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Krispy Kreme board ousts top executive

Troubled doughnut company employs turnaround specialist

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Krispy Kreme chief Scott A. Livengood, in 2002 at Winston-Salem, N.C., store, will be an interim consultant.

Krispy Kreme chief Scott A. Livengood, in 2002 at Winston-Salem, N.C., store, will be an interim consultant.

David Rolfe, Associated Press

WINSTON-SALEM, N.C. — Krispy Kreme Doughnuts Inc. board of directors ousted its top executive on Tuesday 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 last 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.

The company also warned on Tuesday 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 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 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.

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.

In warning of a possible fourth-quarter loss, Krispy Kreme noted that for the eight weeks ending Dec. 26, average weekly sales per factory store throughout the Krispy Kreme system were 18 percent lower than the same period a year earlier.

The company said quarterly results also will be harmed by the costs of dealing with its current legal and regulatory troubles.

Analysts surveyed by Thomson First Call had projected a profit of 5 cents per share for the fourth quarter.

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.