e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 30, 2011
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-51439
DIAMOND FOODS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State of Incorporation)
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20-2556965
(IRS Employer Identification No.) |
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600 Montgomery Street, 17th Floor
San Francisco, California
(Address of Principal Executive Offices)
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94111-2702
(Zip Code) |
415-912-3180
(Telephone No.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o | |
Accelerated filer þ | |
Non-accelerated filer o | |
Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule
12b-2). Yes o No þ
Number of shares of common stock outstanding as of April 30, 2011: 22,020,989
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report regarding our future financial and operating
performance and results, business strategy, market prices, future commodity prices, plans and
forecasts, and other statements that are not historical facts are forward-looking statements. We
use the words anticipate, believe, estimate, expect, intend, plan, seek, and other
similar expressions to identify forward-looking statements. These forward-looking statements are
based on our assumptions, expectations and projections about future events only as of the date of
this Report.
These forward-looking statements also involve many risks and uncertainties that could cause
actual results to differ from our expectations in material ways. Please refer to the risks and
uncertainties discussed in the section titled Risk Factors. You also should carefully consider
other cautionary statements elsewhere in this Quarterly Report and in other documents we file from
time to time with the Securities and Exchange Commission (SEC), including our most recent Annual
Report on Form 10-K. We do not undertake any obligation to update forward-looking statements to
reflect events or circumstances occurring after the date of this report.
3
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
DIAMOND FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)
(Unaudited)
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April 30, |
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July 31, |
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April 30, |
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2011 |
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2010 |
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2010 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
1,541 |
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$ |
5,642 |
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$ |
5,416 |
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Trade receivables, net |
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105,266 |
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65,553 |
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71,983 |
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Inventories |
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189,532 |
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143,405 |
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157,498 |
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Deferred income taxes |
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9,748 |
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10,497 |
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14,346 |
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Prepaid income taxes |
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2,600 |
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9,225 |
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4,670 |
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Prepaid expenses and other current assets |
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9,393 |
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5,767 |
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6,158 |
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Total current assets |
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318,080 |
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240,089 |
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260,071 |
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Restricted cash |
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21,406 |
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Property, plant and equipment, net |
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120,510 |
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117,816 |
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117,030 |
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Deferred income taxes |
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4,785 |
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13,625 |
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6,741 |
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Goodwill |
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410,034 |
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396,788 |
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382,420 |
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Other intangible assets, net |
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455,119 |
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449,018 |
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476,068 |
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Other long-term assets |
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7,366 |
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8,536 |
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9,022 |
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Total assets |
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$ |
1,337,300 |
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$ |
1,225,872 |
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$ |
1,251,352 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
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$ |
41,700 |
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$ |
40,000 |
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$ |
40,000 |
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Accounts payable and accrued liabilities |
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137,266 |
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92,166 |
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118,864 |
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Payable to growers |
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15,702 |
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35,755 |
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35,927 |
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Total current liabilities |
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194,668 |
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167,921 |
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194,791 |
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Long-term obligations |
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530,669 |
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516,100 |
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518,500 |
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Deferred income taxes |
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141,315 |
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144,755 |
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152,694 |
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Other liabilities |
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20,218 |
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17,153 |
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12,543 |
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Stockholders equity: |
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Preferred stock, $0.001 par value; Authorized: 5,000,000 shares; no shares
issued or outstanding |
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Common stock, $0.001 par value; Authorized: 100,000,000 shares; 22,289,111, 22,121,534
and 22,039,476 shares issued and 22,020,989, 21,891,928 and 21,809,870 shares
outstanding at April 30, 2011, July 31, 2010 and April 30, 2010, respectively |
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22 |
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22 |
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22 |
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Treasury stock, at cost: 268,122, 229,606 and 229,606 shares held at April 30, 2011,
July 31, 2010 and April 30, 2010, respectively |
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(6,775 |
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(5,050 |
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(5,050 |
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Additional paid-in capital |
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316,020 |
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307,032 |
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305,668 |
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Accumulated other comprehensive income (loss) |
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23,655 |
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(869 |
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(869 |
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Retained earnings |
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117,508 |
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78,808 |
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73,053 |
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Total stockholders equity |
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450,430 |
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379,943 |
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372,824 |
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Total liabilities and stockholders equity |
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$ |
1,337,300 |
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$ |
1,225,872 |
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$ |
1,251,352 |
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See notes to condensed consolidated financial statements.
4
DIAMOND FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)
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Three Months |
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Nine Months |
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Ended April 30, |
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Ended April 30, |
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2011 |
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2010 |
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2011 |
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2010 |
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Net sales |
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$ |
222,991 |
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$ |
138,734 |
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$ |
733,149 |
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$ |
503,544 |
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Cost of sales |
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163,403 |
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107,641 |
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539,109 |
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386,382 |
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Gross profit |
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59,588 |
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31,093 |
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194,040 |
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117,162 |
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Operating expenses: |
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Selling, general and administrative |
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24,178 |
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15,186 |
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71,292 |
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44,021 |
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Advertising |
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11,925 |
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7,582 |
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34,362 |
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26,024 |
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Acquisition and integration related expenses |
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5,932 |
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10,223 |
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7,368 |
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10,223 |
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Total operating expenses |
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42,035 |
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32,991 |
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113,022 |
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80,268 |
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Income (loss) from operations |
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17,553 |
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(1,898 |
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81,018 |
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36,894 |
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Interest expense, net |
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5,941 |
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1,908 |
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18,050 |
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4,072 |
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Other expense, net |
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1,849 |
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1,849 |
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Income (loss) before income taxes |
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11,612 |
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(5,655 |
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62,968 |
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30,973 |
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Income taxes (benefit) |
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3,879 |
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(1,382 |
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21,301 |
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11,502 |
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Net income (loss) |
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$ |
7,733 |
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$ |
(4,273 |
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$ |
41,667 |
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$ |
19,471 |
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Earnings (loss) per share: |
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Basic |
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$ |
0.35 |
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$ |
(0.22 |
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$ |
1.90 |
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$ |
1.11 |
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Diluted |
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$ |
0.34 |
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$ |
(0.22 |
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$ |
1.85 |
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$ |
1.07 |
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Shares used to compute earnings per share: |
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Basic |
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21,604 |
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19,313 |
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21,563 |
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17,272 |
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Diluted |
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22,341 |
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19,313 |
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22,128 |
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17,793 |
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Dividends declared per share |
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$ |
0.045 |
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$ |
0.045 |
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$ |
0.135 |
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$ |
0.135 |
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See notes to condensed consolidated financial statements.
5
DIAMOND FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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Nine Months Ended |
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April 30, |
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2011 |
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2010 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income |
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$ |
41,667 |
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$ |
19,471 |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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22,299 |
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9,585 |
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Deferred income taxes |
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2,849 |
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4,475 |
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Excess tax benefit from stock option transactions |
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(2,266 |
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(367 |
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Stock-based compensation |
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5,097 |
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2,135 |
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Other, net |
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487 |
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531 |
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Changes in assets and liabilities: |
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Trade receivables |
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(39,713 |
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(9,303 |
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Inventories |
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(46,127 |
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(59,612 |
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Prepaid expenses, income taxes and other current assets |
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2,999 |
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(1,615 |
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Accounts payable and accrued liabilities |
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47,178 |
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17,067 |
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Payable to growers |
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(20,053 |
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6,778 |
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Other, net |
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1,431 |
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1,211 |
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Net cash provided by (used in) operating activities |
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15,848 |
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(9,644 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Net proceeds from sale of property, plant and equipment and other |
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259 |
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545 |
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Purchase of property, plant and equipment |
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(15,195 |
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(6,933 |
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Restricted cash |
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(21,406 |
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Acquisition of Pop Secret |
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833 |
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Acquisition of Kettle Foods, net of cash acquired |
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(616,222 |
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Net cash used in investing activities |
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(36,342 |
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(621,777 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Initial revolving line of credit borrowings under the Secured Credit Facility |
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176,000 |
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Borrowings (repayment) of revolving line of credit under the Secured Credit Facility |
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25,069 |
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(17,500 |
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Proceeds from issuance of long-term debt |
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21,200 |
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400,000 |
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Debt issuance costs |
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(8,852 |
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Payment of long-term debt and notes payable |
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(30,085 |
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(115,089 |
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Gross proceeds from equity offering |
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191,475 |
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Equity offering costs |
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(11,711 |
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Dividends paid |
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(2,967 |
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(2,477 |
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Excess tax benefit from stock option transactions |
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2,266 |
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367 |
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Other, net |
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854 |
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(205 |
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Net cash provided by financing activities |
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16,337 |
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612,008 |
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Effect of exchange rate changes on cash |
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56 |
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27 |
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Net decrease in cash and cash equivalents |
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(4,101 |
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(19,386 |
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Cash and cash equivalents: |
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Beginning of period |
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5,642 |
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24,802 |
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End of period |
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$ |
1,541 |
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$ |
5,416 |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Interest |
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$ |
16,281 |
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$ |
3,952 |
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Income taxes |
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|
7,956 |
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9,513 |
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Non-cash investing activity: |
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Accrued capital expenditures |
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1,830 |
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298 |
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See notes to condensed consolidated financial statements.
