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Lamb Weston Reports Fiscal Second Quarter 2020 Results; Updates Fiscal Year 2020 Outlook

January 3, 2020 GMT

EAGLE, Idaho--(BUSINESS WIRE)--Jan 3, 2020--

Lamb Weston Holdings, Inc. (NYSE: LW) announced today its fiscal second quarter 2020 results.

“In the second quarter, we delivered strong sales, volume and earnings growth across each of our core business segments by continuing to execute well across the organization,” said Tom Werner, President and CEO. “We’re generating strong cash flow, and we’re investing that cash back into the business to support customer growth, improve manufacturing operations and systems, and bolster our presence in key markets such as Australia and South America. We’re also returning more cash to shareholders, including recently raising our quarterly dividend by 15 percent.”

“Because of our strong performance in the first half of fiscal 2020, we have raised our annual outlook for sales growth and EBITDA. We anticipate delivering solid results in the second half of the year, supported by continued favorable restaurant traffic trends. While overall raw potato supply in North America and Europe is tight due to relatively poor weather late in the growing season and during the harvest, we expect to have enough raw potatoes to support our volume growth targets for the year. We’ll continue to evaluate opportunities to improve price and mix in each of our business segments. Over the long term, we remain committed to executing on our strategies, driving growth and creating value for all our stakeholders.”

 

 

 

 

 

 

 

 

 

Summary of Second Quarter FY 2020 Results

($ in millions, except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-Over-Year

 

 

 

Year-Over-Year

 

 

Q2 2020

 

Growth Rates

 

YTD 2020

 

Growth Rates

Net sales

 

$

1,019.2

 

12

%

 

$

2,008.2

 

10

%

Income from operations

 

$

193.5

 

11

%

 

$

363.5

 

11

%

Net income attributable to Lamb Weston

 

$

140.4

 

18

%

 

$

256.1

 

13

%

EBITDA including unconsolidated joint ventures (1)

 

$

260.9

 

17

%

 

$

493.8

 

13

%

Diluted EPS

 

$

0.95

 

28

%

 

$

1.74

 

18

%

Adjusted Diluted EPS (1)

 

$

0.95

 

19

%

 

$

1.74

 

14

%

Q2 2020 Commentary

Net sales increased $107.8 million to $1,019.2 million, up 12 percent versus the year-ago period. Volume increased 10 percent, primarily driven by growth in the Company’s Global and Foodservice segments, and includes an approximate 1.5 percentage point benefit from acquisitions, as well as an approximate 1 percentage point benefit from additional shipping days related to the timing of the Thanksgiving holiday. Price/mix increased 2 percent due to pricing actions and favorable mix.

Income from operations rose 11 percent to $193.5 million versus the year-ago period, driven by higher sales and gross profit. Gross profit increased $36.1 million due to volume growth, favorable price/mix and lower transportation costs, which more than offset input cost inflation; higher manufacturing costs due to inefficiencies, which were primarily driven by higher maintenance and related costs; and higher depreciation expense primarily associated with the Company’s french fry production line in Hermiston, Oregon, which started operating towards the end of the fourth quarter of fiscal 2019. In addition, gross profit included a $3.9 million gain related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts in the current quarter, compared with a $1.7 million loss related to these items in the prior year quarter.

The increase in gross profit in the current quarter was partially offset by a $16.6 million increase in selling, general and administrative expenses (“SG&A”). The increase was largely driven by an approximate $6 million increase in incentive compensation expense accruals based primarily on the Company’s operating performance, as well as investments in the Company’s sales, marketing, operating and systems capabilities, which included more than $2 million of expense associated with designing and implementing a new enterprise resource planning (“ERP”) system. These increases were partially offset by an approximate $2 million reduction in foreign exchange losses. The prior year period also included an approximate $4 million insurance settlement benefit.

Net income attributable to Lamb Weston increased $21.4 million, or 18 percent, to $140.4 million, primarily reflecting growth in income from operations and higher equity method earnings, as well as an approximate $5 million benefit from acquiring the remaining 50.01% equity interest in the Company’s joint venture, Lamb Weston BSW, LLC (“Lamb Weston BSW”) in November 2018 (the “BSW Acquisition”).

