Fourth Quarter Fiscal 2022
Highlights
- Compared to Fourth Quarter Fiscal 2021:
- Net sales increased 14% to $1,153 million
- Income from operations increased 38% to $136 million
- Net income decreased 51% to $32 million; Adjusted Net Income(1)
increased 45% to $95 million
- Diluted EPS decreased 50% to $0.22 from $0.44; Adjusted Diluted
EPS(1) increased 48% to $0.65
- Adjusted EBITDA including unconsolidated joint ventures(1)
increased 21% to $202 million
Full Year 2022 Highlights
- Compared to Full Year Fiscal 2021:
- Net sales increased 12% to $4,099 million
- Income from operations decreased 6% to $444 million
- Net income decreased 37% to $201 million; Adjusted Net
Income(1) decreased 4% to $304 million
- Diluted EPS decreased 36% to $1.38 from $2.16; Adjusted Diluted
EPS(1) decreased 4% to $2.08
- Adjusted EBITDA including unconsolidated joint ventures(1)
decreased 3% to $726 million
- Cash flows from operations declined 24% to $418 million
- Capital Returned to Shareholders:
- Paid $138 million in cash dividends
- Repurchased $151 million of common stock
Fiscal 2023 Outlook
- Net sales of $4.7 billion to $4.8 billion
- Net income of $360 million to $410 million
- Diluted EPS of $2.45 to $2.85
- Adjusted EBITDA including unconsolidated joint ventures(1) of
$840 million to $910 million
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fiscal
fourth quarter and full year 2022 results and provided its outlook
for fiscal 2023.
“We finished the year on a strong note, including a record high
sales quarter fueled by double-digit growth in each of our core
segments. Our fiscal 2022 performance is a testament to the
strength and dedication of the entire Lamb Weston team,” said Tom
Werner, President and CEO. “Benefits from our pricing actions,
productivity, simplification, and cost mitigation efforts continued
to build through the year as we managed increases in input and
transportation costs, constraints in global logistics networks, and
the impact of a historically poor potato crop. Our sales volumes
throughout the year also held up well despite volatile consumer
demand and supply chain disruptions.”
“We enter this new fiscal year with strong underlying
fundamentals and business momentum, and believe our financial
targets of strong sales growth and continued improvement in
profitability in fiscal 2023 are prudent in light of the current
challenging operating and inflationary environment. Specifically,
our targets include gross margins approaching normalized levels
during the second half of fiscal 2023 behind higher pricing in each
of our core segments, an average potato crop, a broad easing of
cost and logistics pressures across our supply chain, and continued
productivity and cost mitigation efforts.”
“We continue to be encouraged by the resiliency of U.S.
restaurant traffic and french fry demand as consumers adjust to
sharp inflation headwinds. We remain confident in the health and
long-term growth prospects for the global frozen potato category,
and we are committed to executing our strategies, investing in our
people and operations, and supporting our customers in order to
drive sustainable, profitable growth and create value for our
shareholders over the long term.”
Summary of Fourth Quarter and
FY 2022 Results
($ in millions, except per
share)
Year-Over-Year
Year-Over-Year
Q4 2022
Growth Rates
FY 2022
Growth Rates
Net sales
$
1,153.1
14%
$
4,098.9
12%
Income from operations
$
136.0
38%
$
444.4
(6%)
Net income
$
32.0
(51%)
$
200.9
(37%)
Adjusted Net Income(1)
$
94.7
45%
$
304.1
(4%)
Diluted EPS
$
0.22
(50%)
$
1.38
(36%)
Adjusted Diluted EPS(1)
$
0.65
48%
$
2.08
(4%)
Adjusted EBITDA including unconsolidated
joint ventures(1)
$
201.8
21%
$
725.7
(3%)
Q4 2022 Commentary
Net sales increased $145.6 million to $1,153.1 million, up 14
percent versus the prior year quarter. Price/mix increased 15
percent, primarily reflecting the benefit of pricing actions across
each of the Company’s core business segments to offset input,
manufacturing, and transportation cost inflation. Volume declined 1
percent, primarily reflecting lower export volume due to limited
shipping container availability and disruptions to ocean freight
networks. Total volume in North America increased behind shipments
to large chain restaurant customers. This growth more than offset
lower shipments to foodservice and retail channels in North America
stemming from an inability to fully serve customer demand due to
widespread industry supply chain constraints, including labor and
commodities shortages, that resulted in lower production run-rates
and throughput in the Company’s production facilities.
