Lamb Weston Holdings, Inc 10-Q for FY2020 Q3

Lamb Weston Holdings, Inc. (LW)

10-Q 2020-04-01 For: 2020-02-23

Added on April 07, 2026

About this 10-Q

Lamb Weston Holdings, Inc filed this 10-Q on April 1, 2020, covering the quarter ended February 23, 2020 (FY2020 Q3).

Headline figures

Quarter ended February 23, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $937.3M; up 1.1% from $926.8M a year earlier
Net income: $111.4M; down 21.2% from net income of $141.4M a year earlier
Diluted EPS: $0.76; down 20.0% 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 Thirty-Nine Weeks ended February 23, 2020 and February 24, 2019	3
		Consolidated Statements of Comprehensive Income (Loss) for the Thirteen and Thirty-Nine Weeks ended February 23, 2020 and February 24, 2019	4
		Consolidated Balance Sheets as of February 23, 2020 and May 26, 2019	5
		Consolidated Statements of Stockholders’ Equity for the Thirteen and Thirty-Nine Weeks Ended February 23, 2020 and February 24, 2019	6
		Consolidated Statements of Cash Flows for the Thirty-Nine Weeks ended February 23, 2020 and February 24, 2019	7
		Condensed Notes to Consolidated Financial Statements	8
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	35
	Item 4	Controls and Procedures	35

Part II. OTHER INFORMATION			36
	Item 1	Legal Proceedings	36
	Item 1A	Risk Factors	36
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 3	Defaults Upon Senior Securities	37
	Item 4	Mine Safety Disclosures	37
	Item 5	Other Information	37
	Item 6	Exhibits	38
		Signatures	39


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	February 23,		February 24,		February 23,		February 24,
	2020		2019		2020		2019
Net sales	$	937.3	$	926.8	$	2,945.5	$	2,753.1
Cost of sales		686.9		653.4		2,161.4		2,000.1
Gross profit		250.4		273.4		784.1		753.0
Selling, general and administrative expenses		87.9		79.6		258.1		232.6
Income from operations		162.5		193.8		526.0		520.4
Interest expense, net		25.2		27.0		78.8		80.0
Income before income taxes and equity method earnings		137.3		166.8		447.2		440.4
Income tax expense		35.7		39.6		115.1		107.9
Equity method investment earnings		9.8		14.2		35.4		44.3
Net income		111.4		141.4		367.5		376.8
Less: Income attributable to noncontrolling interests		—		—		—		8.6
Net income attributable to Lamb Weston Holdings, Inc.	$	111.4	$	141.4	$	367.5	$	368.2
Earnings per share
Basic	$	0.76	$	0.96	$	2.51	$	2.44
Diluted	$	0.76	$	0.95	$	2.50	$	2.42


☒	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
	February 23, 2020						February 24, 2019
			Tax						Tax
	Pre-Tax		(Expense)		After-Tax		Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
Net income	$	147.1	$	(35.7)	$	111.4	$	181.0	$	(39.6)	$	141.4
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)		(7.8)		0.6		(7.2)		2.4		—		2.4
Comprehensive income (loss) attributable to Lamb Weston Holdings, Inc.	$	139.5	$	(35.2)	$	104.3	$	183.6	$	(39.6)	$	144.0


	February 23,		May 26,
	2020		2019
ASSETS
Current assets:
Cash and cash equivalents	$	30.1	$	12.2
Receivables, less allowance for doubtful accounts of $0.9 and $1.3		368.8		340.1
Inventories		597.3		498.3
Prepaid expenses and other current assets		101.3		110.9
Total current assets		1,097.5		961.5
Property, plant and equipment, net		1,554.0		1,597.8
Operating lease assets		172.4		—
Equity method investments		253.4		224.6
Goodwill		303.0		205.9
Intangible assets, net		39.0		37.6
Other assets		46.9		20.7
Total assets	$	3,466.2	$	3,048.1

