Diamond Foods, Inc. (DMND) Q2 2015 Earnings Call March 5, 2015 4:30 PM ET
Executives
Katie Turner - Managing Director, ICR LLC
Brian J. Driscoll - President, Chief Executive Officer & Director
Ray P. Silcock - Chief Financial Officer & Executive Vice President
David J. Colo - Chief Operating Officer & Executive Vice President
Analysts
Andrew Lazar - Barclays Capital, Inc.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Brett M. Hundley - BB&T Capital Markets
William B. Chappell - SunTrust Robinson Humphrey
Timothy S. Ramey - Pivotal Research Group LLC
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Kenneth B. Zaslow - BMO Capital Markets (United States)
Operator
Good day and welcome to the Diamond Foods, Incorporated Second Quarter 2015 Earnings Conference Call. Today's conference is being recorded.
At this time, I'd like to turn the conference over to Ms. Katie Turner of ICR. Please go ahead, ma'am.
Katie Turner - Managing Director, ICR LLC
Thank you. Good afternoon, and welcome to Diamond Foods second quarter fiscal 2015 earnings conference call and webcast. On today's call are Brian Driscoll, President and Chief Executive Officer; and Ray Silcock, Executive Vice President and Chief Financial Officer. Dave Colo, Diamond's Chief Operating Officer, will also be available for Q&A.
Before we begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. Diamond's actual results may differ materially from those projected in these forward-looking statements. Forward-looking statements involve risks and uncertainties and there are a number of factors that could cause actual results to differ materially from those contained in today's forward-looking statements. Please refer to the company's press release issued today, as well as the company's reports filed with the SEC for a discussion of the risks and uncertainties that may impact Diamond's forward-looking statements.
Finally, on today's call, management will refer to certain non-GAAP financial measures. Please refer to today's press release for a description of these non-GAAP financial measures and the reconciliation to Diamond's GAAP financial results.
And now, I'd like to turn the call over to Brian Driscoll, President and Chief Executive Officer.
Brian J. Driscoll - President, Chief Executive Officer & Director
Thank you, Katie. Good afternoon, everyone, and thanks for joining us. I'll begin with an overview of our Q2 operating results. Ray Silcock will then discuss our financial performance for the second quarter as well as fiscal year to-date.
Overall, we are encouraged by our financial performance in the second quarter. Our revenue improved to $229.7 million, a 4.1% increase versus last year, reflecting 3.2% growth in our Snack segment and 5.2% growth in our Nut segment. These results were adversely impacted by continued challenges in the UK, foreign exchange and the West Coast port disruptions.
In the U.S. our Snack segment delivered strong growth reflecting new distribution and market share gains for both Pop Secret and Kettle.
In the Nut segment, net price realization improved significantly and we continue to generate solid growth behind our Emerald convenient protein, 100-calorie pack platform.
Our Q2 consolidated gross increased 120 basis points to 26.6%. In our Snack segment, gross margin decreased 170 basis points, primarily due to increase promotional spending on both Pop Secret and Kettle UK. Importantly, our Kettle U.S. gross margin performance increased significantly as a result of improved overhead leverage and net price realization. In our Nut segment, gross margin performance improved by 490 basis points to 17.8% more than offsetting our Snack segment decrease. This Nut segment gross margin performance was driven by improved net price realization and lower walnut cost partially offset by higher tree nut costs.
Overall, we generated $33.8 million in adjusted EBITDA, an 18.4% increase versus the same period last year. As we head into Q3, seasonally our lowest quarter of the year for both sales and earnings, we continue to face a number of uncertainties. These include tree nut cost pressures and intensely competitive promotional environment, challenges in the UK marketplace, and the effects of a strong dollar. However, we believe that we are on-track to achieve our updated fiscal year 2015 annual adjusted EBITDA and non-GAAP EPS guidance, which Ray will provide more detail on later in his remarks.
Before I delve into our segment results further, I would like to touch briefly on the Kettle UK conditions. While foreign currency fluctuations in an aggressive competitive environment there have and will continue to impact our results, we believe that our business maybe showing early signs of improvement. To help address our UK challenges, we have updated our promotional strategy, accelerated new product plans and have further initiatives under review.
In addition, as many of you know, we recently announced that we acquired a majority interest in Yellow Chips, a manufacturer of high-quality vegetable and organic potato chips based in the Netherlands. Yellow Chips markets its products under private labels and has its own premium brand GoPure in Europe. Yellow Chips currently produces Kettle Brand vegetable chips for us in the UK. We're excited about this acquisition, which better enables us to compete in the UK and Europe. We'll leverage this acquisition with our existing distribution and capitalize on the rapid on-trend growth of vegetable chips. Long-term, we believe Yellow Chips will help us grow our overall sales and market share in the UK and Europe.
Now moving on to our segment operating results beginning with Snacks. Pop Secret continued to outperform the category and gain market share, picking up 100 basis points in the most recent Nielsen 12-week scanning period ending February 2014. We achieved this improvement despite an increasingly intense competitive environment in the category.
Looking forward, we believe we will benefit from continued distribution gains, new products and strong marketing support plans. As well our team will continue to actively manage our level of promotional spend in this competitive category to support our future growth.
Turning now to Kettle, the brand continues to experience solid growth in North America. Kettle U.S. Nielsen scan retail sales increased 7.8% in the last 12-week Nielsen period with our core fried chip line up 10.9%.
In the quarter, we gained momentum with our social media and field marketing platform, soft launched three new flavors, one of which, Pepperoncini, is already one of our top five items on a point of distribution basis and successfully launched Thick and Bold Dill Pickle and Carolina Barbecue into small format. We will be launching these unique new products nationally this summer.
Regarding small bag more specifically, Kettle continued its positive momentum with sales increasing by over 30% in the quarter versus last year, fueled in part by distribution gains and the aforementioned new products. Overall, we remain focused on innovation to maximize the Kettle Brand's full potential.
For those of you who will be attending Natural Products Expo West in Anaheim this weekend, we welcome you to come by the Kettle booth to taste some of these exciting new products and flavors.
