##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-51439
 DIAMOND FOODS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State of Incorporation)
    
    20-2556965(IRS Employer Identification No.)600 Montgomery Street, 17th Floor
San Francisco, California(Address of Principal Executive Offices)
    
    94111-2702(Zip Code)
 415-912-3180  (Telephone No.)
 þ o
 o o
  Large accelerated filer o   
    Accelerated filer þ
    Non-accelerated filer o
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PagePart I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    4Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    20Item 4. Controls and Procedures
    
    20Part II.OTHER INFORMATIONItem 1. Legal Proceedings
    
    20Item 1A. Risk Factors
    
    20Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    21Item 3. Defaults Upon Senior Securities
    
    21Item 4. Removed and Reserved
    
    21Item 5. Other Information
    
    21Item 6. Exhibits
    
    22SIGNATURE
    
    23EX-31.01EX-31.02EX-32.01
  2




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
   3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 DIAMOND FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share information)
(Unaudited)
 April 30,
    
    
    July 31,
    
    
    April 30,2011
    
    
    2010
    
    
    2010ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,541
    
    
    $
    5,642
    
    
    $
    5,416Trade receivables, net
    
    
    105,266
    
    
    
    65,553
    
    
    
    71,983Inventories
    
    
    189,532
    
    
    
    143,405
    
    
    
    157,498Deferred income taxes
    
    
    9,748
    
    
    
    10,497
    
    
    
    14,346Prepaid income taxes
    
    
    2,600
    
    
    
    9,225
    
    
    
    4,670Prepaid expenses and other current assets
    
    
    9,393
    
    
    
    5,767
    
    
    
    6,158Total current assets
    
    
    318,080
    
    
    
    240,089
    
    
    
    260,071Restricted cash
    
    
    21,406
    
    
    
    
    
    
    
    Property, plant and equipment, net
    
    
    120,510
    
    
    
    117,816
    
    
    
    117,030Deferred income taxes
    
    
    4,785
    
    
    
    13,625
    
    
    
    6,741Goodwill
    
    
    410,034
    
    
    
    396,788
    
    
    
    382,420Other intangible assets, net
    
    
    455,119
    
    
    
    449,018
    
    
    
    476,068Other long-term assets
    
    
    7,366
    
    
    
    8,536
    
    
    
    9,022Total assets
    
    $
    1,337,300
    
    
    $
    1,225,872
    
    
    $
    1,251,352LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt
    
    $
    41,700
    
    
    $
    40,000
    
    
    $
    40,000Accounts payable and accrued liabilities
    
    
    137,266
    
    
    
    92,166
    
    
    
    118,864Payable to growers
    
    
    15,702
    
    
    
    35,755
    
    
    
    35,927Total current liabilities
    
    
    194,668
    
    
    
    167,921
    
    
    
    194,791Long-term obligations
    
    
    530,669
    
    
    
    516,100
    
    
    
    518,500Deferred income taxes
    
    
    141,315
    
    
    
    144,755
    
    
    
    152,694Other liabilities
    
    
    20,218
    
    
    
    17,153
    
    
    
    12,543Stockholders equity:Preferred stock, $0.001 par value; Authorized: 5,000,000 shares; no shares
issued or outstanding
    
    
    
    
    
    
    
    
    
    
    Common stock, $0.001 par value; Authorized: 100,000,000 shares; 22,289,111, 22,121,534
and 22,039,476 shares issued and 22,020,989, 21,891,928 and 21,809,870 shares
outstanding at April 30, 2011, July 31, 2010 and April 30, 2010, respectively
    
    
    22
    
    
    
    22
    
    
    
    22Treasury stock, at cost: 268,122, 229,606 and 229,606 shares held at April 30, 2011,
July 31, 2010 and April 30, 2010, respectively
    
    
    (6,775
    )
    
    
    (5,050
    )
    
    
    (5,050
    )Additional paid-in capital
    
    
    316,020
    
    
    
    307,032
    
    
    
    305,668Accumulated other comprehensive income (loss)
    
    
    23,655
    
    
    
    (869
    )
    
