First Quarter Fiscal 2025
Highlights
- GAAP Results as Compared to First Quarter Fiscal 2024:
- Net sales declined 1% to $1,654 million
- Income from operations declined 34% to $212 million
- Net income declined 46% to $127 million
- Diluted EPS declined 45% to $0.88
- Non-GAAP Results as Compared to First Quarter Fiscal 2024:
- Adjusted Income from Operations(1) declined 43% to $187
million
- Adjusted Net Income(1) declined 56% to $105 million
- Adjusted Diluted EPS(1) declined 55% to $0.73
- Adjusted EBITDA(1) declined 30% to $290 million
- Repurchased $82 million of common stock and paid $52 million in
cash dividends to common shareholders
Restructuring Plan
- Restructuring actions expected to generate approximately $55
million of pre-tax cost savings in fiscal 2025 and a $100 million
reduction in capital expenditures in fiscal 2025
- Key actions include closing Connell, Washington facility,
temporarily curtailing production lines and schedules in North
America, reducing approximately 4% of global workforce, and
eliminating unfilled job positions
- Expected to record total estimated pre-tax charges of $200
million to $250 million
Updated Fiscal 2025 Outlook
- Reaffirming net sales of $6.6 billion to $6.8 billion
- Reducing GAAP net income target to $395 million to $445
million, and Diluted EPS target to $2.70 to $3.15
- Targeting low-end of target ranges of Adjusted EBITDA(1) of
$1,380 million to $1,480 million
- Reducing Adjusted Net Income(1) target to $600 million to $615
million and Adjusted Diluted EPS(1) target to $4.15 to $4.35
- Reducing capital expenditures target by $100 million to $750
million
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its
results for the first quarter of fiscal 2025 and updated its full
year earnings targets for fiscal 2025.
“We delivered first quarter financial results that were
generally in line with our expectations, driven by sequentially
improved volume performance, solid price/mix, and strict management
of operating costs,” said Tom Werner, President and CEO. “However,
restaurant traffic and frozen potato demand, relative to supply,
continue to be soft, and we believe it will remain soft through the
remainder of fiscal 2025.”
“To drive operational and cost efficiencies, we are taking
actions that include the permanent closure of an older, higher-cost
processing facility and the temporary curtailment of certain
production lines and schedules in our manufacturing network.
Together, we expect these actions will help us better manage our
factory utilization rates and ease some of the current
supply-demand imbalance in North America. We are also taking
actions to reduce operating expenses, including reducing headcount
and eliminating certain unfilled job positions, as well as reducing
capital expenditures. The combined estimated savings from these
actions are reflected in our updated fiscal 2025 targets.”
“These actions are proactive steps designed to improve our
operating efficiency, profitability and cash flows, while also
positioning us to continue to make strategic investments to support
our customers and create value for our stakeholders over the
long-term.”
Summary of First Quarter FY
2025 Results ($ in millions, except per share)
Q1 2025
Year-Over-Year
Growth Rates
Net sales
$
1,654.1
(1)%
Income from operations
$
212.1
(34)%
Net income
$
127.4
(46)%
Diluted EPS
$
0.88
(45)%
Adjusted Income from Operations(1)
$
187.2
(43)%
Adjusted Net Income(1)
$
104.7
(56)%
Adjusted Diluted EPS(1)
$
0.73
(55)%
Adjusted EBITDA(1)
$
289.9
(30)%
Q1 2025 Commentary
Net sales declined $11.2 million to $1,654.1 million, down 1
percent versus the prior year quarter. Volume declined 3 percent,
largely reflecting the impact of customer share losses, soft
restaurant traffic trends, the carryover effect of the Company's
decision in the prior year to exit certain lower-priced and
lower-margin business in Europe to strategically manage customer
and product mix, and the impact of a previously announced voluntary
product withdrawal initiated in late fiscal 2024. The volume
decline was partially offset by growth in key international
markets. Price/mix increased 2 percent, reflecting the benefit of
inflation-driven pricing actions in Europe and North America, and
was partially offset by unfavorable channel and product mix, as
well as targeted investments in price and trade support.
Gross profit declined $143.5 million versus the prior year
quarter to $356.0 million, and included a $2.9 million ($2.2
million after-tax, or $0.01 per share) unrealized gain related to
mark-to-market adjustments associated with commodity hedging
contracts. The prior year quarter included a $31.7 million ($23.8
million after-tax, or $0.16 per share impact) unrealized gain
related to mark-to-market adjustments associated with commodity
hedging contracts, and $22.5 million of costs ($16.7 million
after-tax, or $0.11 per share) associated with the sale of
inventory stepped-up to fair value following the Company’s
acquisition of the remaining interest in Lamb-Weston/Meijer v.o.f.
