First Quarter Fiscal 2023
Highlights
- Compared to First Quarter Fiscal 2022:
- Net sales increased 14% to $1,126 million
- Income from operations increased 161% to $157 million
- Net income increased 678% to $232 million and Diluted EPS
increased 700% to $1.60, including items impacting comparability of
$161.4 million ($123.7 million after-tax, or $0.85 per share)
- Adjusted Net Income(1) increased 315% to $108 million and
Adjusted Diluted EPS(1) increased 317% to $0.75
- Adjusted EBITDA including unconsolidated joint ventures(1)
increased 92% to $228 million
- Capital Returned to Shareholders:
- Paid $35 million in cash dividends
- Repurchased $28 million of common stock
Reaffirms Fiscal 2023 Outlook
- Net sales of $4.7 billion to $4.8 billion
- Net income of $485 million to $535 million, including items
impacting comparability; Adjusted Net Income(1) of $360 million to
$410 million
- Diluted EPS of $3.30 to $3.70, including items impacting
comparability; Adjusted Diluted EPS(1) of $2.45 to $2.85
- Adjusted EBITDA including unconsolidated joint ventures(1) of
$840 million to $910 million
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fiscal
first quarter 2023 results and reaffirmed its fiscal 2023
outlook.
“We drove strong sales, earnings growth, and gross margin
expansion in the quarter by executing pricing actions across each
of our business segments and generating manufacturing cost-savings
to counter inflation,” said Tom Werner, President and CEO. “While
volume declined as a result of softer restaurant traffic trends and
supply chain constraints impacting production run-rates in our
plants, we continued to make progress in improving customer service
levels.”
“We continue to manage through this difficult macro environment
and are on track to deliver the higher end of our fiscal 2023
financial targets, including gross margins approaching normalized
levels during the second half of the year. We expect the potato
crop in our growing regions to be at the lower end of historical
averages with good overall quality and below average yields due to
the significant heat waves late in the season. While near-term
demand trends may continue to be volatile as consumers navigate
this inflationary environment, our recent announcement to expand
capacity in Argentina, along with our ongoing investments in Idaho
and China, demonstrate our confidence in the long-term health and
growth outlook of the frozen potato category.”
Summary of First Quarter FY
2023 Results
($ in millions, except per
share)
Year-Over-Year
Q1 2023
Growth Rates
Net sales
$
1,125.6
14
%
Income from operations
$
157.0
161
%
Net income
$
231.9
678
%
Adjusted Net Income (1)
$
108.2
315
%
Diluted EPS
$
1.60
700
%
Adjusted Diluted EPS(1)
$
0.75
317
%
Adjusted EBITDA including unconsolidated
joint ventures(1)
$
227.8
92
%
Q1 2023 Commentary
Net sales increased $141.4 million to $1,125.6 million, up 14
percent versus the prior year quarter. Price/mix increased 19
percent, 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 5
percent, primarily reflecting softer casual dining and full-service
restaurant traffic in the U.S. as well as the timing of shipments
to large chain restaurant customers. Shipments into foodservice and
retail channels in the U.S. continued to be affected by an
inability to fully serve customer demand due to widespread industry
supply chain constraints, including labor and commodities
shortages, that impacted production run-rates and throughput in the
Company’s production facilities.
Income from operations increased $96.8 million to $157.0
million, up 161 percent versus the prior year quarter, reflecting
higher gross profit, partially offset by higher selling, general
and administrative expenses (“SG&A”). Gross profit increased
$122.0 million, as the benefits from higher price/mix and
productivity initiatives 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 for key inputs, including:
edible oils, ingredients such as grains and starches used in
product coatings, labor costs, and transportation costs. The
increase in costs per pound also reflected higher costs associated
with the impact of extreme summer heat that negatively affected the
yield and quality of potato crops in the Pacific Northwest in fall
of 2021, as well as the effects of labor and commodities shortages
on production run-rates. The increase in gross profit also included
a $2.8 million increase in unrealized mark-to-market adjustments
associated with commodity hedging contracts, which includes a $4.0
million loss in the current quarter, compared with a $6.8 million
loss related to these items in the prior year quarter.
