Krispy Kreme reduces debt, looks to further strengthen balance sheet

By Jennifer Lanning Drey

Portland, Ore., April 15 - Krispy Kreme Doughnuts, Inc. continues to evaluate ways to further improve and strengthen its balance sheet after reducing its debt by 42% in fiscal 2010, Jim Morgan, chief executive officer of Krispy Kreme, said Thursday during its year-end earnings conference call for fiscal 2010.

Krispy Kreme made a total of $31.4 million in principal payments on its debt during fiscal 2010, reducing total debt to $43.4 million at the Jan. 31 end of the period.

The company had $20 million of cash and cash equivalents at Jan. 31.

"Our net debt of slightly over $23 million is manageable, and our survival is no longer in question. We are well clear of our bank covenants and are increasingly looking for ways to strengthen our balance sheet," Morgan said.

Cash provided by operating activities was $19.8 million in fiscal 2010, compared to cash provided by operating activities of $16.6 million in fiscal 2009.

"We placed a high priority on generating free cash flow and reducing our leverage in fiscal 2010, and we accomplished both of these objectives," Morgan said.

Krispy Kreme had $10 million of unused borrowing capacity on its revolving credit facility at year-end.

Q4, full-year revenues down

Krispy Kreme's revenues decreased to $86.8 million in the fourth quarter of fiscal 2010, down from $91.9 million in the comparable prior-year period. Approximately $1 million of the decrease was due to refranchising, the company said.

Company same-store sales rose by 1.1% in the fourth quarter.

Full-year revenues of $346.5 million were down by 10% from the prior year's revenues of $385.5 million, with approximately $8.0 million of the decrease attributed to refranchising.

Krispy Kreme said it expects consolidated revenues to stabilize in fiscal 2011 after years of decline due in part to store closings.

Krispy Kreme is a Winston-Salem, N.C.-based retailer and wholesaler of doughnuts and packaged sweets.

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