UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________

FORM 10-Q

_________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~July 3, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 001-04321

Krispy Kreme, Inc.

(Exact name of registrant as specified in its charter)

_________________________


Delaware			37-1701311
(State or other jurisdiction of incorporation)			(IRS Employer Identification No.)

2~~116~~2116 Hawkins Street, Charlotte, North Carolina 28203

(Address of principal executive offices)

(800) 457-4779

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

_________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock, $0.01 par value per share

DNUT

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

~~APPLICABLE ONLY TO CORPORATE ISSUERS:~~

The registrant had outstanding ~~167,250,735~~167,428,302 shares of common stock as of ~~November 2, 2021.~~August 10, 2022.

Table of ~~Content~~Contents

Table of Contents


PART I. FINANCIAL INFORMATION			Page
	Item 1.	Financial Statements (Unaudited)	1
		Condensed Consolidated Statements of Operations (Unaudited)	1
		Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited)	2
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)	4
		Condensed Consolidated Statements of Cash Flows (Unaudited)	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4238
	Item 4.	Controls and Procedures	4238
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	4440
	Item 1A.	Risk Factors	4440
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4441
	Item 3.	Defaults upon Senior Securities	4441
	Item 4.	Mine Safety Disclosures	4441
	Item 5.	Other Information	4441
	Item 6.	Exhibits	4541

Signatures			4642

Table of ~~Content~~Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Krispy Kreme, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share ~~amounts and number of shares)~~amounts)


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
		October 3, 2021 (13 weeks)		September 27, 2020 (13 weeks)		October 3, 2021 (39 weeks)		September 27, 2020 (39 weeks)			July 3, 2022 (13 weeks)		July 4, 2021 (13 weeks)		July 3, 2022 (26 weeks)		July 4, 2021 (26 weeks)
Net revenues	Net revenues									Net revenues
Product sales	Product sales	$	334,324	$	281,317	$	989,132	$	769,461	Product sales	$	367,777	$	341,223	$	731,829	$	654,808
Royalties and other revenues	Royalties and other revenues	8,475		8,916		24,662		26,960		Royalties and other revenues	7,468		7,963		15,948		16,187
Total net revenues	Total net revenues	342,799		290,233		1,013,794		796,421		Total net revenues	375,245		349,186		747,777		670,995
Product and distribution costs	Product and distribution costs	92,152		85,303		257,166		222,409		Product and distribution costs	100,558		85,017		196,669		165,014
Operating expenses	Operating expenses	157,315		121,792		462,733		341,792		Operating expenses	173,942		157,877		342,668		305,418
Selling, general and administrative expense	Selling, general and administrative expense	52,950		46,521		163,417		129,090		Selling, general and administrative expense	51,754		60,930		105,465		110,467
Marketing expenses	Marketing expenses	12,062		8,015		31,621		24,704		Marketing expenses	11,215		10,052		21,374		19,559
Pre-opening costs	Pre-opening costs	1,192		3,368		4,335		9,668		Pre-opening costs	985		1,752		2,314		3,143
Other (income)/expenses, net		(359)		4,667		(4,365)		7,177
Other expenses/(income), net										Other expenses/(income), net	1,469		(761)		(1,164)		(4,006)
Depreciation and amortization expense	Depreciation and amortization expense	25,663		20,435		74,258		57,619		Depreciation and amortization expense	27,814		25,194		55,655		48,595
Operating income	Operating income	1,824		132		24,629		3,962		Operating income	7,508		9,125		24,796		22,805
Interest expense, net	Interest expense, net	7,186		7,908		25,228		26,263		Interest expense, net	7,586		9,793		14,937		18,042
Interest expense — related party	Interest expense — related party	—		5,566		10,387		16,698		Interest expense — related party	—		4,821		—		10,387
Other non-operating expense/(income), net	Other non-operating expense/(income), net	732		(357)		(126)		(469)		Other non-operating expense/(income), net	756		(416)		435		(858)
Loss before income taxes		(6,094)		(12,985)		(10,860)		(38,530)
Income tax (benefit)/expense		(2,342)		499		8,266		(2,413)
Net loss		(3,752)		(13,484)		(19,126)		(36,117)
(Loss)/income before income taxes										(Loss)/income before income taxes	(834)		(5,073)		9,424		(4,766)
Income tax expense										Income tax expense	1,574		9,923		5,374		10,608
Net (loss)/income										Net (loss)/income	(2,408)		(14,996)		4,050		(15,374)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	1,907		1,368		6,736		2,880		Net income attributable to noncontrolling interest	1,441		2,146		3,897		4,829
Net loss attributable to Krispy Kreme, Inc.		$	(5,659)	$	(14,852)	$	(25,862)	$	(38,997)
Net (loss)/income attributable to Krispy Kreme, Inc.										Net (loss)/income attributable to Krispy Kreme, Inc.	$	(3,849)	$	(17,142)	$	153	$	(20,203)
Net loss per share:	Net loss per share:									Net loss per share:
Common stock — Basic	Common stock — Basic	$	(0.04)	$	(0.12)	$	(0.20)	$	(0.31)	Common stock — Basic	$	(0.02)	$	(0.13)	$	0.00	$	(0.16)
Common stock — Diluted	Common stock — Diluted	$	(0.04)	$	(0.12)	$	(0.20)	$	(0.31)	Common stock — Diluted	$	(0.02)	$	(0.13)	$	0.00	$	(0.16)
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	166,033,539		124,987,370		141,123,999		124,987,370		Basic	167,367		132,351		167,314		128,669
Diluted	Diluted	166,033,539		124,987,370		141,123,999		124,987,370		Diluted	167,367		132,351		167,314		128,669

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Krispy Kreme, Inc.

Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited)

(in thousands)


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
		October 3, 2021 (13 weeks)		September 27, 2020 (13 weeks)		October 3, 2021 (39 weeks)		September 27, 2020 (39 weeks)			July 3, 2022 (13 weeks)		July 4, 2021 (13 weeks)		July 3, 2022 (26 weeks)		July 4, 2021 (26 weeks)
Net loss		$	(3,752)	$	(13,484)	$	(19,126)	$	(36,117)
Net (loss)/income										Net (loss)/income	$	(2,408)	$	(14,996)	$	4,050	$	(15,374)
Other comprehensive (loss)/income, net of income taxes:	Other comprehensive (loss)/income, net of income taxes:									Other comprehensive (loss)/income, net of income taxes:
Foreign currency translation adjustment	Foreign currency translation adjustment	(9,823)		10,839		(13,544)		(18,168)		Foreign currency translation adjustment	(37,513)		(1,457)		(36,179)		(3,721)
Unrealized income/(loss) on cash flow hedges, net of income taxes(1)		1,398		1,066		7,631		(16,262)
Unrealized income on cash flow hedges, net of income taxes(1)										Unrealized income on cash flow hedges, net of income taxes(1)	2,872		1,131		17,106		6,233

Total other comprehensive (loss)/income, net of income taxes	Total other comprehensive (loss)/income, net of income taxes	(8,425)		11,905		(5,913)		(34,430)		Total other comprehensive (loss)/income, net of income taxes	(34,641)		(326)		(19,073)		2,512
Comprehensive loss	Comprehensive loss	(12,177)		(1,579)		(25,039)		(70,547)		Comprehensive loss	(37,049)		(15,322)		(15,023)		(12,862)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	1,907		1,368		6,736		2,880		Net income attributable to noncontrolling interest	1,441		2,146		3,897		4,829
Foreign currency translation adjustment attributable to noncontrolling interest	Foreign currency translation adjustment attributable to noncontrolling interest	(414)		—		(414)		—		Foreign currency translation adjustment attributable to noncontrolling interest	(903)		—		(903)		—
Total comprehensive income attributable to noncontrolling interest	Total comprehensive income attributable to noncontrolling interest	1,493		1,368		6,322		2,880		Total comprehensive income attributable to noncontrolling interest	538		2,146		2,994		4,829
Comprehensive loss attributable to Krispy Kreme, Inc.	Comprehensive loss attributable to Krispy Kreme, Inc.	$	(13,670)	$	(2,947)	$	(31,361)	$	(73,427)	Comprehensive loss attributable to Krispy Kreme, Inc.	$	(37,587)	$	(17,468)	$	(18,017)	$	(17,691)

1.(1)Net of income tax ~~(expense)/benefit~~expense of ~~($0.5 million)~~$1.0 million and ~~($2.6 million) for the quarter and three quarters ended October 3, 2021, respectively, and ($0.4 million) and $5.4~~$5.7 million for the quarter and ~~three~~two quarters ended ~~September 27, 2020, respectively.~~July 3, 2022, respectively, and $0.4 million and $2.1 million for the quarter and two quarters ended July 4, 2021.

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Krispy Kreme, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share ~~data)~~amounts)


		As of					As of
		(Unaudited) October 3, 2021		January 3, 2021			(Unaudited) July 3, 2022		January 2, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	44,895	$	37,460	Cash and cash equivalents	$	25,796	$	38,562
Marketable securities		614		1,048
Restricted cash	Restricted cash	193		23		Restricted cash	411		630
Accounts receivable, net	Accounts receivable, net	60,069		74,351		Accounts receivable, net	45,027		47,491
Inventories	Inventories	36,141		38,519		Inventories	47,420		34,851
Taxes receivable						Taxes receivable	14,614		14,662
Prepaid expense and other current assets	Prepaid expense and other current assets	22,068		12,692		Prepaid expense and other current assets	29,264		20,701
Total current assets	Total current assets	163,980		164,093		Total current assets	162,532		156,897
Property and equipment, net	Property and equipment, net	423,547		395,255		Property and equipment, net	443,898		438,918
Goodwill	Goodwill	1,089,914		1,086,546		Goodwill	1,083,199		1,105,322
Other intangible assets, net	Other intangible assets, net	993,440		998,014		Other intangible assets, net	969,319		992,520
Operating lease right of use asset, net	Operating lease right of use asset, net	414,612		399,688		Operating lease right of use asset, net	419,211		435,168
Other assets	Other assets	17,165		17,399		Other assets	21,761		16,429
Total assets	Total assets	$	3,102,658	$	3,060,995	Total assets	$	3,099,920	$	3,145,254
LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long-term debt	Current portion of long-term debt	$	38,608	$	41,245	Current portion of long-term debt	$	39,844	$	36,583
Current operating lease liabilities	Current operating lease liabilities	42,637		45,675		Current operating lease liabilities	45,936		50,359
Accounts payable	Accounts payable	170,780		148,645		Accounts payable	187,516		182,104
Accrued liabilities	Accrued liabilities	132,638		124,951		Accrued liabilities	108,497		140,750
Structured payables	Structured payables	108,969		137,319		Structured payables	135,542		116,361
Total current liabilities	Total current liabilities	493,632		497,835		Total current liabilities	517,335		526,157
Long-term debt, less current portion	Long-term debt, less current portion	682,676		785,810		Long-term debt, less current portion	686,013		680,307
Related party notes payable		—		344,581

Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	397,640		376,099		Noncurrent operating lease liabilities	407,141		415,208
Deferred income taxes, net	Deferred income taxes, net	155,982		144,866		Deferred income taxes, net	142,361		145,418
Other long-term obligations and deferred credits	Other long-term obligations and deferred credits	53,008		63,445		Other long-term obligations and deferred credits	38,088		42,509
Total liabilities	Total liabilities	1,782,938		2,212,636		Total liabilities	1,790,938		1,809,599
Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies	0		0
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, $0.01 par value; 300,000,000 and 174,500,000 shares authorized as of October 3, 2021 and January 3, 2021, respectively; 167,112,953 and 124,987,370 shares issued and outstanding as of October 3, 2021 and January 3, 2021, respectively		1,671		1,250
Common stock, $0.01 par value; 300,000 shares authorized as of both July 3, 2022 and January 2, 2022; 167,428 and 167,251 shares issued and outstanding as of July 3, 2022 and January 2, 2022, respectively						Common stock, $0.01 par value; 300,000 shares authorized as of both July 3, 2022 and January 2, 2022; 167,428 and 167,251 shares issued and outstanding as of July 3, 2022 and January 2, 2022, respectively	1,674		1,673
Additional paid-in capital	Additional paid-in capital	1,410,724		845,499		Additional paid-in capital	1,420,410		1,415,185

Shareholder note receivable	Shareholder note receivable	(4,216)		(18,660)		Shareholder note receivable	(4,573)		(4,382)
Accumulated other comprehensive loss, net of income tax	Accumulated other comprehensive loss, net of income tax	(6,707)		(1,208)		Accumulated other comprehensive loss, net of income tax	(20,647)		(2,478)
Retained deficit	Retained deficit	(173,911)		(142,197)		Retained deficit	(189,970)		(178,409)
Total shareholders’ equity attributable to Krispy Kreme, Inc.	Total shareholders’ equity attributable to Krispy Kreme, Inc.	1,227,561		684,684		Total shareholders’ equity attributable to Krispy Kreme, Inc.	1,206,894		1,231,589
Noncontrolling interest	Noncontrolling interest	92,159		163,675		Noncontrolling interest	102,088		104,066
Total shareholders’ equity	Total shareholders’ equity	1,319,720		848,359		Total shareholders’ equity	1,308,982		1,335,655
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	3,102,658	$	3,060,995	Total liabilities and shareholders’ equity	$	3,099,920	$	3,145,254

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Krispy Kreme, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(in thousands, except per share ~~data)~~amounts)


		Common Stock			Additional Paid-in Capital				Subscription Receivable			Shareholder Note Receivable		Accumulated Other Comprehensive (Loss)/Income						Retained (Deficit) Earnings			Noncontrolling Interest				Total					Common Stock						Additional Paid-in Capital				Subscription Receivable			Shareholder Note Receivable				Accumulated Other Comprehensive Income/(Loss)										Retained (Deficit)/ Earnings			Noncontrolling Interest			Total
		Shares Outstanding	Amount								Foreign Currency Translation Adjustment			Unrealized Loss on Cash Flow Hedges		Unrealized Loss on Employee Benefit Plans						Shares Outstanding								Amount										Foreign Currency Translation Adjustment							Unrealized (Loss)/Income on Cash Flow Hedges				Unrealized Loss on Employee Benefit Plans
Balance at January 3, 2021		124,987,370	$	1,250			$	845,499				$	—	$	(18,660)	$	23,508	$	(24,610)	$	(106)				$	(142,197)			$	163,675			$	848,359
Net (loss)/income for the quarter ended April 4, 2021		—	—		—				—			—		—		—		—		(3,061)			2,683				(378)
Other comprehensive income/(loss) for the quarter ended April 4, 2021 before reclassifications		—	—		—				—			—		(2,264)		2,572		—		—			—				308
Balance at January 2, 2022																													Balance at January 2, 2022		167,251				$	1,673	$		1,415,185			$	—		$	(4,382)			$	8,967			$	(11,001)		$	(444)		$	(178,409)		$	104,066		$	1,335,655
Net income for the quarter ended April 3, 2022																													Net income for the quarter ended April 3, 2022		—				—		—				—			—				—				—			—			4,002			2,456			6,458
Other comprehensive income for the quarter ended April 3, 2022 before reclassifications																													Other comprehensive income for the quarter ended April 3, 2022 before reclassifications		—				—		—				—			—				1,334				11,724			—			—			—			13,058
Reclassification from AOCI	Reclassification from AOCI	—	—		—				—			—		—		2,530		—		—			—				2,530			Reclassification from AOCI		—				—		—				—			—				—				2,510			—			—			—			2,510
Capital contribution by shareholders																													Capital contribution by shareholders		—				—		(3)				—			243				—				—			—			—			—			240
Share-based compensation	Share-based compensation	—	—		2,368				—			—		—		—		—		—			—				2,368			Share-based compensation		—				—		5,041				—			—				—				—			—			—			—			5,041
Purchase of shares by noncontrolling interest	Purchase of shares by noncontrolling interest	—	—		—				—			139		—		—		—		—			12,048				12,187			Purchase of shares by noncontrolling interest		—				—		—				—			(58)				—				—			—			—			110			52
Distribution to shareholders		—	—		—				—			—		—		—		—		—			—				—
Dividends declared on common stock and equivalents ($0.035 per share)																													Dividends declared on common stock and equivalents ($0.035 per share)		—				—		—				—			—				—				—			—			(5,855)			—			(5,855)

Distribution to noncontrolling interest	Distribution to noncontrolling interest	—	—		—				—			363		—		—		—		—			(2,239)				(1,876)			Distribution to noncontrolling interest		—				—		—				—			21				—				—			—			—			(1,383)			(1,362)
Issuance of common stock upon settlement of RSUs, net of shares withheld																													Issuance of common stock upon settlement of RSUs, net of shares withheld		46				—		(390)				—			—				—				—			—			—			—			(390)
Other	Other	—	—		(26)				—			(70)		—		—		—		2			(1)				(95)			Other		—				—		(2)				—			(14)				—				—			—			1			—			(15)
Balance at April 4, 2021		124,987,370	$	1,250	$	847,841			$	—		$	(18,228)	$	21,244	$	(19,508)	$	(106)	$	(145,256)		$	176,166			$	863,403
Net (loss)/income for the quarter ended July 4, 2021		—	—		—				—			—		—		—		—		(17,142)			2,146				(14,996)
Other comprehensive loss for the quarter ended July 4, 2021 before reclassifications		—	—		—				—			—		(1,457)		(1,430)		—		—			—				(2,887)
Balance at April 3, 2022																													Balance at April 3, 2022		167,297				$	1,673	$	1,419,831			$	—		$	(4,190)			$	10,301			$	3,233		$	(444)		$	(180,261)		$	105,249		$	1,355,392
Net (loss)/income for the quarter ended July 3, 2022																													Net (loss)/income for the quarter ended July 3, 2022		—				—		—				—			—				—				—			—			(3,849)			1,441			(2,408)
Other comprehensive (loss)/income for the quarter ended July 3, 2022 before reclassifications																													Other comprehensive (loss)/income for the quarter ended July 3, 2022 before reclassifications		—				—		—				—			—				(36,610)				1,011			—			—			(903)			(36,502)
Reclassification from AOCI	Reclassification from AOCI	—	—		—				—			—		—		2,561		—		—			—				2,561			Reclassification from AOCI		—				—		—				—			—				—				1,861			—			—			—			1,861
Capital contribution from shareholders	Capital contribution from shareholders	6,997,450	70		120,862				—			—		—		—		—		—			—				120,932			Capital contribution from shareholders		—				—		(31)				—			(236)				—				—			—			—			—			(267)
Share-based compensation	Share-based compensation	—	—		8,290				—			—		—		—		—		—			—				8,290			Share-based compensation		—				—		5,452				—			—				—				—			—			—			—			5,452
Purchase of shares by noncontrolling interest	Purchase of shares by noncontrolling interest	—	—		—				—			14,421		—		—		—		—			26,648				41,069			Purchase of shares by noncontrolling interest		—				—		—				—			(133)				—				—			—			—			491			358
Distribution to shareholders		—	—		(42,334)				—			—		—		—		—		—			—				(42,334)
Distribution to noncontrolling interest		—	—		—				—			—		—		—		—		—			(4,142)				(4,142)
Conversion of noncontrolling interest to additional paid-in capital in connection with the Merger		9,370,881	93		107,258				—			—		—		—		—		—			(107,351)				—
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs		29,411,765	294		459,391				(471,250)			—		—		—		—		—			—				(11,565)
Issuance of common stock upon settlement of RSUs, net of shares withheld		1,267,491	13		(15,507)				—			—		—		—		—		—			—				(15,494)
Repurchase of common stock		(8,439,441)	(84)		(122,922)				—			—		—		—		—		—			—				(123,006)
Other		—	—		(4)				—			(20)		—		—		—		(1)			—				(25)
Balance at July 4, 2021		163,595,516	$	1,636	$	1,362,875			$	(471,250)		$	(3,827)	$	19,787	$	(18,377)	$	(106)	$	(162,399)		$	93,467			$	821,806
Net (loss)/income for the quarter ended October 3, 2021		—	—		—				—			—		—		—		—		(5,659)			1,907				(3,752)
Other comprehensive loss for the quarter ended October 3, 2021 before reclassifications		—	—		—				—			—		(9,409)		(1,215)		—		—			(414)				(11,038)
Reclassification from AOCI		—	—		—				—			—		—		2,613		—		—			—				2,613
Capital contribution from shareholders		—	—		(17)				—			(383)		—		—		—		—			—				(400)
Share-based compensation		—	—		6,315				—			—		—		—		—		—			—				6,315
Dividends declared on common stock and equivalents ($0.035 per share)(1)	Dividends declared on common stock and equivalents ($0.035 per share)(1)	—	—		—				—			—		—		—		—		(5,853)			—				(5,853)			Dividends declared on common stock and equivalents ($0.035 per share)(1)		—				—		—				—			—				—				—			—			(5,860)			—			(5,860)
Purchase of shares by noncontrolling interest		—	—		—				—			—		—		—		—		—			81				81

Distribution to noncontrolling interest	Distribution to noncontrolling interest	—	—		(13,413)				—			—		—		—		—		—			(2,882)				(16,295)			Distribution to noncontrolling interest		—				—		(3,944)				—			—				—				—			—			—			(4,190)			(8,134)
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs		3,500,000	35		55,151				471,250			—		—		—		—		—			—				526,436

Issuance of common stock upon settlement of RSUs, net of shares withheld	Issuance of common stock upon settlement of RSUs, net of shares withheld	17,437	—		(188)				—			—		—		—		—		—			—				(188)			Issuance of common stock upon settlement of RSUs, net of shares withheld		132				1		(898)				—			—				—				—			—			—			—			(897)

Other	Other	—	—		1				—			(6)		—		—		—		—			—				(5)			Other		—				—		—				—			(14)				—				1			—			—			—			(13)
Balance at October 3, 2021		167,112,953	$	1,671	$	1,410,724			$	—		$	(4,216)	$	10,378	$	(16,979)	$	(106)	$	(173,911)		$	92,159			$	1,319,720
Balance at July 3, 2022																													Balance at July 3, 2022		167,428				$	1,674	$	1,420,410			$	—		$	(4,573)			$	(26,309)			$	6,106		$	(444)		$	(189,970)		$	102,088		$	1,308,982

1. (1)Includes a $0.035 cash dividend per common share declared in the ~~third~~second quarter of fiscal ~~2021~~2022 and expected to be paid in the ~~fourth~~third quarter of fiscal ~~2021.~~2022.

See accompanying notes to Condensed Consolidated Financial ~~Statements~~Statements.

Table of Contents

Krispy Kreme, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

(in ~~thousands, except per share data)~~thousands)


		Common Stock			Additional Paid-in Capital				Subscription Receivable			Shareholder Note Receivable		Accumulated Other Comprehensive (Loss)/Income						Retained (Deficit) Earnings			Noncontrolling Interest				Total					Common Stock						Additional Paid-in Capital				Subscription Receivable			Shareholder Note Receivable				Accumulated Other Comprehensive Income/(Loss)										Retained (Deficit)/ Earnings			Noncontrolling Interest			Total
		Shares Outstanding	Amount								Foreign Currency Translation Adjustment			Unrealized Loss on Cash Flow Hedges		Unrealized Loss on Employee Benefit Plans						Shares Outstanding								Amount										Foreign Currency Translation Adjustment							Unrealized Loss on Cash Flow Hedges				Unrealized Loss on Employee Benefit Plans
Balance at December 29, 2019		124,987,370	$	1,250			$	834,233				$	—	$	(17,232)	$	4,629	$	(10,180)	$	—				$	(77,880)			$	148,597			$	883,417
Net (loss)/income for the quarter ended March 29, 2020		—	—		—				—			—		—		—		—		(11,515)			567				(10,948)
Other comprehensive loss for the quarter ended March 29, 2020 before reclassifications		—	—		—				—			—		(46,423)		(16,130)		—		—			—				(62,553)
Balance at January 3, 2021																													Balance at January 3, 2021		124,987				$	1,250	$		845,499			$	—		$	(18,660)			$	23,508			$	(24,610)		$	(106)		$	(142,197)		$	163,675		$	848,359
Net (loss)/income for the quarter ended April 4, 2021																													Net (loss)/income for the quarter ended April 4, 2021		—				—		—				—			—				—				—			—			(3,061)			2,683			(378)
Other comprehensive (loss)/income for the quarter ended April 4, 2021 before reclassifications																													Other comprehensive (loss)/income for the quarter ended April 4, 2021 before reclassifications		—				—		—				—			—				(2,264)				2,572			—			—			—			308
Reclassification from AOCI	Reclassification from AOCI	—	—		—				—			—		—		695		—		—			—				695			Reclassification from AOCI		—				—		—				—			—								2,530			—			—			—			2,530
Share-based compensation																													Share-based compensation		—				—		2,368				—			—								—			—			—			—			2,368
Purchase of shares by noncontrolling interest																													Purchase of shares by noncontrolling interest		—				—		—				—			139								—			—			—			12,048			12,187

Distribution to noncontrolling interest																													Distribution to noncontrolling interest		—				—		—				—			363								—			—			—			(2,239)			(1,876)
Other																													Other		—				—		(26)				—			(70)								—			—			2			(1)			(95)
Balance at April 4, 2021																													Balance at April 4, 2021		124,987				$	1,250	$	847,841			$	—		$	(18,228)			$	21,244			$	(19,508)		$	(106)		$	(145,256)		$	176,166		$	863,403
Net (loss)/income for the quarter ended July 4, 2021																													Net (loss)/income for the quarter ended July 4, 2021		—				—		—				—			—				—				—			—			(17,142)			2,146			(14,996)
Other comprehensive loss for the quarter ended July 4, 2021 before reclassifications																													Other comprehensive loss for the quarter ended July 4, 2021 before reclassifications		—				—		—				—			—				(1,457)				(1,430)			—			—			—			(2,887)
Reclassification from AOCI																													Reclassification from AOCI		—				—		—				—			—				—				2,561			—			—			—			2,561
Capital contribution from shareholders																													Capital contribution from shareholders		6,997				70		120,862				—			—				—				—			—			—			—			120,932
Share-based compensation	Share-based compensation	—	—		3,167				—			—		—		—		—		—			—				3,167			Share-based compensation		—				—		8,290				—			—				—				—			—			—			—			8,290
Purchase of shares by noncontrolling interest	Purchase of shares by noncontrolling interest	—	—		—				—			—		—		—		—		—			17,562				17,562			Purchase of shares by noncontrolling interest		—				—		—				—			14,421				—				—			—			—			26,648			41,069
Distribution to shareholders	Distribution to shareholders	—	—		(15)				—			—		—		—		—		—			—				(15)			Distribution to shareholders		—				—		(42,334)				—			—				—				—			—			—			—			(42,334)
Distribution to noncontrolling interest	Distribution to noncontrolling interest	—	—		—				—			—		—		—		—		—			(2,506)				(2,506)			Distribution to noncontrolling interest		—				—		—				—			—				—				—			—			—			(4,142)			(4,142)
Conversion of noncontrolling interest to additional paid-in capital in connection with the Merger																													Conversion of noncontrolling interest to additional paid-in capital in connection with the Merger		9,371				93		107,258				—			—				—				—			—			—			(107,351)			—
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs																													Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs		29,412				294		459,391				(471,250)			—				—				—			—			—			—			(11,565)
Issuance of common stock upon settlement of RSUs, net of shares withheld																													Issuance of common stock upon settlement of RSUs, net of shares withheld		1,267				13		(15,507)				—			—				—				—			—			—			—			(15,494)
Repurchase of common stock																													Repurchase of common stock		(8,439)				(84)		(122,922)				—			—				—				—			—			—			—			(123,006)
Other	Other	—	—		—				—			(76)		—		—		—		—			(1)				(77)			Other		—				—		(4)				—			(20)				—				—			—			(1)			—			(25)
Balance at March 29, 2020		124,987,370	$	1,250	$	837,385			$	—		$	(17,308)	$	(41,794)	$	(25,615)	$	—	$	(89,395)		$	164,219			$	828,742
Net (loss)/income for the quarter ended June 28, 2020		—	—		—				—			—		—		—		—		(12,630)			945				(11,685)
Other comprehensive income/(loss) for the quarter ended June 28, 2020 before reclassifications		—	—		—				—			—		17,416		(3,855)		—		—			—				13,561
Reclassification from AOCI		—	—		—				—			—		—		1,962		—		—			—				1,962
Share-based compensation		—	—		2,974				—			—		—		—		—		—			—				2,974
Purchase of shares by noncontrolling interest		—	—		—				—			—		—		—		—		—			30				30
Distribution to shareholders		—	—		—				—			—		—		—		—		(4)			—				(4)
Distribution to noncontrolling interest		—	—		—				—			178		—		—		—		—			(3,284)				(3,106)
Other		—	—		—				—			(18)		—		—		—		1			1				(16)
Balance at June 28, 2020		124,987,370	$	1,250	$	840,359			$	—		$	(17,148)	$	(24,378)	$	(27,508)	$	—	$	(102,028)		$	161,911			$	832,458
Net (loss)/income for the quarter ended September 27, 2020		—	—		—				—			—		—		—		—		(14,852)			1,368				(13,484)
Other comprehensive income/(loss) for the quarter ended September 27, 2020 before reclassifications		—	—		—				—			—		10,839		(1,402)		—		—			—				9,437
Reclassification from AOCI		—	—		—				—			—		—		2,468		—		—			—				2,468
Share-based compensation		—	—		3,095				—			—		—		—		—		—			—				3,095
Distribution to noncontrolling interest		—	—		—				—			—		—		—		—		—			(941)				(941)
Other		—	—		(5)				—			(77)		—		—		—		(12)			(1)				(95)
Balance at September 27, 2020		124,987,370	$	1,250	$	843,449			$	—		$	(17,225)	$	(13,539)	$	(26,442)	$	—	$	(116,892)		$	162,337			$	832,938
Balance at July 4, 2021																													Balance at July 4, 2021		163,596				$	1,636	$	1,362,875			$	(471,250)		$	(3,827)			$	19,787			$	(18,377)		$	(106)		$	(162,399)		$	93,467		$	821,806

See accompanying notes to Condensed Consolidated Financial ~~Statements~~Statements.

Table of Contents

Krispy Kreme, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


		Three Quarters Ended					Two Quarters Ended
		October 3, 2021 (39 weeks)		September 27, 2020 (39 weeks)			July 3, 2022 (26 weeks)		July 4, 2021 (26 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(19,126)	$	(36,117)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income/(loss)						Net income/(loss)	$	4,050	$	(15,374)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:						Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization expense	Depreciation and amortization expense	74,258		57,619		Depreciation and amortization expense	55,655		48,595
Deferred income taxes	Deferred income taxes	9,168		(4,623)		Deferred income taxes	(6,866)		7,995
Loss on extinguishment of debt	Loss on extinguishment of debt	1,700		—		Loss on extinguishment of debt	—		1,700
Impairment and lease termination charges	Impairment and lease termination charges	854		3,287		Impairment and lease termination charges	1,991		1,126
Loss on disposal of property and equipment		157		773
(Gain)/loss on disposal of property and equipment						(Gain)/loss on disposal of property and equipment	(499)		148
Gain on sale-leaseback						Gain on sale-leaseback	(2,374)		—
Share-based compensation	Share-based compensation	16,973		9,236		Share-based compensation	10,493		10,658
Change in accounts and notes receivable allowances	Change in accounts and notes receivable allowances	133		700		Change in accounts and notes receivable allowances	193		110
Inventory write-off	Inventory write-off	2,983		34		Inventory write-off	251		776
Other	Other	(315)		276		Other	(733)		(425)
Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments	Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments	12,003		(433)		Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments	(8,238)		1,536
Net cash provided by operating activities	Net cash provided by operating activities	98,788		30,752		Net cash provided by operating activities	53,923		56,845
CASH FLOWS USED FOR INVESTING ACTIVITIES:	CASH FLOWS USED FOR INVESTING ACTIVITIES:					CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment	Purchase of property and equipment	(83,485)		(69,437)		Purchase of property and equipment	(51,460)		(52,842)
Proceeds from disposals of assets	Proceeds from disposals of assets	202		2,793		Proceeds from disposals of assets	872		147
Proceeds from sale-leaseback						Proceeds from sale-leaseback	3,000		—
Acquisition of shops and franchise rights from franchisees, net of cash acquired	Acquisition of shops and franchise rights from franchisees, net of cash acquired	(33,888)		(59,658)		Acquisition of shops and franchise rights from franchisees, net of cash acquired	—		(33,888)
Principal payments received from loans to franchisees	Principal payments received from loans to franchisees	67		519		Principal payments received from loans to franchisees	29		45
Purchases of held-to-maturity debt securities		—		(56)
Disbursement for loan receivable						Disbursement for loan receivable	(720)		—

Maturities of held-to-maturity debt securities	Maturities of held-to-maturity debt securities	388		517		Maturities of held-to-maturity debt securities	—		277
Net cash used for investing activities	Net cash used for investing activities	(116,716)		(125,322)		Net cash used for investing activities	(48,279)		(86,261)
CASH FLOWS FROM FINANCING ACTIVITIES:
CASH FLOWS (USED FOR)/FROM FINANCING ACTIVITIES:						CASH FLOWS (USED FOR)/FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt	Proceeds from the issuance of debt	670,000		263,097		Proceeds from the issuance of debt	53,000		540,000
Repayment of long-term debt and lease obligations	Repayment of long-term debt and lease obligations	(1,115,910)		(206,966)		Repayment of long-term debt and lease obligations	(50,179)		(541,353)
Payment of financing costs	Payment of financing costs	(1,700)		—		Payment of financing costs	—		(1,700)
Proceeds from structured payables	Proceeds from structured payables	194,927		211,892		Proceeds from structured payables	153,097		140,598
Payments on structured payables	Payments on structured payables	(223,063)		(155,951)		Payments on structured payables	(133,530)		(138,100)
Payment of contingent consideration related to a business combination	Payment of contingent consideration related to a business combination	—		(506)		Payment of contingent consideration related to a business combination	(900)		—
Capital contribution by shareholders		120,532		—
Proceeds from IPO, net of underwriting discounts (excluding unpaid issuance costs)		527,329		—
Capital contribution by shareholders, net of loans issued						Capital contribution by shareholders, net of loans issued	(27)		120,932
Payments of issuance costs in connection with IPO						Payments of issuance costs in connection with IPO	(12,458)		—
Proceeds from sale of noncontrolling interest in subsidiary	Proceeds from sale of noncontrolling interest in subsidiary	53,337		17,592		Proceeds from sale of noncontrolling interest in subsidiary	410		53,256
Distribution to shareholders	Distribution to shareholders	(42,334)		(19)		Distribution to shareholders	(11,710)		(34,364)
Payments for repurchase and retirement of common stock	Payments for repurchase and retirement of common stock	(138,501)		—		Payments for repurchase and retirement of common stock	(2,363)		(102,698)
Distribution to noncontrolling interest	Distribution to noncontrolling interest	(17,257)		(6,553)		Distribution to noncontrolling interest	(9,496)		(6,018)
Net cash provided by financing activities		27,360		122,586
Net cash (used for)/provided by financing activities						Net cash (used for)/provided by financing activities	(14,156)		30,553
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(1,827)		759		Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4,473)		(1,161)
Net increase in cash, cash equivalents and restricted cash		7,605		28,775
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(12,985)		(24)
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	37,483		35,450		Cash, cash equivalents and restricted cash at beginning of period	39,192		37,483
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	45,088	$	64,225	Cash, cash equivalents and restricted cash at end of period	$	26,207	$	37,459
Supplemental schedule of non-cash investing and financing activities:	Supplemental schedule of non-cash investing and financing activities:					Supplemental schedule of non-cash investing and financing activities:
Accrual for property and equipment		$	3,137	$	11,280
Increase in accrual for property and equipment						Increase in accrual for property and equipment	$	4,499	$	1,381
Stock issuance under shareholder notes	Stock issuance under shareholder notes	446		—		Stock issuance under shareholder notes	324		446
Accrual for distribution to noncontrolling interest		(5,056)		—

Common stock issuance under subscription receivable in connection with initial public offering, net of underwriting discounts and issuance costs						Common stock issuance under subscription receivable in connection with initial public offering, net of underwriting discounts and issuance costs	—		459,685
Accrual for distribution to shareholders	Accrual for distribution to shareholders	(5,853)		—		Accrual for distribution to shareholders	(5,860)		(7,970)
Accrual for repurchase and retirement of common stock	Accrual for repurchase and retirement of common stock	(188)		—		Accrual for repurchase and retirement of common stock	—		(35,803)
Reconciliation of cash, cash equivalents and restricted cash at end of period:	Reconciliation of cash, cash equivalents and restricted cash at end of period:					Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	Cash and cash equivalents	$	44,895	$	64,154	Cash and cash equivalents	$	25,796	$	37,377
Restricted cash	Restricted cash	193		71		Restricted cash	411		82
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	45,088	$	64,225	Total cash, cash equivalents and restricted cash	$	26,207	$	37,459

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

Krispy Kreme, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

(~~Dollars~~dollars in thousands, unless otherwise specified)

Note 1 — Description of Business and Summary of Significant Accounting Policies

Description of Business

Krispy Kreme, Inc. (“KKI”) and its subsidiaries (collectively, the “Company” or “Krispy Kreme”) ~~operates~~operate through ~~its~~their omni-channel business model to provide doughnut experiences and produce doughnuts for Doughnut Shops, Delivered Fresh Daily (“DFD”) outlets, Ecommerce and delivery, and Krispy Kreme branded sweet treats (“Branded Sweet Treat Line”) channels, expanding consumer access to the Krispy Kreme brand.

The Company has 3 reportable operating segments: 1) U.S. and Canada, which includes all Krispy Kreme Company-owned operations in the U.S. and Canada, Insomnia Cookies shops and the Branded Sweet Treat Line; 2) International, which includes all Krispy Kreme Company-owned operations in the ~~United Kingdom,~~U.K., Ireland, Australia, New Zealand and Mexico; and 3) Market Development, which includes worldwide franchise operations, ~~across the globe,~~ as well as Krispy Kreme Company-owned shops in Japan. Unallocated corporate costs are excluded from the Company’s measurement of segment performance.

~~Initial Public Offering~~

The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on June 30, 2021 and the Company’s common stock began trading on the Nasdaq Global Select Market on July 1, 2021. On July 1, 2021, the Company completed its IPO, in which the Company sold 29.4 million shares of common stock at a price to the public of $17.00 per share. The Company received aggregate net proceeds of $458.8 million after deducting underwriting discounts and commissions of $28.7 million and offering expenses of $12.5 million.

~~In connection with the IPO, the Company and its affiliates completed the following transactions:~~

•On June 10, 2021, the Company's wholly owned (excluding certain management equity interests) subsidiary, Krispy Kreme Holdings, Inc. (“KKHI”), entered into a term loan credit agreement, as borrower, which provided for term loans in an initial aggregate principal amount of $500.0 million (the “Term Loan Facility”). On June 17, 2021, KKHI borrowed $500.0 million under the Term Loan Facility, with debt issuance costs of $1.7 million which were included in Interest expense, net on the Condensed Consolidated Statements of Operations during the quarter ended July 4, 2021.The borrowings bore an all-in interest rate of 2.68175%. On June 28, 2021, following the Merger (as defined below), KKI assumed all of the obligations of KKHI as borrower under the Term Loan Facility. On July 7, 2021, the Company repaid in full and terminated the Term Loan Facility with a cash outflow of $500.7 million, which included $0.7 million of accrued interest. The Term Loan Facility would have matured on the earlier of (i) June 10, 2022 and (ii) within four business days following the consummation of the IPO.

•On June 28, 2021, KKHI merged into KKI (the “Merger”). As a result of the Merger, the Company eliminated $107.4 million of noncontrolling interest at KKHI as of the merger date. The management equity interests at KKHI were exchanged for common shares in KKI. Restricted stock units (“RSUs”) and stock options held at KKHI were exchanged for RSUs and stock options held at KKI at a rate of 317.24 KKI shares to 1 KKHI share.

•~~On June 30, 2021, the Company effected a 1,745-for-1 split of each outstanding share of common stock (the “Stock Split”).All share and per share information has been retroactively adjusted to effect the Stock Split for all periods presented.~~

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In connection with the IPO, the Company used the proceeds from the Term Loan Facility for the following: (1) repay the related party notes payable (including accrued interest of $17.8 million) of $355.0 million during the quarter ended July 4, 2021, (2) redeem certain common stock of $102.7 million held by Krispy Kreme, G.P. (“KK GP”) during the quarter ended July 4, 2021 and (3) pay a pro rata dividend to members of its management who, prior to the Merger, held equity interests in KKHI in an aggregate amount of $42.3 million ($34.4 million of which was paid during the quarter ended July 4, 2021 and $7.9 million of which was paid during the quarter ended October 3, 2021). Additionally, at the beginning of the third quarter of fiscal 2021, the Company paid $20.3 million to repurchase approximately 1.3 million shares of common stock from certain of the Company’s executive officers at the price paid by the underwriters and $15.5 million to repurchase approximately 1.0 million shares of common stock from certain of its executive officers for payment of their withholding taxes with respect to the RSUs vesting or for which vesting was accelerated in connection with the offering.

On August 2, 2021, the underwriters exercised their over-allotment option and purchased an additional 3.5 million shares of common stock at the IPO price less the underwriting discounts and commissions. The net proceeds received on August 2, 2021 were $56.1 million after deducting underwriting discounts and commissions of $3.4 million. This brought total net IPO proceeds to $514.9 million.

Basis of Presentation and Consolidation

The Company operates and reports financial information on a 52 or 53-week year with the fiscal year ending on the Sunday closest to December 31. The data periods contained within fiscal years ~~2020~~2021 and ~~2021~~2022 reflect the results of operations for the ~~53-week period ended January 3, 2021 and the~~ 52-week ~~period~~periods ended January 2, 2022 and January 1, 2023, respectively. The quarters ended ~~October~~July 3, ~~2021~~2022 and ~~September 27, 2020~~July 4, 2021 were both 13-week periods.

The unaudited Condensed Consolidated Financial Statements include the accounts of KKI and subsidiaries and have been prepared in accordance with generally accepted accounting principles ~~generally accepted~~ in the United States of America (“~~U.S.~~ GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these interim financial statements do not include all information and footnotes required under ~~U.S.~~ GAAP for complete financial statements. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of results of operations, balance sheet, cash flows, and shareholders’ equity for the periods presented. All significant intercompany balances and transactions among KKI and subsidiaries have been eliminated in consolidation. Investments in entities over which the Company has the ability to exercise significant influence but which it does not control and whose financial statements are not otherwise required to be consolidated, are accounted for using the equity method.

These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto as of and for the year ended January ~~3, 2021,~~2, 2022, included in the ~~IPO Prospectus.~~Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of January ~~3, 2021~~2, 2022 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The results of operations for the ~~third~~ quarter and two quarters ended ~~October~~July 3, ~~2021~~2022 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending January ~~2, 2022.~~1, 2023.

Noncontrolling interest in the Company’s Condensed Consolidated Financial Statements represents the interest in subsidiaries held by joint venture partners and employee shareholders. The joint venture partners hold noncontrolling interests in the Company’s consolidated subsidiaries, Awesome Doughnut, LLC (“Awesome Doughnut”) ~~and~~, W.K.S. Krispy Kreme, LLC (“WKS Krispy Kreme”), and Krispy K Canada, Inc. (“KK Canada”). Employee shareholders hold noncontrolling interests in the consolidated subsidiaries Krispy Kreme Holding UKU.K. Ltd. (“KKUK”), Krispy Kreme Holdings Pty Ltd. (“KK Australia”), Krispy Kreme Mexico S. de R.L. de C.V. (“KK Mexico”) and Insomnia Cookies Holdings, LLC (“Insomnia Cookies”). Since the Company consolidates the financial statements of these subsidiaries, the noncontrolling owners’ share of each subsidiary’s net assets and results of operations are deducted and reported as noncontrolling interest on the Condensed Consolidated Balance Sheets and as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations and comprehensive income attributable to noncontrolling interest in the Condensed Consolidated Statements of Comprehensive Income/(Loss).

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Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for the year ended January ~~3, 2021~~2, 2022 included in the ~~IPO Prospectus.~~Annual Report on Form 10-K. There have been no material changes to the significant accounting policies during the quarter ended ~~October~~July 3, ~~2021.~~

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~~Reclassifications~~

As previously disclosed in the Quarterly Report on Form 10-Q issued for the second quarter of fiscal 2021, Marketing expenses have been reclassified (formerly presented within Selling, general and administrative expense) to be consistent with the current quarter presentation. This reclassification does not have a significant impact on the reported financial position and does not impact the results of operations or cash flows.2022.

Recent Accounting Pronouncements

In ~~December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12,~~ ~~Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes~~. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions in Topic 740 and clarifying and amending existing guidance. The Company adopted ASU 2019-12 at the beginning of fiscal year 2021, and the adoption had no material impact to the Company’s Condensed Consolidated Financial Statements.

~~In September~~March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. It is effective for all entities as of March 12, 2020 through December 31, 2022. A company may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The Company is currently evaluating the effect of the new guidance on its Condensed Consolidated Financial Statements and related disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which prescribes the measurement of acquired contract assets and contract liabilities arising from revenue contracts with customers recognized in a business combination. It is effective for public business entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments in this update should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effect of the new guidance on its Condensed Consolidated Financial Statements and related disclosures.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires certain disclosures to be made when an entity receives government assistance, including the types of assistance, an entity’s accounting for the assistance, and the effect of the assistance on an entity’s financial statements. It is effective for all entities for financial statements issued for annual periods beginning after December 15, 2021. Early application of the amendments is permitted. The Company is currently evaluating the effect of the new guidance on its annual disclosures.

Note 2 — Acquisitions

~~2021~~2022 Acquisitions

In the ~~quarter ended October 3, 2021,~~first two quarters of fiscal 2022, there were no acquisitions. ~~The Company acquired 10 franchise shops in Canada subsequent to the quarter ended October 3, 2021; see~~ ~~Note 15, Subsequent Events.~~

2021 Acquisitions

In the first quarter of fiscal 2021, the Company acquired the business and operating assets of 2 franchisees, collectively consisting of 17 Krispy Kreme shops in the United States. The Company paid total consideration of $38.1 million, consisting of $33.9 million of cash, $0.9 million of consideration payable to the sellers within 12 months of the respective acquisition dates, and $3.3 million settlement of amounts related to pre-existing relationships, to acquire substantially all of the shops’ assets. Consideration payable of $0.9 million was withheld to cover indemnification claims that could arise after closing. Absent any claims, these amounts are payable within 12 months of the respective acquisition dates.

The settlement of pre-existing relationships included in the purchase consideration includes the write-off of accounts and notes receivable, net of deferred revenue, of $0.6 million. It also includes the disposal of the franchise intangible asset related to the 2 franchisees recorded at time of the acquisition of Krispy Kreme by JAB. The cumulative net book value of the franchise intangible assets was $2.7 million at the acquisition dates. The Company accounted for the transactions as business combinations.

U.S.~~Table of Contents~~

~~The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition for the acquisitions above.~~


	~~KK U.S. Shops~~
~~Assets acquired:~~
~~Cash and cash equivalents~~	$	40
~~Prepaid expense and other current assets~~	~~474~~
~~Property and equipment, net~~	~~3,829~~
~~Other intangible assets, net~~	~~23,906~~
~~Operating lease right of use asset, net~~	~~19,292~~
~~Other assets~~	~~115~~
~~Total identified assets acquired~~	~~47,656~~
~~Liabilities assumed:~~
~~Accrued liabilities~~	~~(334)~~
~~Current operating lease liabilities~~	~~(2,093)~~
~~Noncurrent operating lease liabilities~~	~~(17,199)~~
~~Total liabilities assumed~~	~~(19,626)~~
~~Goodwill~~	~~10,036~~
~~Purchase consideration, net~~	$	~~38,066~~
~~Transaction costs in 2021~~	$	~~1,252~~
~~Transaction costs in 2020~~	~~184~~
~~Reportable segment~~	~~U.S. and Canada~~

During the measurement period, the Company will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates. Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined. Measurement period changes for the 2021 acquisitions did not have a material impact to the Condensed Consolidated Financial Statements for the quarter endedOn October ~~3, 2021.~~

~~2020 Acquisitions~~

~~In the second half of fiscal year 2020,~~4, 2021, the Company acquired ~~all equity interests~~a 60% controlling ownership interest in ~~Krispy Kreme Doughnut Japan Co., Ltd. (“KK Japan”) and the business and operating assets of an additional 8 franchisees~~10 franchise shops in ~~the United States.~~Canada (KK Canada). The valuation for the acquisitions requires significant estimates and assumptions. The estimates are inherently uncertain and subject to revision as additional information is obtained during the measurement period for the acquisitions. Measurement period ~~changes~~adjustments for the ~~2020~~2021 acquisitions did not have a material impact to the Condensed Consolidated Financial Statements for the quarter and two quarters ended ~~October~~July 3, ~~2021.~~2022.

