Investor Contact: Randy Casstevens
Chief Financial Officer
Krispy Kreme Doughnuts, Inc.
336.733.3730
Financial Media Contact: Robbin E. Moore
Investor Relations Director
Krispy Kreme Doughnuts, Inc.
336.726.8857
KRISPY KREME EARNINGS EXCEED CONSENSUS
EPS INCREASES 45%; SYSTEMWIDE COMP STORE SALES UP 11.2%
FISCAL YEAR 2004 EARNINGS GUIDANCE IS INCREASED TO $0.90
Winston-Salem, NC (May 28, 2003) - Krispy Kreme Doughnuts, Inc. (NYSE: KKD)
today reported financial results for the three months ended May 4, 2003, the
Company's first quarter of Fiscal 2004.
Net income for the first quarter increased 48.3% to $13.1 million compared with
$8.9 million in the first quarter of Fiscal 2003. Diluted earnings per share
increased to $0.22 in the first quarter compared with $0.15 for the same period
in Fiscal 2003. Diluted earnings per share for the quarter includes the effect
of a $0.5 million reversal of an accrual related to the arbitration award
against the Company, discussed in the Company's Form 8-K filing dated February
10, 2003. The Company's fourth quarter Fiscal 2003 results included a $9.1
million pre-tax charge related to this arbitration award and in the first
quarter of Fiscal 2004, the Company paid $8.6 million to settle the award.
Excluding the effect of the reversal of the remaining accrual, net income for
the quarter increased 44.7% to $12.8 million and diluted earnings per share for
the period would have been $0.01 less than the reported $0.22 per share.
Total company revenues, which include sales from company stores, franchise
operations, and Krispy Kreme Manufacturing and Distribution (KKM&D), rose 33.9%
to $148.7 million, compared with $111.1 million in the prior year comparable
period. Sales from the company stores increased 37.8% to $102.2 million; KKM&D
sales increased 26.8% to $41.4 million; and revenues from franchise operations
grew to $5.1 million, an 18.7% increase.
Systemwide sales, including sales of company and franchise stores, advanced
24.4% to $227.8 million in the first quarter compared with $183.1 million in the
first quarter of Fiscal 2003. Sales were driven by an increase in company store
sales of 37.8% to $102.2 million and an increase in franchise store sales of
15.3% to $125.6 million. On a comparable store basis, systemwide store sales
increased 11.2% and company store sales were up 15.4%.
Commenting on the Company's financial performance, Scott Livengood, Chairman,
President and Chief Executive Officer of Krispy Kreme Doughnuts, Inc. said, "Our
business momentum continues and our first quarter results give us a strong
start to our Fiscal Year 2004. In spite of a challenging environment for most
retail businesses, we produced systemwide sales of $228 million and net income
growth of 48%. I am very proud of these results."
During the quarter, six new Krispy Kreme stores were opened. New stores opened
during the first quarter are located in Elk Grove, CA, Tucson, AZ, Marrero, LA,
Melville, NY, Orlando, FL and Tampa, FL. This brings the total number of stores
at the end of the first quarter to 282. Subsequent to the
quarter-end, Krispy Kreme has opened six additional stores in Rockland, Quebec,
Cranston, RI, El Paso, TX, Seattle, WA, Sioux Falls, SD and San Antonio, TX and
one commissary in Brossard, Quebec.
Additionally, the Company announced plans to expand its development into the
Canadian provinces of Alberta, Manitoba and Saskatchewan. KremeKo, Inc., the
Company's franchisee in Eastern Canada, will develop an additional eight stores
in the region over the next five years.
Also, the Company announced its fourth international joint venture agreement,
awarding development rights for Mexico. Krispy Kreme Mexico, S. de R.L. de C.V.
will develop 20 stores over the next six years throughout Mexico.
Further commenting on the Company's financial performance, Livengood added, "We
are positioned for another year of strong growth. The opportunity created by
multiple sales channels, our national expansion and our international growth
prospects give me great confidence for this year and the years to come."
The Company indicated that based on its first quarter performance, it now
expects to earn $0.90 per fully diluted share or $0.02 above consensus for
Fiscal Year 2004. Quarterly earnings guidance is as follows: Q2 - $0.20; Q3 -
$0.22; Q4 - $0.26. The Company affirmed its previously announced goals of
systemwide comparable sales of 10% for the year with quarterly variations.