(“LW EMEA”), its former joint venture in Europe (the “LW EMEA
Acquisition”).
Adjusted Gross Profit(1) declined $137.2 million versus the
prior year quarter to $353.1 million. Higher manufacturing costs
per pound, an approximately $39 million loss from the voluntary
product withdrawal, lower sales volumes, and higher warehouse costs
drove the decline, and was partially offset by a net benefit from
pricing actions. The higher manufacturing costs per pound largely
reflected input cost inflation, which was primarily driven by
higher raw potato costs; utilization-related production costs and
inefficiencies; and $15.5 million of higher depreciation expense
primarily associated with the Company’s recent capacity expansions
in China and the U.S. The Company does not expect further
significant sales or earnings impact from the voluntary product
withdrawal during the remainder of fiscal 2025.
Selling, general and administrative expenses (“SG&A”)
declined $32.3 million versus the prior year quarter to $143.9
million, and included: a gain of $16.6 million (before and
after-tax, or $0.12 per share) related to blue chip swap
transactions(2) in Argentina, $0.6 million ($0.5 million after-tax,
or $0.01 per share) of foreign currency exchange losses, and $6.0
million ($4.4 million after-tax, or $0.03 per share) of unrealized
gains related to mark-to-market adjustments associated with
currency hedging contracts. The prior year quarter included $7.4
million ($5.5 million after-tax, or $0.04 per share) of foreign
currency exchange losses, $4.4 million ($3.3 million after-tax, or
$0.02 per share) of unrealized losses related to mark-to-market
adjustments associated with currency hedging contracts, and $4.0
million ($3.0 million after-tax, or $0.02 per share) of LW EMEA
integration and acquisition-related expenses.
Adjusted SG&A(1) increased $5.5 million versus the prior
year quarter to $165.9 million, primarily due to $6.1 million of
incremental non-cash amortization and expense related to the
Company's new enterprise resource planning (“ERP”) system. The
benefit of cost savings initiatives essentially offset inflation
and information technology investments.
Income from operations declined $111.2 million versus the prior
year quarter to $212.1 million. Adjusted Income from Operations(1)
declined $142.7 million versus the prior year quarter to $187.2
million, driven by lower sales and Adjusted Gross Profit(1),
partially offset by lower Adjusted SG&A(1).
Net income declined $107.4 million versus the prior year quarter
to $127.4 million, and Diluted EPS declined $0.72 versus the prior
year quarter to $0.88. Net income in the current quarter included a
total net gain of $22.7 million ($24.9 million before tax, or $0.15
per share) for gains resulting from blue chip swap transactions(2)
in Argentina, foreign currency exchange losses, and unrealized
mark-to-market derivative gains and losses. Net income in the prior
year quarter included a total net loss of $4.7 million ($6.6
million before tax, or $0.03 per share) for foreign currency
exchange losses and unrealized mark-to-market derivative gains and
losses, and items impacting comparability.
Adjusted Net Income(1) declined $134.8 million versus the prior
year quarter to $104.7 million, and Adjusted Diluted EPS(1)
declined $0.90 from the prior year quarter to $0.73. The declines
in Adjusted Net Income(1) and Adjusted Diluted EPS(1) largely
reflect lower Adjusted Income from Operations(1) due to the factors
described above; a higher effective tax rate, reflecting discrete
tax items in the current and prior year quarters; and increased
interest expense primarily due to higher total debt and higher
interest rates on floating rate debt.
Adjusted EBITDA(1) declined $122.9 million versus the prior year
quarter to $289.9 million, primarily due to lower sales and
Adjusted Gross Profit(1), which includes an approximately $39
million loss associated with the voluntary product withdrawal.
The Company’s effective tax rate(3) in the first quarter was
28.5 percent, versus 22.9 percent in the prior year quarter.
Excluding a $2.2 million net tax benefit and a $1.9 million of net
tax loss from items impacting comparability in the current quarter
and prior year quarter, respectively, the Company’s effective tax
rate in the first quarter was 31.7 percent, versus 23.1 percent in
the prior year quarter, largely due to a higher proportion of
earnings from the Company’s International segment in the current
quarter, and discrete tax items.
Q1 2025 Segment
Highlights
North America Summary
Net sales for the North America segment, which includes all
sales to customers in the U.S., Canada and Mexico, declined $31.7
million to $1,103.7 million, down 3 percent versus the prior year
quarter. Volume declined 4 percent, largely reflecting the impact
of customer share losses and declining restaurant traffic in the
U.S.
