##### 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 November 5, 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
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    33-0602639
(I.R.S. Employer
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 November 5, 2007 and January 31, 2007
    
    
    3Condensed Consolidated Statements of Income for the twelve and forty weeks ended
November 5, 2007 and November 6, 2006
    
    
    4Condensed Consolidated Statement of Stockholders Equity for the forty weeks ended
November 5, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows for the forty weeks ended November 5,
2007 and November 6, 2006
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    52Item 4 Controls and Procedures
    
    
    52Part II. Other InformationItem 1 Legal Proceedings
    
    
    53Item 1A Risk Factors
    
    
    53Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 3 Defaults Upon Senior Securities
    
    
    54Item 4 Submission of Matters to a Vote of Security Holders
    
    
    54Item 5 Other Information
    
    
    54Item 6 Exhibits
    
    
    55Signatures
    
    
    56EXHIBIT 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)
 November 5, 2007
    
    
    January 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,493
    
    
    $
    18,620Accounts receivable, net of allowance for doubtful accounts of $1,105 as of November 5,
2007 and $821 as of January 31, 2007
    
    
    45,980
    
    
    
    42,485Related party trade receivables
    
    
    5,716
    
    
    
    4,644Inventories, net
    
    
    24,105
    
    
    
    21,708Prepaid expenses
    
    
    13,185
    
    
    
    13,548Assets held for sale
    
    
    897
    
    
    
    3,949Advertising fund assets, restricted
    
    
    18,937
    
    
    
    17,896Deferred income tax assets, net
    
    
    13,346
    
    
    
    25,450Current assets of discontinued operations
    
    
    
    
    
    
    2,007Other current assets
    
    
    2,940
    
    
    
    1,971Total current assets
    
    
    152,599
    
    
    
    152,278Notes receivable, net of allowance for doubtful accounts of $629 as of November 5, 2007
and $2,786 as of January 31, 2007
    
    
    230
    
    
    
    775Property and equipment, net of accumulated depreciation and amortization of $430,549 as of
November 5, 2007 and $441,447 as of January 31, 2007
    
    
    496,200
    
    
    
    482,388Property under capital leases, net of accumulated amortization of $46,124 as of November
5, 2007 and $44,885 as of January 31, 2007
    
    
    21,992
    
    
    
    25,153Deferred income tax assets, net
    
    
    85,924
    
    
    
    85,997Goodwill
    
    
    22,649
    
    
    
    22,649Long-term assets of discontinued operations
    
    
    
    
    
    
    18,859Other assets, net
    
    
    9,486
    
    
    
    8,539Total assets
    
    $
    789,080
    
    
    $
    796,638LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of bank indebtedness and other long-term debt
    
    $
    18,033
    
    
    $
    1,500Current portion of capital lease obligations
    
    
    5,663
    
    
    
    5,323Accounts payable
    
    
    62,162
    
    
    
    63,994Advertising fund liabilities
    
    
    18,937
    
    
    
    17,896Current liabilities of discontinued operations
    
    
    
    
    
    
    1,749Other current liabilities
    
    
    95,420
    
    
    
    94,677Total current liabilities
    
    
    200,215
    
    
    
    185,139Bank indebtedness and other long-term debt, less current portion
    
    
    315,980
    
    
    
    114,942Convertible subordinated notes due 2023
    
    
    
    
    
    
    15,167Capital lease obligations, less current portion
    
    
    36,410
    
    
    
    41,123Long-term liabilities of discontinued operations
    
    
    
    
    
    
    5,746Other long-term liabilities
    
    
    58,513
    
    
    
    55,675Total liabilities
    
    
    611,118
    
    
    
    417,792Commitments and contingencies (Notes 6 and 14)Subsequent events (Notes 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; 55,057 shares issued and
55,041 shares outstanding as of November 5, 2007; 67,247 shares issued and 67,229
shares outstanding as of January 31, 2007
    
    
    550
    
    
    
    672Common stock held in treasury, at cost; 16 shares as of November 5, 2007 and 18 shares
as of January 31, 2007
    
    
    (252
    )
    
    
    (360
    )Additional paid-in capital
    
    
    280,946
    
    
    
    501,437Accumulated deficit
    
    
    (103,282
    )
    
    
    (122,903
    )Total stockholders equity
    
    
    177,962
    
    
    
    378,846Total liabilities and stockholders equity
    
    $
    789,080
    
    
    $
    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
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Revenue:Company-operated restaurants
    
    $
    273,319
    
    
    $
    280,821
    
    
    $
    941,639
    
    
    $
    947,079Franchised and licensed restaurants and other
    
    
    78,303
    
    
    
    73,566
    
    
    
    254,876
    
    
    
    245,760Total revenue
    
    
    351,622
    
    
    
    354,387
    
    
    
    1,196,515
    
    
    
    1,192,839Operating costs and expenses:Restaurant operating costs:Food and packaging
    
    
    82,298
    
    
    
    81,539
    
    
    
    279,761
    
    
    
    272,614Payroll and employee benefits
    
    
    78,261
    
    
    
    81,087
    
    
    
    273,901
    
    
    
    274,355Occupancy and other
    
    
    62,459
    
    
    
    61,228
    
    
    
    207,706
    
    
    
    200,240Total restaurant operating costs
    
    
    223,018
    
    
    
    223,854
    
    
    
    761,368
    
    
    
    747,209Franchised and licensed restaurants and other
    
    
    60,373
    
    
    
    54,881
    
    
    
    197,685
    
    
    
    184,137Advertising
    
    
    15,829
    
    
    
    15,825
    
    
    
    55,861
    
    
    
    55,030General and administrative
    
    
    32,636
    
    
    
    34,516
    
    
    
    110,278
    
    
    
    111,316Facility action charges, net
    
    
    287
    
    
    
    (1,424
    )
    
    
    (1,513
    )
    
    
    909Total operating costs and expenses
    
    
    332,143
    
    
    
    327,652
    
    
    
    1,123,679
    
    
    
    1,098,601Operating income
    
    
    19,479
    
    
    
    26,735
    
    
    
    72,836
    
    
    
    94,238Interest expense
    
    
    (7,686
    )
    
    
    (3,812
    )
    
    
    (17,442
    )
    
    
    (15,918
    )Conversion inducement expense
    
    
    
    
    
    
    (2,807
    )
    
    
    
    
    
    
    (6,406
    )Other income, net
    
    
    1,079
    
    
    
    1,872
    
    
    
    3,291
    
    
    
    3,427Income before income taxes and discontinued
operations
    
    
    12,872
    
    
    
    21,988
    
    
    
    58,685
    
    
    
    75,341Income tax expense
    
    
    5,388
    
    
    
    10,882
    
    
    
    23,851
    
    
    
    33,377Income from continuing operations
    
    
    7,484
    
    
    
    11,106
    
    
    
    34,834
    
    
    
    41,964Loss from discontinued operations (net of
income tax (benefit) expense of $(500) and
$1,841 for the twelve and forty weeks ended
November 5, 2007, respectively, and $(821) and $(920) for the twelve and
forty weeks ended November 6, 2006,
respectively)
    
    
    (1,282
    )
    
    
    (1,649
    )
    
    
    (3,856
    )
    
    
    (2,123
    )Net income
    
    $
    6,202
    
    
    $
    9,457
    
    
    $
    30,978
    
    
    $
    39,841Basic income per common share:Continuing operations
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.57
    
    
    $
    0.67Discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.06
    )
    
    
    (0.03
    )Net income
    
    $
    0.11
    
    
    $
    0.14
    
    
    $
    0.51
    
    
    $
    0.64Diluted income per common share:Continuing operations
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.54
    
    
    $
    0.60Discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.06
    )
    
    
    (0.03
    )Net income
    
    $
    0.11
    
    
    $
    0.14
    
    
    $
    0.48
    
    
    $
    0.57Dividends per common share
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.18
    
    
    $
    0.12Weighted-average common shares outstanding:Basic
    
    
    55,908
    
    
    
    68,001
    
    
    
    61,312
    
    
    
    62,233Dilutive effect of stock options,
convertible notes and restricted stock
    
    
    3,056
    
    
    
