Event Brief of Q3 2003 CKE Restaurants Earnings Conference Call - Final - Part 1.

(From Fair Disclosure Wire)

CORPORATE PARTICIPANTS . Steven Posey, Director, Finance . Andrew Puzder, Pres. & CEO . Joseph Higgins (Phonetic), VP & Corporate Controller OVERVIEW CKR retired an additional $5.5m of convertible debt in 3Q03, reducing balance to $136m. The co. continues to make progress on improving margins at Hardee's where margin for 3Q03 was 13.1% vs. 9.4% margin in 3Q02, a 39% improvement. FINANCIAL DATA A. Key Data From Call 1. 3Q03 net income = $9.2m or $0.16 per diluted share. 2. 3Q03 interest expense = $1.5m. PRESENTATION SUMMARY S1. 3Q03 REVIEW (A.P.) 1. 3Q03 was the third consecutive quarter of positive earnings before the cumulative effect of the accounting rule change for goodwill. 2. 3Q03 net income was $9.2m or $0.16 per diluted share vs. a net loss of $1.7m or net loss of $0.03 per share in 3Q02. 3. The co. continues to make progress on improving the margins at Hardee's where the margin for 3Q03 was 13.1% vs. 9.4% margin in 3Q02, a 39% improvement. 4. Although the co. has made CAPEX of approx. $47m YTD and repurchased convertible debt of approx. $23m YTD, at the end of 3Q03, it had no outstanding borrowings under bank line and had approx. $13m in overnight cash invested. 5. CKR retired an additional $5.5m of convertible debt in 3Q03, reducing balance to $136m. 6. The co. further reduced debt balance to $122m as of last Friday. 7. All of these accomplishments were done in the phase (Phonetic) of significant price discounting by the QSR industry leaders. 8. CKR was also a victim of the Enron debacle as they rejected the co.'s fixed contract with them, resulting in an approx. $1.4m increase in cost in 3Q03. 9. Although these circumstances affected CKR's results, the co. also benefited from three one-time transactions: 1. A gain arising from one-time tax refund resulting from the filing of an amended tax return. 2. Gains on the sale of Checkers' stock. 3. Gains on the repurchase of convertible debt. S2. 3Q03 MAJOR BRANDS' PERFORMANCE (A.P.) 1. Carl's Jr.: 1. In 3Q03, Carl's GM was approx. 20% and contributed $10.7m in operating income. 2. 3Q03 same-store sales decreased 5% vs. 3Q02 increase of 6.1%. 3. During 3Q03, the co. faced heavy competitive discounting and began rolling over strong same-store sales related to last year's introduction and rollout of The Six Dollar Burger. 4. Since June 2002, the co. introduced new products and marketing campaigns that the co. believes would help offset last year's increases. 5. Same-store sales at Carl's Jr. for period 11 rebounded to positive 4%. 2. Hardee's: 1. The co. has been focused on improving operations to bring customers back into the store with the goal of restoring profitability to the brand. 2. The co. believes that ongoing menu management, principally the switch to products with higher profit margins as well as effective controls over certain fixed and variable costs have allowed to report substantial improvement in GM. 3. In 3Q03, Hardee's generated margins of 13.1%, a 39% increase YoverY, following a 43% increase in 1Q03 and a 34% increase in 2Q03. 4. Hardee's contributed $700,000 to operating income vs. an operating loss of $3.3m in 3Q02. 5. The co. believes that its greatest opportunity for margin expansion and earnings growth rests in its ability to increase sales pursuant to the plan for Hardee's, which is currently in test. 6. Assuming the test results support the decision, the co. would have this plan in place in all stores sometime during 1H04. 7. The co.'s shift to premium products and less discounting at Hardee's this past year while improving operating margins impacted sales growth and as with the Carl's Jr. brand, was combined with heavy competitive discounting. 8. In 3Q03, same-store sales declined 3.5%, vs. 3Q02 increase of 1%, when the co. was engaged in heavy promotions and discounting. 9. During 4Q03, Hardee's will be rolling over the last year's introduction of The Six Dollar Burger. 10. To help bolster sales in 3Q03, the co. introduced new products such as the Chili Burger, the Big Chicken Sandwich, and Chili Cheese Fries and placed renewed emphasis on local store marketing initiatives. 3. La Salsa: 1. Same-store ...