SG&A increased $25.2 million compared to the prior year
quarter, primarily due to higher compensation and benefits expense,
and higher expenses related to improving the Company’s information
and technology services infrastructure.
Net income was $231.9 million, up $202.1 million versus the
prior year quarter, and Diluted EPS was $1.60, up $1.40 versus the
prior year quarter. The increases were driven by a $141.3 million
increase ($104.9 million after-tax, or $0.73 per share) in
unrealized mark-to-market adjustments associated with natural gas
and electricity hedging contracts in the Company’s joint venture in
Europe, higher income from operations, and a $15.1 million gain
(before and after-tax, or $0.10 per share) recognized in connection
with the Company’s acquisition in July 2022 of an additional 40
percent interest in Lamb Weston Alimentos Modernos S.A. (“LWAMSA”),
its joint venture in Argentina. The gain related to the remeasuring
of the Company’s previously held 50 percent ownership interest to
fair value. The Company has identified the mark-to-market
adjustments related to natural gas and electricity derivatives in
the current and prior year quarters, as well as the LWAMSA gain in
the current quarter as items impacting comparability.
Adjusted Net Income(1) was $108.2 million, up $82.1 million
versus the prior year quarter, and Adjusted Diluted EPS(1) was
$0.75, up $0.57 versus the prior year quarter. Adjusted EBITDA
including unconsolidated joint ventures(1) increased $109.4 million
to $227.8 million, up 92 percent versus the prior year quarter.
These increases were driven primarily by higher income from
operations.
The Company’s effective tax rate(2) in the first fiscal quarter
was 24.1 percent, versus 22.6 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.
Excluding items impacting comparability, the Company’s effective
tax rate was 25.0 percent.
Q1 2023 Segment
Highlights
Global
Global Segment Summary
Year-Over-Year
Q1 2023
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
559.7
12
%
14
%
(2
%)
Segment product contribution margin(3)
$
83.7
96
%
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 $58.5 million to $559.7
million compared to the prior year quarter. The benefit of domestic
and international product and freight pricing actions to offset
inflation, as well as favorable mix, drove a 14 percent increase in
price/mix. The timing of shipments to large QSR chain customers in
the U.S., including the effect of lapping a notable limited time
product offering in the prior year quarter, largely drove the 2
percent decline in volume. Export shipments declined modestly
primarily due to production volumes being diverted to higher-margin
sales channels in the U.S.
Global segment product contribution margin increased $41.1
million to $83.7 million, up 96 percent versus the prior year
quarter. Favorable price/mix, primarily reflecting the benefit of
pricing actions, drove the increase, more than offsetting higher
manufacturing and distribution costs per pound.
Foodservice
Foodservice Segment
Summary
Year-Over-Year
Q1 2023
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
366.3
14
%
26
%
(12
%)
Segment product contribution margin(3)
$
138.2
43
%
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 $44.9 million to $366.3 million, up 14 percent
versus the prior year quarter, with price/mix up 26 percent and
volume down 12 percent. The carryover benefits of product and
freight pricing actions taken in the prior year as well as early in
fiscal 2023 to offset inflation drove the increase in price/mix.
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)
softened along with restaurant traffic as inflation pressured
consumer discretionary spending. The slowdown in restaurant traffic
and consumer demand was more pronounced in casual dining and other
full-service restaurants than in QSRs. Shipments were also affected
by an inability to fully serve customer demand due to widespread
industry supply chain constraints, including labor and commodities
shortages that impacted production run-rates and throughput in the
Company’s production facilities, as well as incremental losses of
certain low-margin non-commercial business.
Foodservice segment product contribution margin increased $41.8
million to $138.2 million, up 43 percent compared to the prior year
quarter. Favorable price drove the increase, and was partially
offset by higher manufacturing and distribution costs per pound,
and the impact of lower sales volumes.
