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Krispy Kreme Doughnuts, Inc. Message Board

  • di_vur_se_fi di_vur_se_fi May 26, 2004 1:51 AM Flag

    Q1 Kapex Kwestionable

    kkd announced on the cc that q1 capex was approximately $20 million. Additionally, the recently released 10-k states that kkd had $6.55 million in "construction in progress" at the beginning of Q1.

    What did kkd get for their $20 million plus the $6.55 million in "construction in progress"?

    3 new consolidated joint venture stores (new stores cost $2-$3 million a piece) were opened in q1. Just the previous entry in construction in progress ($6.5 million) should have been enough to cover most, if not all of, the typical expenditures for these factories.

    What about uncompleted factory stores at the end of Q1? While I can't say for sure, it looks to me that the first company store openings in Q2 are scheduled for mid-June in Branson and Springfield, MO. Given that these openings are 6 weeks into the current quarter and stores are built in 8 weeks, I doubt that these stores would have had significant expenditures in Q1.

    Why does this matter?

    The wsj article, if accurate, details aggressive (possibly in violation of gaap) accounting techniques. If kkd is, in fact, playing such accounting games, then all accounts and transactions must be scrutinized more closely. Capex accounts (which are typically quite large) are notorious for containing inappropriately classified expenses in cases of massive fraud (Healthsouth, Worldcom to name two).

    Now, is it reasonable that kkd spent $20 million in capex in q1 when a more reasonable guesstimate, given new store activity, would have been only $1-$5 million (allowing for some expenditures on stores to be opened in Q2)?

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