    4,004
    
    
    
    3,238
    
    
    
    10,481Diluted
    
    
    58,964
    
    
    
    72,005
    
    
    
    64,550
    
    
    
    72,714
 See Accompanying Notes to Condensed Consolidated Financial Statements
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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In thousands, except per share amounts)
(Unaudited)
 Forty Weeks Ended November 5, 2007Common Stock
    
    
    
    
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Held in Treasury
    
    
    Additional
    
    
    Accumulated
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Paid-In Capital
    
    
    Deficit
    
    
    EquityBalance at January
31, 2007
    
    
    67,247
    
    
    $
    672
    
    
    
    (18
    )
    
    $
    (360
    )
    
    $
    501,437
    
    
    $
    (122,903
    )
    
    $
    378,846Cash dividends
declared
($0.18 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,586
    )
    
    
    (10,586
    )Issuance of
restricted stock
awards
    
    
    619
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    Exercise of stock
options
    
    
    392
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    2,645
    
    
    
    
    
    
    
    2,649Tax benefit from
exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,925
    
    
    
    
    
    
    
    2,925Share-based
compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,616
    
    
    
    
    
    
    
    7,616Repurchase and
retirement of
common stock
    
    
    (13,201
    )
    
    
    (132
    )
    
    
    2
    
    
    
    108
    
    
    
    (233,671
    )
    
    
    
    
    
    
    (233,695
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,978
    
    
    
    30,978FIN 48 transition
amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (771
    )
    
    
    (771
    )Balance at November
5, 2007
    
    
    55,057
    
    
    $
    550
    
    
    
    (16
    )
    
    $
    (252
    )
    
    $
    280,946
    
    
    $
    (103,282
    )
    
    $
    177,962
 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)
 Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006Cash flows from operating activities:Net income
    
    $
    30,978
    
    
    $
    39,841Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    49,679
    
    
    
    47,245Amortization of deferred loan fees
    
    
    686
    
    
    
    2,349Share-based compensation expense
    
    
    7,616
    
    
    
    4,934Recovery of losses on accounts and notes receivable
    
    
    (693
    )
    
    
    (351
    )Loss on sales of property and equipment, capital leases and
extinguishment of debt
    
    
    3,706
    
    
    
    1,942Facility action charges, net
    
    
    (2,218
    )
    
    
    3,526Deferred income taxes
    
    
    12,355
    
    
    
    29,954Other non-cash charges
    
    
    39
    
    
    
    56Net change in estimated liability for closed restaurants
and estimated liability for self-insurance
    
    
    (4,211
    )
    
    
    (3,857
    )Net change in receivables, inventories, prepaid expenses
and other current and non-current assets
    
    
    943
    
    
    
    (2,474
    )Net change in accounts payable and other current and
long-term liabilities
    
    
    7,401
    
    
    
    11,705Net cash provided by operating activities
    
    
    106,281
    
    
    
    134,870Cash flows from investing activities:Purchases of property and equipment
    
    
    (101,692
    )
    
    
    (85,020
    )Proceeds from sales of property and equipment
    
    
    44,252
    
    
    
    19,312Collections of non-trade notes receivable
    
    
    2,903
    
    
    
    2,725Disposition of La Salsa, net of cash surrendered
    
    
    5,720
    
    
    
    Other investing activities
    
    
    58
    
    
    
    51Net cash used in investing activities
    
    
    (48,759
    )
    
    
    (62,932
    )Cash flows from financing activities:Net change in bank overdraft
    
    
    (5,979
    )
    
    
    (774
    )Borrowings under revolving credit facility
    
    
    306,500
    
    
    
    69,500Repayments of borrowings under revolving credit facility
    
    
    (303,000
    )
    
    
    (76,500
    )Borrowings under credit facility term loan
    
    
    200,179
    
    
    
    Repayments of credit facility term loan
    
    
    (1,100
    )
    
    
    (28,748
    )Repayments of other long-term debt
    
    
    (133
    )
    
    
    (121
    )Net (repayment) borrowing by consolidated variable interest entity
    
    
    (44
    )
    
    
    39Repayments of capital lease obligations
    
    
    (4,200
    )
    
    
    (3,898
    )Payment of deferred loan fees
    
    
    (1,279
    )
    
    
    Repurchase of common stock
    
    
    (233,803
    )
    
    
    (30,938
    )Exercise of stock options
    
    
    2,649
    
    
    
    9,561Tax benefit from exercise of stock options
    
    
    1,616
    
    
    
    1,527Dividends paid on common stock
    
    
    (10,115
    )
    
    
    (7,364
    )Net cash used in financing activities
    
    
    (48,709
    )
    
    
    (67,716
    )Net increase in cash and cash equivalents
    
    
    8,813
    
    
    
    4,222Cash and cash equivalents at beginning of period
    
    
    18,680
    
    
    
    21,343Cash and cash equivalents at end of period
    
    $
    27,493
    
    
    $
    25,565
 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
    
    
    401
    
    
    
    584
    
    
    
    1
    
    
    
    986Franchised and licensed
    
    
    720
    
    
    
    1,331
    
    
    
    15
    
    
    
    2,066Total
    
    
    1,121
    
    
    
    1,915
    
    
    
    16
    
    
    
    3,052
   ®
 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
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an amendment of ARB No. 51
 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
  Twelve Weeks Ended
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Share-based compensation expense
related to performance-vested
restricted stock awards
    
    $
    1,283
    
    
    $
    527
    
    
    $
    2,188
    
    
    $
    527All other share-based compensation
expense
    
    
    1,567
    
    
    
    1,482
    
    
    
    5,567
    
    
    
    4,407Total share-based compensation expense
    
    $
    2,850
    
    
    $
    2,009
    
    
    $
    7,755
    
    
    $
    4,934Associated tax benefits
    
    $
    654
    
    
    $
    370
    
    
    $
    1,969
    
    
    $
    1,534
  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-AverageShares
    
    
    Exercise PriceOutstanding at January 31, 2007
    
    
    5,374,306
    
    
    $
    13.36Granted
    
    
    55,000
    
    
    
    17.36Exercised
    
    
    (392,397
    )
    
    
    6.65Forfeited
    
    
    (74,023
    )
    
    
    18.47Expired
    
    
    (455,924
    )
    
    
    23.58Outstanding at November 5, 2007
    
    
    4,506,962
    
    
    
    12.88
 Restricted stock awards:
 Weighted-AverageGrant DateShares
    
    
    Fair ValueRestricted stock awards at January 31, 2007
    
    
    616,012
    
    
    $
    17.36Awarded
    
    
    618,956
    
    
    
    16.30Awards vested
    
    
    (135,511
    )
    
    
    16.17Restricted stock awards at November 5, 2007
    
    
    1,099,457
    
    
    
    16.86
   Note 5  Other Assets
  November 5,
    
    
    January 31,2007
    
    
    2007Intangible assets (see table below)
    
    $
    2,728
    
    
    $
    2,922Deferred loan fees
    
    
    4,276
    
    
    
    3,697Net investment in lease receivables, less current portion
    
    
    552
    
    
    
    610Other
    
    
    1,930
    
    
    
    1,310$
    9,486
    
    
    $
    8,539
  10




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
   Weighted-
    
    
    November 5, 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
    
    
    $
    (898
    )
    
    $
    2,268
    
    
    $
    3,166
    
    
    $
    (776
    )
    
    $
    2,390Favorable lease agreements
    
    
    21
    
    
    
    1,121
    
    
    
    (661
    )
    
    
    460
    
    
    
    1,491
    
    
    
    (959
    )
    
    
    532$
    4,287
    
    
    $
    (1,559
    )
    
    $
    2,728
    
    
    $
    4,657
    
    
    $
    (1,735
    )
    
    $
    2,922
  Note 6  Indebtedness and Interest Expense
     Accounting for
Derivative Instruments and Hedging Activities
 11




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
       12




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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
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Facility
    
    $
    4,147
    
    
    $
    1,228
    
    
    $
    9,799
    
    
    $
    4,757Capital lease obligations
    
    
    1,171
    
    
    
    1,306
    
    
    
