Lamb Weston Holdings, Inc 10-Q for FY2021 Q2

Lamb Weston Holdings, Inc. (LW)

10-Q 2021-01-07 For: 2020-11-29

Added on April 07, 2026

About this 10-Q

Lamb Weston Holdings, Inc filed this 10-Q on January 7, 2021, covering the quarter ended November 29, 2020 (FY2021 Q2).

Headline figures

Quarter ended November 29, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $896.1M; down 12.1% from $1.02B a year earlier
Net income: $96.9M; down 31.0% from net income of $140.4M a year earlier
Diluted EPS: $0.66; down 30.5% from $0.95 a year earlier

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Delaware		61-1797411
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

599 S. Rivershore Lane Eagle, Idaho		83616
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	LW	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

Part I. FINANCIAL INFORMATION (Unaudited)
	Item 1	Financial Statements
		Consolidated Statements of Earnings for the Thirteen and Twenty-Six Weeks ended November 29, 2020 and November 24, 2019	3
		Consolidated Statements of Comprehensive Income for the Thirteen and Twenty-Six Weeks ended November 29, 2020 and November 24, 2019	4
		Consolidated Balance Sheets as of November 29, 2020 and May 31, 2020	5
		Consolidated Statements of Stockholders’ Equity for the Thirteen and Twenty-Six Weeks Ended November 29, 2020 and November 24, 2019	6
		Consolidated Statements of Cash Flows for the Twenty-Six Weeks ended November 29, 2020 and November 24, 2019	7
		Condensed Notes to Consolidated Financial Statements	8
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4	Controls and Procedures	30

Part II. OTHER INFORMATION			30
	Item 1	Legal Proceedings	30
	Item 1A	Risk Factors	30
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	31
	Item 3	Defaults Upon Senior Securities	31
	Item 4	Mine Safety Disclosures	31
	Item 5	Other Information	31
	Item 6	Exhibits	32
		Signatures	33


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 29,		November 24,		November 29,		November 24,
	2020		2019		2020		2019
Net sales	$	896.1	$	1,019.2	$	1,767.6	$	2,008.2
Cost of sales		672.6		734.1		1,330.3		1,474.5
Gross profit		223.5		285.1		437.3		533.7
Selling, general and administrative expenses		83.9		91.6		162.0		170.2
Income from operations		139.6		193.5		275.3		363.5
Interest expense, net		30.0		25.4		60.3		53.6
Income before income taxes and equity method earnings		109.6		168.1		215.0		309.9
Income tax expense		31.9		42.7		59.9		79.4
Equity method investment earnings		19.2		15.0		31.1		25.6
Net income	$	96.9	$	140.4	$	186.2	$	256.1
Earnings per share
Basic	$	0.66	$	0.96	$	1.27	$	1.75
Diluted	$	0.66	$	0.95	$	1.27	$	1.74


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Thirteen Weeks Ended						Thirteen Weeks Ended
	November 29, 2020						November 24, 2019
			Tax						Tax
	Pre-Tax		(Expense)		After-Tax		Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
Net income	$	128.8	$	(31.9)	$	96.9	$	183.1	$	(42.7)	$	140.4
Other comprehensive income (loss):
Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss)		—		—		—		0.2		(0.1)		0.1
Unrealized currency translation gains (losses)		8.1		(0.1)		8.0		(0.4)		1.0		0.6
Comprehensive income	$	136.9	$	(32.0)	$	104.9	$	182.9	$	(41.8)	$	141.1


	November 29,		May 31,
	2020		2020
ASSETS
Current assets:
Cash and cash equivalents	$	763.9	$	1,364.0
Receivables, less allowance for doubtful accounts of $1.0 and $1.3		353.2		342.1
Inventories		630.5		486.7
Prepaid expenses and other current assets		38.2		109.8
Total current assets		1,785.8		2,302.6
Property, plant and equipment, net		1,485.2		1,535.0
Operating lease assets		155.1		167.0
Equity method investments		291.4		250.2
Goodwill		325.1		303.8
Intangible assets, net		37.9		38.3
Other assets		78.6		65.4
Total assets	$	4,159.1	$	4,662.3

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	—	$	498.7
Current portion of long-term debt and financing obligations		31.8		48.8
Accounts payable		377.4		244.4
Accrued liabilities		205.1		233.0
Total current liabilities		614.3		1,024.9
Long-term liabilities:
Long-term debt and financing obligations, excluding current portion		2,719.4		2,992.6
Deferred income taxes		158.0		152.5
Other noncurrent liabilities		258.5		252.3
Total long-term liabilities		3,135.9		3,397.4
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value, 600,000,000 shares authorized; 147,466,446 and 146,993,751 shares issued		147.5		147.0
Additional distributed capital		(850.4)		(862.9)
Retained earnings		1,182.8		1,064.6
Accumulated other comprehensive income (loss)		7.0		(40.5)
Treasury stock, at cost, 1,111,364 and 954,858 common shares		(78.0)		(68.2)
Total stockholders' equity		408.9		240.0
Total liabilities and stockholders’ equity	$	4,159.1	$	4,662.3


	Thirteen Weeks Ended November 29, 2020 and November 24, 2019
							Additional				Accumulated
	Common Stock,		Common		Treasury		Paid-in				Other
	net of Treasury		Stock		Stock		(Distributed)		Retained		Comprehensive		Total
	Shares		Amount		Amount		Capital		Earnings		Income (Loss)		Equity
Balance at August 30, 2020		146,324,943	$	147.4	$	(77.8)	$	(856.5)	$	1,119.9	$	(1.0)	$	332.0
Dividends declared, $0.23 per share		—		—		—		—		(33.7)		—		(33.7)
Common stock issued		35,494		0.1		—		0.4		—		—		0.5
Stock-settled, stock-based compensation expense		—		—		—		5.3		—		—		5.3
Common stock withheld to cover taxes		(5,355)		—		(0.2)		—		—		—		(0.2)
Other		—		—		—		0.4		(0.3)		—		0.1
Comprehensive income		—		—		—		—		96.9		8.0		104.9
Balance at November 29, 2020		146,355,082	$	147.5	$	(78.0)	$	(850.4)	$	1,182.8	$	7.0	$	408.9

Balance at August 25, 2019		146,062,722	$	146.8	$	(46.7)	$	(884.7)	$	911.1	$	(34.2)	$	92.3
Dividends declared, $0.20 per share		—		—		—		—		(29.2)		—		(29.2)
Common stock issued		76,787		—		—		0.2		—		—		0.2
Stock-settled, stock-based compensation expense		—		—		—		7.2		—		—		7.2
Repurchase of common stock and common stock withheld to cover taxes		(136,305)		—		(10.4)		—		—		—		(10.4)
Other		—		—		—		0.3		(0.4)		—		(0.1)
Comprehensive income		—		—		—		—		140.4		0.7		141.1
Balance at November 24, 2019		146,003,204	$	146.8	$	(57.1)	$	(877.0)	$	1,021.9	$	(33.5)	$	201.1


	Twenty-Six Weeks Ended November 29, 2020 and November 24, 2019
							Additional				Accumulated
	Common Stock,		Common		Treasury		Paid-in				Other
	net of Treasury		Stock		Stock		(Distributed)		Retained		Comprehensive		Total
	Shares		Amount		Amount		Capital		Earnings		Income (Loss)		Equity
Balance at May 31, 2020		146,038,893	$	147.0	$	(68.2)	$	(862.9)	$	1,064.6	$	(40.5)	$	240.0
Dividends declared, $0.46 per share		—		—		—		—		(67.4)		—		(67.4)
Common stock issued		472,695		0.5		—		0.6		—		—		1.1
Stock-settled, stock-based compensation expense		—		—		—		11.3		—		—		11.3
Common stock withheld to cover taxes		(156,506)		—		(9.8)		—		—		—		(9.8)
Other		—		—		—		0.6		(0.6)		—		—
Comprehensive income		—		—		—		—		186.2		47.5		233.7
Balance at November 29, 2020		146,355,082	$	147.5	$	(78.0)	$	(850.4)	$	1,182.8	$	7.0	$	408.9

Balance at May 26, 2019		146,069,033	$	146.7	$	(39.3)	$	(890.3)	$	803.6	$	(25.3)	$	(4.6)
Adoption of ASC 842 leases		—		—		—		—		20.5		—		20.5
Dividends declared, $0.40 per share		—		—		—		—		(58.4)		—		(58.4)
Common stock issued		182,197		0.1		—		0.1		—		—		0.2
Stock-settled, stock-based compensation expense		—		—		—		12.6		—		—		12.6
Repurchase of common stock and common stock withheld to cover taxes		(248,026)		—		(17.8)		—		—		—		(17.8)
Other		—		—		—		0.6		0.1		—		0.7
Comprehensive income		—		—		—		—		256.1		(8.2)		247.9
Balance at November 24, 2019		146,003,204	$	146.8	$	(57.1)	$	(877.0)	$	1,021.9	$	(33.5)	$	201.1