6
DIAMOND FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended April 30, 2011 and 2010
(In thousands, except share and per share information, unaudited)
(1) Organization and Basis of Presentation
Diamond Foods, Inc. (the Company or Diamond) is an innovative packaged food company
focused on building, acquiring and energizing brands. Diamond specializes in processing, marketing
and distributing snack products and culinary, in-shell and ingredient nuts. In 2004, Diamond
complemented its strong heritage in the culinary nut market under the Diamond of California® brand
by launching a full line of snack nuts under the Emerald® brand. In September 2008, Diamond
acquired the Pop Secret® brand of microwave popcorn products, which provided the Company with
increased scale in the snack market, significant supply chain economies of scale and cross
promotional opportunities with its existing brands. In March 2010, Diamond acquired Kettle Foods, a
leading premium potato chip company in the two largest potato chip markets in the world, the United
States and United Kingdom, which added the complementary premium brand Kettle to Diamonds existing
portfolio of leading brands in the snack industry. In general, Diamond sells directly to retailers,
particularly large national grocery store and drug store chains, and indirectly through wholesale
distributors to independent and small regional retail grocery store chains and convenience stores.
Diamond also sells its products to mass merchandisers, club stores, convenience stores and through
other retail channels. Sales to the Companys largest customer accounted for approximately 15.9%
and 15.8% of total net sales for the three and nine months ended April 30, 2011 and 21.0% and 17.1%
of total net sales for the three and nine months ended April 30, 2010.
The accompanying unaudited condensed consolidated financial statements of Diamond have been
prepared in accordance with accounting principles generally accepted in the United States of
America (GAAP) for interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required for annual financial statements. The accompanying unaudited condensed consolidated
financial statements have been prepared on the same basis as the audited consolidated financial
statements at and for the year ended July 31, 2010 and, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation
of the Companys financial condition at April 30, 2011, the results of the Companys operations for
the three and nine months ended April 30, 2011 and 2010, and cash flows for the nine months ended
April 30, 2011 and 2010. These unaudited interim condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and related notes
included in the Companys 2010 Annual Report on Form 10-K. Operating results for the three and nine
months ended April 30, 2011 are not necessarily indicative of the results that may be expected for
the year ending July 31, 2011.
Total comprehensive income (loss) was $19,629 and $66,191 for the three and nine months ended
April 30, 2011 and ($4,075) and $19,898 for the three and nine months ended April 30, 2010.
(2) Recent Accounting Pronouncements
In December 2010, the Financial Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) No. 2010-29, Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations. This guidance was issued to clarify
that pro forma disclosures should be presented as though the business combination that occurred
during the current year had occurred as of the beginning of the comparable prior annual reporting
period. The disclosures should also be accompanied by a narrative description of the nature and
amount of material, nonrecurring pro forma adjustments. This new guidance is effective
prospectively for business combinations consummated on or after the annual reporting period
beginning on or after December 15, 2010. Early adoption is permitted. The Company does not believe
that the adoption of this guidance will have a material impact on its consolidated financial
statements.
(3) Fair Value Measurements
The fair value of certain financial instruments, including cash and cash equivalents, trade
receivables, accounts payable and accrued liabilities, approximate the amounts recorded in the
balance sheet because of the relatively short term nature of these financial instruments. The fair
value of notes payable and long-term obligations at the end of each fiscal period approximates the
amounts recorded in the balance sheet based on information available to Diamond with respect to
current interest rates and terms for similar financial instruments.
The Company transacts business in foreign currencies and has international sales denominated
in foreign currencies, subjecting the Company to foreign currency risk. The Company may enter into
foreign currency forward contracts, generally with monthly
7
maturities over twelve months or less, to reduce the volatility of cash flows primarily
related to forecasted revenue denominated in certain foreign currencies. The Company does not use
foreign currency contracts for speculative or trading purposes. On the date a foreign currency
forward contract is entered into, the Company designates the contract as a hedge, for a forecasted
transaction, of the variability of cash flows to be received (cash flow hedge). The Company
formally documents all relationships between hedging instruments and hedged items, as well as its
risk-management objective and strategy for undertaking various hedge transactions. This process
includes linking all derivatives that are designated as cash flow hedges to anticipated
transactions. The Company also formally assesses, both at the hedges inception and on an ongoing
basis, whether the derivatives that are used in hedging transactions are highly effective in
offsetting changes in cash flows of hedged items. Effective changes in derivative contracts
designated and qualifying as cash flow hedges of forecasted revenue are reported in other
comprehensive income. These gains and losses are reclassified into interest income or expense, as a
component of revenue, in the same period as the hedged revenue is recognized. The Company includes
time value in the assessment of effectiveness of the foreign currency derivatives. The ineffective
portion of the hedge is recorded in interest expense or income. Hedge ineffectiveness recorded for
the three and nine months ended April 30, 2011 for foreign currency derivatives are immaterial. The
maximum length of time over which the Company is hedging its exposure to the variability in future
cash flows associated with forecasted foreign currency transactions is less than twelve months.
In the three months ended July 31, 2010, the Company entered into three interest rate swap
agreements in accordance with Company policy to mitigate the impact of London Interbank Offered
Rate (LIBOR) based interest expense fluctuations on Company profitability. These swap agreements,
with a total hedged notional amount of $100 million, were entered into to hedge future interest
payments associated with a portion of the Companys variable rate bank debt. The Company has
designated these swaps as hedges of future cash flows associated with its variable rate debt. All
effective changes in the fair value of the designated swaps are recorded in other comprehensive
income (loss) and are released to interest income or expense as the underlying transaction occurs.
Ineffective changes, if any, are recognized in interest income or expense immediately. For the
three and nine months ended April 30, 2011, the Company recognized other comprehensive loss of $46
and $42 based on the change in fair value of the swap agreements; no hedge ineffectiveness for
these swap agreements was recognized in interest income or expense over the same period.
