I hate posting on these boards because I'll surely be bombarded by people with opinions that are based on everything but facts. However, I've been looking at this for the last few days and this is what I think.
First, the max liability in 2011 will be $40 million pre-tax. DMND is paying about 32% tax, so that's $27.2 million after tax. GAAP earnings would drop from $50.2 to $23 million. I do not think the liability will be nearly this great for FY2011.
There were several "one-time" charges in 2011. About $16.8 mil were associated with the acquisitions of Kettle and Pringles. They also show a "foreign currency translation adjustment" of $19.93 mil. None of this $36.73 million benefits the net earnings of $50.2 million. They do, however, benefit the adjusted earnings and issued guidance.
I don't believe the whole $37 mil in charges will go toward the $40 mil walnut grower payment. At the same time, I don't believe the whole $40 mil will be taken from the reported earnings. The charge will be somewhere around $14 million after tax or $20 million pre-tax. FY2011 earnings will be somewhere around $34-36 million or $1.70 - $1.80/sh. This is based on about 20.05 mil shares. That puts the TTM PE at 13 or so and around 10x FY 2012 earnings.
For disclosure purposes, I bought shares in December at $27 and may buy more at current levels.
I look forward to well thought out comments.
Why would DMND pay the walnut growers $40 million in advance of delivery? Why not just put together a contract with the growers for $40 million in walnuts ,to be paid within say 30 days of delivery. What's the value of cutting a $40 million check months in advance of delivery?.....Bob
The payment was made right after the FY 2011 ended. If the payment had been made a month earlier, it would have reduced FY 2011 earnings. They wanted to prop up the earnings and growth to inflate the stock price. That would have made the Pringles acquisition cheaper for them.
I think some of that payment is hidden in all of the one-time costs and the rest will reduce the earnings when they are restated.
"You need to consider the fact that they are in default on their loan agreements. They could be pushed into bankruptcy."
no, you need to consider the fact that a technical infringement of a loan agreement based on a restatement of financials is not the same
thing as missing payments due to insolvency.
your numbers may be close, but I don't think
anyone really cares about 2010 and 2011 earnings.
Fiscal 2011 ended in September of last year.
Q1 and Q2 2012, guidance, is what will matter
but only if Diamond continues as its own public company, which I do not believe will happen if
Pringles is gone. I do not think the board will decide it's worth all the aggravation to keep this company public unless Pringles is allowed
to transform them. There is too much scrutiny.
1. Pringles happens, DMND stays public.
2. Pringles does not happen, DMND is sold
to private equity. $37-44.