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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________

FORM 10-Q
_________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______

Commission file number: 001-04321

DNUT-20210704_G1.JPG
Krispy Kreme, Inc.
(Exact name of registrant as specified in its charter)
_________________________

Delaware 37-1701311
(State or other jurisdiction of incorporation)
(IRS Employer Identification No.)
2116 Hawkins Street, Charlotte, North Carolina 28203
(Address of principal executive offices)

(800) 457-4779
(Registrant’s telephone number, including area code)

N/A
(Former name or former address, if changed since last report)
_________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered
Common stock, $0.01 par value per share
DNUT
Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes ☒ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

APPLICABLE ONLY TO CORPORATE ISSUERS:

The registrant had outstanding 167,112,953 shares of common stock as of August 10, 2021.

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Table of Contents
Part I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Krispy Kreme, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts and number of shares)
Quarter Ended Two Quarters Ended
July 4,
2021 (13 weeks) 		June 28,
2020 (13 weeks) 		July 4,
2021 (26 weeks) 		June 28,
2020 (26 weeks)
Net revenues
Product sales $ 341,223  $ 236,608  $ 654,808  $ 488,144 
Royalties and other revenues 7,963  8,364  16,187  18,044 
Total net revenues 349,186  244,972  670,995  506,188 
Product and distribution costs 85,017  68,958  165,014  137,106 
Operating expenses 157,877  104,221  305,418  220,000 
Selling, general and administrative expense 60,930  41,487  110,467  82,569 
Marketing expenses 10,052  8,575  19,559  16,689 
Pre-opening costs 1,752  2,863  3,143  6,300 
Other (income)/expenses, net (761) 1,339  (4,006) 2,510 
Depreciation and amortization expense 25,194  18,097  48,595  37,184 
Operating income/(loss) 9,125  (568) 22,805  3,830 
Interest expense, net 9,793  9,711  18,042  18,355 
Interest expense — related party 4,821  5,566  10,387  11,132 
Other non-operating income, net (416) (2,660) (858) (112)
Loss before income taxes (5,073) (13,185) (4,766) (25,545)
Income tax expense/(benefit) 9,923  (1,500) 10,608  (2,912)
Net loss (14,996) (11,685) (15,374) (22,633)
Net income attributable to noncontrolling interest 2,146  945  4,829  1,512 
Net loss attributable to Krispy Kreme, Inc. $ (17,142) $ (12,630) $ (20,203) $ (24,145)
Net loss per share:
Common stock — Basic $ (0.13) $ (0.10) $ (0.16) $ (0.19)
Common stock — Diluted $ (0.13) $ (0.10) $ (0.16) $ (0.19)
Weighted average shares outstanding:
Basic 132,351,087  124,987,370  128,669,228  124,987,370 
Diluted 132,351,087  124,987,370  128,669,228  124,987,370 
See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents
Krispy Kreme, Inc.
Condensed Consolidated Statements of Comprehensive Income/(Loss) (Unaudited)
(In thousands)
  Quarter Ended Two Quarters Ended
  July 4,
2021 (13 weeks) 		June 28,
2020 (13 weeks) 		July 4,
2021 (26 weeks) 		June 28,
2020 (26 weeks)
Net loss $ (14,996) $ (11,685) $ (15,374) $ (22,633)
Other comprehensive (loss)/income, net of income taxes:
Foreign currency translation adjustment (1,457) 17,416  (3,721) (29,007)
Unrealized income/(loss) on cash flow hedges, net of income taxes(1)
1,131  (1,893) 6,233  (17,328)
Total other comprehensive (loss)/income, net of income taxes (326) 15,523  2,512  (46,335)
Comprehensive (loss)/income (15,322) 3,838  (12,862) (68,968)
Net income attributable to noncontrolling interest 2,146  945  4,829  1,512 
Total comprehensive income attributable to noncontrolling interest 2,146  945  4,829  1,512 
Comprehensive (loss)/income attributable to Krispy Kreme, Inc. $ (17,468) $ 2,893  $ (17,691) $ (70,480)
1.Net of income tax benefit/(expense) of ($0.4 million) and ($2.1 million) for the quarter and two quarters ended July 4, 2021, respectively, and $0.6 million and $5.8 million for the quarter and two quarters ended June 28, 2020, respectively.
See accompanying notes to Condensed Consolidated Financial Statements.
2
 Krispy Kreme, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except number of shares)
As of
  (Unaudited) July 4,
2021 		January 3,
2021
ASSETS    
Current Assets:    
Cash and cash equivalents $ 37,377  $ 37,460 
Marketable securities 744  1,048 
Restricted cash 82  23 
Accounts receivable, net 49,207  74,351 
Inventories 38,500  38,519 
Prepaid expense and other current assets 20,911  12,692 
Total current assets 146,821  164,093 
Property and equipment, net 415,319  395,255 
Goodwill 1,095,369  1,086,546 
Other intangible assets, net 1,003,948  998,014 
Operating lease right of use asset, net 414,096  399,688 
Other assets 18,027  17,399 
Total assets $ 3,093,580  $ 3,060,995 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of long-term debt $ 538,985  $ 41,245 
Current operating lease liabilities 46,763  45,675 
Accounts payable 156,564  148,645 
Accrued liabilities 165,826  124,951 
Structured payables 139,748  137,319 
Total current liabilities 1,047,886  497,835 
Long-term debt, less current portion 626,417  785,810 
Related party notes payable —  344,581 
Noncurrent operating lease liabilities 390,962  376,099 
Deferred income taxes, net 150,687  144,866 
Other long-term obligations and deferred credits 55,822  63,445 
Total liabilities 2,271,774  2,212,636 
Commitments and contingencies
Shareholders’ Equity:
Common stock, $0.01 par value; 300,000,000 and 174,500,000 shares authorized as of July 4, 2021 and January 3, 2021, respectively; 163,595,516 and 124,987,370 shares issued and outstanding as of July 4, 2021 and January 3, 2021, respectively
1,636  1,250 
Additional paid-in capital 1,362,875  845,499 
Subscription receivable (471,250) — 
Shareholder note receivable (3,827) (18,660)
Accumulated other comprehensive income/(loss), net of income tax 1,304  (1,208)
Retained deficit (162,399) (142,197)
Total shareholders’ equity attributable to Krispy Kreme, Inc. 728,339  684,684 
Noncontrolling interest 93,467  163,675 
Total shareholders’ equity 821,806  848,359 
Total liabilities and shareholders’ equity $ 3,093,580  $ 3,060,995 
See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents
Krispy Kreme, Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(In thousands, except number of shares)
 
Common Stock
Additional
Paid-in
Capital
Subscription Receivable
Shareholder
Note
Receivable
Accumulated Other Comprehensive
Income/(Loss)  
Retained
(Deficit)
Earnings
Noncontrolling
Interest
Total
 
Shares
Outstanding
Amount
Foreign
currency
translation
adjustment
Unrealized
loss on
cash flow
hedges
Unrealized  loss on employee
benefit plans
Balance at January 3, 2021 124,987,370  $ 1,250  $ 845,499  $ —  $ (18,660) $ 23,508  $ (24,610) $ (106) $ (142,197) $ 163,675  $ 848,359 
Net (loss)/income for the quarter ended April 4, 2021 —  —  —  —  —  —  —  —  (3,061) 2,683  (378)
Other comprehensive income/(loss) for the quarter ended April 4, 2021 before reclassifications —  —  —  —  —  (2,264) 2,572  —  —  —  308 
Reclassification from AOCI —  —  —  —  —  —  2,530  —  —  —  2,530 
Share-based compensation —  —  2,368  —  —  —  —  —  —  —  2,368 
Purchase of shares by noncontrolling interest —  —  —  —  139  —  —  —  —  12,048  12,187 
Distribution to shareholders —  —  —  —  —  —  —  —  —  —  — 
Distribution to noncontrolling interest —  —  —  —  363  —  —  —  —  (2,239) (1,876)
Other —  —  (26) —  (70) —  —  —  2  (1) (95)
Balance at April 4, 2021 124,987,370  $ 1,250  $ 847,841  $ —  $ (18,228) $ 21,244  $ (19,508) $ (106) $ (145,256) $ 176,166  $ 863,403 
Net (loss)/income for the quarter ended July 4, 2021 —  —  —  —  —  —  —  —  (17,142) 2,146  (14,996)
Other comprehensive (loss)/income for the quarter ended July 4, 2021 before reclassifications —  —  —  —  —  (1,457) (1,430) —  —  —  (2,887)
Reclassification from AOCI —  —  —  —  —  —  2,561  —  —  —  2,561 
Capital contribution from shareholders 6,997,450  70  120,862  —  —  —  —  —  —  —  120,932 
Share-based compensation —  —  8,290  —  —  —  —  —  —  —  8,290 
Purchase of shares by noncontrolling interest —  —  —  —  14,421  —  —  —  —  26,648  41,069 
Distribution to shareholders —  —  (42,334) —  —  —  —  —  —  —  (42,334)
Distribution to noncontrolling interest —  —  —  —  —  —  —  —  —  (4,142) (4,142)
Conversion of noncontrolling interest to additional paid-in capital in connection with the Merger 9,370,881  93  107,258  —  —  —  —  —  —  (107,351) — 
Issuance of common stock in connection with initial public offering, net of underwriting discounts and issuance costs 29,411,765  294  459,391  (471,250) —  —  —  —  —  —  (11,565)
Issuance of common stock upon settlement of RSUs, net of shares withheld 1,267,491  13  (15,507) —  —  —  —  —  —  —  (15,494)
Repurchase of common stock (8,439,441) (84) (122,922) —  —  —  —  —  —  —  (123,006)
Other —  —  (4) —  (20) —  —  —  (1) —  (25)
Balance at July 4, 2021 163,595,516  $ 1,636  $ 1,362,875  $ (471,250) $ (3,827) $ 19,787  $ (18,377) $ (106) $ (162,399) $ 93,467  $ 821,806 
See accompanying notes to Condensed Consolidated Financial Statements
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Table of Contents
Krispy Kreme, Inc.
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
(In thousands, except number of shares)
 
Common Stock
Additional
Paid-in
Capital
Subscription Receivable
Shareholder
Note
Receivable
Accumulated Other Comprehensive
Income/(Loss)  
Retained
(Deficit)
Earnings
Noncontrolling
Interest
Total
 
Shares
Outstanding
Amount
Foreign
currency
translation
adjustment
Unrealized
loss on
cash flow
hedges
Unrealized  loss on employee
benefit plans
Balance at December 29, 2019 124,987,370  $ 1,250  $ 834,233  $ —  $ (17,232) $ 4,629  $ (10,180) $ —  $ (77,880) $ 148,597  $ 883,417 
Net (loss)/income for the quarter ended March 29, 2020 —  —  —  —  —  —  —  —  (11,515) 567  (10,948)
Other comprehensive (loss)/income for the quarter ended March 29, 2020 before reclassifications —  —  —  —  —  (46,423) (16,130) —  —  —  (62,553)
Reclassification from AOCI —  —  —  —  —  —  695  —  —  —  695 
Share-based compensation —  —  3,167  —  —  —  —  —  —  —  3,167 
Purchase of shares by noncontrolling interest —  —  —  —  —  —  —  —  —  17,562  17,562 
Distribution to shareholders —  —  (15) —  —  —  —  —  —  —  (15)
Distribution to noncontrolling interest —  —  —  —  —  —  —  —  —  (2,506) (2,506)
Other —  —  —  —  (76) —  —  —  —  (1) (77)
Balance at March 29, 2020 124,987,370  $ 1,250  $ 837,385  $ —  $ (17,308) $ (41,794) $ (25,615) $ —  $ (89,395) $ 164,219  $ 828,742 
Net (loss)/income for the quarter ended June 28, 2020 —  —  —  —  —  —  —  —  (12,630) 945  (11,685)
Other comprehensive income/(loss) for the quarter ended June 28, 2020 before reclassifications —  —  —  —  —  17,416  (3,855) —  —  —  13,561 
Reclassification from AOCI —  —  —  —  —  —  1,962  —  —  —  1,962 
Share-based compensation —  —  2,974  —  —  —  —  —  —  —  2,974 
Purchase of shares by noncontrolling interest —  —  —  —  —  —  —  —  —  30  30 
Distribution to shareholders —  —  —  —  —  —  —  —  (4) —  (4)
Distribution to noncontrolling interest —  —  —  —  178  —  —  —  —  (3,284) (3,106)
Other —  —  —  —  (18) —  —  —  1  1  (16)
Balance at June 28, 2020 124,987,370  $ 1,250  $ 840,359  $ —  $ (17,148) $ (24,378) $ (27,508) $ —  $ (102,028) $ 161,911  $ 832,458 
See accompanying notes to Condensed Consolidated Financial Statements
5
Krispy Kreme, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
  Two Quarters Ended
  July 4, 2021 (26 weeks) June 28, 2020 (26 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (15,374) $ (22,633)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization expense 48,595  37,184 
Deferred income taxes 7,995  (2,601)
Loss on extinguishment of debt 1,700  — 
Impairment and lease termination charges 1,126  1,693 
Loss/(gain) on disposal of property and equipment 148  (1,164)
Share-based compensation 10,658  6,141 
Change in accounts and notes receivable allowances 110  717 
Inventory write-off 776  — 
Other (425) (76)
Change in operating assets and liabilities, excluding business acquisitions and foreign currency translation adjustments: 1,536  (5,325)
Net cash provided by operating activities 56,845  13,936 
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Purchase of property and equipment (52,842) (44,133)
Proceeds from disposals of assets 147  2,793 
Acquisition of shops and franchise rights from franchisees, net of cash acquired (33,888) 212 
Principal payments received from loans to franchisees 45  362 
Purchases of held-to-maturity debt securities —  (55)
Maturities of held-to-maturity debt securities 277  116 
Net cash used for investing activities (86,261) (40,705)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt 540,000  263,097 
Repayment of long-term debt and lease obligations (541,353) (97,496)
Payment of financing costs (1,700) — 
Proceeds from structured payables 140,598  135,222 
Payments on structured payables (138,100) (97,530)
Capital contribution by shareholders 120,932  — 
Proceeds from sale of noncontrolling interest in subsidiary 53,256  17,592 
Distribution to shareholders (34,364) (19)
Payments for repurchase and retirement of common stock (102,698) — 
Distribution to noncontrolling interest (6,018) (5,612)
Net cash provided by financing activities 30,553  215,254 
Effect of exchange rate changes on cash, cash equivalents and restricted cash (1,161) 249 
Net (decrease)/increase in cash, cash equivalents and restricted cash (24) 188,734 
Cash, cash equivalents and restricted cash at beginning of period 37,483  35,450 
Cash, cash equivalents and restricted cash at end of period $ 37,459  $ 224,184 
Supplemental schedule of non-cash investing and financing activities:
Accrual for property and equipment $ 1,381  $ 6,105 
Stock issuance under shareholder notes 446  — 
Common stock issuance under subscription receivable in connection with initial public offering, net of underwriting discounts and issuance costs 459,685  — 
Accrual for distribution to shareholders (7,970) — 
Accrual for repurchase and retirement of common stock (35,803) — 
Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents $ 37,377  $ 224,050 
Restricted cash 82  134 
Total cash, cash equivalents and restricted cash $ 37,459  $ 224,184 
See accompanying notes to Condensed Consolidated Financial Statements.
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Table of Contents
Krispy Kreme, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in thousands, unless otherwise specified)
Note 1 — Description of Business and Summary of Significant Accounting Policies
Description of Business
Krispy Kreme, Inc. (“KKI”) and its subsidiaries (collectively, the “Company” or “Krispy Kreme”) operates through its omni-channel business model to provide doughnut experiences and produce doughnuts for Doughnut Shops, Delivered Fresh Daily (“DFD”) outlets, Ecommerce and delivery, and Krispy Kreme branded sweet treats (“Branded Sweet Treat Line”) channels, expanding consumer access to the Krispy Kreme brand.
The Company has three reportable operating segments: 1) U.S. and Canada, which includes all Krispy Kreme Company-owned operations in the U.S. and Canada, Insomnia-branded cookie shops and our Branded Sweet Treat Line; 2) International, which includes all Krispy Kreme Company-owned operations in the United Kingdom, Ireland, Australia, New Zealand and Mexico; and 3) Market Development, which includes franchise operations across the globe, as well as Krispy Kreme Company-owned shops in Japan. Unallocated corporate costs are excluded from the Company’s measurement of segment performance.
Initial Public Offering
The Company’s registration statement on Form S-1 related to its initial public offering (“IPO”) was declared effective on June 30, 2021 and the Company’s common stock began trading on the Nasdaq Global Select Market on July 1, 2021. On July 1, 2021, the Company completed its IPO, in which the Company sold 29.4 million shares of common stock at a price to the public of $17.00 per share. The Company received aggregate net proceeds of $459.7 million after deducting underwriting discounts and commissions of $28.7 million and offering expenses of $11.6 million. The net proceeds were received subsequent to quarter end on July 6, 2021 and, therefore, are recorded as Stock subscription receivable within Shareholders’ equity on the Condensed Consolidated Balance Sheet as of July 4, 2021.
In connection with the IPO, the Company and its affiliates completed the following transactions:
•On June 10, 2021, the Company's wholly-owned (excluding certain management equity interests) subsidiary, Krispy Kreme Holdings, Inc. (“KKHI”), entered into a term loan credit agreement, as borrower, which provided for term loans in an initial aggregate principal amount of $500.0 million (the “Term Loan Facility”). On June 17, 2021, KKHI borrowed $500.0 million under the Term Loan Facility, with debt issuance costs of $1.7 million which were included in Interest expense, net on the Condensed Consolidated Statements of Operations during the quarter ended July 4, 2021. The borrowings bore an all-in interest rate of 2.68175%. On June 28, 2021, following the Merger (as defined below), KKI assumed all of the obligations of KKHI as borrower under the Term Loan Facility. On July 7, 2021, the Company repaid in full and terminated the Term Loan Facility with a cash outflow of $500.7 million, which included $0.7 million of accrued interest. The Term Loan Facility would have matured on the earlier of (i) June 10, 2022 and (ii) within four business days following the consummation of the IPO.
•On June 28, 2021, KKHI merged into KKI (the “Merger”). As a result of the Merger, the Company eliminated $107.4 million of noncontrolling interest at KKHI as of the merger date. The management equity interests at KKHI were exchanged for common shares in KKI. Restricted stock units (“RSUs”) and stock options held at KKHI were exchanged for RSUs and stock options held at KKI at a rate of 317.24 KKI shares to 1 KKHI share.
•On June 30, 2021, the Company effected a 1,745-for-1 split of each outstanding share of common stock (the “Stock Split”). All share and per share information has been retroactively adjusted to effect the Stock Split for all periods presented.
7
In connection with the IPO, the Company used the proceeds from the Term Loan Facility for the following: (1) repay the related party notes payable (including accrued interest of $17.8 million) of $355.0 million during the quarter ended July 4, 2021, (2) redeem certain common stock of $102.7 million held by Krispy Kreme, G.P. (“KK GP”) during the quarter ended July 4, 2021 and (3) pay a pro rata dividend to members of its management who, prior to the Merger, held equity interests in KKHI in an aggregate amount of $42.3 million ($34.4 million of which was paid during the quarter ended July 4, 2021 and $7.9 million of which was paid at the beginning of the third quarter of fiscal 2021). Additionally, at the beginning of the third quarter of fiscal 2021, the Company paid $20.3 million to repurchase approximately 1.3 million shares of common stock from certain of the Company’s executive officers at the price paid by the underwriters and $15.5 million to repurchase approximately 1.0 million shares of common stock from certain of its executive officers for payment of their withholding taxes with respect to the RSUs vesting or for which vesting was accelerated in connection with the offering.
As a result of the above and the timing of certain payments across quarters, the Company’s Condensed Consolidated Balance Sheet as of July 4, 2021 reflected the following amounts:
•The $500.0 million Term Loan Facility principal outstanding as Current portion of long-term debt, and
•The cumulative $43.7 million unpaid equity distributions and share repurchases as Accrued liabilities.
On August 2, 2021, the underwriters exercised their over-allotment option and purchased an additional 3.5 million shares of common stock at the IPO price less the underwriting discounts and commissions. The net proceeds received on August 2, 2021 were $56.1 million after deducting underwriting discounts and commissions of $3.4 million. As the option was exercised subsequent to the end of the quarter ended July 4, 2021, the shares will be reflected as outstanding beginning in the third quarter of fiscal 2021.
Basis of Presentation and Consolidation
The Company operates and reports financial information on a 52 or 53-week year with the fiscal year ending on the Sunday closest to December 31. The data periods contained within fiscal years 2020 and 2021 reflect the results of operations for the 53-week period ended January 3, 2021 and the 52-week period ended January 2, 2022, respectively. The quarters ended July 4, 2021 and June 28, 2020 were both 13-week periods.
The unaudited Condensed Consolidated Financial Statements include the accounts of KKI and subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, these interim financial statements do not include all information and footnotes required under U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of results of operations, balance sheet, cash flows, and shareholders’ equity for the periods presented. All significant intercompany balances and transactions among KKI and subsidiaries have been eliminated in consolidation. Investments in entities over which the Company has the ability to exercise significant influence but which it does not control and whose financial statements are not otherwise required to be consolidated, are accounted for using the equity method.
These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto as of and for the year ended January 3, 2021, included in the IPO Prospectus. The Condensed Consolidated Balance Sheet as of January 3, 2021 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements. The results of operations for the second quarter ended July 4, 2021 are not necessarily indicative of the results of operations that may be achieved for the entire fiscal year ending January 2, 2022.
Noncontrolling interest in the Company’s Condensed Consolidated Financial Statements represents the interest in subsidiaries held by joint venture partners and employee shareholders. The joint venture partners hold noncontrolling interests in the Company’s consolidated subsidiaries, Awesome Doughnut, LLC (“Awesome Doughnut”) and W.K.S. Krispy Kreme, LLC (“WKS Krispy Kreme”). Employee shareholders hold noncontrolling interests in the consolidated subsidiaries Krispy Kreme Holding UK Ltd. (“KKUK”), Krispy Kreme Holdings Pty Ltd (“KK Australia”), Krispy Kreme Mexico S. de R.L. de C.V. (“KK Mexico”) and Insomnia Cookies Holdings, LLC (“Insomnia Cookies”). Since the Company consolidates the financial statements of these subsidiaries, the noncontrolling owners’ share of each subsidiary’s net assets and results of operations are deducted and reported as noncontrolling interest on the Condensed Consolidated Balance Sheets and as net income attributable to noncontrolling interest in the Condensed Consolidated Statements of Operations and comprehensive income attributable to noncontrolling interest in the Condensed Consolidated Statements of Comprehensive Income/(Loss).
8
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note 1, “Description of Business and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for the year ended January 3, 2021 included in the IPO Prospectus. There have been no material changes to the significant accounting policies during the quarter ended July 4, 2021.
Reclassifications
On the Condensed Consolidated Statements of Operations, Marketing expenses have been reclassified (formerly presented within Selling, general and administrative expense) to be consistent with the current quarter presentation. This reclassification does not have a significant impact on the reported financial position and does not impact the results of operations or cash flows.
Recent Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions in Topic 740 and clarifying and amending existing guidance. The Company adopted ASU 2019-12 at the beginning of fiscal year 2021, and the adoption had no material impact to the Company’s Condensed Consolidated Financial Statements.
In June 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. It is effective for all entities as of March 12, 2020 through December 31, 2022. A company may elect to apply the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The Company is currently evaluating the effect of the new guidance on its Condensed Consolidated Financial Statements and related disclosures.
Note 2 — Acquisitions
2021 Acquisitions
In the quarter ended July 4, 2021, there were no acquisitions.
In the first quarter of fiscal 2021, the Company acquired the business and operating assets of two franchisees, collectively consisting of 17 Krispy Kreme shops in the United States. The Company paid total consideration of $38.1 million, consisting of $33.9 million of cash, $0.9 million of consideration payable to the sellers within 12 months of the respective acquisition dates, and $3.3 million settlement of amounts related to pre-existing relationships, to acquire substantially all of the shops’ assets. Consideration payable of $0.9 million was withheld to cover indemnification claims that could arise after closing. Absent any claims, these amounts are payable within 12 months of the respective acquisition dates.
The settlement of pre-existing relationships included in the purchase consideration includes the write-off of accounts and notes receivable, net of deferred revenue, of $0.6 million. It also includes the disposal of the franchise intangible asset related to the two franchisees recorded at time of the acquisition of Krispy Kreme by JAB Holding Company (“JAB”). The cumulative net book value of the franchise intangible assets was $2.7 million at the acquisition dates. The Company accounted for the transactions as business combinations.
9
The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition for the acquisitions above.
 
