##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended May 18, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from  to.
 Commission file number 1-11313
 
 CKE RESTAURANTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    33-0602639
(I.R.S. Employer
Identification No.)6307 Carpinteria Avenue, Ste.
A, Carpinteria, California
(Address of Principal Executive Offices)
    
    93013
(Zip Code)
 Registrants telephone number, including area code: (805) 745-7500
 Former Name, Former Address and Former Fiscal Year, if changed since last report.
 Yes þ No o
 Yes
o No o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



CKE RESTAURANTS, INC. AND SUBSIDIARIES
INDEX
 Page NoPart I. Financial InformationItem 1 Condensed Consolidated Financial Statements (unaudited):Condensed Consolidated Balance Sheets as of May 18, 2009 and January 31, 2009
    
    
    3Condensed Consolidated Statements of Income for the sixteen weeks ended May
18, 2009 and
May 19, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the sixteen weeks ended
May 18, 2009 and May 19, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2 Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    14Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4 Controls and Procedures
    
    
    26Part II. Other InformationItem 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 6 Exhibits
    
    
    28Signatures
    
    
    29Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Part I. Financial Information
 
 Item 1. Condensed Consolidated Financial Statements
 CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 AS OF MAY 18, 2009 AND JANUARY 31, 2009
 (In thousands, except par values)
 (Unaudited)
 May 18, 2009
    
    
    January 31, 2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,560
    
    
    $
    17,869Accounts receivable, net of allowance for doubtful accounts of $704 as of May 18,
2009 and $720 as of January 31, 2009
    
    
    30,111
    
    
    
    40,738Related party trade receivables
    
    
    4,610
    
    
    
    4,923Inventories, net
    
    
    25,796
    
    
    
    24,215Prepaid expenses
    
    
    12,809
    
    
    
    13,445Assets held for sale
    
    
    1,489
    
    
    
    805Advertising fund assets, restricted
    
    
    18,988
    
    
    
    16,340Deferred income tax assets, net
    
    
    19,213
    
    
    
    20,781Other current assets
    
    
    2,066
    
    
    
    1,843Total current assets
    
    
    134,642
    
    
    
    140,959Notes receivable, net of allowance for doubtful accounts of $457 as of May 18, 2009
and $529 as of January 31, 2009
    
    
    1,589
    
    
    
    3,259Property and equipment, net of accumulated depreciation and amortization of $426,087
as of May 18, 2009 and $420,375 as of January 31, 2009
    
    
    553,346
    
    
    
    543,770Property under capital leases, net of accumulated amortization of $45,490 as of May
18, 2009 and $48,341 as of January 31, 2009
    
    
    32,293
    
    
    
    23,403Deferred income tax assets, net
    
    
    54,160
    
    
    
    57,832Goodwill
    
    
    24,106
    
    
    
    23,688Intangible assets, net
    
    
    2,475
    
    
    
    2,508Other assets, net
    
    
    9,162
    
    
    
    9,268Total assets
    
    $
    811,773
    
    
    $
    804,687LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of bank indebtedness and other long-term debt
    
    $
    2,708
    
    
    $
    4,341Current portion of capital lease obligations
    
    
    7,375
    
    
    
    6,389Accounts payable
    
    
    50,907
    
    
    
    60,903Advertising fund liabilities
    
    
    18,988
    
    
    
    16,340Other current liabilities
    
    
    91,447
    
    
    
    91,765Total current liabilities
    
    
    171,425
    
    
    
    179,738Bank indebtedness and other long-term debt, less current portion
    
    
    302,281
    
    
    
    310,447Capital lease obligations, less current portion
    
    
    43,807
    
    
    
    36,273Other long-term liabilities
    
    
    87,818
    
    
    
    83,953Total liabilities
    
    
    605,331
    
    
    
    610,411Commitments and contingencies (Notes 5 and 7)Subsequent events (Note 8)Stockholders equity:Preferred stock, $.01 par value; 5,000 shares authorized; none issued or outstanding
    
    
    
    
    
    
    Series A Junior Participating Preferred stock, $.01 par value; 1,500 shares
authorized; none issued or outstanding
    
    
    
    
    
