CKE Restaurants, Inc. Announces Preliminary, Unaudited Fourth Quarter and Full Year Fiscal 2011 Results
The Company expects to report total revenue of $297 million for the fiscal 2011 fourth quarter, a decrease of $14 million, or 4.6%, compared to the fiscal 2010 fourth quarter.
CKE Restaurants, Inc. announced today its preliminary, unaudited financial results for the fourth quarter and full year fiscal 2011. The fourth quarter and full year fiscal 2011 financial results discussed in this press release are unaudited, should be considered preliminary and are subject to change (see “Preliminary Nature of Results”). The Company does not currently expect to update this information prior to the release of its final fourth quarter and full year fiscal 2011 financial results. The Company expects to hold its regular quarterly conference call after the final results are released. The Company plans to file its Annual Report on Form 10-K for the fiscal year ended January 31, 2011 on or before the due date of May 2, 2011.
The fourth quarter and fiscal year ended January 31, 2011, included 13 weeks and 53 weeks, respectively, as compared to 12 weeks and 52 weeks in the fourth quarter and fiscal year ended January 25, 2010. As previously reported, on July 12, 2010, CKE Holdings, Inc., formerly known as Columbia Lake Acquisition Holdings, Inc., an affiliate of Apollo Management VII, L.P., acquired all of the outstanding shares of the Company (the “Merger”). Management is continuing to update the preliminary acquisition accounting related to the Merger, and as a result the final fourth quarter and full year fiscal 2011 financial results could change materially. Additionally, the preliminary, unaudited financial results are pending the completion of the fourth quarter accounting and financial reporting close processes.
The results of operations for the full year fiscal 2011 and related information have been prepared by adding the preliminary results of operations for the twenty-nine weeks ended January 31, 2011 (the “Successor” period) and the twenty-four weeks ended July 12, 2010, which precedes the Merger (the “Predecessor” period), and are compared to the Predecessor full year fiscal 2010. This presentation does not comply with generally accepted accounting principles; however, the Company believes that it provides a meaningful method of comparison. The discussion of the Company’s fourth fiscal quarter results compares the preliminary results of operations for the Successor thirteen weeks ended January 31, 2011 to the Predecessor twelve weeks ended January 25, 2010.
Same-Store Sales and Average Unit Volumes
Company-operated same-store sales for the fourth quarter and full fiscal year were as follows:
| Q4 | Fiscal Year | ||||||||||||||||||||||||||||||||||||
| Brand | FY11 | FY10 | FY11 | FY10 | |||||||||||||||||||||||||||||||||
| Carl's Jr. | -0.4 | % | -8.7 | % | -4.8 | % | -6.2 | % | |||||||||||||||||||||||||||||
| Hardee's | 5.7 | % | -2.5 | % | 4.4 | % | -0.9 | % | |||||||||||||||||||||||||||||
| Blended | 2.3 | % | -6.0 | % | -0.8 | % | -3.9 | % | |||||||||||||||||||||||||||||
At the end of fiscal year 2011, the fifty-two week average unit volumes for Carl’s Jr. and Hardee’s were $1,375,000 and $1,054,000, respectively.
Fourth Quarter Results
The Company expects to report total revenue of $297 million for the fiscal 2011 fourth quarter, a decrease of $14 million, or 4.6%, compared to the fiscal 2010 fourth quarter. The decrease was attributable to the sale of the Carl’s Jr. distribution business on July 2, 2010, partially offset by the impact of an additional week in the fiscal 2011 fourth quarter. Total revenue, excluding both the Carl’s Jr. distribution center revenue in the prior year quarter and the impact of the additional week, increased by $7 million, or 2.8%. The Company estimates the additional week in the fiscal 2011 fourth quarter added approximately $22 million to revenue.
Blended same-store sales for company-operated restaurants improved by 2.3% in the fiscal 2011 fourth quarter. Hardee’s same-store sales increased 5.7% and Carl’s Jr. same-store sales declined 0.4%.
Adjusted EBITDA for the fiscal 2011 fourth quarter is expected to be between $36 million and $38 million, compared to $32.8 million for the fiscal 2010 fourth quarter. The Company estimates the additional week in the fiscal 2011 fourth quarter added approximately $2 million to Adjusted EBITDA. Loss before income taxes for the fiscal 2011 fourth quarter is expected to be between $9 million and $12 million, compared to income before income taxes of $7.9 million for the fiscal 2010 fourth quarter. The Company estimates the additional week in the fiscal 2011 fourth quarter increased the loss before income taxes by approximately $1 million. The schedule of Adjusted EBITDA along with a discussion and a reconciliation of income (loss) before income taxes to Adjusted EBITDA is included below.