KK U.S. Shops
Assets acquired:  
Cash, cash equivalents and restricted cash $ 40 
Other current assets 474 
Property and equipment, net 3,829 
Other intangible assets 23,906 
Operating lease right of use asset 19,292 
Other assets 115 
Total identified assets acquired 47,656 
Liabilities assumed:
Accrued liabilities (334)
Current operating lease liabilities (2,093)
Noncurrent operating lease liabilities (17,199)
Total liabilities assumed (19,626)
Goodwill 10,036 
Purchase consideration, net $ 38,066 
Transaction costs in 2021 $ 1,225 
Transaction costs in 2020 184 
Reportable segment U.S. and Canada
During the measurement period, the Company will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates. Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined. Measurement period changes for the 2021 acquisitions did not have a material impact to the Condensed Consolidated Financial Statements for the second quarter of 2021.
2020 Acquisitions
In the second half of fiscal year 2020, the Company acquired all equity interests in Krispy Kreme Doughnut Japan Co., Ltd. (“KK Japan”) and the business and operating assets of an additional eight franchisees in the United States. The valuation for the acquisitions requires significant estimates and assumptions. The estimates are inherently uncertain and subject to revision as additional information is obtained during the measurement period for the acquisitions. Measurement period changes for the 2020 acquisitions did not have a material impact to the Condensed Consolidated Financial Statements for the quarter ended July 4, 2021.
Note 3 — Inventories
The components of Inventories are as follows:
July 4, 2021 January 3, 2021
Raw materials $ 15,915  $ 16,263 
Work in progress 603  871 
Finished goods and purchased merchandise 21,982  21,385 
Total Inventories $ 38,500  $ 38,519 
10
Note 4 — Goodwill and Other Intangible Assets
Goodwill
Changes in the carrying amount of goodwill by reportable segment are as follows:
U.S. and Canada
International
Market Development
Total
Balance as of January 3, 2021 $ 642,704  $ 290,872  $ 152,970  $ 1,086,546 
Acquisitions
27,560  —  (17,524) 10,036 
Measurement periods adjustments related to fiscal year 2020 acquisitions
186  —  —  186 
Foreign currency impact
(1,399) —  (1,399)
Balance as of July 4, 2021 $ 670,450  $ 289,473  $ 135,446  $ 1,095,369 
Acquisitions of franchises result in a reclassification of goodwill between segments.
Other intangible assets
Other intangible assets consist of the following:
  July 4, 2021 January 3, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net Amount
Gross
Carrying
Amount  
Accumulated
Amortization
Net Amount
Intangible assets with indefinite lives      
 
 
Trade name $ 657,900  $ —  $ 657,900  $ 657,900  $ —  $ 657,900 
Intangible assets with definite lives
Franchise agreements 32,961  (7,697) 25,264  36,254  (7,519) 28,735 
Customer relationships 15,000  (4,251) 10,749  15,000  (3,819) 11,181 
Reacquired franchise rights 381,782  (72,197) 309,585  358,095  (59,432) 298,663 
Website development costs 6,500  (6,050) 450  6,500  (4,965) 1,535 
Total intangible assets with definite lives 436,243  (90,195) 346,048  415,849  (75,735) 340,114 
Total intangible assets $ 1,094,143  $ (90,195) $ 1,003,948  $ 1,073,749  $ (75,735) $ 998,014 
Amortization expense related to intangible assets included in depreciation and amortization expense was $7.6 million and $15.1 million for the quarter and two quarters ended July 4, 2021, respectively and $6.2 million and $12.6 million for the quarter and two quarters ended June 28, 2020, respectively.
11
Note 5 — Leases
The Company included the following amounts related to operating and finance assets and liabilities within the Condensed Consolidated Balance Sheets:
As of
    July 4, 2021 January 3, 2021
Assets Classification    
Operating lease Operating lease right of use asset, net $ 414,096  $ 399,688 
Finance lease Property and equipment, net 24,236  23,556 
Total leased assets   $ 438,332  $ 423,244 
Liabilities  
Current  
Operating lease Current operating lease liabilities $ 46,763  $ 45,675 
Finance lease Current portion of long-term debt 3,985  6,245 
Noncurrent  
Operating lease Noncurrent operating lease liabilities 390,962  376,099 
Finance lease Long-term debt, less current portion 22,293  19,979 
Total leased liabilities   $ 464,003  $ 447,998 
Lease costs were as follows:
Quarter Ended Two Quarters Ended
    July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Lease cost Classification    
Operating lease cost Selling, general and administrative expense $ 609  $ 755  $ 1,319  $ 1,573 
Operating lease cost Operating expenses 21,368  16,110  41,706  33,599 
Short-term lease cost Operating expenses 792  797  1,564  1,429 
Variable lease costs Operating expenses 4,218  676  7,297  3,888 
Sublease income Royalties and other revenues (97) (130) (177) (239)
Finance lease cost:
 
 
Amortization of right of use assets Depreciation and amortization expense 850  331  1,648  1,331 
Interest on lease liabilities Interest expense, net $ 481  $ 836  $ 1,074  $ 1,062 
Supplemental disclosures of cash flow information related to leases were as follows:
Two Quarters Ended
July 4, 2021 June 28, 2020
Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$ 45,889  $ 35,638 
Operating cash flows from finance leases
984  971 
Financing cash flows from finance leases
1,705  1,899 
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases
39,473  6,296 
Finance leases
$ 1,788  $ 6,827 
The Company did not record any lease termination costs in the quarter and two quarters ended July 4, 2021. Lease termination charges included in Other expenses, net were $1.7 million in the quarter and two quarters ended June 28, 2020.
12
Note 6 — Fair Value Measurements
The following table presents assets and liabilities that are measured at fair value on a recurring basis as of July 4, 2021 and January 3, 2021:
July 4, 2021
Level 1 Level 2 Level 3
Assets:
401(k) mirror plan assets
$ 215  $ —  $ — 
Commodity derivatives
—  1,890  — 
Total Assets $ 215  $ 1,890  $ — 
Liabilities:
Foreign currency derivative
—  393  — 
Interest rate derivative
—  24,503  — 
Total Liabilities $ —  $ 24,896  $ — 
January 3, 2021
Level 1
Level 2
Level 3
Assets:
401(k) mirror plan assets
$ 237  $ —  $ — 
Foreign currency derivative
—  131  — 
Commodity derivatives
—  420  — 
Total Assets $ 237  $ 551  $ — 
Liabilities:
Interest rate derivative
—  32,813  — 
Total Liabilities $ —  $ 32,813  $ — 
There were no transfers of financial assets or liabilities among the levels within the fair value hierarchy during the quarter ended July 4, 2021 and fiscal year ended January 3, 2021. The Company’s derivatives are valued using discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves and currency rates.
Note 7 — Derivative Instruments
Commodity Price Risk
The Company uses forward contracts to protect against the effects of commodity price fluctuations in the cost of ingredients of its products, of which flour, sugar and shortening are the most significant, and the cost of gasoline used by its delivery vehicles. Management has not designated these forward contracts as hedges. As of July 4, 2021 and January 3, 2021, the total notional amount of commodity derivatives was 2.3 million and 3.0 million gallons of gasoline, respectively. They were scheduled to mature between July 5, 2021 and December 31, 2022 and January 4, 2021 and December 1, 2022, respectively. As of July 4, 2021 and January 3, 2021, the Company recorded an asset of $1.9 million and $0.4 million, respectively, related to the fair market values of its commodity derivatives. The settlement of commodity derivative contracts is reported in the Condensed Consolidated Statements of Cash Flows as a cash flow from operating activities.
Interest Rate Risk
The Company is exposed to interest rate risk related to its borrowing obligations. From time to time, the Company enters into interest rate swap arrangements to manage the risk. Management has designated the swap agreements as cash flow hedges and recognized the changes in the fair value of these swaps in other comprehensive income. As of July 4, 2021 and January 3, 2021, the Company has recorded liabilities of $24.5 million and $32.8 million, respectively, related to the fair market values of its interest rate derivatives. The cash flows associated with the interest rate swaps are reflected in the operating activities in the Condensed Consolidated Statements of Cash Flows, which is consistent with the classification as operating activities of the interest payments on the term loan.
13
Foreign Currency Exchange Rate Risk
The Company is exposed to foreign currency risk primarily from its investments in consolidated subsidiaries that operate in the United Kingdom, Ireland, Australia, New Zealand, Mexico and Japan. In order to mitigate foreign exchange fluctuations, the Company enters into foreign exchange forward contracts. Management has not designated these forward contracts as hedges. As of July 4, 2021 and January 3, 2021, the total notional amount of foreign exchange derivatives was $44.3 million and $26.7 million, respectively. They were scheduled to mature between July 2021 and September 2021, and in January 2021, respectively. The Company recorded a liability of $0.4 million and an asset of $0.1 million as of July 4, 2021 and January 3, 2021, respectively, related to the fair market values of its foreign exchange derivatives.
Quantitative Summary of Derivative Positions and Their Effect on Results of Operations
The following tables present the fair values of derivative instruments included in the Condensed Consolidated Balance Sheets as of July 4, 2021 and January 3, 2021, for derivatives not designated as hedging instruments and derivatives designated as hedging instruments, respectively. The Company only has cash flow hedges that are designated as hedging instruments.
Derivatives Fair Value
Derivatives Not Designated as Hedging
Instruments
July 4,
2021 		January 3,
2021
Balance Sheet Location
Foreign currency derivatives
$ —  $ 131  Prepaid expense and other current assets
Commodity derivatives
1,890  420  Prepaid expense and other current assets
$ 1,890  $ 551 
Foreign currency derivatives
$ 393  $ —  Accrued liabilities
$ 393  $ — 
Derivatives Fair Value
Derivatives Designated as Hedging
Instruments
July 4,
2021 		January 3,
2021 		Balance Sheet Location
Interest rate derivatives
$ 9,935  $ 10,235 
Accrued liabilities
Interest rate derivatives
14,568  22,578 
Other long-term obligations and deferred credits
$ 24,503  $ 32,813 
The effect of derivative instruments on the Condensed Consolidated Statements of Operations for the quarter and two quarters ended July 4, 2021 and June 28, 2020 is as follows:
 
Derivative Gain/(Loss) Recognized in Income for the Quarter Ended
Derivative Gain/(Loss) Recognized in Income for the Two Quarters Ended
 
Derivatives Designated as Hedging Instruments July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Location of Derivative Gain/(Loss)
Recognized in Income
Loss on interest rate derivatives $ (2,561) $ (1,962) $ (5,091) $ (2,657) Interest expense, net
  $ (2,561) $ (1,962) $ (5,091) $ (2,657)  
 
Derivative Gain/(Loss) Recognized in Income for the Quarter Ended
Derivative Gain/(Loss) Recognized in Income for the Two Quarters Ended
 
Derivatives Not Designated as Hedging Instruments July 4, 2021 June 28, 2020 July 4, 2021 June 28, 2020
Location of Derivative Gain/(Loss)
Recognized in Income
Gain/(loss) on foreign currency derivatives $ 235  $ (294) $ (375) $ 185  Other non-operating income, net
Gain/(loss) on commodity derivatives 477  1,419  1,470  (874) Other non-operating income, net
  $ 712  $ 1,125  $ 1,095  $ (689)  
14
Note 8 — Share-based Compensation

Restricted Stock Units (“RSUs”)
The Company and certain of its subsidiaries issue time-vested RSUs under their respective executive ownership plans and long-term incentive plans. The time-vested RSUs are awarded to eligible employees and non-employee directors and entitle the grantee to receive shares of common stock at the end of a vesting period. Certain RSUs vest in 54 months from the date of grant and include a minimum holding period of six months before the shareholder may redeem the shares. Certain RSUs granted during the second quarter of 2021 vest over a 60-month period subsequent to the grant date (with 60% vesting during the third year following the grant date, 20% vesting during the fourth year, and 20% vesting at the end of the 60-month term). Throughout the vesting period and the holding period, shareholders are subject to the market risk on the value of their shares. RSU activity under the Company’s various plans during the periods presented is as follows:
Non-vested shares outstanding at January 3,
2021 		Granted RSU Dividend Equivalents Vested Forfeited Non-vested shares outstanding at July 4,
2021
KKI(1)
RSUs
4,649,551  2,772,199  1,018,629  2,389,567  224,675  5,826,137 
Weighted Average Grant Date Fair Value
$ 11.37  18.39  —  9.41  13.17  $ 13.46 
KKUK
RSUs
404,568  —  —  351,500  —  53,068 
Weighted Average Grant Date Fair Value
$ 12.45  —  —  12.22  —  $ 13.98 
Insomnia Cookies
RSUs
29,279  15,173  —  —  3,488  40,964 
Weighted Average Grant Date Fair Value
$ 68.87  97.77  —  —  78.31  $ 78.77 
KK Australia
RSUs
1,844,241  78,534  —  —  —  1,922,775 
Weighted Average Grant Date Fair Value
$ 1.48  1.45  —  —  —  $ 1.48 
KK Mexico
RSUs
25,055  167  —  —  —  25,222 
Weighted Average Grant Date Fair Value
$ 29.21  28.69  —  —  —  $ 29.21 
1.For KKI RSU holders that did not vest upon IPO, dividend equivalent shares were granted after the IPO at a weighted average grant date fair value of zero. The vesting terms for the dividend equivalent shares are the same as the underlying RSUs. The KKI shares presented have been retroactively adjusted to give effect to the Stock Split and the Merger.
The Company recorded total non-cash compensation expense related to RSUs under the plans of $7.4 million and $9.8 million for the quarter and two quarters ended July 4, 2021, respectively, and $3.0 million and $6.2 million for the quarter and two quarters ended June 28, 2020, respectively.

15
The unrecognized compensation cost related to the unvested RSUs and the weighted-average period over which such cost is expected to be recognized are as follows:
  As of July 4, 2021
 
Unrecognized
compensation
cost
Recognized over a
weighted-average
period of
KKI $ 62,542  3.4 years
KKUK 327  0.9 years
Insomnia Cookies 2,426  3.4 years
KK Australia 944  1.2 years
KK Mexico $ 654  4.0 years
The estimated fair value of restricted stock is calculated using a market approach (i.e. market multiple is used for the KKUK and Insomnia Cookies’ plans and an agreed-upon EBITDA buyout multiple is used for KK Australia and KK Mexico plans).
Time-Vested Stock Options
KKI issues time-vested stock options under its Omnibus Incentive Plan. The stock options are awarded to eligible employees and entitle the grantee to purchase shares of common stock at the respective exercise price at the end of a vesting period. Stock options vest over a 60-month period subsequent to the grant date (with 60% vesting during the third year following the grant date, 20% vesting during the fourth year, and 20% vesting at the end of the 60-month term), and as such are subject to a service condition. The maximum contractual term of the stock options is 10 years.
The fair value of time-vested stock options was estimated on the date of grant using the Black-Scholes option pricing model. This model is impacted by the Company’s stock price and certain assumptions related to the Company’s stock and employees’ exercise behavior. The expected term for stock options granted during fiscal year 2021 was estimated utilizing the simplified method. We utilized the simplified method because the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate assumption was based on yields of U.S. Treasury securities in effect at the date of grant with terms similar to the expected term. Expected volatility was estimated based on the Company’s historical volatility, and also considering historical volatility of peer companies over a period equivalent to the expected term. Additionally, the dividend yield was estimated based on dividends currently being paid on the underlying common stock at the date of grant. Estimated and actual forfeitures have not had a material impact on share-based compensation expense.
The following weighted-average assumptions were utilized in determining the fair value of the time-vested stock options granted during fiscal year 2021:
Quarter Ended Year Ended
July 4,
2021 		January 3,
2021
KKI
Risk-free interest rate 1.3  % —  %
Expected volatility 34.4  % —  %
Dividend yield 1.0  % —  %
Expected term (years) 6.8 years — 

16
A summary of the status of the time-vested stock options as of January 3, 2021 and changes during fiscal year 2021 is presented below:
Share options outstanding at Share options outstanding at
January 3,
2021 		Granted Exercised Forfeited or expired July 4,
2021
KKI
Options —  2,817,398  —  —  2,817,398
Weighted Average Grant Date Fair Value $ —  $ 6.10  $ —  $ —  $ 6.10
Weighted Average Exercise Price $ —  $ 14.61  $ —  $ —  $ 14.61
Weighted Average Remaining Contractual Term (years) —  9.8 years
Aggregate Intrinsic Value (in thousands) $ —  $ 12,714 
The Company recorded total non-cash compensation expense related to the time-vested stock options of $0.9 million for the quarter and two quarters ended July 4, 2021.
The unrecognized compensation cost related to the unvested stock options and the weighted-average period over which such cost is expected to be recognized are as follows:
As of July 4, 2021
Unrecognized compensation cost Recognized over a weighted-average period of
KKI $ 16,313  3.4 years
No time-vested stock options under the KKI plan vested nor were exercised during the fiscal periods presented.
Note 9 — Income Taxes
For interim tax reporting, the Company estimates a worldwide annual effective tax rate and applies that rate to the year-to-date ordinary income/(loss). The tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.
The Company’s effective income tax rates were (195.60)% and (222.58)% for the quarter and two quarters ended July 4, 2021, respectively and 11.38% and 11.40% for the quarter and two quarters ended June 28, 2020, respectively. The Company’s effective income tax rate for the quarter and two quarters ended July 4, 2021 differed from the respective statutory rates primarily due to the revaluation of U.K. deferred taxes as a result of the increase in the corporate tax rate from 19.0% to 25.0% beginning in 2023 and disallowed executive compensation expense in connection with the IPO. The Company’s effective income tax rates were also impacted by the mix of income and taxes attributable to foreign jurisdictions.
Note 10 — Commitments and Contingencies
Pending Litigation
K2 Asia litigation
On April 7, 2009, a Cayman Islands corporation, K2 Asia Ventures and its owners filed a lawsuit in Forsyth County, North Carolina Superior Court against the Company, the Company’s franchisee in the Philippines and other persons associated with the franchisee. The suit alleges that the Company and the other defendants conspired to deprive the plaintiffs of claimed “exclusive rights” to negotiate franchise and development agreements with prospective franchisees in the Philippines and sought at least $3.0 million. The Company believes that these allegations lack merit and continues to vigorously defend against the lawsuit. The Company does not believe it is probable that a loss has been incurred with respect to this matter, and accordingly no liability related to it has been reflected in the accompanying Condensed Consolidated Financial Statements.



17
Insomnia Cookies litigation related to employee wages
Insomnia Cookies is currently a party to a class action lawsuit alleging violations of unfair competition, unpaid minimum wages, unpaid overtime, meal and rest period violations and unpaid premiums, failure to reimburse for business expenses, untimely paid wages, and violation of the California Private Attorneys General Act. Insomnia Cookies vigorously disputes these claims. On March 11, 2021, the parties participated in a mediation and reached a class wide settlement and release of claims in principle for $0.4 million, expected to be paid during the quarter ended October 3, 2021. The parties have executed a memorandum of understanding memorializing the key settlement terms and are in the process of finalizing long form settlement documents and seeking preliminary court approval of the settlement.
TSW Food, LLC litigation
On November 13, 2020, TSW Foods, LLC (“TSW”), a reseller of certain Krispy Kreme packaged products, filed a demand for arbitration and statement of claim alleging Anticipatory Repudiation of the Master Reseller Agreement, Breach of the Master Reseller Agreement, and Breach of the Implied Covenant of Good Faith and Fair Dealing. The Company intends to vigorously defend against TSW’s claims and prosecute its counterclaims. At this time the Company is unable to predict the outcome of this matter, the potential loss or range of loss, if any, associated with the resolution of this matter or any potential effect it may have on the Company or its operations.
Other Legal Matters
The Company also is engaged in various legal proceedings arising in the normal course of business. The Company maintains insurance policies against certain kinds of such claims and suits, including insurance policies for workers’ compensation and personal injury, all of which are subject to deductibles. While the ultimate outcome of these matters could differ from management’s expectations, management currently does not believe their resolution will have a material adverse effect on the Company’s Condensed Consolidated Financial Statements.
Other Commitments and Contingencies
One of the Company’s primary banks issued letters of credit on its behalf totaling $8.5 million and $14.0 million as of July 4, 2021 and January 3, 2021, respectively, a majority of which secure the Company’s reimbursement obligations to insurers under its self-insurance arrangements.
Note 11 — Related Party Transactions
As of July 4, 2021 and January 3, 2021, the Company had an equity ownership in two franchisees, KremeWorks USA, LLC (20% ownership) and KremeWorks Canada, L.P. (25% ownership), with an aggregate carrying value of $0.7 million and $0.9 million as of July 4, 2021 and January 3, 2021, respectively. Revenues from sales of ingredients and equipment to these franchisees were $1.9 million and $3.8 million for the quarter and two quarters ended July 4, 2021, respectively, and $1.7 million and $3.4 million for the quarter and two quarters ended June 28, 2020, respectively. Royalty revenues from these franchisees were $0.4 million and $0.7 million for the quarter and two quarters ended July 4, 2021, respectively, and $0.3 million and $0.6 million for the quarter and two quarters ended June 28, 2020. Trade receivables from these franchisees are included in Accounts receivable, net on the Condensed Consolidated Balance Sheets, which were $0.4 million and $0.4 million as of July 4, 2021 and January 3, 2021, respectively.
Keurig Dr Pepper Inc. (“KDP”), an affiliated company of JAB, licenses the Krispy Kreme trademark for the Company in the manufacturing of portion packs for the Keurig brewing system. KDP also sells beverage concentrates and packaged beverages to Krispy Kreme for resale through Krispy Kreme’s shops. Licensing revenues from KDP were $0.5 million and $1.0 million for the quarter and two quarters ended July 4, 2021, respectively, and $0.3 million and $0.8 million for the quarter and two quarters ended June 28, 2020, respectively.
The Company had service agreements with BDT Capital Partners, LLC (“BDT”), a minority investor in KKI, to provide advisory services to the Company, including valuation services related to certain acquisitions. The Company recognized expenses of $0.6 million related to the service agreements with BDT for the two quarters ended July 4, 2021, and $0.1 million and $0.6 million for the quarter and two quarters ended June 28, 2020, respectively. No related expenses were incurred for the quarter ended July 4, 2021.
18
In connection with valuation assistance provided by BDT in preparation for the IPO, the Company incurred costs of $6.3 million that are capitalized in additional paid-in capital for the quarter and two quarters ended July 4, 2021. No related costs were incurred for the quarter and two quarters ended June 28, 2020.
In connection with tax sharing arrangements with JAB and other JAB portfolio companies, the Company had a $7.4 million related party receivable from JAB and a $15.3 million related party payable to the other JAB portfolio companies offset by a $15.3 million income tax receivable due from taxing authorities as of January 3, 2021. No related party receivable or related party payable was due to JAB or other JAB portfolio companies as of July 4, 2021, as these amounts were settled. The related party receivable amounts were presented within Accounts receivable, net on the Condensed Consolidated Balance Sheet as of January 3, 2021.
The Company was party to a senior unsecured note agreement (the “original agreement”) with KK GP. In the original agreement, which was outstanding prior to fiscal year ended December 30, 2018, the aggregate principal amount was $283.1 million. In April 2019, the Company entered into an additional unsecured note with KK GP for $54.0 million (the “additional agreement”). As of January 3, 2021, the outstanding amount of principal and interest was $344.6 million. The note was paid off in full during the quarter ended July 4, 2021. The interest expense was $4.8 million and $10.4 million for the quarter and two quarters ended July 4, 2021, respectively, and $5.6 million and $11.1 million for the quarter and two quarters ended June 28, 2020.
The Company granted loans to employees of KKI, KKUK, KK Australia, KK Mexico and Insomnia Cookies for the purchase of shares in those subsidiaries. The loan balance was $3.8 million and $18.7 million as of July 4, 2021 and January 3, 2021, respectively, and it is presented as a reduction from Shareholders’ equity on the Condensed Consolidated Balance Sheet.
Note 12 — Revenue Recognition
Disaggregation of Revenues
Revenues are disaggregated as follows:
Quarter Ended
Two Quarters Ended
July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
Company shops, Branded Sweet Treat Line and DFD $ 329,775  $ 218,336  $ 630,270  $ 448,950 
Mix and equipment revenue from franchisees 11,448  18,272  24,538  39,194 
Franchise royalties and other 7,963  8,364  16,187  18,044 
Total net revenues $ 349,186  $ 244,972  $ 670,995  $ 506,188 
Other revenues include advertising fund contributions, rental income, development and franchise fees and licensing royalties from Keurig related to Krispy Kreme brands coffee sales.
Contract Balances
Deferred revenue subject to Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, and related receivables are as follows:
  July 4,
2021 		January 3,
2021
Balance Sheet Classification
Trade receivables, net of allowances of $954 and $1,437, respectively
$ 38,344  $ 39,624  Accounts receivables, net
Deferred revenue
Current 17,341  16,045  Accrued liabilities
Noncurrent 2,824  2,838  Other long-term obligations and deferred credits
Total deferred revenue $ 20,165  $ 18,883 
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Note 13 — Net Loss per Share
The following table presents the calculations of basic and diluted EPS:
 
Quarter Ended
Two Quarters Ended
(In thousands, except share and per share amounts) July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
Net loss attributable to Krispy Kreme, Inc. $ (17,142) $ (12,630) $ (20,203) $ (24,145)
Adjustment to net loss attributable to common shareholders (424) (253) (417) (150)
Net loss attributable to common shareholders - Basic $ (17,566) $ (12,883) $ (20,620) $ (24,295)
Additional income attributed to noncontrolling interest due to subsidiary potential common shares (120) (18) (145) (27)
Net loss attributable to common shareholders - Diluted $ (17,686) $ (12,901) $ (20,765) $ (24,322)
Basic weighted average common shares outstanding 132,351,087  124,987,370  128,669,228  124,987,370 
Dilutive effect of outstanding common stock options and RSUs —  —  —  — 
Diluted weighted average common shares outstanding 132,351,087  124,987,370  128,669,228  124,987,370 
Loss per share attributable to common shareholders:
 
 
Basic $ (0.13) $ (0.10) $ (0.16) $ (0.19)
Diluted $ (0.13) $ (0.10) $ (0.16) $ (0.19)
Potential dilutive shares consist of unvested RSUs, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes certain unvested RSUs granted under certain subsidiaries’ executive ownership plans and long-term incentive plans, because their inclusion would have been antidilutive. Refer to Note 8, Share-based Compensation, to the Condensed Consolidated Financial Statements for further information about the plans.
The following table summarizes the number of unvested RSUs excluded due to antidilution:
Quarter Ended Two Quarters Ended
July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
KKI 5,317,943  4,426,789  5,237,844  4,356,259 
KKUK 3,258  416,068  3,258  416,068 
Insomnia Cookies —  24,069  —  26,175 
KK Australia —  —  —  — 
KK Mexico —  —  —  — 
The 2,817,398 KKI time-vested stock options were also excluded from the computations for the quarter and two quarters ended July 4, 2021 due to antidilution.
Note 14 — Segment Reporting
The Company conducts business through the three reportable segments: U.S. and Canada, International, and Market Development. Unallocated corporate costs are excluded from the Company’s measurement of segment performance. These costs include general corporate expenses.
The reportable segment results are as follows:
20
  Quarter Ended Two Quarters Ended
  July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
Net revenues:
 
 
 
 
U.S. and Canada $ 230,918  $ 184,255  $ 453,388  $ 354,705 
International 89,237  34,412  155,743  95,071 
Market Development 29,031  26,305  61,864  56,412 
Total net revenues $ 349,186  $ 244,972  $ 670,995  $ 506,188 
Quarter Ended Two Quarters Ended
July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
Segment adjusted EBITDA:
U.S. and Canada $ 28,285  $ 27,551  $ 55,848  $ 49,188 
International 23,673  1,618  39,021  12,811 
Market Development 9,858  7,880  20,749  18,585 
Corporate (9,423) (7,580) (16,822) (14,671)
52,393  29,469  98,796  65,913 
Interest expense, net 9,793  9,711  18,042  18,355 
Interest expense — related party(1)
4,821  5,566  10,387  11,132 
Income tax expense/(benefit) 9,923  (1,500) 10,608  (2,912)
Depreciation and amortization expense 25,194  18,097  48,595  37,184 
Share-based compensation 8,290  2,970  10,658  6,141 
Employer payroll taxes related to share-based compensation 841  —  841  — 
Other non-operating income, net(2)
(416) (2,660) (858) (112)
New York City flagship Hot Light Theater Shop opening(3)
—  1,667  —  4,239 
Strategic initiatives(4)
—  5,661  —  9,274 
Acquisition and integration expenses(5)
223  812  2,375  4,423 
Shop closure expenses(6)
—  2,786  —  2,786 
Restructuring and severance expenses(7)
1,336  —  1,336  — 
IPO-related expenses(8)
6,727  —  10,203  — 
Other(9)
657  (1,956) 1,983  (1,964)
Net Loss $ (14,996) $ (11,685) $ (15,374) $ (22,633)
 
1.Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021.
2.Primarily foreign translation gains and losses in each period.
3.Consists of pre-opening costs related to our New York City flagship Hot Light Theater Shop opening, including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.
4.The quarter and two quarters ended June 28, 2020 consists mainly of consulting and advisory fees, personnel transition costs, and network conversion and set-up costs related to the transformation of the Company’s legacy wholesale business in the United States.
5.Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with acquisition-related activities for the applicable period.
6.Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
7.Consists of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses.
8.Includes consulting and advisory fees incurred in connection with preparation for the Company’s IPO.
9.The quarter and two quarters ended July 4, 2021 consist primarily of legal expenses incurred on matters described in Note 10, Commitments and Contingencies. The quarter and two quarters ended June 28, 2020 consists primarily of a gain on the sale of land.
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Note 15 — Subsequent Events
The Company evaluated subsequent events and transactions for potential recognition or disclosure in the Condensed Consolidated Financial Statements through August 17, 2021, the date the Condensed Consolidated Financial Statements were available to be issued. All subsequent events requiring recognition and disclosure have been incorporated into these Condensed Consolidated Financial Statements.
On July 7, 2021, the Company repaid in full and terminated the Term Loan Facility with a cash outflow of $500.7 million, which included $0.7 million of accrued interest.
During July 2021, the Company took a drawdown of $100.0 million on the 2019 Facility’s (as defined below) revolving credit facility in part to fund IPO-related items discussed in Note 1, Description of Business and Summary of Significant Accounting Policies to the Condensed Consolidated Financial Statements. Subsequent to the quarter ended July 4, 2021 and through August 9, 2021 the Company also repaid a cumulative $65.0 million on the 2019 Facility’s revolving credit facility, to reduce the outstanding balance on the revolving credit facility to $40.0 million as of August 9, 2021. This repayment activity in part was funded by the underwriters’ exercise of the over-allotment option discussed in Note 1.
During August 2021, the Company granted 431,115 RSUs to certain employees. The estimated fair value of the RSUs was $6.9 million.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in our Annual Report included in our IPO Prospectus for the year ended January 3, 2021, and in other reports filed subsequently with the SEC. This discussion contains forward-looking statements that involve risks and uncertainties. The words “believe,” “may,” “could,” “will,” “should,” “would,” “anticipate,” “estimate,” “expect,” “intend,” “objective,” “seek,” “strive” or similar words, or the negative of these words, identify forward-looking statements. Such forward-looking statements are based on certain assumptions and estimates that we consider reasonable but are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial conditions, business, prospects, growth strategy and liquidity. Accordingly, there are, or will be, important factors that could cause our actual results to differ materially from those indicated in these statements. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. Our actual results could differ materially from the forward-looking statements included herein. These forward-looking statements are made only as of the date of this document, and we do not undertake any obligation, other than as may be required by applicable law, to update or revise any forward-looking or cautionary statement to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

Overview
Krispy Kreme is one of the most beloved and well-known sweet treat brands in the world. Our iconic Original Glazed® doughnut is universally recognized for its hot-off-the-line, melt-in-your-mouth experience. Krispy Kreme operates in 30 countries through its unique network of fresh Doughnut Shops, partnerships with leading retailers, and a rapidly growing Ecommerce and delivery business. Our purpose of touching and enhancing lives through the joy that is Krispy Kreme guides how we operate every day and is reflected in the love we have for our people, our communities, and the planet.
Our second quarter ended July 4, 2021 demonstrated powerful momentum and illustrates the continued and successful execution of our strategy:
•Increasing purchase frequency through marketing, innovation, and Ecommerce. Year to date, our marketing and innovation generated approximately 16.3 billion media impressions, largely driven by the success of our vaccine program and innovative product rollouts around the world. In addition, Ecommerce drove 19% of global company shop sales, representing strong progress as we continue to expand our Ecommerce platforms.
•Increasing availability of our fresh doughnuts through new points of access as we execute on our omni-channel strategy. In the first half of the year alone, we have added 1,300 points of access, driven by the transition from our legacy wholesale business to DFD.
•Increasing profitability, largely driven by broader application of the Hub and Spoke model. During our second quarter ended July 4, 2021 we grew our Adjusted EBITDA margin by 300 basis points to 15.0%, and we are investing in additional labor and delivery routes in order to expand our points of access through DFD and other channels.
The following table presents a summary of our financial results for the periods presented:
Quarter Ended
Two Quarters Ended
(in thousands except percentages) July 4, 2021 June 28, 2020 % Change July 4, 2021 June 28, 2020 % Change
Total Net Revenues $ 349,186  $ 244,972  42.5  % $ 670,995  $ 506,188  32.6  %
Net Loss (14,996) (11,685) -28.3  % (15,374) (22,633) 32.1  %
Adjusted Net Income
20,469  5,780  254.1  % 38,095  16,891  125.5  %
Adjusted EBITDA
52,393  29,469  77.8  % 98,796  65,913  49.9  %
We generated 22.5% and 15.2% organic revenue growth for the quarter and two quarters ended July 4, 2021, respectively.
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We operate and report financial information on a 52 or 53-week year with the fiscal year ending on the Sunday closest to December 31. The additional week in a 53-week fiscal year is added to the fourth fiscal quarter, resulting in a 14-week quarter. The quarters ended July 4, 2021 and June 28, 2020 were both 13-week periods.
We conduct our business through the following three reported segments:
•U.S. and Canada: reflects all of our Company-owned operations in the United States and Canada, including our Krispy Kreme and Insomnia Cookies shops, DFD and our Branded Sweet Treat Line.
•International: reflects all of our Krispy Kreme Company-owned operations in the U.K. and Ireland (“U.K./Ireland”), Australia, New Zealand and Mexico, including their respective DFD operations.
•Market Development: reflects our franchise operations across the globe. It also includes our Company-owned operations in Japan, which belonged to a franchise that we acquired in December 2020. Our franchise operations include franchisee royalties and sales of doughnut mix, other ingredients, supplies and doughnut-making equipment to franchisees.
All of our segments offer Hot Light Theater Shops, Fresh Shops, and DFD. Hot Light Theater Shops feature our famous glaze waterfalls and “Hot Now” light, with 87% of U.S. locations featuring drive-thru capability. Fresh Shops are smaller Doughnut Shops and kiosks, without manufacturing capabilities, selling fresh doughnuts delivered daily from Hub (as defined below) locations. DFD represents Krispy Kreme branded product within high traffic grocery and convenience locations, selling fresh doughnuts delivered daily from Hub locations.
Only our U.S. and Canada segment offers Insomnia Cookies and our Branded Sweet Treat Line. Our Branded Sweet Treat Line was launched in mid-2020 and is our line of Krispy Kreme-branded packaged sweet treats intended to extend our consumer reach with shelf-stable, high quality products available through grocery, mass merchandise, and convenience locations.
Key Performance Indicators and Non-GAAP Measures
We monitor the key business metrics and non-GAAP metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.
Throughout this Quarterly Report on Form 10-Q, we utilize “global points of access” as a key performance indicator. Global points of access reflect all locations at which fresh doughnuts or cookies can be purchased. We define global points of access to include all Hot Light Theater Shops, Fresh Shops, DFD doors and Cookie Shops, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor global points of access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments and by asset type.

