Exhibit 99.1
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 ANNOUNCES THIRD QUARTER EARNINGS
NET INCOME INCREASES 43.4%; EPS INCREASES 35.3% TO $0.23
Winston-Salem, NC (November 21, 2003) - Krispy Kreme Doughnuts, Inc. (NYSE: KKD)
today reported financial results for the three months ended November 2, 2003,
the Company's third quarter of Fiscal 2004.
Net income for the third quarter increased 43.4% to $14.5 million compared with
$10.1 million in the third quarter of Fiscal 2003. Diluted earnings per share
increased to $0.23 in the third quarter compared with $0.17 for the same period
in Fiscal 2003.
Total company revenues, which include sales from company stores, franchise
operations, Krispy Kreme Manufacturing and Distribution (KKM&D) and Montana
Mills rose 31.4% to $169.6 million, compared with $129.1 million in the prior
year comparable period. Sales from company stores increased 40.0% to $110.6
million; revenues from franchise operations grew 32.3% to $6.5 million; KKM&D
sales increased 12.1% to $50.7 million; and Montana Mills revenues were $1.9
million.
Systemwide sales, including sales of company and franchise stores, advanced
28.6% to $251.2 million in the third quarter compared with $195.3 million in the
third quarter of Fiscal 2003. Sales were driven by an increase in company store
sales of 40.0% to $110.6 million and an increase in franchise store sales of
20.9% to $140.6 million. Systemwide sales, including Krispy Kreme stores and
Montana Mills, increased 29.6% to $253.1 million in the third quarter. On a
comparable store basis, systemwide store sales increased 9.5% and company store
sales were up 13.3%. Events affecting systemwide comp store sales included
Hurricane Isabel, grocery store strikes and unseasonably warm weather in many
markets late in the quarter. In the absence of these factors, the Company
estimates systemwide comps would have been at least 10% for the quarter.
Net income for the nine months ended November 2, 2003, increased 46.0% to $40.7
million compared with $27.8 million in the same period last year. Diluted
earnings per share increased 39.6% to $0.66 in the first nine months of the year
from $0.47 per share in the same period a year ago.
Total Company revenues increased 35.3% to $480.1 million compared with $354.8
million for the same period in Fiscal 2003. Sales from company stores increased
to $317.2 million, a 39.2% increase; franchise operations increased 25.5% to
$17.6 million; KKM&D sales increased 24.8% to $140.9 million and Montana Mills
revenues totaled $4.5 million.
Systemwide sales, including company and franchise stores, increased 26.9% to
$717.5 million from $565.3 million for the same period in Fiscal 2003. This
increase was a result of growth in company store sales of 39.2% to $317.2
million and an 18.7% increase in franchise store sales to $400.4 million.
Systemwide sales, including Krispy Kreme stores and Montana Mills, advanced
27.7% to $722.0 million.
"Our business momentum continues and our third quarter results reflect our focus
on opening new stores, establishing strong off-premises relationships and
gaining greater market share," said Scott Livengood, Chairman, President and
Chief Executive Officer. "Our fundamentals remain very strong and we delivered
solid results in an active quarter. Despite weather related issues and the
grocery store strike that impacted several of our markets, we produced
systemwide sales of $253 million and grew net income by 43%. I am very pleased
with these results."
During the quarter, 27 new Krispy Kreme factory stores were opened in ten new
markets. The Company opened its first factory store in Europe, located in the
world-renowned department store, Harrods of Knightsbridge, London. Other new
markets entered included Lansing, MI, Evansville and South Bend, IN,
Hattiesburg, MS, Chico and Visalia, CA, Boise, ID, and Lubbock and Laredo, TX.
This brings the total number of stores at the end of the third quarter to 326.
Additionally, during the quarter the Company opened eight satellite units
consisting of six fresh shops and two doughnut and coffee shops.
Subsequent to quarter end, the Company opened six new Krispy Kreme factory
stores and three satellite stores consisting of two fresh shops and one doughnut
and coffee shop. Also, the Company opened its first commissary in Mexico City,
Mexico. Krispy Kreme Mexico, S. de R.L. de C. V., the Company's franchisee in
Mexico, will develop 20 stores over the next six years throughout Mexico.
Commenting on the Company's outlook, Livengood said, "The momentum generated by
store openings, our broadening platform and growth in both our stores and
off-premises give me great confidence for this year and the years to come."
