Diamond Foods Reports Financial Results for First Three Quarters of Fiscal 2012

Diamond Foods Reports Financial Results for First Three Quarters of Fiscal
2012

Completes Fiscal 2010 and 2011 Restatement

SAN FRANCISCO, Nov. 14, 2012 (GLOBE NEWSWIRE) -- Diamond Foods, Inc.
(Nasdaq:DMND) ("Diamond") today reported financial results for the first three
quarters of its fiscal 2012 and filed with the Securities and Exchange
Commission ("SEC") its restated consolidated financial statements for the
fiscal years 2010 and 2011, and interim periods ended January 31, 2010, April
30, 2010, July 31, 2010, October 31, 2010, January 31, 2011, April 30, 2011
and July 31, 2011. The restatement resulted in reductions in income before
taxes of $39.5 million in fiscal 2011 and $17.0 million in fiscal 2010 from
amounts previously reported.

"Today Diamond made an important first step in becoming current with our
financial reporting and we look forward to completing our other required
filings," said Diamond's Chief Executive Officer Brian Driscoll, who joined
the company on May 8, 2012. "Clearly, the results for the first three quarters
of 2012 demonstrate that Diamond faced challenges. However, we have a strong
brand portfolio to build upon and have launched a new strategic direction with
a focus on investing in innovation and brand building, significantly improving
our cost structure and rebuilding our walnut supply."

Q1 – Q3 Fiscal Year 2012 Financial Review

  *For the three quarters ended April 30, 2012, net sales were $757.4
    million, up 3.5 percent over the prior year restated period. The increase
    was primarily due to an 11.0 percent increase in culinary/retail in-shell
    sales and a 10.0 percent increase in snack sales, offset by a 36.2 percent
    decrease in total non-retail sales. The decline in non-retail sales was
    primarily due to a significant drop in walnut crop deliveries to Diamond
    in the fall of 2011.
    
  *Gross profit as a percentage of net sales was 18.1 percent in the first
    three quarters of fiscal 2012, down from 22.9 percent in the prior year
    restated period. The greatest impact on gross margin was a substantial
    decline in walnut crop deliveries to Diamond and an increase in average
    walnut cost per pound of over 50 percent. Rising prices of other
    commodities and higher operating costs primarily due to excess plant
    capacity also contributed to the downward pressure on gross margin.
    
  *Selling, general and administrative expense (SG&A) was $97.0 million in
    the first three quarters of fiscal 2012, a 35.6 percent increase compared
    to $71.6 million in the prior year restated period. The increase in SG&A
    expense was primarily related to the audit committee investigation,
    restatement and related expenses. When adjusted for certain costs
    associated with the audit committee investigation, restatement, and
    related matters, SG&A was $76.0 million compared to $71.6 million in the
    prior year restated period. The increase was due primarily to an increase
    in selling related expenses.
    
  *Advertising expense was $31.6 million in the first three quarters of
    fiscal 2012 compared to $34.4 million in the prior year restated period, a
    decline of 8.2 percent. The decrease in advertising expenses was primarily
    due to the cancellation of programs during the third quarter of fiscal
    2012 in an effort to reduce costs.
    
  *Acquisition and integration expenses were $40.6 million in the first three
    quarters of fiscal 2102 primarily related to the terminated Pringles
    acquisition, compared to $7.5 million in the prior year restated period
    primarily related to Kettle integration.
    
  *Interest expense was $19.9 million in the three quarters of fiscal 2012
    compared to $18.1 million in the prior year restated period, an increase
    of 9.9% due primarily to the forbearance fee of 0.25% paid to our lenders.
    
  *Income tax expense was $1.7 million in the first three quarters of fiscal
    2012, compared to $12.3 million in the prior year restated period. The tax
    benefits of the company's pre-tax loss of $51.7 million for the first
    three quarters of fiscal 2012 were offset by a $27.6 million charge to
    establish a valuation allowance against deferred tax assets. The valuation
    allowance charge was a result of recent net operating losses. Diamond also
    recognized a $5.6 million benefit in taxes in the first quarter of fiscal
    2012 due to a favorable ruling with the U.K. tax authorities. Reversal of
    the valuation allowance in future periods is dependent on future taxable
    income and would result in income tax benefit in those periods.
    
  *The net loss for the first three quarters of fiscal 2012 was $53.4 million
    compared to net income of $23.7 million in the prior year restated period.
    The decrease was due primarily to the decline in gross profit, the
    significant increase in expenses related to the audit committee
    investigation, restatement, and Pringles integration planning, and the tax
    charge related to the valuation allowance against net deferred tax assets.
    
  *Non-GAAP income before income taxes for the first three quarters of fiscal
    2012, which excludes acquisition and integration, audit committee
    investigation, restatement, legal and other related expenses, was $11.0
    million compared to $43.6 million in the prior year restated period. The
    decrease was due primarily to the decline in gross profit. Please refer to
    thenon-GAAP information table that follows.
    
  *GAAP EPS on a fully diluted basis for the first three quarters of fiscal
    2012 was ($2.46) compared to $1.05 in the prior year restated period.
    
  *Non-GAAP EPS on a fully diluted basis for the first three quarters of
    fiscal 2012 was $0.53 compared to a restated non-GAAP EPS of $1.54 in the
    prior year restated period. Please refer to thenon-GAAP information table
    that follows.
    
  *Capital expenditures were $40.6 million in the first three quarters of
    fiscal 2012, compared to $15.2 million in the prior year restated period.
    The increase was primarily due to the Kettle plant expansions in Beloit,
    Wisconsin and Norwich, England and for automation of Emerald's 'Breakfast
    on the Go' product line.
    
  *Adjusted EBITDA for the first three quarters of fiscal 2012 declined to
    $58.9 million from $89.6 million in the prior year primarily due to lower
    gross profit. Please refer to the reconciliation ofnet income to adjusted
    EBIDTA that follows.
    
  *As of July 31, 2012, cash and availability on Diamond's bank revolving
    line of credit was in excess of $70 million.

Brand Performance

In the most recent 12-week Nielsen tracking period ended October 27, 2012,
retail sales results reflect Diamond's recent changes in brand strategy
direction. For both Emerald and Kettle, Diamond has reduced trade spend to
improve net price realization and leverage brand equity rather than use
discounting as a means to drive sales. While Emerald snack nuts and Kettle
Brand potato chips experienced retail sales declines and lost share as a
result of planned reductions in promotional spending, non-promoted sales
growth for both brands outpaced category growth resulting in share gains in a
non-promoted environment. Emerald Breakfast on the go! and Pop Secret outgrew
their respective categories and gained share. Diamond of California culinary
sales declined primarily due to volume declines following price increases,
which resulted in lost share in the category.

Diamond's U.S. Nielsen retail scanner performance along with category data for
the 12-week period ended October 27, 2012 (U.S. Expanded All Outlets Combined)
compared to the similar prior year period was as follows:


                         Brand YoY    Category YoY    Market Share
                          Change       Change          Change
Emerald snack nuts        -5.5%       +8.2%           -90 basis points
Emerald Breakfast on the  +28.7%       -0.4 %          +30 basis points
go!
Pop Secret                +11.7%       +0.7%           +220 basis points
Kettle U.S.               -8.0%        +5.5%           -40 basis points
Diamond of California     -2.8%        +10.1%          - 340 basis
                                                       points
Source: Nielsen Expanded All Outlets Combined sales for 12-week period
ended October 27, 2012. All comparisons in this table are to the same      
measured period in the prior year.

Business Outlook

Full-year fiscal 2012 financial results have not yet been finalized, but the
following are estimates for full year results:

  *Net sales: $975 to $980 million
  *Snack sales: $600 to $605 million
  *Culinary sales: $290 to $295 million
  *Gross margin: 18.0% to 18.5%
  *Adjusted EBITDA: $78 to $81 million

Note: Adjusted EBITDA above excludes Pringles integration related costs,
Fishers, Indiana plant closure charges, audit committee and restatement
related accounting and legal expenses and other costs.

Restatement

Diamond today also filed its restated consolidated financial statements for
fiscal years 2011 and 2010 and interim periods ended January 31, 2010, April
30, 2010, July 31, 2010, October 31, 2010, January 31, 2011, April 30, 2011
and July 31, 2011 with the SEC.

"The company regrets the extended time investors had to wait for financial
reports during the restatement process," said Brian Driscoll, Diamond's
President and CEO. "The company has emerged from this process with
strengthened financial discipline and rigorous commitment to enhancing
internal controls and remediating material weaknesses."

  *The Audit Committee and the company have determined that certain grower
    payments of $20.8 million and $61.5 million previously accounted for in
    fiscal 2011 and 2012, were not accounted for in the correct periods.
    Corrections were made to account for these payments in the appropriate
    periods of fiscal 2010 and 2011. The restatement also included corrections
    related to accounts payable and accrued expenses which were accounted for
    in incorrect periods; these adjustments decreased net income $3.5 million
    in 2011 and $0.1 million in 2010.
    
  *The restatement resulted in a reduction in fiscal 2011 income before
    income taxes of $39.5 million ($69.1 million previously reported compared
    to $29.7 million restated), and $17.0 million in fiscal 2010 ($40.2
    million previously reported compared to $23.2 million restated). Please
    refer to thesummarized GAAP Statement of Operations table that follows.
    
  *Diluted EPS for restated fiscal 2011 was $1.17 compared to $2.22 per share
    as previously reported and $0.82 for restated fiscal 2010 as compared to
    $1.36 per share as previously reported.
    
  *Non-GAAP diluted EPS for restated fiscal 2011 was $1.76 compared to $2.61
    per share as previously reported and $1.29 for restated fiscal 2010 as
    compared to $1.91 per share as previously reported. Please refer to the
    non-GAAP financial information table that follows.
    
  *Gross margin for restated fiscal 2011 was 22.4 percent compared to 26.0
    percent as previously reported and 21.2 percent for restated fiscal 2010
    as compared to 23.7 percent as previously reported. The decrease primarily
    was due to the correction of the walnut costs, which increased cost of
    goods sold in fiscal 2010 and 2011.
    
  *Adjusted EBITDA for restated fiscal 2011 was $111.5 million compared to
    $146.2 million as previously reported and $68.2 million for restated
    fiscal 2010 compared to $84.9 million as previously reported.
    
  *In connection with the Audit Committee investigation, management
    identified material weaknesses in internal control over financial
    reporting in three areas: control environment, walnut grower accounting,
    and accounts payable and accrued expenses. Numerous remediation steps have
    been implemented or are in progress to correct these weaknesses,
    including: enhanced oversight and controls, leadership changes, revised
    walnut cost estimation policy, enhanced documentation, oversight and
    monitoring of accounting policies related to walnut payments, and improved
    financial and operational reporting throughout the organization. For a
    list of remediation steps, please refer to the 10-K/A or supplemental
    presentation, both of which are available on the Diamond Foods website.

Conference Call and Webcast

Diamond will host an investor conference call and webcast today, November 14,
2012, at 2:00 p.m. Pacific Standard Time, to discuss these results and the
restatement. To participate in the call via telephone dial (877) 681-3373 from
the U.S./Canada or (719) 325-2171 elsewhere and enter the participant pass
code of 279-604. To listen to the call over the internet, visit Diamond's
website at www.diamondfoods.com and select "Investor Relations."

Archived audio replays of the call will be available on the Company's website
and via telephone. The latter will begin approximately two hours after the
call's conclusion and remain available through 5:00 p.m. Pacific Standard Time
November 21, 2012. It can be accessed by dialing (888) 203-1112 from the
U.S./Canada or (719) 457-0820 elsewhere. Both phone numbers require the
participant pass code 884-2287.

To receive email notification of future press releases from Diamond Foods,
please visit http://investor.diamondfoods.com and select "email alerts."

                                                              
Net Sales by Product Line
Fiscal 2012 (Unaudited)
                                                              
                                                         Three     % Change in
                                                         Quarters  Year over
(in thousands)               Q1       Q2       Q3        Ended     Year
                                                         April 30, Three
                                                         2012      Quarter
                                                                   Period
Snack                        $157,122 $141,818 $147,653  $446,593  10.0%
Culinary/Retail in-shell     98,112   94,677   49,127    241,916   11.0%
Total Retail                255,234  236,495  196,780  688,509   10.4%
                                                              
International Non-Retail     21,444   21,025   4,174     46,643    -47.7%
NA Ingredient/Food           10,715   4,831    6,731     22,277    18.0%
Service/Other
Total Non-Retail            32,159   25,856   10,905   68,920    -36.2%
Total Net Sales              $287,393 $262,351 $207,685 $757, 429 3.5%
                                                              
                                                              
                                                              
Fiscal 2011 (Restated)
                                                         Three
                                                         Quarters
(in thousands)               Q1       Q2       Q3        Ended     
                                                         April 30,
                                                         2011
Snack                        $137,056 $134,183 $134,799  $406,039  
Culinary/Retail in-shell     90,190   80,711   46,983    217,884   
Total Retail                227,246  214,894  181,782  623,923   
                                                              
International Non-Retail     21,015   36,793   31,368    89,176    
NA Ingredient/Food           3,800    5,157    9,916     18,873    
Service/Other
Total Non-Retail            24,815   41,950   41,284   108,049   
Total Net Sales              $252,061 $256,844 $223,066 $731,972  





Summarized GAAP Statement of Operations:
                                  
(in thousands, except per share    Three Quarters Ended Three Quarters %
amounts)                           April 30, 2011       Ended          Change
                                   (Restated)           April 30, 2012
Net sales                          $731,972            $757,429       3.5%
Cost of sales                      564,394              619,972        9.8%
Gross profit                       167,578              137,457        (18.0%)
Gross margin                       22.9%                18.1%          (4.8%)
Operating expenses:                                                  
Selling general and administrative 71,570               97,019         35.6%
Advertising                        34,362               31,554         (8.2%)
Acquisition and integration        7,548                40,641         438%
related expenses
Total operating expenses           113,480              169,214        49.1%
Income (loss) from operations      54,098               (31,757)       (159%)
Interest expense, net              18,050               19,933         10.4%
Income (loss) before income taxes  36,048               (51,690)       (243%)
Income tax expense (benefit)       12,315               1,710          (86.1%)
Net income (loss)                  $23,733              ($53,400)      (325%)
                                                                    
Earnings (loss) per share:                                           
Basic                              $1.08                ($2.46)        
Diluted                            $1.05                ($2.46)        
Shares used to compute earnings                                      
per share:
Basic                              21,563               21,676         
Diluted                            22,119               21,676         



                                                


Summarized GAAP Statement of Operations:
                                 Fiscal 2012 (Unaudited)
(in thousands, except per share                                 Three Quarters
amounts)                          Q1       Q2        Q3         Ended
                                                                April 30, 2012
Net sales                         $287,393 $262,351  $207,685   $757,429
Cost of sales                     226,086  220,429   173,457    619,972
Gross profit                      61,307  41,922   34,228    137,457
Operating expenses:                                          
Selling general and               29,455   34,304    33,260     97,019
administrative
Advertising                       12,716   11,638    7,200      31,554
Acquisition and integration       17,214   12,091    11,336     40,641
related expenses
Total operating expenses          59,385   58,033    51,796     169,214
Income (loss) from operations     1,922    (16,111)  (17,568)   (31,757)
Interest expense, net             5,761    6,471     7,701      19,933
Income (loss) before income taxes (3,839)  (22,582)  (25,269)   (51,690)
Income tax expense (benefit) **   (14,640) (2,398)   18,748    1,710
Net income (loss)                 $10,801  ($20,184) ($44,017) ($53,400)
                                                            
Earnings (loss) per share:                                   
Basic                             $0.49    ($0.93)   ($2.02)    ($2.46)
Diluted                           $0.47    ($0.93)   ($2.02)    ($2.46)
Shares used to compute earnings                              
per share:
Basic                             21,668   21,724    21,752     21,676
Diluted                           22,567   21,724    21,752     21,676

**Q1 tax benefit is comprised of: discrete tax benefit of $5.5 million
resulting, primarily, from the conclusion of a tax ruling with the United
Kingdom tax authorities, acquisition and integration related expenses
resulting in a tax benefit of $6.1 million, and the forecasted annual tax rate
applied to profit before tax and acquisition and integration related expenses,
resulting in a tax benefit of $3.0 million.

Q2 tax benefit is the result of acquisition and integration related expenses
and the forecasted annual tax rate applied to profit before tax and
acquisition and integration related expenses.

Q3 tax expense is, primary, the effect of a valuation allowance applied
against deferred tax assets (principally, net operating losses in the current
fiscal year and carryforward State tax credits).


Summarized GAAP Statement of Operations:
                                    Fiscal 2011 (Restated)
(in thousands, except per share                                 Three Quarters
amounts)                             Q1       Q2       Q3       Ended
                                                                April 30, 2011
Net sales                            $252,061 $256,844 $223,066 $731,972
Cost of sales                        195,953  197,866  170,576  564,394
Gross profit                         56,108  58,978  52,490   167,578
Operating expenses:                                          
Selling general and administrative   23,289   24,052   24,229   71,570
Advertising                          12,469   10,170   11,723   34,362
Acquisition and integration related  579     1,023    5,946    7,548
expenses
Total operating expenses             36,337   35,245   41,898   113,480
Income (loss) from operations        19,771   23,733   10,592   54,098
Interest expense, net                6,117    5,992    5,941    18,050
Income (loss) before income taxes    13,654   17,741   4,651    36,048
Income taxes (benefit)               4,372    6,643    1,300    12,315
Net income (loss)                    $9,282   $11,098  $3,351   $23,733
                                                            
Earnings (loss) per share:                                   
Basic                                $0.42    $0.51    $0.15    $1.08
Diluted                              $0.42    $0.49    $0.15    $1.05
Shares used to compute earnings per                          
share:
Basic                                21,489   21,565   21,604   21,563
Diluted                              21,933   22,212   22,332   22,119



Summarized Balance Sheet Data:
                                   Fiscal 2012 (Unaudited)
                                                 
(in thousands)                      Q1      Q2      Q3
Cash and cash equivalents           $4,474  $1,333  $7,592
Trade receivables, net              141,760 93,782  89,528
Inventories                         254,860 220,611 200,937
Total current assets                463,161 383,697 350,864
Property, plant and equipment, net  146,417 157,303 159,985
Other intangible assets, net        446,267 441,669 443,276
Goodwill                            406,850 403,903 408,075
Current liabilities, excluding debt 330,372 288,531 249,090
Total debt                          576,778 558,449 598,815
Stockholders' equity                425,321 402,130 366,504

                                   
                                   Fiscal 2011 (Restated)
                                   
(in thousands)                      Q1      Q2      Q3      Q4
Cash and cash equivalents           $8,012  $2,276  $1,541  $3,112
Trade receivables, net              122,660 80,648  105,324 98,275
Inventories                         239,007 234,048 204,714 153,534
Total current assets                402,366 349,963 349,626 299,999
Property, plant and equipment, net  118,243 117,022 126,907 134,275
Other intangible assets, net        453,830 451,745 455,119 450,855
Goodwill                            406,255 406,186 412,211 409,735
Current liabilities, excluding debt 284,322 242,012 212,861 205,853
Total debt                          555,000 548,900 572,369 531,701
Stockholders' equity                392,128 404,378 421,825 420,495

                                  
                                  
Non-GAAP Financial Information:
                                  Fiscal 2012 (Unaudited)
(in thousands, except for per                                   Three Quarters
share amounts)                     Q1       Q2        Q3        Ended
                                                                April 30, 2012
GAAP (loss) before income taxes    ($3,839) ($22,582) ($25,269) ($51,690)
Adjustment to exclude acquisition  17,214   12,091    11,336    40,641
and integration related expenses
Adjustment to exclude certain SG&A 2,016    10,710    8,309     21,035
costs
Adjustment to exclude forbearance  --       --        1,006     1,006
fee
Non-GAAP income (loss) before     15,391   219       (4,618)   10,992
income taxes
                                                            
GAAP income taxes (benefit)        (14,640) (2,398)   18,748    1,710
Adjustment for tax effect of       13,686   2,384     (18,462)  (2,392)
Non-GAAP adjustments
Non-GAAP income taxes (benefit)    (954)    (14)      286       (682)
                                                            
Non-GAAP net income (loss)         $16,345  $233      ($4,904)  $11,674
                                                            
Non-GAAP EPS-diluted               $0.71    $0.01     ($0.22)   $0.53
Shares used in computing Non-GAAP  22,932   22,056    22,108    22,026
EPS-diluted *

                                        
                                        Fiscal 2011 (Restated)
(in thousands, except for per share                             Three Quarters
amounts)                                 Q1      Q2      Q3     Ended
                                                                April 30, 2011
GAAP incomebefore income taxes          $13,654 $17,741 $4,651 $36,046
Adjustment to exclude acquisition and    579     1,023   5,946  7,548
integration related expenses
Non-GAAP income before income taxes      14,233  18,764  10,597 43,594
                                                            
GAAP income taxes                        4,372   6,643   1,300  12,315
Adjustment for tax effect of Non-GAAP    (1,651) (3,055) 1,284  (3,422)
adjustments
Non-GAAP income taxes                    2,721   3,588   2,584  8,893
                                                            
Non-GAAP net income                      $11,512 $15,176 $8,013 $34,701
                                                            
Non-GAAP EPS-diluted                     $0.52   $0.67   $0.35  $1.54
Shares used in computing Non-GAAP        22,343  22,622  22,726 22,513
EPS-diluted *


* Includes shares associated with participating securities



Reconciliation of GAAP Net Income to AdjustedEBITDA:
                                  Fiscal 2012 (Unaudited)
                                                                Three Quarters
(in thousands)                     Q1       Q2        Q3        Ended
                                                                April 30, 2012
Net income (loss)                  $10,801  ($20,184) ($44,017) ($53,400)
Income taxes (benefit)             (14,640) (2,398)   18,748    1,710
Income (loss) before income taxes  (3,839)  (22,582)  (25,269)  (51,690)
Interest expense, net              5,761    6,471     7,701     19,933
Income (loss) from operations      1,922    (16,111)  (17,568)  (31,757)
(EBIT)
Acquisition and integration        17,214   12,091    11,336    40,641
related expenses
Certain SG&A costs                 2,016    10,710    7,863     20,589
Stock-based compensation expense   1,902    2,949     2,291     7,142
Depreciation and amortization      7,180    7,353     7,702     22,235
Adjusted EBITDA                    $30,234  $16,992   $11,624   $58,850

                                  
                                  Fiscal 2011 (Restated)
                                                                Three Quarters
(in thousands)                     Q1       Q2        Q3        Ended
                                                                April 30, 2011
Net income                         $9,282   $11,098   $3,351    $23,731
Income taxes                       4,372    6,643     1,300     12,315
Income before income taxes         13,654   17,741    4,651     36,046
Interest expense, net              6,117    5,992     5,941     18,050
Income from operations (EBIT)      19,771   23,733    10,592    54,096
Acquisition and integration        579      1,023     5,946     7,548
related expenses
Stock-based compensation expense   1,772    2,104     1,739     5,615
Depreciation and amortization      7,472    7,506     7,321     22,299
Adjusted EBITDA                    $29,594  $34,366   $25,598   $89,558

                                               
                                                                          
Restated Fiscal 2010 and 2011 Financials                                   
Net Sales by Product                            
Line:
                        Twelve months ended      Twelve months ended
                       July 31,                 July 31,
                        (Restated)               (Previously reported)
                                         %                    %
(in thousands)                             Prior                   Prior
                        2011      2010     Year  2011     2010     Year
Snack                   $553,676 $323,620 71%   $553,165 $321,422 72%
Culinary/Retail         263,161   248,960 6%    262,906  248,994  6%
in-shell
Total Retail           816,837  572,580 43%   816,071  570,416  43%

International           119,017  69,206  72%   119,017  69,206   72%
Non-Retail
NA Ingredient/Food      30,834   40,540  -24%  30,834   40,540   -24%
Service/Other
Total Non-Retail       149,851  109,746 37%   149,851 109,746  37%
Total                   $966,688  $682,326 42%   $965,922 $680,162 42%

                                                                 
Summarized GAAP Statement of Operations:                          
                                                                
                                     Twelve months ended Twelvemonths ended
                                    July 31,            July 31,
                                     (Restated)          (Previously reported)
(in thousands, except per share      2011      2010      2011       2010
amounts)
Net sales                           $966,688  $682,326  $965,922   $680,162
Cost of sales                       750,209   537,484   714,775    519,161
Gross profit                         216,479   144,842   251,147    161,001
Operating expenses:                                              
Selling, general and administrative  97,506    64,551    96,960     64,301
Advertising                          45,035    33,726    44,415     32,962
Acquisition and integration related  20,350    11,328    16,792     11,508
expenses
Total operating expenses             162,891   109,605   158,167    108,771
Incomefrom operations              53,588    35,237    92,980     52,230
Interest expense, net                23,918    10,180    23,840     10,180
Other expense, net                   --       1,849     --         1,849
Income before income taxes          29,670    23,208    69,140     40,201
Income taxes                        3,103     7,532     18,929     13,990
Net income                          $26,567   $15,676   $50,211    $26,211
EPS (earnings per share):                                        
Basic                                $1.21     $0.84     $2.28      $1.40
Diluted                              $1.17     $0.82     $2.22      $1.36
Shares used to compute EPS:                                      
Basic                                21,577    18,313    21,577     18,313
Diluted                              22,233    18,843    22,242     18,843

                                                               
                                                               
Summarized Balance Sheet Data:                                   
                                                               
                                    Twelve months ended Twelve months ended
                                   July 31,            July 31,
                                    (Restated)          (Previously reported)
(in thousands)                      2011      2010      2011       2010
Cash and cash equivalents           $3,112    $5,642    $3,112     $5,642
Trade receivables, net              98,275    65,698    98,218     65,553
Inventories                         153,534   145,832   145,575    143,405
Current assets                      299,999   248,364   276,039    240,089
Property, plant and equipment, net  134,275   118,235   127,407    117,816
Other intangible assets, net        450,855   453,107   450,855    449,018
Goodwill                            409,735   403,264   407,587    396,788
Current liabilities, excluding debt 205,853   145,756   144,060    127,921
Total debt                          531,701   556,100   531,701    556,100
Stockholders' equity                420,495   376,543   454,795    379,943

                        Non-GAAP Financial Information

We have provided the following non-GAAP financial information for the 12
months ended July 31, 2011 and 2010.

                                                                 
Reconciliation of income (loss) before income taxes to non-GAAP EPS:
                                                                 
                                     Twelve months ended Twelve months ended
                                    (Restated)          (Previously reported)
                                     July 31,            July 31,
(in thousands, except per share      2011      2010      2011        2010
amounts)
GAAP income before income taxes     $29,670   $23,208   $69,140    $40,201
Adjustments to exclude loss on
extinguishment of debt and fees for  --        2,324     --         2,324
tax projects
Adjustments to remove costs
associated with Kettle and Pringles  20,350    11,640    16,792      11,820
integration
Non-GAAP income before income taxes 50,020    37,172    85,932      54,345
                                                                 
GAAP income taxes (A)               3,103     7,532     18,929      13,990
Adjustment for tax effect of         7,018     4,820     7,968       3,574
Non-GAAP adjustments (B-A)
                                                                 
Non-GAAP income taxes (B)            10,121    12,352    26,897      17,564
                                                                 
Non-GAAP net income                 $39,899   $24,820   $59,035     $36,781
                                                                 
Non-GAAP EPS-diluted                 $1.76     $1.29     $2.61       $1.91
                                                                 
Shares used in computing Non-GAAP    22,634    19,215    22,642      19,215
EPS-diluted *
                                                                 
* Includes shares associated with                                  
participating securities

                                                                 
                                                                 
Reconciliation of GAAP net income to Adjusted EBITDA:
                                                                 
                                     Twelve months ended Twelve months ended
                                    (Restated)          (Previously reported)
                                     July 31,            July 31,
(in thousands)                     2011       2010     2011        2010
Net income                          $26,567    $15,676  $50,211     $26,211
Income taxes                        3,103      7,532    18,929      13,990
Income before income taxes           29,670     23,208   69,140      40,201
Other expense, net                   --        1,849    --         1,849
Interest expense, net                23,918     10,180   23,840      10,180
Income from operations               53,588     35,237   92,980      52,230
                                                                 
Acquisition and integration related
expenses included in operating       20,350     11,640   16,792      11,820
expenses
Stock-based compensation expense    7,687      3,738    6,974       3,231
Selling, general and administrative  --        475      --         475
Depreciation and amortization        29,865     17,154   29,465      17,154
                                                                 
Adjusted EBITDA                      $111,490   $68,244  $146,211    $84,910
                                                                 

                 About Diamond's non-GAAP Financial Measures

This release contains non-GAAP financial measures of Diamond's performance
("non-GAAP financial measures") for different periods. Non-GAAP financial
measures should not be considered as a substitute for financial measures
prepared in accordance with GAAP. Diamond's non-GAAP financial measures do not
reflect a comprehensive system of accounting, and differ both from GAAP
financial measures and from non-GAAP financial measures used by other
companies. Diamond urges investors to review its reconciliation of non-GAAP
financial measures to GAAP financial measures, and its financial statements to
evaluate its business.

Diamond believes that its non-GAAP financial measures provide meaningful
information regarding operating results because they do not include amounts
that Diamond excludes when monitoring operating results and assessing
performance of the business. Diamond believes that its non-GAAP financial
measures also facilitate comparison of results for current periods and
business outlook for future periods. Diamond's non-GAAP financial measures
include adjustments for the following items:

  *In the third quarter of fiscal 2012, $11.3 million in fees were incurred
    as a result of the proposed merger of Pringles, $5.7 million in fees were
    incurred related to the audit committee investigation, resulting
    restatement, and related items, $2.6 million in expenses were incurred
    related to certain SG&A costs, and $1.0 million in expenses were incurred
    related to the forbearance fee.
    
  *In the second quarter of fiscal 2012, $12.1 million in fees were incurred
    as a result of the proposed merger of Pringles and $10.7 million in fees
    were incurred related to the audit committee investigation.
    
  *In the first quarter of fiscal 2012, $17.2 million in fees were incurred
    as a result of the proposed merger of Pringles, $1.8 million was accrued
    for settlement of walnut labeling claims, and $0.2 million in fees were
    incurred related to the audit committee investigation.
    
  *In the fourth quarter of fiscal 2011, $12.9 million in expenses were
    incurred as a result of the integration of Kettle Foods and the proposed
    merger of Pringles.
    