EBITDA including unconsolidated joint ventures (1) increased $38.1 million to $260.9 million, up 17 percent versus the prior year period, primarily due to growth in income from operations, an approximate $6 million incremental benefit from the BSW Acquisition, and higher equity method investment earnings.

Diluted EPS increased $0.21, or 28 percent, to $0.95. The increase largely reflects growth in income from operations and higher equity method investment earnings, as well as an approximate $0.04 benefit from the BSW Acquisition, and a $0.06 charge related to the BSW Acquisition in the prior year period.

Adjusted Diluted EPS (1) increased $0.15, or 19 percent, to $0.95. The increase in Adjusted Diluted EPS reflects growth in income from operations, an approximate $0.04 benefit from the BSW Acquisition, and higher equity method investment earnings.

The Company’s effective tax rate (2) in the second quarter of fiscal 2020 was approximately 23.3 percent, versus 21.5 percent in the prior year period. The effective tax rate varies from the U.S. statutory tax rate of 21% principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items.

Cash Flow

Through the first half of fiscal 2020, net cash from operating activities increased $28.5 million to $345.3 million, primarily driven by earnings growth. Capital expenditures, including for information technology items, were $107.4 million in fiscal 2020, down $63.0 million versus the prior year period due to investments for the construction of a new production line in Hermiston, Oregon, which was completed in the fourth quarter of fiscal 2019.

Capital Returned to Shareholders

In the first half of fiscal 2020, the Company returned a total of $71.9 million to shareholders, including $58.5 million in dividends and $13.4 million in share repurchases. The average price per share repurchased was $72.61. The Company has approximately $205 million remaining under its current $250 million share repurchase authorization.

Q2 2020 Segment Highlights

Global

 

 

 

 

 

 

 

 

 

 

Global Segment Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-Over-Year

 

 

 

 

 

 

 

Q2 2020

 

Growth Rates

 

Price/Mix

 

Volume

 

 

 

(dollars in millions)

 

 

 

 

 

 

Net sales

 

$

539.6

 

15%

 

1%

 

14%

Segment product contribution margin (3)

 

$

128.9

 

15%

 

 

 

 

Net sales for the Global segment, which is comprised of the top 100 North American based restaurant chain customers as well as the Company’s international business, increased $69.6 million to $539.6 million, up 15 percent compared to the prior year period. Volume increased 14 percent, driven by growth in sales, including the benefit of limited time product offerings, to strategic customers in the U.S. and key international markets, as well as an approximate 3 percentage point benefit from acquisitions. Approximately 1 percentage point of the volume increase reflected the benefit of additional shipping days related to the timing of the Thanksgiving holiday. Price/mix increased 1 percent, largely reflecting pricing adjustments associated with multi-year contracts.

Global segment product contribution margin increased $16.5 million to $128.9 million, up 15 percent compared to the prior year period. Favorable volume growth, higher price/mix and lower transportation costs drove the increase, more than offsetting input cost inflation, higher manufacturing costs due to inefficiencies, and higher depreciation expense primarily associated with the new Hermiston production line.

Foodservice

 

 

 

 

 

 

 

 

 

 

Foodservice Segment Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-Over-Year

 

 

 

 

 

 

 

Q2 2020

 

Growth Rates

 

Price/Mix

 

Volume

 

 

 

(dollars in millions)

 

 

 

 

 

 

Net sales

 

$

304.9

 

9%

 

4%

 

5%

Segment product contribution margin (3)

 

$

111.3

 

14%

 

 

 

 

Net sales for the Foodservice segment, which services North American foodservice distributors and restaurant chains outside the top 100 North American based restaurant chain customers, increased $25.2 million to $304.9 million, up 9 percent compared to the prior year period. Volume increased 5 percent, led by growth in distributor private label and Lamb Weston branded products. Approximately half of the volume increase reflected the benefit of additional shipping days related to the timing of the Thanksgiving holiday. Price/mix increased 4 percent, primarily reflecting pricing actions initiated during the quarter, and improved mix.

Foodservice segment product contribution margin increased $13.9 million to $111.3 million, up 14 percent compared to the prior year period, as favorable price/mix, volume growth and lower transportation costs more than offset input cost inflation, higher manufacturing costs due to inefficiencies, and higher depreciation expense primarily associated with the new Hermiston production line.

