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CKE records 13-percent drop in 3Q profit

CARPINTERIA Calif. Carl’s Jr. and Hardee’s parent CKE Restaurants Inc. said Wednesday that reduced revenue from refranchising efforts and higher interest expenses pushed third-quarter profit down 13 percent, even as both brands posted positive same-store sales.

For the quarter ended Nov. 3, CKE’s net income totaled $5.4 million, or 10 cents per share, compared with $6.2 million, or 11 cents per share, a year ago.

Revenue for the latest quarter fell 4.3 percent to $336.6 million. The drop reflected the sale of the sale of 118 formerly corporate Hardee’s locations to franchisees during the past 12 months.

Same-store sales at corporate Carl’s Jr. restaurants rose 0.5 percent, which reversed a decline in the second quarter, and Hardee’s continued its same-store-sales climb with an increase of 1.3 percent at corporate locations.

The latest-quarter results included $4.9 million of interest expense — mainly from CKE’s move to mark to market its interest rate swap agreements — compared with a $1.8 million interest expense a year ago.

Andrew Puzder, CKE president and chief executive, said the company’s bottom line also was hurt by restaurant operating expenses that rose 50 basis points from last year, primarily because of higher utility costs and increased depreciation expense from the company’s ongoing remodel program. In the current fiscal year, CKE has completed the remodeling of 50 Carl’s Jr. outlets and 80 Hardee’s units as well as 13 Green Burrito and 26 Red Burrito dual-branded conversions.

Puzder noted that menu initiatives and price increases taken over the past year have helped to keep food costs relatively flat during the quarter.

CKE will continue to focus on managing costs, he added.

“We continue to believe that our brands are well-positioned to endure the current macroeconomic situation,” he said. “Going forward, the combination of our premium product strategy, cutting-edge advertising and remodeled and dual-branded restaurants should allow us to continue growing our average unit volumes, as well as maintain, if not improve, our restaurant operating costs as demonstrated through the first three quarters of this year.”

CKE, based in Carpinteria, is franchisor or operator of 3,110 restaurants in 42 states and 14 countries, including 1,185 Carl’s Jr. restaurants and 1,912 Hardee’s restaurants.

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