Retail
Retail Segment Summary
Year-Over-Year
Q1 2023
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
169.6
28
%
32
%
(4
%)
Segment product contribution margin(3)
$
48.7
229
%
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 $37.1 million to $169.6
million, up 28 percent versus the prior year quarter, with
price/mix up 32 percent and volume down 4 percent. The carryover
benefits of pricing actions across the branded and private label
portfolios taken in the prior year as well as earlier in fiscal
2023 to counter inflation 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. Shipments of branded products increased, although growth
was tempered by an inability to fully serve customer demand due to
constrained production run-rates and throughput in the Company’s
production facilities.
Retail segment product contribution margin increased $33.9
million to $48.7 million, up 229 percent versus the prior year
quarter. The benefits of pricing actions and favorable mix drove
the increase, partially offset by higher manufacturing and
distribution costs per pound.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures in Europe, the U.S., and South America were $174.6 million
and $6.2 million for first quarter of fiscal 2023 and 2022,
respectively. Equity method investment earnings in the quarter
include a $144.6 million unrealized gain related to mark-to-market
adjustments associated with currency and commodity hedging
contracts, of which $146.3 million ($108.6 million after-tax, or
$0.75 per share) related to changes in natural gas and electricity
derivatives as commodity markets in Europe have experienced
significant volatility. Equity method investment earnings in the
prior year quarter include a $4.3 million unrealized gain for
mark-to-market adjustments, of which $5.0 million related to
changes in natural gas and electricity derivatives. Equity method
investment earnings also include a $15.1 million gain (before and
after-tax, or $0.10 per share) recognized in connection with the
Company’s acquisition of an additional 40 percent interest in
LWAMSA. The gain related to remeasuring the Company’s previously
held 50 percent ownership interest to fair value.
Excluding the items impacting comparability noted above and the
other mark-to-market adjustments, earnings from equity method
investments increased $13.0 million compared to the prior year
quarter, reflecting favorable price/mix, partially offset by higher
manufacturing and distribution costs in both Europe and the
U.S.
Liquidity and Cash Flows
Net cash provided by operating activities was $192.1 million, up
$30.3 million versus the prior year quarter, primarily due to
higher earnings. Capital expenditures, including information
technology expenditures, were $121.2 million, up $42.3 million
versus the prior year quarter, primarily reflecting increased
investments to support capacity expansion projects.
In July 2022, the Company paid $42.3 million to increase its
ownership in LWAMSA. The Company’s total ownership in the joint
venture is now 90 percent. The Company began consolidating LWAMSA’s
results in its consolidated financial statements following the
acquisition.
Capital Returned to Shareholders
In the first quarter, the Company returned a total of $63.7
million to shareholders, including $35.3 million in cash dividends
and $28.4 million through share repurchases. The Company
repurchased 404,476 shares during the first quarter of fiscal 2023
at an average price per share of $70.11. The Company has
approximately $241 million remaining under its existing share
repurchase program.
Fiscal 2023 Outlook
The Company is reaffirming its financial targets for fiscal
2023, which include:
- Net sales of $4.7 billion to $4.8 billion, with growth versus
the prior year primarily driven by the benefit of pricing actions
to offset significant input and transportation cost inflation, as
well as favorable mix.
- Including items impacting comparability of $161.4 million
(approximately $123.7 million after-tax, or $0.85 per share), net
income of $485 million to $535 million and Diluted EPS of $3.30 to
$3.70.
- Excluding items impacting comparability, Adjusted Net Income(1)
of $360 million to $410 million, Adjusted Diluted EPS(1) of $2.45
to $2.85, and Adjusted EBITDA including unconsolidated joint
ventures(1) of $840 million to $910 million, with growth versus the
prior year driven by higher sales and gross margin expansion. The
Company continues to expect SG&A of $475 million to $500
million, reflecting increased higher compensation and benefits
costs, increased investments to upgrade its information systems and
enterprise resource planning (“ERP”) infrastructure, and higher
advertising and promotion expenses.
