First Quarter Fiscal 2024
Highlights
- GAAP Results as Compared to First Quarter Fiscal 2023:
- Net sales increased 48% to $1,665 million, which includes $375
million of incremental sales attributable to acquisitions
- Income from operations increased 106% to $323 million
- Net income increased to $235 million from $232 million
- Diluted EPS remained flat at $1.60
- Non-GAAP Results as Compared to First Quarter Fiscal 2023:
- Adjusted Income from Operations(1) increased 104% to $330
million
- Adjusted Net Income(1)increased 111% to $240 million
- Adjusted Diluted EPS(1) increased 109% to $1.63 from $0.78
- Adjusted EBITDA(1) increased 76% to $413 million
- Repurchased $100 million of common stock and paid $41 million
in cash dividends
Updated Fiscal 2024 Outlook
- Net sales of $6.8 billion to $7.0 billion
- Net income of $800 million to $870 million, and Diluted EPS of
$5.47 to $5.92
- Adjusted Net Income(1) of $805 million to $875 million and
Adjusted Diluted EPS(1) of $5.50 to $5.95
- Adjusted EBITDA(1) of $1,540 million to $1,620 million
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its
results for the first quarter of fiscal 2024 and raised its full
year earnings targets for fiscal 2024.
“We delivered solid sales and earnings growth in the quarter,
driven by the carryover benefit of pricing actions initiated last
year as well as improved customer and product mix,” said Tom
Werner, President and CEO. “Organic sales volumes were in line with
expectations, and shipment trends improved as the quarter
progressed.”
“We raised our earnings target for the year to reflect our
performance in the quarter, as well as the current solid demand and
pricing environment. We continue to expect the potato crop in our
growing regions in North America will be in line with historical
averages, and we believe the overall crop in Europe has improved
compared to earlier predictions as a result of better growing
conditions. The integration of our EMEA operations and our capacity
expansions also remain on track, including the start-up of our
facility in China this month. With these investments, along with
our strategic efforts to improve the capabilities and flexibility
of our global production network and operations, we believe that we
are well-positioned to continue to serve our customers and drive
sustainable, profitable growth over the long term.”
Summary of First Quarter FY
2024 Results
($ in millions, except per
share)
Year-Over-Year
Q1 2024
Growth Rates
Net sales
$
1,665.3
48%
Income from operations
$
323.3
106%
Net income
$
234.8
1%
Diluted EPS
$
1.60
0%
Adjusted Income from Operations (1)
$
329.9
104%
Adjusted Net Income (1)
$
239.5
111%
Adjusted Diluted EPS(1)
$
1.63
109%
Adjusted EBITDA(1)
$
412.8
76%
Q1 2024 Commentary
Net sales increased $539.7 million to $1,665.3 million, up 48
percent versus the prior year quarter, with the current year
quarter including $374.9 million of incremental sales attributable
to the consolidation of the financial results of (1)
Lamb-Weston/Meijer v.o.f. (“LW EMEA”), the Company’s former joint
venture in Europe, following the completion of the Company’s
acquisition in February 2023 of the remaining interest in LW EMEA
(the “LW EMEA Acquisition”), and (2) Lamb Weston Alimentos Modernos
S.A. (“LWAMSA”), the Company’s joint venture in Argentina,
following the Company’s acquisition in July 2022 of an additional
40 percent interest in LWAMSA (the “LWAMSA Acquisition” and,
together with the LW EMEA Acquisition, the “Acquisitions”).
Net sales, excluding the incremental sales attributable to the
Acquisitions, grew 15 percent versus the prior year quarter.
Price/mix increased 23 percent, reflecting the benefit of pricing
actions across both of the Company’s business segments to counter
input and manufacturing cost inflation, the timing of trade
spending in North America, and favorable mix, partially offset by
lower customer transportation charges. Volume declined 8 percent,
primarily reflecting the Company’s decisions to exit certain
lower-priced and lower-margin business as it continues to
strategically manage customer and product mix. To a lesser extent,
inventory destocking by certain customers in international markets
and in select U.S. retail channels also pressured volumes. Volume
elasticities in response to inflation-based pricing actions across
the Company’s portfolio have generally been low.
Gross profit increased $226.2 million versus the prior year
quarter to $499.5 million, and included $22.5 million of costs
($16.7 million after-tax, or $0.11 per share) associated with the
sale of inventory stepped-up to fair value in the LW EMEA
Acquisition, and a $31.7 million ($23.8 million after-tax, or $0.16
per share) unrealized gain related to mark-to-market adjustments
associated with commodity hedging contracts. The prior year quarter
included a $4.0 million ($3.0 million after-tax, or $0.02 per
share) unrealized loss related to mark-to-market adjustments
associated with commodity hedging contracts. The Company has
identified LW EMEA integration and acquisition-related items as
items impacting comparability.
