Income Statement
Lamb Weston Holdings, Inc.
Consolidated Statements of Earnings
(unaudited, in millions, except per share amounts)
Thirteen Weeks Ended Twenty-Six Weeks Ended
November 27, November 28, November 27, November 28,
2022 2021 2022 2021
Net sales $ 1,276.5 $ 1,006.6 $ 2,402.1 $ 1,990.8
Cost of sales 894.9 801.1 1,747.2 1,634.0
Gross profit 381.6 205.5 654.9 356.8
Selling, general and administrative expenses 109.8 91.1 226.1 182.2
Income from operations (1) 271.8 114.4 428.8 174.6
Interest expense, net (2) 24.6 82.4 50.6 110.3
Income before income taxes and equity method earnings 247.2 32.0 378.2 64.3
Income tax expense 36.8 9.6 110.5 18.3
Equity method investment earnings (loss) (3) (107.3) 10.1 67.3 16.3
Net income $ 103.1 $ 32.5 $ 335.0 $ 62.3
Earnings per share:
Basic $ 0.72 $ 0.23 $ 2.33 $ 0.43
Diluted $ 0.71 $ 0.22 $ 2.32 $ 0.42
Dividends declared per common share $ 0.245 $ 0.235 $ 0.490 $ 0.470
Weighted average common shares outstanding:
Basic 144.0 146.0 144.0 146.1
Diluted 144.6 146.3 144.6 146.6
(1) Income from operations for the thirteen and twenty-six weeks ended November 27, 2022 included a net $26.5 million gain ($19.2 million after-tax, or $0.13 per share) related to actions taken to mitigate the effect of changes in currency rates on the purchase price of the remaining ownership interest in LWM, net of other acquisition-related costs.
(2) Interest expense, net, for the thirteen and twenty-six weeks ended November 28, 2021 included a loss on the extinguishment of debt of $53.3 million ($40.5 million after-tax, or $0.28 per share), which included an aggregate call premium of $39.6 million related to the redemption of the Company's 4.625% senior notes due 2024 and 4.875% senior notes due 2026, and the write-off of $13.7 million of previously unamortized debt issuance costs associated with those notes.
(3) Equity method investment earnings (loss) included a $136.8 million unrealized loss ($101.5 million after-tax, or $0.70 per share) and a $6.3 million unrealized gain ($4.7 million after-tax, or $0.03 per share) for the thirteen weeks ended November 27, 2022 and November 28, 2021, respectively; and unrealized gains of $9.5 million ($7.0 million after-tax, or $0.05 per share) and $11.3 million ($8.4 million after-tax, or $0.06 per share) for the twenty-six weeks ended November 27, 2022 and November 28, 2021, respectively, related to mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility. Equity method investment earnings (loss) for the twenty-six weeks ended November 27, 2022 also included a $15.1 million gain (before and after-tax, or $0.10 per share) recognized in connection with the Company's acquisition of an additional 40 percent interest in its Argentina joint venture, bringing total ownership from 50 percent to 90 percent. The gain related to the remeasuring of the Company's previously held 50 percent ownership interest to fair value.
Balance Sheet
Lamb Weston Holdings, Inc.
