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Events The Company evaluated subsequent events and transactions for
potential recognition or disclosure in the Condensed Consolidated
Financial Statements through November 15, 2022, the date the
Condensed Consolidated Financial Statements were available to be
issued. All subsequent events requiring recognition and disclosure
have been incorporated into these Condensed Consolidated Financial
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended
October 2, 2022
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number:
001-04321
Krispy Kreme, Inc.
(Exact name of registrant as specified in its charter)
_________________________
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Delaware |
37-1701311 |
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(State or other jurisdiction of incorporation)
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(IRS Employer Identification No.)
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2116 Hawkins Street, Charlotte, North Carolina 28203
(Address of principal executive offices)
(800) 457-4779
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last
report)
_________________________
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Common stock, $0.01 par value per share
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DNUT
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Nasdaq Global Select Market
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Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
☒
Yes
☐
No
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
☒
Yes
☐
No
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
☐
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Emerging growth company |
☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
☐
Yes
☒
No
The registrant had outstanding 167,437,123 shares of common stock
as of October 31, 2022.
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
Krispy Kreme, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share amounts)
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Quarter Ended |
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Three Quarters Ended |
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October 2, 2022 (13 weeks) |
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October 3, 2021 (13 weeks) |
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October 2, 2022 (39 weeks) |
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October 3, 2021 (39 weeks) |
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Net revenues |
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Product sales |
$ |
370,216 |
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$ |
334,324 |
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$ |
1,102,045 |
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$ |
989,132 |
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Royalties and other revenues |
7,306 |
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8,475 |
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23,254 |
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24,662 |
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Total net revenues |
377,522 |
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342,799 |
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1,125,299 |
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1,013,794 |
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Product and distribution costs |
102,870 |
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92,152 |
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299,539 |
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257,166 |
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Operating expenses |
177,592 |
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157,315 |
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520,260 |
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462,733 |
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Selling, general and administrative expense |
54,801 |
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52,950 |
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160,266 |
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163,417 |
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Marketing expenses |
10,995 |
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12,062 |
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32,369 |
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31,621 |
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Pre-opening costs |
1,200 |
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1,192 |
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3,514 |
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4,335 |
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Other expenses/(income), net |
2,964 |
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(359) |
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1,800 |
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(4,365) |
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Depreciation and amortization expense |
28,127 |
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25,663 |
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83,782 |
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74,258 |
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Operating (loss)/income |
(1,027) |
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1,824 |
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23,769 |
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24,629 |
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Interest expense, net |
8,871 |
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7,186 |
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23,808 |
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25,228 |
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Interest expense — related party |
— |
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— |
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— |
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10,387 |
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Other non-operating expense/(income), net |
1,648 |
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732 |
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2,083 |
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(126) |
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Loss before income taxes |
(11,546) |
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(6,094) |
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(2,122) |
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(10,860) |
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Income tax expense/(benefit) |
294 |
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(2,342) |
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5,668 |
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8,266 |
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Net loss |
(11,840) |
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(3,752) |
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(7,790) |
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(19,126) |
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Net income attributable to noncontrolling interest |
1,216 |
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1,907 |
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5,113 |
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6,736 |
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Net loss attributable to Krispy Kreme, Inc. |
$ |
(13,056) |
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$ |
(5,659) |
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$ |
(12,903) |
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$ |
(25,862) |
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Net loss per share: |
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Common stock — Basic |
$ |
(0.08) |
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$ |
(0.04) |
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$ |
(0.08) |
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$ |
(0.20) |
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Common stock — Diluted |
$ |
(0.08) |
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$ |
(0.04) |
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$ |
(0.08) |
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$ |
(0.20) |
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Weighted average shares outstanding: |
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Basic |
167,431 |
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166,034 |
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167,353 |
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141,124 |
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Diluted |
167,431 |
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166,034 |
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167,353 |
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141,124 |
|
See accompanying notes to Condensed Consolidated Financial
Statements.
Krispy Kreme, Inc.
Condensed Consolidated Statements of Comprehensive (Loss)/Income
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Three Quarters Ended |
|
|
October 2, 2022 (13 weeks) |
|
October 3, 2021 (13 weeks) |
|
October 2, 2022 (39 weeks) |
|
October 3, 2021 (39 weeks) |
|
Net loss |
$ |
(11,840) |
|
|
$ |
(3,752) |
|
|
$ |
(7,790) |
|
|
$ |
(19,126) |
|
|
Other comprehensive (loss)/income, net of income taxes: |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
(25,708) |
|
|
(9,823) |
|
|
(61,887) |
|
|
(13,544) |
|
|
Unrealized income on cash flow hedges, net of income
taxes(1)
|
7,692 |
|
|
1,398 |
|
|
24,798 |
|
|
7,631 |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss, net of income taxes |
(18,016) |
|
|
(8,425) |
|
|
(37,089) |
|
|
(5,913) |
|
|
Comprehensive loss |
(29,856) |
|
|
(12,177) |
|
|
(44,879) |
|
|
(25,039) |
|
|
Net income attributable to noncontrolling interest |
1,216 |
|
|
1,907 |
|
|
5,113 |
|
|
6,736 |
|
|
Foreign currency translation adjustment attributable to
noncontrolling interest |
(1,283) |
|
|
(414) |
|
|
(2,186) |
|
|
(414) |
|
|
Total comprehensive (loss)/income attributable to noncontrolling
interest |
(67) |
|
|
1,493 |
|
|
2,927 |
|
|
6,322 |
|
|
Comprehensive loss attributable to Krispy Kreme, Inc. |
$ |
(29,789) |
|
|
$ |
(13,670) |
|
|
$ |
(47,806) |
|
|
$ |
(31,361) |
|
(1)Net
of income tax expense of $2.6 million and $8.3 million for the
quarter and three quarters ended October 2, 2022,
respectively, and $0.5 million and $2.6 million for the quarter and
three quarters ended October 3, 2021,
respectively.
See accompanying notes to Condensed Consolidated Financial
Statements.
Krispy
Kreme, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
(Unaudited) October 2, 2022 |
|
January 2, 2022 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
28,096 |
|
|
$ |
38,562 |
|
|
Restricted cash |
403 |
|
|
630 |
|
|
Accounts receivable, net |
46,941 |
|
|
47,491 |
|
|
Inventories |
49,406 |
|
|
34,851 |
|
|
Taxes receivable |
16,537 |
|
|
14,662 |
|
|
Prepaid expense and other current assets |
33,126 |
|
|
20,701 |
|
|
Total current assets |
174,509 |
|
|
156,897 |
|
|
Property and equipment, net |
450,954 |
|
|
438,918 |
|
|
Goodwill |
1,074,241 |
|
|
1,105,322 |
|
|
Other intangible assets, net |
966,358 |
|
|
992,520 |
|
|
Operating lease right of use asset, net |
410,001 |
|
|
435,168 |
|
|
Other assets |
25,788 |
|
|
16,429 |
|
|
Total assets |
$ |
3,101,851 |
|
|
$ |
3,145,254 |
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Current portion of long-term debt |
$ |
40,243 |
|
|
$ |
36,583 |
|
|
Current operating lease liabilities |
45,551 |
|
|
50,359 |
|
|
Accounts payable |
188,059 |
|
|
182,104 |
|
|
Accrued liabilities |
111,818 |
|
|
140,750 |
|
|
Structured payables |
123,331 |
|
|
116,361 |
|
|
Total current liabilities |
509,002 |
|
|
526,157 |
|
|
Long-term debt, less current portion |
738,504 |
|
|
680,307 |
|
|
|
|
|
|
Noncurrent operating lease liabilities |
400,594 |
|
|
415,208 |
|
|
Deferred income taxes, net |
140,244 |
|
|
145,418 |
|
|
Other long-term obligations and deferred credits |
39,784 |
|
|
42,509 |
|
|
Total liabilities |
1,828,128 |
|
|
1,809,599 |
|
|
Commitments and contingencies |
|
|
|
|
Shareholders’ equity: |
|
|
|
|
Common stock, $0.01 par value; 300,000 shares authorized as of both
October 2, 2022 and January 2, 2022; 167,437 and 167,251
shares issued and outstanding as of October 2, 2022 and
January 2, 2022, respectively
|
1,674 |
|
|
1,673 |
|
|
Additional paid-in capital |
1,422,850 |
|
|
1,415,185 |
|
|
|
|
|
|
Shareholder note receivable |
(4,812) |
|
|
(4,382) |
|
|
Accumulated other comprehensive loss, net of income tax |
(37,380) |
|
|
(2,478) |
|
|
Retained deficit |
(208,886) |
|
|
(178,409) |
|
|
Total shareholders’ equity attributable to Krispy Kreme,
Inc. |
1,173,446 |
|
|
1,231,589 |
|
|
Noncontrolling interest |
100,277 |
|
|
104,066 |
|
|
Total shareholders’ equity |
1,273,723 |
|
|
1,335,655 |
|
|
Total liabilities and shareholders’ equity |
$ |
3,101,851 |
|
|
$ |
3,145,254 |
|
See accompanying notes to Condensed Consolidated Financial
Statements.