    3,903
    
    
    
    4,345Interest rate swaps
    
    
    1,839
    
    
    
    
    
    
    
    1,839
    
    
    
    2023 Convertible Notes
    
    
    140
    
    
    
    202
    
    
    
    466
    
    
    
    2,428Amortization of deferred loan fees
    
    
    187
    
    
    
    570
    
    
    
    679
    
    
    
    2,348Letter of credit fees and other
    
    
    202
    
    
    
    506
    
    
    
    756
    
    
    
    2,040$
    7,686
    
    
    $
    3,812
    
    
    $
    17,442
    
    
    $
    15,918
 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 closed restaurants.
  13




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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
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Carls Jr.Estimated liability for new restaurant closures
    
    $
    
    
    
    $
    74
    
    
    $
    
    
    
    $
    74Adjustments to estimated liability for closed
restaurants
    
    
    128
    
    
    
    (196
    )
    
    
    493
    
    
    
    916Impairment of assets to be held and used
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    44Loss (gain) on sales of restaurants and
surplus properties, net
    
    
    71
    
    
    
    123
    
    
    
    281
    
    
    
    (706
    )Amortization of discount related to estimated
liability for closed restaurants
    
    
    34
    
    
    
    63
    
    
    
    121
    
    
    
    194233
    
    
    
    64
    
    
    
    949
    
    
    
    522HardeesEstimated liability for new restaurant closures
    
    
    51
    
    
    
    712
    
    
    
    221
    
    
    
    2,633Adjustments to estimated liability for closed
restaurants
    
    
    (67
    )
    
    
    6
    
    
    
    152
    
    
    
    (117
    )Impairment of assets to be disposed of
    
    
    105
    
    
    
    182
    
    
    
    485
    
    
    
    634Impairment of assets to be held and used
    
    
    
    
    
    
    123
    
    
    
    442
    
    
    
    359Loss (gain) on sales of restaurants and surplus
properties, net
    
    
    65
    
    
    
    (2,688
    )
    
    
    (4,060
    )
    
    
    (3,786
    )Amortization of discount related to estimated
liability for closed restaurants
    
    
    82
    
    
    
    111
    
    
    
    298
    
    
    
    390236
    
    
    
    (1,554
    )
    
    
    (2,462
    )
    
    
    113Other(Gain) loss on sales of restaurants and surplus
properties, net
    
    
    (182
    )
    
    
    66
    
    
    
    
    
    
    
    274TotalEstimated liability for new restaurant closures
    
    
    51
    
    
    
    786
    
    
    
    221
    
    
    
    2,707Adjustments to estimated liability for closed
restaurants
    
    
    61
    
    
    
    (190
    )
    
    
    645
    
    
    
    799Impairment of assets to be disposed of
    
    
    105
    
    
    
    182
    
    
    
    485
    
    
    
    634Impairment of assets to be held and used
    
    
    
    
    
    
    123
    
    
    
    496
    
    
    
    403Gain on sales of restaurants and surplus
properties, net
    
    
    (46
    )
    
    
    (2,499
    )
    
    
    (3,779
    )
    
    
    (4,218
    )Amortization of discount related to estimated
liability for closed restaurants
    
    
    116
    
    
    
    174
    
    
    
    419
    
    
    
    584$
    287
    
    
    $
    (1,424
    )
    
    $
    (1,513
    )
    
    $
    909
  Carls Jr.
    
    
    Hardees
    
    
    TotalBalance at January 31, 2007
    
    $
    3,186
    
    
    $
    9,173
    
    
    $
    12,359Estimated liability for new restaurant closures
    
    
    
    
    
    
    221
    
    
    
    221Estimated liability for refranchising transactions
    
    
    
    
    
    
    1,426
    
    
    
    1,426Usage
    
    
    (1,074
    )
    
    
    (2,490
    )
    
    
    (3,564
    )Adjustments to estimated liability for closed restaurants
    
    
    493
    
    
    
    152
    
    
    
    645Amortization of discount
    
    
    121
    
    
    
    298
    
    
    
    419Balance at November 5, 2007
    
    
    2,726
    
    
    
    8,780
    
    
    
    11,506Less current portion
    
    
    794
    
    
    
    2,782
    
    
    
    3,576Long-term portion
    
    $
    1,932
    
    
    $
    5,998
    
    
    $
    7,930
  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
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Federal and state income taxes
    
    $
    5,145
    
    
    $
    10,660
    
    
    $
    23,011
    
    
    $
    32,533Foreign income taxes
    
    
    243
    
    
    
    222
    
    
    
    840
    
    
    
    844Income tax expense
    
    $
    5,388
    
    
    $
    10,882
    
    
    $
    23,851
    
    
    $
    33,377Effective income tax rate
    
    
    41.9
    %
    
    
    49.5
    %
    
    
    40.6
    %
    
    
    44.3
    %
       15




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 9  Income Per Share
   16




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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
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006(In thousands except per share amounts)Numerator:Income from continuing operations
    
    $
    7,484
    
    
    $
    11,106
    
    
    $
    34,834
    
    
    $
    41,964Loss from discontinued operations
    
    
    (1,282
    )
    
    
    (1,649
    )
    
    
    (3,856
    )
    
    
    (2,123
    )Net income for computation of
basic earnings per share
    
    $
    6,202
    
    
    $
    9,457
    
    
    $
    30,978
    
    
    $
    39,841Adjustment for interest and
amortization costs for 2023
Convertible Notes, net of related
tax effect
    
    
    102
    
    
    
    152
    
    
    
    341
    
    
    
    1,743Income from continuing operations
for computation of diluted
earnings per share
    
    $
    7,586
    
    
    $
    11,258
    
    
    $
    35,175
    
    
    $
    43,707Net income for computation of
diluted earnings per share
    
    $
    6,304
    
    
    $
    9,609
    
    
    $
    31,319
    
    
    $
    41,584Denominator:Weighted-average shares for
computation of basic earnings per
share
    
    
    55,908
    
    
    
    68,001
    
    
    
    61,312
    
    
    
    62,233Dilutive effect of stock options
and restricted stock
    
    
    1,309
    
    
    
    1,515
    
    
    
    1,491
    
    
    
    1,501Dilutive effect of 2023
Convertible Notes
    
    
    1,747
    
    
    
    2,489
    
    
    
    1,747
    
    
    
    8,980Weighted-average shares for
computation of diluted earnings
per share
    
    
    58,964
    
    
    
    72,005
    
    
    
    64,550
    
    
    
    72,714Basic earnings per share:Basic income per share from
continuing operations
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.57
    
    
    $
    0.67Basic loss per share from
discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.06
    )
    
    
    (0.03
    )Basic net income per share
    
    $
    0.11
    
    
    $
    0.14
    
    
    $
    0.51
    
    
    $
    0.64Diluted earnings per share:Diluted income per share from
continuing operations
    
    $
    0.13
    
    
    $
    0.16
    
    
    $
    0.54
    
    
    $
    0.60Diluted loss per share from
discontinued operations
    
    
    (0.02
    )
    
    
    (0.02
    )
    
    
    (0.06
    )
    
    
    (0.03
    )Diluted net income per share
    
    $
    0.11
    
    
    $
    0.14
    
    
    $
    0.48
    
    
    $
    0.57
 17




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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
    
    Forty Weeks EndedNovember 5, 2007
    
    November 6, 2006
    
    November 5, 2007
    
    November 6, 2006Stock options and
restricted stock
    
    
    1,344
    
    
    
    1,647
    
    
    
    1,155
    
    
    
    2,179
 Note 10  Segment Information
  Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwelve Weeks Ended November 5, 2007Revenue
    
    $
    192,609
    
    
    $
    158,004
    
    
    $
    1,009
    
    
    $
    351,622Operating income
    
    
    14,570
    
    
    
    4,599
    
    
    
    310
    
    
    
    19,479Income (loss) before income
taxes and discontinued
operations
    
    
    14,326
    
    
    
    2,917
    
    
    
    (4,371
    )
    
    
    12,872
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalTwelve Weeks Ended November 6, 2006Revenue
    
    $
    187,194
    
    
    $
    166,154
    
    
    $
    1,039
    
    
    $
    354,387Operating income
    
    
    16,513
    
    
    
    10,219
    
    
    
    3
    
    
    
    26,735Income before income taxes and discontinued operations
    
    
    16,480
    
    
    
    5,371
    
    
    
    137
    
    
    
    21,988
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalForty Weeks Ended November 5, 2007Revenue
    
    $
    647,983
    
    
    $
    545,295
    
    
    $
    3,237
    
    
    $
    1,196,515Operating income
    
    
    51,058
    
    
    
    21,468
    
    
    
    310
    
    
    
    72,836Income (loss) before income
taxes and discontinued
operations
    
    
    50,293
    
    
    
    15,736
    
    
    
    (7,344
    )
    
    
    58,685
 Carls Jr.
    
