Hot glazed doughnut maker Krispy Kreme Doughnuts (NYSE:KKD) said today it will buy back up to $50 million worth of its stock. At Friday's closing price of $20.10, that would be equivalent to almost 2.5 million shares. The company had approximately 66 million shares outstanding as of July 12, so the repurchase plan equates to just under 4% of its stock.
Noting that the company had made substantial improvements to its balance sheet and had recently completed a $20 million share repurchase authorization, Krispy Kreme Chairman, President, and CEO James H. Morgan said the doughnut maker had the financial wherewithal to complete this newest buyback plan.
"While we will always seek to first deploy cash to grow the business," Morgan said, "we will complement that usage, as appropriate, with other means of increasing shareholder value. The repurchase authorization announced today reflects our desire to further enhance shareholder returns when our cash flow generation is excess to our current needs and when doing so is in the best interests of our shareholders."
As of last Friday, Krispy Kreme had $55 million in cash available plus $31 million in unused borrowing capacity on its revolving credit facility, reflecting the retirement of the $22 million remaining balance of its term loan and the refinancing of its secured credit facilities that it just completed.
The doughnut maker anticipates generating net income of between $42 million and $45 million in fiscal 2014, an increase of 28% to 31% over the profits generated in 2013. Operating cash flows are expected to be in a range of $63 million to $66 million, and after deducting capital expenditures of $23 million to $35 million, Krispy Kreme will generate free cash flow of around $5 million to $20 million.
Included in these figures is the refinancing of its secured credit facilities. It paid in full the $22 million balance of its term loan and increased the size of its revolving credit commitments from $25 million to $40 million, which is expected to lower Krispy Kreme's interest expense by approximately $1 million in the first 12 months. It also expects to record a non-cash charge of approximately $1 million in the second quarter related to the transaction. It has no borrowings outstanding under the term loan at this time.
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