Krispy Kreme, Inc.
Condensed Consolidated Statements of Changes in Shareholders’
Equity (Unaudited)
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Subscription Receivable
|
|
Shareholder
Note
Receivable
|
|
Accumulated Other Comprehensive
Income/(Loss)
|
|
Retained
(Deficit)/
Earnings
|
|
Noncontrolling
Interest
|
|
Total
|
|
|
Shares
Outstanding
|
|
Amount
|
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Unrealized
(Loss)/Income on
Cash Flow
Hedges
|
|
Unrealized Loss on Employee
Benefit Plans
|
|
|
|
|
Balance at January 2, 2022 |
167,251 |
|
|
$ |
1,673 |
|
|
$ |
1,415,185 |
|
|
$ |
— |
|
|
$ |
(4,382) |
|
|
$ |
8,967 |
|
|
$ |
(11,001) |
|
|
$ |
(444) |
|
|
$ |
(178,409) |
|
|
$ |
104,066 |
|
|
$ |
1,335,655 |
|
|
Net income for the quarter ended April 3, 2022 |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,002 |
|
|
2,456 |
|
|
6,458 |
|
|
Other comprehensive income for the quarter ended April 3, 2022
before reclassifications |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,334 |
|
|
11,724 |
|
|
— |
|
|
— |
|
|
— |
|
|
13,058 |
|
|
Reclassification from AOCI |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,510 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,510 |
|
|
Capital contribution by shareholders |
— |
|
|
— |
|
|
(3) |
|
|
— |
|
|
243 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
240 |
|
|
Share-based compensation |
— |
|
|
— |
|
|
5,041 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,041 |
|
|
Purchase of shares by noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(58) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
110 |
|
|
52 |
|
|
Dividends declared on common stock and equivalents ($0.035 per
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,855) |
|
|
— |
|
|
(5,855) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
21 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,383) |
|
|
(1,362) |
|
|
Issuance of common stock upon settlement of RSUs, net of shares
withheld |
46 |
|
|
— |
|
|
(390) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(390) |
|
|
Other |
— |
|
|
— |
|
|
(2) |
|
|
— |
|
|
(14) |
|
|
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
(15) |
|
|
Balance at April 3, 2022 |
167,297 |
|
|
$ |
1,673 |
|
|
$ |
1,419,831 |
|
|
$ |
— |
|
|
$ |
(4,190) |
|
|
$ |
10,301 |
|
|
$ |
3,233 |
|
|
$ |
(444) |
|
|
$ |
(180,261) |
|
|
$ |
105,249 |
|
|
$ |
1,355,392 |
|
|
Net (loss)/income for the quarter ended July 3, 2022 |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,849) |
|
|
1,441 |
|
|
(2,408) |
|
|
Other comprehensive (loss)/income for the quarter ended July 3,
2022 before reclassifications |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(36,610) |
|
|
1,011 |
|
|
— |
|
|
— |
|
|
(903) |
|
|
(36,502) |
|
|
Reclassification from AOCI |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,861 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,861 |
|
|
Capital contribution from shareholders |
— |
|
|
— |
|
|
(31) |
|
|
— |
|
|
(236) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(267) |
|
|
Share-based compensation |
— |
|
|
— |
|
|
5,452 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,452 |
|
|
Purchase of shares by noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(133) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
491 |
|
|
358 |
|
|
Dividends declared on common stock and equivalents ($0.035 per
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,860) |
|
|
— |
|
|
(5,860) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest |
— |
|
|
— |
|
|
(3,944) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,190) |
|
|
(8,134) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon settlement of RSUs, net of shares
withheld |
131 |
|
|
1 |
|
|
(898) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(897) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(14) |
|
|
— |
|
|
1 |
|
|
— |
|
|
— |
|
|
— |
|
|
(13) |
|
|
Balance at July 3, 2022 |
167,428 |
|
|
$ |
1,674 |
|
|
$ |
1,420,410 |
|
|
$ |
— |
|
|
$ |
(4,573) |
|
|
$ |
(26,309) |
|
|
$ |
6,106 |
|
|
$ |
(444) |
|
|
$ |
(189,970) |
|
|
$ |
102,088 |
|
|
$ |
1,308,982 |
|
|
Net (loss)/income for the quarter ended October 2, 2022 |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(13,056) |
|
|
1,216 |
|
|
(11,840) |
|
|
Other comprehensive (loss)/income for the quarter ended October 2,
2022 before reclassifications |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(24,425) |
|
|
7,585 |
|
|
— |
|
|
— |
|
|
(1,283) |
|
|
(18,123) |
|
|
Reclassification from AOCI |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
107 |
|
|
— |
|
|
— |
|
|
— |
|
|
107 |
|
|
Capital contribution from shareholders |
— |
|
|
— |
|
|
(38) |
|
|
— |
|
|
(223) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(261) |
|
|
Share-based compensation |
— |
|
|
— |
|
|
2,825 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,825 |
|
|
Dividends declared on common stock and equivalents ($0.035 per
share)(1)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,860) |
|
|
— |
|
|
(5,860) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest |
— |
|
|
— |
|
|
(285) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,744) |
|
|
(2,029) |
|
|
Issuance of common stock upon settlement of RSUs, net of shares
withheld |
9 |
|
|
— |
|
|
(62) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(62) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(16) |
|
|
Balance at October 2, 2022 |
167,437 |
|
|
$ |
1,674 |
|
|
$ |
1,422,850 |
|
|
$ |
— |
|
|
$ |
(4,812) |
|
|
$ |
(50,734) |
|
|
$ |
13,798 |
|
|
$ |
(444) |
|
|
$ |
(208,886) |
|
|
$ |
100,277 |
|
|
$ |
1,273,723 |
|
(1)Includes
a $0.035 cash dividend per common share declared in the third
quarter of fiscal 2022 and expected to be paid in the fourth
quarter of fiscal 2022.
See accompanying notes to Condensed Consolidated Financial
Statements.
Krispy Kreme, Inc.
