   Income Taxes
      Significant Known Events, Trends, or Uncertainties Expected to Impact Fiscal 2008 Comparisons with
Fiscal 2007
  Fiscal Year and Seasonality
  27




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Business Strategy
  
    
    increase revenues, average unit volumes and operating income at our major brands;
    
    remain focused on restaurant fundamentals  quality, service and cleanliness;
    
    capitalize on our unique brand positioning and cutting-edge advertising;
    
    offer premium products that compete on quality, innovation and taste;
    
    continue to capitalize on dual-branding opportunities available with Green Burrito and Red Burrito;
    
    control costs and improve capital structure while increasing stockholder distributions;
    
    leverage our infrastructure and marketing presence to build out existing core markets;
    
    remodel our existing store base to remain competitive;
    
    focus on the strategic growth of the Hardees brand through our new refranchising program; and
    
    strengthen our franchise system and pursue further franchising opportunities, including new franchisees.
 Franchise Operations
   28




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Operating Review
  Twelve Weeks Ended August 13, 2007Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    138,893
    
    
    $
    148,832
    
    
    $
    71
    
    
    $
    
    
    
    $
    287,796Restaurant operating costs:Food and packaging
    
    
    40,256
    
    
    
    45,750
    
    
    
    22
    
    
    
    
    
    
    
    86,028Payroll and employee benefits
    
    
    38,860
    
    
    
    46,271
    
    
    
    28
    
    
    
    
    
    
    
    85,159Occupancy and other
    
    
    31,445
    
    
    
    31,897
    
    
    
    31
    
    
    
    
    
    
    
    63,373Total restaurant operating costs
    
    
    110,561
    
    
    
    123,918
    
    
    
    81
    
    
    
    
    
    
    
    234,560Franchised and licensed restaurants and other
revenue:Royalties
    
    
    7,439
    
    
    
    10,190
    
    
    
    106
    
    
    
    
    
    
    
    17,735Distribution centers
    
    
    45,481
    
    
    
    3,587
    
    
    
    
    
    
    
    (2
    )
    
    
    49,066Rent
    
    
    5,048
    
    
    
    1,629
    
    
    
    
    
    
    
    
    
    
    
    6,677Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    831
    
    
    
    
    
    
    
    831Other
    
    
    368
    
    
    
    618
    
    
    
    
    
    
    
    
    
    
    
    986Total franchised and licensed
restaurants and other revenue
    
    
    58,336
    
    
    
    16,024
    
    
    
    937
    
    
    
    (2
    )
    
    
    75,295Franchised and licensed restaurants and other
expenses:Administrative expense (including
provision for bad debts)
    
    
    1,348
    
    
    
    1,407
    
    
    
    
    
    
    
    
    
    
    
    2,755Distribution centers
    
    
    45,162
    
    
    
    3,666
    
    
    
    
    
    
    
    
    
    
    
    48,828Rent and other occupancy
    
    
    4,282
    
    
    
    1,162
    
    
    
    
    
    
    
    
    
    
    
    5,444Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    812
    
    
    
    (18
    )
    
    
    794Total franchised and licensed
restaurants and other expenses
    
    
    50,792
    
    
    
    6,235
    
    
    
    812
    
    
    
    (18
    )
    
    
    57,821Advertising
    
    
    8,206
    
    
    
    9,064
    
    
    
    1
    
    
    
    
    
    
    
    17,271General and administrative
    
    
    12,269
    
    
    
    19,303
    
    
    
    43
    
    
    
    
    
    
    
    31,615Facility action charges, net
    
    
    341
    
    
    
    (1,935
    )
    
    
    48
    
    
    
    
    
    
    
    (1,546
    )Operating income
    
    $
    15,060
    
    
    $
    8,271
    
    
    $
    23
    
    
    $
    16
    
    
    $
    23,370Company-operated average unit volume

(trailing-13 periods)
    
    $
    1,481
    
    
    $
    934Franchise-operated average unit volume

(trailing-13 periods)
    
