Fourth Quarter Fiscal 2021
Highlights
- Net sales increased 19% to $1,008 million
- Income from operations increased 220% to $99 million
- Net income increased to $66 million from a loss of $2
million
- Diluted EPS increased to $0.44 from a loss of $0.01
- Adjusted EBITDA including unconsolidated joint ventures(1)
increased 112% to $166 million
Full Year 2021 Highlights
- Net sales declined 3% to $3,671 million
- Income from operations declined 15% to $475 million
- Net income declined 13% to $318 million
- Diluted EPS declined 13% to $2.16
- Adjusted EBITDA including unconsolidated joint ventures(1)
declined 6% to $748 million
- Cash flows from operations declined 4% to $553 million
- Returned $161 million of cash to stockholders in the form of
both dividends and share repurchases
Fiscal 2022 Outlook
- Net sales growth above long-term target range of low-to-mid
single digits
- Net income and Adjusted EBITDA including joint ventures(1) to
be pressured during the first half, and normalize in the second
half
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fiscal
fourth quarter and full year 2021 results and provided its outlook
for fiscal 2022.
“Fiscal 2021 was the most challenging operating environment in
our company’s history, but we believe the worst of the COVID-19
pandemic’s effect on our business is behind us,” said Tom Werner,
President and CEO. “I’m proud of how the entire Lamb Weston team
has been navigating through the pandemic by prioritizing the health
and welfare of our employees, maintaining product safety, and
servicing our customers. We’re encouraged by the pace of recovery
in U.S. restaurant traffic, especially at full-service restaurants,
and continue to expect that overall U.S. french fry demand will
return to pre-pandemic levels around the end of calendar 2021. We
also anticipate that demand in Europe and in our key export markets
will steadily improve as vaccines become more widely available and
vaccination rates increase in those markets.
“While french fry demand trends have become more predictable
compared to a year ago, the lingering effects of the pandemic and
the sharp recovery of the broader economy in the U.S. has disrupted
supply chain operations across all industries, including ours.
While we expect these disruptions to be transitory, we believe
these challenges, along with notable input and transportation cost
inflation and the impact of a tighter labor market, will continue
to pressure our earnings in the near term. However, we expect these
pressures will ease as we anticipate gradual improvements in our
supply chain operations as global economic conditions continue to
stabilize, and as we look to pass through rising costs.
“Having seen the resiliency of french fry demand during the
pandemic, we remain confident in the long-term health and growth
prospects for the global category, and are committed to supporting
this growth and our customers by investing in new capacity. Along
with driving margin improvement by improving product and customer
mix, pricing to offset inflation, and executing on our lean
manufacturing initiatives, we believe we’re well-positioned to
drive sustainable, profitable growth and create value for our
stakeholders over the long term.”
Summary of Fourth Quarter and
FY 2021 Results
($ in millions, except per
share)
Year-Over-Year
YTD
Year-Over-Year
Q4 2021
Growth Rates
FY 2021
Growth Rates
Net sales
$
1,007.5
19
%
$
3,670.9
(3
%)
Income from operations
$
98.9
220
%
$
474.8
(15
%)
Net income
$
65.5
NM
$
317.8
(13
%)
Diluted EPS
$
0.44
NM
$
2.16
(13
%)
Adjusted Diluted EPS(1)
$
0.44
NM
$
2.16
(14
%)
Adjusted EBITDA including unconsolidated
joint ventures(1)
$
166.3
112
%
$
748.4
(6
%)
Q4 2021 Commentary
Net sales increased $160.6 million to $1,007.5 million, up 19
percent versus the prior year quarter, with volume up 13 percent
and price/mix up 6 percent. Net sales and volume increased 28
percent and 21 percent, respectively, excluding the benefit of the
additional selling week in the prior year quarter. The increase in
sales volume predominantly reflected the recovery in demand for
frozen potato products outside the home as governments further
eased COVID-19 pandemic-related social restrictions, including on
restaurants and other foodservice operations. The increase in sales
volume also reflected the comparison to reduced shipments in the
prior year quarter when customers significantly destocked
inventories as they adjusted to the abrupt change in the business
environment. The increase in price/mix was driven primarily by
favorable price and mix in each of the Company’s core business
segments.
Income from operations increased $68.0 million to $98.9 million,
up 220 percent versus the prior year quarter, reflecting higher
sales and gross profit, partially offset by higher selling, general
and administrative expenses (“SG&A”). Gross profit increased
$86.9 million, driven by higher sales and lower manufacturing and
distribution costs on a per pound basis. The lower costs per pound
largely reflected a reduction in incremental costs and
inefficiencies related to the COVID-19 pandemic’s effect on the
Company’s production, transportation, and warehousing operations as
compared to the prior year, as well as supply chain productivity
savings. The lower costs per pound were partially offset by input
and transportation cost inflation. The increase in gross profit
also included a $26.7 million increase in unrealized mark-to-market
adjustments associated with commodity hedging contracts, which
includes an $18.8 million gain in the current quarter, compared
with a $7.9 million loss related to these items in the prior year
quarter.
SG&A increased $18.9 million compared to the prior year
quarter, largely due to higher incentive compensation accruals and
investments to improve the Company’s manufacturing, supply chain,
and commercial operations over the long term. In addition,
advertising and promotional expense (“A&P”) increased $3.1
million, largely in support of the launch of new products in the
Retail segment. The increase in SG&A was partially offset by
cost management efforts.
Net income was $65.5 million, up $67.1 million versus the prior
year quarter, and Diluted EPS was $0.44, up $0.45 versus the prior
year quarter, driven by an increase in income from operations and
equity method investment earnings.
Adjusted EBITDA including unconsolidated joint ventures(1)
increased $88.0 million to $166.3 million, up 112 percent versus
the prior year quarter, driven by higher income from operations and
equity method investment earnings.
The Company’s effective tax rate(2) in the fourth quarter fiscal
2021 was 17.9 percent, versus a 63.6 percent benefit in the prior
year period, and the difference is primarily due to lower earnings
in the fourth quarter fiscal 2020. The Company’s 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.
Q4 2021 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
Q4 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
509.6
19
%
3
%
16
%
Segment product contribution margin(3)
$
56.4
68
%
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, increased $80.3 million to $509.6
million, up 19 percent versus the prior year quarter, with volume
up 16 percent and price/mix up 3 percent. Net sales and volume
increased 28 percent and 24 percent, respectively, excluding the
benefit of the additional selling week in the prior year quarter.
The recovery in demand, especially at QSRs and other large chain
restaurant customers in the U.S., largely drove the increase in
sales volume. Shipments to customers in the Company’s key
international markets also improved in the aggregate, although
varied by country. Overall sales volume growth also reflected a
comparison to reduced shipments in the prior year quarter as
customers destocked inventories. The increase in price/mix
reflected both favorable price and mix.
Global segment product contribution margin increased $22.9
million to $56.4 million, up 68 percent versus the prior year
quarter. Higher sales volume, favorable price/mix and lower
manufacturing and distribution costs per pound drove the
increase.
Foodservice
Foodservice Segment
Summary
Year-Over-Year
Q4 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
320.0
82
%
18
%
64
%
Segment product contribution margin(3)
$
96.3
127
%
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, increased $144.2 million to $320.0 million, up 82
percent versus the prior year period, with volume up 64 percent and
price/mix up 18 percent. Net sales and volume increased 94 percent
and 74 percent, respectively, excluding the benefit of the
additional selling week in the prior year quarter. The recovery in
demand at small and regional chain restaurants, as well as
independently-owned restaurants, especially at full-service
establishments, drove the increase in sales volume. Shipments to
non-commercial customers, such as lodging and hospitality,
healthcare, schools and universities, sports and entertainment, and
workplace environments, also increased versus the prior year
quarter, but remained well below pre-pandemic levels. Overall sales
volume growth also reflected a comparison to reduced shipments in
the prior year quarter as customers significantly destocked
inventories. In the current quarter, shipment and order trends in
each of the segment’s primary sales channels improved as the
quarter progressed as governments eased social restrictions, and as
consumers enjoyed the onset of warmer weather. The increase in
price/mix largely reflected the benefit of favorable mix from
higher sales of Lamb Weston branded and premium products, which had
softened in the prior year quarter.
Foodservice segment product contribution margin increased $53.8
million to $96.3 million, up 127 percent compared to the prior year
quarter. Higher sales volume, favorable price/mix and lower
manufacturing and distribution costs per pound drove the
increase.
Retail
Retail Segment Summary
Year-Over-Year
Q4 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
146.3
(28
%)
2
%
(30
%)
Segment product contribution margin(3)
$
21.2
(32
%)
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, declined $55.6 million to $146.3
million, down 28 percent versus the prior year period, with volume
down 30 percent and price/mix up 2 percent. Net sales and volume
declined 22 percent and 24 percent, respectively, excluding the
benefit of the additional selling week in the prior year quarter.
The sales volume decline reflects a comparison to the prior year
quarter that included a surge in demand for in-home consumption of
frozen potato products following government-imposed social
restrictions, as well as lower shipments of private label products
resulting from incremental losses of certain low-margin business.
However, total shipments in the current quarter remained near
pre-pandemic levels, driven by continued strong demand for the
Company’s premium and mainstream branded offerings, partially
offset by lower private label sales. The increase in price/mix was
largely driven by favorable mix from higher sales of branded
products.
Retail segment product contribution margin declined $10.2
million to $21.2 million, down 32 percent versus the prior year
quarter. Lower sales volumes and a $3.1 million increase in A&P
expenses to support new product launches, drove the decline,
partially offset by favorable price/mix.
Equity Method Investment Earnings
Equity method investment earnings (loss) from unconsolidated
joint ventures in Europe, the U.S., and South America were earnings
of $9.6 million and a loss of $6.1 million for the fourth quarter
of fiscal 2021 and 2020, respectively. Equity method investment
earnings (loss) included a $4.5 million unrealized gain related to
mark-to-market adjustments associated with currency and commodity
hedging contracts in the current quarter, compared to a $2.7
million unrealized gain related to these items in the prior year
quarter. Excluding the mark-to-market adjustments, earnings from
equity method investments increased $13.9 million compared to the
prior year period. The earnings increase was driven by higher sales
volume due to a recovery in demand, as well as higher incremental
costs and inefficiencies related to the pandemic’s effect on
operations, including the write-off of raw potato contracts, in the
prior year.
Fiscal Year 2021
Commentary
Net sales declined $121.5 million to $3,670.9 million, down 3
percent versus fiscal 2020, with volume down 6 percent and
price/mix up 3 percent. Net sales and volume declined 2 percent and
6 percent, respectively, excluding the benefit of the 53rd week in
the prior year. The decline in sales volume reflected soft demand
for much of the first three fiscal quarters following
government-imposed pandemic-related social restrictions, including
on restaurants and other foodservice operations. As described
above, sales volumes increased in the fiscal fourth quarter due to
a recovery in demand, as well as a comparison to reduced shipments
in the prior year quarter when customers were destocking
inventories. The increase in price/mix was driven primarily by
favorable pricing in the Company’s Foodservice segment and
favorable mix in its Retail segment, while price/mix in the Global
segment was flat.
Income from operations declined $82.1 million to $474.8 million,
down 15 percent from the prior year, reflecting lower gross profit
and higher SG&A. Gross profit declined $63.2 million, driven by
lower sales and higher manufacturing and distribution costs on a
per pound basis, which largely included: incremental costs and
inefficiencies related to the pandemic’s effect on the Company’s
production, transportation, and warehousing operations; and input
and transportation cost inflation. The increase in costs was
partially offset by supply chain productivity savings. In addition,
gross profit included a $40.4 million change in unrealized
mark-to-market adjustments and realized settlements associated with
commodity hedging contracts, which reflects a $37.9 million gain in
the current year, compared with a $2.5 million loss related to
these items in the prior year.
SG&A increased $18.9 million compared to the prior year. The
increase was largely driven by investments to improve the Company’s
manufacturing, supply chain, commercial and information technology
operations over the long term, which included approximately $9
million of non-recurring expenses (primarily consulting and
employee training expenses) associated with implementing the first
phase of a new enterprise resource planning (“ERP”) system compared
to approximately $8 million in the prior year. Additionally, the
increase in SG&A was due to higher compensation and benefits.
The increase in SG&A was partially offset by a $5.2 million
decline in A&P expense, as well as by cost management
efforts.
Net income declined $48.1 million to $317.8 million, down 13
percent versus the prior year, due to a decline in income from
operations and higher interest expense, partially offset by higher
equity method investment earnings. The increase in interest expense
reflected a higher level of average total debt resulting from the
Company’s actions in late fiscal 2020 and early fiscal 2021 to
enhance its liquidity position during the pandemic. In addition,
fiscal 2020 results included a $2.6 million ($2.0 million
after-tax) loss related to the withdrawal from a multiemployer
pension plan by the Company’s joint venture, Lamb-Weston/RDO Frozen
(“Lamb Weston RDO”).
Diluted EPS declined $0.33 to $2.16, largely reflecting a
decline in income from operations and higher interest expense,
partially offset by higher equity method investment earnings.
Adjusted Diluted EPS(1), which excludes the $2.6 million loss
($2.0 million after-tax) related to the withdrawal from a
multiemployer pension plan by Lamb Weston RDO in the prior year,
declined $0.34 to $2.16.
Adjusted EBITDA including unconsolidated joint ventures(1)
declined $51.4 million to $748.4 million, down 6 percent versus the
prior year, driven by a decline in income from operations,
partially offset by an increase in equity method investment
earnings.
The Company’s effective tax rate(2) was 22.2 percent for fiscal
2021, compared to 23.5 percent in fiscal 2020. The difference
between the Company’s effective tax rates in fiscal 2021 and 2020
is primarily due to permanent differences and discrete items. The
Company’s 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.
Fiscal Year 2021 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
FY 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
1,911.5
(3
%)
0
%
(3
%)
Segment product contribution margin(3)
$
306.2
(18
%)
Net sales for the Global segment declined $62.1 million to
$1,911.5 million, down 3 percent compared to the prior year, with
volume down 3 percent and price/mix flat. Net sales and volume each
declined 2 percent excluding the benefit of the 53rd week in the
prior year. Sales volumes in the first half of the year declined as
compared to the prior year, but largely stabilized beginning in the
fiscal third quarter behind strength in shipments to large QSR
customers in the U.S. As described above, overall sales volumes for
the segment increased in the fiscal fourth quarter due to a
recovery in demand in the U.S. and in the Company’s key
international markets, as well as a comparison to reduced shipments
in the prior year quarter when customers were destocking
inventories. Price/mix was flat as positive pricing actions were
offset by unfavorable customer mix.
Global segment product contribution margin declined $68.3
million to $306.2 million, down 18 percent compared to the prior
year. Higher manufacturing and distribution costs, as well as lower
sales volumes, largely drove the decline.
Foodservice
Foodservice Segment
Summary
Year-Over-Year
FY 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
1,017.3
(5
%)
7
%
(12
%)
Segment product contribution margin(3)
$
340.0
(4
%)
Net sales for the Foodservice segment declined $51.8 million to
$1,017.3 million, down 5 percent compared to the prior year, with
volume down 12 percent and price/mix up 7 percent. Net sales and
volume declined 4 percent and 11 percent, respectively, excluding
the benefit of the 53rd week in the prior year. Sales volumes
during the first three quarters of the year declined as compared to
the prior year as demand at full-service restaurants and
non-commercial customers were significantly affected by
government-imposed social restrictions. As described above, overall
sales volumes for the segment increased in the fiscal fourth
quarter due to a recovery in most of the segment’s customer
channels, as well as a comparison to significantly reduced
shipments in the prior year quarter when customers were destocking
inventories. The increase in price/mix primarily reflected the
carryover benefit of pricing actions implemented during fiscal
2020, partially offset by unfavorable mix as sales of Lamb Weston
branded and premium products softened during the height of the
pandemic.
Foodservice segment product contribution margin declined $16.0
million to $340.0 million, down 4 percent compared to the prior
year, as lower sales volumes and higher manufacturing and
distribution costs more than offset the benefit of favorable
price/mix.
Retail
Retail Segment Summary
Year-Over-Year
FY 2021
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
603.4
1
%
5
%
(4
%)
Segment product contribution margin(3)
$
120.2
2
%
Net sales for the Retail segment increased $7.9 million to
$603.4 million, up 1 percent versus the prior year, with price/mix
up 5 percent and volume down 4 percent. Excluding the benefit of
the 53rd week in the prior year, net sales increased 4 percent and
volume declined 2 percent. The increase in price/mix was largely
driven by favorable mix from higher sales of premium and mainstream
branded offerings. The decline in sales volumes reflected lower
shipments of private label products resulting from incremental
losses of certain low-margin business, partially offset by strong
growth in branded products, which have historically comprised
approximately 40 percent of the segment’s volume. In addition, as
described above, the sales volume decline reflects a comparison to
the fourth quarter of fiscal 2020 which included a surge in demand
for in-home consumption of frozen potato products following
government-imposed social restrictions.
Retail segment product contribution margin increased $2.6
million to $120.2 million, up 2 percent compared to fiscal 2020, as
favorable product mix more than offset the impact of higher
manufacturing and distribution costs, as well as lower sales
volumes of private label products.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures in Europe, the U.S., and South America were $51.8 million
and $29.3 million for fiscal 2021 and 2020, respectively. Earnings
in fiscal 2020 included a $2.6 million loss related to the
withdrawal from a multiemployer pension plan by Lamb Weston RDO.
Equity method investment earnings also included an $11.3 million
unrealized gain related to mark-to-market adjustments associated
with currency and commodity hedging contracts in fiscal 2021 and a
$6.3 million loss related to these items in fiscal 2020. In
addition, in December 2020, Lamb-Weston/Meijer increased its
ownership interest in its Russian joint venture from 35.5% to
74.9%, and now consolidates that joint venture in its results.
Excluding the Lamb Weston RDO pension-related comparability item
and the mark-to-market adjustments, equity method investments
earnings increased $2.3 million compared to the prior year period,
largely driven by Lamb-Weston/Meijer’s increased ownership interest
in its Russian joint venture and higher manufacturing costs per
pound in the prior year, partially offset by lower frozen potato
demand in Europe following government-imposed restrictions on
restaurant and other foodservice operations.
Cash Flow and Liquidity
Net cash from operating activities was $553.2 million, down
$20.8 million versus the prior year, primarily due to lower
earnings and partially offset by lower working capital needs.
Capital expenditures, including information technology
expenditures, were $161.3 million, down $47.1 million versus the
prior year period.
In March 2021, the Company announced the planned construction of
a greenfield 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
would 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 cost of this investment is expected to be approximately $250
million.
In addition, in July 2021, the Company announced the expansion
and modernization of its facility in American Falls, Idaho,
including the construction of a new processing line with capacity
to produce approximately 350 million pounds of frozen french fries
and other potato products per year. The new facility is expected to
be completed in the second half of fiscal year 2023, and the cost
of this investment is expected to be approximately $415
million.
Capital Returned to Shareholders
In fiscal 2021, the Company returned a total of $161.0 million
to shareholders, including $135.3 million in cash dividends and
$25.7 million through share repurchases. The average price per
share repurchased during fiscal 2021 was $78.19. The Company has
approximately $170 million remaining under its existing $250
million share repurchase authorization.
Fiscal 2022 Outlook
The Company expects fiscal 2022 net sales growth will be above
its long-term target of low-to-mid single digits. The Company
anticipates net sales growth in the first half of fiscal year 2022
will be driven largely by higher volume, reflecting an ongoing
recovery in frozen potato demand, as well as a comparison to
relatively soft shipments in the prior year. The Company expects
net sales growth in the second half of its fiscal year will reflect
more of a balance of higher volume and improved price/mix as recent
pricing actions are fully implemented in the market, and as sales
volumes in higher-margin channels approach pre-pandemic levels.
