Lamb Weston(LW) - 2025 Q1 - Quarterly Results

Q1 Fiscal 2025 Performance Overview Financial Highlights Lamb Weston reported significant Q1 FY2025 declines in GAAP and Adjusted net income and EPS, with a 1% net sales decrease, alongside capital returns Q1 Fiscal 2025 Key Financial Results (vs. Q1 FY2024) | Metric | Q1 FY2025 Value (Millions USD) | Year-Over-Year Change | | :--- | :--- | :--- | | GAAP Results | | | | Net Sales | $1,654 | -1% | | Income from Operations | $212 | -34% | | Net Income | $127 | -46% | | Diluted EPS | $0.88 | -45% | | Non-GAAP Results | | | | Adjusted Income from Operations | $187 | -43% | | Adjusted Net Income | $105 | -56% | | Adjusted Diluted EPS | $0.73 | -55% | | Adjusted EBITDA | $290 | -30% | - The company returned a total of $134 million to shareholders during the quarter, consisting of $82 million in common stock repurchases and $52 million in cash dividends[1][15] Management Commentary Management noted Q1 results were in line with expectations, but anticipates persistent soft restaurant traffic and supply-demand imbalance, prompting restructuring actions - Q1 financial results were generally in line with expectations, driven by sequentially improved volume, solid price/mix, and strict cost management[3] - Management believes that soft restaurant traffic and frozen potato demand relative to supply will continue through the remainder of fiscal 2025[3] - The company is taking proactive steps to improve efficiency, including closing an older facility, temporarily curtailing production, reducing headcount, and cutting capital expenditures[3] Consolidated Financial Results Consolidated net sales decreased 1% due to volume declines, while gross profit and adjusted income from operations fell significantly from higher costs and a product withdrawal - Net sales decreased by 1% due to a 3% volume decline, partially offset by a 2% increase in price/mix, largely driven by customer share losses, soft restaurant traffic, and the impact of a voluntary product withdrawal[5] - Adjusted Gross Profit declined by $137.2 million, primarily due to higher manufacturing costs per pound from input cost inflation (especially raw potatoes), an approximately $39 million loss from a product withdrawal, lower sales volumes, and higher warehouse costs[7] - Adjusted Net Income and Adjusted Diluted EPS fell 56% and 55% respectively, driven by lower Adjusted Income from Operations, a higher effective tax rate (31.7% vs 23.1% prior year), and increased interest expense[8] Segment Performance Both North America and International segments experienced significant profitability declines due to volume drops, higher costs, and product withdrawal impacts North America North America segment net sales declined 3% due to volume drops, leading to a 27% Adjusted EBITDA decrease from higher costs and product withdrawal North America Segment Performance (Q1 FY2025) | Metric | Value (Millions USD) | YoY Change | | :--- | :--- | :--- | | Net Sales | $1,103.7 | -3% | | Volume | | -4% | | Price/Mix | | +1% | | Adjusted EBITDA | $276.1 | -27% | - The decline in Adjusted EBITDA was driven by higher manufacturing costs per pound, an approximately $21 million charge from the voluntary product withdrawal, and lower sales volumes[10] International International segment net sales grew 4% from price/mix, but Adjusted EBITDA plummeted 44% due to product withdrawal and higher manufacturing costs International Segment Performance (Q1 FY2025) | Metric | Value (Millions USD) | YoY Change | | :--- | :--- | :--- | | Net Sales | $550.4 | +4% | | Volume | | -1% | | Price/Mix | | +5% | | Adjusted EBITDA | $50.5 | -44% | - The decline in Adjusted EBITDA was largely driven by an approximately $18 million impact from the voluntary product withdrawal and higher manufacturing costs per pound[12] Financial Position and Cash Flow Net cash from operations slightly decreased, while capital expenditures increased for expansion, with the company maintaining strong liquidity and securing new debt - Net cash provided by operating activities was $330.2 million, a slight decrease of $4.4 million from the prior year period[14] - Capital expenditures were $335.6 million, up $30.9 million year-over-year, primarily for strategic capacity expansion projects[14] - The company returned $133.7 million to shareholders, comprising $51.7 million in dividends and $82.0 million in share repurchases[15] Corporate Actions and Outlook Restructuring Plan The company initiated a restructuring plan to improve efficiency and cash flow, targeting cost savings and capex reductions through facility closure, production curtailments, and workforce reduction - The plan is expected to generate approximately $55 million in pre-tax cost savings and a $100 million reduction in capital expenditures in fiscal 2025[2][17] - Key actions include closing the Connell, WA facility, temporarily curtailing production lines in North America, and reducing the global workforce by approximately 4%[2][16] - The company expects to record total estimated pre-tax charges of $200 million to $250 million, with about 80% being cash charges[2][17] Updated Fiscal 2025 Outlook Lamb Weston reaffirmed net sales guidance but significantly lowered its fiscal 2025 earnings outlook for GAAP and Adjusted EPS and EBITDA, while reducing capital expenditure Updated Fiscal 2025 Outlook | Metric | Updated FY2025 Target | Previous FY2025 Target | | :--- | :--- | :--- | | Net Sales | $6.6 B - $6.8 B | Reaffirmed | | GAAP Net Income | $395 M - $445 M | Not specified (lowered) | | GAAP Diluted EPS | $2.70 - $3.15 | Not specified (lowered) | | Adjusted EBITDA | Low-end of $1,380 M - $1,480 M | $1,380 M - $1,480 M | | Adjusted Net Income | $600 M - $615 M | $630 M - $705 M | | Adjusted Diluted EPS | $4.15 - $4.35 | $4.35 - $4.85 | | Capital Expenditures | ~$750 M | ~$850 M | - The company increased its full-year effective tax rate estimate to approximately 25% (from 24%) and its interest expense estimate to approximately $185 million (from ~$180 million)[18][19] Financial Statements and Reconciliations Consolidated Statements of Earnings This section provides the unaudited consolidated income statement for the thirteen weeks ended August 25, 2024, compared to the thirteen weeks ended August 27, 2023, detailing revenues, costs, and profits Consolidated Balance Sheets This section presents the unaudited consolidated balance sheet as of August 25, 2024, and May 26, 2024, outlining the company's assets, liabilities, and stockholders' equity Consolidated Statements of Cash Flows This section details the unaudited consolidated cash flows from operating, investing, and financing activities for the thirteen weeks ended August 25, 2024, and August 27, 2023 Reconciliation of Non-GAAP Financial Measures This section provides detailed reconciliations of GAAP financial measures to their non-GAAP counterparts, such as Adjusted Gross Profit, Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted EBITDA, for the reported periods