|WSJ -- Krispy Kreme Names Brewster as New CEO .........................................|
March 7, 2006
Krispy Kreme Names Brewster as New CEO
Doughnut Chain Is Trying to Rebound Following Accounting Problems
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
WINSTON-SALEM, N.C. – Krispy Kreme Doughnuts Inc. named Daryl G. Brewster to be its new president and chief executive, as the doughnut maker tries to recover from a spate of accounting problems.
Mr. Brewster joins Krispy Kreme after serving as president of Kraft Foods' North American snacks and cereals unit. He replaces Stephen F. Cooper, who has served as Krispy Kreme's chief executive on an interim basis since January 2005. The appointment is effective immediately, the company said.
Once a trendy and fast-growing doughnut chain, Krispy Kreme hit a rough patch after going public in 2000, as it revealed accounting problems and investigations by several regulators. Last year, its directors forced out longtime CEO Scott Livengood and hired Mr. Cooper to turn around its struggling operations.
"Krispy Kreme has made steady progress in its turnaround and I am confident that it has a solid future of growth and profitability," Mr. Brewster said in a statement.
The Winston-Salem, N.C.-based company said Mr. Cooper, chairman of Kroll Zolfo Cooper LLC, will remain with the company for a transition period, serving as chief restructuring officer. Steven G. Panagos, managing director of Kroll Zolfo, who has been serving as Krispy Kreme's president and chief operating officer, also will stay on in the post of director of restructuring during the transition, the company said.
Mr. Brewster is a 23-year veteran of the food business who has been with Kraft Foods/Nabisco since 1997, Krispy Kreme said. From 2000 to mid-2002, Mr. Brewster was president of Nabisco Biscuit Co., then he took on international responsibilities for Kraft, serving as president for Canada, Mexico and Puerto Rico before assuming his current role in late 2003.
After going public in 2000, Krispy Kreme sought to capitalize on Wall Street's appetite for growth stocks at the end of the stock-market boom. But the company wasn't ready for prime time. An internal report last August found former executives at Krispy Kreme used improper, even "egregious," accounting to satisfy Wall Street's hunger for growth. The report, a 24-page summary of which was made public in a regulatory filing, says the company lacked internal controls, didn't employ a general counsel for a two-year period and hired three chief financial officers in four years – including one who told the panel he wasn't comfortable in the job.
The report said Krispy Kreme's woes stemmed in part from a common 1990s-era practice: Setting earnings-per-share targets for Wall Street analysts and then pushing to beat them by a penny. The panel noted that executive bonuses were tied to exceeding those growth targets. Though the report stopped short of accusing former executives of outright fraud, it included a strong condemnation of the former management team led by Mr. Livengood, as well as the company's outside directors, noting that senior managers "were profiting greatly" from questionable accounting.
The report, which followed a 10-month investigation of the doughnut maker by a special board committee, didn't directly tie Mr. Livengood to any particular accounting maneuver, but it criticized him for setting aggressive growth targets and being "too focused on meeting and exceeding" Wall Street expectations, while disregarding "essential requirements of public company stewardship."
Mr. Livengood started at Krispy Kreme as a personnel trainee and became its CEO in 1998. As CEO, he recounted that while growing up not far from the company's Winston-Salem, N.C., headquarters, he was such a fan that he ordered a plate of chocolate-covered, cream-filled Krispy Kremes for his 16th birthday. At his 2002 wedding, he served a cake made of 720 doughnuts.
Krispy Kreme, which was founded in 1937, had fewer than 100 stores in 1996 when it opened its first Manhattan store, which helped catapult its glazed doughnuts to cult status and fuel rapid growth. Today it has hundreds of stores across the U.S. and sells doughnuts in thousands of supermarkets, convenience stores, truck stops and other locations.
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