- During the first half of fiscal 2023, the Company continues to
expect 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 continues to expect 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 continues to
expect gross margins will improve and approach a normalized annual
rate of 25 percent to 26 percent. The anticipated improvement is
predicated on a U.S. 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.
In addition, the Company is reaffirming other financial targets,
including:
- Interest expense, net of approximately $115 million;
- Depreciation and amortization expense of approximately $210
million;
- Cash used for capital expenditures of $475 million to $525
million; and an
- Effective tax rate(2) (full year) of approximately 24
percent.
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, including a discussion of earnings guidance
provided on a non-GAAP basis, and the associated reconciliations at
the end of this press release for more information.
(2)
The effective tax rate vis 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 first
quarter fiscal 2023 results at 10:00 a.m. ET today, October 5,
2022. Participants in the U.S. and Canada may access the conference
call by dialing 888-204-4368 and participants outside the U.S. and
Canada should dial +1-323-994-2093. The confirmation code is
2956808. 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=1569368&tp_key=f44251d5a7.
A rebroadcast of the conference call will be available beginning
on Friday, October 7, 2022 after 2:00 p.m. ET 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 “manage,”
“expect,” “improve,” “will,” “continue,” “deliver,” “expand,”
“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 and
financial 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 income tax expense and equity method
investment earnings, 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.
The Company has also provided earnings guidance on a non-GAAP
basis. The Company cannot predict certain elements that are
included in reported GAAP results, including items such as
strategic developments, acquisition and integration costs, impact
of commodity derivatives, and other items impacting comparability.
This list is not inclusive of all potential items, and the Company
will update as necessary as these items are evaluated on an ongoing
basis, can be highly variable and could be significant to its GAAP
measures. As such, prospective quantification of these items is not
feasible and a full reconciliation of non-GAAP Adjusted Net Income,
Adjusted EBITDA including unconsolidated joint ventures and
Adjusted Diluted EPS to GAAP net income or diluted earnings per
share has not been provided.
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Earnings
(unaudited, in millions, except
per share amounts)
Thirteen Weeks Ended
August 28,
August 29,
2022
2021
Net sales
$
1,125.6
$
984.2
Cost of sales
852.3
832.9
Gross profit
273.3
151.3
Selling, general and administrative
expenses
116.3
91.1
Income from operations
157.0
60.2
Interest expense, net
26.0
27.9
Income before income taxes and equity
method earnings
131.0
32.3
Income tax expense
73.7
8.7
Equity method investment earnings (1)
174.6
6.2
Net income
$
231.9
$
29.8
Earnings per share:
Basic
$
1.61
$
0.20
Diluted
$
1.60
$
0.20
Dividends declared per common share
$
0.245
$
0.235
Weighted average common shares
outstanding:
Basic
144.0
146.3
Diluted
144.6
146.9
____________________________________
(1)
Equity method investment earnings for the
thirteen weeks ended August 28, 2022 and August 29, 2021 included a
$146.3 million and $5.0 million unrealized gain, respectively,
related to mark-to-market adjustments associated with changes in
natural gas and electricity derivatives as commodity markets in
Europe have experienced significant volatility.
Equity method investment earnings for the
thirteen weeks ended August 28, 2022 also included a $15.1 million
gain recognized in connection with the Company’s acquisition of an
additional 40 percent interest in its Argentina joint venture,
bringing total ownership from 50 percent to 90 percent. The gain
related to the remeasuring of the Company’s previously held 50
percent ownership interest to fair value.