In summary, we have good momentum across our U.S. Snacks portfolio, are seeing signs of improvement in Kettle UK and are focused on capitalizing on opportunities to grow our product offerings and deliver steady profitable growth.
Now turning to our Nut segment beginning with Emerald; we are encouraged by the brand sales performance. Our on-the-go 100-calorie pack platform grew sales by 19.4% in the most recent Nielsen 12-week scanning period compared to 2.8% growth for the snack nut category. We believe this trend bodes well for the transformation we're making from canisters to standup resealable bags with simple ingredient labels. We've received excellent distribution with and high marks from our retail partners thus far. As part of the launch we introduced two new products into the line of raspberry-glazed and honey-glazed almonds with several new varieties planned for later this fiscal year.
Although, it's still early to tell how consumers will respond to our relaunch, the early signs are positive. Going forward, we will continue to build on our Emerald platforms and believe that this will represent another great opportunity for us to capitalize on the rapidly growing demand for convenient protein snacks.
And lastly, on Diamond of California, for the 12-week Nielsen reporting period ending February 14, retail sales for the brand was up 3.7% and market share increased by 50 basis points.
As we've discussed on recent calls, our primary goal this year is to get both our pricing and margin profile right. While walnut costs have been favorable, we are still experiencing headwinds in non-walnut tree nuts, especially almonds. We've worked to mitigate these higher costs to the price increase we rolled out in Q1. This pricing effort helps strengthen our margins and our Q2 results represent meaningful progress on this initiative.
Consistent with our focus on margin expansion, we are eliminating some high-volume low margin SKUs which will adversely impact net sales in the back half of this fiscal year. The improvements in the foundation of our Diamond brand will help us as we focus on significant opportunities to increase our market share by expanding sales in the baking aisle as well as entering new categories. A great example of this is our introduction of new, clean label glazed walnuts and pecans in the current calendar year.
In summary, we are pleased with what we've accomplished in the first half of fiscal 2015. Our team remains focused on future margin expansion opportunities and we believe we are well positioned to navigate the uncertainties in the market today and achieve our updated annual outlook.
With that, let me turn the discussion over to Ray.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Thank you, Brian. Good afternoon everyone and thanks again for joining us on the call today. I will now walk you through the main elements of our second quarter-summarized statement of operations and some other data from today's press release.
As Brian already noted, net sales for Q2 were $229.7 million, up 4.1% from last year's second quarter. Q2 sales were adversely impacted by the strength of the dollar versus the pound as well as by shipping delays resulting from West Coast port disruptions. The impact of foreign exchange in the quarter amounted to $1.3 million in net revenue, while we estimate that shipping delays cost approximately $1.6 million. The increase in sales this quarter was led by a 5.2% increase in the Nuts segment and would have been almost a point higher without the shipping delays I referred to. Nuts net revenue was driven by improved net price realization, higher walnut sales and strong performance of the Emerald 100-calorie pack.
In the Snacks segment, we had a 3.2% increase in sales which would have been almost 2 points higher had it not been for the foreign exchange impact and the shipping delays. Strong Snacks segment growth in the U.S. was significantly offset by another weak quarter in the UK.
Gross margin for the quarter at 26.6% was 120 basis points better than for the same period last year and 250 basis points better than in our most recent quarter, Q1. This improvement was led by our Nuts segment, where the gross margin in the second quarter of 17.8% was 490 basis points better than for Q2 last year. This improvement stems from nut price increases put in place at the outset of the fiscal year as we sought to return our nut margins to mid-teen levels.
In addition, gross margin this quarter was positively impacted by a reduction in the estimated final price we expect to pay for the 2014 walnut crop. Note that $1.4 million of this walnut price improvement was for walnuts sold in the first quarter. Both of these factors were somewhat offset by sharply higher prices on other tree nuts, principally almonds.
Snacks segment margins on the other hand declined to 34.7%, down 170 basis points from the 36.4% in last year's second quarter. This primarily reflects the impact of higher promotional spending, both in the UK, where we have continued to struggle with the fallout from the grocery retailer's challenges there, and in the U.S. as we encounter heightened competitive pressure in the microwave popcorn segments.
Moving on to operating expenses, adjusted SG&A in Q2 amounted to $27.6 million as compared to an adjusted $24.2 million for the same period last year, an increase of $3.4 million. While the continued growth of our business in the U.S. and higher brokerage fees as a result of increased sales drove some of this increase, we also spent to invest in building an internal audit function of the company and in other financial infrastructure as well.
Advertising expense in Q2 was $9.7 million, down $3.4 million from $13.1 million last year. This drop primarily reflected our decision to shift from advertising to promotional spending. We increased the frequency of promotions in the U.S. in response to competitive pressure in the microwave popcorn segment and had sharply higher promotional spending in the UK driven by the business and competitive environment there.
Adjusted EBITDA for Q2 reconciled to net income in today's press release, amounted to $33.8 million and was up 18.4% from the $28.6 million in Q2 last year. Note that adjusted EBITDA excludes stock-based compensation and certain legal expenses principally related to the SEC's lawsuit against the company's former CFO, which is now being settled, and some other items as disclosed in the reconciliation included in today's press release. For the first half of fiscal 2015, we generated adjusted EBITDA of $64.5 million as compared to $57.7 million for the first six months of the prior year, an increase of 11.9%.
Moving on to earnings per share, non-GAAP EPS for Q2 amounted to $0.35 per share, up from $0.12 for the second quarter last year. In addition to the impact of higher revenue and improved operating performance, the major drivers of earnings per share, lower interest expense due to last year's debt refi was almost entirely offset by a combination of the change in our non-GAAP effective tax rate, the result of the shift in pre-tax earnings from the UK to the U.S. and the increase in share count from 29.9 million in Q2 last year to 31.5 million this quarter.