The fair values of the Companys derivative instruments as of April 30, 2011 and 2010 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value |
|
Liability Derivatives |
|
Balance Sheet Location |
|
4/30/11 |
|
|
7/31/10 |
|
|
4/30/10 |
|
Derivatives designated as hedging instruments under ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Other current liabilities |
|
$ |
(639 |
) |
|
$ |
(668 |
) |
|
$ |
|
|
Interest rate contracts |
|
Other non-current liabilities |
|
|
(74 |
) |
|
|
|
|
|
|
|
|
Cash flow hedges |
|
Accounts payable and accrued liabilities |
|
|
(110 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments under ASC 815 |
|
|
|
$ |
(823 |
) |
|
$ |
(680 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments under ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges |
|
Accounts payable and accrued liabilities |
|
$ |
(46 |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Total derivatives not designated as hedging instrument under ASC 815 |
|
|
|
$ |
(46 |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Total derivatives |
|
|
|
$ |
(869 |
) |
|
$ |
(680 |
) |
|
$ |
|
|
|
|
|
|
|
The effect of the Companys derivative instruments on the Consolidated Statements of
Operations for the three months ended April 30, 2011 and 2010 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss |
|
|
Amount of Loss |
|
|
|
|
|
|
|
|
|
Amount of Loss |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
Location of Loss |
|
|
|
|
|
|
Recognized in OCI on |
|
|
Accumulated OCI into |
|
|
Accumulated OCI into |
|
|
Recognized in Income on |
|
|
Amount of Loss Recognized |
|
Derivatives in ASC 815 Cash |
|
Derivative (Effective |
|
|
Income (Effective |
|
|
Income (Effective |
|
|
Derivative (Ineffective |
|
|
in Income on Derivative |
|
Flow Hedging Relationships |
|
Portion) |
|
|
Portion) |
|
|
Portion) |
|
|
Portion) |
|
|
(Ineffective Portion) |
|
|
|
4/30/11 |
|
|
4/30/10 |
|
|
|
|
|
|
4/30/11 |
|
|
4/30/10 |
|
|
|
|
|
|
4/30/11 |
|
|
4/30/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
(222 |
) |
|
$ |
|
|
|
Interest expense |
|
$ |
(175 |
) |
|
$ |
|
|
|
Interest expense |
|
$ |
|
|
|
$ |
|
|
Cash flow hedges |
|
|
(119 |
) |
|
|
|
|
|
Net sales |
|
|
(113 |
) |
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(341 |
) |
|
$ |
|
|
|
|
|
|
|
$ |
(288 |
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Loss Recognized |
|
Derivatives Not Designated as Hedging |
|
Location of Loss Recognized in |
|
in Income on Derivative |
|
Instruments under ASC 815 |
|
Income on Derivative |
|
4/30/11 |
|
|
4/30/10 |
|
Interest rate contracts |
|
Interest expense |
|
$ |
|
|
|
$ |
(15 |
) |
Cash flow hedges |
|
Interest expense |
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
(33 |
) |
|
$ |
(15 |
) |
|
|
|
|
|
|
|
8
The effect of the Companys derivative instruments on the Consolidated Statements of
Operations for the nine months ended April 30, 2011 and 2010 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location of Loss |
|
|
Amount of Loss |
|
|
|
|
|
|
|
|
|
Amount of Loss |
|
|
Reclassified from |
|
|
Reclassified from |
|
|
Location of Loss |
|
|
|
|
|
|
Recognized in OCI on |
|
|
Accumulated OCI into |
|
|
Accumulated OCI into |
|
|
Recognized in Income on |
|
|
Amount of Loss Recognized |
|
Derivatives in ASC 815 Cash |
|
Derivative (Effective |
|
|
Income (Effective |
|
|
Income (Effective |
|
|
Derivative (Ineffective |
|
|
in Income on Derivative |
|
Flow Hedging Relationships |
|
Portion) |
|
|
Portion) |
|
|
Portion) |
|
|
Portion) |
|
|
(Ineffective Portion) |
|
|
|
4/30/11 |
|
|
4/30/10 |
|
|
|
|
|
|
4/30/11 |
|
|
4/30/10 |
|
|
|
|
|
|
4/30/11 |
|
|
4/30/10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
(574 |
) |
|
$ |
|
|
|
Interest expense |
|
$ |
(532 |
) |
|
$ |
|
|
|
Interest expense |
|
$ |
|
|
|
$ |
|
|
Cash flow hedges |
|
|
(215 |
) |
|
|
|
|
|
Net sales |
|
|
(117 |
) |
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(789 |
) |
|
$ |
|
|
|
|
|
|
|
$ |
(649 |
) |
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives Not Designated as Hedging |
|
Location of Loss Recognized in |
|
Amount of Loss Recognized |
|
Instruments under ASC 815 |
|
Income on Derivative |
|
in Income on Derivative |
|
|
|
|
|
|
|
4/30/11 |
|
|
4/30/10 |
|
Interest rate contracts |
|
Interest expense |
|
$ |
|
|
|
$ |
(240 |
) |
Cash flow hedges |
|
Interest expense |
|
|
(108 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
(108 |
) |
|
$ |
(240 |
) |
|
|
|
|
|
|
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Companys cash equivalents measured at fair value on a recurring basis was $586 as of July
31, 2010. There were no cash equivalents as of April 30, 2011 and 2010. Diamond used level 1,
quoted prices in active markets for identical assets, to value the cash equivalents.
The Companys derivative liabilities measured at fair value on a recurring basis were $869 and
$680 as of April 30, 2011 and July 31, 2010. There was no derivative liability for the three months
ended April 30, 2010. The Company has elected to use the income approach to value the derivative
liabilities, using observable Level 2 market expectations at the measurement date and standard
valuation techniques to convert future amounts to a single present amount assuming that
participants are motivated, but not compelled to transact. Level 2 inputs for the valuations are
limited to quoted prices for similar assets or liabilities in active markets (specifically futures
contracts on LIBOR for the first two years) and inputs other than quoted prices that are observable
for the asset or liability (specifically LIBOR cash and swap rates). Mid-market pricing is used as
a practical expedient for fair value measurements. Under Accounting Standards Codification (ASC)
820, Fair Value Measurements and Disclosures, the fair value measurement of an asset or liability
must reflect the nonperformance risk of the entity and the counterparty. Therefore, the impact of
the counterpartys creditworthiness when in an asset position and the Companys creditworthiness
when in a liability position has also been factored into the fair value measurement of the
derivative instruments.
(4) Stock Plan Information
In March 2010, the Company issued and sold 5,175,000 shares of its common stock for $37.00 per
share. After deducting the underwriting discount and other related expenses, the Company received
total net proceeds from the sale of its common stock of approximately $179.7 million. The proceeds
from the equity offering were used to fund a portion of the purchase price for the Kettle Foods
acquisition.
The Company uses a broad based equity incentive plan to help align employees and director
incentives with stockholders interests, and accounts for stock-based compensation in accordance
with ASC 718, Compensation Stock Compensation. The fair value of all stock options granted is
recognized as an expense in the Companys statements of operations, typically over the related
vesting period of the options. The guidance requires use of fair value computed at the date of
grant to measure share-based awards. The fair value of restricted stock awards is recognized as
stock-based compensation expense over the vesting period. Stock options may be granted to officers,
employees and directors.
Stock Option Awards: The fair value of each stock option grant was estimated on the date of
grant using the Black-Scholes option valuation model. Expected stock price volatilities were
estimated based on the Companys implied historical volatility. The expected term of options
granted and forfeiture rates were based on assumptions and historical data to the extent it is
available. The risk-free
9
rates were based on U.S. Treasury yields in effect at the time of the
grant. For purposes of this valuation model, dividends are based on the historical rate.
Assumptions used in the Black-Scholes model are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Nine Months |
|
|
|
Ended April 30, |
|
|
Ended April 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Average expected life, in years |
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
|
|
6 |
|
Expected volatility |
|
|
37.00 |
% |
|
|
46.00 |
% |
|
|
37.00 |
% |
|
|
46.00 |
% |
Risk-free interest rate |
|
|
2.52 |
% |
|
|
2.83 |
% |
|
|
2.13 |
% |
|
|
3.28 |
% |
Dividend rate |
|
|
0.33 |
% |
|
|
0.44 |
% |
|
|
0.37 |
% |
|
|
0.53 |
% |
The following table summarizes stock option activity during the nine months ended April 30,
2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
remaining |
|
|
Aggregate |
|
|
|
Number of Shares |
|
|
exercise price per |
|
|
contractual life (in |
|
|
intrinsic value (in |
|
|
|
(in thousands) |
|
|
share |
|
|
years) |
|
|
thousands) |
|
Outstanding at July 31, 2010 |
|
|
1,452 |
|
|
$ |
21.11 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
364 |
|
|
|
41.15 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(87 |
) |
|
|
18.58 |
|
|
|
|
|
|
|
|
|
Cancelled |
|
|
(22 |
) |
|
|
37.85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2011 |
|
|
1,707 |
|
|
|
25.30 |
|
|
|
6.4 |
|
|
$ |
68,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 30, 2011 |
|
|
1,176 |
|
|
|
18.64 |
|
|
|
5.2 |
|
|
|
55,257 |
|
The weighted average fair value per share of stock options granted during the three and nine
months ended April 30, 2011 was $20.02 and $15.13, respectively. The weighted average fair value
per share of stock options granted during the three and nine months ended April 30, 2010 was $18.71
and $17.18, respectively. The fair value per share of stock options vested during the three and
nine months ended April 30, 2011 was $12.14 and $10.65, respectively. The fair value per share of
stock options vested during the three and nine months ended April 30, 2010 was $7.02 and $7.06,
respectively.
