Less Sugar-Coating Needed at Krispy Kreme: Fool by Numbers

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On Thursday, April 12, after the market closed, doughnut chain Krispy Kreme Doughnuts (NYSE: KKD) released fourth-quarter and year-end results for the period ended Jan. 28. Here are the quick and dirty details for the quarter.

• Net sales fell 8.2% as company-owned stores saw an 11.2% sales drop. According to the company, it "made progress during the past year" even though total top-line trends remain challenging.
• The net earnings loss narrowed but was still firmly negative, dragged down by another litigation settlement charge.
• On a more positive note, operating cash flow was positive as negative capital expenditures brought in funds and long-term debt fell 10%. Management reckons it is seeing "stability in [its] overall average unit volume, [and has] developed a pipeline for new products and seen growth internationally utilizing a flexible real estate model."
• Krispy Kreme carries an unhealthy one-star rating in the Motley Fool CAPS community. Fools may want to consider more tasty prospects in the restaurant industry, including Buffalo Wild Wings (Nasdaq: BWLD) and Sonic (Nasdaq: SONC), which have four-star ratings, or YUM! Brands (NYSE: YUM) and McDonald's (NYSE: MCD) with their respective three-star ratings. All sell sugary treats with overall prospects that could be easier to swallow.

(Figures in thousands, except per-share data)

Income Statement Highlights

	Q4 2007	Q4 2006	Change
Sales	$112,188	$122,246	(8.2%)
Net Profit	($24,416)	($37,727)	N/A
EPS	($0.39)	($0.61)	N/A

Get back to basics with a look at the income statement.

Margin Checkup

	Q4 2007	Q4 2006	Change*
Gross Margin	11.7%	11%	0.75
Operating Margin	(19.1%)	(29.1%)	n/m
Net Margin	(21.8%)	(30.9%)	n/m

*Expressed in percentage points.

Margins are the earnings engine.

Balance Sheet Highlights

Assets	Q4 2007	Q4 2006	Change
Cash + ST Invest.	$36,242	$16,980	113.4%
Accounts Rec.	$26,769	$26,677	0.3%
Inventory	$21,006	$23,761	(11.6%)

Liabilities	Q4 2007	Q4 2006	Change
Accounts Payable	$7,874	$8,897	(11.5%)
Long-Term Debt	$105,966	$118,241	(10.4%)

The balance sheet reflects the company's health.

Cash Flow Highlights

	Q4 2007	Q4 2006	Change*
Cash From Ops.	$22,108	$1,865	1,085.4%
Capital Expenditures	($5,658)	$3,051	(285.4%)
Free Cash Flow	$27,766	($1,186)	(2,441.1%)

*Twelve months ended Jan. 28, 2007, and Jan. 29, 2006.

Free cash flow is a Fool's best friend.

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Buffalo Wild Wings is a Motley Fool Hidden Gems selection. Find out why with a free 30-day trial subscription.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.