4. Preview Exhibits 7 & 8, and comment on how these tables might look had Krispy Kreme originally followed the SEC recommendation as the "right thing to do" and amortized the reacquired franchises? Exhibit 7 KRISPY KREME DOUGHNUTS, INC. Analytical Financial Ratios for Krispy Kreme Jan 30, 2000 Fiscal Year Ended Jan 28, Feb 3, Feb 2, 2001 2002 2003 Feb 1, 2004 1.05 1.39 1.46 1.77 1.63 1.94 1.96 2.36 2.72 3.25 47.96% 32.41% 7.11 2.20 0.00% 0.00% 38.73 1.36 2.47% 2.41% 124.29 1.36 19.46% 16.29% 33.59 1.50 11.26% 10.12% 23.15 1.46 Liquidity ratios Quick (acid-test) rati Current rati Leverage ratios Debt-to-equity (book) Debt-to-capital Times interest eamed Assets to Equity Activity ratios Receivables tumover Inventory turnover Asset tumover Cash turnover Profitability ratios Return on assets Return on equity Operating profit margin Net proft margin 10.81 19.04 2.10 69.19 12.16 20.84 1.75 42.80 10.19 19.61 1.54 18.00 10.61 15.66 1.20 15.26 9.70 17.76 1.01 32.79 5.67% 12.47% 4.92% 2.70% 8.59% 11.72% 7.82% 4.90% 10.33% 14.06% 10.62% 6.69% 8.16% 12.25% 12.17% 6.81% 8.649 12.62% 15.34% 8.58% Exhibit 8 KRISPY KREME DOUGHNUTS, INC. Analytical Financial Ratios: Quick-Service Restaurants at End of FY2003 CHE $1413 JACKIN DOMINO'S THE BOX $1,333 $2.05 CHICKERS $190 KRISPY PANTRA KREME MCDONALD'S BREAD 5666 $17,141 $156 PAPA JOHN'S $917 YUME SONIC STARBUCKS WENDY'S BRANDS $447 $4,076 S3,149 $8,380 0.96 1.41 047 0.76 0.60 0.99 0.23 0.63 2.72 3.25 0.49 0.76 0.33 0.77 0.77 0.92 0.26 0.55 0.76 1.52 0.61 0.88 1.5 0.21 0.21 33.96 25 36 6.98 1.76 262.97 (131.07) 72.45 421.90 (0.09) 2.05 5.29 (0.62) 61.82 38.20 5.44 2.50 11.26 10.12 23.15 1.46 77.97 0.00 43.81 0.00 6.93 1.014.10 2.13 1.26 38.30 26.98 8.91 2.18 62.53 3.11 14.09 39 39 18357 28.26 64.74 9.25 5.79 180 5.02 1.31 Company name Sales-net (milions) Liquidity rates Quick to Current ratio Leverage ratios Long-term deb/shareholders' equly (9) Long term debtotal capital (9) Interest coverage before tax Total assets total equity Activity ratios Receivables TV Inventory tumover Toulassett Casumover Profitability rates Return on asets (5) Return on equity) EBIT margin() Net profiter 27.49 38.44 10.5 65.07 133.19 1.50 35.15 59.30 1.75 3883 20.63 46.58 3.16 40.90 71 22 523 1.84 147.12 9.70 21.56 17.76 I 39.54 1.01 0.69 32.79 41.64 50.20 38.75 1.64 2.57 8.74 T10.73 28.42 79.5 1.08 17.12 49.73 91.32 1.52 46.04 1.00 40.31 10.84 12.00 7.46 8.66 55.18 12.23 21.55 1.24 (592) (31.30) 3.49 15.65 64 1262 1534 XSN 591 12.59 19.62 8.NO 12.46 15.64 14.02 361 9.79 21.30 6.38 3.70 10.75 19.69 23.42 11.70 983 12.89 94 6.58 13.20 2.91 6.94 3.58 1315 7.49 7.37 Data source: Standard & Poor's Research Insight Checkers Drive-in Restaurants, Inc.: Checkers is the #1 operator of drive-through fast-food restaurants, with more than 780 owned and franchised locations. Nearly 30% of its locations are company owned CKE Restaurants, Ine: CKE is a leading operator of quick-service food chains, with about 3,100 locations. CKE owns and operates more than a third of its restaurants, the rest are operated by franchisees. Domino's Pizza, Inc.: Domino's is the world's #2 pizza chain, with more than 7.750 locations in more than 50 countries. Domino's stores are principally delivery locations and generally do not have any dine-in seating Jack in the Box Inc. Jack in the Box operates and franchises more than 2,000 of its flagship hamburger outlets in 17 states. Approximately 1,550 locations are company-owned, while the rest we franchised Sonic Corp.: The largest chain of quick-service drive-ins in the United States, Sonic operates about 535 restaurants and franchises more than 2,325 locations in 30 states. Starbucks Corp.: The world's Mi specialty-coffee retailer, Starbucks operates and licenses more than 8.500 coffee shops in more than 30 countries. In addition, Starbucks markets its coffee through grocery stores and licenses its brand for other food and beverage products. Wendy's International, Inc.: Wendy's is the 3 hamburger chain by sales. There are almost 6,700 Wendy's restaurants worldwide, about 78% of them are franchised McDonald's Corp.: McDonald's is the world's fast-food company by sales, with more than 31,000 flagship restaurants serving burgers and fries in more than 100 countries. Almost 30% of its locations are company owned, the others are run by franchisees YUM! Brands, Inc. YUM! Brands is one of the largest fast-food franchises in the world, trailing only McDonald's in overall sales. It outnumbers the burger giant, however, in store locations, with more than 33,000 units in about 100 countries. The company owns and operates almost alquarter of its stores and franchises most of the others.) The company's flagship brands include KFC, Pizza Hut, and Taco Bell. Yum! also owns A&W All-American Food Restaurants and Long John Silver's Its long-term multibranding strategy offering more than one of its brands at one site) has proven successful Panera Bread Company Panera Bread is a leader in the quick-casual restaurant business, with more than 740 bakery-cates in about 35 states Approximately 70% of its locations are operated by franchises Wisconsin- Mom See202010 Papa John's International, Inc.: Papa John's the puza chain, with 3,000 pizzerias across the United States and in 17 intentional markets Papa John's owns and operates about 20% of its focus Data source: Hoover's, Inc. (accessed Nov. 14, 2005)