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The following table presents our global points of access, by segment and type, as of the end of the second quarter of 2021, second quarter of 2020 and fiscal 2020, respectively:
Global Points of Access (1)
Quarter Ended Fiscal Year Ended
July 4,
2021 		June 28,
2020 		January 3,
2021
U.S. and Canada: (2)
Hot Light Theater Shops 237  176  229 
Fresh Shops 56  45  47 
Cookie Shops 199  175  184 
DFD doors (3)
5,067  1,923  4,137 
Total 5,559  2,319  4,597 
International:
Hot Light Theater Shops 28  27  28 
Fresh Shops 354  354  348 
DFD doors 2,264  1,657  1,986 
Total 2,646  2,038  2,362 
Market Development: (4)
Hot Light Theater Shops 113  168  119 
Fresh Shops 739  705  732 
DFD doors (3)
518  405  465 
Total 1,370  1,278  1,316 
Total global (as defined) 9,575  5,635  8,275 
Total Hot Light Theater Shops 378  371  376 
Total Fresh Shops 1,149  1,104  1,127 
Total Cookie Shops 199  175  184 
Total Shops 1,726  1,650  1,687 
Total DFD Doors 7,849  3,985  6,588 
Total global points of access (as defined) 9,575  5,635  8,275 
1.Excludes Branded Sweet Treat Line distribution points and legacy wholesale business doors.
2.Includes points of access that were acquired from franchisees in the United States during the first quarter of fiscal 2021 and the second half of fiscal 2020. These points of access were previously included in the Market Development segment. See Note 2, Acquisitions, to our Condensed Consolidated Financial Statements for further information.
3.DFD doors for both the U.S. and Canada and Market Development segments exclude legacy wholesale doors, which have been declining consistent with our strategy to evolve our legacy wholesale business to focus on the new DFD model and our new Branded Sweet Treat Line. As of July 4, 2021 legacy wholesale doors for the U.S. and Canada and the Market Development segments were substantially eliminated.
4.Includes locations in Japan, which were acquired in December 2020 and are now Company-owned. As of the end of July 4, 2021, there were three Hot Light Theater Shops, 46 Fresh Shops and 53 DFD doors in Japan operating. As of the end of January 3, 2021, there were three Hot Light Theater Shops, 40 Fresh Shops and 24 DFD doors in Japan operating. All remaining points of access in the Market Development segment relate to our franchisee business.
As of July 4, 2021, we had 9,575 global points of access, with 1,726 Krispy Kreme and Insomnia Cookies branded shops and 7,849 DFD doors. We plan to continue adding new locations and expanding our Ecommerce and delivery platform in order to extend the availability of our products.
We also utilize “Hubs” as a key performance indicator. Our transformation is driven by the implementation of an omni-channel strategy to reach more customers where they are and drive revenue growth, and this strategy is supported by a capital-efficient Hub and Spoke distribution model that provides a route to market and powers profitability. Our Hot Light Theater shops and Doughnut Factories serve as centralized production facilities (“Hubs”). From these Hubs, we deliver doughnuts to our fresh shops and DFD doors (“Spokes”) through an integrated network of company-operated delivery routes, ensuring quality and freshness.
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Hubs
Quarter Ended Fiscal Year Ended
July 4,
2021 		June 28,
2020 		January 3,
2021
U.S. and Canada:
Hot Light Theater Shops (1)
233  175  226 
Doughnut Factories 5  7  5 
Total 238  182  231 
Hubs with Spokes 114  88  113 
International:
Hot Light Theater Shops (1)
25  27  27 
Doughnut Factories 12  9  9 
Total 37  36  36 
Hubs with Spokes 37  36  36 
Market Development:
Hot Light Theater Shops (1)
112  165  116 
Doughnut Factories 26  25  26 
Total 138  190  142 
Total Hubs 413  408  409 
1.Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a spoke location that produces hot doughnuts.
Total Hubs increased by 5 from the second quarter of fiscal 2020 to the second quarter of fiscal 2021 driven by our development activity globally, which included new Hubs opened in the U.S., the U.K., and Mexico, among other locations. Hubs with Spokes for the U.S. and Canada segment increased by 26 from the second quarter of fiscal 2020 to the second quarter of fiscal 2021 driven by both acquisition of franchisee Hubs and our efforts to add points of access to existing Hubs.
For the U.S. and Canada segment, the average number of Spokes per Hub with Spokes was 44.9 and 22.4 as of July 4, 2021 and June 28, 2020, respectively, with growth driven primarily by the DFD transformation. For the International segment, the average number of Spokes per Hub with Spokes was 70.8 and 55.9 as of July 4, 2021 and June 28, 2020, respectively, with growth driven primarily by new customer listings.
Non-GAAP Measures
We report our financial results in accordance with generally accepted accounting principles in the United States (“GAAP”); however, management evaluates our results of operations using, among other measures, organic revenue growth, adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), and Adjusted Net Income as we believe these non-GAAP measures are useful in evaluating our operating performance.
These non-GAAP financial measures are not universally consistent calculations, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, you should examine our non-GAAP financial measures in conjunction with our historical Condensed Consolidated Financial Statements and notes thereto included in this Quarterly Report on Form 10-Q.    
Organic Revenue Growth
We define “organic revenue growth” as the growth in revenues, excluding (i) acquired shops owned by us for less than twelve months following their acquisition, (ii) the impact of foreign currency exchange rate changes, and (iii) the impact of revenues generated during the 53rd week for those fiscal years that have a 53rd week based on our fiscal calendar defined in the “Overview” section. See “Results of Operations” for our organic growth calculations for the periods presented.
Adjusted EBITDA and Adjusted Net Income
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We define “Adjusted EBITDA” as earnings before interest expense, net (including interest payable to related parties), income tax expense/(benefit), and depreciation and amortization, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, and other certain non-recurring, infrequent or non-core income and expense items. Adjusted EBITDA enables operating performance to be reviewed across reporting periods on a consistent basis and is one of the principal measures used by management to evaluate and monitor our operating performance.
We define “Adjusted Net Income” as net loss adjusted for interest expense – related party, share-based compensation, certain strategic initiatives, acquisition and integration expenses, amortization of acquisition-related intangibles, the tax impact of adjustments and other certain non-recurring, infrequent or non-core income and expense items.
Adjusted EBITDA and Adjust Net Income have certain limitations, including adjustments for income and expense items that are required by GAAP. In evaluating these non-GAAP measures, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as share-based compensation. Our presentation of Adjusted EBITDA and Adjusted Net Income should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using Adjusted EBITDA and Adjusted Net Income supplementally.
The following tables present a reconciliation of net loss to Adjusted EBITDA and net loss to Adjusted Net Income for the periods presented:
Quarter Ended Two Quarters Ended
(in thousands) July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
Net income/(loss) $ (14,996) $ (11,685) $ (15,374) $ (22,633)
Interest expense, net 9,793  9,711  18,042  18,355 
Interest expense — related party(1)
4,821  5,566  10,387  11,132 
Income tax expense/(benefit) 9,923  (1,500) 10,608  (2,912)
Depreciation and amortization expense 25,194  18,097  48,595  37,184 
Share-based compensation 8,290  2,970  10,658  6,141 
Employer payroll taxes related to share-based compensation 841  —  841  — 
Other non-operating income, net(2)
(416) (2,660) (858) (112)
New York City flagship Hot Light Theater Shop opening(3)
—  1,667  —  4,239 
Strategic initiatives(4)
—  5,661  —  9,274 
Acquisition and integration expenses(5)
223  812  2,375  4,423 
Shop closure expenses(6)
—  2,786  —  2,786 
Restructuring and severance expenses(7)
1,336  —  1,336  — 
IPO-related expenses(8)
6,727  —  10,203  — 
Other(9)
657  (1,956) 1,983  (1,964)
Adjusted EBITDA $ 52,393  $ 29,469  $ 98,796  $ 65,913 
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Quarter Ended Two Quarters Ended
(in thousands) July 4,
2021 		June 28,
2020 		July 4,
2021 		June 28,
2020
Net income/(loss) $ (14,996) $ (11,685) $ (15,374) $ (22,633)
Interest expense — related party(1)
4,821  5,566  10,387  11,132 
Share-based compensation 8,290  2,970  10,658  6,141 
Employer payroll taxes related to share-based compensation 841  —  841  — 
Other non-operating income, net(2)
(416) (2,660) (858) (112)
New York City flagship Hot Light Theater Shop opening(3)
—  1,667  —  4,239 
Strategic initiatives(4)
—  5,661  —  9,274 
Acquisition and integration expenses(5)
223  812  2,375  4,423 
Shop closure expenses(6)
—  2,786  —  2,786 
Restructuring and severance expenses(7)
1,336  —  1,336  — 
IPO-related expenses(8)
6,727  —  10,203  — 
Other(9)
657  (1,956) 1,983  (1,964)
Amortization of acquisition related intangibles(10)
7,627  6,192  15,076  12,572 
KKI Term Loan Facility interest and debt issuance costs(11)
2,341  —  2,341  — 
Tax impact of adjustments(12)
(798) (3,573) (4,820) (8,967)
Tax specific adjustments(13)
3,816  —  3,947  — 
Adjusted net income $ 20,469  $ 5,780  $ 38,095  $ 16,891 
1.Consists of interest expense related to the Related Party Notes which were paid off in full during the quarter ended July 4, 2021.
2.Primarily foreign translation gains and losses in each period.
3.Consists of pre-opening costs related to our New York City flagship Hot Light Theater Shop opening, including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.
4.The quarter and two quarters ended June 28, 2020 consists mainly of consulting and advisory fees, personnel transition costs, and network conversion and set-up costs related to the transformation of the Company’s legacy wholesale business in the United States.
5.Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, consulting and advisory fees incurred in connection with acquisition-related activities for the applicable period.
6.Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
7.Consists of severance and related benefits costs associated with the Company’s realignment of the Company shop organizational structure to better support the DFD and Branded Sweet Treat Line businesses.
8.Includes consulting and advisory fees incurred in connection with preparation for the Company’s IPO.
9.The quarter and two quarters ended July 4, 2021 consist primarily of legal expenses incurred on matters described in Note 10, Commitments and Contingencies to our unaudited Condensed Consolidated Financial Statements. The quarter and two quarters ended June 28, 2020 consists primarily of a gain on the sale of land.
10.Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the consolidated statements of operations.
11.Includes interest expense of $0.6 million and debt issuance costs of $1.7 million incurred and recognized as expenses in the quarter ended July 4, 2021 in connection with the extinguishment of the KKI Term Loan Facility within four business days of receipt of the net proceeds from the IPO.
12.Tax impact of adjustments calculated applying the applicable statutory rates. The quarter and two quarters ended July 4, 2021 also include the impact of disallowed executive compensation expense incurred in connection with the IPO.
13.The quarter and two quarters ended July 4, 2021 consist primarily of the effect of the U.K. 2023 statutory tax rate change from 19.0% to 25.0% on existing temporary differences.
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Sales Per Hub
In order to measure the effectiveness of our Hub and Spoke model, we use “Sales per Hub” on a trailing twelve month basis, which includes all revenue generated from a Hub and its associated Spokes. Sales per Hub, also known as Fresh Revenues per Average Hub with Spokes, equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes during the period. Fresh Revenues include product sales generated from our Doughnut Shop business (including Ecommerce and delivery), as well as DFD sales, but excluding sales from our legacy wholesale business and our Branded Sweet Treat Line. It also excludes all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme business. The Average Hub with Spokes for a period is calculated as the simple average of the number of Hubs with Spokes at the end of the current period and the number of Hubs with Spokes at the end of the comparative period.
Sales per Hub was as follows for each of the periods below:
Trailing Four Quarters Ended Fiscal Year Ended
(in thousands, unless otherwise stated) July 4,
2021 		January 3,
2021 		December 29,
2019
U.S. and Canada:
Revenues $ 881,400  $ 782,717  $ 587,522 
Non-Fresh Revenues (1)
(82,271) (128,619) (112,051)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)
(389,762) (323,079) (271,067)
Sales from Hubs with Spokes 409,367  331,019  204,404 
Sales per Average Hub with Spokes (millions) 3.6  3.5  3.2 
International:
Sales from Hubs with Spokes (3)
$ 290,857  $ 230,185  $ 223,115 
Sales per Average Hub with Spokes (millions) 8.0  6.4  8.3 
1.Includes legacy wholesale business revenues and Branded Sweet Treat Line revenues.
2.Includes Insomnia Cookies revenues and Fresh Revenues generated by Hubs without Spokes.
3.Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment.
In the U.S. and Canada, we reached average Sales per Hub of $3.6 million, up from $3.5 million in the full year 2020 and up from $3.2 million at the beginning of our transformation in 2019. In our International markets, where the Hub and Spoke model is most developed, Sales per Hub reached $8.0 million, up from $6.4 million the previous year. As we further extend the Hub and Spoke model into existing and new markets around the world, we expect to see this measure continue to grow.
Significant Events and Transactions
COVID-19
From the onset of the COVID-19 pandemic, our first priority has been ensuring the health and safety of our employees, partners, and consumers, and compliance with applicable health and safety regulations. The COVID-19 pandemic has, to date, impacted our business both positively and negatively.
The COVID-19 pandemic resulted in the temporary closure of certain Krispy Kreme shops beginning in the first quarter of fiscal 2020, with the most significant temporary closures occurring internationally, including the U.K./Ireland, Australia, New Zealand and Mexico. Our U.S. and Canada segment began its recovery in April 2020, fueled by consumer adoption of Ecommerce channels and promotions. Sales were slower to recover in our International segment, with the most significant impact in Europe being in the second quarter of fiscal 2020, as our entire U.K./Ireland market was heavily impacted by shop closures over a ten week period, leading to substantial lost revenue and profits.
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As of the end of the second quarter of 2021, approximately 98% of global system-wide shops were operational. All Krispy Kreme shops in the U.S. and Canada were operational. All but one Insomnia Cookies shops were also operational throughout the second quarter of fiscal 2021, with the one temporary shop closure not relating to COVID-19 impacts. The International segment experienced a strong recovery during the second quarter of fiscal 2021, with the U.K. seeing a return to in-shop dining during the quarter. All shops within Australia, New Zealand, and Mexico were also operational as of the end of the quarter, with reduced impact related to in-shop dining limitations and operating hours. We continue to monitor situations in these countries for potential impacts in future quarters due to new COVID-19 cases and related imposed restrictions.
Certain international franchise markets within the Market Development segment were more heavily impacted by COVID-19 restrictions during the second quarter of fiscal 2021, with 45% of shops operating at reduced hours and only 50% with lobby dining open as of the end of the quarter. However, other markets saw a rebound in performance during the second quarter due to the lifting of restrictions, leading to an overall trend of improved performance for Market Development.
Executing on our Transformation Strategy
Our omni-channel strategy continues to perform well, which is evident in our strong organic growth through the first two quarters of fiscal 2021. This strategy is underpinned by the growth of our Hub and Spoke model, which is how we operate our fresh doughnut network. Our Hot Light Theater Shops and Doughnut Factories serve as our Hubs. From these Hubs, we deliver doughnuts to our Fresh Shops, DFD doors, and Ecommerce channels through an integrated network of company-operated delivery routes, ensuring quality and freshness.
In the second half of fiscal 2019, we implemented a DFD model that is enabled by our Hot Light Theater Shops and Doughnut Factories. The net increase of 1,261 DFD doors globally from the end of fiscal 2020 contributed to organic revenue growth during the second quarter of fiscal 2021. We plan to continue adding new DFD doors to expand the availability of our products to consumers, regardless of where they shop. Due to the highly incremental off-site fresh doughnut revenues leveraging the production capacity of our existing Hubs, we believe the strategy of DFD expansion to reach new consumers is important to the long-term penetration of our brand and products in new markets, as demonstrated by the strong historical performance of our business in the International segment.
Continued Strength of Insomnia Cookies
Insomnia Cookies’ digital-first approach continues to drive strong performance, supporting meaningful organic revenue growth in the second quarter of fiscal 2021. In the quarter, Insomnia Cookies opened its CookieLab flagship shop in Philadelphia, which is an extension of Insomnia’s research and development lab designed for sweet treat lovers of all ages to enjoy cookie innovation and customization.
Growing the Branded Sweet Treat Line
Our Branded Sweet Treat Line continues to gain momentum as production ramps up, in-store merchandising improves, and store count grows. Our Branded Sweet Treat Line is available at approximately 6,300 locations across 17 different retailers. Branded Sweet Treats in the second quarter demonstrated strong sequential growth as we brought to market three new varieties: S’mores Bites, Key Lime Crullers and Chocolate Crullers. Branded Sweet Treat item velocities are strong, leading to the addition of new grocery customers and expansion of shelf-spaces, number of items carried, and increased merchandising opportunities with current customers. In addition, higher volumes create production efficiencies that further our ability to sell into new channels and customers, and this virtuous cycle makes us confident in the line’s continued growth in the quarters ahead.
Strategic Franchise Acquisitions
From the start of fiscal 2018 through the end of the second quarter of 2021, we have invested $465.6 million to acquire a significant number of our franchised Krispy Kreme shops, completing transactions with 24 franchisees to acquire control of 165 shops in the United States and 304 shops internationally. In the second quarter of fiscal 2021, we did not acquire any franchised Krispy Kreme shops, however we will continue to assess individual markets in determining whether franchise acquisitions would be accretive to continued sales and profitability growth. We believe increasing control in our system has allowed us to more rapidly and efficiently deploy our omni-channel model. Internationally, we have generally focused on acquiring franchise shops in our largest and most strategic growth markets, including the U.K./Ireland, Australia, New Zealand and Mexico, among others, which we believe provide a strong base for future organic growth.
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Components of Revenues and Expenses
Product sales
Product sales include revenues derived from (1) the sale of doughnuts, cookies and complementary products on-premises and to DFD and Branded Sweet Treat Line customers and (2) the sale of doughnut mix, other ingredients and supplies and doughnut-making equipment to our franchisees.
Royalties and other revenues
Royalties and other revenues are derived primarily from ongoing royalties and advertising fees charged to franchisees, which are based on a percentage of franchisee net sales, development fees and initial franchise fees relating to franchise rights and new shop openings, and other revenue, including licensing revenues from our arrangement with Keurig for use in the manufacturing of portion packs for the Keurig brewing system.
Product and distribution costs
Product and distribution costs includes mainly raw material (principally sugar, flour, wheat, oil and their derivatives) and production costs (including labor) related to doughnuts, cookies, other sweet treats, doughnut mix, packaging, and logistics costs related to raw materials.
Operating expenses
Operating expenses consist of expenses primarily related to Company-operated shops including payroll and benefit costs for service employees at Company-operated locations, Hub & Spoke driver and delivery costs, rent and utilities, expenses associated with Company operations, costs associated with procuring materials from vendors and other shop-level operating cost. Based on current macroeconomic trends, operating expenses relating to certain commodity prices (for example, fuel) and shop labor are expected to increase in the second half of fiscal 2021.
Selling, general and administrative expenses
Selling, general and administrative expenses, or “SG&A”, include management and support personnel (including field personnel in corporate support functions), including salaries and benefits (including share-based compensation), travel, compliance, information technology and professional fees. We expect our SG&A expenses to increase in future periods, particularly as we continue to expand our operations globally, develop new products and enhancements for existing products and as we begin to operate as a public company, including as a result of costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, increased share based compensation expense related to grants of options to purchase shares of our common stock and restricted stock units to certain of our employees and directors, and increased expenses for insurance, investor relations and accounting expense.
Marketing expenses
Marketing expenses include costs associated with marketing our products, including advertising and other brand promotional activities. 
Pre-opening costs
Pre-opening costs include labor, rent, utilities and other expenses that are required as part of the setup and use of a new shop, prior to generating sales. Pre-opening costs also include costs to integrate acquired franchises back into the Company-owned model, which typically occur with the relevant shop closed over a one to three-day period subsequent to acquisition. Pre-opening costs do not include expenses related to strategic planning (for example, new site lease negotiations), which are recorded in SG&A.
Other expenses, net
Other expenses, net include asset impairment charges, shop closing costs, gain or loss on disposal of assets, and other miscellaneous expenses and income.
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Depreciation and amortization expense
Depreciation and amortization expense includes depreciation of fixed assets and amortization of intangible assets which do not have indefinite lives.
Income taxes
We utilize the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Potential accrued interest and penalties related to unrecognized tax benefits within operations are recognized as a component of interest expense and other expenses.

