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| KKD > SEC Filings for KKD > Form 10-Q on 7-Dec-2012 | All Recent SEC Filings |
7-Dec-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 third quarter and the first nine months of fiscal 2013 are not comparable to the corresponding amounts for the third quarter and the first nine 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 October 28, 2012 Compared to Three Months Ended October 30, 2011 - Provision for Income Taxes" and "Results of Operations - Nine Months Ended October 28, 2012 Compared to Nine Months Ended October 30, 2011 - Provision for Income Taxes" below.
Results of Operations
The following table sets forth operating metrics for the three and nine
months ended October 28, 2012 and October 30, 2011.
Three Months Ended Nine Months Ended
October 28, October 30, October 28, October 30,
2012 2011 2012 2011
Change in Same Store Sales (on-premises sales only):
Company stores 6.8 % 4.0 % 4.7 % 4.2 %
Domestic Franchise stores 5.0 % 7.9 % 5.8 % 6.2 %
International Franchise stores (8.3 ) % (8.5 ) % (9.6 ) % (5.4 ) %
International Franchise stores, in constant dollars(1) (7.7 ) % (12.2 ) % (8.4 ) % (11.3 ) %
Change in Same Store Customer Count - Company stores
(retail sales only) 8.4 % (1.3 ) % 5.3 % (0.4 ) %
Average guest check - Company stores (retail sales only) $ 7.43 $ 7.49 $ 7.33 $ 7.34
Wholesale Metrics (Company stores only):
Average weekly number of doors served:
Grocery/mass merchants 5,644 5,811 5,611 5,851
Convenience stores 4,466 4,675 4,512 4,889
Average weekly sales per door:
Grocery/mass merchants $ 311 $ 291 $ 316 $ 293
Convenience stores 247 236 247 226
Systemwide Sales (in thousands):(2)
Company stores $ 71,884 $ 67,126 $ 213,399 $ 201,629
Domestic Franchise stores 68,950 64,976 210,454 196,502
International Franchise stores 103,536 91,928 310,893 279,188
International Franchise stores, in constant dollars(3) 103,536 91,457 310,893 275,138
Average Weekly Sales Per Store (in thousands):(4) (5)
Company stores:
Factory stores:
Commissaries - wholesale $ 179.9 $ 203.0 $ 180.6 $ 201.6
Dual-channel stores:
On-premises 34.3 32.0 33.3 32.0
Wholesale 43.5 45.1 44.8 46.1
Total 77.8 77.1 78.1 78.1
On-premises only stores 34.4 32.0 34.3 32.0
All factory stores 69.8 69.3 70.3 69.7
Satellite stores 19.6 19.4 19.8 19.7
All stores 58.8 58.9 59.3 59.9
Domestic Franchise stores:
Factory stores $ 46.7 $ 42.8 $ 47.2 $ 43.8
Satellite stores 15.7 16.8 16.7 16.8
International Franchise stores:
Factory stores $ 39.9 $ 41.3 $ 40.7 $ 44.0
Satellite stores 10.7 10.5 11.2 10.5
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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 nine months ended
October 30, 2011 to U.S. dollars based upon the weighted average of the
exchange rates prevailing in the three and nine months ended October 28,
2012.
(4) Includes sales between Company and franchise stores.
(5) Metrics for the three and nine months ended October 28, 2012 and October
30, 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 October 28, 2012 and October 30, 2011.
October 28, October 30,
2012 2011
Number of Stores Open At Period End:
Company stores:
Factory:
Commissaries 7 6
Dual-channel stores 37 35
On-premises only stores 31 29
Satellite stores 21 19
Total Company stores 96 89
Domestic Franchise stores:
Factory stores 101 103
Satellite stores 41 38
Total Domestic Franchise stores 142 141
International Franchise stores:
Factory stores 119 112
Satellite stores 374 336
Total International Franchise stores 493 448
Total systemwide stores 731 678
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The following table sets forth data about the number of store operating weeks for the three and nine months ended October 28, 2012 and October 30, 2011.
Three Months Ended Nine Months Ended
October 28, October 30, October 28, October 30,
2012 2011 2012 2011
Store Operating Weeks:
Company stores:
Factory stores:
Commissaries 91 78 273 234
Dual-channel stores 477 455 1,413 1,365
On-premises only stores 395 377 1,156 1,131
Satellite stores 269 237 789 662
Domestic Franchise stores:(1)
Factory stores 1,303 1,331 3,887 3,921
Satellite stores 518 491 1,531 1,370
International Franchise stores:(1)
Factory stores 1,331 1,163 3,902 3,413
Satellite stores 4,655 4,159 13,190 11,978
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(1) Metrics for the three and nine months ended October 28, 2012 and October 30, 2011 include only stores open at the respective period end.
The following table sets forth the types and locations of Company stores as of October 28, 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 7 5 - 12
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 13 4 - 17
Ohio 6 - - 6
South Carolina 3 3 - 6
Tennessee 9 3 - 12
Texas 3 - - 3
Virginia 6 2 - 8
West Virginia 1 - - 1
Total 75 20 1 96
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Changes in the number of Company stores during the three and nine months ended October 28, 2012 and October 30, 2011 are summarized in the table below.