Condensed Consolidated Statements of Changes in Shareholders’
Equity (Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Subscription Receivable
|
|
Shareholder
Note
Receivable
|
|
Accumulated Other Comprehensive Income/(Loss)
|
|
Retained
(Deficit)/
Earnings
|
|
Noncontrolling
Interest
|
|
Total
|
|
|
Shares
Outstanding
|
|
Amount
|
|
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
Unrealized
Loss on
Cash Flow
Hedges
|
|
Unrealized Loss on Employee
Benefit Plans
|
|
|
|
|
Balance at January 3, 2021 |
124,987 |
|
|
$ |
1,250 |
|
|
$ |
845,499 |
|
|
$ |
— |
|
|
$ |
(18,660) |
|
|
$ |
23,508 |
|
|
$ |
(24,610) |
|
|
$ |
(106) |
|
|
$ |
(142,197) |
|
|
$ |
163,675 |
|
|
$ |
848,359 |
|
|
Net (loss)/income for the quarter ended April 4, 2021 |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,061) |
|
|
2,683 |
|
|
(378) |
|
|
Other comprehensive (loss)/income for the quarter ended April 4,
2021 before reclassifications |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,264) |
|
|
2,572 |
|
|
— |
|
|
— |
|
|
— |
|
|
308 |
|
|
Reclassification from AOCI |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
2,530 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,530 |
|
|
Share-based compensation |
— |
|
|
— |
|
|
2,368 |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,368 |
|
|
Purchase of shares by noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
139 |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
12,048 |
|
|
12,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution to noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
363 |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
(2,239) |
|
|
(1,876) |
|
|
Other |
— |
|
|
— |
|
|
(26) |
|
|
— |
|
|
(70) |
|
|
|
|
— |
|
|
— |
|
|
2 |
|
|
(1) |
|
|
(95) |
|
|
Balance at April 4, 2021 |
124,987 |
|
|
$ |
1,250 |
|
|
$ |
847,841 |
|
|
$ |
— |
|
|
$ |
(18,228) |
|
|
$ |
21,244 |
|
|
$ |
(19,508) |
|
|
$ |
(106) |
|
|
$ |
(145,256) |
|
|
$ |
176,166 |
|
|
$ |
863,403 |
|
|
Net (loss)/income for the quarter ended July 4, 2021 |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(17,142) |
|
|
2,146 |
|
|
(14,996) |
|
|
Other comprehensive loss for the quarter ended July 4, 2021 before
reclassifications |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,457) |
|
|
(1,430) |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,887) |
|
|
Reclassification from AOCI |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,561 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,561 |
|
|
Capital contribution from shareholders |
6,997 |
|
|
70 |
|
|
120,862 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
120,932 |
|
|
Share-based compensation |
— |
|
|
— |
|
|
8,290 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
8,290 |
|
|
Purchase of shares by noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
14,421 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26,648 |
|
|
41,069 |
|
|
Distribution to shareholders |
— |
|
|
— |
|
|
(42,334) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(42,334) |
|
|
Distribution to noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,142) |
|
|
(4,142) |
|
|
Conversion of noncontrolling interest to additional paid-in capital
in connection with the Merger |
9,371 |
|
|
93 |
|
|
107,258 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(107,351) |
|
|
— |
|
|
Issuance of common stock in connection with initial public
offering, net of underwriting discounts and issuance
costs |
29,412 |
|
|
294 |
|
|
459,391 |
|
|
(471,250) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11,565) |
|
|
Issuance of common stock upon settlement of RSUs, net of shares
withheld |
1,267 |
|
|
13 |
|
|
(15,507) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(15,494) |
|
|
Repurchase of common stock |
(8,438) |
|
|
(84) |
|
|
(122,922) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(123,006) |
|
|
Other |
— |
|
|
— |
|
|
(4) |
|
|
— |
|
|
(20) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1) |
|
|
— |
|
|
(25) |
|
|
Balance at July 4, 2021 |
163,596 |
|
|
$ |
1,636 |
|
|
$ |
1,362,875 |
|
|
$ |
(471,250) |
|
|
$ |
(3,827) |
|
|
$ |
19,787 |
|
|
$ |
(18,377) |
|
|
$ |
(106) |
|
|
$ |
(162,399) |
|
|
$ |
93,467 |
|
|
$ |
821,806 |
|
|
Net (loss)/income for the quarter ended October 3, 2021 |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,659) |
|
|
1,907 |
|
|
(3,752) |
|
|
Other comprehensive income/(loss) for the quarter ended October 3,
2021 before reclassifications |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,409) |
|
|
(1,215) |
|
|
— |
|
|
— |
|
|
(414) |
|
|
(11,038) |
|
|
Reclassification from AOCI |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,613 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,613 |
|
|
Capital contribution from shareholders |
— |
|
|
— |
|
|
(17) |
|
|
— |
|
|
(383) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(400) |
|
|
Share-based compensation |
— |
|
|
— |
|
|
6,315 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6,315 |
|
|
Dividends declared on common stock and equivalents ($0.035 per
share)
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5,853) |
|
|
— |
|
|
(5,853) |
|
|
Purchase of shares by noncontrolling interest |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
81 |
|
|
81 |
|
|
Distribution to noncontrolling interest |
— |
|
|
— |
|
|
(13,413) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,882) |
|
|
(16,295) |
|
|
Issuance of common stock in connection with initial public
offering, net of underwriting discounts and issuance
costs |
3,500 |
|
|
35 |
|
|
55,151 |
|
|
471,250 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
526,436 |
|
|
Issuance of common stock upon settlement of RSUs, net of shares
withheld |
17 |
|
|
— |
|
|
(188) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(188) |
|
|
Other |
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
(6) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(5) |
|
|
Balance at October 3, 2021 |
167,113 |
|
|
$ |
1,671 |
|
|
$ |
1,410,724 |
|
|
$ |
— |
|
|
$ |
(4,216) |
|
|
$ |
10,378 |
|
|
$ |
(16,979) |
|
|
$ |
(106) |
|
|
$ |
(173,911) |
|
|
$ |
92,159 |
|
|
$ |
1,319,720 |
|
See accompanying notes to Condensed Consolidated Financial
Statements.
Krispy Kreme, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended |
|
|
October 2, 2022 (39 weeks) |
|
October 3, 2021 (39 weeks) |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
Net loss |
$ |
(7,790) |
|
|
$ |
(19,126) |
|
|
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
Depreciation and amortization expense |
83,782 |
|
|
74,258 |
|
|
Deferred income taxes |
(10,259) |
|
|
9,168 |
|
|
Loss on extinguishment of debt |
— |
|
|
1,700 |
|
|
Impairment and lease termination charges |
7,255 |
|
|
854 |
|
|
(Gain)/loss on disposal of property and equipment |
(244) |
|
|
157 |
|
|
Gain on sale-leaseback |
(4,311) |
|
|
— |
|
|
Share-based compensation |
13,318 |
|
|
16,973 |
|
|
Change in accounts and notes receivable allowances |
378 |
|
|
133 |
|
|
Inventory write-off |
388 |
|
|
2,983 |
|
|
Other |
804 |
|
|
(315) |
|
|
Change in operating assets and liabilities, excluding business
acquisitions and foreign currency translation
adjustments |
(12,591) |
|
|
12,003 |
|
|
Net cash provided by operating activities |
70,730 |
|
|
98,788 |
|
|
CASH FLOWS USED FOR INVESTING ACTIVITIES: |
|
|
|
|
Purchase of property and equipment |
(75,002) |
|
|
(83,485) |
|
|
Proceeds from disposals of assets |
856 |
|
|
202 |
|
|
Proceeds from sale-leaseback |
5,700 |
|
|
— |
|
|
Acquisition of shops and franchise rights from franchisees, net of
cash acquired |
(17,335) |
|
|
(33,888) |
|
|
Purchase of equity method investment |
(989) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investing activities |
(931) |
|
455 |
|
Net cash used for investing activities |
(87,701) |
|
|
(116,716) |
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuance of debt |
121,500 |
|
|
670,000 |
|
|
Repayment of long-term debt and lease obligations |
(70,180) |
|
|
(1,115,910) |
|
|
Payment of financing costs |
— |
|
|
(1,700) |
|
|
Proceeds from structured payables |
219,459 |
|
|
194,927 |
|
|
Payments on structured payables |
(211,778) |
|
|
(223,063) |
|
|
Payment of contingent consideration related to a business
combination |
(900) |
|
|
— |
|
|
Capital contribution by shareholders, net of loans
issued |
(288) |
|
|
120,532 |
|
|
Proceeds from IPO, net of underwriting discounts (excluding unpaid
issuance costs) |
— |
|
|
527,329 |
|
|
Payments of issuance costs in connection with IPO |
(12,458) |
|
|
— |
|
|
Proceeds from sale of noncontrolling interest in
subsidiary |
410 |
|
|
53,337 |
|
|
Distribution to shareholders |
(17,570) |
|
|
(42,334) |
|
|
Payments for repurchase and retirement of common stock |
(2,425) |
|
|
(138,501) |
|
|
Distribution to noncontrolling interest |
(11,525) |
|
|
(17,257) |
|
|
Net cash provided by financing activities |
14,245 |
|
|
27,360 |
|
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash |
(7,967) |
|
|
(1,827) |
|
|
Net (decrease)/increase in cash, cash equivalents and restricted
cash |
(10,693) |
|
|
7,605 |
|
|
Cash, cash equivalents and restricted cash at beginning of
period |
39,192 |
|
|
37,483 |
|
|
Cash, cash equivalents and restricted cash at end of
period |
$ |
28,499 |
|
|
$ |
45,088 |
|
|
Supplemental schedule of non-cash investing and financing
activities: |
|
|
|
|
Increase in accrual for property and equipment |
$ |
16,272 |
|
|
$ |
3,137 |
|
|
Stock issuance under shareholder notes |
547 |
|
|
446 |
|
|
|
|
|
|
Accrual for distribution to shareholders |
(5,860) |
|
|
(5,853) |
|
|
Accrual for repurchase and retirement of common stock |
— |
|
|
(188) |
|
|
Accrual for distribution to noncontrolling interest |
— |
|
|
(5,056) |
|
|
Reconciliation of cash, cash equivalents and restricted cash at end
of period: |
|
|
|
|
Cash and cash equivalents |
$ |
28,096 |
|
|
$ |
44,895 |
|
|
Restricted cash |
403 |
|
|
193 |
|
|
Total cash, cash equivalents and restricted cash |
$ |
28,499 |
|
|
$ |
45,088 |
|
See accompanying notes to Condensed Consolidated Financial
Statements.
