Market Screams Ahead: Dow Rises Nearly 500 Points

The stock market ended November with a no-holds-barred rally, as the Dow posted its largest point and percentage gain since March 2009. The index ended 490 points higher at 12,045.7. The S&P 500 rose 51.8 points to 1247.

The stunning rally was spurred by a series of big headlines that came out in different parts of the world: China lowered its reserve requirements for banks, six central banks including the Fed announced a plan to reduce the cost of dollar swaps for European banks, and a report on U.S. private-sector jobs showed substantial growth.

This is the kind of news that investors have been waiting for: policymakers acting together to prop up the banking system and increase liquidity, and another sign that the U.S. is not slipping into a double-dip recession.

Bank stocks jumped immediately after the pre-market Fed announcement, and kept climbing for most of the day into the close. Citigroup (C) ended 8.9% higher, and Morgan Stanley (MS) rose a jaw-breaking 11%.

November has been a rocky month for the market, and the Dow would have ended the month in the red had the market not posted a strong rally today. For the month, the index was up only 90.7 points. The S&P 500 was actually off 6.3 points in November, or 0.5%.

For the month, Home Depot (HD) led the Dow, rising 9.6%. Bank of America (BAC) was the weakest performer falling 20%.

Pfizer: Dividend Dynamo or the Next Blowup?

Dividend investing is a tried-and-true strategy for generating strong, steady returns in economies both good and bad. But as Corporate America's slew of dividend cuts and suspensions over the past few years has demonstrated, it's not enough simply to buy a high yield. You also need to make sure those payouts are sustainable.

Let's examine how Pfizer (NYSE: PFE  ) stacks up in four critical areas to determine whether it's a dividend dynamo or a disaster in the making.

1. Yield
First and foremost, dividend investors like a large forward yield. But if a yield gets too high, it may reflect investors' doubts about the payout's sustainability. If investors had confidence in the stock, they'd be buying it, driving up the share price and shrinking the yield.

Pfizer yields 4%, considerably higher than the S&P's 1.9%.

2. Payout ratio
The payout ratio might be the most important metric for judging dividend sustainability. It compares the amount of money a company paid out in dividends last year to the earnings it generated. A ratio that's too high -- say, greater than 80% of earnings -- indicates that the company may be stretching to make payouts it can't afford, even when its dividend yield doesn't seem particularly high.

Pfizer has a moderate payout ratio of 62%, though that figure falls quite a bit to 34% on a free cash flow basis.

3. Balance sheet
The best dividend payers have the financial fortitude to fund growth and respond to whatever the economy and competitors throw at them. The interest coverage ratio indicates whether a company is having trouble meeting its interest payments -- any ratio less than 5 is a warning sign. Meanwhile, the debt-to-equity ratio is a good measure of a company's total debt burden.

Pfizer has a moderate debt-to-equity ratio of 47% and an interest coverage rate of 12 times.

4. Growth
A large dividend is nice; a large growing dividend is even better. To support a growing dividend, we also want to see earnings growth.

All told, over the past five years, Pfizer's earnings plunged have sunk at an average annual rate of 6%, while its quarterly dividend has gradually risen to $0.22 after being cut in half from $0.32 to help finance its 2009 acquisition of Wyeth.

The Foolish bottom line
So is Pfizer a dividend dynamo? Perhaps. It has a high yield, a moderate payout ratio, and manageable debt. However, dividend investors will still want to keep an eye on how well Pfizer is able to manage its pipeline issues as more of its brand-name drugs continue to go off patent to ensure that the company is able to grow its earnings over time. If you're looking for some solid dividend stocks, I also suggest you check out "Secure Your Future With 9 Rock-Solid Dividend Stocks," a special report from The Motley Fool about some serious dividend dynamos. I invite you to grab a free copy to discover everything you need to know about these 11 generous dividend payers.

This Apple Rumor Checks Out

It's that time of year again!

No, not the time for fireworks under the frosty stars, or tipsy hugs as the world's largest disco ball drops on Times Square. I'm not even talking about the end of the tax year (but you'd better have your tax-planning stock sales done by now, buddy).

This is the time of year when rumors about the next Apple (Nasdaq: AAPL  ) iPad pop up, silly.

Today, the hot tip from Taiwanese business publication DigiTimes says that the iPad 3 will get a fancy new screen that rivals the resolution of the iPhone Retina display. We're talking about a full HD screen in 10 inches of diagonal real estate, courtesy of indium gallium zinc oxide panels from Sharp.

Mind you, this particular news outlet is about as reliable as your iPod after an accidental turn through the washer and dryer. For example, DigiTimes also claims that the new tablet will be unveiled at the Macworld conference -- a show that Apple hasn't attended since 2009.

That said, this particular report could be on the money. Sharp suited up for TV-sized IGZO screen production last spring and could easily adapt the production line to smaller screen sizes. The technology provides image quality on par with the Retina displays using lightly modified equipment for making lower-quality amorphous TFT LCD screens.

Low-cost but high-quality gear like that is right up Apple's Infinite Loop. The display assembly is by far the most expensive component in today's iPads, so any opportunity to save a buck while juicing the quality should be welcome.

Moreover, a 10-inch IGZO screen is said to use less power than traditional LCDs. Apple absolutely loves bragging about battery life.

And if DigiTimes doesn't float your boat, The Wall Street Journal also says that Sharp is paking next-generation iPad screens in its Kameyama 2 factory. That just happens to be the exact factory that Sharp converted to IGZO manufacturing a few months ago.

It's all coming together. Even the purported release date might be right, though Tim Cook would probably throw his own shindig to launch the tablet rather than genuflecting at the Macworld Expo.

Whenever it launches and whatever's inside it, the iPad 3 should help Cupertino impress my friends even further. But it's not the only top-notch portfolio play in the mobile market today. Check out three ideas for 2012 that are set to soar whether Apple kills Android or the other way around.

Luxeyard, Inc. (LUXR.OB) Ready to Take the Flash Sales Industry by Storm

Luxeyard, Inc. (LUXR) owns and operates www.luxeyard.com, a members-only "flash-sale" e-commerce site for luxury home furnishings, decor and fashion that offers access to unique products at sub-retail prices. LuxeYard is the pioneer of Concierge Buying, which gives members the power to determine what items will be sold on the site, and Group Buy, which allows them to lower the price by sharing sale items with friends. LuxeYard partners with celebrity Trendsetters and design and fashion industry insiders to deliver a curated buying experience and point of view to its members.

'Flash Sales' Market Opportunity

The term 'flash sale' may not be a familiar one to some investors, but the concept is universally known at this point. A flash sale is a deeply-discounted sale on goods intended to liquidate a lot of overstocked inventory in a very short period of time. In many regards it's akin to the Groupon business model, which sells deeply-discounted goods too, via limited-time coupons or vouchers.

Manufacturers and wholesalers love flash sales because they can clear out a huge amount nagging inventory in relatively little time. The weak profit margin associated with the low sale price isn't even a worry with flash sales - the goods just have to be moved.