    
    Common stock, $.01 par value; 100,000 shares authorized; 54,584 shares issued and
outstanding as of May 18, 2009; 54,653 shares issued and outstanding as of January
31, 2009
    
    
    546
    
    
    
    546Additional paid-in capital
    
    
    277,111
    
    
    
    276,068Accumulated deficit
    
    
    (71,215
    )
    
    
    (82,338
    )Total stockholders equity
    
    
    206,442
    
    
    
    194,276Total liabilities and stockholders equity
    
    $
    811,773
    
    
    $
    804,687
 See Accompanying Notes to Condensed Consolidated Financial Statements
  3




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 FOR THE SIXTEEN WEEKS ENDED MAY 18, 2009 AND MAY 19, 2008
 (In thousands, except per share amounts)
 (Unaudited)
 May 18, 2009
    
    
    May 19, 2008Revenue:Company-operated restaurants
    
    $
    343,164
    
    
    $
    358,238Franchised and licensed restaurants and other
    
    
    103,640
    
    
    
    107,933Total revenue
    
    
    446,804
    
    
    
    466,171Operating costs and expenses:Restaurant operating costs:Food and packaging
    
    
    98,502
    
    
    
    105,074Payroll and other employee benefits
    
    
    97,369
    
    
    
    103,683Occupancy and other
    
    
    78,837
    
    
    
    78,035Total restaurant operating costs
    
    
    274,708
    
    
    
    286,792Franchised and licensed restaurants and other
    
    
    79,493
    
    
    
    83,067Advertising
    
    
    20,767
    
    
    
    21,098General and administrative
    
    
    41,113
    
    
    
    44,511Facility action charges, net
    
    
    1,048
    
    
    
    1,073Total operating costs and expenses
    
    
    417,129
    
    
    
    436,541Operating income
    
    
    29,675
    
    
    
    29,630Interest expense
    
    
    (6,344
    )
    
    
    (4,568
    )Other income, net
    
    
    862
    
    
    
    992Income before income taxes
    
    
    24,193
    
    
    
    26,054Income tax expense
    
    
    9,798
    
    
    
    9,434Net income
    
    $
    14,395
    
    
    $
    16,620Dividends per common share
    
    $
    0.06
    
    
    $
    0.06Earnings per common share:Basic
    
    $
    0.26
    
    
    $
    0.32Diluted
    
    $
    0.26
    
    
    $
    0.31Weighted-average common shares outstanding:Basic
    
    
    54,615
    
    
    
    52,437Diluted
    
    
    55,037
    
    
    
    55,011
 See Accompanying Notes to Condensed Consolidated Financial Statements
  4




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE SIXTEEN WEEKS ENDED MAY 18, 2009 AND MAY 19, 2008
 (In thousands)
 (Unaudited)
 May 18, 2009
    
    
    May 19, 2008Cash flows from operating activities:Net income
    
    $
    14,395
    
    
    $
    16,620Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    21,298
    
    
    
    18,982Amortization of deferred loan fees
    
    
    326
    
    
    
    436Share-based compensation expense
    
    
    1,850
    
    
    
    3,934Recovery of losses on accounts and notes receivable
    
    
    (70
    )
    
    
    (44
    )Loss on sale of property and equipment and capital leases
    
    
    450
    
    
    
    206Facility action charges, net
    
    
    1,048
    
    
    
    1,073Deferred income taxes
    
    
    5,259
    
    
    
    4,064Other non-cash charges
    
    
    8
    
    
    
    11Net changes in operating assets and liabilities:Receivables, inventories, prepaid expenses and other current and non-current assets
    
    
    9,716
    
    
    
    11,566Estimated liability for closed restaurants and estimated liability for self-insurance
    
    
    (687
    )
    
    
    (3,473
    )Accounts payable and other current and long-term liabilities
    
    
    (3,401
    )
    
    
    (4,597
    )Net cash provided by operating activities
    
    
    50,192
    
    
    
    48,778Cash flows from investing activities:Purchases of property and equipment
    
    
    (27,661
    )
    
    
    (20,093
    )Proceeds from sale of property and equipment
    
    
    793
    
    
    