Income from operations increased $37.1 million to $136.0
million, up 38 percent versus the prior year quarter, reflecting
higher gross profit, partially offset by higher selling, general
and administrative expenses (“SG&A”). Gross profit increased
$56.2 million, as the benefits from higher price/mix more than
offset the impact of higher manufacturing and distribution costs on
a per pound basis, as well as lower sales volumes. The higher costs
per pound primarily reflected double-digit cost inflation from key
inputs, including: edible oils, ingredients such as grains and
starches used in product coatings, packaging, labor costs, and
higher transportation costs. The increase in costs per pound also
reflected higher costs and inefficiencies associated with the
impact of extreme summer heat that negatively affected the yield
and quality of potato crops in the Pacific Northwest in fall 2021,
the effects of labor and commodities shortages on production
run-rates, and production downtimes associated with scheduled
maintenance and capital improvements. The increase in per pound
costs was partially offset by supply chain productivity savings.
The increase in gross profit also included a $7.9 million decrease
in unrealized mark-to-market adjustments associated with commodity
hedging contracts, which includes a $0.1 million gain in the
current quarter, compared with a $8.0 million gain related to these
items in the prior year quarter.
SG&A increased $19.1 million compared to the prior year
quarter, primarily due to higher incentive compensation expense and
a $3.5 million contribution to the Lamb Weston charitable
foundation. The increase in SG&A was partially offset by lower
consulting expenses associated with improving the Company’s
commercial and supply chain operations, and a $2.4 million decrease
in advertising and promotion expenses (“A&P”).
Net income was $32.0 million, down $33.5 million versus the
prior year quarter, and Diluted EPS was $0.22, down $0.22 versus
the prior year quarter. The decreases were driven by a $62.7
million non-cash impairment charge (before and after-tax, or $0.43
per share) to write-off the Company’s portion of Lamb-Weston/Meijer
v.o.f’s (“LWM”) net investment in Russia resulting from LWM’s
announced intent to withdraw from its joint venture in response to
the war in Ukraine. These charges were partially offset by higher
income from operations and lower interest expense.
Adjusted Net Income(1) was $94.7 million, up $29.2 million
versus the prior year quarter, and Adjusted Diluted EPS(1) was
$0.65, up $0.21 versus the prior year quarter. Adjusted EBITDA
including unconsolidated joint ventures(1) increased $35.5 million
to $201.8 million, up 21 percent versus the prior year quarter.
These increases were driven by higher income from operations.
The Company’s effective tax rate(2) in the fourth fiscal quarter
was 41.2 percent, versus 17.9 percent in the prior year quarter.
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,
and was elevated relative to the Company’s historical rate
primarily due to the Russia impairment charge treated as a
non-deductible permanent difference. Excluding the Russia
impairment charge, the Company’s effective tax rate was 19.1
percent.
Q4 2022 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
Q4 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
558.4
10%
10%
0%
Segment product contribution margin(3)
$
55.7
(1%)
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 $48.8 million to $558.4
million, up 10 percent versus the prior year quarter, with
price/mix up 10 percent and volume flat. The benefit of domestic
and international product and freight pricing actions to offset
inflation, as well as favorable mix, drove the increase in
price/mix. A solid increase in sales volumes to North American
large QSR and casual dining restaurant chain customers was offset
by lower export shipments due to limited shipping container
availability and disruptions to ocean freight networks.
Global segment product contribution margin declined $0.7 million
to $55.7 million, down 1 percent versus the prior year quarter.
Higher manufacturing and distribution costs per pound more than
offset the benefit of favorable price/mix.
Foodservice
Foodservice Segment
Summary
Year-Over-Year
Q4 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
388.4
21%
24%
(3%)
Segment product contribution margin(3)
$
141.8
47%
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 $68.4 million to $388.4 million, up 21 percent
versus the prior year quarter, with price/mix up 24 percent and
volume down 3 percent. The benefits of product and freight pricing
actions taken earlier in the year to offset inflation drove the
increase in price/mix. Overall demand in the segment’s restaurant
and non-commercial channels (such as lodging and hospitality,
healthcare, schools and universities, sports and entertainment, and
workplace environments) remained solid in the quarter despite the
effect of high inflation on consumers. However, shipments declined
due to an inability to fully serve customer demand due to
widespread industry supply chain constraints, including labor
shortages, as well as downtimes for scheduled maintenance and
capital improvements that resulted in lower production run-rates
and throughput in the Company’s production facilities.