Price/mix increased 1 percent, reflecting the carryover benefit
of inflation-driven pricing actions taken in fiscal 2024 for
contracts with large and regional chain restaurant customers,
partially offset by unfavorable channel and product mix, as well as
targeted investments in price and trade support across all sales
channels to attract and retain volume.
North America Segment Adjusted EBITDA declined $103.3 million to
$276.1 million. Higher manufacturing costs per pound, an
approximately $21 million charge for the voluntary product
withdrawal related to products manufactured in North America, and
lower sales volumes drove the decline, which was partially offset
by a net benefit from pricing actions.
International Summary
Net sales for the International segment, which includes all
sales to customers outside of North America, increased $20.5
million to $550.4 million, up 4 percent versus the prior year
quarter. Volume declined 1 percent, due to the carryover effect of
the Company's decision in the prior year to exit certain
lower-priced and lower-margin business in Europe to strategically
manage customer and product mix, as well as the impact of the
voluntary product withdrawal. The volume decline was partially
offset by growth in key international markets outside of Europe.
Price/mix increased 5 percent reflecting pricing actions announced
this fiscal year to counter input cost inflation.
International Segment Adjusted EBITDA declined $39.1 million to
$50.5 million. An approximately $18 million impact associated with
the voluntary product withdrawal and higher manufacturing costs per
pound largely drove the decline, which was partially offset by the
benefit of inflation-driven pricing actions.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures were $11.3 million and $12.1 million for the first quarter
of fiscal 2025 and 2024, respectively. The results in the current
and prior year quarters reflect earnings associated with the
Company’s 50 percent interest in Lamb Weston/RDO Frozen, an
unconsolidated joint venture in Minnesota.
Liquidity and Cash Flows
Net cash provided by operating activities for the first quarter
of fiscal 2025 was $330.2 million, down $4.4 million versus the
prior year period, due to lower earnings. Capital expenditures, net
of proceeds from blue chip swap transactions, during the first
quarter of fiscal 2025 were $335.6 million, up $30.9 million versus
the prior year period, primarily reflecting higher investments to
support strategic capacity expansion projects in the U.S., the
Netherlands and Argentina.
As of August 25, 2024, the Company had $120.8 million of cash
and cash equivalents, with $1,004.0 million of available liquidity
under its global revolving credit facility.
On September 27, 2024, the Company entered into a new $500
million term loan facility due September 2031, the proceeds of
which were used to repay the remaining $225 million balance of an
existing term loan due June 2026 and $275 million of outstanding
borrowings under the Company's global revolving credit
facility.
Capital Returned to Shareholders
In the first quarter of fiscal 2025, the Company returned $51.7
million to shareholders through cash dividends. Additionally, the
Company repurchased 1,412,852 shares of common stock totaling $82.0
million under the Company's existing share repurchase program
during the quarter, at an average price of $58.04 per share. The
Company has approximately $308 million of remaining unused capacity
under this program.
Restructuring Plan
The Company is implementing a restructuring plan (the
“Restructuring Plan”) that is designed to drive operational and
cost efficiencies and improve cash flows, while positioning the
Company to continue to make strategic investments to drive
long-term value for its stakeholders. The Restructuring Plan
includes:
- The permanent closure of the Company’s manufacturing facility
in Connell, Washington, effective October 1, 2024;
- The temporary curtailment of certain production lines and
schedules across its manufacturing network in North America;
- A reduction in operating expenses, including headcount
reductions approximating 4% of the Company’s global workforce and
the elimination of certain unfilled job positions; and
- A $100 million reduction in fiscal 2025 capital expenditures to
$750 million from the Company’s previous estimate of $850
million.
The Company estimates that the Restructuring Plan will generate
approximately $55 million in pre-tax cost savings and a reduction
in working capital in fiscal 2025. The estimated savings and
improvements in cash flow have been reflected in the Company’s
updated fiscal 2025 financial targets.
In connection with the Restructuring Plan, the Company expects
to record total estimated pre-tax charges of $200 million to $250
million, of which the Company estimates that approximately 80
percent will be cash and 20 percent will be non-cash. The charges
primarily relate to the cost of contracted raw potatoes that will
not be used due to production line curtailments, accelerating
depreciation of assets, the write-down of inventory and long-lived
assets, employee severance and other one-time termination benefits,
and other costs. The Company expects to record most of the pre-tax
charges in the second quarter of fiscal 2025, with the remainder
expected to be recorded during the second half of fiscal 2025.
Fiscal 2025 Outlook
The Company updated its financial targets for fiscal 2025 as
follows:
- The Company reaffirmed its net sales target range of $6.6
billion to $6.8 billion, reflecting growth of approximately 2
percent to 5 percent on a constant currency basis. The Company
continues to expect net sales growth will be largely driven by
increases in volume.
