##### Table of Contents



---

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-Q

|           |  |                                                                                          
|---------- |  | -----------------------------------------------------------------------------------------
|(Mark One)
|x          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. 
|           |  |                                                                                          
|           |  | For the quarter ended August 11, 2003                                                    
|           |  |                                                                                          
|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, CA
(Address of Principal Executive Offices) |  | 93013
(Zip Code)                               

Registrants telephone
number, including area code: (805) 745-7500

Former Name, Former Address and Former Fiscal Year, if changed since last report.
3916 State Street, Ste. 300 Santa Barbara, CA 93105

Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x
 No o

Indicate by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes x
 No o

As of September 10, 2003, 57,595,063 shares of the Registrants Common
Stock were outstanding.



---

---





---

TABLE OF CONTENTS



|                              |                                                                                               |                                                          |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------- |  |  |  |  |  | 
|PART 1. FINANCIAL INFORMATION
|                              | ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                          
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                   
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS         
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS         
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS    
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|Part II. Other Information   
|                              | Item 1. Legal Proceedings                                                                    
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 
|EXHIBIT 32.2                 



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES

INDEX

|                              |  |                                                                                                                                       |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                                       |  | Page
|                              |  |                                                                                                                                       |  |     
|Part I. Financial Information |  |                                                                                                                                      
|Item 1.                       |  | Condensed Consolidated Financial Statements (unaudited):                                                                              |  |     
|                              |  | Condensed Consolidated Balance Sheets as of August 11, 2003 and January 31, 2003                                                      |  | 3   
|                              |  | Condensed Consolidated Statements of Operations for the twelve weeks and twenty-eight
weeks ended August 11, 2003 and August 12, 2002 |  | 4   
|                              |  | Condensed Consolidated Statement of Stockholders Equity for the twenty-eight weeks
ended August 11, 2003                             |  | 5   
|                              |  | Condensed Consolidated Statements of Cash Flows for the twenty-eight weeks ended
August 11, 2003 and August 12, 2002                  |  | 6   
|                              |  | Notes to Condensed Consolidated Financial Statements                                                                                  |  | 7   
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                 |  | 18  
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                            |  | 40  
|Item 4.                       |  | Controls and Procedures                                                                                                               |  | 41  
|Part II. Other Information    |  |                                                                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                                                                     |  | 42  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                                   |  | 42  
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                                      |  | 43  

2



---



##### 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 share data)
(Unaudited)

|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                  |         |  |  | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | -------- | ------- | --------------- | ------- | ---------------- | ------- |  |  | 
|                                                |                                                                                                                                                                            |                                            |         |          |         | August 11, 2003 |         | January 31, 2003
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|ASSETS                                          |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|Current assets:                                 |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                | Cash and cash equivalents                                                                                                                                                  |                                            | $       | 22,396   |         |                 | $       | 18,440           |        
|                                                | Accounts receivable, net                                                                                                                                                   |                                            |         | 34,387   |         |                 |         | 40,593           |        
|                                                | Related party trade receivables                                                                                                                                            |                                            |         | 5,314    |         |                 |         | 5,106            |        
|                                                | Inventories                                                                                                                                                                |                                            |         | 20,235   |         |                 |         | 19,224           |        
|                                                | Prepaid expenses                                                                                                                                                           |                                            |         | 11,367   |         |                 |         | 16,325           |        
|                                                | Assets held for sale                                                                                                                                                       |                                            |         | 16,250   |         |                 |         | 21,170           |        
|                                                | Other current assets                                                                                                                                                       |                                            |         | 1,514    |         |                 |         | 1,492            |        
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                |                                                                                                                                                                            | Total current assets                       |         |          | 111,463 |                 |         |                  | 122,350 | 
|Notes receivable                                |                                                                                                                                                                            |                                            | 4,062   |          |         |                 | 3,891   |                 
|Property and equipment, net                     |                                                                                                                                                                            |                                            | 536,228 |          |         |                 | 553,325 |                 
|Property under capital leases, net              |                                                                                                                                                                            |                                            | 54,884  |          |         |                 | 59,014  |                 
|Goodwill                                        |                                                                                                                                                                            |                                            | 56,708  |          |         |                 | 56,708  |                 
|Other assets                                    |                                                                                                                                                                            |                                            | 43,368  |          |         |                 | 48,185  |                 
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                |                                                                                                                                                                            | Total assets                               |         | $        | 806,713 |                 |         | $                | 843,473 | 
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|LIABILITIES AND STOCKHOLDERS EQUITY            |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|Current liabilities:                            |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                | Bank indebtedness                                                                                                                                                          |                                            | $       | 8,500    |         |                 | $       | 25,000           |        
|                                                | Convertible subordinated notes                                                                                                                                             |                                            |         | 122,319  |         |                 |         | 122,319          |        
|                                                | Current portion of capital lease obligations                                                                                                                               |                                            |         | 8,817    |         |                 |         | 9,782            |        
|                                                | Accounts payable                                                                                                                                                           |                                            |         | 43,855   |         |                 |         | 56,968           |        
|                                                | Other current liabilities                                                                                                                                                  |                                            |         | 104,998  |         |                 |         | 102,052          |        
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                |                                                                                                                                                                            | Total current liabilities                  |         |          | 288,489 |                 |         |                  | 316,121 | 
|Capital lease obligations, less current portion |                                                                                                                                                                            |                                            | 58,006  |          |         |                 | 62,518  |                 
|Senior subordinated notes                       |                                                                                                                                                                            |                                            | 200,000 |          |         |                 | 200,000 |                 
|Other long-term liabilities                     |                                                                                                                                                                            |                                            | 65,144  |          |         |                 | 71,260  |                 
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                |                                                                                                                                                                            | Total liabilities                          |         |          | 611,639 |                 |         |                  | 649,899 | 
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|Stockholders equity:                           |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                | Preferred stock, $.01 par value; authorized 5,000,000 shares; none issued and outstanding                                                                                  |                                            |         |         |         |                 |         |                 |        
|                                                | Common stock, $.01 par value; authorized 100,000,000 shares; issued and outstanding
59,175,000 and 58,868,000 shares at August 11, 2003 and January 31, 2003, respectively |                                            |         | 592      |         |                 |         | 589              |        
|                                                | Additional paid-in capital                                                                                                                                                 |                                            |         | 464,532  |         |                 |         | 463,474          |        
|                                                | Non-employee director and officer notes receivable                                                                                                                         |                                            |         | (2,530   | )       |                 |         | (2,530           | )      
|                                                | Accumulated deficit                                                                                                                                                        |                                            |         | (257,114 | )       |                 |         | (257,553         | )      
|                                                | Treasury stock at cost, 1,585,000 shares                                                                                                                                   |                                            |         | (10,406  | )       |                 |         | (10,406          | )      
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                |                                                                                                                                                                            | Total stockholders equity                 |         |          | 195,074 |                 |         |                  | 193,574 | 
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 
|                                                |                                                                                                                                                                            | Total liabilities and stockholders equity |         | $        | 806,713 |                 |         | $                | 843,473 | 
|                                                |                                                                                                                                                                            |                                            |         |          |         |                 |         |                 

See Accompanying Notes to Condensed Consolidated Financial Statements

3



---



##### Table of Contents






CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |         |         |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ------------------------------------------- | ---------------------------------- | ------- | ------------------ | ------- | ------------------------ | ------- | --------------- | ------- | --------------- | ------- | ------- | ------- | -------- | ------- | ------- | ------- | 
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         | Twelve Weeks Ended |         | Twenty-eight Weeks Ended
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                         
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         | August 11, 2003    |         | August 12, 2002          |         | August 11, 2003 |         | August 12, 2002
|Revenue:                                                                                                                                                                                                                                                                                                                |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Company-operated restaurants                                      |                                             | $                                  | 271,168 |                    |         | $                        | 267,430 |                 |         | $               | 610,210 |         |         | $        | 611,279 |        
|                                                                                                                                                                                                                                                                                                                        | Franchised and licensed restaurants and other                     |                                             |                                    | 62,551  |                    |         |                          | 60,141  |                 |         |                 | 143,067 |         |         |          | 140,690 |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             | Total revenue                      |         |                    | 333,719 |                          |         |                 | 327,571 |                 |         |         | 753,277 |          |         |         | 751,969 | 
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Operating costs and expenses:                                                                                                                                                                                                                                                                                           |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Restaurant operations:                                            |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |         |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   | Food and packaging                          |                                    |         | 80,852             |         |                          |         | 76,012          |         |                 |         | 180,949 |         |          |         | 175,814 |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   | Payroll and other employee benefit expenses |                                    |         | 84,909             |         |                          |         | 85,601          |         |                 |         | 197,544 |         |          |         | 196,163 |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   | Occupancy and other operating expenses      |                                    |         | 61,870             |         |                          |         | 57,145          |         |                 |         | 140,891 |         |          |         | 131,650 |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             | 227,631                            |         |                    |         | 218,758                  |         |                 |         | 519,384         |         |         |         | 503,627  |        
|                                                                                                                                                                                                                                                                                                                        | Franchised and licensed restaurants and other                     |                                             |                                    | 48,507  |                    |         |                          | 45,802  |                 |         |                 | 113,413 |         |         |          | 107,456 |        
|                                                                                                                                                                                                                                                                                                                        | Advertising expenses                                              |                                             |                                    | 16,571  |                    |         |                          | 16,788  |                 |         |                 | 37,584  |         |         |          | 38,761  |        
|                                                                                                                                                                                                                                                                                                                        | General and administrative expenses                               |                                             |                                    | 24,804  |                    |         |                          | 26,624  |                 |         |                 | 56,162  |         |         |          | 60,398  |        
|                                                                                                                                                                                                                                                                                                                        | Facility action charges, net                                      |                                             |                                    | 831     |                    |         |                          | 2,075   |                 |         |                 | 1,893   |         |         |          | 5,062   |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             | Total operating costs and expenses |         |                    | 318,344 |                          |         |                 | 310,047 |                 |         |         | 728,436 |          |         |         | 715,304 | 
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Operating income                                                                                                                                                                                                                                                                                                        |                                                                   |                                             | 15,375                             |         |                    |         | 17,524                   |         |                 |         | 24,841          |         |         |         | 36,665   |        
|Interest expense                                                                                                                                                                                                                                                                                                        |                                                                   |                                             | (9,024                             | )       |                    |         | (9,660                   | )       |                 |         | (21,202         | )       |         |         | (22,733  | )      
|Other income (expense), net                                                                                                                                                                                                                                                                                             |                                                                   |                                             | 228                                |         |                    |         | 3,696                    |         |                 |         | (410            | )       |         |         | 7,902    |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Income before income taxes, discontinued operations and cumulative
effect of accounting change for goodwill                                                                                                                                                                                                             |                                                                   |                                             | 6,579                              |         |                    |         | 11,560                   |         |                 |         | 3,229           |         |         |         | 21,834   |        
|Income tax expense (benefit)                                                                                                                                                                                                                                                                                            |                                                                   |                                             | 370                                |         |                    |         | 572                      |         |                 |         | 723             |         |         |         | (2,128   | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Income from continuing operations                                                                                                                                                                                                                                                                                       |                                                                   |                                             | 6,209                              |         |                    |         | 10,988                   |         |                 |         | 2,506           |         |         |         | 23,962   |        
|Income (loss) from operations of discontinued segment (net of income
tax expense (benefit) of $(25), $11, $(26) and $4 for the twelve
weeks ended August 11, 2003, the twelve weeks ended August 12, 2002,
the twenty-eight weeks ended August 11, 2003 and the twenty-eight
weeks ended August 12, 2002, respectively) |                                                                   |                                             | 46                                 |         |                    |         | (215                     | )       |                 |         | (2,067          | )       |         |         | (16      | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Income before cumulative effect of accounting change for goodwill                                                                                                                                                                                                                                                       |                                                                   |                                             | 6,255                              |         |                    |         | 10,773                   |         |                 |         | 439             |         |         |         | 23,946   |        
|Cumulative effect of accounting change for goodwill                                                                                                                                                                                                                                                                     |                                                                   |                                             |                                   |         |                    |         |                         |         |                 |         |                |         |         |         | (175,780 | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Net income (loss)                                                                                                                                                                                                                                                                                                       |                                                                   | $                                           | 6,255                              |         |                    | $       | 10,773                   |         |                 | $       | 439             |         |         | $       | (151,834 | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Basic income (loss) per common share:                                                                                                                                                                                                                                                                                   |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Continuing operations                                             |                                             | $                                  | 0.11    |                    |         | $                        | 0.19    |                 |         | $               | 0.04    |         |         | $        | 0.43    |        
|                                                                                                                                                                                                                                                                                                                        | Discontinued operations (including loss on discontinued segment)  |                                             |                                    |        |                    |         |                          |        |                 |         |                 | (0.03   | )       |         |          |        |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Income before cumulative effect of accounting change for goodwill |                                             |                                    | 0.11    |                    |         |                          | 0.19    |                 |         |                 | 0.01    |         |         |          | 0.43    |        
|                                                                                                                                                                                                                                                                                                                        | Cumulative effect of accounting change for goodwill               |                                             |                                    |        |                    |         |                          |        |                 |         |                 |        |         |         |          | (3.13   | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Net income (loss)                                                 |                                             | $                                  | 0.11    |                    |         | $                        | 0.19    |                 |         | $               | 0.01    |         |         | $        | (2.70   | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Diluted income (loss) per common share:                                                                                                                                                                                                                                                                                 |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Continuing operations                                             |                                             | $                                  | 0.10    |                    |         | $                        | 0.18    |                 |         | $               | 0.04    |         |         | $        | 0.41    |        
|                                                                                                                                                                                                                                                                                                                        | Discontinued operations (including loss on discontinued segment)  |                                             |                                    |        |                    |         |                          |        |                 |         |                 | (0.03   | )       |         |          |        |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Income before cumulative effect of accounting change for goodwill |                                             |                                    | 0.10    |                    |         |                          | 0.18    |                 |         |                 | 0.01    |         |         |          | 0.41    |        
|                                                                                                                                                                                                                                                                                                                        | Cumulative effect of accounting change for goodwill               |                                             |                                    |        |                    |         |                          |        |                 |         |                 |        |         |         |          | (3.02   | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Net income (loss)                                                 |                                             | $                                  | 0.10    |                    |         | $                        | 0.18    |                 |         | $               | 0.01    |         |         | $        | (2.61   | )      
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|Weighted-average common shares outstanding:                                                                                                                                                                                                                                                                             |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Basic                                                             |                                             |                                    | 59,152  |                    |         |                          | 57,240  |                 |         |                 | 59,059  |         |         |          | 56,275  |        
|                                                                                                                                                                                                                                                                                                                        | Dilutive effect of stock options                                  |                                             |                                    | 1,105   |                    |         |                          | 1,895   |                 |         |                 | 942     |         |         |          | 1,971   |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        
|                                                                                                                                                                                                                                                                                                                        | Diluted                                                           |                                             |                                    | 60,257  |                    |         |                          | 59,135  |                 |         |                 | 60,001  |         |         |          | 58,246  |        
|                                                                                                                                                                                                                                                                                                                        |                                                                   |                                             |                                    |         |                    |         |                          |         |                 |         |                 |         |         |         |          |        

See Accompanying Notes to Condensed Consolidated Financial Statements

4



---



##### Table of Contents






CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(In thousands)
(Unaudited)

|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   |           |   |                |   |          |     |               |  |        |   |  |   |         |   |  |   |         |       | 
|--------------------------- | ------------------------- |  | ---------------------------------------- | --- | ------ | - | ------- | - | ---------- | - | ------------- | ----- | ------------ | - | --------- | - | -------------- | - | -------- | --- | ------------- |  | ------ | - |  | - | ------- | - |  | - | ------- | ----- | 
|                            |                           |  | Twenty-eight Weeks Ended August 11, 2003
|                            |                           |  |                                         
|                            |                           |  | Common Stock                             |     |        |   |         |   |            |   |               |       |              |   |           |   | Treasury Stock |   |          |     |              
|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   |           |   |                |   |          |     |              
|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   | Non-      |   |                |   |          |     |               |  |        |   |  |   |         |   |  |   |        
|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   | Employee  |   |                |   |          |     |               |  |        |   |  |   |         |   |  |   |        
|                            |                           |  |                                          |     |        |   |         |   |            |   | Additional    |       | Director and |   |           |   |                |   |          |     |               |  |        |   |  |   | Total  
|                            |                           |  | Number of                                |     |        |   |         |   | Paid-In    |   | Officer Notes |       | Accumulated  |   | Number of |   |                |   |          |     | Stockholders
|                            |                           |  | Shares                                   |     | Amount |   | Capital |   | Receivable |   | Deficit       |       | Shares       |   | Amount    |   | Equity        
|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   |           |   |               
|Balance at
January 31, 2003 |                           |  | 58,868                                   |     |        | $ | 589     |   |            | $ | 463,474       |       |              | $ | (2,530    | ) |                | $ | (257,553 | )   |               |  | (1,585 | ) |  | $ | (10,406 | ) |  | $ | 193,574 |      
|                            | Exercise of stock options |  |                                          | 307 |        |   |         | 3 |            |   |               | 1,058 |              |   |           |  |                |   |          |    |               |  |        |  |  |   |         |  |  |   |         | 1,061 | 
|                            | Net income                |  |                                          |    |        |   |         |  |            |   |               |      |              |   |           |  |                |   |          | 439 |               |  |        |  |  |   |         |  |  |   |         | 439   | 
|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   |           |   |                |   |          |     |               |  |        |   |  |   |         |   |  |   |         |      
|Balance at
August 11, 2003  |                           |  | 59,175                                   |     |        | $ | 592     |   |            | $ | 464,532       |       |              | $ | (2,530    | ) |                | $ | (257,114 | )   |               |  | (1,585 | ) |  | $ | (10,406 | ) |  | $ | 195,074 |      
|                            |                           |  |                                          |     |        |   |         |   |            |   |               |       |              |   |           |   |                |   |          |     |               |  |        |   |  |   |         |   |  |   |         |      

See Accompanying Notes to Condensed Consolidated Financial Statements

5



---



##### Table of Contents






CKE RESTAURANTS, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                 |          |    |         |  
|-------------------------------------------------- | ------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- | -------- | ------------------------ | ------- | --------------- | -------- | -- | ------- | -
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          | Twenty-eight Weeks Ended
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                         
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          | August 11, 2003          |         | August 12, 2002
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|Net cash flow from operating activities:           |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             | Net income (loss)                                                                                                                   |                                                  | $                                                                                                                             | 439      |                          |         | $               | (151,834 | ) 
|                                                   |                                             | Adjustments to reconcile net income (loss) to net cash provided by operating activities (excluding effects of acquisition in 2002): |                                                  |                                                                                                                               |          |                          |         |                 |          |   
|                                                   |                                             |                                                                                                                                     |                                                  | Cumulative effect of accounting change for goodwill                                                                           |          |                          |        |                 |          |    | 175,780 |  
|                                                   |                                             |                                                                                                                                     |                                                  | Depreciation and amortization                                                                                                 |          |                          | 34,068  |                 |          |    | 33,613  |  
|                                                   |                                             |                                                                                                                                     |                                                  | Amortization of loan fees included in interest expense                                                                        |          |                          | 2,536   |                 |          |    | 2,165   |  
|                                                   |                                             |                                                                                                                                     |                                                  | Provision (recovery) for losses on accounts and notes receivable                                                              |          |                          | 2,094   |                 |          |    | (239    | )
|                                                   |                                             |                                                                                                                                     |                                                  | Gain (loss) on investments, sale of property and equipment, capital leases and extinguishment of debt                         |          |                          | 89      |                 |          |    | (6,497  | )
|                                                   |                                             |                                                                                                                                     |                                                  | Facility action charges, net                                                                                                  |          |                          | 1,893   |                 |          |    | 5,062   |  
|                                                   |                                             |                                                                                                                                     |                                                  | Other non-cash items                                                                                                          |          |                          | (160    | )               |          |    | 426     |  
|                                                   |                                             |                                                                                                                                     |                                                  | Income tax refund accrued                                                                                                     |          |                          |        |                 |          |    | (3,721  | )
|                                                   |                                             |                                                                                                                                     |                                                  | Change in estimated liability for closing restaurants, estimated liability for self-insurance and other long-term liabilities |          |                          | (5,802  | )               |          |    | (10,316 | )
|                                                   |                                             |                                                                                                                                     |                                                  | Income tax refund received                                                                                                    |          |                          | 639     |                 |          |    | 7,021   |  
|                                                   |                                             |                                                                                                                                     |                                                  | Net change in accounts receivable, inventories, prepaid expenses and other current assets                                     |          |                          | 5,820   |                 |          |    | 673     |  
|                                                   |                                             |                                                                                                                                     |                                                  | Net change in accounts payable and other current liabilities                                                                  |          |                          | 2,357   |                 |          |    | 13,517  |  
|                                                   |                                             |                                                                                                                                     |                                                  | Net loss from discontinued operations                                                                                         |          |                          | 2,067   |                 |          |    | 16      |  
|                                                   |                                             |                                                                                                                                     |                                                  | Cash used by discontinued operations                                                                                          |          |                          | (216    | )               |          |    | (1,907  | )
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             |                                                                                                                                     |                                                  | Net cash provided by operating activities                                                                                     |          |                          | 45,824  |                 |          |    | 63,759  |  
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|Cash flow from investing activities:               |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             | Purchases of property and equipment                                                                                                 |                                                  |                                                                                                                               | (23,157  | )                        |         |                 | (27,263  | ) 
|                                                   |                                             | Proceeds from sale of:                                                                                                              |                                                  |                                                                                                                               |          |                          |         |                 |          |   
|                                                   |                                             |                                                                                                                                     |                                                  | Marketable securities and long-term investments                                                                               |          |                          |        |                 |          |    | 5,760   |  
|                                                   |                                             |                                                                                                                                     |                                                  | Property and equipment                                                                                                        |          |                          | 9,243   |                 |          |    | 12,441  |  
|                                                   |                                             | Collections on notes receivable and related party receivables                                                                       |                                                  |                                                                                                                               | 1,203    |                          |         |                 | 1,908    |   
|                                                   |                                             | Cash of subsidiary in property held for sale                                                                                        |                                                  |                                                                                                                               |         |                          |         |                 | 1,087    |   
|                                                   |                                             | Net change in other assets                                                                                                          |                                                  |                                                                                                                               | 939      |                          |         |                 | (650     | ) 
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             |                                                                                                                                     |                                                  | Net cash used in investing activities                                                                                         |          |                          | (11,772 | )               |          |    | (6,717  | )
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|Cash flow from financing activities:               |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             | Net change in bank overdraft                                                                                                        |                                                  |                                                                                                                               | (8,661   | )                        |         |                 | (11,050  | ) 
|                                                   |                                             | Long-term borrowings                                                                                                                |                                                  |                                                                                                                               | 149,500  |                          |         |                 | 74,500   |   
|                                                   |                                             | Repayments of long-term debt                                                                                                        |                                                  |                                                                                                                               | (166,000 | )                        |         |                 | (98,196  | ) 
|                                                   |                                             | Repayments of capital lease obligations                                                                                             |                                                  |                                                                                                                               | (5,477   | )                        |         |                 | (5,635   | ) 
|                                                   |                                             | Repayments of non-employee director and officer notes receivable                                                                    |                                                  |                                                                                                                               |         |                          |         |                 | 1,554    |   
|                                                   |                                             | Payment of deferred financing costs                                                                                                 |                                                  |                                                                                                                               | (42      | )                        |         |                 | (5,159   | ) 
|                                                   |                                             | Net change in other long-term liabilities                                                                                           |                                                  |                                                                                                                               | (477     | )                        |         |                 | 2,257    |   
|                                                   |                                             | Exercise of stock options                                                                                                           |                                                  |                                                                                                                               | 1,061    |                          |         |                 | 1,293    |   
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             |                                                                                                                                     |                                                  | Net cash used in financing activities                                                                                         |          |                          | (30,096 | )               |          |    | (40,436 | )
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             |                                                                                                                                     |                                                  | Net increase in cash and cash equivalents                                                                                     |          |                          | 3,956   |                 |          |    | 16,606  |  
|                                                   |                                             |                                                                                                                                     |                                                  | Cash and cash equivalents at beginning of period                                                                              |          |                          | 18,440  |                 |          |    | 24,642  |  
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             |                                                                                                                                     |                                                  | Cash and cash equivalents at end of period                                                                                    |          | $                        | 22,396  |                 |          | $  | 41,248  |  
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|Supplemental disclosures of cash flow information: |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   | Cash (paid) received during the period for: |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                 |         
|                                                   |                                             | Interest                                                                                                                            |                                                  | $                                                                                                                             | (17,973  | )                        |         | $               | (19,301  | ) 
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             | Income taxes                                                                                                                        |                                                  | $                                                                                                                             | (282     | )                        |         | $               | 7,021    |   
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|Non-cash investing and financing activities:       |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                
|                                                   |                                             |                                                                                                                                     | Deferred gain on sale and leaseback transactions |                                                                                                                               | $        | 162                      |         |                 | $        | 66 |        
|                                                   |                                             |                                                                                                                                     |                                                  |                                                                                                                               |          |                          |         |                

See Accompanying Notes to Condensed Consolidated Financial Statements

6



---



##### Table of Contents






CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

NOTE (1) BASIS OF PRESENTATION

CKE Restaurants, Inc. (CKE or the Company), through its wholly-owned
subsidiaries, owns, operates, franchises and licenses the Carls Jr.®,
Hardees®, The Green Burrito® (Green Burrito) and La Salsa Fresh Mexican
Grill® (La Salsa) concepts. Carls Jr. restaurants are primarily located in
the Western United States, predominantly in California. Hardees restaurants
are located throughout the Southeastern and Midwestern United States. Green
Burrito restaurants are located in California, primarily in dual-brand Carls
Jr. restaurants. La Salsa restaurants are primarily located in California. As
of August 11, 2003, the Companys system-wide restaurant portfolio consisted
of:

|                        |  |            |       |          |  |          |       |       |  |       |     |  |  |  |    |  |  |  |       | 
|----------------------- |  | ---------- | ----- | -------- |  | -------- | ----- | ----- |  | ----- | --- |  |  |  | -- |  |  |  | ----- | 
|                        |  | Carls Jr. |       | Hardees |  | La Salsa |       | Other |  | Total
|                        |  |            |       |          |  |          |       |       |  |      
|Company-operated        |  |            | 442   |          |  |          | 729   |       |  |       | 60  |  |  |  | 4  |  |  |  | 1,235 | 
|Franchised and licensed |  |            | 558   |          |  |          | 1,425 |       |  |       | 40  |  |  |  | 17 |  |  |  | 2,040 | 
|                        |  |            |       |          |  |          |       |       |  |       |     |  |  |  |    |  |  |  |       | 
|Total                   |  |            | 1,000 |          |  |          | 2,154 |       |  |       | 100 |  |  |  | 21 |  |  |  | 3,275 | 
|                        |  |            |       |          |  |          |       |       |  |       |     |  |  |  |    |  |  |  |       | 

The accompanying unaudited Condensed Consolidated Financial Statements include
the accounts of CKE and its wholly-owned subsidiaries and have been prepared in
accordance with accounting principles generally accepted in the United States
of America, the instructions to Form 10-Q, and Article 10 of Regulation S-X.
These statements should be read in conjunction with the audited consolidated
financial statements presented in the Companys Annual Report on Form 10-K for
the fiscal year ended January 27, 2003. In the opinion of management, all
adjustments consisting of normal recurring accruals necessary for a fair
presentation of financial position and results of operations for the interim
periods presented have been reflected herein. The results of operations for
such interim periods are not necessarily indicative of results for the full
year or for any future period.

For clarity of presentation, the Company generally labels all fiscal year ends
as fiscal year ended January 31.

Stock Based Compensation

The Company has various stock-based compensation plans that provide options for
certain employees and outside directors to purchase common shares of the
Company. The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure(SFAS 148). SFAS 148 amends Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation(SFAS 123), to
provide alternative methods of transition for a voluntary change to the
fair-value method for stock-based employee compensation. In addition, SFAS 148
amends the disclosure requirements of SFAS 123 to require prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results.

For purposes of the following pro forma disclosures required by SFAS 148 and
SFAS 123, the fair value of each option has been estimated on the date of grant
using the Black-Scholes option-pricing model. The Black-Scholes option
valuation model was developed for use in estimating the fair value of traded
options that do not have vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the
Companys stock options have characteristics significantly different from those
of traded options and because changes in the subjective input assumptions can
materially affect the value of an estimate, in managements opinion, the
existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.

7



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

The assumptions used for grants in the twelve week and twenty-eight week
periods ended August 11, 2003 and August 12, 2002 are as follows:

|                                                                                 |  |                 |      |                 |  |   |      |  
|-------------------------------------------------------------------------------- |  | --------------- | ---- | --------------- |  | - | ---- | -
|                                                                                 |  | August 11, 2003 |      | August 12, 2002
|                                                                                 |  |                 |      |                
|Annual dividends                                                                 |  | $               |     |                 |  | $ |     |  
|Expected volatility                                                              |  |                 | 55.2 | %               |  |   | 73.4 | %
|Risk-free interest rate (matched to the expected term of the outstanding option) |  |                 | 3.88 | %               |  |   | 3.88 | %
|Expected life of all options outstanding (years)                                 |  |                 | 5.46 |                 |  |   | 5.46 |  
|Weighted-average fair value of each option granted                               |  | $               | 3.07 |                 |  | $ | 5.79 |  

The following table reconciles reported net income (loss) to pro forma net
income (loss) assuming compensation expense for stock-based compensation had
been recognized in accordance with SFAS 123:

|                                                                                                                             |                       |   |                    |      |                 |   |        |      | 
|---------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ------------------ | ---- | --------------- | - | ------ | ---- | 
|                                                                                                                             |                       |   | Twelve Weeks Ended
|                                                                                                                             |                       |   |                   
|                                                                                                                             |                       |   | August 11, 2003    |      | August 12, 2002
|                                                                                                                             |                       |   |                    |      |                
|Net income, as reported                                                                                                      |                       | $ | 6,255              |      |                 | $ | 10,773 |     
|Add: Stock-based employee
compensation expense included in
reported net income                                               |                       |   |                   |      |                 |   |       |     
|Deduct: Total stock-based employee
compensation expense determined under
fair value based method, net of
related tax effects |                       |   | (598               | )    |                 |   | (495   | )   
|                                                                                                                             |                       |   |                    |      |                 |   |        |     
|Net income  pro forma                                                                                                       |                       | $ | 5,657              |      |                 | $ | 10,278 |     
|                                                                                                                             |                       |   |                    |      |                 |   |        |     
|Income per common share:                                                                                                     |                       |   |                    |      |                 |   |        |     
|                                                                                                                             | Basic  as reported   |   | $                  | 0.11 |                 |   | $      | 0.19 | 
|                                                                                                                             | Basic  pro forma     |   | $                  | 0.10 |                 |   | $      | 0.18 | 
|                                                                                                                             | Diluted  as reported |   | $                  | 0.10 |                 |   | $      | 0.18 | 
|                                                                                                                             | Diluted  pro forma   |   | $                  | 0.09 |                 |   | $      | 0.17 | 

|                                                                                                                             |                       |   |                          |       |                 |   |          |       |  
|---------------------------------------------------------------------------------------------------------------------------- | --------------------- | - | ------------------------ | ----- | --------------- | - | -------- | ----- | -
|                                                                                                                             |                       |   | Twenty-eight Weeks Ended
|                                                                                                                             |                       |   |                         
|                                                                                                                             |                       |   | August 11, 2003          |       | August 12, 2002
|                                                                                                                             |                       |   |                          |       |                
|Net income (loss), as reported                                                                                               |                       | $ | 439                      |       |                 | $ | (151,834 | )    
|Add: Stock-based employee
compensation expense included in
reported net income (loss)                                        |                       |   |                         |       |                 |   |         |      
|Deduct: Total stock-based employee
compensation expense determined under
fair value based method, net of
related tax effects |                       |   | (1,232                   | )     |                 |   | (1,392   | )    
|                                                                                                                             |                       |   |                          |       |                 |   |          |      
|Net loss  pro forma                                                                                                         |                       | $ | (793                     | )     |                 | $ | (153,226 | )    
|                                                                                                                             |                       |   |                          |       |                 |   |          |      
|Income (loss) per common share:                                                                                              |                       |   |                          |       |                 |   |          |      
|                                                                                                                             | Basic  as reported   |   | $                        | 0.01  |                 |   | $        | (2.70 | )
|                                                                                                                             | Basic  pro forma     |   | $                        | (0.01 | )               |   | $        | (2.72 | )
|                                                                                                                             | Diluted  as reported |   | $                        | 0.01  |                 |   | $        | (2.61 | )
|                                                                                                                             | Diluted  pro forma   |   | $                        | (0.01 | )               |   | $        | (2.63 | )

NOTE (2) ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

During the first quarter of fiscal 2004, the Company adopted Statement of
Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations(SFAS 143). SFAS 143 addresses the financial accounting and
reporting for obligations related to the retirement of tangible long-lived
assets and the associated asset retirement costs. The adoption of SFAS 143 did
not have a material effect on the Companys consolidated financial statements.

During the first quarter of fiscal 2004, the Company adopted Statement of
Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement 13 and Technical Corrections(SFAS 145).
As permitted, the Company had previously implemented the provisions of SFAS 145
regarding debt extinguishment in the first quarter of fiscal 2003. SFAS 145
eliminates the classification of debt extinguishment activity as extraordinary
items, eliminates inconsistencies in lease modification treatment and makes
various technical corrections or clarifications of other existing authoritative
pronouncements. The adoption of SFAS 145 did not have a material effect on the
Companys consolidated financial statements.

8



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

During the first quarter of fiscal 2004, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 46, Consolidation of
Variable Interest Entities(FIN 46). FIN 46 requires that companies that have
a controlling financial interest in another entity through interests other than
voting interests should consolidate the controlled entity. FIN 46 provisions
must be applied to applicable variable interest entities created before
February 1, 2003 from the beginning of the Companies third quarter of 2004.
Where it is reasonably possible that the company will consolidate or disclose
information about a variable interest entity, the company must disclose the
nature, purpose, size and activity of the variable interest entity and the
companys maximum exposure to loss as a result of its involvement with the
variable interest entity in all financial statements issued after January 31,
2003. The Company has not yet determined if it will be required to consolidate
any of its franchise arrangements under FIN 46 and the effect FIN 46 may have
on the Companys consolidated financial statements.

The Company utilizes various advertising funds (Funds) to administer its
advertising programs. These Funds receive cash contributions from franchisees,
as well as the Company, to be used for mutually beneficial marketing programs.
The Company is evaluating the impact of FIN 46 on its financial statements,
including the classification of these Funds under FIN 46. The Company has
determined that the consolidation of the Funds is appropriate under FIN 46. The
Company has not yet determined the impact of the consolidation of the Funds,
however the Company does not expect the consolidation of the Funds to have a
material impact on its results of operations.

During the first quarter of fiscal 2004, the Company adopted Emerging Issues
Task Force No. 02-16, Accounting by a Reseller for Cash Consideration Received
from a Vendor(EITF 02-16). EITF 02-16 provides guidance on the recognition
of cash consideration received by a customer from a vendor and is effective for
transactions entered into or modified after December 31, 2002. The Companys
initial adoption of EITF 02-16 did not have a material impact on the Companys
consolidated financial statements.

NOTE (3) ACQUISITIONS

On March 1, 2002, the Company acquired Santa Barbara Restaurant Group, Inc.
(SBRG). SBRG owns, operates and franchises the Green Burrito, La Salsa and
Timber Lodge restaurant chains. Through the Companys dual-branding
relationship with GB Franchise Corporation, an indirect wholly-owned subsidiary
of SBRG, Carls Jr. had been SBRGs largest franchisee. The Company acquired
SBRG for strategic purposes, which included gaining control of the Green
Burrito brand, eliminating the payment of royalties on franchised Green Burrito
restaurants, investing in the fast-casual segment, which is an emerging
competitor to the quick-service restaurant segment, and providing the Company
with a growth opportunity in the Fresh Mex segment with La Salsa. The results
of operations of SBRG are included in the operating results for the twelve week
and twenty-eight week periods ended August 11, 2003, the twelve week period
ended August 12, 2002 and the period from March 1, 2002 (date of acquisition)
through August 12, 2002. The purchase price consisted of 6,352,000 shares of
the Companys common stock valued at $78,815 as of the closing, plus
transaction costs of $1,465.

The final allocation of the purchase price to the assets acquired, including
the goodwill and liabilities assumed in the acquisition of SBRG are as follows:

|                                          |  |                        |         |                    |  |                |         |   |  |       |        | 
|----------------------------------------- |  | ---------------------- | ------- | ------------------ |  | -------------- | ------- | - |  | ----- | ------ | 
|                                          |  |                        |         |                    |  |                |         |   |  | Final
|                                          |  | Initial
Purchase Price |         | Adjustments to the |  | Purchase Price
|                                          |  | Allocation             |         | Initial Allocation |  | Allocation    
|                                          |  |                        |         |                    |  |               
|Current assets                            |  | $                      | 5,173   |                    |  | $              | (2,099  | ) |  | $     | 3,074  | 
|Property and equipment                    |  |                        | 33,722  |                    |  |                | (22,699 | ) |  |       | 11,023 | 
|Goodwill                                  |  |                        | 32,225  |                    |  |                | 12,504  |   |  |       | 44,729 | 
|Net assets held for sale                  |  |                        |        |                    |  |                | 9,835   |   |  |       | 9,835  | 
|Other assets                              |  |                        | 30,566  |                    |  |                | (6,784  | ) |  |       | 23,782 | 
|                                          |  |                        |         |                    |  |                |         |   |  |       |        | 
|Total assets acquired                     |  |                        | 101,686 |                    |  |                | (9,243  | ) |  |       | 92,443 | 
|                                          |  |                        |         |                    |  |                |         |   |  |       |        | 
|Current liabilities                       |  |                        | 13,141  |                    |  |                | (7,670  | ) |  |       | 5,471  | 
|Long-term debt, excluding current portion |  |                        | 6,500   |                    |  |                |        |   |  |       | 6,500  | 
|Other long-term liabilities               |  |                        | 2,230   |                    |  |                | (2,038  | ) |  |       | 192    | 
|                                          |  |                        |         |                    |  |                |         |   |  |       |        | 
|Total liabilities assumed                 |  |                        | 21,871  |                    |  |                | (9,708  | ) |  |       | 12,163 | 
|                                          |  |                        |         |                    |  |                |         |   |  |       |        | 
|Net assets acquired                       |  | $                      | 79,815  |                    |  | $              | 465     |   |  | $     | 80,280 | 
|                                          |  |                        |         |                    |  |                |         |   |  |       |        | 

9



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

The Company has made adjustments to the initial purchase price allocation, the
impact of which was immaterial to the Companys results of operations, as
follows:

|                                                                                                                                                                    |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | -
|Increase in assets held for sale due to plan to divest Timber Lodge                                                                                                 |  | $ | 9,835   |  
|Decrease in property and equipment due to adjustments for capital leases,
leasehold improvements, other property and equipment, and reclass to
assets held for sale |  |   | (22,699 | )
|Decrease in current assets due to reclassification to assets held for sale                                                                                          |  |   | (2,099  | )
|Decrease in other assets due to adjustments for prepaid expenses and assets
held for sale                                                                           |  |   | (6,784  | )
|Increase in goodwill due to adjustments listed above                                                                                                                |  |   | 12,504  |  
|Decrease in current liabilities due to adjustments for leases at Timber Lodge and
reclassification to assets held for sale                                          |  |   | 7,670   |  
|Decrease in other long-term liabilities due to adjustments to record additional
estimated liabilities for closing restaurants and reclass to assets held for sale   |  |   | 2,038   |  
|                                                                                                                                                                    |  |   |         |  
|Change in purchase price                                                                                                                                            |  | $ | 465     |  
|                                                                                                                                                                    |  |   |         |  

The Company acquired identifiable intangible assets as a result of the
acquisition of SBRG. The intangible assets acquired, included in other assets
above, excluding goodwill, are classified and valued as follows:

|                                 |  |              |       |                       |   |               |             |                  |                |        |   |  |   |        | 
|-------------------------------- |  | ------------ | ----- | --------------------- | - | ------------- | ----------- | ---------------- | -------------- | ------ | - |  | - | ------ | 
|                                 |  |              |       |                       |   |               |             |                  | Adjustments to |        |   |  |  
|                                 |  |              |       |                       |   |               | the Initial |                  |               
|                                 |  | Amortization |       | Initial Balance Sheet |   | Balance Sheet |             | Final Balance   
|Intangible Asset                 |  | Period       |       | Allocation            |   | Allocation    |             | Sheet Allocation
|                                 |  |              |       |                       |   |               |             |                 
|Trademarks                       |  | 20           | years |                       | $ | 17,000        |             |                  | $              | 171    |   |  | $ | 17,171 | 
|Franchise agreements             |  | 20           | years |                       |   | 1,700         |             |                  |                | 80     |   |  |   | 1,780  | 
|Favorable leases                 |  | 6 to 15      | years |                       |   | 9,600         |             |                  |                | (6,468 | ) |  |   | 3,132  | 
|Other intangible assets          |  | 20           | years |                       |   | 46            |             |                  |                | (46    | ) |  |   |       | 
|                                 |  |              |       |                       |   |               |             |                  |                |        |   |  |   |        | 
|Total intangible assets acquired |  |              |       |                       | $ | 28,346        |             |                  | $              | (6,263 | ) |  | $ | 22,083 | 
|                                 |  |              |       |                       |   |               |             |                  |                |        |   |  |   |        | 

Amortization expense related to identifiable intangible assets acquired as a
result of the acquisition of SBRG was approximately $357, $752, $413 and $413
for the twelve week and twenty-eight week periods ended August 11, 2003, the
twelve week period ended August 12, 2002 and the period from March 1, 2002 (the
date of acquisition) through August 12, 2002, respectively.

Selected unaudited pro forma combined results of operations for the
twenty-eight weeks ended August 12, 2002, assuming the SBRG acquisition
occurred on January 30, 2002, using actual restaurant-level margins and general
and administrative expenses prior to the acquisition, are as follows:

10



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

|                                                                  |                                                                   |   |                          |        |  
|----------------------------------------------------------------- | ----------------------------------------------------------------- | - | ------------------------ | ------ | -
|                                                                  |                                                                   |   | Twenty-eight Weeks Ended
|                                                                  |                                                                   |   | August 12, 2002         
|                                                                  |                                                                   |   |                         
|Total revenue                                                     |                                                                   | $ | 753,310                  |       
|                                                                  |                                                                   |   |                          |       
|Income from continuing
operations                                 |                                                                   | $ | 22,907                   |       
|Loss from discontinued operations                                 |                                                                   |   | (170                     | )     
|                                                                  |                                                                   |   |                          |       
|Income before cumulative effect of accounting change for goodwill |                                                                   |   | 22,737                   |       
|Cumulative effect of accounting change for goodwill               |                                                                   |   | (175,780                 | )     
|                                                                  |                                                                   |   |                          |       
|Net loss                                                          |                                                                   | $ | (153,043                 | )     
|                                                                  |                                                                   |   |                          |       
|Basic income (loss) per common share:                             |                                                                   |   |                          |       
|                                                                  | Income from continuing operations                                 |   | $                        | 0.40   |  
|                                                                  | Loss from discontinued operations                                 |   |                          |       |  
|                                                                  |                                                                   |   |                          |       
|                                                                  | Income before cumulative effect of accounting change for goodwill |   |                          | 0.40   |  
|                                                                  | Cumulative effect of accounting change for goodwill               |   |                          | (3.09  | )
|                                                                  |                                                                   |   |                          |       
|                                                                  | Net loss                                                          |   | $                        | (2.69  | )
|                                                                  |                                                                   |   |                          |       
|Diluted income (loss) per common share:                           |                                                                   |   |                          |       
|                                                                  | Income from continuing operations                                 |   | $                        | 0.38   |  
|                                                                  | Loss from discontinued operations                                 |   |                          |       |  
|                                                                  |                                                                   |   |                          |       
|                                                                  | Income before cumulative effect of accounting change for goodwill |   |                          | 0.38   |  
|                                                                  | Cumulative effect of accounting change for goodwill               |   |                          | (2.98  | )
|                                                                  |                                                                   |   |                          |       
|                                                                  | Net loss                                                          |   | $                        | (2.60  | )
|                                                                  |                                                                   |   |                          |       
|Weighted-average common shares outstanding:                       |                                                                   |   |                          |       
|                                                                  | Basic                                                             |   |                          | 56,926 |  
|                                                                  | Dilutive effect of stock options and awards                       |   |                          | 1,971  |  
|                                                                  |                                                                   |   |                          |       
|                                                                  | Diluted                                                           |   |                          | 58,897 |  
|                                                                  |                                                                   |   |                          |       

NOTE (4) INDEBTEDNESS AND RELATED INTEREST EXPENSE

The Companys senior credit facility (Facility) consists of a $100,000
revolving credit facility, which includes a $75,000 letter of credit
sub-facility. The Facility has a maturity date of December 14, 2003, extendable
to November 15, 2006, provided the Company is able to refinance its convertible
subordinated notes, which are due in March 2004, prior to December 14, 2003. As
of August 11, 2003, the total cash borrowings outstanding under the Facility
were $8,500, outstanding letters of credit were $49,552 and the availability
was $41,948. On July 8, 2002, the Company amended the Facility to, among other
things, allow it to use the proceeds received from its sale of the common stock
of Checkers Drive-In Restaurants, Inc. (Checkers) to repurchase its
convertible subordinated notes. On October 18, 2002, the Company again amended
the Facility to allow it to repurchase an additional $15,000 of convertible
subordinated notes. On June 27, 2003, the Company amended the Facility to
exclude any additional writedown of Timber Lodge assets held for sale, as
further discussed in Note 8, and to amend the minimum consolidated EBITDA
requirements through maturity. During the twelve weeks ended August 12, 2002
the Company repurchased $6,143 (face value) of convertible notes for $5,700
(including accrued interest) at various prices ranging from $90.50 to $91.50.
Those transactions resulted in the recognition of a gain on the retirement of
debt of $537.

During the twenty-eight weeks ended August 12, 2002, the Company repurchased
$17,196 (face value) of convertible notes for $15,699 (including accrued
interest) at various prices ranging from $87.25 to $91.50. Those transactions
resulted in the recognition of a gain on the retirement of debt in the amount
of $1,715.

Gains on the retirement of debt are recorded as other income (expense), net in
the accompanying Condensed Consolidated Statements of Operations.

