Krispy Kreme Reports Operating Profit for the Fourth Quarter and Fiscal Year Ended February 1, 2009
WINSTON-SALEM, N.C., April 16, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Krispy Kreme Doughnuts, Inc. (NYSE: KKD) (the "Company") today reported financial results for the fourth quarter and fiscal year ended February 1, 2009 ("fiscal 2009").
(Logo: http://www.newscom.com/cgi-bin/prnh/19991216/NYTH146 )
Fourth Quarter Highlights:
-- Operating income for the fourth quarter was $1.5 million compared to an
operating loss of $25.2 million in the fourth quarter last year
-- For the year, operating income was $4.8 million compared to an operating
loss of $42.6 million last year
-- The net loss in the fourth quarter was $303,000 (less than $0.01 per
share) compared to a net loss of $31.8 million ($0.50 per share) in the
fourth quarter of fiscal 2008
-- For the year, the net loss was $4.1 million ($.06 per share) compared to
a loss of $67.1 million ($1.05 per share) last year
-- Same store sales at Company-owned stores rose 0.9% in the fourth quarter
and finished down 0.7% for the year, improving over year-to-date third
quarter same store sales
"We are seeing early signs of progress toward achieving a number of our strategic goals," said Jim Morgan, Chairman, President and Chief Executive Officer. "We earned an operating profit for the fourth quarter and also for the year, our first annual operating profit since fiscal 2004. We've also made measurable progress in implementing our initiatives." That progress includes:
-- On March 31, we opened the first of the Company's new small retail
concept shops, a traditional factory store on a smaller scale, paired
with tunnel oven technology that will enable us to offer our signature
hot Original Glazed(R) doughnuts virtually around the clock;
-- We opened our second new Company small retail concept shop on April 9,
and we are in active negotiations for 7 additional sites;
-- We are reaching sufficient scale in several markets to begin deploying a
more comprehensive and integrated marketing portfolio with enhanced use
of broadcast media;
-- Domestic franchisees opened 5 new small retail shops in fiscal 2009 and
have additional stores planned;
-- We are enhancing off-premises route profitability by closely focusing on
door economics, measured by sales per mile and delivery cost per mile;
-- We have identified the first new, longer shelf-life products for
distribution to our off-premises customers beginning in late May, to
more closely match our off-premises product offerings to consumer
preferences;
-- We have introduced a new sales-focused incentive compensation plan that
incentivizes our off-premises sales force to grow the business and
allows them to share in that growth
-- We have begun reorganizing both our on- and off-premises operations to
more clearly establish lines of authority and responsibility for results
and to focus on driving customer satisfaction in both channels;
-- We have engaged a new global marketing firm to assist in the development
of integrated product, promotional and brand-building efforts for our
growing international store operations;
-- We have identified regional/global supply chain opportunities in order
to leverage our growing international business, and are working to
implement additional improvements that deliver efficiencies to
international franchisees; and
-- We have implemented new food and labor cost management tools and
training to improve shop operations, and have more tools in the
pipeline, all of which will benefit both Company and franchise stores
"We also have reached agreement with our lenders on amendments to our credit facilities that should enable us to remain in compliance with the agreements and continue to provide backup sources of liquidity," Morgan noted. "We finished the year with $39 million of net debt, down $32 million in the past two years, and remain committed to further reducing our need for borrowed money.
"While there is still much work to be done, we continue to believe that our strategies are the right ones, and that our extraordinarily committed employees will continue to successfully implement those strategies. We look forward to seeing the benefits of these strategies more fully reflected in our financial results in the quarters and years ahead," Morgan concluded.
Management will host a conference call to review fourth quarter and annual results this afternoon at 4:30 p.m. (ET). A live webcast of the conference call will be available at www.KrispyKreme.com. To access an archived audio replay of the call, dial 888-203-1112 and enter the passcode 6897534. International callers may access the replay by dialing 719-457-0820 and entering passcode 6897534. The audio replay will be available through April 22, 2009.