Note 3 — Inventories

The components of Inventories are as follows:


		October 3, 2021		January 3, 2021			July 3, 2022		January 2, 2022
Raw materials	Raw materials	$	15,052	$	16,263	Raw materials	$	18,084	$	15,278
Work in progress	Work in progress	393		871		Work in progress	816		700
Finished goods and purchased merchandise	Finished goods and purchased merchandise	20,696		21,385		Finished goods and purchased merchandise	28,520		18,873
Total Inventories		$	36,141	$	38,519
Total inventories						Total inventories	$	47,420	$	34,851

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Note 4 — Goodwill and Other Intangible Assets, net

Goodwill

Changes in the carrying amount of goodwill by reportable segment are as follows:

U.S. and Canada International Market Development Total
Balance as of January 3, 2021 $ 642,704 $ 290,872 $ 152,970 $ 1,086,546
Acquisitions 27,560 — (17,524) 10,036
Measurement periods adjustments related to fiscal year 2020 acquisitions 186 — — 186
Foreign currency impact — (6,854) — (6,854)
Balance as of October 3, 2021 $ 670,450 $ 284,018 $ 135,446 $ 1,089,914

~~Acquisitions of franchises result in a reclassification of goodwill between segments.~~


	U.S. and Canada		International		Market Development		Total
Balance as of January 2, 2022	$	688,048	$	283,342	$	133,932	$	1,105,322


Foreign currency impact	(307)		(21,816)		—		(22,123)
Balance as of July 3, 2022	$	687,741	$	261,526	$	133,932	$	1,083,199

Other ~~intangible assets~~Intangible Assets, net

Other intangible assets consist of the following:


		October 3, 2021						January 3, 2021							July 3, 2022						January 2, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount			Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
Intangible assets with indefinite lives	Intangible assets with indefinite lives													Intangible assets with indefinite lives
Trade name	Trade name	$	657,900	$	—	$	657,900	$	657,900	$	—	$	657,900	Trade name	$	657,900	$	—	$	657,900	$	657,900	$	—	$	657,900
Intangible assets with definite lives	Intangible assets with definite lives													Intangible assets with definite lives
Franchise agreements	Franchise agreements	32,961		(8,090)		24,871		36,254		(7,519)		28,735		Franchise agreements	32,545		(9,143)		23,402		32,545		(8,369)		24,176
Customer relationships	Customer relationships	15,000		(4,467)		10,533		15,000		(3,819)		11,181		Customer relationships	15,000		(5,116)		9,884		15,000		(4,684)		10,316
Reacquired franchise rights	Reacquired franchise rights	377,836		(77,700)		300,136		358,095		(59,432)		298,663		Reacquired franchise rights	370,249		(92,116)		278,133		384,305		(84,177)		300,128
Website development costs	Website development costs	6,500		(6,500)		—		6,500		(4,965)		1,535		Website development costs	6,500		(6,500)		—		6,500		(6,500)		—
Total intangible assets with definite lives	Total intangible assets with definite lives	432,297		(96,757)		335,540		415,849		(75,735)		340,114		Total intangible assets with definite lives	424,294		(112,875)		311,419		438,350		(103,730)		334,620
Total intangible assets	Total intangible assets	$	1,090,197	$	(96,757)	$	993,440	$	1,073,749	$	(75,735)	$	998,014	Total intangible assets	$	1,082,194	$	(112,875)	$	969,319	$	1,096,250	$	(103,730)	$	992,520

Amortization expense related to intangible assets included in depreciation and amortization expense was ~~$7.5~~$7.0 million and ~~$22.6~~$14.2 million for the quarter and ~~three~~two quarters ended ~~October~~July 3, ~~2021,~~2022, respectively, and ~~$6.6~~$7.6 million and ~~$19.1~~$15.1 million for the quarter and ~~three~~two quarters ended ~~September 27, 2020,~~July 4, 2021, respectively.

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Note 5 — Leases

The Company included the following amounts related to operating and finance lease assets and liabilities within the Condensed Consolidated Balance Sheets:


			As of						As of
			October 3, 2021		January 3, 2021				July 3, 2022		January 2, 2022
Assets	Assets	Classification					Assets	Classification
Operating lease	Operating lease	Operating lease right of use asset, net	$	414,612	$	399,688	Operating lease	Operating lease right of use asset, net	$	419,211	$	435,168
Finance lease	Finance lease	Property and equipment, net	23,499		23,556		Finance lease	Property and equipment, net	22,989		19,298
Total leased assets	Total leased assets		$	438,111	$	423,244	Total leased assets		$	442,200	$	454,466
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating lease	Operating lease	Current operating lease liabilities	$	42,637	$	45,675	Operating lease	Current operating lease liabilities	$	45,936	$	50,359
Finance lease	Finance lease	Current portion of long-term debt	3,608		6,245		Finance lease	Current portion of long-term debt	4,844		1,583
Noncurrent	Noncurrent						Noncurrent
Operating lease	Operating lease	Noncurrent operating lease liabilities	397,640		376,099		Operating lease	Noncurrent operating lease liabilities	407,141		415,208
Finance lease	Finance lease	Long-term debt, less current portion	21,906		19,979		Finance lease	Long-term debt, less current portion	23,303		22,890
Total leased liabilities	Total leased liabilities		$	465,791	$	447,998	Total leased liabilities		$	481,224	$	490,040

Lease costs were as follows:


			Quarter Ended				Three Quarters Ended						Quarter Ended				Two Quarters Ended
			October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020				July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Lease cost	Lease cost	Classification									Lease cost	Classification
Operating lease cost	Operating lease cost	Selling, general and administrative expense	$	648	$	752	$	1,967	$	2,325	Operating lease cost	Selling, general and administrative expense	$	413	$	609	$	977	$	1,319
Operating lease cost	Operating lease cost	Operating expenses	21,201		17,149		62,910		50,748		Operating lease cost	Operating expenses	21,774		21,368		43,657		41,706
Short-term lease cost	Short-term lease cost	Operating expenses	233		693		1,797		2,122		Short-term lease cost	Operating expenses	1,241		792		2,286		1,564
Variable lease costs	Variable lease costs	Operating expenses	4,015		2,497		11,309		6,385		Variable lease costs	Operating expenses	6,328		4,218		11,335		7,297
Sublease income	Sublease income	Royalties and other revenues	(108)		(140)		(285)		(380)		Sublease income	Royalties and other revenues	(71)		(97)		(140)		(177)
Finance lease cost:	Finance lease cost:										Finance lease cost:
Amortization of right of use assets	Amortization of right of use assets	Depreciation and amortization expense	727		586		2,375		1,917		Amortization of right of use assets	Depreciation and amortization expense	$	1,359	$	850	$	1,943	$	1,648
Interest on lease liabilities	Interest on lease liabilities	Interest expense, net	$	466	$	484	$	1,540	$	1,545	Interest on lease liabilities	Interest expense, net	496		481		941		1,074

Supplemental disclosures of cash flow information related to leases were as follows:


		Three Quarters Ended					Two Quarters Ended
		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021
Other information	Other information					Other information
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	67,129	$	54,031
Operating cash flows from finance leases		1,458		1,452
Financing cash flows from finance leases		2,512		2,619
Operating cash flows for operating leases						Operating cash flows for operating leases	$	51,147	$	45,889
Operating cash flows for finance leases						Operating cash flows for finance leases	950		984
Financing cash flows for finance leases						Financing cash flows for finance leases	1,679		1,705
Right-of-use assets obtained in exchange for new lease liabilities:	Right-of-use assets obtained in exchange for new lease liabilities:					Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	Operating leases	48,770		33,427		Operating leases	$	19,682	$	39,473
Finance leases	Finance leases	$	1,788	$	6,827	Finance leases	455		1,788

The Company ~~did not record any~~recognized $1.4 million of lease termination ~~costs~~charges in the quarter and ~~three~~two quarters ended ~~October~~July 3, ~~2021. Lease~~2022, related to the decision to exit 6 Krispy Kreme shops in the U.S. later in fiscal 2022. There were no lease termination charges ~~included in Other (income)/expenses,~~ ~~net were $1.6 million and $3.3 million~~ in the ~~quarter and three~~two quarters ended ~~September 27, 2020, respectively.~~July 4, 2021.

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In March 2022, the Company completed a sale-leaseback transaction whereby it disposed of the land at 1 real estate property for proceeds of $3.0 million. The Company subsequently leased back the property, which is accounted for as an operating lease. The Company recognized a gain on sale of $2.6 million, which is included in Other expenses/(income), net on the Condensed Consolidated Statement of Operations for the two quarters ended July 3, 2022. There were no sale-leaseback transactions completed in the two quarters ended July 4, 2021.

Note 6 — Fair Value Measurements

The following table presents assets and liabilities that are measured at fair value on a recurring basis as of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021:~~2, 2022:


		October 3, 2021							July 3, 2022
		Level 1		Level 2		Level 3			Level 1		Level 2
Assets:	Assets:							Assets:
401(k) mirror plan assets	401(k) mirror plan assets	$	215	$	—	$	—	401(k) mirror plan assets	$	7	$	—
Foreign currency derivatives		—		238		—
Interest rate derivatives								Interest rate derivatives	—		8,141
Commodity derivatives	Commodity derivatives	—		1,776		—		Commodity derivatives	—		2,159
Total Assets	Total Assets	$	215	$	2,014	$	—	Total Assets	$	7	$	10,300
Liabilities:	Liabilities:							Liabilities:
Interest rate derivatives		—		22,638		—
Foreign currency derivatives								Foreign currency derivatives	$	—	$	334
Total Liabilities	Total Liabilities	$	—	$	22,638	$	—	Total Liabilities	$	—	$	334


		January 3, 2021							January 2, 2022
		Level 1		Level 2		Level 3			Level 1		Level 2
Assets:	Assets:							Assets:
401(k) mirror plan assets	401(k) mirror plan assets	$	237	$	—	$	—	401(k) mirror plan assets	$	111	$	—
Foreign currency derivatives		—		131		—

Commodity derivatives	Commodity derivatives	—		420		—		Commodity derivatives	—		1,486
Total Assets	Total Assets	$	237	$	551	$	—	Total Assets	$	111	$	1,486
Liabilities:	Liabilities:							Liabilities:
Foreign currency derivatives								Foreign currency derivatives	$	—	$	80
Interest rate derivatives	Interest rate derivatives	—		32,813		—		Interest rate derivatives	—		14,667
Total Liabilities	Total Liabilities	$	—	$	32,813	$	—	Total Liabilities	$	—	$	14,747

There were no assets nor liabilities measured using Level 3 inputs and no transfers of financial assets or liabilities among the levels within the fair value hierarchy during the quarter ended ~~October~~July 3, ~~2021~~2022 and fiscal year ended January ~~3, 2021.~~2, 2022. The Company’s derivatives are valued using discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves and currency rates.

Note 7 — Derivative Instruments

Commodity Price Risk

The Company uses forward contracts to protect against the effects of commodity price fluctuations in the cost of ingredients of its products, of which flour, sugar and shortening are the most significant, and the cost of gasoline used by its delivery vehicles. Management has not designated these forward contracts as hedges. As of ~~October~~both July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, the total notional amount of commodity derivatives was 1.9 million ~~and 3.0 million~~ gallons of ~~gasoline, respectively.~~gasoline. They were scheduled to mature between ~~October~~July 4, ~~2021~~2022 and December 1, 2023 and January 3, 2022 and March 31, 2023, respectively. As of July 3, 2022 and January ~~4, 2021 and December 1,~~2, 2022, ~~respectively. As of October 3, 2021 and January 3, 2021,~~ the Company recorded an asset of ~~$1.8~~$2.2 million and ~~$0.4~~$1.5 million, respectively, related to the fair market values of its commodity derivatives. The settlement of commodity derivative contracts is reported in the Condensed Consolidated Statements of Cash Flows as a cash flow from operating activities.

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Interest Rate Risk

The Company ~~is exposed~~uses interest rate swaps to manage its exposure to interest rate ~~risk related to~~volatility from its ~~borrowing obligations. From time to time, the Company enters into interest rate swap arrangements to manage the risk.~~debt arrangements. Management has designated the swap agreements as cash flow hedges and recognized the changes in the fair value of these swaps in other comprehensive income. As of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, the Company has recorded assets of $8.1 million and liabilities of ~~$22.6 million and $32.8~~$14.7 million, respectively, related to the fair market values of its interest rate derivatives. The cash flows associated with the interest rate swaps are reflected in operating activities in the Condensed Consolidated Statements of Cash Flows, which is consistent with the classification as operating activities of the interest payments on the term loan.

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Foreign Currency Exchange Rate Risk

The Company is exposed to foreign currency risk primarily from its investments in consolidated subsidiaries that operate in Canada, the ~~United Kingdom,~~U.K., Ireland, Australia, New Zealand, Mexico and Japan. In order to mitigate the impact of foreign exchange fluctuations on commercial and financial transactions with these subsidiaries, the Company enters into foreign exchange forward contracts. Management has not designated these forward contracts as hedges. As of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, the total notional amount of foreign exchange derivatives was ~~$31.3~~$54.1 million and ~~$26.7~~$51.8 million, respectively. They were scheduled to mature in July 2022 and between ~~October 2021~~January 2022 and ~~November 2021, and in January 2021,~~February 2022, respectively. The Company recorded ~~an asset~~a liability of ~~$0.2~~$0.3 million and $0.1 million as of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, respectively, related to the fair market values of its foreign exchange derivatives.

Quantitative Summary of Derivative Positions and Their Effect on Results of Operations

The following tables present the fair values of derivative instruments included in the Condensed Consolidated Balance Sheets as of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, for derivatives not designated as hedging instruments and derivatives designated as hedging instruments, respectively. The Company only has cash flow hedges that are designated as hedging instruments.


		Derivatives Fair Value						Derivatives Fair Value
Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments	October 3, 2021		January 3, 2021		Balance Sheet Location	Derivatives Not Designated as Hedging Instruments	July 3, 2022		January 2, 2022		Balance Sheet Location

Commodity derivatives							Commodity derivatives	$	2,159	$	1,486	Prepaid expense and other current assets
Total Assets							Total Assets	$	2,159	$	1,486
Foreign currency derivatives	Foreign currency derivatives	$	238	$	131	Prepaid expense and other current assets	Foreign currency derivatives	$	334	$	80	Accrued liabilities
Commodity derivatives		1,776		420		Prepaid expense and other current assets
		$	2,014	$	551

Total Liabilities							Total Liabilities	$	334	$	80

Derivatives Fair Value
Derivatives Designated as Hedging
Instruments
October 3,
2021 January 3,
2021 Balance Sheet Location
Interest rate derivatives $ 10,046 $ 10,235 Accrued liabilities
Interest rate derivatives 12,592 22,578 Other long-term obligations and deferred credits
$ 22,638 $ 32,813


	Derivatives Fair Value
Derivatives Designated as Hedging Instruments	July 3, 2022		January 2, 2022		Balance Sheet Location
Interest rate derivatives (current)	$	5,358	$	—	Prepaid expense and other current assets
Interest rate derivatives (noncurrent)	2,783		—		Other assets
Total Assets	$	8,141	$	—
Interest rate derivatives (current)	$	—	$	8,535	Accrued liabilities
Interest rate derivatives (noncurrent)	—		6,132		Other long-term obligations and deferred credits
Total Liabilities	$	—	$	14,667

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The effect of derivative instruments on the Condensed Consolidated Statements of Operations for the quarter and ~~three~~two quarters ended ~~October~~July 3, ~~2021~~2022 and ~~September 27, 2020~~July 4, 2021 is as follows:


		Derivative Gain/(Loss) Recognized in Income for the Quarter Ended				Derivative Gain/(Loss) Recognized in Income for the Three Quarters Ended						Derivative Gain/(Loss) Recognized in Income for the Quarter Ended				Derivative Gain/(Loss) Recognized in Income for the Two Quarters Ended
Derivatives Designated as Hedging Instruments	Derivatives Designated as Hedging Instruments	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020		Location of Derivative Gain/(Loss) Recognized in Income	Derivatives Designated as Hedging Instruments	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		Location of Derivative Gain/(Loss) Recognized in Income
Loss on interest rate derivatives	Loss on interest rate derivatives	$	(2,613)	$	(2,468)	$	(7,704)	$	(5,125)	Interest expense, net	Loss on interest rate derivatives	$	(1,861)	$	(2,561)	$	(4,371)	$	(5,091)	Interest expense, net
		$	(2,613)	$	(2,468)	$	(7,704)	$	(5,125)			$	(1,861)	$	(2,561)	$	(4,371)	$	(5,091)


		Derivative Gain/(Loss) Recognized in Income for the Quarter Ended				Derivative Gain/(Loss) Recognized in Income for the Three Quarters Ended						Derivative Gain/(Loss) Recognized in Income for the Quarter Ended				Derivative Gain/(Loss) Recognized in Income for the Two Quarters Ended
Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020		Location of Derivative Gain/(Loss) Recognized in Income	Derivatives Not Designated as Hedging Instruments	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021		Location of Derivative Gain/(Loss) Recognized in Income
Gain/(loss) on foreign currency derivatives	Gain/(loss) on foreign currency derivatives	$	632	$	(258)	$	256	$	(73)	Other non-operating expense/(income), net	Gain/(loss) on foreign currency derivatives	$	108	$	235	$	(255)	$	(375)	Other non-operating expense/(income), net
(Loss)/gain on commodity derivatives	(Loss)/gain on commodity derivatives	(114)		530		1,356		(345)		Other non-operating expense/(income), net	(Loss)/gain on commodity derivatives	(188)		477		672		1,470		Other non-operating expense/(income), net
		$	518	$	272	$	1,612	$	(418)			$	(80)	$	712	$	417	$	1,095

~~Table of Contents~~

Note 8 — Share-based Compensation

Restricted Stock Units (“RSUs”)

The Company and certain of its subsidiaries issue time-vested RSUs under their respective executive ownership plans and long-term incentive plans.

Table of Contents

RSU activity under the Company’s various plans during the periods presented is as follows:

Non-vested shares outstanding at January 3,
2021 Granted
RSU Dividend Equivalents(1)
Vested Forfeited Non-vested shares outstanding at October 3,
2021
KKI
RSUs 4,649,551 3,283,065 1,018,629 2,417,395 326,975 6,206,875
Weighted Average Grant Date Fair Value $ 11.37 18.13 — 9.42 13.72 $ 13.71
KKUK
RSUs 404,568 — — 351,500 — 53,068
Weighted Average Grant Date Fair Value $ 12.45 — — 12.22 — $ 13.98
Insomnia Cookies
RSUs 29,279 15,173 — — 9,224 35,228
Weighted Average Grant Date Fair Value $ 68.87 97.77 — — 75.68 $ 79.54
KK Australia
RSUs 1,844,241 78,534 — — 26,042 1,896,733
Weighted Average Grant Date Fair Value $ 1.48 1.45 — — 1.36 $ 1.48
KK Mexico
RSUs 25,055 32,963 — — — 58,018
Weighted Average Grant Date Fair Value $ 29.21 35.64 — — — $ 32.86

1.For KKI RSU holders that did not vest upon IPO, dividend equivalent shares were granted after the IPO at a weighted average grant date fair value of zero. The vesting terms for the dividend equivalent shares are the same as the underlying RSUs. The KKI shares presented have been retroactively adjusted to give effect to the Stock Split and the Merger.


(in thousands, except per share amounts)	Non-vested shares outstanding at January 2, 2022		Granted	Vested	Forfeited	Non-vested shares outstanding at July 3, 2022
KKI
RSUs	5,866		941	267	318	6,222
Weighted Average Grant Date Fair Value	$	13.78	14.45	9.35	14.66	$	14.03
KKUK
RSUs	60		—	—	—	60
Weighted Average Grant Date Fair Value	$	15.77	—	—	—	$	15.77
Insomnia Cookies
RSUs	33		10	—	4	40
Weighted Average Grant Date Fair Value	$	79.66	169.70	—	100.80	$	100.40
KK Australia
RSUs	1,897		21	—	—	1,918
Weighted Average Grant Date Fair Value	$	1.48	1.73	—	—	$	1.49
KK Mexico
RSUs	58		2	—	—	60
Weighted Average Grant Date Fair Value	$	32.86	40.14	—	—	$	33.08

The Company recorded total non-cash compensation expense related to RSUs under the plans of ~~$5.1~~$4.7 million and ~~$14.9~~$8.9 million for the quarter and ~~three~~two quarters ended ~~October~~July 3, ~~2021,~~2022, respectively, and ~~$3.1~~$7.4 million and ~~$9.3~~$9.8 million for the quarter and ~~three~~two quarters ended ~~September 27, 2020,~~July 4, 2021, respectively.

~~Table of Contents~~

The unrecognized compensation cost related to the unvested RSUs and the weighted-average period over which such cost is expected to be recognized are as follows:

As of ~~October~~July 3, ~~2021~~2022

Unrecognized Compensation Cost

Recognized Over a
Weighted-Average
Period of

KKI

~~64,500~~58,025

~~3.3~~3.2 years

KKUK

~~278~~291

~~1.6~~1.5 years

Insomnia Cookies

~~1,983~~2,847

~~3.3~~3.2 years

KK Australia

~~755~~305

~~1.3~~0.6 years

KK Mexico

~~1,760~~1,498

~~4.2~~3.5 years

The estimated fair value of restricted stock is calculated using a market approach (i.e., market multiple is used for the KKUK and Insomnia Cookies plans and an agreed-upon EBITDA buyout multiple is used for KK Australia and KK Mexico plans).

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Time-Vested Stock Options

KKI issues time-vested stock options under its Omnibus Incentive Plan. The fair value of time-vested stock options was estimated on the date of grant using the Black-Scholes option pricing model.

A summary of the status of the time-vested stock options as of January ~~3, 2021~~2, 2022 and changes during the first two quarters of fiscal ~~year 2021~~2022 is presented below:


		Share Options Outstanding At								Share Options Outstanding At			Share Options Outstanding At					Share Options Outstanding At
		January 3, 2021		Granted		Exercised		Forfeited or Expired		October 3, 2021
(in thousands, except per share amounts)												(in thousands, except per share amounts)	January 2, 2022		Granted	Exercised	Forfeited or Expired	July 3, 2022
KKI	KKI											KKI
Options	Options	—		2,817,398		—		—		2,817,398		Options	2,817		—	—	—	2,817
Weighted Average Grant Date Fair Value	Weighted Average Grant Date Fair Value	$	—	$	6.10	$	—	$	—	$	6.10	Weighted Average Grant Date Fair Value	$	6.10	—	—	—	$	6.10
Weighted Average Exercise Price	Weighted Average Exercise Price	$	—	$	14.61	$	—	$	—	$	14.61	Weighted Average Exercise Price	$	14.61	—	—	—	$	14.61

The Company recorded total non-cash compensation expense related to the time-vested stock options of ~~$1.2 million and $2.1~~$0.8 million and $1.6 million for the quarter and ~~three~~two quarters ended ~~October~~July 3, ~~2021, respectively.~~2022, respectively, and $0.9 million for the quarter and two quarters ended July 4, 2021.

The unrecognized compensation cost related to the unvested stock options and the weighted-average period over which such cost is expected to be recognized are as follows:


	As of ~~October~~July 3, ~~2021~~2022
	Unrecognized Compensation Cost		Recognized Over a Weighted-Average Period of
KKI	$	~~15,071~~12,235	~~3.3~~3.8 years

No time-vested stock options under the KKI plan vested nor were exercised during the fiscal periods presented.

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Note 9 — Income Taxes

For interim tax reporting, the Company estimates a worldwide annual effective tax rate and applies that rate to the year-to-date ordinary income/(loss). The tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

The Company’s effective income tax rates were ~~38.43%~~(188.73)% and ~~(76.11)~~57.02% for the quarter and two quarters ended July 3, 2022, respectively, and (195.60)% and (222.58)% for the quarter and ~~three~~two quarters ended ~~October 3,~~July 4, 2021, ~~respectively and (3.84)% and 6.26% for the quarter and three quarters ended September 27, 2020,~~ respectively. The Company’s effective income tax rate for the quarter and ~~three~~two quarters ended ~~October~~July 3, 2022 differed from the respective statutory rates primarily due to disallowed executive compensation expense, the mix of income and taxes attributable to foreign jurisdictions, the recognition of previously unrecognized tax benefits, and a discrete tax benefit related to a legal accrual discussed in Note 10, Commitments and Contingencies. The Company’s effective income tax rate for the quarter and two quarters ended July 4, 2021 differed from the respective statutory rates primarily due to the revaluation of U.K. deferred taxes as a result of the increase in the corporate tax rate from 19.0% to 25.0% beginning in 2023 and disallowed executive compensation ~~expense~~ in connection with the IPO. ~~The Company’s effective income tax rates were also impacted by the mix of income and taxes attributable to foreign jurisdictions.~~

Note 10 — Commitments and Contingencies

Pending Litigation

K2 ~~Asia litigation~~

~~On April 7, 2009, a Cayman Islands corporation, K~~2 Asia Ventures and its owners filed a lawsuit in Forsyth County, North Carolina Superior Court against the Company, the Company’s franchisee in the Philippines and other persons associated with the franchisee. The suit alleges that the Company and the other defendants conspired to deprive the plaintiffs of claimed “exclusive rights” to negotiate franchise and development agreements with prospective franchisees in the Philippines and sought at least $3.0 million. The case was dismissed by the North Carolina Superior Court on November 9, 2018. As of August 10, 2021, all levels of appellate review were exhausted and denied. No loss has been incurred with respect to this matter, and accordingly no liability related to it has been reflected in the accompanying Condensed Consolidated Financial Statements.

