Second Quarter
Fiscal 2025 Highlights
- GAAP Results include a $159 million pre-tax charge related to
the Restructuring Plan announced on October 1, 2024
- GAAP Results as Compared to Second Quarter Fiscal 2024:
- Net sales declined 8% to $1,601 million
- Income from operations declined 94% to $19 million
- Net income declined $251 million to a loss of $36 million
- Diluted EPS declined $1.73 to a loss of $0.25
- Non-GAAP Results as Compared to Second Quarter Fiscal 2024:
- Adjusted Income from Operations(1) declined 41% to $178
million
- Adjusted Net Income(1) declined 55% to $95 million
- Adjusted Diluted EPS(1) declined 54% to $0.66
- Adjusted EBITDA(1) declined 25% to $282 million
- Paid $51.6 million in cash dividends to common
shareholders
Updated Fiscal 2025 Outlook
- Net sales of $6.35 billion to $6.45 billion
- GAAP net income target of $330 million to $350 million, and
Diluted EPS target of $2.30 to $2.45
- Adjusted EBITDA(1) of $1,170 million to $1,210 million
- Adjusted Net Income(1) target of $440 million to $460 million
and Adjusted Diluted EPS(1) target of $3.05 to $3.20
Lamb Weston Holdings, Inc. (NYSE: LW) announced today its
results for the second quarter of fiscal 2025 and updated its full
year financial targets for fiscal 2025.
“Our financial results in the second quarter were below our
expectations,” said Tom Werner, President and CEO.
“Higher-than-expected manufacturing costs and softer volumes
accounted for the shortfall, while price/mix and operating expenses
were broadly in line with our targets for the quarter.”
“In terms of the broader operating environment, we expect
challenging conditions to persist through the remainder of fiscal
2025 and into fiscal 2026, driven primarily by an accelerating rate
of capacity additions and continued near-term softening of global
frozen potato demand below historical rates, particularly outside
North America, until demand trends improve and capacity expansion
normalizes. As a result, we are reducing our fiscal 2025 financial
targets.”
“The Company continues to take prudent steps to successfully
adapt to this dynamic environment. In addition to the cost benefits
we expect to realize from our Restructuring Plan, including our
previously announced actions to permanently close or temporarily
curtail production lines to better manage our factory utilization
rates, we are actively evaluating additional cost-savings
opportunities as we work to better align our operations with the
current environment. This includes efforts to reduce manufacturing
and supply chain costs and operating expenses to protect and
improve profitability. We are executing with urgency and discipline
to make lasting improvements to our operations as we weather what
we believe are transitory challenges, and we remain focused on
leveraging our solid fundamentals and balance sheet to deliver
value to shareholders.”
Summary of Second Quarter FY
2025 Results
($ in millions, except per
share)
Q2 2025
Year-Over-Year
Growth Rates
YTD
FY 2025
Year-Over-Year
Growth Rates
Net sales
$
1,600.9
(8
)%
$
3,255.0
(4
)%
Income from operations
$
18.5
(94
)%
$
230.6
(63
)%
Net income (loss)
$
(36.1
)
(117
)%
$
91.3
(80
)%
Diluted EPS
$
(0.25
)
(117
)%
$
0.64
(79
)%
Adjusted Income from Operations(1)
$
178.3
(41
)%
$
365.5
(42
)%
Adjusted Net Income(1)
$
94.5
(55
)%
$
199.2
(56
)%
Adjusted Diluted EPS(1)
$
0.66
(54
)%
$
1.40
(55
)%
Adjusted EBITDA(1)
$
281.9
(25
)%
$
571.8
(28
)%
Q2 2025 Commentary
Restructuring Plan
On October 1, 2024, the Company announced a restructuring plan
(the “Restructuring Plan”), which is designed to drive operational
and cost efficiencies and improve cash flows. The Restructuring
Plan includes the permanent closure of a manufacturing facility,
the temporary curtailment of certain production lines and schedules
across the Company's manufacturing network in North America, and
reductions in employee headcount, other operating expenses, and
capital expenditures.
In connection with the Restructuring Plan, the Company expects
to recognize total pre-tax charges of $190 million to $210 million.
Any changes to estimates or timing will be reflected in the
Company's results of operations in future periods. The Company
expects actions in connection with the Restructuring Plan will be
substantially complete by the end of the fourth quarter of fiscal
2025. The Company estimates that the Restructuring Plan will
generate approximately $55 million in pre-tax cost savings and
reduce working capital in fiscal 2025.
Net income (loss) for the thirteen and twenty-six weeks ended
November 24, 2024 included:
- $159.1 million ($123.6 after-tax, or $0.86 per share) of
pre-tax charges, of which $114.5 million were cash expenses and
$44.6 million of non-cash expenses;
- $75.5 million ($57.4 million after-tax, or $0.40 per share) was
included in Cost of sales;
- $74.6 million ($59.3 million after-tax, or $0.41 per share) was
included in Restructuring expense; and
- $9.0 million ($6.9 million after-tax, or $0.05 per share) was
included in Equity method investment earnings.