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Results of Operations
The following comparisons are historical results and are not indicative of future results which could differ materially from the historical financial information presented.
Quarter ended July 4, 2021 compared to the Quarter ended June 28, 2020
The following table presents our unaudited condensed consolidated results of operations for the quarter ended July 4, 2021 and the quarter ended June 28, 2020:
Quarter Ended
July 4, 2021 June 28, 2020 Change
(in thousands except percentages) Amount % of Revenue Amount % of Revenue $ %
Net revenues
Product sales
$ 341,223  97.7  % $ 236,608  96.6  % $ 104,615  44.2  %
Royalties and other revenues
7,963  2.3  % 8,364  3.4  % (401) -4.8  %
Total net revenues
349,186  100.0  % 244,972  100.0  % 104,214  42.5  %
Product and distribution costs
85,017  24.3  % 68,958  28.1  % 16,059  23.3  %
Operating expenses
157,877  45.2  % 104,221  42.5  % 53,656  51.5  %
Selling, general and administrative expense
60,930  17.4  % 41,487  16.9  % 19,443  46.9  %
Marketing expenses 10,052  2.9  % 8,575  3.5  % 1,477  17.2  %
Pre-opening costs
1,752  0.5  % 2,863  1.2  % (1,111) -38.8  %
Other (income)/expenses, net
(761) -0.2  % 1,339  0.5  % (2,100) -156.8  %
Depreciation and amortization expense
25,194  7.2  % 18,097  7.4  % 7,097  39.2  %
Operating income/(loss)
9,125  2.6  % (568) -0.2  % 9,693  1706.5  %
Interest expense, net 9,793  2.8  % 9,711  4.0  % 82  0.8  %
Interest expense – related party 4,821  1.4  % 5,566  2.3  % (745) -13.4  %
Other non-operating income, net (416) -0.1  % (2,660) -1.1  % 2,244  84.4  %
Loss before income taxes (5,073) -1.5  % (13,185) -5.4  % 8,112  61.5  %
Income tax expense/(benefit) 9,923  2.8  % (1,500) -0.6  % 11,423  761.5  %
Net loss (14,996) -4.3  % (11,685) -4.8  % (3,311) -28.3  %
Net income attributable to noncontrolling interest 2,146  0.6  % 945  0.4  % 1,201  127.1  %
Net loss attributable to Krispy Kreme, Inc. $ (17,142) -4.9  % $ (12,630) -5.2  % $ (4,512) -35.7  %
Product sales: Product sales increased $104.6 million, or 44.2%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021. Approximately $37.9 million of the increase in product sales was attributable to shops acquired from franchisees. Sales growth was also partially driven by adverse COVID-19 impacts in the comparative period.
Royalties and other revenues: Royalties and other revenues decreased $0.4 million, or 4.8%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, reflecting the impact of the acquisition of KK Japan in the fourth quarter of 2020.
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The following table presents a further breakdown of total net revenue and organic revenue growth by segment for the quarter ended July 4, 2021 and the quarter ended June 28, 2020:
(in thousands except percentages)
U.S. and
Canada
International
Market
Development
Total
Company
Total net revenues in second quarter of fiscal 2021 $ 230,918  $ 89,237  $ 29,031  $ 349,186 
Total net revenues in second quarter of fiscal 2020
184,255  34,412  26,305  244,972 
Total Net Revenues Growth 46,663  54,825  2,726  104,214 
Total Net Revenues Growth % 25.3  % 159.3  % 10.4  % 42.5  %
Impact of acquisitions (39,429) —  1,750  (37,679)
Impact of foreign currency translation —  (11,499) —  (11,499)
Organic Revenue Growth $ 7,234  $ 43,326  $ 4,476  $ 55,036 
Organic Revenue Growth % 3.9  % 125.9  % 17.0  % 22.5  %
Total net revenue growth of $104.2 million, or approximately 42.5%, and organic revenue growth of $55.0 million, or approximately 22.5%, was driven by increasing availability through new points of access and the omni-channel model, particularly the expansion of spokes, including DFD doors, for existing Hubs with Spokes during the second quarter of fiscal 2021.
U.S. and Canada segment net revenue growth was driven by a combination of franchise acquisitions (17 shops in the first quarter of fiscal 2021 and 51 shops in the second half of fiscal 2020) and by strong organic revenue growth. U.S. and Canada net revenue grew $46.7 million, or approximately, 25.3%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021 and U.S. and Canada organic revenue grew $7.2 million, or approximately 3.9%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021. Our strategic expansion of the Krispy Kreme DFD programs contributed to organic revenue growth with added points of access and continued growth at existing DFD doors. Additionally, the launch of our Branded Sweet Treat Line in June of 2020, as well as the addition of new customers in the second quarter of fiscal 2021, provided additional organic revenue growth which we expect to continue to grow as we expand this business to new customers and channels. Insomnia Cookies also contributed to the organic revenue growth in the second quarter of fiscal 2021, with strong sales driven by limited time offers and promotions as compared to a comparative quarter in 2020 heavily impacted by COVID-19 and college campus closures. Organic growth for the second quarter of fiscal 2021 was partially offset by a $27.1 million withdrawal in revenue from our legacy wholesale business, reflecting the evolution of the DFD business and the discontinuance of certain legacy extended shelf-life products sold through that channel. Throughout 2021, we expect to continue to see expansion of new fresh points of access, but they will be partially offset by the exit of the legacy wholesale business which occurred mostly through the back half of 2020.
Our International segment net revenue grew $54.8 million, or approximately 159.3%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021 and International organic revenue grew $43.3 million, or approximately 125.9%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021. Organic growth in the quarter was driven by restrictions being lifted in the United Kingdom, where COVID-19 had led to a nearly complete closure of the business, as well as a strong DFD and ecommerce performance. Australia, New Zealand, Ireland, and Mexico also contributed to organic growth while lapping the second quarter of 2020, which was heavily impacted by COVID-19 disruptions.
Our Market Development net revenue grew $2.7 million, or approximately 10.4%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, driven mainly by the acquisition of KK Japan in the final quarter of 2020. Market Development organic revenue grew $4.5 million, or approximately 17.0%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, driven mainly by improved market conditions for international franchise locations as COVID-19 restrictions in certain key markets continued to ease.
Product and distribution costs (exclusive of depreciation and amortization): Product and distribution costs increased $16.1 million, or 23.3%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, largely in line with and attributable to the same factors as our revenue growth.
Product and distribution costs as a percentage of revenue decreased by approximately 380 basis points from 28.1% in the second quarter of fiscal 2020 to 24.3% in the second quarter of fiscal 2021. This decrease was primarily driven by our International segment which experienced strong top-line revenue growth for the second quarter of fiscal 2021 as COVID-19 restrictions were lifted, out-pacing expenses. The U.S. and Canada business also contributed to the basis point improvement as
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in the second quarter of fiscal 2020 we had one time costs associated with launching our Branded Sweet Treat Line that was not yet operational at the beginning of that quarter.
Operating expenses: Operating expenses increased $53.7 million, or 51.5%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, driven mainly by franchise acquisitions, new shop openings, labor investments, and lower operating expenses incurred during the second quarter of fiscal 2020 as a result of COVID-19 with lower than normal labor costs a result of temporary shop closures.
Operating expenses as a percentage of revenue increased approximately 270 basis points, from 42.5% in the second quarter of fiscal 2020 to 45.2% in the second quarter of fiscal 2021, driven mainly by the impact of franchisee acquisitions, which resulted in additional operating expenses that are needed to run company-owned operations versus franchises. This was particularly evident in the Market Development segment where the acquisition of KK Japan contributed to an increase of approximately $5.6 million of operating expenses. Additionally, we have invested in labor to drive expansion of DFD points of access and to accommodate staffing for our post-COVID-19 recovery. As COVID-19 restrictions lift, the business is incurring more overtime and training costs compared to the second quarter of fiscal 2020 when many shops were operating with reduced staffing. The increase in operating expenses as a percentage of revenue was partially offset by the COVID-19 impacts on our International businesses in the second quarter of fiscal 2020. In the second quarter of fiscal 2020, International markets continued to incur fixed cost despite shutdowns.
Selling, general and administrative expense: Selling, general and administrative expenses increased $19.4 million, or 46.9%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021. The increase was driven mainly by costs related to the preparation for our IPO ($6.7 million), increased share-based compensation expense related to the accelerated vesting of certain employee restricted stock units in conjunction with the IPO (as well as the re-loading of executive units and stock options during the second quarter of fiscal 2021), and by SG&A expenses incurred by franchise shops acquired subsequent to the second quarter of fiscal 2020 ($3.9 million). As a percentage of revenue, SG&A expenses increased approximately 50 basis points, from 16.9% in the second quarter of fiscal 2020 to 17.4% in the second quarter of fiscal 2021 primarily because of the impacts described prior, which were somewhat offset by top-line revenue growth in the International segment out-pacing expenses.
Marketing expenses: Marketing expenses increased $1.5 million, or 17.2%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, primarily driven by spend associated with the increased revenues during the quarter. As a percentage of revenue, marketing expenses decreased approximately 60 basis points, from 3.5% in the second quarter of fiscal 2020 to 2.9% in the second quarter of fiscal 2021 driven by heavier spend related to our Acts of Joy marketing initiative at the beginning of the second quarter of fiscal 2020 in response to the COVID-19 pandemic.
Pre-opening costs: Pre-opening costs decreased $1.1 million, or 38.8%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, primarily driven by costs associated with our expansion in NYC in the second quarter of fiscal 2020, including expenses incurred as we prepared for the opening of our NYC flagship Hot Light Theater Shop later in 2020.
Depreciation and amortization expense: Depreciation and amortization expense increased $7.1 million, or 39.2%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, primarily driven by the impact of acquired franchises and depreciation resulting from increased capital expenditures.
Interest expense - related party: Interest expense with related parties decreased $0.7 million or 13.4%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, driven by paying off our Related Party Notes in full with KK GP during the quarter.
Income tax expense/(benefit): Income tax expense of $9.9 million in the second quarter ended of fiscal 2021 was driven by the revaluation of U.K. deferred taxes as a result of the increase in the corporate tax rate from 19.0% to 25.0% beginning in 2023 and disallowed executive compensation expense in connection with the IPO. The Company’s tax expense was also impacted by the mix of income between the U.S. and foreign jurisdictions.
Net income attributable to noncontrolling interest: Net income attributable to noncontrolling interest for the second quarter of fiscal 2021 increased $1.2 million, or 127.1%, from the second quarter of fiscal 2020, reflecting stronger earnings allocated to the shareholders of consolidated subsidiaries, particularly Insomnia Cookies and the U.K./Ireland.
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Results of Operations by Segment – Quarter ended July 4, 2021 compared to the Quarter ended June 28, 2020
The following table presents Adjusted EBITDA by segment for the periods indicated:
Quarter Ended Change
(in thousands except percentages)
July 4, 2021 June 28, 2020 $ %
Adjusted EBITDA
U.S. and Canada
$ 28,285  $ 27,551  $ 734  2.7  %
International
23,673  1,618  22,055  1363.1  %
Market Development
9,858  7,880  1,978  25.1  %
Corporate
(9,423) (7,580) (1,843) 24.3  %
Total Adjusted EBITDA (1)
$ 52,393  $ 29,469  $ 22,924  77.8  %
1.    Refer to “Key Performance Indicators and Non-GAAP Measures” above for a reconciliation of Adjusted EBITDA to net loss.
U.S. and Canada Adjusted EBITDA increased $0.7 million, or 2.7%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, primarily driven by the sales increase of 25.3%. In particular, the Insomnia Cookies business saw significant EBITDA margin expansion compared to the second quarter of fiscal 2020 due to the top-line revenue growth. We also saw efficiency benefits of our DFD expansion and improving traffic in NYC. When compared to the second quarter of 2020, at the height of the pandemic when our lobbies were sometimes closed, labor costs have increased, impacting overall EBITDA growth. As we continue to expand our Hub and Spoke model in more cities, we are also hiring more employees or “Krispy Kremers” than ever before, as we take on newly-acquired shops, add routes and transition to DFD.
International Adjusted EBITDA increased $22.1 million, or 1,363.1%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021, primarily driven by revenue growth of 159.3% due the adverse impacts of the COVID-19 pandemic on our international markets during the second quarter of fiscal 2020. Revenue growth significantly out-paced expense growth, leading to higher margins consistent with these more established Hub and Spoke markets. We expect the International segment to continue to contribute to strong EBITDA performance as the markets have rebounded well to match or exceed their performance prior to the pandemic.
Market Development Adjusted EBITDA increased $2.0 million, or 25.1%, from the second quarter of fiscal 2020 to the second quarter of fiscal 2021 driven mainly by improved market conditions for international franchise locations as COVID-19 restrictions in certain key markets continued to ease.
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Two Quarters ended July 4, 2021 compared to the Two Quarters ended June 28, 2020
The following table presents our unaudited condensed consolidated results of operations for the two quarters ended July 4, 2021 and June 28, 2020:
Two Quarters Ended
July 4, 2021 June 28, 2020 Change
(in thousands except percentages) Amount % of Revenue Amount % of Revenue $ %
Net revenues
Product sales
$ 654,808  97.6  % $ 488,144  96.4  % $ 166,664  34.1  %
Royalties and other revenues
16,187  2.4  % 18,044  3.6  % (1,857) -10.3  %
Total net revenues
670,995  100.0  % 506,188  100.0  % 164,807  32.6  %
Product and distribution costs
165,014  24.6  % 137,106  27.1  % 27,908  20.4  %
Operating expenses
305,418  45.5  % 220,000  43.5  % 85,418  38.8  %
Selling, general and administrative expense
110,467  16.5  % 82,569  16.3  % 27,898  33.8  %
Marketing expenses 19,559  2.9  % 16,689  3.3  % 2,870  17.2  %
Pre-opening costs
3,143  0.5  % 6,300  1.2  % (3,157) -50.1  %
Other (income)/expenses, net
(4,006) -0.6  % 2,510  0.5  % (6,516) -259.6  %
Depreciation and amortization expense
48,595  7.2  % 37,184  7.3  % 11,411  30.7  %
Operating income
22,805  3.4  % 3,830  0.8  % 18,975  495.4  %
Interest expense, net
18,042  2.7  % 18,355  3.6  % (313) -1.7  %
Interest expense – related party
10,387  1.5  % 11,132  2.2  % (745) -6.7  %
Other non-operating income, net
(858) -0.1  % (112) —  % (746) -666.1  %
Loss before income taxes
(4,766) -0.7  % (25,545) -5.0  % 20,779  81.3  %
Income tax expense/(benefit)
10,608  1.6  % (2,912) -0.6  % 13,520  464.3  %
Net loss
(15,374) -2.3  % (22,633) -4.5  % 7,259  32.1  %
Net income attributable to noncontrolling interest
4,829  0.7  % 1,512  0.3  % 3,317  219.4  %
Net loss attributable to Krispy Kreme, Inc
$ (20,203) -3.0  % $ (24,145) -4.8  % $ 3,942  16.3  %
Product sales: Product sales increased $166.7 million, or 34.1%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021. Approximately $72.3 million of the increase in product sales was attributable to shops acquired from franchisees.
Royalties and other revenues: Royalties and other revenues decreased $1.9 million, or 10.3%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, reflecting the impact of franchise acquisitions, mainly KK Japan. 
The following table presents a further breakdown of total net revenue and organic revenue growth by segment for the two quarters ended July 4, 2021 and June 28, 2020:
(in thousands except percentages)
U.S. and Canada
International
Market Development
Total Company
Total net revenues in first two quarters of fiscal 2021 $ 453,388 $ 155,743 $ 61,864 $ 670,995
Total net revenues in first two quarters of fiscal 2020 354,705 95,071 56,412 506,188
Total Net Revenues Growth 98,683 60,672 5,452 164,807
Total Net Revenues Growth % 27.8  % 63.8  % 9.7  % 32.6  %
Impact of acquisitions (71,134) — (390) (71,524)
Impact of foreign currency translation — (16,462) — (16,462)
Organic Revenue Growth $ 27,549 $ 44,210 $ 5,062 $ 76,821
Organic Revenue Growth % 7.8  % 46.5  % 9.0  % 15.2  %
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Total net revenue growth of $164.8 million, or approximately 32.6%, and organic revenue growth of $76.8 million, or approximately 15.2%, was driven by the continued and successful execution of our growth strategy and transformation deploying our omni-channel approach globally. We have continued to increase availability through new points of access and the omni-channel model, particularly the expansion of spokes, including DFD doors, for existing Hubs with Spokes during the first two quarters of fiscal 2021.
U.S. and Canada segment net revenue growth, which reflects franchise acquisitions (17 shops in the first quarter of fiscal 2021 and 51 shops in the second half of fiscal 2020), was also driven by strong organic revenue growth. U.S. and Canada net revenue grew $98.7 million, or approximately 27.8% from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021 and U.S. and Canada organic revenue grew $27.5 million, or approximately 7.8%, for the period, primarily driven by our adaptation to changing consumer behavior in response to the COVID-19 pandemic as well as new Krispy Kreme and Insomnia Cookies shop openings, strong DFD growth, and successful limited time offers. Our strategic expansion of the DFD programs contributed to net revenue and organic revenue growth with added points of access. Additionally, the Krispy Kreme U.S. and Canada business was more heavily impacted by COVID-19 temporary closures during the first fiscal quarter of 2020, aiding the organic growth for the first two quarters of fiscal 2021. U.S. and Canada segment net revenue growth was also driven by the expansion of our Ecommerce and delivery channels, particularly compared to the first fiscal quarter of 2020. Organic growth was partially offset by a $57.9 million withdrawal in revenue from our legacy wholesale business, reflecting the evolution of the DFD business and the discontinuance of certain legacy extended shelf-life products sold through that channel.
Our International segment net revenue grew $60.7 million, or approximately 63.8%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021. International organic revenue grew $44.2 million, or approximately 46.5%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, driven mainly by successfully leveraging our Hub and Spoke model with added points of access and by COVID-19 restrictions being lifted compared to 2020. Despite certain ongoing COVID-19 restrictions in place during the first fiscal quarter of 2021, our international markets experienced a strong rebound in the second fiscal quarter of 2021, helped by our continued increase in global Ecommerce penetration, the expansion of DFD doors, and successful leverage of limited time offers and promotions.
Our Market Development segment net revenue grew $5.5 million, or approximately 9.7%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, driven mainly by the acquisition of KK Japan in the final quarter of fiscal 2020. Market Development organic revenue grew $5.1 million, or approximately 9.0%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, driven mainly by improved market conditions for international franchise locations as COVID-19 restrictions in certain key markets began to ease.
Product and distribution costs (exclusive of depreciation and amortization): Product and distribution costs increased $27.9 million, or 20.4%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, largely in line with and attributable to the same factors as our revenue growth.
 Product and distribution costs as a percentage of revenue decreased by approximately 250 basis points from 27.1% in the first two quarters of fiscal 2020 to 24.6% in the first two quarters of fiscal 2021. The U.S. and Canada business contributed to the basis point improvement as in the first two quarters of fiscal 2020 we had one time costs associated with launching our Branded Sweet Treat Line that was not yet operational at the beginning of the second quarter of fiscal 2020.
Operating expenses: Operating expenses increased $85.4 million, or 38.8%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, driven mainly by franchise acquisitions and new shop openings.
Operating expenses as a percentage of revenue increased approximately 200 basis points, from 43.5% in the first two quarters of fiscal 2020 to 45.5% in the first two quarters of fiscal 2021 driven mainly by the impact of franchisee acquisitions, which resulted in additional operating expenses which are needed to run company-owned operations versus franchises. This was particularly evident in the Market Development segment where the acquisition of KK Japan contributed to an increase of approximately $11.6 million of operating expenses. Additionally, we have invested in labor to drive expansion of DFD points of access and to accommodate staffing for our post-COVID-19 recovery. As COVID-19 restrictions lift, the business is incurring more overtime costs and training costs as the shops work to meet the demand driven by the increase in foot traffic. This is contrasted with a first two quarters of fiscal 2020 which saw labor reductions due to temporary shop closures.

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Selling, general and administrative expense: Selling, general and administrative expenses increased $27.9 million, or 33.8%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021. The increase was driven mainly by an increase in costs related to the preparation for our IPO ($10.2 million), increased share-based compensation expense related to the accelerated vesting of certain employee restricted stock units in conjunction with the IPO (as well as the re-loading of executive units and stock options during the second quarter of fiscal 2021), and by SG&A expenses incurred by franchise shops acquired subsequent to the second quarter of fiscal 2020 ($7.6 million). As a percentage of revenue, SG&A expenses increased approximately 20 basis points, from 16.3% in the first two quarters of fiscal 2020 to 16.5% in the first two quarters of fiscal 2021 primarily because of the impacts described prior, which were offset by top-line revenue growth for Insomnia Cookies and the International segment out-pacing expenses.
Marketing expenses: Marketing expenses increased $2.9 million, or 17.2%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, primarily driven by spend associated with the increased revenues during the two quarters.
Pre-opening costs: Pre-opening costs decreased $3.2 million, or 50.1%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, primarily driven by $2.4 million pre-opening expenses associated with our expansion in NYC in the second half of fiscal 2020, including expenses incurred as we prepared for the opening of our NYC flagship Hot Light Theater Shop later in 2020.
Other (income)/expenses, net: Other income, net of $4.0 million in the first two quarters of fiscal 2021 was primarily driven by one-time COVID-19 related business interruption insurance proceeds of approximately $3.5 million in the U.K./Ireland in the first quarter of fiscal 2021.
Depreciation and amortization expense: Depreciation and amortization expense increased $11.4 million, or 30.7%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, primarily driven by the impact of acquired franchises and depreciation resulting from increased capital expenditures.
Interest expense - related party: Interest expense with related parties decreased $0.7 million, or 6.7% from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, driven by paying off our Related Party Notes in full with KK GP during the second quarter of 2021.
Income tax expense/(benefit): Income tax expense of $10.6 million in the first two quarters of fiscal 2021 was driven by the revaluation of U.K. deferred taxes as a result of the increase in the corporate tax rate from 19.0% to 25.0% beginning in 2023 and disallowed executive compensation in connection with the IPO. The Company’s tax expense was also impacted by the mix of income between the U.S. and foreign jurisdictions.
Net income attributable to noncontrolling interest: Net income attributable to noncontrolling interest for the first two quarters of fiscal 2021 increased $3.3 million, or 219.4%, from the first two quarters of fiscal 2020, reflecting stronger earnings allocated to the shareholders of consolidated subsidiaries, particularly, Insomnia Cookies, WKS Krispy Kreme and the U.K./Ireland.

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Results of Operations by Segment – Two Quarters ended July 4, 2021 compared to the Two Quarters ended June 28, 2020
The following table presents Adjusted EBITDA by segment for the periods indicated:
Two Quarters Ended Change
(in thousands except percentages)
July 4, 2021 June 28, 2020 $ %
Adjusted EBITDA
U.S. and Canada
$ 55,848  $ 49,188  $ 6,660  13.5  %
International
39,021  12,811  26,210  204.6  %
Market Development
20,749  18,585  2,164  11.6  %
Corporate
(16,822) (14,671) (2,151) 14.7  %
Total Adjusted EBITDA (1)
$ 98,796  $ 65,913  $ 32,883  49.9  %
1.    Refer to “Key Performance Indicators and Non-GAAP Measures” above for a reconciliation of Adjusted EBITDA to net loss.
U.S. and Canada Adjusted EBITDA increased $6.7 million, or 13.5%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, primarily driven by the revenue growth of 27.8%. Our strategic expansion of the DFD programs contributed to this growth with added points of access. The Insomnia Cookies business saw significant EBITDA margin expansion compared to the first two quarters of fiscal 2020 due to the top-line revenue growth. This offset margin decline for the Krispy Kreme U.S. and Canada business which was impacted by increased near-term costs, primarily related to labor and training, as well as our investments in labor to drive expansion of our DFD points of access. The Krispy Kreme U.S. and Canada business also saw increased occupancy costs as a percentage of revenue in part due to NYC rents (including Times Square), and incremental costs from our Branded Sweet Treat Line (initiatives which currently have higher operational expenses compared to the prior comparative period that have not yet been absorbed by the sales generated). Towards the end of the second quarter of fiscal 2021 we began to see improved margins for the Krispy Kreme U.S. and Canada business related to the NYC market along with the Branded Sweet Treats Line which, coupled with continued growth of the DFD business should contribute to EBITDA margin expansion as these businesses mature.
International Adjusted EBITDA increased $26.2 million, or 204.6%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021, primarily driven by revenue growth of 63.8% due to strong DFD performance as well as widespread impacts of the COVID-19 pandemic on our international markets during 2020, particularly in the U.K./Ireland. The U.K. government eased COVID-19 restrictions during the second quarter of 2021, allowing for in-shop dining. We expect the International segment to continue to contribute to strong EBITDA performance as the markets have rebounded well to match (or exceed) their performance prior to the pandemic. Additionally, during the first quarter of fiscal 2021, the U.K./Ireland received one-time insurance proceeds of $3.5 million which helped to offset continued COVID-19 impacts during the first quarter of fiscal 2021.
Market Development Adjusted EBITDA increased $2.2 million, or 11.6%, from the first two quarters of fiscal 2020 to the first two quarters of fiscal 2021 driven mainly by improved market conditions for international franchise locations as COVID-19 restrictions in certain key markets continued to ease.
Capital Resources and Liquidity
Our principal sources of liquidity to date have included cash from operating activities, cash on hand, amounts available under our credit facility, and commercial trade financing including our SCF Program (as defined below). Our primary use of liquidity is to fund the cash requirements of our business operations, including working capital needs, capital expenditures, acquisitions and other commitments.