Consumers love flash sales too, for the obvious reason - they're getting a great deal.

The challenge is connecting the sellers who want to dump a massive amount of merchandise at any cost to consumers who are willing to buy those goods at the right price. Groupon isn't the answer, because it tends to deal with food and service offers. It simply isn't equipped to sell large-but-finite quantities of retail merchandise. Overstock.com isn't quite the answer either, as it's designed to be more of an online store with a constant variety of goods for sale. Overstock's prices aren't always all the competitive either, as the company has gotten away from its 'overstock' roots.

A company like Luxeyard, Inc. is the solution, however, as it provides the e-commerce marketplace where shoppers can buy what manufacturers are willing to sell at rock-bottom prices, at least for a limited time (usually while quantities last).

And make no mistake... flash sales are a full-fledged industry right here, right now, just like social networking and online daily deal coupons.� In fact, it's following in the same development footsteps as social networking and daily deals, and within a year could be as high-profile as both of those other two industries are now. It's been estimated that the flash sales industry quietly generated $1.5 billion in sales last year, which was double 2010's total flash sales revenue. That growth streak is expected to continue into 2015, when the flash sales market is estimated by some to be worth $6 billion.

LUXR Overview & Business Model

Luxeyard, Inc. hosts its flash sales through its free-membership website www.luxeyard.com. The e-commerce portal presently offers two venues at the site - fashion apparel, and furniture, with a bias for the higher-end luxury names within those two categories. Further category breakdowns have been planned, including home accessories, bedding, travel, and even consumables like wine or chocolate. �

The operation is a very new one, with the website only becoming operational in late January. Yet, the site has already amassed more than 400,000 members, and the company expected 1 million members to be in the fold by the end of 2012's second quarter. That membership roster is critical too, since 'members' tend to be regular and recurring spenders.

The operation is simple on the surface, though brilliant under the hood. Luxeyard.com offers retailers something of a self-service platform, where each of them can add and edit their special offer for what's usually about a day, or sometimes more. The discounts from, retail prices are generally 60% to 70%.

On that note, it's important to understand that Luxeyard, Inc. stores little to no inventory. It doesn't need to. The vendors and manufacturers themselves simply drop ship the items to buyers; Luxeyard simply collects a commission. As such, the business is a high-margin one, with no need for accounts receivable arm.

As for marketing, the sales-promotion effort is equally simple, and equally brilliant, consisting of two key components. �

One of those components is the involvement of high-profile 'trendsetters' that can suggest particular items. Celebrities like Nicky Hilton and Bobby Berk have been featured as a couple of the site's trendsetters.

The other key marketing component is a concept called 'Group Buy', which Luxeyard is pioneering in the flash sale space. Simply put, the more people that buy a particular product, the lower the price gets for each customer buying that item. The price-break structure encourages each buyer to forward the deal on to his or her friends and family, potentially lowering the price for everyone.

Of course, deep discounts alone are also a powerful marketing tool. The more Luxeyard can offer, the more visitors it can attract, which means it can go out and add even more vendors to its list of suppliers.

In sum, Luxeyard, Inc. is positioned to become a leading name and leading investment opportunity within the flash sales segment of the online-retailing market because it offers low prices for luxury goods, utilizes consumer driven (social network) marketing, has a low-cost operating model, and ffers real value to vendors

Luxeyard Management Team

As is so often the case with a young startup, the likely success of www.luxeyard.com has as much to do with its leadership as it does the business idea itself. To that end, Luxeyard's management team is nothing less than top-notch.

Braden Richter, CEO

Braden Richter has been a successful entrepreneur and CEO for over 19 years. He was CEO of Archetype Design Development, where he developed designs and sales strategy for some top US retailers such as Pottery Barn, West Elm, Williams Sonoma and American Signature.

As the founder and President of Richter Designs, Braden started the company with a $2,000 investment, and grew the company to over $70,000,000 a year in annual sales and 450 employees. During this time he worked directly with CEO's of Restoration Hardware, Crate & Barrel and Pottery Barn with efforts to improve store aesthetics and design.

He opened 6 manufacturing plants and 5 wholesale showrooms. Prior to that he was employee number 3 at Shabby Chic, Development Supervisor/Head purchasing agent all at the age of 21, and assisted in growing the company from start up to a $25,000,000 retail and wholesale chain.

Steve Beauregard, COO

Prior to LuxeYard Steve Beauregard was President and Founder of REGARD Solutions Corp, a successful mobile, social and eCommerce development firm for multi-channel retailers and venture-backed startups.

Steve was the driving force behind bringing on key accounts such as Sony Pictures, Coffee Bean & Tea Leaf, J Hilburn, Ray-Ban, Wells Fargo, Harbor Freight Tools, DIRECTV, and Burlington Coat Factory.

Steve was featured in Entrepreneur Magazine (9/07), is often quoted in trade mags, has spoken at international mobility conferences and is a frequent guest speaker on entrepreneurship at numerous southern California universities including USC, UCLA and Pepperdine.

Margot Ritcher, CFO

In January of 2012, Margot Ritcher joined LuxeYard from Arcadian Management Company where she served as interim controller, helping the company prepare for an IPO. Prior to Arcadian, Ms. Ritcher ran an executive management consulting practice for companies including USA Broadband, CBRE Richard Ellis, People Support, Paycom, SpotRunner, and Nextwave Telecommunications.

Earlier in her career, Ms. Richter was employed as Controller of DirecTV domestic. From there she worked her way up to Vice President of Business for DirecTV International. During her nine-year tenure, she helped take DirecTV from 20 employees and no revenue to over 2,000 employees and $9 billion in revenues.

Kate Richter, VP of Brand Sales

Kate Richter was the President of Birdie Joe, a high-end fashion sportswear line. Kate successfully grew the company from infancy to a nationally recognized brand carried in major department stores internationally.

Due to her background in furniture (Calvin Klein home collection lead developer), fashion and marketing Kate was an easy fit for the upstart later to be known as HauteLook. She developed the business with tremendous success in its first year doubling the company's projections and exceeding $30 million by the end of 16 months. Hautelook sold out to Nordstroms last year for $270 million.

Eula Smith, VP of Apparel

Eula Smith is a highly experienced 20+ year Nordstrom senior apparel buyer and retail-merchandising expert. For the past decade, Eula has run a consulting firm specializing in new store openings, product development and product mix and placement. In addition to
Nordstrom, her clients include Paige Denium, Belk, Dillard's, and Winter Kate to name a few.

David Shor, VP of Marketing

As a seasoned digital marketing strategist, advertising executive and technology entrepreneur Mr. Shor has launched four successful media companies. As a data-driven analytics and search engine marketing expert, Mr. Shor served a wide variety of companies such as Procter & Gamble, Disney, GE, Chase Bank, and WalMart.

