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Company Press Release
SOURCE: CKE Restaurants, Inc.
CKE Restaurants, Inc. Announces Record Fourth Quarter
And Fiscal Year-End Results
ANAHEIM, Calif., March 17 /PRNewswire/ -- CKE Restaurants, Inc. (NYSE: CKR - news)
today reported continued increases in net income, revenues, restaurant-level margins and earnings
per share for the 12 and 52 weeks ended January 26, 1998.
Highlights for the quarter include:
Net income for the fourth quarter increased 102 percent to $12.5 million, or $0.26 per share,
compared with net income of $6.2 million, or $0.17 per share for the same prior year period,
representing the highest fourth quarter net income and earnings per share ever reported by the
Company.
Operating income for the quarter more than doubled to $23.7 million from $11.2 million.
Operating income for Carl's Jr. increased to $15.9 million, up $4.0 million or 34 percent for
the quarter as compared with the fourth quarter of fiscal 1997.
Revenues for the 12 weeks increased to $324.7 million, up $154.1 million or 90 percent as
compared with the prior year 12-week period. Carl's Jr., Hardee's, and Taco Bueno
contributed $16.0 million, $153.1 million, and $1.3 million, respectively, of the increase, offset
in part by the decrease in revenues of HomeTown Buffet and Casa Bonita, which were
spun-off to Star Buffet, Inc. in September 1997.
Restaurant-level margins for the quarter continued to increase reaching 24.2 percent for Carl's
Jr., an increase of 1.1 percent from the prior year quarter, and 24.4 percent for the Taco
Bueno, an increase of 5.4 percent from the prior year quarter. Hardee's margins for the fourth
quarter were 12.8 percent, an increase of 11.3 percent as compared with restaurant-level
margins of 1.5 percent for the prior year fourth quarter.
Company-operated Carl's Jr. restaurants posted same-store sales increases of 6.7 percent for
the fourth quarter, topping a 10.5 percent increase for the quarter one year ago, and marking
the 11th consecutive quarter of same-store sale increases. Taco Bueno experienced a 6.5
percent same-store sales increase. Hardee's same-store sales were down 9.3 percent for the
fourth quarter, much of which can be attributed to menu deletions made since the acquisition.
Year-end results are as follows:
For the fiscal year, the Company posted record net income of $46.8 million, a 110 percent
increase from the prior fiscal year's net income of $22.3 million, and earnings per share of
$1.07 per share, an increase of 60 percent over the prior fiscal year earnings of $0.67 per
share.
Revenues for the fiscal year increased to $1.150 billion, up $536.3 million or 87 percent,
including an increase of $50.1 million, or 10 percent, for the Carl's Jr. chain.
Restaurant-level operating margins for the fiscal year for Carl's Jr. rose 1.1 percent to 24.2
percent and the margins for Taco Bueno reached 24.6 percent.
Per-store averages in Company-operated Carl's Jr. restaurants increased to $1,157,000 on a
13-period rolling basis, an increase of $43,000 over the prior year.
Operating results for fiscal 1998 include 28 weeks of operations for Hardee's Food Systems, Inc.,
which was acquired on July 15, 1997. Fiscal 1997 results included 28 weeks of operations of
Summit Family Restaurants, 30 weeks of the 26 Rally's restaurants operated by CKE, and 17
weeks of Casa Bonita Incorporated, but did not include Hardee's.
''Our tremendous fourth quarter capped off a spectacular year for CKE Restaurants,'' said William
P. Foley II, CKE's chairman and chief executive officer. ''Without a doubt, the highlight was our
acquisition of the Hardee's chain. In just six and a half months of ownership, we've been able to
reduce corporate general and administrative expenses by more than $21 million annually, and
increase restaurant-level margins to 12.9 percent from 6.2 percent for calendar year end 1996. In
fact, Hardee's was profitable in the month of January -- something that hadn't been achieved since
1987.''
