Krispy Kreme Reports Financial Results For The Fourth Quarter And Fiscal Year Ended February 3, 2013

Raises Fiscal 2014 Guidance

WINSTON-SALEM, N.C. - March 14, 2013 // PRNewswire // - Krispy Kreme Doughnuts, Inc. (NYSE: KKD) (the "Company") today reported financial results for the fourth quarter and fiscal year ended February 3, 2013, and raised its guidance for fiscal 2014.

Fiscal Year

The fourth quarter and fiscal year ended February 3, 2013 included 14 and 53 weeks, respectively, compared to 13 and 52 weeks, respectively, for the fourth quarter and fiscal year ended January 29, 2012. Accordingly, financial results for the fiscal 2013 periods are not directly comparable to those of the corresponding fiscal 2012 periods. The Company's fiscal year ends on the Sunday closest to January 31, which periodically results in a 53-week year.

Fourth Quarter Fiscal 2013 Highlights Compared to the Year-Ago Period (Tables 1 and 2):

  • Revenues increased 15.9% to $118.1 million from $102.0 million
  • Operating income rose 60% to $8.5 million from $5.3 million
  • Adjusted net income increased 85% to $7.4 million ($0.11 per share) from $4.0 million ($0.06 per share); adjusted net income and adjusted EPS reflect income tax expense only to the extent currently payable in cash; adjusted net income and adjusted EPS are non-GAAP measures (see the reconciliation of all adjusted earnings measures to the related GAAP amounts in Table 6 accompanying this release)
  • Net income was $4.8 million ($0.07 per share) compared to $143.5 million ($2.01 per share) in the fourth quarter last year; net income for the fourth quarter of last year included an unusual credit of$139.6 million ($1.95 per share) from the reversal of valuation allowances on deferred income tax assets
  • Cash provided by operating activities was $21.3 million compared to $10.9 million in the fourth quarter last year

To facilitate comparisons, the following highlights compare the 13 weeks ended January 27, 2013 to the 13 weeks ended January 29, 2012:

  • Revenues increased 7.0% to $109.1 million from $102.0 million
  • Company same store sales rose 7.5%, the seventeenth consecutive quarterly increase
  • Operating income increased 35% to $7.2 million from $5.3 million
  • Adjusted net income rose 53% to $6.1 million ($0.09 per share) from $4.0 million ($0.06 per share)

Fiscal 2013 Highlights Compared to Fiscal 2012 (Tables 1 and 3):

  • Revenues increased 8.1% to $435.8 million from $403.2 million
  • Operating income rose 48% to $37.7 million from $25.6 million
  • Adjusted net income increased 54% to $34.2 million ($0.49 per share) from $22.2 million ($0.31 per share); adjusted net income and adjusted EPS reflect income tax expense only to the extent currently payable in cash and, in fiscal 2012, exclude the gain on the Company's sale of its 30% equity interest in KK Mexico
  • Net income was $20.8 million ($0.30 per share) compared to $166.3 million ($2.33 per share) last year; net income in fiscal 2012 included an unusual credit of $139.6 million ($1.95 per share) from the reversal of valuation allowances on deferred income tax assets and a $4.7 million after tax gain ($0.06 per share) on the Company's sale of its 30% equity interest in KK Mexico
  • Cash provided by operating activities was $59.3 million compared to $33.9 million in fiscal 2012

To facilitate comparisons, the following highlights compare the 52 weeks ended January 27, 2013 to the 52 weeks ended January 29, 2012:

  • Revenues increased 5.9% to $426.8 million from $403.2 million
  • Company same store sales rose 5.5%
  • Operating income increased 43% to $36.4 million from $25.6 million
  • Adjusted net income rose 49% to $32.9 million ($0.47 per share) from $22.2 million ($0.31 per share)

James H. Morgan, Chairman and Chief Executive Officer, commented:  "In the fourth quarter, Krispy Kreme not only achieved earnings at the top end of our November guidance, but also posted its best fourth quarter results since fiscal 2004.  The year as a whole also was our best since fiscal 2004, and demonstrated again the strength of our business model and affirmed our confidence in achieving our goal of sustainable and profitable growth for years to come.  Going forward, the Krispy Kreme investment thesis will no longer be predicated solely on the progress we have made in building a strong foundation for our business, but also on our ability to execute our long-term growth plans.  Based upon the strength of these results and the momentum we have carried into the new year, we are pleased to increase our fiscal 2014 earnings guidance.

"Krispy Kreme is truly blessed with four attributes most companies spend a lifetime trying to achieve:  a brand that is beloved worldwide, best-in-class products, compelling strategies, and incredibly capable and energized franchisees and team members.  We are committed to doing everything in our power to continue improving our profitability while expanding our system to 1,300 stores by fiscal 2017 through Company and domestic and international franchise development.  We are gratified by our accomplishments and are optimistic that we can build on them to achieve our long-term aspirations, and those of our shareholders." 

Results For the 13 Weeks Ended January 27, 2013 (Tables 2 and 8)

To facilitate comparisons, the following discussion compares the 13 weeks ended January 27, 2013 with the 13 weeks ended January 29, 2012.

Consolidated Results

For the 13 weeks ended January 27, 2013, revenues increased 7.0% to $109.1 million.  All four business segments reported year-over-year revenue growth.

