Second Quarter Fiscal 2022
Highlights
- Compared to Second Quarter Fiscal 2021:
- Net sales increased 12% to $1,007 million
- Income from operations declined 18% to $114 million
- Net income declined 66% to $33 million
- Diluted EPS declined 67% to $0.22 from $0.66
- Adjusted Diluted EPS(1) declined 24% to $0.50 from $0.66
- Adjusted EBITDA including unconsolidated joint ventures(1)
declined 15% to $181 million
- Capital Return to Shareholders:
- Paid $34 million in cash dividends and announced a 4% increase
in the quarterly dividend
- Repurchased $50 million of common stock and increased share
repurchase authorization by $250 million
Updated FY 2022 Outlook
- Net sales growth above long-term target range of low-to-mid
single digits
- Net income and Adjusted EBITDA including joint ventures(1)
expected to be pressured through fiscal 2022 due to higher potato,
input and transportation costs
- Gross margin of 18% to 20% or 600 to 700 basis points below
pre-pandemic gross margin of 25% to 26%; previous gross margin
estimate was 17% to 21%
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fiscal
second quarter 2022 results and updated its fiscal 2022
outlook.
“We are pleased with our financial and operating progress in the
quarter as we continue to navigate through a difficult and volatile
macro environment defined by cost inflation, supply chain
disruptions and production challenges due primarily to a tight
labor market,” said Tom Werner, President and CEO. “We generated
strong sales as solid demand across our restaurant and foodservice
sales channels in North America drove volume growth, and as we
continued to implement pricing actions in each of our business
segments. These pricing actions, along with the other strategic
actions we’ve taken to offset cost pressures and improve throughput
in our factories, led to sequential gross margin gains in the
quarter.”
“Looking ahead, we are on track to deliver our financial targets
for the year. We expect our pricing actions, productivity
improvements in our factories, and product optimization efforts to
mitigate the effect of the ongoing macro-operational challenges and
higher potato costs resulting from an exceptionally poor harvest in
the Pacific Northwest. We remain confident in the strong long-term
outlook for the global frozen potato category, and believe that
executing on our strategies and ongoing investments in our business
will keep us on a path to deliver sustainable, profitable growth
and create value for our stakeholders.”
Summary of Second Quarter FY
2022 Results
($ in millions, except per
share)
Year-Over-Year
YTD
Year-Over-Year
Q2 2022
Growth Rates
FY 2022
Growth Rates
Net sales
$
1,006.6
12%
$
1,990.8
13%
Income from operations
$
114.4
(18%)
$
174.6
(37%)
Net income
$
32.5
(66%)
$
62.3
(67%)
Diluted EPS
$
0.22
(67%)
$
0.42
(67%)
Adjusted Diluted EPS(1)
$
0.50
(24%)
$
0.70
(45%)
Adjusted EBITDA including unconsolidated
joint ventures(1)
$
180.9
(15%)
$
304.3
(27%)
Q2 2022 Commentary
Net sales increased $110.5 million to $1,006.6 million, up 12
percent versus the prior year quarter, with volume and price/mix
each up 6 percent. The ongoing recovery in demand for frozen potato
products in the Company’s restaurant and foodservice channels in
North America drove the increase in sales volumes, while the
initial benefits of product pricing actions, as well as higher
prices charged to customers for product delivery, primarily drove
the increase in price/mix.
Income from operations declined $25.2 million to $114.4 million,
down 18 percent versus the prior year quarter, reflecting lower
gross profit and higher selling, general and administrative
expenses (“SG&A”). Gross profit declined $18.0 million, as the
benefits from increased sales volumes and higher price/mix were
more than offset by higher manufacturing and distribution costs on
a per-pound basis. The higher costs per pound predominantly
reflected double-digit cost inflation from key inputs, particularly
edible oils; ingredients, such as grains and starches used in
product coatings; transportation; and packaging. The increase in
costs per pound also reflected the effect of labor shortages on
production run-rates, as well as lower raw potato utilization
rates. The increase in per pound costs was partially offset by
supply chain productivity savings. The decline in gross profit also
included a $6.1 million decrease in unrealized mark-to-market
adjustments associated with commodity hedging contracts, which
includes a $1.0 million loss in the current quarter, compared with
a $5.1 million gain related to these items in the prior year
quarter.
