Livengood ousted as head of troubled Krispy Kreme
Tuesday, January 18th 2005, 10:30 am
By: News On 6
CHARLOTTE, N.C. (AP) _ Chief executive officer Scott Livengood was ousted Tuesday as head of Krispy Kreme Doughnuts Inc., the once-trendy chain whose stock price has plummeted amid a federal securities investigation and allegations of padded sales figures. Shares of Krispy Kreme jumped more than 17 percent on the news.
The Winston-Salem company's board of directors said Livengood, who has been criticized for his handling of the company's recent financial problems, would retire as part of a series of ``important actions to address the company's current situation.'' Livengood, 52, who has been at the helm for seven years and led the company's rapid rise, was replaced as CEO by Stephen Cooper, a turnaround specialist who most recently shepherded the Enron Corp. bankruptcy.
The company also warned of persistent declines in sales and said it may post a fourth quarter loss.
The company said Livengood also retired from his positions as president, chairman of the board and as a director of the company and will become a consultant on an interim basis.
``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,'' said Morgan.
Livengood made no comment in the company's prepared statement.
Sales have continued to slide in the fourth quarter of the current fiscal year, the company said, adding that for the eight weeks ending Dec. 26, average weekly sales per factory store throughout the Krispy Kreme system were down 18 percent.
The company said quarterly results will also be harmed by the substantial costs of dealing with its current legal and regulatory troubles, which include a formal probe by the Securities and Exchange Commission, and it could post a loss for the current quarter.
Still, Krispy Kreme stock surged $1.53 to $10.25 in morning trading on the New York Stock Exchange.
Earlier this month, the company said it was restating earnings for the last three quarters of fiscal 2004. That came after allegations in a shareholder lawsuit that the company padded shipments to hide declining sales over the last two years
In its latest SEC filing, the company said it continues reviewing other errors and proposed adjustments that could result in the company's net income for the year being trimmed by as much as 7.6 percent.
The SEC investigation is probing Krispy Kreme's accounting for franchise buybacks and its earnings outlooks and is facing shareholder lawsuits. The once-high flying company in November posted a $3 million third-quarter loss, its second losing quarter of 2004 and its stock, which traded at nearly $50 a share a year and a half ago, hit an all-time low last week.
Krispy Kreme has closed a number of stores since May and taken other steps to address its problems.
Replacing Livengood as president will be Stephen Panagos, the company said; James Morgan, who has served as a director of the Company since July 2000 and vice chairman since March 2004, has been elected chairman, Krispy Kreme said.
Cooper and Panagos are both associated with Kroll Zolfo Cooper LLC, which Krispy Kreme has retained to be its financial advisor and interim management consultant. Cooper now acts as interim CEO, president and COO of Enron.
According to Krispy Kreme, Cooper has more than 30 years' experience leading companies through operational and financial restructurings.
``I am looking forward to working with all of the company's employees, franchisees, vendors and other business partners to strengthen Krispy Kreme,'' he said.