Shares of Diamond Foods fell 37% in after-hours trading on Wall Street after it announced errors in its public filings that will cause the company to restate two years of earnings.
The snack and packaged foods giant based in San Francisco dumped its President/CEO Michael J. Mendes and CFO Steven M. Neil after learning that payments to nut growers were accounted for in the wrong time periods.
Mr. Mendes and Mr. Neil were placed on administrative leave and directors on Diamond Foods' board are filling in. The Wall Street Journal reported on the interim assignments.
"Director and former Del Monte Foods CEO Rick Wolford will serve as the company's acting president and CEO. Michael Murphy, a managing director at Alix Partners, is now the company's acting chief financial officer. Robert J. Zollars, who previously served as lead independent director, was named chairman of the board."
According to he Associated Press Diamond Foods has begun a search for permanent replacements for those positions.
Both fiscal years 2010 and 2011 are involved in the restatement. The alleged reporting errors are the subject of a lawsuit by stockholders and after the audit committee of the board of directors completed its investigation, it seemed to agree that mistakes were made.
Some $20 million dollars in payments during 2010 and $60 million in 2011 were judged as having been applied to the incorrect fiscal quarter. The company will file all necessary documents with the SEC, which undoubtedly will begin to review whether the acts were intentional and calculated to mislead those who traded in Diamond Foods' stock.
Diamond's business is organized around five premium lines of products, three of which are sales of nuts, packaged as snacks, in-shell and for culinary purposes. It sells them under the Diamond of California as well as the Emerald brand names.
The company's other focus is popcorn and potato chips, including Kettle brand chips and Pop Secret pop corn. To expand its product line, Diamond Foods had come to an agreement with Proctor & Gamble to purchases its Pringles brand snack foods.
The deal did not close yet and the announcement of the earnings misstatements must be figured into the equation. The purchase was announced in April 2011 and the stated price of the deas was more than $2 billion.
Image credit: Wikimedia Commons
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