FORM 10-K KRISPY KREME DOUGHNUTS INC - KKD Filed: April 17, 2008 (period: February 03, 2008) Annual report which provides a comprehensive overview of the company for the past year Table of Contents 10-K - ANNUAL REPORT PART I Item 1. Business 3 Item 1. BUSINESS. Item 1A. RISK FACTORS. Item 1B. UNRESOLVED STAFF COMMENTS. Item 2. PROPERTIES. Item 3. LEGAL PROCEEDINGS. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. PART II Item 5. Item 6. SELECTED FINANCIAL DATA. Item 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Item 9A. CONTROLS AND PROCEDURES. Item 9B. OTHER INFORMATION. PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Item 11. EXECUTIVE COMPENSATION. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURES EX-10.2 (FORM OF DEVELOPMENT AGREEMENT) EX-10.3 (FORM OF FRANCHISE AGREEMENT) EX-10.18 (EMPLOYMENT AGREEMENT) EX-10.19 (EMPLOYMENT AGREEMENT) EX-10.30 (FORM OF NONQUALIFIED STOCK OPTION AGREEMENT) EX-10.32 (ANNUAL INCENTIVE PLAN) EX-10.33 (FORM OF RESTRICTED STOCK) EX-10.34 (PURCHASE AGREEMENT) EX-21 (LIST OF SUBSIDIARIES) EX-23 (CONSENT OF PRICEWATERHOUSECOOPERS LLP) EX-31.1 (CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)) EX-31.2 (CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)) EX-32.1 (CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350) EX-32.2 (CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________ Form 10-K (Mark one) �� ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 3, 2008 OR �� TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-16485 KRISPY KREME DOUGHNUTS, INC. (Exact name of registrant as specified in its charter) North Carolina 56-2169715 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 370 Knollwood Street, 27103 Winston-Salem, North Carolina (Zip Code) (Address of principal executive offices) Registrant’s telephone number, including area code: (336) 725-2981 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Which Title of Each Class Registered Common Stock, No Par Value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes � No � Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes � No � Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes � No � Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. � Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer � Accelerated filer � Non-accelerated filer � Smaller Reporting Company � Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes � No � The aggregate market value of voting and non-voting common equity of the registrant held by nonaffiliates of the registrant as of July 27, 2007 was $449.8 million. Number of shares of Common Stock, no par value, outstanding as of March 28, 2008: 65,370,272. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive proxy statement for the registrant’s 2008 Annual Meeting of Shareholders to be held on June 17, 2008 are incorporated by reference into Part III hereof. Source: KRISPY KREME DOUGHNU, 10-K, April 17, 2008 Source: KRISPY KREME DOUGHNU, 10-K, April 17, 2008 Source: KRISPY KREME DOUGHNU, 10-K, April 17, 2008 TABLE OF CONTENTS Page FORWARD-LOOKING STATEMENTS 1 PART I Item 1. Business 3 Item 1A. Risk Factors 14 Item 1B. Unresolved Staff Comments 21 Item 2. Properties 21 Item 3. Legal Proceedings 22 Item 4. Submission of Matters to a Vote of Security Holders 24 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 25 Item 6. Selected Financial Data 27 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 57 Item 8. Financial Statements and Supplementary Data 59 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 104 Item 9A. Controls and Procedures 104 Item 9B. Other Information 105 PART III Item 10. Directors, Executive Officers and Corporate Governance 106 Item 11. Executive Compensation 106 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 106 Item 13. Certain Relationships and Related Transactions, and Director Independence 106 Item 14. Principal Accountant Fees and Services 106 PART IV Item 15. Exhibits and Financial Statement Schedules 107 SIGNATURES 114 Source: KRISPY KREME DOUGHNU, 10-K, April 17, 2008 As used herein, unless the context otherwise requires, “Krispy Kreme,” the “Company,” “we,” “us” and “our” refer to Krispy Kreme Doughnuts, Inc. and its subsidiaries. References contained herein to fiscal 2004, fiscal 2005, fiscal 2006, fiscal 2007, fiscal 2008 and fiscal 2009 mean the fiscal years ended February 1, 2004, January 30, 2005, January 29, 2006, January 28, 2007, February 3, 2008 and February 1, 2009, respectively. Please note that fiscal 2008 contained 53 weeks. FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains statements about future events and expectations, including our business strategy and trends in or expectations regarding the Company’s operations, financing abilities and planned capital expenditures that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs, assumptions and expectations of our future economic performance, considering the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties that may cause our actual results, performance or financial condition to differ materially from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. The words “believe,” “may,” “will,” “should,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” or similar words, or the negative of these words, identify forward-looking statements. Factors that could contribute to these differences include, but are not limited to: • the outcome of pending governmental investigations, including by the Securities and Exchange Commission (the “SEC”) and the United States Attorney’s Office for the Southern District of New York; • potential indemnification obligations and limitations of our director and officer liability insurance; • the quality of Company and franchise store operations; • our ability, and our dependence on the ability of our franchisees, to execute on our and their business plans; • our relationships with our franchisees; • our ability to implement our international growth strategy; • our ability to implement our new domestic operating model and refranchising strategy; • currency, economic, political and other risks associated with our international operations; • the price and availability of raw materials needed to produce doughnut mixes and other ingredients; • compliance with government regulations relating to food products and franchising; • our relationships with wholesale customers; • our ability to protect our trademarks; • risks associated with our high levels of indebtedness; • restrictions on our operations and compliance with covenants contained in our secured credit facilities; • changes in customer preferences and perceptions; • significant changes in our management; • risks associated with competition; and • other factors discussed below in Item 1A, “Risk Factors” and in Krispy Kreme’s periodic reports and other information