Diamond Foods Inc.
) first-quarter fiscal 2013 adjusted earnings of 24 cents per
share plummeted 66.2% from the year-ago quarter's earnings of 71
cents, primarily driven by weak top-line performance and
deleveraged operating expenses. However, the earnings were above
the Zacks Consensus Estimate of 23 cents.
Including certain items, the company reported a loss of 49
cents during the quarter against earnings of 47 cents in the
first quarter of fiscal 2012.
Total sales for the reported quarter were $258.5 million, down
10.1% from $287.4 million recorded in the year-ago quarter.
Moreover, the top line missed the Zacks Consensus Estimate of
$274.0 million. The year-over-year decline in total sales was
mainly due to weak performances delivered at the company's both
Total retail sales decreased 4.1% year over year to $244.8
million in the first quarter of fiscal 2013, including snack
sales of $154.1 million that were down 2.0%. The decline in snack
sales was attributed to the fall in Emerald and Kettle sales,
partially offset by better Pop Secret sales. Moreover, total
non-retail sales plunged 57.5% to $13.7 million over the year-ago
Quarter in Detail
Gross profit for the quarter declined 4.5% year over year to
$58.5 million primarily due to a drop in sales. However, gross
margin expanded 140 basis points to 22.7% compared with the
year-ago quarter's gross margin of 21.3%. The expansion in gross
margin was a result of better price realization and benefit
coming from reducing underperforming SKUs.
Selling, general and administrative (SG&A) expenses
augmented 29.6% year over year to $38.2 million, including $11.8
million primarily related to audit committee investigation,
restatement, and related expenses. However, excluding these
costs, SG&A expenses came at $26.4 million, which is 10.2% of
net sales versus 9.5% in the comparable quarter last year.
Advertising expenses in the quarter declined 29.1% year over
year to $9.0 million primarily due to shift in timings of
spending to the remaining period of fiscal 2013.
Consequently, on a reported basis, operating income in the
quarter came in at $3.8 million compared with an operating income
of $1.9 million in the year-ago quarter.
Diamond Foods ended the quarter with cash & equivalents of
$9.9 million compared with $4.5 million at the end of the first
quarter of fiscal 2012. Total debt at the end of the quarter came
in at $613.1 million, compared with $576.8 million in the
Cash and availability on Diamond's bank revolving line of
credit on Dec 14, 2012 was approximately $95.0 million.
Capital expenditures for the first quarter totaled $2.9
million. The company's major recent expansions including the UK
and Beloit, Wisconsin Kettle expansions were completed in the
fall of 2011 and spring of 2012, respectively.
Diamond Foods is swiftly moving ahead with its recently
announced cost savings and operational effectiveness initiatives.
Though the company's first quarter fiscal 2013 results do not
reflect much of the strategic changes, the company believes
future results will reflect sustained growth of its brands
arising from innovation and differentiation, improving cost
structure and rebuilding walnut supply.
Diamond Foods, which faces intense competition from
Mondelez International Inc.
ConAgra Foods Inc.
), currently, holds a Zacks #5 Rank, implying a short-term Strong
Sell rating on the stock.
CONAGRA FOODS (CAG): Free Stock Analysis
DIAMOND FOODS (DMND): Free Stock Analysis
MONDELEZ INTL (MDLZ): Free Stock Analysis
To read this article on Zacks.com click here.