updated 2/8/2012 6:40:52 PM ET 2012-02-08T23:40:52

Diamond Foods Inc. said Wednesday it is replacing its CEO and chief financial officer after an internal investigation found that the company improperly accounted for payments to walnut growers and it needs to restate two years of financial results.

The news sent shares of the San Francisco-based company plummeting more than 43 percent in after-hours trading.

Diamond Foods, which makes Emerald Nuts and Pop Secret popcorn, has been embroiled in a dispute over the payments for several months. The company said that its audit committee found that the payments were booked in the wrong period.

The payments — an estimated $20 million in 2010 and $60 million in 2011 — skewed the company's financial results.

Diamond Foods placed its CEO Michael Mendes and Chief Financial Officer Steven Neil on administrative leave. The company is looking for permanent replacements. In the meantime, it appointed Rick Wolford, a Diamond Foods director and former CEO of Del Monte Foods, as its acting CEO. Michael Murphy, of Alix Parners, will serve as acting chief financial officer.

The deal could put Diamond Foods' plans to acquire the Pringles brand from Procter & Gamble Co. in jeopardy. The deal, worth $1.5 billion when it was announced in April, would be the biggest acquisition ever for Diamond Foods and make it the second-largest snack maker in America behind PepsiCo Inc.

The collapse of Diamond Foods' shares also hurts its ability to finance the deal.

Cincinnati-based P&G called the news from Diamond Foods "very disappointing." It said in a statement that it is evaluating its next steps and keeping all its options open.

"Pringles remains a valuable asset and it has attracted considerable interest from other outside parties," P&G said.

Shares of Diamond Foods were halted in trading earlier in the day but fell $15.88 to $20.78 in after-hours trading. Its shares have been on a downward slide since hitting $96.13 in late September.

Diamond Foods said it takes the integrity of its financial statements seriously and is working to complete the restatements as soon as possible.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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