US doughnut maker and retailer Krispy Kreme has announced that its report for the quarter ended 30 October 2005, will be delayed, while it looks into earlier irrgularities.
“There are ongoing analyses related to the proper application of generally accepted accounting principles to certain transactions which occurred in fiscal 2005 and earlier years,” the company said in a filing with the Securities and Exchange Commission. “Until such analyses are complete, the company is unable to finalise its financial statements for the third quarter of fiscal 2006.”
The results of the analyses completed to date caused the company to conclude that its previously issued financial statements for fiscal 2004 and certain earlier years, and for the first three quarters of fiscal 2005, should be restated, it said. It is currently in the process of finalising the restatement adjustments it has identified and completing its analyses of certain other accounting matters in order to determine if additional restatement adjustments are necessary.
It is also finalising its financial statements for fiscal 2005, including impairment testing of intangible assets, and anticipates that a significant, non-cash impairment charge will be reflected in fiscal 2005 earnings.
The company has not yet completed its assessment of internal control over financial reporting; however, management has concluded that material weaknesses existed as of 30 January 2005.
The company has identified further adjustments to its financial statements in addition to those previously disclosed. The company now estimates that the cumulative effect of the adjustments to be made to previously issued financial statements will decrease pre-tax income for periods through the third quarter of fiscal 2005 by an estimated US$35.1m. The adjustments currently are estimated to decrease pre-tax income by $1.6m, $3.7m, $4.0m, $16.5m and $5.4m for fiscal 2001, 2002, 2003 and 2004 and the first nine months of fiscal 2005, respectively, as well as by $3.9m for periods prior to fiscal 2001. These estimates remain subject to revision and the results of the audit of the company’s annual financial statements.