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Our future obligations primarily consist of our debt and lease obligations, as well as commitments under ingredient and other forward purchase contracts. As of January 3, 2021, we had the following future obligations:
•    An aggregate principal amount of $806.3 million outstanding under the 2019 Facility;
•    An aggregate principal amount of $337.1 million outstanding under the Related Party Notes;
•    Non-cancellable future minimum operating lease payments totaling $645.0 million;
•    Non-cancellable future minimum finance lease payments totaling $43.7 million; and
•    Purchase commitments under ingredient and other forward purchase contracts of $48.3 million.
As of July 4, 2021, our outstanding principal amount under the 2019 Facility was $643.8 million. The reduction from the balance as of January 3, 2021 included a net paydown of $145.0 million on the revolving credit facility and cumulative quarterly term loan repayments of $17.5 million, which were funded mainly by capital contributions from shareholders and other minority interests in the second quarter of fiscal 2021.
On June 10, 2021, we entered into the Term Loan Facility. On June 17, 2021, we borrowed $500.0 million under the Term Loan Facility. The borrowings under the Term Loan Facility bore an all-in interest rate of 2.68175%. As of July 4, 2021, our outstanding principal amount under the Term Loan Facility was $500.0 million. The Term Loan Facility was subsequently paid off in full and terminated on July 7, 2021, primarily using the net IPO proceeds with the difference being partially funded by a drawdown of $100.0 million on the 2019 Facility’s revolving credit facility. The Term Loan Facility would have matured on the earlier of (i) June 10, 2022 and (ii) within four business days following consummation of the IPO. The principal outstanding under the Term Loan Facility is presented within Current portion of long-term debt on the Condensed Consolidated Balance Sheet as of July 4, 2021.
As of July 4, 2021, we had no outstanding amount payable under the Related Party Notes as the balance was paid off in full in the second quarter of fiscal 2021.
We had cash and cash equivalents of $37.5 million as of January 3, 2021 and $37.4 million as of July 4, 2021. We believe that our existing cash and cash equivalents and debt facilities will be sufficient to fund our operating and capital needs for at least the next twelve months. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to acquire franchises, the growth of our presence in new markets and the expansion of our omni-channel model in existing markets. We may enter into arrangements in the future to acquire or invest in complementary businesses, services and technologies. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations and financial condition would be adversely affected.
Cash Flows
We generate significant cash from operations and have substantial credit availability and capacity to fund operating and discretionary spending such as capital expenditures and debt repayments. Our requirement for working capital is not significant because our customers pay us in cash or on debit or credit cards at the time of the sale and we are able to sell many of our inventory items before payment is due to the vendor of such items. The following table and discussion present, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities:
Two Quarters Ended
(in thousands) 
July 4,
2021 		June 28,
2020
Net cash provided by operating activities $ 56,845  $ 13,936 
Net cash used for investing activities (86,261) (40,705)
Net cash provided by financing activities 30,553  215,254 
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Cash Flows Provided by Operating Activities
Cash provided by operations totaled $56.8 million for the first two quarters of fiscal 2021, an increase of $42.9 million compared with the amount for the first two quarters of fiscal 2020. Cash provided by operations increased primarily due to operating results producing a smaller net loss in the first two quarters of fiscal 2021 due in part to impacts on business operations during the COVID-19 pandemic in the first two quarters of fiscal 2020. The increase also reflected an improvement of approximately $6.9 million from working capital management primarily as a result of changes in accounts receivable and inventories balances.
We have undertaken broad efforts to improve our working capital position and cash generation, in part by negotiating longer payment terms with vendors. We have an agreement with a third-party administrator which allows participating vendors to track our payments, and if voluntarily elected by the vendor, to sell payment obligations from us to financial institutions (the “Supply Chain Financing Program” or the “SCF Program”). Our typical payment terms for trade payables range to 180 days outside of the SCF Program, depending on the type of vendors and the nature of the supplies or services. For vendors under the SCF Program, we have established payable terms ranging up to, but not exceeding, 360 days. When participating vendors elect to sell one or more of our payment obligations, our rights and obligations to settle the payables on their contractual due date are not impacted. We have no economic or commercial interest in a vendor’s decision to enter into these agreements and the financial institutions do not provide us with incentives such as rebates or profit sharing under the SCF Program. We agree on commercial terms with vendors for the goods and services procured, which are consistent with payment terms observed at other peer companies in the industry, and as the terms are not impacted by the SCF Program, such obligations are classified as trade payables. Our increased use of the SCF programs has continued through the two quarters ended July 4, 2021.
Cash Flows Used for Investing Activities
Cash used for investing activities totaled $86.3 million for the first two quarters of fiscal 2021, an increase in investment of $45.6 million compared with the first two quarters of fiscal 2020. The increase is primarily due to $33.9 million cash used for acquisitions of franchised shops in the first two quarters of fiscal 2021 (compared to no acquisitions completed in the first two quarters of fiscal 2020) and an incremental $8.7 million of property and equipment purchases.
Cash Flows Provided by Financing Activities
Cash provided by financing activities totaled $30.6 million for the first two quarters of fiscal 2021, a decrease of $184.7 million compared with the first two quarters of fiscal 2020. The decrease was mainly driven by a $260.0 million draw down on the revolving credit facility during the first quarter of fiscal 2020, which was related to cash preservation at the onset of the COVID-19 pandemic, offset by a combined $97.5 million repayment of long-term debt and lease obligations in the first two quarters of fiscal 2020. As described above, in the first two quarters of fiscal 2021, we had a net $162.5 million outflow relating to the 2019 Facility and paid off the entire $337.1 million outstanding principal balance of the Related Party Notes. Additionally, shareholders and noncontrolling interests contributed $174.2 million of capital, partially offset by $40.4 million of distributions and $102.7 million of share repurchases. We also entered into the $500.0 million Term Loan Facility agreement, which was subsequently paid off in full on July 7, 2021 using the IPO proceeds and additional funding under the 2019 Facility.
We utilize various card products issued by financial institutions to facilitate purchases of goods and services. By using these products, we may receive differing levels of rebates based on timing of repayment. The payment obligations under these cards products are classified as structured payables on our Condensed Consolidated Balance Sheets and the associated cash flows are included in the financing section of our Condensed Consolidated Statement of Cash Flows. During the two quarters ended July 4, 2021, and June 28, 2020, the cash generated under the various purchase cards was $2.5 million and $37.7 million, respectively.
Debt
Related Party Notes
We were previously party to a senior unsecured note agreement with KK GP for an aggregate principal amount of $283.1 million. In April 2019, we entered into an additional unsecured note with KK GP for $54.0 million (such notes together, the “Related Party Notes”). As of January 3, 2021, the outstanding amount of principal and interest was $344.6 million. The Related Party Notes were paid off in full during the second quarter of fiscal 2021. The interest expense was $4.8 million and $10.4 million for the quarter and two quarters ended July 4, 2021, respectively, and $5.6 million and $11.1 million for the quarter and two quarters ended June 28, 2020, respectively.
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Term Loan Facility
On June 10, 2021, we entered into the Term Loan Facility. On June 17, 2021, we borrowed $500.0 million under the Term Loan Facility. The borrowings under the Term Loan Facility bore an all-in interest rate of 2.68175%. As of July 4, 2021, our outstanding principal amount under the Term Loan Facility was $500.0 million. The Term Loan Facility was subsequently paid off in full and terminated on July 7, 2021, primarily using the net IPO proceeds with the difference being partially funded by a drawdown of $100.0 million on the 2019 Facility’s revolving credit facility. The Term Loan Facility would have matured on the earlier of (i) June 10, 2022 and (ii) within four business days following consummation of the IPO. The interest expense was $2.3 million for the quarter and two quarters ended July 4, 2021, which included $1.7 million of debt issuance costs incurred and recognized as expenses.
2019 Facility
On June 13, 2019, we entered into a credit agreement (the “2019 Facility”). The 2019 Facility provides for senior secured credit facilities in the form of $700.0 million in aggregate principal of term loans and $300.0 million of revolving capacity. Borrowings under the 2019 Facility are subject to an interest rate of one-month LIBOR plus 2.25% if our Total Net Leverage Ratio (as defined in the 2019 Facility) equals or exceeds 4.00 to 1.00, 2.00% if our Total Net Leverage Ratio is less than 4.00 to 1.00 but greater than or equal to 3.00 to 1.00 or 1.75% if our Total Net Leverage Ratio is less than 3.00 to 1.00, as determined under the 2019 Facility. We are required to make equal installments of 1.25% of the aggregate closing date principal amount of the term loans on the last business day of each fiscal quarter. All remaining term loan and revolving loan balances are to be due five years from the initial closing date.
Under the terms of the 2019 Facility, we are subject to a requirement to maintain a Total Net Leverage Ratio of less than 5.50 to 1.00 as of July 4, 2021, which reduces to 5.00 to 1.00 by April 2, 2023. The Total Net Leverage Ratio under the 2019 Facility is defined as the ratio of (a) Total Indebtedness (as defined in the 2019 Facility, which includes all debt and finance lease obligations) minus unrestricted cash and cash equivalents to (b) a defined calculation of adjusted EBITDA (“2019 Facility Adjusted EBITDA”) for the most recently ended Test Period (as defined in the 2019 Facility). The 2019 Facility Adjusted EBITDA for purposes of these restrictive covenants includes incremental adjustments beyond those included in our Adjusted EBITDA non-GAAP measure. Specifically, the 2019 Facility Adjusted EBITDA definition includes pro forma impact of EBITDA to be received from new shop openings and acquisitions for periods not yet in operation, certain acquisition related synergies and cost optimization activities and incremental add-backs for pre-opening costs and for COVID-19 expenses and lost profits. Our Total Net Leverage Ratio was 2.92 to 1.00 as of the end of the second quarter of fiscal 2021 compared to 3.98 to 1.00 as of the end of fiscal 2020, primarily due to the favorable impact of capital contributions from shareholders in 2021.
We were in compliance with the financial and other covenants related to the 2019 Facility as of July 4, 2021, and expect to remain in compliance over the next 12 months. If we are unable to meet the 2019 Facility financial or other covenants in future periods, it may negatively impact our liquidity by limiting our ability to draw on the revolving credit facility, could result in the lenders accelerating the maturity of such indebtedness and foreclosing upon the collateral pledged thereunder, and could require the replacement of the 2019 Facility with new sources of financing, which there is no guaranty we could secure.
At the beginning of the third quarter of fiscal 2021, we amended the 2019 Facility to allow for financial reporting at the KKI legal entity level and to allow for KKI to be guarantor of the obligations of its subsidiary KKDI under the 2019 Facility.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q have been prepared in conformity with U.S. GAAP. The preparation of the Condensed Consolidated Financial Statements requires the use of judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as related disclosures. We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our Condensed Consolidated Financial Statements. Actual results could differ from the estimates made by management.
There have been no material changes to our critical accounting policies and estimates as compared to those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our IPO Prospectus.
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New Accounting Pronouncements
Refer to Note 1 to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q, for a detailed description of recent accounting pronouncements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Effects of Changing Prices – Inflation
We are exposed to the effects of commodity price fluctuations in the cost of ingredients of our products, of which flour, sugar and shortening are the most significant. We have demonstrated an ability to manage inflationary cost increases effectively due to rapid inventory turnover, ability to adjust pricing of our products, and from time to time we may enter into forward contract for supply through our vendors for raw materials which are ingredients of our products or which are components of such ingredients, including wheat and soybean oil. We are also exposed to the effects of commodity price fluctuations in the cost of gasoline used by our delivery vehicles. To mitigate the risk of fluctuations in the price of our gasoline purchases, we may directly purchase commodity futures contracts.
Interest Rate Risk
We are exposed to changes in interest rates on any borrowings under our debt facilities, which bear interest based on the one-month LIBOR (with a floor of zero). Generally, interest rate changes could impact the amount of our interest paid and, therefore, our future earnings and cash flows, assuming other factors are held constant. To mitigate the impact of changes in LIBOR on interest expense for a portion of our variable rate debt, we have entered into interest rate swaps on $505.0 million notional of our $643.8 million of outstanding debt under the 2019 Facility as of July 4, 2021, which we account for as cash flow hedges. Based on the $138.8 million of unhedged outstanding as of July 4, 2021, a 100 basis point increase in the one-month LIBOR would result in a $1.4 million increase in interest expense for a twelve-month period, while a 100 basis point decrease would result in the floor of zero and thus a decrease in interest expense of $0.2 million for a twelve-month period based on the daily average of the one-month LIBOR through the fiscal quarter ended July 4, 2021.
The Financial Conduct Authority in the U.K. intends to phase out LIBOR by the end of 2023. We have negotiated terms in consideration of this discontinuation and do not expect that the discontinuation of the LIBOR rate, including any legal or regulatory changes made in response to its future phase out, will have a material impact on our liquidity or results of operations.
Foreign Currency Risk
We are exposed to foreign currency translation risk on the operations of our subsidiaries that have functional currencies other than the U.S. dollar, whose revenues accounted for approximately 23% of our total net revenues for fiscal 2020. A substantial majority of these revenues, or approximately $230.2 million, were attributable to subsidiaries whose functional currencies are the British pound sterling, the Australian dollar and the Mexican peso. A 10% increase or decrease in the average fiscal 2020 exchange rate of the British pound sterling, the Australian dollar and the Mexican peso against the U.S. dollar would have resulted in a decrease or increase of approximately $23.0 million in our fiscal 2020 total net revenues.
From time to time, we engage in foreign currency exchange and credit transactions with our non-U.S. subsidiaries, which we typically hedge. To date, the impact of such transactions, including the cost of hedging, has not been material. We do not engage in foreign currency or hedging transactions for speculative purposes.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of July 4, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.
There were no changes during the fiscal quarter ended July 4, 2021 in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of conducting our business, we have in the past and may in the future become involved in various legal actions and other claims. We may also become involved in other judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses. Some of these matters may involve claims of substantial amounts. These legal proceedings may be subject to many uncertainties and there can be no assurance of the outcome of any individual proceedings. We do not presently anticipate any material legal proceedings that, if determined adversely to us, would have a material adverse effect on our financial position, results of operations or cash flows. See Note 10, Commitments and Contingencies, to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for information regarding certain legal proceedings in which we are involved. 
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our IPO Prospectus for the year ended January 3, 2021. 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On July 1, 2021 we completed the IPO of our Class A common stock, $0.01 par value, pursuant to our Registration Statement on Form S-1, as amended (No. 333-256664) that was declared effective on June 30, 2021. We sold 29,411,765 shares in the offering at a price to the public of $17.00 per share. The lead book-running managers in the offering were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, BofA Securities, Inc. and Citigroup Global Markets Inc.
The net proceeds received by us in the offering were $459.7 million.
None of the underwriting discounts and commissions or offering expenses were incurred or paid to our directors or officers or their associates or to persons owning 10% or more of our common stock or to any affiliates of ours. Subsequent to the quarter ended July 4, 2021 we used the net proceeds of the offering along with additional borrowings under our 2019 Facility revolving credit facility as follows: (i) $500.0 million to repay all of the outstanding indebtedness under the Term Loan Facility, (ii) $20.3 million to repurchase approximately 1.3 million shares of common stock from certain of our executive officers at the price to be paid by the underwriters and (iii) $15.5 million to repurchase approximately 1.0 million shares of common stock from certain of our executive officers for payment of their withholding taxes with respect to the RSUs vesting or for which vesting was accelerated in connection with the offering.
On August 2, 2021 the underwriters exercised their over-allotment option and purchased an additional 3,500,000 shares of common stock at the IPO price less the underwriting discounts and commissions. The net proceeds received on August 2, 2021 were $56.1 million after deducting underwriting discounts and commissions of $3.4 million. This brought total net IPO proceeds to $515.8 million.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
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Exhibit No.
Description of Exhibit
   
   
   
   
   
101
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income/(Loss), (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Filed herewith.
** Furnished herewith.


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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Charlotte, North Carolina on August 17, 2021.
Krispy Kreme, Inc.
   
By: /s/ Josh Charlesworth
Name: Josh Charlesworth
Title: Chief Financial Officer
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Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
KRISPY KREME, INC.
Pursuant to Sections 242 and 245
of the General Corporation Law of the State of Delaware
The undersigned, being the Chief Legal Officer of Krispy Kreme, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), does hereby certify that:
1.the name of the Corporation is Krispy Kreme, Inc.;
2.the original certificate of incorporation of the Corporation was filed in the Office of the Secretary of State of the State of Delaware on July 18, 2012 pursuant to the General Corporation Law of the State of Delaware (the “DGCL”) and the Corporation was originally incorporated under the name JAB Beech Inc;
3.pursuant to Sections 242 and 245 of the DGCL, this Amended and Restated Certificate of Incorporation restates, integrates and further amends the provisions of the current Certificate of Incorporation of the Corporation;
4.the directors and the stockholders of the Corporation, in accordance with Sections 228, 242 and 245 of the DGCL, have duly adopted and approved this Amended and Restated Certificate of Incorporation; and
5.the certificate of incorporation of the Corporation is hereby amended and restated to read in its entirety as follows:
FIRST. Name. The name of the corporation is Krispy Kreme, Inc. (the “Corporation”).
SECOND, Registered Office. The registered office of the Corporation in the State of Delaware is located at 251 Little Falls Drive, City of Wilmington, County of New Castle, Delaware 19808. The name of the Corporation’s registered agent for service of process in Delaware is Corporation Service Company.
THIRD. Corporate Purpose. The nature of the business or purposes of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “DGCL”) as it now exists and may hereinafter be amended.
FOURTH. Shares, Classes and Series Authorized. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 350,000,000 shares, consisting of 50,000,000 shares of Preferred Stock, par value $0.01 per share, as more fully described in Article Fifth, Section A below (the “Preferred Stock”), and 300,000,000 shares of Common Stock, par value $0.01 per share, as more fully described in Article Fifth, Section B below (the “Common Stock”). Upon the filing (the “Effective Time”) of this Amended and Restated Certificate of Incorporation of the Corporation, pursuant to the DGCL, the shares of Common Stock issued and outstanding immediately prior to the Effective Time shall be reclassified as, and shall be converted into, a larger number of shares such that each share of issued Common Stock immediately prior to the Effective Time shall be reclassified and converted into and shall become 1,745.00 shares of fully paid and non-assessable Common Stock, without any action by the holder thereof. From and after the Effective Time, certificates representing Common Stock outstanding immediately prior to the Effective Time shall represent the number of shares of Common Stock into which the Common Stock shall have been reclassified pursuant to the foregoing provisions. Notwithstanding the foregoing, any stockholder of Common Stock outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate or certificates, a new certificate evidencing and representing the number of shares of Common Stock to which such stockholder is entitled pursuant to the foregoing provisions.



