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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 2004
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KRISPY KREME DOUGHNUTS, INC.
(Exact name of registrant as specified in its charter)
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North Carolina 001-16485 56-2169715
(State or other jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
of incorporation)
370 Knollwood Street, Winston-Salem, North Carolina 27103
(Address of principal executive offices)
Registrant's telephone number, including area code: (336) 725-2981
Not Applicable
(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 8.01. Other Events.
On December 15, 2004, Krispy Kreme Doughnuts, Inc. (the "Company")
issued a press release announcing that its Form 10-Q for the quarter ended
October 31, 2004 cannot be completed by the extended filing deadline of December
15, 2004. A copy of that press release is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
As discussed in the Company's Report on Form 10-Q dated September 10,
2004 for the period ended August 1, 2004, on August 30, 2004, the Audit
Committee retained an independent law firm to investigate certain issues
relating to an amount recorded in error in an acquisition in fiscal 2004; the
acquisition in question was the Company's acquisition of its Michigan franchise.
Following its investigation, the independent law firm concluded that neither the
Company nor any of its employees engaged in any intentional misconduct related
to these issues. The Company's independent auditors subsequently requested that
the independent law firm perform certain additional procedures, primarily
related to a further review of certain electronic files. The independent law
firm performed its additional procedures and did not change its conclusion. The
dollar amount recorded in error would reduce net income for fiscal 2004 by less
than 1% and net income for the fiscal 2004 third quarter by 2.1%. Accordingly,
management and the Audit Committee believe that this amount is immaterial to the
Company's financial statements.
Certain other errors and related proposed adjustments have been
identified with respect to the Company's historical financial statements for
fiscal 2004, which the Company is reviewing. These proposed adjustments, as well
as the matter discussed in the preceding paragraph, primarily relate to the
accounting for the Company's acquisitions of its Michigan and Northern
California franchises and would reduce net income for fiscal 2004 by 2.7% and
net income for the fiscal 2004 second, third and fourth quarters by 1.9%, 2.1%
and 6%, respectively. Subject to the outcome of the Special Committee's
investigation discussed below, management and the Audit Committee believe that
these matters are immaterial to the Company's financial statements. Two of the
proposed adjustments involve treating as compensation expense, rather than as
purchase price, a part of the disproportionate purchase prices paid to a former
operating manager of the Michigan franchise and a former operating manager of
the Northern California franchise, each of whom worked for the Company for a
short period of time. The amounts of these two adjustments are subject to
judgment. If it is determined that all of the disproportionate amounts of these
purchase prices should be considered compensation expense, the Company's net
income would be reduced by 7.6% for fiscal 2004 and by 23% for the fiscal 2004
fourth quarter.
As discussed in the Company's Current Report on Form 8-K dated October
4, 2004, the Company has formed a Special Committee of two new independent
directors that is currently engaged in investigating matters raised by the
Securities and Exchange Commission (which has issued a formal order of private
investigation), claims asserted in pending shareholder derivative actions,
matters raised by the Company's independent auditors and other matters relevant
to the Special Committee's work, including but not limited to the matters
described in the preceding two paragraphs. There can be no assurance that, upon
completion of the Special Committee's investigation, the Special Committee will
not conclude, either for quantitative or qualitative reasons, that the Company's
historical financial statements require restatement.
The Company's independent auditors have informed the Company that,
prior to completion of the Special Committee's investigation and their review of
its report, they will not complete their review of the financial statements
contained in the Company's Quarterly Report on Form 10-Q for the period ended
August 1, 2004 or the financial statements to be contained in the Quarterly
Report on Form 10-Q for the period ended October 31, 2004.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits. The following exhibits are filed herewith:
Exhibit No. Description
99.1 Press release ("Krispy Kreme Updates Status of Form
10-Q Filing")dated December 15, 2004.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
KRISPY KREME DOUGHNUTS, INC.
