GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Diamond Foods Inc. Reports Operating Results (10-Q)

November 14, 2012 | About:
10qk

10qk

18 followers
Diamond Foods Inc. (DMND) filed Quarterly Report for the period ended 2012-01-31.

Diamond Foods, Inc. has a market cap of $396.5 million; its shares were traded at around $19.86 with and P/S ratio of 0.4. Diamond Foods, Inc. had an annual average earning growth of 43.7% over the past 5 years.

Highlight of Business Operations:

Diamond Foods, Inc. (the Company or Diamond) is an innovative packaged food company focused on building 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 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 the United Kingdom, which added the complementary premium Kettle Brand® to Diamonds existing portfolio of leading brands in the snack industry. Diamond sells its products to global, national, regional and independent grocery, drug, and convenience store chains, as well as to mass merchandisers, club stores, other retail channels and non-retail channels. Sales to the Companys largest customer accounted for approximately 18.2% and 18.3% of total net sales for the three and six months ended January 31, 2012 and 15.4% and 15.7% of total net sales for the three and six months ended January 31, 2011. Sales to the second largest customer accounted for approximately 11.4% and 10.1% of total net sales for the three and six months ended January 31, 2012 and 9.9% and 9.4% of total net sales for the three and six months ended January 31, 2011.

In February 2010, Diamond entered into an agreement with a syndicate of lenders to replace its prior credit facility with a five-year $600 million secured credit facility (the Secured Credit Facility). As of January 31, 2012, the Secured Credit Facility consisted of a $285 million revolving credit facility, of which $209 million was outstanding, and a $400 million term loan facility, of which $330 million was outstanding. Since the inception of the Secured Credit Facility, the syndicate of lenders has approved two requests to increase the revolving credit facility of the Secured Credit Facility: in March 2011, the revolving credit facility was increased from $200 million to $235 million to fund increased working capital requirements, and in August 2011, the revolving credit facility was increased from $235 million to $285 million to accommodate spending related to the proposed Pringles merger and to increase general liquidity. In both cases, the terms of the revolving credit facility were not changed. On the term loan, scheduled principal payments were $40 million for fiscal 2012 and each of the succeeding two years (due quarterly), and $10 million for each of the first two quarters in fiscal 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. As of January 31, 2012, borrowings under the Secured Credit Facility initially bear interest, at Diamonds option, at either a fluctuating rate per annum (the Base Rate) plus a margin of 2.50%, 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 months and six months ended January 31, 2012, the blended interest rate was 3.7% and 3.8%, respectively, for the Companys consolidated borrowings. Substantially all of the Companys tangible and intangible assets are considered collateral security under the Secured Credit Facility.

Sales to our largest customer, Wal-Mart Stores, Inc. (which includes sales to both Sams Club and Wal-Mart) represented approximately 18.2% and 18.3% of total net sales for the three and six months ended January 31, 2012 and 15.4% and 15.7% of total net sales for the three and six months ended January 31, 2011. Sales to our second largest customer accounted for approximately 11.4% and 10.1% of total net sales for the three and six months ended January 31, 2012 and 9.9% and 9.4% of total net sales for the three and six months ended January 31, 2011.

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 $34.3 million and $63.8 million for the three and six months ended January 31, 2012 and $24.1 million and $47.3 million for the three and six months ended January 31, 2011. Selling, general and administrative expenses as a percentage of net sales were 13.1% and 11.6% for the three and six months ended January 31, 2012 and 9.4% and 9.3% for the three and six months ended January 31, 2011. The increase in expense was primarily due to costs incurred as a result of the audit committee investigation and related lawsuits.

Interest expense, net. Net interest expense was $6.5 million and $12.2 million for the three and six months ended January 31, 2012 and $6.0 million and $12.1 million for the three and six months ended January 31, 2011. Net interest expense as a percentage of net sales was 2.5% and 2.2% for the three and six months ended January 31, 2012 and 2.3% and 2.4% for the three and six months ended January 31, 2011.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Email Hide