from pnra cc:
"We're experiencing a substantial uptick in the cost of butter," Hood said. Prices on the spot market averaged $1.80 a pound last month, compared with Panera's average cost last year of $1.23 a pound.
The likely result could be a $1 million "hit" to expenses this year, Hood said.
I infer with roughly a 50% increase in the price of butter, he's saying pnra's butter expense will go from $2 million to $3 million (out of about $120 million in food expenses).
from the kkd website:
The only animal byproducts used in our doughnut are eggs (whites and yolks) and dairy products (including milk, butter, yogurt, whey, nonfat milk and nonfat whey).
If kkd makes 3 billion doughnuts a year, even a 0.5 cent increase in the cost of a doughnut adds
3,000,000,000 * $0.005 = $15 million in extra expense systemwide. That's about 15 cents in eps.
(I have no idea how much butter kkd puts in a doughnut, or if substitutes are available)
Thank you for confirming my earlier response to bigpimp's post.
The whiners here cry "foul" every time KKD relates one of its accounting practices, as if KKD had just created the practice and was using the practice in a criminal manner.
To summarize this tread,
Perspicuator said that KKD might be capitalizing pre-opening costs
Doofus said "Why are you whining? Any corporation would (and does) take advantage of [this], given the opportunity."
I asked Doofus what the F he was talking about and stated that this is not a normal accounting practice. Then I said that if Doofus is implying that KKD is taking advantage of this then he is implying that they are misleading investors.
Tarheel said that GAAP requires capitalizing pre-opening costs. He may be right (although I don't think he is), but KKD, PNRA, CAKE, SBUX and PFCG all say that they expense pre-opening costs as incurred.
Then millenium said that most companies try to manage earnings.
Millenium - I am a CPA, however, I never practiced accounting or auditing. You are correct most companies manage earnings and KKD like all companies that are concious of hitting analyst estimates, manage earnings. This is just an example of how KKD may be managing earnings. Cisco beat estimates by 1 penny every quarter then they missed estimates and it blew-up. KKD used to beat estimates by a quarter but now they are only meeting estimates. The clock is ticking until they run-out of reserves, capitalized expenses, not taking charges for bad debt expense and many other things that diversify mentions. This is how Worldcom started. I'm not implying that they are going the route of worldcom, but they are definately going down the same path as Cisco.
KKD to the mmmmmoooonnnnnnnn!!!
I see the AH quote on Yahoo but when I look for the detail I get the following trades AH.
Time Price Vol
17.21 $ 37.35 300
16.37 $ 37.36 400
16.02 $ 37.36 2700
16.02 $ 37.36 1500
16.00 $ 37.32 100
16.00 $ 37.35 400
I think the Yahoo is a mistake.
So the stock's about to plunge?
You base that on a single fake after-hours quote on Yahoo!?
Did you look at the bid/ask on that "quote"?
Narrowing trading range, thinning volume. This looks like it's about to get interesting.
While not taking a stand on whether KKD does or doesn't cook the books, I do want to say my profession is a business consultant and I have gotten into the deep inner workings, and the financials, of many of the largest corps in the world. I am not a CPA but I advise CFO's and their accounting staffs manufacturing processes and cost accounting. I specialize in material movement and inter-company accounting. What I have found is some aggressive companies look for ways to bolster their financial statements by using creative accounting practices. Often you will see disclaimers on the financial statements that say unaudited which is the first indication that their may be errors or omissions or other things not necessarily correct. I have seen companies capitalize expenses that I strongly disagree with but am not in a position to keep these accounting issues from happening. A couple of examples of capitalized costs that I have seen are advertising expense for a new store opening...direct employees labor costs shifted to capitalized expenses for new operation start up costs...etc.
Things like these may never come out in the published financial 10Q's or 10K's, but I will attest to the fact that it is a somewhat common practice, even though it is questionable.
"GAAP requires capitalization of store pre-opening costs. The costs are then expensed either at the time of the store opening or over a short period of time thereafter, such as the first year the store is open."
Are you sure? SBUX and CAKE both say that they expense pre-opening costs as incurred. Are they just being overly conservative?
Expensing as incurred fits with the same concepts that require R&D to be expensed as incurred.
Let me know your thoughts.
pnra got crushed last week because an analyst on the cc asked a specific question regarding the much lower sg&a expenditures; pnra responded that bonuses were cut, amounting to a significant savings which allowed pnra to meet their numbers.
So far as I know, none of the "analysts" covering kkd have ever caught on to kkd's 8 cent benefit cut eps windfall from a year ago.
When I discovered by reading the 10-k what kkd had done, I wrote about it given that I thought 8 cents was rather significant; prior to that, I was certainly not aware that they had cut benefits to that extent and I don't think the market did either. In fact, I would argue, given the reaction at pnra, that the market still hasn't discounted it.
As an accountant you may know your GAAP, but you don't seem to have a clue as to how the market discounts information. The price of kkd, in the long run, must approximate the discounted present values of its cashflows. imo, the knowledge that kkd's fy03 earnings (which help determine the firm's growth rate) were juiced might be of some interest to market participants. Apparently the overall market didn't care, given that the press didn't pick up on it and the stock price did not react at the time of the 10-k, but a subset of market participants, including me, probably thinks this info very telling regarding kkd's long-term prospects.
BTW, are you ever going to respond to the 10 points that I raised some time ago?
What about the cogs issue that I've raised that I'm sure you've read.
the questions di_vur has raised about the numbers, clarity is what investors need here."
You are actually suggesting that "clarity" will be provided here??!?!
Di_vur_se_fi purposely "raises question" that he KNOWS or believes can't be answered, especially on a Yahoo chat board.
Hence, creation of doubt to help him support his ridiculous vendetta against KKD.
He has been on that crusade for almost 3 years now.