Krispy Kreme Doughnuts, Inc. has reported financial results for the fourth quarter and the fiscal year ended February 1, 2004.

Net income for fourth quarter fiscal 2004 increased 45.3% to $16.4 million compared with $11.3 million in the fourth quarter last year, before the $9.1 million pre-tax arbitration award discussed in the Company’s 8-K filing dated February 10, 2003. Diluted earnings per share for the quarter increased to $0.26 compared with $0.19 last year, before the arbitration award.

Total revenues for the quarter, which includes sales from company stores, franchise operations, Krispy Kreme Manufacturing and Distribution (KKM&D) and Montana Mills increased 35.7% to $185.5 million compared with $136.7 million in the fourth quarter of last year. Sales from company stores advanced 36.0% to $124.7 million; KKM&D sales increased 31.5% to $52.2 million; franchise operations grew 18.3% to $6.3 million and Montana Mills revenues were $2.3 million.

Fourth quarter systemwide sales including sales of company and franchise stores advanced 25.5%. Systemwide sales were driven by an increase in company store sales of 36.0% to $124.7 million. On a comparable store basis, company store sales advanced 10.7% and systemwide sales increased 9.1%. Systemwide sales including Krispy Kreme stores and Montana Mills rose 26.6%.

“We are pleased with our record fourth quarter results,” stated Scott Livengood, Chairman, President and Chief Executive Officer of Krispy Kreme Doughnuts, Inc. “During the quarter, we continued to execute on our core business model while investing in operating initiatives designed for future growth.”

Fiscal 2004 net income advanced 45.0% to $56.8 million compared with $39.1 million, before the arbitration award. Diluted earnings per share for fiscal 2004 grew to $0.91 compared with $0.66 in fiscal 2003, before the arbitration award. Including the $0.01 positive impact of the arbitration award, diluted earnings per share for fiscal 2004 was $0.92.

Total revenues for fiscal 2004 advanced 35.4% to $665.6 million compared with $491.5 million in the prior year. Sales from company stores increased 38.3% to $441.9 million; KKM&D sales grew 26.5% to $193.1 million; revenues from franchise operations increased 23.5% to $23.8 million and Montana Mills sales were $6.7 million.

Fiscal 2004 systemwide sales including company and franchise stores increased 26.5% primarily due to company stores sales advancing 38.3% to $441.9 million. On a comparable store basis, company store sales advanced 13.6% and systemwide sales rose 10.2%. Systemwide sales including Krispy Kreme stores and Montana Mills grew 27.4%.

Further commenting on the Company’s financial performance, Livengood added, “Fiscal 2004 was a year of milestones and our fourth quarter results cap another year marked by strong execution of our growth strategy. We produced record earnings, opened 99 new stores – a record number – and grew systemwide sales 26 percent. We plan to leverage this momentum in fiscal 2005 as we continue to develop factory stores and invest in international operations and emerging growth initiatives, including satellites and store-in- store partnerships.”

The Company set a new record in the fourth quarter for unit growth by opening 35 new stores, including 31 factory stores and four satellites in nine new markets. The Company opened its first store in Mexico, located in Interlomas, a suburb of Mexico City. Other new markets entered included Altoona, PA, Youngstown, OH, Atlantic City, NJ, Syracuse, NY, Lexington, KY, Kahului, HI, Onalaska, WI and Florence, AL.

As discussed in the Company’s February 17, 2004 press release, the Company expects diluted earnings per share of $1.16 to $1.18 for fiscal 2005 and systemwide comparable store sales growth in the mid-to-high single digits. The Company estimates that systemwide sales will increase approximately 25 percent in fiscal 2005, while each quarter may be slightly above or below 25 percent. Additionally, the Company expects to open approximately 120 new stores systemwide, including 20 to 25 satellites, in fiscal 2005.