Krispy Kreme Doughnuts, Inc. (NYSE: KKD) today reported financial results for the three months ended July 29, 2001, the Company’s second quarter of fiscal 2002.

Systemwide sales, including sales of both company and franchise stores, increased 34.0% to $144.3 million in the second quarter, compared with $107.7 million in the second quarter of fiscal 2001. Sales were driven by an increase in company store sales of 19.4% to $61.5 million and growth in franchise store sales of 47.3% to $82.8 million. On a comparable store basis, systemwide store sales increased 13.1% and company store sales grew 11.9%.

Total company revenues, which include sales from Company Stores, Franchise Operations, and Krispy Kreme Manufacturing and Distribution (“KKM&D”), rose 27.8% to $89.5 million in the second quarter, compared with $70.1 million in the second quarter of fiscal 2001. Sales from Company Stores increased 19.4% to $61.5 million; revenues from Franchise Operations increased 39.9% to $3.2 million; and KKM&D sales increased 52.6% to $24.8 million.

Net income for the second quarter was $5.9 million, an increase of 65.0% compared with $3.6 million in the second quarter last year. Diluted earnings per share increased to $0.10 in the second quarter of fiscal 2002 from $0.06 per share in the prior year comparable period, a 57.8% gain versus last year.

For the six months ended July 29, 2001, systemwide sales increased 34.9% to $284.7 million from $211.1 million in the same period of last year. This increase was a result of growth in company store sales of 19.3% to $122.2 million and an increase in franchise store sales of 49.6% to $162.5 million.

Total company revenues rose 25.9% to $177.5 million in the first six months of the year compared with $140.9 million in the same period of the prior year. Sales from Company Stores increased 19.3% to $122.2 million; revenues from Franchise Operations rose 44.7% to $6.2 million; and KKM&D sales increased 43.5% to $49.1 million.

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Net income for the six months was $11.6 million, an increase of 75.8% compared to $6.6 million a year ago. Diluted earnings per share increased to $0.20 in the first six months of the year from $0.13 per share in the prior year.

Commenting on the second quarter results, Scott Livengood, Chairman, President and CEO of Krispy Kreme Doughnuts, Inc., said: “Our fundamentals remain strong. We once again achieved very positive results across all sales channels and across the country. Our continued focus on opening stores in new markets, establishing strong relationships with our customers and communities, and gaining greater market penetration through multiple channels of sales has generated results in excess of our previous projections for the quarter. I believe the strength of our brand, unique business model and a proven strategy positions us to achieve continued strong results over the long term. On the strength of this momentum and to provide our investors with prudently conservative but more realistic projections, we have elected to increase our forward looking guidance.”

Earnings guidance for the full fiscal year 2002 has been raised to $0.42 per diluted share versus the previous consensus of $0.40 per diluted share. The Company additionally expects to open 40 stores in fiscal year 2002 versus previous guidance of 38 new stores. For fiscal 2003, the Company expects earnings per diluted share to increase by 40% to $0.59 per diluted share, an increase of 18% over the previous consensus estimates. Finally, the Company indicated that over a three year planning horizon it now expects to grow earnings between 30% and 35% per year versus the previous guidance of 25%.

During the quarter, eleven new Krispy Kreme stores (including three new commissaries) were opened. New markets entered were Oklahoma City, OK, Albuquerque, NM, and Modesto, CA. Additionally, Krispy Kreme closed one store in Charleston, SC during the quarter, bringing the total number of stores at July 29, 2001 to 190. Since the end of the quarter, Krispy Kreme has opened an additional franchise store in Austin, TX and an additional company store in Northern California.

The 64-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 192 stores in 31 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 periodic reports, proxy statement and other information statements filed with the Securities and Exchange Commission.

                         Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the Second Quarter Ended July 29, 2001
(All dollar amounts in thousands except per share data)

Quarter Ended
July 29, 2001 July 30, 2000(1) $Change %Change

Total revenues $ 89,545 $ 70,060 $ 19,485 27.8%
Operating expenses 72,683 52,286 14,397 24.7%
General and
administrative
expenses 5,966 4,566 1,400 30.7%
Depreciation and
amortization expenses 1,952 1,581 371 23.5%
Income from operations 8,944 5,627 3,317 58.9%
Interest Income 825 547 278 50.8%
Interest expense 128 40 88 220.0%
Loss from joint ventures 33 220 (187) -85.0%
Minority interest in
consolidated joint
ventures 66 138 (72) -52.2%
Income before income
taxes 9,542 5,776 3,766 65.2%
Provision for income
taxes 3,627 2,192 1,435 65.5%
Net income $ 5,915 $ 3,584 $ 2,331 65.0%

Diluted earnings
per share (2) $ 0.10 $ 0.06 $ 0.04 57.8%
Diluted shares
outstanding (2) 58,457 56,296 2,161 3.8%

Segment Information

Revenues
Company store
operations $ 61,496 $ 51,484 $ 10,012 19.4%
Franchise operations 3,215 2,298 917 39.9%
KKM&D 24,834 16,278 8,556 52.6%
Total revenues $ 89,545 $ 70,060 $ 19,485 27.8%