Based on its latest review of factory store and satellite development plans, the
Company now expects Fiscal 2004 store openings will range between 92 and 97,
exceeding the previous guidance of 87 that included 77 factory stores and 10
satellites. The Company expects to earn $0.26 per fully diluted share in the
fourth quarter of Fiscal 2004 and $0.92 for all of Fiscal 2004, including the
$0.01 positive impact of the arbitration settlement recorded in the first
quarter of Fiscal 2004. Additionally, the Company affirmed its previously
announced goal for systemwide comparable sales of 10% for the fiscal year;
systemwide comp store sales in the fourth quarter are expected to be slightly
above or below 10%.
Based on the performance in the first nine months of Fiscal 2004, the Company
today established a new long-term operating margin target for its Franchise
Operations segment. The three to five year target for franchise operating income
as a percent of franchise revenue was increased from 70% to a range between 75%
and 85%.
Additionally, the Company announced the appointment of Robert S. McCoy, Jr. to
its Board of Directors. McCoy, the former Chief Financial Officer of Wachovia
Corporation before the transaction with First Union, is an independent director
appointed to fill the vacancy created by the resignation of Erskine Bowles.
McCoy, who recently retired from Wachovia Corporation after leading its
integration efforts with First Union, was appointed Chairman of the Company's
Audit Committee and will serve as the financial expert.
"We are delighted to have someone with Bob McCoy's business acumen and expertise
joining our board," said Livengood. "We look forward to his contributions as we
continue to expand the Krispy Kreme brand."
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, November 28, 2003 by
calling 800.297.0781 (domestic) or 402.220.3826 (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 333 stores in 42
U.S. states, Canada, the United Kingdom and Australia. 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 Third Quarter Ended November 2, 2003
(All dollar amounts in thousands except per share data)
(Unaudited)
Quarter Ended
November 2, 2003 November 3, 2002 $ Change % Change
--------------------------------------------------------------------------------
Total revenues $ 169,629 $ 129,130 $ 40,499 31.4%
Operating expenses 129,229 100,295 28,934 28.8%
General and administrative expenses 9,400 7,429 1,971 26.5%
Depreciation and amortization expenses 4,964 3,403 1,561 45.9%
----------------------------------------------------------------
Income from operations 26,036 18,003 8,033 44.6%
Interest income 222 511 (289) -56.6%
Interest expense 1,312 653 659 100.9%
Loss from joint ventures 33 819 (786) -96.0%
Minority interest in consolidated
joint ventures 455 352 103 29.3%
Other expenses 302 218 84 38.5%
----------------------------------------------------------------
Income before income taxes 24,156 16,472 7,684 46.6%
Provision for income taxes 9,634 6,347 3,287 51.8%
----------------------------------------------------------------
Net income $ 14,522 $ 10,125 $ 4,397 43.4%
----------------------------------------------------------------
Diluted earnings per share $ 0.23 $ 0.17 $ 0.06 35.3%
Diluted shares outstanding 63,136 59,575 3,561 6.0%
Segment Information
Revenues
Company store operations $ 110,573 $ 78,991 $ 31,582 40.0%
Franchise operations 6,536 4,941 1,595 32.3%
KKM&D 50,653 45,198 5,455 12.1%
Montana Mills 1,867 - 1,867 -
----------------------------------------------------------------
Total revenues $ 169,629 $ 129,130 $ 40,499 31.4%
----------------------------------------------------------------
Operating Income
Company store operations $ 20,309 $ 13,886 $ 6,423 46.3%
Franchise operations 5,324 3,723 1,601 43.0%
KKM&D 10,941 8,225 2,716 33.0%
Montana Mills (723) - (723) -
Unallocated general and administrative
expenses (9,815) (7,831) (1,984) 25.3%
----------------------------------------------------------------
Total operating income $ 26,036 $ 18,003 $ 8,033 44.6%
----------------------------------------------------------------
Operating Margins
Company store operations 18.4% 17.6% 0.8%
Franchise operations 81.5% 75.4% 6.1%
KKM&D 21.6% 18.2% 3.4%
Montana Mills -38.7% - -38.7%
Unallocated general and administrative
expenses 5.8% 6.1% -0.3%
Total operating income 15.3% 13.9% 1.4%
Depreciation and Amortization Expenses
Company store operations $ 3,625 $ 2,282 $ 1,343 58.9%
Franchise operations 43 41 2 4.9%
KKM&D 752 678 74 10.9%
Montana Mills 128 - 128 -
Corporate administration 416 402 14 3.5%
----------------------------------------------------------------
Total depreciation and amortization
expenses $ 4,964 $ 3,403 $ 1,561 45.9%
----------------------------------------------------------------
Systemwide Sales
Company stores $ 110,573 $ 78,991 $ 31,582 40.0%
Franchise stores 140,613 116,323 24,290 20.9%
----------------------------------------------------------------
Total Krispy Kreme stores 251,186 195,314 55,872 28.6%
Montana Mills stores 1,867 - 1,867 -
----------------------------------------------------------------
Total $ 253,053 $ 195,314 $ 57,739 29.6%
----------------------------------------------------------------
Comparable Store Sales
Company stores 13.3%
Systemwide 9.5%
Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the Nine Months Ended November 2, 2003
(All dollar amounts in thousands except per share data)
(Unaudited)
Nine Months Ended
November 2, 2003 November 3, 2002 $ Change % Change
---------------------------------------------------------------------------------
Total revenues $ 480,079 $ 354,815 $ 125,264 35.3%
Operating expenses 365,414 277,144 88,270 31.8%
General and administrative expenses 27,362 21,641 5,721 26.4%
Depreciation and amortization expenses 13,768 8,561 5,207 60.8%
Arbitration Award (525) - (525) -
----------------------------------------------------------------
Income from operations 74,060 47,469 26,591 56.0%
Interest income 664 1,702 (1,038) -61.0%
Interest expense 3,175 1,161 2,014 173.5%
Loss from joint ventures 1,529 999 530 53.1%
Minority interest in consolidated joint
ventures 1,687 1,476 211 14.3%
Other expenses 670 368 302 82.1%
----------------------------------------------------------------
Income before income taxes 67,663 45,167 22,496 49.8%
Provision for income taxes 27,000 17,323 9,677 55.9%
----------------------------------------------------------------
Net income $ 40,663 $ 27,844 $ 12,819 46.0%
----------------------------------------------------------------
Diluted earnings per share (1) $ 0.66 $ 0.47 $ 0.19 39.6%
Diluted shares outstanding 61,975 59,203 2,772 4.7%
Segment Information
Revenues
Company store operations $ 317,158 $ 227,919 $ 89,239 39.2%
Franchise operations 17,555 13,983 3,572 25.5%
KKM&D 140,885 112,913 27,972 24.8%
Montana Mills 4,481 - 4,481 -
----------------------------------------------------------------
Total revenues $ 480,079 $ 354,815 $ 125,264 35.3%
----------------------------------------------------------------
Operating Income
Company store operations $ 61,969 $ 39,593 $ 22,376 56.5%
Franchise operations 13,721 10,525 3,196 30.4%
KKM&D 27,824 20,176 7,648 37.9%
Montana Mills (1,408) - (1,408) -
Unallocated general and administrative
expenses (28,571) (22,825) (5,746) 25.2%
Arbitration Award 525 - 525 -
----------------------------------------------------------------
Total operating income $ 74,060 $ 47,469 $ 26,591 56.0%
----------------------------------------------------------------
Operating Margins
Company store operations 19.5% 17.4% 2.1%
Franchise operations 78.2% 75.3% 2.9%
KKM&D 19.7% 17.9% 1.8%
Montana Mills -31.4% - -31.4%
Unallocated general and administrative
expenses 6.0% 6.4% -0.4%
Arbitration Award 0.1% - 0.1%
Total operating income 15.4% 13.4% 2.0%
Depreciation and Amortization Expenses
Company store operations $ 9,900 $ 6,276 $ 3,624 57.7%
Franchise operations 129 67 62 92.5%
KKM&D 2,233 1,034 1,199 116.0%
Montana Mills 295 - 295 -
Corporate administration 1,211 1,184 27 2.3%
----------------------------------------------------------------
Total depreciation and amortization
expenses $ 13,768 $ 8,561 $ 5,207 60.8%
----------------------------------------------------------------
Systemwide Sales
Company stores $ 317,158 $ 227,919 $ 89,239 39.2%
Franchise stores 400,362 337,391 62,971 18.7%
----------------------------------------------------------------
Total Krispy Kreme stores 717,520 565,310 152,210 26.9%
Montana Mills stores 4,481 - 4,481 -
----------------------------------------------------------------
Total $ 722,001 $ 565,310 $ 156,691 27.7%
----------------------------------------------------------------
Comparable Store Sales
Company stores 14.7%
Systemwide 10.6%
(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. In the first
quarter of fiscal 2004, the Company paid $8,550 to settle the award. Diluted
earnings per share for the nine months ended November 2, 2003 of $.66 includes
the effect of the reversal of the remaining accrual, $525. Excluding the effect
of the reversal of this accrual, operating income for the nine months ended
November 2, 2003 would have been $73,535 and the operating income margin would
have been 15.3%. After applying the effective tax rate of 39.9% to the $525
accrual reversal, net income for the nine month period would have been $40,347,
a 44.9% increase over the prior year quarter and diluted earnings per share
would have been $.01 less than the reported $.66.