    
    (869
    )Retained earnings
    
    
    117,508
    
    
    
    78,808
    
    
    
    73,053Total stockholders equity
    
    
    450,430
    
    
    
    379,943
    
    
    
    372,824Total liabilities and stockholders equity
    
    $
    1,337,300
    
    
    $
    1,225,872
    
    
    $
    1,251,352
  4




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DIAMOND FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share information)
(Unaudited)
 Three Months
    
    
    Nine MonthsEnded April 30,
    
    
    Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net sales
    
    $
    222,991
    
    
    $
    138,734
    
    
    $
    733,149
    
    
    $
    503,544Cost of sales
    
    
    163,403
    
    
    
    107,641
    
    
    
    539,109
    
    
    
    386,382Gross profit
    
    
    59,588
    
    
    
    31,093
    
    
    
    194,040
    
    
    
    117,162Operating expenses:Selling, general and administrative
    
    
    24,178
    
    
    
    15,186
    
    
    
    71,292
    
    
    
    44,021Advertising
    
    
    11,925
    
    
    
    7,582
    
    
    
    34,362
    
    
    
    26,024Acquisition and integration related expenses
    
    
    5,932
    
    
    
    10,223
    
    
    
    7,368
    
    
    
    10,223Total operating expenses
    
    
    42,035
    
    
    
    32,991
    
    
    
    113,022
    
    
    
    80,268Income (loss) from operations
    
    
    17,553
    
    
    
    (1,898
    )
    
    
    81,018
    
    
    
    36,894Interest expense, net
    
    
    5,941
    
    
    
    1,908
    
    
    
    18,050
    
    
    
    4,072Other expense, net
    
    
    
    
    
    
    1,849
    
    
    
    
    
    
    
    1,849Income (loss) before income taxes
    
    
    11,612
    
    
    
    (5,655
    )
    
    
    62,968
    
    
    
    30,973Income taxes (benefit)
    
    
    3,879
    
    
    
    (1,382
    )
    
    
    21,301
    
    
    
    11,502Net income (loss)
    
    $
    7,733
    
    
    $
    (4,273
    )
    
    $
    41,667
    
    
    $
    19,471Earnings (loss) per share:Basic
    
    $
    0.35
    
    
    $
    (0.22
    )
    
    $
    1.90
    
    
    $
    1.11Diluted
    
    $
    0.34
    
    
    $
    (0.22
    )
    
    $
    1.85
    
    
    $
    1.07Shares used to compute earnings per share:Basic
    
    
    21,604
    
    
    
    19,313
    
    
    
    21,563
    
    
    
    17,272Diluted
    
    
    22,341
    
    
    
    19,313
    
    
    
    22,128
    
    
    
    17,793Dividends declared per share
    
    $
    0.045
    
    
    $
    0.045
    
    
    $
    0.135
    
    
    $
    0.135
  5




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DIAMOND FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months EndedApril 30,2011
    
    
    2010CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    41,667
    
    
    $
    19,471Adjustments to reconcile net income to net cash provided by (used in) operating activities:Depreciation and amortization
    
    
    22,299
    
    
    
    9,585Deferred income taxes
    
    
    2,849
    
    
    
    4,475Excess tax benefit from stock option transactions
    
    
    (2,266
    )
    
    
    (367
    )Stock-based compensation
    
    
    5,097
    
    
    
    2,135Other, net
    
    
    487
    
    
    
    531Changes in assets and liabilities:Trade receivables
    
    
    (39,713
    )
    
    
    (9,303
    )Inventories
    
    
    (46,127
    )
    
    
    (59,612
    )Prepaid expenses, income taxes and other current assets
    
    
    2,999
    
    
    
    (1,615
    )Accounts payable and accrued liabilities
    
    
    47,178
    
    
    
    17,067Payable to growers
    
    
    (20,053
    )
    
    
    6,778Other, net
    
    
    1,431
    
    
    
    1,211Net cash provided by (used in) operating activities
    
    
    15,848
    
    
    
    (9,644
    )CASH FLOWS FROM INVESTING ACTIVITIES:Net proceeds from sale of property, plant and equipment and other
    
    
    259
    
    
    
    545Purchase of property, plant and equipment
    
    
    (15,195
    )
    
    
    (6,933
    )Restricted cash
    
    
    (21,406
    )
    
    
    Acquisition of Pop Secret
    
    
    
    
    
    
    833Acquisition of Kettle Foods, net of cash acquired
    
    
    
    
    
    
    (616,222
    )Net cash used in investing activities
    
    
    (36,342
    )
    
    
    (621,777
    )CASH FLOWS FROM FINANCING ACTIVITIES:Initial revolving line of credit borrowings under the Secured Credit Facility
    
    
    
    
    
    
    176,000Borrowings (repayment) of revolving line of credit under the Secured Credit Facility
    
    
    25,069
    
    
    
    (17,500
    )Proceeds from issuance of long-term debt
    
    
    21,200
    
    
    
    400,000Debt issuance costs
    
    
    
    
    
    
    (8,852
    )Payment of long-term debt and notes payable
    
    
    (30,085
    )
    
    
    (115,089
    )Gross proceeds from equity offering
    
    
    
    
    
    
    191,475Equity offering costs
    
    
    
    
    
    
    (11,711
    )Dividends paid
    
    
    (2,967
    )
    
    
    (2,477
    )Excess tax benefit from stock option transactions
    
    
    2,266
    
    
    
    367Other, net
    
    
    854
    
    
    
    (205
    )Net cash provided by financing activities
    
    
    16,337
    
    
    
    612,008Effect of exchange rate changes on cash
    
    
    56
    
    
    
    27Net decrease in cash and cash equivalents
    
    
    (4,101
    )
    
    
    (19,386
    )Cash and cash equivalents:Beginning of period
    
    
    5,642
    
    
    
    24,802End of period
    
    $
    1,541
    
    
    $
    5,416Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    16,281
    
    
    $
    3,952Income taxes
    
    
    7,956
    
    
    
    9,513Non-cash investing activity:Accrued capital expenditures
    
    
    1,830
    
    
    
    298
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DIAMOND FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended April 30, 2011 and 2010
(In thousands, except share and per share information, unaudited)
 (1) Organization and Basis of Presentation
 ® ® ®
   (2) Recent Accounting Pronouncements
 Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations
 (3) Fair Value Measurements
   7




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##### Table of Contents



Fair ValueLiability Derivatives
    
    Balance Sheet Location
    
    4/30/11
    
    
    7/31/10
    
    
    4/30/10Derivatives designated as hedging instruments under ASC 815:Interest rate contracts
    
    Other current liabilities
    
    $
    (639
    )
    
    $
    (668
    )
    
    $
    Interest rate contracts
    
    Other non-current liabilities
    
    
    (74
    )
    
    
    
    
    
    
    Cash flow hedges
    
    Accounts payable and accrued liabilities
    
    
    (110
    )
    
    
    (12
    )
    
    
    Total derivatives designated as hedging instruments under ASC 815
    
    
    
    $
    (823
    )
    
    $
    (680
    )
    
    $
    Derivatives not designated as hedging instruments under ASC 815:Cash flow hedges
    
    Accounts payable and accrued liabilities
    
    $
    (46
    )
    
    $
    
    
    
    $
    Total derivatives not designated as hedging instrument under ASC 815
    
    
    
    $
    (46
    )
    
    $
    
    
    
    $
    Total derivatives
    
    
    
    $
    (869
    )
    
    $
    (680
    )
    
    $
    
  Location of Loss
    
    
    Amount of LossAmount of Loss
    
    
    Reclassified from
    
    
    Reclassified from
    
    
    Location of LossRecognized in OCI on
    
    
    Accumulated OCI into
    
    
    Accumulated OCI into
    
    
    Recognized in Income on
    
    
    Amount of Loss RecognizedDerivatives in ASC 815 Cash
    
    Derivative (Effective
    
    
    Income (Effective
    
    
    Income (Effective
    
    
    Derivative (Ineffective
    
    
    in Income on DerivativeFlow Hedging Relationships
    
    Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    (Ineffective Portion)4/30/11
    
    
    4/30/10
    
    
    
    
    
    
    4/30/11
    
    
    4/30/10
    
    
    
    
    
    
    4/30/11
    
    
    4/30/10Interest rate contracts
    
    $
    (222
    )
    
    $
    
    
    
    Interest expense
    
    $
    (175
    )
    
    $
    
    
    
    Interest expense
    
    $
    
    
    
    $
    Cash flow hedges
    
    
    (119
    )
    
    
    
    
    
    Net sales
    
    
    (113
    )
    
    
    
    
    
    Net sales
    
    
    
    
    
    
    Total
    
    $
    (341
    )
    
    $
    
    
    
    
    
    
    
    $
    (288
    )
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
 Amount of Loss RecognizedDerivatives Not Designated as Hedging
    
    Location of Loss Recognized in
    
    in Income on DerivativeInstruments under ASC 815
    
    Income on Derivative
    
    4/30/11
    
    
    4/30/10Interest rate contracts
    
    Interest expense
    
    $
    
    
    
    $
    (15
    )Cash flow hedges
    
    Interest expense
    
    
    (33
    )
    
    
    Total
    
    
    
    
    
    $
    (33
    )
    
    $
    (15
    )
 8




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##### Table of Contents



Location of Loss
    
    
    Amount of LossAmount of Loss
    
    
    Reclassified from
    
    
    Reclassified from
    
    
    Location of LossRecognized in OCI on
    
    
    Accumulated OCI into
    
    
    Accumulated OCI into
    
    
    Recognized in Income on
    
    
    Amount of Loss RecognizedDerivatives in ASC 815 Cash
    
    Derivative (Effective
    
    
    Income (Effective
    
    
    Income (Effective
    
    
    Derivative (Ineffective
    
    
    in Income on DerivativeFlow Hedging Relationships
    
    Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    Portion)
    
    
    (Ineffective Portion)4/30/11
    
    
    4/30/10
    
    
    
    
    
    
    4/30/11
    
    
    4/30/10
    
    
    
    
    
    
    4/30/11
    
    
    4/30/10Interest rate contracts
    
    $
    (574
    )
    
    $
    
    
    
    Interest expense
    
    $
    (532
    )
    
    $
    
    
    
    Interest expense
    
    $
    
    
    
    $
    Cash flow hedges
    
    
    (215
    )
    
    
    
    
    
    Net sales
    
    
    (117
    )
    
    
    
    
    
    Net sales
    
    
    
    
    
    
    Total
    
    $
    (789
    )
    
    $
    
    
    
    
    
    
    
    $
    (649
    )
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
 Derivatives Not Designated as Hedging
    
    Location of Loss Recognized in
    
    Amount of Loss RecognizedInstruments under ASC 815
    
    Income on Derivative
    
    in Income on Derivative4/30/11
    
    
    4/30/10Interest rate contracts
    
    Interest expense
    
    $
    
    
    
    $
    (240
    )Cash flow hedges
    
    Interest expense
    
    
    (108
    )
    
    
    Total
    
    
    
    
    
    $
    (108
    )
    
    $
    (240
    )
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
  Fair Value Measurements and Disclosures,
 (4) Stock Plan Information
  Compensation  Stock Compensation
 Stock Option Awards:
 9




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Three Months
    
    
    Nine MonthsEnded April 30,
    
    
    Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Average expected life, in years
    
    
    6
    
    
    
    6
    
    
    
    6
    
    
    
    6Expected volatility
    
    
    37.00
    %
    
    
    46.00
    %
    
    
    37.00
    %
    
    
    46.00
    %Risk-free interest rate
    
    
    2.52
    %
    
    
    2.83
    %
    
    
    2.13
    %
    
    
    3.28
    %Dividend rate
    
    
    0.33
    %
    
    
    0.44
    %
    
    
    0.37
    %
    
    
    0.53
    %
  Weighted averageWeighted average
    
    
    remaining
    
    
    AggregateNumber of Shares
    
    
    exercise price per
    
    
    contractual life (in
    
    
    intrinsic value (in(in thousands)
    
    
    share
    
    
    years)
    
    
    thousands)Outstanding at July 31, 2010
    
    
    1,452
    
    
    $
    21.11Granted
    
    
    364
    
    
    