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(unaudited, dollars in millions,
except share data)
August 28,
May 29,
2022
2022
ASSETS
Current assets:
Cash and cash equivalents
$
485.3
$
525.0
Receivables, less allowance for doubtful
accounts of $1.8 and $1.1
449.5
447.3
Inventories
635.5
574.4
Prepaid expenses and other current
assets
59.9
112.9
Total current assets
1,630.2
1,659.6
Property, plant and equipment, net
1,690.9
1,579.2
Operating lease assets
112.3
119.0
Equity method investments
372.5
257.4
Goodwill
352.2
318.0
Intangible assets, net
32.8
33.7
Other assets
218.8
172.9
Total assets
$
4,409.7
$
4,139.8
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Short-term borrowings
$
9.1
$
—
Current portion of long-term debt and
financing obligations
32.2
32.2
Accounts payable
462.7
402.6
Accrued liabilities
276.3
264.3
Total current liabilities
780.3
699.1
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
2,700.1
2,695.8
Deferred income taxes
218.7
172.5
Other noncurrent liabilities
200.6
211.9
Total long-term liabilities
3,119.4
3,080.2
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 148,286,975 and 148,045,584 shares
issued
148.3
148.0
Additional distributed capital
(796.9
)
(813.3
)
Retained earnings
1,501.8
1,305.5
Accumulated other comprehensive loss
(46.1
)
(15.6
)
Treasury stock, at cost, 4,456,388 and
3,974,156 common shares
(297.1
)
(264.1
)
Total stockholders' equity
510.0
360.5
Total liabilities and stockholders’
equity
$
4,409.7
$
4,139.8
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(unaudited, dollars in
millions)
Thirteen Weeks Ended
August 28,
August 29,
2022
2021
Cash flows from operating
activities
Net income
$
231.9
$
29.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
49.8
47.3
Stock-settled, stock-based compensation
expense
7.6
5.2
Equity method investment (earnings) loss
in excess of distributions
(174.6
)
3.5
Deferred income taxes
34.5
1.7
Other
(2.8
)
1.5
Changes in operating assets and
liabilities, net of acquisition:
Receivables
9.9
(35.1
)
Inventories
(51.5
)
43.4
Income taxes payable/receivable, net
42.3
9.7
Prepaid expenses and other current
assets
45.5
33.0
Accounts payable
24.3
10.0
Accrued liabilities
(24.8
)
11.8
Net cash provided by operating
activities
$
192.1
$
161.8
Cash flows from investing
activities
Additions to property, plant and
equipment
(101.2
)
(78.9
)
Acquisition of interest in joint venture,
net
(42.3
)
—
Additions to other long-term assets
(20.0
)
—
Other
(3.4
)
0.1
Net cash used for investing
activities
$
(166.9
)
$
(78.8
)
Cash flows from financing
activities
Proceeds from issuance of debt
13.8
—
Repayments of debt and financing
obligations
(8.0
)
(7.9
)
Dividends paid
(35.3
)
(34.4
)
Repurchase of common stock and common
stock withheld to cover taxes
(34.4
)
(33.4
)
Other
0.4
(0.1
)
Net cash used for financing
activities
$
(63.5
)
$
(75.8
)
Effect of exchange rate changes on cash
and cash equivalents
(1.4
)
(1.0
)
Net (decrease) increase in cash and
cash equivalents
(39.7
)
6.2
Cash and cash equivalents, beginning of
period
525.0
783.5
Cash and cash equivalents, end of
period
$
485.3
$
789.7
Lamb Weston Holdings,
Inc.