Krispy Kreme Doughnuts, Inc.
Condensed Consolidated Balance Sheets
As of November 2, 2003, August 3, 2003 and February 2, 2003
(All dollar amounts in thousands)
(Unaudited)
November 2, August 3, February 2,
2003 2003 $ Change % Change 2003 $ Change % Change
Cash and investments $ 39,287 $ 28,254 $ 11,033 39.0% $ 59,523 $ (20,236) -34.0%
Receivables 62,454 59,790 2,664 4.5% 46,319 16,135 34.8%
Inventories 29,717 29,240 477 1.6% 24,365 5,352 22.0%
Property and equipment, net 262,975 240,784 22,191 9.2% 202,558 60,417 29.8%
Investments in unconsolidated
joint ventures 14,321 12,688 1,633 12.9% 6,871 7,450 108.4%
Other assets 220,677 191,216 29,461 15.4% 70,851 149,826 211.5%
---------------------------------- ----------------------
Total assets $ 629,431 $ 561,972 $ 67,459 12.0% $410,487 $ 218,944 53.3%
================================== ======================
Payables $ 30,337 $ 26,453 $ 3,884 14.7% $ 25,430 $ 4,907 19.3%
Accrued expenses 21,764 24,201 (2,437) -10.1% 30,056 (8,292) -27.6%
Debt 132,450 124,091 8,359 6.7% 61,389 71,061 115.8%
Other long-term obligations 16,692 24,800 (8,108) -32.7% 20,260 (3,568) -17.6%
Shareholders' equity 428,188 362,427 65,761 18.1% 273,352 154,836 56.6%
---------------------------------- ----------------------
Total liabilities and
shareholders' equity $ 629,431 $ 561,972 $ 67,459 12.0% $410,487 $ 218,944 53.3%
================================== ======================
Krispy Kreme Doughnuts, Inc.
Store Count Recap
Factory Stores
- -----------------------------------------------------------------------------------------------------------------------------------
Consolidated Total Joint Total Total
Company JVs Company Associate AD Ventures AD Franchise Total
Total End Q2 FY04 83 31 114 52 90 46 136 188 302
--------------------------------------------------------------------------------------------------------------
Open 5 5 10 3 3 11 14 17 27
Closed (1) - (1) - (2) - (2) (2) (3)
Transferred 5 - 5 - (5) - (5) (5) -
--------------------------------------------------------------------------------------------------------------
Q3 Net 9 5 14 3 (4) 11 7 10 24
--------------------------------------------------------------------------------------------------------------
Total End Q3 FY04 92 36 128 55 86 57 143 198 326
==============================================================================================================
Krispy Kreme Doughnuts, Inc.
Average Sales per Week
Dollars in Thousands
FY 2004 FY 2003
----------------------------------- -----------------
Q3 Q2 Q3
Company stores $73.0 $74.4 $76.8
Area Developers $60.3 $61.2 $63.0
Associates $45.9 $48.7 $48.6
Total Franchise $56.3 $57.3 $57.8
Systemwide $62.7 $63.7 $64.7
Krispy Kreme Doughnuts, Inc.
Total Operating Weeks
FY 2004 FY 2003
------------------------------------ -----------------
Q3 Q2 Q3
Company stores 1,536 1,396 1,107
Area Developers 1,802 1,617 1,244
Associates 694 724 700
Total Franchise 2,496 2,341 1,944
Systemwide 4,032 3,737 3,051