Diamond details proposed settlement in class action lawsuit
by Eric Schroeder
SAN FRANCISCO — Diamond Foods, Inc. has reached a proposed settlement under which the packaged food company would settle the private securities class action pending against the company and two of its former officers.
Under terms of the settlement, Diamond Foods has agreed to pay a total of $11 million in cash and issue 4.45 million shares of common stock to a “settlement fund.” The fund would be used to resolve all claims asserted on behalf of investors who acquired Diamond Foods’ stock between Oct. 5, 2010, and Feb. 8, 2012.
Diamond Foods said its insurers would fund a substantial portion of the $11 million in cash. Meanwhile, the company would have the ability to privately place, or conduct a public offering of, the 4.45 million shares with the consent of the lead plaintiff and its counsel, prior to the distribution of the settlement fund.
The lawsuit stems from findings 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. Additionally, Diamond Foods’ audit committee said it identified material weaknesses in the company’s internal control over financial reporting.
Diamond Foods has denied all claims of wrongdoing or liability. The settlement remains subject to court approval.
“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 Brian J. Driscoll, chief executive officer. “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.”
Diamond Foods also announced preliminary fiscal 2013 expectations for net sales and adjusted EBITDA. The company said adjusted EBITDA is expected to total between $98 million and $101 million, while sales are expected in the range of $860 million to $865 million.