Direct operating expenses increased to $91.0 million from $87.9 million, but as a percentage of total revenues, decreased to 83.4% from 86.2%.  General and administrative expenses increased to $8.4 million from $6.7 million in the same period last year.  General and administrative expenses in the fourth quarter of last year included a non-recurring credit of approximately $840,000.  Excluding that item, general and administrative expenses were 7.7% of revenues compared to 7.4% last year. 

Operating income rose 35% to $7.2 million from $5.3 million.

Adjusted net income was $6.1 million ($0.09 per share) compared to $4.0 million ($0.06 per share), in the fourth quarter last year.  Adjusted net income and EPS are non-GAAP measures (see the reconciliation of GAAP to adjusted earnings in Table 6 accompanying this release).

Segment Results

For the 13 weeks ended January 27, 2013, Company Stores revenues increased 9.6% to $75.2 million.  Same store sales at Company stores rose 7.5%, the seventeenth consecutive quarterly increase, driven by higher traffic.  The Company Stores segment posted operating income of $3.0 million compared to an operating loss of $0.3 million last year.

Domestic Franchise revenues increased 4.2% to $2.5 million.  Higher royalties from an 8.3% increase in sales by domestic franchisees were partially offset by a reduction in other franchise revenue.  Same store sales rose 9.6% at domestic franchise stores.  During the quarter, we added new personnel and took additional steps to begin execution of our domestic franchise expansion programs.  Domestic Franchise segment operating income was $1.3 million in the fourth quarter of both years.

International Franchise revenues increased 6.3% to $6.7 million.  Adjusted to eliminate the effects of changes in foreign exchange rates, same store sales at international franchise stores fell 7.4%, reflecting, among other things, honeymoon effects from the substantial number of international store openings in recent years, as well as cannibalization as markets develop.  International Franchise costs and expenses in the quarter included an increase of almost $200,000 compared to the prior year quarter in trademark protection costs, a provision of approximately $185,000 for potential uncollectible accounts and higher personnel and personnel-related costs to support continued and anticipated international growth.  The International Franchise segment generated operating income of $4.0 million compared to $4.2 million in the fourth quarter last year.

Total KK Supply Chain revenues (including sales to Company stores) increased 1.8% to $52.9 million.  KK Supply Chain generated operating income of $7.5 million compared to $7.1 million in the fourth quarter last year.

Fiscal 2014 Outlook

In fiscal 2014, management estimates that the Company and its domestic franchisees will each open approximately 10 Krispy Kreme shops, and that international franchisees will open approximately 75 locations.  Although the Company looks for continued organic same store sales growth in its domestic stores, international franchise same store sales will likely remain pressured by the substantial growth in international markets in recent years.

Based on these factors, management currently expects fiscal 2014 operating income in the range of $41 million to $44 million, which would represent an increase of 13% to 21% from the $36.4 millionoperating income for fiscal 2013 measured on a 52-week basis.  Management estimates adjusted net income will be in the range of $37 million to $40 million and adjusted EPS will range from $0.53 to $0.57per share based on a forecasted 70 million diluted shares outstanding.

Adjusted net income and adjusted EPS are non-GAAP measures; see the reconciliation of GAAP to adjusted earnings in Table 6 accompanying this release.

Conference Call

The Company will host a conference call to review fiscal 2013 fourth quarter and annual results, as well as management's outlook for fiscal 2014, this afternoon at 4:30 p.m. (ET).  A live webcast of the conference call will be available at www.krispykreme.com.  The conference call also can be accessed over the phone by dialing (800) 901-5217 or, for international callers, by dialing (617) 786-2964.  An archived replay of the call will be available shortly after its conclusion by dialing (888) 286-8010, or (617) 801-6888 for international callers; the passcode is 17091755.  The audio replay will be available through March 21, 2013.  A transcript of the conference call also will be available on the Company's website.

About Krispy Kreme

Krispy Kreme is a leading branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, including its signature Original Glazed® doughnut.  Headquartered inWinston-Salem, N.C., the Company has offered the highest quality doughnuts and great tasting coffee since it was founded in 1937.  Today, Krispy Kreme shops can be found in over 740 locations in 22 countries around the world.  Connect with Krispy Kreme at KrispyKreme.com and on Facebook, Foursquare, Twitter and YouTube.

Defined Terms

"Honeymoon effect" means the common pattern for many start-up restaurants in which a flurry of activity due to start-up publicity and natural curiosity is followed by a decline during which a steady repeat customer base develops.  "Cannibalization" means the tendency for new stores to become successful, in part or in whole, by "shifting" sales from existing stores in the same market. 

