Krispy Kreme Doughnuts' board of directors ousted its chief executive yesterday and replaced him with a turnaround specialist it hopes can save another company beset by allegations...
WINSTON-SALEM, N.C. — Krispy Kreme Doughnuts’ board of directors ousted its chief executive yesterday and replaced him with a turnaround specialist it hopes can save another company beset by allegations of corporate deceit.
Shares of Krispy Kreme jumped more than 10 percent on the news that Scott Livengood, the company’s CEO for seven years, will be replaced by Stephen Cooper, who has been overseeing the bankruptcy reorganization of Enron as interim CEO.
Cooper has three decades of experience in corporate restructurings at Enron, Polaroid, TWA, Boston Chicken and Pegasus Gold.
Krispy Kreme also warned yesterday that persistent declines in sales for the quarter ending Jan. 30 may lead to its third quarterly loss of the fiscal year.
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Livengood’s exit came after the once-high-flying company endured months of bad news, including plummeting profits, a securities investigation and allegations of padded sales that resulted in restated earnings.
Its stock, which reached almost $50 a share in 2003, hit an all-time low of $8.72 last week. It rose 89 cents, or 10.2 percent, to close at $9.61 yesterday.
Krispy Kreme said Livengood, 52, also retired from his positions as president, chairman and a board director. He will become an interim consultant, paid $45,833 a month for the next six months.
The company said Livengood will not receive a severance package, although his exit does trigger an option to buy 330,125 shares of Krispy Kreme stock. He now has vested options to purchase more than 1.3 million shares.
Livengood did not immediately respond to attempts to reach him.
Board member James Morgan was elected chairman. He heads the Morgan Crossroads Funds and previously was CEO of Wachovia Securities.
Both Cooper, 58, and newly named Krispy Kreme President Stephen Panagos are associated with Kroll Zolfo Cooper, which the doughnut maker has retained as financial adviser and interim management consultant.
At Enron, Cooper oversaw a reorganization plan that went into effect in November. Enron expects to begin distributing $12.8 billion to creditors — 92 percent in cash and 8 percent in stock in Prisma Energy International, a hodgepodge of power plants and pipelines in 14 countries.
Kroll Zolfo Cooper spokeswoman Rebecca Randall said Cooper will continue at Enron while he takes on his Krispy Kreme duties.
In warning of a possible fourth-quarter loss, Krispy Kreme noted that for the eight weeks ended Dec. 26, average weekly sales per factory store were 18 percent lower than a year earlier.
It said quarterly results will be harmed by the costs of dealing with the legal and regulatory troubles.
Livengood, with Krispy Kreme for 28 years, was instrumental in the company’s rapid growth in the past 10 years. He led the chain into markets well outside the company’s Southeast base, debuting in New York in 1996 and in Los Angeles three years later.
In 2000, the company went public at $21 a share, and the stock shot up from there.
In May, Krispy Kreme reported its first-ever quarterly loss, blaming it on the popularity of low-carbohydrate diets.
Store closings, the shareholder lawsuit and word of a Securities and Exchange Commission investigation soon made it apparent Krispy Kreme’s problems ran deeper than a diet fad.
The SEC is looking into Krispy Kreme’s accounting for franchise buybacks and its earnings outlooks. In November, Krispy Kreme posted a $3 million third-quarter loss.
A recent filing in a shareholder lawsuit alleged Krispy Kreme executives knew sales were sagging by early 2003 but tried to hide them by routinely padding sales figures to wholesale customers at the end of fiscal quarters.
Earlier this month, the company said it was restating earnings for the last three quarters of fiscal 2004.
In its latest SEC filing, it said it continues reviewing other errors and proposed adjustments that could result in net income for the year being trimmed by as much as 7.6 percent.
The company said yesterday creditors have agreed to extend until Monday a deadline for it to provide lenders with a revised third-quarter earnings report.