Foodservice segment product contribution margin increased $45.5
million to $141.8 million, up 47 percent compared to the prior year
quarter. Favorable price drove the increase, and was partially
offset by higher manufacturing and distribution costs per
pound.
Retail
Retail Segment Summary
Year-Over-Year
Q4 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
175.9
20%
22%
(2%)
Segment product contribution margin(3)
$
41.6
96%
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 $29.6 million to $175.9
million, up 20 percent versus the prior year quarter, with
price/mix up 22 percent and volume down 2 percent. Product and
freight pricing actions across the branded and private label
portfolios to offset inflation, as well as improved mix, drove the
increase in price/mix. Lower shipments of private label products,
resulting from incremental losses of certain low-margin business,
drove the sales volume decline. The volume decline was partially
offset by an increase in shipments of branded products, although
growth was tempered by an inability to fully serve customer demand
due to lower production run-rates and throughput in the Company’s
production facilities.
Retail segment product contribution margin increased $20.4
million to $41.6 million, up 96 percent versus the prior year
quarter. Favorable price/mix and a $3.1 million decrease in A&P
expenses drove the increase, partially offset by lower sales
volumes and higher manufacturing and distribution costs per
pound.
Equity Method Investment Earnings (Loss)
Equity method investment earnings (loss) from unconsolidated
joint ventures in Europe, the U.S., and South America were a loss
of $56.7 million and earnings of $9.6 million for fourth quarter
fiscal 2022 and 2021, respectively. Equity method investment
earnings (loss) in the fourth quarter of fiscal 2022 included a
$62.7 million non-cash impairment charge to write-off the Company’s
portion of LWM’s net investment in Russia. Equity method investment
earnings also included a $1.0 million unrealized loss related to
mark-to-market adjustments associated with currency and commodity
hedging contracts in the current quarter, compared to a $4.5
million unrealized gain related to these items in the prior year
quarter.
Excluding the charge to write-off the Company’s portion of LWM’s
net investment in Russia and the mark-to-market adjustments,
earnings from equity method investments increased $1.9 million
compared to the prior year quarter, reflecting the benefit of
favorable price/mix and higher sales volumes, largely offset by
input cost inflation and higher manufacturing and distribution
costs in both Europe and the U.S.
Fiscal Year 2022
Commentary
Net sales increased $428.0 million to $4,098.9 million, up 12
percent versus fiscal 2021. Price/mix increased 9 percent,
primarily reflecting the benefit of pricing actions across each of
the Company’s business segments to offset input, manufacturing, and
transportation cost inflation, as well as favorable mix. Volume
increased 3 percent, reflecting higher shipments to restaurant and
foodservice channels in North America, partially offset by lower
exports due to limited shipping container availability and
disruptions to ocean freight networks, as well as lower shipments
to retail channels. The Company’s volume growth was tempered by an
inability to fully serve customer demand due to widespread industry
supply chain constraints, including labor and commodities
shortages, that resulted in lower production run-rates and
throughput in the Company’s production facilities.
Income from operations declined $30.4 million to $444.4 million,
down 6 percent from the prior year, reflecting higher SG&A.
Gross profit was flat, as the benefits from higher price/mix and
volume were offset by the impact of higher manufacturing and
distribution costs on a per pound basis. The higher costs per pound
primarily reflected double-digit cost inflation from key inputs and
higher transportation costs. The increase in costs per pound also
reflected higher raw potato costs due to the impact of extreme
summer heat that negatively affected the yield and quality of
potato crops in the Pacific Northwest in fall 2021, the effects of
labor and commodities shortages on production run-rates, as well as
lower raw potato utilization rates. The increase in per pound costs
was partially offset by securing changes to product specifications,
portfolio simplification, and driving supply chain savings behind
our Win as 1 productivity program. Gross profit also included a
$28.9 million decrease in unrealized mark-to-market adjustments
associated with commodity hedging contracts, which included a $9.5
million loss in the current year, compared with a $19.4 million
gain related to these items in the prior year.
SG&A increased $30.4 million compared to the prior year,
primarily due to higher compensation and benefits expense; higher
travel, employee relations and in-person meeting expenses; higher
information technology infrastructure costs, including expenses
related to the planning and design of the Company’s new enterprise
resource planning system; and a $3.5 million contribution to the
Lamb Weston charitable foundation. The increase in SG&A was
partially offset by lower consulting expenses associated with
improving the Company’s commercial and supply chain operations.