11



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

Interest expense consists of the following:

|                               |                        |   |                    |       |                          |   |                 |       |                 |   |       |        |  |   |       |        | 
|------------------------------ | ---------------------- | - | ------------------ | ----- | ------------------------ | - | --------------- | ----- | --------------- | - | ----- | ------ |  | - | ----- | ------ | 
|                               |                        |   | Twelve Weeks Ended |       | Twenty-eight Weeks Ended
|                               |                        |   |                    |       |                         
|                               |                        |   | August 11, 2003    |       | August 12, 2002          |   | August 11, 2003 |       | August 12, 2002
|                               |                        |   |                    |       |                          |   |                 |       |                
|Senior credit facility         |                        | $ | 233                |       |                          | $ | 371             |       |                 | $ | 715   |        |  | $ | 1,382 |       
|Senior subordinated notes      |                        |   | 4,212              |       |                          |   | 4,212           |       |                 |   | 9,827 |        |  |   | 9,827 |       
|Capital lease obligations      |                        |   | 1,812              |       |                          |   | 2,051           |       |                 |   | 4,228 |        |  |   | 4,827 |       
|Convertible subordinated notes |                        |   | 1,200              |       |                          |   | 1,562           |       |                 |   | 2,800 |        |  |   | 3,644 |       
|Amortization of loan fees      |                        |   | 1,091              |       |                          |   | 683             |       |                 |   | 2,504 |        |  |   | 1,177 |       
|Other                          |                        |   | 476                |       |                          |   | 781             |       |                 |   | 1,128 |        |  |   | 1,876 |       
|                               |                        |   |                    |       |                          |   |                 |       |                 |   |       |        |  |   |       |       
|                               | Total interest expense |   | $                  | 9,024 |                          |   | $               | 9,660 |                 |   | $     | 21,202 |  |   | $     | 22,733 | 
|                               |                        |   |                    |       |                          |   |                 |       |                 |   |       |        |  |   |       |       

NOTE (5) FACILITY ACTION CHARGES, NET

In late fiscal 2000, the Company embarked on a refranchising initiative to
reduce outstanding borrowings under the Facility, as well as
to increase the number of franchise-operated restaurants. In addition, the
Company identified and closed under-performing restaurants. The results of
these strategies have caused the following transactions to be recorded in the
Condensed Consolidated Financial Statements as facility action charges, net:



|(i)   |  | impairment of long-lived assets for restaurants the Company closes;                                     
|----- |  | --------------------------------------------------------------------------------------------------------
|     
|(ii)  |  | impairment of long-lived assets for restaurants with net asset values in excess of estimated fair value;
|     
|(iii) |  | restaurant closure costs (primarily reflecting the estimated liability to terminate leases); and        
|     
|(iv)  |  | gains (losses) on the sale of restaurants and surplus properties.                                       

On a quarterly basis, the Company evaluates the adequacy of its estimated
liability for closing restaurants and subsidizing restaurant lease payments to
franchisees and modifies the assumptions used based on actual results from
selling surplus properties and terminating leases, and estimated property
values obtained from a third-party real estate broker (a related party). The
Company closed one Hardees and one Carls Jr. company-operated restaurants
during the twelve weeks ended August 11, 2003. The Company closed four
Hardees, two La Salsa company-operated restaurants and one Carls Jr.
company-operated restaurants during the twenty-eight weeks ended August 11,
2003. During the twelve weeks ended August 11, 2003, the Company identified
five Hardees restaurants that it believed it should continue operating, but
whose estimated fair value (based on projected cash flows from operations  see
discussion of Impairment of Property and Equipment Held and Used, for Sale or
to be Disposed of Other than by Sale) did not support the related net asset
values and, accordingly, an impairment charge in the amount of $ 722 was
recorded.

12



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

The components of facility action charges, net are as follows:

|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |        |  
|---------- | ----------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ------------------------ | - | --------------- | ------ | --------------- | - | ----- | ------ | - | - | ----- | ------ | -
|           |                                                                                                                   |   | Twelve Weeks Ended |        | Twenty-eight Weeks Ended
|           |                                                                                                                   |   |                    |        |                         
|           |                                                                                                                   |   | August 11, 2003    |        | August 12, 2002          |   | August 11, 2003 |        | August 12, 2002
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                
|Hardees   |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           | (Decrease) increase in estimated liability for closing
restaurants and subsidizing lease payments for
franchisees |   | $                  | (1,152 | )                        |   | $               | 311    |                 |   | $     | (2,044 | ) |   | $     | 602    |  
|           | Impairment of assets to be disposed of                                                                            |   |                    | 2,085  |                          |   |                 | 1,082  |                 |   |       | 3,315  |   |   |       | 1,826  |  
|           | Impairment of assets to be held and used                                                                          |   |                    | 732    |                          |   |                 | 534    |                 |   |       | 854    |   |   |       | 2,864  |  
|           | Gain on sales of restaurants and surplus properties, net                                                          |   |                    | (920   | )                        |   |                 | (936   | )               |   |       | (655   | ) |   |       | (2,695 | )
|           | Amortization of discount related to estimated liability
for closing restaurants                                   |   |                    | 548    |                          |   |                 | 520    |                 |   |       | 1,279  |   |   |       | 1,212  |  
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           |                                                                                                                   |   | 1,293              |        |                          |   | 1,511           |        |                 |   | 2,749 |        |   |   | 3,809 |       
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|Carls Jr. |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           | (Decrease) increase in estimated liability for closing
restaurants and subsidizing lease payments for
franchisees |   |                    | (245   | )                        |   |                 | 173    |                 |   |       | (231   | ) |   |       | 186    |  
|           | Impairment of assets to be disposed of                                                                            |   |                    |       |                          |   |                 | 478    |                 |   |       |       |   |   |       | 478    |  
|           | Impairment of assets to be held and used                                                                          |   |                    |       |                          |   |                 | 344    |                 |   |       | 562    |   |   |       | 641    |  
|           | Gain on sales of restaurants and surplus properties, net                                                          |   |                    | (461   | )                        |   |                 | (524   | )               |   |       | (829   | ) |   |       | (269   | )
|           | Amortization of discount related to estimated liability
for closing restaurants                                   |   |                    | 73     |                          |   |                 | 93     |                 |   |       | 195    |   |   |       | 217    |  
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           |                                                                                                                   |   | (633               | )      |                          |   | 564             |        |                 |   | (303  | )      |   |   | 1,253 |       
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|Other      |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           | Decrease in estimated liability for closing restaurants                                                           |   |                    | (191   | )                        |   |                 |       |                 |   |       | (846   | ) |   |       |       |  
|           | Impairment
of assets to be held and used                                                                          |   |                    | 429    |                          |   |                 |       |                 |   |       | 429    |   |   |       |       |  
|           | Gain on sales of restaurants and surplus properties, net                                                          |   |                    | (67    | )                        |   |                 |       |                 |   |       | (136   | ) |   |       |       |  
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           |                                                                                                                   |   | 171                |        |                          |   |                |        |                 |   | (553  | )      |   |   |      |       
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|Total      |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           | (Decrease) increase in estimated liability for closing
restaurants and subsidizing lease payments to
franchisees  |   |                    | (1,588 | )                        |   |                 | 484    |                 |   |       | (3,121 | ) |   |       | 788    |  
|           | Impairment of assets to be disposed of                                                                            |   |                    | 2,085  |                          |   |                 | 1,560  |                 |   |       | 3,315  |   |   |       | 2,304  |  
|           | Impairment of assets to be held and used                                                                          |   |                    | 1,161  |                          |   |                 | 878    |                 |   |       | 1,845  |   |   |       | 3,505  |  
|           | Gain on sales of restaurants and surplus properties, net                                                          |   |                    | (1,448 | )                        |   |                 | (1,460 | )               |   |       | (1,620 | ) |   |       | (2,964 | )
|           | Amortization of discount related to estimated liability
for closing restaurants                                   |   |                    | 621    |                          |   |                 | 613    |                 |   |       | 1,474  |   |   |       | 1,429  |  
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       
|           |                                                                                                                   | $ | 831                |        |                          | $ | 2,075           |        |                 | $ | 1,893 |        |   | $ | 5,062 |       
|           |                                                                                                                   |   |                    |        |                          |   |                 |        |                 |   |       |        |   |   |       |       

The following table is a summary of the activity in the estimated liability for
closing restaurants:

|                                                           |                                                     |   |        |        |  
|---------------------------------------------------------- | --------------------------------------------------- | - | ------ | ------ | -
|Balance at January 31, 2003                                |                                                     | $ | 36,390 |       
|                                                           | New decisions                                       |   |        | 448    |  
|                                                           | Usage                                               |   |        | (7,776 | )
|                                                           | Favorable dispositions of leased surplus properties |   |        | (3,569 | )
|                                                           | Discount amortization                               |   |        | 1,474  |  
|                                                           |                                                     |   |        |       
|Balance at August 11, 2003                                 |                                                     |   | 26,967 |       
|Less current portion, included in Other Liabilities        |                                                     |   | 14,101 |       
|                                                           |                                                     |   |        |       
|Long-term portion, included in Other Long-term Liabilities |                                                     | $ | 12,866 |       
|                                                           |                                                     |   |        |       

13



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

The following table summarizes sales and operating losses related to the
restaurants the Company decided to close, or was required to close, during the
current quarter.

|               |            |  |                    |     |                          |  |                 |     |                 |  |   |      |   |  |   |       |  
|-------------- | ---------- |  | ------------------ | --- | ------------------------ |  | --------------- | --- | --------------- |  | - | ---- | - |  | - | ----- | -
|               |            |  | Twelve Weeks Ended |     | Twenty-eight Weeks Ended
|               |            |  |                    |     |                         
|               |            |  | August 11, 2003    |     | August 12, 2002          |  | August 11, 2003 |     | August 12, 2002
|               |            |  |                    |     |                          |  |                 |     |                
|Sales          |            |  |                    |     |                          |  |                 |     |                 |  |   |      |   |  |   |      
|               | Hardees   |  | $                  | 41  |                          |  | $               | 541 |                 |  | $ | 465  |   |  | $ | 1,261 |  
|               | Carls Jr. |  | $                  | 39  |                          |  | $               | 99  |                 |  | $ | 240  |   |  | $ | 321   |  
|Operating loss |            |  |                    |     |                          |  |                 |     |                 |  |   |      |   |  |   |      
|               | Hardees   |  | $                  | (47 | )                        |  | $               | (81 | )               |  | $ | (199 | ) |  | $ | (130  | )
|               | Carls Jr. |  | $                  | (35 | )                        |  | $               | (32 | )               |  | $ | (47  | ) |  | $ | (27   | )

NOTE (6) INCOME (LOSS) PER SHARE

The Company presents basic income or loss per share, which represents net
income or loss divided by the weighted average shares outstanding excluding all
potentially dilutive common shares, and diluted income or loss per share
reflecting the effect of all potentially dilutive common shares. Potentially
dilutive common shares are considered in the computation of the fiscal 2003
diluted net loss per share because they are dilutive to income before the
cumulative effect of accounting change for goodwill.

For the twelve weeks ended August 11, 2003 and August 12, 2002, 2,791,000 and
3,400,000 shares, respectively, relating to the possible conversion of
convertible subordinated notes, were not included in the computation of diluted
income or loss per share as their effect would have been anti-dilutive. For the
twelve weeks ended August 11, 2003 and August 12, 2002, 4,870,000 and 3,600,000
options, respectively, relating to the possible exercise of stock options
granted, were not included in the computation of diluted income or loss per
share as their effect would have been anti-dilutive. For the twelve weeks ended
August 11, 2003 and August 12, 2002, 982,000 shares, relating to the possible
exercise of stock warrants granted, were not included in the computation of
diluted income or loss per share as their effect would have been anti-dilutive.

For the twenty-eight weeks ended August 11, 2003 and August 12, 2002, 2,791,000
and 3,400,000 shares, respectively, relating to the possible conversion of
convertible subordinated notes, were not included in the computation of diluted
income or loss per share as their effect would have been anti-dilutive. For
the twenty-eight weeks ended August 11, 2003 and August 12, 2002, 4,901,000 and
3,600,000 options, respectively, relating to the possible exercise of stock
options granted, were not included in the computation of diluted income or loss
per share as their effect would have been anti-dilutive. For the twenty-eight
weeks ended August 11, 2003 and the period March 1, 2002 to August 12, 2002,
982,000 shares, relating to the possible exercise of stock warrants granted,
were not included in the computation of diluted income or loss per share as
their effect would have been anti-dilutive.

NOTE (7) SEGMENT INFORMATION

The Company principally is engaged in developing, operating and franchising its
Carls Jr., Hardees and La Salsa quick-service restaurants, each of which is
considered an operating segment that is managed and evaluated separately.
Management evaluates the performance of its segments and allocates resources to
them based on several factors, of which the primary financial measure is
segment operating income or loss. General and administrative expenses are
allocated to each segment based on managements analysis of the resources
applied to each segment. Interest expense related to the senior and
convertible notes, as well as the credit facility, is allocated to Hardees
based on the use of funds. Certain amounts that the Company does not believe
would be proper to allocate to the operating segments are included in Other
(i.e., gains or losses on sales of long-term investments). The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies (see Note 1 of Notes to Consolidated Financial
Statements in our Annual Report on Form 10-K for the fiscal year ended January
27, 2003).

14



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

|                   |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |         | 
|------------------ | ------------------------------------- | ---------- | - | -------- |  | -------- | - | ------- | - | ----- | - | ------ | - |  | - | ------ | - |  | - | ------- | 
|                   |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|Twelve Weeks
Ended |                                       | Carls Jr. |   | Hardees |  | La Salsa |   | Other   |   | Total
|                   |                                       |            |   |          |  |          |   |         |   |       |  
|August 11, 2003    |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|                   | Revenue                               |            | $ | 168,301  |  |          | $ | 154,198 |   |       | $ | 10,832 |   |  | $ | 388    |   |  | $ | 333,719 | 
|                   | Operating income (loss)               |            |   | 15,672   |  |          |   | (231    | ) |       |   | 17     |   |  |   | (83    | ) |  |   | 15,375  | 
|                   | Interest expense                      |            |   | 1,345    |  |          |   | 7,726   |   |       |   | (32    | ) |  |   | (15    | ) |  |   | 9,024   | 
|                   | Total assets                          |            |   | 268,154  |  |          |   | 451,621 |   |       |   | 68,741 |   |  |   | 18,197 |   |  |   | 806,713 | 
|                   | Capital expenditures                  |            |   | 1,779    |  |          |   | 3,012   |   |       |   | 1,820  |   |  |   | 1,484  |   |  |   | 8,095   | 
|                   | Depreciation and amortization         |            |   | 5,611    |  |          |   | 8,294   |   |       |   | 863    |   |  |   | 44     |   |  |   | 14,812  | 
|                   |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|August 12, 2002    |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|                   | Revenue                               |            | $ | 162,589  |  |          | $ | 153,711 |   |       | $ | 10,809 |   |  | $ | 462    |   |  | $ | 327,571 | 
|                   | Operating income (loss)               |            |   | 16,184   |  |          |   | 1,225   |   |       |   | 232    |   |  |   | (117   | ) |  |   | 17,524  | 
|                   | Interest expense                      |            |   | 1,436    |  |          |   | 8,220   |   |       |   | 4      |   |  |   |       |   |  |   | 9,660   | 
|                   | Total assets (as of January 31, 2003) |            |   | 299,522  |  |          |   | 473,095 |   |       |   | 45,091 |   |  |   | 25,765 |   |  |   | 843,473 | 
|                   | Capital expenditures                  |            |   | 3,347    |  |          |   | 8,479   |   |       |   | 1,567  |   |  |   | 562    |   |  |   | 13,955  | 
|                   | Depreciation and amortization         |            |   | 5,861    |  |          |   | 7,828   |   |       |   | 845    |   |  |   | 76     |   |  |   | 14,610  | 

|                         |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |         | 
|------------------------ | ------------------------------------- | ---------- | - | -------- |  | -------- | - | ------- | - | ----- | - | ------ | - |  | - | ------ | - |  | - | ------- | 
|                         |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|Twenty-eight Weeks
Ended |                                       | Carls Jr. |   | Hardees |  | La Salsa |   | Other   |   | Total
|                         |                                       |            |   |          |  |          |   |         |   |       |  
|August 11, 2003          |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|                         | Revenue                               |            | $ | 387,024  |  |          | $ | 341,335 |   |       | $ | 23,971 |   |  | $ | 947    |   |  | $ | 753,277 | 
|                         | Operating income (loss)               |            |   | 34,034   |  |          |   | (9,475  | ) |       |   | (170   | ) |  |   | 452    |   |  |   | 24,841  | 
|                         | Interest expense                      |            |   | 2,880    |  |          |   | 18,357  |   |       |   | 27     |   |  |   | (62    | ) |  |   | 21,202  | 
|                         | Total assets                          |            |   | 268,154  |  |          |   | 451,621 |   |       |   | 68,741 |   |  |   | 18,197 |   |  |   | 806,713 | 
|                         | Capital expenditures                  |            |   | 5,737    |  |          |   | 11,639  |   |       |   | 3,613  |   |  |   | 2,168  |   |  |   | 23,157  | 
|                         | Depreciation and amortization         |            |   | 13,377   |  |          |   | 18,680  |   |       |   | 1,913  |   |  |   | 98     |   |  |   | 34,068  | 
|                         |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|August 12, 2002          |                                       |            |   |          |  |          |   |         |   |       |   |        |   |  |   |        |   |  |   |        
|                         | Revenue                               |            | $ | 379,973  |  |          | $ | 331,177 |   |       | $ | 19,849 |   |  | $ | 20,970 |   |  | $ | 751,969 | 
|                         | Operating income (loss)               |            |   | 34,918   |  |          |   | 1,304   |   |       |   | 524    |   |  |   | (81    | ) |  |   | 36,665  | 
|                         | Interest expense                      |            |   | 3,542    |  |          |   | 19,187  |   |       |   | 4      |   |  |   |       |   |  |   | 22,733  | 
|                         | Total assets (as of January 31, 2003) |            |   | 299,522  |  |          |   | 473,095 |   |       |   | 45,091 |   |  |   | 25,765 |   |  |   | 843,473 | 
|                         | Capital expenditures                  |            |   | 5,717    |  |          |   | 17,548  |   |       |   | 2,030  |   |  |   | 2,446  |   |  |   | 27,741  | 
|                         | Depreciation and amortization         |            |   | 14,058   |  |          |   | 18,191  |   |       |   | 1,278  |   |  |   | 86     |   |  |   | 33,613  | 

NOTE (8) NET ASSETS HELD FOR SALE

The Company has made the decision to divest Timber Lodge as the concept does
not fit with its core concepts of quick-service and fast-casual restaurants.
During the first quarter of fiscal 2004, the Company received an offer to
purchase Timber Lodge in a transaction that would generate net proceeds of
approximately $10,000. We continue to negotiate with the interested party. We
are currently evaluating our plans for Timber Lodge, including an assessment of
whether to continue active efforts to divest. Net assets held for sale
consisted of the following at August 11, 2003:

15



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

|                               |                                                                                                                 |              |       |       |        | 
|------------------------------ | --------------------------------------------------------------------------------------------------------------- | ------------ | ----- | ----- | ------ | 
|ASSETS                         |                                                                                                                 |              |       |      
|                               | Current assets                                                                                                  |              | $     | 909   |       
|                               | Property and equipment, net                                                                                     |              |       | 8,927 |       
|                               | Other assets                                                                                                    |              |       | 6,414 |       
|                               |                                                                                                                 |              |       |      
|                               |                                                                                                                 | Total assets |       | $     | 16,250 | 
|                               |                                                                                                                 |              |       |      
|LIABILITIES                    |                                                                                                                 |              |       |      
|                               | Current liabilities                                                                                             |              | $     | 5,083 |       
|                               | Other long-term liabilities                                                                                     |              |       | 1,628 |       
|                               |                                                                                                                 |              |       |      
|                               | Total liabilities (included in other current
liabilities in the Companys Condensed Consolidated
Balance Sheet) |              | $     | 6,711 |       
|                               |                                                                                                                 |              |       |      
|Excess assets over liabilities |                                                                                                                 | $            | 9,539 |      
|                               |                                                                                                                 |              |       |      

The operating results of Timber Lodge included in the Condensed Consolidated
Statements of Operations as discontinued operations are as follows:

|                                                              |            |   |                    |    |                 |   |                  |   |                 |   |        |     |  |   |        |    | 
|------------------------------------------------------------- | ---------- | - | ------------------ | -- | --------------- | - | ---------------- | - | --------------- | - | ------ | --- |  | - | ------ | -- | 
|                                                              |            |   | Twelve Weeks Ended |    | Twenty-eight    |   | Period from     
|                                                              |            |   |                    |    | Weeks Ended     |   | March 1, 2002 to
|                                                              |            |   | August 11, 2003    |    | August 12, 2002 |   | August 11, 2003  |   | August 12, 2002
|                                                              |            |   |                    |    |                 |   |                  |   |                
|Revenue                                                       |            | $ | 9,059              |    |                 | $ | 9,650            |   |                 | $ | 23,297 |     |  | $ | 19,733 |   
|                                                              |            |   |                    |    |                 |   |                  |   |                 |   |        |     |  |   |        |   
|Operating income (loss)                                       |            | $ | 14                 |    |                 | $ | (201             | ) |                 | $ | (778   | )   |  | $ | 28     |   
|Interest expense                                              |            |   | 11                 |    |                 |   | 31               |   |                 |   | 24     |     |  |   | 60     |   
|Other income (expense), net
Loss on discontinuance of
segment |            |   |                   |    |                 |   |                 |   |                 |   | (1,421 | )   |  |   |       |   
|                                                              | Other, net |   |                    | 18 |                 |   |                  | 6 |                 |   |        | 130 |  |   |        | 20 | 
|Income tax expense (benefit)                                  |            |   | (25                | )  |                 |   | (11              | ) |                 |   | (26    | )   |  |   | 4      |   
|                                                              |            |   |                    |    |                 |   |                  |   |                 |   |        |     |  |   |        |   
|Net income (loss)                                             |            | $ | 46                 |    |                 | $ | (215             | ) |                 | $ | (2,067 | )   |  | $ | (16    | ) 
|                                                              |            |   |                    |    |                 |   |                  |   |                 |   |        |     |  |   |        |   

NOTE (9) RELATED PARTY TRANSACTIONS

As previously disclosed, in the past we have made relocation loans to officers
of the Company, and we occasionally make relocation loans to other employees
(excluding officers and directors). Relocation loans are forgiven over time if
the employee remains an employee of the Company for a specific term, typically
three to five years. As of August 11, 2003, there were six relocation loans
outstanding with an aggregate balance of $197. For the twelve weeks ended
August 11, 2003, the amount forgiven, including interest, for all such
employees was approximately $34. During the twenty-eight weeks ended August
11, 2003, the amount forgiven, including interest for all such employees was
approximately $130. Additionally, one outstanding loan in the amount of $64
was repaid in cash during the twenty-eight weeks ended August 11, 2003.

16



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)

NOTE (10) OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:

|                                                         |                                   |   |                    |     |                          |   |                 |       |                 |   |      |      |   |   |       |       | 
|-------------------------------------------------------- | --------------------------------- | - | ------------------ | --- | ------------------------ | - | --------------- | ----- | --------------- | - | ---- | ---- | - | - | ----- | ----- | 
|                                                         |                                   |   | Twelve Weeks Ended |     | Twenty-eight Weeks Ended
|                                                         |                                   |   |                    |     |                         
|                                                         |                                   |   | August 11, 2003    |     | August 12, 2002          |   | August 11, 2003 |       | August 12, 2002
|                                                         |                                   |   |                    |     |                          |   |                 |       |                
|Gain on the sale of Checkers stock                       |                                   | $ |                   |     |                          | $ | 3,159           |       |                 | $ |     |      |   | $ | 5,825 |      
|Gain on the repurchase of convertible subordinated notes |                                   |   |                   |     |                          |   | 537             |       |                 |   |     |      |   |   | 1,715 |      
|Other                                                    |                                   |   | 228                |     |                          |   |                |       |                 |   | (410 | )    |   |   | 362   |      
|                                                         |                                   |   |                    |     |                          |   |                 |       |                 |   |      |      |   |   |       |      
|                                                         | Total other income (expense), net |   | $                  | 228 |                          |   | $               | 3,696 |                 |   | $    | (410 | ) |   | $     | 7,902 | 
|                                                         |                                   |   |                    |     |                          |   |                 |       |                 |   |      |      |   |   |       |      

NOTE (11) INCOME TAXES

Income taxes for the interim periods were computed using the effective tax rate
estimated for the full fiscal year.

