Krispy Kreme Donuts, Inc.
By:
Elizabeth Altneu
Chris Beam
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Alternatives
Recommendation
Income Statements
Reflects performance over a period of
time
Net Income = Profit
Earnings per share
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
Balance Sheet
Snapshot of a
company’s
financial position
on the last day of
each year
Assets =
Liability + Equity
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Alternatives
Recommendation
Profitability Ratios
Return on Assets
Net income / Assets
Return on Equity
Net Income / Equity
Net Profit Margin
Net Income / Sales
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
Other Financial Ratios
Liquidity Ratios
Current Ratio
Current Assets / Current Liability
Activity Ratios
Receivables Turnover
Sales / Accounts Receivables
Inventory Turnover
Cost of Good Sold / Inventory
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
General Information
1937 Winston Salem, NC
Vernon Randolph
Factory Store
Franchises
1982 bought for $24 million
1989 Expansion begins, debt-free
April 2000 KK goes public
Scott Livengood
Aggressive growth strategy
Revenue Streams
Revenue Streams
4% On-Premises
27% Sales
29% Off-Premises
Sales
Manufacturing &
Distribution
Franchise
40% Royalties & Fees
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
Performance
Original IPO: $40.63
April
2000
Market cap $500 million
Today: $12.52
Market cap $761.46 million
Acquired back poor franchises by
buying at higher price to cover interest
owed.
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
Decision
Was aggressive accounting the source
of Krispy Kreme’s stock price decline?
Yes, but not the only problem.
Account receivable turnover
Industry AVG:40.04 KK:9.70
Inventory turnover
Industry AVG:68.96 KK:17.76
Other financial issues
Lack of growth
Analysts’ Buy Recommendations
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
6/14/01 6/14/02 6/14/03 6/14/04
Outline
Concept
Financial Statements
Income
Balance Sheet
Financial Ratio
Profitability Ratios
Other Financial Ratios
Application
General Information
Performance
Decision
Recommendation
Recommendation
Recommendation
Use conventional accounting methods so
not show inflated Net income.
KK did this when they restated
Slow down growth and be more selective
with franchises.