Question

Income Statement and Balance Sheet

KRISPY KREME DOUGHNUTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended Feb. 1, 2015 (In thousands, except per share amounts)

Revenues $ 383,984

Operating expenses:

Direct operating expenses (exclusive of depreciation and amortization

shown below) 345,007

General and administrative expenses 23,458

Depreciation and amortization expense 8,709

Impairment charges and lease termination costs 548

Settlement of litigation — (14,930 )

Other operating (income) and expense, net 1,501

Operating income (loss) 4,761

Interest income 331

Interest expense (10,679 )

Loss on extinguishment of debt —

Equity in losses of equity method franchisees (786 )

Other non-operating income and (expense), net 2,815

Loss before income taxes (3,558 )

Provision for income taxes 503

Net loss $ (4,061 )

KRISPY KREME DOUGHNUTS, INC.

CONSOLIDATED BALANCE SHEET

Feb. 1, 2015 (In thousands)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 35,538

Receivables 19,229

Accounts and notes receivable — equity method franchisees 1,019

Inventories 15,587

Deferred income taxes 106

Other current assets 4,327

Total current assets 75,806

Property and equipment 85,075

Investments in equity method franchisees 1,187

Goodwill and other intangible assets 23,856

Other assets 9,002

Total assets $ 194,926

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt $ 1,413

Accounts payable 8,981

Accrued liabilities 29,222

Total current liabilities 39,616

Long-term debt, less current maturities 73,454

Deferred income taxes 106

Other long-term obligations 23,995

Commitments and contingencies

SHAREHOLDERS’ EQUITY:

Preferred stock, no par value; 10,000 shares authorized; none issued and outstanding---common stock, no par value, 300,000 shares authorized; 67,512 and 65,370 shares issued and outstanding 361,801

Accumulated other comprehensive income (loss) (913 )

Accumulated deficit (303,133 )

Total shareholders’ equity 57,755

Total liabilities and shareholders’ equity $ 194,926

9. Analysis: Please analyze the information presented above and discuss what conclusions you can draw from this information.

Answer 1

The net profit margin, operating income margin and return on equity are all negative due to net loss.

The current ratio and the quick ratio show that the company will be able to meet its short term obligations as it has a fair amount of current and quick assets as compared to its current liabilities.

The debt to equity ratio and the financial leverage ratio show that the debt component in the capital structure is more than the equity structure.

The fixed assets turnover ratio show that the company is able to use its fixed assets efficiently in order to generate revenue.

All the ratios, however, should be compared with the industry average or the peerset average to get a better understanding of the company's position in the landscape.  

	AMOUNT		ASSETS	AMOUNT
Revenue	383984		Current Assets:
Operating Expenses:			Cash and Equivalent	35538
Direct operating expenses	345007		Receivables	19229
General and admin expenses	23458		Receivables - franchises	1019
Dep and amortization	8709		Inventories	15587
Impairment	548		Deferred Income Tax	106
Litigation settlement	14930		Other current assets	4327
Other operating income & exp	1501		TOTAL	75,806
TOTAL	394153		Property and Equipment	85075
Operating Income	-4761		Investment in franchises	1187
Interest income	331		Goodwill	23856
Interest expense	-10679		Other assets	9002
Losses on equity method franchises	-786		TOTAL ASSETS	194,926
Other non-operating income and expenses	2815
EBT	-3558		LIABILITIES AND EQUITY
Provision for taxes	503		Current liabilities:
Net loss	-4061		Current maturities of long term debt	1413
			Accounts payable	8981
			Accrued liabilities	29222
			TOTAL	39616
			Long term debt	73454
			Deferred income taxes	106
			Other long term obligations	23995
			Shareholder's equity	57755
			TOTAL	194926
Net margin	-1.06%
Operating income margin	-1.24%
Current ratio	1.91
Quick ratio	1.52
Debt to equity ratio	1.30
Financial leverage ratio	2.06
Fixed assets turnover ratio	3.22
Return on equity	-7.03%