    41.15Exercised
    
    
    (87
    )
    
    
    18.58Cancelled
    
    
    (22
    )
    
    
    37.85Outstanding at April 30, 2011
    
    
    1,707
    
    
    
    25.30
    
    
    
    6.4
    
    
    $
    68,868Exercisable at April 30, 2011
    
    
    1,176
    
    
    
    18.64
    
    
    
    5.2
    
    
    
    55,257
   Weighted averageNumber of Shares
    
    
    grant date fair(in thousands)
    
    
    value per shareNonvested at July 31, 2010
    
    
    234
    
    
    $
    15.28Granted
    
    
    364
    
    
    
    15.13Vested
    
    
    (49
    )
    
    
    10.65Cancelled
    
    
    (18
    )
    
    
    18.30Nonvested at April 30, 2011
    
    
    531
    
    
    
    15.50
  Restricted Stock Awards:
 10




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##### Table of Contents



WeightedNumber of
    
    
    average grantShares
    
    
    date fair value(in thousands)
    
    
    per shareOutstanding at July 31, 2010
    
    
    408
    
    
    $
    26.78Granted
    
    
    92
    
    
    
    41.77Vested
    
    
    (108
    )
    
    
    23.54Cancelled
    
    
    (12
    )
    
    
    37.00Outstanding at April 30, 2011
    
    
    380
    
    
    
    31.02
   (5) Earnings Per Share
 Earnings Per Share
  Three Months
    
    
    Nine MonthsEnded April 30,
    
    
    Ended April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Numerator:Net income (loss)
    
    $
    7,733
    
    
    $
    (4,273
    )
    
    $
    41,667
    
    
    $
    19,471Less: income allocated to participating securities
    
    
    (137
    )
    
    
    
    
    
    
    (746
    )
    
    
    (371
    )Income (loss) attributable to common shareholders  basic
    
    
    7,596
    
    
    
    (4,273
    )
    
    
    40,921
    
    
    
    19,100Add: undistributed income attributable to participating securities
    
    
    121
    
    
    
    
    
    
    
    694
    
    
    
    326Less: undistributed income reallocated to participating securities
    
    
    (117
    )
    
    
    
    
    
    
    (677
    )
    
    
    (316
    )Income (loss) attributable to common shareholders  diluted
    
    $
    7,600
    
    
    $
    (4,273
    )
    
    $
    40,938
    
    
    $
    19,110Denominator:Weighted average shares outstanding  basic
    
    
    21,604
    
    
    
    19,313
    
    
    
    21,563
    
    
    
    17,272Dilutive shares  stock options
    
    
    737
    
    
    
    
    
    
    
    565
    
    
    
    521Weighted average shares outstanding  diluted
    
    
    22,341
    
    
    
    19,313
    
    
    
    22,128
    
    
    
    17,793Income (loss) per share attributable to common shareholders (1):Basic
    
    $
    0.35
    
    
    $
    (0.22
    )
    
    $
    1.90
    
    
    $
    1.11Diluted
    
    $
    0.34
    
    
    $
    (0.22
    )
    
    $
    1.85
    
    
    $
    1.07
 
 (1)
    
    Computations may reflect rounding adjustments. 11




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##### Table of Contents



(6) Acquisition and Pending Transaction
 Pending Pringles Merger
   Kettle Foods
 Business Combinations
  Accounts receivable
    
    $
    29,188Inventory
    
    
    12,526Deferred tax asset
    
    
    2,119Prepaid expenses and other assets
    
    
    3,617Property, plant and equipment
    
    
    66,289Brand intangibles
    
    
    235,000Customer relationships
    
    
    120,000Goodwill
    
    
    321,545Assumed liabilities
    
    
    (39,211
    )Deferred tax liabilities
    
    
    (134,851
    )Purchase price
    
    $
    616,222
    12




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##### Table of Contents



(7) Balance Sheet Items
  April 30,
    
    
    July 31,
    
    
    April 30,2011
    
    
    2010
    
    
    2010Raw materials and supplies
    
    $
    105,185
    
    
    $
    64,660
    
    
    $
    78,748Work in process
    
    
    20,190
    
    
    