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings	$	21.0	$	8.4
Current portion of long-term debt and financing obligations		36.6		38.0
Accounts payable		291.9		289.2
Accrued liabilities		244.2		217.2
Total current liabilities		593.7		552.8
Long-term liabilities:
Long-term debt and financing obligations, excluding current portion		2,195.3		2,280.2
Deferred income taxes		156.9		125.7
Other noncurrent liabilities		249.9		94.0
Total long-term liabilities		2,602.1		2,499.9
Commitments and contingencies
Stockholders' equity:
Common stock of $1.00 par value, 600,000,000 shares authorized; 146,993,259 and 146,654,827 shares issued		147.0		146.7
Additional distributed capital		(867.0)		(890.3)
Retained earnings		1,099.2		803.6
Accumulated other comprehensive loss		(40.6)		(25.3)
Treasury stock, at cost, 954,680 and 585,794 common shares		(68.2)		(39.3)
Total stockholders' equity (deficit)		270.4		(4.6)
Total liabilities and stockholders’ equity	$	3,466.2	$	3,048.1


	Thirteen Weeks Ended February 23, 2020 and February 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 November 24, 2019		146,003,204	$	146.8	$	(57.1)	$	(877.0)	$	1,021.9	$	(33.5)	$	201.1
Dividends declared, $0.2300 per share		—		—		—		—		(33.6)		—		(33.6)
Common stock issued		156,235		0.2		—		3.9		—		—		4.1
Stock-settled, stock-based compensation expense		—		—		—		5.6		—		—		5.6
Repurchase of common stock and common stock withheld to cover taxes		(120,860)		—		(11.1)		—		—		—		(11.1)
Other		—		—		—		0.5		(0.5)		—		—
Comprehensive income (loss)		—		—		—		—		111.4		(7.1)		104.3
Balance at February 23, 2020		146,038,579	$	147.0	$	(68.2)	$	(867.0)	$	1,099.2	$	(40.6)	$	270.4

Balance at November 25, 2018		146,491,903	$	146.6	$	(7.3)	$	(900.9)	$	610.4	$	(15.9)	$	(167.1)
Increase in redemption value of noncontrolling interests in excess of earnings allocated		—		—		—		(0.5)		—		—		(0.5)
Dividends declared, $0.2000 per share		—		—		—		—		(29.3)		—		(29.3)
Common stock issued		3,867		—		—		—		—		—		—
Stock-settled, stock-based compensation expense		—		—		—		4.5		—		—		4.5
Repurchase of common stock and common stock withheld to cover taxes		(112,280)		—		(7.9)		—		—		—		(7.9)
Other		—		—		—		0.1		—		—		0.1
Comprehensive income		—		—		—		—		141.4		2.6		144.0
Balance at February 24, 2019		146,383,490	$	146.6	$	(15.2)	$	(896.8)	$	722.5	$	(13.3)	$	(56.2)


	Thirty-Nine Weeks Ended February 23, 2020 and February 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 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, $0.6300 per share		—		—		—		—		(92.0)		—		(92.0)
Common stock issued		338,432		0.3		—		4.0		—		—		4.3
Stock-settled, stock-based compensation expense		—		—		—		18.2		—		—		18.2
Repurchase of common stock and common stock withheld to cover taxes		(368,886)		—		(28.9)		—		—		—		(28.9)
Other		—		—		—		1.1		(0.4)		—		0.7
Comprehensive income (loss)		—		—		—		—		367.5		(15.3)		352.2
Balance at February 23, 2020		146,038,579	$	147.0	$	(68.2)	$	(867.0)	$	1,099.2	$	(40.6)	$	270.4

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		—		—		—		(11.4)		—		—		(11.4)
Dividends declared, $0.5825 per share		—		—		—		—		(85.3)		—		(85.3)
Common stock issued		224,398		0.2		—		0.9		—		—		1.1
Stock-settled, stock-based compensation expense		—		—		—		13.7		—		—		13.7
Repurchase of common stock and common stock withheld to cover taxes		(173,240)		—		(12.3)		—		—		—		(12.3)
Other		—		—		—		0.4		(0.5)		—		(0.1)
Comprehensive income (loss)		—		—		—		—		368.2		(9.0)		359.2
Balance at February 24, 2019		146,383,490	$	146.6	$	(15.2)	$	(896.8)	$	722.5	$	(13.3)	$	(56.2)