Addressing each of these impacts individually, interest expense before deferred financing was $8.8 million in Q2 this year versus $14.3 million last year, $0.13 per share of improvement. However, the change in the non-GAAP effective tax rate from 14% last year to 26.7% this year adversely impacted EPS by $0.12 a share, while the increased share count cost us another $0.02. The three items netted together resulted in a change of $0.01 per share. Note that on a GAAP basis our effective tax rate, the tax rate we pay, is 1.7%. For the first half of this year, our non-GAAP EPS amounted to $0.64, up from $0.34 for the same period last year.
Moving on to the balance sheet briefly, net debt as of January 31, 2015 in the end of Q2 was $590.3 million, approximately 5.3 times our last 12 months adjusted EBITDA and included $49.1 million in cash on hand as at quarter end. We had $119.8 million net availability on our $125 million ABL Revolver as at quarter end.
Moving now to our earnings outlook. We have, as noted in today's press release, updated and narrowed the range on our guidance for fiscal 2015. Despite having had to absorb the adverse impact of business challenges in the UK, the weakness of the UK pound and that higher non-GAAP effective tax rate, we now expect non-GAAP EPS to be in the range of $0.95 to $1.10 and adjusted EBITDA to be in the range of $117 million to $123 million. We've also updated our assumptions around this outlook. We continue to see cost inflation of 3% to 4% and expect productivity improvement of 2% to 3% for fiscal year 2015. We now expect the U.S./UK exchange rate to reach $1.50 per pound for the third and fourth quarters.
Finally, we expect our non-GAAP effective tax rate to be between 28% and 30%. We anticipate stock-based compensation of $9.7 million and 31.9 million diluted shares to be outstanding by yearend.
In conclusion, we are already well into our third fiscal quarter and while we don't provide quarterly earnings guidance, I would like to note once again that this is seasonally our lowest quarter for sales and earnings. We also anticipate that we'll face ongoing challenges this quarter, including an aggressive promotional spending environment in the UK and for microwave popcorn in the U.S. as well.
Foreign-exchange translation which knocked a point of growth from our Snacks segment in the second quarter is likely to be even more impactful in Q3 as we cycle a stronger pound last year while anticipating a weaker one this year. These uncertainties and challenges can be expected to negatively impact sales and earnings in the third quarter, although we expect to see a stronger Q4 as we anticipate seasonally higher U.S. sales particularly for Kettle Chips as we come into the summer and we feel confident we can achieve our annual outlook.
With that, I'd now like to ask the operator to open up the lines for questions. Operator?
Question-and-Answer Session
Operator
Thank you. And we'll take our first question from Andrew Lazar at Barclays.
Andrew Lazar - Barclays Capital, Inc.
Good afternoon, everybody.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Hi, Andrew.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hi, Andrew.
Andrew Lazar - Barclays Capital, Inc.
Just a couple of questions for me. I guess, first would be on the first quarter call, Brian, I think one of the things that you, I think felt probably most comfortable with as we went into the second quarter would have been an acceleration in snack sales from the growth rate you saw in the first quarter. It seems like the U.S. Kettle piece held the momentum actually reasonably well suggesting it really is the UK So, am I reading that right?
And then what is it that gives you, I guess, some comfort at this stage that maybe you're starting to turn a little bit of a corner in the UK? So, I'm trying to get a sense of, do we see the sales growth rate in keeping with what Ray said about the third quarter, but do we see snack sales start to actually accelerate in the back half?
Brian J. Driscoll - President, Chief Executive Officer & Director
So, first of all, on the U.S. business, both Pop Secret and Kettle had very good sales results for us in the quarter. And so, you're right that the lion's share of the muted performance, if you will, is a result of our performance in the UK. Even setting aside the impact of forex, even setting that aside, it's not what we expected because the UK continue to struggle in ways that perhaps exceeded what we had originally thought.
But now that we're in – literally in Q3, we're beginning to see some signs. We're beginning to see some evidence that the top-line in the UK is beginning to turn the corner. I can't say at this stage that it's going to be sufficient enough to offset – to be enough of an offset from this quarter to produce the kind of outcome that we had hoped for. So we do expect the balance of the year on snack sales to be up, but certainly muted for the same reasons. And I think Ray also pointed out that the impact of forex will probably be a little bit more substantial in the back half than it was in the front half.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
We saw the pound that's sharply stronger in Q3 and for last year, and that it came off really after that, obviously the strength of the pound maybe – the strength of the dollar rather maybe, but we certainly don't expect to see that reverse and we expect it quite possibly to get worse in Q3 overall.
Brian J. Driscoll - President, Chief Executive Officer & Director
But at this stage though, I don't see a structural issue on the brand in the UK. I believe it's everything we've been saying it is in terms of the competitive environment and we're beginning to see our way through that.
And plus frankly in the face of some very intense competition, I know I must've said that three times in my script, but in spite of some very intense competition in the popcorn segment we're very proud of how we've responded and the brand has performed. So as you think about our snack business for the long haul, we're still very optimistic about the prospects.
Andrew Lazar - Barclays Capital, Inc.
Thanks. And then with respect to walnut cost outlook for the full year now, I think it had previously been – the expectation have been flat year-over-year. So I am trying to get a sense of what that looks like now and I guess how much benefit do you guys get in the back half of the year from that?
Brian J. Driscoll - President, Chief Executive Officer & Director
So it's hard to say at this stage. We – our projection of the walnut cost is our best estimate at the time as you know, so at the time we make that estimate it's based on all the evidence we have when we do it.
The crop is up substantially. I think it's 568,000 tons, which is roughly up 15% versus year ago. Demand is down 8%. The Chinese crop we understand is up quite substantially, the Chile crop is just coming on right now. And so, the supply and demand equation is shaping in ways that could suggest some further tailwinds going forward. But that's – our estimate right now is based on the data we have now. So more to come in terms of whether or not the shipment results in the walnut business globally weaken further, continue to weaken. So – Dave, do you have anything you want to add on it?