Excluding unrealized mark-to-market gains and losses related to
commodity derivatives and items impacting comparability, gross
profit increased $213.0 million, driven primarily by: benefits from
pricing actions, which more than offset the impact of higher costs
on a per pound basis and lower sales volumes; the timing of trade
spending in North America; and incremental earnings attributable to
the consolidation of the financial results of LW EMEA. The higher
costs per pound reflected mid-to-high-single-digit cost inflation
for key inputs, including: raw potatoes, labor, ingredients such as
grains and starches used in product coatings, and energy. The
increase in per pound costs was partially offset by lower costs for
edible oils and transportation.
Selling, general and administrative expenses (“SG&A”)
increased $59.9 million versus the prior year quarter to $176.2
million, and included $4.0 million of LW EMEA integration and
acquisition-related expenses ($3.0 million after-tax, or $0.02 per
share), $4.4 million ($3.3 million after-tax, or $0.02 per share)
of unrealized losses related to mark-to-market adjustments
associated with currency hedging contracts, and $7.4 million ($5.5
million after-tax, or $0.04 per share) of foreign currency exchange
losses. The prior year quarter included $1.0 million ($0.7 million
after-tax, with no per share impact) of foreign currency exchange
losses.
Excluding these items, SG&A increased $45.1 million to
$160.4 million, primarily due to incremental expenses attributable
to the consolidation of the financial results of LW EMEA and higher
expenses related to improving the Company’s information systems and
enterprise resource planning (“ERP”) infrastructure.
Income from operations increased $166.3 million to $323.3
million, up 106 percent versus the prior year quarter. Adjusted
Income from Operations(1), which excludes foreign currency exchange
and unrealized mark-to-market derivative gains and losses and items
impacting comparability, increased $167.9 million to $329.9
million, up 104 percent versus the prior year quarter. The
increases were driven by higher sales and gross profit, partially
offset by higher SG&A.
Net income was $234.8 million, up $2.9 million versus the prior
year quarter, and Diluted EPS was $1.60, which is the same as the
prior year quarter. Net income in the current quarter included a
total net loss of $4.7 million ($6.6 million before tax, or $0.03
per share) of foreign currency exchange and unrealized
mark-to-market derivative gains and losses and items impacting
comparability. Net income in the prior year quarter included a
total net benefit of $118.6 million ($154.6 million before tax, or
$0.82 per share), including $104.2 million ($140.5 million before
tax, or $0.72 per share) in unrealized mark-to-market adjustments
associated with commodity and currency hedging contracts (primarily
at LW EMEA), $0.7 million ($1.0 million before tax) in foreign
currency exchange losses, and a $15.1 million gain (before and
after-tax, or $0.10 per share) recognized in connection with the
LWAMSA Acquisition, which related to the remeasuring of the
Company’s previously held 50 percent ownership interest to fair
value.
Adjusted Net Income(1) was $239.5 million, up $126.2 million
versus the prior year quarter, and Adjusted Diluted EPS(1) was
$1.63, up $0.85 versus the prior year quarter. Adjusted EBITDA(1)
increased $178.2 million to $412.8 million, up 76 percent compared
to the prior year quarter. Higher income from operations, which
includes the benefit of incremental earnings from LW EMEA, drove
the increases.
The Company’s effective tax rate(2) in the first quarter was
22.9 percent, versus 24.1 percent in the prior year quarter.
Excluding foreign currency exchange and unrealized mark-to-market
derivative gains and losses and items impacting comparability in
the first quarter of fiscal 2024 and 2023, the Company’s effective
tax rate was 23.1 percent in the current quarter, and 25.0 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 and currency,
permanent differences, and discrete items.
Q1 2024 Segment
Highlights
Effective May 29, 2023, in connection with the Company’s
Acquisitions and to align with its expanded global footprint,
management, including the Company’s chief executive officer, who is
its chief operating decision maker, began managing the Company’s
operations as two business segments based on management’s change to
the way it monitors performance, aligns strategies, and allocates
resources. This resulted in a change from four reportable segments
to two (North America and International), effective the beginning
of fiscal 2024. Beginning with this first quarter of fiscal 2024,
all summary financial information is presented under the new
reportable segments and corresponding prior period amounts have
been reclassified to conform with current period
classification.
