Diamond Reports Third Quarter Fiscal 2013 Financial Results

Diamond Reports Third Quarter Fiscal 2013 Financial Results

  *Consolidated net sales were $184.9 million, down from $207.7 million.
  *Snacks segment net sales grew 1.6 percent.
  *Nuts segment net sales declined 23.2 percent.
  *Gross profit was $43.4 million, up from $34.2 million.
  *Gross margin was 23.4 percent, up from 16.5 percent.
  *GAAP net loss was $15.6 million, compared to a GAAP net loss of $44.0
    million.
  *Adjusted EBITDA was $23.2 million, up from $11.2 million.
  *Restates GAAP diluted EPS for Q2 and YTD Q2 of fiscal 2013.

       (All comparisons above are to the third quarter of fiscal 2012)

SAN FRANCISCO, June 10, 2013 (GLOBE NEWSWIRE) -- Diamond Foods, Inc.
(Nasdaq:DMND) ("Diamond") today reported financial results for its fiscal 2013
third quarter, which ended April 30, 2013.

In the third quarter of fiscal 2013, Diamond's GAAP net loss was $15.6 million
and its GAAP diluted loss per share ("EPS") was ($0.71). GAAP results for the
quarter included $12.9 million of certain SG&A expenses described below and a
$1.9 million non-cash charge related to a change in the fair value of the
Oaktree warrant liability. Excluding these items, Diamond's non-GAAP net
income for the third quarter of fiscal 2013 was $1.1 million and non-GAAP
diluted EPS was $0.05.

"The progress we are making with our efforts to revitalize the Company is
reflected in our results this quarter," said Diamond's Chief Executive Officer
Brian J. Driscoll. "The improvement in gross margins reflects both an increase
in net price realization in our portfolio and results of our cost saving
efforts that are materializing in our operations and supply chain. While we
still have difficult and important challenges to tackle, we continue to track
toward an operating model that is designed to create sustainable growth."

                               Financial Review

    (All comparisons below are to the third quarter of fiscal 2012 unless
                             specified otherwise)

Consolidated net sales during the quarter decreased 11.0 percent, to $184.9
million, compared to the same quarter of the prior year. Gross profit was
$43.4 million, or 23.4 percent of net sales, for the third quarter of fiscal
2013, compared to $34.2 million, or 16.5 percent of net sales, for the same
quarter in the prior year.

The Company has two reportable segments: Snacks and Nuts. The Snacks segment
includes products sold under the Kettle U.S., Kettle U.K. and Pop Secret
brands. The Nuts segment includes products sold under the Diamond of
California and Emerald brands.

Snacks Performance: Snacks net sales increased 1.6 percent, to $104.2 million
driven by an increase in net price realization partially offset by a 5.5
percent decrease in volume. Snacks gross profit was $36.7 million, or 35.2
percent of net sales, for the third quarter of fiscal 2013, compared to $28.1
million, or 27.4 percent of net sales, for the same quarter in the prior year.
This improvement in Snacks gross profit as a percentage of net sales reflected
an increase in net price realization and a reduction in unit processing costs.

Nuts Performance: Nuts net sales decreased 23.2 percent, to $80.7 million
driven by a 40.3 percent decrease in volume. The primary drivers of the volume
decline were planned reductions in SKUs and lower promotional spending
associated with the Emerald brand and lower walnut supply. Nuts gross profit
was $6.7 million, or 8.3 percent of net sales, in the third quarter of fiscal
2013, compared to $6.1 million, or 5.8 percent of net sales, for the same
quarter in the prior year. This improvement in Nuts gross profit as a
percentage of net sales reflected an increase in net price realization, the
elimination of lower performing SKUs, and cost savings initiatives, partially
offset by an increase in certain commodity costs.

SG&A expense increased to $35.3 million for the third quarter of fiscal 2013,
compared to $33.3 million for the same quarter in the prior year. Included in
the third quarter of fiscal 2013 are $12.9 million of charges related to
Fishers plant closure, impairment of an intangible asset, consulting fees and
legal expenses. Included in the third quarter of fiscal 2012 are $8.3 million
of charges that are related primarily to the audit committee investigation,
restatement expenses and legal expenses.