Consolidated Balance Sheets
(unaudited, in millions, except share data)
November 27, May 29,
2022 2022
ASSETS
Current assets:
Cash and cash equivalents $ 419.4 $ 525.0
Receivables, less allowance for doubtful accounts of $1.4 and $1.1 508.9 447.3
Inventories 822.1 574.4
Prepaid expenses and other current assets 50.7 112.9
Total current assets 1,801.1 1,659.6
Property, plant and equipment, net 1,758.2 1,579.2
Operating lease assets 113.9 119.0
Equity method investments 263.7 257.4
Goodwill 347.5 318.0
Intangible assets, net 32.0 33.7
Other assets 253.2 172.9
Total assets $ 4,569.6 $ 4,139.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 9.0 $ -
Current portion of long-term debt and financing obligations 32.2 32.2
Accounts payable 580.6 402.6
Accrued liabilities 296.7 264.3
Total current liabilities 918.5 699.1
Long-term liabilities:
Long-term debt and financing obligations, excluding current portion 2,701.1 2,695.8
Deferred income taxes 177.7 172.5
Other noncurrent liabilities 199.3 211.9
Total long-term liabilities 3,078.1 3,080.2
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value, 600,000,000 shares authorized; 148,330,983 and 148,045,584 shares issued 148.3 148.0
Additional distributed capital (785.5) (813.3)
Retained earnings 1,569.2 1,305.5
Accumulated other comprehensive loss (61.5) (15.6)
Treasury stock, at cost, 4,460,674 and 3,974,156 common shares (297.5) (264.1)
Total stockholders' equity 573.0 360.5
Total liabilities and stockholders' equity $ 4,569.6 $ 4,139.8
Cash Flows
Lamb Weston Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited, in millions)
Twenty-Six Weeks Ended
November 27, November 28,
2022 2021
Cash flows from operating activities
Net income $ 335.0 $ 62.3
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles and debt issuance costs 102.0 94.9
Loss on extinguishment of debt - 53.3
Stock-settled, stock-based compensation expense 17.6 9.6
Equity method investment earnings in excess of distributions (67.6) (2.2)
Deferred income taxes (6.8) 4.3
Foreign currency remeasurement gain (16.8) -
Other (13.2) (0.5)
Changes in operating assets and liabilities, net of acquisition:
Receivables (54.8) (57.7)
Inventories (240.1) (101.3)
Income taxes payable/receivable, net 24.8 3.1
Prepaid expenses and other current assets 52.7 58.5
Accounts payable 140.6 94.7
Accrued liabilities 14.6 (11.5)
Net cash provided by operating activities $ 288.0 $ 207.5
Cash flows from investing activities
Additions to property, plant and equipment (232.9) (147.1)
Acquisition of interest in joint venture, net (42.3) -
Additions to other long-term assets (37.4) (1.0)
Other 1.6 0.5
Net cash used for investing activities $ (311.0) $ (147.6)
Cash flows from financing activities
Proceeds from issuance of debt 23.3 1,655.4
Repayments of debt and financing obligations (16.7) (1,682.1)
Dividends paid (70.6) (68.7)
Repurchase of common stock and common stock withheld to cover taxes (34.9) (83.5)
Payments of senior notes call premium - (39.6)
Other 2.3 (0.8)
Net cash used for financing activities $ (96.6) $ (219.3)
Effect of exchange rate changes on cash and cash equivalents 14.0 (2.2)
Net decrease in cash and cash equivalents (105.6) (161.6)
Cash and cash equivalents, beginning of period 525.0 783.5
Cash and cash equivalents, end of period $ 419.4 $ 621.9
Segments
Lamb Weston Holdings, Inc.
Segment Information
(unaudited, in millions, except percentages)
Thirteen Weeks Ended
Year-Over-
November 27, November 28, Year Growth
2022 2021 Rates Price/Mix Volume
Segment net sales
Global $ 692.8 $ 516.7 34% 31% 3%
Foodservice 357.9 313.9 14% 25% (11%)
Retail 191.5 142.6 34% 43% (9%)
Other 34.3 33.4 3% 5% (2%)
$ 1,276.5 $ 1,006.6 27% 30% (3%)
Segment product contribution margin (1)
Global $ 171.0 $ 80.9 111%
Foodservice 130.8 104.4 25%
Retail 65.7 21.4 207%
Other (2) 7.5 (6.2) 221%
375.0 200.5 87%
Add: Advertising and promotion expenses 6.6 5.0 32%
Gross profit $ 381.6 $ 205.5 86%
Twenty-Six Weeks Ended
Year-Over-
November 27, November 28, Year Growth
2022 2021 Rates Price/Mix Volume
Segment net sales
Global $ 1,252.5 $ 1,017.9 23% 23% 0%
Foodservice 724.3 635.3 14% 25% (11%)
Retail 361.0 275.1 31% 38% (7%)
Other 64.3 62.5 3% 8% (5%)
$ 2,402.1 $ 1,990.8 21% 26% (5%)
Segment product contribution margin (1)
Global $ 254.7 $ 123.5 106%
Foodservice 269.1 200.8 34%
Retail 114.4 36.2 216%
Other (2) 5.6 (12.8) 144%
643.8 347.7 85%
Add: Advertising and promotion expenses 11.1 9.1 22%
Gross profit $ 654.9 $ 356.8 84%
(1) Product contribution margin is one of the primary measures reported to the Company's chief operating decision maker for purposes of allocating resources to the Company's segments and assessing their performance. Product contribution margin represents net sales less cost of sales and advertising and promotion expenses. Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with the performance of the Company's segments. Product contribution margin, when presented on a consolidated basis, is a non-GAAP financial measure. See "Non-GAAP Financial Measures" in this press release for a description of non-GAAP financial measures and the table above for a reconciliation of product contribution margin on a consolidated basis to gross profit.
(2) The Other segment primarily includes the Company's vegetable and dairy businesses and unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts. Unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts reported in the Other segment included a gain of $2.0 million and a loss of $8.6 million for the thirteen weeks ended November 27, 2022 and November 28, 2021, respectively; and losses of $6.9 million and $16.9 million for the twenty-six weeks ended November 27, 2022 and November 28, 2021, respectively.
NON GAAP
Lamb Weston Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures
(unaudited, in millions, except per share amounts)
Equity
Income Income Method
From Interest Tax Investment Diluted
Thirteen Weeks Ended November 27, 2022 Operations Expense Expense (1) Earnings (Loss) Net Income EPS
As reported $ 271.8 $ 24.6 $ 36.8 $ (107.3) $ 103.1 $ 0.71
Items impacting comparability:
Impact of LWM natural gas and electricity derivatives (2) - - 35.3 136.8 101.5 0.70
LWM acquisition-related items, net (2) (26.5) - (7.3) - (19.2) (0.13)
Total items impacting comparability (26.5) - 28.0 136.8 82.3 0.57
Adjusted (3) $ 245.3 $ 24.6 $ 64.8 $ 29.5 $ 185.4 $ 1.28
Thirteen Weeks Ended November 28, 2021
As reported $ 114.4 $ 82.4 $ 9.6 $ 10.1 $ 32.5 $ 0.22
Items impacting comparability:
Impact of LWM natural gas and electricity derivatives (2) - - (1.6) (6.3) (4.7) (0.03)
Loss on extinguishment of debt (2) - (53.3) 12.8 - 40.5 0.28
Total items impacting comparability - (53.3) 11.2 (6.3) 35.8 0.25
Adjusted (3) $ 114.4 $ 29.1 $ 20.8 $ 3.8 $ 68.3 $ 0.47
Twenty-Six Weeks Ended November 27, 2022
As reported $ 428.8 $ 50.6 $ 110.5 $ 67.3 $ 335.0 $ 2.32
Items impacting comparability:
Impact of LWM natural gas and electricity derivatives (2) - - (2.5) (9.5) (7.0) (0.05)
LWM acquisition-related items, net (2) (26.5) - (7.3) - (19.2) (0.13)
Gain on acquisition of interest in joint venture (2) - - - (15.1) (15.1) (0.10)
Total items impacting comparability (26.5) - (9.8) (24.6) (41.3) (0.28)
Adjusted (3) $ 402.3 $ 50.6 $ 100.7 $ 42.7 $ 293.7 $ 2.04
Twenty-Six Weeks Ended November 28, 2021
As reported $ 174.6 $ 110.3 $ 18.3 $ 16.3 $ 62.3 $ 0.42
Items impacting comparability:
Impact of LWM natural gas and electricity derivatives (2) - - (2.9) (11.3) (8.4) (0.06)
Loss on extinguishment of debt (2) - (53.3) 12.8 - 40.5 0.28
Total items impacting comparability - (53.3) 9.9 (11.3) 32.1 0.22
Adjusted (3) $ 174.6 $ 57.0 $ 28.2 $ 5.0 $ 94.4 $ 0.64
(1) Items impacting comparability are tax effected at the marginal rate based on the applicable tax jurisdiction. For the twenty-six weeks ended November 27, 2022, there is no tax impact associated with the gain on the acquisition of an additional 40 percent interest in the Company's Argentina joint venture.
(2) See footnotes (1), (2), and (3) to the Consolidated Statements of Earnings above for a discussion of the items impacting comparability.
(3) Adjusted income from operations, interest expense, income tax expense, equity method investment earnings (loss), net income, and diluted earnings per share are non-GAAP financial measures. These non-GAAP financial measures reflect management's exclusion of items impacting comparability between periods as management believes these items are not necessarily reflective of the underlying operating trends of the Lamb Weston business. Management uses these non-GAAP financial measures as a means to evaluate the underlying performance of the Lamb Weston business on an ongoing basis, and management believes these measures, when considered together with the corresponding GAAP financial measures and the reconciliations to those measures, provide useful supplemental information regarding the factors and trends affecting the Company's business than could be obtained absent these disclosures. Any analysis of non-GAAP financial measures should be done only in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures are not intended to be a substitute for GAAP financial measures and should not be used as such. See also "Non-GAAP Financial Measures" in this press release.
New EBITDA Recon
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 and Adjusted EBITDA including unconsolidated joint ventures, which are non-GAAP financial measures. The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures.
Thirteen Weeks Ended Twenty-Six Weeks Ended
November 27, November 28, November 27, November 28,
2022 2021 2022 2021
Net income $ 103.1 $ 32.5 $ 335.0 $ 62.3
Equity method investment loss (earnings) (1) 107.3 (10.1) (67.3) (16.3)
Interest expense, net 24.6 82.4 50.6 110.3
Income tax expense 36.8 9.6 110.5 18.3
Income from operations 271.8 114.4 428.8 174.6
Depreciation and amortization 51.2 46.2 99.9 92.2
Adjusted EBITDA (2) 323.0 160.6 528.7 266.8
Unconsolidated Joint Ventures (3)
Equity method investment earnings (loss) (107.3) 10.1 67.3 16.3
Interest expense, income tax expense, and depreciation and
amortization included in equity method investment earnings 8.6 10.2 17.6 21.2
Items impacting comparability
Impact of LWM natural gas and electricity derivatives (1) 136.8 (6.3) (9.5) (11.3)
LWM acquisition-related items, net (1) (26.5) - (26.5) -
Gain on acquisition of interest in joint venture (1) - - (15.1) -
Add: Adjusted EBITDA from unconsolidated joint ventures 11.6 14.0 33.8 26.2
Adjusted EBITDA including unconsolidated joint ventures (2) $ 334.6 $ 174.6 $ 562.5 $ 293.0
(1) See footnotes (1) and (3) to the Consolidated Statements of Earnings for a discussion of the items impacting comparability.
(2) Ajusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures are non-GAAP financial measures. These non-GAAP financial measures reflect management's exclusion of items impacting comparability between periods as management believes these items are not necessarily reflective of the underlying operating trends of the Lamb Weston business. Management uses these non-GAAP financial measures as a means to evaluate the underlying performance of the Lamb Weston business on an ongoing basis, and management believes these measures, when considered together with the corresponding GAAP financial measure, net income, and the reconciliations to that measure, provide useful supplemental information regarding the factors and trends affecting the Company's business than could be obtained absent these disclosures. Any analysis of non-GAAP financial measures should be done only in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures are not intended to be a substitute for GAAP financial measures and should not be used as such. See also "Non-GAAP Financial Measures" in this press release.
(3) Lamb Weston holds equity interest in three potato processing joint ventures, including 50 percent of LWM, 50 percent of Lamb-Weston/RDO Frozen ("LWRDO"), and 90 percent of LWAMSA. Lamb Weston accounts for the investments in LWM and LWRDO under the equity method of accounting. In July 2022, Lamb Weston acquired an additional 40 percent interest in LWAMSA and began to account for the investment in LWAMSA by consolidating their results in Lamb Weston's consolidated financial statements. See Note 4, Equity Method Investments, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in the Company's fiscal 2022 Form 10-K, for more information. In October 2022, the Company entered into an agreement to acquire the remaining equity interest in LWM. The acquisition is expected to close during the fourth quarter of fiscal 2023, after which Lamb Weston will own 100% of LWM and consolidate its results in Lamb Weston's consolidated financial statements.

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Lamb Weston Holdings Inc. published this content on 05 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 January 2023 16:17:05 UTC.