    $
    1,204
    
    
    $
    964Company-operated same-store sales increase
    
    
    2.0
    %
    
    
    2.9
    %Franchise-operated same-store sales increase
    
    
    0.3
    %
    
    
    Company-operated same-store transaction
(decrease) increase
    
    
    (1.9
    )%
    
    
    2.7
    %Average check (actual $)
    
    $
    6.80
    
    
    $
    4.99Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    29.0
    %
    
    
    30.7
    %Payroll and employee benefits
    
    
    28.0
    %
    
    
    31.1
    %Occupancy and other
    
    
    22.6
    %
    
    
    21.4
    %Total restaurant operating costs
    
    
    79.6
    %
    
    
    83.2
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.9
    %
    
    
    6.1
    %
 29




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Twelve Weeks Ended August 14, 2006Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    138,407
    
    
    $
    150,627
    
    
    $
    80
    
    
    $
    
    
    
    $
    289,114Restaurant operating costs:Food and packaging
    
    
    39,502
    
    
    
    43,214
    
    
    
    25
    
    
    
    
    
    
    
    82,741Payroll and employee benefits
    
    
    36,622
    
    
    
    47,125
    
    
    
    31
    
    
    
    
    
    
    
    83,778Occupancy and other
    
    
    28,767
    
    
    
    31,728
    
    
    
    26
    
    
    
    
    
    
    
    60,521Total restaurant operating costs
    
    
    104,891
    
    
    
    122,067
    
    
    
    82
    
    
    
    
    
    
    
    227,040Franchised and licensed restaurants and other
revenue:Royalties
    
    
    6,849
    
    
    
    12,640
    
    
    
    118
    
    
    
    (29
    )
    
    
    19,578Distribution centers
    
    
    43,494
    
    
    
    3,631
    
    
    
    
    
    
    
    
    
    
    
    47,125Rent
    
    
    4,988
    
    
    
    1,572
    
    
    
    
    
    
    
    
    
    
    
    6,560Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    848
    
    
    
    
    
    
    
    848Other
    
    
    943
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    1,179Total franchised and licensed
restaurants and other revenue
    
    
    56,274
    
    
    
    18,079
    
    
    
    966
    
    
    
    (29
    )
    
    
    75,290Franchised and licensed restaurants and other
expenses:Administrative expense (including
provision for bad debts)
    
    
    1,189
    
    
    
    848
    
    
    
    
    
    
    
    
    
    
    
    2,037Distribution centers
    
    
    43,038
    
    
    
    3,809
    
    
    
    
    
    
    
    
    
    
    
    46,847Rent and other occupancy
    
    
    4,144
    
    
    
    1,099
    
    
    
    
    
    
    
    
    
    
    
    5,243Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    809
    
    
    
    (27
    )
    
    
    782Total franchised and licensed
restaurants and other expenses
    
    
    48,371
    
    
    
    5,756
    
    
    
    809
    
    
    
    (27
    )
    
    
    54,909Advertising
    
    
    8,063
    
    
    
    8,737
    
    
    
    2
    
    
    
    
    
    
    
    16,802General and administrative
    
    
    12,715
    
    
    
    19,214
    
    
    
    58
    
    
    
    
    
    
    
    31,987Facility action charges, net
    
    
    (332
    )
    
    
    84
    
    
    
    50
    
    
    
    
    
    
    
    (198
    )Operating income (loss)
    
    $
    20,973
    
    
    $
    12,848
    
    
    $
    45
    
    
    $
    (2
    )
    
    $
    33,864Company-operated average unit volume

(trailing-13 periods)
    
    $
    1,384
    
    
    $
    896Franchise-operated average unit volume

(trailing-13 periods)
    
    $
    1,187
    
    
    $
    913Company-operated same-store sales increase
    
    
    4.8
    %
    
    
    3.0
    %Franchise-operated same-store sales increase
    
    
    4.7
    %
    
    
    3.9
    %Company-operated same-store transaction
increase (decrease)
    
    
    0.1
    %
    
    
    (0.4
    )%Average check (actual $)
    
    $
    6.47
    
    
    $
    5.01Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    28.5
    %
    
    
    28.7
    %Payroll and employee benefits
    
    
    26.5
    %
    
    
    31.3
    %Occupancy and other
    
    
    20.8
    %
    
    
    21.1
    %Total restaurant operating costs
    
    
    75.8
    %
    
    
    81.0
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.8
    %
    
    
    5.8
    %
 30




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Twenty-Eight Weeks Ended August 13, 2007Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    320,122
    
    
    $
    348,024
    
    
    $
    174
    
    
    $
    
    
    
    $
    668,320Restaurant operating costs:Food and packaging
    
    
    93,178
    
    
    
    104,228
    
    
    
    57
    
    
    
    
    
    
    
    197,463Payroll and employee benefits
    
    
    87,396
    
    
    
    108,173
    
    
    
    71
    
    
    
    
    
    
    
    195,640Occupancy and other
    
    
    70,343
    
    
    
    74,840
    
    
    
    64
    
    
    
    
    
    
    
    145,247Total restaurant operating costs
    
    
    250,917
    
    
    
    287,241
    
    
    
    192
    
    
    
    
    
    
    
    538,350Franchised and licensed restaurants and other
revenue:Royalties
    
    
    17,192
    
    
    
    23,182
    
    
    
    271
    
    
    
    
    
    
    
    40,645Distribution centers
    
    
    105,251
    
    
    
    11,294
    
    
    
    
    
    
    
    (4
    )
    
    
    116,541Rent
    
    
    12,007
    
    
    
    3,964
    
    
    
    
    
    
    
    
    
    
    
    15,971Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    1,787
    
    
    
    
    
    
    
    1,787Other
    
    
    802
    
    
    
    827
    
    
    
    
    
    
    
    
    
    
    
    1,629Total franchised and licensed
restaurants and other revenue
    
    
    135,252
    
    
    
    39,267
    
    
    
    2,058
    
    
    
    (4
    )
    
    
    176,573Franchised and licensed restaurants and other
expenses:Administrative expense (including
provision for bad debts)
    
    
    3,206
    
    
    
    3,147
    
    
    
    
    
    
    
    
    
    
    
    6,353Distribution centers
    
    
    105,089
    
    
    
    11,392
    
    
    
    
    
    
    
    
    
    
    
    116,481Rent and other occupancy
    
    
    10,182
    
    
    
    2,556
    
    
    
    
    
    
    
    
    
    
    
    12,738Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    1,780
    
    
    
    (40
    )
    
    
    1,740Total franchised and licensed
restaurants and other expenses
    
    
    118,477
    
    
    
    17,095
    
    
    
    1,780
    
    
    
    (40
    )
    
    
    137,312Advertising
    
    
    18,806
    
    
    
    21,223
    
    
    
    3
    
    
    
    
    
    
    
    40,032General and administrative
    
    
    29,970
    
    
    
    47,561
    
    
    
    111
    
    
    
    
    
    
    
    77,642Facility action charges, net
    
    
    716
    
    
    
    (2,698
    )
    
    
    182
    
    
    
    
    
    
    
    (1,800
    )Operating income (loss)
    
    $
    36,488
    
    
    $
    16,869
    
    
    $
    (36
    )
    
    $
    36
    
    
    $
    53,357Company-operated same-store sales increase
    
    
    0.8
    %
    
    
    2.3
    %Franchise-operated same-store sales increase
    
    
    0.2
    %
    
    
    0.5
    %Company-operated same-store transaction
(decrease) increase
    
    
    (3.9
    )%
    
    
    1.8
    %Average check (actual $)
    
    $
    6.78
    
    
    $
    4.95Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    29.1
    %
    
    
    29.9
    %Payroll and employee benefits
    
    
    27.3
    %
    
    
    31.1
    %Occupancy and other
    
    
    22.0
    %
    
    
    21.5
    %Total restaurant operating costs
    
    
    78.4
    %
    
    
    82.5
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.9
    %
    
    
    6.1
    %
 31




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Twenty-Eight Weeks Ended August 14, 2006Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    325,504
    
    
    $
    340,566
    
    
    $
    188
    
    
    $
    
    
    
    $
    666,258Restaurant operating costs:Food and packaging
    
    
    92,738
    
    
    
    98,275
    
    
    
    62
    
    
    
    
    
    
    
    191,075Payroll and employee benefits
    
    
    85,469
    
    
    