SG&A increased $7.2 million compared to the prior year
quarter, primarily due to a $2.5 million increase in advertising
and promotion expenses (“A&P”), higher sales commissions
associated with increased sales volumes, and higher expenses
largely related to employee recruiting and retention. The increase
in SG&A was partially offset by lower consulting expenses
associated with improving the Company’s commercial and supply chain
operations, as well as fewer expenses for its new enterprise
resource planning system (“ERP”). Approximately $2 million of the
ERP-related expenses recognized in the quarter consisted primarily
of consulting expenses that will not continue after the Company
implements the new ERP system, compared to approximately $5 million
in the prior year quarter.
Net income was $32.5 million, down $64.4 million versus the
prior year quarter, and Diluted EPS was $0.22, down $0.44 versus
the prior year quarter. The declines were driven by a loss of $53.3
million ($40.5 million, or $0.28 per share, after-tax) associated
with the extinguishment of debt (see Cash Flow and Liquidity
below), as well as lower income from operations and equity method
investment earnings.
Excluding a loss of $40.5 million after-tax for the
extinguishment of debt, net income was $73.0 million, down $23.9
million versus the prior year quarter, and Adjusted Diluted EPS(1)
was $0.50, down $0.16 versus the prior year quarter, reflecting
lower income from operations and equity method investment
earnings.
Adjusted EBITDA including unconsolidated joint ventures(1)
declined $32.3 million to $180.9 million, down 15 percent versus
the prior year quarter, driven by lower income from operations and
equity method investment earnings.
The Company’s effective tax rate(2) in the second fiscal quarter
was 22.8 percent, versus 24.8 percent in the prior year period. 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.
Q2 2022 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
Q2 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
516.7
9%
5%
4%
Segment product contribution margin(3)
$
80.9
(13%)
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 $40.8 million to $516.7
million, up 9 percent versus the prior year quarter, with price/mix
up 5 percent and volume up 4 percent. The increase in price/mix
largely reflected the benefit of pricing actions, including higher
prices charged for freight. Strong growth in shipments to
restaurant chain customers in the U.S. drove the increase in sales
volumes. While demand in most of the Company’s key international
markets was solid, export sales volumes declined as a result of
limited shipping container availability and disruptions to ocean
freight networks.
Global segment product contribution margin declined $11.8
million to $80.9 million, down 13 percent versus the prior year
quarter. Higher manufacturing and distribution costs per pound more
than offset the benefit of favorable price/mix and higher sales
volumes.
Foodservice
Foodservice Segment
Summary
Year-Over-Year
Q2 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
313.9
30%
8%
22%
Segment product contribution margin(3)
$
104.4
19%
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 $72.8 million to $313.9 million, up 30 percent
versus the prior year quarter, with volume up 22 percent and
price/mix up 8 percent. Strong demand at small and regional chain
restaurants, as well as independently-owned restaurants, drove the
increase in sales volumes. 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 below
pre-pandemic levels. The segment’s overall volume growth was
tempered by the inability to serve full customer demand due to
widespread industry supply chain constraints, including labor
shortages, that resulted in lower production run-rates and
throughput in the factories. The increase in price/mix largely
reflected the initial benefits of pricing actions taken earlier in
the year, higher prices charged for freight, and favorable mix.
Foodservice segment product contribution margin increased $16.7
million to $104.4 million, up 19 percent compared to the prior year
quarter. Favorable price/mix and higher sales volumes drove the
increase, and were partially offset by higher manufacturing and
distribution costs per pound.
