Third Quarter Fiscal 2021 Highlights, as
Compared to Third Quarter Fiscal 2020
- Net sales declined 4% to $896 million
- Income from operations declined 38% to $101 million
- Net income declined 41% to $66 million
- Diluted EPS declined 41% to $0.45
- Adjusted EBITDA including unconsolidated joint ventures(1)
declined 27% to $167 million
- Paid $34 million in dividends to shareholders
- Repurchased 164,678 shares for $13 million
Fourth Quarter Fiscal 2021 Business Update
(for 4 weeks ended March 28, 2021), as
Compared to Fourth Quarter Fiscal 2019 Levels (2)
- North America shipments were approximately 90% of fourth
quarter fiscal 2019 levels
- Europe shipments were approximately 85% of fourth quarter
fiscal 2019 levels
- Other International shipments were approximately 75% of fourth
quarter fiscal 2019 levels
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its third
quarter fiscal 2021 results and provided a business update for the
fourth quarter fiscal 2021.
“We delivered solid sales volumes during the quarter as
consumers and full-service restaurant traffic responded favorably
to the gradual easing of broad social restrictions as the quarter
progressed, as well as to the benefit of relatively mild winter
weather for much of the period,” said Tom Werner, President and
CEO. “However, COVID-19 continued to significantly disrupt our
manufacturing and distribution operations across our entire supply
chain network, which resulted in higher costs.”
“In the coming months, we believe the gradual improvement in
frozen potato demand will continue to the extent governments
further lift social restrictions, and as warmer weather provides
more outside dining opportunities. The ongoing disruptive effects
of COVID-19 on our supply chain will continue to pressure near-term
costs, but should also lessen after vaccines become more widely
available for our manufacturing teams and our supply chain
partners. In addition, we remain optimistic that overall demand in
the U.S. will steadily return to pre-pandemic levels around the end
of calendar 2021, and that global category growth will resume at
historical rates soon thereafter. Our recently-announced
investments to construct a new manufacturing facility in China, as
well as the expansion of our chopped and formed product capacity in
the U.S., underscore our confidence in the long-term health of the
global category, as well as our strategy to support the growth of
our customers as they continue to expand across our key
markets.”
Summary of Third Quarter 2021
Results
($ in millions, except per
share)
Year-Over-Year
YTD
Year-Over-Year
Q3 2021
Growth Rates
FY 2021
Growth Rates
Net sales
$
895.8
(4%)
$
2,663.4
(10%)
Income from operations
$
100.6
(38%)
$
375.9
(29%)
Net income
$
66.1
(41%)
$
252.3
(31%)
Diluted EPS
$
0.45
(41%)
$
1.72
(31%)
Adjusted Diluted EPS(1)
$
0.45
(42%)
$
1.72
(31%)
Adjusted EBITDA including unconsolidated
joint ventures(1)
$
167.1
(27%)
$
582.1
(19%)
Q3 2021 Commentary
Net sales declined $41.5 million to $895.8 million, down 4
percent versus the prior year quarter. Volume declined 6 percent,
predominantly reflecting lower demand for frozen potato products
outside the home related to government-imposed restrictions on
restaurants and other foodservice operations to slow the spread of
the COVID-19 virus. The rate of the decline in shipments improved
sequentially as compared to the 14 percent decline that the Company
realized during the first half of its fiscal 2021, reflecting the
steady recovery in demand, particularly in the Company’s Global
segment. Price/mix increased 2 percent, driven primarily by
improved price in the Retail and Foodservice segments, and
favorable mix in the Retail segment.
Income from operations declined $61.9 million, or 38 percent, to
$100.6 million versus the prior year quarter, reflecting lower
sales and gross profit, as well as higher selling, general and
administrative expenses (“SG&A”). Gross profit declined $53.7
million, driven by lower sales and higher manufacturing and
distribution costs. These higher costs were largely due to
incremental costs and inefficiencies related to the COVID-19
pandemic’s effect on the Company’s production, transportation, and
warehousing operations. The Company also incurred higher costs in
the quarter related to capital, repair and maintenance activities
that it delayed at the onset of the pandemic. In addition, higher
manufacturing costs reflected input cost inflation. The decline was
partially offset by a $7.5 million change in unrealized
mark-to-market adjustments associated with commodity hedging
contracts, which includes a $7.2 million gain in the current
quarter, compared with a $0.3 million loss related to these items
in the prior year quarter.