Retail

 

 

 

 

 

 

 

 

 

 

Retail Segment Summary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-Over-Year

 

 

 

 

 

 

 

Q2 2020

 

Growth Rates

 

Price/Mix

 

Volume

 

 

 

(dollars in millions)

 

 

 

 

 

 

Net sales

 

$

132.1

 

7%

 

3%

 

4%

Segment product contribution margin (3)

 

$

28.5

 

10%

 

 

 

 

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 $8.2 million to $132.1 million, up 7 percent compared to the prior year period. Volume increased 4 percent, driven by increased sales of Grown in Idaho and other branded products as well as private label products. Approximately 2 percentage points of the volume increase reflected the benefit of additional shipping days related to the timing of the Thanksgiving holiday. Price/mix increased 3 percent, driven by favorable mix and pricing actions.

Retail segment product contribution margin increased $2.6 million to $28.5 million, up 10 percent compared to the prior year period, as favorable price/mix, volume growth and lower transportation costs, more than offset input cost inflation, higher manufacturing costs due to inefficiencies, and higher depreciation expense, primarily associated with the new Hermiston production line.

Equity Method Investment Earnings

Equity method investment earnings from unconsolidated joint ventures in Europe and the U.S. were $15.0 million and $10.2 million for the second quarter of fiscal 2020 and 2019, respectively. These amounts included a $2.7 million unrealized loss related to mark-to-market adjustments associated with currency and commodity hedging contracts in the current quarter and a $1.1 million loss related to these items in the prior year quarter. Excluding these adjustments, earnings from equity method investments increased $6.4 million compared to the prior year period, largely reflecting lower raw potato prices in Europe.

Outlook

The Company provides guidance on its financial outlook on a non-GAAP basis and does not reconcile guidance to GAAP as the Company cannot predict the effects of items impacting comparability that are included in reported GAAP results. These items are discussed in more detail in the notes to this press release.

The Company is updating its fiscal 2020 outlook, which includes the contribution of a 53 rd week in the fiscal 2020 period, with the additional week falling in the fourth quarter, as follows:

 

 

FY 2020 Outlook Summary

 

 

Net sales growth rate

High end of Mid-Single Digit Range

 

 

 

 

Adjusted EBITDA including unconsolidated joint ventures (1)

$965 million to $985 million

 

 

 

 

Interest expense

Approximately $110 million

 

 

 

 

Effective tax rate (2) excluding comparability items

Approximately 24%

 

 

 

 

Cash used for capital expenditures, excluding acquisitions

Approximately $300 million

 

 

 

 

Depreciation and amortization

Approximately $175 million

 

 

As summarized in the table above, for fiscal 2020, the Company expects:

End Notes

(1) Adjusted EBITDA including unconsolidated joint ventures, EBITDA including unconsolidated joint ventures, and Adjusted Diluted EPS 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 reconciliations at the end of this press release for more information.

(2) The effective tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.

(3) For more information about product contribution margin, please see the table titled “Segment Information” in this press release.

Webcast and Conference Call Information

Lamb Weston will host a conference call to review its second quarter 2020 results at 10:00 a.m. ET today. Investors and analysts may access the call toll-free by dialing (800) 367-2403, and using the event confirmation code of 6281338. A listen-only webcast will be provided at www.lambweston.com.

About Lamb Weston

Lamb Weston, along with its joint venture partners, is a leading supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers around the world. For more than 60 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 “continue,” “expect,” “support,” “grow,” “anticipate,” “improve,” “create,” “deliver,” “execute,” “generate,” “invest,” “raise,” “drive,” 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, business outlook and prospects. 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 Company’s ability to successfully execute its long-term value creation strategies; its ability to execute on large capital projects, including construction of new production lines; the competitive environment and related conditions in the markets in which it and its joint ventures operate; political and economic conditions of the countries in which it and its joint ventures conduct business and other factors related to its international operations; disruption of its access to export mechanisms; risks associated with possible acquisitions, including its ability to complete acquisitions or integrate acquired businesses; its debt levels; the availability and prices of raw materials; changes in its relationships with its growers or significant customers; the success of its joint ventures; actions of governments and regulatory factors affecting its businesses or joint ventures; the ultimate outcome of litigation or any product recalls; levels of pension, labor and people-related expenses; its ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends; the Company’s ability to remediate the material weakness in internal control described in the Company’s Form 10-K; 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 EBITDA including unconsolidated joint ventures, Adjusted Net Income Available to Lamb Weston Common Stockholders, and Adjusted Diluted EPS, 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. 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. These measures are not substitutes for their comparable GAAP financial measures, such as net income, diluted earnings per share, or other measures prescribed by GAAP, and there are limitations to using non-GAAP financial measures.