    107,726
    
    
    
    73
    
    
    
    
    
    
    
    193,268Occupancy and other
    
    
    67,210
    
    
    
    71,742
    
    
    
    60
    
    
    
    
    
    
    
    139,012Total restaurant operating costs
    
    
    245,417
    
    
    
    277,743
    
    
    
    195
    
    
    
    
    
    
    
    523,355Franchised and licensed restaurants and
other revenue:Royalties
    
    
    15,495
    
    
    
    26,276
    
    
    
    254
    
    
    
    (42
    )
    
    
    41,983Distribution centers
    
    
    101,317
    
    
    
    9,480
    
    
    
    
    
    
    
    
    
    
    
    110,797Rent
    
    
    11,217
    
    
    
    4,570
    
    
    
    
    
    
    
    
    
    
    
    15,787Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    1,921
    
    
    
    
    
    
    
    1,921Other
    
    
    1,262
    
    
    
    444
    
    
    
    
    
    
    
    
    
    
    
    1,706Total franchised and licensed
restaurants and other revenue
    
    
    129,291
    
    
    
    40,770
    
    
    
    2,175
    
    
    
    (42
    )
    
    
    172,194Franchised and licensed restaurants and other
expenses:Administrative expense (including
provision for bad debts)
    
    
    2,832
    
    
    
    2,544
    
    
    
    
    
    
    
    
    
    
    
    5,376Distribution centers
    
    
    99,331
    
    
    
    9,932
    
    
    
    
    
    
    
    
    
    
    
    109,263Rent and other occupancy
    
    
    9,710
    
    
    
    3,047
    
    
    
    
    
    
    
    
    
    
    
    12,757Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    1,894
    
    
    
    (34
    )
    
    
    1,860Total franchised and licensed
restaurants and other expenses
    
    
    111,873
    
    
    
    15,523
    
    
    
    1,894
    
    
    
    (34
    )
    
    
    129,256Advertising
    
    
    19,113
    
    
    
    20,088
    
    
    
    4
    
    
    
    
    
    
    
    39,205General and administrative
    
    
    30,229
    
    
    
    46,430
    
    
    
    141
    
    
    
    
    
    
    
    76,800Facility action charges, net
    
    
    458
    
    
    
    1,667
    
    
    
    208
    
    
    
    
    
    
    
    2,333Operating income (loss)
    
    $
    47,705
    
    
    $
    19,885
    
    
    $
    (79
    )
    
    $
    (8
    )
    
    $
    67,503Company-operated same-store sales increase
    
    
    5.2
    %
    
    
    4.4
    %Franchise-operated same-store sales increase
    
    
    5.8
    %
    
    
    4.6
    %Company-operated same-store transaction
increase
    
    
    1.7
    %
    
    
    0.8
    %Average check (actual $)
    
    $
    6.39
    
    
    $
    4.95Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    28.5
    %
    
    
    28.9
    %Payroll and employee benefits
    
    
    26.3
    %
    
    
    31.6
    %Occupancy and other operating costs
    
    
    20.6
    %
    
    
    21.1
    %Total restaurant operating costs
    
    
    75.4
    %
    
    
    81.6
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.9
    %
    
    
    5.9
    %
 
 (A)
    
    Other consists of Green Burrito and amounts that we do not believe would be proper to
allocate to the operating segments.(B)
    
    Eliminations consists of the elimination of royalty revenues and expenses generated between
Hardees and a consolidated variable interest entity franchisee included in our accompanying
Condensed Consolidated Financial Statements. 32




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Presentation of Non-GAAP Measurements
 Adjusted EBITDA
    Twelve Weeks Ended August 13, 2007DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    8,801
    
    
    $
    3,946
    
    
    $
    (1,096
    )
    
    $
    (2,226
    )
    
    $
    9,425Interest expense
    
    
    632
    
    
    
    1,996
    
    
    
    1,833
    
    
    
    7
    
    
    
    4,468Income tax expense (benefit)
    
    
    5,934
    
    
    
    2,664
    
    
    
    (752
    )
    
    
    2,501
    
    
    
    10,347Depreciation and amortization
    
    
    7,281
    
    
    
    7,258
    
    
    
    49
    
    
    
    438
    
    
    
    15,026Facility action charges, net
    
    
    341
    
    
    
    (1,935
    )
    
    
    48
    
    
    
    (496
    )
    
    
    (2,042
    )Share-based compensation expense
    
    
    677
    
    
    
    1,090
    
    
    
    
    
    
    
    
    
    
    
    1,767Adjusted EBITDA
    
    $
    23,666
    
    
    $
    15,019
    
    
    $
    82
    
    
    $
    224
    
    
    $
    38,991
 Twelve Weeks Ended August 14, 2006DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    12,442
    
    
    $
    1,971
    
    
    $
    239
    
    
    $
    (436
    )
    
    $
    14,216Interest expense (income)
    
    
    881
    
    
    
    4,065
    
    
    
    118
    
    
    
    (1
    )
    
    
    5,063Income tax expense (benefit)
    
    
    7,978
    
    
    
    3,635
    
    
    
    126
    
    
    
    (131
    )
    
    
    11,608Depreciation and amortization
    
    
    5,753
    
    
    
    7,522
    
    
    
    54
    
    
    
    718
    
    
    
    14,047Facility action charges, net
    
    
    (332
    )
    
    
    84
    
    
    
    50
    
    
    
    1,172
    
    
    
    974Share-based compensation expense
    
    
    442
    
    
    
    713
    
    
    
    
    
    
    
    
    
    
    
    1,155Adjusted EBITDA
    
    $
    27,164
    
    
    $
    17,990
    
    
    $
    587
    
    
    $
    1,322
    
    
    $
    47,063
 Twenty-Eight Weeks Ended August 13, 2007DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    21,461
    
    
    $
    7,649
    
    
    $
    (1,760
    )
    
    $
    (2,574
    )
    
    $
    24,776Interest expense
    
    
    1,556
    
    
    
    4,896
    
    
    
    3,304
    
    
    
    22
    
    
    
    9,778Income tax expense (benefit)
    
    
    14,506
    
    
    
    5,170
    
    
    
    (1,213
    )
    
    
    2,341
    
    
    
    20,804Depreciation and amortization
    
    
    16,312
    
    
    
    17,149
    
    
    
    108
    
    
    
    1,341
    
    
    
    34,910Facility action charges, net
    
    
    716
    
    
    
    (2,698
    )
    
    
    182
    
    
    
    (705
    )
    
    
    (2,505
    )Share-based compensation expense
    
    
    1,879
    
    
    
    3,026
    
    
    
    
    
    
    
    
    
    
    
    4,905Adjusted EBITDA
    
    $
    56,430
    
    
    $
    35,192
    
    
    $
    621
    
    
    $
    425
    
    
    $
    92,668
 33




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Twenty-Eight Weeks Ended August 14, 2006DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    27,958
    
    
    $
    3,150
    
    
    $
    (250
    )
    
    $
    (474
    )
    
    $
    30,384Interest expense
    
    
    2,271
    
    
    
    9,717
    
    
    
    118
    
    
    
    6
    
    
    
    12,112Income tax expense (benefit)
    
    
    18,310
    
    
    
    4,419
    
    
    
    (234
    )
    
    
    (99
    )
    
    
    22,396Depreciation and amortization
    
    
    13,432
    
    
    
    17,462
    
    
    
    105
    
    
    
    1,701
    
    
    
    32,700Facility action charges, net
    
    
    458
    
    
    
    1,667
    
    
    
    208
    
    
    
    1,203
    
    
    
    3,536Share-based compensation expense
    
    
    1,120
    
    
    
    1,805
    
    
    
    
    
    
    
    
    
    
    
    2,925Adjusted EBITDA
    
    $
    63,549
    
    
    $
    38,220
    
    
    $
    (53
    )
    
    $
    2,337
    
    
    $
    104,053
 Trailing-13 Periods Ended August 13, 2007DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    41,862
    
    
    $
    10,998
    
    
    $
    (2,173
    )
    
    $
    (6,123
    )
    
    $
    44,564Interest expense (income)
    
    
    3,276
    
    
    
    10,670
    
    
    
    3,472
    
    
    
    (1
    )
    