~~Insomnia Cookies litigation related to employee wages~~

Insomnia Cookies is currently a party to a class action lawsuit alleging violations of unfair competition, unpaid minimum wages, unpaid overtime, meal and rest period violations and unpaid premiums, failure to reimburse for business expenses, untimely paid wages, and violation of the California Private Attorneys General Act. Insomnia Cookies vigorously disputes these claims. On March 11, 2021, the parties participated in a mediation and reached a class wide settlement and release of claims in principle for $0.4 million. The parties have executed a memorandum of understanding memorializing the key settlement terms and are in the process of finalizing long form settlement documents and seeking preliminary court approval of the settlement.

TSW ~~Food,~~Foods, LLC litigation

On November 13, 2020, TSW Foods, LLC (“TSW”), a reseller of certain Krispy Kreme packaged products, filed a demand for arbitration and statement of claim alleging Anticipatory Repudiation of the Master Reseller Agreement, Breach of the Master Reseller Agreement, and Breach of the Implied Covenant of Good Faith and Fair Dealing. ~~The Company intends to vigorously defend against TSW’s claims and prosecute its counterclaims. The parties have scheduled a voluntary, non-binding mediation for November 11, 2021. At this time~~On July 14, 2022, the Company ~~is unable to predict~~and TSW negotiated a net settlement of approximately $3.3 million, for which the ~~outcome of this matter,~~related liability has been reflected in the ~~potential loss or range of loss, if any, associated with the resolution of this matter or any potential effect it may have on the Company or its operations.~~accompanying Condensed Consolidated Financial Statements.

Other Legal Matters

The Company also is engaged in various legal proceedings arising in the normal course of business. The Company maintains insurance policies against certain kinds of such claims and suits, including insurance policies for workers’ compensation and personal injury, all of which are subject to deductibles. While the ultimate outcome of these matters could differ from management’s expectations, management currently does not believe their resolution will have a material adverse effect on the Company’s Condensed Consolidated Financial Statements.

Other Commitments and Contingencies

One of the Company’s primary banks issued letters of credit on its behalf totaling ~~$8.5~~$10.3 million and ~~$14.0~~$8.5 million as of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, respectively, a majority of which secure the Company’s reimbursement obligations to insurers under its self-insurance arrangements.

~~Table of Contents~~

Note 11 — Related Party Transactions

As of ~~October~~July 3, ~~2021~~2022 and January ~~3, 2021,~~2, 2022, the Company had an equity ownership in 2 franchisees, KremeWorks USA, LLC (20% ownership) and KremeWorks Canada, L.P. (25% ownership), with an aggregate carrying value of ~~$0.7 million and $0.9~~$1.1 million as of ~~October~~both July 3, ~~2021~~2022 and January 3, 2021, respectively. Revenues from sales of ingredients and equipment to these franchisees were $1.9 million and $5.7 million for the quarter and three quarters ended October 3, 2021, respectively, and $1.5 million and $4.9 million for the quarter and three quarters ended September 27, 2020, respectively. Royalty revenues from these franchisees were $0.3 million and $1.0 million for the quarter and three quarters ended October 3, 2021, respectively, and $0.3 million and $0.9 million for the quarter and three quarters ended September 27, 2020. Trade receivables from these franchisees are included in Accounts receivable, net on the Condensed Consolidated Balance Sheets, which were $0.4 million and $0.4 million as of October 3, 2021 and January 3, 2021, respectively.

Keurig Dr Pepper Inc. (“KDP”), an affiliated company of JAB, licenses the Krispy Kreme trademark for the Company in the manufacturing of portion packs for the Keurig brewing system. KDP also sells beverage concentrates and packaged beverages to Krispy Kreme for resale through Krispy Kreme’s shops. Licensing revenues from KDP were $0.4 million and $1.4 million for the quarter and three quarters ended October 3, 2021, respectively, and $0.5 million and $1.3 million for the quarter and three quarters ended September 27, 2020, respectively.

The Company had service agreements with BDT Capital Partners, LLC (“BDT”), a minority investor in KKI, to provide advisory services to the Company, including valuation services related to certain acquisitions. The Company recognized expenses of $0.6 million related to the service agreements with BDT for the three quarters ended October 3, 2021, and $0.9 million and $1.6 million for the quarter and three quarters ended September 27, 2020, respectively. No related expenses were incurred for the quarter ended October 3, 2021.

In connection with valuation assistance provided by BDT in preparation for the IPO, the Company incurred costs of $6.3 million that are capitalized in additional paid-in capital for the three quarters ended October 3, 2021. No related costs were incurred for the quarter ended October 3, 2021, nor for the quarter and three quarters ended September 27, 2020.

In connection with tax sharing arrangements with JAB and other JAB portfolio companies, the Company had a $7.4 million related party receivable from JAB and a $15.3 million related party payable to the other JAB portfolio companies offset by a $15.3 million income tax receivable due from taxing authorities as of January 3, 2021. No related party receivable nor related party payable was due to JAB or other JAB portfolio companies as of October 3, 2021. The related party receivable amounts were presented within Accounts receivable, net on the Condensed Consolidated Balance Sheet as of January 3, 2021.2, 2022.

The Company was party to a senior unsecured note agreement ~~(the “original agreement”~~with Krispy Kreme, G.P. (“KK GP”) ~~with KK GP. In the original agreement, which was outstanding prior to fiscal year ended December 30, 2018, the~~for an aggregate principal amount ~~was~~of $283.1 million. In April 2019, the Company entered into an additional unsecured note with KK GP for $54.0 million ~~(the “additional agreement”~~(such notes together, the “Related Party Notes”). As of January 3, 2021, the outstanding amount of principal and interest was $344.6 million. The ~~note was~~Related Party Notes were paid off in full during the second quarter ~~ended July 4,~~of fiscal 2021. The interest expense was ~~$10.4 million for the three quarters ended October 3, 2021, and $5.6~~$4.8 million and ~~$16.7~~$10.4 million for the quarter and ~~three~~two quarters ended ~~September 27, 2020.~~July 4, 2021. No interest expense was incurred for the quarter and two quarters ended ~~October~~July 3, ~~2021.~~

The Company granted loans to employees of KKI, KKUK, KK Australia, KK Mexico and Insomnia Cookies for the purchase of shares in those subsidiaries. The loan balance was $4.2 million and $18.7 million as of October 3, 2021 and January 3, 2021, respectively, and it is presented as a reduction from Shareholders’ equity on the Condensed Consolidated Balance Sheet.2022.

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Note 12 — Revenue Recognition

Disaggregation of Revenues

Revenues are disaggregated as follows:


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
		October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Company Shops, DFD and Branded Sweet Treat Line	Company Shops, DFD and Branded Sweet Treat Line	$	322,410	$	265,554	$	952,680	$	714,504	Company Shops, DFD and Branded Sweet Treat Line	$	354,551	$	329,775	$	706,385	$	630,270
Mix and equipment revenue from franchisees	Mix and equipment revenue from franchisees	11,914		15,763		36,452		54,957		Mix and equipment revenue from franchisees	13,226		11,448		25,444		24,538
Franchise royalties and other	Franchise royalties and other	8,475		8,916		24,662		26,960		Franchise royalties and other	7,468		7,963		15,948		16,187
Total net revenues	Total net revenues	$	342,799	$	290,233	$	1,013,794	$	796,421	Total net revenues	$	375,245	$	349,186	$	747,777	$	670,995

Other revenues include advertising fund contributions from franchisees, rental income, development and franchise fees, and licensing royalties from Keurig related to Krispy Kreme brands coffee sales.

Contract Balances

Deferred revenue subject to Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, and related receivables are as follows:


		October 3, 2021		January 3, 2021		Balance Sheet Location		July 3, 2022		January 2, 2022		Balance Sheet Location
Trade receivables, net of allowances of $796 and $1,437, respectively		$	37,476	$	39,624	Accounts receivables, net
Trade receivables, net of allowances of $424 and $896, respectively							Trade receivables, net of allowances of $424 and $896, respectively	$	37,413	$	41,132	Accounts receivables, net
Deferred revenue:	Deferred revenue:						Deferred revenue:
Current	Current	15,901		16,045		Accrued liabilities	Current	$	16,916	$	17,458	Accrued liabilities
Noncurrent	Noncurrent	2,889		2,838		Other long-term obligations and deferred credits	Noncurrent	3,084		2,981		Other long-term obligations and deferred credits
Total deferred revenue	Total deferred revenue	$	18,790	$	18,883		Total deferred revenue	$	20,000	$	20,439

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Note 13 — Net Loss per Share

The following table presents the calculations of basic and diluted EPS:


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
(in thousands, except share and per share amounts)		October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020
Net loss attributable to Krispy Kreme, Inc.		$	(5,659)	$	(14,852)	$	(25,862)	$	(38,997)
Adjustment to net loss attributable to common shareholders		(522)		34		(1,815)		(121)
(in thousands, except per share amounts)										(in thousands, except per share amounts)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net (loss)/income attributable to Krispy Kreme, Inc.										Net (loss)/income attributable to Krispy Kreme, Inc.	$	(3,849)	$	(17,142)	$	153	$	(20,203)
Adjustment to net (loss)/income attributable to common shareholders										Adjustment to net (loss)/income attributable to common shareholders	—		(424)		(374)		(417)
Net loss attributable to common shareholders - Basic	Net loss attributable to common shareholders - Basic	$	(6,181)	$	(14,818)	$	(27,677)	$	(39,118)	Net loss attributable to common shareholders - Basic	$	(3,849)	$	(17,566)	$	(221)	$	(20,620)
Additional income attributed to noncontrolling interest due to subsidiary potential common shares	Additional income attributed to noncontrolling interest due to subsidiary potential common shares	(88)		(22)		(237)		(48)		Additional income attributed to noncontrolling interest due to subsidiary potential common shares	(83)		(120)		(122)		(145)
Net loss attributable to common shareholders - Diluted	Net loss attributable to common shareholders - Diluted	$	(6,269)	$	(14,840)	$	(27,914)	$	(39,166)	Net loss attributable to common shareholders - Diluted	$	(3,932)	$	(17,686)	$	(343)	$	(20,765)
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	166,033,539		124,987,370		141,123,999		124,987,370		Basic weighted average common shares outstanding	167,367		132,351		167,314		128,669
Dilutive effect of outstanding common stock options and RSUs	Dilutive effect of outstanding common stock options and RSUs	—		—		—		—		Dilutive effect of outstanding common stock options and RSUs	—		—		—		—
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	166,033,539		124,987,370		141,123,999		124,987,370		Diluted weighted average common shares outstanding	167,367		132,351		167,314		128,669
Loss per share attributable to common shareholders:	Loss per share attributable to common shareholders:									Loss per share attributable to common shareholders:
Basic	Basic	$	(0.04)	$	(0.12)	$	(0.20)	$	(0.31)	Basic	$	(0.02)	$	(0.13)	$	0.00	$	(0.16)
Diluted	Diluted	$	(0.04)	$	(0.12)	$	(0.20)	$	(0.31)	Diluted	$	(0.02)	$	(0.13)	$	0.00	$	(0.16)

Potential dilutive shares consist of unvested RSUs and stock options, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes certain unvested RSUs granted under certain subsidiaries’ executive ownership plans and long-term incentive plans, because their inclusion would have been antidilutive.

The following table summarizes the gross number of potential dilutive unvested RSUs excluded due to antidilution (unadjusted for the treasury stock method):


		Quarter Ended		Three Quarters Ended			Quarter Ended		Two Quarters Ended
		October 3, 2021	September 27, 2020	October 3, 2021	September 27, 2020
(in thousands)						(in thousands)	July 3, 2022	July 4, 2021	July 3, 2022	July 4, 2021
KKI	KKI	6,206,875	4,556,675	6,206,875	4,556,675	KKI	6,222	5,318	6,222	5,238
KKUK	KKUK	—	404,568	—	412,235	KKUK	—	3	—	3
Insomnia Cookies	Insomnia Cookies	—	16,200	—	13,365	Insomnia Cookies	—	—	5	—
KK Australia	KK Australia	—	—	—	—	KK Australia	—	—	—	—
KK Mexico	KK Mexico	—	—	—	—	KK Mexico	—	—	1	—

~~The 2,817,398 KKI~~For the quarter and two quarters ended July 3, 2022, as well as the quarter and two quarters ended July 4, 2021, all 2.8 million time-vested stock options were ~~also~~ excluded from the ~~computations for~~computation of diluted weighted average common shares outstanding based on application of the ~~quarter and three quarters ended October 3, 2021 due to antidilution.~~treasury stock method.

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Note 14 — Segment Reporting

The Company conducts business through the 3 reportable segments: U.S. and Canada, International, and Market Development. Unallocated corporate costs are excluded from the Company’s measurement of segment performance. These costs include general corporate expenses.

The reportable segment results are as follows:


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
		October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net revenues:	Net revenues:									Net revenues:
U.S. and Canada	U.S. and Canada	$	225,807	$	202,575	$	679,195	$	557,280	U.S. and Canada	$	250,460	$	230,918	$	503,587	$	453,388
International	International	87,262		63,504		243,005		158,575		International	93,853		89,237		181,054		155,743
Market Development	Market Development	29,730		24,154		91,594		80,566		Market Development	30,932		29,031		63,136		61,864
Total net revenues	Total net revenues	$	342,799	$	290,233	$	1,013,794	$	796,421	Total net revenues	$	375,245	$	349,186	$	747,777	$	670,995


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
		October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020			July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Segment Adjusted EBITDA:	Segment Adjusted EBITDA:									Segment Adjusted EBITDA:
U.S. and Canada	U.S. and Canada	$	19,912	$	20,028	$	75,760	$	69,216	U.S. and Canada	$	26,017	$	28,285	$	59,625	$	55,848
International	International	21,655		15,098		60,676		27,909		International	19,535		23,673		36,779		39,021
Market Development	Market Development	9,033		9,374		29,782		27,959		Market Development	10,495		9,858		21,782		20,749
Corporate	Corporate	(9,183)		(6,715)		(26,005)		(21,386)		Corporate	(8,686)		(9,423)		(21,918)		(16,822)
		41,417		37,785		140,213		103,698			47,361		52,393		96,268		98,796
Interest expense, net	Interest expense, net	7,186		7,908		25,228		26,263		Interest expense, net	7,586		9,793		14,937		18,042
Interest expense — related party(1)	Interest expense — related party(1)	—		5,566		10,387		16,698		Interest expense — related party(1)	—		4,821		—		10,387
Income tax (benefit)/expense		(2,342)		499		8,266		(2,413)
Income tax expense										Income tax expense	1,574		9,923		5,374		10,608
Depreciation and amortization expense	Depreciation and amortization expense	25,663		20,435		74,258		57,619		Depreciation and amortization expense	27,814		25,194		55,655		48,595
Share-based compensation	Share-based compensation	6,315		3,095		16,973		9,236		Share-based compensation	5,452		8,290		10,493		10,658
Employer payroll taxes related to share-based compensation	Employer payroll taxes related to share-based compensation	1,171		—		2,012		—		Employer payroll taxes related to share-based compensation	35		841		90		841
Other non-operating expense/(income), net(2)	Other non-operating expense/(income), net(2)	732		(357)		(126)		(469)		Other non-operating expense/(income), net(2)	756		(416)		435		(858)
New York City flagship Hot Light Theater Shop opening(3)		—		2,190		—		6,429
Strategic initiatives(4)		—		4,649		—		13,923
Acquisition and integration expenses(5)		1,288		4,274		3,663		8,697
Shop closure expenses(6)		—		2,058		—		4,844
Restructuring and severance expenses(7)		57		—		1,393		—
IPO-related expenses(8)		4,018		206		14,221		206
Other(9)		1,081		746		3,064		(1,218)
Net Loss		$	(3,752)	$	(13,484)	$	(19,126)	$	(36,117)
Acquisition and integration expenses(3)										Acquisition and integration expenses(3)	82		223		599		2,375
Shop closure expenses(4)										Shop closure expenses(4)	1,894		—		2,124		—
Restructuring and severance expenses(5)										Restructuring and severance expenses(5)	476		1,336		476		1,336
IPO-related expenses(6)										IPO-related expenses(6)	—		6,727		—		10,203
Gain on sale-leaseback										Gain on sale-leaseback	—		—		(2,374)		—
Other(7)										Other(7)	4,100		657		4,409		1,983
Net (loss)/income										Net (loss)/income	$	(2,408)	$	(14,996)	$	4,050	$	(15,374)

1.(1)Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021.

2.(2)Primarily foreign translation gains and losses in each period.

3.Consists of pre-opening costs related to our New York City flagship Hot Light Theater Shop opening, including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.

4.The quarter and three quarters ended September 27, 2020 consists mainly of consulting and advisory fees, personnel transition costs, and network conversion and set-up costs related to the transformation of the Company’s legacy wholesale business in the United States.

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5.(3)Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with ~~acquisition-related~~acquisition and integration-related activities for the applicable period.

6.(4)Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.

7.(5)~~Consists~~The quarter and two quarters ended July 3, 2022 consist of costs associated with restructuring of the global executive team. The quarter and two quarters ended July 4, 2021 consist of severance and related benefits costs associated with the Company’s realignment of the Company ~~Shop~~shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses.

8.(6)Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. ~~Due to the timing~~

Table of ~~the IPO, certain costs were incurred in the quarter ended October 3, 2021 that are not expected to recur in future quarters.~~Contents

9.(7)The quarter and ~~three~~two quarters ended ~~October~~July 3, 2022 and July 4, 2021 consist primarily of legal expenses incurred outside the ordinary course of business on matters described in Note 10, Commitments and ~~Contingencies. The quarter and three quarters ended September 27, 2020 consists primarily of fixed asset and lease impairment expenses, net of a gain on~~Contingencies, including the ~~sale of land.~~TSW litigation.

Note 15 — Subsequent Events

The Company evaluated subsequent events and transactions for potential recognition or disclosure in the Condensed Consolidated Financial Statements through ~~November 9, 2021,~~August 17, 2022, the date the Condensed Consolidated Financial Statements were available to be issued. All subsequent events requiring recognition and disclosure have been incorporated into these Condensed Consolidated Financial Statements.

On ~~October 4, 2021,~~August 5, 2022, the Company ~~acquired a 60% controlling~~signed an agreement to acquire ownership ~~interest in 10~~of 6 franchise shops in ~~Canada for~~the U.S. (located in the Midwest), as well as an additional shop still under construction. The acquisition is expected to occur later in August, with an expected total cash consideration of approximately ~~$14.7 million, consisting of approximately $14.4 million in cash and approximately $0.3 million related to settlement of pre-existing relationships.~~$18.5 million. The acquisition provides the opportunity to expand the Company’s omni-channel strategy in ~~Canada,~~the U.S., and ~~will~~is expected to be accounted for as a business combination. The results of the acquired franchise business were reported within the Market Development segment ~~as of~~through the quarter ended ~~October~~July 3, ~~2021~~2022 and ~~will~~are expected to be reported within the U.S. and Canada segment ~~beginning at~~following the acquisition ~~date in the fourth quarter of fiscal 2021. As of the date of issuance of this Quarterly Report on Form 10-Q, the Company has not completed the initial accounting for this business combination.~~date.

2220

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Cautionary Note Regarding Forward-Looking Statements~~

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited ~~consolidated financial statements~~Consolidated Financial Statements and related notes included in our Annual Report ~~included in our IPO Prospectus~~on Form 10-K for the year ended January ~~3, 2021,~~2, 2022, and in other reports filed subsequently with the SEC.

Cautionary Note Regarding Forward-Looking Statements

This ~~discussion~~report contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “could,” “will,” “should,” ~~“would,”~~ “anticipate,” “estimate,” “expect,” ~~“intend,~~“outlook,” ~~“objective,~~“guidance,” ~~“seek,” “strive”~~ or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. Factors that could cause actual results to differ from those expressed in forward-looking statements include, without limitation, the risks and uncertainties described under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the year ended January 2, 2022, filed by us with the SEC and described in the other filings we make from time to time with the SEC. We believe that these factors include, but are not limited to, the impact of pandemics, changes in consumer preferences, the impact of inflation, and our ability to execute on our omni-channel business strategy. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

Overview

Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in 31over 30 countries through its unique network of fresh Doughnut Shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities, and the planet.

The following table presents a summary of our financial results for the periods presented:


		Quarter Ended						Three Quarters Ended							Quarter Ended						Two Quarters Ended
(in thousands except percentages)	(in thousands except percentages)	October 3, 2021		September 27, 2020		% Change		October 3, 2021		September 27, 2020		% Change		(in thousands except percentages)	July 3, 2022		July 4, 2021		% Change		July 3, 2022		July 4, 2021		% Change
Total Net Revenues	Total Net Revenues	$	342,799	$	290,233	18.1	%	$	1,013,794	$	796,421	27.3	%	Total Net Revenues	$	375,245	$	349,186	7.5	%	$	747,777	$	670,995	11.4	%
Net Loss		(3,752)		(13,484)		72.2	%	(19,126)		(36,117)		47.0	%
Net (Loss)/Income														Net (Loss)/Income	(2,408)		(14,996)		83.9	%	4,050		(15,374)		126.3	%
Adjusted Net Income	Adjusted Net Income	12,616		11,782		7.1	%	50,711		28,673		76.9	%	Adjusted Net Income	14,646		20,469		-28.4	%	30,729		38,095		-19.3	%
Adjusted EBITDA	Adjusted EBITDA	41,417		37,785		9.6	%	140,213		103,698		35.2	%	Adjusted EBITDA	47,361		52,393		-9.6	%	96,268		98,796		-2.6	%

We generated ~~6.2%~~8.9% and ~~11.9%~~11.8% organic revenue growth for the quarter and ~~three~~two quarters ended ~~October~~July 3, ~~2021, respectively.~~2022.

Significant Events and Transactions

Executing on our ~~Transformation~~Omni-channel Strategy

We ~~continue~~made strong progress on the execution of our omni-channel model in the second quarter of fiscal 2022, where we focus on being able to deliver fresh doughnuts to where our consumers are located. We continued to add quality ~~points~~Global Points of ~~access~~Access across our network as we convert markets into fully implemented Hub and Spoke models, ~~surpassing 10,000 points~~including a net total of ~~access as~~382 new Global Points of Access in the ~~end of the third~~second quarter of fiscal ~~2021.~~2022 to surpass 11,400 Global Points of Access. The primary driver of the increased ~~points~~Points of ~~access from~~Access during the second quarter ~~of fiscal 2021~~ was the continued expansion of our low capital DFD network in alignment with our transformation strategy, as we added ~~393~~396 DFD Doors globally, including ~~153~~109 DFD Doors to the U.S. and Canada segment, ~~(including~~ ~~expansion in major markets such as Chicago, Dallas, Phoenix, Los Angeles, and Denver), 151~~209 to the International segment, and 8978 to the Market Development segment.

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~~The increase in DFD Doors is the result of our focus on executing our omni-channel strategy to drive our transformation.~~ As highlighted by the more developed model within the International segment, ~~which has experienced a quick recovery from the impacts of the COVID-19 pandemic,~~ the capital-efficient Hub and Spoke distribution model ~~provides a route~~increases

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accessibility to ~~market~~our consumers and ~~powers profitability. As of the end of the third quarter of fiscal 2021, our Krispy Kreme U.S.~~drives higher profitability and ~~Canada business has completed the conversion of the last few designated market areas from our legacy wholesale business to DFD, allowing us to focus on DFD expansion in priority areas.~~increased margins. We expect DFD growth to continue to be one of our most significant drivers of ~~profitability~~earnings growth, through both increased door count and growth in average revenue per door per week (“APD”), which ~~has risen over 50%~~rose by 9.0% in the ~~third~~U.S. and Canada in the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021.

The increase in Points of Access and the strong growth in APD in the U.S. and Canada allowed our trailing four quarters Sales per Hub to increase 22.2% from $3.6 million in the second quarter of fiscal 2021 to a record high $4.4 million in the second quarter of fiscal 2022. Our trailing four quarters International Sales per Hub also increased by 22.5% from $8.0 million to $9.8 million for the same periods. The increase in our Sales per Hub domestically and internationally led to 8.9% organic revenue growth in the second quarter compared to the ~~third quarter of fiscal 2020. Additionally, we expect further global expansion of points of access to come~~same period in the ~~near-term as~~prior year. Our goal is to continue to grow our Sales per Hub over time, which we ~~acquired ten franchise shops~~believe will drive higher margins and higher return on invested capital.

During the second quarter, the macroeconomic environment has been challenging with supply chain disruption, inflationary pressures in commodities and labor costs, and inflationary pressures on consumer demand. These effects have been felt most heavily by our KKUK and Krispy Kreme U.S. and Canada ~~at the beginning~~businesses, with weakness in our less resilient Hubs without Spokes. With this backdrop, our strategy has been to continue to focus on long-term growth through execution of the ~~fourth quarter~~omni-channel model in the U.S. and Canada as well as internationally, and to invest in the consumer through Acts of ~~fiscal 2021, providing opportunity to expand our omni-channel strategy~~Joy, including a “Sweet New Deal” and other higher promotional activity. We also delayed pricing action in ~~Canada.~~

~~COVID-19 Update~~

~~As of~~ the ~~end~~U.K. and the U.S. and Canada until the beginning of the third quarter of fiscal ~~2021, approximately~~ ~~98%~~ ~~of global system-wide shops (includes Company-owned~~2022, when we increased prices by mid to high single digits for the first time in fiscal 2022. We made the increase to offset labor and ~~franchise shops) were operational. In the U.S.~~commodity pressures, while continuing to leverage innovation and ~~Canada, all Krispy Kreme~~promotions to connect with consumers in a thoughtful way and ~~all Insomnia Cookies shops were operational with certain locations still limiting lobby dining based on local regulations throughout the quarter.~~build brand power.