LUXR Valuation and Analysis

With most startups in a budding industry - particularly one that hasn't even posted any quarterly numbers yet - it's more than a little difficult to piece together a valuation model or establish a reasonable price target. In the case of LUXR, there are actually some industry metrics we can apply to make a pretty meaningful guess as to what the stock and company should be worth.

That metric is the monetary value per member, as witnessed through acquisitions of and fund-raising for competing flash sales sites.

Take One Kings Lane for instance. With approximately 2 million members in its fold, it reached an inferred $440 million valuation with its latest round of fund-raising. That's $220 per member. Similarly, Zulily was estimated to be worth $750 million after its recent $43 million fund-raiser. That works out to be a value of $187.50 per member Vente Privee's 13,000,000 members make the company worth an estimated $3 billion, or $230.77 per member.

All told, the average value-per-member for the flash sales' industry's companies works out to be $197 each. That number multiplied by Luxeyard's current 425,000 members translates into a reasonable company valuation of $83 million. If the company reached that 1 million-member target by the end of Q2 (and it looks like it will), that same valuation math works to make the company worth $197 million.

And what's LUXR worth right now? A mere $47 million. Point being, no matter how one slices it, the stock is undervalued in its current situation, and will be even more undervalued at the end of this quarter if investors don't start recognizing the metrics.

That said, it's unlikely these metrics will go unnoticed for that long. The story's starting to spread, and a growing number of traders are already accumulating positions, knowing what's apt to be in store. And why not? It's the only publicly-traded flash sale opportunity out there. The rest are privately-held or owned by venture capital companies. �

Even without the comparison metrics though, LUXR looks like a solid speculative opportunity.

Simply put, Luxeyard is a well-planned organization with powerful differentiators that should allow it easily break into the flash sales space and quickly win market share.

Along with the previously-mentioned Group Buy, with which consumers can lower the price tag on any flash sale item by encouraging more people to buy the item, www.luxeyard.com is also developing a Concierge Service that will allow the site's members to request certain goods be brought to the site to sell. That type of customized proposition will keep the crowd interested, while celebrity 'Trendsetter' endorsements will funnel newcomers to the marketplace.

And, the flash sale space is proven. Companies already in the industry have shown historical revenue growth up to as much as 30% per month.

More than any of that though, LUXR is a compelling opportunity because it's a low-risk, high-margin business model. All Luxeyard needs to do to pump up the top and bottom line is attract a crowd, and bring more vendors into the fold (the two fuel each other). There's no retail store overhead, no accounts receivable, and no inventory to store. That allows the organization to continue differentiating itself from its competition - which it is - while simultaneously riding the bigger flash sales growth wave.

Based on the per-member model, some analysts are pegging a current value for LUXR shares at $1.32 - a number we don't disagree with. Based on the membership growth though, that price target is pushed up to above $3.00 by the end of the quarter. Again, it's not a number we disagree with. It also represents a quadrupling of the current value... a move most anybody would be happy with. Micro cap speculators should consider a position now.

Holding:No Position Disclosure: SmallCap Network has been compensated $10,000 from Next Media LLC for market awareness and other advertising services on LUXR.

Tourists Fail to Boost Employment in Spain

A bull ring in the Spanish capital, Madrid.

Even the influx of tourists during peak travel season has failed to boost Spanish employment out of the doldrums. While more people were working in May than in April, fewer found employment this year than during last year’s tourist season. At the same time, Prime Minister Mariano Rajoy called for direct aid to banks in need of financial assistance and China sought plans to cope with a Greek exit from the euro zone.

Bloomberg reported Monday that while the number of those registering for unemployment benefits in Spain fell during May by 30,113, a year ago that number was more than twice as large at 79,701. The Labor Ministry data indicated that this May is the worst showing since the beginning of the financial crisis in 2008.

Unemployment still lingers above 24%, and with tourism the country’s biggest economic factor, a lack of relief in that sector will make it even harder on the beleaguered country to make the cuts it has mandated in its deficit reduction plan.

“Even seasonal hiring is becoming difficult for cash-strapped Spanish companies,” Thibault Mercier, an economist at BNP Paribas in Paris, said in the report. Added to the country’s bank woes, it appears increasingly likely that Spain will be the next in line for a bailout.

Rajoy’s government, however, said that it was not under pressure from other eurozone countries to seek a rescue package. An unidentified government spokeswoman also denied a report in the newspaper El Pais that Madrid is negotiating for aid from the European Union for its banks that would not be considered a bailout.

On June 2 Rajoy called for funds to come directly to troubled banks rather than being routed through government channels. That added to the push on Chancellor Angela Merkel of Germany to consider a sturdier “banking union” in Europe.

Rajoy encouraged other eurozone member countries to “cede more sovereignty” to a central fiscal authority, and also voiced support for the European Commission’s (EC) call for a banking union that would include a single regulator and a deposit guarantee fund.

Merkel, however, has been steadfastly opposed to any measures that would lead to such things as joint euro bonds, although she has become increasingly isolated in her position as one after another of the eurozone countries have called for growth rather than austerity and a greater financial interdependence among the countries in the bloc.

Among those pressuring Germany is the billionaire investor George Soros, who was quoted saying on Saturday, “We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.”

On Sunday, Pierre Moscovici, the new French finance minister, added his voice to the chorus, saying that aid for troubled European banks should come through the European Stability Mechanism (ESM) rather than through governments. “We need to go toward a banking union,” he was quoted saying.

Spain’s troubles may be taking temporary center stage, but meanwhile the days are still ticking down toward a second Greek election. Should the results be inconclusive or come down on the side of renegotiating or abandoning its agreement with European officials for its second bailout, it could end up departing the eurozone—and China wants to be ready.

Reuters reported Monday that Chinese sources said the government has asked a number of prominent agencies, including the country’s central bank, its banking regulator and the National Development and Reform Commission, to prepare plans to deal with the fallout from a Greek exit from the eurozone.

"It's very urgent," the report quoted one source as saying. "The government has asked every department to analyze measures to cope with a Greek exit from the eurozone and make their own suggestions as soon as possible."

In comments that appeared last week, Yu Yongding, an influential economist and a former central bank adviser, proposed actions that included capital controls and cash injections to domestic markets to cut volatility.

On Monday the head of the central bank said that China would continue to invest in eurozone government debt and other assets, and also exhorted the eurozone to more quickly implement reforms that would resolve the debt crisis.

Top Stocks For 2012-1-4-5

Ctrip.com International Ltd. (Nasdaq:CTRP) announced that it will hold its 2011 annual general meeting of shareholders at 6F, 99 Fu Quan Road, Shanghai 200335, People’s Republic of China on October 20, 2011 at 10:00 a.m. (local time). No proposal will be submitted to shareholders for approval at the meeting.

Ctrip.com International, Ltd. is a leading travel service provider of hotel accommodations, airline tickets, packaged tours and corporate travel management in China.