    12,085Collections of non-trade notes receivable
    
    
    1,737
    
    
    
    2,658Acquisition of restaurant, net of cash received
    
    
    (485
    )
    
    
    Other investing activities
    
    
    42
    
    
    
    22Net cash used in investing activities
    
    
    (25,574
    )
    
    
    (5,328
    )Cash flows from financing activities:Net change in bank overdraft
    
    
    (7,311
    )
    
    
    (18,144
    )Borrowings under revolving credit facility
    
    
    53,500
    
    
    
    57,500Repayments of borrowings under revolving credit facility
    
    
    (61,000
    )
    
    
    (63,000
    )Repayments of credit facility term loan
    
    
    (2,291
    )
    
    
    (14,465
    )Repayments of other long-term debt
    
    
    (8
    )
    
    
    (58
    )Repayments of capital lease obligations
    
    
    (1,742
    )
    
    
    (1,618
    )Payment of deferred loan fees
    
    
    
    
    
    
    (399
    )Repurchase of common stock
    
    
    (1,340
    )
    
    
    (1,612
    )Exercise of stock options
    
    
    515
    
    
    
    207Excess tax benefits from exercise of stock options
    
    
    29
    
    
    
    162Dividends paid on common stock
    
    
    (3,279
    )
    
    
    (3,148
    )Net cash used in financing activities
    
    
    (22,927
    )
    
    
    (44,575
    )Net increase (decrease) in cash and cash equivalents
    
    
    1,691
    
    
    
    (1,125
    )Cash and cash equivalents at beginning of period
    
    
    17,869
    
    
    
    19,993Cash and cash equivalents at end of period
    
    $
    19,560
    
    
    $
    18,868
 See Accompanying Notes to Condensed Consolidated Financial Statements
  5




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands, except per share amounts)
 (Unaudited)
 Note 1  Basis of Presentation and Description of Business
 ® ® ®
  Carls Jr.
    
    

Hardees
    
    
    Other
    
    
    TotalCompany-operated
    
    
    423
    
    
    
    480
    
    
    
    1
    
    
    
    904Franchised
    
    
    659
    
    
    
    1,233
    
    
    
    12
    
    
    
    1,904Licensed
    
    
    123
    
    
    
    202
    
    
    
    
    
    
    
    325Total
    
    
    1,205
    
    
    
    1,915
    
    
    
    13
    
    
    
    3,133
   Note 2  Accounting Pronouncements Not Yet Adopted and Adoption of New Accounting Pronouncements
 Fair Value Measurements
 Business Combinations
  6




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities Earnings
per Share
 Disclosures about Derivative Instruments and Hedging
Activities Accounting for Derivative Instruments and Hedging Activities
 Subsequent Events
 Amendments to FASB Interpretation No. 46(R)
 Note 3  Assets Held For Sale
  Note 4  Purchase of Assets
   7




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 5  Indebtedness and Interest Expense
      May 18, 2009
    
    
    January 31, 2009Balance
    
    
    
    
    
    
    BalanceSheet
    
    
    Fair
    
    
    Sheet
    
    
    FairLocation
    
    
    Value
    
    
    Location
    
    
    ValueDerivatives
not designated as hedging instruments:Interest rate swap agreements
    
    Other current liabilities
        
    $
    7,681
    
    
    Other current liabilities
        
    $
    7,234Interest rate swap agreements
    
    Other long-term liabilities
        
    
    9,473
    
    
    Other long-term liabilities
        
    
    10,356
   8




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Facility
    
    $
    1,784
    
    
    $
    4,684Interest rate swap agreements
    
    
    2,396
    
    
    
    (2,359
    )Capital lease obligations
    
    
    1,520
    
    
    
    1,362Amortization of deferred loan fees
    
    
    315
    
    
    
    3422023 Convertible Notes
    
    
    
    
    
    
    183Letter of credit fees and other
    
    
    329
    
    
    
    356$
    6,344
    
    
    $
    4,568
 Note 6  Fair Value Measurement
  Level 1 
    
    Quoted prices in active markets for identical assets or liabilities;Level 2 
    
    Observable inputs other than Level 1 prices, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full
term of the assets or liabilities; andLevel 3 
    
    Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
  Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest rate swap agreements
    
    $
    17,154
    
    
    $
    
    
    
    $
    17,154
    
    
    $
    
  Note 7  Commitments and Contingent Liabilities
   9




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
     Accounting for Contingencies
 Note 8  Stockholders Equity
  Note 9  Share-Based Compensation
   10




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Share-based compensation expense related
to performance-vested restricted stock
awards
    
    $
    
    
    
    $
    1,302All other share-based compensation expense
    
    
    1,852
    
    
    
    2,635Total share-based compensation expense
    
    $
    1,852
    
    
    $
    3,937Associated tax benefits
    
    $
    622
    
    
    $
    1,170
 Note 10  Facility Action Charges, Net
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Estimated liability for new restaurant closures
    
    $
    509
    
    
    $
    12Adjustments to estimated liability for closed restaurants
    
    
    176
    
    
    
    (102
    )Impairment of assets to be disposed of
    
    
    
    
    
    
    310Impairment of assets to be held and used
    
    
    23
    
    
    
    Loss on sales of restaurants and surplus properties, net
    
    
    208
    
    
    
    707Amortization of discount related to estimated liability for closed restaurants
    
    
    132
    
    
    
    146$
    1,048
    
    
    $
    1,073
 Note 11  Income Taxes
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Federal and state income taxes
    
    $
    9,549
    
    
    $
    8,954Foreign income taxes
    
    
    249
    
    
    
    480Income tax expense
    
    $
    9,798
    
    
    $
    9,434Effective income tax rate
    
    
    40.5
    %
    
    
    36.2
    %
    11




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 12  Income Per Share
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008(In thousands, except per share amounts)Numerator:Distributed net income for computation of basic and diluted distributed earnings per share
    
    $
    3,273
    
    
    $
    3,143Undistributed net income for computation of basic undistributed earnings per share
    
    $
    11,122
    
    
    $
    13,477Adjustment for interest and amortization costs for 2023 Convertible Notes, net of related tax effect
    
    
    
    
    
    
    135Undistributed net income for computation of diluted undistributed earnings per share
    
    $
    11,122
    
    
    $
    13,612Net income for computation of basic earnings per share
    
    $
    14,395
    
    
    $
    16,620Net income for computation of diluted earnings per share
    
    $
    14,395
    
    
    $
    16,755Denominator:Weighted-average shares for computation of basic earnings per share
    
    
    54,615
    
    
    
    52,437Dilutive effect of stock options
    
    
    422
    
    
    
    805Dilutive effect of 2023 Convertible Notes
    
    
    
    
    
    
    1,769Weighted-average shares for computation of diluted earnings per share
    
    
    55,037
    
    
    
    55,011Basic earnings per share:Distributed income per share
    
    $
    0.06
    
    
    $
    0.06Undistributed income per share
    
    
    0.20
    
    
    
    0.26Net income per share
    
    $
    0.26
    
    
    $
    0.32Diluted earnings per share:Distributed income per share
    
    $
    0.06
    
    
    $
    0.06Undistributed income per share
    
    
    0.20
    
    
    
    0.25Net income per share
    
    $
    0.26
    
    
    $
    0.31
 Note 13  Segment Information
  Sixteen Weeks Ended May 18, 2009
    

Carls Jr.
    
    

Hardees
    
    
    Other
    
    
    TotalRevenue
    
    $
    267,888
    
    
    $
    178,610
    
    
    $
    306
    
    
    $
    446,804Operating income
    
    
    20,497
    
    
    
    9,003
    
    
    
    175
    
    
    
    29,675Income (loss) before income taxes
    
    
    20,207
    
    
    
    8,042
    
    
    
    (4,056
    )
    
    
    24,193
 Sixteen Weeks Ended May 19, 2008
    

Carls Jr.
    
