2nd UPDATE: Diamond Foods Expects To Miss Deadline For 1Q Results

Diamond Foods Inc. (DMND) said it expects to miss the filing deadline for its fiscal first-quarter results as it continues to work through an internal accounting investigation into payments to walnut growers.

Diamond's audit committee expects to wrap up its investigation into the matter by the middle of February. Diamond Foods added it will file its fiscal first-quarter results "as soon as practicable" following the conclusion of the investigation.

The accounting questions, which relate to whether payments to walnut growers were properly booked, have hammered Diamond Foods shares over the past month. Shares were recently plunging 23% to $31.17, making it the biggest percentage decliner in the S&P 1500 for Monday's session. The stock has lost more than two-thirds of its value since late September, shortly after Diamond Foods reported fiscal-year results.

Monday's decline erases nearly all of the gains Diamond Foods' shares had posted Friday after a KeyBanc Capital Markets analyst said the company's accounting inquiry into walnut payments likely wouldn't turn up any wrongdoing.

The calendar date of the filing deadline fell on Saturday, which pushed the deadline to the following business day: Monday. As a result of missing that deadline, Diamond Foods said it expects to receive a note from Nasdaq that it is not in compliance with listing rules. But Diamond Foods will continue to trade on the Nasdaq Global Select Market for now, as the company has a period of time to submit a plan to get back into compliance.

Some walnut growers have challenged Diamond Foods' explanation of what the company called momentum payments. Shareholder suits against the company have claimed that Diamond may have used the payments to shift costs from the fiscal year that ended July 31 into the current year, padding earnings for the previous year.

Some analysts have said investors were hoping the issues would be resolved by the end of the calendar year, but Monday's announcement seems to indicate otherwise, putting more pressure on the shares.

The probe has caused Diamond Foods to delay to next year its planned $2.35 billion acquisition of the Pringles snack brand from Procter & Gamble Co. (PG). In April, P&G agreed to sell the potato-crisp maker to Diamond Foods, a deal that would allow Diamond to triple the size of its snack business.

D.A. Davidson analysts said the company's guidance regarding the timing of the investigation is a "significant positive" because it "gives us the ability to quantify the slippage on the timing of the Pringles deal," which they estimate would have contributed a little more than a penny per month to earnings.

Also, Deloitte & Touche has not withdrawn its clean audit opinion in July regulatory filings, despite Diamond's ongoing investigation.

"Deloitte's silence is golden," D.A. Davidson said. "Every day it stands by its opinion is an affirmation of the clean opinion--and should make investors feel better about the ultimate outcome."

-By Mia Lamar and John Kell, Dow Jones Newswires;

212-416-3207; mia.lamar@dowjones.com

--Annie Gasparro contributed to this article.

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