Diamond Foods, Inc. (NASDAQ: DMND) is a story that just goes from negative to bad to worse to just plain awful. The maker of nuts and almond products has reported that it is removing its CEO and it CFO amid a probe of the audit committee investigation. It turns out that the board member suicide was not just coincidental on the surface of it. The company now has to restate its earnings for the fiscal years of 2010 and 2011.
The statement shows the damage and this will hit earnings considerably: “The Audit Committee has concluded that a “continuity” payment made to growers in August 2010 of approximately $20 million and a “momentum” payment made to growers in September 2011 of approximately $60 million were not accounted for in the correct periods, and the Audit Committee identified material weaknesses in the Company’s internal control over financial reporting.”
Director Rick Wolford will serve as Acting President and Chief Executive Officer and Michael Murphy, of Alix Partners, LLP, to serve as Acting Chief Financial Officer. The Company is commencing searches for permanent replacements for the CEO and CFO positions. The Board has also appointed Robert J. Zollars, who previously served as Lead Independent Director, to the position of Chairman of the Board.
Shares were down 2.6% at $36.66 today, but the 52-week trading range is $26.11 to $96.13. That “is” should be a “was” on the 52-week trading starting on Thursday. Diamond Foods is down almost 40% at $22.00 in the after-hours session.
Many investors refuse to own companies which have accounting irregularities. Procter & Gamble (NYSE: PG) is reviewing the situation per CNBC’s Herb Greenberg and he believes that the company has other interested parties for the Pringles unit.
With a Department of Justice inquiry outstanding, this situation does not appear to be over.
JON C. OGG
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