UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 7, 2012
DIAMOND FOODS, INC.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 000-51439 | 20-2556965 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 600 Montgomery Street, 13th Floor San Francisco, California |
94111-2702 | |||
| (Address of Principal Executive Offices) | (Zip Code) | |||
Registrant’s telephone number, including area code: (415) 445-7444
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 4.02(a). | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. |
The Audit Committee of the Board of Directors (“Audit Committee”) of Diamond Foods, Inc. (“Diamond”) has substantially completed its previously announced investigation of Diamond’s accounting for certain crop payments to walnut growers. The investigation focused primarily on whether payments to growers in September 2011 in the amount of approximately $60 million and payments to growers in August 2010 of approximately $20 million were accounted for in the correct periods.
On February 7, 2012, the Audit Committee concluded that such crop payments were not accounted for in the correct periods and that Diamond’s previously issued consolidated financial statements for the fiscal years ended July 31, 2011 and July 31, 2010, the accompanying reports of Diamond’s independent registered public accounting firm, and the previously issued unaudited condensed financial statements for the interim quarterly periods for the fiscal year ended July 31, 2011 and the quarter ended July 31, 2010, should no longer be relied upon. In addition, the Audit Committee determined that Diamond has one or more material weaknesses in its internal control over financial reporting. As a result of these internal control deficiencies, Diamond’s disclosure controls and procedures were not effective as of the fiscal years ended July 31, 2011 and 2010. The Audit Committee has discussed these matters with Diamond’s independent registered public accounting firm.
Although the Audit Committee has concluded that restatements of certain of Diamond’s previously issued financial statements will be required as described above, additional information could be discovered as part of the ongoing investigation or in connection with the preparation of the restated consolidated financial statements that could result in Diamond identifying additional accounting errors. Diamond is working diligently to address control deficiencies and to complete the restatement of Diamond’s financial statements, and to file all required periodic reports with the Securities and Exchange Commission as soon as practicable.
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On February 7, 2012, Michael J. Mendes and Steven M. Neil were placed on administrative leave from their positions as President and Chief Executive Officer of Diamond, and Executive Vice President, Chief Financial and Administrative Officer of Diamond, respectively.
On February 7, 2012, the Diamond Board of Directors (“Board”) appointed director Richard G. Wolford to serve as Diamond’s Acting President and Chief Executive Officer. Mr. Wolford, 66, has served as a director of Diamond since April 2011. Mr. Wolford began his career in 1967 in the food industry at Dole Foods, a producer and marketer of fresh and packaged fruit and vegetables, where he held a range of management positions, including President of Dole Packaged Foods from 1982 to 1987. In 1996, he worked with TPG Capital, a private equity partnership, to acquire Del Monte Foods, a manufacturer, distributor and marketer of premium quality, branded food and pet products. He was named Chief Executive Officer and a director of Del Monte Foods in 1997, President of Del Monte Foods in 1998, and was elected Chairman of Del Monte Foods in 2000. He held these positions until his retirement in March 2011. Since September 2011, Mr. Wolford has served on the board of directors of Schiff Nutrition International, Inc., a provider of vitamins, nutritional supplements and nutrition bars, and Advantage Sales and Marketing LLC, a sales and marketing agency. From March 2008 to August 2009, Mr. Wolford served on the Board of Directors of Pulte Homes, Inc. Mr. Wolford holds a B.A. from Harvard University. Mr. Wolford’s compensation arrangements have not yet been determined.
On February 8, 2012, the Board appointed Michael Murphy of Alix Partners, LLP as Diamond’s Acting Chief Financial Officer. Mr. Murphy, age 53, has over twenty-five years of professional experience in providing financial consulting services. He has served as a Managing Director of Alix Partners, a global business consulting firm, since 2005. Mr. Murphy has served in interim officer roles, including Chief Financial Officer, Chief Operating Officer, Chief Administrative Officer, Chief Restructuring Officer and Treasurer. He has extensive experience in a broad range of industries including, consumer business, retail, media, high technology and real estate. Diamond will pay Alix Partners a monthly fee of $100,000 in connection with Mr. Murphy’s service as Diamond’s Acting Chief Financial Officer, and will pay Alix Partners additional fees based on hourly rates for other Alix Partners personnel.
In addition, on February 7, 2012, the Board appointed director Robert J. Zollars to serve as Chairman of the Board. Mr. Zollars has served as the Board’s Lead Independent Director since July 2011.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit Number |
Description | |
| 99.1 | Diamond Foods, Inc. press release dated February 8, 2012. | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DIAMOND FOODS, INC. | ||||||
| Date: February 8, 2012 | By: | /s/ Stephen E. Kim | ||||
| Name: | Stephen E. Kim | |||||
| Title: | Senior Vice President, General Counsel and Human Resources | |||||
Exhibit 99.1
Diamond Foods Announces Audit Committee Investigation Findings
SAN FRANCISCO, CA, February 8, 2012 – 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.
Contacts
| Investors: | Media: | |
| Linda Segre | Sard Verbinnen & Co. for Diamond Foods | |
| SVP, Corporate Strategy | Paul Kranhold | |
| Diamond Foods | pkranhold@sardverb.com | |
| 415 -445 -7444 | John Christiansen | |
| lsegre@diamondfoods.com | jchristiansen@sardverb.com | |
| Lucy Neugart | ||
| lneugart@sardverb.com | ||
| 415-618-8750 |