Dated: December 15, 2004
By: /s/ Michael C. Phalen
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Michael C. Phalen
Chief Financial Officer
EXHIBIT 99.1
Investor Contact: Mike Phalen
Chief Financial Officer
Krispy Kreme Doughnuts, Inc.
336.733.3707
Financial Media Contact: Robbin E. Moore
Investor Relations Director
Krispy Kreme Doughnuts, Inc.
336.726.8857
KRISPY KREME UPDATES STATUS OF FORM 10-Q FILING
Winston-Salem, NC (December 15, 2004) - Krispy Kreme Doughnuts, Inc. (NYSE:KKD)
today announced that the Company will be unable to file its Form 10-Q for the
fiscal quarter ended October 31, 2004 by the extension deadline of December 15,
2004.
On December 13, 2004, the Company filed a Notification of Late Filing on Form
12b-25 stating that its quarterly report on Form 10-Q for the period ended
October 31, 2004 could not be filed timely due to ongoing analysis related to
the accounting treatment of certain franchise matters in the Company's third
fiscal quarter, primarily concerning the Company's consolidation of KremeKo,
Inc., its area developer for Central and Eastern Canada. As soon as practicable
following the completion of its ongoing analysis, the Company will file with the
SEC a quarterly report on Form 10-Q for the period ended October 31, 2004. The
ongoing analysis is primarily related to the timing of consolidating KremeKo,
Inc. and the accounting treatment of certain other franchise matters including,
but not limited to, classification of certain items in the Company's third
fiscal quarter. The primary accounting matter being evaluated relates to whether
KremeKo, Inc. should be presented in our financial statements on a consolidated
basis from the time of our adoption of Interpretation 46 (R) issued by the
Financial Accounting Standards Board ("FIN 46-R") as of the end of the first
quarter, which ended May 2, 2004, as opposed to the end of the third quarter,
which ended October 31, 2004. The Company has historically accounted for
KremeKo, Inc. using the equity method of accounting, which has been applied for
the first three quarters of fiscal 2005. While this difference in the timing of
adoption would generally not affect net income (loss), the Company's analysis
also includes the accounting for and classification of certain other items that
could be affected by the conclusion reached. Based on the analysis performed to
date, the Company believes that the outcome of its ongoing analysis will not
have a material impact on net loss for the quarter ended October 31, 2004 or the
preliminary balance sheet as of October 31, 2004, as presented in the Company's
Form 8-K dated November 22, 2004.
The Company is filing a Form 8-K disclosing the matters discussed above and
relating to the previously disclosed Audit Committee investigation, the pending
Special Committee investigation and certain errors and related proposed
adjustments that have been identified with respect to the Company's fiscal 2004
financial statements.
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 437 stores
(comprised of 399 factory stores and 38 satellites) in 45 U.S. states,
Australia, Canada, Mexico and the United Kingdom. Krispy Kreme can be found on
the World Wide Web at www.krispykreme.com.
# # #
Information contained in this press release, other than historical information,
should be considered forward-looking. In particular, the Company believes that
the outcome of its ongoing analysis of the accounting treatment for certain
franchise matters will not have a material impact on net loss for the quarter
ended October 31, 2004 or the preliminary balance sheet as of October 31, 2004.
Forward-looking statements are subject to various risks, uncertainties, and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or expected. Among the key factors
that may have a direct bearing on Krispy Kreme's operating results, performance
or financial condition are its dependence on franchisees to execute its store
expansion strategy, supply issues, changes in consumer preferences and
perceptions, the failure of new products or cost saving initiatives to
contribute to financial results in the timeframe or amount currently estimated,
the outcome of the pending formal investigation by the United States Securities
and Exchange Commission, the pending shareholder class action, the pending
shareholder derivative actions, the pending Special Committee investigation, our
auditors' ongoing review of our financial statements, and numerous other factors
discussed in Krispy Kreme's periodic reports, proxy statements filed with the
Securities and Exchange Commission.