Krispy Kriem Doughnuts

Prepared by:
Sanae DRISSI
Sofia SBITI
Alae eddine ALAMI
Sara HAFYANE
 Summary
1.About Krispy Kreme.
2.The Case Isssue.
3.SWOT Analysis.
4.KK Financial Statements.
5.The Financial Health of KK.
6.Financial Ratios.
7.Krispy Kreme Vs Competitors.
8.Conclusion.
• Founded by Vernon Carver Rudolph in
1933

• First donut shop (partnered) was in

Paducah, KY

• Operations were moved to Nashville,

TN

• Focused on selling to grocery stores

• Rudolph opened his own shop in

Winton-Salem,NC in 1937 with $25
dollars and a 1936 Pontiac
Krispy Kreme U.S.
Krispy Kreme Worldwide
 Case Issue
This case considers the sudden and
very large drop in the market value of equity
for Krispy Kreme Doughnuts, Inc., associated
with a series of announcements made in
2004.

Those announcements caused

investors to revise their expectations about
the future growth of Krispy Kreme, which had
been one of the most rapidly growing
American corporations in the new millennium.
• Strengths
Great brand recognition.
Centralized manufacturing.
The “donut theatre” experience.
• Weaknesses.
Heavy debt to equity ratio.
The single product focus.
The idea of rapid expansion.
• Opportunities :
One of them being offering premium coffees and beverages.

Threats:
• Dunkin’ Donuts, Tim Horton’s, Starbucks, and other National
Chains/Specialty Eateries
• KK stores went up too fast.
• Store locations too scattered
• Increasing cost of ingredients
• Increasing utility and fuel costs
 Krispy Kreme Finance–Income Statement
　 2007 2006 2005 2004 2003

Revenue 461.2 543.36 707.77 649.35 490.73

Total Revenue 461.2 543.36 707.77 649.35 490.73
Cost of Revenue, Total 389.38 474.59 598.28 493.65 380.64
Gross Profit 71.82 68.77 109.49 155.7 110.08
Selling/General/Administrative Expenses, Total 48.86 67.73 55.3 45.23 30.07
Depreciation/Amortization 21.05 28.92 31.93 22.31 14.68
Unusual Expense (Income) 28.49 90.9 161.85 -0.53 9.08
Operating Income -26.58 -118.77 -139.6 88.68 56.26
Interest Income (Expense), Net Non-Operating -19.55 -23.44 -7.72 -5.85 -2.01
Other, Net 5.11 5.67 -0.06 0.16 -3.47
Income Before Tax -41.03 -136.54 -147.38 82.99 50.78
Income Tax - Total 1.21 -0.78 9.67 33.15 19.72
Income After Tax -42.24 -135.76 -157.05 49.85 31.06
Total Extraordinary Items 0 0 -41.29 -1.28 0
Accounting Change 0 0 -1.23 0 0
Discontinued Operations 0 0 -40.05 -1.28 0

