Lamb Weston Reports Fiscal Second Quarter 2024 Results; Updates Fiscal Year 2024 Outlook
Lamb Weston Reports Fiscal Second Quarter 2024 Results; Updates Fiscal Year 2024 Outlook
Lamb Weston Holdings, Inc. (NYSE: LW) has announced its results for the second quarter of fiscal 2024 and updated its full year earnings targets for fiscal 2024.
Tom Werner, President and CEO at Lamb Weston Holdings:
Q2 2024 Commentary
Net sales increased USD 455.6 million to USD 1,732.1 million, up 36 percent versus the prior year quarter, with the current year quarter including USD 375.8 million of incremental sales attributable to the consolidation of the financial results of Lamb-Weston/Meijer v.o.f., the Company’s former joint venture in Europe ("LW EMEA"), following the completion of the Company’s acquisition in February 2023 of the remaining interest in LW EMEA (the "LW EMEA Acquisition").
Net sales, excluding the incremental sales attributable to the LW EMEA Acquisition, grew 6 percent versus the prior year quarter. Price/mix increased 12 percent, reflecting the benefit of inflation-driven pricing actions across both of the Company’s business segments, and favorable mix, partially offset by lower customer transportation charges.
Volume declined 6 percent, primarily reflecting the carryover effect of the Company’s decisions to exit certain lower-priced and lower-margin business in the prior year to strategically manage customer and product mix. Volume elasticities in response to inflation-based pricing actions across the Company’s portfolio have continued to remain low.
Gross profit increased USD 94.0 million versus the prior year quarter to USD 475.6 million, and included USD 1.8 million of benefit (USD 1.3 million after-tax, or USD 0.01 per share) associated with the sale of inventory stepped-up to fair value in the LW EMEA Acquisition, and a USD 4.6 million (USD 3.5 million after-tax, or USD 0.02 per share) unrealized loss related to mark-to-market adjustments associated with commodity hedging contracts.
The prior year quarter included a USD 0.4 million (USD 0.3 million after-tax, with no per share impact) unrealized gain related to mark-to-market adjustments associated with commodity hedging contracts. The Company has identified LW EMEA integration and acquisition-related items as items impacting comparability.
Excluding unrealized mark-to-market gains and losses related to commodity derivatives and items impacting comparability, gross profit increased USD 97.2 million. Gross profit also included a USD 64.6 million pre-tax charge(1) for the write-off of excess raw potatoes.
The charge for excess raw potatoes largely reflected a reduction to the Company’s sales volume estimate as compared with the January 2023 estimate that the Company used to determine the number of acres to contract, as well as a solid potato crop in the Company’s growing regions in North America.
The increase in gross profit was also partially offset by higher costs per pound, which largely reflected mid-single-digit cost inflation, in aggregate, for key inputs, including: raw potatoes; ingredients such as grains and starches used in product coatings; and labor. The increase in per pound costs was partially offset by supply chain productivity savings as well as lower costs for edible oils.
Selling, general and administrative expenses ("SG&A") increased USD 60.2 million versus the prior year quarter to USD 170.0 million, and included: USD 4.8 million (USD 3.6 million after-tax, or USD 0.02 per share) of LW EMEA integration and acquisition-related expenses; USD 3.0 million (USD 2.2 million after-tax, or USD 0.01 per share) of unrealized gains related to mark-to-market adjustments associated with currency hedging contracts; and USD 9.2 million (USD 6.9 million after-tax, or USD 0.05 per share) of foreign currency exchange gains.
The prior year quarter included USD 26.5 million (USD 19.2 million after-tax, or USD 0.13 per share) of LW EMEA integration and acquisition-related net gains and USD 1.4 million (USD 1.0 million after-tax, or USD 0.01 per share) of foreign currency exchange losses.
Excluding these items, SG&A increased USD 42.5 million to USD 177.4 million, primarily due to: incremental expenses attributable to the consolidation of the financial results of LW EMEA; higher expenses related to improving the Company’s information systems and enterprise resource planning ("ERP") infrastructure; and higher compensation and benefits expenses.
Income from operations increased USD 33.8 million to USD 305.6 million, up 12 percent versus the prior year quarter. Adjusted Income from Operations(2), which excludes foreign currency exchange and unrealized mark-to-market derivative gains and losses and items impacting comparability, increased USD 54.7 million to USD 301.0 million, up 22 percent versus the prior year quarter.
The increases were driven by higher sales and gross profit, which included a USD 64.6 million pre-tax charge(1) for the write-off of excess raw potatoes, partially offset by higher SG&A.
Net income was USD 215.0 million, up USD 111.9 million versus the prior year quarter, and Diluted EPS was USD 1.48, up 108 percent from the prior year quarter. Net income in the current quarter included a total net gain of USD 3.3 million (USD 4.6 million before tax, or USD 0.03 per share) for foreign currency exchange and unrealized mark-to-market derivative gains and losses, and items impacting comparability.