Acme Packet, Inc. (Nasdaq:APKT) provided a financial update for the quarter ended September 30, 2011 and reaffirmed its business outlook for 2011.Total revenues to be approximately $70 million. Non-GAAP1 gross margin to be approximately 84%. Earnings per share on a non-GAAP1 basis to be between $0.20 and $0.22.

Acme Packet, Inc. provides session delivery network solutions that enable the delivery of interactive communications, such as voice, video, and multimedia sessions; and data services across internet protocol (IP) network borders.

Diodes Incorporated (Nasdaq:DIOD) announced the AL8807 buck LED driver. Switching at a frequency of up to 1MHz and ensuring closely controlled rise and fall times, the AL8807 reduces EMI issues in the lower cost MR16 LED lamp market. To achieve required higher output powers, the driver can operate at input voltages between 6V to 30V and provide up to eight series-connected LEDs with a constant 1A current.

Diodes Incorporated, together with its subsidiaries, designs, manufactures, and markets semiconductor products worldwide.

Global Hunter (GBLHF.PK)

Global Hunter’s focus is on strategic and base metals, with an advanced stage copper oxide project in Chile and a highly prospective molybdenum property in British Columbia, Canada. GBLHF teams are working on developing the Corona de Cobre property in Chile and the Rabbit south property in British Columbia.

There is a widespread use of Molybdenum in various fields ranging from fertilizer to structural material for spacecrafts. It is material for the future. Research is going on worldwide on development of high temperature material based on Molybdenum. The main uses for Molybdenum are:

(1) Alloying element in steel: It is used as alloying element in high-strength steels and stainless steels because it readily forms hard, stable carbides.
(2) High temperature and pressure applications in various industries as Aerospace, Zinc processing industries etc. because of its ability to withstand extreme temperatures and high resistance to corrosion.
(3) Pigments and catalyst.
(4) Aircraft parts and industrial motors.

Global Hunter Corp. (GBLHF.PK) is pleased to announce initial assay results from its previously announced surface sampling program. The results are encouraging with new gold showings as well as very positive copper oxide assays over wide-spread areas.

Highlights of the entire program
9 mineralized shear and/or alteration zones sampled total of 13.5 kilometers of strike length along know copper bearing shear and alteration zones tested with 205 rock chip samples

Good grades of soluble copper (oxide) over a significantly large area have been identified, however they represent only about 50% of the total copper grade indicating a mixed oxide-sulphide zone. Numerous iron oxide structures have also been mapped but no iron assays have been received to date.

The Company is planning to re-assay samples for iron to determine if iron is present in significant quantities to represent another target.

For more information http://www.globalhunter.ca/homeabout.html

My No. 1 Prediction For the New Year

One of the biggest trends for 2012 already has started: For the first time, we saw corporations bypass banks as a source of lending. Instead of begging leery and unsteady banks for new capital to fund expansion, companies chose to issue bonds to raise the money on their own.

Now, you might hear some shocking statements from the major news outlets like CNBC, specifically from Herb Greenberg, who will tell you that companies that issue debt to implement corporate stock buybacks are going down a dangerous path. This couldn�t be further from the truth.

Essentially, companies can issue bonds at very low interest rates and use the extra capital to:

Refinance their existing debt at lower interest rates

Buy back their existing stock

Buy out their competitors

All of which increase shareholder value and earnings per share.

Currently, companies are issuing new debt at a rate of up to $60 billion per week (up to a $3 trillion annual pace), and I expect this trend to persist until at least 2013. This is because the Fed has released its playbook for how to handle the recovery through 2013, and the conditions will remain just right for corporate borrowing.

First, the Fed isn�t going to raise interest rates. Higher interest rates would exacerbate the debt problem, and that�s the last thing the recovery needs. Plus, the Fed reiterated in its latest FOMC statement that it is going to continue to flatten the yield curve via Operation Twist. This effectively helps to lower borrowing costs for Corporate America even further, so these interest rates will encourage even more debt offerings as companies take advantage of ultra-low interest rates and continue aggressively buying back their outstanding stock.

Many blue-chip companies are taking full advantage of this opportunity:

• Altria Group (NYSE:MO) plans to buy back $1 billion in stock by the end of 2012.
• AutoZone (NYSE:AZO) plans to repurchase $659 million in stock in Q2 2012.
• Dollar Tree (NASDAQ:DLTR) plans to buy back $1.5 billion in stock.
• Dr Pepper Snapple Group (NYSE:DPS) has authorized a $1 billion stock buyback program on top of its ongoing $2 billion stock buyback program.
• Reynolds American (NYSE:RAI) has pledged to purchase $2.5 billion of its stock by mid-2014.

This is going to be the first catalyst that pushes these stocks higher in the new year, and that�s just the tip of the iceberg:

New Years Prediction #2: Upward Swing in Jobs and GDP

NYC Cannot Collect Commercial Rent Tax for World Trade Center Airspace

Not long ago I participated in the Forbes 9/11 memorial with two posts one on aheroic Port Authority officer and the other something of a public service promotionto encourage people to give blood more regularly. Now here I am writing about the World Trade Center because of a recent tax decision by the New York City Tax Appeals Tribunal -In the Matter of One World Trade Center LLC.  It is over a month old but it does not seem to have attracted much attention perhaps because it is a little difficult to understand. Still I think there is an interesting story there.

I think it is fairly probable that the fact that the World Trade Center was leased to private interests just months before the attack is a cooincidence.  Conspiracy theorists of course think otherwise and attribute non-humantiarian motives to Larry Silverstein�s suggestion to the Fire Department that they �pull it�:

The interests that Larry Silverstein represented and presumably formed a part of did not own the World Trade Center but they had  99 year leases on which the ink was barely dry :

Of course the nature of the tragedy was such that the Silverstein interests could not just go in and rebuild:

There were several agreements between Port Authority and the lesseess as to how redevelopment would proceed with the Port Authority ultimately taking ownership of One World Trade Center LLC and leaving other parts of the original footprint to the Silverstein interests.  It is a complicated story and I�m sure it will lead to more litigation for the remainder of the 99 years and maybe beyond.  The important point for this case, though, is that the Silverstein interests, in order to preserve their rights, had to keep paying rent on buildings that were not there anymore.

Give your personal finances a makeover -- in one day

Whether you're one of the many employed Americans sticking around the home front during your vacation, or whether you shake the printer awake every morning to crank out a fresh pile of resumes, this New York Times article offers a great, point-by-point suggestion of a weekday project everyone should carve out time to do: take a fiscal health day.

You're familiar with the concept of a "mental health day," right? Whether you scoot off to a neighborhood spa or just stick your toes in the kiddie pool while nursing a cold one, the idea is to recharge and reset your mind to what lies ahead. A fiscal health day is very similar (although we don't recommend mixing either footbaths or brewskis).

First of all, it's crucial to do this on a regular, non-holiday weekday, when help desks and call centers are staffed. The Times' writer offers a list of common financial logjams and details of what he did on his self-imposed fiscal health day.

