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| Diamond Foods Reports Strong Profits for the Second Quarter of Fiscal 2008 |
STOCKTON, Calif.--(BUSINESS WIRE)--March 11, 2008--Diamond Foods, Inc. (Nasdaq:DMND) today reported financial results for its fiscal 2008 second quarter. Diluted earnings per share (EPS) for the quarter grew 31 percent to $0.17 compared to $0.13 for the prior year's comparable period. Last year's second fiscal quarter EPS included $0.01 in income associated with restructuring and other activities that did not recur in the current period. For the six months ended January 31, 2008, EPS was $0.69 compared to $0.74 for the prior year's comparable period. The prior year's six month EPS included a gain of $0.11 per share from the curtailment of a pension plan, a net gain of $0.02 per share principally related to closing and selling a production facility and consolidating operations in another facility, and $0.01 in income associated with restructuring and other activities which did not recur in the current period. "Our business is on a trajectory to generate strong operating earnings growth for the fiscal year," said Michael J. Mendes, President and CEO. "This reflects the pricing power of our brands and allows us to more aggressively rationalize some of our less profitable items. We are taking a more measured approach to expanding distribution of our snack business to protect its long-term positioning." Net sales were $133.8 million for the three months ended January 31, 2008 compared to $143.6 million for the three months ended January 31, 2007, a decrease of 7 percent due to an earlier harvest this year than last which shifted sales to the first fiscal quarter. For the six months ended January 31, 2008, net sales grew 2 percent to $318.3 million compared to $313.1 million for the prior year's comparable period. Recent Financial and Corporate Development Highlights
Fiscal 2008 Outlook We reaffirm the following full-year fiscal 2008 financial guidance, which was most recently updated on February 20 at an industry conference:
For the three months ending April 30, 2008, we expect net sales of between $93 million and $103 million, and EPS of between $0.04 and $0.08. The third fiscal quarter is seasonally the weakest fiscal quarter for Diamond. Financial Results Net sales by product line were:
Three months ended Six months ended
January 31, January 31,
(in thousands) 2008 2007 2008 2007
----------------------------------------------------------------------
Culinary $ 72,293 $ 61,657 $ 144,840 $ 129,378
Snack 19,572 21,232 38,175 36,623
In-shell 10,787 18,083 41,702 45,640
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Total North American Retail 102,652 100,972 224,717 211,641
Ingredient 12,633 17,606 27,885 39,775
International 17,878 24,267 64,339 60,248
Other 635 777 1,394 1,470
---------------------------------------
Total $ 133,798 $ 143,622 $ 318,335 $ 313,134
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For the three months ended January 31, 2008, gross profit as a percentage of net sales was 16.8 percent, a 260 basis point improvement over the prior year period's 14.2 percent. Gross profit per pound shipped increased 48 percent to $0.548 compared to $0.370 during the prior year period due to price increases taken to cover higher input costs. For the six months ended January 31, 2008, gross profit as a percentage of net sales was 16.3 percent, a 90 basis point improvement over the prior year period's 15.4 percent. Gross profit per pound shipped increased 23 percent to $0.436 compared to $0.356 during the prior year period. For the three months ended January 31, 2008, selling, general and administrative expense was $10.4 million, a $1.1 million decline from the comparable prior year period due primarily to lower broker and administrative costs. Stock-based compensation was $1.5 million and $1.4 million for the current and prior year comparable periods, respectively. Selling, general and administrative expense as a percentage of net sales improved to 7.8 percent, compared to 8.0 percent for the prior year period. For the six months ended January 31, 2008, selling, general and administrative expense was $21.8 million, a $1.2 million decline from the comparable prior year period. Stock based compensation was $3.1 million and $2.6 million for the current and prior year comparable periods, respectively. Advertising expense for the three and six months ended January 31, 2008 was $7.4 million and $11.8 million, compared to $5.1 million and $8.4 million for the prior year periods. The increases over the prior year periods reflect the introduction of new television commercials during the Emerald Bowl in December 2007. As of January 31, 2008, Diamond had $59 million in cash and cash equivalents, no short-term debt, $20.3 million in long-term debt, and 16 million common shares issued and outstanding. Operating cash flow for the quarter was $64 million; for the 6-month period it was $30 million compared to a usage of $9 million during the prior year period. Conference Call Diamond will host an investor conference call and web cast today, March 11, 2008 at 1:30 p.m. Pacific Time to discuss fiscal 2008 second quarter results. The dial-in number for the conference call is 877-243-0333 for U.S./Canada participants and 706-634-1263 for all other participants. The conference ID is 3570-5785. A taped replay of the conference call will be available beginning approximately two hours after the call's conclusion, and will remain available through March 18, 2008 at midnight Eastern Time, and can be accessed by dialing 800-642-1687 for U.S./Canada callers and 706-645-9291 for international callers, with the conference ID above. To access the live web cast of the call, visit the Diamond Foods website at http://www.diamondfoods.com/ and select "Investor Relations." An archived web cast will also be available at http://www.diamondfoods.com/ under "Investor Relations." Financial Statements Diamond's financial results for the three and six months ended January 31, 2008 and 2007 were as follows:
