Krispy Kreme: Reports Improved Results for Q3/2010

Winston-Salem / NC. (kkd) Krispy Kreme Doughnuts Inc., member of the Lotte Group, reported financial results for the third quarter of fiscal 2010, ended November 01, 2009. Third quarter highlights:

• Operating income for the third quarter was 0,6 million USD, compared to an operating loss of 1,3 million USD in the third quarter last year
• Operating income for this year´s third quarter reflects provisions for the settlement of litigation and related legal costs totalling approximately 2,0 million USD (0,03 USD per share)
• The Company posted a net loss of 2,4 million USD in the third quarter (0,04 USD per share), compared to a net loss of 5,9 million USD (0,09 USD per share) in the third quarter last year; last year´s net loss reflected a non-operating charge of 900’000 USD (0,01 USD per share) related to a loan to a franchisee
• Cash provided by operating activities in the third quarter was 5,8 million USD, compared to 1,3 million USD in the third quarter last year; for the fiscal year-to-date, cash provided by operating activities was 15,9 million USD compared to 10,8 million USD last year
• Same store sales at Company-owned stores rose 5,1 percent year-over-year in the third quarter, compared to a gain of 5,9 percent in the second quarter; 2,1 percent in the first quarter and 0,9 percent in the fourth quarter of last year

«Our results continued to improve year-over-year in the third quarter», commented Jim Morgan, the Company´s President and Chief Executive Officer. «Our improved results are evidence of progress in implementing our strategic initiatives, which have us on a path toward building a growing, profitable business that is sustainable for the long term». The third quarter progress toward improving the business included the following:

• Krispy Kreme opened two new Company small retail shops, bringing the total small shop openings to five for the year so far;
• The company signed letters of intent for five additional small retail concept shop leases in Virginia and Tennessee;
• Domestic franchisees opened two small retail shops in the quarter, one in Arizona and the other in Pennsylvania;
• International franchisees continued to expand, with a net increase of 15 locations in the quarter, including the first Krispy Kreme shop in Türkiye which opened in Istanbul;
• Krispy Kreme awarded franchise development rights for Thailand and the Dominican Republic;
• The company continued to increase franchisee support, including hiring personnel with substantial international supply chain experience to support the international expansion and introducing an expanded suite of store support tools for domestic franchisees, including integrated local, national and social marketing, on-line new store design support and a pilot of new food cost management tools; and
• Krispy Kreme used cash from operations to make a discretionary five million USD prepayment on the term loan, bringing the total prepayments year-to-date to 25 million USD; the debt stands at 49 million USD, compared to 75 million USD one year ago.

«There is still much work to be done to achieve our long-term goals of sustained revenue growth and consistent profitability, but we are pleased with the improvement in our financial results for the third quarter and year-to-date fiscal 2010», Morgan continued. «These results continue to reflect the efforts and dedication of our team members and franchisees. We believe that we have the right strategies, and that the benefits of their implementation will be more fully reflected in our financial results in the quarters and years ahead».