Number of Company Stores
Factory
Stores Hot Shops Fresh Shops Total
Three months ended October 28, 2012
July 29, 2012 73 19 1 93
Opened 1 - - 1
Closed - - - -
Transferred 1 1 - 2
October 28, 2012 75 20 1 96
Nine months ended October 28, 2012
January 29, 2012 72 19 1 92
Opened 2 - - 2
Closed - - - -
Transferred 1 1 - 2
October 28, 2012 75 20 1 96
Three months ended October 30, 2011
July 31, 2011 70 17 1 88
Opened - 1 - 1
Closed - - - -
October 30, 2011 70 18 1 89
Nine months ended October 30, 2011
January 30, 2011 69 15 1 85
Opened - 4 - 4
Closed - - - -
Change in store type 1 (1 ) - -
October 30, 2011 70 18 1 89
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The following table sets forth the types and locations of domestic franchise stores as of October 28, 2012.
Number of Domestic Franchise Stores
Factory
State Stores Hot Shops Fresh Shops Total
Alabama 5 3 - 8
Arizona 1 1 - 2
Arkansas 2 - - 2
California 14 1 4 19
Colorado 2 - - 2
Connecticut 1 - 3 4
Florida 12 6 1 19
Georgia 5 3 - 8
Hawaii 1 - - 1
Idaho 1 - - 1
Illinois 4 - - 4
Iowa 1 - - 1
Louisiana 3 - - 3
Mississippi 3 1 - 4
Missouri 2 1 - 3
Nebraska 1 - 1 2
Nevada 3 - 2 5
New Jersey - 1 - 1
New Mexico 1 1 1 3
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 27 14 142
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Changes in the number of domestic franchise stores during the three and nine months ended October 28, 2012 and October 30, 2011 are summarized in the table below.
Number of Domestic Franchise Stores
Factory
Stores Hot Shops Fresh Shops Total
Three months ended October 28, 2012
July 29, 2012 101 26 14 141
Opened 1 2 - 3
Closed - - - -
Transferred (1 ) (1 ) - (2 )
October 28, 2012 101 27 14 142
Nine months ended October 28, 2012
January 29, 2012 102 25 15 142
Opened 2 4 - 6
Closed (2 ) (1 ) (1 ) (4 )
Transferred (1 ) (1 ) - (2 )
October 28, 2012 101 27 14 142
Three months ended October 30, 2011
July 31, 2011 103 22 23 148
Opened 1 1 - 2
Closed (1 ) - (8 ) (9 )
October 30, 2011 103 23 15 141
Nine months ended October 30, 2011
January 30, 2011 102 17 25 144
Opened 3 7 1 11
Closed (2 ) (1 ) (11 ) (14 )
October 30, 2011 103 23 15 141
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The types and locations of international franchise stores as of October 28, 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 1 - 1 - 2
Dominican Republic 2011 1 - 2 - 3
Indonesia 2007 3 - 3 6 12
Japan 2007 17 - 22 - 39
Kuwait 2007 2 - 5 6 13
Lebanon 2009 2 - 6 1 9
Malaysia 2010 2 1 1 4 8
Mexico 2004 7 1 31 46 85
Philippines 2007 6 3 24 6 39
Puerto Rico 2009 4 - - - 4
Qatar 2008 2 - - - 2
Saudi Arabia 2008 9 - 63 20 92
South Korea 2005 33 - 30 - 63
Thailand 2011 3 2 - 1 6
Turkey 2010 1 - 10 4 15
United Arab Emirates 2008 2 - 13 5 20
United Kingdom 2004 14 3 28 9 54
Total 119 11 249 114 493
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Changes in the number of international franchise stores during the three and nine months ended October 28, 2012 and October 30, 2011 are summarized in the table below.
Number of International Franchise Stores
Factory
Stores Hot Shops Fresh Shops Kiosks Total
Three months ended October 28, 2012
July 29, 2012 118 11 234 114 477
Opened 3 - 18 5 26
Closed (2 ) - (3 ) (5 ) (10 )
October 28, 2012 119 11 249 114 493
Nine months ended October 28, 2012
January 29, 2012 118 11 226 105 460
Opened 7 - 46 17 70
Closed (5 ) - (17 ) (15 ) (37 )
Change in store type (1 ) - (6 ) 7 -
October 28, 2012 119 11 249 114 493
Three months ended October 30, 2011
July 31, 2011 111 11 229 82 433
Opened 3 2 11 4 20
Closed (2 ) - (2 ) (1 ) (5 )
October 30, 2011 112 13 238 85 448
Nine months ended October 30, 2011
January 30, 2011 106 11 222 78 417
Opened 10 2 27 14 53
Closed (4 ) - (11 ) (7 ) (22 )
October 30, 2011 112 13 238 85 448
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Three months ended October 28, 2012 compared to three months ended October 30, 2011
Total revenues rose by 8.5% to $107.1 million for the three months ended October 28, 2012 compared to $98.7 million for the three months ended October 30, 2011.
Consolidated operating income increased to $9.2 million from $5.6 million and consolidated net income was $5.0 million compared to $4.7 million. Net income and earnings per share for the third quarter of fiscal 2013 are not comparable to the corresponding amounts for the third 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
October 28, October 30,
2012 2011
(Dollars in thousands)
Revenues by business segment:
Company Stores $ 72,493 $ 67,606
Domestic Franchise 2,498 2,327
International Franchise 6,024 5,374
KK Supply Chain:
Total revenues 52,825 50,277
Less - intersegment sales elimination (26,753 ) (26,876 )
External KK Supply Chain revenues 26,072 23,401
Total revenues $ 107,087 $ 98,708
Segment revenues as a percentage of total revenues:
Company Stores 67.7 % 68.5 %
Domestic Franchise 2.3 2.4
International Franchise 5.6 5.4
KK Supply Chain (external sales) 24.3 23.7
100.0 % 100.0 %
Operating income (loss):
. . .
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