Premium nuts and snacks maker Diamond Foods has agreed to settle a private securities class action against the firm and two of its former executives over accounting errors that forced it to restate its 2010 and 2011 earnings and scuppered its plan to buy Pringles.
In a statement released yesterday, the maker of Kettle Chips, Emerald Nuts and Pop Secret popcorn said it has agreed to pay $96.1m in cash and common stock to a settlement fund to resolve all claims asserted by the class, which includes shareholders who acquired Diamond stock between October 5, 2010, and February 8, 2012.
Settlement allows us to move forward
Under the terms of the proposed settlement - which is subject to court approval - Diamond denies all claims of wrongdoing or liability.
"We believe this proposed settlement eliminates the burden of further time, expense and risk related to the class action, allowing the Diamond team to move forward fully focused on expanding the reach of our leading brands and executing on our strategic and operational initiatives for growth," said CEO Brian J. Driscoll.
"We continue to strengthen our business and are pleased that our fourth quarter performance enables us to complete fiscal year 2013 in an improved financial position”, added Driscoll, who said he expects net sales for fiscal 2013 to be $860-865m and adjusted EBITDA to be $98-101m.
Emerald Nuts re-launch
Speaking on the firm’s Q3 earnings call in June, Driscoll said he was confident that momentum gained by Kettle Chips in the natural channel “can extend to mainstream retail channels as well when supported by a more robust innovation pipeline and a proved consumer support activity”, while the Pop Secret brand had continued to perform well.
As for Emerald Nuts, he added: “While we've improved net price realization, eliminated the least profitable SKUs and effectively transitioned production to our Stockton plant, the critical next step of relaunching the brand has not yet occurred but is fast approaching.
“With the development of a new and impactful brand positioning approach, new packaging, new offerings and a pricing architecture that is not discounting dependent, we are gearing up for a relaunch this summer.”
Diamond Foods saw its shares plummet in 2011 after it incorrectly accounted for payments to walnut growers.
After a three-month investigation, an audit committee found that $80m of payments to walnut growers were unaccounted for, prompting the company to remove its CEO Michael Mendes and CFO Steven Neil.
The accounting errors were also cited as a reason for the collapse of Diamond’s $2.35bn bid for Pringles, which was snapped up by Kellogg instead.