Net Income -42.24 -135.76 -198.34 48.56 31.06

 KK Finance–Balance Sheet (Asset)
　 2007 2006 2005 2004 2003

Assets 　 　 　 　 　

Cash and Short Term Investments 36.24 16.98 27.69 21.03 55.18

Cash & Equivalents 36.24 16.98 27.69 21.03 32.2

Short Term Investments 0 0 0 0 22.98

Total Receivables, Net 62.57 73.8 45.71 71.82 48.28

Accounts Receivable - Trade, Net 27.6 37.68 44.77 63.09 45.44

Accounts Receivable - Trade, Gross 29.51 39.18 40.64 46.09 35.83

Provision for Doubtful Accounts -2.75 -13.66 -11.38 -1.27 -1.45

Notes Receivable - Short Term 0 1.15 0.94 0.75 0

Receivables - Other 34.97 34.97 0 7.97 2.85

Total Inventory 21.01 23.76 28.59 29.82 24.37

Prepaid Expenses 0 0 0 0 3.48

Other Current Assets, Total 12 32.49 17.38 14.83 9.82

Total Current Assets 131.82 147.03 119.36 137.5 141.13

Property/Plant/Equipment, Total - Net 168.65 205.58 309.21 287.49 202.56

Goodwill, Net 28.09 29.18 32.69 197.16 0.2

Intangibles, Net 0.84 1.11 1.69 0 49.15

Long Term Investments 3.22 8.6 5.97 14.58 11.22

Note Receivable - Long Term 0 0.04 2.12 6.56 1

Other Long Term Assets, Total 16.86 19.32 9.23 13.31 5.23

Other Assets, Total 0 0 0 0 0

Total Assets 349.49 410.86 480.28 656.6 410.49

 KK Finance – Balance Sheet (L+S)
　 2007 2006 2005 2004 2003

Liabilities and Shareholders' Equity 　 　 　 　 　

Accounts Payable 7.87 8.9 17.44 19.11 14.06

Accrued Expenses 125.25 140.48 43.62 23.3 20.98

Notes Payable/Short Term Debt 0 0.11 8.48 8.12 12.28

Current Port. of LT Debt/Capital Leases 1.73 4.43 48.1 8.14 3.3

Other Current Liabilities, Total 0.02 0 0 0 9.08

Total Current Liabilities 134.87 153.92 117.64 58.67 59.69

Total Long Term Debt 105.97 118.24 90.95 137.11 57.19

Long Term Debt 105.97 118.24 90.95 137.11 57.19

Deferred Income Tax 0 0.85 3.91 0 9.85

Minority Interest 0 0 0.39 2.15 5.19

Other Liabilities, Total 29.69 29.18 26.45 22.26 5.22

Total Liabilities 270.53 302.18 239.34 220.19 137.14

Redeemable Preferred Stock 0 0 0 0 0

Preferred Stock - Non Redeemable, Net 0 0 0 0 0

Common Stock 310.94 298.26 295.61 294.48 173.11

Additional Paid-In Capital 0 0 -0.2 -0.38 -0.56

Retained Earnings (Accumulated Deficit) -233.25 -191.01 -55.25 143.09 102.4

Other Equity, Total 1.27 1.43 0.78 -0.77 -1.61

Total Equity 78.96 108.67 240.94 436.41 273.35

Total Liabilities & Shareholders’ Equity 349.49 410.86 480.28 656.6 410.49
Firms in financial difficulty display several of the following
conditions:

1) Low or negative earnings.

2) High financial leverage
3) Low liquidity.
4) Low stock prices
 2000 2001 2002 2003 2004

Return on Equity 12.47% 11.72% 14.06% 12.25% 12.62%

Profit/Sales 2.70% 4.90% 6.69% 6.81% 8.58%

(profit margin)

Sales/Assets 2.10x 1.75x 1.54x 1.20x 1.01x

(asset turnover)

Assets/Equity 2.20x 1.36x 1.36x 1.50x 1.46x

(leverage)

Return on Assets 5.67% 8.59% 10.33% 8.16% 8.64%

Source: Case Exhibit 7

 2000 2001 2002 2003 2004
Debt to 47.96% 0.00% 2.47% 19.46% 11.26%
equity
Debt to 32.41% 0.00% 2.41% 16.29% 10.12%
capital
Current 1.39 1.77 1.94 2.36 3.25
Ratio
Turnover 10.81 12.16 10.19 10.61 9.70
of Acc REC

Price 16.22 39.85 30.41 35.64

Earning
Ratio
 Krispy Kreme Finance 2005
Krispy Specialty
Tim Restaurants
Kreme Starbucks Caribou Eateries
Horton’s Industry
Doughnuts Industry

Market Cap: 201.84M 12.81B 6.29B 53.85M 204.46M 1.29B

Employ­ees: 3,875 172,000 525 1,603 4.70K 759

Qtrly Rev Growth (yoy): -11.70% 17.50% 10.50% 5.20% 7.10% 20.90%

Revenue (ttm): 430.56M 9.82B 1.86B 256.83M 402.90M 1.07B

Gross Margin (ttm): 11.21% 57.24% 26.82% 16.13% 28.56% 32.41%

EBITDA (ttm): 19.00M 1.47B 461.55M 25.57M 41.75M 147.18M

Oper Margins (ttm): 0.10% 9.72% 20.42% -3.47% 5.72% 1.14%

Net Income (ttm): -59.65M 675.74M 264.34M -30.66M 8.81M -22.36K

EPS (ttm): -0.944 0.888 1.400 -1.586 0.59 N/A

P/E (ttm): N/A 19.89 24.22 N/A 19.92 23.91

PEG (5 yr expected): N/A 1 1.47 N/A 1.10 1.21

P/S (ttm): 0.47 1.31 3.45 0.20 0.54 1.21

Latest Full Context Quarter Ending Date 2009/10

Gross Profit Margin 13.9%

EBIT Margin 3.6%

EBITDA Margin 7.2%

Pre-Tax Profit Margin 0.3%

Interest Coverage 1.1

Current Ratio 1.5 We Can notice

Current Ratio 1.5

Quick Ratio 0.9

Leverage Ratio 2.8

Receivables Turnover

Quick Ratio 17.1

0.9
Inventory Turnover

Asset Turnover

Leverage Ratio
18.7

1.9

2.8 that Krispy

Kreme could
Revenue to Assets 2.0

Receivables Turnover 17.1

Return on Invested Capital -0.9%

Return on Assets -0.6%

Debt/Common Equity Ratio

Price/Book Ratio (Price/Equity)

Inventory Turnover 0.79

4.67
18.7 catch up after the
Book Value per Share

Asset Turnover $0.90

1.9
Total Debt/ Equity

Long-Term Debt to Total Capital

Return on Invested Capital

0.81

0.44

-0.9% crises faced in

the previous
SG&A as % of Revenue 6.6%

R&D as % of Revenue

Receivables per Day Sales

Return on Assets 0.0%

$19.34
-0.6%
Days CGS in Inventory

Working Capital per Share

Price/Book Ratio (Price/Equity)
19

$0.33
4.67 years.
Cash per Share

Book Value per Share $0.27

$0.90
Total Debt/ Equity 0.81%
Cash Flow per Share $0.11

Free Cash Flow per Share $0.20

Receivables per Day Sales $19.34

Tangible Book Value per Share $0.55

Price/Cash Flow Ratio 39.4

Price/Free Cash Flow Ratio 21.1

Price/Tangible Book Ratio 7.67

Most recent data