- The Company decreased its target ranges for GAAP net income to
$395 million to $445 million and Diluted EPS to $2.70 to $3.15,
including a net after-tax gain from blue chip swap transactions(2)
in Argentina, foreign currency exchange, and unrealized
mark-to-market derivative gains and losses and items impacting
comparability of $22.7 million ($24.9 million before-tax, or $0.15
per share) during the first quarter of fiscal 2025; and estimated
pre-tax charges of $200 million to $250 million (approximately $150
million to $190 million after-tax, or $1.05 to $1.30 per share) in
connection with the Restructuring Plan.
- The Company expects to deliver at the low end of its Adjusted
EBITDA(1) target range of $1,380 million to $1,480 million. The
Company expects that higher manufacturing costs per pound net of
restructuring cost savings, less favorable mix, and to a lesser
extent, higher investments in price and trade than originally
anticipated will offset a reduction in Adjusted SG&A(1).
- The Company lowered its Adjusted Net Income(1) target range of
$600 million to $615 million, and Adjusted Diluted EPS(1) of $4.15
to $4.35, as the Company targets the lower end of its Adjusted
EBITDA(1) range and increases its estimates for interest expense
and effective tax rate(3) (full year). The Company previously
estimated Adjusted Net Income(1) of $630 million to $705 million
and Adjusted Diluted EPS(1) of $4.35 to $4.85.
- The Company reduced its Adjusted SG&A(1) target range to
$680 million to $690 million from $740 million to $750 million,
reflecting Restructuring Plan cost savings generated by headcount
reductions across its commercial and support functions, and the
elimination of certain unfilled job positions; as well as other
cost savings initiatives not associated with the Restructuring
Plan.
- The Company increased its estimate of interest expense to
approximately $185 million from its previous estimate of
approximately $180 million to reflect higher average debt
outstanding.
- The Company reaffirmed its estimate of depreciation and
amortization expense of approximately $375 million.
- The Company increased its effective tax rate(3) (full year)
estimate to approximately 25 percent from its previous estimate of
24 percent due to higher proportion of earnings from its
international locations with higher tax rates and discrete tax
items.
- The Company reduced its target for cash used for capital
expenditures, excluding acquisitions, if any, to approximately $750
million from its previous estimate of approximately $850 million
reflecting the rephasing of certain capital projects, including
pausing the next phase of its ERP build and implementation.
End Notes
(1)
Adjusted Gross Profit, Adjusted SG&A,
Adjusted Income from Operations, Adjusted Net Income, Adjusted
Diluted EPS, and Adjusted EBITDA, are non-GAAP financial measures.
Please see the discussion of non-GAAP financial measures, including
a discussion of guidance provided on a non-GAAP basis, and the
associated reconciliations at the end of this press release for
more information.
(2)
The Company enters into blue chip swap
transactions to transfer U.S. dollars into Argentina primarily
related to funding the Company’s announced capacity expansion in
Argentina. The blue chip swap rate can diverge significantly from
Argentina's official exchange rate.
(3)
The effective tax rate is calculated as
the ratio of income tax expense to pre-tax income, inclusive of
equity method investment earnings.
Webcast and Conference Call
Information
Lamb Weston will host a conference call to review its first
quarter fiscal 2025 results at 10:00 a.m. EDT on October 2, 2024.
Participants in the U.S. and Canada may access the conference call
by dialing 888-394-8218 and participants outside the U.S. and
Canada should dial +1-323-994-2093. The conference ID is 3993446.
The conference call also may be accessed live on the internet.
Participants can register for the event at: https://event.webcasts.com/starthere.jsp?ei=1685794&tp_key=0c5e4acd51.
A rebroadcast of the conference call will be available beginning
on Thursday, October 3, 2024, after 2:00 p.m. EDT at https://investors.lambweston.com/events-and-presentations.
About Lamb Weston
Lamb Weston is a leading supplier of frozen potato products to
restaurants and retailers around the world. For more than 70 years,
Lamb Weston has led the industry in innovation, introducing
inventive products that simplify back-of-house management for its
customers and make things more delicious for their customers. From
the fields where Lamb Weston potatoes are grown to proactive
customer partnerships, Lamb Weston always strives for more and
never settles. Because, when we look at a potato, we see
possibilities. Learn more about us at lambweston.com.
