Diamond Foods Falls After Missing Deadline: San Francisco

Diamond Foods Inc. (DMND), the maker of Kettle Chips and Emerald snack nuts, fell to a three-year low after saying it won’t file its quarterly results on time to meet an extension granted by the Nasdaq Stock Market.

The shares sank 6.6 percent to $18.84 at 11:49 a.m. in New York after declining to $18.55, the lowest intraday level since January 2009. Before today, the stock had dropped 45 percent since early February, when it said it had reported costs in the wrong quarters and needed to restate earnings.

Diamond Foods hasn’t yet filed its 10-Q reports for the quarters ended Oct. 31 and Jan. 31, and will also miss the deadline for the quarter ended April 30, according to a filing today with the U.S. Securities and Exchange Commission.

The San Francisco-based company has been working to strengthen its balance sheet and get the business back on track since February. By missing today’s deadline, Diamond has left shareholders questioning what its true financial condition is.

“Investors are wondering why it has taken so long to restate earnings,” Thilo Wrede, an analyst with Jefferies & Co. in New York who recommends holding the stock, said in a phone interview. “It disappoints the expectations of a lot of investors. It raises concerns that something else is wrong at Diamond.”

The company said in the filing today it expects the Nasdaq will consider delisting its stock.

Diamond has been trying to get its financial reporting in order, restore the faith of investors and get walnut farmers in California to supply it with nuts for its snack business. Last month, Diamond hired a new chief executive officer, former Hostess Brands Inc. CEO Brian Driscoll.

Oaktree Management

On May 23, Diamond secured $225 million in investment from Oaktree Capital Management in exchange for senior secured notes and warrants that are convertible to stock.

Oaktree’s notes will pay 12 percent interest a year, and the warrants are convertible at $10 a share, Diamond said in a May filing with the SEC.

Part of the investment also provides that if Diamond secures a specified quantity of walnuts from suppliers and meets certain profit targets during the six months ending Jan. 31, the warrants will be canceled and Oaktree will get $75 million in convertible preferred stock that pays a dividend of 10 percent a year and has an initial conversion price of $20.75 a share.

In February, Procter & Gamble Co. (PG) terminated a deal to sell its Pringles unit to Diamond; instead Kellogg Co. (K) acquired the potato chip business for $2.7 billion.

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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