Q2 Results of Operations
Net sales declined $131.2 million, to $1,600.9 million, down 8
percent versus the prior year quarter. Volume declined 6 percent,
largely reflecting the impact of soft global restaurant traffic
trends; customer share losses, net of gains; and the carryover
effect of the Company's decision in the prior year to exit certain
lower-priced and lower-margin business in Europe to strategically
manage customer and product mix. Price/mix declined 2 percent,
reflecting the impact of planned investments in price and trade
support to attract and retain volume in North America, pricing
actions in key international markets in response to a more
competitive environment, and unfavorable channel and product mix.
The decline in price/mix was partially offset by the benefit of
inflation-driven pricing actions in EMEA.
Gross profit declined $197.8 million versus the prior year
quarter to $277.8 million, and included $75.5 million of pre-tax
charges ($57.4 million after-tax, or $0.40 per share) related to
the Restructuring Plan, and $9.8 million ($7.3 million after-tax,
or $0.05 per share) of unrealized gains related to mark-to-market
adjustments associated with commodity hedging contracts. The prior
year quarter included $4.6 million ($3.5 million after-tax, or
$0.02 per share) of unrealized losses related to mark-to-market
adjustments associated with commodity hedging contracts, and $1.8
million of benefit ($1.3 million after-tax, or $0.01 per share)
associated with the sale of inventory stepped-up to fair value
following the completion of the Company's acquisition of the
remaining interest in Lamb-Weston/Meijer v.o.f. (“LW EMEA”), its
former joint venture in Europe.
Adjusted Gross Profit(1) declined $134.9 million versus the
prior year quarter to $343.5 million due to unfavorable price/mix,
higher manufacturing costs per pound, and lower sales volumes. The
higher manufacturing costs per pound largely reflected input cost
inflation, which was primarily driven by higher raw potato costs;
utilization-related production costs and inefficiencies; higher
transportation and warehousing costs; and $15.8 million of higher
depreciation expense largely associated with the Company's recent
capacity expansions in China and the U.S. Manufacturing costs in
the prior year quarter included a $64.6 million pre-tax charge for
the write-off of excess raw potatoes.
Selling, general and administrative expenses (“SG&A”)
increased $14.7 million versus the prior year quarter to $184.7
million, and included a gain of $3.3 million ($2.7 million
after-tax, or $0.02 per share) related to blue chip swap
transactions in Argentina(2), $9.6 million ($7.2 million after-tax,
or $0.05 per share) of foreign currency exchange losses, $12.8
million ($9.5 million after-tax, or $0.07 per share) of unrealized
losses related to mark-to-market adjustments associated with
currency hedging contracts, and $0.4 million ($0.3 million
after-tax, no per share impact) of expenses related to ongoing
shareholder activism matters. The prior year quarter included a
gain of $7.1 million ($5.3 million after-tax, or $0.04 per share)
related to blue chip swap transactions in Argentina(2), $2.1
million ($1.6 million after-tax, or $0.01 per share) of foreign
currency exchange gains, $3.0 million ($2.2 million after-tax, or
$0.01 per share) of unrealized gains related to mark-to-market
adjustments associated with currency hedging contracts, and $4.8
million of LW EMEA integration and acquisition-related expenses
($3.6 million after-tax, or $0.02 per share).
Adjusted SG&A(1) declined $12.2 million versus the prior
year quarter to $165.2 million, despite including an incremental
$6.5 million of non-cash amortization and expense related to the
Company's new enterprise resource planning (“ERP”) system. Savings
from expense reduction initiatives, including savings associated
with the Restructuring Plan, lower performance-based compensation
and benefits accruals, and lower net investments in information
technology, more than offset inflation.
Income from operations declined $287.1 million versus the prior
year quarter to $18.5 million and included the amounts listed
above. Adjusted Income from Operations(1) declined $122.7 million
versus the prior year quarter to $178.3 million, driven by lower
net sales and Adjusted Gross Profit(1), partially offset by lower
Adjusted SG&A(1).
Net income declined $251.1 million from the prior year quarter
to a loss of $36.1 million. Net loss in the second quarter of
fiscal 2025 included $130.6 million ($168.8 million before tax, or
$0.91 per share) of gains resulting from blue chip swap
transactions in Argentina(2), foreign currency exchange losses,
unrealized mark-to-market derivative gains and losses, and items
impacting comparability. Net income in the prior year quarter
included a total net gain of $3.3 million ($4.6 million before tax,
or $0.03 per share) for gains resulting from blue chip swap
transactions in Argentina(2), foreign currency exchange gains,
unrealized mark-to-market derivative gains and losses, and items
impacting comparability.
Adjusted Net Income(1) declined $117.2 million versus the prior
year quarter to $94.5 million, and Adjusted Diluted EPS(1) declined
$0.79 from the prior year quarter to $0.66. The declines in
Adjusted Net Income(1) and Adjusted Diluted EPS(1) largely reflect
lower Adjusted Income from Operations(1) due to the factors
described above; a higher effective tax rate, reflecting discrete
tax items in the current and prior year quarters; and increased
interest expense primarily due to higher total debt.
Adjusted EBITDA(1) declined $95.0 million from the prior year
quarter to $281.9 million, primarily due to lower net sales and
Adjusted Gross Profit(1). Adjusted EBITDA(1) in the prior year
quarter included a $70.9 million pre-tax charge for the write-off
of excess raw potatoes, of which $6.3 million was recorded in
Equity Method Investment Earnings.
