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| KKD > SEC Filings for KKD > Form 10-Q on 1-Jun-2012 | All Recent SEC Filings |
1-Jun-2012
Quarterly Report
The following discussion of the Company's financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere herein.
Comparability of Results of Operations
The Company's net income and earnings per share for the first quarter of fiscal 2013 are not comparable to the corresponding amounts for the first quarter of fiscal 2012 as a result of the reversal of valuation allowances on deferred tax assets in the fourth quarter of fiscal 2012. See "Results of Operations - Three Months Ended April 29, 2012 Compared to Three Months Ended May 1, 2011 - Provision for Income Taxes" below.
Results of Operations
The following table sets forth operating metrics for the three months ended
April 29, 2012 and May 1, 2011.
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Three Months Ended
April 29, May 1,
2012 2011
Change in Same Store Sales (on-premises sales only):
Company stores 2.1 % 5.8 %
Domestic Franchise stores 5.8 % 4.6 %
International Franchise stores (7.9 ) % (4.3 ) %
International Franchise stores, in constant dollars(1) (7.4 ) % (9.6 ) %
Change in Same Store Customer Count - Company stores (retail sales only) 1.3 % 2.9 %
Wholesale Metrics (Company stores only):
Average weekly number of doors served:
Grocers/mass merchants 5,603 5,866
Convenience stores 4,600 5,145
Average weekly sales per door:
Grocers/mass merchants $ 316 $ 292
Convenience stores 248 216
Systemwide Sales (in thousands):(2)
Company stores $ 72,805 $ 69,027
Domestic Franchise stores 71,972 66,697
International Franchise stores 104,920 91,591
International Franchise stores, in constant dollars(3) 104,920 91,144
Average Weekly Sales Per Store (in thousands):(4) (5)
Company stores:
Factory stores:
Commissaries - wholesale $ 181.9 $ 198.5
Dual-channel stores:
On-premises 35.6 34.9
Wholesale 46.9 46.5
Total 82.5 81.4
On-premises only stores 35.1 34.3
All factory stores 72.5 72.6
Satellite stores 21.3 20.7
All stores 61.3 62.6
Domestic Franchise stores:
Factory stores $ 47.7 $ 44.9
Satellite stores 18.0 14.3
International Franchise stores:
Factory stores $ 41.1 $ 45.8
Satellite stores 11.7 9.8
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(1) Represents the change in International Franchise same store sales computed
by reconverting franchise store sales in each foreign currency to U.S.
dollars at a constant rate of exchange for each period.
(2) Excludes sales among Company and franchise stores.
(3) Represents International Franchise store sales computed by reconverting
International Franchise store sales for the three months ended May 1, 2011
to U.S. dollars based upon the weighted average of the exchange rates
prevailing in the three months ended April 29, 2012.
(4) Includes sales between Company and franchise stores.
(5) Metrics for the three months ended April 29, 2012 and May 1, 2011 include
only stores open at the respective period end.
The change in "same store sales" is computed by dividing 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 (but only to the extent such sales occurred in the 57th or later week of each store's operation) by the aggregate on-premises sales of such stores for the comparable weeks in the preceding year. Once a store has been open for at least 57 consecutive weeks, its sales are included in the computation of same store 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.
For wholesale sales, "average weekly number of doors" represents the average number of customer locations to which product deliveries were made during a week, and "average weekly sales per door" represents the average weekly sales to each such location.
Systemwide sales, a non-GAAP financial measure, include sales by both Company and franchise stores. The Company believes systemwide sales data are useful in assessing the overall performance of the Krispy Kreme brand and, ultimately, the performance of the Company. 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.
The following table sets forth data about the number of systemwide stores as of April 29, 2012 and May 1, 2011.
April 29, May 1,
2012 2011
Number of Stores Open At Period End:
Company stores:
Factory:
Commissaries 7 6
Dual-channel stores 35 35
On-premises only stores 30 28
Satellite stores 20 17
Total Company stores 92 86
Domestic Franchise stores:
Factory stores 102 101
Satellite stores 40 44
Total Domestic Franchise stores 142 145
International Franchise stores:
Factory stores 115 109
Satellite stores 343 312
Total International Franchise stores 458 421
Total systemwide stores 692 652
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The following table sets forth data about the number of store operating weeks for the three months ended April 29, 2012 and May 1, 2011.
Three Months Ended
April 29, May 1,
2012 2011
Store Operating Weeks:
Company stores:
Factory stores:
Commissaries 91 78
Dual-channel stores 455 455
On-premises only stores 390 364
Satellite stores 260 212
Domestic Franchise stores:(1)
Factory stores 1,314 1,313
Satellite stores 519 547
International Franchise stores:(1)
Factory stores 1,313 1,158
Satellite stores 4,268 3,906
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(1) Metrics for the three months ended April 29, 2012 and May 1, 2011 include only stores open at the respective period end.
