Jefferies Maintains Hold on Diamond Foods' Restatement

Jefferies & Company has published a research report on Diamond Foods

after the company announced a restatement of FY10 and FY11 earnings by $20M and $60M, respectively. In the report, Jefferies writes, "According to DMND, the restatement is due to a breakdown of internal controls. We assume this would mean an unauthorized communication about the nature of the walnut payments that would change their accounting treatment from a pre-payment to a bonus payment. We hope to eventually learn more details in this matter. A timeline for the restatement or 1Q12 and 2Q12 earnings was not given. We assume the Pringles deal will be called off now, leaving DMND liable for a $60 million breakup fee to P&G. While many questions remain, we are making a preliminary attempt to address at least some of them below." Jefferies maintains its Hold rating and $27 price target on Diamond Foods, which closed yesterday at $36.66.