WSJ -- Krispy Kreme will likely incur charges of $25.6 million to restate earnings for the past few years.
[My own immediate reaction to that headline : "You mean ... that's all ???"]
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August 10, 2005 10:03 a.m.
Krispy Kreme to Restate Several Years of Earnings
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
A special committee formed by Krispy Kreme Doughnuts Inc. found the company "failed to meet its accounting and financial reporting obligations," with the former chief executive and chief operating officer culpable, ending an internal investigation into accounting irregularities that spurred two federal probes.
The committee also recommended that Krispy Kreme, Winston-Salem, N.C., restate earnings downward by $22.2 million for 2001 through 2004, and by $3.4 million for previous years.
"The Krispy Kreme story is one of a newly public company, experiencing rapid growth, that failed to meet its accounting and financial reporting obligations to its shareholders and the public," the panel said in its report. "While some may see the accounting errors discussed in our summary as relatively small in magnitude, they were critical in a corporate culture driven by a narrowly focused goal of exceeding projected earnings by a penny [per share] each quarter.''
Krispy Kreme isn't publicly releasing the committee's report, but has made copies available to the Securities and Exchange Commission and the U.S. Attorney of the Southern District of New York, both of which are actively investigating the company's accounting and disclosure practices.
In a news release Wednesday, the committee, deputized by the doughnut maker's board after the accounting problems surfaced, said former Chief Executive Scott Livengood and his aide, John Tate, bear most of the responsibility for accounting irregularities that "strongly suggest an intent to manage earnings."
Several lawsuits have been filed against Krispy Kreme, including one that alleges workers lost millions of dollars in retirement savings because executives at the company hid evidence of declining sales and profits.
The accounting probes have taken a toll on Krispy Kreme's once highflying stock, which hit $49.37 a share in August 2003. In Wednesday morning trading, shares were up 4.2% at $7.45 on the New York Stock Exchange.
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