Lamb Weston Holdings, Inc 10-Q for FY2020 Q2

Lamb Weston Holdings, Inc. (LW)

10-Q 2020-01-03 For: 2019-11-24

Added on April 07, 2026

About this 10-Q

Lamb Weston Holdings, Inc filed this 10-Q on January 3, 2020, covering the quarter ended November 24, 2019 (FY2020 Q2).

Headline figures

Quarter ended November 24, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.02B; up 11.8% from $911.4M a year earlier
Net income: $140.4M; up 18.0% from net income of $119M a year earlier
Diluted EPS: $0.95; up 28.4% from $0.74 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 24, 2019 and November 25, 2018	3
		Consolidated Statements of Comprehensive Income (Loss) for the Thirteen and Twenty-Six Weeks ended November 24, 2019 and November 25, 2018	4
		Consolidated Balance Sheets as of November 24, 2019 and May 26, 2019	5
		Consolidated Statements of Stockholders’ Equity for the Thirteen and Twenty-Six Weeks Ended November 24, 2019 and November 25, 2018	6
		Consolidated Statements of Cash Flows for the Twenty-Six Weeks ended November 24, 2019 and November 25, 2018	7
		Condensed Notes to Consolidated Financial Statements	8
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4	Controls and Procedures	33

Part II. OTHER INFORMATION			34
	Item 1	Legal Proceedings	34
	Item 1A	Risk Factors	34
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	34
	Item 3	Defaults Upon Senior Securities	34
	Item 4	Mine Safety Disclosures	34
	Item 5	Other Information	34
	Item 6	Exhibits	35
		Signatures	36


	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		—		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


☒	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 24, 2019						November 25, 2018
			Tax						Tax
	Pre-Tax		(Expense)		After-Tax		Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
Net income	$	183.1	$	(42.7)	$	140.4	$	158.0	$	(34.0)	$	124.0
Other comprehensive income (loss):
Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss)		0.2		(0.1)		0.1		0.2		—		0.2
Unrealized currency translation gains (losses)		(0.4)		1.0		0.6		(7.6)		—		(7.6)
Comprehensive income (loss)		182.9		(41.8)		141.1		150.6		(34.0)		116.6
Less: Comprehensive income attributable to noncontrolling interests		—		—		—		5.0		—		5.0
Comprehensive income (loss) attributable to Lamb Weston Holdings, Inc.	$	182.9	$	(41.8)	$	141.1	$	145.6	$	(34.0)	$	111.6


	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		1,552.3		1,597.8
Operating lease assets		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		217.4		217.2
Total current liabilities		669.4		552.8
Long-term liabilities:
Long-term debt and financing obligations, excluding current portion		2,203.7		2,280.2
Deferred income taxes		149.5		125.7
Other noncurrent liabilities		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		1,021.9		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


	Thirteen Weeks Ended November 24, 2019 and November 25, 2018
							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 25, 2019		146,062,722	$	146.8	$	(46.7)	$	(884.7)	$	911.1	$	(34.2)	$	92.3
Dividends declared, $0.20000 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

Balance at August 26, 2018		146,447,756	$	146.6	$	(6.8)	$	(896.4)	$	519.7	$	(8.5)	$	(245.4)
Increase in redemption value of noncontrolling interests in excess of earnings allocated		—		—		—		(10.0)		—		—		(10.0)
Dividends declared, $0.19125 per share		—		—		—		—		(28.0)		—		(28.0)
Common stock issued		51,064		—		—		0.3		—		—		0.3
Stock-settled, stock-based compensation expense		—		—		—		5.0		—		—		5.0
Common stock withheld to cover taxes		(6,917)		—		(0.5)		—		—		—		(0.5)
Other		—		—		—		0.2		(0.3)		—		(0.1)
Comprehensive income (loss)		—		—		—		—		119.0		(7.4)		111.6
Balance at November 25, 2018		146,491,903	$	146.6	$	(7.3)	$	(900.9)	$	610.4	$	(15.9)	$	(167.1)


	Twenty-Six Weeks Ended November 24, 2019 and November 25, 2018
							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 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, $0.40000 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 (loss)		—		—		—		—		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

Balance at May 27, 2018		146,332,332	$	146.4	$	(2.9)	$	(900.4)	$	426.4	$	(4.3)	$	(334.8)
Adoption of ASC 606 revenue from contracts with customers		—		—		—		—		13.7		—		13.7
Increase in redemption value of noncontrolling interests in excess of earnings allocated		—		—		—		(10.9)		—		—		(10.9)
Dividends declared, $0.38250 per share		—		—		—		—		(56.0)		—		(56.0)
Common stock issued		220,531		0.2		—		0.9		(0.1)		—		1.0
Stock-settled, stock-based compensation expense		—		—		—		9.2		—		—		9.2
Common stock withheld to cover taxes		(60,960)		—		(4.4)		—		—		—		(4.4)
Other		—		—		—		0.3		(0.4)		—		(0.1)
Comprehensive income (loss)		—		—		—		—		226.8		(11.6)		215.2
Balance at November 25, 2018		146,491,903	$	146.6	$	(7.3)	$	(900.9)	$	610.4	$	(15.9)	$	(167.1)


	Thirteen Weeks Ended November 24, 2019 (a)
	Operating		Finance
	Leases		Leases		Total
Operating lease costs	$	6.6	$	—	$	6.6
Short-term, variable, and other lease costs, net		0.8		—		0.8
Amortization of lease assets		—		0.8		0.8
Interest on lease liabilities		—		0.2		0.2
Total lease costs, net	$	7.4	$	1.0	$	8.4