About Krispy Kreme
Krispy Kreme is a leading branded specialty retailer of premium quality sweet treats, including its signature hot Original Glazed(R) doughnut. Headquartered in Winston-Salem, NC, the Company has offered the highest quality doughnuts and great tasting coffee since it was founded in 1937. Today, Krispy Kreme can be found in approximately 520 locations around the world. Visit us at www.KrispyKreme.com.
Information contained in this press release, other than historical information, should be considered forward-looking. Forward-looking statements are 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 the quality of Company and franchise store operations; our ability, and our dependence on the ability of our franchisees, to execute on our and their business plans; our relationships with our franchisees; our ability to implement our international growth strategy; our ability to implement our new domestic operating model; currency, economic, political and other risks associated with our international operations; the price and availability of raw materials needed to produce doughnut mixes and other ingredients; compliance with government regulations relating to food products and franchising; our relationships with wholesale customers; our ability to protect our trademarks and trade secrets; risks associated with our high levels of indebtedness; restrictions on our operations and compliance with covenants contained in our secured credit facilities; changes in customer preferences and perceptions; risks associated with competition; and other factors discussed in Krispy Kreme's periodic reports filed with the Securities and Exchange Commission.
KRISPY KREME DOUGHNUTS, INC.
CONSOLIDATED BALANCE SHEET
Feb. 1, Feb. 3,
2009 2008
---- ----
(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $35,538 $24,735
Receivables 19,229 22,991
Accounts and notes receivable - equity method
franchisees 1,019 2,637
Inventories 15,587 19,987
Deferred income taxes 106 83
Other current assets 4,327 5,647
----- -----
Total current assets 75,806 76,080
Property and equipment 85,075 90,996
Investments in equity method franchisees 1,187 1,950
Goodwill and other intangible assets 23,856 23,856
Other assets 9,002 9,469
----- -----
Total assets $194,926 $202,351
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $1,413 $1,557
Accounts payable 8,981 5,712
Accrued liabilities 29,222 35,949
------ ------
Total current liabilities 39,616 43,218
Long-term debt, less current maturities 73,454 75,156
Deferred income taxes 106 83
Other long-term obligations 23,995 27,270
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; 10,000 shares
authorized; none issued and Outstanding - -
Common stock, no par value; 300,000 shares
authorized; 67,512 and 65,370 shares issued and
outstanding 361,801 355,615
Accumulated other comprehensive income (loss) (913) 81
Accumulated deficit (303,133) (299,072)
------- -------
Total shareholders' equity 57,755 56,624
------ ------
Total liabilities and shareholders' equity $194,926 $202,351
======= =======
KRISPY KREME DOUGHNUTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands, except per share amounts)
Quarter Ended Year Ended
------------------ ------------------
Feb. 1, Feb. 3, Feb. 1, Feb. 3,
2009 2008 2009 2008
---- ---- ---- ----
Revenues $91,768 $110,948 $383,984 $429,319
Operating expenses:
Direct operating expenses
(exclusive of depreciation
and amortization shown
below) 80,081 96,775 345,007 380,014
General and administrative
expenses 6,052 6,909 23,458 26,303
Depreciation and amortization
expense 2,100 4,791 8,709 18,433
Impairment charges and lease
termination costs 1,196 27,569 548 62,073
Settlement of litigation - - - (14,930)
Other operating (income) and
expense, net 875 86 1,501 13
--- -- ----- --
Operating income (loss) 1,464 (25,182) 4,761 (42,587)
Interest income 44 198 331 1,422
Interest expense (3,338) (2,367) (10,679) (9,796)
Loss on extinguishment of
debt - - - (9,622)
Equity in losses of equity
method franchisees (101) (238) (786) (933)
Other non-operating income
and (expense), net 2,744 (2,948) 2,815 (3,211)
----- ------- ----- -------
Income (loss) before income
taxes 813 (30,537) (3,558) (64,727)
Provision for income taxes 1,116 1,278 503 2,324
----- ----- --- -----
Net loss $(303) $(31,815) $(4,061) $(67,051)
====== ========= ======== =========
Loss per common share:
Basic $- $(.50) $(.06) $(1.05)
====== ====== ====== =======
Diluted $- $(.50) $(.06) $(1.05)
====== ====== ====== =======
Weighted average shares
outstanding
Basic 66,998 64,233 65,940 63,805
Diluted 66,998 64,233 65,940 63,805
KRISPY KREME DOUGHNUTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended
--------------------
Feb. 1, Feb. 3,
2009 2008
---- -----
(In thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(4,061) $(67,051)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 8,709 18,433
Deferred income taxes 651 889
Impairment charges 1,050 61,041
Settlement of litigation - (14,930)
Accrued rent expense (352) (663)
Loss on disposal of property and equipment 746 64
Gain on refranchise of Canadian subsidiary (2,805) --
Gain on disposal of interests in equity method
franchisees (931) (260)
Unrealized loss on interest rate derivatives 798 --
Share-based compensation 5,152 7,599
Provision for doubtful accounts 270 1,786
Amortization of deferred financing costs 832 6,041
Equity in losses of equity method franchisees 786 933
Other 1,820 991
Change in assets and liabilities:
Receivables 4,158 284
Inventories 4,263 1,058
Other current and non-current assets 590 2,105
Accounts payable and accrued liabilities (3,817) (7,550)
Other long-term obligations (1,266) (1,058)
----- -----
Net cash provided by operating activities 16,593 9,712
------ -----
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,694) (5,509)
Proceeds from disposals of property and
equipment 748 18,314
Investment in a franchise investee (113) --
Sale of interests in equity method franchisee -- 300
Other investing activities (237) 13
--- --
Net cash provided by (used for) investing
activities (4,296) 13,118
----- ------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- 110,000
Repayment of long-term debt (1,989) (141,733)
Deferred financing costs (467) (2,891)
Proceeds from exercise of stock options 3,103 292
Repurchase of common shares (2,069) (93)
----- --
Net cash used for financing activities (1,422) (34,425)
----- ------
Effect of exchange rate changes on cash (72) 88
-- --
Net increase (decrease) in cash and cash
equivalents 10,803 (11,507)
Cash and cash equivalents at beginning of year 24,735 36,242
------ ------
Cash and cash equivalents at end of year $35,538 $24,735
====== ======
Supplemental schedule of non-cash investing
and financing activities:
Assets acquired under capital leases $143 $750
=== ===
KRISPY KREME DOUGHNUTS, INC.
SEGMENT INFORMATION
(Dollars in thousands)
Quarter Ended Year Ended
------------------ ------------------
Feb. 1, Feb. 3, Feb. 1, Feb. 3,
2009 2008 2009 2008
---- ---- ---- ----
Revenues:
Company Stores $63,929 $75,940 $265,890 $304,444
Franchise 6,005 7,185 25,537 22,958
KK Supply Chain:
Total revenues 44,391 52,868 188,115 203,283
Less- intersegment
sales elimination (22,557) (25,045) (95,558) (101,366)
------ ------ ------ -------
External KK Supply
Chain revenues 21,834 27,823 92,557 101,917
------ ------ ------ -------
Total revenues $91,768 $110,948 $383,984 $429,319
====== ======= ======= =======
Operating income (loss):
Company Stores $(828) $895 $(9,813) $(6,292)
Franchise 3,987 4,320 16,515 14,317
KK Supply Chain 5,829 4,402 23,269 24,083
Unallocated general and
administrative expenses (6,328) (7,230) (24,662) (27,552)
Impairment charges and
lease termination costs (1,196) (27,569) (548) (62,073)
Settlement of litigation - - - 14,930
--- --- --- ------
Total operating income
(loss) $1,464 $(25,182) $4,761 $(42,587)
===== ====== ====== ======
Depreciation and amortization
expense:
Company Stores $1,548 $2,540 $6,402 $11,558
Franchise 22 22 86 92
KK Supply Chain 254 1,915 1,019 5,586
Corporate administration 276 314 1,202 1,197
--- --- ----- -----
Total depreciation and
amortization expense $2,100 $4,791 $8,709 $18,433
===== ===== ====== ======
KRISPY KREME DOUGHNUTS, INC.