Krispy Kreme, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(dollars in thousands, unless otherwise specified)
Note 1 — Description of Business and Summary of Significant
Accounting Policies
Description of Business
Krispy Kreme, Inc. (“KKI”) and its subsidiaries (collectively, the
“Company” or “Krispy Kreme”) operate through their omni-channel
business model to provide doughnut experiences and produce
doughnuts for Doughnut Shops, Delivered Fresh Daily (“DFD”)
outlets, Ecommerce and delivery, and Krispy Kreme branded sweet
treats (“Branded Sweet Treat Line”) channels, expanding consumer
access to the Krispy Kreme brand.
The Company has three reportable operating segments: 1)
U.S. and Canada, which includes all Krispy Kreme Company-owned
operations in the U.S. and Canada, Insomnia Cookies shops and the
Branded Sweet Treat Line; 2) International, which includes all
Krispy Kreme Company-owned operations in the U.K., Ireland,
Australia, New Zealand and Mexico; and 3) Market Development, which
includes worldwide franchise operations, as well as Krispy Kreme
Company-owned shops in Japan. Unallocated corporate costs are
excluded from the Company’s measurement of segment
performance.
Basis of Presentation and Consolidation
The Company operates and reports financial information on a 52 or
53-week year with the fiscal year ending on the Sunday closest to
December 31. The data periods contained within fiscal years
2021 and 2022 will reflect the results of operations for the
52-week periods ended January 2, 2022 and January 1,
2023, respectively. The quarters ended October 2, 2022 and
October 3, 2021 were both 13-week periods.
The unaudited Condensed Consolidated Financial Statements include
the accounts of KKI and subsidiaries and have been prepared in
accordance with generally accepted accounting principles in the
United States of America (“GAAP”) for interim financial information
and pursuant to the rules and regulations of the Securities and
Exchange Commission (“SEC”). Accordingly, these interim financial
statements do not include all information and footnotes required
under GAAP for complete financial statements. In the opinion of
management, the accompanying unaudited Condensed Consolidated
Financial Statements contain all adjustments, consisting of only
normal recurring adjustments, necessary for a fair statement of
results of operations, balance sheet, cash flows, and shareholders’
equity for the periods presented. All significant intercompany
balances and transactions among KKI and subsidiaries have been
eliminated in consolidation. Investments in entities over which the
Company has the ability to exercise significant influence but which
it does not control and whose financial statements are not
otherwise required to be consolidated, are accounted for using the
equity method.
These Condensed Consolidated Financial Statements should be read in
conjunction with the Consolidated Financial Statements and notes
thereto as of and for the year ended January 2, 2022, included
in the Annual Report on Form 10-K. The Condensed Consolidated
Balance Sheet as of January 2, 2022 was derived from audited
annual financial statements but does not contain all of the
footnote disclosures from the annual financial statements. The
results of operations for the quarter and three quarters ended
October 2, 2022 are not necessarily indicative of the results
of operations that may be achieved for the entire fiscal year
ending January 1, 2023.
Noncontrolling interest in the Company’s Condensed Consolidated
Financial Statements represents the interest in subsidiaries held
by joint venture partners and employee shareholders. The joint
venture partners hold noncontrolling interests in the Company’s
consolidated subsidiaries, Awesome Doughnut, LLC (“Awesome
Doughnut”), W.K.S. Krispy Kreme, LLC (“WKS Krispy Kreme”), and
Krispy K Canada, Inc. (“KK Canada”). Employee shareholders hold
noncontrolling interests in the consolidated subsidiaries Krispy
Kreme Holding U.K. Ltd. (“KKUK”), Krispy Kreme Holdings Pty Ltd.
(“KK Australia”), Krispy Kreme Mexico S. de R.L. de C.V. (“KK
Mexico”) and Insomnia Cookies Holdings, LLC (“Insomnia Cookies”).
Since the Company consolidates the financial statements of these
subsidiaries, the noncontrolling owners’ share of each subsidiary’s
net assets and results of operations are deducted and reported as
noncontrolling interest on the Condensed Consolidated Balance
Sheets and as net income attributable to noncontrolling interest in
the Condensed Consolidated Statements of Operations and
comprehensive income attributable to noncontrolling interest in the
Condensed Consolidated Statements of Comprehensive
Income/(Loss).
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note
1, “Description of Business and Summary of Significant Accounting
Policies,” to the Consolidated Financial Statements for the year
ended January 2, 2022 included in the Annual Report on Form
10-K. There have been no material changes to the significant
accounting policies during the quarter ended October 2,
2022.
Recent Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting,
which provides companies with optional guidance to ease the
potential accounting burden associated with transitioning away from
reference rates that are expected to be discontinued. It is
effective for all entities as of March 12, 2020 through
December 31, 2022. A company may elect to apply the amendments
for contract modifications as of any date from the beginning of an
interim period that includes or is subsequent to March 12,
2020, or prospectively from a date within an interim period that
includes or is subsequent to March 12, 2020, up to the date
that the financial statements are available to be issued. The
Company is currently evaluating the effect of the new guidance on
its Condensed Consolidated Financial Statements and related
disclosures.
In October 2021, the FASB issued ASU 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with
Customers,
which prescribes the measurement of acquired contract assets and
contract liabilities arising from revenue contracts with customers
recognized in a business combination. It is effective for public
business entities for fiscal years beginning after December 15,
2022, including interim periods within those fiscal years. The
amendments in this update should be applied prospectively to
business combinations occurring on or after the effective date of
the amendments. Early adoption is permitted, including adoption in
an interim period. The Company is currently evaluating the effect
of the new guidance on its Condensed Consolidated Financial
Statements and related disclosures.