The International segment continued to perform strongly with all shops in the United Kingdom, Ireland, and Mexico operational as of the end of the third quarter of fiscal 2021. Australia and New Zealand were more heavily impacted by COVID-19 restrictionsAdditionally, during ~~the quarter, experiencing temporary shop closures and with lobby dining currently not allowed at certain locations.~~

~~Certain international franchise markets within the Market Development segment were more heavily impacted by COVID-19 restrictions during the third quarter of fiscal 2021, with 23% of shops operating at reduced hours and 13%~~ ~~with lobby dining closed as of the end of the quarter. This still represented an improvement from conditions as of the end of~~ the second quarter of fiscal ~~2021, contributing~~2022, we initiated portfolio optimization efforts for our legacy Krispy Kreme U.S. and Canada business, with a focus on our Hubs without Spokes and overall efficiencies. Some of this optimization may include converting shop types to better leverage labor costs and to better facilitate the expansion of DFD, reviewing the overall cost structure, and other potential actions. We believe this will enable us to focus even more on capital-efficient expansion in key strategic markets and to improve overall margins. As part of these efforts, we decided to exit six Doughnut Shops in the U.S. during the second quarter of fiscal 2022.

Ecommerce, Brand, and Innovation

Ecommerce represented 17.5% of our Doughnut and Cookie Shop sales (excluding DFD) for the second quarter of fiscal 2022, up from less than 10% pre-pandemic and 17.2% for the full fiscal year 2021. This reflects the growing importance of our loyalty members which increased to over 13 million in our equity markets during the second quarter. We are also expanding the delivery radius in several key markets around the world through partnerships with third party aggregators and the addition of Dark Shops.

Innovation is a ~~continued trend~~significant driver of ~~growth for Market Development.~~frequency as we create and introduce premium, fresh and buzz-worthy offerings to consumers across our Points of Access. High profile initiatives during the second quarter included Cinnamon Toast Crunch in the U.S. and Xbox in the U.K. In addition, we started a limited pilot of soft-serve ice cream products in 44 shops in the U.S. which generated over one billion earned media impressions. We also had successful seasonal activations across the globe, including our Easter and Mother’s Day limited time offerings (“LTOs”), and our celebrations of National Doughnut Day and Krispy Kreme’s 85th birthday.

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Key Performance Indicators and Non-GAAP Measures

We monitor the key ~~business metrics~~performance indicators and non-GAAP metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key ~~business metrics~~performance indicators discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.

Throughout this Quarterly Report on Form 10-Q, we utilize ~~“global points~~“Global Points of ~~access”~~Access” as a key performance indicator. Global ~~points~~Points of ~~access~~Access reflect all locations at which fresh doughnuts or cookies can be purchased. We define ~~global points~~Global Points of ~~access~~Access to include all Hot Light Theater Shops, Fresh Shops, Carts, ~~and~~ Food Trucks, and Other, DFD Doors, Cookie Shops, and other defined points at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor ~~global points~~Global Points of ~~access~~Access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments and by asset type.

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The following table presents our ~~global points~~Global Points of ~~access,~~Access, by segment and type, as of the end of the ~~third~~second quarter of ~~2021, third~~fiscal 2022, the second quarter of ~~2020~~fiscal 2021, and fiscal ~~2020,~~2021, respectively:


		Global Points of Access (1)				Global Points of Access (1)
		Quarter Ended		Fiscal Year Ended		Quarter Ended		Fiscal Year Ended
		October 3, 2021	September 27, 2020	January 3, 2021		July 3, 2022	July 4, 2021	January 2, 2022
U.S. and Canada: (2)	U.S. and Canada: (2)				U.S. and Canada: (2)
Hot Light Theater Shops	Hot Light Theater Shops	238	206	229	Hot Light Theater Shops	245	237	241
Fresh Shops	Fresh Shops	57	48	47	Fresh Shops	66	56	66
Cookie Shops	Cookie Shops	206	178	184	Cookie Shops	221	199	210
DFD Doors (3)		5,220	2,846	4,137
Carts, Food Trucks, and Other (3)					Carts, Food Trucks, and Other (3)	1	—	2
DFD Doors					DFD Doors	5,520	5,067	5,204
Total	Total	5,721	3,278	4,597	Total	6,053	5,559	5,723
International:	International:				International:
Hot Light Theater Shops	Hot Light Theater Shops	30	28	28	Hot Light Theater Shops	34	28	32
Fresh Shops	Fresh Shops	352	353	348	Fresh Shops	386	365	370
Carts, Food Trucks, and Other (4)		12	10	11
DFD Doors (3)		2,415	1,833	1,986
Carts, Food Trucks, and Other (3)					Carts, Food Trucks, and Other (3)	2	—	1
DFD Doors					DFD Doors	3,003	2,264	2,488
Total	Total	2,809	2,224	2,373	Total	3,425	2,657	2,891
Market Development: (5)
Market Development: (4)					Market Development: (4)
Hot Light Theater Shops	Hot Light Theater Shops	113	144	119	Hot Light Theater Shops	107	113	109
Fresh Shops	Fresh Shops	761	716	732	Fresh Shops	778	739	782
Carts, Food Trucks, and Other (4)		30	30	30
DFD Doors (3)		607	470	465
Carts, Food Trucks, and Other (3)					Carts, Food Trucks, and Other (3)	29	30	31
DFD Doors					DFD Doors	1,017	518	891
Total	Total	1,511	1,360	1,346	Total	1,931	1,400	1,813
Total global points of access (as defined)		10,041	6,862	8,316
Total Global Points of Access (as defined)					Total Global Points of Access (as defined)	11,409	9,616	10,427
Total Hot Light Theater Shops	Total Hot Light Theater Shops	381	378	376	Total Hot Light Theater Shops	386	378	382
Total Fresh Shops	Total Fresh Shops	1,170	1,117	1,127	Total Fresh Shops	1,230	1,160	1,218
Total Cookie Shops	Total Cookie Shops	206	178	184	Total Cookie Shops	221	199	210
Total Shops	Total Shops	1,757	1,673	1,687	Total Shops	1,837	1,737	1,810
Total Carts, Food Trucks, and Other	Total Carts, Food Trucks, and Other	42	40	41	Total Carts, Food Trucks, and Other	32	30	34
Total DFD Doors	Total DFD Doors	8,242	5,149	6,588	Total DFD Doors	9,540	7,849	8,583
Total global points of access (as defined)		10,041	6,862	8,316
Total Global Points of Access (as defined)					Total Global Points of Access (as defined)	11,409	9,616	10,427

1.(1)Excludes Branded Sweet Treat Line distribution ~~points and legacy wholesale business doors.~~points.

2.(2)Includes ~~points~~Points of ~~access~~Access that were acquired from ~~franchisees~~a franchisee in the ~~United States~~Canada during the ~~first~~fourth quarter of fiscal ~~2021 and the second half~~2021. These Points of ~~fiscal 2020. These points of access~~Access were previously included in the Market Development segment. See Note 2, Acquisitions, to our Condensed Consolidated Financial Statements for further information.

3.(3)DFD Doors for both the U.S. and Canada and Market Development segments exclude legacy wholesale doors, which have been declining consistent with our strategy to evolve our legacy wholesale business to focus on the new DFD model and our new Branded Sweet Treat Line. As of July 4, 2021 legacy wholesale doors for the U.S. and Canada and the Market Development segments were substantially eliminated.

4.~~Beginning in the quarter ended October 3, 2021, the Company includes Carts and Food Trucks in its calculation of global points of access.~~ Carts and Food Trucks are non-producing, mobile (typically on wheels) facilities without walls or a door where product is received from a Hot Light Theater Shop or Doughnut Factory. ~~They~~Other includes a vending machine as of July 3, 2022.

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Points of Access in this category are primarily found in international locations, in airports, train stations, etc. Comparative data has been included in all periods presented above.

5.(4)Includes locations in Japan, which were acquired in ~~December~~the fourth quarter of fiscal 2020 and are now Company-owned. All remaining ~~points~~Points of ~~access~~Access in the Market Development segment relate to our franchise business.

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As of ~~October~~July 3, ~~2021,~~2022, we had ~~10,041 global points~~11,409 Global Points of ~~access,~~Access, with ~~1,757~~1,837 Krispy Kreme and Insomnia Cookies branded shops, 4232 Carts, ~~and~~ Food Trucks, and ~~8,242~~Other, and 9,540 DFD Doors. During the ~~third~~second quarter of fiscal ~~2021,~~2022 we added a net 3118 additional shops globally (excluding the exit of 30 franchise shops in Russia), including ~~three~~two Hot Light Theater Shops, 2112 Fresh Shops and ~~seven~~four Insomnia Cookie Shops. ~~The~~In the quarter, Hot Light Theater ~~Shop openings included expansion~~Shops were added in ~~Lakeland, FL for the U.S. and Canada segment, Boca del Rio, Mexico for the International segment, and~~locations such as Cairo, Egypt ~~for~~and Maribyrnong, Australia. We added 396 new DFD Doors during the ~~Market Development segment which represents~~quarter as we continue to focus on the expansion of our ~~first franchise shop in Egypt, increasing our global presence to 31 countries.~~Hub and Spoke model. We plan to continue adding new locations and expanding our Ecommerce and delivery platform in order to extend the availability of our products.

We also utilize “Hubs” as a key performance indicator. Our transformation is driven by the implementation of an omni-channel strategy to reach more consumers where they are and drive revenue growth, and this strategy is supported by a capital-efficient Hub and Spoke distribution model that provides a route to market and powers profitability. Our Hot Light Theater shops and Doughnut Factories serve as centralized production facilities (“Hubs”). From these Hubs, we deliver doughnuts to our Fresh Shops, Carts, ~~and~~ Food Trucks, and Other, Dark Shops, and DFD Doors (“Spokes”) through an integrated network of company-operated delivery routes, ensuring quality and freshness. A Dark Shop is a non-consumer facing, non-producing facility where product is received from a Hub and stored until taken out for delivery, typically via Ecommerce channels.

Hubs
Quarter Ended Fiscal Year Ended
October 3,
2021 September 27,
2020 January 3,
2021
U.S. and Canada:
Hot Light Theater Shops (1)
234 203 226
Doughnut Factories 4 7 5
Total 238 210 231
Hubs with Spokes 121 112 113
International:
Hot Light Theater Shops (1)
25 27 27
Doughnut Factories 10 9 9
Total 35 36 36
Hubs with Spokes 35 36 36
Market Development:
Hot Light Theater Shops (1)
111 141 116
Doughnut Factories 26 26 26
Total 137 167 142
Total Hubs 410 413 409
The following table presents our Hubs, by segment and type, as of the end of the second quarter of fiscal 2022, the second quarter of fiscal 2021 and fiscal 2021, respectively:


	Hubs
	Quarter Ended		Fiscal Year Ended
	July 3, 2022	July 4, 2021	January 2, 2022
U.S. and Canada:
Hot Light Theater Shops (1)	242	233	238
Doughnut Factories	4	5	4
Total	246	238	242
Hubs with Spokes	127	114	126
International:
Hot Light Theater Shops (1)	26	25	25
Doughnut Factories	11	12	11
Total	37	37	36
Hubs with Spokes	37	37	36
Market Development:
Hot Light Theater Shops (1)	104	112	106
Doughnut Factories	26	26	27
Total	130	138	133
Total Hubs	413	413	411

1.(1)Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a ~~spoke~~Spoke location that produces ~~hot doughnuts.~~some doughnuts for itself and also receives doughnuts from another producing location.

Non-GAAP Measures

We report our financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”); however, management evaluates our results of operations using, among other measures, organic revenue growth, adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), and Adjusted Net Income as we believe these non-GAAP measures are useful in evaluating our operating performance.

These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to

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facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q.

~~Table of Contents~~

Organic Revenue Growth

Organic revenue growth measures our revenue growth trends excluding the impact of acquisitions and foreign currency, and we believe it is useful for investors to understand the expansion of our global footprint through internal efforts. We define ~~“organic~~organic revenue ~~growth”~~growth as the growth in revenues, excluding (i) acquired shops owned by us for less than twelve months following their acquisition, (ii) the impact of foreign currency exchange rate changes, and (iii) the impact of revenues generated during the 53rd week for those fiscal years that have a 53rd week based on our fiscal calendar defined in ~~the “Overview” section.~~Note 1, Description of Business and Summary of Significant Accounting Policies. See “Results of Operations” for our organic growth calculations for the periods presented.

Adjusted EBITDA and Adjusted Net Income

We define “Adjusted EBITDA” as earnings before interest expense, net (including interest payable to related parties), income tax expense/(benefit), and depreciation and amortization, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, and other certain non-recurring, infrequent or non-core income and expense items. Adjusted EBITDA enables operating performance to be reviewed across reporting periods on a consistent basis and is one of the principal measures used by management to evaluate and monitor our operating performance.

We define “Adjusted Net Income” as net loss adjusted for interest expense – related party, share-based compensation, certain strategic initiatives, acquisition and integration expenses, amortization of acquisition-related intangibles, the tax impact of adjustments and other certain non-recurring, infrequent or non-core income and expense items.

Adjusted EBITDA and ~~Adjust~~Adjusted Net Income have certain limitations, including adjustments for income and expense items that are required by GAAP. In evaluating these non-GAAP measures, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as share-based compensation. Our presentation of Adjusted EBITDA and Adjusted Net Income should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using Adjusted EBITDA and Adjusted Net Income supplementally.

The following tables present a reconciliation of net ~~loss~~(loss)/income to Adjusted EBITDA and net ~~loss~~(loss)/income to Adjusted Net Income for the periods presented:


		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
(in thousands)	(in thousands)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020		(in thousands)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net loss		$	(3,752)	$	(13,484)	$	(19,126)	$	(36,117)
Net (loss)/income										Net (loss)/income	$	(2,408)	$	(14,996)	$	4,050	$	(15,374)
Interest expense, net	Interest expense, net	7,186		7,908		25,228		26,263		Interest expense, net	7,586		9,793		14,937		18,042
Interest expense — related party(1)	Interest expense — related party(1)	—		5,566		10,387		16,698		Interest expense — related party(1)	—		4,821		—		10,387
Income tax (benefit)/expense		(2,342)		499		8,266		(2,413)
Income tax expense										Income tax expense	1,574		9,923		5,374		10,608
Depreciation and amortization expense	Depreciation and amortization expense	25,663		20,435		74,258		57,619		Depreciation and amortization expense	27,814		25,194		55,655		48,595
Share-based compensation	Share-based compensation	6,315		3,095		16,973		9,236		Share-based compensation	5,452		8,290		10,493		10,658
Employer payroll taxes related to share-based compensation	Employer payroll taxes related to share-based compensation	1,171		—		2,012		—		Employer payroll taxes related to share-based compensation	35		841		90		841
Other non-operating expense/(income), net(2)	Other non-operating expense/(income), net(2)	732		(357)		(126)		(469)		Other non-operating expense/(income), net(2)	756		(416)		435		(858)
New York City flagship Hot Light Theater Shop opening(3)		—		2,190		—		6,429
Strategic initiatives(4)		—		4,649		—		13,923

Acquisition and integration expenses~~(5)~~(3)	Acquisition and integration expenses~~(5)~~(3)	1,288		4,274		3,663		8,697		Acquisition and integration expenses~~(5)~~(3)	82		223		599		2,375
Shop closure expenses~~(6)~~(4)	Shop closure expenses~~(6)~~(4)	—		2,058		—		4,844		Shop closure expenses~~(6)~~(4)	1,894		—		2,124		—
Restructuring and severance expenses~~(7)~~(5)	Restructuring and severance expenses~~(7)~~(5)	57		—		1,393		—		Restructuring and severance expenses~~(7)~~(5)	476		1,336		476		1,336
IPO-related expenses~~(8)~~(6)	IPO-related expenses~~(8)~~(6)	4,018		206		14,221		206		IPO-related expenses~~(8)~~(6)	—		6,727		—		10,203
Other(9)		1,081		746		3,064		(1,218)
Gain on sale-leaseback										Gain on sale-leaseback	—		—		(2,374)		—
Other(7)										Other(7)	4,100		657		4,409		1,983
Adjusted EBITDA	Adjusted EBITDA	$	41,417	$	37,785	$	140,213	$	103,698	Adjusted EBITDA	$	47,361	$	52,393	$	96,268	$	98,796

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		Quarter Ended				Three Quarters Ended					Quarter Ended				Two Quarters Ended
(in thousands)	(in thousands)	October 3, 2021		September 27, 2020		October 3, 2021		September 27, 2020		(in thousands)	July 3, 2022		July 4, 2021		July 3, 2022		July 4, 2021
Net loss		$	(3,752)	$	(13,484)	$	(19,126)	$	(36,117)
Net (loss)/income										Net (loss)/income	$	(2,408)	$	(14,996)	$	4,050	$	(15,374)
Interest expense — related party(1)	Interest expense — related party(1)	—		5,566		10,387		16,698		Interest expense — related party(1)	—		4,821		—		10,387
Share-based compensation	Share-based compensation	6,315		3,095		16,973		9,236		Share-based compensation	5,452		8,290		10,493		10,658
Employer payroll taxes related to share-based compensation	Employer payroll taxes related to share-based compensation	1,171		—		2,012		—		Employer payroll taxes related to share-based compensation	35		841		90		841
Other non-operating expense/(income), net(2)	Other non-operating expense/(income), net(2)	732		(357)		(126)		(469)		Other non-operating expense/(income), net(2)	756		(416)		435		(858)
New York City flagship Hot Light Theater Shop opening(3)		—		2,190		—		6,429
Strategic initiatives(4)		—		4,649		—		13,923

Acquisition and integration expenses~~(5)~~(3)	Acquisition and integration expenses~~(5)~~(3)	1,288		4,274		3,663		8,697		Acquisition and integration expenses~~(5)~~(3)	82		223		599		2,375
Shop closure expenses~~(6)~~(4)	Shop closure expenses~~(6)~~(4)	—		2,058		—		4,844		Shop closure expenses~~(6)~~(4)	2,144		—		2,374		—
Restructuring and severance expenses~~(7)~~(5)	Restructuring and severance expenses~~(7)~~(5)	57		—		1,393		—		Restructuring and severance expenses~~(7)~~(5)	476		1,336		476		1,336
IPO-related expenses~~(8)~~(6)	IPO-related expenses~~(8)~~(6)	4,018		206		14,221		206		IPO-related expenses~~(8)~~(6)	—		6,727		—		10,203
Other(9)		1,081		746		3,064		(1,218)
Amortization of acquisition related intangibles(10)		7,497		6,566		22,573		19,138
KKI Term Loan Facility interest and debt issuance costs(11)		107		—		2,448		—
Tax impact of adjustments(12)		(5,784)		(5,702)		(10,604)		(14,669)
Tax specific adjustments(13)		(114)		1,975		3,833		1,975
Gain on sale-leaseback										Gain on sale-leaseback	—		—		(2,374)		—
Other(7)										Other(7)	4,100		657		4,409		1,983
Amortization of acquisition related intangibles(8)										Amortization of acquisition related intangibles(8)	6,978		7,627		14,224		15,076
KKI Term Loan Facility interest and debt issuance costs(9)										KKI Term Loan Facility interest and debt issuance costs(9)	—		2,341		—		2,341
Tax impact of adjustments(10)										Tax impact of adjustments(10)	(2,341)		(798)		(3,419)		(4,820)
Tax specific adjustments(11)										Tax specific adjustments(11)	(628)		3,816		(628)		3,947
Adjusted net income	Adjusted net income	$	12,616	$	11,782	$	50,711	$	28,673	Adjusted net income	$	14,646	$	20,469	$	30,729	$	38,095

1.(1)Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021.

2.(2)Primarily foreign translation gains and losses in each period.

6.(4)Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment. Shop closure expenses included in Adjusted Net Income are inclusive of accelerated depreciation related to replacing a point of sale system.

8.(6)Includes consulting and advisory fees incurred in connection with preparation for and execution of the Company’s IPO. ~~Due to the timing of the IPO, certain costs were incurred in the quarter ended October 3, 2021 that are not expected to recur in future quarters.~~

9.(7)The quarter and ~~three~~two quarters ended ~~October~~July 3, 2022 and July 4, 2021 consist primarily of legal expenses incurred outside the ordinary course of business on matters described in Note 10, Commitments and Contingencies to our unaudited Condensed Consolidated Financial Statements. The quarter and three quarters ended September 27, 2020 consists primarily of fixed asset and impairment expenses, net of a gain on the sale of land.Contingencies.

~~10.~~(8)Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations.

~~11.~~(9)Includes interest expense of $0.6 million and debt issuance costs of $1.7 million incurred and recognized as expenses in the quarter ended July 4, 2021 in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO.

~~12.~~(10)Tax impact of adjustments calculated applying the applicable statutory rates. The ~~three~~quarter and two quarters ended ~~October~~July 3, ~~2021~~2022 also ~~includes~~include the impact of disallowed executive compensation expense ~~incurred~~and a discrete tax benefit related to a legal accrual described in ~~connection with the IPO.~~Note 10, Commitments and Contingencies.

~~13.~~(11)The ~~three~~quarter and two quarters ended ~~October~~July 3, 2022 consist of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations. The quarter and two quarters ended July 4, 2021 ~~consists~~consist primarily of the effect of ~~the U.K. 2023 statutory~~ tax ~~rate change from 19.0% to 25.0%~~law changes on existing temporary differences.

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Sales Per Hub

In order to measure the effectiveness of our Hub and Spoke model, we use “Sales per Hub” on a trailing four-quarter basis, which includes all revenue generated from a Hub and its associated Spokes. Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes during the period. Fresh Revenues include product sales generated from our Doughnut Shop business (including Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. The Average Hub with Spokes for a period is calculated as the average of the number of Hubs with Spokes at the end of the five most recent quarters. The Sales per Hub performance measure allows us and investors to measure our effectiveness at leveraging the Hubs in the Hub and Spoke model to distribute product and generate cost efficiencies and profitability.

Sales per Hub was as follows for each of the trailing four quarters periods below:


		Trailing Four Quarters Ended		Fiscal Year Ended					Trailing Four Quarters Ended		Fiscal Year Ended
(in thousands, unless otherwise stated)	(in thousands, unless otherwise stated)	October 3, 2021		January 3, 2021		December 29, 2019		(in thousands, unless otherwise stated)	July 3, 2022		January 2, 2022		January 3, 2021
U.S. and Canada:	U.S. and Canada:							U.S. and Canada:
Revenues	Revenues	$	904,633	$	782,717	$	587,522	Revenues	$	978,612	$	928,413	$	782,717
Non-Fresh Revenues (1)	Non-Fresh Revenues (1)	(53,719)		(128,619)		(112,051)		Non-Fresh Revenues (1)	(39,677)		(37,311)		(128,619)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)	Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)	(414,186)		(323,079)		(271,067)		Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)	(399,959)		(415,768)		(323,079)
Sales from Hubs with Spokes	Sales from Hubs with Spokes	436,728		331,019		204,404		Sales from Hubs with Spokes	538,976		475,334		331,019
Sales per Hub (millions)	Sales per Hub (millions)	3.8		3.5		3.2		Sales per Hub (millions)	4.4		4.0		3.5

International:	International:							International:
Sales from Hubs with Spokes (3)	Sales from Hubs with Spokes (3)	$	314,615	$	230,185	$	223,115	Sales from Hubs with Spokes (3)	$	358,306	$	332,995	$	230,185
Sales per Hub (millions)	Sales per Hub (millions)	8.6		6.4		8.3		Sales per Hub (millions)	9.8		9.1		6.4

1.(1)Includes legacy wholesale business revenues and Branded Sweet Treat Line revenues.

2.(2)Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes.

3.(3)Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment.

In our International segment, where the Hub and Spoke model is most developed, Sales per Hub reached ~~$8.6~~$9.8 million, up from $9.1 million in the full fiscal year 2021 and $6.4 million in the full fiscal year ~~2020, and also up from pre-pandemic levels in the full fiscal year 2019.~~2020. The International segment illustrates the benefits of leveraging our Hub and Spoke model in the most efficient way to grow the business, as shown by the ~~International segment’s~~its quick recovery from the impacts of the COVID-19 pandemic and growth in profit margins. In the U.S. and Canada segment, we reached Sales per Hub of ~~$3.8~~$4.4 million, up from $4.0 million in the full fiscal year 2021 and $3.5 million in the full fiscal year ~~2020 and up from $3.2 million at the beginning of our transformation in 2019.~~2020. U.S. and Canada growth was driven by our efforts to increase the number of DFD Doors served by our Hubs and to increase APD for the DFD Door portfolio, as the segment makes progress toward optimizing the model to look more like International. As we further extend the Hub and Spoke model into existing and new markets around the world, increase innovation, and selectively take pricing actions, we expect to see this measure continue to grow.