    

Hardees
    
    
    Other
    
    
    TotalRevenue
    
    $
    275,878
    
    
    $
    190,023
    
    
    $
    270
    
    
    $
    466,171Operating income
    
    
    24,051
    
    
    
    5,468
    
    
    
    111
    
    
    
    29,630Income (loss) before income taxes
    
    
    23,746
    
    
    
    3,860
    
    
    
    (1,552
    )
    
    
    26,054
  12




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
 Note 14  Supplemental Cash Flow Information
 Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Cash paid for:Interest, net of amounts capitalized
    
    $
    6,421
    
    
    $
    4,479Income taxes, net of refunds received
    
    
    1,482
    
    
    
    329Non-cash investing and financing activities:Dividends declared, not paid
    
    
    3,275
    
    
    
    3,146Capital lease obligations incurred to acquire assets
    
    
    10,847
    
    
    
    Accrued property and equipment purchases at quarter-end
    
    
    5,750
    
    
    
    3,840
  13




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Introduction and Safe Harbor Disclosure
    New Accounting Pronouncements Not Yet Adopted and Adoption of New Accounting Pronouncements
  Critical Accounting Policies
  Impairment of Property and Equipment and Other Amortizable Long-Lived Assets Held and Used, Held
for Sale or To Be Disposed of Other Than By Sale
   14




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Impairment of Goodwill
  Estimated Liability for Closed Restaurants
  Estimated Liability for Self-Insurance
   Franchised and Licensed Operations
  Income Taxes
    15




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Significant Known Events, Trends, or Uncertainties Expected to Impact Fiscal 2010 Comparisons with
Fiscal 2009
  Fiscal Year and Seasonality
   Operating Review
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Revenue:Company-operated restaurants
    
    
    76.8
    %
    
    
    76.8
    %Franchised and licensed restaurants and other
    
    
    23.2
    
    
    
    23.2Total revenue
    
    
    100.0
    
    
    
    100.0Operating costs and expenses:Restaurant operating costs (1):Food and packaging
    
    
    28.7
    
    
    
    29.3Payroll and other employee benefits
    
    
    28.4
    
    
    
    28.9Occupancy and other
    
    
    23.0
    
    
    
    21.8Total restaurant operating costs
    
    
    80.1
    
    
    
    80.1Franchised and licensed restaurants and other (2)
    
    
    76.7
    
    
    
    77.0Advertising (1)
    
    
    6.1
    
    
    
    5.9General and administrative
    
    
    9.2
    
    
    
    9.5Facility action charges, net
    
    
    0.2
    
    
    
    0.2Operating income
    
    
    6.6
    
    
    
    6.4Interest expense
    
    
    (1.4
    )
    
    
    (1.0
    )Other income, net
    
    
    0.2
    
    
    
    0.2Income before income taxes
    
    
    5.4
    
    
    
    5.6Income tax expense
    
    
    2.2
    
    
    
    2.0Net income
    
    
    3.2
    %
    
    
    3.6
    %
 
 (1)
    
    As a percent of company-operated restaurants revenue.(2)
    
    As a percent of franchised and licensed restaurants and other revenue.  16




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Company-operated restaurants revenue
    
    $
    343,164
    
    
    $
    358,238Restaurant operating costs:Food and packaging
    
    
    98,502
    
    
    
    105,074Payroll and other employee benefits
    
    
    97,369
    
    
    
    103,683Occupancy and other
    
    
    78,837
    
    
    
    78,035Total restaurant operating costs
    
    
    274,708
    
    
    
    286,792Franchised and licensed restaurants and other revenue:Royalties
    
    
    25,679
    
    
    
    25,003Distribution centers
    
    
    67,157
    
    
    
    70,690Rent
    
    
    10,093
    
    
    
    9,620Franchise fees
    
    
    711
    
    
    
    2,620Total franchised and licensed restaurants and other revenue
    
    
    103,640
    
    
    
    107,933Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad debts)
    
    
    4,638
    
    
    
    4,581Distribution centers
    
    
    66,220
    
    
    
    70,545Rent and other occupancy
    
    
    8,635
    
    
    
    7,941Total franchised and licensed restaurants and other expenses
    
    
    79,493
    
    
    
    83,067Advertising
    
    
    20,767
    
    
    
    21,098General and administrative
    
    
    41,113
    
    
    
    44,511Facility action charges, net
    
    
    1,048
    
    
    
