Posted on: Wednesday, January 19, 2005
Krispy Kreme fires CEO, hires turnaround expert
By Paul Nowell
Associated Press
WINSTON-SALEM, N.C. — The board of directors at Krispy Kreme Doughnuts Inc. ousted its top 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 A. Livengood, the company's chief executive officer for the past seven years, will be replaced by Stephen F. Cooper, who has been overseeing the bankruptcy reorganization of Enron Corp. as interim CEO. Cooper has three decades of experience in corporate restructurings at Enron, Polaroid, TWA, Boston Chicken and Pegasus Gold. Cooper will continue his role at Enron while he takes on his new duties at Krispy Kreme.
The company also warned that persistent declines in sales for the quarter ending on Jan. 30 may lead to its third quarterly loss of the fiscal year.
Livengood's departure came after the once-high-flying Krispy Kreme endured months of bad news, including plummeting profits, a federal securities probe and allegations of padded sales that forced the company to restate earnings.
Shares of the company, which reached almost $50 a share a year and a half ago, dropped to a low of $8.72 last week. They rose 89 cents, or 10.2 percent, to close at $9.61 in trading yesterday on the New York Stock Exchange.
Analyst Glenn Guard, who follows Krispy Kreme for Legg Mason, wrote in a letter to investors yesterday that the change in command was just what was needed and the market responded.
"We view this news as positive for the company, as the previous management team's credibility was very low, in our opinion," he wrote. "All three of the responsible parties for KKD's current situation (previous CFO, COO and CEO) are no longer with the firm."
Krispy Kreme said the 52-year-old Livengood also retired from his positions as president and chairman of the board, and as a director of the company, and 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 departure does trigger an option to purchase 330,125 shares of Krispy Kreme stock; he now has vested options to purchase more than 1.3 million shares.
Livengood made no comment in the news release announcing his departure and did not immediately respond to attempts to reach him through a speaker's bureau.
In 2000, Krispy Kreme went public at $21 a share and the stock price shot up from there. Each time Krispy Kreme opened a new store, it seemed, lines curled around the block.
In May, Krispy Kreme reported its first-ever quarterly loss, blaming it on the popularity of low-carbohydrate diets like Atkins and South Beach.
Store closings, the shareholder lawsuit and word of a formal probe by the Securities and Exchange Commission soon made it apparent Krispy Kreme's problems ran deeper than a diet fad.
The SEC is probing Krispy Kreme's accounting for franchise buybacks and its earnings outlooks. In November, Krispy Kreme posted a $3 million third-quarter loss.