    Hardees
    
    Other
    
    TotalForty Weeks Ended November 6, 2006Revenue
    
    $
    641,989
    
    
    $
    547,490
    
    
    $
    3,360
    
    
    $
    1,192,839Operating income (loss)
    
    
    64,218
    
    
    
    30,104
    
    
    
    (84
    )
    
    
    94,238Income (loss) before income
taxes and discontinued
operations
    
    
    62,748
    
    
    
    12,940
    
    
    
    (347
    )
    
    
    75,341
 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)
 Note 11  Assets Held For Sale
  Note 12  Discontinued Operations
   Accounting for the Impairment or Disposal of Long-Lived Assets
 19




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  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
  Twelve Weeks Ended
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Revenue
    
    $
    
    
    
    $
    10,531
    
    
    $
    20,907
    
    
    $
    36,602Operating loss
    
    
    
    
    
    
    (2,480
    )
    
    
    (724
    )
    
    
    (3,041
    )Interest (expense) income
    
    
    
    
    
    
    8
    
    
    
    (22
    )
    
    
    2Other income (expense), net
    
    
    
    
    
    
    2
    
    
    
    92
    
    
    
    (4
    )Income tax benefit
    
    
    
    
    
    
    821
    
    
    
    173
    
    
    
    920
    
    
    
    (1,649
    )
    
    
    (481
    )
    
    
    (2,123
    )Loss on disposal of La Salsa
    
    
    (1,782
    )
    
    
    
    
    
    
    (1,361
    )
    
    
    Income tax benefit (expense)
related to disposal of La Salsa
    
    
    500
    
    
    
    
    
    
    
    (2,014
    )
    
    
    Net loss on disposal of La Salsa
    
    
    (1,282
    )
    
    
    
    
    
    
    (3,375
    )
    
    
    Loss from discontinued operations
    
    $
    (1,282
    )
    
    $
    (1,649
    )
    
    $
    (3,856
    )
    
    $
    (2,123
    )
  Note 13  Purchase and Sale of Assets
  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 14  Commitments and Contingent Liabilities
       21




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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
   Twelve Weeks
    
    Forty WeeksCommon shares repurchased
    
    
    4,796,899
    
    
    
    13,199,219Average price per share
    
    $
    16.66
    
    
    $
    17.68Total cost, including trading commissions
    
    $
    80,067
    
    
    $
    233,695Common shares retired
    
    
    4,780,699
    
    
    
    13,201,319
   Dividends
  22




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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
 Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006Cash paid for:Interest, net of amounts capitalized
    
    $
    16,690
    
    
    $
    14,787Income taxes, net of refunds received
    
    $
    6,837
    
    
    $
    545Non-cash investing and financing activities:Gain recognized on sale and leaseback transactions
    
    $
    266
    
    
    $
    269Dividends declared, not paid
    
    $
    3,304
    
    
    $
    2,794Capital lease obligations incurred to acquire assets
    
    $
    
    
    
    $
    102
  Note 17  Subsequent Events
   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)
 
 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
  24




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  
    
    estimation of future cash flows used to assess the recoverability of long-lived
assets and to establish the estimated liability for closed restaurants and subsidizing
lease payments of franchisees;
    
    estimation, using actuarially determined methods, of our self-insured claim
losses under our workers compensation, general and auto liability insurance programs;
    
    determination of appropriate estimated liabilities for loss contingencies;
    
    determination of appropriate assumptions to use in evaluating leases for capital
versus operating lease treatment, establishing depreciable lives for leasehold
improvements and establishing straight-line rent expense periods;
    
    estimation of the appropriate allowances associated with franchise and license
receivables and liabilities for franchise subleases;
    
    determination of the appropriate assumptions to use to estimate the fair value of
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
   25




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Impairment of Goodwill
 Business Combinations
  Estimated Liability for Closed Restaurants
    26




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Estimated Liability for Self-Insurance
    Loss Contingencies
   27




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Accounting for Lease Obligations
   Franchised and Licensed Operations
    28




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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
   Income Taxes
  29




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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 2008 Comparisons with
Fiscal 2007
  Fiscal Year and Seasonality
   30




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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
   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)
 Operating Review
  Twelve Weeks Ended
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Revenue:Company-operated restaurants
    
    
    77.7
    %
    
    
    79.2
    %
    
    
    78.7
    %
    
    
    79.4
    %Franchised and licensed restaurants and
other
    
    
    22.3
    
    
    
    20.8
    
    
    
    21.3
    
    
    
    20.6Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Operating costs and expenses:Restaurant operating costs (1):Food and packaging
    
    
    30.1
    
    
    
    29.0
    
    
    
    29.7
    
    
    
    28.8Payroll and employee benefits
    
    
    28.6
    
    
    
    28.9
    
    
    
    29.1
    
    
    
    29.0Occupancy and other
    
    
    22.9
    
    
    
    21.8
    
    
    
    22.1
    
    
    
    21.1Total restaurant operating costs
    
    
    81.6
    
    
    
    79.7
    
    
    
    80.9
    
    
    
    78.9Franchised and licensed restaurants and
other (2)
    
    
    77.1
    
    
    
    74.6
    
    
    
    77.6
    
    
    
    74.9Advertising (1)
    
    
    5.8
    
    
    
    5.6
    
    
    
    5.9
    
    
    
    5.8General and administrative
    
    
    9.3
    
    
    
    9.7
    
    
    
    9.2
    
    
    
    9.3Facility action charges, net
    
    
    0.1
    
    
    
    (0.4
    )
    
    
    (0.1
    )
    
    
    0.1Operating income
    
    
    5.5
    
    
    
    7.5
    
    
    
    6.1
    
    
    
    7.9Interest expense
    
    
    (2.2
    )
    
    
    (1.1
    )
    
    
    (1.5
    )
    
    
    (1.3
    )Conversion inducement expense
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.5
    )Other income, net
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.3
    
    
    
    0.3Income before income taxes and
discontinued operations
    
    
    3.7
    
    
    
    6.2
    
    
    
    4.9
    
    
    
    6.3Income tax expense
    
    
    1.5
    
    
    
    3.1
    
    
    
    2.0
    
    
    
    2.8Income from continuing operations
    
    
    2.1
    %
    
    
    3.1
    %
    
    
    2.9
    %
    
    
    3.5
    %
 
 (1)
    
    As a percent of company-operated restaurants revenue.(2)
    
    As a percent of franchised and licensed restaurants and other revenue. 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)
  Carls Jr.
    
