Lamb Weston(LW) - 2025 Q3 - Quarterly Report

Financial Performance - Net sales for the third quarter of fiscal 2025 increased by $62.2 million, or 4$1,520.5 million, with volume increasing by 9% compared to the prior year quarter [89]. - North America segment net sales rose by $38.8 million, or 4$986.3 million, with volume increasing by 8% due to recent customer contract wins [91]. - International segment net sales increased by $23.4 million, or 5$534.2 million, with volume up by 12% driven by chain customer contract wins [92]. - Net income decreased by $0.1 million to$146.0 million, impacted by a total net loss of $10.6 million from various unrealized gains and losses [97]. - Net sales for the first three quarters of fiscal 2025 declined by$80.2 million, or 2%, to $4,775.5 million [105]. - North America segment net sales decreased by$87.9 million, or 3%, to $3,162.1 million, primarily due to customer volume losses [107]. - Net income for the thirty-nine weeks ended February 23, 2025, was$237.3 million, compared to $595.8 million for the same period in the prior year [137]. Profitability - Adjusted Gross Profit declined by$6.6 million to $420.4 million, primarily due to unfavorable price/mix and higher transportation costs [94]. - Adjusted Gross Profit declined by$278.7 million to $1,117.0 million, influenced by higher manufacturing and transportation costs [110]. - Adjusted EBITDA increased by$20.2 million to 363.8 million, driven by higher net sales and lower Adjusted SG&A, despite lower Adjusted Gross Profit [98]. - Adjusted EBITDA for the thirty-nine weeks ended February 23, 2025, was 935.6 million, down from $1,133.4 million in the prior year [137]. - Adjusted gross profit for the thirty-nine weeks ended February 23, 2025, was$1,117.0 million, down from $1,395.7 million in the prior year, indicating a decrease of 20$15.6 million to 164.2 million, including various unrealized gains and losses related to currency hedging [95]. - Adjusted SG&A declined by 7.2 million year-over-year to $157.2 million, primarily due to cost savings from the Restructuring Plan and management initiatives [96]. - Interest expense increased by$11.6 million to $47.3 million, reflecting higher total debt and lower capitalized interest [101]. - The company incurred restructuring plan expenses of$76.2 million for the thirty-nine weeks ended February 23, 2025, compared to $84.2 million in the same period of 2024 [140]. Restructuring and Future Outlook - The Restructuring Plan is expected to generate approximately$55 million in pre-tax cost savings and reduce working capital in fiscal 2025 [86]. - Total pre-tax charges related to the Restructuring Plan are estimated to be between $190 million and$210 million [86]. - The company expects sales volumes in the fourth quarter to be slightly higher than in the third quarter, primarily due to growth in the International segment [82]. - The company anticipates an increase in costs per pound in the fourth quarter, reflecting seasonal trends and high input costs [82]. - The company recorded an estimated $135 million impact on net sales due to the ERP transition, with a net income impact of approximately$95 million [137]. Cash Flow and Capital Management - Cash provided by operating activities increased by $3.8 million to$485.3 million for the first three quarters of fiscal 2025, primarily due to $274.0 million in favorable changes in working capital [126]. - Investing activities used$559.0 million in cash during the first three quarters of fiscal 2025, a decrease from $824.8 million in the same period of the prior year, mainly for expanding french fry capacity and facility modernization [127]. - The company decreased its estimated capital expenditures for fiscal 2025 by$100 million to $750 million, excluding acquisitions, due to a pause in the next phase of its ERP build [129]. - During the first three quarters of fiscal 2025, the company borrowed$162.2 million under its revolving credit facility and $525.3 million under new long-term debt facilities [130]. - The company repurchased 2,972,221 shares of common stock at an average price of$61.23 per share, totaling $193.8 million, and paid$154.7 million in cash dividends to common stockholders [130]. Market Risks and Compliance - The company is evaluating the impact of new tariffs but does not expect them to significantly affect fiscal 2025 financial results [83]. - The company remains in compliance with financial covenant ratios and other covenants contained in its debt agreements as of February 23, 2025 [132]. - The company continues to monitor and manage market risks related to currency exchange rates, commodity prices, and interest rates as part of its risk management program [145]. - No material changes to market risk were reported during the thirty-nine weeks ended February 23, 2025 [146].