FIFTH.
A.Preferred Stock.
The shares of Preferred Stock may be divided and issued from time to time in one or more series as may be designated by the Board of Directors of the Corporation (the “Board”), each such series to be distinctly titled and to consist of the number of shares designated by the Board. Subject to any limitations prescribed by applicable law or this Certificate of Incorporation, the Board is hereby expressly vested with authority to fix by resolution the number of shares constituting such series, the powers, designations, preferences and relative, participating, optional or other special rights (if any), and the qualifications, limitations or restrictions thereof (if any), of the Preferred Stock and each series thereof that may be designated by the Board, including, but without limiting the generality of the foregoing, the following:
(a)the maximum number of shares to constitute such series, which may subsequently be increased or decreased (but not below the number of shares of that series then outstanding) by resolution of the Board, the distinctive designation thereof and the stated value thereof if different than the par value thereof;
(b)whether the shares of such series shall have voting powers, full or limited, or no voting powers and, if any, the terms of such voting powers;
(c)the dividend rate, if any, on the shares of such series, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any other class or classes or on any other series of capital stock and whether such dividend shall be cumulative or noncumulative;
(d)whether the shares of such series shall be subject to redemption by the Corporation and, if made subject to redemption, the times, prices and other terms, limitations, restrictions or conditions of such redemption;
(e)the relative amounts and the relative rights or preference, if any, of payment in respect of shares of such series, which the holders of shares of such series shall be entitled to receive upon the liquidation, dissolution or winding-up of the Corporation;
(f)whether or not the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or to other corporate purposes and the terms and provisions relative to the operation thereof;
(g)whether or not the shares of such series shall be convertible into, or exchangeable for, shares of any other class, classes or series, or other securities, whether or not issued by the Corporation, and if so convertible or exchangeable, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting same;
(h)the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, and upon the purchase, redemption or other acquisition by the Corporation of, the Common Stock or any other class or classes of stock of the Corporation ranking junior to the shares of such series either as to dividends or upon liquidation, dissolution or winding-up;
(i)the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issuance of any additional stock (including additional shares of such series or of any other series or of any other class) ranking on a parity with or prior to the shares of such series as to dividends or distributions of assets upon liquidation, dissolution or winding-up; and
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(j)any other preference and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, as shall not be inconsistent with applicable law, this Article Fifth or any resolution of the Board adopted pursuant hereto.
B.Common Stock.
All shares of Common Stock shall be identical and shall entitle the holders thereof to the same rights and privileges. The voting, dividend, liquidation and other rights and privileges of the holders of the Common Stock are subject to and qualified by the rights of the holders of Preferred Stock of any series as may be designated from time to time by the Board upon any issuance of Preferred Stock of any series.
(a)Dividends. Dividends may be declared and paid on the Common Stock then outstanding from funds lawfully available therefor as, when and if determined by the Board and subject to any preferential dividend or other rights of any then outstanding Preferred Stock. The holders of Common Stock then outstanding shall be entitled to share equally, share for share, in such dividends, whether payable in cash, in property or in shares of stock of the Corporation.
(b)Voting Rights. Each holder of Common Stock then outstanding shall be entitled to one vote per share held by such holder at all meetings of stockholders. There shall be no cumulative voting.
(c)Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment shall have been made to holders of the Preferred Stock then outstanding of the full amounts to which they shall be entitled as stated and expressed herein or as may be stated and expressed in any resolution of the Board adopted pursuant hereto, the holders of Common Stock then outstanding shall be entitled to share ratably according to the number of shares of the Common Stock then outstanding held by them in all remaining assets of the Corporation available for distribution to its stockholders.
SIXTH. Perpetual Existence. The Corporation shall have perpetual existence.
SEVENTH. Director Liability.
(a)To the fullest extent permitted by the DGCL, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL.
(b)No amendment to or repeal of this Article Seventh shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
(c)If the DGCL is amended to authorize corporate action further eliminating or limiting the liability of directors, then a director of the Corporation shall be free of liability to the fullest extent permitted by the DGCL.
EIGHTH. Indemnification.
(a)Actions, Suits and Proceedings Other than by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other entity (including any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such person’s capacity as a director, officer, employee or agent of the Corporation or in any other capacity while serving at the request of the Corporation as a director,
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officer, employee or agent of another corporation, partnership, joint venture, trust or other entity (including any employee benefit plan), against all expenses (including attorneys’ fees), judgments, fines, taxes or penalties and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the Indemnitee’s conduct was unlawful.
(b)Actions or Suits by or in the Right of the Corporation. The Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other entity (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such person’s capacity as a director, officer, employee or agent of the Corporation or in any other capacity while serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other entity (including any employee benefit plan), against all expenses (including attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, except that no indemnification shall be made under this Article Eighth in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including attorneys’ fees) which the Court of Chancery of Delaware or such other court shall deem proper.
(c)Indemnification for Expenses. Notwithstanding any other provisions of this Article Eighth, to the extent that an Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in clauses (a) and (b) of this Article Eighth, or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all expenses (including attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication that Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable cause to believe his or her conduct was unlawful, Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.
(d)Notification and Defense of Claim. As a condition precedent to an Indemnitee’s right to be indemnified, such Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit or proceeding involving such Indemnitee for which indemnification will or could be sought. With respect to any action, suit or proceeding of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to Indemnitee. After notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any legal or other expenses subsequently incurred by Indemnitee in
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connection with such action, suit or proceeding, other than as provided below in this Article Eighth. Indemnitee shall have the right to employ his or her own counsel in connection with such action, suit or proceeding, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation, (ii) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and Indemnitee in the conduct of the defense of such action, suit or proceeding or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, suit or proceeding, in each of which cases, the fees and expenses of one counsel for Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article Eighth. The Corporation shall not be required to indemnify Indemnitee under this Article Eighth for any amounts paid in settlement of any action, suit or proceeding effected without its written consent. The Corporation shall not settle any action, suit or proceeding in any manner which would impose any judgment, penalty, admission or limitation on Indemnitee without Indemnitee’s written consent. Neither the Corporation nor Indemnitee will unreasonably withhold or delay its consent to any proposed settlement.
(e)Advancement of Expenses. In the event of any threatened or pending action, suit or proceeding of which the Corporation receives notice under this Article Eighth, any expenses (including attorneys’ fees for attorneys retained in accordance with clause (d) above) incurred by or on behalf of any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director or officer of the Corporation, or while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other entity (including any employee benefit plan) in defending an action, suit or proceeding or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter; provided, however, that the payment of such expenses incurred by or on behalf of such person in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of such person to repay all amounts so advanced in the event that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such person is not entitled to be indemnified by the Corporation as authorized in this Article Eighth. Such undertaking shall be accepted without reference to the financial ability of such person to make such repayment. Any advances or undertakings to repay pursuant to this clause (e) shall be unsecured and interest-free.
(f)Procedure for Indemnification. In order to obtain indemnification or advancement of expenses pursuant to clauses (a), (b), (c), (d) or (e) of this Article Eighth, an Indemnitee or person entitled to advancement of expenses pursuant to clause (e) above shall submit to the Corporation a written request. Any such indemnification or advancement of expenses shall be made as soon as practicable after written demand by Indemnitee or such person therefor is presented to the Corporation, and in any event within (i) in the case of indemnification under clause (c) or advancement of expenses, 20 business days after receipt by the Corporation, of the written request of Indemnitee or such person, or (ii) in the case of all other indemnification, 45 business days after receipt by the Corporation of the written request of Indemnitee, unless with respect to requests under this subclause (ii), the Corporation (y) has assumed the defense pursuant to clause (d) of this Article Eighth (and none of the circumstances described in clause (d) of this Article Eighth that would nonetheless entitle Indemnitee to indemnification for the fees and expenses of separate counsel have occurred) or (z) determined, by clear and convincing evidence, within such 45 business day period referred to above that Indemnitee did not meet the applicable standard of conduct. Such determination in clause (z), and any determination that advanced expenses must be repaid to the Corporation, shall be made in each instance (a) by a majority vote of the directors consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), whether or not a quorum, (b) by a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by applicable
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law, be regular legal counsel to the Corporation) in a written opinion, or (d) by the stockholders of the Corporation. Any determination made under this clause (f) shall not create any presumption or bind any court in determining whether indemnification or repayment of advanced expenses is required.
(g)Limitations. Notwithstanding anything to the contrary in this Article Eighth, the Corporation shall not indemnify an Indemnitee pursuant to this Article Eighth (i) in connection with an action, suit or proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board, or (ii) to the extent such Indemnitee or person entitled to advancement of expenses pursuant to clause (e) above, is reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification or advancement payments to an Indemnitee or such person and such Indemnitee or such person is subsequently reimbursed from the proceeds of such insurance, such Indemnitee or such person shall promptly refund indemnification or advancement payments to the Corporation to the extent of such insurance reimbursement.
(h)Subsequent Amendment. No amendment, termination or repeal of this Article Eighth or of the relevant provisions of the DGCL or any other applicable laws shall adversely affect or diminish in any way the rights of any Indemnitee to indemnification or person entitled to advancements pursuant to clause (e) above to such advancement under the provisions hereof with respect to any action, suit or proceeding arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.
(i)Other Rights. The indemnification and advancement of expenses provided by this Article Eighth shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or a person seeking advancement of expenses pursuant to clause (e) above may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in Indemnitee’s or such person’s official capacity and as to action in any other capacity while holding office for the Corporation. In addition, the Corporation may, to the extent authorized from time to time by its Board, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article Eighth.
(j)Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, manager, member, employee or agent of another corporation, partnership, limited liability company, joint venture, trust or other entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of Section 145 of the DGCL.
(k)Savings Clause. If this Article Eighth or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys’ fees), liabilities, losses, judgments, fines, Employee Retirement Income Security Act of 1974, as amended (ERISA) taxes or penalties and amounts paid in settlement in connection with any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article Eighth that shall not have been invalidated and to the fullest extent permitted by applicable law.
(l)Definitions. For purposes of this Article Eighth references to the “Corporation” shall include, in addition to the resulting corporation, any constituent corporation, partnership, limited liability company or joint venture, trust or other entity (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, managers, members, and employees or agents so that any person who is or was a director, officer, manager, member, employee or agent of such constituent, or is or was serving at the request of such constituent as a director, officer, manager, member, employee or agent of another corporation, partnership, limited liability company, joint
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venture, trust or other entity, shall stand in the same position under the provisions of this Article Eighth with respect to the resulting or surviving corporation, partnership, limited liability company, or joint venture or other enterprise as such person would have with respect to such constituent if its separate existence had continued.
(m)Scope. The Corporation shall indemnify any Indemnitee and advance expenses to a person pursuant to clause (e) above to the fullest extent permitted by the DGCL, and if the DGCL is amended after adoption of this Article Eighth to expand further the indemnification or advancements permitted to Indemnitees or such persons, then the Corporation shall indemnify such persons to the fullest extent permitted by the DGCL, as so amended.
(n)Continuation of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article Eighth shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent, as applicable, and shall inure to the benefit of the heirs, executors and administrators of such a person.
NINTH. Management. For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:
(a)General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by applicable law, this Certificate of Incorporation or the By-Laws of the Corporation, as amended and restated to date (the “By-Laws”) directed or required to be exercised or done by stockholders.
(b)Number of Directors; Election of Directors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, the number of directors which shall constitute the whole Board shall be fixed by or in the manner provided in the By-Laws. Except as otherwise provided by the By-Laws, the election of directors need not be by written ballot.
(c)Classes of Directors. The Board shall not be divided into classes.
(d)Terms of Office. Each director whose term is expiring shall be elected for a term of one (1) year. Each director shall hold office for the term for which he or she was elected and until his or her successor is elected and qualified or until his or her earlier death, resignation, retirement or removal.
(e)Quorum and Manner of Acting. Unless otherwise provided by applicable law, the presence of a majority of the members of the Board shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until the quorum shall be present. Notice of any adjourned meeting need not be given. At all meetings of the Board at which a quorum is present, all matters shall be decided by the affirmative vote of the majority of the directors present, except as otherwise required by law. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified in the respective notices, or waivers of notice, thereof.
(f)Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director or the entire board of directors may be removed, with or without cause, by the affirmative vote of a majority of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors at a special meeting of stockholders called in accordance with this Certificate of Incorporation and the By-Laws expressly for that purpose.
(g)Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy or newly created directorships in the Board, however occurring, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to fill a vacancy shall have
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the same remaining term as that of his or her predecessor, subject to the election and qualification of a successor and to such director’s earlier death, resignation, retirement or removal.
(h)Stockholder Nominations and Introduction of Business, Etc. Advance notice of stockholder nominations for election of directors of the Corporation and business other than nominations for election of directors of the Corporation shall be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the By-laws.
TENTH. No Action by Written Consent. No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with the By-Laws, and no action shall be taken by the stockholders by written consent.
ELEVENTH. Special Meetings. Special meetings of stockholders may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a waiver of notice thereof. Special meetings of the stockholders may be called only by the Chairman of the Board, the Chief Executive Officer or by resolution duly adopted by the affirmative vote of the majority of the members of the Board, and may not be called by any other person or persons. Any such resolution shall be sent to the Chairman of the Board or the Chief Executive Officer and the Secretary or Assistant Secretary and shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting is limited to the purposes stated in the notice.
TWELFTH. Amendment of By-Laws. The Board shall have, and is hereby expressly granted, the power to adopt, amend or repeal the By-Laws at any valid meeting of the Board by the affirmative vote of a majority of the whole Board. The By-Laws may also be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting of the holders of shares of stock entitled to vote thereon called for that purpose, by the affirmative vote of not less than a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon; provided however, that with respect to Sections 2, 6, 7 and 11 of Article II, Sections 2, 3, 7 and 10 of Article III and Article VIII of the By-Laws, such provisions may only be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting of the holders of shares of stock entitled to vote thereon called for that purpose, by an affirmative vote of not less than two-thirds of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon.
THIRTEENTH. Amendment of Certification of Incorporation. The Corporation reserves the right at any time, and from time to time, to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by law, and all rights, preferences and privileges conferred upon stockholders, directors or any other persons herein are granted subject to this reservation. In addition to any affirmative vote required by law and/or provided to the holders of any series of Preferred Stock then outstanding, if any, with respect to Articles Seventh, Eighth, Ninth (other than Section (f)), Tenth, Eleventh, Twelfth and this Thirteenth, such provisions may only be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting of the stockholders called for that purpose, by an affirmative vote of not less than two-thirds of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon, voting as a single class.

[signature page follows]
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IN WITNESS WHEREOF, undersigned, being a duly elected officer of the Corporation, has executed this Amended and Restated Certificate of Incorporation and affirms the statements herein contained on this 1st day of July, 2021.
KRISPY KREME INC.
By:    /s/ Cathy Tang    
    Name:    Catherine Tang
    Title:    Chief Legal Officer and Corporate     Secretary

    
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
KRISPY KREME, INC.
As of June 21, 2021

ARTICLE I

OFFICES
Section 1.01    Registered Office. The registered office of Krispy Kreme, Inc. (the “Corporation”) shall be 1209 Orange Street in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.02    Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the “Board”) may from time to time determine or the business of the Corporation may require.
ARTICLE II

MEETINGS OF STOCKHOLDERS
Section 2.01    Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held for the purpose of electing directors and conducting such other business as may properly come before the meeting in accordance with Article II, Section 6. The date, time and place, within or outside the State of Delaware, or no place, solely by means of remote communication, of the annual meeting shall be determined by the Board and stated in the notice of the meeting or in a waiver of notice of such annual meeting.
Section 2.02    Special Meetings. Special meetings of stockholders may be held at such date, time and place, within or without the State of Delaware, or no place, solely by means of remote communication, as shall be stated in the notice of the meeting or in a waiver of notice thereof. Special meetings of the stockholders may be called only by the Chairman of the Board, the Chief Executive Officer or by resolution duly adopted by the affirmative vote of the majority of the members of the Board, and may not be called by any other person or persons. Any such resolution shall be sent to the Chairman of the Board or the Chief Executive Officer and the Corporate Secretary or Assistant Secretary and shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting is limited to the purposes stated in the notice.


Section 2.03    Notice. (a) Except as otherwise provided by applicable law, notice of each meeting of stockholders, whether annual or special, shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. Without limiting the manner by which notice otherwise may be given to stockholders, any notice shall be effective if given by a form of electronic transmission consented to (in a manner consistent with the General Corporation Law of the State of Delaware as it now exists and may hereinafter be amended (the “DGCL”)) by the stockholder to whom the notice is given. The notices of all meetings shall state the place, date and time of the meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called.
(b)    When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the adjournment is for more than 30 days, or if after the adjournment, a new record date is fixed for the adjourned meeting, written notice of the new place, date and time of the adjourned meeting shall be given in conformity herewith.
(c)    If notice is given by mail, such notice shall be deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. If notice is given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the DGCL.
Section 2.04    Stockholders List. The officer having charge of the stock ledger of the Corporation shall make available, at least ten days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, specifying the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, at the principal place of business of the Corporation. The list shall also be produced and kept open at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
Section 2.05    Quorum. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by law or by the Certificate of Incorporation of the Corporation, as amended and restated to date (the “Certificate of Incorporation”). If a quorum is not present, the holders of the shares present in person or represented by proxy at the meeting, and entitled to vote thereat, shall have the power, by the affirmative vote of the holders of a majority of such shares, to adjourn the meeting to another time and/or place, without notice, other than as required in Section 3(b) above and other than announcement at the meeting at which the adjournment was taken, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.

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Section 2.06    Advance Notice Provisions for Business (other than Nominations for Election of Directors) to be Transacted at Annual Meeting. (a) No business (other than Nominations (as defined below)) (“Business”) may be transacted at an annual meeting of stockholders, other than Business that is either (A) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board (or any duly authorized committee thereof), (B) otherwise properly brought before the annual meeting by or at the direction of the Board (or any duly authorized committee thereof) or (C) otherwise properly brought before the annual meeting by any stockholder of the Corporation who (1) is a stockholder of record on both (x) the date of the giving of the notice provided for in this Section 6 and (y) the record date for the determination of stockholders entitled to vote at such annual meeting and (2) complies with the notice procedures set forth in this Section 6.
(b)    In addition to any other applicable requirements, for Business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Corporate Secretary and the Business must constitute a proper matter under Delaware law for stockholder action.
(c)    To be timely, a stockholder’s notice regarding any proposed Business must be delivered to the Corporate Secretary at the principal executive offices of the Corporation and received not less than 90 days nor more than 120 days prior to the first anniversary of the date of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the tenth day following the day on which notice of such annual meeting was mailed or public announcement of the date of such meeting is first made, whichever first occurs.
(d)    To be in proper written form, a stockholder’s notice to the Corporate Secretary must set forth as to the Business such stockholder proposes to bring before the annual meeting (1) a brief description of such Business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for proposing such Business at the annual meeting, (2) the name and record address of such stockholder, and beneficial owner, if any, on whose behalf the Business is proposed (for purposes of this Section 6, “beneficial owner”), (3) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of the date of notice, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for such meeting of the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of such record date, (4) a description of all arrangements or understandings between such stockholder or beneficial owner and any other person or persons (including their names) in connection with the proposal of such Business by such stockholder or beneficial owner, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner), any
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material interest of such stockholder or beneficial owner in such Business, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual meeting of any such arrangement or understanding in effect, and any such material interest, as of such record date, (5) a description of all arrangements or understandings (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that have been entered into as of the date of the stockholder’s notice by, or on behalf of, the stockholder or beneficial owner, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class or series of capital stock of the Corporation, or increase or decrease the voting power of the stockholder or beneficial owner with respect to shares of capital stock of the Corporation, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual meeting of any such arrangement or understanding in effect as of such record date, (6) a representation that such stockholder (or a qualified representative of such stockholder) intends to appear in person or by proxy at the annual meeting to bring such Business before the meeting and (7) a representation whether the stockholder or the beneficial owner, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposed Business and/or (y) otherwise to solicit proxies from stockholders in support of such proposed Business. For purposes of this Section 6 and Section 7 below, a person or entity is the “beneficial owner” of all shares which such person is deemed to beneficially own pursuant to Rules 13 d-3 and 13 d-5 under the Exchange Act.
(e)    If the presiding officer of an annual meeting determines that any Business was not properly brought before the annual meeting in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that such Business was not properly brought before the meeting and such Business shall not be transacted.
(f)    Notwithstanding the provisions of this Section 6, in order to include information with respect to a stockholder proposal in the Corporation’s proxy statement and form of proxy for an annual meeting, stockholders must provide notice as required by the regulations promulgated under the Exchange Act, and the foregoing notice requirements of this Section 6 will not apply to stockholders who have notified the Corporation of their intention to present a stockholder proposal only pursuant to and in compliance with such regulations.
(g)    Adjournment. In no event shall the adjournment of an annual meeting of the stockholders, or any announcement thereof, commence a new period for the giving of notice under this Section 6.
Section 2.07    Advance Notice Provisions for Nominations for Election of Directors. (a) For a nomination for election of a director of the Corporation (each, a “Nomination”) to be made by a stockholder of the Corporation at an annual or special meeting of stockholders at which one or more directors are to be elected pursuant to the Corporation’s notice of meeting, such stockholder must (A) be a stockholder of record on both (1) the date of the giving of the notice provided for in this Section 7 and (2) the record date for the determination of stockholders entitled to vote at such annual or special meeting and (B) comply with the notice procedures set forth in this Section 7. If a stockholder is entitled to vote only for a specific class or category of directors at an annual or special meeting of the stockholders, such
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stockholder’s right to make a Nomination pursuant to this Section 7 shall be limited to such class or category of directors.
(b)    To be timely in connection with the annual meeting of the stockholders, a stockholder’s notice regarding a Nomination must be delivered to the Corporate Secretary at the principal executive offices of the Corporation and received not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be delivered not earlier than the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting or (ii) the tenth day following the day on which notice of such annual meeting was mailed or public announcement of the date of such meeting is first made, whichever first occurs. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any stockholder entitled to vote for the election of such director(s) at such meeting and otherwise satisfying the requirements specified in Section 7(a) may make a Nomination to such position(s) as are specified in the Corporation’s notice of such meeting, but only if the stockholder’s notice regarding a Nomination shall be delivered to the Corporate Secretary at the principal executive offices of the Corporation not earlier than the 120th day prior to such special meeting and not later than the close of business on the later of (x) the 90th day prior to such special meeting or (y) the tenth day following the day on which notice of the date of such special meeting was mailed or public disclosure of the date of such special meeting was made, whichever first occurs.
(c)    To be in proper written form, a stockholder’s notice to the Corporate Secretary must be set forth (A) as to each person whom the stockholder proposes to be subject to such stockholder’s Nomination, (for purposes of this Section 7, each a “nominee”), (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the class or series and number of shares of capital stock of the Corporation, if any, which are owned beneficially and of record by the nominee as of the date of notice, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of the class or series and number of shares of capital stock of the Corporation, if any, which are owned beneficially and of record by such nominee as of such record date, (4) a written statement executed by such nominee acknowledging that, as a director of the Corporation, such person will owe a fiduciary duty, under the DGCL, exclusively to the Corporation and its stockholders and (5) any other information relating to the nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (B) as to both the stockholder giving notice and the beneficial owner, if any, on whose behalf the Nomination is made (for the purpose of this Section 7, a “beneficial owner”), (1) the name and record address of such stockholder and beneficial owner, (2) the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner as of the date of notice, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of the class or series and number of shares of capital stock of the Corporation which are owned beneficially and of record by such stockholder or beneficial owner
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as of such record date, (3) a description of all arrangements or understandings between such stockholder or beneficial owner and each nominee and any other person or persons (including their names) pursuant to which the Nomination(s) are to be made by such stockholder, including without limitation any agreements that would be required to be disclosed pursuant to Item 5 or Item 6 of Schedule 13D of the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to the stockholder or beneficial owner), and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of any such arrangement or understanding in effect as of such record date, (4) a description of all arrangements or understandings (including any derivative or short positions, profit interests, options, hedging transactions and borrowed or loaned shares) that have been entered into as of the date of the stockholder’s notice by, or on behalf of, the stockholder or beneficial owner, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the share price of any class or series of capital stock of the Corporation, or increase or decrease the voting power of the stockholder or beneficial owner with respect to shares of capital stock of the Corporation, and the stockholder’s agreement to notify the Corporation in writing within five business days after the record date for the annual or special meeting of any such arrangement or understanding in effect as of such record date, (5) a representation that such stockholder (or a qualified representative of such stockholder) intends to appear in person or by proxy at the annual or special meeting to make the Nomination of the nominee(s) named in its notice and (6) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each nominee to being named as a nominee and to serve as a director if elected.
(d)    If the presiding officer of an annual or special meeting determines that such a stockholder Nomination was not made in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that the Nomination was defective and such defective Nomination and such nominee shall be disregarded.
(e)    Adjournment. In no event shall the adjournment of an annual or special meeting of the stockholders, or any announcement thereof, commence a new period for the giving of notice under this Section 7.
(f)    Definition of Publicly Announced. For purposes of Section 6 above and this Section 7, a matter shall be deemed to have been “publicly announced” if such matter is disclosed in a press release reported by the Dow Jones News Service, the Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission and a “public announcement” shall be deemed to have been made on such date.
Section 2.08    Inspectors. The Board shall appoint inspectors of election to act as judges of the voting and to determine those entitled to vote at any meeting of stockholders, or any adjournment thereof, in advance of such meeting, but if the Board fails to make such appointments or if an appointee fails to serve, the presiding officer of the meeting of stockholders may appoint substitute inspectors.
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Section 2.09    Voting. (a) Except as otherwise provided by applicable law or in the Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder on the record date for the meeting. The ability of the stockholders to engage in cumulative voting is specifically denied. If the Certificate of Incorporation provides for more or less than one vote for any share on any matter, every reference in these By-Laws to a majority or other proportion of shares of stock shall refer to such majority or other proportion of the votes of such shares of stock. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Such proxy shall be filed with the Corporate Secretary before the vote at such meeting of stockholders. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Corporate Secretary. Except as set forth below in this Section 9 or as required by applicable law, when a quorum is present at any meeting, the vote of the holders of a majority of the stock which has voting power present in person or represented by proxy and which has actually voted shall decide any question properly brought before such meeting. Voting at meetings of stockholders need not be by written ballot unless so directed by the presiding officer of the meeting or the Board.
(b)    For purposes of non-contested elections of incumbent directors, a vote of the holders of a majority of stock which was actually voted means that the number of shares voted “for” an incumbent director’s election must exceed the number of votes cast “against” that director’s election, with “abstentions” and “broker nonvotes” not counted as votes cast either “for” or “against” that director’s election. Notwithstanding the foregoing, in the event of a contested election of directors, directors shall be elected by the vote of a plurality of the votes present in person or represented by proxy at any meeting for the election of directors at which a quorum is present. An election of directors shall be considered contested if the number of nominees standing for election at any meeting of stockholders exceeds the number of directors to be elected, with the determination that an election is “contested” to be made by the Corporate Secretary within 30 days following the close of the applicable notice of Nomination period set forth in Section 7 of this Article II, based on whether one or more notices of Nomination were timely filed in accordance with said Section 7 (provided that the determination that an election is a “contested election” shall be determinative only as to the timeliness of a notice of Nomination and not otherwise as to its validity). If, prior to the time the Corporation mails its initial proxy statement in connection with such election of directors, one or more notices of Nomination are withdrawn such that the number of candidates for election as director no longer exceeds the number of directors to be elected, the election shall not be considered a contested election.
(c)    If an incumbent director does not receive a majority of the votes cast in an election that is not a contested election, the director shall promptly tender his or her irrevocable resignation to the Chairman of the Board following certification of the vote. Thereafter, the Board shall decide, through a process managed by the Corporate Governance and Nominating Committee (excluding the nominee in question from all Board and Committee
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deliberations), whether to accept such resignation within 90 days of the date of such resignation. The Board in making its decision may consider any factors and other information that it considers appropriate or relevant. The Board’s explanation of its decision shall be disclosed promptly in a Current Report on Form 8-K filed with the Securities and Exchange Commission or in a press release that is widely disseminated. If such incumbent director’s resignation is accepted by the Board, then such director shall immediately cease to be a member of the Board upon the date of action taken by the Board to accept such resignation. If such incumbent director’s resignation is not accepted by the Board, such director will continue to serve until the next annual meeting or until his or her subsequent resignation or removal.
(d)    If the Board accepts a director’s resignation pursuant to this Section 9, or if a nominee for director is not elected and such nominee is not an incumbent director, then the Board may fill the resulting vacancy in accordance with Section 10 of Article III or may decrease the size of the Board pursuant to Section 2 of Article III.
Section 2.10    Order of Business. (a) Unless otherwise determined by the Board prior to the meeting, the presiding officer of the meeting of stockholders shall determine the order of business and shall have the authority in his or her discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the Corporation or their duly appointed proxies) who may attend any such meeting of stockholders, by ascertaining whether any stockholder or his or her proxy may be excluded from any meeting of stockholders based upon any determination by the presiding officer, in his or her sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and by determining the circumstances in which any person may make a statement or ask questions at any meeting of stockholders.
(b)    Meetings of stockholders shall be presided over by the Chairman of the Board or, in the Chairman’s absence, by the Chief Executive Officer, or in the Chief Executive Officer’s absence, by an officer of the Corporation designated by the Board, or in the absence of such designation by a Chairman chosen by vote of the stockholders at the meeting. The Corporate Secretary or Assistant Secretary shall act as secretary of the meeting, but in the Corporate Secretary’s or Assistant Secretary’s absence, the Chairman of the meeting may appoint any person to act as secretary of the meeting.
Section 2.11    Action without a Meeting. No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these By-Laws, and no action shall be taken by the stockholders by written consent.
Section 2.12    Waiver of Notice. Whenever notice is required to be given by law, by the Certificate of Incorporation or by these By-Laws, a written waiver signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before, at or after the time stated in such notice, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