Changes in the Companys nonvested stock options during the nine months ended April 30, 2011
are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
Number of Shares |
|
|
grant date fair |
|
|
|
(in thousands) |
|
|
value per share |
|
Nonvested at July 31, 2010 |
|
|
234 |
|
|
$ |
15.28 |
|
Granted |
|
|
364 |
|
|
|
15.13 |
|
Vested |
|
|
(49 |
) |
|
|
10.65 |
|
Cancelled |
|
|
(18 |
) |
|
|
18.30 |
|
|
|
|
|
|
|
|
|
Nonvested at April 30, 2011 |
|
|
531 |
|
|
|
15.50 |
|
|
|
|
|
|
|
|
|
As of April 30, 2011, there was approximately $6.3 million of total unrecognized compensation
expense related to nonvested stock options, which is expected to be recognized over a weighted
average period of 2.0 years.
Restricted Stock Awards: As of April 30, 2011, there were 379,720 shares of restricted stock
outstanding. Restricted stock activity during the nine months ended April 30, 2011 is summarized as
follows:
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Number of |
|
|
average grant |
|
|
|
Shares |
|
|
date fair value |
|
|
|
(in thousands) |
|
|
per share |
|
Outstanding at July 31, 2010 |
|
|
408 |
|
|
$ |
26.78 |
|
Granted |
|
|
92 |
|
|
|
41.77 |
|
Vested |
|
|
(108 |
) |
|
|
23.54 |
|
Cancelled |
|
|
(12 |
) |
|
|
37.00 |
|
|
|
|
|
|
|
|
|
Outstanding at April 30, 2011 |
|
|
380 |
|
|
|
31.02 |
|
|
|
|
|
|
|
|
|
The weighted average fair value per share of restricted stock granted during the three and
nine months ended April 30, 2011 was $49.03 and $41.77, respectively. The weighted average fair
value per share of restricted stock granted during the three and nine months ended April 30, 2010
was $41.30 and $29.02, respectively. The fair value per share of restricted stock vested during the
three and nine months ended April 30, 2011 was $29.92 and $23.54, respectively. The fair value per
share of restricted stock vested during the three and nine months ended April 30, 2010 was $18.02
and $20.92, respectively.
As of April 30, 2011 there was $9.3 million of unrecognized compensation expense related to
nonvested restricted stock awards, which is expected to be recognized over a weighted average
period of 2.3 years.
(5) Earnings Per Share
ASC 260-10, Earnings Per Share impacted the determination and reporting of earnings per
share by requiring the inclusion of restricted stock as participating securities, since they have
the right to share in dividends, if declared, equally with common shareholders. Participating
securities are allocated a proportional share of net income determined by dividing total weighted
average participating securities by the sum of total weighted average common shares and
participating securities (the two-class method). Including these shares in the Companys earnings
per share calculation during periods of net income has the effect of diluting both basic and
diluted earnings per share.
The computations for basic and diluted earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Nine Months |
|
|
|
Ended April 30, |
|
|
Ended April 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
7,733 |
|
|
$ |
(4,273 |
) |
|
$ |
41,667 |
|
|
$ |
19,471 |
|
Less: income allocated to participating securities |
|
|
(137 |
) |
|
|
|
|
|
|
(746 |
) |
|
|
(371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common shareholders basic |
|
|
7,596 |
|
|
|
(4,273 |
) |
|
|
40,921 |
|
|
|
19,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: undistributed income attributable to participating securities |
|
|
121 |
|
|
|
|
|
|
|
694 |
|
|
|
326 |
|
Less: undistributed income reallocated to participating securities |
|
|
(117 |
) |
|
|
|
|
|
|
(677 |
) |
|
|
(316 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) attributable to common shareholders diluted |
|
$ |
7,600 |
|
|
$ |
(4,273 |
) |
|
$ |
40,938 |
|
|
$ |
19,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic |
|
|
21,604 |
|
|
|
19,313 |
|
|
|
21,563 |
|
|
|
17,272 |
|
Dilutive shares stock options |
|
|
737 |
|
|
|
|
|
|
|
565 |
|
|
|
521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted |
|
|
22,341 |
|
|
|
19,313 |
|
|
|
22,128 |
|
|
|
17,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share attributable to common shareholders (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.35 |
|
|
$ |
(0.22 |
) |
|
$ |
1.90 |
|
|
$ |
1.11 |
|
Diluted |
|
$ |
0.34 |
|
|
$ |
(0.22 |
) |
|
$ |
1.85 |
|
|
$ |
1.07 |
|
|
|
|
(1) |
|
Computations may reflect rounding adjustments. |
11
Options to purchase 10,000 and 17,000 shares of common stock were not included in the
computation of diluted earnings per share because their exercise prices were greater than the
average market price of Diamonds common stock of $54.67 and $48.83 for the three and nine months
ended April 30, 2011, and therefore their effect would be antidilutive. As the Company was in a
loss position for the three months ended April 30, 2010, all stock options outstanding were
excluded in the computation of diluted earnings per share as their effect would be antidilutive.
Options to purchase 13,000 shares of common stock were not included in the computation of diluted
earnings per share because their exercise prices were greater than the average market price of
Diamonds common stock of $34.78 for the nine months ended April 30, 2010, and therefore their
effect would be antidilutive.
(6) Acquisition and Pending Transaction
Pending Pringles Merger
On April 5, 2011, Diamond entered into a definitive agreement with The Procter & Gamble
Company (P&G) to merge P&Gs Pringles business into the company. The value of the proposed
transaction is approximately $2.35 billion, consisting of $1.5 billion in Diamond common stock and
the assumption of $850 million of Pringles debt. The equity portion of the purchase price is
represented by approximately 29.1 million shares.
The transaction, which is expected to be completed by the end of calendar 2011, is subject to
approval by Diamonds and P&Gs stockholders and satisfaction of customary closing conditions and
regulatory approvals. Diamond expects to incur one-time costs of approximately $100 million related
to the transaction over the next two years. P&G will also provide Diamond with transition services
for up to 12 months after closing. The merger will be accounted for as a purchase business
combination and for accounting purposes, Diamond will be treated as the acquiring entity.
Kettle Foods
In March 2010, Diamond completed its acquisition of Kettle Foods for a purchase price of
approximately $616 million in cash. Kettle Foods is a leading premium potato chip company in the
two largest potato chip markets in the world (the United States and the United Kingdom), and adds a
complementary premium brand to Diamonds existing portfolio of leading brands in the snack
industry. The Company believes the acquisition of Kettle Foods will expand Diamonds presence in
the attractive snack market and enables Diamond to enter new channels and geographies by leveraging
its combined marketing and distribution capabilities. The acquisition was accounted for under the
purchase method of accounting in accordance with ASC 805, Business Combinations.
The total purchase price has been allocated to the estimated fair values of assets acquired
and liabilities assumed as follows:
|
|
|
|
|
Accounts receivable |
|
$ |
29,188 |
|
Inventory |
|
|
12,526 |
|
Deferred tax asset |
|
|
2,119 |
|
Prepaid expenses and other assets |
|
|
3,617 |
|
Property, plant and equipment |
|
|
66,289 |
|
Brand intangibles |
|
|
235,000 |
|
Customer relationships |
|
|
120,000 |
|
Goodwill |
|
|
321,545 |
|
Assumed liabilities |
|
|
(39,211 |
) |
Deferred tax liabilities |
|
|
(134,851 |
) |
|
|
|
|
Purchase price |
|
$ |
616,222 |
|
|
|
|
|
Goodwill is calculated as the excess of the consideration transferred over the net assets
recognized and represents the future economic benefits arising from other assets acquired that
could not be individually identified and separately recognized. These benefits include workforce
additions, expansion opportunities and increased presence in the overall snack category.
Goodwill associated with the Kettle Foods acquisition is not amortized and is not deductible
for tax purposes.
Customer relationships of Kettle Foods will be amortized on a straight-line basis over an
estimated life of 20 years. Brand intangibles relate to the Kettle Foods brand name, which has an
indefinite life, and therefore is not amortizable.
