Krispy Kreme Doughnuts, Inc.

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Krispy Kreme Doughnuts, Inc. From the income statement from Krispy Kreme Doughnuts, we can understand that the annual results show a consistent, rapid growth from the Jan 2000 statement through the Feb 2004 statement, with a final net income for the 2003 fiscal year at nearly ten times that of the 1999 fiscal year and a final EPS for the 2003 fiscal year at more than 6 times that of the 1999 fiscal year. Looking at the first quarter and second quarter comparisons for 2003 and 2004, we can clearly see that “discontinued operations and impairment charges and closing costs” are major factors that dragged net income down significantly. The large amount of these two types of costs, especially discontinued operations, is signs of corporate strategy problems and operational inefficiencies. In addition, the decrease in income from operations is larger in the second quarter than it was in the first quarter of 2004, suggesting that Krispy Kreme Doughnut’s financial difficulties may be worsening. In addition, “equity loss in joint ventures” has increased in negative figures for four consecutive years from 2001. This suggests that Krispy Kreme Doughnuts’ developments in other business areas are not successful and that lack of success has impacted the company’s income. Observing the balance sheets, Krispy Kreme Doughnuts’ total assets look good in general from the Jan. 2000 filing through the Feb. 2004 filing, however there are some concerning later-year shifts. In particular, cash reserves between the Feb. 2003 and Feb. 2004 filings have dropped considerably; this might indicate some reason for concern regarding future solvency. Krispy Kreme Doughnuts’ ‘assets held for sale’ is up almost $37 million in the Feb. 2004 filing. Their “reacquired franchise rights, goodwill, other intangibles” entry skyrockets from $49 million in the 2002 fiscal year to $175 million in the 2003

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