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| KKD > SEC Filings for KKD > Form 10-Q on 7-Sep-2012 | All Recent SEC Filings |
7-Sep-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 second quarter and the first six months of fiscal 2013 are not comparable to the corresponding amounts for the second quarter and the first six months of fiscal 2012 as a result of the reversal of valuation allowances on deferred tax assets in the fourth quarter of fiscal 2012 and the resulting increase in income tax expense in periods after the reversal. See "Results of Operations - Three Months Ended July 29, 2012 Compared to Three Months Ended July 31, 2011 - Provision for Income Taxes" and "Results of Operations - Six Months Ended July 29, 2012 Compared to Six Months Ended July 31, 2011 - Provision for Income Taxes" below.
Results of Operations
The following table sets forth operating metrics for the three and six months
ended July 29, 2012 and July 31, 2011.
Three Months Ended Six Months Ended
July 29, July 31, July 29, July 31,
2012 2011 2012 2011
Change in Same Store Sales (on-premises sales only):
Company stores 5.4 % 2.5 % 3.7 % 4.2 %
Domestic Franchise stores 6.7 % 6.3 % 6.2 % 5.4 %
International Franchise stores (12.7 ) % (3.1 ) % (10.3 ) % (3.7 ) %
International Franchise stores, in constant dollars(1) (10.0 ) % (11.7 ) % (8.7 ) % (10.7 ) %
Change in Same Store Customer Count - Company stores
(retail sales only) 6.6 % (2.9 ) % 3.8 % 0.0 %
Average guest check - Company stores (retail sales only) $ 7.43 $ 7.49 $ 7.27 $ 7.28
Wholesale Metrics (Company stores only):
Average weekly number of doors served:
Grocery/mass merchants 5,586 5,876 5,595 5,871
Convenience stores 4,470 4,846 4,535 4,996
Average weekly sales per door:
Grocery/mass merchants $ 322 $ 297 $ 319 $ 294
Convenience stores 246 227 247 221
Systemwide Sales (in thousands):(2)
Company stores $ 68,710 $ 65,476 $ 141,515 $ 134,503
Domestic Franchise stores 69,532 64,829 141,504 131,526
International Franchise stores 102,437 95,669 207,357 187,260
International Franchise stores, in constant dollars(3) 102,437 92,484 207,357 183,679
Average Weekly Sales Per Store (in thousands):(4) (5)
Company stores:
Factory stores:
Commissaries - wholesale $ 179.9 $ 203.2 $ 180.9 $ 200.8
Dual-channel stores:
On-premises 30.4 28.9 32.9 31.9
Wholesale 45.6 46.7 45.5 46.6
Total 76.0 75.6 78.4 78.5
On-premises only stores 32.9 30.1 34.2 32.0
All factory stores 68.5 67.8 70.5 69.8
Satellite stores 18.5 19.3 19.9 19.8
All stores 57.6 58.1 59.5 60.3
Domestic Franchise stores:
Factory stores $ 46.7 $ 43.0 $ 47.3 $ 43.9
Satellite stores 16.6 15.3 17.3 15.0
International Franchise stores:
Factory stores $ 39.8 $ 44.0 $ 40.6 $ 45.0
Satellite stores 11.1 11.0 11.4 10.4
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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 and six months ended
July 31, 2011 to U.S. dollars based upon the weighted average of the
exchange rates prevailing in the three and six months ended July 29, 2012.
(4) Includes sales between Company and franchise stores.
(5) Metrics for the three and six months ended July 29, 2012 and July 31, 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 July 29, 2012 and July 31, 2011.
July 29, July 31,
2012 2011
Number of Stores Open At Period End:
Company stores:
Factory:
Commissaries 7 6
Dual-channel stores 36 35
On-premises only stores 30 29
Satellite stores 20 18
Total Company stores 93 88
Domestic Franchise stores:
Factory stores 101 103
Satellite stores 40 45
Total Domestic Franchise stores 141 148
International Franchise stores:
Factory stores 118 111
Satellite stores 359 322
Total International Franchise stores 477 433
Total systemwide stores 711 669
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The following table sets forth data about the number of store operating weeks for the three and six months ended July 29, 2012 and July 31, 2011.
Three Months Ended Six Months Ended
July 29, July 31, July 29, July 31,
2012 2011 2012 2011
Store Operating Weeks:
Company stores:
Factory stores:
Commissaries 91 78 182 156
Dual-channel stores 468 455 936 910
On-premises only stores 384 377 761 754
Satellite stores 260 226 520 425
Domestic Franchise stores:(1)
Factory stores 1,309 1,321 2,610 2,634
Satellite stores 520 542 1,039 1,063
International Franchise stores:(1)
Factory stores 1,323 1,157 2,623 2,302
Satellite stores 4,494 4,043 8,723 7,897
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(1) Metrics for the three and six months ended July 29, 2012 and July 31, 2011 include only stores open at the respective period end.
The following table sets forth the types and locations of Company stores as of July 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 3 3 - 6
Tennessee 9 3 - 12
Texas 3 - - 3
Virginia 6 2 - 8
West Virginia 1 - - 1
Total 73 19 1 93
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Changes in the number of Company stores during the three and six months ended July 29, 2012 and July 31, 2011 are summarized in the table below.
