DOUGHNUTS Krispy Kreme brings in a turnaround specialist
The outgoing CEO had been at the helm for seven years.
WINSTON-SALEM, 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 12 percent.
The Winston-Salem company's board of directors announced the retirement of Livengood, who has been criticized for his handling of the company's recent financial problems, as one of "a number 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 reorganization. The company also warned that a persistent declines in sales may lead to a fourth-quarter loss. Livengood's departure came after the once-high-flying Krispy Kreme endured months of bad news, including plummeting profits and a federal securities probe.
Shares of the company, which reached almost $50 a share a year and a half ago, dropped to an all-time low of $8.72 last week. They rose 89 cents, or 10.2 percent, to close at $9.61 in trading Tuesday on the New York Stock Exchange.
Krispy Kreme said the 52-year-old Livengood also retired from his positions as president, 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 buy 330,125 shares of Krispy Kreme stock; he now has vested options to buy 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.
Board member James H. Morgan was elected chairman. He heads the Morgan Crossroads Funds and previously was CEO of Wachovia Securities Inc.
Both Cooper and newly named Krispy Kreme president Stephen Panagos are associated with Kroll Zolfo Cooper LLC, which the doughnut maker has retained to be its financial adviser and interim management consultant.
At Enron, the 58-year-old Cooper oversaw a reorganization plan that went into effect in mid-November. The company now expects to begin distributing $12.8 billion to creditors -- 92 percent in cash and 8 percent in stock in Prisma Energy International Inc., a hodgepodge of power plants and pipelines in 14 countries.
Kroll Zolfo Cooper spokeswoman Rebecca Randall said Cooper will continue his role at Enron while he takes on his new duties at Krispy Kreme.
Livengood, who has been with Krispy Kreme for 28 years, was instrumental in the company's rapid growth in the 1990s and early this decade. As president, he led the chain into markets well outside the company's traditional Southeastern 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 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.
A recent filing in a shareholder lawsuit alleged that Krispy Kreme executives knew that sales were sagging by early 2003 but attempted 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, 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 company said Tuesday that creditors have agreed to extend until Monday a deadline for it to provide the lenders with a revised earnings report for the third quarter. Otherwise, the company has said, some $91 million in outstanding loans could be called.