U
O
I
G
February 26 th , 2010
Consumer Goods
BUY
Stock Data
Price (52 weeks) 9.41 – 17.44
Symbol/Exchange CPKI / NYSE
Beta 1.25
Shares Outstanding 24,183,000
Average daily volume
(3 month average)
400,876
Current market cap 365,975,000
Current Price
Dividend
Dividend Yield
$15.07
$0.00
0%
Valuation (per share)
DCF Analysis $15.18
Comparables Analysis
Target Price
Current Price
Summary Financials
$17.73
$16.46
$15.07
Revenue
Operating Cash Flow
662M 2009A
44.6M 2009A
Net Income 4.6M 2009A
B USINESS O VERVIEW
California Pizza Kitchen was founded in 1985 by Rick Rosenfield and Larry Flax in Beverly Hills,
California. Twenty years later, California Pizza kitchen operates over 250 restaurants around the world and is still run by its initial founders. The largest portion of CPK’s restaurants are still located throughout
California, however they are now located in dozens of states as well as internationally in Asia, North America and the Middle East. Almost all of California Pizza Kitchens revenues come from company owned full
Covering Analyst: Ari Siegel
Email: Asiegel@uoregon.edu
The University of Oregon Investment Group (UOIG) is a student run organization whose purpose is strictly educational.
Member students are not certified or licensed to give investment advice or analyze securities, nor do they purport to be.
Members of UOIG may have clerked, interned or held various employment positions with firms held in UOIG’s portfolio. In addition, members of UOIG may attempt to obtain employment positions with firms held in UOIG’s portfolio.

C a l i f o r n i a P i z z a K i t c h e n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p service restaurants, however about fifty stores have been franchised bearing the CPK name. Restaurant revenues tend to have very low margins because of the high cost of goods sold. Fortunately, CPK also generates higher margin revenue through a fairly recent franchising agreement with Kraft foods to produce and distribute a line of premium frozen pizzas. The compounded annual growth rate of Kraft franchise revenues has been extremely high over the past five years. For now however, Kraft franchise revenues are only 1% of CPK’s annual revenues. Other franchise revenue comprises about .72% of revenue, while restaurant sales comprise about 98.31%.
h t t p : / / u o i g . u o r e g o n . e d u
B USINESS AND G ROWTH S TRATEGIES
In the future, top line growth should be driven almost completely organically. While over this last year CPK did not open any new stores due to poor economic conditions, there are currently 8 full service store openings, 8 international franchised locations and 5 domestically franchised locations planned for 2010.
These newly opening stores should start CPKI’s recovery from the recession. Part of top line growth strategy going forward is to penetrate new target markets. Past stores have rarely been opened on college campuses, and starting in the fiscal 4 th quarter of 2009 stores have begun to be opened more frequently in those areas. New fast-casual dining restaurants are being opened in travel locations such as airports, which offer smaller menus to people on the go, who still want a meal that is higher quality than fast food.
Management plans to emphasize geographic diversification in the future as a result of past difficulty with California’s particularly poor economic environment dampening profitability. Currently, none of the newly planned stores will be located in the California area. Throughout the recession, CPK avoided broad menu price discounting in order to protect brand equity, while at the same time preventing price increases. Going forward menu price inflation is expected to be as little as a percentage point a year.
Even with management projecting fairly stable menu prices in the future, average check per customer has recently begun to increase. This is largely due to wine now being offered at all restaurants, and partially from new and expanded menu offerings.
The segment with the largest revenue growth going forward will be its Kraft franchise royalty line. As previously mentioned , the compounded annual growth rate of the Kraft royalty segment has been over 30% annually over the past five years, and this growth should continue, albeit at a lesser rate than previous years.
In their most recent conference call, CEO Larry Flax strongly emphasized that going forward CPK will contribute a larger amount of its attention and money to growing its higher margin revenue streams.
M ANAGEMENT AND E MPLOYEE R ELATIONS
Rich Rosenfield and Larry Flax managed CPK from 1985 to 1992, and from 2003 to present day. In
1992 the two managers sold their company to PepsiCo for about 100 million dollars. In 1997, Bruckmann,
Rosser, Cherill and Company bought out PepsiCo’s stake and took CPK public. Following issues with management, Rich and Larry were then re-instated as managers. Even while not Corporate Officers Rick and
Larry were always involved with the company. The Board of Directors is made up of independent directors and the two CEO’s. Managers have a set salary, and also are awarded pay using equity incentive plans including options and restricted stock awards.
2