Segment Information
(unaudited, dollars in
millions)
Thirteen Weeks Ended
Year-Over-
August 28,
August 29,
Year Growth
2022
2021
Rates
Price/Mix
Volume
Segment net sales
Global
$
559.7
$
501.2
12
%
14
%
(2
%)
Foodservice
366.3
321.4
14
%
26
%
(12
%)
Retail
169.6
132.5
28
%
32
%
(4
%)
Other
30.0
29.1
3
%
11
%
(8
%)
$
1,125.6
$
984.2
14
%
19
%
(5
%)
Segment product contribution margin
(1)
Global
$
83.7
$
42.6
96
%
Foodservice
138.2
96.4
43
%
Retail
48.7
14.8
229
%
Other (2)
(1.8
)
(6.6
)
(73
%)
268.8
147.2
83
%
Add: Advertising and promotion
expenses
4.5
4.1
10
%
Gross profit
$
273.3
$
151.3
81
%
____________________________________
(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 and realized settlements
associated with commodity hedging contracts. Unrealized
mark-to-market adjustments and realized settlements associated with
commodity hedging contracts reported in the Other segment included
a loss of $8.8 million and $8.2 million for the thirteen weeks
ended August 28, 2022 and August 29, 2021, respectively.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, dollars in
millions)
The items impacting comparability for the
thirteen weeks ended August 28, 2022 and August 29, 2021, were as
follows:
Thirteen Weeks Ended August
28, 2022
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense
Earnings
Net Income
EPS
As reported
$
157.0
$
26.0
$
73.7
$
174.6
$
231.9
$
1.60
Items impacting comparability:
Impact of LWM natural gas and electricity
derivatives (1)
—
—
(37.7
)
(146.3
)
(108.6
)
(0.75
)
Gain on acquisition of interest in joint
venture (1)
—
—
—
(1
)
(15.1
)
(15.1
)
(0.10
)
Total items impacting comparability
—
—
(37.7
)
(161.4
)
(123.7
)
(0.85
)
Adjusted (2)
$
157.0
$
26.0
$
36.0
$
13.2
$
108.2
$
0.75
Thirteen Weeks Ended August
29, 2021
Equity
Income
Income
Method
From
Interest
Tax
Investment
Diluted
Operations
Expense
Expense
Earnings
Net Income
EPS
As reported
$
60.2
$
27.9
$
8.7
$
6.2
$
29.8
$
0.20
Item impacting comparability:
Impact of LWM natural gas and electricity
derivatives (1)
—
—
(1.3)
(5.0)
(3.7)
(0.02)
Adjusted (2)
$
60.2
$
27.9
$
7.4
$
1.2
$
26.1
$
0.18
____________________________________
(1)
See footnote (1) to the Consolidated
Statements of Earnings above for a discussion of the items
impacting comparability. There is no tax impact associated with the
gain on the acquisition of an additional 40 percent interest in the
Argentina joint venture.
(2)
Adjusted income tax expense, net income,
equity method investment earnings, 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
August 28,
August 29,
2022
2021
Net income
$
231.9
$
29.8
Equity method investment earnings (1)
(174.6
)
(6.2
)
Interest expense, net
26.0
27.9
Income tax expense
73.7
8.7
Income from operations
157.0
60.2
Depreciation and amortization
48.7
46.0
Adjusted EBITDA (2)
205.7
106.2
Unconsolidated Joint Ventures (3)
Equity method investment earnings
174.6
6.2
Interest expense, income tax expense, and
depreciation and
amortization included in equity method
investment earnings
8.9
11.0
Items impacting comparability
Impact of LWM natural gas and electricity
derivatives (4)
(146.3
)
(5.0
)
Gain on acquisition of interest in joint
venture (4)
(15.1
)
—
Add: Adjusted EBITDA from unconsolidated
joint ventures
22.1
12.2
Adjusted EBITDA including unconsolidated
joint ventures (2)
$
227.8
$
118.4
____________________________________
(1)
Unrealized mark-to-market adjustments
associated with currency and commodity hedging contracts within
equity method investment earnings include a gain of $144.6 million
and $4.3 million for the thirteen weeks ended August 28, 2022 and
August 29, 2021, respectively.
(2)
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.
(3)
Lamb Weston holds equity interests in
three potato processing joint ventures, including 50 percent of
Lamb-Weston Meijer (“LWM”), 50 percent of Lamb-Weston/RDO Frozen
(“LWRDO”), and 90 percent of LWAMSA. Lamb Weston accounts for the
investments in LWM and LWRDO under the equity method of accounting.
In July 2022, Lamb Weston acquired an additional 40 percent
interest in LWAMSA and began to account for the investment in
LWAMSA by consolidating their results in Lamb Weston’s consolidated
financial statements. 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.
(4)
See footnote (1) to the Consolidated
Statements of Earnings for a discussion of the items impacting
comparability.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221005005150/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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