Diamond Foods, San Francisco-Based Snack Company, Names New CEO Amidst Scandal

SAN FRANCISCO -- Diamond Foods Inc. is replacing its CEO and chief financial officer after an internal investigation found that the company improperly accounted for payments to walnut growers and it needs to restate two years of financial results.

The news, announced late Wednesday, sent shares of the San Francisco-based company plummeting more than 43 percent in after-hours trading.

Diamond Foods, which makes Emerald Nuts and Pop Secret popcorn, has been embroiled in a dispute over the payments for several months. The company said that its audit committee found that the payments were booked in the wrong period.

The payments – an estimated $20 million in 2010 and $60 million in 2011 – skewed the company's financial results.

Diamond Foods placed its CEO Michael Mendes and Chief Financial Officer Steven Neil on administrative leave. The company is looking for permanent replacements. In the meantime, it appointed Rick Wolford, a Diamond Foods director and former CEO of Del Monte Foods, as its acting CEO. Michael Murphy, of Alix Parners, will serve as acting chief financial officer.

The deal could put Diamond Foods' plans to acquire the Pringles brand from Procter & Gamble Co. in jeopardy. The deal, worth $1.5 billion when it was announced in April, would be the biggest acquisition ever for Diamond Foods and make it the second-largest snack maker in the nation behind PepsiCo Inc.

The collapse of Diamond Foods' shares also hurts its ability to finance the deal.

Cincinnati-based P&G called the news from Diamond Foods "very disappointing." It said in a statement that it is evaluating its next steps and keeping all its options open.

"Pringles remains a valuable asset and it has attracted considerable interest from other outside parties," P&G said.

Shares of Diamond Foods were halted in trading earlier in the day but fell $15.88 to $20.78 in after-hours trading. Its shares have been on a downward slide since hitting $96.13 in late September.

Diamond Foods said it takes the integrity of its financial statements seriously and is working to complete the restatements as soon as possible.

Comments

[goldcoastjon]

01:35 PM on 02/10/2012

It is still not clear to me from this story whether the improper accounting was deliberate and fraudulent or the result of gross incompetence. Either way, it was a very costly "error."
I wonder what will be revealed when investigators "crack" the rest of this story and get to the meat of what happened...

[PhantomShadow]

09:09 AM on 02/10/2012

Bad news about Diamond. Like their popcorn, but don't like their nuts.

[slidingdoors18]

09:01 AM on 02/10/2012

Wonder if any of those nuts spent any time in their own institution?

[tombill333]

08:53 AM on 02/10/2012

Just wondering if Pringles is so great, why does P&G want to sell it?

[kac0120]

09:29 AM on 02/10/2012

Probably because some doctors refer to them as "cancer in a can."

[grundoboy]

08:48 AM on 02/10/2012

calll Nancy Pelosi,,she'll teach you how to beat all of the raps...

[Aintlate]

02:06 PM on 02/10/2012

That's just stupid.

[jimdcIII]

08:41 AM on 02/10/2012

I would not hold your breath waiting for criminal charges....The MBA used to be a prestigious degree, but now it is just considered a license to steal and defraud.

[pozboys]

08:35 AM on 02/10/2012

Their top law partners,Dewey, Cheatum, and Howe released a statement today, "We are confident that, after an internal audit is taken, that it will be revealed that the only problem found, will be the lawyers fees, that the company will pay, to extricate the CEO and CFO, from paying any share holder's, legal fillings!!

[psandysdad]

08:14 AM on 02/10/2012

$20 million? That's a lotta nuts!

Fraud or incompetence? YOU be the judge!

[rkeeeballs]

07:50 AM on 02/10/2012

Follow the $$$$$...they were all in on it ....When the stock $ goes 96 down to $15 ....Bells, alarms and whistles got to be sounding way before that.....just saying.... $ ....

[davide463]

08:23 AM on 02/10/2012

Maybe a good time to buy huh? They will head back up as confidence returns I guess.

[rkeeeballs]

08:35 AM on 02/10/2012

I wa$ thinking that thought too !....Nut$ to the wall.!.........street...$

[mikennz]

06:31 AM on 02/10/2012

Gee, their external auditors were all over this, weren't they? Losers.

[mhsden]

06:31 AM on 02/10/2012

Thats just nuts.

[MiMi LLawsonn]

05:20 AM on 02/10/2012

A company actually "cheating someone".....REALLY???????? Attorneys do this kind of thing each and every day....and THEY GET BY WITH DOING IT....but then when it is someone else who tries it....they get caught....AMERICA just reeks of EVIL...and it is really SAD....WASHINGTON LEADERS have allowed AMERICA to get in the shape that it is....we, the people, need to CLEAN HOUSE....VOTE THEM ALL OUT OF OFFICE....and then when new faces and new ideas are up in WASHINGTON....perhaps someone will be able to TURN THE COUNTRY AROUND....better do it FAST though....

[abruin]

03:46 AM on 02/10/2012

mendes ??? .....hummmm.

[BloodGlutton]

08:38 AM on 02/10/2012

What in the world are you implying?

[Still able to think]

03:22 AM on 02/10/2012

Don't you just hate it when that happens? A minor mathematical error regarding two small payments of just $20,000,000 and $60,000,000 and people react as if you are a criminal.

Next will be accusations of removing tags from pillows that clearly say, "Do Not Remove This Tag Under Penalty Of Law". Then incriminating gossip that you are a Habitual Jay Walker.

In the article there was bizarre speculation and total overreaction by stating a "deal (worth $1.5 billion) could put Diamond Foods' plans to acquire the Pringles brand from Procter & Gamble Co. in jeopardy". But it gets worse saying, "The collapse of Diamond Foods' shares also hurts its ability to finance the deal."

Seems like everyone is having a hard time of it these days.

[Elroy Jetson]

07:12 AM on 02/10/2012

They would make wonderful Senators...

[Grokwatersharing]

08:43 AM on 02/10/2012

Yeah, it's kinda like; Build a bridge .... Do people call you "The World's Greatest Bridge Builder"? No! Design a fast car ... Do people call you "The World's Greatest Car Builder"? No! Feed the hungry ... Do people call you "The World's Greatest Humanitarian?" No!

But, perform ONE little act of fellatio in a lifetime, and you're forever called
"The World's Biggest __________"!
ROTFLMAO

[dennixx]

03:01 AM on 02/10/2012

know