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"They may have to go up on us, one teary-eyed highway patrolman sobbed."
Entrepreneurs Get $7.9 Million Judgement Against Krispy Kreme
POSTED: 3:57 p.m. EST February 10, 2003
CHARLOTTE, N.C. -- An arbitration panel awarded $7.9 million to two would-be California franchisees who sued Krispy Kreme Doughnuts Inc., the company said Monday.
Kevin Boylan and Bruce Newberg accused Krispy Kreme of breach of contract, intentional interference with contract and business relations and other claims after the company awarded development rights for northern California to another group, Golden Gate Doughnuts LLC, according to SEC filings.
That group is 67 percent owned by Krispy Kreme. Company Chief Executive Scott Livengood was originally a partner but sold his remaining interest in the development group last year as Krispy Kreme made changes to avoid conflicts of interest. Livengood had been dismissed as a defendant in the lawsuit.
Newberg and Boylan filed suit in Superior Court for Los Angeles County in March 2000, according to filings with the Securities and Exchange Commission. The case was later transferred to arbitration by the American Arbitration Association.
Krispy Kreme had claimed that it had been in discussions with the plaintiffs regarding their participation in the northern California franchise, but differences regarding the terms and conditions of their participation were never resolved. Krispy Kreme claimed no oral agreement was ever reached and no written agreement was executed, according to SEC filings.
Krispy Kreme said it is reviewing its options following the award, including further legal options, but Chief Operating Officer John Tate played down that route. "It's just way too early to ascribe any outcome" to the company's review of the decision, he said.
Tate said the ruling will result in a one-time, after-tax charge against earnings of about 8 cents a share for the just-ended fiscal fourth quarter.
"It's a one-time event and it doesn't, in a material way, affect our financial position or any of our prospects," Tate said in an interview Monday with Dow Jones Newswires.
Krispy Kreme, which is based in Winston-Salem, expects to release an update on fourth-quarter sales by week's end and will release earnings on March 18, Tate said.
BB&T Capital Markets analyst Andrew Wolf said he doesn't consider the news to be very negative.
"It's a one-time charge and there are not any other pending lawsuits like this," said Wolf, who rates Krispy Kreme shares at "buy." Wolf doesn't own any shares, but the company is a BB&T investment banking client.
Shares of Krispy Kreme were at $27.54 in late trading Monday on the New York Stock Exchange, down 57 cents, or 2 percent, on heavy volume. The day's weakest level of $26.42, at that point, was a 52-week low, surpassing the previous low of $27.40 set Oct. 10.
"They may have to go up on us, one teary-eyed highway patrolman sobbed."
Entrepreneurs Get $7.9 Million Judgement Against Krispy Kreme
POSTED: 3:57 p.m. EST February 10, 2003
CHARLOTTE, N.C. -- An arbitration panel awarded $7.9 million to two would-be California franchisees who sued Krispy Kreme Doughnuts Inc., the company said Monday.
Kevin Boylan and Bruce Newberg accused Krispy Kreme of breach of contract, intentional interference with contract and business relations and other claims after the company awarded development rights for northern California to another group, Golden Gate Doughnuts LLC, according to SEC filings.
That group is 67 percent owned by Krispy Kreme. Company Chief Executive Scott Livengood was originally a partner but sold his remaining interest in the development group last year as Krispy Kreme made changes to avoid conflicts of interest. Livengood had been dismissed as a defendant in the lawsuit.
Newberg and Boylan filed suit in Superior Court for Los Angeles County in March 2000, according to filings with the Securities and Exchange Commission. The case was later transferred to arbitration by the American Arbitration Association.
Krispy Kreme had claimed that it had been in discussions with the plaintiffs regarding their participation in the northern California franchise, but differences regarding the terms and conditions of their participation were never resolved. Krispy Kreme claimed no oral agreement was ever reached and no written agreement was executed, according to SEC filings.
Krispy Kreme said it is reviewing its options following the award, including further legal options, but Chief Operating Officer John Tate played down that route. "It's just way too early to ascribe any outcome" to the company's review of the decision, he said.
Tate said the ruling will result in a one-time, after-tax charge against earnings of about 8 cents a share for the just-ended fiscal fourth quarter.
"It's a one-time event and it doesn't, in a material way, affect our financial position or any of our prospects," Tate said in an interview Monday with Dow Jones Newswires.
Krispy Kreme, which is based in Winston-Salem, expects to release an update on fourth-quarter sales by week's end and will release earnings on March 18, Tate said.
BB&T Capital Markets analyst Andrew Wolf said he doesn't consider the news to be very negative.
"It's a one-time charge and there are not any other pending lawsuits like this," said Wolf, who rates Krispy Kreme shares at "buy." Wolf doesn't own any shares, but the company is a BB&T investment banking client.
Shares of Krispy Kreme were at $27.54 in late trading Monday on the New York Stock Exchange, down 57 cents, or 2 percent, on heavy volume. The day's weakest level of $26.42, at that point, was a 52-week low, surpassing the previous low of $27.40 set Oct. 10.
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