SG&A increased $8.2 million, largely due to investments to
improve the Company’s manufacturing and supply chain operations
over the long term, and to a lesser extent, its information
technology (“IT”) infrastructure. The IT investments included
approximately $1 million of non-recurring expenses, primarily
related to consulting expenses associated with a new enterprise
resource planning system. The increase in SG&A was partially
offset by cost management efforts.
Net income declined $45.3 million, or 41 percent, to $66.1
million versus the prior year quarter, due to a decline in income
from operations and a $4.1 million increase in interest expense,
which reflects an increase in average total debt resulting from the
Company’s actions in late fiscal 2020 and early fiscal 2021 to
enhance its liquidity position.
Diluted EPS decreased $0.31 to $0.45, due to a decline in income
from operations and higher interest expense.
Adjusted Diluted EPS(1), which excludes the $2.6 million loss
related to the withdrawal from a multiemployer pension plan by
Lamb-Weston/RDO Frozen (“Lamb Weston RDO”) in the prior year
quarter, decreased $0.32 to $0.45.
Adjusted EBITDA including unconsolidated joint ventures(1)
declined $60.6 million, or 27 percent, to $167.1 million versus the
prior year quarter, driven by a decline in income from
operations.
The Company’s effective tax rate(3) in the third quarter fiscal
2021 declined to 19.8 percent, versus 24.3 percent in the prior
year period, primarily due to discrete items originating during the
third quarter fiscal 2021 and a slightly lower annual effective tax
rate. The effective tax rate varies from the U.S. statutory tax
rate of 21 percent principally due to the impact of U.S. state
taxes, foreign taxes, permanent differences, and discrete
items.
Q3 2021 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
Q3 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
478.5
(2%)
0%
(2%)
Segment product contribution margin(4)
$
79.3
(27%)
Net sales for the Global segment, which is generally comprised
of the top 100 North American based quick service (“QSR”) and full
service restaurant chain customers as well as all of the Company’s
international sales, decreased $8.6 million to $478.5 million, down
2 percent compared to the prior year period. Volume declined 2
percent, reflecting lower demand for frozen potato products outside
the home as a result of the pandemic’s negative impact on
restaurant and other foodservice-related traffic in some of the
Company’s key international markets. The Company’s shipments to
North American chain restaurant customers increased nominally
compared to the prior year period, and included the benefit of
increased sales volumes of limited time offering products. The
segment’s overall 2 percent rate of decline is an improvement from
the 12 percent rate of decline that the segment realized during the
first half of fiscal 2021 compared to the first half of fiscal
2020, largely due to a recovery in international shipments in the
third quarter. Price/mix was flat versus the prior year quarter as
favorable price was offset by unfavorable mix.
Global segment product contribution margin decreased $30.0
million to $79.3 million, down 27 percent compared to the prior
year period. Higher manufacturing and distribution costs, as well
as unfavorable mix, drove the decline.
Foodservice
Foodservice Segment
Summary
Year-Over-Year
Q3 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
219.5
(22%)
2%
(24%)
Segment product contribution margin(4)
$
70.2
(30%)
Net sales for the Foodservice segment, which services North
American foodservice distributors and restaurant chains generally
outside the top 100 North American based restaurant chain
customers, declined $63.5 million to $219.5 million, down 22
percent compared to the prior year period. Volume declined 24
percent due to lower demand for frozen potato products outside the
home as a result of the pandemic’s negative impact on traffic at
restaurants and non-commercial customers, such as lodging and
hospitality, healthcare, schools and universities, sports and
entertainment, and workplace environments. Shipment and order
trends improved as the quarter progressed, reflecting the positive
and anticipated effect on restaurant traffic, especially at
full-service restaurants, of governments easing social
restrictions, as well as the benefit of relatively mild winter
weather. Price/mix increased 2 percent, reflecting the carryover
benefit of a pricing action implemented during the second half of
fiscal 2020, partially offset by unfavorable mix as sales of Lamb
Weston branded and premium products softened.
Foodservice segment product contribution margin decreased $29.6
million to $70.2 million, down 30 percent compared to the prior
year period. Lower sales volumes, higher manufacturing and
distribution costs, and unfavorable mix drove the decline,
partially offset by favorable price.
Retail
Retail Segment Summary
Year-Over-Year
Q3 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
162.5
23%
10%
13%
Segment product contribution margin(4)
$
33.1
15%
Net sales for the Retail segment, which includes sales of
branded and private label products to grocery, mass merchant and
club customers in North America, increased $30.3 million to $162.5
million, up 23 percent compared to the prior year period. Volume
increased 13 percent as strong growth in shipments of premium and
mainstream branded offerings, which have historically comprised
approximately 40 percent of the segment’s volume, was partially
offset by a decline in shipments of private label products, which
reflects incremental losses of certain low-margin private label
business. Price/mix increased 10 percent, largely driven by
favorable mix from higher sales of branded products.
Retail segment product contribution margin increased $4.3
million to $33.1 million, up 15 percent compared to the prior year
period. Favorable mix drove the increase, partially offset by
higher manufacturing and distribution costs, and an $0.8 million
increase in advertising and promotional expenses.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures in Europe, the U.S., and South America were $11.1 million
and $9.8 million for the third quarter of fiscal 2021 and 2020,
respectively. Equity method investment earnings included a $2.2
million unrealized gain related to mark-to-market adjustments
associated with currency and commodity hedging contracts in the
current quarter, compared to a $7.3 million unrealized loss related
to these items in the prior year quarter. In addition, in December
2020, Lamb-Weston/Meijer v.o.f. (“Lamb-Weston/Meijer”) increased
its interest in its Russian joint venture from 35.5% to 74.9%, and
now consolidates that joint venture in its results. Earnings in the
prior year quarter also included a $2.6 million loss related to the
withdrawal from a multiemployer pension plan by Lamb Weston
RDO.
Excluding the mark-to-market adjustments and the Lamb Weston RDO
pension-related comparability item, earnings from equity method
investments decreased $10.8 million compared to the prior year
period. Lower frozen potato demand in Europe resulting from the
continuation of government-imposed restrictions, as well as higher
production costs related to the COVID-19 pandemic, largely drove
the earnings decline.
Cash Flow and Liquidity
Through the third quarter fiscal 2021, net cash from operating
activities was $374.8 million, down $60.9 million versus the prior
year period, primarily due to lower earnings. Capital expenditures,
including information technology expenditures, were $106.7 million,
down $45.3 million versus the prior year period.
During the quarter, the Company paid $33.7 million in cash
dividends to shareholders, and repurchased 164,678 shares for $12.7
million, reflecting an average price per purchased share of
$77.04.
In March 2021, the Company announced the planned construction of
a new french fry processing facility in Ulanqab, Inner Mongolia,
China with capacity to produce more than 250 million pounds of
frozen french fries and other potato products per year. The new
facility will add to the Company’s existing in-country production
from its facility in Shangdu, Inner Mongolia, China. The new
facility is expected to be completed in the first half of fiscal
year 2024 and the investment is expected to be approximately $250
million.
Fourth Quarter Fiscal 2021 Business
Update
Set forth below is additional detail on the Company’s shipments
for the first four weeks of the fourth quarter fiscal 2021 through
March 28, 2021. Because of the severe government-imposed social and
business restrictions to slow the spread of COVID-19 and the
resulting negative impact on frozen potato shipments during the
fourth quarter fiscal 2020, the Company believes a comparison to
shipments during the fourth quarter fiscal 2019 provides a more
meaningful comparison for readers to understand the current
condition of the Company’s business.
- United States: Shipments were approximately 90 percent of
fourth quarter fiscal 2019 levels.
- Shipments to large chain restaurant customers, which are
composed of QSR and large full-service chain restaurants, were more
than 85 percent of fourth quarter fiscal 2019 levels. The Company,
which records shipments to these customers in its Global segment,
anticipates this rate will largely continue for the remainder of
its fiscal 2021 fourth quarter.
- Shipments to customers served by the Company’s Foodservice
segment, which includes products ultimately sold to full-service
chain and independent restaurants, regional and small QSRs, and
non-commercial customers (e.g., lodging and hospitality,
healthcare, schools and universities, sports and entertainment, and
workplace environments) were approximately 90 percent of fourth
quarter fiscal 2019 levels. The Company believes that its March
2021 shipments include the benefit of customers restocking depleted
inventories. As a result, the Company anticipates this rate will
largely continue for the remainder of its fiscal 2021 fourth
quarter. The Company also expects shipments to non-commercial
customers, which have historically comprised approximately 25
percent of the segment, will remain soft for the remainder of its
fiscal 2021 fourth quarter.
- Shipments to customers served by the Company’s Retail segment
were approximately 110 percent of fourth quarter fiscal 2019
levels, driven by strength in the Company’s premium and mainstream
branded offerings, partially offset by a decline of private label
product shipments, which reflects incremental losses of certain
low-margin private label business. The Company believes this rate
may gradually decline during the remainder of its fiscal 2021
fourth quarter as the Company expects consumers to increase
purchases away from home.
- International:
- Europe: Shipments by the Company’s joint venture,
Lamb-Weston/Meijer, were approximately 85 percent of fourth quarter
fiscal 2019 levels. The Company anticipates that this rate may
soften during the remainder of its fiscal 2021 fourth quarter as
governments across parts of Europe have reimposed stricter social
restrictions to curb another resurgence of COVID-19.
- Other Key Markets: Shipments to the Company’s key international
markets, which are primarily in Asia, Oceania and Latin America,
were approximately 75 percent of fourth quarter fiscal 2019 levels,
in aggregate. The Company anticipates that shipment rates will
gradually improve during the remainder of its fiscal 2021 fourth
quarter as governments slowly ease social restrictions, where
applicable. For markets that are currently operating under more
lenient government-imposed social restrictions, the Company
anticipates that shipment rates will largely continue for the
remainder of its fiscal 2021 fourth quarter. Excluding shipments
associated with the Company’s unconsolidated joint venture in
Argentina, the Company records shipments to these markets in its
Global segment.
The Company believes that the possibility of wide availability
of government-approved COVID-19 vaccines by mid-calendar 2021 may
allow governments to gradually ease broad social restrictions in
their respective jurisdictions, which would likely have a favorable
impact on restaurant traffic. While the Company expects to continue
to face challenging and volatile operating conditions until the
virus is broadly contained, it continues to believe that global
restaurant traffic will improve through calendar year 2021.
Improvements in global restaurant traffic would, in turn, lead to
overall frozen potato demand approaching pre-pandemic levels, on a
run-rate basis, by the end of the calendar year.
The Company will continue to prioritize the health and welfare
of its employees, maintain product safety, and support its
customers as they manage their supply chains and inventories. The
Company has taken actions, and will continue to evaluate various
options, to lower its cost structure and maximize efficiencies in
its manufacturing and commercial operations, including modifying
production schedules to rebalance utilization rates across its
manufacturing network.
The Company expects that it will continue to incur significant
costs as a result of the pandemic’s ongoing impact on its
manufacturing, distribution, commercial and functional operations
until the COVID-19 virus is broadly contained. These costs may
include, but are not limited to: production inefficiencies and
labor retention costs arising from modifying production schedules,
reducing run-times, and lower overall factory utilization; costs to
shut down, sanitize, and restart production facilities after
production is impacted by the virus; costs to adopt and maintain
enhanced employee safety and sanitation protocols, such as
purchasing personal protection and health screening equipment and
services; and incremental transportation and warehousing costs.
For all of fiscal 2021, the Company is:
- Reducing its estimate for interest expense, net, to
approximately $120 million from its previous estimate of
approximately $125 million,
- Reducing its estimate for depreciation and amortization to
approximately $185 million from its previous estimate of
approximately $190 million, and
- Reducing its estimate for cash used for capital expenditures,
excluding acquisitions, to approximately $160 million from its
previous estimate of approximately $180 million.
End Notes
(1)
Adjusted Diluted EPS and Adjusted EBITDA
including unconsolidated joint ventures are non-GAAP financial
measures. Please see the discussion of non-GAAP financial measures
and the reconciliations at the end of this press release for more
information.
(2)
This press release provides comparisons of
the Company’s third quarter fiscal 2021 financial results with its
third quarter fiscal 2020 financial results. However, because of
the severe government-imposed social and business restrictions to
slow the spread of COVID-19 and the resulting negative impact on
frozen potato shipments during the fourth quarter fiscal 2020, for
purposes of the Company’s business update for the 4 weeks ended
March 28, 2021, the Company believes a comparison to shipments
during the fourth quarter fiscal 2019 provides a more meaningful
comparison for readers to understand the current condition of the
Company’s business.
(3)
The effective tax rate is calculated as
the ratio of income tax expense to pre-tax income, inclusive of
equity method investment earnings.
(4)
For more information about product
contribution margin, please see “Non-GAAP Financial Measures” and
the table titled “Segment Information” included in this press
release.
Webcast and Conference Call
Information
Lamb Weston will host a conference call to review its third
quarter fiscal 2021 results at 10:00 a.m. EDT today, April 7, 2021.
Participants in the U.S. and Canada may access the conference call
by dialing 800-437-2398 and participants outside the U.S. and
Canada should dial +1-323-289-6576. The confirmation code is
9233840. The conference call also may be accessed live on the
internet. Participants can register for the event at:
https://globalmeet.webcasts.com/starthere.jsp?ei=1438303&tp_key=21b7f745da.
A rebroadcast of the conference call will be available beginning
on Thursday, April 8, 2021 after 2:00 p.m. EDT at
https://investors.lambweston.com/events-and-presentations.
About Lamb Weston
Lamb Weston, along with its joint venture partners, is a leading
supplier of frozen potato, sweet potato, appetizer and vegetable
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.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Words such as “expect,”
“may,” “improve,” “believe,” “will,” “continue,” “should,”
“become,” “remain,” “resume,” “expand,” “support,” “provide,”
“anticipate,” “would,” “estimate,” “reduce,” “maintain,” 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 plans, execution, capital expenditures and
investments, operational costs and business outlook and prospects,
as well as the impact of the COVID-19 pandemic on the industry and
consumer demand. 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 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: impacts on the Company’s
business due to health pandemics or other contagious outbreaks,
such as the current COVID-19 pandemic, including impacts on demand
for its products, increased costs, disruption of supply or other
constraints in the availability of key commodities and other
necessary services; 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 and its
joint ventures operate; political and economic conditions of the
countries in which the Company and its joint ventures conduct
business and other factors related to its international operations;
disruption of the Company’s access to export mechanisms; risks
associated with possible acquisitions, including the Company’s
ability to complete acquisitions or integrate acquired businesses;
its debt levels; the availability and prices of raw materials;
changes in the Company’s relationships with its growers or
significant customers; the success of the Company’s joint ventures;
actions of governments and regulatory factors affecting the
Company’s businesses or joint ventures; the ultimate outcome of
litigation or any product recalls; levels of pension, labor and
people-related expenses; 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.
Non-GAAP Financial
Measures
To supplement the financial information included in this press
release, the Company has presented product contribution margin on a
consolidated basis, Adjusted EBITDA, Adjusted EBITDA including
unconsolidated joint ventures, Adjusted Diluted EPS, and adjusted
income tax expense, equity method investment earnings and net
income, each of which is considered a non-GAAP financial
measure.
The non-GAAP financial measures provided 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
presented in this press release. The non-GAAP financial measures
presented 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. These
measures are not substitutes for their comparable GAAP financial
measures, such as gross profit, net income, diluted earnings per
share, or other measures prescribed by GAAP, and there are
limitations to using non-GAAP financial measures.
Management uses these non-GAAP financial measures to assist in
comparing the Company's performance on a consistent basis for
purposes of business decision making. Management believes that
presenting these non-GAAP financial measures provides investors
with useful information because they (i) provide meaningful
supplemental information regarding financial performance by
excluding certain items, (ii) permit investors to view performance
using the same tools that management uses to budget, make operating
and strategic decisions, and evaluate historical performance, and
(iii) otherwise provide supplemental information that may be useful
to investors in evaluating the Company's results. The Company
believes that the presentation of these non-GAAP financial
measures, when considered together with the corresponding GAAP
financial measures and the reconciliations to those measures,
provides investors with additional understanding of the factors and
trends affecting the Company's business than could be obtained
absent these disclosures.
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Earnings
(unaudited, in millions, except
per share amounts)
Thirteen Weeks Ended
Thirty-Nine Weeks
Ended
February 28,
February 23,
February 28,
February 23,
2021 (1)
2020
2021 (1)
2020
Net sales
$
895.8
$
937.3
$
2,663.4
$
2,945.5
Cost of sales
699.1
686.9
2,029.4
2,161.4
Gross profit
196.7
250.4
634.0
784.1
Selling, general and administrative
expenses
96.1
87.9
258.1
258.1
Income from operations
100.6
162.5
375.9
526.0
Interest expense, net
29.3
25.2
89.6
78.8
Income before income taxes and equity
method earnings
71.3
137.3
286.3
447.2
Income tax expense
16.3
35.7
76.2
115.1
Equity method investment earnings (2)
11.1
9.8
42.2
35.4
Net income
$
66.1
$
111.4
$
252.3
$
367.5
Earnings per share
Basic
$
0.45
$
0.76
$
1.72
$
2.51
Diluted
$
0.45
$
0.76
$
1.72
$
2.50
Dividends declared per common share
$
0.235
$
0.230
$
0.695
$
0.630
Computation of diluted earnings per
share:
Net income
$
66.1
$
111.4
$
252.3
$
367.5
Diluted weighted average common shares
outstanding
147.2
147.2
147.1
147.1
Diluted earnings per share
$
0.45
$
0.76
$
1.72
$
2.50
________________
(1)
The thirteen and thirty-nine weeks ended
February 28, 2021, include incremental costs resulting from the
pandemic’s effect on the Company’s manufacturing and supply chain
operations, as well as incremental warehousing and transportation
costs, and costs to enhance employee safety measures, including
purchases of safety and health screening equipment, and retaining
sales employees. In addition, the thirty-nine weeks ended February
28, 2021, include incremental costs related to processing raw
potatoes out of storage longer than prior years.
(2)
The thirteen and thirty-nine weeks ended
February 23, 2020, both include a $2.6 million loss related to the
withdrawal from a multiemployer pension plan by Lamb Weston
RDO.
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(unaudited, dollars in millions,
except share data)
February 28,
May 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents
$
714.3
$
1,364.0
Receivables, less allowance for doubtful
accounts of $1.0 and $1.3
375.6
342.1
Inventories
571.5
486.7
Prepaid expenses and other current
assets
98.0
109.8
Total current assets
1,759.4
2,302.6
Property, plant and equipment, net
1,498.2
1,535.0
Operating lease assets
148.6
167.0
Equity method investments
303.1
250.2
Goodwill
333.7
303.8
Intangible assets, net
37.5
38.3
Other assets
77.7
65.4
Total assets
$
4,158.2
$
4,662.3
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term borrowings
$
—
$
498.7
Current portion of long-term debt and
financing obligations
32.0
48.8
Accounts payable
303.6
244.4
Accrued liabilities
254.6
233.0
Total current liabilities
590.2
1,024.9
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
2,712.3
2,992.6
Deferred income taxes
157.8
152.5
Other noncurrent liabilities
246.2
252.3
Total long-term liabilities
3,116.3
3,397.4
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 147,564,905 and 146,993,751 shares
issued
147.6
147.0
Additional distributed capital
(841.4
)
(862.9
)
Retained earnings
1,213.8
1,064.6
Accumulated other comprehensive income
(loss)
22.8
(40.5
)
Treasury stock, at cost, 1,282,466 and
954,858 common shares
(91.1
)
(68.2
)
Total stockholders' equity
451.7
240.0
Total liabilities and stockholders’
equity
$
4,158.2
$
4,662.3
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(unaudited, dollars in
millions)
Thirty-Nine Weeks
Ended
February 28,
February 23,
2021
2020
Cash flows from operating
activities
Net income
$
252.3
$
367.5
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
143.3
137.5
Stock-settled, stock-based compensation
expense
17.6
18.2
Earnings of joint ventures in excess of
distributions
(29.9
)
(6.5
)
Deferred income taxes
1.0
25.3
Other
9.4
1.2
Changes in operating assets and
liabilities, net of acquisition:
Receivables
(30.4
)
(24.3
)
Inventories
(80.6
)
(94.6
)
Income taxes payable/receivable, net
28.2
8.1
Prepaid expenses and other current
assets
(6.5
)
1.8
Accounts payable
60.9
2.1
Accrued liabilities
9.5
(0.6
)
Net cash provided by operating
activities
$
374.8
$
435.7
Cash flows from investing
activities
Additions to property, plant and
equipment
(92.1
)
(127.8
)
Additions to other long-term assets
(14.6
)
(24.2
)
Acquisition of business, net of cash
acquired
—
(116.7
)
Investment in equity method joint
venture
—
(22.6
)
Other
0.5
1.5
Net cash used for investing
activities
$
(106.2
)
$
(289.8
)
Cash flows from financing
activities
Proceeds (payments) of short-term
borrowings, net
(498.8
)
12.7
Repayments of debt and financing
obligations
(297.6
)
(327.1
)
Dividends paid
(100.9
)
(87.7
)
Repurchase of common stock and common
stock withheld to cover taxes
(22.9
)
(28.9
)
Proceeds from issuance of debt
—
299.3
Other
0.3
4.0
Net cash used for financing
activities
$
(919.9
)
$
(127.7
)
Effect of exchange rate changes on cash
and cash equivalents
1.6
(0.3
)
Net increase (decrease) in cash and
cash equivalents
(649.7
)
17.9
Cash and cash equivalents, beginning of
the period
1,364.0
12.2
Cash and cash equivalents, end of
period
$
714.3
$
30.1
Lamb Weston Holdings,
Inc.
Segment Information
(unaudited, dollars in
millions)
Thirteen Weeks Ended
Year-Over-
February 28,
February 23,
Year Growth
2021
2020
Rates
Price/Mix
Volume
Segment sales
Global
$
478.5
$
487.1
(2%)
0%
(2%)
Foodservice
219.5
283.0
(22%)
2%
(24%)
Retail
162.5
132.2
23%
10%
13%
Other
35.3
35.0
1%
7%
(6%)
$
895.8
$
937.3
(4%)
2%
(6%)
Segment product contribution margin (1)
(2)
Global
$
79.3
$
109.3
(27%)
Foodservice
70.2
99.8
(30%)
Retail
33.1
28.8
15%
Other
8.7
5.9
47%
191.3
243.8
(22%)
Add: Advertising and promotion
expenses
5.4
6.6
(18%)
Gross profit
$
196.7
$
250.4
(21%)
Thirty-Nine Weeks
Ended
Year-Over-
February 28,
February 23,
Year Growth
2021
2020
Rates
Price/Mix
Volume
Segment sales
Global
$
1,401.9
$
1,544.3
(9%)
0%
(9%)
Foodservice
697.3
893.3
(22%)
4%
(26%)
Retail
457.1
393.6
16%
8%
8%
Other
107.1
114.3
(6%)
3%
(9%)
$
2,663.4
$
2,945.5
(10%)
2%
(12%)
Segment product contribution margin (1)
(2)
Global
$
249.8
$
341.0
(27%)
Foodservice
243.7
313.5
(22%)
Retail
99.0
86.2
15%
Other
32.4
26.0
25%
624.9
766.7
(18%)
Add: Advertising and promotion
expenses
9.1
17.4
(48%)
Gross profit
$
634.0
$
784.1
(19%)
________________
(1)
Product contribution margin is one of the
primary measures reported to the Company’s chief operating decision
maker for purposes of allocating resources to the Company’s
segments and assessing their performance. Product contribution
margin represents net sales less cost of sales and advertising and
promotion expenses. Product contribution margin includes
advertising and promotion expenses because those expenses are
directly associated with the performance of the Company’s segments.
Product contribution margin, when presented on a consolidated
basis, is a non-GAAP financial measure. See “Non-GAAP Financial
Measures” in this press release for a description of non-GAAP
financial measures and the table above for a reconciliation of
product contribution margin on a consolidated basis to gross
profit.
(2)
See footnote (1) to the Consolidated
Statements of Earnings above for a discussion of the incremental
costs resulting from the pandemic’s effect on the Company’s
financial results for the thirteen and thirty-nine weeks ended
February 28, 2021.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, dollars in millions,
except share data)
There were no items impacting comparability during the thirteen
and thirty-nine weeks ended February 28, 2021.