    
    17,417Income tax expense (benefit)
    
    
    26,538
    
    
    
    4,828
    
    
    
    (1,379
    )
    
    
    320
    
    
    
    30,307Depreciation and amortization
    
    
    29,208
    
    
    
    32,508
    
    
    
    222
    
    
    
    2,690
    
    
    
    64,628Facility action charges, net
    
    
    922
    
    
    
    (1,871
    )
    
    
    359
    
    
    
    3,095
    
    
    
    2,505Share-based compensation expense
    
    
    3,963
    
    
    
    6,385
    
    
    
    
    
    
    
    
    
    
    
    10,348Adjusted EBITDA
    
    $
    105,769
    
    
    $
    63,518
    
    
    $
    501
    
    
    $
    (19
    )
    
    $
    169,769
 34




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006Net cash provided by operating activities
    
    $
    77,073
    
    
    $
    97,661Interest expense
    
    
    9,778
    
    
    
    12,112Income tax expense
    
    
    20,804
    
    
    
    22,396Amortization of loan fees
    
    
    (495
    )
    
    
    (1,778
    )Recovery of (provision for) losses on accounts and notes receivable
    
    
    695
    
    
    
    (294
    )Loss on sales of property and equipment, capital leases and extinguishment of
debt
    
    
    (1,707
    )
    
    
    (989
    )Deferred income taxes
    
    
    (10,471
    )
    
    
    (21,271
    )Other non-cash (charges) credits
    
    
    (34
    )
    
    
    47Change in estimated liability for closing restaurants and estimated liability for
self-insurance
    
    
    2,047
    
    
    
    2,073Net change in receivables, inventories, prepaid expenses and other current and
non-current assets
    
    
    (2,794
    )
    
    
    2,608Net change in accounts payable and other current and long-term liabilities
    
    
    (2,301
    )
    
    
    (8,512
    )Dividends on unvested restricted stock awards
    
    
    73
    
    
    
    Adjusted EBITDA
    
    $
    92,668
    
    
    $
    104,053
 Trailing-13 PeriodsEnded August 13, 2007Net cash provided by operating activities
    
    $
    143,557Interest expense
    
    
    17,417Income tax expense
    
    
    30,307Amortization of loan fees
    
    
    (1,814
    )Recovery of losses on accounts and notes receivable
    
    
    1,181Loss on sales of property and equipment, capital leases and extinguishment of debt
    
    
    (4,167
    )Deferred income taxes
    
    
    (15,161
    )Other non-cash charges
    
    
    (158
    )Change in estimated liability for closing restaurants and estimated liability for
self-insurance
    
    
    5,178Net change in receivables, inventories, prepaid expenses and other current and
non-current assets
    
    
    2,693Net change in accounts payable and other current and long-term liabilities
    
    
    (9,397
    )Dividends on unvested restricted stock awards
    
    
    133Adjusted EBITDA
    
    $
    169,769
 Carls Jr.
  Restaurant Portfolio
    
    
    RevenueSecond Fiscal Quarter
    
    
    Second Fiscal Quarter
    
    
    Year-to-Date2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeCompany-operated
    
    
    399
    
    
    
    394
    
    
    
    5
    
    
    $
    138,893
    
    
    $
    138,407
    
    
    $
    486
    
    
    $
    320,122
    
    
    $
    325,504
    
    
    $
    (5,382
    )Franchised and licensed(a)
    
    
    712
    
    
    
    678
    
    
    
    34
    
    
    
    58,336
    
    
    
    56,274
    
    
    
    2,062
    
    
    
    135,252
    
    
    
    129,291
    
    
    
    5,961Total
    
    
    1,111
    
    
    
    1,072
    
    
    
    39
    
    
    $
    197,229
    
    
    $
    194,681
    
    
    $
    2,548
    
    
    $
    455,374
    
    
    $
    454,795
    
    
    $
    579
 
 (a)
    
    Includes $45,481, $43,494, $105,251 and $101,317 of revenues from distribution of food,
packaging and supplies to franchised and licensed restaurants during the twelve weeks ended
August 13, 2007 and August 14, 2006, and the twenty-eight weeks ended August 13, 2007 and
August 14, 2006, respectively. 35




