Did Krispy Kreme Sugar Coat Its Financial Statement?

With Krispy Kreme (KKD) hitting new highs on rumors of refinancing its debt, you wouldn't expect me to sit idly by, would you? (OK, some stuff does fall through the cracks, but I digress...) In this case, in the company's recently filed (and very late) financial statement from last quarter, operating cash flow seemed to pick up -- something bankers would no doubt like to see.

But riddle me this: Why did the allowance for doubtful accounts included slip to around $4 million from $14 million the quarter before? Such a slide goes straight to the bottom line, or lack, thereof, which goes straight to cash flow, which is key to a financing. Had the reserve been steady, the loss would've been higher and cash flow would've been lower than a year ago. (Or so it appears.)

A spokesman said the drop in receivables was the result of receivables from unaffiliated franchises that had been written off.

Meanwhile, Krispy Kreme, with no profits and not even a publicly outlined turnaround plan, trades at around 1.74-times sales. By contrast, based on available public data, it appears profitable Dunkin' Donuts last year sold to private equity for about half sales.

Party on...

KKD 1-yr chart: