Diamond Foods in transition

by Monica Watrous
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Diamonds Kettle Brand chips and Pop Secret popcorn
Diamond's Snacks segment gross profit fell 1.5%, and net sales declined 0.7%.

SAN FRANCISCO — Ahead of its proposed merger with Snyder’s-Lance, Diamond Foods, Inc. reported quarterly results that reflect the impact of recent pricing actions and product rationalization. For the first quarter ended Oct. 31, Diamond Foods had net income of $7,779,000, equal to 25c per share on the common stock, up 1.1% from $7,694,000, or 25c per share, for the prior-year period. Net sales declined nearly 9% to $224,849,000 from year-ago sales of $246,621,000.

Brian Driscoll, Diamond Foods
Brian J. Driscoll, president and c.e.o. of Diamond

“We are pleased with our first-quarter financial results overall, which were driven by continued strong gross margin improvement,” said Brian J. Driscoll, president and chief executive officer. “Net sales, however, were adversely impacted by our decision to exit high-volume, low-margin nut s.k.u.s and by lower net price realization in international walnut sales.”

In the Snacks segment, which includes Pop Secret popcorn and Kettle potato chip brands, gross profit fell 1.5% to $42,307,000, and net sales declined 0.7% to $115,799,000. The decrease was due to lower net price realization for Kettle in the United Kingdom and Pop Secret and unfavorable foreign exchange impact, which partially was offset by improved net price realization for Kettle in the United States and strong volume growth in Kettle in both the U.K. and the United States.

In the Nuts segment, which includes Emerald and Diamond of California brands, gross profit advanced 13% to $18,572,000, and net sales tumbled 16% to $109,050,000. The decrease in sales was due to the exit of high-volume, low-margin products and lower net price realization in international walnuts, which partially was offset by higher net price realization for Emerald and other Diamond of California products.

Diamond Foods Emerald cashews and Diamond of California almonds
In Diamond's Nuts segment, gross profit advanced 13%, and net sales tumbled 16%.

“Notably, Kettle U.S. continued to post strong growth, we started to realize signs of a recovery in the U.K., and the Emerald brand transition is almost complete with solid signs of future growth ahead,” Mr. Driscoll said. “This progress, combined with the strength of our new product pipeline, bolsters our optimism about our sales momentum for the balance of this fiscal year. Our business remains on track to meet our original annual outlook, and we remain excited about the future combination of Diamond and Snyder’s-Lance as we work diligently toward a targeted closing in the first quarter of calendar 2016.”

On Oct. 28, Snyder’s-Lance, Inc., Charlotte, N.C., entered into an agreement to acquire Diamond Foods in a cash and stock transaction valued at approximately $1.91 billion, including the assumption of approximately $640 million of debt. Under the terms of the proposed merger, Diamond shareholders will receive 0.775 shares of Snyder’s-Lance common stock and $12.50 in cash per share of Diamond common stock upon closing of the transaction.
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