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Krispy Kreme to Cut Work Force by 25%
"WINSTON-SALEM, N.C. -- Krispy Kreme Doughnuts Inc. will reduce the number of employees in its corporate, mix plant, equipment manufacturing, and distribution facilities by approximately 25%, officials announced late yesterday. It is estimated that these actions will result in annual pre-tax savings of approximately $7.4 million and a cash restructuring charge of approximately $600,000 in the first fiscal quarter.Krispy Kreme has a shop in Boardman, Ohio.In light of plummeting sales and a stock price drop of 74% over the past year, the company has been targeted by shareholder lawsuits. The Securities and Exchange Commission reportedly initiated an investigation of the company's accounting practices last October following allegations the company used the transactions to inflate profit as doughnut sales slowed.Recently, the company divested a corporate airplane that was subject to an operating lease. It is estimated that this action will result in annual pre-tax savings of approximately $3 million but will involve a cash charge of approximately $300,000 in the first fiscal quarter related to the divestiture.As previously disclosed, the lenders under company's Credit Facility have agreed to defer until March 25 the date on which an event of default would occur because of the company's failure to deliver financial statements to the lenders for the quarter ended Oct. 31, 2004. Also as previously disclosed, the company is currently unable to borrow funds under the Credit Facility. Officials are working on a business plan and intend to conduct discussions with its lending banks regarding amendments to its Credit Facility.The company's cash from operations continues to be impacted adversely by previously disclosed unfavorable sales trends, and by the substantial costs and expenses associated with ongoing litigation, regulatory and restructuring matters. As a result, officials see the need to secure, by the end of the waiver period, additional credit to fund its operations and required capital expenditures. "Krispy Kreme is a great brand, and we are working very hard to help the company rediscover its potential," said Steve Panagos, president and chief operating officer.Founded in 1937 in Winston-Salem, North Carolina, Krispy Kreme is a leading branded specialty retailer of premium quality doughnuts, including the Company's signature Hot Original Glazed. Krispy Kreme currently operates more than 400 stores in 45 U.S. states, Australia, Canada, Mexico the Republic of South Korea and the United Kingdom.Visit Krispy Kreme Doughnuts Inc.: www.krispykreme.com"