    
    Hardees
    
    
    Total(1)Twelve Weeks
    
    
    Forty Weeks
    
    
    Twelve Weeks
    
    
    Forty Weeks
    
    
    Twelve Weeks
    
    
    Forty WeeksCompany-operated restaurantsOpen at beginning of period
    
    
    399
    
    
    
    393
    
    
    
    646
    
    
    
    696
    
    
    
    1,046
    
    
    
    1,090New
    
    
    2
    
    
    
    9
    
    
    
    1
    
    
    
    5
    
    
    
    3
    
    
    
    14Closed
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )
    
    
    (11
    )
    
    
    (3
    )
    
    
    (12
    )Divested
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    (106
    )
    
    
    (60
    )
    
    
    (106
    )Open at November 5, 2007
    
    
    401
    
    
    
    401
    
    
    
    584
    
    
    
    584
    
    
    
    986
    
    
    
    986Franchised and licensed
restaurantsOpen at beginning of period
    
    
    712
    
    
    
    694
    
    
    
    1,263
    
    
    
    1,210
    
    
    
    1,990
    
    
    
    1,919New
    
    
    12
    
    
    
    37
    
    
    
    10
    
    
    
    28
    
    
    
    22
    
    
    
    65Closed
    
    
    (4
    )
    
    
    (11
    )
    
    
    (2
    )
    
    
    (13
    )
    
    
    (6
    )
    
    
    (24
    )Acquired
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    106
    
    
    
    60
    
    
    
    106Open at November 5, 2007
    
    
    720
    
    
    
    720
    
    
    
    1,331
    
    
    
    1,331
    
    
    
    2,066
    
    
    
    2,066Total restaurantsOpen at beginning of period
    
    
    1,111
    
    
    
    1,087
    
    
    
    1,909
    
    
    
    1,906
    
    
    
    3,036
    
    
    
    3,009New
    
    
    14
    
    
    
    46
    
    
    
    11
    
    
    
    33
    
    
    
    25
    
    
    
    79Closed
    
    
    (4
    )
    
    
    (12
    )
    
    
    (5
    )
    
    
    (24
    )
    
    
    (9
    )
    
    
    (36
    )Divested
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    (106
    )
    
    
    (60
    )
    
    
    (106
    )Acquired
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    106
    
    
    
    60
    
    
    
    106Open at November 5, 2007
    
    
    1,121
    
    
    
    1,121
    
    
    
    1,915
    
    
    
    1,915
    
    
    
    3,052
    
    
    
    3,052
 
 (1)
    
    Total includes one company-operated and 15 franchised and licensed Green Burrito
restaurants that were open at the beginning of period and at November 5, 2007. 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)
  Twelve Weeks Ended November 5, 2007Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    135,849
    
    
    $
    137,395
    
    
    $
    75
    
    
    $
    
    
    
    $
    273,319Restaurant operating costs:Food and packaging
    
    
    39,642
    
    
    
    42,638
    
    
    
    18
    
    
    
    
    
    
    
    82,298Payroll and employee benefits
    
    
    35,484
    
    
    
    42,746
    
    
    
    31
    
    
    
    
    
    
    
    78,261Occupancy and other
    
    
    31,976
    
    
    
    30,459
    
    
    
    24
    
    
    
    
    
    
    
    62,459Total restaurant operating costs
    
    
    107,102
    
    
    
    115,843
    
    
    
    73
    
    
    
    
    
    
    
    223,018Franchised and licensed restaurants and other
revenue:Royalties
    
    
    7,221
    
    
    
    9,960
    
    
    
    122
    
    
    
    8
    
    
    
    17,311Distribution centers
    
    
    44,079
    
    
    
    6,919
    
    
    
    
    
    
    
    (3
    )
    
    
    50,995Rent
    
    
    5,067
    
    
    
    1,931
    
    
    
    
    
    
    
    
    
    
    
    6,998Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    807
    
    
    
    
    
    
    
    807Franchise fees
    
    
    393
    
    
    
    1,799
    
    
    
    
    
    
    
    
    
    
    
    2,192Total franchised and licensed
restaurants and other revenue
    
    
    56,760
    
    
    
    20,609
    
    
    
    929
    
    
    
    5
    
    
    
    78,303Franchised and licensed restaurants and other
expenses:Administrative expense (including provision
for bad debts)
    
    
    1,316
    
    
    
    1,517
    
    
    
    
    
    
    
    
    
    
    
    2,833Distribution centers
    
    
    44,059
    
    
    
    6,964
    
    
    
    
    
    
    
    
    
    
    
    51,023Rent and other occupancy
    
    
    4,287
    
    
    
    1,466
    
    
    
    
    
    
    
    
    
    
    
    5,753Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    783
    
    
    
    (19
    )
    
    
    764Total franchised and licensed
restaurants and other expenses
    
    
    49,662
    
    
    
    9,947
    
    
    
    783
    
    
    
    (19
    )
    
    
    60,373Advertising
    
    
    8,143
    
    
    
    7,686
    
    
    
    
    
    
    
    
    
    
    
    15,829General and administrative
    
    
    12,898
    
    
    
    19,694
    
    
    
    44
    
    
    
    
    
    
    
    32,636Facility action charges, net
    
    
    234
    
    
    
    235
    
    
    
    (182
    )
    
    
    
    
    
    
    287Operating income
    
    $
    14,570
    
    
    $
    4,599
    
    
    $
    286
    
    
    $
    24
    
    
    $
    19,479Company-operated average unit volume
(trailing-13 periods)
    
    $
    1,486
    
    
    $
    945Franchise-operated average unit volume
(trailing-13 periods)
    
    $
    1,201
    
    
    $
    969Company-operated same-store sales increase
    
    
    0.7
    %
    
    
    2.7
    %Franchise-operated same-store sales
(decrease) increase
    
    
    (1.3
    )%
    
    
    0.4
    %Company-operated same-store transaction
(decrease) increase
    
    
    (1.2
    )%
    
    
    1.8
    %Average check (actual $)
    
    $
    6.62
    
    
    $
    4.87Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    29.2
    %
    
    
    31.0
    %Payroll and employee benefits
    
    
    26.1
    %
    
    
    31.1
    %Occupancy and other
    
    
    23.5
    %
    
    
    22.2
    %Total restaurant operating costs
    
    
    78.8
    %
    
    
    84.3
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    6.0
    %
    
    
    5.6
    %
 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)
 Twelve Weeks Ended November 6, 2006Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    132,068
    
    
    $
    148,668
    
    
    $
    85
    
    
    $
    
    
    
    $
    280,821Restaurant operating costs:Food and packaging
    
    
    38,599
    
    
    
    42,912
    
    
    
    28
    
    
    
    
    
    
    
    81,539Payroll and employee benefits
    
    
    34,522
    
    
    
    46,535
    
    
    
    30
    
    
    
    
    
    
    
    81,087Occupancy and other
    
    
    29,238
    
    
    
    31,964
    
    
    
    26
    
    
    
    
    
    
    
    61,228Total restaurant operating costs
    
    
    102,359
    
    
    
    121,411
    
    
    
    84
    
    
    
    
    
    
    
    223,854Franchised and licensed restaurants and
other revenue:Royalties
    
    
    6,984
    
    
    
    11,793
    
    
    
    128
    
    
    
    4
    
    
    
    18,909Distribution centers
    
    
    42,883
    
    
    
    4,051
    
    
    
    
    
    
    
    
    
    
    
    46,934Rent
    
    
    4,938
    
    
    
    1,531
    
    
    
    
    
    
    
    
    
    
    
    6,469Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    822
    
    
    
    
    
    
    
    822Franchise fees
    
    
    321
    
    
    
    111
    
    
    
    
    
    
    
    
    
    
    
    432Total franchised and licensed
restaurants and other revenue
    
    
    55,126
    
    
    
    17,486
    
    
    
    950
    
    
    
    4
    
    
    
    73,566Franchised and licensed restaurants and
other expenses:Administrative expense (including
provision for bad debts)
    
    
    1,169
    
    
    
    558
    
    
    
    
    
    
    
    
    
    
    
    1,727Distribution centers
    
    
    42,695
    
    
    
    4,290
    
    
    
    
    
    
    
    
    
    
    
    46,985Rent and other occupancy
    
    
    4,238
    
    
    
    1,126
    
    
    
    
    
    
    
    
    
    
    
    5,364Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    801
    
    
    
    4
    
    
    
    805Total franchised and licensed
restaurants and other expenses
    
    
    48,102
    
    
    
    5,974
    
    
    
    801
    
    
    
    4
    
    
    
    54,881Advertising
    
    
    7,140
    
    
    
    8,684
    
    
    
    1
    
    
    
    
    
    
    
    15,825General and administrative
    
    
    13,016
    
    
    
    21,420
    
    
    
    80
    
    
    
    
    
    
    
    34,516Facility action charges, net
    
    
    64
    
    
    
    (1,554
    )
    
    
    66
    
    
    
    
    
    
    