Be prepared to spend a lot of time on hold, the Times warns. If you're one of those people who starts to twitch the instant the Muzak begins, set up in advance some no-attention-required busy work to do while you're in call-center purgatory. Maybe you can go through that pile of magazines that's been accumulating for the past year, or file those zillions of digital photos you never have time to organize.

First in line: earn more interest. If you have a stash of cash parked in a checking account, move it someplace where it's going to work harder for you. Maybe a CD is the answer if you can live without that money for a while (or, look into one of the no-risk CDs if you don't want to lock up your moolah). Another option is an online savings account, which typically pays out higher interest than your average brick-and-mortar equivalent. Be sure to read the fine print to find out a) the minimum balance and b) if a certain number of deposits are required. This way, you won't be socked with those onerous "maintenance fees" that can vacuum up all that interest you're earning.

While you're at it, take a look at what kind of rate you're paying on your credit cards and what kind of perks you're getting (miles, cash back, etc.) for being a customer. How does that compare to what else is out there? If you keep a particular card for the rewards but carry a balance on it, figure out if those airline miles or gas-pump rebates are worth what you're paying in interest every month.

Next up: telecommunications. How much are you paying for your TV service? Internet? Phone? Is that the best you can do? That last question is one you should be asking your current providers -- and their competitors. If you have cable TV, call a satellite provider for a quote, then call your current provider and ask if they'll match it. Currently have satellite service? Do the reverse. Do the same for your Internet connection, landline and mobile phone account or accounts. Many service providers -- especially in this economy -- are willing to offer current customers discounts to keep them, since it costs less to keep an existing customer than to hook a new one. While you've got those bills open, make sure your current plans still work for you: Should you get a texting plan for that teen that runs up your mobile bill every month? Should you scrap the premium kids' channel if they never watch it anymore?

Third: Insurance. Take a look at your home, life, auto and any other policies you have. Do the deductibles and maximums still work for your lifestyle and your family? Do any of your policies need updating? (Did you install a pool? Adopt a pit bull? Take up skydiving? Acquire or inherit pricey jewelry, silver or other items?) After you've updated, your next question should be whether you can get the same coverage from another provider for less.

Since medical insurance is so complex and headache-inducing (how ironic!), we're breaking that out into a separate category. Call your pharmaceutical provider to find out if any pricey drugs can be bought in larger quantities or mail-ordered for a lower cost. Tally up how much you've spent toward annual maximums for ancillary coverage like dental or vision. Think you'll need a tooth capped or a new contact lens prescription? Take care of that now; if you wait until the end of the year, you'll find yourself fighting for appointments with everyone else who waited until the clock ran down to use up their annual maximum. Beat the rush.

If you've already popped an aspirin after dealing with your health insurer, we might as well move along to the next item: taxes. How much are you withholding? Would you be better off with a little more in your paycheck, with the understanding that you'll have to pay more come next April? Do you need to adjust the number of dependents now that Junior's finally taken his futon and moved out? Take a look at your home's assessed value, which determines your property tax rate. Are homes in your neighborhood plummeting in value? Call the assessor's office and plead your case. Do you use a babysitter or a nanny? You might have to pay a "nanny tax" for him or her, and it's better if you figure this out on your own than being informed of your obligation by the IRS.

Outstanding "to dos:" Don't have a will? Get thee to a phone with an estate lawyer's number in hand, stat. Have a 401(k) or related investment from a previous job that's languishing in no-man's land? Find it a new home. Have a tchotcke-of-the-month club or magazine subscription you've been meaning to cancel? Do it.

Finally, here's the cookie for slogging through all of this: Gather up any half-used gift cards you've got lying around and spend the suckers! The store gets to hang onto the cash that went to purchase the gift card for as long as you let it sit in your junk drawer, so dig it out and treat it like what it is: your money.

If this all seems like a long list, it is. Even the Times admits you're probably not going to get through all of it in one shot. But the more you winnow down that stack of tasks, the less insurmountable it'll seem the next time around. And that's the real lesson to take away from your fiscal health day: Do it regularly. Do it now, do it six months from now to finish up the stuff you didn't get to initially, and then check in with your finances once a year.

One final piece of advice: Get the names of every rep you speak with, and if you change anything (your insurance deductible, your cell phone plan), ask for a confirmation number and write everything down.

The Case for Being a Passive, Buy and Hold Investor

In my opinion, the best way to have exposure to the stock market is to buy great companies and hold them through any market condition. Generally, trading in and out of positions or re-adjusting your portfolio based on macro factors does a lot more harm than good. Usually macro conditions have no merit for forecasting stock prices and moving positions in the portfolio does not enhance returns. Trading, re-positioning or taking profits are quick ways to rack up excessive fees and commissions. To quote Warren Buffett, “Wall Street makes money on activity. You make money on inactivity.” Being a passive, long term investor has many advantages over trading.

1) Its low maintenance – Passive, long term investing doesn’t require a lot of your time in front of the stock market. Unlike a trader, during market hours, a buy and hold investor is free to spend time with their kids, walk the dog or start that workout program you’ve been putting off. The practice of watching daily price movements is highly counterproductive to the temperament a long term investor must maintain. Some traders may claim that passive investors simply ‘don’t do anything.’ As Wall Street makes more money off of trading fees, commissions and activity, the ‘don’t do anything’ strategy, in my opinion, is a thoughtful and rational approach to investing in stocks. Why would you want to give Wall Street more of your money in trading fees? The low maintenance way is to think like an owner and only buy stocks that you would be comfortable owning the entire business of. When you buy stocks with the conviction of being the owner, short term price fluctuations are irrelevant. As an owner of a business, do you sell out at the first sign of fluctuation in business? No, and you shouldn’t either with stocks.

2) It’s easier on the nerves – I say ‘easier’ because even passive investing has its nervous moments, but nothing compared to the everyday ups and downs of trading. An advantage of buy and hold investing is admitting defeat to the rationality of stock price fluctuations. The stock market moves in an irrational and chaotic manner in the short term. Making sense of short term moves can be profitable for some, yet the vast majority of short term traders underperform a passive investor. The odds of winning in trading are similar to the odds at a casino. The prudent behaviour is to maintain a steady temperament and essentially ignore stock market fluctuations, unless values depress so much that you can buy stocks on a bargain. As a buy and hold investor, time is on your side, so if your stock goes down from where you bought it, you don’t have to worry like a trader if you still think the company is great.

3) Less fees and commissions – Fees are often overlooked by most do it yourself investors. When working with small amounts of money, fees and commissions become even more important. Learning to control your impulse trading and doing far less when it comes to portfolio management may be the most profitable move an at home investor can make. Despite what you may hear, the big money in investing is made by diligent, long term investors, not from traders. As mentioned earlier, I compare trading to the casino; sure you can make money, and some people learn how to game the system better, but over the long term, you underperform. The reason why casinos are in business is because more people lose then win. The same can be said about Wall Street, more people trade too much and lose, especially the beginner investor.