The following table sets forth the types and locations of Company stores as of April 29, 2012.
Number of Company Stores
Factory
State Stores Hot Shops Fresh Shops Total
Alabama 3 - - 3
District of Columbia - 1 - 1
Florida 4 - - 4
Georgia 6 4 - 10
Indiana 3 1 - 4
Kansas 3 - - 3
Kentucky 3 1 - 4
Louisiana 1 - - 1
Maryland 2 - - 2
Michigan 3 - - 3
Mississippi 1 - - 1
Missouri 4 - - 4
New York - - 1 1
North Carolina 12 4 - 16
Ohio 6 - - 6
South Carolina 2 3 - 5
Tennessee 9 3 - 12
Texas 3 - - 3
Virginia 6 2 - 8
West Virginia 1 - - 1
Total 72 19 1 92
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Changes in the number of Company stores during the three months ended April 29, 2012 and May 1, 2011 are summarized in the table below.
Number of Company Stores
Factory
Stores Hot Shops Fresh Shops Total
Three months ended April 29, 2012
January 29, 2012 72 19 1 92
Opened - - - -
Closed - - - -
April 29, 2012 72 19 1 92
Three months ended May 1, 2011
January 30, 2011 69 15 1 85
Opened - 1 - 1
Closed - - - -
May 1, 2011 69 16 1 86
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The following table sets forth the types and locations of domestic franchise stores as of April 29, 2012.
Number of Domestic Franchise Stores
Factory
State Stores Hot Shops Fresh Shops Total
Alabama 5 3 - 8
Arizona 1 - - 1
Arkansas 2 - - 2
California 14 1 4 19
Colorado 2 - - 2
Connecticut 1 - 3 4
Florida 12 6 1 19
Georgia 6 4 - 10
Hawaii 1 - - 1
Idaho 1 - - 1
Illinois 4 - - 4
Iowa 1 - - 1
Louisiana 3 - - 3
Mississippi 2 1 - 3
Missouri 2 1 - 3
Nebraska 1 - 1 2
Nevada 3 - 2 5
New Jersey - 1 - 1
New Mexico 1 - 1 2
North Carolina 7 1 - 8
Oklahoma 3 - - 3
Oregon 2 - - 2
Pennsylvania 4 3 1 8
South Carolina 6 2 1 9
Tennessee 1 - - 1
Texas 7 2 - 9
Utah 2 - - 2
Washington 7 - - 7
Wisconsin 1 1 - 2
Total 102 26 14 142
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Changes in the number of domestic franchise stores during the three months ended April 29, 2012 and May 1, 2011 are summarized in the table below.
Number of Domestic Franchise Stores
Factory
Stores Hot Shops Fresh Shops Total
Three months ended April 29, 2012
January 29, 2012 102 25 15 142
Opened 1 2 - 3
Closed (1 ) (1 ) (1 ) (3 )
April 29, 2012 102 26 14 142
Three months ended May 1, 2011
January 30, 2011 102 17 25 144
Opened - 3 1 4
Closed (1 ) (1 ) (1 ) (3 )
May 1, 2011 101 19 25 145
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The types and locations of international franchise stores as of April 29, 2012 are summarized in the table below.
Number of International Franchise Stores
Fiscal
Year First Factory
Country Store Opened Stores Hot Shops Fresh Shops Kiosks Total
Australia 2004 5 1 7 6 19
Bahrain 2009 1 - 1 - 2
Canada 2002 4 - 1 - 5
China 2010 2 - 1 - 3
Dominican Republic 2011 1 - 1 - 2
Indonesia 2007 3 - 3 6 12
Japan 2007 16 - 21 - 37
Kuwait 2007 3 - 7 10 20
Lebanon 2009 2 - 6 1 9
Malaysia 2010 2 1 1 3 7
Mexico 2004 6 1 23 43 73
Philippines 2007 5 3 18 4 30
Puerto Rico 2009 4 - - - 4
Qatar 2008 2 - - - 2
Saudi Arabia 2008 9 - 59 20 88
South Korea 2005 33 - 25 - 58
Thailand 2011 2 2 - - 4
Turkey 2010 1 - 10 3 14
United Arab Emirates 2008 2 - 14 4 20
United Kingdom 2004 12 3 25 9 49
Total 115 11 223 109 458
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Changes in the number of international franchise stores during the three months ended April 29, 2012 and May 1, 2011 are summarized in the table below.
