Diamond Foods Inc. has removed its CEO and CFO and will restate its earnings for 2010 and 2011 following the discovery of payments to walnut growers that were improperly accounted for, CNBC reported.
The snack company’s audit committee said that a $20 million "continuity" payment made to walnut growers in August 2010 and a $60 million "momentum" payment made to growers in September 2011 were not booked in the correct periods, the Wall Street Journal reported.
According to the Wall Street Journal:
Diamond's momentum payments sparked confusion among growers and outrage among some shareholders, some of whom have filed lawsuits complaining the timing of the payments allowed Diamond to shift costs into 2011 and pad the prior year's earnings.
Chief executive Michael Mendes and financial chief Steven Neil have been placed on administrative leave while the company figures out what to do about their severance packages and board seats, the Wall Street Journal reported. Diamond has also appointed an acting CEO and acting CFO to oversee the company while it searches for permanent replacements, CNBC reported.
Following the news today, shares of Diamond, which sells Emerald Nuts and Pop Secret Popcorn, fell more than 40 percent in after-hours trading in New York, Bloomberg Businessweek reported.
The restatement jeopardizes Diamond’s anticipated $2.35 billion acquisition of Pringles potato chips from Procter & Gamble Co., Bloomberg Businessweek reported. Diamond planned to cover most of the purchase price by issuing stock to P&G shareholders, the Wall Street Journal reported.
“I don’t think P&G wants to stick its shareholders with a stock that is uncertain like Diamond,” Ali Dibadj, an analyst at Sanford C. Bernstein & Co. in New York, told Bloomberg Businessweek.
A P&G spokesman told Bloomberg Businessweek that the company had plenty of potential buyers and was keeping all of its options open for now.
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