Fun fact: Emerald's sea salt and pepper cashews are pretty much the tastiest nuts ever (don't tell my boyfriend I said that). As for Emerald parent company Diamond Foods' nutty accounting? Not so much.
Just after this afternoon's closing bell, Diamond Foods' audit committee released the results of its investigation into the company's accounting for walnut grower payments. They concluded that Diamond's FY10 and 11 financial statements will need to be restated.
According to the company's statement, a payment of $20 million made in August of 2010 and a payment of $60 million in September of 2011 were not accounted for in the correct period. Additionally, the audit committee identified material weaknesses in the company's internal control over financial reporting (you don't say).
CEO Michael Mendes and CFO Steven Neil have been placed on immediate administrative leave while Diamond searches for their permanent replacements. Director Rick Wolford will serve as acting CEO in the meantime while Michael Murphy will serve as acting CFO.
"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."
As a side, the SEC launched an inquiry into Diamond's payments to walnut growers in December.
Edit: for anyone else who might care, these financial statements are audited by our friends at Deloitte. No word on what Deloitte is thinking at this moment though we imagine it is something along the lines of "oh crap!" or something similar. Analysts at D.A. Davidson told Dow Jones in December "Deloitte's silence is golden. Every day it stands by its opinion is an affirmation of the clean opinion–and should make investors feel better about the ultimate outcome." Is that confident silence or is that "oh crap" silence?