Information contained in this press release, other than historical information, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are based on management's beliefs, assumptions and expectations of our future economic performance, considering the information currently available to management.  These statements are not statements of historical fact.  Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements.  The words "believe," "may," "could," "will," "should," "would," "anticipate," "estimate," "expect," "intend," "objective," "seek," "strive" or similar words, or the negative of these words, identify forward-looking statements.  Factors that could contribute to these differences include, but are not limited to:  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 domestic small shop operating model; political, economic, currency and other risks associated with our international operations; the price and availability of raw materials needed to produce doughnut mixes and other ingredients, and the price of motor fuel; our relationships with wholesale customers; our ability to protect our trademarks and trade secrets; changes in customer preferences and perceptions; risks associated with competition; risks related to the food service industry, including food safety and protection of personal information; compliance with government regulations relating to food products and franchising; and increased costs or other effects of new government regulations relating to healthcare benefits.  These and other risks and uncertainties, which are described in more detail in the Company's most recent Annual Report on Form 10-K and other reports and statements filed with theUnited States Securities and Exchange Commission, are difficult to predict, involve uncertainties that may materially affect actual results and may be beyond the Company's control, and could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements.  New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company.  Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

                       
                       
                       

TABLE 1

                     

KRISPY KREME DOUGHNUTS, INC

                           

CONSOLIDATED STATEMENT OF INCOME

 
     

14 Weeks Ended

 

13 Weeks Ended

 

53 Weeks Ended

 

52 Weeks Ended

           
     

February 3,

 

January 29,

 

February 3,

 

January 29,

     

2013

 

2012

 

2013

 

2012

     

(In thousands, except per share amounts)

                           

Revenues

$

118,145

 

$

101,957

 

$

435,843

 

$

403,217

Operating expenses:

                     
 

Direct operating expenses (exclusive of depreciation and

                     
   

amortization expense shown below) 

 

98,260

   

87,880

   

362,828

   

346,434

 

General and administrative expenses 

 

8,778

   

6,673

   

25,089

   

22,188

 

Depreciation and amortization expense

 

2,653

   

2,002

   

9,891

   

8,235

 

Impairment charges and lease termination costs 

 

4

   

113

   

306

   

793

Operating income 

 

8,450

   

5,289

   

37,729

   

25,567

Interest income 

 

12

   

35

   

114

   

166

Interest expense 

 

(440)

   

(390)

   

(1,642)

   

(1,666)

Equity in losses of equity method franchisees 

 

(52)

   

(53)

   

(202)

   

(122)

Gain on sale of interest in equity method franchisee

 

-

   

-

   

-

   

6,198

Other non-operating income and (expense), net 

 

80

   

(46)

   

317

   

215

Income before income taxes 

 

8,050

   

4,835

   

36,316

   

30,358

Provision for income taxes 

 

3,270

   

(138,707)

   

15,537

   

(135,911)

Net income

$

4,780

 

$

143,542

 

$

20,779

 

$

166,269

                           

Earnings per common share:

                     
 

Basic 

$

0.07

 

$

2.06

 

$

0.31

 

$

2.40

 

Diluted  

$

0.07

 

$

2.01

 

$

0.30

 

$

2.33

                           

Weighted average shares outstanding:

                     
 

Basic 

 

66,864

   

69,542

   

67,624

   

69,145

 

Diluted  

 

69,520

   

71,567

   

69,896

   

71,497

                           

 

TABLE 2

                     

KRISPY KREME DOUGHNUTS, INC

                           

CONSOLIDATED STATEMENT OF ADJUSTED INCOME - 13 WEEK BASIS

 
     

14 Weeks Ended

 

Less - Week

Ended

 

13 Weeks Ended

 

13 Weeks Ended

           
     

February 3,

 

February 3,

 

January 27,

 

January 29,

     

2013

 

2013

 

2013

 

2012

     

(In thousands, except per share amounts)

                           

Revenues

$

118,145

 

$

(9,023)

 

$

109,122

 

$

101,957

Operating expenses:

                     
 

Direct operating expenses (exclusive of depreciation and

                     
   

amortization expense shown below) 

 

98,260

   

(7,213)

   

91,047

   

87,880

 

General and administrative expenses 

 

8,778

   

(331)

   

8,447

   

6,673

 

Depreciation and amortization expense 

 

2,653

   

(189)

   

2,464

   

2,002

 

Impairment charges and lease termination costs 

 

4

   

-

   

4

   

113

Operating income 

 

8,450

   

(1,290)

   

7,160

   

5,289

Interest income 

 

12

   

-

   

12

   

35

Interest expense 

 

(440)

   

12

   

(428)

   

(390)

Equity in losses of equity method franchisees 

 

(52)

   

-

   

(52)

   

(53)

Other non-operating income and (expense), net 

 

80

   

-

   

80

   

(46)

Income before income taxes 

 

8,050

   

(1,278)

   

6,772

   

4,835

Provision for current income taxes 

 

681

   

(5)

   

676

   

855

Adjusted net income

$

7,369

 

 

$

(1,273)

 

$

6,096

 

$

3,980

                           

Adjusted earnings per common share:

                     
 

Basic 

$

0.11

       

$

0.09

 

$

0.06

 

Diluted  

$

0.11

       

$

0.09

 

$

0.06

                           

Weighted average shares outstanding:

                     
 

Basic 

 

66,864

         

66,864

   

69,542

 

Diluted  

 

69,520

         

69,520

   

71,567

                           
                           
                           
                           
                           

Note:  The fourth quarter of fiscal 2013 contained 14 weeks compared to 13 weeks in the fourth quarter of fiscal 2012.  The foregoing table presents fourth quarter fiscal 2013 results exclusive of results for the 14th week in order to facilitate comparison of fourth quarter fiscal 2013 results with results for the fourth quarter of fiscal 2012.

                           

Adjusted net income and adjusted EPS are non-GAAP measures.  See the reconciliation of GAAP to adjusted earnings in Table 6.