North America Summary
Year-Over-Year
Q1 2024
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
1,135.4
19%
24%
(5%)
Segment Adjusted EBITDA
$
379.4
64%
Net sales for the North America segment, which includes all
sales to customers in the U.S., Canada and Mexico, increased $179.8
million to $1,135.4 million, up 19 percent versus the prior year
quarter. Price/mix increased 24 percent, reflecting the carryover
benefit of pricing actions taken in fiscal 2023 to counter
inflationary pressures, the timing of trade spending, and favorable
mix, partially offset by lower customer transportation charges.
Volume declined 5 percent, primarily reflecting the Company’s
decisions to exit certain lower-priced and lower-margin business.
To a lesser extent, lower shipments in response to inventory
destocking by certain customers also pressured volumes.
North America Segment Adjusted EBITDA increased $147.6 million
to $379.4 million. The carryover benefit of pricing actions, the
timing of trade spending, and favorable mix drove the increases,
which were partially offset by higher costs per pound and the
impact of lower volumes.
International Summary
Year-Over-Year
Q1 2024
Growth Rates
Price/Mix
Volume
(dollars in millions)
Net sales
$
529.9
212%
18%
194%
Segment Adjusted EBITDA
$
89.6
171%
Net sales for the International segment, which includes all
sales to customers outside of North America, increased $359.9
million to $529.9 million, with the current year including $374.9
million of incremental sales attributable to the consolidation of
the financial results of LW EMEA and LWAMSA. International net
sales, excluding the incremental sales attributable to the
Acquisitions, declined 9 percent. Price/mix increased 18 percent,
driven by the carryover benefit of pricing actions taken in fiscal
2023 to counter inflationary pressures, as well as favorable mix,
partially offset by lower customer transportation charges. Volume,
excluding the benefit from acquisitions, declined 27 percent,
primarily reflecting the Company’s decisions to exit certain
lower-priced and lower-margin business. To a lesser extent, lower
shipments in response to inventory destocking by certain customers
in several markets in the Asia-Pacific region also pressured
volume.
International Segment Adjusted EBITDA increased $56.5 million to
$89.6 million, up 171 percent and excluded a net loss from
comparability items of $22.5 million. Incremental earnings from the
consolidation of the financial results of LW EMEA and favorable
price/mix drove the increases, which were partially offset by
higher costs per pound and the impact of lower volumes.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures were $12.1 million and $174.6 million for the first
quarter of fiscal 2024 and 2023, respectively. The results in the
current quarter include earnings associated with the Company’s 50
percent interest in Lamb Weston/RDO Frozen, an unconsolidated joint
venture in Minnesota, while results in the prior year quarter also
included earnings associated with the Company’s 50 percent
interests in LW EMEA and LWAMSA. The results in the prior year
quarter include a $144.5 million unrealized gain related to
mark-to-market adjustments associated with currency and commodity
hedging contracts ($107.2 million after-tax, or $0.74 per share),
and a $15.1 million gain (before and after-tax, or $0.10 per share)
recognized in connection with the LWAMSA Acquisition, which related
to remeasuring the Company’s previously held 50 percent ownership
interest to fair value.
Excluding these items, equity method investment earnings
declined $2.9 million compared to the prior year quarter, largely
due to LW EMEA earnings being included in the prior year
quarter.
Liquidity and Cash Flows
As of August 27, 2023, the Company had $163.3 million of cash
and cash equivalents, with no borrowings outstanding under its $1.0
billion U.S. revolving credit facility.
Net cash provided by operating activities was $334.6 million, up
$142.5 million versus the prior year quarter, primarily due to
higher earnings, offset partially by unfavorable changes in working
capital. Capital expenditures were $304.7 million, up $183.5
million versus the prior year quarter, primarily reflecting
increased investments to support capacity expansion projects and to
upgrade the Company’s information systems and ERP
infrastructure.
Capital Returned to Shareholders
In the first quarter of fiscal 2024, the Company returned $40.8
million to shareholders through cash dividends and $100.0 million
through share repurchases, with an aggregate of 992,365 shares
repurchased at an average price per share of $100.77. The Company
has approximately $124 million remaining under its existing share
repurchase program.
Fiscal 2024 Outlook
The Company raised its financial targets for fiscal 2024, which
include:
- Net sales of $6.8 billion to $7.0 billion, including $1.1
billion to $1.2 billion of incremental sales attributable to the
consolidation of the financial results of LW EMEA during the first
three quarters of the fiscal year. The Company is continuing to
target net sales, excluding incremental sales attributable to the
LW EMEA Acquisition, to grow 6.5 percent to 8.5 percent, and to be
largely driven by pricing actions. Sales volumes are expected to be
primarily pressured by the Company’s decisions to strategically
manage customer and product mix by exiting certain lower-priced and
lower-margin business. In addition, the Company believes softening
restaurant traffic trends in the U.S. and other key markets due to
macroeconomic headwinds may also pressure volumes. The Company
previously expected to deliver net sales of $6.7 billion to $6.9
billion, including $1.0 billion to $1.1 billion of incremental
sales attributable to the consolidation of the financial results of
LW EMEA.