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Company-Operated Restaurants
  ® ®
  Twenty-Twelve
    
    EightWeeks
    
    WeeksRestaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
August 14, 2006
    
    
    75.8
    %
    
    
    75.4
    %Increase in workers compensation expense
    
    
    1.4
    
    
    
    0.8Increase in depreciation and amortization expense
    
    
    0.9
    
    
    
    0.7Increase in food and packaging costs
    
    
    0.5
    
    
    
    0.6Increase in rent expense
    
    
    0.5
    
    
    
    0.5Increase in repairs and maintenance
    
    
    0.3
    
    
    
    0.3Increase in asset retirement expense
    
    
    0.2
    
    
    
    0.1Decrease in general liability expense
    
    
    
    
    
    
    (0.2
    )Increase in labor costs, excluding workers compensation
    
    
    0.1
    
    
    
    0.2Other, net
    
    
    (0.1
    )
    
    
    Restaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
August 13, 2007
    
    
    79.6
    %
    
    
    78.4
    %
     36




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
    Franchised and Licensed Restaurants
      Hardees
  37




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Restaurant Portfolio
    
    
    RevenueSecond Fiscal Quarter
    
    
    Second Fiscal Quarter
    
    
    Year-to-Date2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeCompany-operated
    
    
    646
    
    
    
    701
    
    
    
    (55
    )
    
    $
    148,832
    
    
    $
    150,627
    
    
    $
    (1,795
    )
    
    $
    348,024
    
    
    $
    340,566
    
    
    $
    7,458Franchised and licensed
    
    
    1,263
    
    
    
    1,244
    
    
    
    19
    
    
    
    16,024
    
    
    
    18,079
    
    
    
    (2,055
    )
    
    
    39,267
    
    
    
    40,770
    
    
    
    (1,503
    )Total
    
    
    1,909
    
    
    
    1,945
    
    
    
    (36
    )
    
    $
    164,856
    
    
    $
    168,706
    
    
    $
    (3,850
    )
    
    $
    387,291
    
    
    $
    381,336
    
    
    $
    5,955
 Company-Operated Restaurants
  ®
  Twenty-Twelve
    
    
    EightWeeks
    
    
    WeeksRestaurant operating costs as a percentage of company-operated
restaurants revenue for the period ended August 14, 2006
    
    
    81.0
    %
    
    
    81.6
    %Increase in food and packaging costs
    
    
    2.0
    
    
    
    1.1Increase in repairs and maintenance expense
    
    
    
    
    
    
    0.4Decrease in workers compensation expense
    
    
    (0.4
    )
    
    
    (0.4
    )Increase in supplies and uniform expense
    
    
    0.2
    
    
    
    0.2Increase (decrease) in labor costs, excluding workers compensation
    
    
    0.2
    
    
    
    (0.2
    )Increase in rent expense
    
    
    0.2
    
    
    
    Decrease in depreciation and amortization expense
    
    
    (0.2
    )
    
    
    (0.2
    )Other, net
    
    
    0.2
    
    
    
    Restaurant operating costs as a percentage of company-operated
restaurants revenue for the period ended August 13, 2007
    
    
    83.2
    %
    
    
    82.5
    %
  38




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
   Franchised and Licensed Restaurants
     39




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Consolidated Expenses
 Consolidated Variable Interest Entities
   Advertising Expense
   General and Administrative Expense
  40




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Facility Action Charges
     Interest Expense
   Conversion Inducement Expense
  41




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Other Income, Net
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Interest income
on notes receivable
from franchisees,
disposition properties
and capital leases
    
    $
    148
    
    
    $
    220
    
    
    $
    381
    
    
    $
    622Rental income from
properties leased to
third parties, net
    
    
    436
    
    
    
    433
    
    
    
    1,048
    
    
    
    1,011Other, net
    
    
    4
    
    
    
    537
    
    
    
    783
    
    
    