Part of the turnaround plan for Hardee's includes converting some restaurants to a dual-brand format
featuring Hardee's breakfast menu, including its famous Made From Scratch(TM) Biscuits, and
serving Carl's Jr. premium charbroiled burgers and chicken sandwiches the remainder of the day. At
fiscal year end, 76 restaurants had been converted -- 47 in Oklahoma City, Okla. and 29 in Peoria,
Ill., -- which are experiencing increases in same- store sales as compared with the remaining
Hardee's Company-operated restaurants. Plans are to continue converting restaurants in the
Midwest. Seven restaurants in Wichita Falls, Texas completed conversion in February and 14
restaurants in the Tulsa, Okla. market currently are being converted.
In addition, during the quarter the Company announced the acquisition of 557 franchised Hardee's
restaurants from Advantica Restaurant Group, Inc. -- the largest Hardee's franchisee -- for $380.8
million plus assumption of capital leases, subject to final closing adjustments. When the purchase is
completed, which is anticipated by month end, CKE will operate approximately 46.7 percent of the
Hardee's restaurants in the system. ''With a greater percentage of Company-operated restaurants,
we believe that we'll be better positioned to promote a consistent Hardee's brand image as we
attempt to revamp the menu, cooking methods and overall customer satisfaction at Hardee's,'' said
Foley.
The purchase will be partially financed by a private placement of convertible subordinated notes,
which was completed March 13. CKE received net cash proceeds of approximately $192.3 million,
which included the exercise in full of an over-allotment option. The subordinated notes, which are
due 2004, are convertible into the Company's common stock at an initial conversion price of
$48.204 and carry a 4.25 percent coupon. The remainder of the funding is anticipated to come from
available cash and borrowings under CKE's credit facility.
''Our Carl's Jr. chain experienced another superb quarter, helped in part by the introduction of the
new Charbroiled Sirloin Steak Sandwich in November,'' declared Tom Thompson, CKE's president
and chief operating officer. ''The steak sandwich has performed better than any other new product
in the past decade,'' he added.
Carl's also has completed remodeling all Company-operated restaurants, except a handful of units
where there are lease or permit issues, one year ahead of schedule.
In addition, 32 new Carl's Jr. restaurants opened during the year, with average sales of
approximately $1.25 million. ''With new restaurant volumes topping our already impressive average
unit volumes of $1.157 million we plan to build another 30 to 40 in the coming year,'' Thompson
added.
''In fiscal '98 we also achieved our goal of disposing all of our family dining restaurants with the
creation of Star Buffet in September and the recently announced sale of JB's Restaurants and Galaxy
Diner to various purchasers,'' said Foley. These include the sale of 12 JB's restaurant to Star Buffet
for $4.8 million in cash and the sale of 14 JB's restaurants and two Galaxy Diner restaurants to
Timber Lodge Steakhouse, Inc., in connection with the proposed merger of Timber Lodge and GB
Foods, Inc., operator of The Green Burrito. In a separate deal, the Company also agreed to sell 48
JB's restaurants and the JB's franchise system, along with the four Galaxy Diner restaurants to GB
Foods. The Company expects to receive approximately 1.6 million shares of GB Foods for the
transactions when completed.
''We are pleased to have all of these positive results to report, but the bottom line is that we
enhanced shareholder value.'' Foley stressed. This was illustrated with a 10 percent stock divided,
which was paid on February 4 to stockholders of record on January 20.
CKE Restaurants, Inc., through its subsidiaries and franchisees, operates 714 Carl's Jr.
quick-service restaurants, including 125 Carl's Jr./Green Burrito dual-brand locations, primarily
located in California, Nevada, Oregon, Arizona, Mexico and the Pacific Rim; 3,033 Hardee's
quick-service restaurants in 39 states and 10 foreign countries including 84 Carl's Jr./Hardee's dual-
brand locations; 109 Taco Bueno quick-service restaurants in Texas and Oklahoma; 26 Rally's
quick-service restaurants in California and Arizona; 82 JB's Restaurants and six Galaxy Diners.
Statements that are not historical facts contained in this release are forward looking statements that
involve risks and uncertainties, and actual results could vary materially from the descriptions
contained herein due to many factors, including, but not limited to, product demand and market
acceptance risks; the effect of economic conditions; the impact of competitive products and pricing;
the results of financing efforts; the effect of the Company's accounting policies and other risks
detailed in the Company's filings with the Securities and Exchange Commission. |