The Company expects net income and Adjusted EBITDA including
unconsolidated joint ventures to be pressured during the first half
of fiscal 2022. The Company expects volatility in the broader
supply chain as the overall economy continues to recover from the
pandemic’s impact, and anticipates significant inflation for key
production inputs, packaging and transportation compared to fiscal
2021 levels. In addition, the Company expects continued investments
in its manufacturing, supply chain, and commercial operations will
increase operating expenses in the near term, but remains confident
that these investments will improve its ability to support growth
and margin improvement over the long term. While the ongoing impact
of the pandemic is uncertain, the Company anticipates that earnings
will gradually normalize in the second half of fiscal 2022 as
manufacturing and distribution operations stabilize, and as
price/mix improves.
The Company believes that its strong balance sheet and ability
to generate cash has it well-positioned to expand production
capacity to support long-term growth, including its recently
announced investments in the U.S. and China, as well as to make
strategic investments in its information technology platform,
including the second phase of its ERP system. Through its joint
venture in Europe, the Company also announced investments to expand
capacity in Russia and the Netherlands.
In addition, for fiscal 2022, the Company expects:
- Interest expense, net, of approximately $115 million,
- Effective tax rate at the low end of its long-term range of 23
percent to 24 percent,
- Depreciation and amortization of approximately $190 million,
and
- Cash used for capital expenditures, excluding acquisitions, of
$650 million to $700 million, depending on timing of projects,
which include among other items: completion of the Company’s
chopped and formed capacity expansion in American Falls, Idaho;
initial construction of a new french fry processing line and plant
modernization investments in American Falls, Idaho; and initial
construction of a greenfield french fry processing facility in
Ulanqab, Inner Mongolia, China.
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)
The effective tax rate is calculated as
the ratio of income tax expense to pre-tax income, inclusive of
equity method investment earnings.
(3)
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 fourth
quarter fiscal 2021 results at 10:00 a.m. EDT today, July 27, 2021.
Participants in the U.S. and Canada may access the conference call
by dialing 800-430-8332 and participants outside the U.S. and
Canada should dial +1-323-289-6581. The confirmation code is
6192753. 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=1475861&tp_key=65826345b9.
A rebroadcast of the conference call will be available beginning
on Wednesday, July 28, 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,”
“improve,” “believe,” “will,” “continue,” “become,” “remain,”
“support,” “anticipate,” “would,” “maintain,” “drive,” “create,”
“invest,” “increase,” “expand,” “outlook,” 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 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 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 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 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 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
(in millions, except per share
amounts)
Thirteen Weeks Ended
Fourteen Weeks Ended
Fifty-Two Weeks Ended
Fifty-Three Weeks
Ended
May 30,
May 31,
May 30,
May 31,
2021
2020
2021
2020
Net sales
$
1,007.5
$
846.9
$
3,670.9
$
3,792.4
Cost of sales
809.5
735.8
2,838.9
2,897.2
Gross profit
198.0
111.1
832.0
895.2
Selling, general and administrative
expenses
99.1
80.2
357.2
338.3
Income from operations
98.9
30.9
474.8
556.9
Interest expense, net
28.7
29.2
118.3
108.0
Income before income taxes and equity
method earnings
70.2
1.7
356.5
448.9
Income tax expense (benefit)
14.3
(2.8
)
90.5
112.3
Equity method investment earnings
(loss)
9.6
(6.1
)
51.8
29.3
Net income (loss)
$
65.5