In November 2021, the FASB issued ASU 2021-10,
Government Assistance (Topic 832): Disclosures by Business Entities
about Government Assistance,
which requires certain disclosures be made when an entity receives
government assistance, including the types of assistance, an
entity’s accounting for the assistance, and the effect of the
assistance on an entity’s financial statements. It is effective for
all entities for financial statements issued for annual periods
beginning after December 15, 2021. Early adoption is permitted. The
Company is currently evaluating the effect of the new guidance on
its annual disclosures.
In September 2022, the FASB issued ASU 2022-04,
Liabilities - Supplier Finance Programs (Subtopic 405-50):
Disclosure of Supplier Finance Program
Obligations,
which requires certain disclosures be made by a buyer in a supplier
finance program, including the key terms of the program and, for
the obligations that the buyer has confirmed as valid to the
finance provider, the amount outstanding that remains unpaid by the
buyer as of the end of the fiscal period, a description of where
those obligations are presented in the balance sheet, and a
rollforward of those obligations during the fiscal period. It is
effective for all entities for fiscal years beginning after
December 15, 2022, including interim periods within those fiscal
years, except for the amendment on rollforward information, which
is effective for fiscal years beginning after December 15, 2023.
Early adoption is permitted. The Company is currently evaluating
the effect of the new guidance on its annual and interim
disclosures.
Note 2 — Acquisitions
2022 Acquisitions
In the third quarter of fiscal 2022, the Company acquired the
business and operating assets of one franchisee, consisting of
seven Krispy Kreme shops in the U.S. (with one shop under
construction). The Company paid total consideration of $19.4
million, consisting of $17.3 million of cash, $1.2 million of
consideration payable to the sellers, and $0.9 million settlement
of amounts related to pre-existing relationships, to acquire
substantially all of the shops’ assets. Consideration payable of
$1.2 million was withheld primarily to cover indemnification claims
that could arise after closing. Absent any claims, these amounts
are payable within 12 months of the acquisition date.
The settlement of pre-existing relationships included in the
purchase consideration includes the write-off of accounts and notes
receivable, net of deferred revenue, of $0.3 million. It also
includes the disposal of the franchise intangible asset related to
the franchisee recorded at time of the acquisition of Krispy Kreme
by JAB Holding Company (“JAB”). The cumulative net book value of
the franchise intangible asset was $0.6 million at the acquisition
date. The Company accounted for the transaction as a business
combination.
The following table summarizes the preliminary fair values of
assets acquired and liabilities assumed as of the date of
acquisition for the acquisition above.
|
|
|
|
|
|
|
|
KK U.S. Shops
|
|
Assets acquired: |
|
|
Cash and cash equivalents |
$ |
7 |
|
|
Prepaid expense and other current assets |
138 |
|
|
Property and equipment, net |
895 |
|
|
Other intangible assets, net |
11,652 |
|
|
Operating lease right of use asset, net |
4,702 |
|
|
Other assets |
20 |
|
|
Total identified assets acquired |
17,414 |
|
|
Liabilities assumed: |
|
|
Accrued liabilities |
(106) |
|
|
Current operating lease liabilities |
(221) |
|
|
Noncurrent operating lease liabilities |
(4,481) |
|
|
Total liabilities assumed |
(4,808) |
|
|
Goodwill |
6,842 |
|
|
Purchase consideration, net |
$ |
19,448 |
|
|
Transaction costs in 2022 |
$ |
589 |
|
|
Transaction costs in 2021 |
6 |
|
|
Reportable segment |
U.S. and Canada |
During the measurement period, the Company will continue to obtain
information to assist in determining the fair value of net assets
acquired, which may differ materially from these preliminary
estimates. Measurement period adjustments, if applicable, will be
applied in the reporting period in which the adjustment amounts are
determined.
Equity Method Investment in KK France
In the third quarter of fiscal 2022, the Company acquired a 33%
noncontrolling ownership interest in the newly formed entity Krispy
Kreme Doughnuts France SAS (“KK France”), for approximately $1.0
million in cash. As the Company has the ability to exercise
significant influence over KK France, but it does not exercise
control, the investment will be accounted for using the equity
method, and equity method earnings will be recognized within Other
expenses/(income), net on the Condensed Consolidated Statements of
Operations.
2021 Acquisitions
In the first quarter of fiscal 2021, the Company acquired the
business and operating assets of two franchisees, collectively
consisting of 17 Krispy Kreme shops in the U.S. On October 4, 2021,
the Company acquired a 60% controlling ownership interest in ten
franchise shops in Canada (KK Canada). The valuation for the
acquisitions requires significant estimates and assumptions. The
estimates are inherently uncertain and subject to revision as
additional information is obtained during the measurement period
for the acquisitions. Measurement period adjustments for the 2021
acquisitions did not have a material impact to the Condensed
Consolidated Financial Statements for the three quarters ended
October 2, 2022.
Note 3 — Inventories
The components of Inventories are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2022 |
|
January 2, 2022 |
|
Raw materials |
$ |
18,282 |
|
|
$ |
15,278 |
|
|
Work in progress |
394 |
|
|
700 |
|
|
Finished goods and purchased merchandise |
30,730 |
|
|
18,873 |
|
|
Total inventories |
$ |
49,406 |
|
|
$ |
34,851 |
|
Note 4 — Goodwill and Other Intangible Assets, net
Goodwill
Changes in the carrying amount of goodwill by reportable segment
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. and Canada
|
|
International
|
|
Market Development
|
|
Total
|
|
Balance as of January 2, 2022 |
$ |
688,048 |
|
|
$ |
283,342 |
|
|
$ |
133,932 |
|
|
$ |
1,105,322 |
|
|
Acquisitions
|
11,259 |
|
|
— |
|
|
(4,417) |
|
|
6,842 |
|
|
|
|
|
|
|
|
|
|
Foreign currency impact
|
(1,283) |
|
|
(36,640) |
|
|
— |
|
|
(37,923) |
|
|
Balance as of October 2, 2022 |
$ |
698,024 |
|
|
$ |
246,702 |
|
|
$ |
129,515 |
|
|
$ |
1,074,241 |
|
Other Intangible Assets, net
Other intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2022 |
|
January 2, 2022 |
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Amount
|
|
Intangible assets with indefinite lives |
|
|
|
|
|
|
|
|
|
|
|
|
Trade name |
$ |
657,900 |
|
|
$ |
— |
|
|
$ |
657,900 |
|
|
$ |
657,900 |
|
|
$ |
— |
|
|
$ |
657,900 |
|
|
Intangible assets with definite lives |
|
|
|
|
|
|
|
|
|
|
|
|
Franchise agreements |
30,632 |
|
|
(9,006) |
|
|
21,626 |
|
|
32,545 |
|
|
(8,369) |
|
|
24,176 |
|
|
Customer relationships |
15,000 |
|
|
(5,332) |
|
|
9,668 |
|
|
15,000 |
|
|
(4,684) |
|
|
10,316 |
|
|
Reacquired franchise rights |
371,989 |
|
|
(94,825) |
|
|
277,164 |
|
|
384,305 |
|
|
(84,177) |
|
|
300,128 |
|
|
Website development costs |
6,500 |
|
|
(6,500) |
|
|
— |
|
|
6,500 |
|
|
(6,500) |
|
|
— |
|
|
Total intangible assets with definite lives |
424,121 |
|
|
(115,663) |
|
|
308,458 |
|
|
438,350 |
|
|
(103,730) |
|
|
334,620 |
|
|
Total intangible assets |
$ |
1,082,021 |
|
|
$ |
(115,663) |
|
|
$ |
966,358 |
|
|
$ |
1,096,250 |
|
|
$ |
(103,730) |
|
|
$ |
992,520 |
|
Amortization expense related to intangible assets included in
depreciation and amortization expense was $7.1 million and $21.3
million for the quarter and three quarters ended October 2,
2022, respectively, and $7.5 million and $22.6 million for the
quarter and three quarters ended October 3, 2021,
respectively.