12
(7) Balance Sheet Items
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, |
|
|
July 31, |
|
|
April 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2010 |
|
Raw materials and supplies |
|
$ |
105,185 |
|
|
$ |
64,660 |
|
|
$ |
78,748 |
|
Work in process |
|
|
20,190 |
|
|
|
23,768 |
|
|
|
20,499 |
|
Finished goods |
|
|
64,157 |
|
|
|
54,977 |
|
|
|
58,251 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
189,532 |
|
|
$ |
143,405 |
|
|
$ |
157,498 |
|
|
|
|
|
|
|
|
|
|
|
In the three months ended April 30, 2011, the Company revised its estimate for expected
commodity costs which resulted in a pre-tax decrease in cost of sales of approximately $1.5 million
for sales recognized in the first six months of fiscal year 2011. In the three months ended April
30, 2010, the Company revised its estimate for expected commodity costs which resulted in a pre-tax
decrease in cost of sales of approximately $1.1 million for sales recognized in the first six
months of fiscal year 2010.
Accounts payable and accrued liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, |
|
|
July 31, |
|
|
April 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2010 |
|
Accounts payable |
|
$ |
83,821 |
|
|
$ |
42,784 |
|
|
$ |
81,965 |
|
Accrued promotion |
|
|
27,462 |
|
|
|
22,787 |
|
|
|
17,384 |
|
Accrued salaries and benefits |
|
|
13,799 |
|
|
|
17,587 |
|
|
|
13,379 |
|
Other |
|
|
12,184 |
|
|
|
9,008 |
|
|
|
6,136 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
137,266 |
|
|
$ |
92,166 |
|
|
$ |
118,864 |
|
|
|
|
|
|
|
|
|
|
|
(8) Intangible Assets and Goodwill
The changes in the carrying amount of goodwill are as follows:
|
|
|
|
|
Balance as of July 31, 2010 |
|
$ |
396,788 |
|
Acquisitions/other activities |
|
|
|
|
Translation adjustments |
|
|
13,246 |
|
|
|
|
|
Balance as of April 30, 2011 |
|
$ |
410,034 |
|
|
|
|
|
13
Other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, |
|
|
July 31, |
|
|
April 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2010 |
|
Brand intangibles (not subject to amortization) |
|
$ |
301,975 |
|
|
$ |
297,500 |
|
|
$ |
322,500 |
|
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts and related relationships |
|
|
165,256 |
|
|
|
157,300 |
|
|
|
157,300 |
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets, gross |
|
|
467,231 |
|
|
|
454,800 |
|
|
|
479,800 |
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated amortization on intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts and related relationships |
|
|
(12,112 |
) |
|
|
(5,782 |
) |
|
|
(3,732 |
) |
|
|
|
|
|
|
|
|
|
|
Total other intangible assets, net |
|
$ |
455,119 |
|
|
$ |
449,018 |
|
|
$ |
476,068 |
|
|
|
|
|
|
|
|
|
|
|
Identifiable intangible asset amortization expense annually for each of the five succeeding
years will amount to approximately $8,263 and will approximate $2,066 for the remainder of fiscal
year 2011.
(9) Credit Facilities and Long-Term Obligations
In February 2010, Diamond entered into an agreement to replace an existing credit facility
with a new five-year $600 million secured credit facility (the Secured Credit Facility) with a
syndicate of lenders. The Company used the borrowings under the Secured Credit Facility to fund a
portion of the Kettle Foods acquisition and to fund ongoing operations.
Diamonds Secured Credit Facility consists of a $235 million revolving credit facility, of
which $192 million was outstanding as of April 30, 2011, and a $400 million term loan facility, of
which $360 million was outstanding as of April 30, 2011. Scheduled principal payments on the term
loan are $40 million for fiscal year 2011 and each of the succeeding three years (due quarterly),
and $10 million for each of the first two quarters in fiscal year 2015, with the remaining
principal balance and any outstanding loans under the revolving credit facility to be repaid on the
fifth anniversary of initial funding. In March 2011, the syndicate of lenders approved Diamonds
request for an increase in its revolving credit facility by $35 million from $200 million, under
the same terms. Borrowings under the Secured Credit Facility will bear interest, at Diamonds
option, at either the agents base rate or the LIBOR rate, plus a margin for LIBOR loans ranging
from 2.25% to 3.50%, based on the consolidated leverage ratio which is defined as the ratio of
total debt to earnings before interest, taxes, depreciation and amortization (EBITDA). For the
three and nine months ended April 30, 2011, the blended interest rate was 4.76% and 4.73%,
respectively, for the Companys consolidated borrowings. Substantially all of the Companys
tangible and intangible assets are considered collateral security under the Secured Credit
Facility.
The Secured Credit Facility also provides for customary affirmative and negative covenants,
including a debt to EBITDA ratio and minimum fixed charge coverage ratio. As of April 30, 2011, the
Company was in compliance with all applicable financial covenants under the Secured Credit
Facility.
On December 20, 2010, Kettle Foods obtained, and Diamond guaranteed, a 10-year fixed rate loan
(the Guaranteed Loan) in the principal amount of $21.2 million, of which $20.8 million was
outstanding as of April 30, 2011. The principal and interest payments are due monthly throughout
the term of the loan. The Guaranteed Loan will be used to purchase equipment for the Beloit,
Wisconsin plant expansion. Borrowed funds have been placed in an interest-bearing escrow account
and will be made available as expenditures are approved for reimbursement. As the cash will be used
to purchase non-current assets, such restricted cash has been classified as non-current on the
balance sheet. The Guaranteed Loan also provides for customary affirmative and negative covenants,
which are similar to the covenants under the Secured Credit Facility.
(10) Retirement Plans
Diamond provides retiree medical benefits and sponsors two defined benefit pension plans. One
plan is a qualified plan covering all bargaining unit employees and the other is a nonqualified
plan for certain salaried employees. The amounts shown for pension benefits are combined amounts
for all plans. Diamond uses a July 31 measurement date for its plans. Plan assets are held in trust
and primarily include mutual funds and money market accounts. Any employee who joined the Company
after January 15, 1999 is not entitled to retiree medical benefits.
14
Components of net periodic benefit cost (income) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
|
|
Three Months ended |
|
|
Nine Months ended |
|
|
Three Months ended |
|
|
Nine Months ended |
|
|
|
April 30, |
|
|
April 30, |
|
|
April 30, |
|
|
April 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
Service cost |
|
$ |
20 |
|
|
$ |
223 |
|
|
$ |
60 |
|
|
$ |
546 |
|
|
$ |
17 |
|
|
$ |
16 |
|
|
$ |
49 |
|
|
$ |
47 |
|
Interest cost |
|
|
312 |
|
|
|
300 |
|
|
|
944 |
|
|
|
898 |
|
|
|
26 |
|
|
|
33 |
|
|
|
80 |
|
|
|
100 |
|
Expected return on plan assets |
|
|
(257 |
) |
|
|
(238 |
) |
|
|
(773 |
) |
|
|
(714 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
4 |
|
|
|
7 |
|
|
|
11 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss / (gain) |
|
|
151 |
|
|
|
133 |
|
|
|
482 |
|
|
|
388 |
|
|
|
(198 |
) |
|
|
(206 |
) |
|
|
(596 |
) |
|
|
(618 |
) |
Curtailment cost |
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost / (income) |
|
$ |
230 |
|
|
$ |
428 |
|
|
$ |
724 |
|
|
$ |
1,141 |
|
|
$ |
(155 |
) |
|
$ |
(157 |
) |
|
$ |
(467 |
) |
|
$ |
(471 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized defined contribution plan expenses of $304 and $703 for the three
and nine months ended April 30, 2011 and $173 and $454 for the three and nine months ended April
30, 2010, respectively.