Additionally, the Company reiterated its store development plans to open 77 new
stores in 17 new markets and to open 10 other units, a combination of Doughnut
and Coffee Shops and/or satellite stores during Fiscal 2004.
The Company strives to provide the investment community with the necessary
information to evaluate the strength of its business model. In addition to the
Summary Financial Results, the Company has included the following supplemental
materials to assist in this analysis: Condensed Consolidated Balance Sheet,
store opening summary, average weekly sales and operating weeks. Excluding the
Condensed Consolidated Balance Sheet, the Company has provided this information
for the past nine quarters and anticipates incorporating this information as a
part of its quarterly earnings release. PDF files of these materials can be
found on the News Release section at the Company's website.
The Company will hold a conference call today at 9:00 a.m. Eastern Time, which
will be hosted by Scott Livengood, Chairman, President and Chief Executive
Officer, John Tate, Chief Operating Officer and Randy Casstevens, Chief
Financial Officer. The call will be broadcast live over the Internet and can be
accessed at the Investor Relations page at www.krispykreme.com. A replay of the
call will be available until 5:00 p.m. Eastern Time, June 4, 2003 by calling
888.568.0894 (domestic) or 402.998.1573 (international), and entering passcode
1564.
Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme is a leading
branded specialty retailer of premium quality doughnuts, including the Company's
signature Hot Original Glazed. Krispy Kreme currently operates 288 stores in 38
states and Canada. An estimated 7.5 million Krispy Kreme doughnuts are made
everyday and more than 2.7 billion are produced each year. Krispy Kreme can be
found on the World Wide Web at www.krispykreme.com.
# # #
Information contained in this press release, other than historical information,
may be considered forward-looking in nature and is subject to various risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
expected. Among the key factors that may have a direct bearing on Krispy Kreme's
operating results, performance or
financial condition are its dependence on franchisees to execute its store
expansion strategy, supply issues, competition and numerous other factors
discussed in Krispy Kreme's periodic reports, proxy statement and other
information statements filed with the Securities and Exchange Commission.
Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the First Quarter Ended May 4, 2003
(All dollar amounts in thousands except per share data)
(Unaudited)
Quarter Ended
May 4, 2003 May 5, 2002 $ Change % Change
----------- ----------- -------- --------
Total revenues $148,660 $111,059 $37,601 33.9%
Operating expenses 112,480 86,362 26,118 30.2%
General and administrative expenses 8,902 7,623 1,279 16.8%
Depreciation and amortization expenses 4,101 2,546 1,555 61.1%
Arbitration award (525) - (525) -
----------- ----------- --------
Income from operations 23,702 14,528 9,174 63.1%
Interest income 227 599 (372) -62.1%
Interest expense 866 104 762 732.7%
Loss from joint ventures 694 198 496 250.5%
Minority interest in consolidated joint ventures 616 533 83 15.6%
Other expenses 25 - 25 -
----------- ----------- --------
Income before income taxes 21,728 14,292 7,436 52.0%
Provision for income taxes 8,588 5,431 3,157 58.1%
----------- ----------- --------
Net income $13,140 $8,861 $4,279 48.3%
----------- ----------- --------
----------- ----------- --------
Diluted earnings per share (1) $0.22 $0.15 $0.07 44.7%
Diluted shares outstanding 60,689 59,024 1,665 2.8%
Segment Information
Revenues
Company store operations $102,243 $74,184 $28,059 37.8%
Franchise operations 5,066 4,268 798 18.7%
KKM&D 41,351 32,607 8,744 26.8%
----------- ----------- --------
Total revenues $148,660 $111,059 $37,601 33.9%
----------- ----------- --------
----------- ----------- --------
Operating Income
Company store operations $21,559 $13,585 $7,974 58.7%
Franchise operations 3,697 3,066 631 20.6%
KKM&D 7,212 5,891 1,321 22.4%
Unallocated general and administrative expenses (9,291) (8,014) (1,277) 15.9%