The Company’s effective tax rate(3) in the second quarter of
2025 was (59.0) percent, versus 23.5 percent in the second quarter
of fiscal 2024. During the second quarter of 2025, the Company
recorded a $38.2 million tax benefit related to gains resulting
from blue chip swap transactions in Argentina(2), foreign currency
exchange losses, unrealized mark-to-market derivative gains and
losses, and other items impacting comparability, which included a
$35.5 million tax benefit related to Restructuring Plan charges,
and a $14.4 million discrete tax expense, primarily related to the
establishment of a non-cash full valuation allowance against
certain international deferred tax assets. Excluding the impact of
the items above, the Company’s effective tax rate(3) in the second
quarter of fiscal 2025 was 25.5 percent versus 23.5 percent in the
second quarter of fiscal 2024, with the increase largely due to a
higher proportion of earnings in the Company's International
segment.
Q2 2025 Segment
Highlights
North America Summary
Net sales for the North America segment, which includes all
sales to customers in the U.S., Canada and Mexico, declined $95.0
million to $1,072.1 million, down 8 percent versus the prior year
quarter. Volume declined 5 percent, largely reflecting the impact
of declining restaurant traffic in the U.S. and customer share
losses in away-from-home channels.
Price/mix declined 3 percent, due to planned investments in
price and trade support across all sales channels to attract and
retain volume, as well as unfavorable channel and product mix.
North America Segment Adjusted EBITDA declined $54.6 million to
$266.7 million. Unfavorable price/mix, lower sales volumes, and
higher manufacturing costs per pound largely drove the decline.
North America Segment Adjusted EBITDA in the prior year quarter
included a pre-tax charge of $63.3 million charge for the write-off
of excess raw potatoes.
International Summary
Net sales for the International segment, which includes all
sales to customers outside of North America, declined $36.2 million
to $528.8 million, down 6 percent versus the prior year quarter.
Volume declined 6 percent, largely reflecting declining or
softening restaurant traffic in key international markets, the
impact of customer share losses net of gains, and the carryover
effect of the Company's decision in the prior year to exit certain
lower-priced and lower-margin business in Europe to strategically
manage customer and product mix. Price/mix was flat with the prior
year quarter as pricing actions in key international markets, in
response to a more competitive environment, were offset by the
benefit of inflation-driven pricing actions in EMEA.
International Segment Adjusted EBITDA declined $52.8 million to
$47.4 million. Higher manufacturing costs per pound and lower
volume largely drove the decline. International Segment Adjusted
EBITDA in the prior year quarter included a $7.6 million allocated
charge for the write-off of excess raw potatoes.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint
ventures were $2.1 million and $4.7 million for the second quarter
of fiscal 2025 and 2024, respectively. The results in the current
quarter include $9.0 million ($6.9 million after-tax, or $0.05 per
share) of costs associated with the Restructuring Plan. Excluding
this item, Adjusted Equity Method Investment Earnings(1) increased
$6.4 million compared to the prior year quarter. Equity method
investment earnings in the prior year quarter included a $6.3
million charge for the write-off of excess raw potatoes. The
results for the current and prior year quarters reflect earnings
associated with the Company's 50 percent interest in Lamb
Weston/RDO Frozen, an unconsolidated potato processing joint
venture in Minnesota.
Cash Flows, Capital Expenditures and Liquidity
Net cash provided by operating activities for the first half of
fiscal 2025 was $429.3 million, down $25.9 million versus the prior
year period, primarily due to lower earnings, which was partially
offset by favorable changes in working capital.
Capital expenditures, net of proceeds from blue chip swap
transactions, during the first half of fiscal 2025 were $486.4
million, down $73.0 million versus the prior year period, primarily
reflecting higher investments to support strategic capacity
expansion projects in China, the U.S., the Netherlands, and
Argentina during the prior year period. The projects in China and
the U.S. were completed during the second and fourth quarters of
fiscal 2024, respectively. The project in the Netherlands was
completed during the second quarter of fiscal 2025, while the
project in Argentina is on track to be completed by mid-calendar
2025.
As of November 24, 2024, the Company had $79.0 million of cash
and cash equivalents, with $1,211.9 million of available liquidity
under its revolving credit facility.
Capital Returned to Shareholders
In the second quarter of fiscal 2025, the Company returned $51.6
million to shareholders through cash dividends. There were no
repurchases of common stock under the Company's share repurchase
program during the quarter. In the first half of fiscal 2025, the
Company returned $103.3 million to shareholders through cash
dividends and repurchased $82.0 million of its common stock, with
an aggregate of 1,412,852 shares repurchased at an average price of
$58.04 per share.
In December 2024, the Board of Directors approved an increase of
$250 million in the Company's existing $500 million share
repurchase authorization under the program to an aggregate total of
$750 million. After giving effect to this increase, approximately
$558 million remained authorized and available for repurchase under
the share repurchase program.
In addition, the Board of Directors declared a quarterly
dividend of $0.37 per share of Lamb Weston common stock, a $0.01
increase. The dividend is payable on February 28, 2025 to
stockholders of record as of the close of business on January 31,
2025.
