Krispy Kreme Doughnuts, Inc. (Nasdaq: KREM) yesterday reported financial results for the three months ended October 29, 2000, the company’s third quarter of fiscal 2001.

Net income for the third quarter was $3.8 million, an increase of 100% compared with $1.9 million in the third quarter last year. Diluted earnings per share increased to $0.27 in the third quarter of fiscal 2001 from $0.20 per share in the prior year comparable period.

Systemwide sales, including sales of both company and franchise stores, increased 37.3% to $112.3 million in the third quarter, compared with $81.7 million in the third quarter of fiscal 2000. Sales were driven by an increase in company store sales of 30.4% to $54.1 million and an increase in franchise store sales of 44.5% to $58.2 million. On a comparable store basis, systemwide store sales increased 15.5% and company store sales increased 23.6%. The company increased its forecast for systemwide comparable store sales in the fourth quarter to 10%.

Total company revenues, which include sales from company stores, franchise fees and royalties, and support operations sales, rose 37.0% to $77.9 million in the third quarter, compared with $56.8 million in the third quarter of fiscal 2000. Sales from company stores increased 30.4% to $54.1 million; revenues from franchise fees and royalties increased 61.6% to $2.4 million; and support operations sales increased 54.3% to $21.4 million.

Net income for the nine months was $10.5 million, an increase of 118.6% compared to $4.8 million a year ago. Diluted earnings per share increased to $0.79 in the first nine months of the year from $0.51 per share in the prior year.

For the nine months ended October 29, 2000, systemwide sales increased 39.4% to $323.3 million from $232.0 million in the same period of last year. This increase was the result of an increase in company store sales of 29.3% to $156.5 million and an increase in franchise store sales of 50.5% to $166.8 million.

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Total company revenues rose 35.5% to $218.9 million in the first nine months of the year compared with $161.5 million in the same period of the prior year. Sales from company stores increased 29.3% to $156.5 million; revenues from franchise fees and royalties increased 76.5% to $6.7 million; and support operations sales increased 51.9% to $55.7 million.

Commenting on the third quarter results, Scott Livengood, Chairman, President and CEO of Krispy Kreme Doughnuts, said: “Our performance continues to be strong across all sales channels and across the country. A very focused execution of our growth strategy — which is to open markets with highly visible stores, establish strong ties with our customers and communities, and ultimately gain greater market penetration through multiple channels of sales outside our store — has led to a quarter which exceeded our expectations.”

During the quarter, ten new Krispy Kreme stores were opened (including one commissary in Northern California). New markets entered included Buffalo, NY, Salt Lake City, UT, Cedar Rapids, IA, San Jose, CA, and Sacramento, CA. In addition, Houston, TX, Los Angeles, CA, Orlando, FL and greater Phoenix, AZ gained additional locations bringing the total number of stores at October 29, 2000 to 164. Since the end of the quarter, Krispy Kreme has opened an additional franchise store in Bakersfield, CA and a company store in Richmond, VA. The company increased its projected new store openings for the current fiscal year from 28 to 34 new stores and expects to open 36 new stores in fiscal 2002. Additional fourth quarter openings will include stores in Nashville, TN; Austin, TX; New Orleans, LA; Sacramento, CA; San Diego, CA; and two in Chicago, IL.

“This increase in store openings is the direct result of our franchisees’ success to date and their desire to accelerate their development, supported by their growing real estate and development capabilities. I’m very proud of what we’ve achieved together,” said Scott Livengood.

As a result of continuing strong sales momentum and the raised estimate of new store openings, the company increased earnings per share expectations to $1.05 for the current fiscal year and $1.30 for fiscal 2002.

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 166 stores in 28 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 Third Quarter Ended October 29, 2000
(All dollar amounts in thousands except per share data)

Quarter Ended
October 29, October 31,
2000 1999 $ Change % Change

Total revenues $77,909 $56,849 $21,060 37.0%
Operating expenses 65,327 48,464 16,863 34.8%
General and admini-
strative expenses 5,059 3,837 1,222 31.8%
Depreciation and
amortization expenses 1,811 1,237 574 46.4%
Income from operations 5,712 3,311 2,401 72.5%
Interest income 767 200 567 283.5%
Interest expense 47 410 (363) -88.5%
Other expenses 64 -- 64 --
Minority interest
in consolidated
joint ventures 152 -- 152 --
Income before
income taxes 6,216 3,101 3,115 100.5%
Provision for
income taxes 2,363 1,178 1,185 100.6%
Net income $3,853 $1,923 $1,930 100.4%