    1,073Operating income
    
    $
    29,675
    
    
    $
    29,630
  Company-operated
    
    
    Franchised and licensed
    
    
    TotalOpen at May 19, 2008
    
    
    906
    
    
    
    2,195
    
    
    
    3,101New
    
    
    28
    
    
    
    78
    
    
    
    106Closed
    
    
    (22
    )
    
    
    (52
    )
    
    
    (74
    )Divested
    
    
    (46
    )
    
    
    (38
    )
    
    
    (84
    )Acquired
    
    
    38
    
    
    
    46
    
    
    
    84Open at May 18, 2009
    
    
    904
    
    
    
    2,229
    
    
    
    3,133
  17




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Carls Jr.
 Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Company-operated restaurants revenue
    
    $
    192,068
    
    
    $
    195,228Restaurant operating costs:Food and packaging
    
    
    54,136
    
    
    
    56,505Payroll and other employee benefits
    
    
    51,730
    
    
    
    51,919Occupancy and other
    
    
    44,204
    
    
    
    42,867Total restaurant operating costs
    
    
    150,070
    
    
    
    151,291Franchised and licensed restaurants and other revenue:Royalties
    
    
    9,758
    
    
    
    10,326Distribution centers
    
    
    59,336
    
    
    
    63,289Rent
    
    
    6,379
    
    
    
    6,355Franchise fees
    
    
    347
    
    
    
    680Total franchised and licensed restaurants and other revenue
    
    
    75,820
    
    
    
    80,650Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad debts)
    
    
    2,352
    
    
    
    2,160Distribution centers
    
    
    58,430
    
    
    
    62,897Rent and other occupancy
    
    
    5,891
    
    
    
    5,597Total franchised and licensed restaurants and other expenses
    
    
    66,673
    
    
    
    70,654Advertising
    
    
    11,629
    
    
    
    11,434General and administrative
    
    
    18,608
    
    
    
    18,817Facility action charges, net
    
    
    411
    
    
    
    (369
    )Operating income
    
    $
    20,497
    
    
    $
    24,051Company-operated average unit volume (trailing-13 periods)
    
    $
    1,507
    
    
    $
    1,514Franchise-operated average unit volume (trailing-13 periods)
    
    $
    1,163
    
    
    $
    1,194Company-operated same-store sales (decrease) increase
    
    
    (5.1
    )%
    
    
    3.9
    %Franchise-operated same-store sales decrease
    
    
    (5.8
    )%
    
    
    (1.2
    )%Company-operated same-store transaction (decrease) increase
    
    
    (4.5
    )%
    
    
    1.9
    %Average check (actual $)
    
    $
    6.93
    
    
    $
    6.92Restaurant operating costs as a % of company-operated restaurants revenue:Food and packaging
    
    
    28.2
    %
    
    
    28.9
    %Payroll and other employee benefits
    
    
    26.9
    %
    
    
    26.6
    %Occupancy and other
    
    
    23.0
    %
    
    
    22.0
    %Total restaurant operating costs
    
    
    78.1
    %
    
    
    77.5
    %Advertising as a percentage of company-operated restaurants revenue
    
    
    6.1
    %
    
    
    5.9
    %
  Company-operated
    
    
    Franchised and licensed
    
    
    TotalOpen at May 19, 2008
    
    
    410
    
    
    
    752
    
    
    
    1,162New
    
    
    20
    
    
    
    40
    
    
    
    60Closed
    
    
    (5
    )
    
    
    (12
    )
    
    
    (17
    )Divested
    
    
    (3
    )
    
    
    (1
    )
    
    
    (4
    )Acquired
    
    
    1
    
    
    
    3
    
    
    
    4Open at May 18, 2009
    
    
    423
    
    
    
    782
    
    
    
    1,205
  18




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Company-Operated Restaurants
   Restaurant operating costs as a percentage of company-operated
restaurants revenue for the sixteen weeks ended May 19, 2008
    
    
    77.5
    %Decrease in food and packaging costs
    
    
    (0.7
    )Increase in depreciation and amortization expense
    
    
    0.7Increase in rent expense
    
    
    0.4Increase in workers compensation expense
    
    
    0.3Other, net
    
    
    (0.1
    )Restaurant operating costs as a percentage of company-operated
restaurants revenue for the sixteen weeks ended May 18, 2009
    
