Krispy Kreme Reports Financial Results For The Fourth Quarter And Fiscal Year Ended February 3, 2013
Raises Fiscal 2014 Guidance
March 14, 2013, 4:05 p.m. EDT
WINSTON-SALEM, N.C., March 14, 2013 /PRNewswire via COMTEX/ --
Krispy Kreme Doughnuts, Inc.
KKD
-4.95%
(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 million operating
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 $0.57 per 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 in Winston-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 the United 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.
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