Non-GAAP Financial
Measures
To supplement the financial information included in this press
release, the Company has presented Adjusted Gross Profit, Adjusted
SG&A, Adjusted Income from Operations, Adjusted Income Tax
Expense (Benefit), Adjusted Net Income, Adjusted Diluted EPS, and
Adjusted EBITDA, each of which is considered a non-GAAP financial
measure. The non-GAAP financial measures presented in this press
release should be viewed in addition to, and not as an alternative
for, financial measures prepared in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”) that are also presented in this press release. These
measures are not substitutes for their comparable GAAP financial
measures, such as gross profit, SG&A, income from operations,
income tax expense, equity method investment earnings (loss), net
income, diluted earnings per share, or other measures prescribed by
GAAP, and there are limitations to using non-GAAP financial
measures. For example, the non-GAAP financial measures presented in
this press release may differ from similarly titled non-GAAP
financial measures presented by other companies, and other
companies may not define these non-GAAP financial measures the same
way as the Company does.
Management uses these non-GAAP financial measures to assist in
analyzing what management views as the Company's core operating
performance for purposes of business decision making. Management
believes that presenting these non-GAAP financial measures provides
investors with useful supplemental information because they (i)
provide meaningful supplemental information regarding financial
performance by excluding impacts of foreign currency exchange rates
and unrealized derivative activities and other items affecting
comparability between periods, (ii) permit investors to view
performance using the same tools that management uses to budget,
make operating and strategic decisions, and evaluate the Company’s
core operating performance across periods, and (iii) otherwise
provide supplemental information that may be useful to investors in
evaluating the Company's financial results. In addition, the
Company believes that the presentation of these non-GAAP financial
measures, when considered together with the most directly
comparable GAAP financial measures and the reconciliations to those
GAAP financial measures, provides investors with additional tools
to understand the factors and trends affecting the Company's
underlying business than could be obtained absent these
disclosures.
The Company has also provided guidance in this press release
with respect to certain non-GAAP financial measures, including
non-GAAP Adjusted Net Income, Adjusted Diluted EPS, Adjusted
SG&A, and Adjusted EBITDA. The Company cannot predict certain
items that are included in reported GAAP results, including items
such as strategic developments, integration and acquisition costs
and related fair value adjustments, impacts of unrealized
mark-to-market derivative gains and losses, foreign currency
exchange, and items impacting comparability. This list is not
inclusive of all potential items, and the Company intends to update
the list as appropriate as these items are evaluated on an ongoing
basis. In addition, the items that cannot be predicted can be
highly variable and could potentially have significant impacts on
the Company’s GAAP measures. As such, prospective quantification of
these items is not feasible without unreasonable efforts, and a
reconciliation of forward-looking non-GAAP Adjusted Net Income,
Adjusted Diluted EPS, Adjusted SG&A, and Adjusted EBITDA to
GAAP net income, diluted earnings per share, or SG&A has not
been provided.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Words such as “expect,”
“will,” “believe,” “take,” “generate,” “continue,” “manage,”
“improve,” “create,” “reduce,” “deliver,” “drive,” “remain,”
“estimate,” “outlook,” “target,” and variations of such words and
similar expressions are intended to identify forward-looking
statements. Examples of forward-looking statements include, but are
not limited to, statements regarding: the Company’s business and
financial outlook and prospects; the Company’s plans and strategies
and anticipated benefits therefrom, including with respect to the
Restructuring Plan, expected completion and impacts of
restructuring activities and cost-saving or efficiency initiatives,
capital expenditures and investments, cash flows, conditions in the
Company’s industry and the global economy. These forward-looking
statements are based on management’s current expectations and are
subject to uncertainties and changes in circumstances. Readers of
this press release should understand that these statements are not
guarantees of performance or results. Many factors could affect
these forward-looking statements and the Company’s actual financial
results and cause them to vary materially from the expectations
contained in the forward-looking statements, including those set
forth in this press release. These risks and uncertainties include,
among other things: consumer preferences, including restaurant
traffic in North America and the Company's international markets,
and an uncertain general economic environment, including
inflationary pressures and recessionary concerns, any of which
could adversely impact the Company’s business, financial condition
or results of operations, including the demand and prices for its
products; the availability and prices of raw materials and other
commodities; operational challenges; the Company's ability to
successfully implement the Restructuring Plan, including achieving
the benefits of restructuring activities and cost-saving or
efficiency initiatives and possible changes in the size and timing
of related charges; difficulties, disruptions or delays in
implementing new technology, such as the Company’s new ERP system;
levels of labor and people-related expenses; the Company’s ability
to successfully execute its long-term value creation strategies;
the Company’s ability to execute on large capital projects,
including construction of new production lines or facilities; the
competitive environment and related conditions in the markets in
which the Company operates; political and economic conditions of
the countries in which the Company conducts business and other
factors related to its international operations; disruptions in the
global economy caused by conflicts such as the war in Ukraine and
conflicts in the Middle East and the possible related heightening
of the Company’s other known risks; the ultimate outcome of
litigation or any product recalls or withdrawals; changes in the
Company’s relationships with its growers or significant customers;
impacts on the Company’s business due to health pandemics or other
contagious outbreaks, such as the COVID-19 pandemic, including
impacts on demand for its products, increased costs, disruption of
supply, other constraints in the availability of key commodities
and other necessary services or restrictions imposed by public
health authorities or governments; disruption of the Company’s
access to export mechanisms; risks associated with integrating
acquired businesses, including LW EMEA; risks associated with other
possible acquisitions; the Company’s debt levels; actions of
governments and regulatory factors affecting the Company’s
businesses; the Company’s ability to pay regular quarterly cash
dividends and the amounts and timing of any future dividends; and
other risks described in the Company’s reports filed from time to
time with the Securities and Exchange Commission. The Company
cautions readers not to place undue reliance on any forward-looking
statements included in this press release, which speak only as of
the date of this press release. The Company undertakes no
responsibility for updating these statements, except as required by
law.