Advertising expense was $8.0 million, or 4.3 percent of net sales, for the
third quarter of fiscal 2013, compared to $7.2 million, or 3.5 percent of net
sales, for the same quarter in the prior year. This increase in advertising
expense was primarily due to support of the Pop Secret and Kettle brands.

The Company recognized a $1.9 million loss on the Oaktree warrant liability in
the quarter due to the change in the fair value of the warrant between January
31, 2013 and April 30, 2013.

Net interest expense was $14.5 million in the third quarter of fiscal 2013
compared to $7.7 million in the same quarter in the prior year. The increase
was primarily due to the Oaktree debt and the higher interest rate on the
Secured Credit Agreement.

The Company's effective tax rate was 5.1 percent for the third quarter of
fiscal 2013.

GAAP net loss was ($15.6) million compared to a loss of ($44.0) million in the
prior year. On a non-GAAP basis, net income was $1.1 million compared to a net
loss of ($4.9) million in the prior year.

EPS for the third quarter of fiscal 2013 on a GAAP diluted basis was a loss of
($0.71) compared to a loss of ($2.02) in the prior year. Non-GAAP EPS on a
diluted basis was earnings of $0.05 compared to a loss of ($0.22) in the prior
year.

The non-GAAP diluted EPS calculation includes 1.6 million and 1.7 million
shares related to the Oaktree warrants based on the Treasury stock method for
the third quarter and year-to-date periods, respectively.

Capital expenditures were $2.1 million for the third quarter of fiscal 2013.

Adjusted EBITDA was $23.2 million, or 12.6 percent of net sales, in the third
quarter of fiscal 2013, compared to $11.2 million, or 5.4 percent of net
sales, in the prior year. Year-to-date adjusted EBITDA increased $19.6
million, to $77.2 million, compared to the prior year. Please refer to the
table at the end of this press release for a reconciliation of GAAP to
non-GAAP information.

As of April 30, 2013, net debt outstanding was $577.8 million, including the
Oaktree debt at its carrying value, as described in Footnote 3 of the Notes to
Condensed Consolidated Financial Statements included as a part of Diamond's
Quarterly Report on Form 10-Q.

Cash and availability on Diamond's bank revolving line of credit on June 7,
2013 was approximately $96 million.

                                   Outlook

Consistent with the outlook provided in the second quarter, net sales are
expected to decline more in the back half of the fiscal year than the first
half as compared to the prior year. Therefore, fourth quarter sales are
expected to decline more than in the third quarter, driven primarily by the
Nuts Segment. Fourth quarter gross margin is expected to be largely consistent
with year-to-date performance. Advertising spending is expected to increase in
the fourth quarter as compared to the third quarter and the prior year due
largely to campaigns focused on Kettle and Pop Secret.

            GAAP Diluted EPS to be Restated for Q2 of Fiscal 2013

Diamond plans to file an amendment to its quarterly report on Form 10-Q for
the quarterly period ended January 31, 2013, to restate its previously
reported GAAP diluted earnings (loss) per share for the three and six months
ended January 31, 2013. The Company determined that the calculation of diluted
earnings (loss) per share did not reflect the dilutive impact of the change in
fair value in the Oaktree Capital Management, L.P. warrant liability. In
accordance with ASC 260, when calculating diluted earnings (loss) per share,
the gain on the warrant liability should have been reflected as an adjustment
to the income available to common stockholders and the assumed exercise of the
Oaktree warrant should be an adjustment to the weighted average shares
outstanding. These adjustments for the gain or loss attributable to the
Oaktree warrant are required when the effect of the adjustment would be
dilutive. As a result, for the three months ended January 31, 2013, diluted
earnings (loss) per share was restated from the previously reported diluted
earnings per share of $0.43 to a restated diluted loss per share of ($0.37).
For the six months ended January 31, 2013, diluted earnings (loss) per share
was restated from the previously reported diluted loss per share of ($0.03) to
a restated diluted loss per share of ($0.50). Please refer to the restated
information as follows:

                  As Previously                                                             
                  Reported           Adjustment              As Restated            As Reported
                   Three     Six       Three       Six Months  Three      Six Months  Three       Six Months
                   Months    Months    Months      Ended       Months     Ended       Months      Ended
Numerator:         Ended     Ended     Ended       January 31, Ended      January 31, Ended       January
                   January   January   January 31, 2013        January    2013        January 31, 31, 2012
                   31, 2013  31, 2013  2013                    31, 2013               2012
Net income (loss)  $10,141 $(588)  $--      $--      $10,141  $(588)    $(20,184) $(9,383)
Less: income
allocated to       (173)    --      (2)        --        (175)     --        --        --
participating
securities
Income (loss)
attributable to
common             9,968    (588)    (2)        --        9,966     (588)      (20,184)   (9,383)
shareholders -
basic
                                                                                          
Add:undistributed
income
attributable to    175      --      --        --        175       --        --        --
participating
securities
Less: income
attributed to gain --      --      (18,625)   (11,109)   (18,625)  (11,109)   --        --
on warrant
liability
Less:
undistributed
income reallocated (165)    --      165        --        --       --        --        --
to participating
securities
Income (loss)
attributable to
common             $9,978  $(588)  $(18,462) $(11,109) $(8,484) $(11,697) $(20,184) $(9,383)
shareholders -
diluted
                                                                                          
Denominator:                                                                               
Weighted average
shares outstanding 21,781   21,703   --        --        21,781    21,703     21,724     21,684
- basic
Dilutive shares -
stock options and  1,361    --      73         1,805      1,434     1,805      --        --
warrant
Weighted average
shares outstanding 23,142   21,703   73         1,805      23,215    23,508     21,724     21,684
- diluted
                                                                                          
Income (loss) per
share attributable                                                                         
to common
shareholders (1):
Basic              $0.46   $(0.03) $--      $--      $0.46    $(0.03)   $(0.93)   $(0.43)
Diluted            $0.43   $(0.03) $(0.80)   $(0.47)   $(0.37)  $(0.50)   $(0.93)   $(0.43)
                                                                                          
^(1)^ Computations may reflect rounding adjustments.

                               Conference Call

Diamond will host an investor conference call and webcast on June 10, 2013, at
2:45 p.m. Pacific Daylight Time, to discuss results for the third quarter of
fiscal 2013.

To participate in the call via telephone dial (888) 765-5568 from the
U.S./Canada or (913) 981-5530 elsewhere and enter the participant pass code of
202-2171. To listen to the call over the internet, visit the Company's website
at http://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 6:00 p.m. Pacific Daylight Time
June 19, 2013. 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 202-2171.

                               Upcoming Events

Diamond Foods will be attending the Jefferies 2013 Global Consumer Conference
on June 18-19, 2013.The following is a link to the webcast of Diamond's
presentation at the conference on June 19th at 9:30am (Eastern Daylight Time):
http://wsw.com/webcast/jeff76/dmnd/

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

Financial Summary
                                                               
Summarized Statement of Operations (Unaudited):
                                                               
                              Three months ended      Nine months ended
                              April 30,               April 30,
(in thousands, except per      2013        2012        2013        2012
share amounts)
Net sales                     $184,905    $207,685    $664,211    $757,429
Cost of sales                 141,555     173,457     511,746     619,972
Gross profit                   43,350      34,228      152,465     137,457
Operating expenses:                                             
Selling, general and           35,334      33,260      105,781     97,019
administrative
Advertising                    8,023       7,200       29,362      31,554
Acquisition and integration    --          11,336      --          40,641
related expenses
(Gain) loss on warrant         1,873       --          (9,236)     --
liability
Total operating expenses       45,230      51,796      125,907     169,214
Income (loss) from operations (1,880)     (17,568)    26,558      (31,757)
Interest expense, net          14,542      7,701       42,685      19,933
Income (loss) before income    (16,422)    (25,269)    (16,127)    (51,690)
taxes
Income taxes(benefit)         (840)       18,748      43          1,710
Net (loss)                    $(15,582) $(44,017) $(16,170) $(53,400)
Earnings (loss) per share                                       
(EPS):
Basic                          $(0.71)   $(2.02)   $(0.74)   $(2.46)
Diluted                        $(0.71)   $(2.02)   $(1.08)   $(2.46)
Shares used to compute EPS:                                     
Basic                          21,819      21,752      21,774      21,676
Diluted                        21,819      21,752      23,514      21,676


Segment Information (Unaudited):
                                                               