Note 5 — Leases
The Company included the following amounts related to operating and
finance lease assets and liabilities within the Condensed
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
October 2, 2022 |
|
January 2, 2022 |
|
Assets |
Classification |
|
|
|
|
Operating lease |
Operating lease right of use asset, net |
$ |
410,001 |
|
|
$ |
435,168 |
|
|
Finance lease |
Property and equipment, net |
25,604 |
|
|
19,298 |
|
|
Total leased assets |
$ |
435,605 |
|
|
$ |
454,466 |
|
|
Liabilities |
|
|
|
|
|
Current |
|
|
|
|
|
Operating lease |
Current operating lease liabilities |
$ |
45,551 |
|
|
$ |
50,359 |
|
|
Finance lease |
Current portion of long-term debt |
5,243 |
|
|
1,583 |
|
|
Noncurrent |
|
|
|
|
|
Operating lease |
Noncurrent operating lease liabilities |
400,594 |
|
|
415,208 |
|
|
Finance lease |
Long-term debt, less current portion |
25,648 |
|
|
22,890 |
|
|
Total leased liabilities |
$ |
477,036 |
|
|
$ |
490,040 |
|
Lease costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
Three Quarters Ended |
|
|
|
October 2, 2022 |
|
October 3, 2021 |
|
October 2, 2022 |
|
October 3, 2021 |
|
Lease cost |
Classification |
|
|
|
|
|
|
|
|
Operating lease cost |
Selling, general and administrative expense |
$ |
666 |
|
|
$ |
648 |
|
|
$ |
1,643 |
|
|
$ |
1,967 |
|
|
Operating lease cost |
Operating expenses |
20,605 |
|
|
21,201 |
|
|
64,262 |
|
|
62,910 |
|
|
Short-term lease cost |
Operating expenses |
1,555 |
|
|
233 |
|
|
3,841 |
|
|
1,797 |
|
|
Variable lease costs |
Operating expenses |
6,032 |
|
|
4,015 |
|
|
17,367 |
|
|
11,309 |
|
|
Sublease income |
Royalties and other revenues |
(35) |
|
|
(108) |
|
|
(175) |
|
|
(285) |
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
Amortization of right of use assets |
Depreciation and amortization expense |
$ |
1,405 |
|
|
$ |
727 |
|
|
$ |
3,348 |
|
|
$ |
2,375 |
|
|
Interest on lease liabilities |
Interest expense, net |
489 |
|
|
466 |
|
|
1,430 |
|
|
1,540 |
|
Supplemental disclosures of cash flow information related to leases
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Quarters Ended |
|
October 2, 2022 |
|
October 3, 2021 |
|
Other information
|
|
|
|
|
Cash paid for leases:
|
|
|
|
|
Operating cash flows for operating leases(1)
|
$ |
77,122 |
|
|
$ |
67,129 |
|
|
Operating cash flows for finance leases
|
1,441 |
|
|
1,458 |
|
|
Financing cash flows for finance leases
|
2,930 |
|
|
2,512 |
|
|
Right-of-use assets obtained in exchange for new lease
liabilities:
|
|
|
|
|
Operating leases
|
$ |
31,246 |
|
|
$ |
48,770 |
|
|
Finance leases
|
4,549 |
|
|
1,788 |
|
(1)Operating
cash flows for operating leases include variable rent payments
which are not included in the measurement of lease liabilities. For
the three quarters ended October 2, 2022 and October 3,
2021, variable rent payments were $17.4 million and $11.3 million,
respectively.
The Company recognized $3.0 million and $4.4 million of lease
termination charges in the quarter and three quarters ended
October 2, 2022,
respectively, related to the decision to exit certain Krispy Kreme
shops in the U.S.
There were no lease termination charges in
the three quarters ended October 3, 2021.
In March 2022, the Company completed a sale-leaseback transaction
whereby it disposed of the land at one real estate property for
proceeds of $3.0 million. The Company subsequently leased back the
property, which is accounted for as an operating lease. The Company
recognized a gain on sale of $2.6 million, which is included in
Other expenses/(income), net on the Condensed Consolidated
Statement of Operations for the three quarters ended
October 2, 2022. In September 2022, the Company completed a
sale-leaseback transaction whereby it disposed of the land at one
real estate property for proceeds of $2.7 million. The Company
subsequently leased back the property, which is accounted for as an
operating lease. The Company recognized a gain on sale of $1.9
million, which is included in Other expenses/(income), net on the
Condensed Consolidated Statement of Operations for the quarter
ended October 2, 2022. There were no sale-leaseback
transactions completed in the three quarters ended October 3,
2021.
Note 6 — Fair Value Measurements
The following table presents assets and liabilities that are
measured at fair value on a recurring basis as of October 2,
2022 and January 2, 2022:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2022 |
|
|
|
Level 1 |
|
Level 2 |
|
|
|
Assets:
|
|
|
|
|
|
|
401(k) mirror plan assets
|
$ |
6 |
|
|
$ |
— |
|
|
|
|
Interest rate derivatives
|
— |
|
|
18,397 |
|
|
|
|
Commodity derivatives
|
— |
|
|
570 |
|
|
|
|
Foreign currency derivatives
|
— |
|
|
562 |
|
|
|
|
Total Assets |
$ |
6 |
|
|
$ |
19,529 |
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Foreign currency derivatives
|
$ |
— |
|
|
$ |
219 |
|
|
|
|
Total Liabilities |
$ |
— |
|
|
$ |
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2022 |
|
|
|
Level 1
|
|
Level 2
|
|
|
|
Assets:
|
|
|
|
|
|
|
401(k) mirror plan assets
|
$ |
111 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Commodity derivatives
|
— |
|
|
1,486 |
|
|
|
|
Total Assets |
$ |
111 |
|
|
$ |
1,486 |
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Foreign currency derivatives |
$ |
— |
|
|
$ |
80 |
|
|
|
|
Interest rate derivatives
|
— |
|
|
14,667 |
|
|
|
|
Total Liabilities |
$ |
— |
|
|
$ |
14,747 |
|
|
|
There were no assets nor liabilities measured using Level 3 inputs
and no transfers of financial assets or liabilities among the
levels within the fair value hierarchy during the quarter ended
October 2, 2022 and fiscal year ended January 2, 2022.
The Company’s derivatives are valued using discounted cash flow
analyses that incorporate observable market parameters, such as
interest rate yield curves and currency rates.
Note 7 — Derivative Instruments
Commodity Price Risk
The Company uses forward contracts to protect against the effects
of commodity price fluctuations in the cost of ingredients of its
products, of which flour, sugar and shortening are the most
significant, and the cost of gasoline used by its delivery
vehicles. Management has not designated these forward contracts as
hedges. As of October 2, 2022 and January 2, 2022, the
total notional amount of commodity derivatives was 2.1 million and
1.9 million gallons of gasoline, respectively. They were scheduled
to mature between October 3, 2022 and December 1, 2024 and January
3, 2022 and March 31, 2023, respectively. As of October 2,
2022 and January 2, 2022, the Company recorded an asset of
$0.6 million and $1.5 million, respectively, related to the fair
market values of its commodity derivatives. The settlement of
commodity derivative contracts is reported in the Condensed
Consolidated Statements of Cash Flows as a cash flow from operating
activities.
Interest Rate Risk
The Company uses interest rate swaps to manage its exposure to
interest rate volatility from its debt arrangements. Management has
designated the swap agreements as cash flow hedges and recognized
the changes in the fair value of these swaps in other comprehensive
income. As of October 2, 2022 and January 2, 2022, the
Company has recorded assets of $18.4 million and liabilities of
$14.7 million, respectively, related to the fair market values of
its interest rate derivatives. The cash flows associated with the
interest rate swaps are reflected in operating activities in the
Condensed Consolidated Statements of Cash Flows, which is
consistent with the classification as operating activities of the
interest payments on the term loan.