    
    78.1
    %
     Franchised and Licensed Restaurants
     19




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Hardees
 Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Company-operated restaurants revenue
    
    $
    151,015
    
    
    $
    162,923Restaurant operating costs:Food and packaging
    
    
    44,346
    
    
    
    48,530Payroll and other employee benefits
    
    
    45,600
    
    
    
    51,724Occupancy and other
    
    
    34,612
    
    
    
    35,139Total restaurant operating costs
    
    
    124,558
    
    
    
    135,393Franchised and licensed restaurants and other revenue:Royalties
    
    
    15,766
    
    
    
    14,495Distribution centers
    
    
    7,821
    
    
    
    7,400Rent
    
    
    3,644
    
    
    
    3,265Franchise fees
    
    
    364
    
    
    
    1,940Total franchised and licensed restaurants and other revenue
    
    
    27,595
    
    
    
    27,100Franchised and licensed restaurants and other expenses:Administrative expense (including provision for bad debts)
    
    
    2,286
    
    
    
    2,421Distribution centers
    
    
    7,789
    
    
    
    7,648Rent and other occupancy
    
    
    2,745
    
    
    
    2,344Total franchised and licensed restaurants and other expenses
    
    
    12,820
    
    
    
    12,413Advertising
    
    
    9,138
    
    
    
    9,664General and administrative
    
    
    22,454
    
    
    
    25,643Facility action charges, net
    
    
    637
    
    
    
    1,442Operating income
    
    $
    9,003
    
    
    $
    5,468Company-operated average unit volume (trailing-13 periods)
    
    $
    1,010
    
    
    $
    959Franchise-operated average unit volume (trailing-13 periods)
    
    $
    979
    
    
    $
    957Company-operated same-store sales increase (decrease)
    
    
    2.5
    %
    
    
    (0.6
    )%Franchise-operated same-store sales increase (decrease)
    
    
    3.4
    %
    
    
    (1.9
    )%Company-operated same-store transaction increase (decrease)
    
    
    2.2
    %
    
    
    (3.4
    )%Average check (actual $)
    
    $
    5.04
    
    
    $
    5.07Restaurant operating costs as a % of company-operated restaurants revenue:Food and packaging
    
    
    29.4
    %
    
    
    29.8
    %Payroll and other employee benefits
    
    
    30.2
    %
    
    
    31.7
    %Occupancy and other
    
    
    22.9
    %
    
    
    21.6
    %Total restaurant operating costs
    
    
    82.5
    %
    
    
    83.1
    %Advertising as a percentage of company-operated restaurants revenue
    
    
    6.1
    %
    
    
    5.9
    %
  Company-operated
    
    
    Franchised and licensed
    
    
    TotalOpen at May 19, 2008
    
    
    495
    
    
    
    1,428
    
    
    
    1,923New
    
    
    8
    
    
    
    38
    
    
    
    46Closed
    
    
    (17
    )
    
    
    (37
    )
    
    
    (54
    )Divested
    
    
    (43
    )
    
    
    (37
    )
    
    
    (80
    )Acquired
    
    
    37
    
    
    
    43
    
    
    
    80Open at May 18, 2009
    
    
    480
    
    
    
    1,435
    
    
    
    1,915
  20




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Company-Operated Restaurants
   Restaurant operating costs as a percentage of company-operated
restaurants revenue for the sixteen weeks ended May 19, 2008
    
    
    83.1
    %Decrease in labor costs, excluding workers compensation
    
    
    (1.6
    )Increase in depreciation and amortization expense
    
    
    1.3Decrease in food and packaging costs
    
    
    (0.4
    )Increase in general liability insurance expense
    
    
    0.3Decrease in repairs and maintenance
    
    
    (0.3
    )Increase in utilities expense
    
    
    0.2Other, net
    
    
    (0.1
    )Restaurant operating costs as a percentage of company-operated
restaurants revenue for the sixteen weeks ended May 18, 2009
    
    
    82.5
    %
      Franchised and Licensed Restaurants
   21




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Consolidated Expenses
 General and Administrative Expense
  Interest Expense
  Income Tax Expense
   22