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, (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 also provides guidance on its financial outlook on a non-GAAP basis. The Company cannot predict the effects of certain elements that are included in reported GAAP results, including items such as strategic developments, potentially significant costs associated with acquisitions and integration of acquired businesses, 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 Adjusted EBITDA including unconsolidated joint ventures to GAAP net income has not been provided.

Lamb Weston Holdings, Inc.

Consolidated Statements of Earnings

(unaudited, dollars in millions, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

 

November 24,

 

November 25,

 

November 24,

 

November 25,

 

 

2019

 

2018

 

2019

 

2018

Net sales

 

$

1,019.2

 

$

911.4

 

$

2,008.2

 

$

1,826.3

Cost of sales

 

 

734.1

 

 

662.4

 

 

1,474.5

 

 

1,346.7

Gross profit

 

 

285.1

 

 

249.0

 

 

533.7

 

 

479.6

Selling, general and administrative expenses

 

 

91.6

 

 

75.0

 

 

170.2

 

 

153.0

Income from operations

 

 

193.5

 

 

174.0

 

 

363.5

 

 

326.6

Interest expense, net

 

 

25.4

 

 

26.2

 

 

53.6

 

 

53.0

Income before income taxes and equity method earnings

 

 

168.1

 

 

147.8

 

 

309.9

 

 

273.6

Income tax expense

 

 

42.7

 

 

34.0

 

 

79.4

 

 

68.3

Equity method investment earnings

 

 

15.0

 

 

10.2

 

 

25.6

 

 

30.1

Net income

 

 

140.4

 

 

124.0

 

 

256.1

 

 

235.4

Less: Income attributable to noncontrolling interests (1)

 

 

 

 

5.0

 

 

 

 

8.6

Net income attributable to Lamb Weston Holdings, Inc.

 

$

140.4

 

$

119.0

 

$

256.1

 

$

226.8

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.96

 

$

0.74

 

$

1.75

 

$

1.47

Diluted

 

$

0.95

 

$

0.74

 

$

1.74

 

$

1.47

Dividends declared per common share

 

$

0.20000

 

$

0.19125

 

$

0.40000

 

$

0.38250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computation of diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Lamb Weston Holdings, Inc.

 

$

140.4

 

$

119.0

 

$

256.1

 

$

226.8

Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated, net of tax benefits (1)

 

 

 

 

10.0

 

 

 

 

10.9

Net income available to Lamb Weston common stockholders

 

$

140.4

 

$

109.0

 

$

256.1

 

$

215.9

Diluted weighted average common shares outstanding

 

 

147.1

 

 

147.4

 

 

147.1

 

 

147.3

Diluted earnings per share (1)

 

$

0.95

 

$

0.74

 

$

1.74

 

$

1.47

(1) In November 2018, we entered into an agreement to acquire the remaining 50.01% interest in Lamb Weston BSW, LLC (“Lamb Weston BSW”). Our Consolidated Statements of Earnings includes 100% of Lamb Weston BSW’s earnings beginning November 2, 2018. See Note 7, Investments in Joint Ventures, of the Notes to Combined and Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Company’s fiscal 2019 Form 10-K, for more information.

During the thirteen and twenty-six weeks ended November 25, 2018, net income available to common stockholders and earnings per share included accretion expense, net of estimated tax benefits, of $9.5 million, or $0.06 per share, to increase the redeemable noncontrolling interest to the amount the Company agreed to pay to acquire the remaining 50.01% interest in Lamb Weston BSW. While the accretion, net of estimated tax benefits, reduced net income available to Lamb Weston common stockholders and earnings per share, it did not impact net income in the Consolidated Statements of Earnings.

Lamb Weston Holdings, Inc.

Consolidated Balance Sheets

(unaudited, dollars in millions, except share data)

 

 

 

 

 

 

 

November 24,

 

May 26,

 

 

2019

 

2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

23.8

 

 

$

12.2

 

Receivables, less allowance for doubtful accounts of $1.3 and $1.3

 

 

399.7

 

 

 

340.1

 

Inventories

 

 

636.0

 

 

 

498.3

 

Prepaid expenses and other current assets

 

 

47.8

 

 

 

110.9

 

Total current assets

 

 

1,107.3

 

 

 

961.5

 

Property, plant and equipment, net (1)

 

 

1,552.3

 

 

 

1,597.8

 

Operating lease assets (1)

 

 

162.9

 

 

 

Equity method investments

 

 

257.9

 

 

 

224.6

 

Goodwill

 

 

307.2

 

 

 

205.9

 

Intangible assets, net

 

 

39.8

 

 

 

37.6

 

Other assets

 

 

39.4

 

 

 

20.7

 

Total assets

 

$

3,466.8

 

 

$

3,048.1

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Short-term borrowings

 

$

9.9

 

 

$

8.4

 

Current portion of long-term debt and financing obligations

 

 

36.1

 

 

 

38.0

 

Accounts payable

 

 

406.0

 

 

 

289.2

 

Accrued liabilities (1)

 

 

217.4

 

 

 

217.2

 

Total current liabilities

 

 

669.4

 

 

 

552.8

 

Long-term liabilities:

 

 

 

 

Long-term debt and financing obligations, excluding current portion (1)

 

 

2,203.7

 

 

 

2,280.2

 

Deferred income taxes

 

 

149.5

 

 

 

125.7

 

Other noncurrent liabilities (1)

 

 

243.1

 

 

 

94.0

 

Total long-term liabilities

 

 

2,596.3

 

 

 

2,499.9

 

Commitments and contingencies

 

 

 

 

Stockholders' equity:

 

 

 

 

Common stock of $1.00 par value, 600,000,000 shares authorized; 146,837,024 and 146,654,827 shares issued

 

 

146.8

 

 

 

146.7

 

Additional distributed capital

 

 

(877.0

)

 

 

(890.3

)

Retained earnings (1)

 

 

1,021.9

 

 

 

803.6

 

Accumulated other comprehensive loss

 

 

(33.5

)

 

 

(25.3

)

Treasury stock, at cost, 833,820 and 585,794 common shares

 

 

(57.1

)

 

 

(39.3

)

Total stockholders' equity (deficit)

 

 

201.1

 

 

 

(4.6

)

Total liabilities and stockholders’ equity

 

$

3,466.8

 

 

$

3,048.1

 

(1) Effective May 27, 2019, the Company adopted Accounting Standards Update 2016-02, Leases, and its related amendments, using the modified retrospective transition method. The Company adopted the guidance by recording the cumulative effect of initially applying the guidance at the date of initial application and the Company did not recast prior periods presented in the Consolidated Financial Statements. The adoption of the new lease standard resulted in the recognition of an operating lease asset of $154.1 million and an operating lease liability of $155.5 million. The adoption also resulted in a cumulative effect transitional adjustment of $26.6 million ($20.5 million, net of tax), to increase retained earnings, as a result of the elimination of a deferred gain related to a sale leaseback and the elimination of $38.7 million of property, plant, and equipment and $65.3 million of lease financing obligations also related to the sale leaseback. The adoption did not have a material impact on the Company’s results of operations or cash flows. See Notes 1 and 6 of the Condensed Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of the Company’s fiscal 2020 second quarter Form 10-Q for more information.

Lamb Weston Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited, dollars in millions)

 

 

 

 

 

 

 

Twenty-Six Weeks Ended

 

 

November 24,

 

November 25,

 

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net income

 

$

256.1

 

 

$

235.4

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization of intangibles and debt issuance costs

 

 

91.7

 

 

 

77.2

 

Stock-settled, stock-based compensation expense

 

 

12.6

 

 

 

9.2

 

Earnings of joint ventures in excess of distributions

 

 

(7.6

)

 

 

(4.5

)

Deferred income taxes

 

 

17.2

 

 

 

27.9

 

Other

 

 

2.0

 

 

 

6.2

 

Changes in operating assets and liabilities, net of acquisition:

 

 

 

 

Receivables

 

 

(55.2

)

 

 

(28.2

)

Inventories

 

 

(133.4

)

 

 

(149.4

)

Income taxes payable/receivable, net

 