  *In the third quarter of fiscal 2011, $5.9 million in expenses were
    incurred as a result of the integration of Kettle Foods and the proposed
    merger of Pringles.
    
  *In the second quarter of fiscal 2011, $1.0 million in expenses were
    incurred as a result of the integration of Kettle Foods.
    
  *In the first quarter of fiscal 2011, $0.6 million in expenses were
    incurred as a result of the integration of Kettle Foods.
    
  *In the fourth quarter of fiscal 2010, $1.1 million in expenses were
    incurred as a result of the acquisition of Kettle Foods.
    
  *In the third quarter of fiscal 2010, $12.3 million in expenses were
    incurred as a result of the acquisition of Kettle Foods. Other expense
    included $1.8 million in early extinguishment charges from our prior
    credit facility, and $10.2 million in transaction expenses, primarily
    legal and accounting fees, bridge financing costs and advisory fees.
    Additionally, Cost of Goods Sold included $0.3 million in inventory
    step-up charges.
    
  *In the second quarter of fiscal 2010, $0.5 million in fees were incurred
    primarily to achieve $1 million in various prior period R&D and other tax
    credits, including costs to file amended tax returns.
    
  *Adjusted EBITDA is used by management as a measure of operating
    performance. Adjusted EBITDA is defined as net income before interest
    expense, income taxes, stock-based compensation, depreciation,
    amortization, and other expenses, including the aforementioned acquisition
    and integration costs. 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.

Diamond's management uses non-GAAP financial measures in internal reports used
to monitor and make decisions about its business, such as monthly financial
reports prepared for management. The principal limitation of the non-GAAP
financial measures is that they exclude significant expenses and gains
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 non-GAAP financial measures in connection with GAAP
results, and recommends that investors do not give undue weight to them.
Diamond believes that non-GAAP financial measures 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.

Note regarding forward-looking statements

This press release includes forward-looking statements, including statements
about our future financial and operating performance and results, business
strategy, strength of our brand portfolio, our filing of delayed SEC filings,
our position in the walnut industry, potential for optimizing our cost
structure and streamlining our supply chain, ability to grow, expand margins
and deliver shareholder value, fiscal 2012 financial results, enhancing
internal controls and remediating material weaknesses. These forward-looking
statements are based on our assumptions, expectations and projections about
future events only as of the date of this press release, and we make such
forward-looking statements pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Many of our forward-looking
statements include discussions of trends and anticipated developments under
the "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" sections of the periodic reports that we
file with the SEC. We use the words "anticipate," "believe," "estimate,"
"expect," "intend," "plan," "seek," "may" and other similar expressions to
identify forward-looking statements that discuss our future expectations,
contain projections of our results of operations or financial condition or
state other "forward-looking" information. You also should carefully consider
other cautionary statements elsewhere in this press release and in other
documents we file from time to time with the SEC. We do not undertake any
obligation to update forward-looking statements to reflect events or
circumstances occurring after the date of this press release. Actual results
may differ materially from what we currently expect because of many risks and
uncertainties, such as: uncertainty about the need to file additional periodic
reports and financial information in connection with our restatement
disclosures; risks relating to our leverage and its effect on our ability to
respond to changes in our business, markets and industry; increase in the cost
of our debt; ability to raise additional capital and possible dilutive impact
of raising such capital; risks relating to litigation and regulatory
proceedings; risks related to our current inability to timely file required
periodic reports under the Securities Exchange Act of 1934, as amended, and
any resulting delisting of Diamond's common stock on the NASDAQ Global Select
Market; uncertainties relating to relations with growers; availability and
cost of walnuts and other raw materials; increasing competition and possible
loss of key customers; and general economic and capital markets conditions.

About Diamond

Diamond Foods is an innovative packaged food company focused on building and
energizing brands including Kettle® Chips, Emerald® snack nuts, Pop Secret®
popcorn, and Diamond of California® culinary and snack nuts. The Company's
products are distributed in a wide range of stores where snacks and culinary
nuts are sold.

Corporate Web Site: www.diamondfoods.com

The Diamond Foods, Inc. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=6112

CONTACT: Investors:
         Diamond Foods
         Linda Segre
         SVP, Corporate Strategy
         (415) 230-7952
         lsegre@diamondfoods.com
        
         Media:
         Sard Verbinnen & Co for Diamond Foods
         Paul Kranhold/Lucy Neugart
         (415) 618-8750
         pkranhold@sardverb.com
         lneugart@sardverb.com

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