David J. Colo - Chief Operating Officer & Executive Vice President
No. We don't disclose the exact price we put on walnuts, we are disclosing that it's down from the price we had. We've disclosed as a small look back that goes into the first quarter. Those of you who follow the company will recall that we had an adverse look back in the second quarter of last year as the prices rose faster than we anticipated. And it's fair to say that prices have gone down lower than we anticipated at the end of Q1. But we have our best estimate in right now for as of today's date and we will review and update it in time for our next quarter.
Brian J. Driscoll - President, Chief Executive Officer & Director
It's just hard to say where it's going to go.
David J. Colo - Chief Operating Officer & Executive Vice President
It is.
Andrew Lazar - Barclays Capital, Inc.
So you say that's probably the key piece that gives you some of the additional comfort despite some of the incremental headwinds you've talked about to be able to raise the bottom end of the range and feel good about getting to where you need to be (24:29)
Brian J. Driscoll - President, Chief Executive Officer & Director
No. Our change in our guidance is not a reflection of any anticipated further improvement in walnuts at all.
Andrew Lazar - Barclays Capital, Inc.
Okay.
Brian J. Driscoll - President, Chief Executive Officer & Director
It's based only and exclusively on – with respect to walnut cost, the cost we estimated at the time. So to the extent that there might – that there could be either – the cost go up or down, it would result in another look at our guidance.
Andrew Lazar - Barclays Capital, Inc.
Got it. Thank you.
Brian J. Driscoll - President, Chief Executive Officer & Director
You got it.
Operator
And we'll go next to Akshay Jagdale at KeyBanc Capital Markets.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Hi, good evening.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hi, Akshay.
David J. Colo - Chief Operating Officer & Executive Vice President
Good morning, Akshay.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Hey. Can you – just wanted to get a little more detail on FX. So can you just help us quantify what impact it's going to have on EBITDA now versus what you are expecting? Do you have that handy, Ray?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Yeah. We don't disclose the FX translation impact in a lot of detail. We did disclose $1.3 million impact on our net revenue in Q2 which you can obviously estimate what that would've been in gross profit terms as relatively modest. And we don't really know where foreign exchange is going. Our estimate was $1.50 to the pound for the balance of the fiscal year for quarters three and four. And that's a little bit lower than it was in Q2, so obviously proportionally a little bit more impact than what we've already disclosed in Q2.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Okay. So, the reason I'm asking is there's a lot of companies that we cover have come out with a much greater impact on their earnings from FX. It doesn't seem like that's the case for you? So if I'm wrong then correct me, but if not, my second question is what would your snack margins have been gross margins if you sort of exclude UK?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
We don't – we report our Snacks segment as a whole. We don't disaggregate the U.S. and the UK elements. However, I think it's clear from the language that Brian used and I did too that without the drag of the ongoing weak performance in the UK related largely to the challenges we face in the retailers – the challenges that retailers face in a tough and competitive environment there and our own competitors too, without that drag our margin would have been substantially better. But we're not disaggregating it.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Okay. And then just on innovation. So, can you just give us an overall view of where you are relative to plan? I mean, so, you've launched a lot of new innovation, right? So – and you talked about it sporadically, but can you give us a little bit more detail on the Emerald going to the bags, and sort of what's happening there? And maybe talk a little bit about the ready-to-eat popcorn launch and where you ended up, and maybe just sort of overall help us understand relative to your expectations, overall, are you – how is your innovation? How are your innovation efforts really playing out in the marketplace? Thank you. I will pass on.
Brian J. Driscoll - President, Chief Executive Officer & Director
So, at this stage as I look at Kettle, I give us – my personal view is I give us a thumbs up on ready-to-eat. I give us a thumbs down so far for reasons I talked about on the last call. And for Emerald standup bag, again, at this stage a thumbs up. So, we feel very good about the impact of the innovation we've had on Kettle Chips. We talked before about sriracha and maple bacon, I mentioned Pepperoncini, I mentioned Thick and Bold Dill Pickle and Carolina Barbecue – all have had a very nice impact on the brand and continues to keep the brand vibrant and contemporary and really helps us from a growth perspective.
On Emerald, the standup bags, our distribution performance in terms of authorizations is exceeding our expectations. We are very pleased with that. The early signs of customers that we have it on the shelf already are positive, but I'm hesitant to overstate how that might translate, but right now the signs are quite positive.
Our ready-to-eat popcorn, we've – fortunately we have some great alignment with key customers. We've been able to keep the brand in reasonably good distribution. We've changed the packaging, we've changed the pricing architecture and the jury's still out, but we're not done on that. I don't know Dave if you want to add anything on that?
David J. Colo - Chief Operating Officer & Executive Vice President
Yeah. I was just going to say on the ready-to-eat, the comments you just made, we've improved the pricing structure and we've come out with new packaging on the Kettle Brand in particular that started to shift as we sit here today. So – and on Pop Secret, we have some new packaging coming out in the next couple of months as well. So we think that's going to help give us a much better read on the long-term liability of our R-T-E business.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Okay, great. I'll pass it on. Thank you.
David J. Colo - Chief Operating Officer & Executive Vice President
Thank you.
Operator
And we'll go next to Brett Hundley at BB&T Capital Markets.
Brett M. Hundley - BB&T Capital Markets
Hey, good afternoon, guys.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hey, Brett.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Hey, Brett.
Brett M. Hundley - BB&T Capital Markets
Two just quick questions. Ray, would you mind giving some forward CapEx guidance?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
I think what we've told people hasn't really changed, is that we're expecting CapEx this year in the mid-$20s million and that's probably an order of magnitude where we'd see that in the future, but certainly for this year – that may change, but we certainly see it for this year in the mid-$20s million.
Brett M. Hundley - BB&T Capital Markets
Okay. And guys can you, to the extent that you can, I think across tree nuts in general, people feel okay about the way things are trending, California, globally et cetera. But, almonds becomes little bit squishier. And to the extent that you can, can you talk about what almonds represent as a percentage of your nut portfolio? Can you quantify that in some way?