Updated Fiscal 2025
Outlook
The Company updated its financial targets for fiscal 2025 as
follows:
- The Company reduced its annual net sales target range to $6.35
billion to $6.45 billion, from a previous range of $6.6 billion to
$6.8 billion to primarily reflect the increased competitive
environment on price/mix and volume in its International Segment,
incremental volume pressure in North America, and its financial
performance in the second quarter. Accordingly, the Company is
targeting net sales of $3.1 billion to $3.2 billion in the second
half of fiscal 2025, or growth of approximately 1 percent to 4
percent versus the prior year period, and expects the growth will
be driven by higher volume.
- The Company reduced its target ranges for GAAP net income to
$330 million to $350 million and Diluted EPS to $2.30 to $2.45,
including a net loss from Restructuring Plan charges and other
items impacting comparability of $107.9 million ($143.9 million
before-tax, or $0.76 per share) during the first half of fiscal
2025. The Company previously targeted a GAAP net income range of
$395 to $445 and a Diluted EPS range of $2.70 to $3.15.
- The Company reduced its Adjusted EBITDA(1) target range to
$1,170 million to $1,210 million from a previous target of
approximately $1,380 million, to primarily reflect its financial
performance in the second quarter, the reduction in forecasted
sales described above, and increased manufacturing costs.
- The Company reduced its Adjusted Net Income(1) target range to
$440 million to $460 million, and Adjusted Diluted EPS(1) to $3.05
to $3.20, largely reflecting the Company's lower forecast for net
sales and Adjusted Gross Profit(1), as well as a higher effective
tax rate. The Company previously estimated Adjusted Net Income(1)
of $600 million to $615 million and Adjusted Diluted EPS(1) of
$4.15 to $4.35.
- The Company expects to be at the top of the range for its
Adjusted SG&A(1) target range of $680 million to $690
million.
The Company's other financial targets are as follows:
- Depreciation and amortization expense of approximately $375
million;
- An effective tax rate(3) (full year) estimate of approximately
28 percent, excluding the impact of comparability items, which is
an increase from the Company's previous estimate of approximately
25 percent; and
- Cash used for capital expenditures, excluding acquisitions, if
any, of approximately $750 million.
End Notes
(1)
Adjusted Gross Profit, Adjusted SG&A,
Adjusted Income from Operations, Adjusted Net Income, Adjusted
Diluted EPS, Adjusted Equity Method Investment Earnings, 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 Company enters into blue chip swap
transactions to transfer U.S. dollars into Argentina primarily
related to funding the Company’s announced capacity expansion in
Argentina. The blue chip swap rate can diverge significantly from
Argentina's official exchange rate.
(3)
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 second
quarter fiscal 2025 results at 8:00 a.m. EST on December 19, 2024.
Participants in the U.S. and Canada may access the conference call
by dialing 888-394-8218 and participants outside the U.S. and
Canada should dial +1-323-994-2093. The conference ID is 5411916.
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=1699372&tp_key=bd61c9987b
A rebroadcast of the conference call will be available beginning
on Friday, December 20, 2024, after 2:00 p.m. EST 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 Gross Profit, Adjusted
SG&A, Adjusted Restructuring Expense, Adjusted Income from
Operations, Adjusted Income Tax Expense (Benefit), Adjusted Net
Income, Adjusted Diluted EPS, Adjusted Equity Method Investment
Earnings, and Adjusted EBITDA, 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 gross profit, SG&A,
income from operations, restructuring expense, equity method
investment earnings (loss), 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 impacts of foreign currency exchange rates
and unrealized derivative activities and other 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 the Company’s
core operating performance across periods, 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, Adjusted
SG&A, 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, Adjusted SG&A, and Adjusted EBITDA to
GAAP net income, diluted earnings per share, or SG&A 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,”
“will,” “believe,” “take,” “generate,” “continue,” “manage,”
“improve,” “reduce,” “deliver,” “drive,” “remain,” “realize,”
“evaluate,” “align,” “protect,” “execute,” “make,” “estimate,”
“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 business and financial
outlook and prospects; the Company’s plans and strategies and
anticipated benefits therefrom, including with respect to the
Restructuring Plan, expected completion and impacts of
restructuring activities and cost-saving or efficiency initiatives,
capital expenditures and investments, dividends, share repurchases,
cash flows, conditions in the Company’s operating environment,
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 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: consumer preferences, including restaurant
traffic in North America and the Company's international markets,
and 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 its
products; the availability and prices of raw materials and other
commodities; operational challenges; the Company's ability to
successfully implement the Restructuring Plan, including achieving
the benefits of restructuring activities and cost-saving or
efficiency initiatives and possible changes in the size and timing
of related charges; difficulties, disruptions or delays in
implementing new technology, such as the Company’s new ERP system;
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
conflicts in the Middle East and the possible related heightening
of the Company’s other known risks; the ultimate outcome of
litigation or any product recalls or withdrawals; changes in the
Company’s relationships with its growers or significant customers;
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 integrating
acquired businesses, including LW EMEA; risks associated with other
possible acquisitions; the Company’s debt levels; actions of
governments and regulatory factors affecting the Company’s
businesses; 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.
