So, Krispy Kreme Doughnuts Inc., which is the target of a Securities and Exchange Commission probe, said today it will restate fiscal 2004 earnings to correct accounting mistakes connected to buying franchised stores. The changes will cut annual net profit by up to $4.9 million. The stock has dropped as much as 14%.
Oh, and by the way, the company also said it will be in default on a $150 million credit line if its lenders do not grant a waiver for late reporting of quarterly earnings that are due to be filed Jan. 14. And Krispy Kreme can no longer borrow against the credit line. And late filing of its 10-K or 10-Q reports may mean Krispy Kreme is in violation of the New York Stock Exchange’s listing rules.
Well, for a company whose shares fell 66% last year, they’re certainly starting 2005 on an exciting note. Just MHO, but I’d argue that this is a good example of why faddish companies that don’t pay dividends are best avoided like the proverbial plague. That’s not to say one can’t make money on them with the right timning, but I’ll take my investments nice and dull, thanks.