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
 Presentation of Non-GAAP Measurements
 Adjusted EBITDA
  Sixteen Weeks Ended
    
    
    Trailing-13 Periods EndedMay 18, 2009
    
    
    May 19, 2008
    
    
    May 18, 2009Net income
    
    $
    14,395
    
    
    $
    16,620
    
    
    $
    34,731Interest expense
    
    
    6,344
    
    
    
    4,568
    
    
    
    30,385Income tax expense
    
    
    9,798
    
    
    
    9,434
    
    
    
    21,897Depreciation and amortization
    
    
    21,298
    
    
    
    18,982
    
    
    
    65,813Facility action charges, net
    
    
    1,048
    
    
    
    1,073
    
    
    
    4,114Share-based compensation expense
    
    
    1,852
    
    
    
    3,937
    
    
    
    10,449Adjusted EBITDA
    
    $
    54,735
    
    
    $
    54,614
    
    
    $
    167,389
 Liquidity and Capital Resources
      23




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##### Table of Contents



CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
          24




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CKE RESTAURANTS, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS
(Dollars in thousands, except per share amounts)
  Sixteen Weeks EndedMay 18, 2009
    
    
    May 19, 2008Non-discretionary:RemodelsCarls Jr.
    
    $
    874
    
    
    $
    3,042Hardees
    
    
    7,115
    
    
    
    1,961Capital MaintenanceCarls Jr.
    
    
    3,905
    
    
    
    3,626Hardees
    
    
    4,225
    
    
    
    3,274Corporate/other
    
    
    715
    
    
    
    1,474Total non-discretionary
    
    
    16,834
    
    
    
    13,377Discretionary:New restaurants/rebuildsCarls Jr.
    
    
    4,083
    
    
    
    2,256Hardees
    
    
    962
    
    
    
    1,505Dual-brandingCarls Jr.
    
    
    16
    
    
    
    88Hardees
    
    
    73
    
    
    
    1,118Real estate/franchise acquisitions
    
    
    1,998
    
    
    
    1,654Corporate/other
    
    
    3,759
    
    
    
    95Total discretionary
    
    
    10,891
    
    
    
    6,716Total
    
    $
    27,725
    
    
    $
    20,093
    25




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
    Commodity Price Risk
  
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
   26




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##### Table of Contents



(b) Changes in Internal Control Over Financial Reporting
  
 Part II. Other Information
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchase of Equity Securities
  (a)
    
    
    (b)
    
    
    (c)
    
    
    (d)MaximumDollarValue ofTotal
    
    
    Shares thatNumber of Shares
    
    
    May Yet BeAverage
    
    
    Purchased as Part
    
    
    PurchasedTotal
    
    
    Price
    
    
    of Publicly
    
    
    Under theNumber of Shares
    
    
    Paid per
    
    
    Announced Plans
    
    
    Plans orPeriod
    
    Purchased
    
    
    Share
    
    
    or Programs
    
    
    ProgramsJanuary 27, 2009  February 23, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    38,599February 24, 2009  March 23, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,599March 24, 2009  April 20, 2009 (1)
    
    
    153,968
    
    
    
    8.71
    
    
    
    153,968
    
    
    
    37,259April 21, 2009  May 18, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,259Total
    
    
    153,968
    
    
    $
    8.71
    
    
    
    153,968
    
    
    $
    37,259
 
 (1)
    
    We received and cancelled a total of 153,968 shares of our outstanding common stock in
payment of taxes owed on ordinary income recognized by three of our executives in connection
with the vesting of restricted stock awards issued under our stock incentive plans.  27




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##### Table of Contents



Item 6. Exhibits
 Exhibit #31.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.31.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.32.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350.32.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350.
  28




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##### Table of Contents



SIGNATURES
  CKE RESTAURANTS, INC.Date: June 24, 2009
    /s/ Reese StewartReese StewartSenior Vice President
Chief Accounting Officer
(Principal Accounting Officer)  29




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##### Table of Contents



Exhibit Index
 Exhibit #31.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934.31.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934.32.1
    
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.32.2
    
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) of the
Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.