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Earnings
(unaudited, in millions, except
per share amounts)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
November 24,
2024
November 26,
2023
November 24,
2024
November 26,
2023
Net sales
$
1,600.9
$
1,732.1
$
3,255.0
$
3,397.4
Cost of sales (1) (2)
1,323.1
1,256.5
2,621.2
2,422.3
Gross profit
277.8
475.6
633.8
975.1
Selling, general and administrative
expenses (3)
184.7
170.0
328.6
346.2
Restructuring expense (1)
74.6
—
74.6
—
Income from operations
18.5
305.6
230.6
628.9
Interest expense, net
43.3
29.1
88.5
59.8
Income (loss) before income taxes and
equity method earnings
(24.8
)
276.5
142.1
569.1
Income tax expense
13.4
66.2
64.2
136.1
Equity method investment earnings (1)
2.1
4.7
13.4
16.8
Net income (loss) (1) (4)
$
(36.1
)
$
215.0
$
91.3
$
449.8
Earnings (loss) per share:
Basic
$
(0.25
)
$
1.48
$
0.64
$
3.10
Diluted
$
(0.25
)
$
1.48
$
0.64
$
3.08
Dividends declared per common share
$
0.36
$
0.28
$
0.72
$
0.56
Weighted average common shares
outstanding:
Basic
142.8
144.9
143.2
145.3
Diluted
143.2
145.5
143.7
146.0
_______________________________________________
(1)
Net income (loss) for the thirteen and
twenty-six weeks ended November 24, 2024 included the following
related to the Restructuring Plan:
a.
Total pre-tax charges totaling $159.1
million ($123.6 after-tax, or $0.86 per share), of which $114.5
million is cash and $44.6 million is non-cash;
b.
Cost of sales included a $75.5 million
($57.4 million after-tax, or $0.40 per share) charge for contracted
raw potatoes that will not be used due to production line
curtailments, as well as other inventory write-offs;
c.
Restructuring expense included a $74.6
million ($59.3 million after-tax, or $0.41 per share) charge
related to accelerating depreciation of a manufacturing facility
closed in connection with the Restructuring Plan and other asset
retirements, and employee severance and benefits-related headcount
reductions in connection with the Restructuring Plan, and;
d.
Equity method investment earnings included
$9.0 million ($6.9 million after-tax, or $0.05 per share) related
to Restructuring Plan expenses for potato contract terminations and
other inventory write-offs.
(2)
Cost of sales for the thirteen and
twenty-six weeks ended November 24, 2024 included $9.8 million
($7.3 million after-tax, or $0.05 per share) and $12.7 million
($9.4 million after-tax, or $0.06 per share) of unrealized gains
related to mark-to-market adjustments associated with commodity
hedging contracts, respectively.
The thirteen and twenty-six weeks ended
November 26, 2023 included $4.6 million of unrealized losses ($3.5
million after-tax, $0.02 per share) and $27.1 million of unrealized
gains ($20.2 million after-tax, or $0.14 per share) related to
mark-to-market adjustments associated with commodity hedging
contracts, respectively. Also included is a net benefit of $1.8
million ($1.3 million after-tax, or $0.01 per share) related to the
step-up and sale of inventory following completion of the Company's
acquisition of the remaining interest in LW EMEA (the “LW EMEA
Acquisition”) for the thirteen weeks ended November 26, 2023; the
twenty-six weeks ended November 26, 2023 included $20.7 million
($15.4 million after-tax, or $0.11 per share) of costs related to
the step-up and sale of inventory following completion the LW EMEA
Acquisition.
(3)
Selling, general and administrative
expenses (SG&A) included the following:
a.
Blue chip swap transaction gains of $3.3
million ($2.7 million after-tax, or $0.02 per share) and $19.9
million ($19.3 million after-tax, $0.13 per share) for the thirteen
and twenty-six weeks ended November 24, 2024, respectively. The
prior year period included gains of $7.1 million ($5.3 million
after-tax, or $0.04 per share) for the thirteen and twenty-six
weeks ended November 26, 2023;
b.
Unrealized losses related to
mark-to-market adjustments associated with currency hedging
contracts of $12.8 million ($9.5 million after-tax, or $0.07 per
share) and $6.8 million ($5.1 million after-tax, or $0.04 per
share) for the thirteen and twenty-six weeks ended November 24,
2024, respectively. The prior year period included $3.0 million of
unrealized gains ($2.2 million after-tax, or $0.01 per share) and
$1.4 million unrealized losses ($1.0 million after-tax, or $0.01
per share) for the thirteen and twenty-six weeks ended November 26,
2023, respectively;
c.
Foreign currency exchange losses of $9.6
million ($7.2 million after-tax, or $0.05 per share) and $10.2
million ($7.6 million after-tax, or $0.05 per share) for the
thirteen and twenty-six weeks ended November 24, 2024,
respectively. The thirteen and twenty-six weeks ended November 26,
2023 included gains of $2.1 million ($1.6 million after-tax, or
$0.01 per share) and losses of $5.3 million ($3.9 million
after-tax, or $0.03 per share), respectively;
d.