                           
                           
                           
                           
                           

 

TABLE 3

                     

KRISPY KREME DOUGHNUTS, INC

                           

CONSOLIDATED STATEMENT OF ADJUSTED INCOME - 52 WEEK BASIS

 
     

53 Weeks Ended

 

Less - Week

Ended

 

52 Weeks Ended

 

52 Weeks Ended

           
     

February 3,

 

February 3,

 

January 27,

 

January 29,

     

2013

 

2013

 

2013

 

2012

     

(In thousands, except per share amounts)

                           

Revenues

$

435,843

 

$

(9,023)

 

$

426,820

 

$

403,217

Operating expenses:

                     
 

Direct operating expenses (exclusive of depreciation and

                     
   

amortization expense shown below) 

 

362,828

   

(7,213)

   

355,615

   

346,434

 

General and administrative expenses 

 

25,089

   

(331)

   

24,758

   

22,188

 

Depreciation and amortization expense 

 

9,891

   

(189)

   

9,702

   

8,235

 

Impairment charges and lease termination costs 

 

306

   

-

   

306

   

793

Operating income 

 

37,729

   

(1,290)

   

36,439

   

25,567

Interest income 

 

114

   

-

   

114

   

166

Interest expense 

 

(1,642)

   

12

   

(1,630)

   

(1,666)

Equity in losses of equity method franchisees 

 

(202)

   

-

   

(202)

   

(122)

Other non-operating income and (expense), net 

 

317

   

-

   

317

   

215

Income before income taxes 

 

36,316

   

(1,278)

   

35,038

   

24,160

Provision for current income taxes 

 

2,124

   

(5)

   

2,119

   

2,000

Adjusted net income

$

34,192

 

$

(1,273)

 

$

32,919

 

$

22,160

                           

Adjusted earnings per common share:

                     
 

Basic 

$

0.51

       

$

0.49

 

$

0.32

 

Diluted  

$

0.49

       

$

0.47

 

$

0.31

                           

Weighted average shares outstanding:

                     
 

Basic 

 

67,624

         

67,624

   

69,145

 

Diluted  

 

69,896

         

69,896

   

71,497

                           
                           
                           
                           
                           

Note:  Fiscal 2013 contained 53 weeks compared to 52 weeks in fiscal 2012.  The foregoing table presents fiscal 2013 results exclusive of results for the 53rd week in order to facilitate comparison of fiscal 2013 results with results for fiscal 2012.

                           

Adjusted net income and adjusted EPS are non-GAAP measures.  See the reconciliation of GAAP to adjusted earnings in Table 6.

                           
 
           
           

TABLE 4

         

KRISPY KREME DOUGHNUTS, INC.

               

CONSOLIDATED BALANCE SHEET

 
               
     

February 3,

 

January 29,

   

2013

 

2012

     

(In thousands)

 

                                     ASSETS

CURRENT ASSETS:

         

Cash and cash equivalents 

$

66,332

 

$

44,319

Receivables 

 

22,037

   

21,616

Receivables from equity method franchisees                         

 

705

   

655

Inventories 

 

15,948

   

16,497

Deferred income taxes

 

23,323

   

10,540

Other current assets 

 

6,439

   

3,613

 

Total current assets 

 

134,784

   

97,240

Property and equipment 

 

78,024

   

75,466

Investments in equity method franchisees 

 

-

   

-

Goodwill and other intangible assets 

 

24,195

   

23,776

Deferred income taxes

 

93,088

   

129,053

Other assets 

 

11,847

   

9,413

 

Total assets 

$

341,938

 

$

334,948

   
 

         LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

         

Current maturities of long-term debt 

$

2,148

 

$

2,224

Accounts payable 

 

12,198

   

10,494

Accrued liabilities 

 

32,330

   

28,800

 

Total current liabilities 

 

46,676

   

41,518

Long-term debt, less current maturities 

 

23,595

   

25,369

Other long-term obligations 

 

25,235

   

18,935

               

Commitments and contingencies

         
               

SHAREHOLDERS' EQUITY:

         

Preferred stock, no par value 

 

-

   

-

Common stock, no par value 

 

354,068

   

377,539

Accumulated other comprehensive loss 

 

(338)

   

(336)

Accumulated deficit 

 

(107,298)

   

(128,077)

 

Total shareholders' equity 

 

246,432

   

249,126

   

Total liabilities and shareholders' equity

$

341,938

 

$

334,948

               

 

 
 

TABLE 5

KRISPY KREME DOUGHNUTS, INC

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 
   

53 Weeks Ended

 

52 Weeks Ended

   

February 3,

 

January 29,

 

2013

 

2012

     

(In thousands)

CASH FLOW FROM OPERATING ACTIVITIES:

         

Net income

$

20,779

 

$

166,269

Adjustments to reconcile net income to net cash provided by operating activities:

         

    Depreciation and amortization expense

 

9,891

   

8,235

    Deferred income taxes

 

13,413

   

(139,403)

    Impairment charges

 

-

   

60

    Accrued rent expense

 

585

   

465

    Loss on disposal of property and equipment

 

543

   

414

    Gain on sale of interest in equity method franchisee

 

-

   

(6,198)

    Share-based compensation

 

6,801

   

6,699

    Provision for doubtful accounts

 

194

   

(374)

    Amortization of deferred financing costs

 

398

   

422

    Equity in losses of equity method franchisees

 

202

   

122

    Other

 

(219)

   

676

Change in assets and liabilities:

         

    Receivables

 

(509)

   

(862)

    Inventories

 

560

   

(1,862)

    Other current and non-current assets

 

(1,012)

   

462

    Accounts payable and accrued liabilities

 

4,740

   

(168)

    Other long-term obligations

 

2,944

   

(1,096)

        Net cash provided by operating activities 

 

59,310

   

33,861

CASH FLOW FROM INVESTING ACTIVITIES:

         

Purchase of property and equipment

 

(14,218)

   

(11,884)

Proceeds from disposals of property and equipment

 

178

   

44

Acquisition of stores from franchisee

 

(915)

   

-

Proceeds from sale of interest in equity method franchisee

 

-

   

7,723

Escrow deposit recovery

 

-

   

1,800

Other investing activities

 

517

   

(207)

        Net cash used for investing activities

 

(14,438)

   

(2,524)

CASH FLOW FROM FINANCING ACTIVITIES:

         

Repayment of long-term debt

 

(2,346)

   

(8,991)

Deferred financing costs

 

(11)

   

(29)

Proceeds from exercise of stock options

 

247

   

1,036

Proceeds from exercise of warrants

 

9

   

-

Repurchase of common shares

 

(20,758)

   

(1,004)

        Net cash used for financing activities

 

(22,859)

   

(8,988)

Net increase in cash and cash equivalents

 

22,013

   

22,349

Cash and cash equivalents at beginning of year

 

44,319

   

21,970

Cash and cash equivalents at end of year

$

66,332

 

$

44,319

Supplemental schedule of non-cash investing and financing activities:

         

    Assets acquired under capital leases

$

516

 

$

1,197

TABLE 6

KRISPY KREME DOUGHNUTS, INC.

NON-GAAP FINANCIAL INFORMATION

The Company has net deferred income tax assets of approximately $116 million, of which approximately $76 million relates to federal and state net operating loss carryovers.  The Company's federal net operating loss carryovers total approximately $206 million.

In the quarter ended January 29, 2012, the Company reversed approximately $139.6 million of valuation allowances against its deferred income tax assets because management concluded that realization of such assets was more likely than not.  While such reversal, which was required by GAAP, increased the Company's earnings by $139.6 million in fiscal 2012, the reversal has the effect of reducing the Company's earnings beginning in fiscal 2013 as a result of an increase in the provision for income taxes.  This negative effect on earnings beginning in fiscal 2013 occurs because the reversal of the valuation allowance resulted in the recognition in fiscal 2012 of income tax benefits expected to be realized in later years; absent the reversal of the valuation allowance, any such tax benefits would have been recognized when realized in future periods upon the generation of taxable income.  Accordingly, beginning in fiscal 2013, the Company's effective income tax rate, which in fiscal 2012 and earlier years bore little or no relationship to pretax income, more closely reflects the blended federal and state income tax rates in jurisdictions in which the Company operates.

Because of the increase in the Company's effective income tax rate resulting from the reversal of a valuation allowance, the Company's income tax expense in fiscal 2013 is not comparable to income tax expense in fiscal 2012 and earlier years.  In addition, until such time as the Company's net operating loss carryovers are exhausted or expire, GAAP income tax expense is expected to substantially exceed the amount of cash income taxes payable by the Company.

In the second quarter of fiscal 2012, the Company realized a pretax gain of $6.2 million ($4.7 million after tax, or $.06 per share) on the sale of its 30% ownership interest in KK Mexico, an equity method investee.  The Company does not expect to realize similar gains in the future.

The Company's fiscal year ends on the Sunday closest to January 31, which periodically results in a 14-week fourth quarter and a 53-week year.  Fiscal 2013 contained 53 weeks, while fiscal 2012 contained 52 weeks.

The following non-GAAP financial information and related reconciliation to GAAP measures are provided to assist the reader in understanding the effects of the above transactions and events, which, except for the periodic occurrence of the 53-week year, are expected to be non-recurring, on the Company's results of operations, and to facilitate comparison of fiscal 2013 results with the Company's financial results for fiscal 2012.  In addition, the non-GAAP financial information is intended to illustrate the material difference between the Company's income tax expense and income taxes currently payable.  These non-GAAP performance measures are consistent with other measurements made by management in the operation of the business which do not consider income taxes except to the extent to which those taxes currently are payable, for example, capital allocation decisions and incentive compensation measurements that are made on a pretax basis.

 

     

Management's

 

Historical Periods

     

Earnings Guidance

 

Three Months Ended

 

Year Ended

     

Year Ending February 2, 2014

 

February 3,

 

January 29,

 

February 3,

 

January 29,

     

From

 

To

 

2013

 

2012

 

2013

 

2012

     

(In thousands, except per share amounts)

                                       

Net income, as reported

$

22,000

 

$

23,700

 

$

4,780

 

$

143,542

 

$

20,779

 

$

166,269

Provision for deferred income taxes

 

15,000

   

16,300

   

2,589

   

(139,562)

   

13,413

   

(139,403)

Gain on sale of interest in KK Mexico

                                 

     (net of income taxes of $1,492)

 

-

   

-

   

-

   

-

   

-

   

(4,706)

Adjusted net income

$

37,000

 

$

40,000

   

7,369

   

3,980

   

34,192

   

22,160

Earnings for the 14th/53rd week

             

(1,273)

   

-

   

(1,273)

   

-

Adjusted net income - 13/52 week basis

           

$

6,096

 

$

3,980

 

$

32,919

 

$

22,160

                                     

Adjusted earnings per common share:

                                 

     Basic

$

0.55

 

$

0.60

 

$

0.11

 

$

0.06

 

$

0.51

 

$

0.32

     Diluted

$

0.53

 

$

0.57

 

$

0.11

 

$

0.06

 

$

0.49

 

$

0.31

                                     

Adjusted earnings per common share -

                                 

   13/52 week basis:

                                 

     Basic

           

$

0.09

 

$

0.06

 

$

0.49

 

$

0.32

     Diluted

           

$

0.09

 

$

0.06

 

$

0.47

 

$

0.31

                                     

Weighted average shares outstanding:

                                 

     Basic

 

67,000

   

67,000

   

66,864

   

69,542

   

67,624

   

69,145

     Diluted

 

70,000

   

70,000

   

69,520

   

71,567

   

69,896

   

71,497 

 

TABLE 7

                     

KRISPY KREME DOUGHNUTS, INC

                               

SEGMENT INFORMATION

                 
         

14 Weeks

 

13 Weeks

 

53 Weeks

 

52 Weeks

         

Ended

 

Ended

 

Ended

 

Ended

         

February 3,

 

January 29,

 

February 3,

 

January 29,

         

2013

 

2012

 

2013

 

2012

         

(In thousands)

Revenues:

                     
 

Company Stores: 

                     
   

On-premises sales

$

40,430

 

$

32,852

 

$

142,918

 

$

126,003

   

Wholesale sales

 

40,892

   

35,732

   

153,576

   

145,654

       

Company Stores revenues 

 

81,322

   

68,584

   

296,494

   

271,657

 

Domestic Franchise 

 

2,764

   

2,418

   

10,325

   

9,463

 

International Franchise 

 

7,109

   

6,259

   

24,941

   

22,621

 

KK Supply Chain:

                     
   

Total revenues 

 

57,337

   

51,952

   

215,412

   

206,453

   

Less – intersegment sales elimination 

 

(30,387)

   

(27,256)

   

(111,329)

   

(106,977)

     

 External KK Supply Chain revenues 

 

26,950

   

24,696

   

104,083

   

99,476

       

Total revenues 

$

118,145

 

$

101,957

 

$

435,843

 

$

403,217

                               

Operating income (loss):

                     
 

Company Stores 

$

3,263

 

$

(267)

 

$

8,534

 

$

284

 

Domestic Franchise 

 

1,518

   

1,260

   

5,590

   

3,737

 

International Franchise 

 

4,430

   

4,161

   

17,387

   

15,054

 

KK Supply Chain 

 

8,269

   

7,086

   

32,450

   

30,160

   

Total segment operating income 

 

17,480

   

12,240

   

63,961

   

49,235

 

Unallocated general and administrative expenses 

 

(9,026)

   

(6,838)

   

(25,926)

   

(22,875)

 

Impairment charges and lease termination costs 

 

(4)

   

(113)

   

(306)

   

(793)

   

Consolidated operating income 

$

8,450

 

$

5,289

 

$

37,729

 

$

25,567

                               

Depreciation and amortization expense:

                     
 

Company Stores 

$

2,221

 

$

1,611

 

$

8,142

 

$

6,593

 

Domestic Franchise 

 

14

   

54

   

164

   

219

 

International Franchise 

 

1

   

2

   

10

   

6

 

KK Supply Chain 

 

169

   

170

   

738

   

730

 

Corporate administration 

 

248

   

165

   

837

   

687

   

Total depreciation and amortization expense 

$

2,653

 

$

2,002

 

$

9,891

 

$

8,235

 

TABLE 8

                     

KRISPY KREME DOUGHNUTS, INC

                               

SEGMENT INFORMATION  - 13 WEEK BASIS

                 
         

14 Weeks Ended

 

Less - Week

Ended

 

13 Weeks Ended

 

13 Weeks Ended

               
         

February 3,

 

February 3,

 

January 27,

 

January 29,

         

2013

 

2013

 

2013

 

2012

         

(In thousands)

Revenues:

                     
 

Company Stores: 

                     
   

On-premises sales

$

40,430

 

$

(3,120)

 

$

37,310

 

$

32,852

   

Wholesale sales

 

40,892

   

(3,047)

   

37,845

   

35,732

       

Company Stores revenues 

 

81,322

   

(6,167)

   

75,155

   

68,584

 

Domestic Franchise 

 

2,764

   

(244)

   

2,520

   

2,418

 

International Franchise 

 

7,109

   

(457)

   

6,652

   

6,259

 

KK Supply Chain:

                     
   

Total revenues 

 

57,337

   

(4,438)

   

52,899

   

51,952

   

Less – intersegment sales elimination 

 

(30,387)

   

2,283

   

(28,104)

   

(27,256)

     

 External KK Supply Chain revenues 

 

26,950

   

(2,155)

   

24,795

   

24,696

       

Total revenues 

$

118,145

 

$

(9,023)

 

$

109,122

 

$

101,957

                               

Operating income (loss):

                     
 

Company Stores 

$

3,263

 

$

(280)

 

$

2,983

 

$

(267)

 

Domestic Franchise 

 

1,518

   

(218)

   

1,300

   

1,260

 

International Franchise 

 

4,430

   

(395)

   

4,035

   

4,161

 

KK Supply Chain 

 

8,269

   

(747)

   

7,522

   

7,086

   

Total segment operating income 

 

17,480

   

(1,640)

   

15,840

   

12,240

 

Unallocated general and administrative expenses 

 

(9,026)

   

350

   

(8,676)

   

(6,838)

 

Impairment charges and lease termination costs 

 

(4)

   

-

   

(4)

   

(113)

   

Consolidated operating income 

$

8,450

 

$

(1,290)

 

$

7,160

 

$

5,289

                               

Depreciation and amortization expense:

                     
 

Company Stores 

$

2,221

 

$

(158)

 

$

2,063

 

$

1,611

 

Domestic Franchise 

 

14

   

-

   

14

   

54

 

International Franchise 

 

1

   

-

   

1

   

2

 

KK Supply Chain 

 

169

   

(12)

   

157

   

170

 

Corporate administration 

 

248

   

(19)

   

229

   

165

   

Total depreciation and amortization expense 

$

2,653

 

$

(189)

 

$

2,464

 

$

2,002

                               
                               
                               
                               
                               

Note:  The fourth quarter of fiscal 2013 contained 14 weeks compared to 13 weeks in the fourth quarter of fiscal 2012.  The foregoing table presents fourth quarter fiscal 2013 results exclusive of results for the 14th week in order to facilitate comparison of fourth quarter fiscal 2013 results with results for the fourth quarter of fiscal 2012.

 

TABLE 9

                     

KRISPY KREME DOUGHNUTS, INC

                               

SEGMENT INFORMATION - 52 WEEK BASIS

                 
         

53 Weeks Ended

 

Less - Week

Ended

 

52 Weeks Ended

 

52 Weeks Ended

               
         

February 3,

 

February 3,

 

January 27,

 

January 29,

         

2013

 

2013

 

2013

 

2012

         

(In thousands)

Revenues:

                     
 

Company Stores: 

                     
   

On-premises sales

$

142,918

 

$

(3,120)

 

$

139,798

 

$

126,003

   

Wholesale sales

 

153,576

   

(3,047)

   

150,529

   

145,654

       

Company Stores revenues 

 

296,494

   

(6,167)

   

290,327

   

271,657

 

Domestic Franchise 

 

10,325

   

(244)

   

10,081

   

9,463

 

International Franchise 

 

24,941

   

(457)

   

24,484

   

22,621

 

KK Supply Chain:

                     
   

Total revenues 

 

215,412

   

(4,438)

   

210,974

   

206,453

   

Less – intersegment sales elimination 

 

(111,329)

   

2,283

   

(109,046)

   

(106,977)

     

 External KK Supply Chain revenues 

 

104,083

   

(2,155)

   

101,928

   

99,476

       

Total revenues 

$

435,843

 

$

(9,023)

 

$

426,820

 

$

403,217

                               

Operating income (loss):

                     
 

Company Stores 

$

8,534

 

$

(280)

 

$

8,254

 

$

284

 

Domestic Franchise 

 

5,590

   

(218)

   

5,372

   

3,737

 

International Franchise 

 

17,387

   

(395)

   

16,992

   

15,054

 

KK Supply Chain 

 

32,450

   

(747)

   

31,703

   

30,160

   

Total segment operating income 

 

63,961

   

(1,640)

   

62,321

   

49,235

 

Unallocated general and administrative expenses 

 

(25,926)

   

350

   

(25,576)

   

(22,875)

 

Impairment charges and lease termination costs 

 

(306)

   

-

   

(306)

   

(793)

   

Consolidated operating income 

$

37,729

 

$

(1,290)

 

$

36,439

 

$

25,567

                               

Depreciation and amortization expense:

                     
 

Company Stores 

$

8,142

 

$

(158)

 

$

7,984

 

$

6,593

 

Domestic Franchise 

 

164

   

-

   

164

   

219

 

International Franchise 

 

10

   

-

   

10

   

6

 

KK Supply Chain 

 

738

   

(12)

   

726

   

730

 

Corporate administration 

 

837

   

(19)

   

818

   

687

   

Total depreciation and amortization expense 

$

9,891

 

$

(189)

 

$

9,702

 

$

8,235

                               
                               
                               
                               
                               

Note:  Fiscal 2013 contained 53 weeks compared to 52 weeks in fiscal 2012.  The foregoing table presents fiscal 2013 results exclusive of results for the 53rd week in order to facilitate comparison of fiscal 2013 results with results for fiscal 2012.