    23,768
    
    
    
    20,499Finished goods
    
    
    64,157
    
    
    
    54,977
    
    
    
    58,251Total
    
    $
    189,532
    
    
    $
    143,405
    
    
    $
    157,498
   April 30,
    
    
    July 31,
    
    
    April 30,2011
    
    
    2010
    
    
    2010Accounts payable
    
    $
    83,821
    
    
    $
    42,784
    
    
    $
    81,965Accrued promotion
    
    
    27,462
    
    
    
    22,787
    
    
    
    17,384Accrued salaries and benefits
    
    
    13,799
    
    
    
    17,587
    
    
    
    13,379Other
    
    
    12,184
    
    
    
    9,008
    
    
    
    6,136Total
    
    $
    137,266
    
    
    $
    92,166
    
    
    $
    118,864
 (8) Intangible Assets and Goodwill
  Balance as of July 31, 2010
    
    $
    396,788Acquisitions/other activities
    
    
    Translation adjustments
    
    
    13,246Balance as of April 30, 2011
    
    $
    410,034
 13




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##### Table of Contents



April 30,
    
    
    July 31,
    
    
    April 30,2011
    
    
    2010
    
    
    2010Brand intangibles (not subject to amortization)
    
    $
    301,975
    
    
    $
    297,500
    
    
    $
    322,500Intangible assets subject to amortization:Customer contracts and related relationships
    
    
    165,256
    
    
    
    157,300
    
    
    
    157,300Total other intangible assets, gross
    
    
    467,231
    
    
    
    454,800
    
    
    
    479,800Less accumulated amortization on intangible assets:Customer contracts and related relationships
    
    
    (12,112
    )
    
    
    (5,782
    )
    
    
    (3,732
    )Total other intangible assets, net
    
    $
    455,119
    
    
    $
    449,018
    
    
    $
    476,068
  (9) Credit Facilities and Long-Term Obligations
     (10) Retirement Plans
  14




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##### Table of Contents



Pension Benefits
    
    
    Other BenefitsThree Months ended
    
    
    Nine Months ended
    
    
    Three Months ended
    
    
    Nine Months endedApril 30,
    
    
    April 30,
    
    
    April 30,
    
    
    April 30,2011
    
    
    2010
    
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Service cost
    
    $
    20
    
    
    $
    223
    
    
    $
    60
    
    
    $
    546
    
    
    $
    17
    
    
    $
    16
    
    
    $
    49
    
    
    $
    47Interest cost
    
    
    312
    
    
    
    300
    
    
    
    944
    
    
    
    898
    
    
    
    26
    
    
    
    33
    
    
    
    80
    
    
    
    100Expected return on plan assets
    
    
    (257
    )
    
    
    (238
    )
    
    
    (773
    )
    
    
    (714
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    4
    
    
    
    7
    
    
    
    11
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Amortization of net loss / (gain)
    
    
    151
    
    
    
    133
    
    
    
    482
    
    
    
    388
    
    
    
    (198
    )
    
    
    (206
    )
    
    
    (596
    )
    
    
    (618
    )Curtailment cost
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost / (income)
    
    $
    230
    
    
    $
    428
    
    
    $
    724
    
    
    $
    1,141
    
    
    $
    (155
    )
    
    $
    (157
    )
    
    $
    (467
    )
    
    $
    (471
    )
  (11) Contingencies
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 ® ® ®
  15




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##### Table of Contents



Results of Operations
   Three Months ended
    
    
    
    
    
    
    Nine Months endedApril 30,
    
    
    % Change from
    
    
    April 30,
    
    
    % Change from2011
    
    
    2010
    
    
    2010 to 2011
    
    
    2011
    
    
    2010
    
    
    2010 to 2011Retail (1)
    
    $
    181,707
    
    
    $
    126,086
    
    
    