Advisory fees related to shareholder
activism matters of $0.4 million ($0.3 million after-tax, no per
share impact) for the thirteen and twenty-six weeks ended November
24, 2024; and
e.
Integration and acquisition-related
expenses of $4.8 million ($3.6 million after-tax, or $0.02 per
share) and $8.8 million ($6.6 million after-tax, or $0.04 per
share) for the thirteen and twenty-six weeks ended November 26,
2023, respectively.
(4)
The twenty-six weeks ended November 24,
2024 include an approximately $39 million charge ($30 million
after-tax, or $0.21 per share) related to a previously announced
voluntary product withdrawal initiated in the fourth quarter of
fiscal 2024. This includes an approximately $15 million impact ($11
million after-tax, or $0.08 per share) in net sales and an
approximately $24 million charge ($18 million, or $0.13 per share)
in cost of sales. The total charge was allocated to the reporting
segments as follows: $21 million to North America and $18 million
to International.
Lamb Weston Holdings,
Inc.
Consolidated Balance
Sheets
(unaudited, in millions, except
share data)
November 24,
2024
May 26, 2024
ASSETS
Current assets:
Cash and cash equivalents
$
79.0
$
71.4
Receivables, net of allowances of $0.9
million and $0.9 million
695.0
743.6
Inventories
1,327.2
1,138.6
Prepaid expenses and other current
assets
89.7
136.4
Total current assets
2,190.9
2,090.0
Property, plant and equipment, net
3,609.6
3,582.8
Operating lease assets
119.7
133.0
Goodwill
1,028.3
1,059.9
Intangible assets, net
101.0
104.9
Other assets
402.6
396.4
Total assets
$
7,452.1
$
7,367.0
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Short-term borrowings
$
320.5
$
326.3
Current portion of long-term debt and
financing obligations
69.7
56.4
Accounts payable
846.0
833.8
Accrued liabilities
390.8
407.6
Total current liabilities
1,627.0
1,624.1
Long-term liabilities:
Long-term debt and financing obligations,
excluding current portion
3,693.6
3,440.7
Deferred income taxes
247.3
256.2
Other noncurrent liabilities
251.4
258.2
Total long-term liabilities
4,192.3
3,955.1
Commitments and contingencies
Stockholders’ equity:
Common stock of $1.00 par value,
600,000,000 shares authorized; 151,309,961 and 150,735,397 shares
issued
151.3
150.7
Treasury stock, at cost, 8,669,325 and
7,068,741 common shares
(634.4
)
(540.9
)
Additional distributed capital
(497.3
)
(508.9
)
Retained earnings
2,687.2
2,699.8
Accumulated other comprehensive loss
(74.0
)
(12.9
)
Total stockholders’ equity
1,632.8
1,787.8
Total liabilities and stockholders’
equity
$
7,452.1
$
7,367.0
Lamb Weston Holdings,
Inc.
Consolidated Statements of
Cash Flows
(unaudited, in millions)
Twenty-Six Weeks Ended
November 24,
2024
November 26,
2023
Cash flows from operating
activities
Net income
$
91.3
$
449.8
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization of
intangibles and debt issuance costs
211.0
140.7
Stock-settled, stock-based compensation
expense
21.9
22.2
Equity method investment (earnings) loss,
net of distributions
11.5
(11.3
)
Deferred income taxes
1.4
5.8
Blue chip swap transaction gains
(19.9
)
(7.1
)
Other
15.6
5.7
Changes in operating assets and
liabilities:
Receivables
39.0
(35.2
)
Inventories
(198.2
)
(216.0
)
Income taxes payable/receivable, net
(25.1
)
27.6
Prepaid expenses and other current
assets
75.2
68.8
Accounts payable
216.8
96.1
Accrued liabilities
(11.2
)
(91.9
)
Net cash provided by operating
activities
$
429.3
$
455.2
Cash flows from investing
activities
Additions to property, plant and
equipment
(474.6
)
(507.6
)
Additions to other long-term assets
(31.7
)
(58.9
)
Acquisition of business, net of cash
acquired
—
(11.2
)
Proceeds from blue chip swap transactions,
net of purchases
19.9
7.1
Other
1.5
(0.2
)
Net cash used for investing
activities
$
(484.9
)
$
(570.8
)
Cash flows from financing
activities
Proceeds from short-term borrowings
811.6
194.3
Repayments of short-term borrowings
(813.8
)
(60.6
)
Proceeds from issuance of debt
520.2
28.4
Repayments of debt and financing
obligations
(245.4
)
(27.7
)
Dividends paid
(103.3
)
(81.6
)
Repurchase of common stock and common
stock withheld to cover taxes
(92.8
)
(164.3
)
Other
(13.2
)
(0.5
)
Net cash provided by (used for)
financing activities
$
63.3
$
(112.0
)
Effect of exchange rate changes on cash
and cash equivalents
(0.1
)
1.1
Net increase (decrease) in cash and
cash equivalents
7.6
(226.5
)
Cash and cash equivalents, beginning of
period
71.4
304.8
Cash and cash equivalents, end of
period
$
79.0
$
78.3
Lamb Weston Holdings,
Inc.