Retail
Retail Segment Summary
Year-Over-Year
Q2 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
142.6
1%
5%
(4%)
Segment product contribution margin(3)
$
21.4
(29%)
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 $1.9 million to $142.6
million, up 1 percent versus the prior year quarter, with price/mix
up 5 percent and volume down 4 percent. The increase in price/mix
was largely driven by favorable price in our branded portfolio,
including higher prices charged for freight, and improved mix. The
sales volume decline largely reflects lower shipments of private
label products resulting from incremental losses of certain
low-margin business, partially offset by an increase in branded
product sales volumes. Product shipments were tempered by the
inability to serve full customer demand due to lower production
run-rates and throughput in the factories.
Retail segment product contribution margin declined $8.7 million
to $21.4 million, down 29 percent versus the prior year quarter.
Higher manufacturing and distribution costs per pound, a $1.9
million increase in A&P expenses, and lower sales volumes drove
the decline.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures in Europe, the U.S., and South America were $10.1 million
and $19.2 million for the second quarter of fiscal 2022 and 2021,
respectively. Equity method investment earnings included a $3.6
million unrealized gain related to mark-to-market adjustments
associated with currency and commodity hedging contracts in the
current quarter, compared to a $0.1 million unrealized loss related
to these items in the prior year quarter.
Excluding the mark-to-market adjustments, earnings from equity
method investments declined $12.8 million compared to the prior
year period. The earnings decline largely reflects input cost
inflation and higher manufacturing and distribution costs in Europe
and the U.S.
Cash Flow and Liquidity
The Company ended the first half of fiscal 2022, with $621.9
million of cash and cash equivalents and no borrowings outstanding
under its $1.0 billion revolving credit facility.
Net cash from operating activities was $207.5 million, down
$111.3 million versus the first half of the prior year, primarily
due to lower earnings. Capital expenditures, including information
technology expenditures, were $148.1 million, up $94.4 million
versus the prior year period, reflecting increased investments to
support capacity expansion projects.
During the second quarter, the Company lowered the interest
rates and extended the maturities on approximately $1.7 billion of
its outstanding debt. In connection with doing so, the Company paid
an aggregate call premium of $39.6 million in cash related to the
loss on extinguishment of debt associated with the redemption of
its senior notes due in 2024 and 2026.
Capital Returned to Shareholders
In the second quarter, the Company returned a total of $84.3
million to shareholders, including $34.3 million in cash dividends
and $50.0 million through share repurchases. The Company
repurchased 868,753 shares at an average price per share of $57.55.
In December 2021, the Company announced a 4 percent increase in its
quarterly dividend, and increased its existing share repurchase
authorization by $250 million. The Company has approximately $344
million remaining under its updated 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 second half of fiscal 2022 will
be driven largely by price/mix as the Company’s recent pricing
actions are more fully implemented in the market. The Company
expects to continue to benefit from solid global demand for frozen
potato products, although growth in sales volumes may be tempered
by disruptions to the Company’s production and logistics networks,
as well as the effect of the COVID-19 variants on restaurant
traffic and consumer demand.
The Company expects net income and Adjusted EBITDA including
unconsolidated joint ventures(1) will be pressured for the
remainder of fiscal 2022, as it manages through significant
inflation for key production inputs, transportation and packaging
compared to fiscal 2021 levels, as well as industrywide operational
challenges, including labor shortages, and upstream and downstream
supply chain disruptions, resulting from volatility in the broader
supply chain. In addition, the Company’s raw potato costs on a per
pound basis will increase as the year progresses due to the impact
of extreme summer heat that negatively affected the yield and
quality of potato crops in the Pacific Northwest.
Accordingly, the Company expects its full year fiscal 2022 gross
margin to be 18 percent to 20 percent, or approximately 600 to 700
basis points below its pre-pandemic gross margin of 25 percent to
26 percent. The Company previously expected its full year fiscal
2022 gross margin to be 17 percent to 21 percent, or approximately
500 to 800 basis points below its pre-pandemic gross margin.
The Company continues to expect that ongoing investments in
information technology, including the second phase of its ERP
project, will increase operating expenses during the second half of
fiscal 2022 as compared to the first half of the year. The Company
expects that these investments will improve its ability to support
growth and margin improvement over the long-term.
In addition, for fiscal 2022, the Company continues to
expect:
- Depreciation and amortization of approximately $190
million,
- Income tax expense of approximately 22 percent, and
- Cash used for capital expenditures, excluding acquisitions, of
approximately $450 million.
The Company is increasing its estimate for interest expense, net
to approximately $163 million from its previous estimate of
approximately $115 million. The current estimate reflects the
benefits of recent refinancing initiatives and includes a $53.3
million loss on the extinguishment of debt that the Company
recognized during the second quarter of fiscal 2022.
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 second
quarter fiscal 2022 results at 10:00 a.m. EST today, January 6,
2022. 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
6173363. 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=1515279&tp_key=8e5bbed0b0.
A rebroadcast of the conference call will be available beginning
on Friday, January 7, 2022 after 2:00 p.m. EST 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,” “remain,” “support,”
“anticipate,” “deliver,” “create,” “mitigate,” “increase,”
“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, pricing actions,
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, other constraints in the availability of key
commodities and other necessary services or restrictions imposed by
public health authorities or governments; the availability and
prices of raw materials; labor shortages and other operational
challenges; levels of pension, 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 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;
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; 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
interest expense, income tax expense, 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. 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. 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.
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
(unaudited, in millions, except
per share amounts)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
November 28,
November 29,
November 28,
November 29,
2021
2020
2021
2020
Net sales
$
1,006.6
$
896.1
$
1,990.8
$
1,767.6
Cost of sales
801.1
672.6
1,634.0
1,330.3
Gross profit
205.5
223.5
356.8
437.3
Selling, general and administrative
expenses
91.1
83.9
182.2
162.0
Income from operations
114.4
139.6
174.6
275.3
Interest expense, net (1)
82.4
30.0
110.3
60.3
Income before income taxes and equity
method earnings
32.0
109.6
64.3
215.0
Income tax expense
9.6
31.9
18.3
59.9
Equity method investment earnings
10.1
19.2
16.3
31.1
Net income
$
32.5
$
96.9
$
62.3
$
186.2
Earnings per share
Basic
$
0.23
$
0.66
$
0.43
$
1.27
Diluted
$
0.22
$
0.66
$
0.42
$
1.27
Dividends declared per common share
$
0.235
$
0.230
$
0.470
$
0.460
Weighted average common shares
outstanding:
Basic
146.0
146.5
146.1
146.4
Diluted
146.3
147.1
146.6
147.1
Computation of diluted earnings per
share:
Net income
$
32.5
$
96.9
$
62.3
$
186.2
Diluted weighted average common shares
outstanding
146.3
147.1
146.6
147.1
Diluted earnings per share
$
0.22
$
0.66
$
0.42
$
1.27
_________________________________
(1)
Interest expense, net, for the thirteen
and twenty-six weeks ended November 28, 2021, includes a loss on
the extinguishment of debt of $53.3 million, which includes an
aggregate call premium of $39.6 million related to the redemption
of the Company’s 4.625% senior notes due 2024 and 4.875% senior
notes due 2026, and the write-off of $13.7 million of previously
unamortized debt issuance costs associated with those notes.
