Krispy Kreme Doughnuts, Inc. (Nasdaq: KREM) today reported financial results for the three months ended July 30, 2000, the company's second quarter of fiscal 2001.

Systemwide sales, including sales of both company and franchise stores, increased 39.7% to $107.7 million in the second quarter, compared with $77.1 million in the second quarter of fiscal 2000. Sales were driven by an increase in company store sales of 31.9% to $51.5 million and an increase in franchise store sales of 47.8% to $56.2 million. On a comparable store basis, systemwide store sales increased 19.4% and company store sales increased 24.4%. All of these results exceeded earlier projections.

Total company revenues, which include sales from company stores, franchise fees and royalties, and support operations sales, rose 36.3% to $70.0 million in the second quarter, compared with $51.4 million in the second quarter of fiscal 2000. Sales from company stores increased 31.9% to $51.5 million; revenues from franchise fees and royalties increased 84.3% to $2.3 million; and support operations sales increased 46.4% to $16.2 million.

Net income for the second quarter was $3.6 million, an increase of 265.5% compared with $1.0 million in the second quarter last year. Diluted earnings per share increased to $0.25 in the second quarter of fiscal 2001 from $0.10 per share in the prior year comparable period.

For the six months ended July 30, 2000, systemwide sales increased 40.5% to $211.1 million from $150.2 million in the same period of last year. This increase was a result of an increase in company store sales of 28.7% to $102.4 million and an increase in franchise store sales of 53.8% to $108.6 million.

Total company revenues rose 34.7% to $141.0 million in the first six months of the year compared with $104.7 million in the same period of the prior year. Sales from company stores increased 28.7% to $102.4 million; revenues from franchise fees and royalties increased 86.1% to $4.3 million; and support operations sales increased 50.5% to $34.3 million.

Net income for the six months was $6.6 million, an increase of 130.8% compared to $2.9 million a year ago. Diluted earnings per share increased to $0.52 in the first six months of the year from $0.30 per share in the prior year.

Commenting on the second quarter results, Scott Livengood, Chairman, President and CEO of Krispy Kreme Doughnuts, said: "We are very pleased with our second quarter performance. It is gratifying that these excellent results were geographically broad based and across all sales channels. Our national expansion is also going extremely well, both in terms of store openings and the strong sales being achieved in these new markets."

During the quarter, six new Krispy Kreme stores (including one new commissary) were opened in Las Vegas, NV; Owings Mills, MD; Gardena, CA; Roseville, MI; Chicago, IL; and Nashville, TN bringing the total number of stores at July 30, 2000 to 154. Since the end of the quarter, Krispy Kreme has opened an additional franchise store in Houston, TX. The company increased its projected store openings for the current fiscal year from 22 to 28 new stores and expects to open 32 new stores in fiscal 2002.

As a result of continuing strong sales momentum and the raised estimate of new store openings, the company increased earnings per share expectations to $1.00 for the current fiscal year.

The 63-year-old North Carolina-based company is a leading branded specialty retailer of premium quality doughnuts, including the company's signature Hot Original Glazed. Krispy Kreme currently operates 154 stores in 27 states.

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 S-1 Registration Statement, declared effective on April 4, 2000, that is on file with the Securities and Exchange Commission.

                         Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the Second Quarter Ended July 30, 2000
(All dollar amounts in thousands except per share data)

Quarter Ended
July 30, August 1, $ Change % Change
2000 1999

Total revenues $69,994 $51,356 $18,638 36.3%
Operating expenses 58,229 44,356 13,873 31.3%
General and administrative
expenses 4,566 3,933 633 16.1%
Depreciation and amortization
expenses 1,581 1,159 422 36.4%
Income from operations 5,618 1,908 3,710 194.4%

Net income $ 3,575 $ 978 $ 2,597 265.5%


Diluted earnings
per share $0.25 $0.10 $0.15 150.0%
Diluted shares
outstanding 14,074 9,457 4,617 48.8%

Segment Information

Revenues
Company store operations $51,484 $39,032 $12,452 31.9%
Franchise operations 2,298 1,247 1,051 84.3%
Support operations 16,212 11,077 5,135 46.4%
Total revenues $69,994 $51,356 $18,638 36.3%


Operating Income
Company store operations $ 6,675 $ 4,416 $ 2,259 51.2%
Franchise operations 1,451 386 1,065 275.9%
Support operations 2,325 1,329 996 74.9%
Unallocated general and
administrative
expenses (4,833) (4,223) (610) 14.4%
Total operating income $ 5,618 $ 1,908 $ 3,710 194.4%


Operating Margins
Company store operations 13.0% 11.3% 1.7%
Franchise operations 63.1% 31.0% 32.1%
Support operations 14.3% 12.0% 2.3%
Unallocated general and
administrative expenses 6.9% 8.2% -1.3%
Total operating income 8.0% 3.7% 4.3%


Systemwide Sales
Company stores $51,484 $39,032 $12,452 31.9%
Franchise stores 56,222 38,048 18,174 47.8%
Total $107,706 $77,080 $30,626 39.7%


Comparable Store Sales
Company stores 24.4%
Systemwide 19.4%


Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the Six Months Ended July 30, 2000
(All dollar amounts in thousands except per share data)

Six Months Ended
July 30, August 1, $ Change % Change
2000 1999

Total revenues $ 140,995 $ 104,684 $ 36,311 34.7%
Operating expenses 117,505 90,080 27,425 30.4%
General and
administrative
expenses 9,001 7,072 1,929 27.3%
Depreciation and
amortization expenses 3,176 2,261 991 40.5%
Income from operations 11,313 5,271 6,042 114.6%

Net income $ 6,627 $ 2,871 $ 3,756 130.8%


Diluted earnings
per share $ 0.52 $ 0.30 $ 0.22 73.3%

Diluted shares
outstanding 12,702 9,457 3,245 34.3%

Segment Information

Revenues
Company store
operations $ 102,440 $ 79,609 $ 22,831 28.7%
Franchise operations 4,298 2,309 1,989 86.1%
Support operations 34,257 22,766 11,491 50.5%

Total revenues $ 140,995 $104,684 $ 36,311 34.7%


Operating Income
Company store
operations $ 13,335 $ 9,453 $ 3,882 41.1%
Franchise operations 2,451 512 1,939 378.7%
Support operations 5,062 2,957 2,105 71.2%
Unallocated general and
administrative
expenses (9,535) (7,651) (1,884) 24.6%
Total operating
income $ 11,313 $ 5,271 $ 6,042 114.6%


Operating Margins
Company store operations 13.0% 11.9% 1.1%
Franchise operations 57.0% 22.2% 34.8%
Support operations 14.8% 13.0% 1.8%
Unallocated general
and administrative
expenses 6.8% 7.3% 0.5%
Total operating income 8.0% 5.0% 3.0%

Systemwide Sales
Company stores $102,440 $ 79,609 $ 22,831 28.7%
Franchise stores 108,613 70,608 38,005 53.8%
Total $211,053 $150,217 $ 60,836 40.5%


Comparable Store
Sales Company
stores 23.8%
Systemwide 19.2%