Diamond Foods Inc.’s Chairman, Pres. & CEO Michael Mendes and Executive VP and CFO Steven Neil were placed on administrative leave and searches have begun for their replacements as the board of directors’ audit committee concluded its investigation of questioned crop payments to walnut growers.
The San Francisco company also will restate its financial statements for fiscal years 2010 and 2011.
Over the past three months, the audit committee reviewed the accounting treatment of certain payments to walnut growers. The audit committee 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, said a company statement. That committee also identified material weaknesses in the company's internal control over financial reporting.
“Effective immediately, the board has appointed Director Rick Wolford to serve as acting president and [CEO] and Michael Murphy of Alix Partners LLP to serve as acting [CFO],” the statement said. “The company is commencing searches for permanent replacements for the CEO and CFO positions. The board has also appointed Robert Zollars, who previously served as lead independent director, to the position of chairman of the board.”
"The board takes the company's control and the integrity of its financial statements very seriously, and we are moving aggressively to implement corrective measures, including changes to the company's leadership.
"Diamond is working diligently to complete financial restatements for the affected periods and will file all required reports with the U.S. Securities and Exchange Commission as soon as possible.”
Wolford once was chairman, pres. & CEO of Del Monte Foods. He’s been a Diamond director since April 2011.
Once a sleepy walnut co-operative, Diamond Foods has quadrupled in size in just a few years by buying Pop Secret popcorn from General Mills and Kettle Chips – as well as by developing its own Emerald brand of snack nuts. It was destined to double in size again, possibly to $2.5 billion, through a pending deal to buy the Pringles potato crisp business from Procter & Gamble, but that acquisition apparently is on hold.
“This is breaking news for us and the information released by Diamond Foods is very disappointing,” said a P&G statement. “Pringles remains a valuable asset and it has attracted considerable interest from other outside parties. We need to evaluate next steps and we are currently keeping all our options open.”