C a l i f o r n i a P i z z a K i t c h e n
P ORTFOLIO I NFORMATION u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
The Tall Firs, Svigals’ and DADCO portfolios are all currently underweight consumer goods and small cap
R ECENT N EWS

th
o California Pizza Kitchen reported revenue and net income for the fourth quarter and fiscal year 2009 ending January 3 rd , 2010. Overall, total revenue and net income slightly decreased from previous years largely reflecting a still recovering industry.

th
o California Pizza Kitchen announced February 4 th the introduction of a new small cravings menu.
This menu includes the same quality of dish that customers are used to eating at CPKI in smaller portions. Up to the time of this report, this additional menu has seen success among customers.
This type of product introduction is an example of the ways restaurant sales growth will be strengthened going in future years.

th
o California Pizza Kitchen announced January 25th the opening of a new quick-serve store on the campus of Stony Brook University, located 60 miles east of New York City. It is a franchised location that will allow a student population of over 24,000 to order a premium selection of CPK’s pastas, salads, soups & pizzas. This store opening is an example of CPK’s move towards higher margin franchised revenue as well as new quick-serve locations.
I NDUSTRY
The full services restaurant industry is composed of businesses that provide food and other services to customers who order and are served by waiters while seated. Some of the subcategories in this industry include Asian, Traditional
American, Pizza, European,
Latin, Middle Eastern and
Casual Dining restaurants.
Overall, the industry can be broken down into full service restaurants, which comprise
34% of the industry, quick service restaurants, which comprise 31% of the industry, and an “other” category which comprises the remaining 35%.
Recently high growth in the
United States has been in the Asian category, followed by Middle Eastern. The highest growth has been in traditional North American food.
About 80% of industry revenue comes from household expenditure on restaurant meals. The US census has suggested that households with incomes of more than fifty thousand dollars account for more than two thirds of personal expenditure on food away from home – although this number does not stay exactly the same in the more specific restaurant industry. The remaining 20% of the industry’s revenue comes from businesses, and business travelers.
3

C a l i f o r n i a P i z z a K i t c h e n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u








Over the past few years the restaurant industry has been dealing with declining revenues, in line with the overall global recession. This decline in revenues has led many companies’ to close underperforming stores as well as offer increased discounting to attract more customers. The restaurant industry’s success is particularly dependant on a few key factors which include the consumer sentiment index, expenditure by household income and per capita disposable income. All three of these factors have been negatively affected by the recession, however all three should begin to improve as unemployment and the overall global economy begins to recover.
More specifically, real GDP growth should increase to about 1% in 2010 and continue to slowly increase from that rate over the next few years. Unfortunately for the industry, unemployment tends to recover at a lag from GDP, and so unemployment is expected to remain fairly high in the short term. Unemployment is a key factor in determining the consumer sentiment index, house hold expenditure and disposable income per capita.
In general, the restaurant business will trend towards increased use of technology and more efficient operations in order to cut down on costs and improve profitability. While existing chains will continue to consolidate and attempt to maintain a competitive advantage in this saturated market, barriers to entry have been and will continue to be low. Continued new entrants into the market are guaranteed.
S.W.O.T.
A NALYSIS
Strengths
 Recognizable Brand Name
 Strong Balance sheet, consistent reduction in long term debt
 Variety of different products and ways in which the CPK brand is being marketed
 Price competitive without having had to discount menu prices through the recession
Weaknesses
 Lack of geographic diversification, currently 40% of company operated stores are located within California
4