                               

 

TABLE 10

                               

KRISPY KREME DOUGHNUTS, INC

                                       

SELECTED OPERATING STATISTICS

                                 
         

13 Weeks Ended

 

52 Weeks Ended

         

January 27,

 

January 29,

 

January 27,

 

January 29,

       

2013

2012

2013

2012

                           

Systemwide sales (in thousands):(1)

                               
 

Company stores

 

$

74,680

   

$

68,047

   

$

288,079

   

$

269,676

 
 

Domestic Franchise stores

   

70,880

     

65,477

     

281,334

     

261,979

 
 

International Franchise stores

   

112,525

     

104,320

     

423,418

     

383,508

 
 

International Franchise stores, in constant dollars(2)

 

112,525

     

104,972

     

423,418

     

380,028

 
                                       
                                       

Change in same store sales:(3)

                             
 

Company stores

   

7.5

%

   

8.3

%

   

5.5

%

   

5.2

%

 

Domestic Franchise stores  

   

9.6

     

7.9

     

6.8

     

6.6

 
 

International Franchise stores  

   

(7.3)

     

(8.8)

     

(9.0)

     

(6.4)

 
 

International Franchise stores, in constant dollars(2)

 

(7.4)

     

(9.5)

     

(8.1)

     

(10.8)

 
                                       

Company Stores - change in same store sales:

                               
 

Retail pricing

   

0.0

%

   

8.4

%

   

0.7

%

   

7.4

%

 

Guest check average (exclusive of the effects of pricing)

   

(2.9)

     

(4.1)

     

(1.4)

     

(2.9)

 
 

Customer count

   

10.6

     

3.2

     

6.2

     

0.5

 
 

Other

   

(0.2)

     

0.8

     

0.0

     

0.2

 
 

    Total

   

7.5

%

   

8.3

%

   

5.5

%

   

5.2

%

                                       

Change in same store customer count - Company stores (retail sales

only)

   

11.9

%

   

3.6

%

   

7.1

%

   

0.6

%

                                       

Average guest check - Company stores (retail sales only)

 

$

7.19

   

$

7.42

   

$

7.29

   

$

7.36

 
                                       

Company Stores - store operating weeks

   

1,260

     

1,175

     

4,891

     

4,567

 
                                       

Company stores wholesale sales:(4)

                               
 

Grocers/mass merchants:  

                               
 

    Change in average weekly number of doors

   

(3.7)

%

   

(0.5)

%

   

(4.0)

%

   

2.6

%

 

    Change in average weekly sales per door

   

12.3

     

10.6

     

8.9

     

12.7

 
 

Convenience stores:  

                               
 

    Change in average weekly number of doors

   

(2.0)

%

   

(10.2)

%

   

(6.3)

%

   

(5.9)

%

 

    Change in average weekly sales per door

   

6.9

     

14.2

     

8.8

     

10.7

 
   

(1)

Systemwide sales, a non-GAAP financial measure, include sales by both Company and franchise Krispy Kreme stores. The Company believes systemwide 
sales data are useful in assessing consumer demand for the Company's products, the overall success of the Krispy Kreme brand and, ultimately, the 
performance of the Company. All of the Company's royalty revenues are computed as percentages of sales made by the Company's domestic and 
international franchisees, and substantially all of KK Supply Chain's external sales of doughnut mixes and other ingredients ultimately are determined by 
demand for the Company's products at franchise stores. Accordingly, sales by the Company's franchisees have a direct effect on the Company's royalty and 
KK Supply Chain revenues, and therefore on the Company's profitability. The Company's consolidated financial statements appearing elsewhere herein 
include sales by Company stores, sales to franchisees by the KK Supply Chain business segment, and royalties and fees received from franchise stores based 
on their sales, but exclude sales by franchise stores to their customers.

(2)

Computed on a pro forma basis assuming the average rate of exchange between the U.S. dollar and each of the foreign currencies in which the Company's 
international franchisees conduct business had been the same in the comparable prior year period.

(3)

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. The change in "same store customer count" is similarly computed, but is based upon 
the number of retail transactions reported in the Company's point-of-sale system.

(4)

For Company wholesale 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.
     

 

TABLE 11

           

KRISPY KREME DOUGHNUTS, INC

                   

STORE COUNT

                   
         

NUMBER OF STORES

         

DOMESTIC

 

INTERNATIONAL

 

TOTAL

                   

Number of stores at February 3, 2013

           

Company:

           
 

Factory

 

76

 

-

 

76

 

Satellite

 

21

 

-

 

21

   

Total Company

 

97

 

-

 

97

Franchise:

           
 

Factory

 

99

 

120

 

219

 

Satellite

 

43

 

389

 

432

   

Total franchise

 

142

 

509

 

651

     

Total systemwide

 

239

 

509

 

748

                   
                   
         

NUMBER OF STORES

         

COMPANY

 

FRANCHISE

 

TOTAL

Quarter ended February 3, 2013

           

October 28, 2012

 

96

 

635

 

731

Opened 

 

2

 

31

 

33

Closed 

 

(1)

 

(15)

 

(16)

February 3, 2013

 

97

 

651

 

748

                   

Quarter ended January 29, 2012

           

October 30, 2011

 

89

 

589

 

678

Opened 

 

3

 

26

 

29

Closed 

 

-

 

(13)

 

(13)

January 29, 2012

 

92

 

602

 

694

SOURCE Krispy Kreme Doughnut Corporation

Contacts:

Media
Brian K. Little
+1-336-726-8825
blittle@krispykreme.com

Investor Relations
Anita K. Booe
+1-336-703-6902
abooe@krispykreme.com

###

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