              Three months ended % Change Nine months ended % Change Year
                                                                      Ended
              April 30,          From     April 30,         From     July 31
(in thousands) 2013      2012     2012 to  2013     2012     2012 to  2012
                                  2013                       2013
Net sales                                                      
Snacks         $104,201  $102,546 2%       $320,865 $311,804 3%       $425,175
Nuts          80,704    105,139  -23%     343,346  445,625  -23%     556,243
Total          184,905   207,685  -11%     664,211  757,429  -12%     981,418
Gross profit                                                   
Snacks         36,684    28,108   31%      109,812  91,553   20%      125,354
Nuts           6,666     6,120    9%       42,653   45,904   -7%      54,368
Total         $43,350   $34,228  27%      $152,465 $137,457 11%      $179,722


Summarized Balance Sheet Data (Unaudited):
                                                    
                                          April 30,
(in thousands)                             2013       2012
Total current assets                       $251,269   $350,864
Restricted cash                            --         6,382
Property, plant and equipment, net         138,420    159,985
Goodwill                                   401,906    408,075
Other intangible assets, net               428,419    443,276
Other long-term assets                     20,886     6,421
Total assets                               $1,240,900 $1,375,003
                                                    
Total current liabilities                  $200,008   $290,790
Long-term obligations                      579,202    557,115
Deferred income taxes                      127,604    132,477
Other liabilities                          24,825     28,117
Total stockholders' equity                 309,261    366,504
Total liabilities and stockholders' equity $1,240,900 $1,375,003


Non-GAAP Financial Information
                                                               
Reconciliation of GAAP Income (Loss) Before Income Taxes to Non-GAAP EPS:
                                                               
                              Three months ended      Nine months ended
                              April 30,               April 30,
(in thousands, except per      2013        2012        2013        2012
share amounts)
GAAP income (loss) before      $(16,422) $(25,269) $(16,127) $(51,690)
income taxes
(Gain) Loss on warrant         1,873       --          (9,236)     --
liability
Reduction of liability due to  --          --          (1,319)     --
lease assignment
Adjustment to exclude          --          1,006       --          1,006
forbearance fee
Adjustment to remove costs
associated with acquisitions   --          11,336      --          40,641
and integrations
Adjustment to exclude certain  12,868      8,309       31,662      21,035
SG&A expenses ^(1)
Non-GAAP income before income  (1,681)     (4,618)     4,980       10,992
taxes
GAAP income taxes (benefit)   (840)       18,748      43          1,710
Tax effect of Non-GAAP         (1,967)     (18,462)    (2,549)     (2,392)
adjustments
Non-GAAP income taxes          (2,807)     286         (2,506)     (682)
(benefit)
Non-GAAP net income (loss)     $1,126    $(4,904)  $7,486    $11,674
Non-GAAP EPS-diluted           $0.05     $(0.22)   $0.32     $0.53
Shares used in computing       23,500      22,108      23,464      22,026
Non-GAAP EPS-diluted

^(1)Fiscal 2013 SG&A expenses are related primarily to audit committee
investigation, restatement-related expenses, legal investigation expenses,
consulting fees, accrued contract termination expenses, retention and
severance accruals, Fishers plant closure costs and impairment of an
intangible asset.These expenses are partially offset by the clawback of
bonuses paid to a former CEO and the reversal of certain previously recorded
stock compensation expenses associated with former executives.

With respect to the Fishers plant closure costs, the Q3 2013 adjustment
includes $4.9 million related to the Fishers operating lease termination
liability, which includes future lease obligations and other future standard
maintenance costs netted against projected sublease income, ($0.1) million in
decrease to severance charges previously recorded, and $0.9 million in other
closure costs.

With respect to the impairment of an intangible asset, the Q3 2013 adjustment
includes $1.6 million associated with the customer contracts and related
relationships.

In the third quarter of fiscal 2012, $7.9 million in costs were incurred due
to SG&A expenses related primarily to the audit committee investigation,
restatement-related expenses, and legal expenses, and $0.4 million in certain
stock-based compensation.