For the twelve weeks and twenty-eight weeks ended August 11, 2003, the Company
recorded an income tax expense of $370 and $723, respectively, which consisted
of minimum state franchise taxes and foreign taxes.

During the twelve weeks and twenty-eight weeks ended August 12, 2002, the
Company recorded income tax expense of $572 and an income tax benefit of
$2,128, respectively. The year-to-date income tax benefit was a result of
changes in existing tax laws whereby the Company was allowed to carry back
certain operating losses for prior years in which the Company had taxable
income.

NOTE (12) NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

During April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities(SFAS 149). SFAS 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities(SFAS 133). The statement requires that contracts with
comparable characteristics be accounted for similarly and clarifies when a
derivative contains a financing component that warrants special reporting in
the statement of cash flows. SFAS 149 is effective for contracts entered into
or modified after June 30, 2003, except in certain circumstances, and for
hedging relationships designated after June 30, 2003. The Company does not
expect that the adoption of this standard will have a material effect on its
financial position or results of operations.

In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity(SFAS 150).
SFAS 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. This Statement is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for
mandatorily redeemable financial instruments of nonpublic entities. The Company
does not expect that the adoption of this standard will have a material effect
on its financial position or results of operations.

17



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)




Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Introduction and Safe Harbor Disclosure

CKE Restaurants, Inc. and its Subsidiaries (collectively referred to as the
Company) is comprised of the worldwide operations of Carls Jr., Hardees, La
Salsa Fresh Mexican Grill (La Salsa), and The Green Burrito (Green
Burrito), which is primarily operated as a dual-brand concept with Carls Jr.
quick-service restaurants. The following Managements Discussion and Analysis
should be read in conjunction with the unaudited Condensed Consolidated
Financial Statements contained herein, and our Annual Report on Form 10-K for
the fiscal year ended January 27, 2003 (collectively, the 2003 Financial
Statements). All note references herein refer to the accompanying notes to
Condensed Consolidated Financial Statements (Financial Statements).

Matters discussed in this Form 10-Q contain forward-looking statements relating
to future plans and developments, financial goals, and operating performance
that are based on managements current beliefs and assumptions. Such statements
are subject to risks and uncertainties. Factors that could cause the Companys
results to differ materially from those described include, but are not limited
to, whether or not restaurants will be closed and the number of restaurant
closures, consumers concerns or adverse publicity regarding the Companys
products, effectiveness of operating initiatives and advertising and
promotional efforts (particularly at the Hardees brand), changes in economic
conditions, changes in the price or availability of commodities, availability
and cost of energy, workers compensation and general liability premiums and
claims experience, changes in the Companys suppliers ability to provide
quality and timely products to the Company, delays in opening new restaurants
or completing remodels, severe weather conditions, the operational and
financial success of the Companys franchisees, franchisees willingness to
participate in our strategy, availability of financing for the Company and its
franchisees, unfavorable outcomes on litigation, changes in accounting policies
and practices, new legislation or government regulation (including
environmental laws), the availability of suitable locations and terms for the
sites designed for development, and other factors as discussed in the Companys
filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date they are made. The Company
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise,
except as required by law or the rules of the New York Stock Exchange.

New Accounting Pronouncements Not Yet Adopted

See Note (12) of Notes to Condensed Consolidated Financial Statements.

Critical Accounting Policies

Our reported results are impacted by the application of certain accounting
policies that require us to make subjective or complex judgments. These
judgments involve making estimates about the effect of matters that are
inherently uncertain and may significantly impact our quarterly or annual
results of operations and financial condition. Specific risks associated with
these critical accounting policies are described in the following paragraphs.

For all of these policies, we caution that future events rarely develop exactly
as expected, and the best estimates routinely require adjustment. Our most
significant accounting policies require:



| |  |  | estimation of future cash flows used to assess the
recoverability of long-lived assets, assess the recoverability of
goodwill, and establish the estimated liability for closing
restaurants and subsidizing lease payments of franchisees;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | estimation, using actuarially determined methods, of our
self-insured claim losses under our workers compensation and fire
and general liability insurance programs;                                                                      
|
| |  |  | determination of appropriate estimated liabilities for litigation;                                                                                                                                                                         
|
| |  |  | determination of the appropriate allowances associated with
franchise and license receivables and estimated liabilities for
franchise subleases; and                                                                                       
|
| |  |  | estimation of our net deferred income tax asset valuation allowance.                                                                                                                                                                       

18



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Descriptions of these critical accounting policies follow.

Impairment of Property and Equipment Held and Used, Held for Sale or To Be
Disposed of Other Than By Sale

Each quarter we evaluate the carrying value of individual restaurants when the
operating results have reasonably progressed to a point to adequately evaluate
the probability of continuing operating losses or a current expectation that a
restaurant will be sold or otherwise disposed of before the end of its
previously estimated useful life. In making these judgments, we consider the
period of time since the restaurant was opened or remodeled, and the trend of
operations and expectations for future sales growth. For restaurants selected
for review, we estimate the future estimated cash flows from operating the
restaurant over its estimated useful life. We make judgments about future
same-store sales and the operating expenses and estimated useful life that we
would expect with such level of same-store sales. We employ a
probability-weighted approach wherein we estimate the effectiveness of future
sales and marketing efforts on same-store sales and related estimated useful
life. A material accounting judgment is the estimated useful life. In general,
in expected same-store sales scenarios where sales are not expected to
increase, we generally assume a shorter than previously estimated useful life.
Quarterly, we update our model for estimating future cash flows based upon
experience gained, current intentions about refranchising restaurants and
closures, expected sales trends, internal plans, and other relevant
information. In prior fiscal years, because we were significantly engaged in
refranchising restaurants to generate cash to repay bank indebtedness, we had
assumed, in some cases, estimated lives that were less than the estimated
useful life for certain restaurants. As our financial position has improved
such that refranchising activities are unnecessary, we estimated cash flows
over their remaining estimated useful life of the restaurants. Additionally,
commencing with the second quarter of fiscal 2003, we reduced the probability
weighting for the occurrence of future same-store sales from the higher end of
our strategic business plan in light of our current same-store sales results.
As the operations of restaurants opened or remodeled in recent years progress
to the point that their profitability and future prospects can adequately be
evaluated, additional restaurants will become subject to review and the
possibility that impairments exist. Most likely, this would arise in new
markets the Company expanded into in recent years. As described above,
same-store sales are the key indicator used to estimate future cash flow for
evaluating recoverability. To provide a sensitivity analysis of the impairment
that could arise were the actual same-store sales of all mature restaurants we
owned to grow at only the assumed rate of inflation for our operating costs
(same-store sales sensitivity), for no real growth, the aggregate additional
impairment loss would be approximately $11,298. The inflation rate assumed in
making this calculation is 2.0% for both revenue and expenses.

Additionally, restaurants are operated for three years before we test them for
impairment. Restaurants are also not tested for three years following a major
remodel. We believe this provides the restaurant sufficient time to establish
its presence in the market and build a customer base. If we were to test all
restaurants for impairment without regard to the amount of time the restaurants
were operating, the total asset impairment would increase substantially.
Assuming all restaurants were tested under the same assumptions described above
(time open sensitivity), we would be required to record additional impairment
losses of approximately $15,211.

The following tables summarize the
sensitivity analysis, as classified by positive or negative cash flow
during the trailing thirteen periods, for both same-store
sales sensitivity and time open sensitivity:

|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |       | 
|---------------------------- | ------------------------------- | -------- | ------- | --------- | ----------- | ---------------- | ---------------- | --- |  | - | ----- | ----- | 
|Carls Jr.                   |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             |                                 | Net Book |         | Number of |             | Impairment Under
|                             |                                 |          | Value   |           | Restaurants |                  | Sensitivity Test
|                             |                                 |          |         |           |             |                  |                 
|Same-store sales sensitivity |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             | Positive cash flow this quarter |          | $       | 86,385    |             |                  |                  | 344 |  |   | $     |      | 
|                             | Negative cash flow this quarter |          |         | 10,664    |             |                  |                  | 33  |  |   |       | 3,090 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             |                                 |          | 97,049  |           |             |                  | 377              |     |  |   | 3,090 |      
|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|Time open sensitivity        |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             | Positive cash flow this quarter |          |         | 14,674    |             |                  |                  | 23  |  |   |       |      | 
|                             | Negative cash flow this quarter |          |         | 8,434     |             |                  |                  | 42  |  |   |       | 2,165 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             |                                 |          | 23,108  |           |             |                  | 65               |     |  |   | 2,165 |      
|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|Total                        |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             | Positive cash flow this quarter |          |         | 101,059   |             |                  |                  | 367 |  |   |       |      | 
|                             | Negative cash flow this quarter |          |         | 19,098    |             |                  |                  | 75  |  |   |       | 5,255 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |      
|                             |                                 | $        | 120,157 |           |             |                  | 442              |     |  | $ | 5,255 |      
|                             |                                 |          |         |           |             |                  |                  |     |  |   |       |      

19



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |        | 
|---------------------------- | ------------------------------- | -------- | ------- | --------- | ----------- | ---------------- | ---------------- | --- |  | - | ------ | ------ | 
|Hardees                     |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 | Net Book |         | Number of |             | Impairment Under
|                             |                                 |          | Value   |           | Restaurants |                  | Sensitivity Test
|                             |                                 |          |         |           |             |                  |                 
|Same-store sales sensitivity |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          | $       | 136,505   |             |                  |                  | 280 |  |   | $      | 615    | 
|                             | Negative cash flow this quarter |          |         | 35,820    |             |                  |                  | 93  |  |   |        | 7,593  | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 |          | 172,325 |           |             |                  | 373              |     |  |   | 8,208  |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|Time open sensitivity        |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          |         | 99,091    |             |                  |                  | 201 |  |   |        | 793    | 
|                             | Negative cash flow this quarter |          |         | 36,407    |             |                  |                  | 155 |  |   |        | 11,572 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 |          | 135,498 |           |             |                  | 356              |     |  |   | 12,365 |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|Total                        |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          |         | 235,596   |             |                  |                  | 481 |  |   |        | 1,408  | 
|                             | Negative cash flow this quarter |          |         | 72,227    |             |                  |                  | 248 |  |   |        | 19,165 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 | $        | 307,823 |           |             |                  | 729              |     |  | $ | 20,573 |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                            
|La Salsa                     |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 | Net Book |         | Number of |             | Impairment Under
|                             |                                 |          | Value   |           | Restaurants |                  | Sensitivity Test
|                             |                                 |          |         |           |             |                  |                 
|Same-store sales sensitivity |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          | $       | 5,262     |             |                  |                  | 41  |  |   | $      |       | 
|                             | Negative cash flow this quarter |          |         | 330       |             |                  |                  | 2   |  |   |        |       | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 |          | 5,592   |           |             |                  | 43               |     |  |   |       |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|Time open sensitivity        |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          |         | 1,784     |             |                  |                  | 8   |  |   |        |       | 
|                             | Negative cash flow this quarter |          |         | 1,114     |             |                  |                  | 9   |  |   |        | 681    | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 |          | 2,898   |           |             |                  | 17               |     |  |   | 681    |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|Total                        |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          |         | 7,046     |             |                  |                  | 49  |  |   |        |       | 
|                             | Negative cash flow this quarter |          |         | 1,444     |             |                  |                  | 11  |  |   |        | 681    | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 | $        | 8,490   |           |             |                  | 60               |     |  | $ | 681    |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                            
|Core Concepts Combined       |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 | Net Book |         | Number of |             | Impairment Under
|                             |                                 |          | Value   |           | Restaurants |                  | Sensitivity Test
|                             |                                 |          |         |           |             |                  |                 
|Same-store sales sensitivity |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          | $       | 228,152   |             |                  |                  | 665 |  |   | $      | 615    | 
|                             | Negative cash flow this quarter |          |         | 46,814    |             |                  |                  | 128 |  |   |        | 10,683 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 |          | 274,966 |           |             |                  | 793              |     |  |   | 11,298 |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|Time open sensitivity        |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          |         | 115,549   |             |                  |                  | 232 |  |   |        | 793    | 
|                             | Negative cash flow this quarter |          |         | 45,955    |             |                  |                  | 206 |  |   |        | 14,418 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 |          | 161,504 |           |             |                  | 438              |     |  |   | 15,211 |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|Total                        |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             | Positive cash flow this quarter |          |         | 343,701   |             |                  |                  | 897 |  |   |        | 1,408  | 
|                             | Negative cash flow this quarter |          |         | 92,769    |             |                  |                  | 334 |  |   |        | 25,101 | 
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       
|                             |                                 | $        | 436,470 |           |             |                  | 1,231            |     |  | $ | 26,509 |       
|                             |                                 |          |         |           |             |                  |                  |     |  |   |        |       

20



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Impairment of Goodwill

At the reporting unit level, which is the individual brand level for us,
goodwill is tested for impairment at least annually, and on an interim basis if
an event or circumstance indicates that it is more likely than not an
impairment may have occurred. The impairment, if any, is measured based on the
estimated fair value of the brand. Fair value can be determined based on
discounted cash flows, comparable sales or valuations of other restaurant
brands. Impairment occurs when the carrying amount of goodwill exceeds its
estimated fair value.

The most significant assumptions we use in this analysis are those made in
estimating future cash flows. In estimating future cash flows, we generally use
the assumptions in our strategic plan for items such as same-store sales growth
rates and the discount rate we consider to be the market discount rate for
acquisitions of restaurant companies and brands.

If our assumptions used in performing the impairment test prove insufficient,
the fair value of the brands may ultimately prove to be significantly lower,
thereby causing the carrying value to exceed the fair value and indicating an
impairment has occurred. We perform our annual impairment test during the
first quarter of each fiscal year. During the first quarter of fiscal year
2004, we engaged an outside party to assist us in performing a valuation of the
La Salsa and Carls Jr. brands. As a result, we concluded that the current
value of the goodwill associated with La Salsa exceeds the carrying value of
that goodwill. Accordingly, no impairment charge was required. Additionally,
we concluded that the current value of the goodwill of Carls Jr. exceeded the
carrying value and no impairment charge was recorded. During the first quarter
of fiscal year 2003, we engaged an outside party to assist us in performing a
valuation of the Hardees brand, through which we concluded that the current
value of the goodwill associated with the acquisition of Hardees was $0.
Accordingly, we recorded a transitional impairment charge to write-off all of
the goodwill related to the Hardees brand of $175,780. As of August 11, 2003,
we have $56,708 in goodwill recorded on the balance sheet, $34,059 and $22,649
related to La Salsa and Carls Jr., respectively.

We regularly evaluate under-performing restaurants to determine the likelihood
we can return them to profitability. In the event that we determine we cannot
return an under-performing restaurant to an acceptable level of profitability,
we close the restaurant (absent any contractual restrictions preventing us from
doing so). We believe the potential closing of any restaurants currently
identified as under-performing would not have a material impact on the
valuation of either the Carls Jr. or La Salsa goodwill.

Estimated Liability for Closing Restaurants

We make decisions to close restaurants based on prospects for estimated future
profitability and sometimes we are forced to close restaurants due to
circumstances beyond our control (e.g., a landlords refusal to negotiate a new
lease). Our restaurant operators evaluate each restaurants performance every
quarter. When restaurants continue to perform poorly, we consider the
demographics of the location, as well as the likelihood of being able to
improve an unprofitable restaurant. Based on the operators judgment, we
estimate the future cash flows. If we determine that the restaurant will not,
within a reasonable period of time, operate at break-even cash flow or be
profitable, and there are no contractual requirements to continue operating the
restaurant, we close the restaurant. Additionally, franchisees may close
restaurants for which we are the primary lessee. If the franchisee cannot make
payments on the lease, we continue making the lease payments and establish an
estimated liability for the closed restaurant if we decide not to operate it as
a company-operated restaurant. We establish the estimated liability on the
actual closure date. Prior to the adoption of Statement of Financial
Accounting Standards No. 146, Accounting for Costs Associated with Exit or
Disposal Activities(SFAS 146) on January 1, 2003, we established the
estimated liability when we identified a restaurant for closure, which may or
may not have been the actual closure date.

The estimated liability for closing restaurants on properties vacated is
generally based on the term of the lease and the lease termination fee we
expect to pay, as well as estimated maintenance costs until the lease has been
abated. The amount of the estimated liability established is generally the net
present value of these estimated future payments. The interest rate used to
calculate the net present value of these liabilities is based on our
incremental borrowing rate at the time the liability is established. The
related discount is amortized and shown in facility action charges, net in our
Condensed Consolidated Statements of Operations.

A significant assumption used in determining the amount of the estimated
liability for closing restaurants is the amount of the estimated liability for
future lease payments on vacant restaurants, which we determine based on our
brokers (a related party)
assessment of its ability to successfully negotiate an early termination of our
lease agreements with the lessors. Additionally, we estimate the cost to
maintain leased and owned vacant properties until the lease has been abated. If
the costs to maintain properties increase, or it takes longer than anticipated
to sell properties or terminate leases, we may need to record additional
estimated liabilities. If the leases on the vacant restaurants are not
terminated on the terms we used to estimate the liabilities, we may be required
to record losses in future periods. Conversely, if the leases on the vacant
restaurants are terminated on more favorable terms than we used to estimate the
liabilities, we reverse previously established estimated liabilities. During
the twelve weeks ended August 11, 2003, we terminated leases on
terms more
favorable than anticipated, resulting in a $1,855 decrease in the

21



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

estimated
liability for closing restaurants. The net present value of lease payments on
all closed restaurants is approximately $52,217, which represents the
discounted amount we would be required to pay if we are unable to terminate the
leases prior to the terms required in the lease agreements. However, it is our
experience that we can terminate those leases for less than that amount and,
accordingly, we have recorded an estimated liability for lease obligations of
$21,147 as of August 11, 2003.

Estimated Liability for Self-Insurance

We are self-insured for a portion of our current and prior years losses
related to workers compensation, fire and general liability insurance
programs. We have obtained stop loss insurance for individual workers
compensation claims, property claims and individual general liability claims
over $500. Insurance liabilities and reserves are accounted for based on the
net present value of actuarial estimates of the amount of loss incurred. These
estimates rely on actuarial observations of historical claim loss development.
The actuary, in determining the estimated liability, bases the assumptions on
the average historical losses on claims we have incurred. The actual loss
development may be better or worse than the development estimated by the
actuary. In that event, we modify the reserve. As such, if we experience a
higher than expected number of claims or the costs of claims rise more than
expected, the actuary may adjust the expected losses upward and our future
self-insurance expenses will rise. Consistent with trends the restaurant
industry has experienced in recent years, particularly in California where
claim cost trends are among the highest in the country, workers compensation
liability costs continue to increase.

Loss Contingencies

We maintain accrued liabilities for contingencies related to litigation. We
account for contingent obligations in accordance with Statement of Financial
Accounting Standards (SFAS) No. 5, Accounting for Contingencies, which
requires that we assess each contingency to determine estimates of the degree
of probability and range of possible settlement. Those contingencies that are
deemed to be probable and where the amount of such settlement is reasonably
estimable are accrued in our consolidated financial statements. If only a range
of loss can be determined, we accrue to the low end of the range. The
assessment of contingencies is highly subjective and requires judgments about
future events. Contingencies are reviewed at least quarterly to determine the
adequacy of the accruals and related consolidated financial statement
disclosure. The ultimate settlement of contingencies may differ materially from
amounts we have accrued in our consolidated financial statements.

Franchised and Licensed Operations

We monitor the financial condition of franchisees and record provisions for
estimated losses on receivables when we believe that our franchisees are unable
to make their required payments to us. Each quarter we perform a
franchisee-by-franchisee analysis and develop estimated bad debts for each
franchisee. We then compare the aggregate result of that analysis to the amount
recorded in our Consolidated Financial Statements as the allowance for doubtful
accounts and adjust the allowance as appropriate. Additionally, we cease
accruing royalty income from franchisees that are materially delinquent in
paying or in default and reverse any royalties accrued during the last 90 days.
From period-to-period our assessment of individual franchisees changes. For
instance, we have had some franchisees, who in the past we had determined
required an estimated loss equal to the total amount of the receivable, who
have paid us in full or established a consistent record of payments (generally
one year) such that we determined an allowance was no longer required.

Depending on the facts and circumstances, there are a number of different
actions we may take to resolve franchise collections issues. These may include
the purchase of franchise restaurants by us or by other franchisees, a
modification to the franchise agreement which may include a provision to defer
certain royalty payments or reduce royalty rates in the future (if royalty
rates are not sufficient to cover our costs of service over the life of the
franchise agreement, we record an estimated loss at the time we modify the
agreements), a restructuring of the franchisees business and/or finances
(including the restructuring of leases for which we are the primary obligee -
see further discussion below) or, if necessary, the termination of the
franchise agreement. The allowance established is based on our assessment of
the most probable course of action that will occur. If we believe we will
operate the restaurants as company-operated restaurants, the allowance for loss
is recorded net of the estimated fair value of the related restaurant assets
that are not pledged as collateral to third parties.

Many of the restaurants that we sold
to Hardees franchisees as part of our
refranchising program were on leased sites. Generally, we remain principally
liable for the lease and have entered into a sublease with the franchisee on the
same terms as the primary lease. We account for the sublease payments received
as franchising rental income. Our payments on the leases are accounted for as
rental expense in franchised and licensed restaurants in our Condensed
Consolidated Statements of Operations. As of August 11, 2003, the present value
of our total obligation on such lease arrangements with Hardees
franchisees was $47,617. We have also entered into similar
arrangements with Carls Jr. franchisees. We do not expect
Carls Jr. franchisees to experience the same level of financial
difficulties as Hardees franchisees have encountered in the
past or may encounter in the future. However, we can provide no
assurance that this will not occur.

22



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

In addition to the sublease arrangements with franchisees described above, we
also lease land and buildings to franchisees. As of August 11, 2003, the net
book value of property under lease to Hardees and Carls Jr. franchisees was
$32,414 and $9,843, respectively. In the event that a troubled franchisee
closes a restaurant for which we own the property, our options are to operate
the restaurant as a Company-owned restaurant, lease the property to another
tenant or sell the property. These circumstances would cause us to consider
whether the carrying value of the land and building was impaired. If we
determined the property value was impaired, we would record a charge to
earnings for the amount the carrying value of the property exceeds its fair
value. As of August 11, 2003, the net book value of land and buildings under

lease to Hardees franchisees that are considered to be troubled franchisees
(as described below) was approximately $23,330. We believe that, during fiscal
2004, some of these franchisees will probably close restaurants and,
accordingly, we may record an impairment loss in connection with some of these
closures.

Prior to adoption of Statement of Financial Accounting Standards (SFAS) No.
146, Accounting for the Costs Associated with Exit or Disposal Activities
(SFAS 146) (see Note 1 of notes to Condensed Consolidated Financial
Statements of our Annual Report on Form 10-K for the fiscal year ended January
27, 2003), the determination of when to establish an estimated liability for
future lease obligations on restaurants operated by franchisees for which we
are the primary obligee was based on the date that either of the following
events occurred:



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

In accordance with SFAS 146, which we adopted on January 1, 2003, an estimated
liability for future lease obligations on restaurants operated by franchisees
for which we are the primary obligee is established on the date the franchisee
closes the restaurant (see Note 1 of notes to Condensed Consolidated Financial
Statements of our Annual Report on Form 10-K for the fiscal year ended January
27, 2003). We record an estimated liability for subsidized lease payments
pursuant to a workout agreement when the agreement is signed.