STORE COUNT
NUMBER OF STORES
----------------
FACTORY SATELLITE TOTAL
------- --------- -----
Quarter ended February 1, 2009:
NOVEMBER 2, 2008 284 225 509
Opened 3 21 24
Closed (5) (5) (10)
Converted from satellites 1 (1) -
Converted to satellites (2) 2 -
--- --- ---
FEBRUARY 1, 2009 281 242 523
=== === ===
Year ended February 1, 2009:
FEBRUARY 3, 2008 295 154 449
Opened 19 101 120
Closed (27) (19) (46)
Converted from satellites 3 (3) -
Converted to satellites (9) 9 -
--- --- ---
FEBRUARY 1, 2009 281 242 523
=== === ===
KRISPY KREME DOUGHNUTS, INC.
SELECTED OPERATING STATISTICS (1)
(Dollars in thousands)
Quarter Ended Year Ended
------------------- ------------------
Feb. 1, Feb. 3, Feb. 1, Feb. 3,
2009 2008 2009 2008
---- ---- ---- ----
Year over year percentage change
in systemwide sales (2) (5.4)% 2.3% (0.1)% (0.9)%
Average weekly sales per
store (3):
Company $50.4 $51.9 $50.8 $53.0
Systemwide $28.5 $35.8 $31.6 $37.2
Store operating weeks (4):
Company 1,252 1,347 5,191 5,626
Systemwide 6,493 5,487 24,448 20,797
Change in Company on-premises
same store sales (5) 0.9% 1.6% (0.7)% 0.0%
Company off-premises sales (6):
Change in average weekly
number of doors (6.8)% 1.9% (7.0)% (1.1)%
Change in average weekly
sales per door (4.2)% (7.7)% (7.5)% (6.4)%
(1) The Company's fiscal year ends on the Sunday closest to January 31,
which periodically results in a 53-week year. Fiscal 2008 contained
53 weeks. To enhance comparability, amounts in the table set forth
above for selected operating statistics for fiscal 2008 have been
computed based upon the 52-week period ended January 27, 2008.
(2) Systemwide sales, a non-GAAP financial measure, include the sales
by both Company and franchise stores. The Company believes
systemwide sales data is useful in assessing the overall performance
of the Krispy Kreme brand and, ultimately, the performance of the
Company.
(3) Represents, on a Company and systemwide basis, total sales of all
stores divided by the number of operating weeks for both factory
and satellite stores.
(4) Represents, on a Company and systemwide basis, the aggregate number
of operating weeks for both factory and satellite stores.
(5) The change in "same store sales" represents the aggregate
on-premises sales (including fundraising sales) during the current
year period for all stores which had been open for more than 56
consecutive weeks during the current year period (but only to the
extent such sales occurred in the 57th or later week of each
store's operation) divided by the aggregate on-premises sales of
such stores for the comparable weeks in the preceding year period.
Once a store has been open for at least 57 consecutive weeks, its
sales are included in the computation of same stores sales for all
subsequent periods. In the event a store is closed temporarily
(for example, for remodeling) and has no sales during one or more
weeks, such store's sales for the comparable weeks during the
earlier or subsequent period are excluded from the same store
sales computation.
(6) For Company off-premises sales, "average weekly number of doors"
represents the average number of customer locations to which
product deliveries are made during a week by Company Stores, and
"average weekly sales per door" represents the average weekly
sales to each such location by Company Stores.
SOURCE Krispy Kreme Doughnuts, Inc.
http://www.KrispyKreme.com
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