Lamb Weston Holdings, Inc.
Consolidated Statements of Earnings (unaudited, in millions,
except per share amounts)
Thirteen Weeks Ended
August 25, 2024
August 27, 2023
Net sales
$
1,654.1
$
1,665.3
Cost of sales (1)
1,298.1
1,165.8
Gross profit
356.0
499.5
Selling, general and administrative
expenses (2)
143.9
176.2
Income from operations
212.1
323.3
Interest expense, net
45.2
30.7
Income before income taxes and equity
method earnings
166.9
292.6
Income tax expense
50.8
69.9
Equity method investment earnings
11.3
12.1
Net income (3)
$
127.4
$
234.8
Earnings per share:
Basic
$
0.89
$
1.61
Diluted
$
0.88
$
1.60
Dividends declared per common share
$
0.36
$
0.28
Weighted average common shares
outstanding:
Basic
143.6
145.7
Diluted
144.2
146.6
_______________________________________________
(1)
The thirteen weeks ended August 25, 2024
included a $2.9 million unrealized gain ($2.2 million after-tax, or
$0.01 per share) related to mark-to-market adjustments associated
with commodity hedging contracts.
The thirteen weeks ended August 27, 2023
included a $31.7 million unrealized gain ($23.8 million after-tax,
$0.16 per share) related to mark-to-market adjustments associated
with commodity hedging contracts and $22.5 million ($16.7 million
after-tax, or $0.11 per share) of costs related to the step-up and
sale of inventory following completion of the LW EMEA
Acquisition.
(2)
Selling, general and administrative
expenses (SG&A) included the following:
- Blue chip swap transaction gains of $16.6 million (before and
after-tax, or $0.12 per share) for the thirteen weeks ended August
25, 2024;
- Unrealized gains related to mark-to-market adjustments
associated with currency hedging contracts of $6.0 million ($4.4
million after-tax, or $0.03 per share) and $4.4 million unrealized
losses ($3.3 million after-tax, or $0.02 per share) for the
thirteen weeks ended August 25, 2024 and August 27, 2023,
respectively;
- Foreign currency exchange losses of $0.6 million ($0.5
after-tax, or $0.01 per share) and $7.4 million ($5.5 million
after-tax, or $0.04 per share) for the thirteen weeks ended August
25, 2024 and August 27, 2023, respectively; and
- Integration and acquisition-related expenses of $4.0 million
($3.0 million after-tax, or $0.02 per share) for the thirteen weeks
ended August 27, 2023.
(3)
Net income results for the thirteen weeks
ended August 25, 2024 include an approximately $39 million charge
($30 million after-tax, or $0.21 per share) related to the
voluntary product withdrawal initiated in the fourth quarter of
fiscal 2024. This includes an approximately $15 million impact ($11
million after-tax, or $0.08 per share) in net sales and an
approximately $24 million charge ($18 million, or $0.13 per share)
in cost of sales. The total charge was allocated to the reporting
segments as follows: $21 million to North America and $18 million
to International.
Lamb Weston Holdings, Inc.