The amount of the estimated liability is established using the methodology
described in Estimated Liability for Closing Restaurants above. Troubled
franchisees (i.e., those with whom we have entered into workout agreements, as
described under Franchise Operations below), may have liquidity problems in
the future. Consistent with accounting principles generally accepted in the
United States of America, we have not established an additional estimated
liability for this eventuality. The present value of the related lease
obligation with all troubled franchisees in these circumstances is
approximately $12,250 (two franchisees represent all of this amount). As of
August 11, 2003, we have recorded a discounted estimated liability for future
lease obligations related to agreed upon subsidies for these franchise
restaurants of $1,606. If sales trends/economic conditions worsen for our
franchisees, their financial health may worsen, our collection rates may
decline and we may be required to assume the responsibility for additional
lease payments on franchised restaurants. Entering into restructured franchise
agreements may result in reduced franchise royalty rates in the future (see
discussion below). The likelihood of needing to increase the estimated
liability for future lease obligations is related to the success of our
Hardees concept (i.e., if our Hardees concept results improve from the
execution of our comprehensive plan, we would reasonably expect that the
financial performance of our franchisees would improve).

Valuation Allowance for Net Deferred Tax Asset

As disclosed in Note 20 of notes to Consolidated Financial Statements of our
Annual Report Form 10-K for the fiscal year ended January 27, 2003, we have
recorded a 100% valuation allowance against our net deferred tax assets. If our
business turnaround is successful, we have been profitable for a number of
years and our prospects for future profitability are reasonably assured, we
would then reverse our valuation allowance. In assessing the prospects for
future profitability, many of the assessments of same-store sales and cash
flows mentioned above become relevant. When circumstances warrant, we assess
the likelihood that our net
deferred tax assets will more likely than not be recovered from future taxable
income. As of August 11, 2003, our net deferred tax assets and related
valuation allowance totaled approximately $164,000.

Significant Known Events, Trends, or Uncertainties Expected to Impact Fiscal
2004 Comparisons with Fiscal 2003

The factors discussed below impact comparability of operating performance for
the twelve and twenty-eight weeks ended August 11, 2003, to the twelve and
twenty-eight weeks ended August 12, 2002, or could impact comparisons for the
remainder of fiscal 2004.

23



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Acquisition of Santa Barbara Restaurant Group, Inc.

As discussed in Note 3 of notes to Condensed Consolidated Financial Statements,
we acquired SBRG on March 1, 2002 (Acquisition Date). The operations of SBRG,
subsequent to the Acquisition Date, are included in our financial statements.

A significant amount of goodwill was recorded in connection with the
acquisition of SBRG. The recoverability of that goodwill is dependent on future
operations and the development of new La Salsa restaurants (see discussion of
financing new restaurants under Liquidity and Capital Resources below). The
acquisition of new restaurant sites is highly competitive.

Divestiture of Timber Lodge

As discussed in Note 8 of Notes to the Condensed Consolidated Financial
Statements, Timber Lodge is accounted for as a discontinued operation. The
operations of Timber Lodge, which are included in the Condensed Consolidated
Statements of Operations as discontinued operations, are as follows:

|                             |                                   |   |                    |    |                 |   |                  |   |                 |   |        |        |   |   |     |    | 
|---------------------------- | --------------------------------- | - | ------------------ | -- | --------------- | - | ---------------- | - | --------------- | - | ------ | ------ | - | - | --- | -- | 
|                             |                                   |   | Twelve Weeks Ended |    | Twenty-eight    |   | Period from     
|                             |                                   |   |                    |    | Weeks Ended     |   | March 1, 2002 to
|                             |                                   |   | August 11, 2003    |    | August 12, 2002 |   | August 11, 2003  |   | August 12, 2002
|                             |                                   |   |                    |    |                 |   |                  |   |                
|Operating income (loss)      |                                   | $ | 14                 |    |                 | $ | (201             | ) |                 | $ | (778   | )      |   | $ | 28  |   
|Interest expense             |                                   |   | 11                 |    |                 |   | 31               |   |                 |   | 24     |        |   |   | 60  |   
|Other income (expense), net  |                                   |   |                    |    |                 |   |                  |   |                 |   |        |        |   |   |     |   
|                             | Loss on discontinuance of segment |   |                    |   |                 |   |                  |  |                 |   |        | (1,421 | ) |   |     |   | 
|                             | All other, net                    |   |                    | 18 |                 |   |                  | 6 |                 |   |        | 130    |   |   |     | 20 | 
|Income tax expense (benefit) |                                   |   | (25                | )  |                 |   | (11              | ) |                 |   | (26    | )      |   |   | 4   |   
|                             |                                   |   |                    |    |                 |   |                  |   |                 |   |        |        |   |   |     |   
|Net income (loss)            |                                   | $ | 46                 |    |                 | $ | (215             | ) |                 | $ | (2,067 | )      |   | $ | (16 | ) 
|                             |                                   |   |                    |    |                 |   |                  |   |                 |   |        |        |   |   |     |   

Adoption of New Accounting Pronouncements

See Note 2 of Notes to Condensed Consolidated Financial Statements.

Seasonality

We operate on a retail accounting calendar. Our fiscal year has 13 four-week
accounting periods and ends the last Monday in January. The first quarter of
our fiscal year has four periods, or 16 weeks. All other quarters have three
periods, or 12 weeks.

Our restaurant sales, and therefore our profitability, are subject to seasonal
fluctuations and are traditionally higher during the spring and summer months
because of factors such as increased travel and improved weather conditions,
which affect the publics dining habits.

Turnaround Strategy

Our management team remains focused on revitalizing Hardees. In June 2001, we
launched a program focused on quality, service and cleanliness. That program
focuses on the fundamentals of restaurant operations: hiring good people,
focusing them on the guests, serving hot quality food, and keeping the
restaurants clean. The continuation of our business turnaround is based on the
following next steps:



| |  |  | maintaining the profitability of the Carls Jr. brand;                                                                                                                                                                                                                                              
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | continuing to focus on premium, rather than discounted, products;                                                                                                                                                                                                                                   
|
| |  |  | continuing to focus on cost controls;                                                                                                                                                                                                                                                               
|
| |  |  | growing the La Salsa brand;                                                                                                                                                                                                                                                                         
|
| |  |  | leveraging dual brand opportunities with Green Burrito;                                                                                                                                                                                                                                             
|
| |  |  | completing the remodeling of the Hardees restaurants;                                                                                                                                                                                                                                              
|
| |  |  | emphasizing the new comprehensive marketing plan for Hardees, to
refocus and redirect the brand (see ''Hardees Revolution below);
and                                                                                                                                                           
|
| |  |  | addressing the maturity of our $122.3 million of convertible notes,
which mature in March 2004 and our credit facility, which matures in
December 2003, unless we refinance the convertible notes prior to
December 14, 2003, in which case the credit facility does not mature
until November 2006.

24



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

If we are unable to grow sales and operating margins at Hardees, it will
significantly affect our future profitability and cash flows. Such
circumstances could affect our ability to access sufficient financing in the
future (See Liquidity and Capital Resources below).

Our strategy has emphasized premium products, as well as routine price
increases prompted by increases in food, labor and utility costs. The impact of
this strategy has been an increase in average guest check. That strategy also
has likely resulted in a decrease in transaction counts. Many of our
competitors offer lower prices on discounted fare and have increased their
efforts in this regard over the past two years, which may have impacted our
transaction counts. We generally have experienced negative transaction counts
at Hardees since our acquisition of the brand and at Carls Jr. for nearly two
years, which we believe is due, in part, to other quick-service restaurant
(QSR) companies offering products at discounted prices and the recent
economic slowdown. We note that others in the QSR industry are experiencing
negative same-store sales trends. We cannot quantify how much of our declines
are related to the QSR segment and how much are related to circumstances
involving our own brands.

As shown in the tables on pages 28-31, the operating margins for each brand
have decreased over the prior year period. Occupancy costs, which are primarily
fixed or semi-fixed in nature, are a component of operating margins. The fixed
nature of those costs allows margins to increase when sales are rising  an
occurrence referred to as sales leverage. If costs increase or sales decrease,
we would have to increase the prices of our products to preserve the operating
margin. Historically, we have been successful at implementing such price
increases, but it likely has had an impact on transaction counts as described
above. During April 2003, we increased prices at our company-operated Carls
Jr. restaurants by approximately 1%. The sensitivity analysis for the
recoverability of restaurants (see Impairment of Property and Equipment Held
and Used, Held for Sale or To Be Disposed of Other Than By Sale) assumes that
our same-store sales in the future grow at the same rate of inflation (i.e. our
costs for delivering our products of food, labor, utilities, etc.). If we are
unable to pass along such price increases, and at the same time do not increase
our transaction counts, the recoverability of the carrying value of our
restaurants would be impacted.

Hardees Revolution

We have introduced a comprehensive plan to reposition Hardees as a premium
burger restaurant. The plan includes menu adjustments and associated
advertising and media strategies. The new menu focus for Hardees features
Angus beef burgers. As of August 11, 2003, all of our company-operated
restaurants and approximately 85% of franchise-operated restaurants have been
converted to the new menu. Additionally, we have introduced related media in
many of the converted markets. There was an initial decrease in same-store
sales due to menu deletions and an initial increase in food and labor costs
(resulting in decreased operating margins) as we determined that significant
management and staff training would be required to execute the new menu
properly. We also invested in additional labor to ensure outstanding customer
service during the introduction of the Revolution. As the training,
implementation and introduction period has now been achieved, restaurant labor
has now returned to pre-Revolution levels and same-store sales increased 1.0%
during the second quarter. While we expect these trends to continue, we can
provide no assurance that this will occur.

Franchise Operations

Like others in the QSR industry, some of our franchise operations experience
financial difficulties from time to time. Our approach to dealing with
financial and operational issues that arise from these situations is described
above (see discussion under Critical Accounting Policies  Franchised and
Licensed Operations). Some franchisees in the Hardees system have experienced
significant financial problems. As discussed above, there are a number of
potential resolutions of these financial issues.

We continue to work with franchisees in an attempt to maximize our future
franchising income. Our franchising income is dependent on both the number of
restaurants operated by franchisees and their operational and financial
success, such that they can make their contractual royalty and lease payments
to us. Although we quarterly review the allowance for doubtful accounts and the
estimated liability for closed franchise restaurants (see discussion under
Critical Accounting Policies  Franchised and Licensed Operations), there can
be no assurance that the number of franchisees or franchised restaurants
experiencing financial difficulties will not increase from our current
assessments, nor can there be any assurance that we will be successful in
resolving financial issues relating to any specific franchisee. As of the end
of the current quarter, on a consolidated basis, our allowance for doubtful
accounts was 30% of the gross balance of accounts and notes receivable. We
still experience specific problems with troubled franchisees (see Critical
Accounting Policies  Franchise and Licensed Operations) and may be required to
increase the amount of our allowance for doubtful accounts and/or increase the
amount of our estimated liability for future lease obligations. The result of
increasing the allowance for doubtful accounts is an effective royalty rate
lower than our standard contractual royalty rate.

25



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Effective royalty rate reflects royalties deemed collectible as a percent of
franchise generated revenue for all franchisees for which we are recognizing
revenue, adjusted to reflect contractual deviations from our standard royalty
rate of 4%. For the trailing 13 periods ended August 11, 2003, the effective
royalty rates for Carls Jr. and Hardees were 3.7% and 3.6%, respectively.

Repositioning Activity

In late fiscal 2000, we embarked on a refranchising initiative to generate cash
to reduce outstanding borrowings on our senior credit facility, as well as
increase the number of franchise-operated restaurants. Additionally, as sales
trends for the Hardees restaurants and certain Carls Jr. restaurants
(primarily in the Oklahoma area) continued to decline in fiscal 2000 through
fiscal 2001, we determined that it was necessary to close certain restaurants
for which a return to profitability was not likely. These repositioning
activities resulted in the charges generally reflected in our financial
statements as Facility Action Charges. We have made reductions to operating
expenses in an effort to bring them to levels commensurate with our re-balanced
restaurant portfolio.

During the twelve week periods ended August 11, 2003 and August 12, 2002, we
recorded repositioning charges of $831 and $2,075, respectively, which were
primarily non-cash in nature and are classified in the Condensed Consolidated
Statements of Operations as facility action charges, net.

During the twenty-eight week periods ended August 11, 2003 and August 12, 2002,
we recorded repositioning charges of $1,893 and $5,062, respectively, which
were primarily non-cash in nature and are classified in the Condensed
Consolidated Statements of Operations as facility action charges, net.

We believe we have substantially completed our repositioning activities and are
now able to focus on the operations of our core brands, Carls Jr., Hardees
and La Salsa. We have substantially completed the closure of under-performing
restaurants. However, there can be no assurance that we will not determine in
the future that additional repositioning activities will be necessary or that
we would not take advantage of opportunities to generate funds through
additional restaurant asset sales, which could result in losses, which may be
material.

Financial Comparison

Our results reflect the substantial changes we have made in executing our
business turnaround including the sale and closure of under-performing
restaurants and efforts to contain corporate overhead, improve margins and pay
down bank indebtedness. The table below is a condensed presentation of those
activities, and other changes in the components of income, designed to
facilitate the discussion of results in this Form 10-Q.

(All amounts are approximate and in millions)

|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |              |       |        |       | 
|-------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---- | --------------------- | ---- | ------------ | ----- | ------ | ----- | 
|                                                                                                         |                                                                 |                                                                                                      |      | Second Fiscal Quarter |      | Year-To-Date
|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |             
|Current Year:                                                                                            |                                                                 |                                                                                                      |      |                       |      |              |       |       
|                                                                                                         | Net income                                                      |                                                                                                      | $    | 6.3                   |      |              | $     | 0.4    |      
|                                                                                                         | Repositioning activities (facility action charges, net)         |                                                                                                      |      | 0.8                   |      |              |       | 1.9    |      
|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |              |       |        |      
|                                                                                                         | Current year results, exclusive of repositioning activities (A) |                                                                                                      | $    | 7.1                   |      |              | $     | 2.3    |      
|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |              |       |        |      
|Prior Year:                                                                                              |                                                                 |                                                                                                      |      |                       |      |              |       |       
|                                                                                                         | Net income (loss)                                               |                                                                                                      | $    | 10.8                  |      |              | $     | (151.8 | )    
|                                                                                                         |                                                                 | Repositioning activities (facility action charges, net)                                              |      |                       | 2.1  |              |       |        | 5.1   | 
|                                                                                                         |                                                                 | Adoption of accounting rule change for goodwill                                                      |      |                       |     |              |       |        | 175.8 | 
|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |              |       |        |      
|                                                                                                         |                                                                 | Prior
year results, exclusive of repositioning activities
and adoption of accounting rule change (B) |      | $                     | 12.9 |              |       | $      | 29.1  | 
|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |              |       |        |      
|Decrease in earnings, exclusive of repositioning activities and
adoption of accounting rule change (A-B) |                                                                 | $                                                                                                    | (5.8 | )                     |      | $            | (26.8 | )     
|                                                                                                         |                                                                 |                                                                                                      |      |                       |      |              |       |        |      

26



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

(All amounts are approximate and in millions)

|                                                                                                         |                                                                                                                                                             |   |                      |      |                          |   |       |       |  
|-------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------------- | ---- | ------------------------ | - | ----- | ----- | -
|                                                                                                         |                                                                                                                                                             |   |                     
|                                                                                                         |                                                                                                                                                             |   | Second Quarter       |      |                          |   |      
|                                                                                                         |                                                                                                                                                             |   | Fiscal Year 2004 vs. |      | Year-To-Date Fiscal Year
|                                                                                                         |                                                                                                                                                             |   | Second Quarter       |      | 2004 vs. Year - To-Date 
|                                                                                                         |                                                                                                                                                             |   | Fiscal Year 2003     |      | Fiscal Year 2003        
|                                                                                                         |                                                                                                                                                             |   |                      |      |                         
|Items causing earnings to increase (decrease) from the prior year to the current year:                   |                                                                                                                                                             |   |                      |      |                          |   |       |      
|                                                                                                         | Approximate restaurant margin reduction in restaurants operated (other than
SBRG brands) at August 11, 2003                                                 |   | $                    | (6.2 | )                        |   | $     | (16.3 | )
|                                                                                                         | Gain on sales of investments and repurchases of convertible subordinated notes                                                                              |   |                      | (3.6 | )                        |   |       | (7.3  | )
|                                                                                                         | Decrease in corporate overhead                                                                                                                              |   |                      | 1.5  |                          |   |       | 4.6   |  
|                                                                                                         | One-time income tax benefit                                                                                                                                 |   |                      |     |                          |   |       | (2.9  | )
|                                                                                                         | Decrease in net franchising income and distribution centers, excluding
provision for doubtful accounts                                                      |   |                      | (0.1 | )                        |   |       | (1.5  | )
|                                                                                                         | Increase in the provision for doubtful accounts                                                                                                             |   |                      | (0.3 | )                        |   |       | (2.6  | )
|                                                                                                         | Income/(loss) from discontinued operations                                                                                                                  |   |                      | 0.3  |                          |   |       | (2.1  | )
|                                                                                                         | Claim development/settlement on insurance programs                                                                                                          |   |                      | 0.2  |                          |   |       | (0.8  | )
|                                                                                                         | Decrease in interest expense excluding write-off of deferred financing fees                                                                                 |   |                      | 0.6  |                          |   |       | 1.5   |  
|                                                                                                         | Increase in estimated liability for litigation                                                                                                              |   |                      | (0.1 | )                        |   |       | (0.8  | )
|                                                                                                         | Approximate
operating loss of SBRG restaurants                                                                                                              |   |                      |     |                          |   |       | (0.7  | )
|                                                                                                         | Decrease in advertising expenses, excluding restaurants involved in facility actions                                                                        |   |                      | 0.1  |                          |   |       | 0.2   |  
|                                                                                                         | Approximate operating income of restaurants involved in facility actions, including
related field general and administrative expenses and advertising costs |   |                      | 0.3  |                          |   |       | 0.5   |  
|                                                                                                         | All other, net                                                                                                                                              |   |                      | 1.5  |                          |   |       | 1.4   |  
|                                                                                                         |                                                                                                                                                             |   |                      |      |                          |   |       |      
|Decrease in earnings exclusive of repositioning charges and effect of adoption of
accounting rule change |                                                                                                                                                             | $ | (5.8                 | )    |                          | $ | (26.8 | )    
|                                                                                                         |                                                                                                                                                             |   |                      |      |                          |   |       |      

27



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Operating Review

The following tables are presented to facilitate Managements Discussion and
Analysis and are presented in the same format we present segment information
(See Note 7 of Notes to Condensed Consolidated Financial Statements).

|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |        |        |        | 
|------------------------------------------------------------ | ---------------------------------------------------------- | ------------------------- | ------------------------- | ------ | ---------------------------------- | ------ | -------- | ----- | -------- | ------ | --------- | ---- | ----- | --- | ---- | -- | - | -- | ------- | ------ | ------ | ------ | 
|                                                             |                                                            |                           |                           |        | Twelve Weeks Ended August 11, 2003
|                                                             |                                                            |                           |                           |        |                                   
|                                                             |                                                            |                           |                           |        | Carls Jr.                         |        | Hardees |       | La Salsa |        | Other (A) |      | Total
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |      
|Company-operated revenue                                     |                                                            | $                         | 121,792                   |        |                                    | $      | 138,611  |       |          | $      | 10,439    |      |       | $   | 326  |    |   | $  | 271,168 |       
|Company-operated average unit volume (trailing 13 periods)   |                                                            |                           | 1,158                     |        |                                    |        | 758      |       |          |        | 726       |      |       |     |      |    |   |    |         |       
|Franchise-operated average unit volume (trailing 13 periods) |                                                            |                           | 1,060                     |        |                                    |        | 794      |       |          |        | 684       |      |       |     |      |    |   |    |         |       
|Average check (B)                                            |                                                            | $                         | 5.55                      |        |                                    | $      | 4.38     |       |          | $      | 9.20      |      |       |     |      |    |   |    |         |       
|Company-operated same-store sales increase (decrease) (C)    |                                                            |                           | 2.3                       | %      |                                    |        | 1.0      | %     |          |        | (2.0      | )%   |       |     |      |    |   |    |         |       
|Company-operated same-store transaction decrease (D)         |                                                            |                           | (1.0                      | )%     |                                    |        | (7.0     | )%    |          |        | (3.0      | )%   |       |     |      |    |   |    |         |       
|Franchise-operated same-store sales increase (decrease) (C)  |                                                            |                           | (1.3                      | )%     |                                    |        | (1.8     | )%    |          |        | 4.5       | %    |       |     |      |    |   |    |         |       
|Operating costs as a % of company-operated revenue           |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|                                                             | Food and packaging                                         |                           |                           | 28.5   | %                                  |        |          | 31.3  | %        |        |           | 25.9 | %     |     |      |    |   |    |         |        |       
|                                                             | Payroll and employee benefits                              |                           |                           | 28.5   | %                                  |        |          | 33.8  | %        |        |           | 30.2 | %     |     |      |    |   |    |         |        |       
|                                                             | Occupancy and other operating costs                        |                           |                           | 21.2   | %                                  |        |          | 23.4  | %        |        |           | 33.1 | %     |     |      |    |   |    |         |        |       
|                                                             | Restaurant level margin                                    |                           |                           | 21.8   | %                                  |        |          | 11.5  | %        |        |           | 10.8 | %     |     |      |    |   |    |         |        |       
|Advertising as a percentage of company-operated revenue      |                                                            |                           | 6.4                       | %      |                                    |        | 6.2      | %     |          |        | 1.0       | %    |       |     |      |    |   |    |         |       
|Franchising revenue:                                         |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|                                                             | Royalties                                                  |                           | $                         | 5,078  |                                    |        | $        | 9,192 |          |        | $         | 393  |       |     | $    | 62 |   |    | $       | 14,725 |       
|                                                             | Distribution centers                                       |                           |                           | 36,342 |                                    |        |          | 4,209 |          |        |           |     |       |     |      |   |   |    |         | 40,551 |       
|                                                             | Rent                                                       |                           |                           | 4,927  |                                    |        |          | 2,080 |          |        |           |     |       |     |      |   |   |    |         | 7,007  |       
|                                                             | Other                                                      |                           |                           | 162    |                                    |        |          | 106   |          |        |           |     |       |     |      |   |   |    |         | 268    |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|                                                             |                                                            |                           | Total franchising revenue |        | $                                  | 46,509 |          |       | $        | 15,587 |           |      | $     | 393 |      |    | $ | 62 |         |        | $      | 62,551 | 
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|Franchising expense:                                         |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|                                                             | Administrative expense (including provision for bad debts) |                           | $                         | 977    |                                    |        | $        | 1,511 |          |        | $         | 128  |       |     | $    |   |   |    | $       | 2,616  |       
|                                                             | Distribution centers                                       |                           |                           | 35,341 |                                    |        |          | 3,891 |          |        |           |     |       |     |      |   |   |    |         | 39,232 |       
|                                                             | Rent & other occupancy                                     |                           |                           | 4,882  |                                    |        |          | 1,777 |          |        |           |     |       |     |      |   |   |    |         | 6,659  |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|                                                             |                                                            | Total franchising expense |                           | $      | 41,200                             |        |          | $     | 7,179    |        |           | $    | 128   |     |      | $  |  |    |         | $      | 48,507 |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|Net franchising income                                       |                                                            | $                         | 5,309                     |        |                                    | $      | 8,408    |       |          | $      | 265       |      |       | $   | 62   |    |   | $  | 14,044  |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|Operating income (loss)                                      |                                                            | $                         | 15,672                    |        |                                    | $      | (231     | )     |          | $      | 17        |      |       | $   | (83  | )  |   | $  | 15,375  |       
|Facility action charges (gains), net                         |                                                            |                           | (634                      | )      |                                    |        | 1,294    |       |          |        | 192       |      |       |     | (21  | )  |   |    | 831     |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|Operating income (loss) excluding facility action charges    |                                                            | $                         | 15,038                    |        |                                    | $      | 1,063    |       |          | $      | 209       |      |       | $   | (104 | )  |   | $  | 16,206  |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       
|EBITDA (as calculated on page 32)                            |                                                            | $                         | 21,559                    |        |                                    | $      | 7,886    |       |          | $      | 854       |      |       | $   | 116  |    |   | $  | 30,415  |       
|                                                             |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |      |    |   |    |         |       