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(unaudited, dollars in millions,
except share data)
November 28,
May 30,
2021
2021
ASSETS
Current assets:
Cash and cash equivalents
$
621.9
$
783.5
Receivables, less allowance for doubtful
accounts of $1.1 and $0.9
423.2
366.9
Inventories
613.9
513.5
Prepaid expenses and other current
assets
58.8
117.8
Total current assets
1,717.8
1,781.7
Property, plant and equipment, net
1,568.0
1,524.0
Operating lease assets
136.1
141.7
Equity method investments
294.7
310.2
Goodwill
318.6
334.5
Intangible assets, net
35.0
36.9
Other assets
85.4
80.4
Total assets
$
4,155.6
$
4,209.4
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt and
financing obligations
$
32.2
$
32.0
Accounts payable
445.4
359.3
Accrued liabilities
215.4
226.9
Total current liabilities
693.0
618.2
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
2,692.1
2,705.4
Deferred income taxes
161.4
159.7
Other noncurrent liabilities
243.9
245.5
Total long-term liabilities
3,097.4
3,110.6
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 148,028,060 and 147,640,632 shares
issued
148.0
147.6
Additional distributed capital
(825.8
)
(836.8
)
Retained earnings
1,238.3
1,244.6
Accumulated other comprehensive income
(loss)
(7.5
)
29.5
Treasury stock, at cost, 2,827,412 and
1,448,768 common shares
(187.8
)
(104.3
)
Total stockholders’ equity
365.2
480.6
Total liabilities and stockholders’
equity
$
4,155.6
$
4,209.4
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(unaudited, dollars in
millions)
Twenty-Six Weeks Ended
November 28,
November 29,
2021
2020
Cash flows from operating
activities
Net income
$
62.3
$
186.2
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
94.9
94.7
Loss on extinguishment of debt
53.3
1.0
Stock-settled, stock-based compensation
expense
9.6
11.3
Earnings of joint ventures in excess of
distributions
(2.2
)
(24.4
)
Deferred income taxes
4.3
2.5
Other
(0.5
)
15.5
Changes in operating assets and
liabilities:
Receivables
(57.7
)
(8.5
)
Inventories
(101.3
)
(140.3
)
Income taxes payable/receivable, net
3.1
33.0
Prepaid expenses and other current
assets
58.5
51.8
Accounts payable
94.7
138.5
Accrued liabilities
(11.5
)
(42.5
)
Net cash provided by operating
activities
$
207.5
$
318.8
Cash flows from investing
activities
Additions to property, plant and
equipment
(147.1
)
(42.3
)
Additions to other long-term assets
(1.0
)
(11.4
)
Other
0.5
0.4
Net cash used for investing
activities
$
(147.6
)
$
(53.3
)
Cash flows from financing
activities
Proceeds from issuance of debt
1,655.4
—
Repayments of debt and financing
obligations
(1,682.1
)
(289.6
)
Repurchase of common stock and common
stock withheld to cover taxes
(83.5
)
(9.8
)
Dividends paid
(68.7
)
(67.2
)
Payments of senior notes call premium
(39.6
)
—
Repayments of short-term borrowings,
net
—
(498.8
)
Other
(0.8
)
(1.8
)
Net cash used for financing
activities
$
(219.3
)
$
(867.2
)
Effect of exchange rate changes on cash
and cash equivalents
(2.2
)
1.6
Net decrease in cash and cash
equivalents
(161.6
)
(600.1
)
Cash and cash equivalents, beginning of
period
783.5
1,364.0
Cash and cash equivalents, end of
period
$
621.9
$
763.9
Lamb Weston Holdings,
Inc.