Consolidated Balance Sheets (unaudited, in millions, except
share data)
August 25,
2024
May 26,
2024
ASSETS
Current assets:
Cash and cash equivalents
$
120.8
$
71.4
Receivables, net of allowances of $0.9
million and $0.9 million
720.9
743.6
Inventories
1,135.7
1,138.6
Prepaid expenses and other current
assets
86.2
136.4
Total current assets
2,063.6
2,090.0
Property, plant and equipment, net
3,691.8
3,582.8
Operating lease assets
127.3
133.0
Goodwill
1,087.5
1,059.9
Intangible assets, net
108.3
104.9
Other assets
434.0
396.4
Total assets
$
7,512.5
$
7,367.0
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Short-term borrowings
$
530.4
$
326.3
Current portion of long-term debt and
financing obligations
63.2
56.4
Accounts payable
688.7
833.8
Accrued liabilities
448.0
407.6
Total current liabilities
1,730.3
1,624.1
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
3,437.3
3,440.7
Deferred income taxes
257.2
256.2
Other noncurrent liabilities
251.0
258.2
Total long-term liabilities
3,945.5
3,955.1
Commitments and contingencies
Stockholders’ equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 151,255,891 and 150,735,397 shares
issued
151.3
150.7
Treasury stock, at cost, 8,660,534 and
7,068,741 common shares
(633.7
)
(540.9
)
Additional distributed capital
(499.0
)
(508.9
)
Retained earnings
2,775.3
2,699.8
Accumulated other comprehensive income
(loss)
42.8
(12.9
)
Total stockholders’ equity
1,836.7
1,787.8
Total liabilities and stockholders’
equity
$
7,512.5
$
7,367.0
Lamb Weston Holdings, Inc.
Consolidated Statements of Cash Flows (unaudited, in
millions)
Thirteen Weeks Ended
August 25,
2024
August 27,
2023
Cash flows from operating
activities
Net income
$
127.4
$
234.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
90.5
70.1
Stock-settled, stock-based compensation
expense
9.5
9.9
Equity method investment earnings in
excess of distributions
(0.1
)
(12.2
)
Deferred income taxes
(2.9
)
3.6
Blue chip swap transaction gains
(16.6
)
—
Other
(14.4
)
9.3
Changes in operating assets and
liabilities:
Receivables
31.9
0.4
Inventories
10.2
60.2
Income taxes payable/receivable, net
49.1
61.2
Prepaid expenses and other current
assets
50.1
62.8
Accounts payable
9.5
(22.4
)
Accrued liabilities
(14.0
)
(143.1
)
Net cash provided by operating
activities
$
330.2
$
334.6
Cash flows from investing
activities
Additions to property, plant and
equipment
(325.9
)
(267.3
)
Additions to other long-term assets
(26.3
)
(37.4
)
Proceeds from blue chip swap transactions,
net of purchases
16.6
—
Other
—
(0.1
)
Net cash used for investing
activities
$
(335.6
)
$
(304.8
)
Cash flows from financing
activities
Proceeds from short-term borrowings
398.0
14.0
Repayments of short-term borrowings
(194.4
)
(32.9
)
Proceeds from issuance of debt
3.3
15.1
Repayments of debt and financing
obligations
(10.2
)
(13.7
)
Dividends paid
(51.7
)
(40.8
)
Repurchase of common stock and common
stock withheld to cover taxes
(92.2
)
(113.5
)
Other
(0.6
)
0.1
Net cash provided by (used for)
financing activities
$
52.2
$
(171.7
)
Effect of exchange rate changes on cash
and cash equivalents
2.6
0.4
Net increase (decrease) in cash and
cash equivalents
49.4
(141.5
)
Cash and cash equivalents, beginning of
period
71.4
304.8
Cash and cash equivalents, end of
period
$
120.8
$
163.3
Lamb Weston Holdings, Inc.
Segment Information (unaudited, in millions, except
percentages)
Thirteen Weeks Ended
August 25,
2024
August 27,
2023
Year-Over-
Year Growth
Rates
Price/Mix
Volume
Segment net sales
North America
$
1,103.7
$
1,135.4
(3%)
1%
(4%)
International
550.4
529.9
4%
5%
(1%)
$
1,654.1
$
1,665.3
(1%)
2%
(3%)
Segment Adjusted EBITDA (1)(2)
North America
$
276.1
$
379.4
(27%)
International
50.5
89.6
(44%)
_______________________________________________
(1)
Segment Adjusted EBITDA includes equity
method investment earnings and losses and excludes unallocated
corporate costs, foreign currency exchange gains and losses,
unrealized mark-to-market derivative gains and losses, and items
discussed in footnotes (1) and (2) to the Consolidated Statements
of Earnings.
(2)
Includes an approximately $39 million
pre-tax charge related to the voluntary product withdrawal. See
footnote (3) to the Consolidated Statements of Earnings for more
information.