Arbitration award 525 - 525 -
----------- ----------- --------
Total operating income $23,702 $14,528 $9,174 63.1%
----------- ----------- --------
----------- ----------- --------
Operating Margins
Company store operations 21.1% 18.3% 2.8%
Franchise operations 73.0% 71.8% 1.1%
KKM&D 17.4% 18.1% -0.6%
Unallocated general and administrative expenses 6.2% 7.2% -1.0%
Arbitration award 0.4% - 0.4%
Total operating income 15.9% 13.1% 2.8%
Depreciation and Amortization Expenses
Company store operations $2,934 $1,964 $970 49.4%
Franchise operations 43 13 30 230.8%
KKM&D 734 178 556 312.4%
Corporate administration 390 391 (1) -0.3%
----------- ----------- --------
Total depreciation and amortization expenses $4,101 $2,546 $1,555 61.1%
----------- ----------- --------
----------- ----------- --------
Systemwide Sales
Company stores $102,243 $74,184 $28,059 37.8%
Franchise stores 125,562 108,874 16,688 15.3%
----------- ----------- --------
Total $227,805 $183,058 $44,747 24.4%
----------- ----------- --------
----------- ----------- --------
Comparable Store Sales
Company stores 15.4%
Systemwide 11.2%
(1) In the fourth quarter of fiscal 2003, the Company accrued a pre-tax charge
of $9,075 related to an arbitration award against the Company, which was
discussed in the Company's Form 8-K filing dated February 10, 2003. During the
quarter ended May 4, 2003, the Company paid $8,550 to settle the award. Diluted
earnings per share for the quarter ended May 4, 2003 of $.22 includes the effect
of the reversal of the remaining accrual, $525. Excluding the effect of the
reversal of this accrual operating income would have been $23,177 and the
operating income margin would have been 15.6%. After applying the effective tax
rate of 39.5% to the $525 accrual reversal, net income would have been $12,822,
a 44.7% increase over the prior year quarter and diluted earnings per share
would have been $.01 less than the reported $.22.
Krispy Kreme Doughnuts, Inc.
Condensed Consolidated Balance Sheets
As of May 4, 2003
(All dollar amounts in thousands)
May 4, 2003 February 2, 2003 $ Change % Change
----------- ---------------- -------- --------
Cash and investments $29,826 $59,523 $(29,697) -49.9%
Receivables 50,407 46,319 4,088 8.8%
Inventories 27,017 24,365 2,652 10.9%
Property and equipment, net 220,382 202,558 17,824 8.8%
Investments in unconsolidated joint ventures 7,030 6,871 159 2.3%
Other assets 135,021 70,851 64,170 90.6%
----------- ---------------- --------
Total assets $469,683 $410,487 $59,196 14.4%
----------- ---------------- --------
----------- ---------------- --------
Payables $24,228 $25,430 $(1,202) -4.7%
Accrued expenses 23,115 30,056 (6,941) -23.1%
Debt 65,034 61,389 3,645 5.9%
Other long-term obligations 22,727 20,260 2,467 12.2%
Shareholders' equity 334,579 273,352 61,227 22.4%
----------- ---------------- --------
Total liabilities and shareholders' equity $469,683 $410,487 $59,196 14.4%
----------- ---------------- --------
----------- ---------------- --------
Krispy Kreme Doughnuts, Inc.
Summary of Store Openings
Store Count Recap
Consolidated Total
Company JVs Company Associate
------- ------------- ---------- -----------
Beginning Count FY01 58 5 63 52
Open - - - 2
Closed - - - -
Transferred - - - -
Q1 Net - - - 2
Total End Q1 02 58 5 63 54
Open 3 1 4 -
Closed - - - (1)
Transferred 3 - 3 (3)
Q2 Net 6 1 7 (4)
Total End Q2 02 64 6 70 50
Open - 2 2 -
Closed (1) - (1) -
Transferred 4 - 4 -
Q3 Net 3 2 5 -
Total End Q3 02 67 8 75 50
Open - 1 1 2
Closed (1) - (1) -
Transferred (2) 2 - -
Q4 Net (3) 3 - 2
Total End Q4 02 64 11 75 52
Open 1 - 1 2
Closed - - - (2)
Transferred (1) - (1) 1
Q1 Net - - - 1
Total End Q1 03 64 11 75 53
Open 1 - 1 1
Closed (1) - (1) -
Transferred 3 - 3 (2)
Q2 Net 3 - 3 (1)
Total End Q2 03 67 11 78 52
Open 1 3 4 1
Closed (1) - (1) -
Transferred - 9 9 -
Q3 Net - 12 12 1
Total End Q3 03 67 23 90 53
Open 2 6 8 6
Closed (1) - (1) -
Transferred 2 - 2 (2)
Q4 Net 3 6 9 4
Total End Q4 03 70 29 99 57
Open - 1 1 3
Closed - - - -
Transferred 4 - 4 (2)
Q1 Net 4 1 5 1
----- ----- ----- ----
Total End Q1 04 74 30 104 58
----- ----- ----- ----
----- ----- ----- ----
Krispy Kreme Doughnuts, Inc.