Three months ended Six months ended
January 31, January 31,
(in thousands, except per share
amounts) 2008 2007 2008 2007
----------------------------------------------------------------------
Net sales $ 133,798 $ 143,622 318,335 $313,134
Cost of sales 111,371 123,281 266,359 264,853
-------------------------------------
Gross profit 22,427 20,341 51,976 48,281
Operating expenses:
Selling, general and
administrative 10,441 11,512 21,829 23,045
Advertising 7,439 5,117 11,795 8,354
Restructuring and other costs,
net -- (190) -- (854)
Gain on curtailment of defined
benefit plan -- -- -- (3,039)
-------------------------------------
Total operating expenses 17,880 16,439 33,624 27,506
-------------------------------------
Income from operations 4,547 3,902 18,352 20,775
Interest expense, net 233 290 584 571
Other -- 112 -- 82
-------------------------------------
Income before income taxes 4,314 3,500 17,768 20,122
Income taxes 1,640 1,470 6,752 8,451
-------------------------------------
Net income 2,674 $ 2,030 11,016 $ 11,671
=====================================
Earnings per share:
Basic $ 0.17 $ 0.13 $ 0.69 $ 0.74
Diluted $ 0.17 $ 0.13 $ 0.69 $ 0.74
Shares used to compute earnings
per share:
Basic 16,044 15,772 16,019 15,755
Diluted 16,101 15,772 16,048 15,755
About Diamond's Non-GAAP Financial Measure. This release contains Adjusted EBITDA, a non-GAAP financial measure of Diamond's performance. Non-GAAP financial measures should not be considered a substitute for financial measures prepared in accordance with GAAP, since non-GAAP financial measures do not reflect a comprehensive system of accounting and differ from the most comparable GAAP financial measure. They may also differ from non-GAAP financial measures used by other companies; as a result, a reconciliation of Net Income to Adjusted EBITDA is included in this release. Adjusted EBITDA is used by management as a measure of our operating performance. Adjusted EBITDA is defined as net income before net interest expense, income taxes, equity compensation, depreciation, amortization, and other non-operating and non-recurring expenses. We believe that Adjusted EBITDA is useful as an indicator of ongoing operating performance. As a result, some management reports feature Adjusted EBITDA, in conjunction with traditional GAAP measures, as part of our overall assessment of company performance. However, we do not place undue reliance on Adjusted EBITDA, as it is only one of many measures of operating performance. Adjusted EBITDA is also not a complete measure of an entity's profitability because it excludes certain costs and expenses required to determine net income in accordance with GAAP. The principal limitation of non-GAAP measures is that they exclude significant income or expenses required under GAAP. They also reflect the exercise of management's judgments about which adjustments are appropriately made. To mitigate this limitation, Diamond presents the impact of adjustments in connection with GAAP results, and recommends that investors do not give undue weight to them. Diamond believes that non-GAAP measures can provide useful information to investors by allowing them to view the business through the eyes of management, facilitating comparison of results across historical and future periods, and providing a focus on the underlying operating performance of the business. Reconciliation of Net Income to Adjusted EBITDA:
Year ended July 31, Six months ended
-------------------------
(in thousands) Guidance 2008 January 31,
-------------------------
2007 2007 2008
Actual Low end High end Actual Actual
-------------------------------------------
Net Income $ 8,433 $ 12,960 $ 14,580 $ 11,671 $ 11,016
Income taxes 2,793 7,943 8,936 8,451 6,752
-------------------------------------------
Income before income
taxes 11,226 20,903 23,516 20,122 17,768
Other 98 100 200 82 --
Interest expense, net 1,291 1,097 984 571 584
-------------------------------------------
Income from operations 12,615 22,100 24,700 20,775 18,352
Stock-based compensation
expense(1) 5,859 6,800 6,800 2,612 3,099
Depreciation and
amortization 7,561 7,000 7,000 3,724 3,138
Restructuring and other
costs, net (15) -- -- (854) --
Loss (gain) on
termination
(curtailment) of defined
benefit plan 3,054 -- -- (3,039) --
-------------------------------------------
Adjusted EBITDA $29,074 $ 35,900 $ 38,500 $ 23,218 $ 24,589
===========================================
(1) 2008 full-year stock-based compensation represents the mid-point
of guidance.
Note regarding forward-looking statements This release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, including projections of Diamond's results. Forward-looking statements necessarily depend on assumptions, data or methods that may be incorrect or imprecise and are subject to risks and uncertainties. Actual results could differ materially from projections made in this release. Some factors that could cause actual results to differ from our expectations include availability and pricing of raw materials, loss of key customers and an increase in competition. A more extensive list of factors that could materially affect our results can be found in Diamond's periodic filings with the Securities and Exchange Commission. They are available publicly and on request from Diamond's investor relations department. About Diamond Diamond is a leading branded food company specializing in processing, marketing and distributing culinary nuts and snack products under the Diamond(R) and Emerald(R) brands.
CONTACT: Diamond Foods, Inc.
SOURCE: Diamond Foods, Inc. |