    (1,424
    )Operating income
    
    $
    16,513
    
    
    $
    10,219
    
    
    $
    3
    
    
    $
    
    
    
    $
    26,735Company-operated average unit volume
(trailing-13 periods)
    
    $
    1,416
    
    
    $
    907Franchise-operated average unit volume
(trailing-13 periods)
    
    $
    1,192
    
    
    $
    924Company-operated same-store sales increase
    
    
    6.2
    %
    
    
    5.6
    %Franchise-operated same-store sales increase
    
    
    5.7
    %
    
    
    4.1
    %Company-operated same-store transaction
increase
    
    
    1.0
    %
    
    
    2.5
    %Average check (actual $)
    
    $
    6.49
    
    
    $
    4.83Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    29.2
    %
    
    
    28.9
    %Payroll and employee benefits
    
    
    26.1
    %
    
    
    31.3
    %Occupancy and other
    
    
    22.1
    %
    
    
    21.5
    %Total restaurant operating costs
    
    
    77.5
    %
    
    
    81.7
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.4
    %
    
    
    5.8
    %
 35




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Forty Weeks Ended November 5, 2007Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    455,971
    
    
    $
    485,419
    
    
    $
    249
    
    
    $
    
    
    
    $
    941,639Restaurant operating costs:Food and packaging
    
    
    132,820
    
    
    
    146,866
    
    
    
    75
    
    
    
    
    
    
    
    279,761Payroll and employee benefits
    
    
    122,880
    
    
    
    150,919
    
    
    
    102
    
    
    
    
    
    
    
    273,901Occupancy and other
    
    
    102,319
    
    
    
    105,299
    
    
    
    88
    
    
    
    
    
    
    
    207,706Total restaurant operating costs
    
    
    358,019
    
    
    
    403,084
    
    
    
    265
    
    
    
    
    
    
    
    761,368Franchised and licensed restaurants and
other revenue:Royalties
    
    
    24,413
    
    
    
    33,142
    
    
    
    394
    
    
    
    9
    
    
    
    57,958Distribution centers
    
    
    149,330
    
    
    
    18,213
    
    
    
    
    
    
    
    (8
    )
    
    
    167,535Rent
    
    
    17,074
    
    
    
    5,895
    
    
    
    
    
    
    
    
    
    
    
    22,969Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    2,593
    
    
    
    
    
    
    
    2,593Franchise fees
    
    
    1,195
    
    
    
    2,626
    
    
    
    
    
    
    
    
    
    
    
    3,821Total franchised and licensed
restaurants and other revenue
    
    
    192,012
    
    
    
    59,876
    
    
    
    2,987
    
    
    
    1
    
    
    
    254,876Franchised and licensed restaurants and
other expenses:Administrative expense (including
provision for bad debts)
    
    
    4,522
    
    
    
    4,663
    
    
    
    
    
    
    
    
    
    
    
    9,185Distribution centers
    
    
    149,148
    
    
    
    18,357
    
    
    
    
    
    
    
    
    
    
    
    167,505Rent and other occupancy
    
    
    14,469
    
    
    
    4,022
    
    
    
    
    
    
    
    
    
    
    
    18,491Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    2,563
    
    
    
    (59
    )
    
    
    2,504Total franchised and licensed
restaurants and other expenses
    
    
    168,139
    
    
    
    27,042
    
    
    
    2,563
    
    
    
    (59
    )
    
    
    197,685Advertising
    
    
    26,949
    
    
    
    28,909
    
    
    
    3
    
    
    
    
    
    
    
    55,861General and administrative
    
    
    42,868
    
    
    
    67,255
    
    
    
    155
    
    
    
    
    
    
    
    110,278Facility action charges, net
    
    
    950
    
    
    
    (2,463
    )
    
    
    
    
    
    
    
    
    
    
    (1,513
    )Operating income
    
    $
    51,058
    
    
    $
    21,468
    
    
    $
    250
    
    
    $
    60
    
    
    $
    72,836Company-operated same-store sales increase
    
    
    0.8
    %
    
    
    2.4
    %Franchise-operated same-store sales
(decrease) increase
    
    
    (0.1
    )%
    
    
    0.5
    %Company-operated same-store transaction
(decrease) increase
    
    
    (3.1
    )%
    
    
    1.9
    %Average check (actual $)
    
    $
    6.73
    
    
    $
    4.93Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    29.1
    %
    
    
    30.3
    %Payroll and employee benefits
    
    
    26.9
    %
    
    
    31.1
    %Occupancy and other
    
    
    22.4
    %
    
    
    21.7
    %Total restaurant operating costs
    
    
    78.5
    %
    
    
    83.0
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.9
    %
    
    
    6.0
    %
 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)
 Forty Weeks Ended November 6, 2006Carls Jr.
    
    
    Hardees
    
    
    Other(A)
    
    
    Eliminations(B)
    
    
    TotalCompany-operated restaurants revenue
    
    $
    457,572
    
    
    $
    489,234
    
    
    $
    273
    
    
    $
    
    
    
    $
    947,079Restaurant operating costs:Food and packaging
    
    
    131,337
    
    
    
    141,187
    
    
    
    90
    
    
    
    
    
    
    
    272,614Payroll and employee benefits
    
    
    119,991
    
    
    
    154,261
    
    
    
    103
    
    
    
    
    
    
    
    274,355Occupancy and other
    
    
    96,448
    
    
    
    103,706
    
    
    
    86
    
    
    
    
    
    
    
    200,240Total restaurant operating costs
    
    
    347,776
    
    
    
    399,154
    
    
    
    279
    
    
    
    
    
    
    
    747,209Franchised and licensed restaurants and
other revenue:Royalties
    
    
    22,478
    
    
    
    38,070
    
    
    
    382
    
    
    
    (38
    )
    
    
    60,892Distribution centers
    
    
    144,201
    
    
    
    13,531
    
    
    
    
    
    
    
    
    
    
    
    157,732Rent
    
    
    16,059
    
    
    
    6,101
    
    
    
    
    
    
    
    
    
    
    
    22,160Retail sales of variable interest entity
    
    
    
    
    
    
    
    
    
    
    2,743
    
    
    
    
    
    
    
    2,743Franchise fees
    
    
    1,679
    
    
    
    554
    
    
    
    
    
    
    
    
    
    
    
    2,233Total franchised and licensed
restaurants and other revenue
    
    
    184,417
    
    
    
    58,256
    
    
    
    3,125
    
    
    
    (38
    )
    
    
    245,760Franchised and licensed restaurants and
other expenses:Administrative expense (including
provision for bad debts)
    
    
    4,001
    
    
    
    3,102
    
    
    
    
    
    
    
    
    
    
    
    7,103Distribution centers
    
    
    142,026
    
    
    
    14,222
    
    
    
    
    
    
    
    
    
    
    
    156,248Rent and other occupancy
    
    
    13,948
    
    
    
    4,173
    
    
    
    
    
    
    
    
    
    
    
    18,121Operating costs of variable interest entity
    
    
    
    
    
    
    
    
    
    
    2,695
    
    
    
    (30
    )
    
    
    2,665Total franchised and licensed
restaurants and other expenses
    
    
    159,975
    
    
    
    21,497
    
    
    
    2,695
    
    
    
    (30
    )
    
    
    184,137Advertising
    
    
    26,253
    
    
    
    28,772
    
    
    
    5
    
    
    
    
    
    
    
    55,030General and administrative
    
    
    43,245
    
    
    
    67,850
    
    
    
    221
    
    
    
    
    
    
    
    111,316Facility action charges, net
    
    
    522
    
    
    
    113
    
    
    
    274
    
    
    
    
    
    
    
    909Operating income (loss)
    
    $
    64,218
    
    
    $
    30,104
    
    
    $
    (76
    )
    
    $
    (8
    )
    
    $
    94,238Company-operated same-store sales increase
    
    
    5.5
    %
    
    
    4.8
    %Franchise-operated same-store sales increase
    
    
    6.0
    %
    
    
    4.4
    %Company-operated same-store transaction
increase
    
    
    1.5
    %
    
    
    1.3
    %Average check (actual $)
    
    $
    6.42
    
    
    $
    4.89Restaurant operating costs as a % of
company-operated restaurants revenue:Food and packaging
    