28



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |        |        |        | 
|--------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------- | ------------------------- | ------ | ---------------------------------- | ------ | -------- | ----- | -------- | ------ | --------- | ---- | ----- | --- | ----- | -- | - | -- | ------- | ------ | ------ | ------ | 
|                                                                |                                                            |                           |                           |        | Twelve Weeks Ended August 12, 2002
|                                                                |                                                            |                           |                           |        |                                   
|                                                                |                                                            |                           |                           |        | Carls Jr.                         |        | Hardees |       | La Salsa |        | Other (A) |      | Total
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |      
|Company-operated revenue                                        |                                                            | $                         | 118,673                   |        |                                    | $      | 137,981  |       |          | $      | 10,384    |      |       | $   | 392   |    |   | $  | 267,430 |       
|Company-operated average unit volume (trailing 13 periods)      |                                                            |                           | 1,158                     |        |                                    |        | 779      |       |          |        | 726       |      |       |     |       |    |   |    |         |       
|Franchise-operated average unit volume (trailing 13 periods)    |                                                            |                           | 1,058                     |        |                                    |        | 823      |       |          |        | 625       |      |       |     |       |    |   |    |         |       
|Average check (B)                                               |                                                            | $                         | 5.36                      |        |                                    | $      | 4.02     |       |          | $      | 9.00      |      |       |     |       |    |   |    |         |       
|Company-operated same-store sales increase (decrease) (C)       |                                                            |                           | 0.6                       | %      |                                    |        | (1.0     | )%    |          |        | 1.9       | %    |       |     |       |    |   |    |         |       
|Company-operated same-store transaction increase (decrease) (D) |                                                            |                           | (4.2                      | )%     |                                    |        | (7.0     | )%    |          |        | 1.3       | %    |       |     |       |    |   |    |         |       
|Franchise-operated same-store sales increase (decrease) (C)     |                                                            |                           | 2.6                       | %      |                                    |        | 2.2      | %     |          |        | (0.2      | )%   |       |     |       |    |   |    |         |       
|Operating costs as a % of company-operated revenue              |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|                                                                | Food and packaging                                         |                           |                           | 27.4   | %                                  |        |          | 29.4  | %        |        |           | 26.8 | %     |     |       |    |   |    |         |        |       
|                                                                | Payroll and employee benefits                              |                           |                           | 28.8   | %                                  |        |          | 34.8  | %        |        |           | 31.6 | %     |     |       |    |   |    |         |        |       
|                                                                | Occupancy and other operating costs                        |                           |                           | 19.7   | %                                  |        |          | 22.4  | %        |        |           | 25.5 | %     |     |       |    |   |    |         |        |       
|                                                                | Restaurant level margin                                    |                           |                           | 24.1   | %                                  |        |          | 13.4  | %        |        |           | 16.1 | %     |     |       |    |   |    |         |        |       
|Advertising as a percentage of company-operated revenue         |                                                            |                           | 6.8                       | %      |                                    |        | 6.0      | %     |          |        | 3.3       | %    |       |     |       |    |   |    |         |       
|Franchising revenue:                                            |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|                                                                | Royalties                                                  |                           | $                         | 4,855  |                                    |        | $        | 9,642 |          |        | $         | 425  |       |     | $     | 70 |   |    | $       | 14,992 |       
|                                                                | Distribution centers                                       |                           |                           | 34,719 |                                    |        |          | 3,681 |          |        |           |     |       |     |       |   |   |    |         | 38,400 |       
|                                                                | Rent                                                       |                           |                           | 4,261  |                                    |        |          | 2,286 |          |        |           |     |       |     |       |   |   |    |         | 6,547  |       
|                                                                | Other                                                      |                           |                           | 81     |                                    |        |          | 121   |          |        |           |     |       |     |       |   |   |    |         | 202    |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|                                                                |                                                            |                           | Total franchising revenue |        | $                                  | 43,916 |          |       | $        | 15,730 |           |      | $     | 425 |       |    | $ | 70 |         |        | $      | 60,141 | 
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|Franchising expense:                                            |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|                                                                | Administrative expense (including provision for bad debts) |                           | $                         | 386    |                                    |        | $        | 1,443 |          |        | $         | 116  |       |     | $     |   |   |    | $       | 1,945  |       
|                                                                | Distribution centers                                       |                           |                           | 33,703 |                                    |        |          | 3,611 |          |        |           |     |       |     |       |   |   |    |         | 37,314 |       
|                                                                | Rent & other occupancy                                     |                           |                           | 4,386  |                                    |        |          | 2,157 |          |        |           |     |       |     |       |   |   |    |         | 6,543  |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|                                                                |                                                            | Total franchising expense |                           | $      | 38,475                             |        |          | $     | 7,211    |        |           | $    | 116   |     |       | $  |  |    |         | $      | 45,802 |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|Net franchising income                                          |                                                            | $                         | 5,441                     |        |                                    | $      | 8,519    |       |          | $      | 309       |      |       | $   | 70    |    |   | $  | 14,339  |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|Operating income (loss)                                         |                                                            | $                         | 16,184                    |        |                                    | $      | 1,225    |       |          | $      | 232       |      |       | $   | (117  | )  |   | $  | 17,524  |       
|Facility action charges, net                                    |                                                            |                           | 564                       |        |                                    |        | 1,511    |       |          |        |          |      |       |     |      |    |   |    | 2,075   |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|Operating income (loss) excluding facility action charges       |                                                            | $                         | 16,748                    |        |                                    | $      | 2,736    |       |          | $      | 232       |      |       | $   | (117  | )  |   | $  | 19,599  |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       
|EBITDA (as calculated on page 32)                               |                                                            | $                         | 22,161                    |        |                                    | $      | 9,353    |       |          | $      | 1,077     |      |       | $   | 3,239 |    |   | $  | 35,830  |       
|                                                                |                                                            |                           |                           |        |                                    |        |          |       |          |        |           |      |       |     |       |    |   |    |         |       

29



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |        |         |         | 
|--------------------------------------------------------------- | ---------------------------------------------------------- | ------------------------- | ----------------------------------- | ------ | ---------- | ------- | -------- | ------ | ---------------------------------------- | ------ | --------- | --- | ----- | ---- | ---- | - | - | --- | ------- | ------ | ------- | ------- | 
|                                                                |                                                            |                           |                                     |        |            |         |          |        | Twenty-eight Weeks Ended August 11, 2003 |        |           |     |      
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |      
|                                                                |                                                            |                           |                                     |        | Carls Jr. |         | Hardees |        | La Salsa                                 |        | Other (A) |     | Total
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |      
|Company-operated revenue                                        |                                                            | $                         | 280,076                             |        |            | $       | 306,224  |        |                                          | $      | 23,135    |     |       | $    | 775  |   |   | $   | 610,210 |       
|Average check (B)                                               |                                                            | $                         | 5.44                                |        |            | $       | 4.25     |        |                                          | $      | 9.10      |     |       |      |      |   |   |     |         |       
|Company-operated same-store sales increase (decrease) (C)       |                                                            |                           | 0.8                                 | %      |            |         | (1.7     | )%     |                                          |        | (2.0      | )%  |       |      |      |   |   |     |         |       
|Company-operated same-store transaction increase (decrease) (D) |                                                            |                           | (1.7                                | )%     |            |         | (8.7     | )%     |                                          |        | (4.2      | )%  |       |      |      |   |   |     |         |       
|Franchise-operated same-store sales increase (decrease) (C)     |                                                            |                           | (1.5                                | )%     |            |         | (4.1     | )%     |                                          |        | 1.9       | %   |       |      |      |   |   |     |         |       
|Operating costs as a % of company-operated revenue              |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|                                                                |                                                            |                           | Food and packaging                  |        |            | 28.4    | %        |        |                                          | 31.1   | %         |     |       | 26.1 | %    |   |   |     |         |        |         |         | 
|                                                                |                                                            |                           | Payroll and employee benefits       |        |            | 28.8    | %        |        |                                          | 35.8   | %         |     |       | 30.9 | %    |   |   |     |         |        |         |         | 
|                                                                |                                                            |                           | Occupancy and other operating costs |        |            | 21.6    | %        |        |                                          | 23.8   | %         |     |       | 32.2 | %    |   |   |     |         |        |         |         | 
|                                                                |                                                            |                           | Restaurant-level margin             |        |            | 21.2    | %        |        |                                          | 9.3    | %         |     |       | 10.8 | %    |   |   |     |         |        |         |         | 
|Advertising as a percentage of company-operated revenue         |                                                            |                           | 6.4                                 | %      |            |         | 6.3      | %      |                                          |        | 2.1       | %   |       |      |      |   |   |     |         |       
|Franchising revenue:                                            |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|                                                                |                                                            |                           | Royalties                           |        | $          | 11,647  |          |        | $                                        | 19,665 |           |     | $     | 836  |      |   | $ | 172 |         |        | $       | 32,320  | 
|                                                                |                                                            |                           | Distribution centers                |        |            | 82,921  |          |        |                                          | 11,067 |           |     |       |     |      |   |   |    |         |        |         | 93,988  | 
|                                                                |                                                            |                           | Rent                                |        |            | 12,023  |          |        |                                          | 4,199  |           |     |       |     |      |   |   |    |         |        |         | 16,222  | 
|                                                                |                                                            |                           | Other                               |        |            | 357     |          |        |                                          | 180    |           |     |       |     |      |   |   |    |         |        |         | 537     | 
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|                                                                |                                                            |                           | Total franchising revenue           |        | $          | 106,948 |          |        | $                                        | 35,111 |           |     | $     | 836  |      |   | $ | 172 |         |        | $       | 143,067 | 
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|Franchising expense:                                            |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|                                                                | Administrative expense (including provision for bad debts) |                           | $                                   | 2,336  |            |         | $        | 3,062  |                                          |        | $         | 263 |       |      | $    |  |   |     | $       | 5,661  |        
|                                                                | Distribution centers                                       |                           |                                     | 80,770 |            |         |          | 11,257 |                                          |        |           |    |       |      |      |  |   |     |         | 92,027 |        
|                                                                | Rent & other occupancy                                     |                           |                                     | 11,654 |            |         |          | 4,071  |                                          |        |           |    |       |      |      |  |   |     |         | 15,725 |        
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|                                                                |                                                            | Total franchising expense |                                     | $      | 94,760     |         |          | $      | 18,390                                   |        |           | $   | 263   |      |      | $ |  |     |         | $      | 113,413 |        
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|Net franchising income                                          |                                                            | $                         | 12,188                              |        |            | $       | 16,721   |        |                                          | $      | 573       |     |       | $    | 172  |   |   | $   | 29,654  |       
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|Operating income (loss)                                         |                                                            | $                         | 34,034                              |        |            | $       | (9,475   | )      |                                          | $      | (170      | )   |       | $    | 452  |   |   | $   | 24,841  |       
|Facility action charges (gains), net                            |                                                            |                           | (304                                | )      |            |         | 2,750    |        |                                          |        | 192       |     |       |      | (745 | ) |   |     | 1,893   |       
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|Operating income (loss) excluding facility action charges       |                                                            | $                         | 33,730                              |        |            | $       | (6,725   | )      |                                          | $      | 22        |     |       | $    | (293 | ) |   | $   | 26,734  |       
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       
|EBITDA (as calculated on page 32)                               |                                                            | $                         | 47,966                              |        |            | $       | 8,073    |        |                                          | $      | 1,717     |     |       | $    | 743  |   |   | $   | 58,499  |       
|                                                                |                                                            |                           |                                     |        |            |         |          |        |                                          |        |           |     |       |      |      |   |   |     |         |       

30



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |        |   |         |         | 
|--------------------------------------------------------------- | --------------------------------------------------------- | - | ------------------------- | ---------------------------------------------------------- | - | ---------- | ------- | -------- | - | ---------------------------------------- | ------ | --------- | - | ----- | ---- | ----- | - | - | ------- | ------ | - | ------- | ------- | 
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   | Twenty-eight Weeks Ended August 12, 2002 |        |           |   |      
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |      
|                                                                |                                                           |   |                           |                                                            |   | Carls Jr. |         | Hardees |   | La Salsa                                 |        | Other (A) |   | Total
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |      
|Company-operated revenue                                        |                                                           | $ | 277,227                   |                                                            |   | $          | 314,165 |          |   | $                                        | 19,113 |           |   | $     | 774  |       |   | $ | 611,279 |       
|Average check (B)                                               |                                                           | $ | 5.30                      |                                                            |   | $          | 3.95    |          |   | $                                        | 9.00   |           |   |       |      |       |   |   |         |       
|Company-operated same-store sales increase (decrease) (C)       |                                                           |   | 2.6                       | %                                                          |   |            | (0.3    | )%       |   |                                          | 1.8    | %         |   |       |      |       |   |   |         |       
|Company-operated same-store transaction increase (decrease) (D) |                                                           |   | (4.0                      | )%                                                         |   |            | (6.4    | )%       |   |                                          | 1.7    | %         |   |       |      |       |   |   |         |       
|Franchise-operated same-store sales increase (decrease) (C)     |                                                           |   | 3.1                       | %                                                          |   |            | (0.8    | )%       |   |                                          | 0.5    | %         |   |       |      |       |   |   |         |       
|Operating costs as a % of company-operated revenue              |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                |                                                           |   |                           | Food and packaging                                         |   |            | 27.9    | %        |   |                                          | 29.6   | %         |   |       | 26.9 | %     |   |   |         |        |   |         |         | 
|                                                                |                                                           |   |                           | Payroll and employee benefits                              |   |            | 28.5    | %        |   |                                          | 35.2   | %         |   |       | 31.8 | %     |   |   |         |        |   |         |         | 
|                                                                |                                                           |   |                           | Occupancy and other operating costs                        |   |            | 20.3    | %        |   |                                          | 22.4   | %         |   |       | 26.0 | %     |   |   |         |        |   |         |         | 
|                                                                |                                                           |   |                           | Restaurant level margin                                    |   |            | 23.3    | %        |   |                                          | 12.8   | %         |   |       | 15.3 | %     |   |   |         |        |   |         |         | 
|Advertising as a percentage of company-operated revenue         |                                                           |   | 6.9                       | %                                                          |   |            | 6.1     | %        |   |                                          | 3.3    | %         |   |       |      |       |   |   |         |       
|Franchising revenue:                                            |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                |                                                           |   |                           | Royalties                                                  |   | $          | 11,025  |          |   | $                                        | 21,497 |           |   | $     | 737  |       |   | $ | 196     |        |   | $       | 33,455  | 
|                                                                |                                                           |   |                           | Distribution centers                                       |   |            | 79,840  |          |   |                                          | 8,895  |           |   |       |     |       |   |   |        |        |   |         | 88,735  | 
|                                                                |                                                           |   |                           | Rent                                                       |   |            | 11,713  |          |   |                                          | 6,424  |           |   |       |     |       |   |   |        |        |   |         | 18,137  | 
|                                                                |                                                           |   |                           | Other                                                      |   |            | 168     |          |   |                                          | 195    |           |   |       |     |       |   |   |        |        |   |         | 363     | 
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                |                                                           |   |                           | Total franchising revenue                                  |   | $          | 102,746 |          |   | $                                        | 37,011 |           |   | $     | 737  |       |   | $ | 196     |        |   | $       | 140,690 | 
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                | Franchising expense:                                      |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |        |  
|                                                                |                                                           |   |                           | Administrative expense (including provision for bad debts) |   | $          | 931     |          |   | $                                        | 2,517  |           |   | $     | 213  |       |   | $ |        |        |   | $       | 3,661   | 
|                                                                |                                                           |   |                           | Distribution centers                                       |   |            | 77,772  |          |   |                                          | 8,601  |           |   |       |     |       |   |   |        |        |   |         | 86,373  | 
|                                                                |                                                           |   |                           | Rent & other occupancy                                     |   |            | 11,810  |          |   |                                          | 5,612  |           |   |       |     |       |   |   |        |        |   |         | 17,422  | 
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                |                                                           |   | Total franchising expense |                                                            | $ | 90,513     |         |          | $ | 16,730                                   |        |           | $ | 213   |      |       | $ |  |         |        | $ | 107,456 |        
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|Net franchising income                                          |                                                           | $ | 12,233                    |                                                            |   | $          | 20,281  |          |   | $                                        | 524    |           |   | $     | 196  |       |   | $ | 33,234  |       
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                | Operating income (loss)                                   |   | $                         | 34,918                                                     |   |            | $       | 1,304    |   |                                          | $      | 524       |   |       | $    | (81   | ) |   | $       | 36,665 |  
|                                                                | Facility action charges, net                              |   |                           | 1,253                                                      |   |            |         | 3,809    |   |                                          |        |          |   |       |      |      |   |   |         | 5,062  |  
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                | Operating income (loss) excluding facility action charges |   | $                         | 36,171                                                     |   |            | $       | 5,113    |   |                                          | $      | 524       |   |       | $    | (81   | ) |   | $       | 41,727 |  
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       
|                                                                | EBITDA (as calculated on page 32)                         |   | $                         | 49,457                                                     |   |            | $       | 21,085   |   |                                          | $      | 1,802     |   |       | $    | 5,836 |   |   | $       | 78,180 |  
|                                                                |                                                           |   |                           |                                                            |   |            |         |          |   |                                          |        |           |   |       |      |       |   |   |         |       



|(A) |  | Other consists of Green Burrito. Additionally, amounts that we do not
believe would be proper to allocate to the operating segments are included
in Other (i.e., gains or losses on sales of long-term investments).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(B) |  | Average check represents total restaurant sales divided by total
transactions for any given period. The average check is viewed in
conjunction with same-store sales and same-store transactions, as defined
below. This indicator, when viewed with other measures, may illustrate
revenue growth or decline resulting from a change in menu or price
offering. When the Company introduces menu items or pricing initiatives
with higher or lower price points than the existing menu base, the average
check may reflect the benefit or impact from these new items or pricing on
the average price paid by the consumer.                                                                                  
|   
|(C) |  | Same-store sales is a key performance indicator in our industry. This
indicator is a measure of revenue growth on the existing comparable store
base of a multi-unit chain company such as ours and is measured as a
percentage variance over the same fiscal period in the prior year.
Same-store sales illustrate how competitive forces and external economic
conditions benefit or impact the Company, as well as any benefit from the
diverse value propositions and marketing initiatives undertaken by the
Company. In calculating same-store sales, we include restaurants open for
14 full accounting periods, which allows for a year-over-year comparison.                                         
|   
|(D) |  | Same-store transactions represent the number of consumer visits to our
restaurants. Transactions are viewed on the same basis as same-store sales
above and are another key performance indicator in our industry. This
indicator is a measure of consumer frequency in the existing comparable
store base and is measured as a percentage variance over the same fiscal
period in the prior year. Same-store transactions are another measure of
the effects of competitive forces and economic climate on consumer
behavior and resulting benefit, or impact, to the Company. Transactions
also reflect any benefit from the diverse value propositions and marketing
initiatives undertaken by the Company.

31



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Presentation of Non-GAAP Measurements

EBITDA

EBITDA is a typical non-GAAP measurement for companies that issue public debt.
We believe EBITDA is a useful to our investors as an indicator of earnings
available to service debt. EBITDA is not a recognized term under GAAP and does
not purport to be an alternative to operating income, an indicator of operating
cash flows or a measure of liquidity. We calculate EBITDA as income (loss) from
continuing operations before interest, income taxes, depreciation and
amortization of leasehold improvements and goodwill. Because not all companies
calculate EBITDA identically, this presentation of EBITDA may not be comparable
to similarly titled measures of other companies. Additionally, EBITDA is not
intended to be a measure of free cash flow for managements discretionary use,
as it does not consider certain cash requirements such as interest, income tax
and debt service payments.

|                                         |  |            |        |          |  |                                    |        |       |  |       |     |   |  |   |     |   |  |   |        | 
|---------------------------------------- |  | ---------- | ------ | -------- |  | ---------------------------------- | ------ | ----- |  | ----- | --- | - |  | - | --- | - |  | - | ------ | 
|                                         |  |            |        |          |  | Twelve Weeks Ended August 11, 2003 |        |       |  |      
|                                         |  |            |        |          |  |                                    |        |       |  |      
|                                         |  | Carls Jr. |        | Hardees |  | La Salsa                           |        | Other |  | Total
|                                         |  |            |        |          |  |                                    |        |       |  |      
|Income (loss) from continuing operations |  | $          | 14,345 |          |  | $                                  | (8,256 | )     |  | $     | 33  |   |  | $ | 87  |   |  | $ | 6,209  | 
|Interest expense (benefit)               |  |            | 1,345  |          |  |                                    | 7,726  |       |  |       | (32 | ) |  |   | (15 | ) |  |   | 9,024  | 
|Income tax (benefit) expense             |  |            | 258    |          |  |                                    | 122    |       |  |       | (10 | ) |  |   |    |   |  |   | 370    | 
|Depreciation and amortization            |  |            | 5,611  |          |  |                                    | 8,294  |       |  |       | 863 |   |  |   | 44  |   |  |   | 14,812 | 
|                                         |  |            |        |          |  |                                    |        |       |  |       |     |   |  |   |     |   |  |   |        | 
|EBITDA                                   |  | $          | 21,559 |          |  | $                                  | 7,886  |       |  | $     | 854 |   |  | $ | 116 |   |  | $ | 30,415 | 
|                                         |  |            |        |          |  |                                    |        |       |  |       |     |   |  |   |     |   |  |   |        | 

|                                         |  |            |        |          |  |                                    |        |       |  |       |       |  |  |   |       |  |  |   |        | 
|---------------------------------------- |  | ---------- | ------ | -------- |  | ---------------------------------- | ------ | ----- |  | ----- | ----- |  |  | - | ----- |  |  | - | ------ | 
|                                         |  |            |        |          |  | Twelve Weeks Ended August 12, 2002 |        |       |  |      
|                                         |  |            |        |          |  |                                    |        |       |  |      
|                                         |  | Carls Jr. |        | Hardees |  | La Salsa                           |        | Other |  | Total
|                                         |  |            |        |          |  |                                    |        |       |  |      
|Income (loss) from continuing operations |  | $          | 14,643 |          |  | $                                  | (7,046 | )     |  | $     | 228   |  |  | $ | 3,163 |  |  | $ | 10,988 | 
|Interest expense                         |  |            | 1,436  |          |  |                                    | 8,220  |       |  |       | 4     |  |  |   |      |  |  |   | 9,660  | 
|Income tax (benefit) expense             |  |            | 221    |          |  |                                    | 351    |       |  |       |      |  |  |   |      |  |  |   | 572    | 
|Depreciation and amortization            |  |            | 5,861  |          |  |                                    | 7,828  |       |  |       | 845   |  |  |   | 76    |  |  |   | 14,610 | 
|                                         |  |            |        |          |  |                                    |        |       |  |       |       |  |  |   |       |  |  |   |        | 
|EBITDA                                   |  | $          | 22,161 |          |  | $                                  | 9,353  |       |  | $     | 1,077 |  |  | $ | 3,239 |  |  | $ | 35,830 | 
|                                         |  |            |        |          |  |                                    |        |       |  |       |       |  |  |   |       |  |  |   |        | 

|                                         |  |            |        |          |  |                                          |         |       |  |       |       |   |  |   |     |   |  |   |        | 
|---------------------------------------- |  | ---------- | ------ | -------- |  | ---------------------------------------- | ------- | ----- |  | ----- | ----- | - |  | - | --- | - |  | - | ------ | 
|                                         |  |            |        |          |  | Twenty-eight Weeks Ended August 11, 2003 |         |       |  |      
|                                         |  |            |        |          |  |                                          |         |       |  |      
|                                         |  | Carls Jr. |        | Hardees |  | La Salsa                                 |         | Other |  | Total
|                                         |  |            |        |          |  |                                          |         |       |  |      
|Income (loss) from continuing operations |  | $          | 31,216 |          |  | $                                        | (29,204 | )     |  | $     | (159  | ) |  | $ | 653 |   |  | $ | 2,506  | 
|Interest expense                         |  |            | 2,880  |          |  |                                          | 18,357  |       |  |       | (27   | ) |  |   | (8  | ) |  |   | 21,202 | 
|Income tax (benefit) expense             |  |            | 493    |          |  |                                          | 240     |       |  |       | (10   | ) |  |   |    |   |  |   | 723    | 
|Depreciation and amortization            |  |            | 13,377 |          |  |                                          | 18,680  |       |  |       | 1,913 |   |  |   | 98  |   |  |   | 34,068 | 
|                                         |  |            |        |          |  |                                          |         |       |  |       |       |   |  |   |     |   |  |   |        | 
|EBITDA                                   |  | $          | 47,966 |          |  | $                                        | 8,073   |       |  | $     | 1,717 |   |  | $ | 743 |   |  | $ | 58,499 | 
|                                         |  |            |        |          |  |                                          |         |       |  |       |       |   |  |   |     |   |  |   |        | 

|                                         |  |            |        |          |  |                                          |         |       |  |       |       |  |  |   |       |  |  |   |        |  
|---------------------------------------- |  | ---------- | ------ | -------- |  | ---------------------------------------- | ------- | ----- |  | ----- | ----- |  |  | - | ----- |  |  | - | ------ | -
|                                         |  |            |        |          |  | Twenty-eight Weeks Ended August 12, 2002 |         |       |  |      
|                                         |  |            |        |          |  |                                          |         |       |  |      
|                                         |  | Carls Jr. |        | Hardees |  | La Salsa                                 |         | Other |  | Total
|                                         |  |            |        |          |  |                                          |         |       |  |      
|Income (loss) from continuing operations |  | $          | 33,147 |          |  | $                                        | (15,455 | )     |  | $     | 520   |  |  |   | 5,750 |  |  | $ | 23,962 |  
|Interest expense                         |  |            | 3,542  |          |  |                                          | 19,187  |       |  |       | 4     |  |  |   |      |  |  |   | 22,733 |  
|Income tax expense                       |  |            | (1,290 | )        |  |                                          | (838    | )     |  |       |      |  |  |   |      |  |  |   | (2,128 | )
|Depreciation and amortization            |  |            | 14,058 |          |  |                                          | 18,191  |       |  |       | 1,278 |  |  |   | 86    |  |  |   | 33,613 |  
|                                         |  |            |        |          |  |                                          |         |       |  |       |       |  |  |   |       |  |  |   |        |  
|EBITDA                                   |  | $          | 49,457 |          |  | $                                        | 21,085  |       |  | $     | 1,802 |  |  | $ | 5,836 |  |  | $ | 78,180 |  
|                                         |  |            |        |          |  |                                          |         |       |  |       |       |  |  |   |       |  |  |   |        |  