4) Its proven – Very simply, common knowledge passed down from past great practical financial minds such as Benjamin Franklin, say that the way to wealth is through slow, steady and diligent industry and frugality. It makes sense that something as difficult as gaining financial freedom cannot be accomplished quickly, otherwise everyone would be rich. Benjamin Franklin also spoke of the lure and danger of ‘get rich quick’ schemes. Franklin warns that even men of good conscience are enticed by the prospect of quick and easy money, when in reality the real way to wealth takes a great deal of conviction and time. My advice is to avoid the herd of quick money traders and the Wall Street mentality, and embrace the old school American, Benjamin Franklin mentality.

The stock markets record over the long term is quite compelling as well. Despite recent negativity, stocks have returned about 9% annualized return over the last 100 years. With current sentiment, you would think the return would have been negative 9% over the long term. The fact is, if you bought the Dow Jones 50 years ago, fell asleep and woke up today, you would be extremely happy with your investments. These are the facts that you must keep in mind when executing your long term investment plan.

John Laframboise is founder and author at http://www.riseofamillionaire.com, a personal finance Blog that follows his progress to become a millionaire. John has held positions within the Canadian banking industry and has a Bachelor of Commerce from the University of Windsor in Canada.

Top Stocks For 2011-12-1-9

 

Raises Outlook for Fiscal 2012 and Provides Preliminary Guidance for Fiscal 2013

WINSTON-SALEM, N.C., Nov. 30, 2011 (CRWENEWSWIRE) — Krispy Kreme Doughnuts, Inc. (NYSE:KKD) (the “Company”) today reported financial results for the third quarter of fiscal 2012, ended October 30, 2011. The Company also raised its outlook for fiscal 2012 and provided preliminary guidance for fiscal 2013.

Third Quarter Fiscal 2012 Highlights Compared to the Year-Ago Period:

Revenues increased 9.4% to $98.7 million from $90.2 million
Company same store sales rose 4.0%, the twelfth consecutive quarterly increase
Operating income rose 36.2% to $5.6 million from $4.1 million
Net income was $4.7 million ($0.07 per share diluted) compared to $2.4 million ($0.03 per share diluted) in the third quarter last year
Cash provided by operating activities was $10.2 million compared to $7.4 million in the third quarter last year

The Company ended the third quarter of fiscal 2012 with a total of 678 Krispy Kreme stores systemwide, a net increase of nine shops during the quarter. As of October 30, 2011, there were 89 Company stores and 589 franchise locations.

Chief Executive Officer James H. Morgan commented: “Our third quarter performance reflects continued progress in strengthening our financial condition and realizing our vision for the Krispy Kreme brand. We generated a healthy increase in revenues, recorded our twelfth consecutive quarter of positive same store sales at Company stores, and delivered substantial improvements in both profitability and operating cash flow. Despite economic headwinds and input cost challenges, we now project fiscal 2012 consolidated operating income, exclusive of impairment charges and lease termination costs, of $24 to $26 million, which would represent at least 25% growth over fiscal 2011.”

Morgan continued, “While we are encouraged by our near-term results, we also believe that maintaining a longer term perspective is critical to building shareholder value. We are therefore working on a number of initiatives to improve profitability in the Company Stores segment in the years ahead. In addition, within our franchise segments, we are expanding our international franchisee pipeline to expand our geographic reach and market penetration, developing plans to reintroduce domestic franchise marketing, and improving support to our existing franchisees throughout the world. In summary, fiscal 2012 is proving to be an exciting year at Krispy Kreme, both strategically and as a result of our financial performance, and we continue to position the Company to build shareholder value for the long term.”

Third Quarter Fiscal 2012 Results

Consolidated Results

For the third quarter ended October 30, 2011, revenues increased 9.4% to $98.7 million from $90.2 million. Year-over-year revenue increases were generated in all four business segments.

Direct operating expenses increased to $85.9 million from $79.2 million in the same period last year, but as a percentage of total revenues, fell to 87.0% from 87.7%. General and administrative expenses increased to $4.9 million from $4.8 million in the year-ago period but, as a percentage of total revenues, decreased to 5.0% from 5.3%.

Operating income increased to $5.6 million from $4.1 million.

Interest expense decreased to $385,000 from $1.6 million, reflecting lower interest rates as a result of the January 2011 refinancing of the Company’s credit facilities, as well as the reduced level of indebtedness.

Net income was $4.7 million ($0.07 per share diluted) compared to $2.4 million ($0.03 per share diluted), in the third quarter last year.

Segment Results

Company Stores revenues increased 9.8% to $67.6 million from $61.6 million. Same store sales at Company stores rose 4.0%, the twelfth consecutive quarterly increase. Price increases instituted to help offset higher input costs drove the increase, but were partially offset by a decrease in customer traffic. The Company believes that expected cannibalization by new store openings in expansion markets adversely affected same store sales in the third quarter. The Company Stores segment posted an operating loss of $574,000, compared to an operating loss of $1.4 million in the third quarter last year.

Domestic Franchise revenues increased 14.1% to $2.3 million from $2.0 million, reflecting an 11.7% rise in sales by domestic franchisees. Same store sales rose 7.9% at domestic franchise stores. Domestic Franchisee segment operating income improved to $1.1 million, compared to $499,000 in the third quarter last year.

International Franchise revenues increased 22.4% to $5.4 million from $4.4 million, driven by higher royalty revenues. Sales by international franchise stores rose 9.4%, and provisions for uncollectible royalties fell almost $700,000 from the third quarter last year. Adjusted to eliminate the effects of changes in foreign exchange rates, same store sales at international franchise stores fell 12.2%, reflecting, among other things, honeymoon effects from the over 300 stores opened internationally since the beginning of fiscal 2009, as well as cannibalization as markets develop. The International Franchise segment generated operating income of $3.3 million, up from $3.0 million in the third quarter last year.

KK Supply Chain revenues (including sales to Company stores) increased 11.7% to $50.3 million from $45.0 million in the same period last year, driven by selling price increases. External KK Supply Chain revenues rose 5.2% to $23.4 million from $22.2 million in the year-ago period. KK Supply Chain generated operating income of $7.0 million in the third quarter of fiscal 2012, down slightly from $7.3 million in the third quarter last year. KK Supply Chain has raised selling prices to recover rising input costs resulting from higher agricultural commodity prices, but generally has not marked up those higher costs; accordingly, KK Supply Chain’s operating margin declined in the third quarter of fiscal 2012 compared to the third quarter last year.

Outlook

Given our third quarter and fiscal year-to-date results, along with other current information, the Company is raising its fiscal 2012 outlook for consolidated operating income, exclusive of impairment charges and lease termination costs, to between $24 and $26 million from between $22 million and $24 million previously.

For fiscal 2013, the Company anticipates opening 5 to 10 Company stores, between 10 and 15 domestic franchise stores, and more than 60 international franchise stores. Although the Company looks for continued organic same store sales growth in its domestic stores, international franchise same store sales will likely continue to be pressured by the substantial growth in international markets in recent years. In addition, as prices of agricultural and other commodities are expected to remain volatile, the Company will continue working to reduce its consumption of certain key ingredients while taking other measures to combat the rise in input costs the Company has experienced over the past year.