Net income was $200.9 million, down $116.9 million versus the
prior year, and Diluted EPS was $1.38, down $0.78 versus the prior
year. The decreases were driven by a $62.7 million non-cash
impairment charge (before and after-tax, or $0.43 per share) to
write-off the Company’s portion of LWM’s net investment in Russia,
and a loss of $53.3 million ($40.5 million after-tax or $0.27 per
share) associated with the extinguishment of debt (see Liquidity
and Cash Flow below).
Adjusted Net Income(1) was $304.1 million, down $13.7 million
versus the prior year, and Adjusted Diluted EPS(1) was $2.08, down
$0.08 versus the prior year, reflecting lower income from
operations, partially offset by lower interest expense. Adjusted
EBITDA including unconsolidated joint ventures(1) declined $22.7
million to $725.7 million, down 3 percent versus the prior year,
primarily due to lower income from operations.
The Company’s effective tax rate(2) was 26.3 percent for fiscal
2022, compared to 22.2 percent in fiscal 2021. 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, and was elevated
in fiscal 2022 relative to the Company’s historical rate primarily
due to the Russia impairment charge treated as a non-deductible
permanent difference. Excluding the Russia impairment charge, the
Company’s effective tax rate for fiscal 2022 was 21.4 percent.
Fiscal Year 2022 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
FY 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
2,064.2
8%
6%
2%
Segment product contribution margin(3)
$
252.2
(18%)
Net sales for the Global segment increased $152.7 million to
$2,064.2 million, up 8 percent compared to the prior year, with
price/mix up 6 percent and volume up 2 percent. The benefit of
domestic and international product and freight pricing actions to
offset inflation, as well as favorable mix, drove the increase in
price/mix. A strong increase in sales volumes to North American
large QSR and casual dining restaurant chain customers was
partially offset by lower export shipments due to limited shipping
container availability and disruptions to ocean freight
networks.
Global segment product contribution margin declined $54.0
million to $252.2 million, down 18 percent compared to the prior
year. 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
FY 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
1,318.2
30%
15%
15%
Segment product contribution margin(3)
$
449.3
32%
Net sales for the Foodservice segment increased $300.9 million
to $1,318.2 million, up 30 percent compared to the prior year, with
both price/mix and volume up 15 percent. The benefits of product
and freight pricing actions taken throughout the year to offset
inflation, as well as favorable mix, drove the increase in
price/mix. The segment’s strong volume growth reflects the
progressive recovery in demand in its restaurant and non-commercial
channels, although growth was tempered by an inability to fully
serve customer demand due to widespread industry supply chain
constraints, including labor shortages, that resulted in lower
production run-rates and throughput in the Company’s production
facilities.
Foodservice segment product contribution margin increased $109.3
million to $449.3 million, up 32 percent compared to the prior
year. Favorable price, volume and mix drove the increase, and were
partially offset by higher manufacturing and distribution costs per
pound.
Retail
Retail Segment Summary
Year-Over-Year
FY 2022
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
594.6
(1%)
7%
(8%)
Segment product contribution margin(3)
$
109.4
(9%)
Net sales for the Retail segment declined $8.8 million to $594.6
million, down 1 percent versus the prior year, with volume down 8
percent and price/mix up 7 percent. Lower shipments of private
label products, resulting from incremental losses of certain
low-margin business, as well as lower shipments of branded
products, drove the sales volume decline. The decline in branded
product volume reflected an inability to fully serve customer
demand due to lower production run-rates and throughput in the
production facilities. Product and freight pricing actions across
the branded and private label portfolios to offset inflation, as
well as improved mix, drove the increase in price/mix.
Retail segment product contribution margin declined $10.8
million to $109.4 million, down 9 percent compared to the prior
year. Higher manufacturing and distribution costs per pound and
lower sales volumes drove the decline, partially offset by
favorable price/mix and a $0.8 million decrease in A&P
expenses.
Equity Method Investment Earnings (Loss)
Equity method investment earnings (loss) from unconsolidated
joint ventures in Europe, the U.S., and South America were a loss
of $10.7 million and earnings of $51.8 million for fiscal 2022 and
2021, respectively. Equity method investment earnings in fiscal
2022 included a $62.7 million non-cash impairment charge to
write-off the Company’s portion of LWM’s net investment in Russia.
