KKD, according to this morning's p/r, had accounts receivable $73.4 million at the end of Q2. This represents over 43% of revenue (39 days outstanding).
Why does KKD have such high receivables? After all, it's a RETAIL doughnut shop, right?
Well, for one thing, the company stated in the May 7th p/r that 60% of company store sales are offsite (which generate receivables). So, during Q3 (using 60% as a reasonable estimator), 60% of the $121.2 in company stores sales ($72.7 million) is offsite. KKD states that their receivables terms are 30 days for offsite and as much as 54 days for franchisees (equipment purchases).
Let's backout what the days outstanding to franchisees are assuming that all offsite sales are fully aged (30 days). We therefore expect that 30/91 * $72.7 = $24.0 million as the outstanding a/r due to offsite sales.
What about the residual ($72.7 - 24.0) of $48.7 million?
kkd's other revenue (franchise royalties/fees and mix/equipment sales) is from franchisees; this was $6.2 (franchise royalties/fees) + $42.7 (mix/equipment sales) = $48.9 million.
So, assuming that the offsite customers are paying on-time (in exactly 30 days), the entire residual receivable total represents 99.6% ($48.7 / 48.9) or over 90 days outstanding from FRANCHISEES.
Let's further assume that 4 stores had been delivered unpaid for equipment (Q3 had 4 franchisee openings); at $600,000 per store, that's $2.4 million (we'll give kkd a break and say all these sales occured in the last 56 days of the quarter).
So, $48.9 - $2.4 = $46.5 million is due to mix sales to and royalties due from franchisees.
33.3% of the quarterly royalties is $2.1 million. So, $46.5 - $2.1 = $44.4 million is outstanding mix sales to franchisees.
Therefore, of the $40.2 million in mix sales ($42.7 - 2.4), 110% of it has not been paid (100.5 days).
This is WAY, WAY too high. IMO, this is evidence of MASSIVE CASHFLOW PROBLEMS AT THE FRANCHISEES.
If, however, you want to argue that the franchisees are likely paying on-time, then the alternative interpretation of the high receivables (inability to collect from offsite vendors) is nearly as troublesome (inevitability of large charge for uncollectible accounts).
I don't know what math you used but let me try to explain...
Say you have $1,000.
Trade 1 - You make $200
Trade 2 - You make $300
Trade 3 - You make $200
Trade 4 - You make $400
Trade 5 - BK You lose $1,000
Trade 6 - You make $200
Trade 7 - You make $400
Trade 8 - You make $200
Trade 9 - You make $200
Trade 10 - You make $200
10% of the time you lost when the company went BK but you more than make up for it with the other 90%.
Dog Track has better odds?
Of course it's gambling. Who said anything about me being an investor! And yes to play with anything else other than money you can afford to lose is foolish!
Using your figure of 10% (to go BK), if I can make 20-50% on my money with only a 10% chance of losing it all (or most of it), I'll take the risk. Do the math.
All i'm saying is insiders/management are hedged short. They have shown NO indication of covering at these levels. Market Makers are relunctant to raise price levels with optimism-in fact it looks pessimistic after a $12.80 peak on last small up-tick to lows hit yesterday. It looks and smells like better prices are ahead if you want to buy more shares in the future !!
Go crawl back under your rock BASHOR.I just looked at the CALLS & PUTS BOARD.If you are so adamnant KKD is going south--Buy PUTS for .55.Wednesday will be huge dead cat bounce with shorts missing the boat to cover in single digets
Sorry but your post sounds like desperation! Keep telling yourself over and over and maybe it will come true!
I'm not saying I'm right and you're wrong but there is a point you have to admit to yourself, I made a mistake a go on from there. I'm sure you would have bought yesterday if you knew where we would be today (I would have bought twice as much!). Now you're thinking it's too high to jump in (I don't think so but it may be). Wait if you want, who knows, you might get your price! However there is also a good chance you'll miss the ride up too. Good luck.