$
(1.6
)
$
317.8
$
365.9
Earnings (loss) per share
Basic
$
0.45
$
(0.01
)
$
2.17
$
2.50
Diluted
$
0.44
$
(0.01
)
$
2.16
$
2.49
Dividends declared per common share
$
0.235
$
0.230
$
0.930
$
0.860
Computation of diluted earnings per
share:
Net income (loss)
$
65.5
$
(1.6
)
$
317.8
$
365.9
Diluted weighted average common shares
outstanding
147.1
146.2
147.1
147.1
Diluted earnings (loss) per share
$
0.44
$
(0.01
)
$
2.16
$
2.49
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(dollars in millions, except
share data)
May 30,
May 31,
2021
2020
ASSETS
Current assets:
Cash and cash equivalents (1)
$
783.5
$
1,364.0
Receivables, less allowance for doubtful
accounts of $0.9 and $1.3
366.9
342.1
Inventories
513.5
486.7
Prepaid expenses and other current
assets
117.8
109.8
Total current assets
1,781.7
2,302.6
Property, plant and equipment, net
1,524.0
1,535.0
Operating lease assets
141.7
167.0
Equity method investments
310.2
250.2
Goodwill
334.5
303.8
Intangible assets, net
36.9
38.3
Other assets
80.4
65.4
Total assets
$
4,209.4
$
4,662.3
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term borrowings (1)
$
—
$
498.7
Current portion of long-term debt and
financing obligations
32.0
48.8
Accounts payable
359.3
244.4
Accrued liabilities
226.9
233.0
Total current liabilities
618.2
1,024.9
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
2,705.4
2,992.6
Deferred income taxes
159.7
152.5
Other noncurrent liabilities
245.5
252.3
Total long-term liabilities
3,110.6
3,397.4
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 147,640,632 and 146,993,751 shares
issued
147.6
147.0
Additional distributed capital
(836.8
)
(862.9
)
Retained earnings
1,244.6
1,064.6
Accumulated other comprehensive income
(loss)
29.5
(40.5
)
Treasury stock, at cost, 1,448,768 and
954,858 common shares
(104.3
)
(68.2
)
Total stockholders' equity
480.6
240.0
Total liabilities and stockholders’
equity
$
4,209.4
$
4,662.3
____________________
(1)
During the fourteen weeks ended May 31,
2020, the Company borrowed $1,320.0 million, including $495.0
million under its revolving credit facility, to increase its cash
position and preserve financial flexibility considering the
uncertainty in the global markets resulting from the COVID-19
pandemic.
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(dollars in millions)
Fifty-Two Weeks Ended
Fifty-Three Weeks
Ended
May 30,
May 31,
2021
2020
Cash flows from operating
activities
Net income
$
317.8
$
365.9
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
188.8
184.0
Stock-settled, stock-based compensation
expense
20.6
22.8
Earnings of joint ventures in excess of
distributions
(33.0
)
(0.4
)
Deferred income taxes
3.8
20.0
Other
10.7
15.6
Changes in operating assets and
liabilities, net of acquisition:
Receivables
(21.0
)
1.1
Inventories
(22.0
)
15.3
Income taxes payable/receivable, net
(3.3
)
2.7
Prepaid expenses and other current
assets
(4.9
)
(2.0
)
Accounts payable
104.7
(34.9
)
Accrued liabilities
(9.0
)
(16.1
)
Net cash provided by operating
activities
$
553.2
$
574.0
Cash flows from investing
activities
Additions to property, plant and
equipment
(147.2
)
(167.7
)
Additions to other long-term assets
(16.1
)
(40.7
)
Acquisition of business, net of cash
acquired
—
(116.7
)
Investment in equity method joint
venture
—
(22.6
)
Other
0.8
1.7
Net cash used for investing
activities
$
(162.5
)
$
(346.0
)
Cash flows from financing
activities
Proceeds (payments) of short-term
borrowings, net
(498.8
)
490.5
Repayments of debt and financing
obligations
(305.5
)
(336.3
)
Dividends paid
(135.3
)
(121.3
)
Repurchase of common stock and common
stock withheld to cover taxes
(36.1
)
(28.9
)
Proceeds from issuance of debt
—
1,122.9
Other
1.7
(1.9
)
Net cash provided by (used for)
financing activities
$
(974.0
)
$
1,125.0
Effect of exchange rate changes on cash
and cash equivalents
2.8
(1.2
)
Net increase (decrease) in cash and
cash equivalents
(580.5
)
1,351.8
Cash and cash equivalents, beginning of
the period
1,364.0
12.2
Cash and cash equivalents, end of
period
$
783.5
$
1,364.0
Lamb Weston Holdings,
Inc.