Table of Contents

Results of Operations

The following comparisons are historical results and are not indicative of future results which could differ materially from the historical financial information presented.

Quarter ended ~~October~~July 3, ~~2021~~2022 compared to the Quarter ended ~~September 27, 2020~~July 4, 2021

The following table presents our unaudited condensed consolidated results of operations for the quarter ended ~~October~~July 3, ~~2021~~2022 and the quarter ended ~~September 27, 2020:~~July 4, 2021:


		Quarter Ended													Quarter Ended
		October 3, 2021				September 27, 2020				Change					July 3, 2022				July 4, 2021				Change
(in thousands except percentages)	(in thousands except percentages)	Amount		% of Revenue		Amount		% of Revenue		$		%		(in thousands except percentages)	Amount		% of Revenue		Amount		% of Revenue		$		%
Net revenues	Net revenues													Net revenues
Product sales	Product sales	$	334,324	97.5	%	$	281,317	96.9	%	$	53,007	18.8	%	Product sales	$	367,777	98.0	%	$	341,223	97.7	%	$	26,554	7.8	%
Royalties and other revenues	Royalties and other revenues	8,475		2.5	%	8,916		3.1	%	(441)		-4.9	%	Royalties and other revenues	7,468		2.0	%	7,963		2.3	%	(495)		-6.2	%
Total net revenues	Total net revenues	342,799		100.0	%	290,233		100.0	%	52,566		18.1	%	Total net revenues	375,245		100.0	%	349,186		100.0	%	26,059		7.5	%
Product and distribution costs	Product and distribution costs	92,152		26.9	%	85,303		29.4	%	6,849		8.0	%	Product and distribution costs	100,558		26.8	%	85,017		24.3	%	15,541		18.3	%
Operating expenses	Operating expenses	157,315		45.9	%	121,792		42.0	%	35,523		29.2	%	Operating expenses	173,942		46.4	%	157,877		45.2	%	16,065		10.2	%
Selling, general and administrative expense	Selling, general and administrative expense	52,950		15.4	%	46,521		16.0	%	6,429		13.8	%	Selling, general and administrative expense	51,754		13.8	%	60,930		17.4	%	(9,176)		-15.1	%
Marketing expenses	Marketing expenses	12,062		3.5	%	8,015		2.8	%	4,047		50.5	%	Marketing expenses	11,215		3.0	%	10,052		2.9	%	1,163		11.6	%
Pre-opening costs	Pre-opening costs	1,192		0.3	%	3,368		1.2	%	(2,176)		-64.6	%	Pre-opening costs	985		0.3	%	1,752		0.5	%	(767)		-43.8	%
Other (income)/expenses, net		(359)		-0.1	%	4,667		1.6	%	(5,026)		-107.7	%
Other expenses/(income), net														Other expenses/(income), net	1,469		0.4	%	(761)		-0.2	%	2,230		293.0	%
Depreciation and amortization expense	Depreciation and amortization expense	25,663		7.5	%	20,435		7.0	%	5,228		25.6	%	Depreciation and amortization expense	27,814		7.4	%	25,194		7.2	%	2,620		10.4	%
Operating income	Operating income	1,824		0.5	%	132		—	%	1,692		1281.8	%	Operating income	7,508		2.0	%	9,125		2.6	%	(1,617)		-17.7	%
Interest expense, net	Interest expense, net	7,186		2.1	%	7,908		2.7	%	(722)		-9.1	%	Interest expense, net	7,586		2.0	%	9,793		2.8	%	(2,207)		-22.5	%
Interest expense – related party		—		—	%	5,566		1.9	%	(5,566)		-100.0	%
Interest expense — related party														Interest expense — related party	—		—	%	4,821		1.4	%	(4,821)		-100.0	%
Other non-operating expense/(income), net	Other non-operating expense/(income), net	732		0.2	%	(357)		-0.1	%	1,089		305.0	%	Other non-operating expense/(income), net	756		0.2	%	(416)		-0.1	%	1,172		281.7	%
Loss before income taxes	Loss before income taxes	(6,094)		-1.8	%	(12,985)		-4.5	%	6,891		53.1	%	Loss before income taxes	(834)		-0.2	%	(5,073)		-1.5	%	4,239		83.6	%
Income tax (benefit)/expense		(2,342)		-0.7	%	499		0.2	%	(2,841)		-569.3	%
Income tax expense														Income tax expense	1,574		0.4	%	9,923		2.8	%	(8,349)		-84.1	%
Net loss	Net loss	(3,752)		-1.1	%	(13,484)		-4.6	%	9,732		72.2	%	Net loss	(2,408)		-0.6	%	(14,996)		-4.3	%	12,588		83.9	%
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	1,907		0.6	%	1,368		0.5	%	539		39.4	%	Net income attributable to noncontrolling interest	1,441		0.4	%	2,146		0.6	%	(705)		-32.9	%
Net loss attributable to Krispy Kreme, Inc.	Net loss attributable to Krispy Kreme, Inc.	$	(5,659)	-1.7	%	$	(14,852)	-5.1	%	$	9,193	61.9	%	Net loss attributable to Krispy Kreme, Inc.	$	(3,849)	-1.0	%	$	(17,142)	-4.9	%	$	13,293	77.5	%

Product ~~sales~~sales:: Product sales increased ~~$53.0~~$26.6 million, or ~~18.8%~~7.8%, from the ~~third~~second quarter of fiscal ~~2020~~2021 to the ~~third~~second quarter of fiscal ~~2021.~~2022. Approximately ~~$32.5~~$4.5 million of the increase in product sales was attributable to shops acquired from ~~franchisees~~.franchisees. However, product sales growth was partially offset by $9.1 million attributable to foreign currencies weakening against the U.S. dollar.

Royalties and other revenues: Royalties and other revenues decreased ~~$0.4~~$0.5 million, or ~~4.9%~~6.2%, from the ~~third quarter of fiscal 2020 to the third~~second quarter of fiscal 2021 to the second quarter of fiscal 2022, reflecting the impact of the ~~acquisitions~~acquisition of KK ~~Japan and U.S. franchises made during~~Canada in the ~~second half of fiscal 2020 and the first~~fourth quarter of fiscal 2021.

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The following table presents a further breakdown of total net revenue and organic revenue growth by segment for the quarter ended ~~October~~July 3, ~~2021 and~~2022 compared to the quarter ended ~~September 27, 2020:~~July 4, 2021:


(in thousands except percentages)	(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company			(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company
Total net revenues in third quarter of fiscal 2021		$	225,807		$	87,262		$	29,730		$	342,799
Total net revenues in third quarter of fiscal 2020		202,575			63,504			24,154			290,233
Total net revenues in second quarter of fiscal 2022														Total net revenues in second quarter of fiscal 2022	$	250,460		$	93,853		$	30,932		$	375,245
Total net revenues in second quarter of fiscal 2021														Total net revenues in second quarter of fiscal 2021	230,918			89,237			29,031			349,186
Total Net Revenues Growth	Total Net Revenues Growth	23,232			23,758			5,576			52,566			Total Net Revenues Growth	19,542			4,616			1,901			26,059
Total Net Revenues Growth %	Total Net Revenues Growth %	11.5		%	37.4		%	23.1		%	18.1		%	Total Net Revenues Growth %	8.5		%	5.2		%	6.5		%	7.5		%
Impact of acquisitions	Impact of acquisitions	(27,928)			—			(1,195)			(29,123)			Impact of acquisitions	(5,795)			—			1,623			(4,172)
Impact of foreign currency translation	Impact of foreign currency translation	—			(5,305)			—			(5,305)			Impact of foreign currency translation	—			7,018			2,044			9,062
Organic Revenue Growth	Organic Revenue Growth	$	(4,696)		$	18,453		$	4,381		$	18,138		Organic Revenue Growth	$	13,747		$	11,634		$	5,568		$	30,949
Organic Revenue Growth %	Organic Revenue Growth %	-2.3		%	29.1		%	18.1		%	6.2		%	Organic Revenue Growth %	6.0		%	13.0		%	19.2		%	8.9		%

Total net revenue growth during the second quarter of ~~$52.6~~fiscal 2022 of $26.1 million, or approximately ~~18.1%~~7.5%, and organic revenue growth of ~~$18.1~~$30.9 million, or approximately ~~6.2%~~8.9%, was driven by increasing availability through new ~~points~~Global Points of ~~access and the omni-channel model, particularly the~~ ~~expansion of spokes, including~~Access, mostly capital-light DFD Doors, ~~for existing Hubs with Spokes~~and via Ecommerce. A record 420 million doughnuts were sold around the world during the quarter, an increase of 7% over the prior year. The lower revenue growth compared to recent quarters is primarily explained by the strong U.S. dollar as well as wider consumer traffic declines in the U.K. Additionally, pricing action was taken early in the third quarter of fiscal ~~2021.~~2022 in the U.S. and the U.K. to offset labor and commodity inflation impacts.

U.S. and Canada segment net revenue growth was driven by a combination of ~~franchise acquisitions (17 shops in the first quarter of fiscal 2021 and 51 shops in the second half of fiscal 2020) and~~ continued execution of our omni-channel ~~strategy.~~strategy and the acquisition of KK Canada (10 shops in the fourth quarter of fiscal 2021). U.S. and Canada net revenue grew ~~$23.2~~$19.5 million, or approximately ~~11.5%~~8.5%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022 ~~2021~~ while U.S. and Canada organic revenue ~~decreased $4.7~~increased $13.7 million, or approximately ~~2.3%~~6.0%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022. ~~2021. The decrease in organic revenue~~Organic growth was driven by a $22.8 million withdrawal in revenue from our legacy wholesale business, reflecting the evolution of the DFD business and the discontinuance of certain legacy extended shelf-life products sold through that channel. ~~Excluding the impact of exiting the legacy wholesale business, U.S. and Canada organic growth was 8.9% and was driven by the~~continued expansion of ~~our points~~fresh Points of ~~access,~~Access, particularly our DFD network, higher DFD APD, and the strong performance of Insomnia Cookies. As we continue our transformation and implementation of the Hub and Spoke model, the transition to DFD from our legacy wholesale business continues to drive strong results with record APD established in the quarter and substantial growth versus 2020 and 2019 driven by the quality of newlow capital DFD Doors ~~(including~~ ~~expansion~~which have increased by 453 (and with a 9.0% increase in ~~major markets such as Chicago, Dallas, Phoenix, Los Angeles, and Denver) and consumer convenience.~~ This growth was partially offset by declines in revenues from our early-stage Branded Sweet Treat Line as we lapped the substantial revenues associated with shipments for the initial launch in 2020. However, we continue to expand production and the customer base and revenues increased whenAPD) compared to the second quarter of fiscal 2021. We also operated an additional 22 Insomnia Cookies shops compared to the second quarter of fiscal 2021. Our organic growth has also been supplemented by effective pricing increases taken in the second half of fiscal 2021, leading to significant increase in the average transaction size, but offset some by transaction declines.

Our International segment ne ~~segment net~~t revenue grew ~~$23.8~~$4.6 million, or approximately ~~37.4%~~5.2%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022 ~~2021 and~~, in spite of foreign currency translation impacts of $7.0 million from a strengthening U.S. dollar. International organic revenue grew ~~$18.5~~$11.6 million, or approximately ~~29.1%~~13.0%, from the ~~third~~second quarter of fiscal ~~2020~~2021 to the ~~third~~second quarter of fiscal 2022, driven by the substantial expansion of DFD Doors and new shop openings, with fresh Points of Access increasing by 768, or 28.9%, to 3,425 compared to the second quarter of fiscal 2021. ~~Organic~~Growth was strong in Mexico, Australia, and New Zealand. We still saw growth in the ~~quarter was driven by successful limited time offerings, substantial expansion of DFD,~~U.K. and ~~while lapping~~Ireland despite a ~~previous period which was negatively impacted by COVID-19. Our businesses in the United Kingdom, Ireland, and Mexico in particular saw strong organic growth during the third quarter,~~challenging consumer environment, with U.K industry retail footfall traffic ~~returning stronger than prior~~declining compared to the ~~pandemic, while our businesses in Australia and New Zealand also contributed to organic growth even with heavier impacts from COVID-19 restrictions and temporary shop closures.~~prior year.

Our Market Development segment net revenue increased $1.9 million, or approximately 6.5%, from the second quarter of fiscal 2021 to the second quarter of fiscal 2022, in spite of the impact of franchise acquisitions such as KK Canada and by certain foreign currencies devaluing against the U.S. dollar. When adjusted for the impacts of acquisitions and foreign currency, Market Development organic revenue grew $5.6 million, or approximately ~~23.1%~~19.2%, from the ~~third~~first quarter of fiscal ~~2020~~ 2021 to the ~~third~~first quarter of fiscal ~~2021,~~ 2022, driven ~~mainly~~ by ~~the acquisition of KK Japan~~focused growth in ~~the final quarter of 2020. Market Development organic revenue grew $4.4 million, or approximately 18.1%, from~~ ~~the third quarter of fiscal~~ ~~2020 to~~ ~~the third quarter of fiscal~~ ~~2021, driven mainly by improved market conditions for~~our international franchise ~~locations as COVID-19 restrictions~~markets and benefits from DFD and Ecommerce expansion in ~~certain key markets continued to ease.~~Japan.

Product and distribution costs (exclusive of depreciation and amortization): Product and distribution costs increased ~~$6.8~~$15.5 million, or ~~8.0%~~18.3%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022 ~~2021, largely in line with and~~, attributable to the same factors as our revenue growth.

Product and distribution costs as a percentage of revenue ~~decreased~~increased by approximately 250 basis points from ~~29.4%~~24.3% in the ~~third~~second quarter of fiscal ~~2020~~2021 to ~~26.9%~~26.8% in the ~~third~~second quarter of fiscal ~~2021.~~2022. This ~~margin improvement~~increase was primarily driven by ~~the U.S.~~inflationary pressures on commodities and Canada segment, which benefited from higher margins from its DFD business due to the shift to fresh doughnut sales from the legacy wholesale business. In addition, margins improved as a result of the sales mix shift due to the impact of franchise acquisitions. These factors more than offset the impact of commodity cost pressurelogistics costs in the ~~third~~second quarter of fiscal ~~2021.~~2022, as well as targeted discount promotions such as “Beat the Pump.”

Operating expenses: Operating expenses increased $16.1 million, or 10.2%, from the second quarter of fiscal 2021 to the second quarter of fiscal 2022, driven mainly by labor cost inflation, as well as investments to support growth. Operating expenses as a percentage of revenue increased approximately 120 basis points, from 45.2% in the second quarter of fiscal 2021 to 46.4% in the second quarter of fiscal 2022 with decreased performance for Hubs without Spokes for Krispy Kreme U.S. and

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~~Operating expenses:~~Canada coupled with transaction volume declines for KKUK. ~~Operating expenses increased $35.5 million, or 29.2%,~~This has been partially offset by efficiency benefits from ~~the third quarter of fiscal~~ ~~2020 to~~ ~~the third quarter of fiscal~~ ~~2021, driven mainly by franchise acquisitions and labor investments.~~

~~Operating expenses~~DFD expansion as ~~a percentage of revenue increased approximately 390 basis points, from 42.0% in~~ ~~the third quarter of fiscal~~ ~~2020 to 45.9% in~~ ~~the third quarter of fiscal~~ 2021, driven in part by the impact of franchise acquisitions, such as KK Japan, which resulted in additional operating expenses that are needed to run Company-owned operations versus franchises. Additionally, we ~~incurred higher labor costs in part due to labor needed to support the~~execute our Hub and Spoke ~~model transformation and labor investments as a result of the current labor markets around the world.~~transformation.

Selling, general and administrative expense: Selling, general and administrative (“SG&A”) ~~expenses increased $6.4~~expense decreased $9.2 million, or ~~13.8%~~15.1%, from the ~~third quarter of fiscal~~ ~~2020 to~~ ~~the third quarter of fiscal~~ 2021. The increase was driven by higher costs related to operating as a public company, increased share-based compensation expense, and by SG&A expenses incurred by franchise shops acquired subsequent to the thirdsecond quarter of fiscal ~~2020.~~2021 to the second quarter of fiscal 2022. As a percentage of revenue, SG&A ~~expenses~~expense decreased approximately 60360 basis points, from ~~16.0%~~17.4% in the ~~third~~second quarter of fiscal ~~2020~~2021 to ~~15.4%~~13.8% in the second quarter of fiscal 2022, primarily due to ~~economies~~a decrease in advisory service fees as we completed our IPO in the second quarter of ~~scale from our top-line revenue growth.~~fiscal 2021. The decline for the quarter was also driven by a decrease in employee compensation.

Marketing expenses: Marketing expenses increased ~~$4.0~~$1.2 million, or ~~50.5%~~11.6%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022 ~~2021,~~, primarily driven by ~~spend associated with the~~an increased ~~revenues during the quarter.~~cost of advertising.

~~Pre-opening costs:~~Other expense/(income), net: ~~Pre-opening costs decreased $2.2~~Other expense, net of $1.5 million ~~or 64.6%, from~~ in the ~~third~~second quarter of fiscal ~~2020 to~~ ~~the third quarter of fiscal~~ ~~2021,~~ 2022 was primarily driven by ~~costs associated with~~impairment and lease termination costs. As part of our ~~expansion in NYC in~~omni-channel transformation, we initiated portfolio optimization efforts for Krispy Kreme U.S. and Canada during the ~~third~~second quarter of fiscal ~~2020, including expenses incurred as we prepared for the opening of our NYC flagship Hot Light Theater Shop near the end of the third quarter of fiscal 2020.~~

~~Other (income)/expenses, net:~~ ~~Other expenses, net of~~ ~~$4.7 million~~2022, which included deciding to exit six lower margin shops in the ~~third quarter of fiscal 2020 were primarily driven by~~U.S. We expect additional impairment and lease termination costs ~~impairment charges, and losses on disposal of property and equipment, a majority of which were~~ related to ~~shop closures driven by impacts~~this project in the second half of ~~COVID-19.~~fiscal 2022.

Depreciation and amortization expense: Depreciation and amortization expense increased ~~$5.2~~$2.6 million, or ~~25.6%~~10.4%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022 ~~2021,~~, primarily driven by ~~the impact of acquired franchises and depreciation resulting from~~ increased capital ~~expenditures.~~spend and assets placed into service to support the Hub and Spoke model evolution.

Interest expense - related party: Interest expense with related parties decreased ~~$5.6~~$4.8 million or 100.0%, from the ~~third~~second quarter of fiscal ~~2020~~ 2021 to the ~~third~~second quarter of fiscal 2022 ~~2021,~~, driven by paying off our Related Party Notes in full with KK GP during the second quarter of fiscal 2021.

Income tax ~~(benefit)/~~expense: The income tax ~~benefit~~expense of ~~$2.3~~$1.6 million in the ~~third~~second quarter of fiscal ~~2021~~2022 was driven by ~~pre-tax results and~~disallowed executive compensation expense, the recognition of previously unrecognized tax benefits, and a discrete tax benefit related to ~~the vesting of RSUs.~~a legal accrual described in Note 10, Commitments and Contingencies. Our tax expense was also impacted by the mix of income between the U.S. and foreign jurisdictions.

Net income attributable to noncontrolling interest: Net income attributable to noncontrolling interest ~~for~~decreased $0.7 million or 32.9%, from the ~~third~~second quarter of fiscal 2021 ~~increased $0.5 million, or 39.4%, from~~ to the ~~third~~second quarter of fiscal 2022 ~~2020, reflecting stronger~~, driven by less earnings allocated to ~~the shareholders of~~certain consolidated subsidiaries, particularly ~~Insomnia Cookies.~~WKS Krispy Kreme.

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Results of Operations by Segment – Quarter ended ~~October~~July 3, ~~2021~~2022 compared to the Quarter ended ~~September 27, 2020~~July 4, 2021

The following table presents Adjusted EBITDA by segment for the periods indicated:


		Quarter Ended				Change					Quarter Ended				Change
(in thousands except percentages)	(in thousands except percentages)	October 3, 2021		September 27, 2020		$		%		(in thousands except percentages)	July 3, 2022		July 4, 2021		$		%
Adjusted EBITDA	Adjusted EBITDA									Adjusted EBITDA
U.S. and Canada	U.S. and Canada	$	19,912	$	20,028	$	(116)	-0.6	%	U.S. and Canada	$	26,017	$	28,285	$	(2,268)	-8.0	%
International	International	21,655		15,098		6,557		43.4	%	International	19,535		23,673		(4,138)		-17.5	%
Market Development	Market Development	9,033		9,374		(341)		-3.6	%	Market Development	10,495		9,858		637		6.5	%
Corporate	Corporate	(9,183)		(6,715)		(2,468)		-36.8	%	Corporate	(8,686)		(9,423)		737		7.8	%
Total Adjusted EBITDA (1)	Total Adjusted EBITDA (1)	$	41,417	$	37,785	$	3,632	9.6	%	Total Adjusted EBITDA (1)	$	47,361	$	52,393	$	(5,032)	-9.6	%

1. (1)Refer to “Key Performance Indicators and Non-GAAP Measures” above for a reconciliation of Adjusted EBITDA to net ~~loss.~~income/(loss).

U.S. and Canada Adjusted EBITDA decreased ~~$0.1~~$2.3 million, or ~~0.6%~~8.0%, ~~from~~with margin decline of approximately 180 basis points to 10.4% in the ~~third~~second quarter of fiscal ~~2020~~2022 compared to the ~~third~~second quarter of fiscal 2021. ~~Efficiency~~This decrease was driven by cost increases in labor and commodities, as well as weaker performance in our Hubs without Spokes. This has been partially offset by efficiency benefits offrom DFD expansion as we execute our Hub and Spoke transformation, ~~were offset by short-term supply challenges related to the~~as well as an improvement in margin for our Branded Sweet Treat ~~line as well as commodity cost and labor pressures. At~~Line. Since the end of the ~~third~~second quarter of fiscal ~~2021,~~2022, we ~~increased prices on fresh doughnuts to help mitigate these cost pressures as well as~~have also implemented mid-single digit pricing increases which we believe will improve margins. Additionally, we believe the ~~growing impact of wage inflation in the marketplace.~~

International Adjusted EBITDA increased $6.6 million, or 43.4%, from the third quarter of fiscal 2020 to the third quarter of fiscal 2021, primarily driven by revenue growth of 37.4% due to DFD expansion and the adverse impacts of the COVID-19 pandemic on our international markets during the third quarter of fiscal 2020. Revenue growth significantly out-paced expense growth, leading to higher margins consistent with these more established Hub and Spoke markets. We expect the International segment to continue to contribute to strong EBITDA performance as the markets have rebounded well to match or exceed their performance prior to the pandemic.

~~Market Development Adjusted EBITDA decreased $0.3 million, or 3.6%, from the third quarter of fiscal 2020 to the third quarter of fiscal 2021 driven mainly by the impact of~~legacy U.S. and Canada ~~franchise acquisitions, which more than offset EBITDA growth in the international franchise markets.~~

Corporate Adjusted EBITDA decreased $2.5 million, or 36.8%, from the third quarter of fiscal 2020 to the third quarter of fiscal 2021 driven by an increase in costs associated with our operation as a public company.

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optimization efforts discussed in “Significant Events and Transactions” above will yield improvement to margins in fiscal 2023 and 2024.

International Adjusted EBITDA decreased $4.1 million, or 17.5%, with margin decline of approximately 570 basis points to 20.8% from the second quarter of fiscal 2021 to the second quarter of fiscal 2022, due to cycling record performance a year ago upon the re-opening from COVID-19, cost pressures from labor and commodities, and a challenging consumer environment in the U.K. Additionally, foreign currency translation had an adverse impact of $1.4 million on International’s Adjusted EBITDA during the quarter.

Market Development Adjusted EBITDA increased $0.6 million, or 6.5%, from the second quarter of fiscal 2021 to the second quarter of fiscal 2022 driven by top-line growth of our international franchise markets, which more than offset the impact of acquisitions and foreign currency fluctuations.

~~Three~~Corporate expenses within Adjusted EBITDA decreased $0.7 million, or 7.8%, from the second quarter of fiscal 2021 to the second quarter of fiscal 2022 driven in part by a decrease of our employee compensation accrual.

