Diamond Foods Announces Audit Committee Investigation Findings
February 08 2012 - 4:10PM
Diamond Foods, Inc. (Nasdaq:DMND) today announced that the Audit
Committee of its Board of Directors has substantially completed its
investigation of the Company's accounting for certain crop payments
to walnut growers. The Audit Committee has concluded that the
Company's financial statements for the fiscal years 2010 and 2011
will need to be restated. Over the course of the last three
months, the Audit Committee has carefully reviewed the accounting
treatment of certain payments to walnut growers. 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.
The Board of Directors is taking a number of corrective
actions including the appointment of a new Chief Executive
Officer and Chief Financial Officer. Effective immediately,
the Board has appointed Director Rick Wolford to 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. Michael J. Mendes and Steven M. Neil have been placed
on administrative leave from the Company.
"After an extensive and thorough investigation, the Audit
Committee concluded that the Company's internal controls were
inadequate and that certain grower payments for the 2011 and
2010 crops were not accounted for in the correct periods. As a
result, the Company will restate its fiscal years 2010
and 2011 financial statements," said Robert Zollars, Diamond
Foods' Chairman. "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."
"I look forward to working with the management team and the
terrific employees at Diamond and will be focused on moving the
business forward, further driving Diamond's strong brands and
helping to find a permanent chief executive," said Rick Wolford,
Acting President and Chief Executive Officer.
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. While the timing of the restatement is difficult to
predict at this time, the Company will endeavor to provide updates
on timing and other material developments.
Rick Wolford previously served as Chief Executive Officer,
President and Chairman of Del Monte Foods. Mr. Wolford began
his career in 1967 in the food industry at Dole Foods, where he
held a variety of positions, including President of Dole Packaged
Foods. He has served as a Director of Diamond Foods since
April 2011.
Michael Murphy is currently a Managing Director at Alix
Partners, a leading financial consulting firm. He has more
than 20 years of broad and varied financial advisory services
experience.
About Diamond
Diamond Foods is an innovative packaged food company focused on
building, acquiring and energizing brands including Kettle® Chips,
Emerald® snack nuts, Pop Secret® popcorn, and Diamond of
California® nuts. The Company's products are distributed in a wide
range of stores where snacks and culinary nuts are sold. For
more information visit our corporate web site:
www.diamondfoods.com.
Note regarding forward-looking statements
Statements in this press release that relate to future results,
events and expectations, including statements about the outcome of
the Audit Committee investigation, the scope of the restatement of
Diamond's financial statements, Diamond's intent to file required
periodic reports with the Securities and Exchange Commission, the
magnitude of grower payments subject to investigation, and changes
in Diamond's management, are forward-looking statements based on
Diamond management's current expectations. Actual results may
differ materially from those described in these forward-looking
statements because of many risks and uncertainties, including:
uncertainty about the timing and scope of Diamond's financial
restatement; potential additional findings from the Audit Committee
investigation; litigation and potential governmental investigations
or proceedings arising out of or related to accounting and
financial reporting matters; risks relating to Diamond's existing
credit facility, including compliance with existing debt covenants;
the terms of the agreements between Diamond and The
Procter & Gamble Company with respect to the Pringles
acquisition, and the availability of financing after the expiration
on March 1, 2012 of commitments under Diamond's Credit
Agreement dated October 5, 2011 that are required in
connection with the Pringles acquisition; the integration of
new executive leadership at Diamond; potential employee disruption;
relations with growers; availability and cost of raw materials;
competition in our industry; and general economic, business and
industry conditions. Discussion of risk factors affecting
Diamond's business and prospects is described under "Part I –
Item 1A. Risk Factors" in Diamond's Annual Report on Form 10-K
for the fiscal year ended July 31, 2011, under "Risk Factors"
in Diamond's registration statement on Form S-4 filed with the SEC
in conjunction with the proposed acquisition of the Pringles snack
business from P&G, which registration statement has not yet
become effective, and under "Additional Risk Factors" in Diamond's
Current Report on Form 8-K filed with the SEC on November 28,
2011. All forward-looking statements and reasons why results might
differ included in this press release are made as of the date of
this press release, based on information currently available to
Diamond's management, and Diamond assumes no obligation to update
any forward-looking statement or reasons why results might
differ.
CONTACT: Investor Contact:
Linda Segre
SVP, Corporate Strategy
Diamond Foods
415-445-7444
lsegre@diamondfoods.com
Media Contact:
Sard Verbinnen & Co for Diamond Foods
415-618-8750
Paul Kranhold
pkranhold@sardverb.com
John Christiansen
jchristiansen@sardverb.com
Lucy Neugart
lneugart@sardverb.com
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