Lamb Weston Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures (unaudited, in
millions, except per share amounts)
Thirteen Weeks Ended August 25,
2024
Gross
Profit
SG&A
Income
From
Operations
Interest
Expense
Income
Tax
Expense
(Benefit)(1)
Equity
Method
Investment
Earnings
Net
Income
Diluted
EPS
As reported
$
356.0
$
143.9
$
212.1
$
45.2
$
50.8
$
11.3
$
127.4
$
0.88
Unrealized derivative gains (2)
(2.9
)
6.0
(8.9
)
—
(2.3
)
—
(6.6
)
(0.04
)
Foreign currency exchange losses (2)
—
(0.6
)
0.6
—
0.1
—
0.5
0.01
Blue chip swap transaction gains (2)
—
16.6
(16.6
)
—
—
—
(16.6
)
(0.12
)
Total adjustments
(2.9
)
22.0
(24.9
)
—
(2.2
)
—
(22.7
)
(0.15
)
Adjusted (3)
$
353.1
$
165.9
$
187.2
$
45.2
$
48.6
$
11.3
$
104.7
$
0.73
Thirteen Weeks Ended August 27,
2023
As reported
$
499.5
$
176.2
$
323.3
$
30.7
$
69.9
$
12.1
$
234.8
$
1.60
Unrealized derivative gains and losses
(2)
(31.7
)
(4.4
)
(27.3
)
—
(6.8
)
—
(20.5
)
(0.14
)
Foreign currency exchange losses (2)
—
(7.4
)
7.4
—
1.9
—
5.5
0.04
Item impacting comparability (2):
Inventory step-up from acquisition
22.5
—
22.5
—
5.8
—
16.7
0.11
Integration and acquisition-related items,
net
—
(4.0
)
4.0
—
1.0
—
3.0
0.02
Total adjustments
(9.2
)
(15.8
)
6.6
—
1.9
—
4.7
0.03
Adjusted (3)
$
490.3
$
160.4
$
329.9
$
30.7
$
71.8
$
12.1
$
239.5
$
1.63
_______________________________________________
(1)
Items are tax effected at the marginal
rate based on the applicable tax jurisdiction.
(2)
See footnotes (1) and (2) to the
Consolidated Statements of Earnings for a discussion of the
adjustment items.
(3)
See “Non-GAAP Financial Measures” in this
press release for additional information.
Lamb Weston Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures (unaudited, in
millions)
To supplement the financial information
included in this press release, the Company is presenting Adjusted
EBITDA, which the Company defines as earnings, less interest
expense, income tax expense, depreciation and amortization, foreign
currency exchange and unrealized mark-to-market derivative gains
and losses, and certain items impacting comparability identified in
the table below. Adjusted EBITDA is a non-GAAP financial measure.
The following table reconciles net income to Adjusted EBITDA for
the identified periods.
Thirteen Weeks Ended
August 25,
2024
August 27,
2023
Net income (3)
$
127.4
$
234.8
Interest expense, net
45.2
30.7
Income tax expense
50.8
69.9
Income from operations including equity
method investment earnings (1)
223.4
335.4
Depreciation and amortization (2)
91.4
70.8
Unrealized derivative gains (3)
(8.9
)
(27.3
)
Foreign currency exchange losses (3)
0.6
7.4
Blue chip swap transaction gains (3)
(16.6
)
—
Items impacting comparability (3):
Inventory step-up from acquisition
—
22.5
Integration and acquisition-related items,
net
—
4.0
Adjusted EBITDA (4)
$
289.9
$
412.8
Segment Adjusted EBITDA
North America
$
276.1
$
379.4
International
50.5
89.6
Unallocated corporate costs (5)
(36.7
)
(56.2
)
Adjusted EBITDA
$
289.9
$
412.8
_______________________________________________
(1)
Lamb Weston holds a 50 percent equity
interest in a U.S. potato processing joint venture, Lamb-Weston/RDO
Frozen (“Lamb Weston RDO”). Lamb Weston accounts for its investment
in Lamb Weston RDO under the equity method of accounting. See Note
12, Joint Venture Investments, of the Notes to Consolidated
Financial Statements in the Company’s Form 10-K, for more
information.
(2)
Depreciation and amortization included
interest expense, income tax expense, and depreciation and
amortization from equity method investments of $2.1 million and
$2.2 million for the thirteen weeks ended August 25, 2024 and
August 27, 2023.
(3)
See footnotes (1) and (2) to the
Consolidated Statements of Earnings for more information.
(4)
See “Non-GAAP Financial Measures” in this
press release for additional information.
(5)
The Company’s two segments include
corporate support staff and services that are directly allocable to
those segments. Unallocated corporate costs include costs related
to corporate support staff and services, foreign exchange gains and
losses, and unrealized mark-to-market derivative gains and losses.
Support services include, but are not limited to, the Company’s
administrative, information technology, human resources, finance,
and accounting functions that are not specifically allocated to the
segments.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241001859423/en/
Investors: Dexter Congbalay 224-306-1535
dexter.congbalay@lambweston.com
Media: communication@lambweston.com
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