	Thirteen Weeks Ended February 23, 2020 (a)
	Operating		Finance
	Leases		Leases		Total
Operating lease costs	$	8.9	$	—	$	8.9
Short-term and variable lease costs		0.6		—		0.6
Sublease income		(0.8)		—		(0.8)
Amortization of lease assets		—		0.9		0.9
Interest on lease liabilities		—		0.1		0.1
Total lease costs, net	$	8.7	$	1.0	$	9.7


	As of February 23, 2020
	Operating		Finance
	Leases		Leases		Total
Assets:
Operating lease assets	$	172.4	$	—	$	172.4
Property, plant and equipment, net (a)		—		12.0		12.0
Total leased assets	$	172.4	$	12.0	$	184.4

Liabilities:
Lease liabilities due within one year:
Accrued liabilities	$	24.3	$	—	$	24.3
Current portion of long-term debt and financing obligations		—		2.8		2.8
Long-term lease liabilities:
Other noncurrent liabilities		151.0		—		151.0
Long-term debt and financing obligations, excluding current portion		—		11.2		11.2
Total lease liabilities	$	175.3	$	14.0	$	189.3



	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		(9.0)		—		—		—		(9.0)
Balance at February 23, 2020	$	244.8	$	42.8	$	10.9	$	4.5	$	303.0


	February 23, 2020							May 26, 2019
	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		42.4		21.4		21.0	14		39.1		19.5		19.6
		$	60.4	$	21.4	$	39.0		$	57.1	$	19.5	$	37.6


	February 23,		May 26,
	2020		2019
Raw materials and packaging	$	149.6	$	93.1
Finished goods		410.2		371.4
Supplies and other		37.5		33.8
Inventories	$	597.3	$	498.3


	February 23,		May 26,
	2020		2019
Land and land improvements (a)	$	107.2	$	142.2
Buildings, machinery, and equipment		2,657.8		2,542.3
Furniture, fixtures, office equipment, and other		107.1		105.2
Construction in progress		63.6		84.8
Property, plant and equipment, at cost		2,935.7		2,874.5
Less accumulated depreciation		(1,381.7)		(1,276.7)
Property, plant and equipment, net	$	1,554.0	$	1,597.8


	Operating		Finance
	Leases		Leases		Total
2020 (remainder of year)	$	8.4	$	1.0	$	9.4
2021		31.2		3.1		34.3
2022		28.7		2.9		31.6
2023		21.5		2.0		23.5
2024		20.5		1.1		21.6
2025		18.5		0.8		19.3
Thereafter		78.3		5.7		84.0
Total lease payments		207.1		16.6		223.7
Less: Interest (a)		(31.8)		(2.6)		(34.4)
Present value of lease liabilities	$	175.3	$	14.0	$	189.3

Weighted-average remaining lease term (years)		8.5		9.3
Weighted-average discount rate		3.6%		3.2%


	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	$	19.5		1.9
Performance Shares		13.2		1.8
Total unrecognized stock-based expense	$	32.7		1.9


	As of February 23, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.4	$	—	$	—	$	0.4
Derivative assets (a)		—		1.4		—		1.4
Total assets	$	0.4	$	1.4	$	—	$	1.8
Liabilities:
Deferred compensation liabilities (b)	$	—	$	20.1	$	—	$	20.1
Total liabilities	$	—	$	20.1	$	—	$	20.1


	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		(15.7)		—		(15.7)
Amounts reclassified out of AOCI, net of tax		—		0.4		0.4
Net current-period other comprehensive income (loss)		(15.7)		0.4		(15.3)
Balance as of February 23, 2020	$	(36.0)	$	(4.6)	$	(40.6)


							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)
November 25, 2019 through December 22, 2019		12,086	$	84.10		—	$	204.7
December 23, 2019 through January 19, 2020		25,448	$	91.61		20,500	$	202.8
January 20, 2020 through February 23, 2020		82,174	$	92.44		81,539	$	195.3
Total		119,708

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 1st day of April, 2020.


Date: April 1, 2020

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

J
Date: April 1, 2020

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


April 1, 2020

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