Two Quarters ended ~~October~~July 3, ~~2021~~2022 compared to the ~~Three~~Two Quarters ended ~~September 27, 2020~~July 4, 2021

The following table presents our unaudited condensed consolidated results of operations for the ~~three~~two quarters ended ~~October~~July 3, ~~2021~~2022 and ~~September 27, 2020:~~the two quarters ended July 4, 2021:


		Three Quarters Ended													Two Quarters Ended
		October 3, 2021				September 27, 2020				Change					July 3, 2022				July 4, 2021				Change
(in thousands except percentages)	(in thousands except percentages)	Amount		% of Revenue		Amount		% of Revenue		$		%		(in thousands except percentages)	Amount		% of Revenue		Amount		% of Revenue		$		%
Net revenues	Net revenues													Net revenues
Product sales	Product sales	$	989,132	97.6	%	$	769,461	96.6	%	$	219,671	28.5	%	Product sales	$	731,829	97.9	%	$	654,808	97.6	%	$	77,021	11.8	%
Royalties and other revenues	Royalties and other revenues	24,662		2.4	%	26,960		3.4	%	(2,298)		-8.5	%	Royalties and other revenues	15,948		2.1	%	16,187		2.4	%	(239)		-1.5	%
Total net revenues	Total net revenues	1,013,794		100.0	%	796,421		100.0	%	217,373		27.3	%	Total net revenues	747,777		100.0	%	670,995		100.0	%	76,782		11.4	%
Product and distribution costs	Product and distribution costs	257,166		25.4	%	222,409		27.9	%	34,757		15.6	%	Product and distribution costs	196,669		26.3	%	165,014		24.6	%	31,655		19.2	%
Operating expenses	Operating expenses	462,733		45.6	%	341,792		42.9	%	120,941		35.4	%	Operating expenses	342,668		45.8	%	305,418		45.5	%	37,250		12.2	%
Selling, general and administrative expense	Selling, general and administrative expense	163,417		16.1	%	129,090		16.2	%	34,327		26.6	%	Selling, general and administrative expense	105,465		14.1	%	110,467		16.5	%	(5,002)		-4.5	%
Marketing expenses	Marketing expenses	31,621		3.1	%	24,704		3.1	%	6,917		28.0	%	Marketing expenses	21,374		2.9	%	19,559		2.9	%	1,815		9.3	%
Pre-opening costs	Pre-opening costs	4,335		0.4	%	9,668		1.2	%	(5,333)		-55.2	%	Pre-opening costs	2,314		0.3	%	3,143		0.5	%	(829)		-26.4	%
Other (income)/expenses, net		(4,365)		-0.4	%	7,177		0.9	%	(11,542)		-160.8	%
Other income, net														Other income, net	(1,164)		-0.2	%	(4,006)		-0.6	%	2,842		70.9	%
Depreciation and amortization expense	Depreciation and amortization expense	74,258		7.3	%	57,619		7.2	%	16,639		28.9	%	Depreciation and amortization expense	55,655		7.4	%	48,595		7.2	%	7,060		14.5	%
Operating income	Operating income	24,629		2.4	%	3,962		0.5	%	20,667		521.6	%	Operating income	24,796		3.3	%	22,805		3.4	%	1,991		8.7	%
Interest expense, net	Interest expense, net	25,228		2.5	%	26,263		3.3	%	(1,035)		-3.9	%	Interest expense, net	14,937		2.0	%	18,042		2.7	%	(3,105)		-17.2	%
Interest expense – related party	Interest expense – related party	10,387		1.0	%	16,698		2.1	%	(6,311)		-37.8	%	Interest expense – related party	—		—	%	10,387		1.5	%	(10,387)		-100.0	%
Other non-operating income, net		(126)		—	%	(469)		-0.1	%	343		73.1	%
Loss before income taxes		(10,860)		-1.1	%	(38,530)		-4.8	%	27,670		71.8	%
Income tax expense/(benefit)		8,266		0.8	%	(2,413)		-0.3	%	10,679		442.6	%
Net loss		(19,126)		-1.9	%	(36,117)		-4.5	%	16,991		47.0	%
Other non-operating expense/(income), net														Other non-operating expense/(income), net	435		0.1	%	(858)		-0.1	%	1,293		150.7	%
Income/(loss) before income taxes														Income/(loss) before income taxes	9,424		1.3	%	(4,766)		-0.7	%	14,190		297.7	%
Income tax expense														Income tax expense	5,374		0.7	%	10,608		1.6	%	(5,234)		-49.3	%
Net income/(loss)														Net income/(loss)	4,050		0.5	%	(15,374)		-2.3	%	19,424		126.3	%
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	6,736		0.7	%	2,880		0.4	%	3,856		133.9	%	Net income attributable to noncontrolling interest	3,897		0.5	%	4,829		0.7	%	(932)		-19.3	%
Net loss attributable to Krispy Kreme, Inc		$	(25,862)	-2.6	%	$	(38,997)	-4.9	%	$	13,135	33.7	%
Net income/(loss) attributable to Krispy Kreme, Inc														Net income/(loss) attributable to Krispy Kreme, Inc	$	153	—	%	$	(20,203)	-3.0	%	$	20,356	100.8	%

Product sales: Product sales increased ~~$219.7~~$77.0 million, or ~~28.5%~~11.8%, from the first ~~three~~two quarters of fiscal ~~2020~~2021 to the first ~~three~~two quarters of fiscal ~~2021.~~2022. Approximately ~~$104.8~~$12.9 million of the increase in product sales was attributable to shops acquired from franchisees. However, product sales growth was partially offset by $13.2 million attributable to foreign currencies weakening against the U.S. dollar.

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Royalties and other revenues: Royalties and other revenues ~~decreased $2.3 million, or 8.5%,~~remained consistent from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 ~~reflecting~~to the first two quarters of fiscal 2022, impacted by activity related to the start of business with franchisees in new markets such as Chile, Costa Rica, Jordan, and Switzerland offset by the impact of franchise acquisitions such as KK Canada in the ~~acquisitions of KK Japan and U.S. franchises made during the second half of fiscal 2020 and the first~~fourth quarter of fiscal 2021.

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The following table presents a further breakdown of total net revenue and organic revenue growth by segment for the ~~three~~two quarters ended ~~October~~July 3, 2022 compared to the two quarters ended July 4, 2021 ~~and September 27, 2020:~~:


(in thousands except percentages)	(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company			(in thousands except percentages)	U.S. and Canada			International			Market Development			Total Company
Total net revenues in first three quarters of fiscal 2021		$	679,195		$	243,005		$	91,594		$	1,013,794
Total net revenues in first three quarters of fiscal 2020		557,280			158,575			80,566			796,421
Total net revenues in first two quarters of fiscal 2022														Total net revenues in first two quarters of fiscal 2022	$	503,587		$	181,054		$	63,136		$	747,777
Total net revenues in first two quarters of fiscal 2021														Total net revenues in first two quarters of fiscal 2021	453,388			155,743			61,864			670,995
Total Net Revenues Growth	Total Net Revenues Growth	121,915			84,430			11,028			217,373			Total Net Revenues Growth	50,199			25,311			1,272			76,782
Total Net Revenues Growth %	Total Net Revenues Growth %	21.9		%	53.2		%	13.7		%	27.3		%	Total Net Revenues Growth %	11.1		%	16.3		%	2.1		%	11.4		%
Impact of acquisitions	Impact of acquisitions	(99,062)			—			(1,584)			(100,646)			Impact of acquisitions	(14,929)			—			4,213			(10,716)
Impact of foreign currency translation	Impact of foreign currency translation	—			(21,767)			—			(21,767)			Impact of foreign currency translation	—			9,953			3,205			13,158
Organic Revenue Growth	Organic Revenue Growth	$	22,853		$	62,663		$	9,444		$	94,960		Organic Revenue Growth	$	35,270		$	35,264		$	8,690		$	79,224
Organic Revenue Growth %	Organic Revenue Growth %	4.1		%	39.5		%	11.7		%	11.9		%	Organic Revenue Growth %	7.8		%	22.6		%	14.0		%	11.8		%

Total net revenue growth of ~~$217.4~~$76.8 million, or approximately ~~27.3%~~11.4%, and organic revenue growth of ~~$95.0~~$79.2 million, or approximately ~~11.9%~~11.8%, was driven by the continued and successful execution of our growth strategy ~~and transformation~~of deploying our omni-channel approach globally. We have continued to increase availability through new ~~points~~Global Points of ~~access~~Access and the omni-channel model, particularly the expansion of ~~spokes,~~Spokes, including DFD Doors, for existing Hubs with Spokes during the first ~~three~~two quarters of fiscal ~~2021.~~2022.

U.S. and Canada ~~segment~~ net revenue ~~growth, which reflects~~grew $50.2 million, or approximately 11.1% from the first two quarters of fiscal 2021 to the first two quarters of fiscal 2022, and was impacted by U.S. franchise acquisitions (17 shops in the first quarter of fiscal ~~2021~~2021) and ~~51 shops in~~ the ~~second half~~acquisition of ~~fiscal 2020), was also driven by strong organic revenue growth.~~ ~~U.S. and Canada net revenue grew $121.9 million, or approximately 21.9% from the first three quarters of fiscal 2020 to the first three quarters of fiscal 2021 and~~KK Canada. U.S. and Canada organic revenue grew ~~$22.9~~$35.3 million, or approximately ~~4.1%~~7.8%, ~~for~~from the ~~period,~~first two quarters of fiscal 2021 to the first two quarters of fiscal 2022, driven by significant expansion of the DFD business in strategic markets, ~~our adaptation to changing consumer behavior in response to the COVID-19 pandemic (which heavily impacted the segment during the first fiscal quarter of 2020), including~~ increased leverage of Ecommerce and delivery channels, Krispy Kreme and Insomnia Cookies new shop openings, and successful ~~limited time offers. Organic growth was partially offset by an $80.7 million~~ ~~withdrawal~~ ~~in revenue from our legacy wholesale business, reflecting the evolution of the DFD business and the discontinuance of certain legacy extended shelf-life products sold through that channel.~~LTOs.

Our International segment net revenue grew ~~$84.4~~$25.3 million, or approximately ~~53.2%~~16.3%, from the first ~~three~~two quarters of fiscal ~~2020~~2021 to the first ~~three~~two quarters of fiscal ~~2021.~~2022, in spite of foreign currency translation impacts of $10.0 million from a strengthening U.S. dollar. International organic revenue grew ~~$62.7~~$35.3 million, or approximately ~~39.5%~~22.6%, from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 to the first two quarters of fiscal 2022, driven mainly by successfully leveraging our Hub and Spoke model with added points of access and by COVID-19 restrictions being lifted compared to 2020. Despite certain ongoing COVID-19 restrictions in place during the first fiscal quarter of 2021, our international markets experienced a strong rebound in the second and third fiscal quarters of 2021, helped by our continued increase in global Ecommerce penetration, thesubstantial expansion of DFD Doors, new shop openings, and successful ~~leverage of limited time offers and promotions~~.LTOs.

Our Market Development segment net revenue grew ~~$11.0~~$1.3 million, or approximately ~~13.7%~~2.1%, from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 ~~driven mainly by~~to the ~~acquisition of KK Japan in the final quarter~~first two quarters of fiscal ~~2020.~~2022, in spite of the impact of franchise acquisitions and by certain foreign currencies devaluing against the U.S. dollar. Market Development organic revenue grew ~~$9.4~~$8.7 million, or approximately ~~11.7%~~14.0%, from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 to the first two quarters of fiscal 2022, driven ~~mainly~~ by ~~improved market conditions for~~focused expansion in Japan and international franchise ~~locations as COVID-19 restrictions in certain key markets began to ease.~~markets.

Product and distribution costs (exclusive of depreciation and amortization): Product and distribution costs increased ~~$34.8~~$31.7 million, or ~~15.6%~~19.2%, from the first ~~three~~two quarters of fiscal ~~2020~~2021 to the first ~~three~~two quarters of fiscal ~~2021,~~2022, largely in line with and attributable to the same factors as our revenue growth.

Product and distribution costs as a percentage of revenue ~~decreased~~increased by approximately ~~250~~170 basis points from ~~27.9%~~24.6% in the first ~~three~~two quarters of fiscal ~~2020~~2021 to ~~25.4%~~26.3% in the first ~~three~~two quarters of fiscal ~~2021. This margin improvement~~2022. The increase was primarily driven by inflationary pressures on commodities and logistics costs in the ~~U.S. and Canada segment, which benefited~~first two quarters of fiscal 2022.

Operating expenses: Operating expenses increased $37.3 million, or 12.2%, from ~~higher margins from its DFD business due~~the first two quarters of fiscal 2021 to the ~~shift~~first two quarters of fiscal 2022, driven mainly by franchise acquisitions, labor cost inflation, and labor investments to ~~fresh doughnut sales from~~support growth. Franchise acquisitions, which result in additional operating expenses that are needed to run Company-owned operations versus franchises, contributed to the ~~legacy wholesale business. In addition, margins improved~~increase. Operating expenses as a ~~result~~percentage of revenue increased approximately 30 basis points, from 45.5% in the ~~sales mix shift due~~first two quarters of fiscal 2021 to 45.8% in the ~~impact~~first two quarters of ~~franchise acquisitions.~~fiscal 2022 with decreased

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~~Operating expenses:~~ performance for Hubs without Spokes~~Operating expenses increased $120.9 million, or 35.4%,~~ for Krispy Kreme U.S. and Canada coupled with transaction volume declines for KKUK. This has been partially offset by efficiency benefits from ~~the first three quarters of fiscal 2020 to the first three quarters of fiscal 2021, driven mainly by franchise acquisitions and~~ ~~labor investments.~~

~~Operating expenses~~DFD expansion as ~~a percentage of revenue increased approximately 270 basis points, from 42.9% in the first three quarters of fiscal 2020 to 45.6% in the first three quarters of fiscal 2021~~ ~~driven mainly by the impact of franchise acquisitions, such as KK Japan, which resulted in additional operating expenses which are needed to run Company-owned operations versus franchises.~~ ~~Additionally,~~ we ~~incurred higher labor costs in part due to labor needed to support the~~execute our Hub and Spoke ~~model transformation and labor investments as a result of the current labor markets around the world.~~transformation.

Selling, general and administrative expense: ~~Selling, general and administrative~~SG&A expenses ~~increased $34.3~~decreased by $5.0 million, or ~~26.6%~~4.5%, from the first ~~three~~two quarters of fiscal ~~2020~~2021 to the first ~~three~~two quarters of fiscal ~~2021. The increase was driven mainly by an increase in costs related to the completion of our IPO ($14.2 million), increased sha~~2022. re-based compensation expense related to the accelerated vesting of certain employee restricted stock units in conjunction with the IPO (as well as the re-loading of executive units and stock options during ~~the second quarter of fiscal~~ ~~2021),and by SG&A expenses incurred related to the impact of franchise acquisitions.~~ As a percentage of revenue, SG&A expenses decreased approximately 10240 basis points, from ~~16.2%~~16.5% in the first ~~three quarters of fiscal 2020 to 16.1% in the first three~~two quarters of fiscal 2021 ~~primarily due~~ to 14.1% in the first two quarters of fiscal 2022. The decrease was driven by higher IPO costs and acquisition and integration costs recognized in the first two quarters of fiscal 2021, a decrease of our employee compensation accrual in the second quarter of fiscal 2022, as well as economies of scale from our top-line revenue ~~growth.~~

~~Marketing expenses:~~ growthMarketing expenses increased $6.9 million, or 28.0%, from the first three quarters of fiscal 2020 to the first three quarters of fiscal 2021, primarily driven by spend associated with the increased revenues during the three quarters.

~~Pre-opening costs:~~ ~~Pre-opening costs decreased $5.3 million, or 55.2%, from the first three quarters of fiscal 2020 to the first three quarters of fiscal 2021,~~ primarily driven by $3.6 million costs associated with our expansion in NYC in the second half of fiscal 2020, including expenses incurred as we prepared for the opening of our NYC flagship Hot Light Theater Shop near the end of the third quarter of fiscal 2020..

Other ~~(income)/expenses,~~income, net: Other income, net of ~~$4.4~~$1.2 million in the first ~~three~~two quarters of fiscal 2022 was primarily driven by a gain on sale-leaseback of $2.6 million during the first quarter of fiscal 2022, partially offset by impairment and lease termination costs in the second quarter of fiscal 2022. Other income, net of $4.0 million in the first two quarters of fiscal 2021 was primarily driven by one-time ~~COVID-19 related~~COVID-related business interruption insurance proceeds of approximately $3.5 million ~~for KKUK~~ in the ~~first quarter of fiscal 2021.~~U.K. and Ireland.

Depreciation and amortization expense: Depreciation and amortization expense increased ~~$16.6~~$7.1 million, or ~~28.9%~~14.5%, from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 to the first two quarters of fiscal 2022, primarily driven by increased assets placed into service to support the ~~impact of acquired franchises~~Hub and ~~depreciation resulting from increased capital expenditures.~~Spoke model evolution.

Interest expense - related party: Interest expense with related parties decreased ~~$6.3~~$10.4 million, or ~~37.8%~~ 100.0% from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 to the first two quarters of fiscal 2022, driven by paying off our Related Party Notes in full with KK GP during the second quarter of fiscal 2021.

Income tax ~~expense/(benefit):~~expense: Income tax expense of ~~$8.3~~$5.4 million in the first ~~three~~two quarters of fiscal ~~2021~~2022 was driven by the revaluation of U.K. deferred taxes as a result of the increase in the corporate tax rate from 19.0% to 25.0% beginning in 2023 and disallowed executive compensation in connection with the IPO. Our tax expense was also impacted by the mix of income between the U.S. and foreign ~~jurisdictions.~~jurisdictions, disallowed executive compensation expense, the recognition of previously unrecognized tax benefits, and a discrete tax benefit related to a legal accrual described in Note 10, Commitments and Contingencies.

Net income attributable to noncontrolling interest: Net income attributable to noncontrolling interest for the first ~~three~~two quarters of fiscal 2022 decreased $0.9 million, or 19.3%, from the first two quarters of fiscal 2021, ~~increased $3.9 million, or 133.9%, from the first three quarters of fiscal 2020, reflecting~~ ~~stronger~~driven by less earnings allocated to ~~the shareholders of~~certain consolidated subsidiaries, particularly ~~Insomnia Cookies,~~ WKS Krispy Kreme ~~and KKUK.~~.

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Results of Operations by Segment – ~~Three~~Two Quarters ended ~~October~~July 3, ~~2021~~2022 compared to the ~~Three~~Two Quarters ended ~~September, 27 2020~~July 4, 2021

The following table presents Adjusted EBITDA by segment for the periods indicated:


		Three Quarters Ended				Change					Two Quarters Ended				Change
(in thousands except percentages)	(in thousands except percentages)	October 3, 2021		September 27, 2020		$		%		(in thousands except percentages)	July 3, 2022		July 4, 2021		$		%
Adjusted EBITDA	Adjusted EBITDA									Adjusted EBITDA
U.S. and Canada	U.S. and Canada	$	75,760	$	69,216	$	6,544	9.5	%	U.S. and Canada	$	59,625	$	55,848	$	3,777	6.8	%
International	International	60,676		27,909		32,767		117.4	%	International	36,779		39,021		(2,242)		-5.7	%
Market Development	Market Development	29,782		27,959		1,823		6.5	%	Market Development	21,782		20,749		1,033		5.0	%
Corporate	Corporate	(26,005)		(21,386)		(4,619)		-21.6	%	Corporate	(21,918)		(16,822)		(5,096)		-30.3	%
Total Adjusted EBITDA (1)	Total Adjusted EBITDA (1)	$	140,213	$	103,698	$	36,515	35.2	%	Total Adjusted EBITDA (1)	$	96,268	$	98,796	$	(2,528)	-2.6	%

1. (1)Refer to “Key Performance Indicators and Non-GAAP Measures” above for a reconciliation of Adjusted EBITDA to net loss.

U.S. and Canada Adjusted EBITDA increased ~~$6.5~~$3.8 million, or ~~9.5%~~6.8%, with margin decline of approximately 50 basis points to 11.8% from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 ~~primarily driven by the revenue growth of 21.9%~~. Our strategic expansion of the DFD programs contributed to this growth with added points of access. As the DFD business continues to grow it will become even more impactful on profitability in future quarters. ~~The Insomnia Cookies business saw significant EBITDA margin expansion compared~~ to the first ~~three~~two quarters of fiscal ~~2020 due to~~2022. This decrease in margin was driven by cost increases in labor and commodities and underperformance in our Hubs without Spokes, partially offset by the ~~top-line revenue growth aided by a return~~positive impacts from an increase in our Points of ~~activity to college campuses. This offset some margin decline for~~Access in our Hubs with Spokes. Since the ~~Krispy Kreme~~end of the second quarter of fiscal 2022, we also implemented mid-single digit pricing increases which we believe will improve margins. Additionally, we believe the legacy U.S. and Canada ~~business which was impacted by increased near-term costs, primarily related~~optimization efforts discussed in “Significant Events and Transactions” above will yield improvement to ~~a challenging labor~~margins in fiscal 2023 and commodity environment. The Krispy Kreme U.S. and Canada business also saw increased occupancy costs as a percentage of revenue in part due to NYC rents (including Times Square), and incremental costs from our Branded Sweet Treat Line (initiatives that currently have higher operational expenses compared to the prior comparative period that have not yet been absorbed by the sales generated). Overall for U.S. and Canada, we believe our long-term EBITDA margin outlook remains strong as we see the efforts of our transformation emerging.2024.

International Adjusted EBITDA ~~increased $32.8~~decreased $2.2 million, or ~~117.4%~~5.7%, with margin decline of approximately 480 basis points to 20.3% from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 to the first two quarters of fiscal 2022, due primarily ~~driven by revenue growth~~to an increase in labor and commodity costs compared to timing of ~~53.2% due to strong DFD performance~~price increases, as well as ~~widespread impacts of the COVID-19 pandemic on our international markets during 2020, particularly~~a challenging consumer environment in the ~~United Kingdom and Ireland. As~~U.K. Additionally, foreign currency translation had an adverse impact of $2.0 million on International’s Adjusted EBITDA during the ~~end of~~first two quarters. Adjusted EBITDA in the ~~third quarter~~first two quarters of fiscal 2021 ~~all shops~~was also impacted positively by $3.5 million business interruption insurance proceeds related to COVID-19 in the ~~United Kingdom, Ireland,~~U.K. Despite these factors, we have seen positive impacts on Adjusted EBITDA margin from Points of Access expansion and Mexico were operational. We expect the International segment to continue to contribute to strong EBITDA performance as the markets have rebounded well to match (or exceed) their performance prior to the pandemic. Additionally, during the first quarter of fiscal 2021, KKUK received one-time insurance proceeds of $3.5 million which helped to offset continued COVID-19 impacts.efficiencies from our Hub and Spoke model evolution.

Market Development Adjusted EBITDA increased ~~$1.8~~$1.0 million, or ~~6.5%~~5.0%, from the first ~~three quarters of fiscal 2020 to the first three~~two quarters of fiscal 2021 to the first two quarters of fiscal 2022 driven ~~mainly~~ by ~~improved market conditions for~~top-line growth of our international franchise ~~locations~~markets and Japan. This growth more than offset the impact of acquisitions and foreign currency translation.

Corporate expenses within Adjusted EBITDA increased $5.1 million, or 30.3%, from the first two quarters of fiscal 2021 to the first two quarters of fiscal 2022 driven by an increase in costs associated with our operation as ~~COVID-19 restrictions in certain key markets continued to ease~~.a public company.

Capital Resources and Liquidity

Our principal sources of liquidity to date have included cash from operating activities, cash on hand, amounts available under our credit facility, and commercial trade financing including our “Supply Chain Financing Program” or the “SCF Program.” Our primary use of liquidity is to fund the cash requirements of our business operations, including working capital needs, capital expenditures, acquisitions and other commitments.

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Our future obligations primarily consist of our debt and lease obligations, as well as commitments under ingredient and other forward purchase contracts. As of January ~~3, 2021,~~2, 2022, we had the following future obligations:

•An aggregate principal amount of ~~$806.3~~$696.3 million outstanding under the 2019 Facility;

• ~~An aggregate principal amount of $337.1 million outstanding under the Related Party Notes;~~

• Non-cancellable future minimum operating lease payments totaling ~~$645.0~~$722.6 million;

•Non-cancellable future minimum finance lease payments totaling ~~$43.7~~$39.9 million; and

•Purchase commitments under ingredient and other forward purchase contracts of ~~$48.3~~$132.4 million.

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As of ~~October~~July 3, ~~2021,~~2022, our outstanding principal amount under the 2019 Facility was ~~$700.0~~$700.8 million. The ~~reduction~~increase from the balance as of January ~~3, 2021 included~~2, 2022 is due to a net ~~paydown~~draw of ~~$80.0~~$22.0 million on the revolving credit facility, ~~and cumulative~~which was used in part to fund quarterly term loan repayments of ~~$26.3 million, which were funded mainly by capital contributions from shareholders and other minority interests in the first three quarters of fiscal 2021.~~$17.5 million.

We had cash and cash equivalents of ~~$37.5~~$38.6 million as of January ~~3, 2021~~2, 2022 and ~~$44.9~~$25.8 million as of ~~October~~July 3, ~~2021.~~2022. We believe that our existing cash and cash equivalents and debt facilities will be sufficient to fund our operating and capital needs for at least the next twelve months. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to acquire franchises, the growth of our presence in new markets and the expansion of our omni-channel model in existing markets. We may enter into arrangements in the future to acquire or invest in complementary businesses, services and technologies. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.