C a l i f o r n i a P i z z a K i t c h e n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
Opportunities
 Franchised Restaurants and frozen pizzas have the possibility of improving overall margins in the long run
 Management has hinted there is a chance of marketing products other than just frozen pizzas through Kraft
 Company will be introducing quick serve restaurants, and catering services in addition to their traditional restaurants
 New target markets such as college campuses can be accessed
Threats
 Restaurant sales are sensitive to timing of weather, holidays and other special events
 Depending on Nestle’s opinion of CPK’s frozen pizza’s, continued marketing of the product may be threatened
P ORTER ’ S 5 F ORCES A NALYSIS
Supplier Power
 There is a low amount of supplier power. The industry has a wide variety of places to obtain the different ingredients used in making food.
Barriers to Entry
 There are very low barriers to entry within the industry. A large number of people can afford to lease buildings and equipment, so initial capital start up costs are very low
Buyer Power
 There is a high amount of buyer power within the industry. While to a certain extent people are willing to pay higher prices for good meals at a restaurant they trust, it is not too long before sales are hurt by a high price elasticity of demand
Threat of Substitutes
 There is a high threat of substitutes within the restaurant industry. Over the recession people have substituted towards more home cooked meals as disposable income per capita decreased
Degree of Rivalry
 There is a high degree of rivalry within the industry. Tens of thousands of restaurants within the industry all compete for the same customers
C OMPARABLES A NALYSIS
There were a few criteria used for selecting comparable companies. First, they had to operate in the restaurant industry for the purpose of ease of comparison. After this, they were chosen if growth, cash flow and risk characteristics were similar to California Pizza Kitchens outlook. This process should give a relatively clear picture of what the market is currently pricing a company with a similar profile to California Pizza Kitchen.
5

C a l i f o r n i a P i z z a K i t c h e n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
The three multiples used to calculate the implied price were EV/Revenue, EV/EBITDA and EV/OCF.
EV/Revenue is a measure of how well a company produces revenue relative to its enterprise value, and is fundamentally affected by how good a company’s margins, growth and risk are. EV/EBIDTA is a good proxy for how well cash flow is produced relative to enterprise value and is also fundamentally affected by expected growth and risk. EV/OCF is also an estimate of how well a company produces cash flows relative to enterprise value, and will be affected by factors similar to the previous two multiples. Given that the three multiples used are affected by the fundamentals in similar ways, they were all weighted equally in the comparables analysis.
The Cheesecake Factory is an upscale casual dining restaurant chain located throughout the United States. The company’s full service restaurants offer over 200 items on their menu’s, with offerings ranging from pizza, seafood and salads to omelets, baked goods and steak. There are currently more than 150 stores bearing the cheesecake factory name, none of which are y franchised locations.
While the Cheesecake Factory is a slightly more risky company than California Pizza
Kitchen, it has similar growth and cash flows and thus makes a more than reasonable comparable. The higher beta is likely due to the company being a slightly more upscale dining experience than CPK. For example, in 2008 it’s average check size per guest was $18.50 in 2008 as compared to about $14 at
CPK. Like most casual dining restaurants within the United States, the Cheese Cake Factory operates in a highly competitive environment, and faces a large amount of competition.
PF Chang’s owns and operates two chains of casual dining restaurants – the PF
Chang chain and the Pei Wei Asian Diner (which is more of a quick service chain).
The company currently operates 189 full service PF Chang restaurants and 159 Pei
Wei restaurants. While the majority of these restaurants are located within the United
States, the company has development and license agreements to develop restaurants in Mexico and the Middle East.
PF Chang’s has slightly lower risk , most likely due to having better geographic diversification as compared to CPK.
An average check size of $8 at its Pei Wei Restaurants also likely contributes to the lower risk. Its’ margins and growth potential are also very similar to California Pizza Kitchen.
Red Robin develops, operates and franchises casual dining restaurants within the
United States and Canada. In 2008, approximately 423 restaurants were operated, 294 of which were company owned and 129 of which were operated under a franchise agreement. Its average check size is about $11.50, which is similar to California Pizza
Kitchens.
Red Robins overall risk profile is very similar to California Pizza Kitchens with a beta of 1.36. While RRGB’s beta is likely lower when unleveraged, in past years it has
6

