Krispy Kreme Doughnuts, Inc. (KKD)

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Krispy Kreme Doughnuts (KKD)

F1Q09 Earnings Call

June 9, 2008 4:30 pm ET


Brian K. Little - Director, Corporate Communications

James H. Morgan - Chairman of the Board, President, Chief Executive Officer

Douglas R. Muir - Chief Financial Officer, Executive Vice President


John Ivankoe - J.P. Morgan

Pat Gailor



Good day, ladies and gentlemen, and welcome to the first quarter 2009 Krispy Kreme Doughnuts earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call, the Director of Corporate Communications, Mr. Brian Little. Please proceed.

Brian K. Little

Thank you, Operator. Welcome, everyone. As the Operator mentioned, I’m Brian Little, Director of Corporate Communications for Krispy Kreme. Thank you for joining us for our 2009 first quarter earnings conference call. On the call with me today are Jim Morgan, Krispy Kreme's President and Chief Executive Officer; and Doug Muir, our Chief Financial Officer.

During our time together this afternoon, Jim will comment on company performance for the quarter and Doug will review first quarter results. As is always the case, we will ask the Operator to open the lines and take your questions following our prepared remarks.

First, however, I would like to remind everyone that a copy of our earnings announcement released this morning, including financial tables, is available in the news release section under investor relations at our website,

This conference call is being webcast and will be archived and available on our website for one year. A transcript of this conference call will also be available at our company website. All SEC filings and press releases are accessible there as well. Investors and analysts are directed to these online public resources for the most up-to-date company information. Krispy Kreme Investor Relations can be reached via e-mail at

Our responses today, as well as our prepared remarks should be considered forward-looking in nature and are subject to various risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or expected. Key factors that may have a direct bearing on Krispy Kreme’s operating results, performance or financial condition are discussed in Krispy Kreme's Form 10-K for fiscal 2008 and other periodic reports filed with the U.S. Securities and Exchange Commission.

I will now turn the call over to Jim Morgan. Jim.

James H. Morgan

Thank you, Brian. Good afternoon, everyone and welcome to today’s conference call. I hope all of you have had an opportunity to review our 2009 first quarter earnings release. While we are certainly pleased that the hard work of our employees has resulted in improved performance during the most recent quarter, we do caution against drawing overly optimistic conclusions about future quarters. The majority of our strategic initiatives will not gain meaningful traction for another 12 to 24 months. Therefore, despite our belief that we are laying the appropriate groundwork for long-term success, near-term corporate performance could be somewhat uneven as we continue to address both the internal and external challenges that have faced the company for the past several years, as well as the more recent challenge of rising commodity prices.

We do believe over time there will be many more opportunities than there are challenges, however. We still have plenty of work to do.

We are confident in the strategic plan we are executing and we are moving at what I consider to be an appropriate pace to achieve the outcomes our stakeholders expect.

You might remember that during our last conference call, for those of you that were on that call, I stated that our goal is to successfully address our challenges without sacrificing any of our opportunities, while at the same time becoming a leaner, stronger, more profitable organization. That continues to be our goal.

I’d also like to reemphasize something else I said during that same call -- Krispy Kreme remains committed to delivering positive financial performance on a consistent basis. I am now more convinced than ever that this organization has a bright future and that by working closely with our franchisees, as well as our employees, we will strive to continue to improve every aspect of our company’s performance.

Today, I’ll speak briefly about our major business segment and in just a few minutes, Doug Muir will address our financial results.

I’ll begin with our off-premises business. We continue to be negatively impacted by the rising cost of agricultural commodities in what appears to be an unending rise in the cost of fuel. Like many other organizations, we have had to pass along some of these cost increases to our customers. The skyrocketing cost of fuel has a particularly negative impact on our off-premises business as we do maintain a fleet of vehicles that deliver our products to stores across the country. However, we continue to search for and find strategic ways to address these rising costs while always remaining aware of the impact on and the needs of our franchisees.

While we do anticipate that these challenges associated with rising fuel and agricultural commodity costs will have an effect on our off-premises business for the foreseeable future, we believe we have identified a couple of opportunities that allow us to meet our customers’ needs, provide additional sales potential for our partners, and buffer some portion of the burden.

Currently, we are testing three varieties of a new packaged snack product in our grocery store channel. Our new Krispy Kreme mini snack packs are individually packaged mini versions of our crullers, doughnut holes, and Krispy Juniors. These new products are being test marketed at a number of grocery and mass merchant stores across North Carolina. It’s too early to gauge the ultimate success of these products but the initial feedback we’ve received is encouraging.

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