    (78
    )Total other income, net
    
    $
    588
    
    
    $
    1,190
    
    
    $
    2,212
    
    
    $
    1,555
 Income Taxes
  Twelve Weeks Ended
    
    
    Twenty-Eight Weeks EndedAugust 13, 2007
    
    
    August 14, 2006
    
    
    August 13, 2007
    
    
    August 14, 2006Federal and state income taxes
    
    $
    7,565
    
    
    $
    11,442
    
    
    $
    17,866
    
    
    $
    21,873Foreign income taxes
    
    
    281
    
    
    
    297
    
    
    
    597
    
    
    
    622Income tax expense
    
    $
    7,846
    
    
    $
    11,739
    
    
    $
    18,463
    
    
    $
    22,495Effective income tax rate
    
    
    40.2
    %
    
    
    44.5
    %
    
    
    40.3
    %
    
    
    42.2
    %
    Discontinued Operations
     Liquidity and Capital Resources
   42




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
          43




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
        44




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
         Twenty-Eight Weeks EndedAugust 13, 2007
    
    August 14, 2006New restaurants (including restaurants under development)Carls Jr.
    
    $
    6,468
    
    $
    4,738Hardees
    
    
    6,425
    
    
    2,283Remodels/Dual-branding (including construction in process)Carls Jr.
    
    
    15,516
    
    
    1,691Hardees
    
    
    13,471
    
    
    2,819Other restaurant additionsCarls Jr.
    
    
    10,918
    
    
    11,556Hardees
    
    
    9,518
    
    
    27,031Corporate/other
    
    
    5,259
    
    
    5,019Capital expenditures  discontinued operations
    
    
    3,523
    
    
    952Total
    
    $
    71,098
    
    $
    56,089
  45




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
   Contractual Obligations
  46




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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
   47




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##### Table of Contents



(b) Changes in Internal Control
  
 Part II. Other Information.
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 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 22, 2007  June 18, 2007
    
    
    75,400
    
    
    $
    21.71
    
    
    
    75,400
    
    
    $
    74,447June 19, 2007  July 16, 2007
    
    
    79,600
    
    
    
    20.53
    
    
    
    79,600
    
    
    
    72,810July 17, 2007  August 13, 2007
    
    
    3,867,300
    
    
    
    17.31
    
    
    
    3,867,300
    
    
    
    105,758Total
    
    
    4,022,300
    
    
    $
    17.45
    
    
    
    4,022,300
    
    
    $
    105,758
 48




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##### Table of Contents



Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
   Nominee
    
    Shares Voted For
    
    Against
    
    Abstentions
    
    Broker Non-VotesByron Allumbaugh
    
    
    51,118,453
    
    
    
    3,100,969
    
    
    
    577,914
    
    
    
    0Frank P. Willey
    
    
    50,851,395
    
    
    
    3,371,022
    
    
    
    574,919
    
    
    
    0Matthew Goldfarb
    
    
    53,791,251
    
    
    
    444,392
    
    
    
    561,694
    
    
    
    0
   Shares Voted For
    
    Against
    
    Abstentions
    
    Broker Non-Votes30,472,449
    
    
    9,967,683
    
    
    
    1,226,333
    
    
    
    13,130,872
  Shares Voted For
    
    Against
    
    Abstentions
    
    Broker Non-Votes53,830,816
    
    
    450,951
    
    
    
    515,569
    
    
    
    0
 
 Item 5. Other Information.
  49




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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).10.1
    
    Additional Loan and Second Amendment to Seventh Amended and
Restated Credit Agreement, dated as of August 27, 2007, by
and among the Company, the Lenders party thereto, and BNP
Paribas, a bank organized under the laws of France acting
through its Chicago branch, as Administrative Agent
(incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 29, 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.
 50




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##### Table of Contents



SIGNATURES
  CKE RESTAURANTS, INC.
(Registrant)Date: September 19, 2007
    /s/ Theodore AbajianTheodore AbajianExecutive Vice President

Chief Financial Officer 51




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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).10.1
    
    Additional Loan and Second Amendment to Seventh Amended
and Restated Credit Agreement, dated as of August 27,
2007, by and among the Company, the Lenders party thereto,
and BNP Paribas, a bank organized under the laws of France
acting through its Chicago branch, as Administrative Agent
(incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed with the
Securities and Exchange Commission on August 29, 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.
 52