(11) Contingencies
The Company is involved in various legal actions in the ordinary course of business. Such
matters are subject to many uncertainties that make their ultimate outcomes unpredictable. However,
in the opinion of management, resolution of all legal matters is not expected to have a material
adverse effect on the Companys financial condition, operating results or cash flows.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are an innovative packaged food company focused on building, acquiring and energizing
brands. Our company was founded in 1912 and has a proven track record of growth, which is reflected
in the growth of our revenues from approximately $200 million in fiscal year 2000 to approximately
$680 million in fiscal year 2010. We specialize in processing, marketing and distributing snack
products and culinary, in-shell and ingredient nuts. In 2004, we complemented our strong heritage
in the culinary nut market under the Diamond of California® brand by launching a full line of snack
nuts under the Emerald® brand. In September 2008, we acquired the Pop Secret® brand of microwave
popcorn products, which provided us with increased scale in the snack market, significant supply
chain economies of scale and cross promotional opportunities with our existing brands. In March
2010, we acquired Kettle Foods, a leading premium potato chip company in the two largest potato
chip markets in the world, the United States and United Kingdom, which added the complementary
premium brand Kettle to our existing portfolio of leading brands in the snack industry. In general,
we sell directly to retailers, particularly large national grocery store and drug store chains, and
indirectly through wholesale distributors to independent and small regional retail grocery store
chains and convenience stores. We also sell our products to mass merchandisers, club stores,
convenience stores and through other retail channels.
Our business is seasonal. For example, in 2010 and 2009, we recognized 54% and 61% of our net
sales for the full fiscal year in the first six months of the year. Demand for nut products,
particularly in-shell nuts and to a lesser extent culinary nuts, is highest during the months of
October, November and December. We receive walnuts during the period from September to November and
process them throughout the year. As a result of this seasonality, our personnel and working
capital requirements and walnut inventories peak during the last quarter of the calendar year. This
seasonality also impacts capacity utilization at our facilities, which routinely operate at
capacity for the last four months of the calendar year. Generally, we receive and pay for
approximately 50% of the corn for popcorn in November, and approximately 50% in April, and we
receive and pay for potatoes for potato chips ratably throughout the year. Accordingly, the working
capital requirements of our popcorn and potato chip product lines are less seasonal than that of
the tree nut product lines.
15
Results of Operations
Net sales were $223.0 million and $733.1 million for the three and nine months ended April 30,
2011. Net sales were $138.7 million and $503.5 million for the three and nine months ended April
30, 2010. For the three and nine months ended April 30, 2011, the increase in net sales was
primarily due to increased snack sales (including Kettle Foods). The impact of foreign exchange on
our net sales was not significant.
Net sales by channel (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended |
|
|
|
|
|
|
Nine Months ended |
|
|
|
|
|
|
April 30, |
|
|
% Change from |
|
|
April 30, |
|
|
% Change from |
|
|
|
2011 |
|
|
2010 |
|
|
2010 to 2011 |
|
|
2011 |
|
|
2010 |
|
|
2010 to 2011 |
|
Retail (1) |
|
$ |
181,707 |
|
|
$ |
126,086 |
|
|
|
44.1 |
% |
|
$ |
625,100 |
|
|
$ |
402,490 |
|
|
|
55.3 |
% |
International Non-Retail |
|
|
31,368 |
|
|
|
6,287 |
|
|
|
398.9 |
% |
|
|
89,176 |
|
|
|
65,445 |
|
|
|
36.3 |
% |
North American Ingredient/Food Service and Other |
|
|
9,916 |
|
|
|
6,361 |
|
|
|
55.9 |
% |
|
|
18,873 |
|
|
|
35,609 |
|
|
|
-47.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
222,991 |
|
|
$ |
138,734 |
|
|
|
60.7 |
% |
|
$ |
733,149 |
|
|
$ |
503,544 |
|
|
|
45.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Retail represents sales of our culinary, snack and in-shell products. |
For the three and nine months ended April 30, 2011, the increases in Retail sales resulted
from higher sales of snack products (including Kettle Foods), which increased by 71.5% and 107.6%,
respectively. Retail sales for the prior year only included Kettle Foods sales for one month.
International non-retail sales increased for the three and nine months ended April 30, 2011, mainly
as a result of a record walnut crop, which after servicing retail customer demand was primarily
shipped to international markets. For the three months ended April 30, 2011, North American
ingredient/food service and other sales increased mainly due to higher volume and higher pricing.
For the nine months ended April 30, 2011, North American ingredient/food service and other sales
decreased primarily because the United States Department of Agriculture school lunch program was
not offered in fiscal year 2011.
Sales to our largest customer represented approximately 15.9% and 15.8% of total net sales for
the three and nine months ended April 30, 2011, compared to 21.0% and 17.1% of total net sales for
the three and nine months ended April 30, 2010. Sales to our second largest customer represented
approximately 13.4% and 10.5% of total net sales for the three and nine months ended April 30,
2011, compared to 15.5% and 10.6% for the three and nine months ended April 30, 2010.
Gross profit. Gross profit as a percentage of net sales was 26.7% and 26.5% for the three and
nine months ended April 30, 2011 compared to 22.4% and 23.3% for the three and nine months ended
April 30, 2010. Gross profit as a percentage of net sales increased mainly due to retail sales mix,
greater scale in snacks and manufacturing efficiencies, which offset some commodity price pressure
and increased slotting and promotion for Breakfast on the go!. In the three months ended April 30,
2011, the Company revised its estimate for expected commodity costs which resulted in a pre-tax
decrease in cost of sales of approximately $1.5 million for sales recognized in the first six
months of fiscal year 2011. In the three months ended April 30, 2010, the Company revised its
estimate for expected commodity costs which resulted in a pre-tax decrease in cost of sales of
approximately $1.1 million for sales recognized in the first six months of fiscal year 2010.
Selling, general and administrative. Selling, general and administrative expenses consist
principally of salaries and benefits for sales and administrative personnel, brokerage,
professional services, travel, non-manufacturing depreciation and facility costs. Selling, general
and administrative expenses were $24.2 million and $71.3 million for the three and nine months
ended April 30, 2011, compared to $15.2 million and $44.0 million for the three and nine months
ended April 30, 2010. Selling, general and administrative expenses as a percentage of net sales
were 10.8% and 9.7% for the three and nine months ended April 30, 2011, compared to 10.9% and 8.7%
for the three and nine months ended April 30, 2010. The increase for the nine-month period was
primarily due to the addition of Kettle Foods, including the associated intangible amortization for
customer relationships.
Advertising. Advertising expenses were $11.9 million and $34.4 million for the three and nine
months ended April 30, 2011, compared to $7.6 million and $26.0 million for the three and nine
months ended April 30, 2010. Advertising expenses as a percentage of net sales were 5.3% and 4.7%
for the three and nine months ended April 30, 2011 compared to 5.5% and 5.2% for the three and
nine months ended April 30, 2010. The increases in advertising expenses, which we expect to
continue throughout the fiscal year,
16
were primarily due to increased media spending associated with
the Emerald Breakfast on the go! launch, as well as incremental Kettle Foods brand support.
Acquisition and integration related expenses. Acquisition and integration related expenses
associated with Kettle Foods and Pringles were $5.9 million and $7.4 million for the three and nine
months ended April 30, 2011. Acquisition related expenses associated with Kettle Foods were $10.2
million for the three and nine months ended April 30, 2010.
Interest expense, net. Net interest expense was $5.9 million and $18.1 million for the three
and nine months ended April 30, 2011, compared to $1.9 million and $4.1 million for the three and
nine months ended April 30, 2010. Net interest expense as a percentage of net sales was 2.7% and
2.5% for the three and nine months ended April 30, 2011, compared to 1.4% and 0.8% for the three
and nine months ended April 30, 2010. The increases were primarily attributable to the borrowings
used to fund the Kettle Foods acquisition.
Other expense, net. There was no net other expense for the three and nine months ended April
30, 2011. Net other expense was $1.8 million for the three and nine months ended April 30, 2010.
The expense represented a loss on debt extinguishment when we replaced the existing Credit Facility
with a new Secured Credit Facility to fund the Kettle Foods acquisition.
Income taxes. The effective tax rate for the three and nine months ended April 30, 2011 was
approximately 33.4% and 33.8%. The effective tax rate for the three and nine months ended April 30,
2010 was approximately 24.4% and 37.1%. The lower effective tax rate for the three months ended
April 30, 2010 was primarily related to the discrete benefit of Kettle acquisition costs in the
period. The lower effective tax rate for the nine months ended April 30, 2011 was primarily
attributable to the influence from certain tax rate jurisdictions where we have Kettle Foods
operations.
Pending Pringles Merger
On April 5, 2011, we entered into a definitive agreement with The Procter & Gamble Company
(P&G) to merge P&Gs Pringles business into our company. The value of the proposed transaction is
approximately $2.35 billion, consisting of $1.5 billion of our common stock and the assumption of
$850 million of Pringles debt. The equity portion of the purchase price is represented by
approximately 29.1 million shares.