Equity method investment earnings also included a $26.5 million
unrealized gain related to mark-to-market adjustments associated
with currency and commodity hedging contracts in the current year,
compared to a $11.3 million unrealized gain related to these items
in the prior year. The increase in mark-to-market adjustments in
fiscal 2022 primarily relates to changes in the value of natural
gas derivatives at LWM as commodity markets in Europe have
experienced significant volatility.
Excluding the charge to write-off the Company’s portion of LWM’s
net investment in Russia and the mark-to-market adjustments,
earnings from equity method investments decreased $15.0 million
compared to the prior year. The decrease reflects input cost
inflation and higher manufacturing and distribution costs in both
Europe and the U.S., partially offset by the benefit of favorable
price/mix and higher sales volumes.
Liquidity and Cash Flows
At the end of fiscal 2022, the Company had $525.0 million of
cash and cash equivalents and no borrowings outstanding under its
$1.0 billion revolving credit facility.
Net cash from operating activities was $418.1 million, down
$135.1 million versus the prior year, primarily due to unfavorable
changes in working capital and lower earnings. Capital
expenditures, including information technology expenditures, were
$306.4 million, up $145.1 million versus the prior year, primarily
reflecting increased investments to support capacity expansion
projects.
On July 5, 2022, the Company acquired an additional 40 percent
interest in Lamb Weston Alimentos Modernos S.A. (“LWAMSA”), its
joint venture in Argentina, for approximately $42 million,
increasing the Company’s total ownership of LWAMSA to 90 percent.
Following this acquisition, the Company will consolidate LWAMSA’s
results in its consolidated financial statements.
Capital Returned to Shareholders
In fiscal 2022, the Company returned a total of $289.1 million
to shareholders, including $138.4 million in cash dividends and
$150.7 million through share repurchases. The Company repurchased
2,407,184 shares during fiscal 2022 at an average price per share
of $62.59.
Fiscal 2023 Outlook
FY 2023 Outlook
Summary
Net Sales
$4.7 billion to $4.8 billion
Net Income
$360 million to $410 million
Diluted Earnings Per Share
$2.45 to $2.85
Adjusted EBITDA including unconsolidated
joint ventures (1)
$840 million to $910 million
Interest expense
Approximately $115 million
Depreciation and amortization expense
Approximately $210 million
Effective tax rate(2) (full year)
Approximately 24%
Cash used for capital expenditures
$475 million to $525 million
For fiscal 2023, the Company expects:
- Net sales of $4.7 billion to $4.8 billion, with growth versus
the prior year driven by the benefit of pricing actions to offset
significant input and transportation cost inflation, as well as
favorable mix and higher volume.
- Net income of $360 million to $410 million, Diluted EPS of
$2.45 to $2.85, and Adjusted EBITDA including unconsolidated joint
ventures(1) in the range of $840 million to $910 million, with
growth versus the prior year driven by higher sales and gross
margin expansion. The Company expects SG&A of $475 million to
$500 million, reflecting increased investments to upgrade its
information systems and enterprise resource planning (ERP)
infrastructure, as well as higher compensation and benefits
costs.
- During the first half of fiscal 2023, the Company expects its
gross margins will be pressured as compared to normalized seasonal
rates as it continues to manage through significant inflation for
key production inputs, transportation and packaging, as well as
higher raw potato costs on a per pound basis due to the impact of
extreme summer heat that negatively affected the yield and quality
of potato crops in the Pacific Northwest in fall 2021. The Company
expects its gross margins will also be pressured by ongoing
industrywide operational challenges, including labor and
commodities shortages, resulting from volatility in the broader
supply chain.
- During the second half of fiscal 2023, the Company expects
gross margins will improve and approach its normalized annual rate
of 25 percent to 26 percent. The anticipated improvement is
predicated on a potato crop harvested in fall 2022 that is in line
with historical averages, particularly in its primary growing
regions in the Columbia Basin and Idaho; the continued successful
implementation of the Company’s pricing actions to offset input and
transportation costs inflation; and a broad easing of labor and
logistics pressures that have been constraining the Company’s
production and shipments.
- Cash used for capital expenditures of $475 million to $525
million, of which approximately $285 million is related to the
previously-announced construction of french fry production lines
and plant modernization investments in Idaho and China, as well as
capital investments to upgrade information systems and ERP
infrastructure.
End Notes
(1)
Adjusted Net Income, 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 associated 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 2022 results at 10:00 a.m. EDT today, July 27, 2022.