C a l i f o r n i a P i z z a K i t c h e n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u taken on a large amount of debt to finance quick expansion and this has also increased its levered beta. However more recently, its revenue growth has stabilized to levels comparable to CPK’s, and its margins are also similar.
Brinker International owns, develops, operates and franchises various restaurant chains within the United States. The chains it owns include Chilli’s Grill & Bar and
On the Border Mexican Grill restaurants. It currently operates or has franchised
1689 restaurants, most of which are Chilli’s. Brinker’s is fairly geographically diversified, having locations throughout Europe, South America, Asia and the
Middle East.
Brinker’s has a risk profile that is fairly comparable to California Pizza Kitchens.
The slight premium on its beta is likely due to its relatively higher proportion of debt. Its margins are similar to
CPK’s, however its revenue has actually been decreasing in recent years. This top line growth is somewhat deceiving however, as its EBITDA growth has been comparable to the industrys’.
D ISCOUNTED C ASH F LOW A NALYSIS
Line Items were projected out to 2020 in the DCF analysis. After this point there was not a lot of value to be gained from further projections due to lack of information. However, from 2019 to 2020 nominal free cash flow is growing at a bit under 10% a year, and so an intermediate terminal growth rate of 5% a year was used until 2025. Line items were generally projected as a percent of revenues.
Revenues
In order to project total revenue for coming years, top line sales were broken down into three segments – Restaurant
Sales, Franchised Restaurant Sales and Kraft Sales.
Restaurant Sales have experienced negative growth in recent years as a result of the recession, however they will begin to see signs of growth as the overall economy improves. While 2010 nominal growth will be negative, this is largely because of a shift from a 53 week fiscal 2009 to a 52 week fiscal 2010. This change alone will cause about a negative
1.5% difference in sales. Not including this effect, sales in 2010 increase by over 1%. CPK is currently planning to open 8 full service restaurants in 2010, and so restaurant sales growth will trend towards historic levels starting in
2011. Revenues will then begin to trail off towards the terminal year as CPK puts more focus on franchise revenue and the market for CPK restaurants becomes more saturated.
Kraft Royalty growth should take a hit in the short term as a result of Nestle’s purchase of Kraft. While Nestle goes through the merger with Kraft, there will not be as much of a focus on marketing CPK frozen pizza’s. However, in the long term, Nestle has the intention of continuing to sell CPK’s products; so growth should increase back to a slight discount of historic rates. Management has even hinted at the possibility of an agreement to sell more than just pizza’s with Nestle.
Restaurant Franchise Growth should be higher than company owned restaurant sales going into the future, largely due to management focus on this segment. In 2010, there are plans to open 13 new franchised restaurants. 8 of these restaurants will be within the United States, while the other 5 will be opened internationally. As CPK currently only
7

C a l i f o r n i a P i z z a K i t c h e n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u receives royalties from a little over 50 franchised restaurants, this growth should increase significantly within a few years and then trend downwards towards the terminal year.
Cost of Goods Sold
Costs of Goods Sold was projected by being broken down into its separate components. Each component was then projected as a percent of revenue.
Food, Beverage & Paper supplies should make a small spike upwards next year due to managements issues with buying cheese futures. After this point, this cost should trend towards historical levels before decreasing very slightly towards the terminal year as more revenues begin to come from royalties.
Labor as a percent of revenue should stay similar to 2009’s due to salary increases cancelling out with revenue per store increasing. After this point, labor costs should trend back to historical levels partially as a result of revenue per store increasing, and partially as a result of total revenue trends towards an increased amount of royalties.
Direct Operating & Occupancy Costs should also trend back towards historical levels as the economy recovers, as well as trend slightly downwards due to higher royalty revenues.
General & Administrative Expenses
General & Administrative Expenses have stayed relatively consistent over time, and thus their percent of revenue over the DCF was projected as an average of their historical percent of revenues.
Pre-Opening Costs
Pre-Opening Costs were abnormally low over the past few years as a result of reduced store openings. These costs should increase to slightly less than their historic levels as CPK begins to open larger amounts of restaurants again.
Store Closure Costs
Store Closure Costs were historically very low before the recession. These costs were projected at an average of percent of revenues of the years prior to 2007
Depreciation
Depreciation rose in 2009 due to an accounting change that accelerated the depreciation of several of CPK’s assets.
Depreciation was projected to increase slowly over time, as theoretically Depreciation and Capital Expenditures should converge in perpetuity.
Net Working Capital
Current Assets were first adjusted by removing cash and marketable securities. After this point, Adjusted Current
Assets and Liabilities were projected as averages of their historical years percent of revenues. It should be noted that
2007 was treated as an outlier for current liabilities.
8

