WSJ -- Krispy Kreme Discloses SEC Probe.
July 29, 2004
Krispy Kreme Discloses SEC Probe
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
Krispy Kreme Doughnuts Inc. disclosed that the Securities and Exchange Commission is conducting an informal inquiry regarding the doughnut seller.
In a statement, Krispy Kreme said the inquiry "generally concerns" the company's franchise repurchases and its previously announced reduction in earnings guidance. Krispy Kreme said it is "fully cooperating with the SEC" in response to requests for information.
Krispy Kreme shares were down 11% to $16.56 in midday trading on the New York Stock Exchange. The company disclosed the inquiry shortly before the open of trading in New York.
Since going public in 2000, Krispy Kreme has faced questions about its accounting transparency and potential for conflicts of interest in investments that its executives made in its franchises. Investors bought the sugar-fueled stock anyway.
But, as The Wall Street Journal reported in May, two recent deals in which Krispy Kreme bought back franchisees could spark new concerns. Some independent accounting experts say the Winston-Salem, N.C., company may have used aggressive bookkeeping to boost its earnings when it acquired its Michigan franchise last year. In the other buyout, completed in January, Krispy Kreme didn't disclose that one of the sellers was Chief Executive Scott Livengood's ex-wife, whose share was valued at about $1.5 million.
In a statement Thursday, Mr. Livengood said that Krispy Kreme "has no higher priority than the confidence of our shareholders, customers and employees. While we are confident in our practices, we understand and respect the SEC's responsibilities and will continue to cooperate fully throughout this process."
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