Brian J. Driscoll - President, Chief Executive Officer & Director
Yeah. So, I mean, we don't get into too much detail. We have almonds, and just to be clear, there are almonds present in our Diamond of California business as well as in our Emerald business. So we have culinary almonds and we have snacking almonds, and overall, approximately a quarter of our nut buy is probably almonds.
Brett M. Hundley - BB&T Capital Markets
And would it be fair to...
Brian J. Driscoll - President, Chief Executive Officer & Director
...as well as cashews and pecans and...
David J. Colo - Chief Operating Officer & Executive Vice President
Yeah. Right. There are other nuts.
Brian J. Driscoll - President, Chief Executive Officer & Director
There are other nut types as well, but specifically to almonds that's the – almonds are our biggest nut type after walnut.
David J. Colo - Chief Operating Officer & Executive Vice President
Correct.
Brett M. Hundley - BB&T Capital Markets
Okay.
Brian J. Driscoll - President, Chief Executive Officer & Director
But we don't buy – just to be clear, we buy almonds exclusively on the spot market or the contract market of some kind, but we don't by almonds from growers in the way we buy walnuts from growers.
Brett M. Hundley - BB&T Capital Markets
Yeah. And is it fair to state that you guys feel across Diamond of California and Emerald, that you might have better pricing capabilities, better price strength in Emerald or is that not really a fair statement?
Brian J. Driscoll - President, Chief Executive Officer & Director
You mean the ability to increase prices?
Brett M. Hundley - BB&T Capital Markets
Correct.
Brian J. Driscoll - President, Chief Executive Officer & Director
Well, let me try to answer that a different way. I think that certainly with the stand-up bag our margin profile and our outlook on margin is substantially better than it was and is on canisters. It also provides us with more flexibility in terms of how we deploy our overall tree nut mix within the product. In terms of pricing power, or the ability to price it better, you know, certainly the 100 calorie pack business, we believe going forward will provide that. That has not been the case with canisters as you can imagine. In fact, despite our very healthy margin improvement profile in Q2, we chose not to raise prices on canisters. So we absorbed the increase in the almond commodity, the substantial increases and did not raise prices on canisters because the brand was struggling so much – that segment of it. So we were able to absorb that hit and still produce what we think are some very impressive margin improvements.
Brett M. Hundley - BB&T Capital Markets
Okay. And – that's helpful. And staying within Nuts, I just want to talk about the margin profile or potential there, because it seems to me like this level of percentage margin can be sustained going forward. I think about the different components in that industry; greater throughput coming through your facility; lower cost nuts or lower cost walnuts, I should say, hopefully over the interim, lower cost packaging, improved distribution and demand. Now you have a culling effort that seems like it's coming through. So is it fair to assume that we can continue to look for a mid-teen margin potential or higher going forward in that segment?
Brian J. Driscoll - President, Chief Executive Officer & Director
Yes. We're planning for mid-teens margins. To improve on mid-teen margins would require that we are successful on our Emerald re-launch. We have high hopes for that, so more to come. But at this stage, I would say that mid-teen margins are appropriate.
Brett M. Hundley - BB&T Capital Markets
Okay. And can you just touch on – the business that you're culling, the lower margin, is that a big chunk, a small chunk – is there a way that we can think about the size of that as it relates to the top-line?
Brian J. Driscoll - President, Chief Executive Officer & Director
So as an example, to the extent that we introduce products – as an example, if we were to get into other nut types other than almonds in – on our Emerald stand up bag, which we're planning to do, yeah, that will begin the shift of mix more and more to segments where we might have less of – less competitive challenges, if you will.
Brett M. Hundley - BB&T Capital Markets
All right. Thanks guys.
Brian J. Driscoll - President, Chief Executive Officer & Director
All right. Thanks, Brett.
Operator
And we'll go next to Bill Chappell at SunTrust.
William B. Chappell - SunTrust Robinson Humphrey
Good afternoon and thanks.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hi, Bill.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Hi, Bill.
William B. Chappell - SunTrust Robinson Humphrey
Hi. How are you?
Brian J. Driscoll - President, Chief Executive Officer & Director
Good.
William B. Chappell - SunTrust Robinson Humphrey
I wanted to touch on the change in the advertising budget, just kind of the – when you decided to kind of switch it to – from add to kind of promo stand? And then as we look going forward, I mean, are we seeing full brunt of – kind of, what you're seeing in the UK and Pop Secret, will it accelerate and how does that affect kind of gross margin for the remainder of the year?
Brian J. Driscoll - President, Chief Executive Officer & Director
So the lion's share of the reduction in advertising was in the UK. And that reduction was to fuel or to fund the promotional spending increases. Not all of it, but I would say the biggest portion of that decline was in the UK. So it's a very tactical move, where as I mentioned on the last call we're – I would characterize us as being in close quarter combat in the UK and competition is pricing aggressively and I think it's probably understood why that's happening there, so I won't get into that further, but we need to be competitive.
Do I anticipate that that's going to be the go-forward condition, a permanent condition? I don't. But I'd rather, hope for the best and plan for the worst and we're relooking our promotional programming, a new product launch timeframe et cetera so that we can get back on track in terms of our margin profile as well in the UK. So in terms of gross margins though, I think yeah, you could have some impact on Pop Secret. We're attempting not to cut advertising on Pop Secret, but we may need to, to some degree to be able to fuel promotional spend, so we're looking at that in order to remain competitive.
So that could have some affect on gross margins, but frankly we're also anticipating, we will continue to see strong gross margin performance on Kettle U.S. So on balance, I think some pressure driven primarily by UK.
William B. Chappell - SunTrust Robinson Humphrey
Okay. And then, maybe just a follow up on that. You alluded a couple times to signs of improvement in the UK or stabilization and I think last quarter you kind of thought this was going to last a while because the retail landscape kind of beating everybody up. And so, maybe you can give us a little more color on what that is and then just as aside, is Yellow Chip, is that – how does that affect your updated guidance?