Summary of Store Openings
Store Count Recap (Continued)
Joint Total Total
AD Ventures AD Franchise Total
----- --------- ------ ----------- --------
Beginning Count FY01 54 5 59 111 174
Open 2 2 4 6 6
Closed - - - - -
Transferred - - - - -
Q1 Net 2 2 4 6 6
Total End Q1 02 56 7 63 117 180
Open 4 3 7 7 11
Closed - - - (1) (1)
Transferred - - - (3) -
Q2 Net 4 3 7 3 10
Total End Q2 02 60 10 70 120 190
Open 6 2 8 8 10
Closed - (1) (1) (1) (2)
Transferred (4) - (4) (4) -
Q3 Net 2 1 3 3 8
Total End Q3 02 62 11 73 123 198
Open 9 9 18 20 21
Closed - - - - (1)
Transferred - - - - -
Q4 Net 9 9 18 20 20
Total End Q4 02 71 20 91 143 218
Open 1 2 3 5 6
Closed - - - (2) (2)
Transferred - - - 1 -
Q1 Net 1 2 3 4 4
Total End Q1 03 72 22 94 147 222
Open 4 6 10 11 12
Closed - - - - (1)
Transferred (1) - (1) (3) -
Q2 Net 3 6 9 8 11
Total End Q2 03 75 28 103 155 233
Open 8 4 12 13 17
Closed - - - - (1)
Transferred - (9) (9) (9) -
Q3 Net 8 (5) 3 4 16
Total End Q3 03 83 23 106 159 249
Open 7 7 14 20 28
Closed - - - - (1)
Transferred - - - (2) -
Q4 Net 7 7 14 18 27
Total End Q4 03 90 30 120 177 276
Open 2 - 2 5 6
Closed - - - - -
Transferred (5) 3 (2) (4) -
Q1 Net (3) 3 - 1 6
----- ----- ----- ----- -----
Total End Q1 04 87 33 120 178 282
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Krispy Kreme Doughnuts, Inc.
Average Sales per Week
Dollars in Thousands
Fiscal Year 2002
Q1 Q2 Q3 Q4 FY02
----- ----- ----- ------ ------
Company stores $73.8 $71.8 $70.7 $70.3 $71.5
Area Developers $60.1 $61.1 $63.8 $67.0 $63.3
Associates $39.0 $40.0 $41.2 $40.8 $40.2
Total Franchise $49.6 $51.0 $53.4 $56.1 $52.7
Systemwide $57.8 $58.2 $59.9 $61.2 $59.4
Fiscal Year 2003
Q1 Q2 Q3 Q4 FY03
----- ----- ----- ------ ------
Company stores $75.6 $75.3 $76.8 $75.9 $75.9
Area Developers $63.9 $63.6 $63.0 $61.3 $62.9
Associates $50.4 $50.7 $48.6 $47.9 $49.4
Total Franchise $58.6 $58.8 $57.8 $56.8 $58.0
Systemwide $64.5 $64.4 $64.7 $63.7 $64.3
Fiscal Year 2004
Q1
------
Company stores $77.4
Area Developers $58.0
Associates $52.4
Total Franchise $56.2
Systemwide $64.1
Krispy Kreme Doughnuts, Inc.
Total Operating Weeks
FY2002
Q1 Q2 Q3 Q4 FY02
----- ----- ----- ------ ------
Company stores 822 857 971 1,073 3,723
Area Developers 809 849 866 1,113 3,637
Associates 796 774 741 799 3,110
Total Franchise 1,605 1,623 1,607 1,912 6,747
Systemwide 2,427 2,480 2,578 2,985 10,470
FY2003
Q1 Q2 Q3 Q4 FY03
----- ----- ----- ------ ------
Company stores 976 989 1,107 1,205 4,277
Area Developers 1,129 1,196 1,244 1,429 4,998
Associates 728 713 700 708 2,849
Total Franchise 1,857 1,909 1,944 2,137 7,847
Systemwide 2,833 2,898 3,051 3,342 12,124
FY2004
Q1
-----
Company stores 1,336
Area Developers 1,505
Associates 732
Total Franchise 2,237
Systemwide 3,573