Foreign Currency Exchange Rate Risk
The Company is exposed to foreign currency risk primarily from its
investments in consolidated subsidiaries that operate in Canada,
the U.K., Ireland, Australia, New Zealand, Mexico and Japan. In
order to mitigate the impact of foreign exchange fluctuations on
commercial and financial transactions with these subsidiaries, the
Company enters into foreign exchange forward contracts. Management
has not designated these forward contracts as hedges. As of
October 2, 2022 and January 2, 2022, the total notional
amount of foreign exchange derivatives was $59.3 million and $51.8
million, respectively. They were scheduled to mature between
October 2022 and November 2022 and between January 2022 and
February 2022, respectively. The Company recorded an asset (net of
liabilities) of $0.3 million and a liability of $0.1 million as of
October 2, 2022 and January 2, 2022, respectively,
related to the fair market values of its foreign exchange
derivatives.
Quantitative Summary of Derivative Positions and Their Effect on
Results of Operations
The following tables present the fair values of derivative
instruments included in the Condensed Consolidated Balance Sheets
as of October 2, 2022 and January 2, 2022, for
derivatives not designated as hedging instruments and derivatives
designated as hedging instruments, respectively. The Company only
has cash flow hedges that are designated as hedging
instruments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Fair Value
|
|
|
|
Derivatives Not Designated as Hedging
Instruments
|
October 2,
2022 |
|
January 2,
2022 |
|
Balance Sheet Location
|
|
|
|
|
|
|
|
Commodity derivatives
|
$ |
570 |
|
|
$ |
1,486 |
|
|
Prepaid expense and other current assets |
|
Foreign currency derivatives
|
562 |
|
|
— |
|
|
Prepaid expense and other current assets |
|
Total Assets |
$ |
1,132 |
|
|
$ |
1,486 |
|
|
|
|
Foreign currency derivatives
|
$ |
219 |
|
|
$ |
80 |
|
|
Accrued liabilities |
|
Total Liabilities |
$ |
219 |
|
|
$ |
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Fair Value |
|
|
|
Derivatives Designated as Hedging
Instruments
|
October 2,
2022 |
|
January 2,
2022 |
|
Balance Sheet Location |
|
Interest rate derivatives (current)
|
$ |
11,623 |
|
|
$ |
— |
|
|
Prepaid expense and other current assets |
|
Interest rate derivatives (noncurrent)
|
6,774 |
|
|
— |
|
|
Other assets |
|
Total Assets |
$ |
18,397 |
|
|
$ |
— |
|
|
|
|
Interest rate derivatives (current)
|
$ |
— |
|
|
$ |
8,535 |
|
|
Accrued liabilities
|
|
Interest rate derivatives (noncurrent)
|
— |
|
|
6,132 |
|
|
Other long-term obligations and deferred credits
|
|
Total Liabilities |
$ |
— |
|
|
$ |
14,667 |
|
|
|
The effect of derivative instruments on the Condensed Consolidated
Statements of Operations for the quarter and three quarters ended
October 2, 2022 and October 3, 2021 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Gain/(Loss) Recognized in Income for the Quarter
Ended
|
|
Derivative Gain/(Loss) Recognized in Income for the Three
Quarters Ended
|
|
|
|
Derivatives Designated as Hedging Instruments |
October 2, 2022 |
|
October 3, 2021 |
|
October 2, 2022 |
|
October 3, 2021 |
|
Location of Derivative Gain/(Loss) Recognized in
Income
|
|
Loss on interest rate derivatives |
$ |
(107) |
|
|
$ |
(2,613) |
|
|
$ |
(4,478) |
|
|
$ |
(7,704) |
|
|
Interest expense, net |
|
|
$ |
(107) |
|
|
$ |
(2,613) |
|
|
$ |
(4,478) |
|
|
$ |
(7,704) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Gain/(Loss) Recognized in Income for the Quarter
Ended
|
|
Derivative Gain/(Loss) Recognized in Income for the Three Quarters
Ended
|
|
|
|
Derivatives Not Designated as Hedging Instruments |
October 2, 2022 |
|
October 3, 2021 |
|
October 2, 2022 |
|
October 3, 2021 |
|
Location of Derivative Gain/(Loss) Recognized in
Income
|
|
Gain on foreign currency derivatives |
$ |
678 |
|
|
$ |
632 |
|
|
$ |
423 |
|
|
$ |
256 |
|
|
Other non-operating expense/(income), net |
|
(Loss)/gain on commodity derivatives |
(1,589) |
|
|
(114) |
|
|
(917) |
|
|
1,356 |
|
|
Other non-operating expense/(income), net |
|
|
$ |
(911) |
|
|
$ |
518 |
|
|
$ |
(494) |
|
|
$ |
1,612 |
|
|
|
Note 8 — Share-based Compensation
Restricted Stock Units (“RSUs”)
The Company and certain of its subsidiaries issue time-vested RSUs
under their respective executive ownership plans and long-term
incentive plans.
RSU activity under the Company’s various plans during the periods
presented is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts) |
Non-vested shares outstanding at January 2,
2022 |
|
Granted |
|
|
|
Vested |
|
Forfeited |
|
Non-vested shares outstanding at October 2,
2022 |
|
KKI
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
5,866 |
|
|
995 |
|
|
|
|
281 |
|
|
801 |
|
|
5,779 |
|
|
Weighted Average Grant Date Fair Value
|
$ |
13.78 |
|
|
14.34 |
|
|
|
|
9.54 |
|
|
14.18 |
|
|
$ |
14.03 |
|
|
KKUK
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
60 |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
60 |
|
|
Weighted Average Grant Date Fair Value
|
$ |
15.77 |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
$ |
15.77 |
|
|
Insomnia Cookies
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
33 |
|
|
10 |
|
|
|
|
1 |
|
|
5 |
|
|
37 |
|
|
Weighted Average Grant Date Fair Value
|
$ |
79.66 |
|
|
169.70 |
|
|
|
|
74.12 |
|
|
102.67 |
|
|
$ |
100.67 |
|
|
KK Australia
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
1,897 |
|
|
21 |
|
|
|
|
1,564 |
|
|
— |
|
|
354 |
|
|
Weighted Average Grant Date Fair Value
|
$ |
1.48 |
|
|
1.73 |
|
|
|
|
1.49 |
|
|
— |
|
|
$ |
1.47 |
|
|
KK Mexico
|
|
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
58 |
|
|
2 |
|
|
|
|
— |
|
|
— |
|
|
60 |
|
|
Weighted Average Grant Date Fair Value
|
$ |
32.86 |
|
|
40.14 |
|
|
|
|
— |
|
|
— |
|
|
$ |
33.08 |
|
The Company recorded total non-cash compensation expense related to
RSUs under the plans of $2.5 million and $11.4 million for the
quarter and three quarters ended October 2, 2022,
respectively, and $5.1 million and $14.9 million for the quarter
and three quarters ended October 3, 2021,
respectively.
The unrecognized compensation cost related to the unvested RSUs and
the weighted-average period over which such cost is expected to be
recognized are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 2, 2022 |
|
|
Unrecognized Compensation Cost |
|
Recognized Over a
Weighted-Average
Period of
|
|
KKI |
$ |
49,955 |
|
|
3.0 years |
|
KKUK |
222 |
|
|
1.2 years |
|
Insomnia Cookies |
2,502 |
|
|
3.0 years |
|
KK Australia |
192 |
|
|
1.8 years |
|
KK Mexico |
1,431 |
|
|
3.2 years |
The estimated fair value of restricted stock is calculated using a
market approach (i.e., market multiple is used for the KKUK and
Insomnia Cookies plans and an agreed-upon EBITDA buyout multiple is
used for KK Australia and KK Mexico plans).
Time-Vested Stock Options
KKI issues time-vested stock options under its Omnibus Incentive
Plan. The fair value of time-vested stock options was estimated on
the date of grant using the Black-Scholes option pricing model.
