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KRISPY KREME REPORTS FINANCIAL RESULTS FOR THE FOURTH QUARTER AND FISCAL YEAR ENDED FEBRUARY 2, 2014

Krispy Kreme Doughnuts, Inc. (NYSE: KKD) (the “Company”) today reported financial results for the fourth quarter and fiscal year ended February 2, 2014, and raised its diluted EPS guidance for fiscal 2015 to reflect fewer forecasted shares outstanding as a result of share repurchases. The Company also announced that its Board of Directors increased the Company’s current share repurchase authorization from $50 million to $80 million.

Fiscal Year

The fourth quarter and fiscal year ended February 2, 2014 included 13 and 52 weeks, respectively, compared to 14 and 53 weeks, respectively, for the fourth quarter and fiscal year ended February 3, 2013. Accordingly, financial results for the fiscal 2014 periods are not directly comparable to those of the corresponding fiscal 2013 periods. The Company’s fiscal year ends on the Sunday closest to January 31, which periodically results in a 53-week year.

Fourth Quarter Fiscal 2014 Highlights Compared to the Year-Ago Period (Table 2):

To facilitate comparisons, the following highlights compare the 13 weeks ended February 2, 2014 to the 13 weeks ended January 27, 2013:

  • Revenues increased 3.3% to $112.7 million from $109.1 million; excluding the effects of refranchising stores, revenues for the quarter rose 5.5% from last year
  • Company same store sales rose 1.6%, the 21st consecutive quarterly increase, despite harsh winter weather in several key markets estimated to have penalized fourth quarter comparisons by approximately 1 point
  • Operating income increased 27% to $9.1 million from $7.2 million
  • Adjusted net income rose 37% to $8.3 million ($0.12 per share) from $6.1 million ($0.09 per share); adjusted net income and adjusted EPS reflect income tax expense only to the extent currently payable in cash; adjusted net income and adjusted EPS are non-GAAP measures (see the reconciliation of GAAP to adjusted earnings in Table 5 accompanying this release)
  • Net income was $14.8 million ($0.21 per share) compared to $4.0 million ($0.06 per share) last year; net income in the current period reflects credits totaling $10.3 million ($0.14 per share) in income tax expense; the credits reflect additional tax benefits expected to be realized from the Company’s net operating loss and tax credit carryovers resulting from an increase in management’s estimate of future annual earnings
  • Cash provided by operating activities was $15.9 million compared to $19.5 million last year
  • Cash at year end totaled $55.7 million, notwithstanding the Company’s repurchase of $20.5 million of common stock in fiscal 2014

Fiscal 2014 Highlights Compared to Last Year (Table 2):

To facilitate comparisons, the following highlights compare the 52 weeks ended February 2, 2014 to the 52 weeks ended January 27, 2013:

  • Revenues increased 7.9% to $460.3 million from $426.8 million; excluding the effects of refranchising stores, revenues for the year rose 9.3% from last year
  • Company same store sales rose 6.7%, the fifth consecutive annual increase
  • Operating income increased 28% to $46.6 million from $36.4 million
  • Adjusted net income rose 31% to $43.2 million ($0.61 per share) from $32.9 million ($0.47 per share)
  • Net income was $34.3 million ($0.48 per share) compared to $20.0 million ($0.29 per share) last year; net income in the current year reflects credits totaling $10.3 million ($0.14 per share) in income tax expense; the credits reflect additional tax benefits expected to be realized from the Company’s net operating loss and tax credit carryovers resulting from an increase in management’s estimate of future annual earnings
  • Cash provided by operating activities was $56.9 million compared to $57.5 million in fiscal 2013

James H. Morgan, Chairman and Chief Executive Officer, commented: “Fiscal 2014 was an outstanding year at Krispy Kreme, and we thank our Company team members and our franchise partners for their outstanding contributions. Among the significant achievements were:

  • We reported our fifth year in a row of higher same store sales at Company shops, notwithstanding tough comparisons and harsh winter weather that affected several Company markets as we closed out the year in January
  • Our domestic franchisees also posted their fifth consecutive year of rising same store sales
  • We achieved 30% year-over-year growth in adjusted EPS on a 52-week basis; in the fourth quarter, adjusted EPS grew 33% on a 13-week basis
  • We successfully tested our new small free-standing factory shop format and began a rollout that we expect will represent the majority of new domestic shops built in the coming year
  • International franchisees in three new countries opened their first Krispy Kreme shops, bringing our total presence outside the U.S. to 23 countries and 574 locations at year end

“Krispy Kreme ranks among the fastest growing brands in QSR, and we have significant potential to further expand our system both domestically and internationally. Our worldwide store count grew by more than 10% in fiscal 2014, and we are projecting similar net unit growth in fiscal 2015. Company development this year will focus exclusively on our small free-standing factory shops, which have shown very encouraging results since we opened the first of these new format shops in January 2013. Domestic franchise development is expected to consist of a mix of small factory and satellite locations, while internationally, we expect to enter several new markets, including Colombia and Guangdong, China. Our goal remains to have 1,300 domestic and international shops in operation by January 2017.

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