Brian J. Driscoll - President, Chief Executive Officer & Director
Well, I'll answer the first question. So the margin profile in the UK right now I'm not satisfied with, because of the increase of – the gross margin profile, because of the increase in spending on promotion and I think I've explained why that's happening, and why I think it's important that we do that. But I don't think that that's a permanent condition. So that's the first thing. In terms of the signs of life, it's the fact that it appears that since we've begun to shift our promotional strategy, it seems like the brands responding well. So that's what I mean by that. The early signs of the shift in promotional strategy seem to be performing better than we had thought. That does not mean we've reached the promised land on this. It just means that we're seeing some signs of life.
William B. Chappell - SunTrust Robinson Humphrey
Got it.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Yeah. On Yellow Chips, no, it won't have a meaningful impact on our earnings for the current fiscal year.
William B. Chappell - SunTrust Robinson Humphrey
Perfect. Thanks so much for the color.
Brian J. Driscoll - President, Chief Executive Officer & Director
Thank you.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Okay.
Operator
And we'll go next to Tim Ramey of Pivotal Research Group.
Timothy S. Ramey - Pivotal Research Group LLC
Thanks so much. Good afternoon.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hi.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Hi, Tim.
Timothy S. Ramey - Pivotal Research Group LLC
If you said it, I missed it. Can you quantify what sort of ACV distribution the standup bag is in, where are we at in kind of the rollout of that?
Brian J. Driscoll - President, Chief Executive Officer & Director
Well, so what I was commenting on is the authorizations, which means the number of retailers and the ACV we've been authorized in, but we're phasing it out. So first shipments to just take a small number of customers were in February. This month is a slightly expanded view, with full rollout by the end of the summer.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Fiscal year.
Brian J. Driscoll - President, Chief Executive Officer & Director
The fiscal year.
Timothy S. Ramey - Pivotal Research Group LLC
Okay. And then on the impact of the port strike, I think you quantified that as $1 million impact to sales. I wonder if – does that roll forward into the 3Q or is that just sales that we're not likely to reclaim? And then secondly, with regard to the port issue, I wondered if in-shell walnuts would back up more than, say, your product and create downward price pressure overall in the market, any thoughts on that?
Brian J. Driscoll - President, Chief Executive Officer & Director
Yeah. So I would say that the Kettle business will ship, so that will reclaim. We do have an in-shell business that we believe will reclaim. But the problem with that is, it's going to replace revenue that we would've gotten this quarter anyway. So I wouldn't look at that as incremental, but it will ship. And in terms of in-shell...
David J. Colo - Chief Operating Officer & Executive Vice President
Our in-shell business, Tim, we ship it early, so we've had minimal issues getting our in-shell business ship. So I feel like we're in pretty good shape there. For the balance of the industry on in-shell shipment, so I think it's probably – the port situation is probably going to have a bigger impact for the balance of the in-shell potentially.
Timothy S. Ramey - Pivotal Research Group LLC
So that could have a positives impact on your margins, if it does sort of backup walnuts?
Brian J. Driscoll - President, Chief Executive Officer & Director
Yeah, those sort of things are hard to...
David J. Colo - Chief Operating Officer & Executive Vice President
Our best impact of the price is what's built into our price right now, but then – and, as we said, it doesn't – that's not in our numbers for the year ahead. And if it were to happen either way, up or down, that price would be different from where we're at. The impact on our projections for the year would be whatever it was.
Timothy S. Ramey - Pivotal Research Group LLC
Got it. Okay. Thanks so much.
Brian J. Driscoll - President, Chief Executive Officer & Director
Thanks
David J. Colo - Chief Operating Officer & Executive Vice President
Thanks, Tim.
Operator
And we'll go next to Robert Moskow at Credit Suisse.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Hi, there. Thank you.
David J. Colo - Chief Operating Officer & Executive Vice President
Hi, Rob.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hi, Rob.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
I just wanted to make sure I understand the rationale for raising the bottom end of the guidance. Did that include the $1.4 million offset that you talked about in first quarter because of lower walnut costs?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
The $1.4 million is in the second quarter and...
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Second quarter?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
...we recorded it. Yeah, it's part of the $0.35 that we reported for the second quarter, but it relates to walnuts that were actually shipped in Q1. We don't go back and adjust Q1. That's why we put our best estimate forward-looking price for the walnuts, that we had our best estimate in Q1. It just happened that our best estimate in Q1 was a bit higher than where we round up for our best estimate in Q2. So we're just letting you know there's a $1.4 million – it's kind of a bit of a windfall, but it does wind up staying in Q2 based on accounting rules and so on and so forth.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Okay. Sorry, if I misstated, how it works. But that is helping your guidance for the year, right?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
It is, I mean, all of the things put together help our guidance for the year. I think we wanted to be clear when we put our guidance out that we feel despite all of those headwinds that we feel that our business in the U.S., especially obviously in the U.S. since the UK has got challenges, but our business in the U.S. is enabling us to overcome those challenges and is actually a little bit stronger than we had thought it would be when we put our guidance in place back at the end of the year.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Yeah.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
End of last fiscal year.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Okay. And then the second question on Pop Secret in the U.S. I've been impressed by how well the brand has stood up to increase promotion by your biggest competitor. And when I look at Nielsen data anyway, it looks like Orville's (45:06) pricing is actually below Pop Secret at least optically in the Nielsen data? Is that what you're seeing on shelf when you look at it head-to-head? And if it really is that low, is it going to become a bigger concern going forward? It doesn't sound like of a huge concern today, but could things potentially get worse here?
Brian J. Driscoll - President, Chief Executive Officer & Director
First of all, when you look at Nielsen, it's very hard to compare the pricing because they have a lot more distribution than us at this stage. And so, as you think about their overall mix and then their – if you look at their equivalent price versus ours, it's not quite apples-to-apples. So whenever you look at Nielsen on a total brand basis, it's really difficult to look at it and assert that they're necessarily lower than us.
Our observations, though, are that our competition has been very aggressive. I would say, especially promotionally our view has been that they've been deeper. I think that the Act II business has performed quite well. We've got some strong competitors out there, there's no question about it. They're working to build their strength back, but I'm just really proud of our ability to withstand that pressure. Frankly, we've been withstanding it for some time. This is not a new dynamic. It intensified, but our competition is that they didn't just wake up, they've been trying to get share back for some time and I like our chances.
