Industry News | June 21, 2005

Krispy Kreme Board Forces Resignation of Six Top Officials

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Krispy Kreme Doughnuts Inc. has forced out six company officers after a special board committee looking into the restaurant chain's accounting practices said they should be "discharged."

Among the officers were four senior vice presidents that had a wide range of responsibilities -- including operations and finance -- the company said in a news release on Tuesday. Krispy Kreme did not identify the officers, and a spokeswoman declined to say why the names were being withheld. She also declined to provide any information not contained in a brief two-paragraph statement.

Five of the officers resigned and the sixth retired, the company says. The departures come six months after Scott Livengood was replaced as chief executive by Stephen Cooper, chairman of turnaround firm Kroll Zolfo Cooper LLC.

Winston-Salem(North Carolina)-based Krispy Kreme, a one-time Wall Street darling, has been hard-hit by probes into the way it accounted for franchise buybacks as well as by sagging sales of its signature doughnuts. The string of troubles began in May 2004, when the company posted its first quarterly loss since going public. It blamed the low-carbohydrate dieting craze for curbing consumers' appetite for doughnuts, but some investors have said the company expanded too quickly.

The stock debuted in May 2001 at $28.75 and rose as high as $49.74 in August 2003. Since then, the shares are down 85 percent.

Krispy Kreme has not filed any financial statements with the U.S. Securities and Exchange Commission since September and said earlier this month it lost money in its fiscal first quarter that ended May 1, as sales dropped 17 percent. The company said on Tuesday that it continues to cooperate with the U.S. Attorney's Office for the Southern District of New York and the Securities and Exchange Commission in their investigations into the company.

Krispy Kreme shares were down 14 cents, or 2 percent, at $7.53 midday on the New York Stock Exchange.