C a l i f o r n i a P i z z a K i t c h e n
Capital Expenditures u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
While in the short term Capital Expenditures are projected to remain similar to recent levels, in the longer term they should theoretically somewhat converge with depreciation, and so Cap Ex is projected to decrease as a percent of revenues over time.
Cost of Capital and Beta
California Pizza Kitchen has undergone somewhat significant changes in its capital structure over the last 5 years. Up until 2008, it was relatively debt free at which point it took out about 75 million dollars worth of debt. By 2009 that debt had decreased to half of its original amount. At the time of this report, CPK’s debt level is currently at 22.3 million dollars. Management has stated that they plan to pay off the rest of this debt by the 3 rd quarter of 2010. As a result of this, a 5 year regression on CPK’s stock price and the S & P 500 was not appropriate. Instead the Hamada formula was applied to find CPK’s beta. Because CPK should have no debt by the time the first year of relevant cash flows is over, free cash flow was discounted at the cost of equity after 2011. This cost of equity was calculated using
CPK’s unlevered beta from the Hamada formula, as oppose to its levered beta. 2010’s WACC was calculated using
CPK’s levered beta, as well as the assumption that the debt was paid off at the end of 2010 (instead of in the third quarter).
R ECOMMENDATION
California Pizza Kitchen has relatively strong growth potential within the casual dining industry. Its valuable brand name and high quality food services are reflected in the DCF and Comparables analysis. Combined, the
DCF
Comps
Implied price of California Pizza Kitchen is $16.48, which suggests an undervaluation of 9.34%. Given this
Implied Price
Current Price undervaluation, and the fact that our three portfolios are underweight small cap and consumer goods, I’m
Undervalued recommending a BUY for the Tall Firs, Svigals’ & DADCO.
Our portfolios can benefit from an undervalued company with a higher beta as the overall economy begins to improve.
$15.18
$17.73
$16.46
$15.07
9.20%
0.5
0.5
9

C a l i f o r n i a P i z z a K i t c h e n
A PPENDIX 1 – C OMPARABLES A NALYSIS
48.9
66.22
8.7
1.2
0.57
7.65
5.65
164.3
169.2
49.9
0.25
1.92
0.93
9.05
8.79
u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
20.00% 20.00% 30.00% 30.00%
15.07
24
365.975
22.3
14.3
373.975
658.6
80.4
23.65
60
1419
150
82.3
1486.7
1,601.70
993.20
41.88
23
963.24
153.6
23.1
1093.74
1196.3
213.15
20.02
16
320.32
178.2
10
488.52
857.4
103.2
18.25
102
1861.5
727
123.9
2464.6
3246.7
2180.7
24.59
52.00
1130.99
332.28
61.25
1402.02
1790.83
926.44
138.8
139.8
39.2
0.25
0.9
0.91
7.88
7.82
92.6
91.16
21.8
0.25
1.36
0.57
5.28
5.36
378.1
201.83
336 189.95
79.2
0.25
1.69
0.76
6.52
7.34
48.12
1.48
0.77
6.92
7.13
$20.48
$13.61
$19.11
33.33%
33.33%
33.33%
Weight 0.20
0.20
0.30
0.30
Implied Price
Undervalued
17.73
17.68%
10