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA:
                                                               
                              Three months ended      Nine months ended
                              April 30,               April 30,
(in thousands)                 2013        2012        2013        2012
Net income (loss)              $(15,582) $(44,017) $(16,170) $(53,400)
Income taxes (benefit)        (840)       18,748      43          1,710
Income (loss) before income    (16,422)    (25,269)    (16,127)    (51,690)
taxes
Interest expense, net          14,542      7,701       42,685      19,933
Income (loss) from operations  (1,880)     (17,568)    26,558      (31,757)
Costs associated with          --          11,336      --          40,641
acquisitions and integrations
Reduction of liability due to  --          --          (1,319)     --
lease assignment
(Gain) Loss on warrant         1,873       --          (9,236)     --
liability
Certain SG&A expenses ^(1)     12,777      7,863       33,457      20,589
Stock-based compensation       1,365       2,291       2,487       7,142
expense ^(2)
Depreciation and amortization  9,072       7,265       25,210      20,924
Adjusted EBITDA                $23,207   $11,187   $77,157   $57,538

^(1) Fiscal 2013 SG&A expenses are related primarily to audit committee
investigation, restatement-related expenses, legal investigation expenses,
consulting fees, accrued contract termination expenses, retention and
severance accruals, Fishers plant closure costs and impairment of an
intangible asset. These expenses are partially offset by the clawback of
bonuses paid to a former CEO.

With respect to the Fishers plant closure costs, the Q3 2013 adjustment
includes $4.9 million related to the Fishers operating lease termination
liability, which includes future lease obligations and other future standard
maintenance costs netted against projected sublease income, ($0.1) million in
decrease to severance charges previously recorded, and $0.9 million in other
closure costs.

With respect to the impairment of an intangible asset, the Q3 2013 adjustment
includes $1.6 million associated with the customer contracts and related
relationships.

In the third quarter of fiscal 2012, $7.9 million in costs were incurred due
to SG&A expenses related primarily to the audit committee investigation,
restatement-related expenses, and legal expenses.

^(2)Stock-based compensation for the nine months ended April 30, 2013,
included a $2.5 million reversal of certain previously recorded stock
compensation expenses associated with former executives.

                 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 its Adjusted EBITDA
calculation:

  *The third quarter of fiscal 2013 included $12.8 million of certain charges
    primarily for Fishers plant closure costs, impairment of an intangible
    asset, consulting fees and legal expenses.In addition, the quarter
    included a charge of $1.9 million due to a loss on the Oaktree warrant
    liability and stock-based compensation expense of $1.4 million.

    The Fishers plant closure costs include $4.9 million related to the
    Fishers operating lease termination liability, which includes future lease
    obligations and other future standard maintenance costs netted against
    projected sublease income, ($0.1) million in decrease to severance charges
    previously recorded, and $0.9 million in other closure costs.

    The impairment of intangible asset adjustment includes $1.6 million
    associated with customer contracts and related relationships.
  *In the third quarter of fiscal 2012, $11.3 million in costs were incurred
    due to the proposed acquisition of Pringles, $7.9 million due to SG&A
    expenses related primarily to the audit committee investigation,
    restatement-related expenses, and legal expenses, and $2.3 million in
    stock-based compensation.
  *Adjusted EBITDA is used by management as a measure of operating
    performance.Adjusted EBITDA is defined as net income before interest
    expense, income taxes, depreciation, amortization, equity compensation and
    certain other expenses, including the aforementioned SG&A and 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 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
measures is that they exclude significant expenses and gains required under
GAAP.They also reflect the exercise of management judgments about which
adjustments are appropriately made.To mitigate this limitation, Diamond
presents the non-GAAP measures in connection with GAAP results and recommends
that investors do not give undue weight to them.Diamond believes that
non-GAAP 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 improvement in gross margins, increase in net price realization,
results of cost savings efforts, materialization of cost savings in operations
and supply chain projections for net sales, gross margin, advertising spending
and suggestions about future financial and operating performance and results
that may be implicit in summaries of recent results.We have based these
forward-looking statements on our assumptions, expectations and projections
about future events only as of the date of this presentation, 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 report 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 report. Actual results may differ materially from what
we currently expect because of many risks and uncertainties, including: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;
compliance with debt covenants; ability to raise additional capital and
possible dilutive impact of raising such capital; risks relating to litigation
and regulatory proceedings; 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 Foodsis an innovative packaged food company focused on building and
energizing brands including Kettle® chips, Emerald® nut varieties, Pop Secret®
popcorn, and Diamond of California® nuts. The Company's products are
distributed in a wide range of stores where snacks and 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
         Stacy Roughan/Alyssa Linn
         (310) 201-2040/(415) 618-8750
         sroughan@sardverb.com
         alinn@sardverb.com

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