Go through the rise and fall of Krispy Kreme Doughnuts, Inc.

1. Krispy Kreme Doughnuts, Inc Marketing Case Analysis Course: MBA 524 Instructor: Mary A. Higby Date: April 22, 2008 Presented by: Jack Szczepaniuk Chun-Chiang Chan

6. Krispy Kreme U.S.

7. Krispy Kreme Worldwide

11. Krispy Kreme Finance–Income Statement 31.06 48.56 -198.34 -135.76 -42.24 Net Income 0 -1.28 -40.05 0 0 Discontinued Operations 0 0 -1.23 0 0 Accounting Change 0 -1.28 -41.29 0 0 Total Extraordinary Items 31.06 49.85 -157.05 -135.76 -42.24 Income After Tax 19.72 33.15 9.67 -0.78 1.21 Income Tax - Total 50.78 82.99 -147.38 -136.54 -41.03 Income Before Tax -3.47 0.16 -0.06 5.67 5.11 Other, Net -2.01 -5.85 -7.72 -23.44 -19.55 Interest Income (Expense), Net Non-Operating 56.26 88.68 -139.6 -118.77 -26.58 Operating Income 9.08 -0.53 161.85 90.9 28.49 Unusual Expense (Income) 14.68 22.31 31.93 28.92 21.05 Depreciation/Amortization 30.07 45.23 55.3 67.73 48.86 Selling/General/Administrative Expenses, Total 110.08 155.7 109.49 68.77 71.82 Gross Profit 380.64 493.65 598.28 474.59 389.38 Cost of Revenue, Total 490.73 649.35 707.77 543.36 461.2 Total Revenue 490.73 649.35 707.77 543.36 461.2 Revenue 2003 2004 2005 2006 2007

12. KK Finance–Balance Sheet (Asset) 410.49 656.6 480.28 410.86 349.49 Total Assets 0 0 0 0 0 Other Assets, Total 5.23 13.31 9.23 19.32 16.86 Other Long Term Assets, Total 1 6.56 2.12 0.04 0 Note Receivable - Long Term 11.22 14.58 5.97 8.6 3.22 Long Term Investments 49.15 0 1.69 1.11 0.84 Intangibles, Net 0.2 197.16 32.69 29.18 28.09 Goodwill, Net 202.56 287.49 309.21 205.58 168.65 Property/Plant/Equipment, Total - Net 141.13 137.5 119.36 147.03 131.82 Total Current Assets 9.82 14.83 17.38 32.49 12 Other Current Assets, Total 3.48 0 0 0 0 Prepaid Expenses 24.37 29.82 28.59 23.76 21.01 Total Inventory 2.85 7.97 0 34.97 34.97 Receivables - Other 0 0.75 0.94 1.15 0 Notes Receivable - Short Term -1.45 -1.27 -11.38 -13.66 -2.75 Provision for Doubtful Accounts 35.83 46.09 40.64 39.18 29.51 Accounts Receivable - Trade, Gross 45.44 63.09 44.77 37.68 27.6 Accounts Receivable - Trade, Net 48.28 71.82 45.71 73.8 62.57 Total Receivables, Net 22.98 0 0 0 0 Short Term Investments 32.2 21.03 27.69 16.98 36.24 Cash & Equivalents 55.18 21.03 27.69 16.98 36.24 Cash and Short Term Investments Assets 2003 2004 2005 2006 2007

13. KK Finance – Balance Sheet (L+S) 410.49 656.6 480.28 410.86 349.49 Total Liabilities & Shareholders’ Equity 273.35 436.41 240.94 108.67 78.96 Total Equity -1.61 -0.77 0.78 1.43 1.27 Other Equity, Total 102.4 143.09 -55.25 -191.01 -233.25 Retained Earnings (Accumulated Deficit) -0.56 -0.38 -0.2 0 0 Additional Paid-In Capital 173.11 294.48 295.61 298.26 310.94 Common Stock 0 0 0 0 0 Preferred Stock - Non Redeemable, Net 0 0 0 0 0 Redeemable Preferred Stock 137.14 220.19 239.34 302.18 270.53 Total Liabilities 5.22 22.26 26.45 29.18 29.69 Other Liabilities, Total 5.19 2.15 0.39 0 0 Minority Interest 9.85 0 3.91 0.85 0 Deferred Income Tax 57.19 137.11 90.95 118.24 105.97 Long Term Debt 57.19 137.11 90.95 118.24 105.97 Total Long Term Debt 59.69 58.67 117.64 153.92 134.87 Total Current Liabilities 9.08 0 0 0 0.02 Other Current Liabilities, Total 3.3 8.14 48.1 4.43 1.73 Current Port. of LT Debt/Capital Leases 12.28 8.12 8.48 0.11 0 Notes Payable/Short Term Debt 20.98 23.3 43.62 140.48 125.25 Accrued Expenses 14.06 19.11 17.44 8.9 7.87 Accounts Payable Liabilities and Shareholders' Equity 2003 2004 2005 2006 2007