32



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

The following table reconciles EBITDA (a non-GAAP measurement) to cash flow
provided by operating activities (a GAAP measurement):

|                                                                                                 |  |  |  |  |  |                    |        |                 |  |   |         |                          |  |                 |  |                 |  |   |        |   |  |   |         |  
|------------------------------------------------------------------------------------------------ |  |  |  |  |  | ------------------ | ------ | --------------- |  | - | ------- | ------------------------ |  | --------------- |  | --------------- |  | - | ------ | - |  | - | ------- | -
|                                                                                                 |  |  |  |  |  | Twelve Weeks Ended |        |                 |  |   |         | Twenty-eight Weeks Ended
|                                                                                                 |  |  |  |  |  |                    |        |                 |  |   |         |                         
|                                                                                                 |  |  |  |  |  | August 11, 2003    |        | August 12, 2002 |  |   |         |                          |  | August 11, 2003 |  | August 12, 2002
|                                                                                                 |  |  |  |  |  |                    |        |                 |  |   |         |                          |  |                 |  |                
|Cash flow provided by operating activities                                                       |  |  |  |  |  | $                  | 28,156 |                 |  | $ | 42,175  |                          |  |                 |  |                 |  | $ | 45,824 |   |  | $ | 63,759  |  
|Interest expense                                                                                 |  |  |  |  |  |                    | 9,024  |                 |  |   | 9,660   |                          |  |                 |  |                 |  |   | 21,202 |   |  |   | 22,733  |  
|Income tax expense (benefit)                                                                     |  |  |  |  |  |                    | 370    |                 |  |   | 572     |                          |  |                 |  |                 |  |   | 723    |   |  |   | (2,128  | )
|Interest on fee and discount amortization                                                        |  |  |  |  |  |                    | 1,123  |                 |  |   | 997     |                          |  |                 |  |                 |  |   | (2,536 | ) |  |   | (2,165  | )
|(Provision for) recovery of losses on accounts and notes receivable                              |  |  |  |  |  |                    | (30    | )               |  |   | (6      | )                        |  |                 |  |                 |  |   | (2,094 | ) |  |   | 239     |  
|Gain on investments, sales of property and equipment, capital leases
and extinguishment of debt  |  |  |  |  |  |                    | (290   | )               |  |   | 2,568   |                          |  |                 |  |                 |  |   | (89    | ) |  |   | 6,497   |  
|Facility action charges, net                                                                     |  |  |  |  |  |                    | (831   | )               |  |   | (2,075  | )                        |  |                 |  |                 |  |   | (1,893 | ) |  |   | (5,062  | )
|Other,
non-cash charges (credits)                                                                |  |  |  |  |  |                    | 139    |                 |  |   | (356    | )                        |  |                 |  |                 |  |   | 160    |   |  |   | (426    | )
|Income tax refund accrued                                                                        |  |  |  |  |  |                    |       |                 |  |   | 79      |                          |  |                 |  |                 |  |   |       |   |  |   | 3,721   |  
|Change in estimated liability for closing restaurants and estimated
liability for self-insurance |  |  |  |  |  |                    | 156    |                 |  |   | 5,055   |                          |  |                 |  |                 |  |   | 5,802  |   |  |   | 10,316  |  
|Net change in income tax receivable                                                              |  |  |  |  |  |                    | (497   | )               |  |   | (6,494  | )                        |  |                 |  |                 |  |   | (639   | ) |  |   | (7,012  | )
|Net change in receivables, inventories, prepaid expenses and other
current assets                |  |  |  |  |  |                    | 5,163  |                 |  |   | 901     |                          |  |                 |  |                 |  |   | (5,820 | ) |  |   | (673    | )
|Net change in accounts payable and other current liabilities                                     |  |  |  |  |  |                    | (9,873 | )               |  |   | (16,378 | )                        |  |                 |  |                 |  |   | (2,357 | ) |  |   | (13,517 | )
|Net loss from discontinued operations                                                            |  |  |  |  |  |                    | 47     |                 |  |   | (216    | )                        |  |                 |  |                 |  |   | (2,067 | ) |  |   | (16     | )
|Net cash used by discontinued operations                                                         |  |  |  |  |  |                    | 50     |                 |  |   | 1,129   |                          |  |                 |  |                 |  |   | 216    |   |  |   | 1,907   |  
|                                                                                                 |  |  |  |  |  |                    |        |                 |  |   |         |                          |  |                 |  |                 |  |   |        |   |  |   |         |  
|EBITDA                                                                                           |  |  |  |  |  |                    | 32,707 |                 |  |   | 37,611  |                          |  |                 |  |                 |  |   | 56,432 |   |  |   | 78,173  |  
|EBITDA provided by discontinued operations                                                       |  |  |  |  |  |                    | (2,292 | )               |  |   | (1,781  | )                        |  |                 |  |                 |  |   | 2,067  |   |  |   | 7       |  
|                                                                                                 |  |  |  |  |  |                    |        |                 |  |   |         |                          |  |                 |  |                 |  |   |        |   |  |   |         |  
|EBITDA provided by continuing operations                                                         |  |  |  |  |  | $                  | 30,415 |                 |  | $ | 35,830  |                          |  |                 |  |                 |  | $ | 58,499 |   |  | $ | 78,180  |  
|                                                                                                 |  |  |  |  |  |                    |        |                 |  |   |         |                          |  |                 |  |                 |  |   |        |   |  |   |         |  

Carls Jr.

During the twelve weeks ended August 11, 2003, we closed one Carls Jr.
restaurant. During the same period, Carls Jr. franchisees and licensees
opened seven restaurants and closed two restaurants. During the twenty-eight
weeks ended August 11, 2003, we opened three Carls Jr. restaurants and closed
one Carls Jr. restaurant. During the same period, Carls Jr. franchisees and
licensees opened 15 restaurants and closed four restaurants. The following
table shows the change in the Carls Jr. component of our restaurant portfolio,
as well as the change in revenue for both the current quarter and the
year-to-date:

|                        |  |                       |       |                       |  |        |     |      |  |              |    |        |  |   |         |  |  |      |         |      |  |        |       |  |  |  |  |  |  |   |         |  |  |   |         |  |  |   |       | 
|----------------------- |  | --------------------- | ----- | --------------------- |  | ------ | --- | ---- |  | ------------ | -- | ------ |  | - | ------- |  |  | ---- | ------- | ---- |  | ------ | ----- |  |  |  |  |  |  | - | ------- |  |  | - | ------- |  |  | - | ----- | 
|                        |  | Restaurant Portfolio  |       | Revenue              
|                        |  |                       |       |                      
|                        |  | Second Fiscal Quarter |       | Second Fiscal Quarter |  |        |     |      |  | Year-to-Date
|                        |  |                       |       |                       |  |        |     |      |  |             
|                        |  | 2004                  |       | 2003                  |  | Change |     | 2004 |  | 2003         |    | Change |  |   |         |  |  | 2004 |         | 2003 |  | Change
|                        |  |                       |       |                       |  |        |     |      |  |              |    |        |  |   |         |  |  |      |         |      |  |       
|Company                 |  |                       | 442   |                       |  |        | 438 |      |  |              | 4  |        |  | $ | 121,792 |  |  | $    | 118,673 |      |  | $      | 3,119 |  |  |  |  |  |  | $ | 280,076 |  |  | $ | 277,227 |  |  | $ | 2,849 | 
|Franchised and licensed |  |                       | 558   |                       |  |        | 539 |      |  |              | 19 |        |  |   | 46,509  |  |  |      | 43,916  |      |  |        | 2,593 |  |  |  |  |  |  |   | 106,948 |  |  |   | 102,746 |  |  |   | 4,202 | 
|                        |  |                       |       |                       |  |        |     |      |  |              |    |        |  |   |         |  |  |      |         |      |  |        |       |  |  |  |  |  |  |   |         |  |  |   |         |  |  |   |       | 
|Total                   |  |                       | 1,000 |                       |  |        | 977 |      |  |              | 23 |        |  | $ | 168,301 |  |  | $    | 162,589 |      |  | $      | 5,712 |  |  |  |  |  |  | $ | 387,024 |  |  | $ | 379,973 |  |  | $ | 7,051 | 
|                        |  |                       |       |                       |  |        |     |      |  |              |    |        |  |   |         |  |  |      |         |      |  |        |       |  |  |  |  |  |  |   |         |  |  |   |         |  |  |   |       | 

Same-store sales for company-operated Carls Jr. restaurants increased 2.3%
during the twelve weeks ended August 11, 2003. Revenue from company-operated
restaurants increased $3,119, or 2.6%, during that period. The increase in
company-operated restaurant revenue is due to the increase in same-store sales
and the opening of five new restaurants during the past year, partially offset
by the closure of one restaurant during that time.

Same-store sales for company-operated Carls Jr. restaurants increased 0.8%
during the twenty-eight weeks ended August 11, 2003. Revenue from
company-operated restaurants increased $2,849, or 1.0%, during that period.
The increase in company-operated restaurant revenue is due to the increase in
same-store sales and the increase in restaurant count during the past year.

Net franchising income decreased $132, or 2.4%, during the twelve weeks ended
August 11, 2003 as compared to the twelve weeks ended August 12, 2002. The
decrease is primarily due to the reduced royalty revenue as a result of the
same-store sales decrease at franchise restaurants.

Net franchising income decreased $45, or 0.4%, during the twenty-eight weeks
ended August 11, 2003, when compared to the twenty-eight weeks ended August 12,
2002. That decrease is the result of an increase in the provision for bad
debts offset by increased distribution center income and higher rental income.

33



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

The changes in restaurant-level margins are explained as follows:

|                                                              |                                                                       |  |                 |      |                 |  |      |      |   
|------------------------------------------------------------- | --------------------------------------------------------------------- |  | --------------- | ---- | --------------- |  | ---- | ---- | --
|                                                              |                                                                       |  | Twelve Weeks    |      | Twenty-eight   
|                                                              |                                                                       |  | Ended           |      | Weeks Ended    
|                                                              |                                                                       |  | August 11, 2003 |      | August 11, 2003
|Restaurant-level margins for the period ended August 12, 2002 |                                                                       |  | 24.1            | %    |                 |  | 23.3 | %   
|                                                              | Decrease due to higher natural gas and electricity costs              |  |                 | (0.8 | )%              |  |      | (0.6 | )%
|                                                              | Decrease
due to changes in labor costs                                |  |                 | (0.2 | )%              |  |      | (0.5 | )%
|                                                              | Decrease due to higher food and paper                                 |  |                 | (1.0 | )%              |  |      | (0.5 | )%
|                                                              | Decrease due to adjustment of general liability claim reserve         |  |                 | (1.1 | )%              |  |      | (0.6 | )%
|                                                              | Increase due to adjustment of workers compensation claim reserve     |  |                 | 0.5  | %               |  |      | 0.2  | % 
|                                                              | Decrease
due to rent expense, taxes and licenses                      |  |                 | (0.5 | )%              |  |      | (0.5 | )%
|                                                              | Increase
due to lower depreciation and losses on retirement of assets |  |                 | 0.2  | %               |  |      | 0.2  | % 
|                                                              | All other, net                                                        |  |                 | 0.6  | %               |  |      | 0.2  | % 
|                                                              |                                                                       |  |                 |      |                 |  |      |      |   
|Restaurant-level margins for the period ended August 11, 2003 |                                                                       |  | 21.8            | %    |                 |  | 21.2 | %   
|                                                              |                                                                       |  |                 |      |                 |  |      |      |   

The current year increase in general liability insurance costs reflects the
recording of an approximately $1,700 credit during the prior year,
compared to an approximately $500 credit during the current year, as a result
of actuarial analyses of our general liability reserve. The current year
increase in food and paper costs are the result of increases in the price of
commodities. We expect that, over time, commodity prices will decrease however,
we can provide no assurance that this will occur.

Previously we had entered into a fixed-rate contract with Enron to supply
energy to our Carls Jr. restaurants. As part of its bankruptcy
reorganization, Enron rejected that contract during the third quarter of fiscal
2003. We have entered into a fixed-rate contract with another energy supplier.
We estimate that our ongoing utility costs for our California restaurants will
increase approximately $1,200 annually. In connection with Enron rejecting our
fixed-rate contract, we have filed bankruptcy court claims totaling $14,204
against Enron. At this time, we cannot make a determination as to the potential
recovery, if any, with respect to these claims. Additionally, our energy costs
may increase $2,000 over our current amount each year for the next three years
due to the efforts of the State of California to recoup higher prices paid to
energy suppliers following Californias electricity crisis in 2001.

California Assembly Bill No. 749,
signed into law during fiscal 2003 relating to workers
compensation claims, includes benefit payment increases that will
phase in through 2006. We estimate the impact of this legislation
will be increased costs of approximately $1,000 annually (see
discussion of price increases under Turnaround Strategy).

On September 12, 2003, the
California legislature passed a bill, SB 2, which would require
California businesses with 200 or more employees either to pay at
least 80% of the premiums for a basic individual health insurance
package for its employees who work over 100 hours per month and
their families, or to pay a fee into a state pool for the purchase of
health insurance for uninsured, low-income workers. If enacted, the
bill would take effect on January 1, 2006. We currently do not
offer health insurance benefits to our hourly employees. We have not
yet determined the impact this bill would have on our future health
insurance costs.

Hardees

During the twelve weeks ended August 11, 2003, we closed one Hardees
restaurant. During the same period, Hardees franchisees and licensees opened
four restaurants and closed 30 restaurants. During the twenty-eight weeks ended
August 11, 2003, we opened three Hardees restaurants and closed four Hardees
restaurants. During the same period, Hardees franchisees and licensees opened
nine restaurants and closed 83 restaurants. The following table shows the
change in the Hardees component of our restaurant portfolio, as well as the
change in revenue at Hardees for the current quarter:

|                        |  |                       |       |                       |  |              |       |      |  |      |      |        |  |      |         |      |  |        |         |  |  |   |      |   |  |   |         |  |  |   |         |  |  |   |        |  
|----------------------- |  | --------------------- | ----- | --------------------- |  | ------------ | ----- | ---- |  | ---- | ---- | ------ |  | ---- | ------- | ---- |  | ------ | ------- |  |  | - | ---- | - |  | - | ------- |  |  | - | ------- |  |  | - | ------ | -
|                        |  | Restaurant Portfolio  |       | Revenue              
|                        |  |                       |       |                      
|                        |  | Second Fiscal Quarter |       | Second Fiscal Quarter |  | Year-to-Date
|                        |  |                       |       |                       |  |             
|                        |  | 2004                  |       | 2003                  |  | Change       |       | 2004 |  | 2003 |      | Change |  | 2004 |         | 2003 |  | Change
|                        |  |                       |       |                       |  |              |       |      |  |      |      |        |  |      |         |      |  |       
|Company                 |  |                       | 729   |                       |  |              | 734   |      |  |      | (5   | )      |  | $    | 138,611 |      |  | $      | 137,981 |  |  | $ | 630  |   |  | $ | 306,224 |  |  | $ | 314,165 |  |  | $ | (7,941 | )
|Franchised and licensed |  |                       | 1,425 |                       |  |              | 1,579 |      |  |      | (154 | )      |  |      | 15,587  |      |  |        | 15,730  |  |  |   | (143 | ) |  |   | 35,111  |  |  |   | 37,011  |  |  |   | (1,900 | )
|                        |  |                       |       |                       |  |              |       |      |  |      |      |        |  |      |         |      |  |        |         |  |  |   |      |   |  |   |         |  |  |   |         |  |  |   |        |  
|Total                   |  |                       | 2,154 |                       |  |              | 2,313 |      |  |      | (159 | )      |  | $    | 154,198 |      |  | $      | 153,711 |  |  | $ | 487  |   |  | $ | 341,335 |  |  | $ | 351,176 |  |  | $ | (9,841 | )
|                        |  |                       |       |                       |  |              |       |      |  |      |      |        |  |      |         |      |  |        |         |  |  |   |      |   |  |   |         |  |  |   |         |  |  |   |        |  

Same-store sales for company-operated Hardees restaurants increased 1.0%
during the twelve weeks ended August 11, 2003. Revenue from company-operated
Hardees restaurants increased $630, or 0.5%, during the twelve weeks ended
August 11, 2003, as compared to the twelve weeks ended August 12, 2002. The
increase in company-operated revenue during the twelve weeks ended August 11,
2003 is due to the increase in same-store sales and the opening and acquisition
of nine restaurants during the past year, partially offset by the closure of 22
restaurants during that time. The average check during the twelve weeks ended
August 11, 2003 was $4.38, as compared to $4.02 during the twelve weeks ended
August 12, 2002, primarily due to our shift to premium products.

Same-store sales for company-operated Hardees restaurants decreased 1.7%
during the twenty-eight weeks ended August 11, 2003. Revenue from
company-operated Hardees restaurants decreased $7,941, or 2.5%, during the
twenty-eight weeks ended August 11, 2003, as compared to the twenty-eight weeks
ended August 12, 2002. The decrease in company-operated revenue is due to the
same-store sales decrease as well as the net closure of five restaurants.

During the twelve weeks ended August 11, 2003, net franchising income decreased
$111, or 1.3%, as compared to the twelve weeks ended August 12, 2002, due to
the decreased royalty revenue as a result of 154 fewer franchise restaurants
operating,

34



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

partially offset by increased distribution center activity.
Additionally, a franchisee that subleases approximately 100 restaurants from us
was in arrears on rental obligations during the twelve weeks ended August
11, 2003. As a result, we did not recognize rental income associated with this
franchisee.

During the twenty-eight weeks ended August 11, 2003, net franchising income
decreased $3,560, or 17.6%, as compared to the twenty-eight weeks ended August
12, 2002. Royalty revenue and net rental income decreased due to 154 fewer
franchise restaurants operating.
Royalty revenue was further impacted by
reduced sales at franchise restaurants. Additionally, at the end of fiscal
2003, a few franchisees who own and operate a large number of restaurants, and
who sublease some of those restaurants from us, became delinquent in their
rental and royalty obligations to us. As a result, we did not recognize rental
revenue related to these franchisees at the beginning of the current fiscal
year. We are currently receiving payments and are therefore recognizing revenue, both rents and royalties, related
to most of these large franchisees.

As discussed above (see Hardees Revolution), we introduced a new menu at
Hardees during the fourth quarter of fiscal 2003. We determined that
significant management and staff training would be required to properly execute
the new menu. We also invested in additional labor in the restaurants to ensure
outstanding customer service during the training stage of the Revolution. As
the training, implementation and introduction of the Revolution have now been
achieved, we have now returned to pre-Revolution staffing levels.

The changes in restaurant-level margins are explained as follows:

|                                                              |                                                                           |  |                 |      |                    |  |      |      |   
|------------------------------------------------------------- | ------------------------------------------------------------------------- |  | --------------- | ---- | ------------------ |  | ---- | ---- | --
|                                                              |                                                                           |  | Twelve Weeks    |      | Twenty-eight Weeks
|                                                              |                                                                           |  | Ended           |      | Ended August 11,  
|                                                              |                                                                           |  | August 11, 2003 |      | 2003              
|Restaurant-level margins for the period ended August 12, 2002 |                                                                           |  | 13.4            | %    |                    |  | 12.8 | %   
|                                                              | Increase/(decrease) due to change in labor costs                          |  |                 | 0.6  | %                  |  |      | (0.6 | )%
|                                                              | Decrease due to food commodity prices and an emphasis on premium products |  |                 | (1.9 | )%                 |  |      | (1.5 | )%
|                                                              | Decrease due to higher natural gas and electricity costs                  |  |                 | (0.7 | )%                 |  |      | (0.8 | )%
|                                                              | Decrease due to rent expense, taxes and
licenses                          |  |                 | (0.3 | )%                 |  |      | (0.1 | )%
|                                                              | Increase due to closure of unprofitable
restaurants                       |  |                 | 0.4  | %                  |  |      | 0.2  | % 
|                                                              | Increase
due to adjustment of general liability claim reserve             |  |                 | 0.4  | %                  |  |      | 0.0  | % 
|                                                              | Decrease due to higher repair and maintenance expenditures                |  |                 | 0.0  | %                  |  |      | (0.1 | )%
|                                                              | Decrease due to higher depreciation and losses on retirement of assets    |  |                 | (0.3 | )%                 |  |      | (0.3 | )%
|                                                              | All other, net                                                            |  |                 | (0.1 | )%                 |  |      | (0.3 | )%
|                                                              |                                                                           |  |                 |      |                    |  |      |      |   
|Restaurant-level margins for the period ended August 11, 2003 |                                                                           |  | 11.5            | %    |                    |  | 9.3  | %   
|                                                              |                                                                           |  |                 |      |                    |  |      |      |   

La Salsa

During the twelve weeks ended August 11, 2003, we opened three La Salsa
restaurants. During the same period, La Salsa franchisees opened two
restaurants and closed two restaurants. During the twenty-eight weeks ended
August 11, 2003, we opened five La Salsa restaurants and closed two La Salsa
restaurants. During the same period, La Salsa franchisees opened four
restaurants and closed six restaurants. The following table shows the change
in the La Salsa component of our restaurant portfolio, as well as the change in
revenue at La Salsa for the current quarter:

|                        |       |  |                      |     |                 |  |              |     |      |  |      |   |        |   |        |        |         |   |        |        |  |   |     |    |  |   |        |        |  |   |        |        |  |   |       |       | 
|----------------------- | ----- |  | -------------------- | --- | --------------- |  | ------------ | --- | ---- |  | ---- | - | ------ | - | ------ | ------ | ------- | - | ------ | ------ |  | - | --- | -- |  | - | ------ | ------ |  | - | ------ | ------ |  | - | ----- | ----- | 
|                        |       |  | Restaurant Portfolio |     | Revenue         |  |              |     |      |  |      |   |        |   |        |        |        
|                        |       |  |                      |     |                 |  |              |     |      |  |      |   |        |   |        |        |        
|                        |       |  | Fiscal Quarter       |     | Quarter-to-Date |  | Year-To-Date
|                        |       |  |                      |     |                 |  |             
|                        |       |  | 2004                 |     | 2003            |  | Change       |     | 2004 |  | 2003 |   | Change |   | 2004   |        | 2003(1) |   | Change
|                        |       |  |                      |     |                 |  |              |     |      |  |      |   |        |   |        |        |         |   |       
|Company                 |       |  | 60                   |     |                 |  | 57           |     |      |  | 3    |   |        | $ | 10,439 |        |         | $ | 10,384 |        |  | $ | 55  |    |  | $ | 23,135 |        |  | $ | 19,113 |        |  | $ | 4,022 |      
|Franchised and licensed |       |  | 40                   |     |                 |  | 43           |     |      |  | (3   | ) |        |   | 393    |        |         |   | 425    |        |  |   | (32 | )  |  |   | 836    |        |  |   | 737    |        |  |   | 99    |      
|                        |       |  |                      |     |                 |  |              |     |      |  |      |   |        |   |        |        |         |   |        |        |  |   |     |    |  |   |        |        |  |   |        |        |  |   |       |      
|                        | Total |  |                      | 100 |                 |  |              | 100 |      |  |      |  |        |   | $      | 10,832 |         |   | $      | 10,809 |  |   | $   | 23 |  |   | $      | 23,971 |  |   | $      | 19,850 |  |   | $     | 4,121 | 
|                        |       |  |                      |     |                 |  |              |     |      |  |      |   |        |   |        |        |         |   |        |        |  |   |     |    |  |   |        |        |  |   |        |        |  |   |       |      



|(1) |  | For the period March 1, 2002 through August 12, 2002.
|--- |  | -----------------------------------------------------

Same-store sales for company-operated La Salsa restaurants decreased 2.0%
during the twelve weeks ended August 11, 2003. Revenue from company-operated La
Salsa restaurants increased $55, or 0.5%, when compared to the twelve weeks
ended August 12, 2002, primarily due to the opening of five new restaurants,
partially offset by the closing of two restaurants during the past year and the
decrease in same-store sales.

During the twelve weeks ended August 11, 2003, restaurant-level margins were
10.8% as a percentage of company-operated restaurant revenue as compared to
16.1% in the prior year. Food and packaging costs decreased 90 basis points,
from 26.8%

35



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

during the second quarter of fiscal 2003 to 25.9% during the second
quarter of fiscal 2004. Payroll and other employee benefits decreased 140 basis
points, from 31.6% during the second quarter of fiscal 2003 to 30.2% during the
second quarter of fiscal 2004. Occupancy and other operating costs increased
760 basis points, from 25.5% during the second quarter of fiscal 2003 to 33.1%
during the second quarter of fiscal 2004 due to opening costs
associated with three new restaurants and depreciation expense related
to five new restaurants opened this year.

Same-store sales from company-operated La Salsa restaurants decreased 2.0%
during the twenty-eight weeks ended August 11, 2003. During the twenty-eight
weeks ended August 11, 2003, revenue from company-operated La Salsa restaurants
increased $4,023, or 21.0%, when compared to the twenty-eight weeks ended
August 12, 2002, as a result of recording 31 additional days of revenue during
that period (we acquired La Salsa on March 1, 2002, resulting in our recording
of less than a full twenty-eight weeks of revenue during the first two quarters
of fiscal 2003) and the opening of five new restaurants, partially offset by
the closing of two restaurants during the past year.

During the twenty-eight weeks ended August 11, 2003, restaurant level margins
were 10.8% as compared to 15.3% during the twenty-eight weeks ended August 12,
2002. Food and packaging costs decreased 80 basis points, from 26.9% to 26.1%.
Payroll and other employee benefits decreased 90 basis points, from 31.8% to
30.9%. Occupancy and other operating costs increased 620 basis points from
26.0% to 32.2%, primarily due to the amortization of favorable leases, which
began during the fourth quarter of fiscal 2003.

We regularly evaluate under-performing restaurants to determine the likelihood
we can return them to profitability. In the event that we determine we cannot
return an under-performing restaurant to an acceptable level of profitability,
we close the restaurant (absent any contractual restrictions preventing us from
doing so). We believe the potential closing of any restaurants currently
identified as under-performing would not have a material impact on the
valuation of the goodwill associated with the acquisition of La Salsa.

Advertising Expense

Advertising expenses decreased $217, or 1.3%, to $16,571 during the twelve
weeks ended August 11, 2003 and decreased $1,177, or 3.0%, to $37,584 during
the twenty-eight weeks ended August 11, 2003. Advertising expenses as a
percentage of company-operated revenue decreased marginally from 6.3% to 6.1%
during the twelve weeks ended August 11, 2003, and decreased marginally from
6.3% to 6.2% during the twenty-eight weeks ended August 12, 2003, as compared
to the prior year periods.

General and Administrative Expense

General and administrative expenses were 7.4% of total revenue during the
twelve weeks ended August 11, 2003, as compared to 8.1% during the twelve weeks
ended August 12, 2002. General and administrative expenses decreased $1,820, or
6.8%, to $24,804 during the twelve weeks ended August 11, 2003, as compared to
the same period last year. This decrease is primarily due to reduced payroll
expense and contract service expenses.

General and administrative expenses were 7.5% of total revenue during the
twenty-eight weeks ended August 11, 2003, as compared to 8.0% during the
twenty-eight weeks ended August 12, 2002. General and administrative expenses
decreased $4,236, or 7.0%, to $56,162 during the twenty-eight weeks ended
August 11, 2003, as compared to the twenty-eight weeks ended August 12, 2002.
This decrease is primarily due to reduced payroll expense, travel costs and
contract service expense, partially offset by increased legal expense.

Interest Expense

During the twelve weeks ended August 11, 2003 interest expense decreased $636,
or 6.6%, to $9,024, as compared to the twelve weeks ended August 12, 2002,
primarily as a result of the prior year repurchase of convertible notes.
During the twenty-eight weeks ended August 11, 2003, interest expense decreased
$1,531, or 6.7%, to $21,202, as compared to the twenty-eight weeks ended August
12, 2002, primarily due to the prior year repurchase of convertible notes and a
lower balance on our senior credit facility.

36



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

Other Income (Expense), Net

Other income (expense), net, consists of the following:

|                                                         |  |                    |     |                          |  |                 |       |                 |  |   |      |   |  |   |       | 
|-------------------------------------------------------- |  | ------------------ | --- | ------------------------ |  | --------------- | ----- | --------------- |  | - | ---- | - |  | - | ----- | 
|                                                         |  | Twelve Weeks Ended |     | Twenty-eight Weeks Ended
|                                                         |  |                    |     |                         
|                                                         |  | August 11, 2003    |     | August 12, 2002          |  | August 11, 2003 |       | August 12, 2002
|                                                         |  |                    |     |                          |  |                 |       |                
|Gain on the sale of Checkers stock                       |  | $                  |    |                          |  | $               | 3,159 |                 |  | $ |     |   |  | $ | 5,825 | 
|Gain on the repurchase of convertible subordinated notes |  |                    |    |                          |  |                 | 537   |                 |  |   |     |   |  |   | 1,715 | 
|All other                                                |  |                    | 228 |                          |  |                 |      |                 |  |   | (410 | ) |  |   | 362   | 
|                                                         |  |                    |     |                          |  |                 |       |                 |  |   |      |   |  |   |       | 
|Total other income (expense), net                        |  | $                  | 228 |                          |  | $               | 3,696 |                 |  | $ | (410 | ) |  | $ | 7,902 | 
|                                                         |  |                    |     |                          |  |                 |       |                 |  |   |      |   |  |   |       | 

During the prior year, we divested our
investment in Checkers resulting in our recording gains on the sale
of those securities as listed in the table above.
Additionally, during the prior year, we repurchased a portion of our convertible
subordinated notes as part of our plan to address the maturity of
those notes, which are due in March 2004. The repurchases of those
notes also resulted in the
recognition of gains as listed in the table above.

Income Taxes

We recorded income tax expense for the twelve and twenty-eight weeks ended
August 11, 2003, of $370 and $723, respectively. We recorded an income tax
expense for the twelve and twenty-eight weeks ended August 12, 2002, of $572
and 2,128, respectively. We believe that our net operating losses are such that
we will not be required to pay federal income taxes on this fiscal years
taxable earnings, if any, and have only provided for minimum state franchise
taxes and foreign income taxes. Our deferred tax assets net to $0 due to our
valuation allowance of approximately $164,000 at August 11, 2003.

At August 11, 2003, the Company had a federal net operating loss (NOL)
carryforward of approximately $87,000, expiring in varying amounts in the years
2021 through 2023 and various state NOL carryforwards in varying amounts
expiring in the years 2006 through 2023. Additionally, the Company has an
alternative minimum tax credit carryforward of approximately $7,300, general
business credit carryforwards expiring in varying amounts in the years 2020
through 2023, and foreign tax credits which expire in the year 2008.

Liquidity and Capital Resources

We have historically financed our business through cash flow from operations
and borrowings under our credit facilities. Our most significant cash uses
during the next 12 months will arise primarily from the refinancing of our
convertible subordinated notes (Convertible Notes) and funding of our capital
expenditures. Our senior credit facility (Facility), which matures on
December 14, 2003, is extendable, by its terms, to November 15, 2006, provided
we have completed the repurchase or refinancing of our Convertible Notes. This
effectively accelerates the maturity of the Convertible Notes (see discussion
below). We anticipate that existing cash balances, availability under the
Facility, cash generated from operations and an anticipated new financing will
be sufficient to service existing debt and to meet our operating and capital
requirements for the next 12 months. We have no mandatory payments of principal
on the $200,000 of Senior Subordinated Notes outstanding prior to final
maturity in 2009.

We arranged for the Facility to fund letters of credit required for our
self-insurance programs. Additionally, the Facility provides working capital
during those periods when seasonality affects our cash flow. We, as well as the
restaurant industry in general, maintain relatively low levels of accounts
receivable and inventories, and vendors grant trade credit for purchases such
as food and supplies. We also continually invest in our business through the
addition of new sites and the refurbishment of existing sites, which are
reflected as long-term assets and not as part of working capital. As a result,
we typically maintain current liabilities in excess of current assets,
resulting in a working capital deficit. As of August 11, 2003, our current
ratio was 0.39 to 1. Our current ratio includes the classification of the
Convertible Notes as a current liability.

The Facility permits borrowings of up to $100,000. As of August 11, 2003, we
had $8,500 outstanding under our Facility, $49,552 outstanding on standby
letters of credit, and available borrowings of $41,948. In addition to a
blanket lien, certain assets secure the Facility, including all of our personal
property assets and certain restaurant property deeds of trust with an
estimated appraised value of $218,200. Borrowings bear interest at either the
LIBOR rate plus an applicable margin or the Prime Rate plus an applicable
margin, with interest due monthly. The applicable interest rate at August 11,
2003 is Prime Rate plus 2.25%, or 6.25% per annum. The agreement underlying
the Facility includes certain restrictive covenants. Among other things, these
covenants restrict our ability to incur debt, incur liens on our assets, make
any significant change in our corporate structure or the nature of our
business, dispose of assets in the above described collateral pool, prepay
certain debt, engage in a change of control transaction without the member
banks consents, pay dividends, make investments or acquisitions and incur
capital expenditures. Subject to the terms of the agreement, we can make
capital expenditures of $50,000 per year, modified based on actual EBITDA (as
defined in the Facility) and provided that $15,000 is available on the Facility
at the time the expenditures are made. The full
text of the contractual requirements imposed by this financing is set forth in
the Fourth Amended and Restated Credit Agreement,

37



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

and the amendments thereto,
which we filed with the Securities and Exchange Commission. We were in
compliance with such requirements as of August 11, 2003. On June 27, 2003, we
amended the Facility to account for the writedown of Timber Lodge assets held
for sale and to amend the minimum consolidated EBITDA requirement. Subject in
certain instances to cure periods, the lenders under our Facility may demand
repayment of these borrowings prior to stated maturity upon certain events,
including if we breach the terms of our agreement, suffer a material adverse
change, engage in a change of control transaction, suffer certain adverse legal
judgments, in the event of specified events of insolvency or if we default
other significant obligations. In the event the Facility is declared
accelerated by the lenders (which can occur only if we are in default under the
Facility), our 9.125% senior subordinated notes (Senior Notes) due 2009 and
the Convertible Notes may also become accelerated under certain circumstances
and after all cure periods have expired.

The Convertible Notes, which are unsecured obligations, are governed by an
indenture. The indenture requires that we pay interest at a rate of 4.25% per
annum in semi-annual coupons due on each March 15 and September 15, with all
outstanding principal due and payable in March 2004. We have the right to
prepay the notes at any time for an amount equal to principal, accrued interest
and a premium, subject to a notice requirement. The premium, as of August 11,
2003, is 0.708% of the principal amount redeemed. The full text of the
contractual requirements imposed by this financing is set forth in the
indenture, which was filed with the Securities and Exchange Commission. We were
in compliance with such requirements as of August 11, 2003. Subject in certain
instances to cure periods, the holders of the Convertible Notes may demand
repayment of these borrowings prior to stated maturity upon certain events,
including if we breach the terms of the indenture, in the event of specified
events of insolvency, or if other significant obligations are accelerated.

The Senior Notes, which are unsecured obligations, are governed by an
indenture. The indenture requires that we pay interest at a rate of 9.125% per
annum in semi-annual coupons due on each May 1 and November 1, with all
outstanding principal due and payable May 1, 2009. We do not have the right to
prepay the notes until May 1, 2004, at which time we may prepay the notes for
an amount equal to principal, accrued interest and a premium, subject to a
notice requirement. The premium from May 1, 2004 to May 1, 2005 is 4.56% of the
principal amount redeemed, but reduces annually through May 2007, at which
point no premium is payable. The indenture includes certain restrictive
covenants including limitations on our ability to incur debt, incur liens on
our assets, make any significant change in our corporate structure or the
nature of our business, pay dividends, make investments, dispose of assets and
make restricted payments. Restricted payments include certain loans, treasury
stock repurchases and voluntary repurchases of outstanding debt. As of August
11, 2003, the remaining amount of permitted restricted payments is $28,734. The
full text of the contractual requirements imposed by this financing is set
forth in the indenture, which has been filed with the Securities and Exchange
Commission. We were in compliance with such requirements as of August 11, 2003.
Subject in certain instances to cure periods, the holders of the Senior Notes
may demand repayment of these borrowings prior to stated maturity upon certain
events, including if we breach the terms of the indenture, specified events of
insolvency, if we suffer certain adverse legal judgments or if other
significant obligations are accelerated.

The terms of our significant financing agreements (the Facility, the
Convertible Notes and the Senior Notes), are not dependent on any change in our
credit rating. We believe the key company-specific factors affecting our
ability to maintain our existing debt financing relationships and to access
such capital in the future are our present and expected levels of profitability
and cash flow from operations, asset collateral bases and the level of our
equity capital relative to our debt obligations. In addition, as noted above,
our existing agreements include significant restrictions on future financings
including, among others, limits on the amount of indebtedness we may incur or
which may be secured by any of our assets.

Because our bank indebtedness matures in advance of the maturity of the
Convertible Notes, we may be obliged to incur additional indebtedness prior to
the maturity of the Facility. Further, because of restrictions on voluntary
prepayments of indebtedness under our indenture on our Senior Notes (see
discussion above), we may be in a position where we are simultaneously
incurring interest expense on the convertible debt and new debt for a period of
time. Any new debt will be at a higher coupon rate than the present convertible
debts coupon. Because of these circumstances, we expect to incur higher
interest expense during fiscal 2004 than the prior year.

We are considering various strategies to address the maturation of the
Convertible Notes. Strategies we may implement include obtaining new bank debt,
a public debt offering, a restructuring of our existing convertible debt, or
some combination thereof. In the event that we are unable to successfully
implement one or more of those options we may be required to sell additional
restaurants, which may be at a loss, to raise sufficient funds to retire the
debt. Those losses may be material and may have a significant negative impact
on our operating results.

During the twenty-eight weeks ended August 11, 2003, cash provided by operating
activities was $45,824. Cash used in investing activities during the
twenty-eight weeks ended August 11, 2003, totaled $11,772, which principally
consisted of purchases of property and equipment, which were partially offset
by proceeds from the sale of property and equipment. Cash used in financing

38



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)

activities during the twenty-eight weeks ended August 11, 2003, totaled
$30,096, which principally consisted of repayments of short-term debt.

Capital expenditures were:

|                                                           |  |                          |        | 
|---------------------------------------------------------- |  | ------------------------ | ------ | 
|                                                           |  | Twenty-eight Weeks Ended
|                                                           |  | August 11, 2003         
|                                                           |  |                         
|New
restaurants (including
restaurants under
development)  |  |                          |        | 
|Carls Jr                                                  |  | $                        | 1,449  | 
|Hardees                                                   |  |                          | 1,472  | 
|La Salsa                                                   |  |                          | 2,146  | 
|Remodels/Dual-branding
(including construction in
process) |  |                          |        | 
|Carls Jr                                                  |  |                          | 2,179  | 
|Hardees                                                   |  |                          | 6,792  | 
|Other restaurant
additions                                 |  |                          |        | 
|Carls Jr                                                  |  |                          | 2,000  | 
|Hardees                                                   |  |                          | 3,293  | 
|La Salsa                                                   |  |                          | 1,430  | 
|Capitalized interest                                       |  |                          | 228    | 
|Corporate/other                                            |  |                          | 2,168  | 
|                                                           |  |                          |        | 
|Total                                                      |  | $                        | 23,157 | 
|                                                           |  |                          |        | 

As of August 11, 2003, we had remodeled 80% of the Hardees company-operated
restaurants to the Star Hardees format and had installed charbroilers in 99%
of the company-operated restaurants.

In an effort to improve operations we have relocated several of our corporate
facilities. During 2002, we began relocating our executive headquarters to the
Santa Barbara, California area. We entered into a five-year agreement to lease
the facility. During 2001, we relocated Hardees corporate offices to St.
Louis, Missouri and entered into a five-year agreement to lease a portion of
the facility.

Contractual Obligations

We enter into purchasing contracts and pricing arrangements to control costs
for commodities that are subject to price volatility. These arrangements result
in unconditional purchase obligations (see further discussion regarding these
obligations in Item 3  Quantitative and Qualitative Disclosures About Market
Risk) which, as of August 11, 2003, totaled $41,960.

39



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands)




Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

Our principal exposure to financial market risks relates to the impact that
interest rate changes could have on our $100,000 Facility. As of August 11,
2003, we had $8,500 of borrowings and $49,552 of letters of credit outstanding
under the credit facility. Borrowings under the Facility bear interest at the
prime rate or LIBOR plus an applicable margin. A hypothetical increase of 100
basis points in short-term interest rates would result in a reduction in the
Companys annual pre-tax earnings of $581. The estimated reduction is based
upon the outstanding balance of the Facility and the weighted-average interest
rate for the quarter and assumes no change in the volume, index or composition
of debt as in effect August 11, 2003. Substantially all of our business is
transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations
have not had a significant impact on us and are not expected to in the
foreseeable future.

Commodity Price Risk

We purchase certain products which are affected by commodity prices and are,
therefore, subject to price volatility caused by weather, market conditions and
other factors which are not considered predictable or within our control.
Although many of the products purchased are subject to changes in commodity
prices, certain purchasing contracts or pricing arrangements contain risk
management techniques designed to minimize price volatility. The purchasing
contracts and pricing arrangements we use may result in unconditional purchase
obligations, which are not reflected in the consolidated balance sheet.
Typically, we use these types of purchasing techniques to control costs as an
alternative to directly managing financial instruments to hedge commodity
prices. In many cases, we believe we will be able to address material commodity
cost increases by adjusting our menu pricing or changing our product delivery
strategy. However, increases in commodity prices, without adjustments to our
menu prices (see page Turnaround Strategy), could result in lower
restaurant-level operating margins for our restaurant concepts.

40



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
CONTROLS AND PROCEDURES




Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
Companys disclosure controls and procedures as of the end of the period
covered by this report, pursuant to Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 as amended. Based on that evaluation, the
Companys Chief Executive Officer and Chief Financial Officer have concluded
that the Companys disclosure controls and procedures, as of the end of the
period covered by this report, were effective in timely alerting them to
material information relating to the Company required to be included in the
Companys periodic filings.

There has been no change in the Companys internal control over financial
reporting during the period covered by this report that has materially
affected, or is reasonably likely to affect, the Companys internal control
over financial reporting.

41



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
OTHER INFORMATION




Part II.   Other Information.




Item 1.   Legal Proceedings.



| |  |      
| |  | -----
| |  | None.




Item 4.   Submission of Matters to a Vote of Security Holders.



| |  |                                                                                                                                            
| |  | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company held its Annual Meeting of Stockholders on June 17,
2003 for the purpose of electing certain members of the board of
directors.
|
| |  | Managements nominees for directors, whose term expired as of the date of
the Annual Meeting, were elected by the following vote:          

|                      |  |                  |            |                            |  |  |           | 
|--------------------- |  | ---------------- | ---------- | -------------------------- |  |  | --------- | 
|                      |  | Shares Voted For |            | Authority to Vote Withheld
|                      |  |                  |            |                           
|William P Foley, II   |  |                  | 45,020,324 |                            |  |  | 4,339,132 | 
|Carl N. Karcher       |  |                  | 47,489,938 |                            |  |  | 1,869,518 | 
|Daniel E. Ponder, Jr. |  |                  | 47,593,801 |                            |  |  | 1,765,655 | 
|Ronald B. Maggard     |  |                  | 48,559,353 |                            |  |  | 800,103   | 



| |  |                                                                                                            
| |  | -----------------------------------------------------------------------------------------------------------
| |  | The following individuals also continue to serve on the board of
directors:                                
|
| |  | Byron Allumbaugh, Peter Churm, Carl L. Karcher, Daniel D. (Ron) Lane,
Andrew F. Puzder and Frank P. Willey.

42



---



##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
EXHIBITS AND REPORTS ON FORM 8-K




Item 6. Exhibits and Reports on Form 8-K

| |           |  |                                                                                                                                                    
| | --------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)       |  | Exhibits:                                                                                                                                          
| |           |  |                                                                                                                                                    
| | Exhibit # |  | Description                                                                                                                                        
| |           |  |                                                                                                                                                    
| | 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  
| |           |  |                                                                                                                                                    
| | (b)       |  | Reports on Form 8-K:                                                                                                                               
|
| |           |  | None.                                                                                                                                              




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                         |  |                                                                                       
|------------------------ |  | --------------------------------------------------------------------------------------
|                         |  | CKE RESTAURANTS, INC.
(Registrant)                                                    
|                         |  |                                                                                       
|September 17, 2003

Date |  | /s/ Theodore Abajian
Theodore Abajian
Executive Vice President
Chief Financial Officer

43