- Net income of $800 million to $870 million and Diluted EPS of
$5.47 to $5.92, including a net loss from foreign currency exchange
and unrealized mark-to-market derivative gains and losses and items
impacting comparability of $6.6 million ($4.7 million after-tax, or
$0.03 per share) during the first quarter of fiscal 2024. The
Company previously expected to deliver net income of $725 million
to $790 million and Diluted EPS of $4.95 to $5.40. Excluding
foreign currency exchange and unrealized mark-to-market derivative
gains and losses and items impacting comparability, Adjusted Net
Income(1) of $805 million to $875 million, Adjusted Diluted EPS(1)
of $5.50 to $5.95, and Adjusted EBITDA(1) of $1,540 million to
$1,620 million (+26% compared to fiscal 2023 using the mid-point).
The Company expects higher sales and gross profit will largely
drive anticipated earnings growth in fiscal 2024. The Company
continues to expect gross profit growth will be partially offset by
higher SG&A of $765 million to $775 million, largely
reflecting: incremental expense attributable to the consolidation
of the financial results of LW EMEA; increased investments to
upgrade the Company’s information systems and ERP infrastructure;
non-cash amortization of intangible assets associated with the LW
EMEA Acquisition; and higher compensation and benefits expense due
to increased employee headcount. The Company previously expected
Adjusted EBITDA(1) of $1,450 million to $1,525 million.
The Company also updated its target of interest expense, net to
approximately $155 million, down from the Company’s previous
estimate of approximately $165 million.
The Company continues to target:
- Depreciation and amortization expense of approximately $325
million;
- Cash used for capital expenditures of $800 million to $900
million as the Company continues construction of
previously-announced capacity expansion efforts in China, Idaho,
the Netherlands and Argentina, as well as capital investments to
upgrade its information systems and ERP infrastructure; and
- An effective tax rate(2) (full year) of 23 percent to 24
percent.
End Notes
(1)
Adjusted Income from Operations,
Adjusted Net Income, Adjusted Diluted EPS, and Adjusted EBITDA are
non-GAAP financial measures. Please see the discussion of non-GAAP
financial measures, including a discussion of 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 is
calculated as the ratio of income tax expense to pre-tax income,
inclusive of equity method investment earnings.
Webcast and Conference Call
Information
Lamb Weston will host a conference call to review its first
quarter fiscal 2024 results at 10:00 a.m. EDT today, October 5,
2023. Participants in the U.S. and Canada may access the conference
call by dialing 888-254-3590 and participants outside the U.S. and
Canada should dial +1-323-794-2551. The conference ID is 8815419.
The conference call also may be accessed live on the internet.
Participants can register for the event at:
https://event.webcasts.com/starthere.jsp?ei=1633450&tp_key=3ea65b6559
A rebroadcast of the conference call will be available beginning
on Friday, October 6, 2023, after 2:00 p.m. EDT at
https://investors.lambweston.com/events-and-presentations.
About Lamb Weston
Lamb Weston is a leading supplier of frozen potato 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.
Non-GAAP Financial
Measures
To supplement the financial information included in this press
release, the Company has presented Adjusted EBITDA, Adjusted Income
from Operations, Adjusted Net Income, Adjusted Diluted EPS,
Adjusted Income Tax Expense, and Adjusted Equity Method Investment
Earnings (Loss), each of which is considered a non-GAAP financial
measure. The non-GAAP financial measures presented in this press
release 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 also presented in this press release. These
measures are not substitutes for their comparable GAAP financial
measures, such as income from operations, net income, diluted
earnings per share, or other measures prescribed by GAAP, and there
are limitations to using non-GAAP financial measures. For example,
the non-GAAP financial measures presented in this press release 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 as the Company does.
Management uses these non-GAAP financial measures to assist in
analyzing what management views as the Company's core operating
performance for purposes of business decision making. Management
believes that presenting these non-GAAP financial measures provides
investors with useful supplemental information because they (i)
provide meaningful supplemental information regarding financial
performance by excluding foreign currency exchange and unrealized
derivative activities and 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 financial results. In addition, the
Company believes that the presentation of these non-GAAP financial
measures, when considered together with the most directly
comparable GAAP financial measures and the reconciliations to those
GAAP financial measures, provides investors with additional tools
to understand the factors and trends affecting the Company's
underlying business than could be obtained absent these
disclosures.
The Company has also provided guidance in this press release
with respect to certain non-GAAP financial measures, including
non-GAAP Adjusted Net Income, Adjusted Diluted EPS, and Adjusted
EBITDA. The Company cannot predict certain items that are included
in reported GAAP results, including items such as strategic
developments, integration and acquisition costs and related fair
value adjustments, impacts of unrealized mark-to-market derivative
gains and losses, foreign currency exchange, and items impacting
comparability. This list is not inclusive of all potential items,
and the Company intends to update the list as appropriate as these
items are evaluated on an ongoing basis. In addition, the items
that cannot be predicted can be highly variable and could
potentially have significant impacts on the Company’s GAAP
measures. As such, prospective quantification of these items is not
feasible without unreasonable efforts, and a reconciliation of
forward-looking non-GAAP Adjusted Net Income, Adjusted Diluted EPS,
and Adjusted EBITDA to GAAP net income or diluted earnings per
share has not been provided.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Words such as “expect,”
“believe,” “will,” “continue,” “deliver,” “drive,” “grow,”
“remain,” “invest,” “improve,” “manage,” “outlook,” “target,” 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, potato crop, pricing actions, integration of LW EMEA,
and business and financial outlook and prospects, the Company’s
industry, and global economic conditions. 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
these forward-looking statements and 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
and other commodities; labor shortages and other operational
challenges; an uncertain general economic environment, including
inflationary pressures and recessionary concerns, any of which
could adversely impact the Company’s business, financial condition
or results of operations, including the demand and prices for the
Company’s products; risks associated with integrating acquired
businesses, including LW EMEA; levels of 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 operates;
political and economic conditions of the countries in which the
Company conducts business and other factors related to its
international operations; disruptions in the global economy caused
by conflicts such as 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; disruption of the Company’s access to
export mechanisms; risks associated with other possible
acquisitions; the Company’s debt levels; changes in the Company’s
relationships with its growers or significant customers; actions of
governments and regulatory factors affecting the Company’s
businesses; 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 (“SEC”). 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.
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Earnings
(unaudited, in millions, except
per share amounts)
Thirteen Weeks Ended
August 27,
August 28,
2023 (1)
2022
Net sales
$
1,665.3
$
1,125.6
Cost of sales (2)
1,165.8
852.3
Gross profit
499.5
273.3
Selling, general and administrative
expenses (3)
176.2
116.3
Income from operations
323.3
157.0
Interest expense, net
30.7
26.0
Income before income taxes and equity
method earnings
292.6
131.0
Income tax expense
69.9
73.7
Equity method investment earnings (4)
12.1
174.6
Net income
$
234.8
$
231.9
Earnings per share:
Basic
$
1.61
$
1.61
Diluted
$
1.60
$
1.60
Dividends declared per common share
$
0.280
$
0.245
Weighted average common shares
outstanding:
Basic
145.7
144.0
Diluted
146.6
144.6
________________________________________
(1)
The thirteen weeks ended August
27, 2023 included the consolidated financial statements of LW EMEA
whereas in the same period in the prior year, LW EMEA’s financial
results were recorded in “Equity method investment earnings.” For
more information about the LW EMEA Acquisition, see Note 3,
Acquisitions, of the Notes to Consolidated Financial Statements in
the Company’s fiscal 2023 Annual Report on Form 10-K filed with the
SEC on July 25, 2023 (the “Form 10-K”).
(2)
The thirteen weeks ended August
27, 2023 included $31.7 million unrealized gain ($23.8 million
after-tax, or $0.16 per share) related to mark-to-market
adjustments associated with commodity hedging contracts and $22.5
million ($16.7 million after-tax, or $0.11 per share) of costs
related to the step-up and sale of inventory acquired in the LW
EMEA Acquisition.
The thirteen weeks ended August
28, 2022 included a $4.0 million unrealized loss ($3.0 million
after-tax, or $0.02 per share) related to mark-to-market
adjustments associated with commodity hedging contracts.
(3)
The thirteen weeks ended August
27, 2023 included (a) $7.4 million ($5.5 million after-tax, or
$0.04 per share) of foreign currency exchange losses, (b) a $4.4
million unrealized loss ($3.3 million after-tax, or $0.02 per
share) related to mark-to-market adjustments associated with
currency hedging contracts, and (c) $4.0 million ($3.0 million
after-tax, or $0.02 per share) of integration and
acquisition-related expenses.
The thirteen weeks ended August
28, 2022 included $1.0 million ($0.7 million after-tax, with no per
share impact) of foreign currency exchange losses.
(4)
Equity method investment earnings
for the thirteen weeks ended August 28, 2022 included a $144.5
million ($107.2 million after-tax, or $0.74 per share) unrealized
gain related to mark-to-market adjustments associated with
commodity and currency hedging contracts.
Equity method investment earnings
for the thirteen weeks ended August 28, 2022 also included a $15.1
million (before and after-tax, or $0.10 per share) gain recognized
in connection with the LWAMSA Acquisition, which increased the
Company’s total equity ownership in LWAMSA from 50 percent to 90
percent. This gain related to remeasuring the Company’s previously
held 50 percent ownership interest to fair value.
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(unaudited, in millions, except
share data)
August 27,
May 28,
2023
2023
ASSETS
Current assets:
Cash and cash equivalents
$
163.3
$
304.8
Receivables, less allowance for doubtful
accounts of $2.5 and $2.6
725.7
724.2
Inventories
872.9
932.0
Prepaid expenses and other current
assets
84.4
166.2
Total current assets
1,846.3
2,127.2
Property, plant and equipment, net
3,008.6
2,808.0
Operating lease assets
145.6
146.1
Goodwill
1,041.7
1,040.7
Intangible assets, net
108.8
110.2
Other assets
388.6
287.6
Total assets
$
6,539.6
$
6,519.8
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Short-term borrowings
$
140.8
$
158.5
Current portion of long-term debt and
financing obligations
55.1
55.3
Accounts payable
678.5
636.6
Accrued liabilities
411.0
509.8
Total current liabilities
1,285.4
1,360.2
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
3,248.5
3,248.4
Deferred income taxes
255.8
252.1
Other noncurrent liabilities
246.9
247.8
Total long-term liabilities
3,751.2
3,748.3
Commitments and contingencies
Stockholders’ equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 150,679,160 and 150,293,511 shares
issued
150.7
150.3
Treasury stock, at cost, 5,752,260 and
4,627,828 common shares
(427.8
)
(314.3
)
Additional distributed capital
(548.7
)
(558.6
)
Retained earnings
2,354.6
2,160.7
Accumulated other comprehensive loss
(25.8
)
(26.8
)
Total stockholders’ equity
1,503.0
1,411.3
Total liabilities and stockholders’
equity
$
6,539.6
$
6,519.8
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(unaudited, in millions)
Thirteen Weeks Ended
August 27,
August 28,
2023
2022
Cash flows from operating
activities
Net income
$
234.8
$
231.9
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
70.1
49.8
Stock-settled, stock-based compensation
expense
9.9
7.6
Equity method investment earnings in
excess of distributions
(12.2
)
(174.6
)
Deferred income taxes
3.6
34.5
Other
9.3
(2.8
)
Changes in operating assets and
liabilities, net of acquisitions:
Receivables
0.4
9.9
Inventories
60.2
(51.5
)
Income taxes payable/receivable, net
61.2
42.3
Prepaid expenses and other current
assets
62.8
45.5
Accounts payable
(22.4
)
24.3
Accrued liabilities
(143.1
)
(24.8
)
Net cash provided by operating
activities
$
334.6
$
192.1
Cash flows from investing
activities
Additions to property, plant and
equipment
(267.3
)
(101.2
)
Additions to other long-term assets
(37.4
)
(20.0
)
Acquisition of interests in joint
ventures, net
—
(42.3
)
Other
(0.1
)
(3.4
)
Net cash used for investing
activities
$
(304.8
)
$
(166.9
)
Cash flows from financing
activities
Proceeds from issuance of debt
15.1
13.8
Repayments of short-term borrowings,
net
(18.9
)
(8.0
)
Repayments of debt and financing
obligations
(13.7
)
(35.3
)
Dividends paid
(40.8
)
(34.4
)
Repurchase of common stock and common
stock withheld to cover taxes
(113.5
)
—
Other
0.1
0.4
Net cash used for financing
activities
$
(171.7
)
$
(63.5
)
Effect of exchange rate changes on cash
and cash equivalents
0.4
(1.4
)
Net decrease in cash and cash
equivalents
(141.5
)
(39.7
)
Cash and cash equivalents, beginning of
period
304.8
525.0
Cash and cash equivalents, end of
period
$
163.3
$
485.3
Lamb Weston Holdings,
Inc.
Segment Information
(unaudited, in millions, except
percentages)
Thirteen Weeks Ended
Year-Over-
August 27,
August 28,
Year Growth
2023
2022
Rates
Price/Mix
Volume
Segment net sales
North America
$
1,135.4
$
955.6
19%
24%
(5%)
International (1)
529.9
170.0
212%
18%
194%
$
1,665.3
$
1,125.6
48%
23%
25%
Segment Adjusted EBITDA
North America
$
379.4
$
231.8
64%
International (1)
89.6
33.1
171%
________________________________________
(1)
The Company acquired the
remaining equity interest in LW EMEA in the fourth quarter of
fiscal 2023. Accordingly, LW EMEA’s net sales and adjusted EBITDA
are reported in the International segment for the thirteen weeks
ended August 27, 2023, whereas in the same period in the prior
year, the Company’s 50 percent equity interest in LW EMEA was
recorded using equity method accounting. As a result, LW EMEA’s net
sales are not included in the International segment’s net sales for
the thirteen weeks ended August 28, 2022, and only 50 percent of LW
EMEA’s adjusted EBITDA is reported in the International
segment.
Segment Adjusted EBITDA includes
equity method investment earnings and losses and excludes
unallocated corporate costs, foreign currency exchange gains and
losses, unrealized mark-to-market derivative gains and losses, and
items discussed in footnotes (1)-(4) to the Consolidated Statements
of Earnings.
Lamb Weston Holdings, Inc.Reconciliation of
Non-GAAP Financial Measures(unaudited, in millions, except per
share amounts)
Equity
Income
Income
Method
From
Interest
Tax Expense
Investment
Diluted
Thirteen Weeks Ended August 27,
2023
Operations
Expense
(Benefit) (1)
Earnings (Loss)
Net Income
EPS
As reported
$
323.3
$
30.7
$
69.9
$
12.1
$
234.8
$
1.60
Unrealized derivative losses (gains)
(2)
(27.3
)
—
(6.8
)
—
(20.5
)
(0.14
)
Foreign currency exchange losses (2)
7.4
—
1.9
—
5.5
0.04
Items impacting comparability (2):
Inventory step-up from acquisition
22.5
—
5.8
—
16.7
0.11
Integration and acquisition-related items,
net
4.0
—
1.0
—
3.0
0.02
Total adjustments
6.6
—
1.9
—
4.7
0.03
Adjusted (3)
$
329.9
$
30.7
$
71.8
$
12.1
$
239.5
$
1.63
Thirteen Weeks Ended August 28,
2022
As reported
$
157.0
$
26.0
$
73.7
$
174.6
$
231.9
$
1.60
Unrealized derivative losses (gains)
(2)
4.0
—
(36.3
)
(144.5
)
(104.2
)
(0.72
)
Foreign currency exchange losses (2)
1.0
—
0.3
—
0.7
—
Item impacting comparability (2):
Gain on acquisition of interest in joint
venture
—
—
—
(15.1
)
(15.1
)
(0.10
)
Total adjustments
5.0
—
(36.0
)
(159.6
)
(118.6
)
(0.82
)
Adjusted (3)
$
162.0
$
26.0
$
37.7
$
15.0
$
113.3
$
0.78
________________________________________
(1)
Items are tax effected at the
marginal rate based on the applicable tax jurisdiction.
(2)
See footnotes (1)-(4) to the
Consolidated Statements of Earnings for a discussion of the
adjustment items.
(3)
See “Non-GAAP Financial Measures”
in this press release for additional information.
Lamb Weston Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures (unaudited, in
millions)
To supplement the financial
information included in this press release, the Company has
presented Adjusted EBITDA which is defined as earnings, less
interest expense, income tax expense, depreciation and
amortization, foreign currency exchange and unrealized
mark-to-market derivative gains and losses, and comparability
items, and is a non-GAAP financial measure. The following table
reconciles net income to Adjusted EBITDA.
Thirteen Weeks Ended
August 27,
August 28,
2023
2022
Net income
$
234.8
$
231.9
Interest expense, net
30.7
26.0
Income tax expense
69.9
73.7
Income from operations including equity
method investment earnings (1)
335.4
331.6
Depreciation and amortization (2)
70.8
57.6
Unrealized derivative losses (gains)
(27.3
)
4.0
Unconsolidated joint venture unrealized
derivative gains
—
(144.5
)
Foreign currency exchange losses
7.4
1.0
Items impacting comparability (3):
Inventory step-up from acquisition
22.5
—
Integration and acquisition-related items,
net
4.0
—
Gain on acquisition of interest in joint
venture
—
(15.1
)
Adjusted EBITDA (4)
$
412.8
$
234.6
________________________________________
(1)
Lamb Weston holds a 50 percent
equity interest in a U.S. potato processing joint venture,
Lamb-Weston/RDO Frozen (“Lamb Weston RDO”). Lamb Weston accounts
for its investment in Lamb Weston RDO under the equity method of
accounting. Lamb Weston accounted for its investment in LWAMSA and
LW EMEA under the equity method of accounting until July 2022 and
February 2023, respectively, when Lamb Weston acquired majority
ownership and began to account for the investments by consolidating
their respective financial results in Lamb Weston’s consolidated
financial statements. See Note 4, Joint Venture Investments, of the
Notes to Consolidated Financial Statements in the Company’s Form
10-K, for more information.