 

17.5

 

 

 

3.7

 

Prepaid expenses and other current assets

 

 

46.3

 

 

 

51.0

 

Accounts payable

 

 

126.4

 

 

 

114.8

 

Accrued liabilities

 

 

(28.3

)

 

 

(26.5

)

Net cash provided by operating activities

 

$

345.3

 

 

$

316.8

 

Cash flows from investing activities

 

 

 

 

Acquisition of business, net of cash acquired

 

 

(116.7

)

 

 

Additions to property, plant and equipment

 

 

(88.1

)

 

 

(170.4

)

Additions to other long-term assets

 

 

(19.3

)

 

 

Investment in equity method joint venture

 

 

(17.1

)

 

 

Other

 

 

1.0

 

 

 

1.7

 

Net cash used for investing activities

 

$

(240.2

)

 

$

(168.7

)

Cash flows from financing activities

 

 

 

 

Proceeds from issuance of debt

 

 

299.3

 

 

 

Repayments of debt and financing obligations

 

 

(318.1

)

 

 

(20.3

)

Dividends paid

 

 

(58.5

)

 

 

(56.0

)

Repurchase of common stock and common stock withheld to cover taxes

 

 

(17.8

)

 

 

(4.4

)

Proceeds (payments) of short-term borrowings, net

 

 

1.4

 

 

 

4.3

 

Cash distributions paid to noncontrolling interest

 

 

 

 

(6.1

)

Other

 

 

0.1

 

 

 

1.1

 

Net cash used for financing activities

 

$

(93.6

)

 

$

(81.4

)

Effect of exchange rate changes on cash and cash equivalents

 

 

0.1

 

 

 

(0.7

)

Net increase in cash and cash equivalents

 

 

11.6

 

 

 

66.0

 

Cash and cash equivalents, beginning of the period

 

 

12.2

 

 

 

55.6

Cash and cash equivalents, end of period

$

23.8

$

121.6

Lamb Weston Holdings, Inc.

Segment Information

(unaudited, dollars in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

 

 

 

 

 

Year-Over-

 

 

 

 

 

 

November 24,

 

November 25,

 

Year Growth

 

 

 

 

 

 

2019

 

2018

 

Rates

 

Price/Mix

 

Volume

Segment sales

 

 

 

 

 

 

 

 

 

 

Global

 

$

539.6

 

$

470.0

 

15

%

 

1

%

 

14

%

Foodservice

 

 

304.9

 

 

279.7

 

9

%

 

4

%

 

5

%

Retail

 

 

132.1

 

 

123.9

 

7

%

 

3

%

 

4

%

Other

 

 

42.6

 

 

37.8

 

13

%

 

(9

%)

 

22

%

 

 

$

1,019.2

 

$

911.4

 

12

%

 

2

%

 

10

%

 

 

 

 

 

 

 

 

 

 

 

Segment product contribution margin (1)

 

 

 

 

 

 

 

 

 

 

Global

 

$

128.9

 

$

112.4

 

15

%

 

 

 

 

Foodservice

 

 

111.3

 

 

97.4

 

14

%

 

 

 

 

Retail

 

 

28.5

 

 

25.9

 

10

%

 

 

 

 

Other

 

 

10.4

 

 

7.2

 

44

%

 

 

 

 

 

 

 

279.1

 

 

242.9

 

15

%

 

 

 

 

Advertising and promotion expenses

 

 

6.0

 

 

6.1

 

(2

%)

 

 

 

 

Gross profit

 

$

285.1

 

$

249.0

 

14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twenty-Six Weeks Ended

 

 

 

 

 

 

Year-Over-

 

 

 

 

 

 

November 24,

 

November 25,

 

Year Growth

 

 

 

 

 

 

2019

 

2018

 

Rates

 

Price/Mix

 

Volume

Segment sales

 

 

 

 

 

 

 

 

 

 

Global

 

$

1,057.2

 

$

936.8

 

13

%

 

1

%

 

12

%

Foodservice

 

 

610.3

 

 

577.5

 

6

%

 

3

%

 

3

%

Retail

 

 

261.4

 

 

240.1

 

9

%

 

3

%

 

6

%

Other

 

 

79.3

 

 

71.9

 

10

%

 

(9

%)

 

19

%

 

 