Number of Company Stores
Factory
Stores Hot Shops Fresh Shops Total
Three months ended July 29, 2012
April 29, 2012 72 19 1 92
Opened 1 - - 1
Closed - - - -
July 29, 2012 73 19 1 93
Six months ended July 29, 2012
January 29, 2012 72 19 1 92
Opened 1 - - 1
Closed - - - -
July 29, 2012 73 19 1 93
Three months ended July 31, 2011
May 1, 2011 69 16 1 86
Opened - 2 - 2
Closed - - - -
Change in store type 1 (1 ) - -
July 31, 2011 70 17 1 88
Six months ended July 31, 2011
January 30, 2011 69 15 1 85
Opened - 3 - 3
Closed - - - -
Change in store type 1 (1 ) - -
July 31, 2011 70 17 1 88
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The following table sets forth the types and locations of domestic franchise stores as of July 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 6 - - 6
Wisconsin 1 1 - 2
Total 101 26 14 141
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Changes in the number of domestic franchise stores during the three and six months ended July 29, 2012 and July 31, 2011 are summarized in the table below.
Number of Domestic Franchise Stores
Factory
Stores Hot Shops Fresh Shops Total
Three months ended July 29, 2012
April 29, 2012 102 26 14 142
Opened - - - -
Closed (1 ) - - (1 )
July 29, 2012 101 26 14 141
Six months ended July 29, 2012
January 29, 2012 102 25 15 142
Opened 1 2 - 3
Closed (2 ) (1 ) (1 ) (4 )
July 29, 2012 101 26 14 141
Three months ended July 31, 2011
May 1, 2011 101 19 25 145
Opened 2 3 - 5
Closed - - (2 ) (2 )
July 31, 2011 103 22 23 148
Six months ended July 31, 2011
January 30, 2011 102 17 25 144
Opened 2 6 1 9
Closed (1 ) (1 ) (3 ) (5 )
July 31, 2011 103 22 23 148
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The types and locations of international franchise stores as of July 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 - 2 - 6
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 - 5 10 18
Lebanon 2009 2 - 6 1 9
Malaysia 2010 2 1 1 4 8
Mexico 2004 7 1 24 45 77
Philippines 2007 5 3 22 4 34
Puerto Rico 2009 4 - - - 4
Qatar 2008 2 - - - 2
Saudi Arabia 2008 9 - 63 20 92
South Korea 2005 33 - 27 - 60
Thailand 2011 3 2 - - 5
Turkey 2010 1 - 9 4 14
United Arab Emirates 2008 2 - 14 5 21
United Kingdom 2004 13 3 27 9 52
Total 118 11 234 114 477
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Changes in the number of international franchise stores during the three and six months ended July 29, 2012 and July 31, 2011 are summarized in the table below.
Number of International Franchise Stores
Factory
Stores Hot Shops Fresh Shops Kiosks Total
Three months ended July 29, 2012
April 29, 2012 115 11 223 109 458
Opened 4 - 14 6 24
Closed - - (4 ) (1 ) (5 )
Change in store type (1 ) - 1 - -
July 29, 2012 118 11 234 114 477
Six months ended July 29, 2012
January 29, 2012 118 11 226 105 460
Opened 4 - 28 12 44
Closed (3 ) - (14 ) (10 ) (27 )
Change in store type (1 ) - (6 ) 7 -
July 29, 2012 118 11 234 114 477
Three months ended July 31, 2011
May 1, 2011 109 11 223 78 421
Opened 3 - 9 5 17
Closed (1 ) - (3 ) (1 ) (5 )
July 31, 2011 111 11 229 82 433
Six months ended July 31, 2011
January 30, 2011 106 11 222 78 417
Opened 7 - 16 10 33
Closed (2 ) - (9 ) (6 ) (17 )
July 31, 2011 111 11 229 82 433
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Three months ended July 29, 2012 compared to three months ended July 31, 2011
Total revenues rose by 4.3% to $102.1 million for the three months ended July 29, 2012 compared to $98.0 million for the three months ended July 31, 2011.
Consolidated operating income increased to $9.2 million in the three months ended July 29, 2012 from $4.9 million in the three months ended July 31, 2011. Consolidated net income was $4.9 million in the three months ended July 29, 2012 compared to $8.8 million in the three months ended July 31, 2011. The Company's net income and earnings per share for the second quarter of fiscal 2013 are not comparable to the corresponding amounts for the second quarter of fiscal 2012 as a result of the reversal of valuation allowances on deferred tax assets in the fourth quarter of fiscal 2012 and the resulting increase in income tax expense after the reversal; 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
July 29, July 31,
2012 2011
(Dollars in thousands)
Revenues by business segment:
Company Stores $ 69,338 $ 65,992
Domestic Franchise 2,430 2,349
International Franchise 5,781 5,352
KK Supply Chain:
Total revenues 51,465 50,341
Less - intersegment sales elimination (26,899 ) (26,082 )
External KK Supply Chain revenues 24,566 24,259
Total revenues $ 102,115 $ 97,952
Segment revenues as a percentage of total revenues:
Company Stores 67.9 % 67.4 %
Domestic Franchise 2.4 2.4
International Franchise 5.7 5.5
KK Supply Chain (external sales) 24.1 24.8
100.0 % 100.0 %
Operating income (loss):
Company Stores $ 338 $ (1,049 )
Domestic Franchise 1,329 216
International Franchise 4,162 3,409
KK Supply Chain 8,392 7,745
Total segment operating income 14,221 10,321
Unallocated general and administrative expenses (4,932 ) (5,083 )
. . .
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