Going forward, I mean, already we're beginning to see the need to be a little bit more price competitive, but we're trying to be very surgical about that. We're being very prescriptive, we're looking at best return scenarios, and I feel like that strategy can continue to work for us.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Here's a marketing question, Brian, on Kettle, ready-to-eat popcorn. Are consumers confused that it might be Kettle corn in there, like a sweet popcorn and when you open up and it's something different?
Brian J. Driscoll - President, Chief Executive Officer & Director
Could be. I don't know the answer to that, but I do know that our packaging change reflects a much clearer message that we hope will overcome whatever those barriers might be. It's hard to know for sure, because it's such a new business whether or not that's necessarily a driver, but it could be. Needless to say, we think that the pack – the new packaging is much more Kettle-like. We went with a completely different direction on our packaging because we were trying to really make it distinctive from Kettle Chips in terms of the packaging and I think that was a miss. And so, we're hoping that this particular packaging with its messaging will resonate much better.
Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker)
Okay. Thank you very much.
Brian J. Driscoll - President, Chief Executive Officer & Director
Thanks, Rob.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Thanks, Rob.
Operator
And we'll go next to Ken Zaslow at Bank of Montréal.
Kenneth B. Zaslow - BMO Capital Markets (United States)
Hey, good evening, everyone.
Brian J. Driscoll - President, Chief Executive Officer & Director
Hey, Ken.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Hey, Ken.
Kenneth B. Zaslow - BMO Capital Markets (United States)
I know this question has been asked, I just didn't understand the answer. So with all the headwinds, the Europe, the promotional activity, you raised the bottom end of your guidance, what is doing better than you expected?
Brian J. Driscoll - President, Chief Executive Officer & Director
U.S. Snacks is doing very well. I'd say North America Snacks. We got a nice business in Canada. We feel very good about that on Kettle. Yeah, it's U.S. Snacks primarily.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
U.S. and Canadian Snacks.
Brian J. Driscoll - President, Chief Executive Officer & Director
Yeah.
Kenneth B. Zaslow - BMO Capital Markets (United States)
So the momentum in the core business is more than offsetting any currency headwind that I might be concerned about. Is that fair?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Yes, that's fair. I mean, the currency headwind is obviously specific, it's UK, U.S. relationship, so the pound to the dollar. And it represents a fairly modest portion of our total business.
Kenneth B. Zaslow - BMO Capital Markets (United States)
Can you remind us what is the relative size or impact of the UK Kettle business, I don't remember it being huge?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
It's not. We don't disclose the UK separately from our U.S. Snack business, we report it as one single segment. But it's a fairly modest element of that. And that's why it's not having a huge impact. We don't enjoy it. We're obviously taking – we're taking it, but I think, as Brian says, our North American Snacks business, Canada and the U.S. combined is doing relatively better than we had expected at the beginning of the year.
Kenneth B. Zaslow - BMO Capital Markets (United States)
But it's not the commodity side of it; it's the actual momentum with the sales and the cost savings opportunities, is that fair?
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Yeah. And so, I think that if the Nuts segment is also doing well, driven largely by the fact that as we promised you a couple of quarters ago, we were going to take pricing to bring our nut margins back in line and we allowed our nut margins to dwindle toward the end of last fiscal. We took pricing, which the market accepted, and we restored our margins back to those mid-teen levels we've talked about. You can see that in today's release. And so that net price realization on Nuts combined with the continued success of Kettle and Pop Secret in North America is what's driving our business forward today and is overcoming the drag from the UK.
Brian J. Driscoll - President, Chief Executive Officer & Director
And that's not fully optimized because we chose not to price on canisters, so Diamond of California, 100-calorie packs, yes; canisters, no, because of the weakness in the business. So to the extent that the stand-up resealable bags achieved the kind of success that we believe it can, that gives us some additional possibilities on the margin side and the growth side.
Kenneth B. Zaslow - BMO Capital Markets (United States)
Okay. And then my last question is, is there a structural reason why Diamond cannot narrow the margin gap with your peers in chips as well? I know you talked a lot about the Nuts, but it still seems like your chip margins are far below your peers, and it seems like there's margin opportunity there, but you don't talk about it as much?
Brian J. Driscoll - President, Chief Executive Officer & Director
Who are you comparing us with?
Kenneth B. Zaslow - BMO Capital Markets (United States)
Pepsi.
Brian J. Driscoll - President, Chief Executive Officer & Director
So we have a very different – we have a very different, sorry...
Kenneth B. Zaslow - BMO Capital Markets (United States)
I know they have a different directional, but the margin difference is still upward of 800 basis points. I mean, you're talking about a huge basis point difference. I'm not saying that you will be their model because, again, they have more scale, they have direct (51:58). I get that. But it still seems like a wide, wide margin. If I was a player in your business, I would kind of scratch my head.
Brian J. Driscoll - President, Chief Executive Officer & Director
Well, we see it as opportunity. I do think that the business that you're comparing us to is in a very different scale, different distribution method, different type of chip, is a different consumer, different (52:21); there's lots of things different about it. But we do see it as an opportunity and we work hard every day, seriously hard, to improve our margins. We've seen good improvement in our chip margins.
We don't disaggregate chips from popcorn of course, but we have seen solid improvement in our margins on our snack business including our chip margins over the course of the last 18 to 24 months. And we have, in productivity improvements, we have targets for the year ahead – the years ahead in our three-year plan. And so, yes, we see the fact that our competitors have better margins as being an opportunity for improvement for us.
Kenneth B. Zaslow - BMO Capital Markets (United States)
Would it be better served in somebody else's portfolio? Is that your implication that if somebody else had a different scale that their margins – they would be able to take your Kettle and actually increase the margins more similarly? Is that – I don't know if I am really...