C a l i f o r n i a P i z z a K i t c h e n
Line Items
Revenues
% Growth Rate
Cost of Products Sold
% of Revenue
Gross Profit
Gross Margin
Operating Items
General and Administrative Expense
% of revenue
Pre-Opening Costs
% of revenue
Store Closure Costs
% of revenue
Depreciation & Amortization
% of revenue
Operating Income
EBIT
Income tax provision
Tax Rate
Net Income
Net Margin
Add Back: Depreciation & Amortization
Cash from Operations
Cash and Marketable Securities
Current Assets
Total Adjusted Current Assets
% of Revenue
Current Liabilities
% of Revenue
Net Working Capital (NWC)
% of revenue
Change in Working Capital
Capital Expenditures
% of Revenue
Free Cash Flow
Present Value of FCF
A PPENDIX 2 – D u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
ISCOUNTED C
h t t p : / / u o i g . u o r e g o n . e d u
ASH F LOWS A NALYSIS
29489
50980
8200
1.48%
37900
29700
5.36%
66000
11.90%
-36300
6.55%
-12842
63712
11.49%
110
2006A
554601
15.64%
444150
80.08%
110451
19.92%
2007A
632884
14.12%
507094
2008A
677074
6.98%
553169
80.12%
125790
19.88%
81.70%
123905
18.30%
2009A 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
664,686 662014.425 705725.18
756465.87 815395.105 875167.295 939777.433
1008609.915 1081515.011 1159685.096 1238121.953 1316174.98
-1.83% -0.40% 6.60% 7.19% 7.79% 7.33% 7.38% 7.32% 7.23% 7.23% 6.76% 6.30%
543504 542189.814 571637.39
607063.86 651704.538 696633.167
745008.56
798819.0527
855748.7523 916731.0686 974711.5073
1035171.62
81.77%
18.23%
81.90%
121182 119824.611 134087.78
18.10%
81.00%
19.00%
80.25%
149402.01 163690.567 178534.128 194768.873
19.75%
79.93%
20.08%
79.60%
20.40%
79.28%
20.73%
79.20%
209790.8623
20.80%
79.13%
225766.2585 242954.0277 263410.4455
20.88%
79.05%
20.95%
78.73%
21.28%
78.65%
281003.358
21.35%
43320
7.81%
6964
1.26%
707
0.13%
29489
5.32%
29,971
30,689
9689
31.57%
21,000
3.79%
50691
8.01%
7167
1.13%
9269
1.46%
37146
5.87%
21,517
21,444
6660
31.06%
14,784
2.34%
52378
7.74%
4478
0.66%
1033
0.15%
40299
5.95%
12,381
11,057
2395
21.66%
8,662
1.28%
52400 52134.0079 55576.254
59572.112 64212.8226 68919.9161 74008.0008
79428.59739
85169.91463 91325.85278 97502.79929
103649.519
7.88% 7.88% 7.88% 7.88% 7.88% 7.88% 7.88% 7.88% 7.88% 7.88% 7.88% 7.88%
1843 4634.10098 5292.9388
5673.494 6523.16084 7001.33836 7048.33075
7060.269406
7029.84757 6958.110578 7428.731717
7897.04987
0.28% 0.70% 0.75% 0.75% 0.80% 0.80% 0.75% 0.70% 0.65% 0.60% 0.60% 0.60%
539 526.87139 561.65907
602.0416 648.941074 696.511423 747.932105
802.7131853
860.7354997 922.9480136
985.37284
1047.49219
0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08% 0.08%
40181 40051.8727 43402.098
46522.651 50962.1941 55573.1232 60615.6444
65559.64448
70298.4757 75379.53126 80477.92693
85551.3736
6.05% 6.05% 6.15% 6.15% 6.25% 6.35% 6.45% 6.50% 6.50% 6.50% 6.50% 6.50%
26,219
2,490
22,478
22,478
29,255
29,255
37,032
37,032
41,343
41,343
46,343
46,343
52,349
52,349
56,940
56,940
62,407
62,407
68,368
68,368
77,016
77,016
82,858
82,858
-2091 7090.21687 9227.9271
11681.007 13041.0701 14618.1668 16512.5683
17960.61604
19685.29004 21565.36274 24293.23291
26136.0873
83.98%
4,581
0.69%
31.54%
15,388
2.32%
31.54%
20,027
2.84%
31.54%
25,351
3.35%
31.54%
28,302
3.47%
31.54%
31,725
3.63%
31.54%
35,836
3.81%
31.54%
38,979
3.86%
31.54%
42,722
3.95%
31.54%
46,802
4.04%
31.54%
52,722
4.26%
31.54%
56,722
4.31%
37146
51880
10800
1.71%
49400
38600
6.10%
101300
16.01%
-62700
9.91%
-26400
83433
13.18%
-5153
40299
61260
14400
2.13%
37500
40181 40051.8727 43402.098
44636
21,400
3.22%
55439 63429
46522.651 50962.1941 55573.1232 60615.6444
71873 79265 87298 96452
65559.64448
104539
70298.4757 75379.53126 80477.92693
113020 122182 133200
85551.3736
142273
23100 32755.95288 32624.2968 34778.378
37278.896
40182.949 43128.5429 46312.5526
49704.64076
53297.42876 57149.67724 61015.07229
64861.5521
3.41% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93% 4.93%
79500 73956.17487 73658.9225 78522.392
84168.047 90724.7978 97375.3404 104564.176
112222.8109
120334.5839 129032.1652 137759.4287
146443.985
11.74% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13% 11.13%
-56400 -41200.222 -41034.6258 -43744.014
-46889.15 -50541.849 -54246.7975 -58251.6239 -62518.17009 -67037.15519
-71882.488 -76744.3564 -81582.4334
8.33% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20% -6.20%
6300 15199.77801 165.596211 -2709.3886 -3145.1361 -3652.6984 -3704.94866 -4004.82639 -4266.546207 -4518.985097
-4845.3328 -4861.86846 -4838.07693
56601
8.36%
-1641
53174.88
8.00%
-798
52961.154 56458.014
8.00%
2313
8.00%
9680
60517.27 57077.6573 61261.7107 65784.4203
8.00%
14501
7.00%
25840
7.00%
29741
7.00%
34672
70602.69406
7.00%
38203
70298.4757 75379.53126 80477.92693
6.50%
47241
6.50%
51648
6.50%
57584
85551.3736
6.50%
61560
2065.34472
7702.693
10285.83 16338.2439 16763.5432
17420.996
17110.59234
18861.51243 18381.96548 18269.65976
17410.4223
11

C a l i f o r n i a P i z z a K i t c h e n
A PPENDIX 3 – D ISCOUNTED C ASH F LOWS A NALYSIS A SSUMPTIONS u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
2011 & Forward WACC
Beta
Market Risk Premium
10 yr Bond
Return on Equity
Cost of Debt
Equity
Debt
Wacc
Terminal Growth
Shares Oustanding
Current Price
Weighted Implied
Sum of FCF
Terminal Value
PV of Terminal Value
Implied Value Per Share
1.2
7%
3.78%
12.18%
3.76%
365974.95
0.00%
12.18%
3%
24285
15.07
16.46
219799.77
839556.1299
149733.233
15.18
A PPENDIX 4 – B ETA S ENSITIVITY A NALYSIS
Standard Error
2
1.5
1
0.5
0
-0.5
-1
-1.5
-2
2010 WACC
Beta
Market Risk Premium
10 yr Bond
Cost of Equity
Cost of Debt
Equity
Debt
WACC
Beta
1.884
1.713
1.542
1.371
1.2
1.029
0.858
0.687
0.516
Implied Price
8.78
9.88
11.25
12.96
15.22
18.13
22.21
28.17
36.57
1.25
7.00%
3.78%
12.53%
4.18%
365974.95
22,300
11.97%
12

