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Krispy Kreme Doughnuts, Inc. Message Board

  • di_vur_se_fi di_vur_se_fi Nov 1, 2005 3:01 AM Flag

    Freedom Rings Cashflow

    Some spooky FR cashflow numbers were filed on October 31st.

    According to the copy of FR bank accounts during the 4 week period Aug 27 - Sep 23, FR received the following "working capital" & "W/E" transfers from kkd:

    (in 000s)
    8/29: 158
    9/6: 108
    9/9: 64
    9/12: 104
    9/16: 180
    9/19: 96
    9/22: 24

    Total: 734

    In other words, kkd had to provide FR $734,000 during the 4 week period just to keep it afloat.

    What about cashflow projections going forward?

    For the 5 factory stores (the 6th store at the airport is a satellite), weekly sales are projected to be $178,000 or about $35,500 per week; this compares to q2 fy06 systemwide sales of about $46,000 per week.

    Here is the projected weekly ebitda (after royalties):

    10/23: (60)
    10/30: (77)
    11/06: (50)
    11/13: (18)
    11/20: (23)
    11/27: (71)
    12/04: (41)
    12/11: (18)
    12/18: (23)
    12/25: (18)
    01/01: (170)
    01/08: (41)
    01/15: (26)
    Total: (636)

    So, FR is expected to have ebitda (after royalties) of ($636,000) during the next 13 weeks.

    What about cashflow from ops?

    How about ($959,000)?

    What about "Net cashflow from restructuring"?

    How about ($1,545,000)?

    So, FR is expected to have negative cash flow of over $1.5 million on sales of $2.3 million during the next quarter. These aren't Boston Chicken numbers; no, these numbers set a new standard. Very impressive PLAN and restructuring from the KZC boys, don't you think? They've certainly earned their millions, right? No wonder the board is telling them to take a hike.

    Does everybody get it?

    These stores are leaking at a rate of about $300,000 per QUARTER per STORE (assuming, of course, that FR cashflow IMPROVES over the 4 week period mentioned above).

    Now, what do you think is happening at Glazed Investments (20 retail factories, no closures) or New England Dough or Kansas City or Golden Gate Doughnuts or Dallas, not to mention ST or Lonestar or ggcf?

    What in the world was SP thinking?

    What in the world is the market thinking?

    Note, however, that mother kkd will receive the following cashflows per week:

    mix: $51
    royalties: $8
    dip fee: $10
    brand fund: $2
    total: $71

    As FR will no longer be consolidated, these numbers will "add" to the kkd bottom line, though, because kkd owns 100% of FR, I expect that they will have to recognize that loss (assuming that they are required to use the equity method to account for their "investment").

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    • <<So go on with your endless speculation...>>

      Why, thank you for your imprimatur. I was afraid, without it, di-vur-se-fi might have had to stop posting on this board.

    • What could possibly be the thinking behind propping up a rapidly sinking business -- with money you yourself don't have -- that is already some $50 million or so in debt?

    • <<< Why not allow the franchises to accumulate enough debt the parent in the form of financing materials and franchise fee's. Once the debt gets big enough offer to forgive the debt in exchange for the franchise rights. Sounds good to me, not to mention pretty simple. >>>


      Sounds very simple to me too. I say let KKDC be a Visa or M/C for all franchisees. Only problem with the logic is that KKDC needs to use its OWN cash to finance someone else. So, it is logical to just use that cash today and buy the franchisee outright. Don't you think?

    • It appears we all know that when KKD annouced they were increasing the numner of shares it could issue left many guessing why.

      It turns out they purchased back franchises to keep quiet the bad news at the store level.

      And some stores paid nothing because they were now company owned and the accounting was so bad that even the most blind among us will find them quilty of fraud and extortion. And the fact at one point the Chairman owned aninterest in 30% of all franchises.

      WE need to watch the out come of all this to see who goes to jail and who does not.

      Are there pizza franchisers looking to buy into KKD, and $325,000 a year a real numbers for this position?

    • I don't have to disprove your conjecture. If you want to classify your conjecture as fact have at it.

    • They certainly did with FR, to the tune of $750,000 during 4 weeks ending late September and $22.5 million over the course of FR's existence.

      gcff owes kkd over $9 million. That's about 5 months worth of receivables. How did that happen?

      Glazed Investments and New England Dough are likely in the same boat. When the Glazed Investments numbers actually come out, my guess is that the losses will be shocking. Take a look at the fy05 q3 income statement (from the p/r as the 10-q was never released). Look at the "Minority interest" entry. What does this loss imply about the 3 cjvs (Glazed Investments, Freedom Rings, New England Dough). Since that quarter, the external debt of those entities had not risen significantly (thru June 26th from the Aug 10 p/r). Do you think losses at those entities slowed down? No way, not with the massive drop in company store auv during the period. If losses continued to be huge for the next 9 months and debt didn't grow, who do you think was financing them?

    • Who knows, the owners could have reached in their pockets, they could have squeezed some areas of their business to produce a little cash, the bankers could have compromised.

      I just looked at the Lone Star legal filing from several months ago. The judge ordered that KKD continue to maintain customary terms (30-35 days) and could continue to debit Lone Star's account for purchases as it had done in the past. The judge also required Lone Star to post a $50,000 bond to ensure KKD didn't suffer financial damages as a result of the ruling.

      I can't get from that ruling to a statement that KKD is selling stuff to the franchisees that they know they'll never get paid for. I suspect most of the existing KKD A/R with franchisees is bad debt that will have to be written off, but doubt KKD is willingly adding more bad debt.

    • There's a connection between the two issues we are discussing here.

      KKDC said they believe ST is insolvent. Therefore, if KKD is financing ST, they are potentially liable for deepening insolvency, and they are doing so AT THE REQUEST of the lenders only.

      This means that to answer the question, we need to know if lenders would like KKD to finance ST. Would they? I think the answer is yes. They already threatened foreclosure in the past? did they change their minds?

    • Your going to be sorry you didn't listen to him!

    • You haven't had any proof for anything you have said on the board for the last six months, and that hasn't stopped you yet. So go on with your endless speculation about who is doing what to whom and when. It makes interesting reading, even if it is a fantasy.

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