Brian J. Driscoll - President, Chief Executive Officer & Director
Yes. I think what we're proving on Kettle, and again, we don't split it out within – from the Snacks segment, but I commented that our margins have improved quite nicely. I think what we've been able to achieve in terms of overhead leverage is you see a margin improvement because we're beginning to utilize our capacity much better. I think one of the reasons I comment on our core fried line, is because to the extent that we grow our core fried line, that's also margin enhancing for us as well. So to the extent that we can utilize excess capacity, to the extent that we can continue to grow our fried business, that has the most significant impact on our margin structure.
But to your question, I mean the key for us is just to keep growing. I mean, the reality is to the extent that we can keep growing that core fried line, utilize capacity et cetera, we can continue to grow this margin profile. I like to post our largest competitor's margin profile on the wall as something for motivation for sure. We have a long way to go to close that gap, but we're working on it.
Kenneth B. Zaslow - BMO Capital Markets (United States)
Great. I appreciate it.
Brian J. Driscoll - President, Chief Executive Officer & Director
Thank you.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Thanks, Ken.
Operator
And we do have a follow-up on the line from Akshay Jagdale at KeyBanc Capital Markets.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Hey. Thanks for taking the follow-up.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Sure. Hi, again.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Yeah. Maybe you said this so forgive me if I missed it, but what exactly have you changed in your promotional strategy in the UK?
Brian J. Driscoll - President, Chief Executive Officer & Director
So the – I won't get into BOGOs versus half-price and so on, but suffice to say that our promotional discount levels were not deep enough. What's happening is, the pressure on CPGs – well, I'll only speak to our category. The pressure in our category, I won't speak for anyone else, is such that the promotional prices are deeper. And so, again, we're trying to be surgical about it and we're trying to do it in a best return manner, but it's primarily deeper discounts. On Pop Secret, it's somewhat different. Up till now it's been in our case more frequency, although there might be some need to cut just a little bit deeper, but it's been, heretofore, primarily more frequency on Pop Secret.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Okay. And then just again on Kettle UK, I think when you acquired that business, or when this business was acquired by Diamond, it was sort of doing better than the U.S. business and had a really good innovation pipeline. They had like multi-pack; so can you just – did that brand grow a little tired? Why are we leading with pricing and I thought you guys would be leaders – continue to be leaders in sort of innovation. So did the pipeline sort of dry out a little bit on innovation? And can you just give us a glimpse as to what you're thinking in terms of innovation there? Is it again flavors and...?
Brian J. Driscoll - President, Chief Executive Officer & Director
Well, first of all, I think you're right that from a new product perspective you want to take the high road, so what you're trying to do is introduce items that perhaps are more premium in nature that allow you to get better margins etcetera. But I don't view this as a function of us not innovating. I think because of the nature of the challenges that exist in that marketplace there's been great pressure on our competitive set and us to be more aggressive and so we've just been – from a pricing perspective. So we're not "leading with price" we're being competitive.
That said, there's no question about it that innovation and a more premium approach is the best way and frankly that's part of the reason why we bought Yellow Chips. We think the veggie snack segment, not just in the UK, but throughout Europe is quite attractive and we intend to participate and hopefully in a big way.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Okay. Just one last one on Nuts. Can you just give us a bit more of a holistic view on how you're looking at the category and include Diamond of California in that discussion because we've covers (58:10) company that has a private label nut business and they're introducing bars, microwavable nut items and recently they talked about a very significant slowdown in the category. So can you just give us your view of the nut category and your opportunity there longer term, and maybe talk a little bit about where we might see you participate longer term?
Brian J. Driscoll - President, Chief Executive Officer & Director
Yeah. So, starting with snack nuts, I think the latest 12-week category growth was up under 3%, so I don't recall who made that comment, but that's an accurate statement the category at least in this past 12 weeks has not been robust. But what we're finding is, depending on your format and your ingredient profile et cetera, you can navigate a scene here and outpace the category. I think 100-calorie packs for us is a great example of that where our Nielsen 12-week consumption was up close to 20%, even though the category was only up 2.8%. And that's what I meant by the opportunity we think exists on our stand-up resealable bags because of our move to clean label.
We think we're navigating a scene here, we think we can compete in ways that allow us to perhaps be able to outpace the category growth. I mean, right now – I mean when you think about the condition of our canister business and how it was, we've got authorizations for roughly 70% U.S. ACV on our new products. So the retailer take of what this new item stands for has been better than we expected, and I think hopefully that augurs well for us going forward in terms of us being able to outpace the category.
In terms of culinary, that category has been sluggish, not great. We performed well. I mean prices have been very high at retail as you know. I think we have a good loyal base, but I do think that there's a real room for innovation. We have a couple things that we're not yet releasing that we're quite excited about in terms of where we're taking the Diamond brand but more to come on that. But, again, our goal is to outpace the category growth.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
And just any thoughts on private label within snack nuts? It was kind of surprising for me to see the kind of success and leadership that they've had?
Brian J. Driscoll - President, Chief Executive Officer & Director
I think private label in my memory has always been a significant factor in snack nuts. And I think it plays a very important role in the category, and I think that there's probably a lot that can be done in that segment. Hey, look, my – the way I think about these things is, I want to see the category grow and the category grow robustly. And I think private label can play an important role in that. That doesn't mean we can't outpace that category growth. But to me, it's important that the category grows. And I think private label can play an important role. I just think we can play a more important role and so – from a growth perspective.
Akshay S. Jagdale - KeyBanc Capital Markets, Inc.
Perfect. Thank you.
Brian J. Driscoll - President, Chief Executive Officer & Director
All right. Thanks, Akshay.
Ray P. Silcock - Chief Financial Officer & Executive Vice President
Thanks. Akshay.
Brian J. Driscoll - President, Chief Executive Officer & Director
So, thank you for joining us this afternoon. Overall, we feel that 2015 is going well for Diamond and we look forward to further improvements throughout the year. Our team looks forward to reporting on our progress on our next earnings call. Thank you very much.
Operator
Thank you. And that does conclude today's conference. We thank you for your participation.
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