Segment Information
(unaudited, in millions, except
percentages)
Thirteen Weeks Ended
November 24,
2024
November 26,
2023
%
Increase (Decrease)
Price/Mix
Volume
Segment net sales
North America
$
1,072.1
$
1,167.1
(8
%)
(3
%)
(5
%)
International
528.8
565.0
(6
%)
—
%
(6
%)
$
1,600.9
$
1,732.1
(8
%)
(2
%)
(6
%)
Segment Adjusted EBITDA (1)
North America
$
266.7
$
321.3
(17
%)
International
47.4
100.2
(53
%)
Twenty-Six Weeks Ended
November 24,
2024
November 26,
2023
% Increase
(Decrease)
Price/Mix
Volume
Segment net sales
North America
$
2,175.8
$
2,302.5
(6
%)
(1
%)
(5
%)
International
1,079.2
1,094.9
(1
%)
1
%
(2
%)
$
3,255.0
$
3,397.4
(4
%)
—
%
(4
%)
Segment Adjusted EBITDA (1)(2)
North America
$
542.8
$
700.7
(23
%)
International
97.9
189.8
(48
%)
______________________________________________
(1)
Segment Adjusted EBITDA includes equity
method investment earnings and losses and excludes unallocated
corporate costs including restructuring-related expenses, 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.
(2)
Includes an approximately $39 million
pre-tax charge related to the voluntary product withdrawal. See
footnote (4) to the Consolidated Statements of Earnings for more
information.
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, in millions, except
per share amounts)
Thirteen Weeks Ended November 24,
2024
Gross Profit
SG&A
Restructuring expense
Income
From
Operations
Interest
Expense
Income
Tax Expense
(Benefit) (1)
Equity
Method
Investment
Earnings
Net Income (Loss)
Diluted
EPS
As reported
$
277.8
$
184.7
$
74.6
$
18.5
$
43.3
$
13.4
$
2.1
$
(36.1
)
$
(0.25
)
Unrealized derivative gains and losses
(2)
(9.8
)
(12.8
)
—
3.0
—
0.8
—
2.2
0.02
Foreign currency exchange losses (2)
—
(9.6
)
—
9.6
—
2.4
—
7.2
0.05
Blue chip swap transaction gains (2)
—
3.3
—
(3.3
)
—
(0.6
)
—
(2.7
)
(0.02
)
Items impacting comparability (2):
Restructuring Plan expenses
75.5
—
(74.6
)
150.1
—
35.5
9.0
123.6
0.86
Shareholder activism expense (4)
—
(0.4
)
—
0.4
—
0.1
—
0.3
—
Total adjustments
65.7
(19.5
)
(74.6
)
159.8
—
38.2
9.0
130.6
0.91
Adjusted (3)
$
343.5
$
165.2
$
—
$
178.3
$
43.3
$
51.6
$
11.1
$
94.5
$
0.66
Thirteen Weeks Ended November 26,
2023
As reported
$
475.6
$
170.0
$
—
$
305.6
$
29.1
$
66.2
$
4.7
$
215.0
$
1.48
Unrealized derivative gains and losses
(2)
4.6
3.0
—
1.6
—
0.3
—
1.3
0.01
Foreign currency exchange gains (2)
—
2.1
—
(2.1
)
—
(0.5
)
—
(1.6
)
(0.01
)
Blue chip swap transaction gains (2)
—
7.1
—
(7.1
)
—
(1.8
)
—
(5.3
)
(0.04
)
Items impacting comparability (2):
Inventory step-up from acquisition
(1.8
)
—
—
(1.8
)
—
(0.5
)
—
(1.3
)
(0.01
)
Integration and acquisition-related items,
net
—
(4.8
)
—
4.8
—
1.2
—
3.6
0.02
Total adjustments
2.8
7.4
—
(4.6
)
—
(1.3
)
—
(3.3
)
(0.03
)
Adjusted (3)
$
478.4
$
177.4
$
—
$
301.0
$
29.1
$
64.9
$
4.7
$
211.7
$
1.45
Lamb Weston Holdings,
Inc.