The transaction, which is expected to be completed by the end of calendar 2011, is subject to
approval by our and P&Gs stockholders and satisfaction of customary closing conditions and
regulatory approvals. We expect to incur one-time costs of approximately $100 million related to
the transaction over the next two years. P&G will also provide us with transition services for up
to 12 months after closing. The merger will be accounted for as a purchase business combination and
for accounting purposes, we will be treated as the acquiring entity.
Liquidity and Capital Resources
Our liquidity is dependent upon funds generated from operations and external sources of
financing.
During the nine months ended April 30, 2011, cash provided by operating activities was $15.8
million, compared to $9.6 million of cash used in operating activities for the nine months ended
April 30, 2010. The increase in cash provided by operating activities was primarily due to improved
profitability. Cash used in investing activities was $36.3 million during the nine months ended
April 30, 2011, compared to $621.8 million for the nine months ended April 30, 2010. The higher
cash used in investing activities for the nine months ended April 30, 2010 was mainly due to the
acquisition of Kettle Foods. Cash provided by financing activities during the nine months ended
April 30, 2011 was $16.3 million, compared to $612.0 million for the nine months ended April 30,
2010. The decrease from prior year was primarily attributable to long-term borrowings used to fund
the Kettle Foods acquisition.
In February 2010, we entered into an agreement to replace our existing credit facility with a
new five-year $600 million secured credit facility (the Secured Credit Facility) with a syndicate
of lenders. We used the borrowings under the Secured Credit Facility to fund a portion of the
Kettle Foods acquisition and to fund ongoing operations.
Our Secured Credit Facility consists of a $235 million revolving credit facility, of which
$192 million was outstanding as of April 30, 2011, and a $400 million term loan facility, of which
$360 million was outstanding as of April 30, 2011. Scheduled principal payments on the term loan
are $40 million for fiscal year 2011 and each of the succeeding three years (due quarterly), and
$10 million for each of the first two quarters in fiscal year 2015, with the remaining principal
balance and any outstanding loans under the
revolving credit facility to be repaid on the fifth anniversary of initial funding. In March
2011, the syndicate of lenders approved our
17
request for an increase in our revolving credit
facility by $35 million from $200 million, under the same terms, to fund our plant expansion and
working capital requirements. Borrowings under the Secured Credit Facility will bear interest, at
our option, at either the agents base rate or the LIBOR rate, plus a margin for LIBOR loans
ranging from 2.25% to 3.50%, based on the consolidated leverage ratio which is defined as the ratio
of total debt to EBITDA. Substantially all of our tangible and intangible assets are considered
collateral security under the Secured Credit Facility.
The Secured Credit Facility also provides for customary affirmative and negative covenants,
including a debt to EBITDA ratio and minimum fixed charge coverage ratio. As of April 30, 2011, we
were in compliance with all applicable financial covenants under the Secured Credit Facility.
In March 2010, we issued 5,175,000 shares of common stock priced at $37.00 per share. After
deducting the underwriting discount and other related expenses, we received total net proceeds from
the sale of our common stock of approximately $179.7 million. The proceeds from the equity offering
were used to fund a portion of the purchase price for the Kettle Foods acquisition.
On December 20, 2010, Kettle Foods obtained, and we guaranteed, a 10-year fixed rate loan (the
Guaranteed Loan) in the principal amount of $21.2 million, of which $20.8 million was outstanding
as of April 30, 2011. The principal and interest payments are due monthly throughout the term of
the loan. The Guaranteed Loan will be used to purchase equipment for our Beloit, Wisconsin plant
expansion. Borrowed funds have been placed in an interest-bearing escrow account and will be made
available as expenditures are approved for reimbursement. As the cash will be used to purchase
non-current assets, such restricted cash has been classified as non-current on the balance sheet.
The Guaranteed Loan also provides for customary affirmative and negative covenants, which are
similar to the covenants under the Secured Credit Facility. As of April 30, 2011, we were in
compliance with all applicable financial covenants under the Guaranteed Loan.
Working capital and stockholders equity were $123.4 million and $450.4 million at April 30,
2011, compared to $72.2 million and $379.9 million at July 31, 2010 and $65.3 million and $372.8
million at April 30, 2010. The increase in working capital was due to increases in receivables,
associated with higher sales levels, and inventory, related to increases in raw material nut
volume, offset by an increase in accounts payable and accrued liabilities related to higher
production and sales levels.
We believe our cash and cash equivalents and cash expected to be provided from our operations,
in addition to borrowings available under our Secured Credit Facility and restricted cash provided
by the Guaranteed Loan, will be sufficient to fund our contractual commitments, repay obligations
as required, and fund our operational requirements for at least the next twelve months.
Effects of Inflation
There has been no material change in our exposure to inflation from that discussed in our 2010
Annual Report on Form 10-K.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of our assets, liabilities,
revenues and expenses. We base our estimates on historical experience and various other assumptions
that we believe to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates. Our critical accounting
policies are set forth below.
Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists,
title and risk of loss has transferred to the buyer (based upon terms of shipment), price is fixed,
delivery occurs and collection is reasonably assured. Revenues are recorded net of rebates,
introductory or slotting payments, coupons, promotion and marketing allowances. The amount we
accrue for promotion is based on an estimate of the level of performance of the trade promotion,
which is dependent upon factors such as historical trends with similar promotions, expectations
regarding customer and consumer participation, and sales and payment trends with similar previously
offered programs. Customers have the right to return certain products. Product returns are
estimated based upon historical results and are reflected as a reduction in sales.
Inventories. All inventories are accounted for on a lower of cost (first-in, first-out) or
market basis.
We have entered into long-term Walnut Purchase Agreements with growers, under which they
deliver their entire walnut crop to us during the Fall harvest season and we determine the purchase
price for this inventory by March 31, or later, of the following year.
This purchase price will be a price determined by us in good faith, taking into account market
conditions, crop size, quality, and nut
18
varieties, among other relevant factors. Since the ultimate
price to be paid will be determined subsequent to receiving the walnut crop, we must make an
estimate of price for interim financial statements. Those estimates may subsequently change and the
effect of the change could be significant. In the three months ended April 30, 2011, the Company
revised its estimate for expected commodity costs which resulted in a pre-tax decrease in cost of
sales of approximately $1.5 million for sales recognized in the first six months of fiscal year
2011. In the three months ended April 30, 2010, the Company revised its estimate for expected
commodity costs which resulted in a pre-tax decrease in cost of sales of approximately $1.1 million
for sales recognized in the first six months of fiscal year 2010.
Valuation of Long-lived and Intangible Assets and Goodwill. We periodically review long-lived
assets and certain identifiable intangible assets for impairment in accordance with ASC 360,
Property, Plant, and Equipment. Goodwill and intangible assets not subject to amortization are
reviewed annually for impairment in accordance with ASC 350, Intangibles Goodwill and Other,
or more often if there are indications of possible impairment.
The analysis to determine whether or not an asset is impaired requires significant judgments
that are dependent on internal forecasts, including estimated future cash flows, estimates of
long-term growth rates for our business, the expected life over which cash flows will be realized,
and assumed royalty and discount rates. Changes in these estimates and assumptions could materially
affect the determination of fair value and any impairment charge. While the fair value of these
assets exceeds their carrying value based on our current estimates and assumptions, materially
different estimates and assumptions in the future in response to changing economic conditions,
changes in our business or for other reasons could result in the recognition of impairment losses.
For assets to be held and used, including acquired intangible assets subject to amortization,
we initiate our review whenever events or changes in circumstances indicate that the carrying
amount of these assets may not be recoverable. Recoverability of an asset is measured by comparison
of its carrying amount to the expected future undiscounted cash flows that the asset is expected to
generate. Any impairment to be recognized is measured by the amount by which the carrying amount of
the asset exceeds its fair value. Significant management judgment is required in this process.
For brand intangible assets not subject to amortization, we test for impairment annually, or
whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. In testing brand intangibles for impairment, we compare the fair value with the
carrying value. The determination of fair value is based on a discounted cash flow analysis, using
inputs such as forecasted future revenues attributable to the brand, assumed royalty rates, and a
risk-adjusted discount rate that approximates our estimated cost of capital. If the carrying value
exceeds the estimated fair value, the brand intangible asset is considered impaired, and an
impairment loss will be recognized in an amount equal to the excess of the carrying value over the
fair value of the brand intangible asset.