$

2,008.2

 

$

1,826.3

 

10

%

 

2

%

 

8

%

 

 

 

 

 

 

 

 

 

 

 

Segment product contribution margin (1)

 

 

 

 

 

 

 

 

 

 

Global

 

$

231.6

 

$

206.9

 

12

%

 

 

 

 

Foodservice

 

 

213.8

 

 

199.4

 

7

%

 

 

 

 

Retail

 

 

57.4

 

 

48.6

 

18

%

 

 

 

 

Other

 

 

20.1

 

 

12.2

 

65

%

 

 

 

 

 

 

 

522.9

 

 

467.1

 

12

%

 

 

 

 

Advertising and promotion expenses

 

 

10.8

 

 

12.5

 

(14

%)

 

 

 

 

Gross profit

 

$

533.7

 

$

479.6

 

11

%

 

 

 

 

(1) Product contribution margin represents net sales less cost of sales and advertising and promotion expenses. Product contribution margin includes advertising and promotion expenses because the amounts are directly associated with segment performance; it excludes general corporate expenses and interest expense because management believes these amounts are not directly associated with segment performance.

Lamb Weston Holdings, Inc.

Reconciliation of Non-GAAP Financial Measures

(unaudited, dollars in millions, except per share amounts)

 

There were no items impacting comparability during the thirteen and twenty-six weeks ended November 24, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended November 25, 2018

 

 

 

 

 

 

 

 

Equity

 

 

 

Net Income

 

Net Income

 

 

 

 

Income

 

 

 

Income

 

Method

 

 

 

Attributable

 

Available to

 

 

 

 

From

 

Interest

 

Tax

 

Investment

 

 

 

to Lamb

 

Lamb Weston

 

Diluted

 

 

Operations

 

Expense

 

Expense

 

Earnings

 

Net Income

 

Weston

 

Stockholders

 

EPS

As reported

 

$

174.0

 

$

26.2

 

$

34.0

 

$

10.2

 

$

124.0

 

$

119.0

 

$

109.0

 

$

0.74

Items impacting comparability (1) (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in redemption value of noncontrolling interests, net of tax benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.5

 

 

0.06

Total items impacting comparability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.5

 

 

0.06

Adjusted (3)

 

$

174.0

 

$

26.2

 

$

34.0

 

$

10.2

 

$

124.0

 

$

119.0

 

$

118.5

 

$

0.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Twenty-Six Weeks Ended November 25, 2018

 

 

 

 

 

 

 

 

Equity

 

 

 

Net Income

 

Net Income

 

 

 

 

Income

 

 

 

Income

 

Method

 

 

 

Attributable

 

Available to

 

 

 

 

From

 

Interest

 

Tax

 

Investment

 

 

 

to Lamb

 

Lamb Weston

 

Diluted

 

 

Operations

 

Expense

 

Expense

 

Earnings

 

Net Income

 

Weston

 

Stockholders

 

EPS

As reported

 

$

326.6

 

$

53.0

 

$

68.3

 

$

30.1

 

$

235.4

 

$

226.8

 

$

215.9

 

$

1.47

Items impacting comparability (1) (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase in redemption value of noncontrolling interests, net of tax benefits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.5

 

 

0.06

Total items impacting comparability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.5

 

 

0.06

Adjusted (3)

 

$

326.6

 

$

53.0

 

$

68.3

 

$

30.1

 

$

235.4

 

$

226.8

 

$

225.4

 

$

1.53

(1) See footnote (1) to the Consolidated Statements of Earnings above for a discussion of the items impacting comparability.

(2) Items impacting comparability are tax effected at the marginal rate based on the applicable tax jurisdiction.

(3) Adjusted net income available to Lamb Weston stockholders 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 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 EBITDA including unconsolidated joint ventures, which is considered a non-GAAP financial measure. The following table reconciles net income attributable to Lamb Weston to EBITDA including unconsolidated joint ventures.

 

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks Ended

 

Twenty-Six Weeks Ended

 

 

November 24,

 

November 25,

 

November 24,

 

November 25,

 

 

2019

 

2018

 

2019

 

2018

Net income attributable to Lamb Weston Holdings, Inc.