14. KK Finance – Cash Flow 51.91 82.67 84.92 1.87 22.11 Cash from Operating Activities -0.41 4.32 2.65 2.28 2.8 Other Liabilities 0.57 1.03 7.97 0 0 Taxes Payable 0.74 -7.12 8.28 0.44 -9.05 Payable/Accrued -0.33 -0.97 -4.06 -2.97 6.85 Other Assets -8.52 -4.07 2.14 4.12 2.56 Inventories -6.98 -18.73 10.98 3.86 0.5 Accounts Receivable -14.92 -25.53 27.97 7.73 3.66 Changes in Working Capital 18.01 37.14 11.8 10.77 17.6 Other Non-Cash Items 2.09 2.24 1.62 4.34 -6.47 Equity in Net Earnings (Loss) 0.93 0.94 198.54 87.76 28.52 Unusual Items 0 0 1.23 0 0 Accounting Change 21.03 40.32 213.2 102.87 39.65 Non-Cash Items 0.06 -3.49 10.12 -1.89 -0.01 Deferred Taxes 14.68 22.81 31.98 28.92 21.05 Depreciation/Depletion 31.06 48.56 -198.34 -135.76 -42.24 Net Income/Starting Line 2003 2004 2005 2006 2007

15. Krispy Kreme Finance – Cash Flow 32.2 21.03 27.69 16.98 36.24 Net Cash - Ending Balance 21.9 32.2 21.03 27.69 16.98 Net Cash - Beginning Balance 10.3 -11.17 6.66 -10.71 19.26 Net Change in Cash 0 0 0.34 -0.01 0 Foreign Exchange Effects 50.03 76.11 -34.21 0.14 -15.48 Cash from Financing Activities 41.5 58.55 -35.21 1.55 -15.05 Issuance (Retirement) of Debt, Net 7.14 19.52 1.18 0.15 0 Issuance (Retirement) of Stock, Net 0 0 0 0 0 Total Cash Dividends Paid 1.4 -1.96 -0.18 -1.57 -0.43 Other Financing Cash Flow 1.4 -1.96 -0.18 -1.57 -0.43 Financing Cash Flow Items -91.64 -169.95 -44.39 -12.7 12.63 Cash from Investing Activities 0.93 -2.87 8.35 -0.4 -1.4 Other Investing Cash Flow -41.14 -13.96 -3.47 -12.22 -0.82 Purchase of Investments 33.1 33.14 0 0 9.59 Sale/Maturity of Investment 2.14 0.46 28.66 7.33 9.66 Sale of Fixed Assets 0 0 0 2.54 2.5 Sale of Business -4.97 -108.4 -3.62 0.43 -2.9 Acquisition of Business -9.94 -91.63 29.92 -2.32 16.64 Other Investing Cash Flow Items, Total -81.7 -78.32 -74.31 -10.38 -4.01 Purchase of Fixed Assets -81.7 -78.32 -74.31 -10.38 -4.01 Capital Expenditures 2003 2004 2005 2006 2007

16. Krispy Kreme Finance 1.21 0.54 0.20 3.45 1.31 0.47 P/S (ttm): 1.21 1.10 N/A 1.47 1 N/A PEG (5 yr expected): 23.91 19.92 N/A 24.22 19.89 N/A P/E (ttm): N/A 0.59 -1.586 1.400 0.888 -0.944 EPS (ttm): -22.36K 8.81M -30.66M 264.34M 675.74M -59.65M Net Income (ttm): 1.14% 5.72% -3.47% 20.42% 9.72% 0.10% Oper Margins (ttm): 147.18M 41.75M 25.57M 461.55M 1.47B 19.00M EBITDA (ttm): 32.41% 28.56% 16.13% 26.82% 57.24% 11.21% Gross Margin (ttm): 1.07B 402.90M 256.83M 1.86B 9.82B 430.56M Revenue (ttm): 20.90% 7.10% 5.20% 10.50% 17.50% -11.70% Qtrly Rev Growth (yoy) : 759 4.70K 1,603 525 172,000 3,875 Employ­ees: 1.29B 204.46M 53.85M 6.29B 12.81B 201.84M Market Cap: Specialty Eateries Industry Restaurants Industry Caribou Tim Horton’s Starbucks Krispy Kreme Doughnuts