Based on these factors, our preliminary guidance is for fiscal 2013 operating income in the range of $29 to $33 million, inclusive of estimated impairment and lease termination costs. In addition, we are also going to start expressing our guidance in terms of diluted earnings per share in order to conform to prevailing practice in the industry. Our preliminary estimate of diluted EPS for fiscal 2013 is in the range of $0.35 to $0.41 per share. The foregoing range assumes income tax expense for fiscal 2013 of approximately $2 million, which would give us an effective income tax rate of approximately 7%. The estimated range does not give effect to the increase in the Company’s effective income tax rate for fiscal 2013 which would result from a conclusion that some or all of the Company’s deferred income tax assets are more likely than not to be realized.

As of the end of fiscal 2011, the Company had a valuation allowance of approximately $160 million, equal to the entire balance of its net deferred income tax assets. If, based on additional evidence, the Company concludes that some or all of such valuation allowance should be released to earnings in the fourth quarter, then the Company’s effective income tax rate for years after fiscal 2012 would rise substantially. Management currently estimates that its annual effective income tax rate subsequent to any reversal of the deferred income tax valuation allowance would be approximately 40%. Any reversal of the valuation allowance will have no effect on the Company’s actual income tax payments or other cash flows, notwithstanding the fact that the Company’s reported earnings would be reduced subsequent to any such reversal.

Conference Call

The Company will host a conference call to review financial results for the third quarter of fiscal 2012 as well as its outlook this afternoon at 4:30 p.m. (ET).

A live webcast of the conference call will be available at www.krispykreme.com. The conference call also can be accessed over the phone by dialing (866) 700-6293 or, for international callers, by dialing (617) 213-8835; the participant passcode is Krispy Kreme. An archived replay of the call will be available shortly after its conclusion by dialing (888) 286-8010, or (617) 801-6888 for international callers; the passcode is 12931664. The audio replay will be available through December 7, 2011. A transcript of the conference call also will be available on the Company website.

About Krispy Kreme

Krispy Kreme is a leading branded specialty retailer and wholesaler of premium quality sweet treats and complementary products, including its signature Original Glazed(R) doughnut. Headquartered in Winston-Salem, NC, the Company has offered the highest quality doughnuts and great tasting coffee since it was founded in 1937. Today, Krispy Kreme shops can be found in over 675 locations in 21 countries around the world. Visit us at www.krispykreme.com.

Information contained in this press release, other than historical information, should be considered 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,” “could,” “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 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; 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 off-premises customers; our ability to protect our trademarks and trade secrets; restrictions on our operations and compliance with covenants contained in our secured credit facilities; changes in customer preferences and perceptions; risks associated with competition; risks related to the food service industry, including food safety and protection of personal information; and increased costs or other effects of new government regulations relating to healthcare benefits. These and other risks and uncertainties, which are described in more detail in the Company’s most recent Annual Report on Form 10-K and other reports and statements filed with the United States Securities and Exchange Commission, are difficult to predict, involve uncertainties that may materially affect actual results and may be beyond the Company’s control, and could cause actual results and developments to be materially different from those expressed or implied by any of these forward-looking statements. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

 

 

KRISPY KREME DOUGHNUTS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
				Three Months Ended						Nine Months Ended
			October 30,			October 31,			October 30,			October 31,
			2011			2010			2011			2010
			(In thousands, except per share amounts)
Revenues			$	98,708		$	90,228		$	301,260		$	270,277
Operating expenses:
	Direct operating expenses (exclusive of depreciation expense
		shown below)		85,874			79,152			258,554			233,382
	General and administrative expenses			4,941			4,784			15,515			15,509
	Depreciation expense			2,208			1,818			6,233			5,619
	Impairment charges and lease termination costs			135			399			680			1,482
Operating income				5,550			4,075			20,278			14,285
Interest income				30			42			131			164
Interest expense				(385)			(1,585)			(1,276)			(5,023)
Equity in income (losses) of equity method franchisees				(72)			190			(69)			371
Gain on sale of interest in equity method franchisee				-			-			6,198			-
Other non-operating income and (expense), net				89			85			261			247
Income before income taxes				5,212			2,807			25,523			10,044
Provision for income taxes				495			417			2,796			979
Net income			$	4,717		$	2,390		$	22,727		$	9,065
Earnings per common share:
	Basic		$	0.07		$	0.03		$	0.33		$	0.13
	Diluted		$	0.07		$	0.03		$	0.32		$	0.13
Weighted average shares outstanding:
	Basic			69,384			68,407			69,013			68,232
	Diluted			71,547			70,023			71,474			69,527

KRISPY KREME DOUGHNUTS, INC.
CONSOLIDATED BALANCE SHEET
			October 30,			January 30,
			2011			2011
			(In thousands)
	ASSETS
CURRENT ASSETS:
Cash and cash equivalents			$	37,579		$	21,970
Receivables				22,502			20,261
Receivables from equity method franchisees				680			586
Inventories				16,948			14,635
Other current assets				4,162			5,970
	Total current assets			81,871			63,422
Property and equipment				73,393			71,163
Investments in equity method franchisees				-			1,663
Goodwill and other intangible assets				23,776			23,776
Other assets				9,668			9,902
	Total assets		$	188,708		$	169,926
	LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt			$	2,220		$	2,513
Accounts payable				11,154			9,954
Accrued liabilities				29,647			28,379
	Total current liabilities			43,021			40,846
Long-term debt, less current maturities				25,345			32,874
Other long-term obligations				17,912			19,778
Commitments and contingencies
SHAREHOLDERS’ EQUITY:
Preferred stock, no par value				-			-
Common stock, no par value				374,327			370,808
Accumulated other comprehensive loss				(278)			(34)
Accumulated deficit				(271,619)			(294,346)
	Total shareholders’ equity			102,430			76,428
		Total liabilities and shareholders’ equity	$	188,708		$	169,926