Participants in the U.S. and Canada may access the conference call
by dialing 800-458-4121 and participants outside the U.S. and
Canada should dial +1-323-794-2093. The confirmation code is
2130194. 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=1553836&tp_key=e7f9e38d4b.
A rebroadcast of the conference call will be available beginning
on Friday, July 29, 2022 after 2:00 p.m. EDT at
https://investors.lambweston.com/events-and-presentations.
About Lamb Weston
Lamb Weston, along with its joint ventures, 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
“believe,” “drive,” “execute,” “invest,” “create,” “manage,”
“expect,” “improve,” “will,” “continue,” “remain,” “support,”
“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,
gross margins, productivity, potato crop, and business outlook and
prospects, as well as supply chain constraints, inflation, 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: the
availability and prices of raw materials; labor shortages and other
operational challenges; disruptions in the global economy caused by
the war in Ukraine and the possible related heightening of the
Company’s other known risks; 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;
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 Net Income, Adjusted
Diluted EPS, and adjusted interest expense, income tax expense, and
equity method investment earnings (loss), 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
(in millions, except per share
amounts)
Thirteen Weeks Ended
Fifty-Two Weeks Ended
May 29,
May 30,
May 29,
May 30,
2022
2021
2022
2021
Net sales
$
1,153.1
$
1,007.5
$
4,098.9
$
3,670.9
Cost of sales
898.9
809.5
3,266.9
2,838.9
Gross profit
254.2
198.0
832.0
832.0
Selling, general and administrative
expenses
118.2
99.1
387.6
357.2
Income from operations
136.0
98.9
444.4
474.8
Interest expense, net (1)
24.9
28.7
161.0
118.3
Income before income taxes and equity
method earnings (loss)
111.1
70.2
283.4
356.5
Income tax expense
22.4
14.3
71.8
90.5
Equity method investment earnings (loss)
(2)
(56.7
)
9.6
(10.7
)
51.8
Net income
$
32.0
$
65.5
$
200.9
$
317.8
Earnings per share
Basic
$
0.22
$
0.45
$
1.38
$
2.17
Diluted
$
0.22
$
0.44
$
1.38
$
2.16
Dividends declared per common share
$
0.245
$
0.235
$
0.960
$
0.930
Weighted average common shares
outstanding:
Basic
144.5
146.4
145.5
146.4
Diluted
145.0
147.1
145.9
147.1
Computation of diluted earnings per
share:
Net income
$
32.0
$
65.5
$
200.9
$
317.8
Diluted weighted average common shares
outstanding
145.0
147.1
145.9
147.1
Diluted earnings per share
$
0.22
$
0.44
$
1.38
$
2.16
__________________________
(1)
Interest expense, net, for the fifty-two
weeks ended May 29, 2022, includes a loss on the extinguishment of
debt of $53.3 million ($40.5 million after-tax or $0.27 per share),
which includes a 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.
(2)
In May 2022, LWM announced its intent to
withdraw from its joint venture in Russia and wrote-off its net
investment in Russia. The Company’s portion of the non-cash
impairment charge was $62.7 million (before and after-tax, or $0.43
per share).
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(dollars in millions, except
share data)
May 29,
May 30,
2022
2021
ASSETS
Current assets:
Cash and cash equivalents
$
525.0
$
783.5
Receivables, less allowance for doubtful
accounts of $1.1 and $0.9
447.3
366.9
Inventories
574.4
513.5
Prepaid expenses and other current
assets
112.9
117.8
Total current assets
1,659.6
1,781.7
Property, plant and equipment, net
1,579.2
1,524.0
Operating lease assets
119.0
141.7
Equity method investments (1)
257.4
310.2
Goodwill
318.0
334.5
Intangible assets, net
33.7
36.9
Other assets
172.9
80.4
Total assets
$
4,139.8
$
4,209.4
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term debt and
financing obligations
$
32.2
$
32.0
Accounts payable
402.6
359.3
Accrued liabilities
264.3
226.9
Total current liabilities
699.1
618.2
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
2,695.8
2,705.4
Deferred income taxes
172.5
159.7
Other noncurrent liabilities
211.9
245.5
Total long-term liabilities
3,080.2
3,110.6
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 148,045,584 and 147,640,632 shares
issued
148.0
147.6
Additional distributed capital
(813.3
)
(836.8
)
Retained earnings
1,305.5
1,244.6
Accumulated other comprehensive income
(loss)
(15.6
)
29.5
Treasury stock, at cost, 3,974,156 and
1,448,768 common shares
(264.1
)
(104.3
)
Total stockholders’ equity
360.5
480.6
Total liabilities and stockholders’
equity
$
4,139.8
$
4,209.4
__________________________
(1)
See footnote (2) to the Consolidated
Statements of Earnings.