Fiscal 2011 Results
The Company expects to report total revenue of $1,331 million for fiscal 2011, a decrease of $88 million, or 6.2%, compared to fiscal 2010. The decrease was primarily attributable to the sale of the Carl’s Jr. distribution business on July 2, 2010, partially offset by the impact of a fifty-third week in fiscal 2011. Total revenue, excluding both the Carl’s Jr. distribution center revenue and the impact of the fifty-third week, decreased by $5 million, or 0.4%. The Company estimates the fifty-third week in fiscal 2011 added approximately $22 million to revenue.
Blended same-store sales for company-operated restaurants declined 0.8% in fiscal 2011. Hardee’s same-store sales improved by 4.4% and Carl’s Jr. same-store sales declined 4.8%.
Adjusted EBITDA for fiscal 2011 is expected to be between $164 million and $166 million, as compared to $167.0 million for fiscal 2010. The Company estimates the fifty-third week in fiscal 2011 added approximately $2 million to Adjusted EBITDA. Loss before income taxes for fiscal 2011 is expected to be between $40 million and $43 million, compared to income before income taxes of $63.2 million for fiscal 2010. The Company estimates the fifty-third week in fiscal 2011 increased the loss before income taxes by approximately $1 million. The schedule of Adjusted EBITDA along with a discussion and a reconciliation of income (loss) before income taxes to Adjusted EBITDA is included below.
Selected Data
The Company has included the following preliminary, unaudited financial data as of and for the fiscal year ended January 31, 2011:
| (Dollars in millions) | ||||
January 31, 2011 | ||||
| Total debt: | ||||
| Senior secured revolving credit facility due 2015 | $ | — | ||
| Senior secured second lien notes due 2018, net of original issue discount(1) | 589 | |||
| Other long-term debt | 1 | |||
| Capital lease obligations(2) | 36 | |||
| Total debt | $ | 626 | ||
| Cash and cash equivalents | $ | 43 | ||
| Capital expenditures(3) | 63 | |||
_________ | ||
| (1) | The aggregate principal amount of the senior secured second lien notes was $600 as of January 31, 2011. | |
| (2) | These amounts remain subject to the finalization of fourth quarter acquisition accounting adjustments related to the Merger and as a result, capital lease obligations could change materially. | |
| (3) | Based on our current capital spending projections for fiscal 2012, we expect capital expenditures to be between $60 and $70. | |
The Company’s restaurant unit count as of January 31, 2011 consisted of: | ||||||||||||
Carl’s Jr. | Hardee’s | Other | Total | |||||||||
| Company-operated | 423 | 466 | 1 | 890 | ||||||||
| Franchised | 674 | 1,226 | 10 | 1,910 | ||||||||
| Licensed | 152 | 207 | — | 359 | ||||||||
| Total | 1,249 | 1,899 | 11 | 3,159 | ||||||||
Company Overview
CKE Restaurants, Inc. is a privately held company headquartered in Carpinteria, California. As of the end of fiscal 2011, CKE, through its subsidiaries, had a total of 3,159 franchised, licensed or company-operated restaurants in 42 states and in 18 countries. For more information about CKE, please visit www.ckr.com.
Preliminary Nature of Results
The Company has not yet finalized its financial results for the fourth quarter and full year fiscal 2011. The preliminary estimated financial results described herein are unaudited and subject to revision pending the completion of the accounting and financial reporting processes necessary to complete the Company’s financial closing procedures and financial statements for the fourth quarter and full year fiscal 2011. Management is continuing to update the preliminary acquisition accounting related to the Merger, and as a result the final fourth quarter and full year fiscal 2011 financial results could change materially. Any subsequent changes to the purchase price allocation that result in material changes to our consolidated financial results will be adjusted retrospectively in periods ending after the Merger. The foregoing preliminary estimates of the financial results were prepared by management. Management believes that such preliminary estimates have been prepared on a reasonable basis, and such preliminary estimates are based upon a number of assumptions, estimates and business decisions that are inherently subject to significant business fluctuations, economic conditions and competitive uncertainties and contingencies, many of which are beyond the Company’s control, and represent, to the best of management’s knowledge, the Company’s expected results. However, because this information is preliminary and highly subjective, it should not be relied on as indicative of the Company’s future actual results. The Company does not intend to update or otherwise revise the preliminary estimates to reflect future events.
Estimated Impact of Fifty-third Week
The Company’s fiscal year ends on the last Monday in January in each year, which resulted in an extra week during fiscal 2011. As a result, the fourth quarter and fiscal year ended January 31, 2011, included 13 weeks and 53 weeks, respectively, as compared to 12 weeks and 52 weeks in the fourth quarter and fiscal year ended January 25, 2010.
Management has estimated the impact of the additional week on its operating results by analyzing the last accounting period of fiscal 2011, excluding the impact of certain year-end and quarter-end adjustments, and making various assumptions that were deemed reasonable and appropriate.
