SAN FRANCISCO — Diamond Foods, Inc. suffered a loss of $163,232,000 during fiscal year 2013, ended July 31. Proposed settlement charges from a class action lawsuit and a decrease in nut business segment sales were the primary drivers for the loss. Sales for the year fell 12% to $864,012,000.

Diamond Foods has two business units: nuts and snacks. The company’s nut processing operations had sales of $426,057,000 during the year, a 23% decline compared with segment sales during 2012. Diamond’s snack segment saw its sales increase 3% to $437,955,000.

“For the nut segment, despite improved price realization, our net sales were down 23.4% to $426.1 million as a consequence of lower volumes, the result of s.k.u. (stock-keeping unit) rationalization, reduced promotional spending, and a curtailed walnut supply,” said Ray Silcock, chief financial officer, during a conference call with analysts on Sept. 30.

The fourth quarter included a charge of $96.1 million to cover the cost of settling a class action lawsuit related to past walnut sales. Under the terms of the proposed settlement, Diamond Foods will give plaintiffs 4.45 million shares of company stock and $11 million in cash. The settlement has received preliminary approval from the court and the company said it expects final approval in January.

The company also said its troubles are not over, and that it expects to face headwinds during the first quarter of fiscal 2014 associated with the re-launch of its Emerald brand and a lower walnut supply. Despite expected increases in tree nut costs, the company said fiscal 2014 is expected to be a year of earnings improvement as additional benefits from the execution of the multi-year turnaround strategy are realized.

“Regarding Emerald, much of the initial heavy lifting associated with its turnaround is behind us,” said Brian Driscoll, president and chief executive officer. “Our re-launch is now under way. And while it’s too soon to draw any conclusions, we are encouraged by early market signals. For instance, with initial shipments beginning in August, 95% of our customers currently have the new Emerald canister items on shelf. We also have new items in development that will launch in the second half of the fiscal year for both our canister and breakfast on-the-go product lines. Additional consumer driven innovation and advertising is also planned that will begin delivering benefits in the second half of the year and into fiscal year '15.

“Moving to walnuts, while we will have somewhat less supply to sell than last year, we believe that we have now stabilized our supply base. This critical step should put us in better position to add new growers going forward. Keep in mind, the number of walnut handlers in California has grown significantly in the past three to four years offering growers many alternatives. The challenges that this new industry structure presents will take time to overcome. In this context, we continue to take the long view on this business, remain confident that we have the right strategy in place, and believe that this segment can deliver strong cash contribution benefits to Diamond over time.”