Segment Information
(dollars in millions)
Thirteen Weeks Ended
Fourteen Weeks Ended
Year-Over-
May 30,
May 31,
Year Growth
2021
2020
Rates
Price/Mix
Volume
Segment sales
Global
$
509.6
$
429.3
19
%
3
%
16
%
Foodservice
320.0
175.8
82
%
18
%
64
%
Retail
146.3
201.9
(28
%)
2
%
(30
%)
Other
31.6
39.9
(21
%)
5
%
(26
%)
$
1,007.5
$
846.9
19
%
6
%
13
%
Segment product contribution margin
(1)
Global
$
56.4
$
33.5
68
%
Foodservice
96.3
42.5
127
%
Retail
21.2
31.4
(32
%)
Other
15.4
(1.9
)
N/M
189.3
105.5
79
%
Add: Advertising and promotion
expenses
8.7
5.6
55
%
Gross profit
$
198.0
$
111.1
78
%
Fifty-Two Weeks Ended
Fifty-Three Weeks
Ended
Year-Over-
May 30,
May 31,
Year Growth
2021
2020
Rates
Price/Mix
Volume
Segment sales
Global
$
1,911.5
$
1,973.6
(3
%)
0
%
(3
%)
Foodservice
1,017.3
1,069.1
(5
%)
7
%
(12
%)
Retail
603.4
595.5
1
%
5
%
(4
%)
Other
138.7
154.2
(10
%)
4
%
(14
%)
$
3,670.9
$
3,792.4
(3
%)
3
%
(6
%)
Segment product contribution margin
(1)
Global
$
306.2
$
374.5
(18
%)
Foodservice
340.0
356.0
(4
%)
Retail
120.2
117.6
2
%
Other
47.8
24.1
98
%
814.2
872.2
(7
%)
Add: Advertising and promotion
expenses
17.8
23.0
(23
%)
Gross profit
$
832.0
$
895.2
(7
%)
____________________
(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.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(dollars in millions, except
share data)
There were no items impacting comparability during the thirteen
and fifty-two weeks ended May 30, 2021, or the fourteen weeks ended
May 31, 2020. The item impacting comparability for the fifty-three
weeks ended May 31, 2020, was as follows:
Fifty-Three weeks Ended May
31, 2020
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense (1)
Earnings
Net Income
EPS
As reported
$
556.9
$
108.0
$
112.3
$
29.3
$
365.9
$
2.49
Items impacting comparability:
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 (2)
$
556.9
$
108.0
$
112.9
$
31.9
$
367.9
$
2.50
___________________
(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)
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
(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 (loss) to Adjusted EBITDA and Adjusted EBITDA
including unconsolidated joint ventures.
Thirteen Weeks Ended
Fourteen Weeks Ended
Fifty-Two Weeks Ended
Fifty-Three Weeks
Ended
May 30,
May 31,
May 30,
May 31,
2021
2020
2021
2020
Net income (loss)
$
65.5
$
(1.6
)
$
317.8
$
365.9
Equity method investment (earnings)
loss
(9.6
)
6.1
(51.8
)
(29.3
)
Interest expense, net
28.7
29.2
118.3
108.0
Income tax expense (benefit)
14.3
(2.8
)
90.5
112.3
Income from operations
98.9
30.9
474.8
556.9
Depreciation and amortization
44.2
45.2
182.7
177.8
Adjusted EBITDA (1)
143.1
76.1
657.5
734.7
Unconsolidated Joint Ventures (2)
Equity method investment earnings
(loss)
9.6
(6.1
)
51.8
29.3
Interest expense, income tax expense, and
depreciation and
amortization included in equity method
investment earnings
13.6
8.3
39.1
33.2
Items impacting comparability
Loss on withdrawal from multiemployer
pension plan
—
—
—
2.6
Add: Adjusted EBITDA from unconsolidated
joint ventures
23.2
2.2
90.9
65.1
Adjusted EBITDA including unconsolidated
joint ventures (1)
$
166.3
$
78.3
$
748.4
$
799.8
___________________
(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 4, 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 2021 Form 10-K, for more information.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210727005236/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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