Cash Flows

We generate significant cash from operations and have substantial credit availability and capacity to fund operating and discretionary spending such as capital expenditures and debt repayments. Our requirement for working capital is not significant because our consumers pay us in cash or on debit or credit cards at the time of the sale and we are able to sell many of our inventory items before payment is due to the vendor of such items. The following table and discussion present, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities:


		Three Quarters Ended					Two Quarters Ended
(in thousands)	(in thousands)	October 3, 2021		September 27, 2020		(in thousands)	July 3, 2022		July 4, 2021
Net cash provided by operating activities	Net cash provided by operating activities	$	98,788	$	30,752	Net cash provided by operating activities	$	53,923	$	56,845
Net cash used for investing activities	Net cash used for investing activities	(116,716)		(125,322)		Net cash used for investing activities	(48,279)		(86,261)
Net cash provided by financing activities		27,360		122,586
Net cash (used for)/provided by financing activities						Net cash (used for)/provided by financing activities	(14,156)		30,553

Cash Flows Provided by Operating Activities

Cash provided by operations totaled ~~$98.8~~$53.9 million for the first ~~three~~two quarters of fiscal ~~2021, an increase~~2022, a decrease of ~~$68.0~~$2.9 million compared with the amount for the first ~~three~~two quarters of fiscal ~~2020.~~2021. Cash provided by operations ~~increased primarily~~decreased due to a decline of $9.8 million from changes in operating assets and liabilities, largely as a result of increases in inventories and other current and noncurrent assets and partially offset by increases in accounts payable and accrued liabilities. These effects were also partially offset by operating results producing net income in the first two quarters of fiscal 2022 compared to a ~~smaller~~ net loss in the first ~~three~~two quarters of fiscal 2021 due in part to impacts on business operations during the COVID-19 pandemic in the first three quarters of fiscal 2020. The increase also reflected an improvement of approximately $12.4 million from working capital management primarily as a result of changes in accounts receivable and inventories balances.

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2021.

We have undertaken broad efforts to improve our working capital position and cash generation, in part by negotiating longer payment terms with vendors. We have an agreement with a third-party administrator which allows participating vendors to track our payments, and if voluntarily elected by the vendor, to sell payment obligations from us to financial institutions as part of our SCF Program. Our typical payment terms for trade payables range up to 180 days outside of the SCF Program, depending on the type of vendors and the nature of the supplies or services. For vendors under the SCF Program, we have established payable terms ranging up to, but not exceeding, 360 days. When participating vendors elect to sell one or more of our payment obligations, our rights and obligations to settle the payables on their contractual due date are not impacted. We have no economic or commercial interest in a vendor’s decision to enter into these agreements and the financial institutions do not provide us with incentives such as rebates or profit sharing under the SCF Program. We agree on commercial terms with vendors for the goods and services procured, which are consistent with payment terms observed at other peer companies in the industry, and as the terms are not impacted by the SCF Program, such obligations are classified as trade payables. Our increased use of the SCF programs has continued through the ~~three quarters~~quarter ended ~~October~~July 3, ~~2021.~~2022.

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Cash Flows Used for Investing Activities

Cash used for investing activities totaled ~~$116.7~~$48.3 million for the first ~~three~~two quarters of fiscal ~~2021,~~2022, a decrease in investment of ~~$8.6~~$38.0 million compared with the first ~~three~~two quarters of fiscal ~~2020.~~2021. The decrease is primarily due to ~~$59.7~~$33.9 million cash used for acquisitions of franchised shops in the first ~~three~~two quarters of fiscal ~~2020~~2021 (compared to ~~$33.9 million~~no cash used for acquisitions in the first two quarters of fiscal 2022), in addition to $3.0 million of proceeds from a sale-leaseback transaction completed in the first ~~three quarters~~quarter of fiscal ~~2021), offset by an incremental $14.1 million~~2022. We also decreased our cash paid for purchases of property and equipment ~~purchases~~as a percentage of net revenue in the first ~~three~~two quarters of fiscal ~~2021.~~2022 compared to the first two quarters of fiscal 2021, aided by capital-light DFD expansion.

Cash Flows (Used for)/Provided by Financing Activities

Cash ~~provided by~~used for financing activities totaled ~~$27.4~~$14.2 million for the first ~~three~~two quarters of fiscal ~~2021,~~2022, a ~~decrease~~reduction in financing of ~~$95.2~~$44.7 million compared with the first ~~three~~two quarters of fiscal ~~2020.~~2021. The ~~decrease~~reduction in financing was ~~mainly driven~~primarily due to decreasing our reliance on equity financing (reduction of $54.3 million invested, net of distributions) in the first two quarters of fiscal 2022 compared to the first two quarters of fiscal 2021, in addition to our payment of $12.5 million of issuance costs in connection with the IPO during the first quarter of fiscal 2022.

These reductions in financing were partially offset by ~~a variance~~$17.1 million of ~~$84.1 million~~ cash ~~flows~~inflows related to structured payables programs (net ~~payments~~proceeds on structured payables of ~~$28.1~~$19.6 million in the ~~three~~two quarters ended ~~October~~July 3, ~~2021~~2022 compared to net proceeds from structured payables of ~~$55.9~~$2.5 million in the ~~three~~two quarters ended ~~September 27, 2020), as we utilized excess cash to pay off outstanding balances.~~July 4, 2021). We utilize various card products issued by financial institutions to facilitate purchases of goods and services. By using these products, we may receive differing levels of rebates based on timing of repayment. The payment obligations under these cards products are classified as structured payables on our Condensed Consolidated Balance Sheets and the associated cash flows are included in the financing section of our Condensed Consolidated Statement of Cash Flows.

~~Other highlights from the three quarters ended October 3, 2021 included:~~

• Repayments of long-term debt and lease obligations (net of proceeds from the issuance of debt) of $447.6 million, which included the extinguishment of the Related Party Notes and the Term Loan Facility described further below;

• Proceeds from investments by shareholders of $701.2 million, including receipt of $527.3 million IPO proceeds net of underwriting discounts (but excluding $12.5 million capitalized offering expenses unpaid as of the end of the third quarter of fiscal 2021); and

~~• Distributions to shareholders and payments for the repurchase and retirement of common stock of $198.1 million.~~

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Debt

Our long-term debt obligations consist of the following:


(in thousands)	(in thousands)	October 3, 2021		January 3, 2021		(in thousands)	July 3, 2022		January 2, 2022
2019 Facility - term loan	2019 Facility - term loan	$	630,000	$	656,250	2019 Facility - term loan	$	603,750	$	621,250
2019 Facility - revolving credit facility	2019 Facility - revolving credit facility	70,000		150,000		2019 Facility - revolving credit facility	97,000		75,000
Less: Debt issuance costs	Less: Debt issuance costs	(4,229)		(5,419)		Less: Debt issuance costs	(3,040)		(3,833)
Financing obligations	Financing obligations	25,513		26,224		Financing obligations	28,147		24,473
Total long-term debt	Total long-term debt	721,284		827,055		Total long-term debt	725,857		716,890
Less: Current portion of long-term debt	Less: Current portion of long-term debt	(38,608)		(41,245)		Less: Current portion of long-term debt	(39,844)		(36,583)
Long-term debt, less current portion	Long-term debt, less current portion	682,676		785,810		Long-term debt, less current portion	$	686,013	$	680,307
Related party notes payable (excluding accrued interest)		—		337,148
Total debt and related party notes payable		$	682,676	$	1,122,958

2019 Facility

On June 13, 2019, we entered into a credit agreement (the “2019 Facility”). The 2019 Facility provides for senior secured credit facilities in the form of $700.0 million in aggregate principal of term loans and $300.0 million of revolving capacity. Borrowings under the 2019 Facility are subject to an interest rate of one-month LIBOR plus 2.25% if our Total Net Leverage Ratio (as defined in the 2019 Facility) equals or exceeds 4.00 to 1.00, 2.00% if our Total Net Leverage Ratio is less than 4.00 to 1.00 but greater than or equal to 3.00 to 1.00 or 1.75% if our Total Net Leverage Ratio is less than 3.00 to 1.00, as determined under the 2019 Facility. We are required to make equal installments of 1.25% of the aggregate closing date principal amount of the term loans on the last business day of each fiscal quarter. All remaining term loan and revolving loan balances are to be due five years from the initial closing date.

Under the terms of the 2019 Facility, we are subject to a requirement to maintain a Total Net Leverage Ratio of less than ~~5.50~~5.25 to 1.00 as of ~~October~~July 3, ~~2021,~~2022, which reduces to 5.00 to 1.00 by April 2, 2023. The Total Net Leverage Ratio under the 2019 Facility is defined as the ratio of (a) Total Indebtedness (as defined in the 2019 Facility, which includes all debt and finance lease obligations) minus unrestricted cash and cash equivalents to (b) a defined calculation of Adjusted EBITDA (“2019 Facility Adjusted EBITDA”) for the most recently ended Test Period (as defined in the 2019 Facility). The 2019 Facility Adjusted EBITDA for purposes of these restrictive covenants includes incremental adjustments beyond those included in our Adjusted EBITDA non-GAAP measure. Specifically, the 2019 Facility Adjusted EBITDA definition includes pro forma impact of EBITDA to be received from new shop openings and acquisitions for periods not yet in operation, certain acquisition related

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synergies and cost optimization activities and incremental add-backs for pre-opening ~~costs and for COVID-19 expenses and lost profits.~~costs. Our Total Net Leverage Ratio was ~~3.19 to 1.00 as of the end of the third quarter of fiscal 2021 compared to 2.92~~3.31 to 1.00 as of the end of the second quarter of fiscal 2022 compared to 2.99 to 1.00 as of the end of fiscal 2021, primarily due to ~~certain IPO-related costs which were paid during the third quarter of fiscal 2021, including share repurchases~~a reduction in cash and ~~distributions to shareholders.~~cash equivalents.

We were in compliance with the financial and other covenants related to the 2019 Facility as of ~~October~~July 3, ~~2021~~2022 and expect to remain in compliance over the next 12 months. If we are unable to meet the 2019 Facility financial or other covenants in future periods, it may negatively impact our liquidity by limiting our ability to draw on the revolving credit facility, could result in the lenders accelerating the maturity of such indebtedness and foreclosing upon the collateral pledged thereunder, and could require the replacement of the 2019 Facility with new sources of financing, which there is no guaranty we could secure.

~~Related Party Notes~~

We were previously party to a senior unsecured note agreement with KK GP for an aggregate principal amount of $283.1 million. In April 2019, we entered into an additional unsecured note with KK GP for $54.0 million (such notes together, the “Related Party Notes”). As of January 3, 2021, the outstanding amount of principal and interest was $344.6 million. The Related Party Notes were paid off in full during the second quarter of fiscal 2021. The interest expense was $10.4 million for the quarter and three quarters ended October 3, 2021, and $5.6 million and $16.7 million for the quarter and three quarters ended September 27, 2020. No interest expense was incurred for the quarter ended October 3, 2021.

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~~Term Loan Facility~~

On June 10, 2021, we entered into the Term Loan Facility. On June 17, 2021, we borrowed $500.0 million under the Term Loan Facility. The borrowings under the Term Loan Facility bore an all-in interest rate of 2.68175%. As of October 3, 2021, there was no outstanding principal amount under the Term Loan Facility, as it was paid off in full and terminated on July 7, 2021, primarily using the net IPO proceeds with the difference being partially funded by a drawdown of $100.0 million on the 2019 Facility’s revolving credit facility. The Term Loan Facility would have matured on the earlier of (i) June 10, 2022 and (ii) within four business days following consummation of the IPO. The interest expense was $0.1 million and $2.4 million for the quarter and three quarters ended October 3, 2021, respectively, which included $1.7 million of debt issuance costs incurred and recognized as expenses in the second quarter of fiscal 2021.

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with ~~U.S.~~ GAAP. The preparation of the Condensed Consolidated Financial Statements requires the use of judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our Condensed Consolidated Financial Statements. Actual results could differ from the estimates made by management.

There have been no material changes to our critical accounting policies and estimates as compared to those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our ~~IPO Prospectus.~~Annual Report on Form 10-K for the year ended January 2, 2022.

New Accounting Pronouncements

Refer to Note 1 to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, for a detailed description of recent accounting pronouncements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Effects of Changing Prices – Inflation

We are exposed to the effects of commodity price fluctuations in the cost of ingredients of our products, of which flour, sugar and shortening are the most significant. During the ~~third quarter~~first two quarters of fiscal ~~2021~~2022, we have ~~experienced~~continued to experience headwinds from commodity inflation globally. We have undertaken efforts to effectively manage inflationary cost increases through rapid inventory turnover and reduced inventory waste, increased focus on resiliency of our supply chains, and an ability to adjust pricing of our ~~products (including price increases taking effect at the end of the third quarter of fiscal 2021).~~products. Additionally, from time to time we may enter into forward contract for supply through our vendors for raw materials which are ingredients of our products or which are components of such ingredients, including wheat and soybean oil.

We are also exposed to the effects of commodity price fluctuations in the cost of gasoline used by our delivery vehicles. To mitigate the risk of fluctuations in the price of our gasoline purchases, we may directly purchase commodity futures contracts.

Interest Rate Risk

We are exposed to changes in interest rates on any borrowings under our debt facilities, which bear interest based on the one-month LIBOR (with a floor of zero). Generally, interest rate changes could impact the amount of our interest paid and, therefore, our future earnings and cash flows, assuming other factors are held constant. To mitigate the impact of changes in LIBOR on interest expense for a portion of our variable rate debt, we have entered into interest rate swaps on $505.0 million notional of our ~~$700.0~~$700.8 million of outstanding debt under the 2019 Facility as of ~~October~~July 3, ~~2021,~~2022, which we account for as cash flow hedges. Based on the ~~$195.0~~$195.8 million of unhedged outstanding as of ~~October~~July 3, ~~2021,~~2022, a 100 basis point increase in the one-month LIBOR would result in a $2.0 million increase in interest expense for a twelve-month period, while a 100 basis point decrease would result in ~~the floor of zero and thus~~ a $0.7 million decrease in interest expense ~~of $0.2 million~~ for a twelve-month period based on the daily average of the one-month LIBOR through the fiscal quarter ended ~~October~~July 3, ~~2021.~~2022.

The Financial Conduct Authority in the U.K. intends to phase out LIBOR by the end of 2023. We have negotiated terms in consideration of this discontinuation and do not expect that the discontinuation of the LIBOR rate, including any legal or regulatory changes made in response to its future phase out, will have a material impact on our liquidity or results of operations.

Foreign Currency Risk

We are exposed to foreign currency translation risk on the operations of our subsidiaries that have functional currencies other than the U.S. dollar, whose revenues accounted for approximately ~~27%~~29% of our total net revenues through the ~~three~~two quarters ended ~~October~~July 3, ~~2021.~~2022. A substantial majority of these revenues, or approximately ~~$275.1~~$215.1 million through the ~~three~~two quarters ended ~~October~~July 3, ~~2021,~~2022, were attributable to subsidiaries whose functional currencies are the Canadian dollar, the British pound sterling, the Euro, the Australian dollar, the New Zealand dollar, the Mexican peso, and the Japanese yen. A 10% increase or decrease in the average ~~fiscal 2021~~ exchange rate of the Canadian dollar, the British pound sterling, the Euro, the Australian dollar, the New Zealand dollar, the Mexican peso, and the Japanese yen against the U.S. dollar would have resulted in a decrease or increase of approximately ~~$27.5~~$21.5 million in our total net revenues through the ~~three~~two quarters ended ~~October~~July 3, ~~2021.~~2022.

From time to time, we engage in foreign currency exchange and credit transactions with our non-U.S. subsidiaries, which we typically hedge. To date, the impact of such transactions, including the cost of hedging, has not been material. We do not engage in foreign currency or hedging transactions for speculative purposes.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of ~~October~~July 3, ~~2021,~~2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this ~~quarterly report.~~Quarterly Report on Form 10-Q.

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There were no changes during the fiscal quarter ended ~~October~~July 3, ~~2021~~2022 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of conducting our business, we have in the past and may in the future become involved in various legal actions and other claims. We may also become involved in other judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts. These legal proceedings may be subject to many uncertainties and there can be no assurance of the outcome of any individual proceedings. We do not presently anticipate any material legal proceedings that, if determined adversely to us, would have a material adverse effect on our financial position, results of operations or cash flows. See Note 10, Commitments and Contingencies, to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for information regarding certain legal proceedings in which we are involved.

Shareholder Derivative Suit

On December 3, 2021, a shareholder of the Company brought a shareholder class and derivative action complaint against the members of the Company’s Board of Directors, the Company, JAB Holdings B.V. (“JAB”), and certain entities related to JAB (JAB and the related entities, collectively the “JAB Entities”). The plaintiff alleges that the members of the Company’s Board breached their fiduciary duty by allowing the JAB Entities to conduct a creeping takeover of the Company and that the JAB Entities aided and abetted those breaches.

On December 16, 2021, the court denied the plaintiff’s request for an emergency temporary restraining order to prohibit further acquisitions of the Company’s stock by the JAB Entities. On March 14, 2022, the Company entered into a letter agreement with the JAB Entities that, among other things, (i) requires JAB to provide notice at least 30 days prior to an acquisition of voting rights, directly or indirectly, that would exceed 45% of the Company’s total outstanding voting stock, (ii) restricts directors who are employees or designees of the JAB Entities from involvement in the consideration of such acquisition by the Company’s Board of Directors, (iii) permits the JAB Entities to enter into future cash-settled total return swap agreements provided that the JAB Entities must comply with the 30-day notice requirement before acquiring shares from or entering into a voting arrangement with the counterparty and that the JAB Entities do not try to influence the voting decisions of the counterparty. The terms of this agreement shall remain in effect for one year from the date of signing, subject to extension by JAB in its sole discretion.

On March 29, 2022, the parties filed a stipulation and order to dismiss the action with prejudice as moot and begin negotiation for an award of attorneys’ fees and reimbursement of expenses. No compensation in any form has passed directly or indirectly from any defendant(s) in the action to plaintiff or plaintiff’s attorneys in this action, and no promise to give any such compensation has been made. At this time the Company is unable to predict the amount of attorneys’ fees (if any) that the court will award, but we do not expect the amount to be material to the Company.

Item 1A. Risk Factors

~~There~~With the exception of the changes discussed below, there have been no material changes tofrom the risk factors ~~previously~~ disclosed in ~~our IPO Prospectus~~“Risk Factors” in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended January ~~3, 2021.~~2, 2022.

We will become increasingly reliant on a single vendor for distribution of materials and supplies in the U.S. and a portion of Canada. If the vendor fails to provide these materials and supplies per the agreement, our and our franchisees’ ability to make doughnuts could be negatively affected.

To consolidate our third-party logistics operations, we have entered into an exclusive distribution agreement (the “Distribution Agreement”) with BakeMark USA LLC, a Delaware limited liability company (“BakeMark”). The Distribution Agreement, among other things, grants BakeMark exclusive rights to distribute ingredients, packaging, and supplies to Company-owned and franchise shops in the U.S., except for New York City and British Columbia, Canada. Exclusivity is granted on a regional basis once BakeMark commences distribution to Company-owned and franchise shops in each of the territories, with all regions expected to be served by BakeMark on or before March 15, 2023. The initial term ends on December 31, 2028, and renews automatically on an annual basis unless either the Company or BakeMark elect not to continue the arrangement.

As BakeMark distribution progresses, we will become increasingly reliant on BakeMark to distribute materials and supplies. If BakeMark experiences economic or operational challenges, this could cause disruptions to our supply chain in the U.S. and Canada. We cannot control the factors that may cause such challenges, and we may not be able to find an alternative distribution channel in a timely manner to prevent disruptions to our operations, which might even require that we temporarily

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stop production in the affected shops until other arrangements are taken. Additionally, the cost of a replacement distribution channel may also affect the financial performance of these shops. Severe disruption to BakeMark could result in a material and adverse impact on our business and our consolidated financial position, results of operations, and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~On July 1, 2021 we completed the IPO of our Class A common stock, $0.01 par value, pursuant to our Registration Statement on Form S-1, as amended (No. 333-256664) that w~~as declared effective on June 30, 2021. We sold 29,411,765 shares in the offering at a price to the public of $17.00 per share. The lead book-running managers in the offering were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, BofA Securities, Inc. and Citigroup Global Markets Inc.

~~The net proceeds received by us in the offering were~~ ~~$458.8 million.~~

None of the underwriting discounts and commissions or offering expenses were incurred or paid to our directors or officers or their associates or to persons owning 10% or more of our common stock or to any affiliates of ours. In the quarter ended October 3, 2021 we used the net proceeds of the offering along with additional borrowings under our 2019 Facility revolving credit facility as follows: (i) $500.0 million to repay all of the outstanding indebtedness under the Term Loan Facility, (ii) $20.3 million to repurchase approximately 1.3 million shares of common stock from certain of our executive officers at the price to be paid by the underwriters and (iii) $15.5 million to repurchase approximately 1.0 million shares of common stock from certain of our executive officers for payment of their withholding taxes with respect to the RSUs vesting or for which vesting was accelerated in connection with the offering.

On August 2, 2021 the underwriters exercised their over-allotment option and purchased an additional 3,500,000 shares of common stock at the IPO price less the underwriting discounts and commissions. The net proceeds received on August 2, 2021 were $56.1 million after deducting underwriting discounts and commissions of $3.4 million. This brought total net IPO proceeds to $514.9 million.None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit No.						Description of Exhibit

~~3.1~~10.1						~~Amended~~Letter Agreement, dated March 14, 2022, by and ~~Restated Certificate of Incorporation of the Registrant(filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q, File number 001-40573, filed on August 18, 2021, and incorporated by reference herein).~~

~~3.2~~						~~Amended and Restated Bylaws of the Registrant(filed as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q, File number 001-40573, filed on August 18, 2021, and incorporated by reference herein).~~

~~10.1~~						~~Master Amendment No. 1, dated as of July 8, 2021,~~ among ~~Cotton Parent, Inc.,~~ Krispy Kreme, ~~Doughnuts,~~ Inc., ~~the other guarantors party thereto, the lenders party thereto~~JAB Indulgence B.V., and ~~Citibank, N.A., as administrative agent~~JAB Holdings B.V. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, File number 001-40573, filed on ~~July 1~~3 ~~, 2021,~~March 16, 2022, and incorporated by reference herein).

10.2						~~Joinder to Credit Agreement,~~Exclusive distribution agreement dated ~~as of July 8, 2021, between~~March 15, 2022, by and among Krispy Kreme ~~Inc.~~Doughnut Corporation and ~~Citibank, N.A., as administrative agent (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, File number 001-40573, filed on July 1~~3 ~~, 2021, and incorporated by reference herein).~~BakeMark USA LLC.

10.3*						31.1*Form of RSU award agreement under the Krispy Kreme, Inc. 2021 Omnibus Incentive Plan.

31.1*						Certification of Chief Executive Officer of Krispy Kreme, Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.

31.2*						Certification of Chief Financial Officer of Krispy Kreme, Inc. pursuant to Rule 13a-14(a) or 15d-14(a) promulgated under the Exchange Act.

32.1**						Certifications of Chief Executive Officer and Chief Financial Officer of Krispy Kreme, Inc. pursuant to Rule 13a-14(b) or 15d-14(b) promulgated under the Exchange Act, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
101						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~October~~July 3, ~~2021,~~2022, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income/(Loss), (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).



*			Filed herewith.
**			Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Charlotte, North Carolina on ~~November 9, 2021.~~August 17, 2022.


Krispy Kreme, Inc.

By:			/s/ Josh Charlesworth
Name:			Josh Charlesworth
Title:			Global President, Chief Operating Officer & Chief Financial Officer

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	Non-vested shares outstanding at January 3, 2021		Granted	RSU Dividend Equivalents(1)	Vested	Forfeited	Non-vested shares outstanding at October 3, 2021
KKI
RSUs	4,649,551		3,283,065	1,018,629	2,417,395	326,975	6,206,875
Weighted Average Grant Date Fair Value	$	11.37	18.13	—	9.42	13.72	$	13.71
KKUK
RSUs	404,568		—	—	351,500	—	53,068
Weighted Average Grant Date Fair Value	$	12.45	—	—	12.22	—	$	13.98
Insomnia Cookies
RSUs	29,279		15,173	—	—	9,224	35,228
Weighted Average Grant Date Fair Value	$	68.87	97.77	—	—	75.68	$	79.54
KK Australia
RSUs	1,844,241		78,534	—	—	26,042	1,896,733
Weighted Average Grant Date Fair Value	$	1.48	1.45	—	—	1.36	$	1.48
KK Mexico
RSUs	25,055		32,963	—	—	—	58,018
Weighted Average Grant Date Fair Value	$	29.21	35.64	—	—	—	$	32.86