Krispy Kreme Doughnuts, Inc. (NYSE: KKD – News) today reported financial results for the three months ended August 4, 2002, the Company’s second quarter of fiscal 2003.

Net income for the second quarter increased 49.8 percent to $8.9 million compared with $5.9 million in second quarter of fiscal 2002. Diluted earnings per share increased to $0.15 in the second quarter compared with $0.10 for the same period in fiscal 2002.

Systemwide sales, including sales of company and franchise stores, increased 29.5 percent to $186.9 million in the second quarter, compared with $144.3 million in the second quarter of fiscal 2002. Sales were driven by an increase in company store sales of 21.5 percent to $74.7 million and an increase in franchise store sales of 35.5 percent to $112.2 million. On a comparable store basis, systemwide store sales increased 12.8 percent and company store sales were up 13.5 percent.

Total company revenues, which include sales from company stores, franchise operations, and Krispy Kreme Manufacturing and Distribution (“KKM&D”), rose 28.0 percent to $114.6 million, compared with $89.5 million in the prior year comparable period. Sales from the company stores increased 21.5 percent to $74.7 million; revenues from franchise operations grew to $4.8 million, up 48.5 percent; and KKM&D sales increased 41.4 percent to $35.1 million.

Net income for the six months ended August 4, 2002, increased 52.3 percent to $17.7 million compared with $11.6 million in the same period last year. Diluted earnings per share increased to $0.30 in the first six months of the year from $0.20 per share in the same period a year ago.

Systemwide sales increased 30.0 percent to $370.0 million from $284.7 million for the same period in fiscal 2002. This increase was a result of growth in franchise store sales of 36.1 percent to $221.1 million and a 21.9 percent increase in company store sales to $148.9 million.

Total revenues increased 27.2 percent to $225.7 million compared with $177.5 million for the same period in fiscal 2002. Sales from company stores increased to $148.9 million, a 21.9 percent increase; franchise operations increased 45.3 percent to $9.0 million; and KKM&D increased 38.0 percent to $67.7 million.

During the quarter, 12 new Krispy Kreme stores, including one commissary, were opened and one store was closed. New stores opened during the second quarter are located in Mobile, AL, Houston, TX, Colorado Springs, CO, Greensboro, NC, Tulsa, OK, Glendale Heights, IL, Atlanta, GA, Spokane, WA, Cheektowaga, NY, West Palm Beach, FL, and West Mifflin, PA; the commissary that opened is located in Pittsburgh, PA. This brings the total number of stores at the end of the second quarter to 233.

Krispy Kreme indicated that based on its performance in the first six months of fiscal 2003, it now expects to earn $0.64 per fully diluted share or $0.01 above consensus for fiscal year 2003. quarterly earnings guidance for the remainder of fiscal 2003 is as follows: Q3-$0.16; Q4-$0.18. The company anticipates systemwide comparable store sales of 10 percent for the year and third quarter expectations of 10 percent. Additionally, the Company increased store opening guidance by two stores to 64 stores in 15 new markets. Also, Krispy Kreme expects to sign at least one additional franchise agreement for development of international markets in fiscal 2003.