Reconciliation of Non-GAAP
Financial Measures
(unaudited, in millions, except
per share amounts)
Twenty-Six Weeks Ended November 24,
2024
Gross Profit
SG&A
Restructuring expense
Income
From
Operations
Interest
Expense
Income
Tax Expense
(Benefit) (1)
Equity
Method
Investment
Earnings
Net (Loss) Income
Diluted
EPS
As reported
$
633.8
$
328.6
$
74.6
$
230.6
$
88.5
$
64.2
$
13.4
$
91.3
$
0.64
Unrealized derivative gains and losses
(2)
(12.7
)
(6.8
)
—
(5.9
)
—
(1.6
)
—
(4.3
)
(0.02
)
Foreign currency exchange losses (2)
—
(10.2
)
—
10.2
—
2.6
—
7.6
0.05
Blue chip swap transaction gains (2)
—
19.9
—
(19.9
)
—
(0.6
)
—
(19.3
)
(0.13
)
Items impacting comparability (2):
Restructuring Plan expenses
75.5
—
(74.6
)
150.1
—
35.5
9.0
123.6
0.86
Shareholder activism expense (4)
—
(0.4
)
—
0.4
—
0.1
—
0.3
—
Total adjustments
62.8
2.5
(74.6
)
134.9
—
36.0
9.0
107.9
0.76
Adjusted (3)
$
696.6
$
331.1
$
—
$
365.5
$
88.5
$
100.2
$
22.4
$
199.2
$
1.40
Twenty-Six Weeks Ended November 26,
2023
As reported
$
975.1
$
346.2
$
—
$
628.9
$
59.8
$
136.1
$
16.8
$
449.8
$
3.08
Unrealized derivative gains and losses
(2)
(27.1
)
(1.4
)
—
(25.7
)
—
(6.5
)
—
(19.2
)
(0.13
)
Foreign currency exchange losses (2)
—
(5.3
)
—
5.3
—
1.4
—
3.9
0.03
Blue chip swap transaction gains (2)
—
7.1
—
(7.1
)
—
(1.8
)
—
(5.3
)
(0.04
)
Items impacting comparability (2):
Inventory step-up from acquisition
20.7
—
—
20.7
—
5.3
—
15.4
0.11
Integration and acquisition-related items,
net
—
(8.8
)
—
8.8
—
2.2
—
6.6
0.04
Total adjustments
(6.4
)
(8.4
)
—
2.0
—
0.6
—
1.4
0.01
Adjusted (3)
$
968.7
$
337.8
$
—
$
630.9
$
59.8
$
136.7
$
16.8
$
451.2
$
3.09
______________________________________________
(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.
(4)
Represents advisory fees related to
shareholder activism matters.
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 is presenting Adjusted EBITDA, which the
Company defines as earnings, less interest expense, income tax
expense, depreciation and amortization, foreign currency exchange
and unrealized mark-to-market derivative gains and losses, and
certain items impacting comparability identified in the table
below. Adjusted EBITDA is a non-GAAP financial measure. The
following table reconciles net (loss) income to Adjusted EBITDA for
the identified periods.
Thirteen Weeks Ended
Twenty-Six Weeks Ended
November 24,
2024
November 26,
2023
November 24,
2024
November 26,
2023
Net income (loss) (1)
$
(36.1
)
$
215.0
$
91.3
$
449.8
Interest expense, net
43.3
29.1
88.5
59.8
Income tax expense
13.4
66.2
64.2
136.1
Income from operations including equity
method investment earnings (2)
20.6
310.3
244.0
645.7
Depreciation and amortization (3)
92.5
71.2
183.9
142.0
Unrealized derivative losses (gains)
(1)
3.0
1.6
(5.9
)
(25.7
)
Foreign currency exchange losses (gains)
(1)
9.6
(2.1
)
10.2
5.3
Blue chip swap transaction gains (1)
(3.3
)
(7.1
)
(19.9
)
(7.1
)
Items impacting comparability (1):
Restructuring Plan expenses (4)
159.1
—
159.1
—
Shareholder activism expense (5)
0.4
—
0.4
—
Inventory step-up from acquisition
—
(1.8
)
—
20.7
Integration and acquisition-related items,
net
—
4.8
—
8.8
Adjusted EBITDA (6)
$
281.9
$
376.9
$
571.8
$
789.7
Segment Adjusted EBITDA
North America
$
266.7
$
321.3
$
542.8
$
700.7
International
47.4
100.2
97.9
189.8
Unallocated corporate costs (7)
(32.2
)
(44.6
)
(68.9
)
(100.8
)
Adjusted EBITDA
$
281.9
$
376.9
$
571.8
$
789.7
_______________________________________________
(1)
See footnotes (1) - (4) to the
Consolidated Statements of Earnings for more information.
(2)
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. See Note
12, Joint Venture Investments, of the Notes to Consolidated
Financial Statements in the Company’s Annual Report on Form 10-K
for the fiscal year ended May 26, 2024, filed with the Securities
and Exchange Commission (“SEC”) on July 24, 2024, for more
information.
(3)
Depreciation and amortization included
interest expense, income tax expense, and depreciation and
amortization from equity method investments of $2.0 million and
$2.1 million for the thirteen weeks ended November 24, 2024 and
November 26, 2023, respectively; and $4.1 million and $4.3 million
for the twenty-six weeks ended November 24, 2024 and November 26,
2023, respectively. Depreciation expense does not include $28.9
million of accelerated depreciation related to the closure of the
Company's manufacturing facility in Connell, Washington.
(4)
On October 1, 2024, the Company announced
the Restructuring Plan. For more information about the
Restructuring Plan, see Note 4, Restructuring Plan, of the
Condensed Notes to Consolidated Financial Statements in the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 24, 2024, to be filed with the SEC.
(5)
Represents advisory fees related to
shareholder activism matters.
(6)
See “Non-GAAP Financial Measures” in this
press release for additional information.
(7)
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 support service, which includes, 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. In the table,
Unallocated corporate costs exclude unrealized derivative gains and
losses, foreign currency exchange gains and losses, blue chip swap
transaction gains, and items impacting comparability. These items
are added back to reconcile Net income (loss) to Adjusted
EBITDA.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241219795808/en/
Investors: Dexter Congbalay 224-306-1535
dexter.congbalay@lambweston.com
Media: Erin Gardiner 208-202-7257
communication@lambweston.com
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