    
    28.7
    %
    
    
    28.9
    %Payroll and employee benefits
    
    
    26.2
    %
    
    
    31.5
    %Occupancy and other operating costs
    
    
    21.1
    %
    
    
    21.2
    %Total restaurant operating costs
    
    
    76.0
    %
    
    
    81.6
    %Advertising as a percentage of
company-operated restaurants revenue
    
    
    5.7
    %
    
    
    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. 37




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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 November 5, 2007DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    8,533
    
    
    $
    1,736
    
    
    $
    (2,785
    )
    
    $
    (1,282
    )
    
    $
    6,202Interest expense
    
    
    608
    
    
    
    2,046
    
    
    
    5,032
    
    
    
    
    
    
    
    7,686Income tax expense (benefit)
    
    
    5,793
    
    
    
    1,181
    
    
    
    (1,586
    )
    
    
    (500
    )
    
    
    4,888Depreciation and amortization
    
    
    7,556
    
    
    
    7,164
    
    
    
    49
    
    
    
    
    
    
    
    14,769Facility action charges, net
    
    
    234
    
    
    
    235
    
    
    
    (182
    )
    
    
    
    
    
    
    287Share-based compensation expense
    
    
    1,091
    
    
    
    1,759
    
    
    
    
    
    
    
    
    
    
    
    2,850Adjusted EBITDA
    
    $
    23,815
    
    
    $
    14,121
    
    
    $
    528
    
    
    $
    (1,782
    )
    
    $
    36,682
 Twelve Weeks Ended November 6, 2006DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    9,117
    
    
    $
    1,875
    
    
    $
    114
    
    
    $
    (1,649
    )
    
    $
    9,457Interest expense
    
    
    875
    
    
    
    2,937
    
    
    
    
    
    
    
    (8
    )
    
    
    3,804Income tax expense (benefit)
    
    
    7,363
    
    
    
    3,496
    
    
    
    23
    
    
    
    (821
    )
    
    
    10,061Depreciation and amortization
    
    
    6,100
    
    
    
    7,722
    
    
    
    46
    
    
    
    677
    
    
    
    14,545Facility action charges, net
    
    
    64
    
    
    
    (1,554
    )
    
    
    66
    
    
    
    1,414
    
    
    
    (10
    )Share-based compensation expense
    
    
    769
    
    
    
    1,240
    
    
    
    
    
    
    
    
    
    
    
    2,009Adjusted EBITDA
    
    $
    24,288
    
    
    $
    15,716
    
    
    $
    249
    
    
    $
    (387
    )
    
    $
    39,866
 38




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Forty Weeks Ended November 5, 2007DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    29,994
    
    
    $
    9,385
    
    
    $
    (4,545
    )
    
    $
    (3,856
    )
    
    $
    30,978Interest expense
    
    
    2,164
    
    
    
    6,942
    
    
    
    8,336
    
    
    
    22
    
    
    
    17,464Income tax expense (benefit)
    
    
    20,299
    
    
    
    6,351
    
    
    
    (2,799
    )
    
    
    1,841
    
    
    
    25,692Depreciation and amortization
    
    
    23,868
    
    
    
    24,313
    
    
    
    157
    
    
    
    1,341
    
    
    
    49,679Facility action charges, net
    
    
    950
    
    
    
    (2,463
    )
    
    
    
    
    
    
    (705
    )
    
    
    (2,218
    )Share-based compensation expense
    
    
    2,970
    
    
    
    4,785
    
    
    
    
    
    
    
    
    
    
    
    7,755Adjusted EBITDA
    
    $
    80,245
    
    
    $
    49,313
    
    
    $
    1,149
    
    
    $
    (1,357
    )
    
    $
    129,350
 Forty Weeks Ended November 6, 2006DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    37,075
    
    
    $
    5,025
    
    
    $
    (136
    )
    
    $
    (2,123
    )
    
    $
    39,841Interest expense
    
    
    3,146
    
    
    
    12,654
    
    
    
    118
    
    
    
    (2
    )
    
    
    15,916Income tax expense (benefit)
    
    
    25,673
    
    
    
    7,915
    
    
    
    (211
    )
    
    
    (920
    )
    
    
    32,457Depreciation and amortization
    
    
    19,532
    
    
    
    25,183
    
    
    
    152
    
    
    
    2,378
    
    
    
    47,245Facility action charges, net
    
    
    522
    
    
    
    113
    
    
    
    274
    
    
    
    2,617
    
    
    
    3,526Share-based compensation expense
    
    
    1,890
    
    
    
    3,044
    
    
    
    
    
    
    
    
    
    
    
    4,934Adjusted EBITDA
    
    $
    87,838
    
    
    $
    53,934
    
    
    $
    197
    
    
    $
    1,950
    
    
    $
    143,919
 Trailing-13 Periods Ended November 5, 2007DiscontinuedCarls Jr.
    
    
    Hardees
    
    
    Other
    
    
    Operations
    
    
    TotalNet income (loss)
    
    $
    41,278
    
    
    $
    10,859
    
    
    $
    (5,072
    )
    
    $
    (5,756
    )
    
    $
    41,309Interest expense
    
    
    3,009
    
    
    
    9,779
    
    
    
    8,504
    
    
    
    7
    
    
    
    21,299Income tax expense (benefit)
    
    
    24,968
    
    
    
    2,513
    
    
    
    (2,988
    )
    
    
    641
    
    
    
    25,134Depreciation and amortization
    
    
    30,664
    
    
    
    31,951
    
    
    
    224
    
    
    
    2,013
    
    
    
    64,852Facility action charges, net
    
    
    1,092
    
    
    
    (82
    )
    
    
    111
    
    
    
    1,681
    
    
    
    2,802Share-based compensation expense
    
    
    4,285
    
    
    
    6,904
    
    
    
    
    
    
    
    
    
    
    
    11,189Adjusted EBITDA
    
    $
    105,296
    
    
    $
    61,924
    
    
    $
    779
    
    
    $
    (1,414
    )
    
    $
    166,585
 39




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Forty Weeks
    
    
    Trailing-13 PeriodsEnded
    
    
    EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007Net cash provided by operating activities
    
    $
    106,281
    
    
    $
    134,870
    
    
    $
    135,556Interest expense
    
    
    17,464
    
    
    
    15,916
    
    
    
    21,299Income tax expense
    
    
    25,692
    
    
    
    32,457
    
    
    
    25,134Amortization of deferred loan fees
    
    
    (686
    )
    
    
    (2,349
    )
    
    
    (1,434
    )Recovery of losses on accounts and notes receivable
    
    
    693
    
    
    
    351
    
    
    
    534Loss on sales of property and equipment, capital
leases and extinguishment of debt
    
    
    (3,706
    )
    
    
    (1,942
    )
    
    
    (5,213
    )Deferred income taxes
    
    
    (12,355
    )
    
    
    (29,954
    )
    
    
    (8,362
    )Other non-cash charges
    
    
    (39
    )
    
    
    (56
    )
    
    
    (60
    )Change in estimated liability for closed
restaurants and estimated liability for
self-insurance
    
    
    4,211
    
    
    
    3,857
    
    
    
    5,558Net change in receivables, inventories, prepaid
expenses and other current and non-current assets
    
    
    (943
    )
    
    
    2,474
    
    
    
    4,678Net change in accounts payable and other current
and long-term liabilities
    
    
    (7,401
    )
    
    
    (11,705
    )
    
    
    (11,304
    )Dividends on unvested restricted stock awards
    
    
    139
    
    
    
    
    
    
    
    199Adjusted EBITDA
    
    $
    129,350
    
    
    $
    143,919
    
    
    $
    166,585
 Carls Jr.
  Restaurant Portfolio
    
    
    RevenueThird Fiscal Quarter
    
    
    Third Fiscal Quarter
    
    
    Year-to-Date2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeCompany-operated
    
    
    401
    
    
    
    394
    
    
    
    7
    
    
    $
    135,849
    
    
    $
    132,068
    
    
    $
    3,781
    
    
    $
    455,971
    
    
    $
    457,572
    
    
    $
    (1,601
    )Franchised and
licensed
    
    
    720
    
    
    