We perform our annual goodwill impairment test required by ASC 350 as of June 30th of each
year. In testing goodwill for impairment, we initially compare the fair value of the Companys
single reporting unit with the net book value of the Company since it represents the carrying value
of the reporting unit. We have one operating and reportable segment. If the fair value of the
reporting unit is less than the carrying value of the reporting unit, we perform an additional step
to determine the implied fair value of goodwill. The implied fair value of goodwill is determined
by first allocating the fair value of the reporting unit to all assets and liabilities and then
computing the excess of the reporting units fair value over the amounts assigned to the assets and
liabilities. If the carrying value of goodwill exceeds the implied fair value of goodwill, the
excess represents the amount of goodwill impairment. Accordingly, we would recognize an impairment
loss in the amount of such excess. Our impairment assessment employs present value techniques and
involves the use of significant estimates and assumptions, including a projection of future
revenues, gross margins, operating costs and cash flows, as well as general economic and market
conditions and the impact of planned business and operational strategies. We base our fair value
estimates on assumptions we believe to be reasonable at the time, but such assumptions are subject
to inherent uncertainty. Actual results may differ from these estimates. We also consider the
estimated fair value of our reporting unit in relation to the Companys market capitalization.
We cannot guarantee that a material impairment charge will not be recorded in the future.
Employee Benefits. We incur various employment-related benefit costs with respect to qualified
and nonqualified pension and deferred compensation plans. Assumptions are made related to discount
rates used to value certain liabilities, assumed rates of return on assets in the plans,
compensation increases, employee turnover and mortality rates. Different assumptions could result
in the recognition of differing amounts of expense over different periods of time.
19
Income Taxes. We account for income taxes in accordance with ASC 740, Income Taxes. This
guidance requires that deferred tax assets and liabilities be recognized for the tax effect of
temporary differences between the financial statement and tax basis of recorded assets and
liabilities at current tax rates. This guidance also requires that deferred tax assets be reduced
by a valuation allowance if it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The recoverability of deferred tax assets is based on both our
historical and anticipated earnings levels and is reviewed periodically to determine if any
additional valuation allowance is necessary when it is more likely than not that amounts will not
be recovered.
Accounting for Stock-Based Compensation. We account for stock-based compensation arrangements,
including stock option grants and restricted stock awards, in accordance with the provisions of ASC
718, Compensation Stock Compensation. Under this guidance, compensation cost is recognized
based on the fair value of equity awards on the date of grant. The compensation cost is then
amortized on a straight-line basis over the vesting period. We use the Black-Scholes option pricing
model to determine the fair value of stock options at the date of grant. This model requires us to
make assumptions such as expected term, volatility, and forfeiture rates that determine the stock
options fair value. These key assumptions are based on historical information and judgment
regarding market factors and trends. If actual results are not consistent with our assumptions and
judgments used in estimating these factors, we may be required to increase or decrease compensation
expense, which could be material to our results of operations.
Recent Accounting Pronouncements
See Note 2 of the condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no material change in our exposure to market risk from that discussed in our
2010 Annual Report on Form 10-K.
Item 4. Controls and Procedures
We have established and currently maintain disclosure controls and procedures designed to
provide reasonable assurance that material information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified by the Securities and Exchange Commission and that any material
information relating to the Company is recorded, processed, summarized and reported to our
principal officers to allow timely decisions regarding required disclosures.
In conjunction with the close of each fiscal quarter, we conduct a review and evaluation,
under the supervision and with the participation of our management, including the Chief Executive
Officer and Chief Financial and Administrative Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Our Chief Executive Officer and Chief
Financial and Administrative Officer, based upon their evaluation as of April 30, 2011, the end of
the fiscal quarter covered in this report, concluded that our disclosure controls and procedures
were effective.
As of April 30, 2011, there has been no change in our internal control over financial
reporting during our most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in various legal actions in the ordinary course of our business. Such matters
are subject to many uncertainties that make their outcomes unpredictable. However, in our opinion,
resolution of all legal matters is not expected to have a material adverse effect on our financial
condition, operating results or cash flows.
Item 1A. Risk Factors
There were no material changes to the Risk Factors disclosed in the Companys Annual Report on
Form 10-K for the year ended July 31, 2010.
20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following are details of repurchases of common stock during the three months ended April
30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of |
|
|
Approximate Dollar |
|
|
|
Total number |
|
|
Average price |
|
|
shares repurchased as |
|
|
value of shares |
|
|
|
of shares |
|
|
paid per |
|
|
part of publicly |
|
|
that may yet be purchased |
|
Period |
|
repurchased (1) |
|
|
share |
|
|
announced plans |
|
|
under the plans |
|
|
Repurchases from February 1 - February 28, 2011 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Repurchases from March 1 - March 31, 2011 |
|
|
6,747 |
|
|
$ |
54.87 |
|
|
|
|
|
|
$ |
|
|
Repurchases from April 1 - April 30, 2011 |
|
|
211 |
|
|
$ |
60.63 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
6,958 |
|
|
$ |
55.05 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(1) |
|
All of the shares in the table above were originally granted to
employees as restricted stock pursuant to our 2005 Equity Incentive
Plan (EIP). Pursuant to the EIP, all of the shares reflected above
were relinquished by employees in exchange for Diamonds agreement to
pay federal and state withholding obligations resulting from the
vesting of the restricted stock. The repurchases reflected above were
not made pursuant to a publicly announced plan. |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Removed and Reserved
Item 5. Other Information
As previously reported on Form 10-Q for the fiscal quarters ended October 31, 2010 and January
31, 2011, after filing its annual report on Form 10-K for the fiscal year ended July 31, 2010,
Company management determined that Note 5 of the Companys notes to consolidated financial
statements, entitled Acquisition of Kettle Foods, contained an error in the tabular presentation
of 2009 pro forma financial information for the acquisition. This mathematical summation error
resulted from the inadvertent omission of certain Kettle Foods sales and net income data from 2009
pro forma net sales and net income. The corrected pro forma financial information is set forth
below (in thousands, except per share data):
|
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|
|
|
|
|
|
|
|
|
As previously |
|
|
|
|
|
|
reported |
|
|
As corrected |
|
2009 net sales |
|
$ |
787,349 |
|
|
$ |
828,863 |
|
2009 net income |
|
$ |
22,363 |
|
|
$ |
28,643 |
|
2009 diluted earnings per share |
|
$ |
1.02 |
|
|
$ |
1.31 |
|
The correction does not impact the Companys consolidated balance sheets as of July 31, 2010
and 2009 or the related statements of operations and cash flows for the years ended July 31, 2010,
2009 and 2008. The Company does not believe the correction of this error is material to its
consolidated financial statements.
21
Item 6. Exhibits
The following exhibits are filed as part of this report or are incorporated by reference to
exhibits previously filed with the SEC.
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|
Filed with this |
|
Incorporated by reference |
Number |
|
Exhibit Title |
|
10-Q |
|
Form |
|
File No. |
|
Date Filed |
3.01
|
|
Certificate of Incorporation, as amended
|
|
|
|
S1
|
|
333-123576
|
|
July 15, 2005 |
|
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|
|
|
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|
|
|
3.02
|
|
Restated Bylaws
|
|
|
|
S1
|
|
333-123576
|
|
March 25, 2005 |
|
|
|
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|
|
|
|
|
|
|
4.01
|
|
Form of Certificate for common stock
|
|
|
|
S1
|
|
333-123576
|
|
July 18, 2005 |
|
|
|
|
|
|
|
|
|
|
|
31.01
|
|
Rule 13a-14(a) and 15d-14(a) Certification of Chief Executive Officer
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.02
|
|
Rule 13a-14(a) and 15d-14(a) Certification of Chief Financial Officer
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.01
|
|
Section 1350 Certifications
|
|
X |
|
|
|
|
|
|
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
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DIAMOND FOODS, INC.
|
|
Date: June 2, 2011 |
By: |
/s/ Steven M. Neil
|
|
|
|
Steven M. Neil |
|
|
|
Chief Financial and Administrative Officer
and duly authorized officer |
|
|
23