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ARTICLE III

BOARD OF DIRECTORS
Section 3.01    Powers. The business and affairs of the Corporation shall be managed by the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these By-Laws directed or required to be exercised or done by stockholders.
Section 3.02    Number, Election and Qualification. Subject to the rights of the holders of any series of Preferred Stock then outstanding to elect directors, the number of directors of the Corporation shall be established by resolution of the Board. Except as otherwise provided by the Certificate of Incorporation or these By-Laws, the election of directors need not be by written ballot. Directors need not be stockholders of the Corporation.
Section 3.03    Terms of Office. Each director shall be elected for a term of one (1) year. Each director shall hold office for the term for which he or she was elected and until his or her successor is elected and qualified or until his or her earlier death, resignation, retirement or removal.
Section 3.04    Quorum and Manner of Acting. Unless otherwise provided by law or the Certificate of Incorporation, the presence of a majority of the members of the Board shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum, a majority of the directors present may adjourn the meeting from time to time until the quorum shall be present. Notice of any adjourned meeting need not be given. At all meetings of the Board at which a quorum is present, all matters shall be decided by the affirmative vote of the majority of directors present, except as otherwise required by law. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified in the respective notices, or waivers of notice, thereof.
Section 3.05    Annual Board Meeting. In connection with each annual meeting of stockholders for the election of directors, the Board shall meet at the place of the annual meeting of the stockholders for the purpose of organization, the election of officers and the transaction of other business. Notice of such meeting need not be given. If such meeting is held at any other time or place, notice thereof must be given as hereinafter provided for special meetings of the Board, subject to the execution of a waiver of the notice thereof signed by, or the attendance at such meeting of, all directors who may not have received such notice.
Section 3.06    Regular Meetings. Regular meetings of the Board may be held, without notice, at such time and place, within or without the State of Delaware, as shall from time to time be determined by resolution of the Board. At such meetings, the Board may transact such business as may be brought before the meeting.
Section 3.07    Special Meetings. Special meetings of the Board shall be held whenever called by the Chairman of the Board, the Chief Executive Officer or the President or by a majority of the directors. Notice of each such meeting shall be given orally or in writing, by
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telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, at least 24 hours before the date and time of the meeting, or sent in writing to each director either by first class mail, charges prepaid, at least three days before the date of the meeting or by a reputable overnight delivery service, at least two days before the date of the meeting. Each such notice shall state the time and place of the meeting and need not state the purpose or purposes thereof. Notice of any meeting of the Board need not be given to any director if he or she shall sign a written waiver thereof either before or after the time stated therein for such meeting, or if he or she shall be present at the meeting. Unless limited by law, the Certificate of Incorporation, these By-Laws or terms of the notice thereof, any and all business may be transacted at any meeting even though no notice shall have been given.
Section 3.08    Removal. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director or the entire board of directors may be removed, with or without cause by the affirmative vote of the holders of a majority of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors at a special meeting of stockholders called in accordance with the Certificate of Incorporation and these By-Laws expressly for that purpose.
Section 3.09    Resignations. Any director may resign at any time by giving notice to the Chairman of the Board, the President, the Corporate Secretary or any committee to which the Board has delegated the authority to accept resignations. Subject to Section 9(c) of Article II, the resignation of any director shall take effect upon receipt of notice thereof or at such later time, including without limitation, upon the happening of a specified event, as shall be specified in such notice, and acceptance of such resignation shall not be necessary to make it effective.
Section 3.10    Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy or newly created directorships in the Board, however occurring, shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to fill a vacancy shall have the same remaining term as that of his or her predecessor, subject to the election and qualification of a successor and to such director’s earlier death, resignation, retirement or removal.
Section 3.11    Compensation. Unless otherwise restricted by the Certificate of Incorporation or these By-Laws, directors shall be entitled to such compensation for their services, in the form of cash or equity of the Corporation or other compensation, or a combination thereof, as may be approved by the Board from time to time, including, if so approved, reasonable annual fees and reasonable fees for attending meetings of the Board and meetings of any committee of the Board. Directors may also be reimbursed by the Corporation for all reasonable expenses incurred in traveling to and from any such meetings. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.
Section 3.12    Action without a Meeting. Any action required or permitted to be taken at any meeting of the Board (including any committee) may be taken without a meeting if written consent thereto is signed or transmitted electronically by all members of the Board (or all
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members of such committee), and such written consent is filed with the minutes or proceedings of the Board or committee, as applicable.
Section 3.13    Telephonic Participation in Meetings. Any member of the Board, or any committee thereof, may participate in a meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meetings.
ARTICLE IV

COMMITTEES OF DIRECTORS
Section 4.01    Designation of Committees. The Board may, by resolution passed thereby, designate one or more committees, each committee to consist of one or more of the directors. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Except as otherwise provided in the Certificate of Incorporation, these By-Laws or the resolution of the Board designating the committee, a committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.
Section 4.02    Vacancies. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.
Section 4.03    Powers. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board to the extent provided by Section 141(c) of the DGCL as it exists now or may hereafter be amended.
Section 4.04    Minutes. Each committee of the Board shall keep regular minutes of its meetings and report the same to the Board when required.
ARTICLE V

OFFICERS
Section 5.01    Principal Officers. The Board shall elect, if and when designated by the Board, a Chairman of the Board, a Chief Executive Officer, a President, a Corporate Secretary and a Treasurer, and may in addition elect one or more Executive Vice Presidents, Senior Vice Presidents, Vice Presidents or one or more Assistant Secretaries and Assistant Treasurers and such other officers as it deems fit; the Chairman of the Board, the Chief Executive Officer, the President, the Corporate Secretary, the Treasurer, the Executive Vice President(s), if any, being the principal officers of the Corporation. No officer need be a
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stockholder and one person may hold, and perform the duties of, any two or more of the said offices.
Section 5.02    Election and Term of Office. The principal officers of the Corporation shall be elected annually by the Board at the meeting thereof held in connection with the annual meeting of stockholders. Each such officer shall hold office until his or her successor shall have been elected and shall qualify, or until his or her earlier death, resignation, retirement or removal.
Section 5.03    Other Officers. In addition, the Board may elect, or the Chairman of the Board or Chief Executive Officer may appoint, such other officers as they deem fit. Any such other officers chosen by the Board shall be subordinate officers and shall hold office for such period, have such authority and perform such duties as the Board, the Chairman of the Board or the Chief Executive Officer may from time to time determine.
Section 5.04    Removal and Resignation. Any officer may be removed, either with or without cause, at any time, by resolution adopted by the Board at any regular meeting of the Board, or at any special meeting of the Board called for that purpose, at which a quorum is present. Any officer may resign at any time by giving written notice to the Chairman of the Board, the Chief Executive Officer, the President, the Corporate Secretary or the Board. Any such resignation shall take effect upon receipt of such notice or at any later time specified therein, and the acceptance of such resignation shall not be necessary to make it effective. Except as the Board may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following such officer’s resignation or removal, or any right to damages on account of such removal, whether such officer’s compensation be by the month or by the year or otherwise, unless such compensation is expressly provided for in a duly authorized written agreement with the Corporation.
Section 5.05    Vacancies. A vacancy in any office may be filled for the unexpired portion of the term in the manner prescribed in these By-Laws for election or appointment to such office for such term.
Section 5.06    Chairman of the Board. The Chairman of the Board shall have general powers and duties of supervision and management usually vested in the office of the Chairman of the Board of a corporation. The Chairman of the Board shall preside, if present, at all meetings of the Board and at all meetings of the stockholders. He or she shall have and perform such other duties as from time to time may be assigned to him or her by the Board.
Section 5.07    Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation and shall have general supervision, direction and control of the business of the Corporation. He or she shall, in the absence of the Chairman, preside at all meetings of the stockholders and the Board. The Chief Executive Officer shall have such other powers and be subject to such other duties as the Board or the Chairman of the Board may from time to time assign and as may be provided by applicable law.
Section 5.08    President. Unless some other officer has been elected Chief Executive Officer, the President shall be the chief executive officer of the Corporation with the
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powers and duties set forth in Section 7 of this Article V. If a Chief Executive Officer has been elected, the President shall have such powers and shall perform such duties as shall be assigned to him or her by the Board, the Chairman of the Board or the Chief Executive Officer and as may be provided by applicable law.
Section 5.09    Vice President(s). Each Executive Vice President, Senior Vice President and Vice President shall have such powers and shall perform such duties as shall be assigned to him or her by the Board, the Chairman of the Board, the Chief Executive Officer or the President.
Section 5.10    Treasurer and Assistant Treasurers. (a) The Treasurer shall have charge and custody of, and be responsible for, all funds and securities of the Corporation and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation. He or she shall exhibit at all reasonable times his or her books of account and records to any of the directors upon application during business hours at the office of the Corporation where such books and records shall be kept; when requested by the Board, he or she shall render a statement of the condition of the finances of the Corporation at any meeting of the Board or at the annual meeting of stockholders; he or she shall receive, and give receipt for, moneys due and payable to the Corporation from any source whatsoever; in general, he or she shall perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the Board, the Chairman of the Board, the Chief Executive Officer or the President. The Treasurer shall give such bond, if any, for the faithful discharge of his or her duties as the Board may require.
(b)    The Assistant Treasurers shall perform such duties and possess such powers as the Board, the Chief Executive Officer, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board or, if there be no such determination, in the order of their election) shall perform the duties and exercise the powers of the Treasurer.
Section 5.11    Corporate Secretary and Assistant Secretaries. (a) The Corporate Secretary, if present, shall act as secretary at all meetings of the Board and of the stockholders and keep the minutes thereof in a book or books to be provided for that purpose; he or she shall see that all notices required to be given by the Corporation are duly given and served; he or she shall have charge of the stock records of the Corporation; he or she shall see that all reports, statements and other documents required by law are properly kept and filed; and in general he or she shall perform all the duties incident to the office of Corporate Secretary and such other duties as from time to time may be assigned to him or her by the Board, the Chairman of the Board, the Chief Executive Officer or the President.
(b)    The Assistant Secretaries shall perform such duties and possess such powers as the Board, the Chief Executive Officer, the President or the Corporate Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Corporate Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board or, if there be no such determination,
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in the order of their election) shall perform the duties and exercise the powers of the Corporate Secretary.
(c)    In the absence of the Corporate Secretary or any Assistant Secretary at any meeting of stockholders or directors, the Chairman of the meeting shall designate a temporary secretary to keep a record of the meeting.
ARTICLE VI

TRANSFERS OF STOCK
Section 6.01    General. The shares of capital stock of the Corporation shall be represented by a certificate, unless and until the Board of Directors of the Corporation adopts a resolution permitting shares to be uncertificated. Every holder of capital stock of the Corporation theretofore represented by certificates shall be entitled to have a certificate for shares of capital stock of the Corporation signed by, or in the name of, the Corporation by any two (2) authorized officers of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. The Corporation shall not have power to issue a certificate in bearer form.

Section 6.02    Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution, or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which, unless otherwise required by law, shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than 60 nor less than ten days before the date of such meetings, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
Section 6.03    Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.
Section 6.04    Lost, Stolen or Destroyed Certificates. The Board of Directors may direct a new certificate or uncertificated shares be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or uncertificated shares, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a
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bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate or the issuance of such new certificate or uncertificated shares.
Section 6.05    Transfers. Stock of the Corporation shall be transferable in the manner prescribed by applicable law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation, and in the case of certificated shares of stock, only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, properly endorsed for transfer and payment of all necessary transfer taxes; or, in the case of uncertificated shares of stock, upon receipt of proper transfer instructions from the registered holder of the shares or by such person's attorney lawfully constituted in writing, and upon payment of all necessary transfer taxes and compliance with appropriate procedures for transferring shares in uncertificated form; provided, however, that such surrender and endorsement, compliance or payment of taxes shall not be required in any case in which the officers of the Corporation shall determine to waive such requirement. With respect to certificated shares of stock, every certificate exchanged, returned or surrendered to the Corporation shall be marked "Cancelled," with the date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.
ARTICLE VII

MISCELLANEOUS
Section 7.01    Corporate Seal. The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing that it was incorporated in the State of Delaware. The Corporate Secretary shall be the custodian of the seal. The Board may authorize a duplicate seal to be kept and used by any other officer.
Section 7.02    Voting of Stock Owned by the Corporation. The Board may authorize any person on behalf of the Corporation to attend, vote and grant proxies to be used at any meeting of stockholders of any corporation (except the Corporation) in which the Corporation may hold stock.
Section 7.03    Dividends. Subject to applicable law and the provisions of the Certificate of Incorporation, the Board may, out of funds legally available therefor, at any regular or special meeting, declare dividends upon the capital stock of the Corporation as and when they deem expedient. Before declaring any dividend, there may be set apart out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the Board shall deem conducive to the interests of the Corporation.

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Section 7.04    Fiscal Year. Except as from time to time otherwise designated by the Board, the fiscal year of the Corporation shall begin on the first day of January of each year and end on the last day of December in each year.
Section 7.05    Certificate of Incorporation. All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.
Section 7.06    Severability. If any provision of these By-Laws is illegal or unenforceable as such, such illegality or unenforceability shall not affect any other provision of these By-Laws and such other provisions shall continue in full force and effect.
Section 7.07    Exclusive Forum: Unless the Corporation consents in writing to the selection of an alternative forum (an “Alternative Forum Consent”), the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a duty (including any fiduciary duty) owed by any current or former director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation or any current or former director, officer, stockholder, employee or agent of the Corporation arising out of or relating to any provision of the General Corporation Law of Delaware or the Corporation's Certificate of Incorporation or Bylaws (each, as in effect from time to time), or (iv) any action asserting a claim against the Corporation or any current or former director, officer, stockholder, employee or agent of the Corporation governed by the internal affairs doctrine of the State of Delaware; provided, however, that, in the event that the Court of Chancery of the State of Delaware lacks subject matter jurisdiction over any such action or proceeding, the sole and exclusive forum for such action or proceeding shall be another state or federal court located within the State of Delaware, in each such case, unless the Court of Chancery (or such other state or federal court located within the State of Delaware, as applicable) has dismissed a prior action by the same plaintiff asserting the same claims because such court lacked personal jurisdiction over an indispensable party named as a defendant therein. Unless the Corporation gives an Alternative Forum Consent, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended; provided, that this Section 7.07 of Article VII shall not apply to any actions arising under the Exchange Act. Failure to enforce the foregoing provisions would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions. Any person or entity purchasing, otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 7.07 of Article VII. The existence of any prior Alternative Forum Consent shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Section 7.07 of Article VII with respect to any current or future actions or claims.

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ARTICLE VIII

AMENDMENTS
Section 8.01    General. The Board shall have the power to adopt, amend or repeal these By-Laws at any valid meeting by the affirmative vote of a majority of the whole Board. These By-Laws may also be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting of holders of shares of stock entitled to vote thereon called for that purpose, by the affirmative vote of not less than a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon; provided however, that with respect to Sections 2, 6, 7 and 11 of Article II, Sections 2, 3, 7, and 10 of Article III and this Article VIII, such provisions may only be altered, amended or repealed at any annual meeting of stockholders, or at any special meeting called for that purpose of holders of shares of stock entitled to vote thereon, by an affirmative vote of not less than two-thirds of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote thereon.

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Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Michael Tattersfield, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2021 of Krispy Kreme, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 17, 2021
/s/ Michael Tattersfield
Michael Tattersfield
Chief Executive Officer

Exhibit 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002


I, Josh Charlesworth, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2021 of Krispy Kreme, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 17, 2021
/s/ Josh Charlesworth
Josh Charlesworth
Chief Financial Officer

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Quarterly Report on Form 10-Q of Krispy Kreme, Inc. (the “Company”), for the quarterly period ended July 4, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: August 17, 2021
/s/ Michael Tattersfield
Michael Tattersfield
Chief Executive Officer


Date: August 17, 2021
/s/ Josh Charlesworth
Josh Charlesworth
Chief Financial Officer Officer