Number of International Franchise Stores
Factory
Stores Hot Shops Fresh Shops Kiosks Total
Three months ended April 29, 2012
January 29, 2012 118 11 226 105 460
Opened - - 14 6 20
Closed (3 ) - (10 ) (9 ) (22 )
Change in store type - - (7 ) 7 -
April 29, 2012 115 11 223 109 458
Three months ended May 1, 2011
January 30, 2011 106 11 222 78 417
Opened 4 - 7 5 16
Closed (1 ) - (6 ) (5 ) (12 )
May 1, 2011 109 11 223 78 421
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Three months ended April 29, 2012 compared to three months ended May 1, 2011
Total revenues rose by 3.7% to $108.5 million for the three months ended April 29, 2012 compared to $104.6 million for the three months ended May 1, 2011.
Consolidated operating income increased to $10.8 million in the three months ended April 29, 2012 from $9.8 million in the three months ended May 1, 2011. Consolidated net income was $6.0 million in the three months ended April 29, 2012 compared to $9.2 million in the three months ended May 1, 2011. The Company's net income and earnings per share for the first quarter of fiscal 2013 are not comparable to the corresponding amounts for the first quarter of fiscal 2012 as a result of the reversal of valuation allowances on deferred tax assets in the fourth quarter of fiscal 2012. See "Provision for Income Taxes" below.
Revenues by business segment (expressed in dollars and as a percentage of total revenues) are set forth in the table below (percentage amounts may not add to totals due to rounding).
Three Months Ended
April 29, May 1,
2012 2011
(Dollars in thousands)
Revenues by business segment:
Company Stores $ 73,341 $ 69,475
Domestic Franchise 2,633 2,369
International Franchise 6,027 5,636
KK Supply Chain:
Total revenues 53,785 53,883
Less - intersegment sales elimination (27,290 ) (26,763 )
External KK Supply Chain revenues 26,495 27,120
Total revenues $ 108,496 $ 104,600
Segment revenues as a percentage of total revenues:
Company Stores 67.6 % 66.4 %
Domestic Franchise 2.4 2.3
International Franchise 5.6 5.4
KK Supply Chain (external sales) 24.4 25.9
100.0 % 100.0 %
Operating income (loss):
Company Stores $ 2,948 $ 2,174
Domestic Franchise 1,569 1,147
International Franchise 4,494 4,171
KK Supply Chain 8,477 8,342
Total segment operating income 17,488 15,834
Unallocated general and administrative expenses (6,623 ) (5,799 )
Impairment charges and lease termination costs (31 ) (244 )
Consolidated operating income $ 10,834 $ 9,791
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A discussion of the revenues and operating results of each of the Company's four business segments follows, together with a discussion of income statement line items not associated with specific segments.
Company Stores
The components of Company Stores revenues and expenses (expressed in dollars
and as a percentage of total revenues) are set forth in the table below
(percentage amounts may not add to totals due to rounding).
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Percentage of Total Revenues
Three Months Ended Three Months Ended
April 29, May 1, April 29, May 1,
2012 2011 2012 2011
(In thousands)
Revenues:
On-premises sales:
Retail sales $ 30,596 $ 28,156 41.7 % 40.5 %
Fundraising sales 4,880 4,705 6.7 6.8
Total on-premises sales 35,476 32,861 48.4 47.3
Wholesale sales:
Grocers/mass merchants 22,740 22,013 31.0 31.7
Convenience stores 14,322 13,879 19.5 20.0
Other wholesale 803 722 1.1 1.0
Total wholesale sales 37,865 36,614 51.6 52.7
Total revenues 73,341 69,475 100.0 100.0
Operating expenses:
Cost of sales:
Food, beverage and packaging 27,797 26,295 37.9 37.8
Shop labor 12,782 12,601 17.4 18.1
Delivery labor 5,907 5,854 8.1 8.4
Employee benefits 4,998 4,606 6.8 6.6
Total cost of sales 51,484 49,356 70.2 71.0
Vehicle costs(1) 4,486 4,381 6.1 6.3
Occupancy(2) 2,414 2,262 3.3 3.3
Utilities expense 1,414 1,339 1.9 1.9
Depreciation expense 2,097 1,537 2.9 2.2
Other operating expenses 4,762 4,544 6.5 6.5
Total store level costs 66,657 63,419 90.9 91.3
Store operating income 6,684 6,056 9.1 8.7
Other segment operating costs(3) 2,661 2,757 3.6 4.0
Allocated corporate overhead 1,075 1,125 1.5 1.6
Segment operating income $ 2,948 $ 2,174 4.0 % 3.1 %
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(1) Includes fuel, maintenance and repairs, rent, taxes and other costs of
operating the delivery fleet, exclusive of depreciation.
(2) Includes rent, property taxes, common area maintenance charges, insurance,
building maintenance and other occupancy costs, exclusive of utilities and
depreciation.
(3) Includes marketing costs not charged to stores, segment management costs,
wholesale selling expenses and support functions.
. . .
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