    44.1
    %
    
    $
    625,100
    
    
    $
    402,490
    
    
    
    55.3
    %International Non-Retail
    
    
    31,368
    
    
    
    6,287
    
    
    
    398.9
    %
    
    
    89,176
    
    
    
    65,445
    
    
    
    36.3
    %North American Ingredient/Food Service and Other
    
    
    9,916
    
    
    
    6,361
    
    
    
    55.9
    %
    
    
    18,873
    
    
    
    35,609
    
    
    
    -47.0
    %Total
    
    $
    222,991
    
    
    $
    138,734
    
    
    
    60.7
    %
    
    $
    733,149
    
    
    $
    503,544
    
    
    
    45.6
    %
 
 (1)
    
    Retail represents sales of our culinary, snack and in-shell products.   Gross profit.
 Selling, general and administrative.
 Advertising.
 16




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##### Table of Contents



Acquisition and integration related expenses.
 Interest expense, net.
 Other expense, net
 Income taxes.
 Pending Pringles Merger
   Liquidity and Capital Resources
     17




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##### Table of Contents



Effects of Inflation
  Critical Accounting Policies
  Revenue Recognition.
 Inventories.
  18




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##### Table of Contents



Valuation of Long-lived and Intangible Assets and Goodwill. Property, Plant, and Equipment Intangibles  Goodwill and Other,
      Employee Benefits.
 19




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##### Table of Contents



Income Taxes. Income Taxe
 Accounting for Stock-Based Compensation. Compensation  Stock Compensation
 Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
    
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  20




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total number of
    
    
    Approximate DollarTotal number
    
    
    Average price
    
    
    shares repurchased as
    
    
    value of sharesof shares
    
    
    paid per
    
    
    part of publicly
    
    
    that may yet be purchasedPeriod
    
    repurchased (1)
    
    
    share
    
    
    announced plans
    
    
    under the plansRepurchases from February 1 - February 28, 2011
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Repurchases from March 1 - March 31, 2011
    
    
    6,747
    
    
    $
    54.87
    
    
    
    
    
    
    $
    Repurchases from April 1 - April 30, 2011
    
    
    211
    
    
    $
    60.63
    
    
    
    
    
    
    $
    Total
    
    
    6,958
    
    
    $
    55.05
    
    
    
    
    
    
    $
    
 
 (1)
    
    All of the shares in the table above were originally granted to
employees as restricted stock pursuant to our 2005 Equity Incentive
Plan (EIP). Pursuant to the EIP, all of the shares reflected above
were relinquished by employees in exchange for Diamonds agreement to
pay federal and state withholding obligations resulting from the
vesting of the restricted stock. The repurchases reflected above were
not made pursuant to a publicly announced plan. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
  As previouslyreported
    
    
    As corrected2009 net sales
    
    $
    787,349
    
    
    $
    828,8632009 net income
    
    $
    22,363
    
    
    $
    28,6432009 diluted earnings per share
    
    $
    1.02
    
    
    $
    1.31
  21




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Item 6. Exhibits
  Filed with this
    
    Incorporated by referenceNumber
    
    Exhibit Title
    
    10-Q
    
    Form
    
    File No.
    
    Date Filed3.01
    
    Certificate of Incorporation, as amended
    
    
    
    S1
    
    333-123576
    
    July 15, 20053.02
    
    Restated Bylaws
    
    
    
    S1
    
    333-123576
    
    March 25, 20054.01
    
    Form of Certificate for common stock
    
    
    
    S1
    
    333-123576
    
    July 18, 200531.01
    
    Rule 13a-14(a) and 15d-14(a) Certification of Chief Executive Officer
    
    X31.02
    
    Rule 13a-14(a) and 15d-14(a) Certification of Chief Financial Officer
    
    X32.01
    
    Section 1350 Certifications
    
    X
 22




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##### Table of Contents



SIGNATURES
  DIAMOND FOODS, INC.Date: June 2, 2011
    By:
    /s/ Steven M. NeilSteven M. NeilChief Financial and Administrative Officer
and duly authorized officer 23