	Global		Foodservice		Retail		Other		Total
Balance at May 31, 2020	$	245.6	$	42.8	$	10.9	$	4.5	$	303.8
Foreign currency translation adjustment		21.3		—		—		—		21.3
Balance at November 29, 2020	$	266.9	$	42.8	$	10.9	$	4.5	$	325.1


	November 29, 2020							May 31, 2020
	Weighted							Weighted
	Average	Gross						Average	Gross
	Useful Life	Carrying		Accumulated		Intangible		Useful Life	Carrying		Accumulated		Intangible
	(in years)	Amount		Amortization		Assets, Net		(in years)	Amount		Amortization		Assets, Net
Non-amortizing intangible assets (a)	n/a	$	18.0	$	—	$	18.0	n/a	$	18.0	$	—	$	18.0
Amortizing intangible assets (b)	11		43.5		(23.6)		19.9	11		42.4		(22.1)		20.3
		$	61.5	$	(23.6)	$	37.9		$	60.4	$	(22.1)	$	38.3


			Remaining
			Weighted
	Unrecognized		Average
	Compensation		Recognition
	Expense		Period (in years)
Stock-settled RSUs	$	23.8		2.1
Performance Shares		11.9		1.9
Total unrecognized stock-based expense	$	35.7		2.0


	As of November 29, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.1	$	—	$	—	$	0.1
Derivative assets (a)		—		5.4		—		5.4
Total assets	$	0.1	$	5.4	$	—	$	5.5
Liabilities:
Deferred compensation liabilities (b)		—		22.9		—		22.9
Total liabilities	$	—	$	22.9	$	—	$	22.9


	Twenty-Six Weeks Ended
	November 29,		November 24,
	2020		2019
Cash flows from operating activities
Net income	$	186.2	$	256.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles and debt issuance costs		95.7		91.7
Stock-settled, stock-based compensation expense		11.3		12.6
Earnings of joint ventures in excess of distributions		(24.4)		(7.6)
Deferred income taxes		2.5		17.2
Other		15.5		2.0
Changes in operating assets and liabilities, net of acquisition:
Receivables		(8.5)		(55.2)
Inventories		(140.3)		(133.4)
Income taxes payable/receivable, net		33.0		17.5
Prepaid expenses and other current assets		51.8		46.3
Accounts payable		138.5		126.4
Accrued liabilities		(42.5)		(28.3)
Net cash provided by operating activities	$	318.8	$	345.3
Cash flows from investing activities
Additions to property, plant and equipment		(42.3)		(88.1)
Additions to other long-term assets		(11.4)		(19.3)
Acquisition of business, net of cash acquired		—		(116.7)
Investment in equity method joint venture		—		(17.1)
Other		0.4		1.0
Net cash used for investing activities	$	(53.3)	$	(240.2)
Cash flows from financing activities
Proceeds (payments) of short-term borrowings, net		(498.8)		1.4
Repayments of debt and financing obligations		(289.6)		(318.1)
Dividends paid		(67.2)		(58.5)
Repurchase of common stock and common stock withheld to cover taxes		(9.8)		(17.8)
Payments of debt issuance costs		(2.8)		—
Proceeds from issuance of debt		—		299.3
Other		1.0		0.1
Net cash used for financing activities	$	(867.2)	$	(93.6)
Effect of exchange rate changes on cash and cash equivalents		1.6		0.1
Net increase (decrease) in cash and cash equivalents		(600.1)		11.6
Cash and cash equivalents, beginning of the period		1,364.0		12.2
Cash and cash equivalents, end of period	$	763.9	$	23.8


	November 29,		May 31,
	2020		2020
Raw materials and packaging	$	208.2	$	106.2
Finished goods		382.7		339.2
Supplies and other		39.6		41.3
Inventories	$	630.5	$	486.7


	November 29,		May 31,
	2020		2020
Land and land improvements	$	107.8	$	107.2
Buildings, machinery, and equipment		2,696.6		2,670.1
Furniture, fixtures, office equipment, and other		95.7		107.1
Construction in progress		73.8		58.3
Property, plant and equipment, at cost		2,973.9		2,942.7
Less accumulated depreciation		(1,488.7)		(1,407.7)
Property, plant and equipment, net	$	1,485.2	$	1,535.0


