Krispy Kreme Doughnuts, Inc. (NYSE:KKD) announced today that James H.
Morgan, age 67, will transition from Executive Chairman of the Board of
Directors of the Company to non-executive Chairman effective January 29,
2015.
Mr. Morgan served as President and Chief Executive Officer of the
Company from January 2008 until June 2014. He has served on the
Company’s Board of Directors since 2000 and has served as Chairman of
the Board since 2005.
As part of its executive succession plan, the Company appointed Tony
Thompson as its new President and Chief Executive Officer effective June
1, 2014, at which time Mr. Morgan became Executive Chairman. Mr.
Morgan’s transition to non-executive Chairman completes the succession
plan.
Robert S. McCoy, Jr. will continue as the Board’s lead independent
director, a position he has held since 2008.
Mr. McCoy commented: “We are grateful to Jim for his exceptional
stewardship of the Company and for his tireless service as an executive
officer since 2008. His many accomplishments over the past seven years
are well known. Jim’s transition to non-executive Chairman is a natural
evolution of his role at Krispy Kreme, and we are appreciative of his
ongoing commitment to the business as the leader of our board of
directors.”
Mr. Thompson commented: “I know that I speak for everyone in the Krispy
Kreme family in expressing my heartfelt appreciation to Jim for his
exemplary service to the Company. Our entire community is grateful for
his unwavering commitment to, and enthusiasm for, Krispy Kreme, and we
look forward to his continued leadership as Chairman.”
Mr. Morgan commented: “Krispy Kreme has had a special place in my heart
since childhood. Working at Krispy Kreme has provided some of the most
enjoyable moments of my career, with the Company’s outstanding community
of team members, franchisees, shareholders and, most importantly,
customers around the world. It has been a supreme pleasure to work here,
and I look forward to my continued service as a director.”
The Company expects to record a charge to earnings in the fourth quarter
of fiscal 2015 (ending February 1, 2015) for payments to be made
pursuant to the terms of Mr. Morgan’s employment agreement.
The charge is not expected to have any effect on adjusted net income or
adjusted earnings per share. Accordingly, management is reaffirming its
forecast of adjusted net income for fiscal 2015 of between $48 million
and $51 million ($0.69 to $0.74 per share).
Adjusted net income and adjusted earnings per share are non-GAAP
measures (see the reconciliation of GAAP to adjusted earnings in the
table accompanying this release).
About Krispy Kreme
Krispy Kreme is a leading branded specialty retailer and wholesaler of
premium quality sweet treats and complementary products, including its
signature Original Glazed® doughnut. Headquartered in
Winston-Salem, NC, the Company has offered the highest quality doughnuts
and great tasting coffee since it was founded in 1937. Today, there are
over 925 Krispy Kreme shops in more than 20 countries around the world.
Connect with Krispy Kreme at www.krispykreme.com.
Information contained in this press release, other than historical
information, should be considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on management’s beliefs,
assumptions and expectations of our future economic performance,
considering the information currently available to management. These
statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties that may cause our actual
results, performance or financial condition to differ materially from
the expectations of future results, performance or financial condition
we express or imply in any forward-looking statements. The words
“believe,” “may,” “forecast,” “could,” “will,” “should,” “would,”
“anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,”
“strive” or similar words, or the negative of these words, identify
forward-looking statements. Factors that could contribute to these
differences include, but are not limited to: the quality of Company and
franchise store operations; our ability, and our dependence on the
ability of our franchisees, to execute on our and their business plans;
our relationships with our franchisees; our ability to implement our
domestic and international growth strategies; our ability to implement
our domestic small shop operating model; political, economic, currency
and other risks associated with our international operations; the price
and availability of raw materials needed to produce doughnut mixes and
other ingredients, and the price of motor fuel; our relationships with
wholesale customers; our ability to protect our trademarks and trade
secrets; changes in customer preferences and perceptions; risks
associated with competition; risks related to the food service industry,
including food safety and protection of personal information; compliance
with government regulations relating to food products and franchising;
increased costs or other effects of new government regulations relating
to healthcare benefits; and risks associated with the use and
implementation of information technology. These and other risks and
uncertainties, which are described in more detail in the Company’s most
recent Annual Report on Form 10-K and other reports and statements filed
with the United States Securities and Exchange Commission, are difficult
to predict, involve uncertainties that may materially affect actual
results and may be beyond the Company’s control, and could cause actual
results, performance or achievements to be materially different from
those expressed or implied by any of these forward-looking statements.
New factors emerge from time to time, and it is not possible for
management to predict all such factors or to assess the impact of each
such factor on the Company. Any forward-looking statement speaks only as
of the date on which such statement is made, and the Company does not
undertake any obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement
is made.
KRISPY KREME DOUGHNUTS, INC.
NON-GAAP FINANCIAL INFORMATION
As of February 2, 2014, the Company had net deferred income tax assets
of approximately $107 million, of which approximately $58 million
related to federal and state net operating loss carryovers. The
Company’s federal net operating loss carryovers totaled approximately
$174 million.
The Company has reported cumulative pretax income of over $120 million
since the beginning of fiscal 2010, and the Company also has generated
significant taxable income during this period. However, because of the
Company’s utilization of its federal and state net operating loss
carryovers and other deferred tax assets, the Company’s cash payments
for income taxes have been relatively insignificant during this period.
As a result, the provision for income tax expense has substantially
exceeded cash payments for income taxes. Until such time as the
Company’s net operating loss carryovers are exhausted or expire, GAAP
income tax expense is expected to continue to substantially exceed the
amount of cash income taxes payable by the Company.
The Company expects to record a pretax charge of approximately $2.5
million in the fourth quarter of fiscal 2015 (ending February 1, 2015)
for the settlement of amounts due under an employment agreement with the
Company’s former chief executive officer. That officer, who is the
Company’s current Executive Chairman, is expected to transition from
that role to the non-employee role of non-executive chairman of the
board of directors in late January 2015.
In the second quarter of fiscal 2014, the Company recorded a charge of
$1.0 million related to the retirement of its secured credit facilities,
consisting principally of the writeoff of deferred financing costs
related to the Company’s term loan, which was retired in full, and the
termination of an interest rate hedge related to the term loan. Charges
of this nature are not expected to recur on a regular basis.
The following non-GAAP financial information and related reconciliation
of adjusted net income to GAAP net income are provided to assist the
reader in understanding the effects of the above facts and transactions
on the Company’s results of operations. In addition, the non-GAAP
financial information is intended to illustrate the material difference
between the Company’s income tax expense and income taxes currently
payable. These non-GAAP performance measures are consistent with other
measurements made by management in the operation of the business which
do not consider income taxes except to the extent to which those taxes
currently are payable, for example, capital allocation decisions and
incentive compensation measurements that are made on a pretax basis.
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Management's Earnings Guidance
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Historical Period
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Year Ending February 1, 2015
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Year Ended
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From
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To
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February 2, 2014
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(In thousands, except per share amounts)
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Net income, as reported
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$
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28,400
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$
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30,400
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$
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34,256
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Charge for settlement of employment contract
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2,500
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2,500
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-
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Loss on retirement of debt
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-
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-
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967
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Provision for deferred income taxes
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16,600
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17,800
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8,014
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Adjusted net income
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$
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47,500
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$
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50,700
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$
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43,237
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Adjusted earnings per common share:
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Basic
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$
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0.72
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$
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0.77
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$
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0.64
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Diluted
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$
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0.69
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$
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0.74
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$
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0.61
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Weighted average shares outstanding:
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Basic
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66,200
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66,200
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67,261
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Diluted
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68,900
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68,900
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71,054
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Copyright Business Wire 2014