US doughnut maker and retailer Krispy Kreme has announced that it is reducing the number of employees in its corporate, mix plant, equipment manufacturing, and distribution facilities by approximately 25%.

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The company, which has previously blamed poor sales on the popularity of low-carbohydrate diets, said it estimates that these actions will result in annual pre-tax savings of approximately US$7.4m and a cash restructuring charge of approximately $600,000 in the first fiscal quarter.


Krispy Kreme also said it recently divested a corporate aeroplane in a move that it estimates will result in annual pre-tax savings of approximately $3m and a cash charge of approximately $300,000 in the first fiscal quarter.


The doughnut company announced recently that the lenders under its credit facility have agreed to defer until 25 March 2005 the date by which it is required to deliver financial statements for the quarter ended 31 October 2004 in order to avoid defaulting. It also announced that it is currently unable to borrow funds under the credit facility.


In light of this, together with the fact that the company’s cash from operations is still be adversely impacted by unfavourable sales trends and by costs associated with ongoing litigation, regulatory and restructuring matters, Krispy Kreme said it believes that it will need to obtain additional credit by the end of March to fund its operations.

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“There can be no assurance that the company will be able to reach any agreement with the banks or that funding will be available when and in the amounts needed,” the company warned.