KRISPY KREME DOUGHNUTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
					Nine Months Ended
					October 30,			October 31,
					2011			2010
						(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income					$	22,727		$	9,065
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation expense					6,233			5,619
	Deferred income taxes					159			(90)
	Impairment charges					-			790
	Accrued rent expense					389			(165)
	Loss on disposal of property and equipment					348			473
	Gain on sale of interest in equity method franchisee					(6,198)			-
	Share-based compensation					3,437			3,197
	Provision for doubtful accounts					(397)			(300)
	Amortization of deferred financing costs					320			560
	Equity in (income) loss of equity method franchisees					69			(371)
	Other					490			(316)
Change in assets and liabilities:
	Receivables					(1,794)			(3,036)
	Inventories					(2,313)			(816)
	Other current and non-current assets					(261)			(1,948)
	Accounts payable and accrued liabilities					1,899			351
	Other long-term obligations					(2,196)			(179)
			Net cash provided by operating activities			22,912			12,834
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment						(8,222)			(5,457)
Proceeds from disposals of property and equipment						26			2,688
Proceeds from sale of interest in equity method franchisee						7,723			-
Escrow deposit recovery						1,600			-
Other investing activities						(52)			6
			Net cash provided by (used for) investing activities			1,075			(2,763)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt						(8,437)			(8,114)
Deferred financing costs						(23)			-
Proceeds from exercise of stock options						1,036			-
Proceeds from exercise of warrants						-			5
Repurchase of common shares						(954)			(421)
			Net cash used for financing activities			(8,378)			(8,530)
Net increase in cash and cash equivalents						15,609			1,541
Cash and cash equivalents at beginning of period						21,970			20,215
Cash and cash equivalents at end of period					$	37,579		$	21,756

KRISPY KREME DOUGHNUTS, INC.
SEGMENT INFORMATION
					Three Months Ended						Nine Months Ended
					October 30,			October 31,			October 30,			October 31,
					2011			2010			2011			2010
					(In thousands)
Revenues:
	Company Stores:
		On-premises sales			$	31,347		$	28,944		$	93,151		$	85,727
		Off-premises sales				36,259			32,621			109,922			98,342
			Company Stores revenues			67,606			61,565			203,073			184,069
	Domestic Franchise					2,327			2,040			7,045			6,314
	International Franchise					5,374			4,389			16,362			13,158
	KK Supply Chain:
		Total revenues				50,277			45,001			154,501			135,798
		Less � intersegment sales elimination				(26,876)			(22,767)			(79,721)			(69,062)
			External KK Supply Chain revenues			23,401			22,234			74,780			66,736
				Total revenues	$	98,708		$	90,228		$	301,260		$	270,277
Operating income (loss):
	Company Stores				$	(574)		$	(1,449)		$	551		$	(3,214)
	Domestic Franchise					1,114			499			2,477			2,694
	International Franchise					3,313			3,018			10,893			9,004
	KK Supply Chain					6,987			7,342			23,074			23,361
		Total segment operating income				10,840			9,410			36,995			31,845
	Unallocated general and administrative expenses					(5,155)			(4,936)			(16,037)			(16,078)
	Impairment charges and lease termination costs					(135)			(399)			(680)			(1,482)
		Consolidated operating income			$	5,550		$	4,075		$	20,278		$	14,285
Depreciation expense:
	Company Stores				$	1,756		$	1,410		$	4,982		$	4,264
	Domestic Franchise					55			56			165			166
	International Franchise					-			2			4			5
	KK Supply Chain					183			198			560			615
	Corporate administration					214			152			522			569
		Total depreciation expense			$	2,208		$	1,818		$	6,233		$	5,619

KRISPY KREME DOUGHNUTS, INC.
STORE COUNT
					NUMBER OF STORES
					DOMESTIC		INTERNATIONAL		TOTAL
Number of Stores Open at October 30, 2011:
Company:
	Factory				70		-		70
	Satellite				19		-		19
		Total Company			89		-		89
Franchise:
	Factory				103		112		215
	Satellite				38		336		374
		Total franchise			141		448		589
			Total systemwide		230		448		678
					NUMBER OF STORES
					COMPANY		FRANCHISE		TOTAL
Quarter ended October 30, 2011
July 31, 2011					88		581		669
Opened					1		22		23
Closed					-		(14)		(14)
October 30, 2011					89		589		678
Quarter ended October 31, 2010
August 1, 2010					84		549		633
Opened					1		19		20
Closed					-		(4)		(4)
October 31, 2010					85		564		649

KRISPY KREME DOUGHNUTS, INC
SELECTED OPERATING STATISTICS
						Three Months Ended								Nine Months Ended
						October 30,				October 31,				October 30,				October 31,
						2011				2010				2011				2010
Systemwide Sales (in thousands):(1)
	Company stores					$	67,126			$	61,146			$	201,629			$	182,936
	Domestic Franchise stores						64,976				58,185				196,502				179,460
	International Franchise stores						91,928				84,039				279,188				235,850
	International Franchise stores, in constant dollars(2)						91,928				86,971				279,188				249,933
Change in Same Store Sales (on-premises sales only):(3)
	Company stores						4.0	%			5.0	%			4.2	%			4.6	%
	Domestic Franchise stores						7.9	%			5.7	%			6.2	%			4.4	%
	International Franchise stores						(8.5)	%			(8.6)	%			(5.4)	%			(9.2)	%
	International Franchise stores, in constant dollars(2)						(12.2)	%			(12.3)	%			(11.3)	%			(14.8)	%
Change in Same Store Customer Count - Company stores
	(retail sales only)						(1.3)	%			2.5	%			(0.4)	%			3.1	%
Company stores Off-Premises Metrics:(4)
	Grocers/mass merchants:
		Change in average weekly number of doors					1.4	%			2.0	%			3.7	%			(0.9)	%
		Change in average weekly sales per door					15.9	%			4.1	%			13.1	%			7.5	%
	Convenience stores:
		Change in average weekly number of doors					(9.3)	%			(1.5)	%			(4.4)	%			(4.8)	%
		Change in average weekly sales per door					14.0	%			(1.4)	%			9.2	%			(1.4)	%

(1) Systemwide sales, a non-GAAP financial measure, include the sales by both Company and franchise stores but excludes sales among Company and franchise stores. The Company believes systemwide sales data are useful in assessing the overall performance of the Krispy Kreme brand and, ultimately, the performance of the Company. The Company’s consolidated financial statements appearing elsewhere herein include sales by Company stores, sales to franchisees by the KK Supply Chain business segment, and royalties and fees received from franchise stores based on their sales, but exclude sales by franchise stores to their customers.

(2) Computed on a pro forma basis assuming the average rate of exchange between the U.S. dollar and each of the foreign currencies in which the Company’s international franchisees conduct business had been the same in the comparable prior year period.

(3) The change in “same store sales” represents the aggregate on-premises sales (including fundraising sales) during the current year period for all stores which had been open for more than 56 consecutive weeks during the current year period (but only to the extent such sales occurred in the 57th or later week of each store’s operation) divided by the aggregate on-premises sales of such stores for the comparable weeks in the preceding year period. Once a store has been open for at least 57 consecutive weeks, its sales are included in the computation of same stores sales for all subsequent periods. In the event a store is closed temporarily (for example, for remodeling) and has no sales during one or more weeks, such store’s sales for the comparable weeks during the earlier or subsequent period are excluded from the same store sales computation. The change in “same store customer count” is similarly computed, but is based upon the number of retail transactions reported in the Company’s point-of-sale system.

(4) For Company off-premises sales, “average weekly number of doors” represents the average number of customer locations to which product deliveries are made during a week by Company Stores, and “average weekly sales per door” represents the average weekly sales to each such location by Company Stores.

THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY!