Krispy Kreme Doughnuts, Inc. announced today that its board of directors has taken a number of important actions to address the company’s current situation.
Stephen F. Cooper has been named CEO replacing Scott A. Livengood, who has retired as chairman of the board, president and Chief Executive Officer and a director of the Company and will become a consultant to Krispy Kreme on an interim basis. Steven G. Panagos has been named president and COO.
James H. Morgan, who has served as a director of the company since July 2000 and vice chairman since March 2004, has been elected Chairman of the Board of Krispy Kreme. Morgan is Chairman of The Morgan Crossroads Funds, having previously served as chairman and CEO of Wachovia Securities, Inc. In addition, Robert L. Strickland has been elected vice chairman. Strickland, a Krispy Kreme director since 1998, is the retired Chairman of Lowe’s Companies, Inc.
Cooper is the Chairman and Panagos is a Managing Director of Kroll Zolfo Cooper LLC (“KZC”), which Krispy Kreme has retained to be its financial advisor and interim management consultant. KZC is one of the world’s leaders in this field. Cooper has more than 30 years’ experience leading companies through operational and financial restructurings and currently acts as interim CEO, president and Chief Restructuring Officer of Enron and prior to that acted as vice chairman of Laidlaw. Panagos is the National Practice Leader of KZC’s domestic Corporate Advisory and Restructuring Group and has more than 20 years’ experience leading companies through operational and financial restructurings. He formerly served as interim CEO but currently serves as Chief Restructuring Officer of The Penn Traffic Company. They will be joined by a team of KZC. Cooper, Panago, and their team will begin working immediately with the Krispy Kreme, its management, and the board of birectors. “I am looking forward to working with all of the Company’s employees, franchisees, vendors, and other business partners to strengthen Krispy Kreme,” says Cooper.
KZC has worked on numerous complex engagements, including Enron, The Penn Traffic Company, NRG Energy, Inc., Federated Department Stores, Sunbeam, Laidlaw, Washington Group International, Polaroid Corporation, Morrison Knudsen, and ICG Communications.
“I believe that [Krispy Kreme’s] employees, franchisees, vendors and shareholders will be excited with the energy, experience and vision which Cooper and the KZC team will bring to the Company. On behalf of the Board, I want to thank Scott for his years of dedicated service to the Company and for making himself available to Krispy Kreme as a consultant to facilitate the transition,” says Morgan.
Krispy Kreme also reported that the lenders under its credit facility have agreed to defer until January 24, 2005 the date on which an event of default would occur by reason of its failure to deliver financial statements for the quarter ended October 31, 2004.
Krispy Kreme also announced that the results for its fourth quarter ending January 30, 2005 have been, and may continue to be, adversely impacted by significant sales declines. For the eight weeks ended December 26, 2004, systemwide and average weekly sales per factory store decreased approximately 18 percent and 25 percent, respectively, compared to the corresponding weeks of the prior year. The quarter is also being adversely impacted by the substantial costs associated with the legal and regulatory matters.