Diluted earnings
per share $0.27 $0.20 $0.07 35.0%
Diluted shares
outstanding 14,141 9,457 4,684 49.5%

Segment Information

Revenues
Company store
operations $54,103 $41,495 $12,608 30.4%
Franchise operations 2,406 1,489 917 61.6%
Support Operations 21,400 13,865 7,535 54.3%
Total revenues $77,909 $56,849 $21,060 37.0%

Operating Income
Company store
operations $6,467 $4,938 $1,529 31.0%
Franchise operations 1,413 291 1,122 385.6%
Support operations 3,231 2,220 1,011 45.5%
Unallocated general
and administrative
expenses (5,399) (4,138) (1,261) 30.5%
Total operating income $5,712 $3,311 $2,401 72.5%

Operating Margins
Company store
operations 12.0% 11.9% 0.1%
Franchise operations 58.7% 19.5% 39.2%
Support operations 15.1% 16.0% -0.9%
Unallocated general
and administrative
expenses 6.9% 7.3% -0.4%
Total operating income 7.3% 5.8% 1.5%

Depreciation and Amortization Expenses:
Company store
operations $1,370 $857 $513 59.9%
Franchise operations 18 18 -- 0.0%
Support operations 83 62 21 33.9%
Corporate administration 340 300 40 13.3%
Total depreciation and
amortization
expenses $1,811 $1,237 $574 46.4%

Systemwide Sales
Company stores $54,102 $41,496 $12,606 30.4%
Franchise stores 58,161 40,241 17,920 44.5%
Total $112,263 $81,737 $30,526 37.3%

Comparable Store Sales
Company stores 23.6%
Systemwide 15.5%


Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the Nine Months Ended October 29, 2000
(All dollar amounts in thousands except per share data)

Nine Months Ended
October 29, October 31,
2000 1999 $ Change % Change

Total revenues $218,904 $161,533 $57,371 35.5%
Operating expenses 182,832 138,544 44,288 32.0%
General and admini-
strative expenses 14,060 10,909 3,151 28.9%
Depreciation and
amortization expenses 4,987 3,498 1,489 42.6%
Income from operations 17,025 8,582 8,443 98.4%
Interest income 1,545 263 1,282 487.5%
Interest expense 567 1,111 (544) -49.0%
Other expenses 664 -- 664 --
Minority interest
in consolidated
joint ventures 403 -- 403 --
Income before
income taxes 16,936 7,734 9,202 119.0%
Provision for
income taxes 6,456 2,940 3,516 119.6%
Net income $10,480 $4,794 $5,686 118.6%

Diluted earnings
per share $0.79 $0.51 $0.28 54.9%
Diluted shares
outstanding 13,219 9,457 3,762 39.8%

Segment Information

Revenues
Company store
operations $156,543 $121,104 $35,439 29.3%
Franchise operations 6,704 3,798 2,906 76.5%
Support Operations 55,657 36,631 19,026 51.9%
Total revenues $218,904 $161,533 $57,371 35.5%

Operating Income
Company store
operations $19,802 $14,391 $5,411 37.6%
Franchise operations 3,864 803 3,061 381.2%
Support operations 8,293 5,177 3,116 60.2%
Unallocated general
and administrative
expenses (14,934) (11,789) (3,145) 26.7%
Total operating
income $17,025 $8,582 $8,443 98.4%

Operating Margins
Company store
operations 12.6% 11.9% 0.7%
Franchise operations 57.6% 21.1% 36.5%
Support operations 14.9% 14.1% 0.8%
Unallocated general
and administrative
expenses 6.8% 7.3% -0.5%
Total operating income 7.8% 5.3% 2.5%

Depreciation and Amortization Expenses:
Company store
operations $3,839 $2,391 $1,448 60.6%
Franchise operations 54 54 -- 0.0%
Support operations 221 174 47 27.0%
Corporate administration 873 879 (6) -0.7%
Total depreciation and
amortization
expenses $4,987 $3,498 $1,489 42.6%

Systemwide Sales
Company stores $156,542 $121,105 $35,437 29.3%
Franchise stores 166,774 110,849 55,925 50.5%
Total $323,316 $231,954 $91,362 39.4%

Comparable Store Sales
Company stores 23.7%
Systemwide 17.9%