(2)
Depreciation and amortization
included interest expense, income tax expense, and depreciation and
amortization from equity method investments of $2.2 million and
$8.9 million for the thirteen weeks ended August 27, 2023 and
August 28, 2022, respectively.
(3)
See footnotes (1)-(4) to the
Consolidated Statements of Earnings for more information.
(4)
See “Non-GAAP Financial Measures”
in this press release for additional information.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, in millions)
Thirteen Weeks Ended August 27,
2023
North America
International
Unallocated Corporate Costs
(1)
Total Company
Income from operations
$
323.6
$
40.9
$
(41.2
)
$
323.3
Equity method investment earnings
12.1
—
—
12.1
Income from operations including equity
method investment earnings
335.7
40.9
(41.2
)
335.4
Depreciation and amortization (2)
43.7
26.2
0.9
70.8
Unrealized derivative losses (gains)
(3)
—
—
(27.3
)
(27.3
)
Foreign currency exchange losses
—
—
7.4
7.4
Items impacting comparability (4):
Inventory step-up from acquisition
—
22.5
—
22.5
Integration and acquisition-related items,
net
—
—
4.0
4.0
Adjusted EBITDA
$
379.4
$
89.6
$
(56.2
)
$
412.8
Thirteen Weeks Ended August 28,
2022
Income from operations
$
186.0
$
6.8
$
(35.8
)
$
157.0
Equity method investment earnings
4.5
25.6
144.5
174.6
Income from operations including equity
method investment earnings
190.5
32.4
108.7
331.6
Depreciation and amortization (2)
41.3
15.8
0.5
57.6
Unrealized derivative losses (gains)
(3)
—
—
4.0
4.0
Foreign currency exchange losses
—
—
1.0
1.0
Unconsolidated joint venture unrealized
derivative gains (3)
—
—
(144.5
)
(144.5
)
Item impacting comparability (4):
Gain on acquisition of interest in joint
ventures
—
(15.1
)
—
(15.1
)
Adjusted EBITDA
$
231.8
$
33.1
$
(30.3
)
$
234.6
________________________________________
(1)
The Company’s two segments
include corporate support staff and services that are directly
allocable to those segments. Unallocated corporate costs include
costs related to corporate support staff and services, foreign
exchange gains and losses, and unrealized mark-to-market derivative
gains and losses. Support services include, but are not limited to,
the Company’s administrative, information technology, human
resources, finance, and accounting functions that are not
specifically allocated to the segments.
Unallocated corporate costs for the
thirteen weeks ended August 27, 2023 included unallocated corporate
costs of LW EMEA whereas in the same period in the prior year, the
Company's portion of LW EMEA’s unallocated corporate costs were
recorded in “Equity method investment earnings” in the
International segment.
(2)
Depreciation and amortization
included interest expense, income tax expense, and depreciation and
amortization from equity method investments of $2.2 million and
$8.9 million for the thirteen weeks ended August 27, 2023 and
August 28, 2022, respectively.
(3)
The thirteen weeks ended August 27, 2023,
included a net $27.3 million unrealized mark-to-market gain on
derivatives, including a $31.7 million ($23.8 million after-tax, or
$0.16 per share) gain related to the Company's commodity hedging
contracts recorded in “Cost of sales” in the Consolidated Statement
of Earnings and a $4.4 million ($3.3 million after-tax, or $0.02
per share) unrealized mark-to-market loss related to currency
hedging contracts and recorded in “Selling, general, and
administrative expenses” in the Consolidated Statement of
Earnings.
The thirteen weeks ended August
28, 2022, included a net $140.5 million unrealized mark-to-market
gain on derivatives, including a $144.5 million ($107.2 million
after-tax, or $0.16 per share) gain related to commodity hedging
contracts recorded in “Equity method investment earnings” in the
Consolidated Statement of Earnings and a $4.0 million ($3.0 million
after-tax, or $0.02 per share) unrealized mark-to-market loss
related to other commodity hedging contracts recorded in “Cost of
sales” in the Consolidated Statement of Earnings.
(4)
See footnotes (1)-(4) to the
Consolidated Statements of Earnings for more information. See
“Non-GAAP Financial Measures” in this press release for additional
information.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231005046034/en/
For more information, please contact: Investors: Dexter
Congbalay 224-306-1535 dexter.congbalay@lambweston.com Media:
Shelby Stoolman 208-424-5461 shelby.stoolman@lambweston.com
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