    685
    
    
    
    35
    
    
    
    56,760
    
    
    
    55,126
    
    
    
    1,634
    
    
    
    192,012
    
    
    
    184,417
    
    
    
    7,595Total
    
    
    1,121
    
    
    
    1,079
    
    
    
    42
    
    
    $
    192,609
    
    
    $
    187,194
    
    
    $
    5,415
    
    
    $
    647,983
    
    
    $
    641,989
    
    
    $
    5,994
 Company-Operated Restaurants
   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)
 ® ®
  Twelve
    
    FortyWeeks
    
    WeeksRestaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
November 6, 2006
    
    
    77.5
    %
    
    
    76.0
    %Increase in depreciation and amortization expense
    
    
    0.8
    
    
    
    0.7(Decrease) increase in workers compensation expense
    
    
    (0.4
    )
    
    
    0.5Increase in labor costs, excluding workers compensation
    
    
    0.3
    
    
    
    0.2Increase in banking expenses
    
    
    0.2
    
    
    
    0.1Increase in rent expense
    
    
    0.2
    
    
    
    0.4Increase in repairs and maintenance
    
    
    0.2
    
    
    
    0.2Decrease in general liability expense
    
    
    (0.2
    )
    
    
    (0.2
    )Increase in supplies and uniform expense
    
    
    0.1
    
    
    
    0.1(Decrease) increase in food and packaging costs
    
    
    (0.1
    )
    
    
    0.4Other, net
    
    
    0.2
    
    
    
    0.1Restaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
November 5, 2007
    
    
    78.8
    %
    
    
    78.5
    %
      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)
  Franchised and Licensed Restaurants
      Hardees
  42




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Restaurant Portfolio
    
    
    RevenueThird Fiscal Quarter
    
    
    Third Fiscal Quarter
    
    
    Year-to-Date2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeCompany-operated
    
    
    584
    
    
    
    705
    
    
    
    (121
    )
    
    $
    137,395
    
    
    $
    148,668
    
    
    $
    (11,273
    )
    
    $
    485,419
    
    
    $
    489,234
    
    
    $
    (3,815
    )Franchised and
licensed
    
    
    1,331
    
    
    
    1,218
    
    
    
    113
    
    
    
    20,609
    
    
    
    17,486
    
    
    
    3,123
    
    
    
    59,876
    
    
    
    58,256
    
    
    
    1,620Total
    
    
    1,915
    
    
    
    1,923
    
    
    
    (8
    )
    
    $
    158,004
    
    
    $
    166,154
    
    
    $
    (8,150
    )
    
    $
    545,295
    
    
    $
    547,490
    
    
    $
    (2,195
    )
 Company-Operated Restaurants
    ®
  Twelve
    
    FortyWeeks
    
    WeeksRestaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
November 6, 2006
    
    
    81.7
    %
    
    
    81.6
    %Increase in food and packaging costs
    
    
    2.2
    
    
    
    1.4Increase in general liability expense
    
    
    0.5
    
    
    
    0.2(Decrease) increase in repairs and maintenance
    
    
    (0.5
    )
    
    
    0.1Decrease in workers compensation expense
    
    
    (0.5
    )
    
    
    (0.4
    )Increase in labor costs, excluding workers compensation
    
    
    0.3
    
    
    
    Increase in other occupancy costs
    
    
    0.2
    
    
    
    Increase in utilities expense
    
    
    0.2
    
    
    
    Other, net
    
    
    0.2
    
    
    
    0.1Restaurant operating costs as a percentage of
company-operated restaurants revenue for the period ended
November 5, 2007
    
    
    84.3
    %
    
    
    83.0
    %
  43




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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
    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)
 Consolidated Expenses
 Advertising Expense
  General and Administrative Expense
   Facility Action Charges
    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)
  Interest Expense
    Conversion Inducement Expense
  Other Income, Net
  Twelve Weeks Ended
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Rental income from
properties leased to
third parties, net
    
    $
    509
    
    
    $
    381
    
    
    $
    1,557
    
    
    $
    1,392Interest income on
notes receivable from
franchisees,
disposition properties
and capital leases
    
    
    401
    
    
    
    239
    
    
    
    782
    
    
    
    861Other, net
    
    
    169
    
    
    
    1,252
    
    
    
    952
    
    
    
    1,174Total other income, net
    
    $
    1,079
    
    
    $
    1,872
    
    
    $
    3,291
    
    
    $
    3,427
  46




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Income Taxes
  Twelve Weeks Ended
    
    
    Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006
    
    
    November 5, 2007
    
    
    November 6, 2006Federal and state income taxes
    
    $
    5,145
    
    
    $
    10,660
    
    
    $
    23,011
    
    
    $
    32,533Foreign income taxes
    
    
    243
    
    
    
    222
    
    
    
    840
    
    
    
    844Income tax expense
    
    $
    5,388
    
    
    $
    10,882
    
    
    $
    23,851
    
    
    $
    33,377Effective income tax rate
    
    
    41.9
    %
    
    
    49.5
    %
    
    
    40.6
    %
    
    
    44.3
    %
    Discontinued Operations
   47




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
    Liquidity and Capital Resources
     48




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
        49




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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
    
    Forty WeeksCommon shares repurchased
    
    
    4,796,899
    
    
    
    13,199,219Average price per share
    
    $
    16.66
    
    
    $
    17.68Total cost, including trading commissions
    
    $
    80,067
    
    
    $
    233,695Common shares retired
    
    
    4,780,699
    
    
    
    13,201,319
       50




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Forty Weeks EndedNovember 5, 2007
    
    
    November 6, 2006Non-discretionary:RemodelsCarls Jr.
    
    $
    19,745
    
    
    $
    1,509Hardees
    
    
    12,556
    
    
    
    428Capital MaintenanceCarls Jr.
    
    
    12,780
    
    
    
    6,480Hardees
    
    
    13,460
    
    
    
    10,670Corporate/other
    
    
    5,677
    
    
    
    16,595Total non-discretionary
    
    
    64,218
    
    
    
    35,682Discretionary:New restaurantsCarls Jr.
    
    
    13,414
    
    
    
    8,495Hardees
    
    
    7,129
    
    
    
    3,412Dual-brandingCarls Jr.
    
    
    1,077
    
    
    
    2,034Hardees
    
    
    2,763
    
    
    
    2,998Real estate/franchise acquisitions
    
    
    7,286
    
    
    
    27,137Corporate/other
    
    
    2,282
    
    
    
    3,536Capital expenditures  discontinued operations
    
    
    3,523
    
    
    
    1,726Total discretionary
    
    
    37,474
    
    
    
    49,338Total
    
    $
    101,692
    
    
    $
    85,020
   51




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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
  52




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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
   Twelve Weeks
    
    Forty WeeksCommon shares repurchased
    
    
    4,796,899
    
    
    
    13,199,219Average price per share
    
    $
    16.66
    
    
    $
    17.68Total cost, including trading commissions
    
    $
    80,067
    
    
    $
    233,695Common shares retired
    
    
    4,780,699
    
    
    
    13,201,319
  53




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##### Table of Contents



(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
    
    
    ProgramsAugust 14, 2007  September 10, 2007
    
    
    2,019,762
    
    
    $
    17.27
    
    
    
    2,019,762
    
    
    $
    70,810September 11, 2007  October 8, 2007
    
    
    1,067,800
    
    
    
    16.52
    
    
    
    1,067,800
    
    
    
    53,137October 9, 2007  November 5, 2007
    
    
    1,709,337
    
    
    
    16.03
    
    
    
    1,709,337
    
    
    
    25,691Total
    
    
    4,796,899
    
    
    $
    16.66
    
    
    
    4,796,899
    
    
    $
    25,691
 
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
  54




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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, 2007.31.1
    
    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.
 55




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##### Table of Contents



SIGNATURES
  CKE RESTAURANTS, INC.
(Registrant)Date: December 12, 2007
    /s/ Theodore AbajianTheodore AbajianExecutive Vice President

Chief Financial Officer 56




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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, 2007.31.1
    
    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.
 57