	As of November 24, 2019
	Operating		Finance
	Leases		Leases		Total
Assets:
Operating lease assets	$	162.9	$	—	$	162.9
Property, plant and equipment, net (a)		—		12.6		12.6
Total leased assets	$	162.9	$	12.6	$	175.5

Liabilities:
Lease liabilities due within one year:
Accrued liabilities	$	23.5	$	—	$	23.5
Current portion of long-term debt and financing obligations		—		2.4		2.4
Long-term lease liabilities:
Other noncurrent liabilities		141.3		—		141.3
Long-term debt and financing obligations, excluding current portion		—		12.1		12.1
Total lease liabilities	$	164.8	$	14.5	$	179.3



	Global		Foodservice		Retail		Other		Total
Balance at May 26, 2019	$	147.7	$	42.8	$	10.9	$	4.5	$	205.9
Acquisition (a)		106.1		—		—		—		106.1
Foreign currency translation adjustment		(4.8)		—		—		—		(4.8)
Balance at November 24, 2019	$	249.0	$	42.8	$	10.9	$	4.5	$	307.2


	November 24, 2019					May 26, 2019
	Weighted					Weighted
	Average	Gross				Average	Gross
	Useful Life	Carrying		Accumulated		Useful Life	Carrying		Accumulated
	(in years)	Amount		Amortization		(in years)	Amount		Amortization
Non-amortizing intangible assets (a)	n/a	$	18.0	$	—	n/a	$	18.0	$	—
Amortizing intangible assets (b)	11.8		42.6		20.8	14		39.1		19.5
		$	60.6	$	20.8		$	57.1	$	19.5


	November 24,		May 26,
	2019		2019
Raw materials and packaging	$	213.5	$	93.1
Finished goods		386.7		371.4
Supplies and other		35.8		33.8
Inventories	$	636.0	$	498.3


	November 24,		May 26,
	2019		2019
Land and land improvements (a)	$	107.0	$	142.2
Buildings, machinery, and equipment		2,606.8		2,542.3
Furniture, fixtures, office equipment, and other		106.8		105.2
Construction in progress		71.7		84.8
Property, plant and equipment, at cost		2,892.3		2,874.5
Less accumulated depreciation		(1,340.0)		(1,276.7)
Property, plant and equipment, net	$	1,552.3	$	1,597.8


	Operating		Finance
	Leases		Leases		Total
2020 (remainder of year)	$	14.5	$	1.8	$	16.3
2021		29.6		3.1		32.7
2022		25.7		2.8		28.5
2023		18.2		1.9		20.1
2024		17.8		1.1		18.9
2025		15.9		0.9		16.8
Thereafter		73.7		5.8		79.5
Total lease payments		195.4		17.4		212.8
Less: Interest (a)		(30.6)		(2.9)		(33.5)
Present value of lease liabilities	$	164.8	$	14.5	$	179.3

Weighted-average remaining lease term (years):		8.4		9.5
Weighted-average discount rate:		3.9%		3.3%


	Operating		Capital
	Leases		Leases (a)		Total
2020	$	18.6	$	7.5	$	26.1
2021		16.5		7.2		23.7
2022		15.7		7.2		22.9
2023		10.5		6.4		16.9
2024		8.6		5.9		14.5
Thereafter		26.6		73.5		100.1
Total lease payments	$	96.5	$	107.7	$	204.2
Discount to present value				(28.8)		(28.8)
Total lease liability			$	78.9	$	175.4
Current portion of financing obligations				(4.3)		(4.3)
Long-term financing obligations, excluding current portion			$	74.6	$	171.1


			Remaining
			Weighted
	Unrecognized		Average
	Compensation		Recognition
	Expense		Period (in years)
Stock-settled RSUs	$	22.7		2.1
Performance Shares		16.4		1.9
Total unrecognized stock-based expense	$	39.1		2.0


	As of November 24, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.5	$	—	$	—	$	0.5
Derivative assets (a)		—		2.4		—		2.4
Total assets	$	0.5	$	2.4	$	—	$	2.9
Liabilities:
Deferred compensation liabilities (b)	$	—	$	19.3	$	—	$	19.3
Total liabilities	$	—	$	19.3	$	—	$	19.3


	As of May 26, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.5	$	—	$	—	$	0.5
Derivative assets (a)		—		0.4		—		0.4
Total assets	$	0.5	$	0.4	$	—	$	0.9
Liabilities:
Derivative liabilities (a)	$	—	$	3.8	$	—	$	3.8
Deferred compensation liabilities (b)		—		15.1		—		15.1
Total liabilities	$	—	$	18.9	$	—	$	18.9


	Foreign				Accumulated
	Currency		Pension and		Other
	Translation		Post-Retirement		Comprehensive
	Gains (Losses)		Benefits		Loss
Balance as of May 26, 2019	$	(20.3)	$	(5.0)	$	(25.3)
Other comprehensive income before reclassifications, net of tax		(8.5)		—		(8.5)
Amounts reclassified out of AOCI, net of tax		—		0.3		0.3
Net current-period other comprehensive income (loss)		(8.5)		0.3		(8.2)
Balance as of November 24, 2019	$	(28.8)	$	(4.7)	$	(33.5)


							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 26, 2019 through September 22, 2019		—	$	—		—	$	213.3
September 23, 2019 through October 20, 2019		76,572	$	76.28		53,400	$	209.2
October 21, 2019 through November 24, 2019		59,733	$	76.40		59,298	$	204.7
Total		136,305

Exhibit Number		Exhibit Description

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 3rd day of January, 2020.


Date: January 3, 2020

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

J
Date: January 3, 2020

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


January 3, 2020

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