Segment Information
(unaudited, dollars in
millions)
Thirteen Weeks Ended
Year-Over-
November 28,
November 29,
Year Growth
2021
2020
Rates
Price/Mix
Volume
Segment net sales
Global
$
516.7
$
475.9
9%
5%
4%
Foodservice
313.9
241.1
30%
8%
22%
Retail
142.6
140.7
1%
5%
(4%)
Other
33.4
38.4
(13%)
11%
(24%)
$
1,006.6
$
896.1
12%
6%
6%
Segment product contribution margin
(1)
Global
$
80.9
$
92.7
(13%)
Foodservice
104.4
87.7
19%
Retail
21.4
30.1
(29%)
Other (2)
(6.2
)
10.5
(159%)
200.5
221.0
(9%)
Add: Advertising and promotion
expenses
5.0
2.5
100%
Gross profit
$
205.5
$
223.5
(8%)
Twenty-Six Weeks Ended
Year-Over-
November 28,
November 29,
Year Growth
2021
2020
Rates
Price/Mix
Volume
Segment net sales
Global
$
1,017.9
$
923.4
10%
4%
6%
Foodservice
635.3
477.8
33%
5%
28%
Retail
275.1
294.6
(7%)
4%
(11%)
Other
62.5
71.8
(13%)
10%
(23%)
$
1,990.8
$
1,767.6
13%
4%
9%
Segment product contribution margin
(1)
Global
$
123.5
$
170.5
(28%)
Foodservice
200.8
173.5
16%
Retail
36.2
65.9
(45%)
Other (2)
(12.8
)
23.7
(154%)
347.7
433.6
(20%)
Add: Advertising and promotion
expenses
9.1
3.7
146%
Gross profit
$
356.8
$
437.3
(18%)
_________________________________
(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)
The Other segment primarily includes the
Company’s vegetable and dairy businesses and unrealized
mark-to-market adjustments associated with commodity hedging
contracts. Unrealized mark-to-market adjustments and realized
settlements associated with commodity hedging contracts included a
loss of $8.6 million and a gain of $4.3 million for the thirteen
weeks ended November 28, 2021 and November 29, 2020, respectively;
and a loss of $16.9 million and a gain of $12.1 million for the
twenty-six weeks ended November 28, 2021 and November 29, 2020,
respectively.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, dollars in
millions)
There were no items impacting
comparability during the thirteen and twenty-six weeks ended
November 29, 2020.
Thirteen Weeks Ended November
28, 2021
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense (1)
Earnings
Net Income
EPS
As reported
$
114.4
$
82.4
$
9.6
$
10.1
$
32.5
$
0.22
Items impacting comparability:
Loss on extinguishment of debt (2)
—
(53.3
)
12.8
—
40.5
0.28
Adjusted (3)
$
114.4
$
29.1
$
22.4
$
10.1
$
73.0
$
0.50
Twenty-Six Weeks Ended
November 28, 2021
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense (1)
Earnings
Net Income
EPS
As reported
$
174.6
$
110.3
$
18.3
$
16.3
$
62.3
$
0.42
Items impacting comparability:
Loss on extinguishment of debt (2)
—
(53.3
)
12.8
—
40.5
0.28
Adjusted (3)
$
174.6
$
57.0
$
31.1
$
16.3
$
102.8
$
0.70
_________________________________
(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 (1) to the Consolidated
Statements of Earnings above for a discussion of the item impacting
comparability.
(3)
Adjusted interest expense, income tax
expense, 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
Twenty-Six Weeks Ended
November 28,
November 29,
November 28,
November 29,
2021
2020
2021
2020
Net income
$
32.5
$
96.9
$
62.3
$
186.2
Equity method investment earnings
(10.1
)
(19.2
)
(16.3
)
(31.1
)
Interest expense, net
82.4
30.0
110.3
60.3
Income tax expense
9.6
31.9
18.3
59.9
Income from operations
114.4
139.6
174.6
275.3
Depreciation and amortization
46.2
46.6
92.2
92.2
Adjusted EBITDA (1)
160.6
186.2
266.8
367.5
Unconsolidated Joint Ventures (2)
Equity method investment earnings
10.1
19.2
16.3
31.1
Interest expense, income tax expense, and
depreciation and
amortization included in equity method
investment earnings
10.2
7.8
21.2
16.4
Add: Adjusted EBITDA from unconsolidated
joint ventures
20.3
27.0
37.5
47.5
Adjusted EBITDA including unconsolidated
joint ventures (1)
$
180.9
$
213.2
$
304.3
$
415.0
_________________________________
(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 v.o.f., 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/20220106005070/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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