C a l i f o r n i a P i z z a K i t c h e n
A PPENDIX 5 – R EVENUE & COST OF GOODS S OLD PROJECTIONS
Company
CAKE
PFCB
RRGB
EAT u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p
h t t p : / / u o i g . u o r e g o n . e d u
Revenue Projections
Sales
% growth
Kraft Franchise Revenue
% growth
Other Franchise Revenue
% growth
Total Revenue
% growth
Cost of Goods Sold Projections
Costs of Sales
% of revenue
Food, Beverage & Paper Supplies
% of revenue
Labor
% of revenue
Direct Operating & Occupancy
% of revenue
2006A
444150
80.08%
135848
24.49%
199744
36.02%
108558
19.57%
2007A 2008A 2009A 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
2006A
547968
15.43%
3691
82.00%
2942
3.85%
554601
15.64%
624324 665616 652,185 648924.075 691104.14 739481.43 794942.537 850588.514 910129.71 973838.7902 1042007.506 1114948.031 1187419.653 1258664.83
13.93% 6.61% -2.02% -0.50% 6.50% 7.00% 7.50% 7.00% 7.00% 7.00% 7.00% 7.00% 6.50% 6.00%
4710 6580 7739 8280.73 9522.8395 11427.407 14284.2593 17855.3241 22319.1551 26782.98609 30800.43401 35420.49911 40733.57398 46843.6101
27.61% 39.70%
3850 4878
30.86% 26.70%
17.61%
4762
-2.38%
7.00%
4809.62 5098.1972 5557.0349 6168.30879 6723.45658 7328.56768 7988.138767 8707.071256 9316.566244 9968.725881 10666.5367
1%
15.00%
6%
20.00%
9%
25.00%
11%
25.00%
9%
25.00%
9%
20.00%
9%
15.00%
9%
15.00%
7%
15.00%
7%
15.00%
7%
2007A
632884 677074 664686 662014.425 705725.18 756465.87 815395.105 875167.295 939777.433 1008609.915 1081515.011 1159685.096 1238121.953 1316174.98
14.12% 6.98% -1.83% -0.40% 6.60% 7.19% 7.79% 7.33% 7.38% 7.32% 7.23% 7.23% 6.76% 6.30%
2008A 2009A 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E
507094 553169 543504 542189.814 571637.39 607063.86 651704.538 696633.167 745008.56 798819.0527 855748.7523 916731.0686 974711.5073 1035171.62
80.12% 81.70% 81.77% 81.90% 81.00% 80.25% 79.93% 79.60% 79.28% 79.20% 79.13% 79.05% 78.73% 78.65%
153954 165526 154181 156897.419 169374.04 183442.97 195694.825 207852.233 220847.697
237023.33 254156.0275 272525.9976 287863.354 306010.683
24.33% 24.45% 23.20% 23.70% 24.00% 24.25% 24.00% 23.75% 23.50% 23.50% 23.50% 23.50% 23.25% 23.25%
228664 247276 247350 246269.366 261118.32 276110.04 297211.516 318560.895 341609.097 366125.3992 392049.1914 419806.0049 447581.0859 475139.167
36.13% 36.52% 37.21% 37.20% 37.00% 36.50% 36.45% 36.40% 36.35% 36.30% 36.25% 36.20% 36.15% 36.10%
124476 140367 141973 139023.029 141145.04 147510.85 158798.197 170220.039 182551.766 195670.3235 209543.5333 224399.0661 239267.0674 254021.771
19.67% 20.73% 21.36% 21.00% 20.00% 19.50% 19.48% 19.45% 19.43% 19.40% 19.38% 19.35% 19.33% 19.30%
A PPENDIX 6 – H AMADA B ETA
Beta D/E ratio S/E
1.92 0.09991341
0.9 0.15572723
1.36 0.53947687
1.69 0.36617306
0.301
0.293
0.392
0.342
Weight
20%
20%
30%
30%
Mean 1.479 0.32282311
0.339
Pure Business Beta
Sample D/E
Unlevered Business Beta
CPKI D/E
CPKI BETA
A PPENDIX 6 – S OURCES
IBIS World
Finace.Yahoo.com
FactSet
Etrade.com
CPK 10-k, 10-Q & Conference Calls
1.479
0.322823
1.203217
0.058642
1.253314
13