WINSTON-SALEM, N.C., April 17 /PRNewswire-FirstCall/ -- Krispy Kreme Doughnuts, Inc. (the "Company") announced today that, on a preliminary basis, the Company expects to report revenues of approximately $120 million for the fourth quarter of the fiscal year ended January 29, 2006 ("fiscal 2006"), compared to revenues of approximately $162 million for the fourth quarter of the fiscal year ended January 30, 2005 ("fiscal 2005"). The Company expects to report revenues of approximately $540 million for fiscal 2006, compared to revenues of approximately $707 million for fiscal 2005. The year-over-year decrease in revenues for both the fourth quarter and the full year principally reflects lower average sales per store, a decrease in the number of Company stores, lower sales to franchisees from the Company's Manufacturing and Distribution segment and lower royalties and fees from franchisees.
Systemwide and Company average weekly sales per factory store (which includes sales through satellites) decreased approximately 9% and 10%, respectively, compared to the fourth quarter of fiscal 2005. Systemwide sales data include sales at all Company and franchise locations. Systemwide average weekly sales per location is a non-GAAP financial measure; however, the Company believes systemwide sales information is useful in assessing the Company's performance.
"As we move into fiscal 2007, Krispy Kreme is continuing to take the steps necessary to turn around the Company," said Daryl Brewster, President and Chief Executive Officer. "While much work remains, we are starting to see signs of stability in our drive to sustained growth and I am encouraged by the Company's potential."
The Company's financial results continue to be adversely affected by the substantial costs associated with the legal and regulatory matters previously disclosed by the Company. The Company expects to report a net loss for the fourth quarter and full year of fiscal 2006.
The Company also stated that it expects to file its Form 10-K for fiscal 2005 by April 30, 2006, as previously announced. The Company noted that it is unable to file timely its annual report on Form 10-K for fiscal 2006 because there have been substantial resources devoted to completing the 10-K for fiscal 2005. The Company intends to file the fiscal 2006 10-K as soon as practicable after completing its fiscal 2005 10-K.
Liquidity Update
"We believe that our cash flow from operations, combined with other anticipated cash inflows, continues to provide us with sufficient liquidity as we move forward," said Mike Phalen, Chief Financial Officer.
The Company's sources of liquidity and outstanding debt as of January 29, 2006 were as follows (based on preliminary data):
(in millions) January 29, 2006 October 30, 2005
Cash:
Company $20 $25
Consolidated joint ventures (a) $1 $2
Unused borrowing capacity under the
credit facilities (b) $18 $27
Indebtedness: (c)
Company $119 $120
Consolidated joint ventures (a) $13 $23
Letters of credit issued under the
credit facilities $22 $23
Guarantees $36 $42
(a) Consistent with past practice, all amounts for consolidated joint
ventures are reported on a one-month delay.
(b) Represents additional net borrowing capacity (i.e., excludes amounts
that could be borrowed to repay existing debt) based on most
restrictive covenant.
(c) Does not reflect certain restatement adjustments related to capital
leases.
Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme is a leading branded retailer and wholesaler of high-quality doughnuts, including its signature Hot Original Glazed. There are currently approximately 310 Krispy Kreme stores and 85 satellites operating systemwide in 43 U.S. states, Australia, Canada, Mexico, South Korea and the United Kingdom. Krispy Kreme can be found on the Internet at http://www.krispykreme.com/.
Information contained in this press release, other than historical information, should be considered forward-looking. Forward-looking statements are 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 the outcome of the pending formal investigation by the United States Securities and Exchange Commission and the investigation by the United States Attorney's Office for the Southern District of New York, the pending shareholder class action, the pending shareholder derivative action, the pending ERISA class action, further actions by the Special Committee, our auditors' ongoing review of our financial statements, actions taken by lenders to the Company and its joint ventures and actions taken by our franchisees, dependence on the ability of our franchisees to execute on their business plans, supply issues, changes in consumer preferences and perceptions, the failure of new products or cost saving initiatives to contribute to financial results in the timeframe or amount currently estimated and numerous other factors discussed in Krispy Kreme's periodic reports and proxy statements filed with the Securities and Exchange Commission.
Contact:
Laura Smith
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449 ext. 154