 

$

140.4

 

 

$

119.0

 

 

$

256.1

 

 

$

226.8

 

Income attributable to noncontrolling interests

 

 

 

 

5.0

 

 

 

 

 

8.6

 

Equity method investment earnings

 

 

(15.0

)

 

 

(10.2

)

 

 

(25.6

)

 

 

(30.1

)

Interest expense, net

 

 

25.4

 

 

 

26.2

 

 

 

53.6

 

 

 

53.0

 

Income tax expense

 

 

42.7

 

 

 

34.0

 

 

 

79.4

 

 

 

68.3

 

Income from operations

 

 

193.5

 

 

 

174.0

 

 

 

363.5

 

 

 

326.6

 

Depreciation and amortization

 

 

44.7

 

 

 

37.4

 

 

 

87.8

 

 

 

74.8

 

EBITDA (1) (2)

 

 

238.2

 

 

 

211.4

 

 

 

451.3

 

 

 

401.4

 

 

 

 

 

 

 

 

 

 

Unconsolidated Joint Ventures (3)

 

 

 

 

 

 

 

 

Equity method investment earnings

 

 

15.0

 

 

 

10.2

 

 

 

25.6

 

 

 

30.1

 

Interest expense, income tax expense, and depreciation and

 

 

 

 

 

 

 

 

amortization included in equity method investment earnings

 

 

7.7

 

 

 

7.0

 

 

 

16.9

 

 

 

14.5

 

Add: EBITDA from unconsolidated joint ventures

 

 

22.7

 

 

 

17.2

 

 

 

42.5

 

 

 

44.6

 

 

 

 

 

 

 

 

 

 

Consolidated Joint Ventures (3)

 

 

 

 

 

 

 

 

Income attributable to noncontrolling interests

 

 

 

 

(5.0

)

 

 

 

 

(8.6

)

Interest expense, income tax expense, and depreciation and

 

 

 

 

 

 

 

 

amortization included in income attributable to noncontrolling interests

 

 

 

 

(0.8

)

 

 

 

 

(1.7

)

Subtract: EBITDA from consolidated joint ventures

 

 

 

 

(5.8

)

 

 

 

 

(10.3

)

 

 

 

 

 

 

 

 

 

EBITDA including unconsolidated joint ventures (1)

 

$

260.9

 

 

$

222.8

 

 

$

493.8

 

 

$

435.7

 

(1) EBITDA including unconsolidated joint ventures is a non-GAAP financial measure. Management excludes items impacting comparability between periods as it believes these items are not necessarily reflective of the ongoing operations of the Company. Lamb Weston presents this measure because the Company believes it provides 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 assists 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. This non-GAAP measure is not intended to be a substitute for GAAP financial measures and should not be used as such. See also “Non-GAAP Financial Measures” in this press release.

(2) EBITDA includes EBITDA from consolidated joint ventures for the thirteen and twenty-six weeks ended November 25, 2018.

(3) Lamb Weston holds equity interests in three potato processing joint ventures, including 50% of Lamb-Weston/Meijer v.o.f., Lamb-Weston/RDO Frozen, and Lamb Weston Alimentos Modernos S.A., which it accounts for its ownership under the equity method of accounting. Prior to purchasing the remaining 50.01% interest in its Lamb Weston BSW joint venture, Lamb Weston consolidated the financial statements of Lamb Weston BSW. In connection with the purchase, Lamb Weston began recognizing 100% of Lamb Weston BSW’s earnings in its Consolidated Statements of Earnings on November 2, 2018. See Note 7, Investments in Joint Ventures, of the Notes to Combined and Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” in the Company’s fiscal 2019 Form 10-K, for more information.

View source version on businesswire.com:https://www.businesswire.com/news/home/20200103005063/en/

CONTACT: Investors:

Dexter Congbalay

224-306-1535

dexter.congbalay@lambweston.comMedia:

Shelby Stoolman

208-424-5461

shelby.stoolman@lambweston.com

KEYWORD: UNITED STATES NORTH AMERICA IDAHO

INDUSTRY KEYWORD: RETAIL AGRICULTURE NATURAL RESOURCES FOOD/BEVERAGE

SOURCE: Lamb Weston Holdings, Inc.

Copyright Business Wire 2020.

PUB: 01/03/2020 08:30 AM/DISC: 01/03/2020 08:31 AM

http://www.businesswire.com/news/home/20200103005063/en