Diamond Foods (NASDAQ:DMND) announced on Wednesday that an internal audit of the company’s finances will result in the San Francisco-based company having to restate two years worth of financial statements. The CEO and the Chief Financial Officer were fired after it was discovered that the company had lied about its payments to walnut farmers.
The stock plunged 43% in after hours trading. Trading was halted during NY hours but the stock was off nearly $5 per share once the after-hours market opened.
Payments to these farmers have been dogging the company for months. This prompted the investigation which revealed that the payments in question were booked to the wrong reporting period. $20 million in 2010 and $60 million in 2011 were improperly booked and skewed the company’s financial results.
CEO Michael Mendes and CFO Steven Neil were place on administrative leave and the company has begun a search for permanent replacements. The board appointed Rick Wolford, former CEO of Del Monte Foods interim CEO and Michael Murphy as interim CFO.
Diamond said that they are working diligently to complete the restatements of their financials as quickly as possible. They are in negotiations to by the Pringles brand from Procter & Gamble (NYSE:PG) which is now in jeopardy. This is a $1.5US billion deal. P&G is likely to pursue other suitors for Pringles.