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(dollars in millions)
Fifty-Two Weeks Ended
May 29,
May 30,
2022
2021
Cash flows from operating
activities
Net income
$
200.9
$
317.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
192.1
187.8
Loss on extinguishment of debt
53.3
1.0
Stock-settled, stock-based compensation
expense
21.3
20.6
Loss (earnings) of joint ventures in
excess of distributions
29.9
(33.0
)
Deferred income taxes
13.5
3.8
Other
(7.0
)
10.7
Changes in operating assets and
liabilities:
Receivables
(76.3
)
(21.0
)
Inventories
(63.0
)
(22.0
)
Income taxes payable/receivable, net
11.6
(3.3
)
Prepaid expenses and other current
assets
(6.8
)
(4.9
)
Accounts payable
16.5
104.7
Accrued liabilities
32.1
(9.0
)
Net cash provided by operating
activities
$
418.1
$
553.2
Cash flows from investing
activities
Additions to property, plant and
equipment
(290.1
)
(147.2
)
Additions to other long-term assets
(16.3
)
(16.1
)
Other
(4.1
)
0.8
Net cash used for investing
activities
$
(310.5
)
$
(162.5
)
Cash flows from financing
activities
Proceeds from issuance of debt
1,676.1
—
Repayments of debt and financing
obligations
(1,698.1
)
(305.5
)
Dividends paid
(138.4
)
(135.3
)
Repurchase of common stock and common
stock withheld to cover taxes
(158.4
)
(36.1
)
Payments of senior notes call premium
(39.6
)
—
Repayments of short-term borrowings,
net
—
(498.8
)
Other
(5.0
)
1.7
Net cash used for financing
activities
$
(363.4
)
$
(974.0
)
Effect of exchange rate changes on cash
and cash equivalents
(2.7
)
2.8
Net decrease in cash and cash
equivalents
(258.5
)
(580.5
)
Cash and cash equivalents, beginning of
period
783.5
1,364.0
Cash and cash equivalents, end of
period
$
525.0
$
783.5
Lamb Weston Holdings,
Inc.
Segment Information
(dollars in millions)
Thirteen Weeks Ended
Year-Over-
May 29,
May 30,
Year Growth
2022
2021
Rates
Price/Mix
Volume
Segment net sales
Global
$
558.4
$
509.6
10%
10%
0%
Foodservice
388.4
320.0
21%
24%
(3%)
Retail
175.9
146.3
20%
22%
(2%)
Other
30.4
31.6
(4%)
(3%)
(1%)
$
1,153.1
$
1,007.5
14%
15%
(1%)
Segment product contribution margin
(1)
Global
$
55.7
$
56.4
(1%)
Foodservice
141.8
96.3
47%
Retail
41.6
21.2
96%
Other (2)
8.8
15.4
(43%)
247.9
189.3
31%
Add: Advertising and promotion
expenses
6.3
8.7
(28%)
Gross profit
$
254.2
$
198.0
28%
Fifty-Two Weeks Ended
Year-Over-
May 29,
May 30,
Year Growth
2022
2021
Rates
Price/Mix
Volume
Segment net sales
Global
$
2,064.2
$
1,911.5
8%
6%
2%
Foodservice
1,318.2
1,017.3
30%
15%
15%
Retail
594.6
603.4
(1%)
7%
(8%)
Other
121.9
138.7
(12%)
5%
(17%)
$
4,098.9
$
3,670.9
12%
9%
3%
Segment product contribution margin
(1)
Global
$
252.2
$
306.2
(18%)
Foodservice
449.3
340.0
32%
Retail
109.4
120.2
(9%)
Other (2)
2.2
47.8
(95%)
813.1
814.2
0%
Add: Advertising and promotion
expenses
18.9
17.8
6%
Gross profit
$
832.0
$
832.0
0%
__________________________
(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 reported in
the Other segment included gains of $3.7 million and $11.5 million
for the thirteen weeks ended May 29, 2022 and May 30, 2021,
respectively; and a loss of $10.4 million and a gain of $27.8
million for the fifty-two weeks ended May 29, 2022 and May 30,
2021, respectively.
