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Krispy Kreme, Wells Fargo Increase Revolving Credit Facility to $40MM

July 15, 2013, 07:52 AM

Krispy Kreme Doughnuts announced that on Jul. 12, the company refinanced its secured credit facilities.  In connection with the refinancing, the company retired in full the $22 million balance of its term loan and increased the size of its revolving credit commitments from $25 to $40 million.  An SEC filing lists Wells Fargo as the adminstrative agent on the revolving credit facility. In addition, the company's board of directors has approved the repurchase of up to $50 million of the company’s common stock, effective immediately. 

The refinancing and the retirement of the term loan are expected to result in a decrease in interest expense of approximately $1 million in the first twelve months following the transaction, principally reflecting the elimination of interest on the term loan, lower costs for outstanding letters of credit, and elimination of the amortization of the cost of an interest rate hedge and the amortization of deferred financing costs related to the retired term loan.

The company expects to record a non-cash charge resulting from the transaction of approximately $1 million in the second quarter, consisting principally of the write-off of the deferred financing costs related to the retired term loan and the termination of a related interest rate hedge.

As of Jul. 12, there were no borrowings outstanding under the revolving facility; the only current utilization of such facility was to support outstanding undrawn letters of credit of approximately $9 million related to the company’s self-insurance programs.

The $50 million share repurchase program will be implemented, as market conditions permit, through purchases made from time to time in either open market or private transactions, in accordance with Securities and Exchange Commission requirements.  As of July 12, 2013, the company had approximately 66 million shares outstanding.

“Having completed a $20 million share repurchase program last year, we view this $50 million additional repurchase authorization as a further indication of Krispy Kreme’s financial strength, our outstanding free cash flow generation, and our positive outlook for the future,” commented James H. Morgan, chairman, president and CEO.  “The substantial improvements we have made to operating results and the balance sheet over the past several years make us confident we have the capital resources to both implement and potentially expand the scope of our growth plans.  While we will always seek to first deploy cash to grow the business, we will complement that usage, as appropriate, with other means of increasing shareholder value.  The repurchase authorization announced today reflects our desire to further enhance shareholder returns when our cash flow generation is excess to our current needs and when doing so is in the best interests of our shareholders.”

As previously announced, the company forecasts generating adjusted net income for fiscal 2014, ending February 2, 2014, in the range of $42 to $45 million.  If achieved, this would represent an increase of between 28% and 37% over the $32.9 million of adjusted net income earned on a 52-week basis in fiscal 2013.

As of Jul. 12, the company’s cash balance was approximately $55 million and unused borrowing capacity on its revolving credit facility was approximately $31 million. 

To view the most recent SEC Filing by the company click here.

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