A summary of the status of the time-vested stock options as of
January 2, 2022 and changes during the first three quarters of
fiscal 2022 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Options Outstanding At |
|
|
|
|
|
|
|
Share Options Outstanding At |
|
(in thousands, except per share amounts) |
January 2,
2022 |
|
Granted |
|
Exercised |
|
Forfeited or Expired |
|
October 2,
2022 |
|
KKI
|
|
|
|
|
|
|
|
|
|
|
Options |
2,817 |
|
|
— |
|
|
— |
|
|
248 |
|
|
2,569 |
|
Weighted Average Grant Date Fair Value |
$ |
6.10 |
|
|
— |
|
|
— |
|
|
6.10 |
|
|
$ |
6.10 |
|
Weighted Average Exercise Price |
$ |
14.61 |
|
|
— |
|
|
— |
|
|
14.61 |
|
|
$ |
14.61 |
The Company recorded total non-cash compensation expense related to
the time-vested stock options
of $0.3 million
and $1.9 million for the quarter and three quarters ended
October 2, 2022, respectively, and $1.2 million and $2.1
million for the quarter and three quarters ended October 3,
2021, respectively.
The unrecognized compensation cost related to the unvested stock
options and the weighted-average period over which such cost is
expected to be recognized are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 2, 2022 |
|
Unrecognized Compensation Cost |
|
Recognized Over a
Weighted-Average
Period of
|
|
KKI |
$ |
10,429 |
|
|
3.6 years |
No time-vested stock options under the KKI plan vested nor were
exercised during the fiscal periods presented.
Note 9 — Income Taxes
For interim tax reporting, the Company estimates a worldwide annual
effective tax rate and applies that rate to the year-to-date
ordinary income/(loss). The tax effects of significant unusual or
infrequently occurring items are excluded from the estimated annual
effective tax rate calculation and recognized in the interim period
in which they occur.
The Company’s effective income tax rates were (2.5)% and (267.1)%
for the quarter and three quarters ended October 2, 2022,
respectively, and 38.4% and (76.1)% for the quarter and three
quarters ended October 3, 2021, respectively. The Company’s
effective income tax rate for the quarter and three quarters ended
October 2, 2022 differed from the respective statutory rates
primarily due to disallowed executive compensation expense, the mix
of income and taxes attributable to foreign jurisdictions, the
recognition of previously unrecognized tax benefits, and a discrete
tax benefit related to a litigation settlement. The Company’s
effective income tax rate for the quarter and three quarters ended
October 3, 2021 differed from the respective statutory rates
primarily due to the revaluation of U.K. deferred taxes as a result
of the increase in the corporate tax rate from 19.0% to 25.0%
beginning in 2023 and disallowed executive compensation in
connection with the IPO. The Company’s effective income tax rates
were also impacted by the mix of income and taxes attributable to
foreign jurisdictions.
Note 10 — Commitments and Contingencies
Legal Matters
The Company is engaged in various legal proceedings arising in the
normal course of business. The Company maintains insurance policies
against certain kinds of such claims and suits, including insurance
policies for workers’ compensation and personal injury, all of
which are subject to deductibles. While the ultimate outcome of
these matters could differ from management’s expectations,
management currently does not believe their resolution will have a
material adverse effect on the Company’s Condensed Consolidated
Financial Statements.
Other Commitments and Contingencies
One of the Company’s primary banks issued letters of credit on its
behalf totaling $12.2 million and $8.5 million as of
October 2, 2022 and January 2, 2022, respectively, a
majority of which secure the Company’s reimbursement obligations to
insurers under its self-insurance arrangements.
Note 11 — Related Party Transactions
As of October 2, 2022, the Company had an equity ownership in
three franchisees, KremeWorks USA, LLC (20% ownership), KremeWorks
Canada, L.P. (25% ownership), and KK France (33% ownership), with
an aggregate carrying value of $1.9 million. As of January 2,
2022, the Company had an equity ownership in two franchisees,
KremeWorks USA, LLC (20% ownership) and KremeWorks Canada, L.P.
(25% ownership), with an aggregate carrying value of $1.1
million.
The Company was party to a senior unsecured note agreement with
Krispy Kreme, G.P. (“KK GP”) for an aggregate principal amount of
$283.1 million. In April 2019, the Company entered into an
additional unsecured note with KK GP for $54.0 million (such
notes together, the “Related Party Notes”). As of January 3,
2021, the outstanding amount of principal and interest was $344.6
million. The Related Party Notes were paid off in full during the
second quarter of fiscal 2021. The interest expense was $10.4
million for the three quarters ended October 3, 2021. No
interest expense was incurred for the three quarters ended
October 2, 2022.
Note 12 — Revenue Recognition
Disaggregation of Revenues
Revenues are disaggregated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended |
|
October 2, 2022 |
|
October 3, 2021 |
|
October 2, 2022 |
|
October 3, 2021 |
|
Company Shops, DFD and Branded Sweet Treat Line |
$ |
353,979 |
|
|
$ |
322,410 |
|
|
$ |
1,060,364 |
|
|
$ |
952,680 |
|
|
Mix and equipment revenue from franchisees |
16,237 |
|
|
11,914 |
|
|
41,681 |
|
|
36,452 |
|
|
Franchise royalties and other |
7,306 |
|
|
8,475 |
|
|
23,254 |
|
|
24,662 |
|
|
Total net revenues |
$ |
377,522 |
|
|
$ |
342,799 |
|
|
$ |
1,125,299 |
|
|
$ |
1,013,794 |
|
Other revenues include advertising fund contributions from
franchisees, rental income, development and franchise fees, and
licensing royalties from Keurig related to Krispy Kreme brands
coffee sales.
Contract Balances
Deferred revenue subject to Accounting Standards Codification Topic
606,
Revenue from Contracts with Customers,
and related receivables are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2022 |
|
January 2, 2022 |
|
Balance Sheet Location
|
|
Trade receivables, net of allowances of $216 and $896,
respectively
|
$ |
41,154 |
|
|
$ |
41,132 |
|
|
Accounts receivables, net |
|
Deferred revenue: |
|
|
|
|
|
|
Current |
$ |
14,878 |
|
|
$ |
17,458 |
|
|
Accrued liabilities |
|
Noncurrent |
3,615 |
|
|
2,981 |
|
|
Other long-term obligations and deferred credits |
|
Total deferred revenue |
$ |
18,493 |
|
|
$ |
20,439 |
|
|
|
Note 13 — Net Loss per Share
The following table presents the calculations of basic and diluted
EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Three Quarters Ended |
|
(in thousands, except per share amounts) |
October 2, 2022 |
|
October 3, 2021 |
|
October 2, 2022 |
|
October 3, 2021 |
|
Net loss attributable to Krispy Kreme, Inc. |
$ |
(13,056) |
|
|
$ |
(5,659) |
|
|
$ |
(12,903) |
|
|
$ |
(25,862) |
|
|
Adjustment to net loss attributable to common
shareholders |
— |
|
|
(522) |
|
|
(374) |
|
|
(1,815) |
|
|
Net loss attributable to common shareholders - Basic |
$ |
(13,056) |
|
|
$ |
(6,181) |
|
|
$ |
(13,277) |
|
|
$ |
(27,677) |
|
|
Additional income attributed to noncontrolling interest due to
subsidiary potential common shares |
(76) |
|
|
(88) |
|
|
(174) |
|
|
(237) |
|
|
Net loss attributable to common shareholders - Diluted |
$ |
(13,132) |
|
|
$ |
(6,269) |
|
|
$ |
(13,451) |
|
|
$ |
(27,914) |
|
|
Basic weighted average common shares outstanding |
167,431 |
|
|
166,034 |
|
|
167,353 |
|
|
141,124 |
|
|
Dilutive effect of outstanding common stock options and
RSUs |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|