	November 29,		May 31,
	2020		2020
Short-term borrowings:
Revolving credit facility	$	—	$	495.0
Other credit facilities		—		3.7
		—		498.7
Long-term debt:
Term loan facility, due November 2021		—		276.6
Term A-1 loan facility, due June 2024		281.3		288.7
Term A-2 loan facility, due April 2025		320.9		325.0
4.625% senior notes, due November 2024		833.0		833.0
4.875% senior notes, due November 2026		833.0		833.0
4.875% senior notes, due May 2028		500.0		500.0
		2,768.2		3,056.3
Financing obligations:
Lease financing obligations due on various dates through 2040 (a)		7.6		13.3
		7.6		13.3

Total debt and financing obligations		2,775.8		3,568.3
Debt issuance costs		(24.6)		(28.2)
Short-term borrowings		—		(498.7)
Current portion of long-term debt and financing obligations		(31.8)		(48.8)
Long-term debt and financing obligations, excluding current portion	$	2,719.4	$	2,992.6


	As of May 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.1	$	—	$	—	$	0.1
Total assets	$	0.1	$	—	$	—	$	0.1
Liabilities:
Derivative liabilities (a)	$	—	$	4.7	$	—	$	4.7
Deferred compensation liabilities (b)		—		18.0		—		18.0
Total liabilities	$	—	$	22.7	$	—	$	22.7


	Foreign				Accumulated
	Currency		Pension and		Other
	Translation		Post-Retirement		Comprehensive
	Gains (Losses)		Benefits		Income (Loss)
Balance as of May 31, 2020	$	(36.3)	$	(4.2)	$	(40.5)
Other comprehensive income before reclassifications, net of tax		47.4		—		47.4
Amounts reclassified out of AOCI, net of tax		—		0.1		0.1
Net current-period other comprehensive income (loss)		47.4		0.1		47.5
Balance as of November 29, 2020	$	11.1	$	(4.1)	$	7.0


							Approximate Dollar
					Total Number of		Value of Maximum
	Total Number		Average		Shares (or Units)		Number of Shares that
	of Shares (or		Price Paid		Purchased as Part of		May Yet be Purchased
	Units)		Per Share		Publicly Announced		Under Plans or Programs
Period	Purchased (a)		(or Unit)		Plans or Programs (b)		(in millions) (b)
August 31, 2020 through September 27, 2020		4,418	$	62.42		—	$	195.3
September 28, 2020 through October 25, 2020		305	$	72.62		—	$	195.3
October 26, 2020 through November 29, 2020		632	$	63.45		—	$	195.3
Total		5,355

Exhibit Number		Exhibit Description

10.1		Amendment No. 5 to Credit Agreement, dated as of September 17, 2020, among Lamb Weston Holdings, Inc., the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent, incorporated herein by reference to Exhibit 10.1 of Lamb Weston Holdings, Inc.’s Current Report on Form 8-K filed on September 23, 2020 (File No. 001-37830)

10.2		Second Amendment, dated as of September 23, 2020, by and among Lamb Weston Holdings, Inc., the guarantors party thereto, the lenders and voting participants party thereto, and Northwest Farm Credit Services, PCA, as administrative agent, incorporated herein by reference to Exhibit 10.2 of Lamb Weston Holdings, Inc.’s Current Report on Form 8-K filed on September 23, 2020 (File No. 001-37830)

31.1		Section 302 Certificate of Chief Executive Officer

31.2		Section 302 Certificate of Chief Financial Officer

32.1		Section 906 Certificate of Chief Executive Officer

32.2		Section 906 Certificate of Chief Financial Officer

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	LAMB WESTON HOLDINGS, INC.

	By:	/s/ ROBERT M. MCNUTT
		ROBERT M. MCNUTT
		Senior Vice President and Chief Financial Officer




Dated this 7th day of January, 2021.


Date: January 7, 2021

/s/ THOMAS P. WERNER
THOMAS P. WERNER
Chief Executive Officer

J
Date: January 7, 2021

/s/ ROBERT M. MCNUTT
ROBERT M. MCNUTT Senior Vice President and Chief Financial Officer


January 7, 2021

/s/ THOMAS P. WERNER
THOMAS P. WERNER
Chief Executive Officer