Lamb Weston Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures (dollars in
millions)
There were no items impacting comparability during the
thirteen and fifty-two weeks ended May 30, 2021. The items
impacting comparability for the thirteen and fifty-two weeks ended
May 29, 2022, were as follows:
Thirteen Weeks Ended May 29,
2022
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense
Earnings (Loss)
Net Income
EPS
As reported
$
136.0
$
24.9
$
22.4
$
(56.7
)
$
32.0
$
0.22
Item impacting comparability:
Write-off of net investment in Russia
—
—
—
(1)
62.7
62.7
0.43
Adjusted (3)
$
136.0
$
24.9
$
22.4
$
6.0
$
94.7
$
0.65
Fifty-Two Weeks Ended May 29,
2022
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense
Earnings (Loss)
Net Income
EPS
As reported
$
444.4
$
161.0
$
71.8
$
(10.7
)
$
200.9
$
1.38
Items impacting comparability:
Write-off of net investment in Russia
—
—
—
(1)
62.7
62.7
0.43
Loss on extinguishment of debt (2)
—
(53.3
)
12.8
(4)
—
40.5
0.27
Total items impacting comparability
—
(53.3
)
12.8
62.7
103.2
0.70
Adjusted (3)
$
444.4
$
107.7
$
84.6
$
52.0
$
304.1
$
2.08
__________________________
(1)
See footnote (2) to the Consolidated
Statements of Earnings above for a discussion of the item impacting
comparability. There is no tax benefit associated with the
write-off of the net investment in Russia.
(2)
See footnote (1) to the Consolidated
Statements of Earnings above for a discussion of the items
impacting comparability.
(3)
Adjusted interest expense, income tax
expense, net income, equity method investment earnings (loss), 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.
(4)
Item impacting comparability is tax
effected at the marginal rate based on the applicable tax
jurisdiction.
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 to Adjusted EBITDA and Adjusted EBITDA
including unconsolidated joint ventures.
Thirteen Weeks Ended
Fifty-Two Weeks Ended
May 29,
May 30,
May 29,
May 30,
2022
2021
2022
2021
Net income
$
32.0
$
65.5
$
200.9
$
317.8
Equity method investment (earnings) loss
(1)
56.7
(9.6
)
10.7
(51.8
)
Interest expense, net (2)
24.9
28.7
161.0
118.3
Income tax expense
22.4
14.3
71.8
90.5
Income from operations
136.0
98.9
444.4
474.8
Depreciation and amortization
48.5
44.2
187.3
182.7
Adjusted EBITDA (3)
184.5
143.1
631.7
657.5
Unconsolidated Joint Ventures (4)
Equity method investment earnings
(loss)
(56.7
)
9.6
(10.7
)
51.8
Interest expense, income tax expense, and
depreciation and
amortization included in equity method
investment earnings (loss)
11.3
13.6
42.0
39.1
Item impacting comparability
Write-off of net investment in Russia
(5)
62.7
—
62.7
—
Add: Adjusted EBITDA from unconsolidated
joint ventures
17.3
23.2
94.0
90.9
Adjusted EBITDA including unconsolidated
joint ventures (3)
$
201.8
$
166.3
$
725.7
$
748.4
__________________________
(1)
Unrealized mark-to-market adjustments
associated with currency and commodity hedging contracts within
equity method investment earnings include a loss of $1.0 million
and a gain of $4.5 million for the thirteen weeks ended May 29,
2022 and May 30, 2021, respectively; and gains of $26.5 million and
$11.3 million for the fifty-two weeks ended May 29, 2022 and May
30, 2021, respectively.
(2)
See footnote (1) to the Consolidated
Statement of Earnings above for a discussion of the items impacting
comparability.
(3)
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.
(4)
In fiscal years 2022 and 2021, Lamb Weston
held equity interests in three potato processing joint ventures,
including 50% of LWM, Lamb-Weston/RDO Frozen, and LWAMSA, and
accounts for these investments under the equity method of
accounting. See Note 4, Equity Method Investments, of the Notes to
Consolidated Financial Statements in “Part II, Item 8. Financial
Statements and Supplementary Data” in the Company’s fiscal 2022
Form 10-K, for more information.
(5)
See footnote (2) to the Consolidated
Statements of Earnings for a discussion of the item impacting
comparability.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220727005208/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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