Thirteen Weeks Ended February
23, 2020
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense (1)
Earnings
Net Income
EPS
As reported
$
162.5
$
25.2
$
35.7
$
9.8
$
111.4
$
0.76
Items impacting comparability (2):
Loss on withdrawal from multiemployer
pension plan
—
—
0.6
2.6
2.0
0.01
Total items impacting comparability
—
—
0.6
2.6
2.0
0.01
Adjusted (3)
$
162.5
$
25.2
$
36.3
$
12.4
$
113.4
$
0.77
Thirty-Nine Weeks Ended
February 23, 2020
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense (1)
Earnings
Net Income
EPS
As reported
$
526.0
$
78.8
$
115.1
$
35.4
$
367.5
$
2.50
Items impacting comparability (2):
Loss on withdrawal from multiemployer
pension plan
—
—
0.6
2.6
2.0
0.01
Total items impacting comparability
—
—
0.6
2.6
2.0
0.01
Adjusted (3)
$
526.0
$
78.8
$
115.7
$
38.0
$
369.5
$
2.51
________________
(1)
Income tax expense is calculated as the
ratio of income tax expense to pre-tax income, inclusive of equity
method investment earnings. Items impacting comparability are tax
effected at the marginal rate based on the applicable tax
jurisdiction.
(2)
See footnote (2) to the Consolidated
Statements of Earnings above for a discussion of the item impacting
comparability.
(3)
Adjusted income tax expense, equity method
investment earnings, net income, and diluted earnings per share are
non-GAAP financial measures. Management excludes items impacting
comparability between periods as it believes these items are not
necessarily reflective of the ongoing operations of Lamb Weston.
These non-GAAP financial measures provide a means to evaluate the
performance of Lamb Weston on an ongoing basis using the same
measures that are frequently used by the Company’s management and
assist in providing a meaningful comparison between periods. See
also “Non-GAAP Financial Measures” in this press release.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, dollars in
millions)
To supplement the financial information
included in this press release, the Company has presented Adjusted
EBITDA and Adjusted EBITDA including unconsolidated joint ventures,
which are non-GAAP financial measures. The following table
reconciles net income to Adjusted EBITDA and Adjusted EBITDA
including unconsolidated joint ventures.
Thirteen Weeks Ended
Thirty-Nine Weeks
Ended
February 28,
February 23,
February 28,
February 23,
2021
2020
2021
2020
Net income
$
66.1
$
111.4
$
252.3
$
367.5
Equity method investment earnings
(11.1
)
(9.8
)
(42.2
)
(35.4
)
Interest expense, net
29.3
25.2
89.6
78.8
Income tax expense
16.3
35.7
76.2
115.1
Income from operations
100.6
162.5
375.9
526.0
Depreciation and amortization
46.3
44.8
138.5
132.6
Adjusted EBITDA (1)
146.9
207.3
514.4
658.6
Unconsolidated Joint Ventures (2)
Equity method investment earnings
11.1
9.8
42.2
35.4
Interest expense, income tax expense, and
depreciation and
amortization included in equity method
investment earnings
9.1
8.0
25.5
24.9
Items impacting comparability (3)
Loss on withdrawal from multiemployer
pension plan
—
2.6
—
2.6
Add: Adjusted EBITDA from unconsolidated
joint ventures
20.2
20.4
67.7
62.9
Adjusted EBITDA including unconsolidated
joint ventures (1)
$
167.1
$
227.7
$
582.1
$
721.5
________________
(1)
Adjusted EBITDA and Adjusted EBITDA
including unconsolidated joint ventures are non-GAAP financial
measures. Lamb Weston presents these measures because the Company
believes they provide a means to evaluate the performance of the
Company on an ongoing basis using the same measure frequently used
by the Company’s management and assist in providing a meaningful
comparison between periods. Any analysis of non-GAAP financial
measures should be done only in conjunction with results presented
in accordance with GAAP. These non-GAAP financial measures are not
intended to be a substitute for GAAP financial measures and should
not be used as such. See also “Non-GAAP Financial Measures” in this
press release.
(2)
Lamb Weston holds equity interests in
three potato processing joint ventures, including 50% of
Lamb-Weston/Meijer, Lamb-Weston/RDO Frozen, and Lamb Weston
Alimentos Modernos S.A., which it accounts for its ownership under
the equity method of accounting. See Note 6, Investments in Joint
Ventures, of the Notes to Consolidated Financial Statements in
“Part II, Item 8. Financial Statements and Supplementary Data” in
the Company’s fiscal 2020 Form 10-K, for more information.
(3)
See footnote (2) to the Consolidated
Statements of Earnings above for a discussion of the item impacting
comparability.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210407005157/en/
Investors: Dexter Congbalay 224-306-1535
dexter.congbalay@lambweston.com
Media: Shelby Stoolman 208-424-5461
shelby.stoolman@lambweston.com
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