Operating Income
Company store
operations $ 9,422 $ 6,675 $ 2,747 41.2%
Franchise operations 2,034 1,451 583 40.2%
KKM&D 3,808 2,334 1,474 63.2%
Unallocated general and
administrative
expenses (6,320) (4,833) (1,487) 30.8%
Total operating
income $ 8,944 $ 5,627 $ 3,317 58.9%

Operating Margins
Company store
operations 15.3% 13.0% 2.3%
Franchise operations 63.3% 63.1% 0.2%
KKM&D 15.3% 14.3% 1.0%
Unallocated general and
administrative
expenses 7.1% 6.9% 0.2%
Total operating income 10.0% 8.0% 2.0%

Depreciation and Amortization Expenses:
Company store
operations $ 1,472 $ 1,227 $ 245 20.0%
Franchise operations 18 18 — 0.0%
KKM&D 108 69 39 56.5%
Corporate administration 354 267 87 32.6%
Total depreciation and
amortization
expenses $ 1,952 $ 1,581 $ 371 23.5%

Systemwide Sales
Company stores $ 61,496 $ 51,484 $ 10,012 19.4%
Franchise stores 82,817 56,222 26,595 47.3%
Total $ 144,313 $ 107,706 $ 36,607 34.0%

Comparable Store Sales
Company stores 11.9%
Systemwide 13.1%

(1) Certain amounts presented for the second quarter of fiscal 2001 have
been restated for a change in accounting policy for revenue
recognition in accordance with Staff Accounting Bulletin No. 101
(“SAB101”), “Revenue Recognition in Financial Statements.” The change
had no effect on earnings per share for the quarterly period.

(2) Diluted earnings per share and the number of diluted shares
outstanding for Fiscal 2001 have been restated for two, two-for-one
stock splits paid in the form of stock dividends on March 19, 2001 and
June 14, 2001.

Krispy Kreme Doughnuts, Inc.
Summary Financial Results
For the Six Months Ended July 29, 2001
(All dollar amounts in thousands except per share data)

Six Months Ended
July 29, 2001 July 30, 2000(1) $Change %Change

Total revenues $ 177,466 $ 140,930 $ 36,536 25.9%
Operating expenses 143,878 117,450 26,428 22.5%
General and
administrative
expenses 12,188 9,001 3,187 35.4%
Depreciation and
amortization expenses 3,824 3,176 648 20.4%
Income from operations 17,576 11,303 6,273 55.5%
Interest income 1,840 778 1,062 136.5%
Interest expense 167 520 (353) -67.9%
Loss from joint ventures 204 600 (396) -66.0%
Minority interest in
consolidated joint
ventures 241 251 (10) – 4.0%
Other expenses 39 — 39 —
Income before income
taxes 18,765 10,710 8,055 75.2%
Provision for income
taxes 7,131 4,093 3,038 74.2%
Net income $ 11,634 $ 6,617 $ 5,017 75.8%

Diluted earnings
per share (2) $ 0.20 $ 0.13 $ 0.07 53.8%
Diluted shares
outstanding (2) 58,123 50,808 7,315 14.4%

Segment Information

Revenues
Company store
operations $ 122,190 $ 102,440 $ 19,750 19.3%
Franchise operations 6,221 4,298 1,923 44.7%
KKM&D 49,055 34,192 14,863 43.5%
Total revenues $ 177,466 $ 140,930 $ 36,536 25.9%

Operating Income
Company store
operations $ 18,835 $ 13,335 $ 5,500 41.2%
Franchise operations 4,002 2,451 1,551 63.3%
KKM&D 7,631 5,052 2,579 51.0%
Unallocated general and
administrative
expenses (12,892) (9,535) (3,357) 35.2%
Total operating
income $ 17,576 $ 11,303 $ 6,273 55.5%

Operating Margins
Company store
operations 15.4% 13.0% 2.4%
Franchise operations 64.3% 57.0% 7.3%
KKM&D 15.6% 14.8% 0.8%
Unallocated general and
administrative
expenses 7.3% 6.8% 0.5%
Total operating income 9.9% 8.0% 1.9%

Depreciation and Amortization Expenses:
Company store
operations $ 2,869 $ 2,468 $ 401 16.2%
Franchise operations 36 36 — 0.0%
KKM&D 216 138 78 56.5%
Corporate administration 703 534 169 31.6%
Total depreciation and
amortization
expenses $ 3,824 $ 3,176 $ 648 20.4%

Systemwide Sales
Company stores $ 122,190 $ 102,440 $ 19,750 19.3%
Franchise stores 162,473 108,613 53,860 49.6%
Total $ 284,663 $ 211,053 $ 73,610 34.9%

Comparable Store Sales
Company stores 12.5%
Systemwide 12.3%

(1) Certain amounts presented for the first six months of fiscal 2001 have
been restated for a change in accounting policy for revenue
recognition in accordance with Staff Accounting Bulletin No. 101
(“SAB101”), “Revenue Recognition in Financial Statements.” The change
had no effect on earnings per share for the six month period.

(2) Diluted earnings per share and the number of diluted shares
outstanding for Fiscal 2001 have been restated for two, two-for-one
stock splits paid in the form of stock dividends on March 19, 2001 and
June 14, 2001.






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