CKE Foresees Growth

Remodeling stores and opening new units will be two of the four key points of the company's growth plans, according to Andrew Puzder, president and CEO, who said that the financial results for the fourth quarter and the fiscal year ended Jan. 31. mean that the company has achieved many of the goals of its five-year turnaround plan and "we can now focus on the growth opportunities ahead." Puzder noted that the company achieved the results despite some unfavorable economic conditions, especially the harsh weather in the Southeast that was caused by "one of the most active Atlantic hurricane seasons in many years."

"Having improved the company's operating results and financial strength, we can now focus on the growth opportunities ahead," Puzder said. One part of the growth plan will be remodeling approximately 1,000 of Carl's Jr. and Hardee's locations, according to Puzder, who said that the company will spend about $125,000 per unit for the remodelings, or $125 million in total. The chain will remodel the stores over a period of years.

CKE will open about 20 new units this year, 15 of them Carl's Jr. locations and five Hardee's units, and execs look forward to ramping up to a total of 50 units per year in the future. The company may in some cases choose to own and the land and buildings of its company-owned stores, Puzder said, but if it does so will depend on whether it believes that owning the underlying real estate makes economic sense for the company. Otherwise, it will continue to lease the restaurants.

The financial results that Puzder cited included fourth-quarter net income that rose to $154.3 million, or $2.14 per diluted share, up from $7.1 million or 12 cents per diluted share in last year's fourth quarter. The huge gain reflects a one-time benefit of $139 million in the fourth quarter for an income tax reduction, which also boosted full-year income far above the previous year. Same-store sales increased 5.3% and 2.9% at company-operated Carl's Jr. and Hardee's restaurants, respectively. Revenue for the quarter was $348.5 million,a 3.7% decrease from the previous year quarter, but last year's fourth quarter included one more week than this year's.

For the year, net income grew to $194.6 million or $2.70 per diluted share, compared with $18 million or 30 cents per diluted share in the previous fiscal year. Same-store sales increased 2.2% at company-operated Carl's Jr. restaurants and decreased by two-tenths of a percent at Hardee's for the full year. Revenue decreased to $1.52 billion for the year, down a tenth of a percentage point.As of the end of its fiscal 2006 fourth quarter, CKE Restaurants Inc. and its subsidiaries operated 3,160 franchised or company-owned restaurants in 43 states and in 13 countries, including 1,049 Carl's Jr. restaurants, 1,993 Hardee's restaurants and 102 La Salsa Fresh Mexican Grill locations.