Net income in the prior year quarter included a total net loss of USD 78.0 million (USD 104.6 million before tax, or USD 0.55 per share), including USD 96.2 million (USD 129.7 million before tax, or USD 0.67 per share) in unrealized mark-to-market adjustments associated with commodity and currency hedging contracts (primarily at LW EMEA), USD 1.0 million (USD 1.4 million before tax, or USD 0.01 per share) in foreign currency exchange losses, and items impacting comparability.
Adjusted EBITDA(2) increased USD 48.0 million to USD 376.9 million, up 15 percent compared to the prior year quarter, and included a USD 70.9 million pre-tax charge(1) for the write-off of excess raw potatoes, of which USD 6.3 million(1) was recorded in Equity Method Investment Earnings. Higher income from operations, which includes the benefit of incremental earnings from LW EMEA, drove the increases.
The Company’s effective tax rate(3) in the second quarter was 23.5 percent, versus 26.3 percent in the prior year quarter. The Company’s effective tax rate varies from the U.S. statutory tax rate of 21 percent principally due to the impact of U.S. state taxes, foreign taxes and currency, permanent differences, and discrete items.
Q2 2024 Segment Highlights
Net sales for the North America segment, which includes all sales to customers in the U.S., Canada and Mexico, increased USD 104.6 million to USD 1,167.1 million, up 10 percent versus the prior year quarter. Price/mix increased 14 percent, reflecting the carryover benefit of inflation-driven pricing actions taken in fiscal 2023, and favorable mix, partially offset by lower customer transportation charges.
Volume declined 4 percent, primarily reflecting the carryover impact of the Company’s decisions to exit certain lower-priced and lower-margin business in the prior fiscal year.
North America Segment Adjusted EBITDA increased USD 21.7 million to USD 321.3 million. The carryover benefit of inflation-driven pricing actions and favorable mix drove the increases, which were partially offset by a USD 63.3 million charge(1) for the write-off of excess raw potatoes, higher costs per pound, and the impact of lower volumes.
Net sales for the International segment, which includes all sales to customers outside of North America, increased USD 351.0 million to USD 565.0 million, with the current quarter including USD 375.8 million of incremental sales attributable to the consolidation of the financial results of LW EMEA.
International net sales, excluding the incremental sales attributable to the LW EMEA Acquisition, declined 12 percent compared to the prior year quarter. Price/mix increased 10 percent, driven by the carryover benefit of inflation-driving pricing actions taken in fiscal 2023, as well as favorable mix, partially offset by lower customer transportation charges.
Volume, excluding the benefit from the LW EMEA Acquisition, declined 22 percent, primarily reflecting the Company’s decisions to exit certain lower-priced and lower-margin business as well as lapping a strong prior year comparison.
International Segment Adjusted EBITDA increased USD 40.0 million to USD 100.2 million and excluded a net benefit from comparability items of USD 1.8 million (USD 1.3 million after tax, or USD 0.01 per share) associated with the sale of inventory stepped-up to fair value in the LW EMEA Acquisition. Incremental earnings from the consolidation of the financial results of LW EMEA drove the increase.
Excluding the benefit from the LW EMEA Acquisition, higher costs per pound, including a USD 7.6 million allocated charge(1) for the write-off of excess raw potatoes, and the impact of lower volumes, more than offset favorable price/mix.
Equity Method Investment Earnings (Loss)
Equity method investment earnings (loss) from unconsolidated joint ventures were earnings of USD 4.7 million and a loss of USD 107.3 million for the second quarter of fiscal 2024 and 2023, respectively.
The results in the current quarter include earnings associated with the Company’s 50 percent interest in Lamb Weston/RDO Frozen, an unconsolidated joint venture in Minnesota ("Lamb Weston RDO"), while results in the prior year quarter also included earnings associated with the Company’s 50 percent interest in LW EMEA.
The results in the prior year quarter include a USD 130.1 million (USD 96.5 million after-tax, or USD 0.67 per share) unrealized loss related to mark-to-market adjustments associated with currency and commodity hedging contracts in LW EMEA. Excluding these items, equity method investment earnings declined USD 18.1 million compared to the prior year quarter, largely due to LW EMEA earnings being reflected as equity method investment earnings in the prior year quarter. The results in the current quarter also include a USD 6.3 million charge(1) for the write-off of excess raw potatoes at Lamb Weston RDO.
Liquidity and Cash Flows
As of November 26, 2023, the Company had USD 78.3 million of cash and cash equivalents, with USD 175.0 million in borrowings outstanding under its USD 1.0 billion U.S. revolving credit facility.
Net cash provided by operating activities for the first half of fiscal 2024 was USD 455.2 million, up USD 167.2 million versus the prior year period, primarily due to higher earnings.
Capital expenditures during the first half of fiscal 2024 were USD 566.5 million, up USD 296.2 million versus the prior year period, primarily reflecting increased investments to support capacity expansion projects and to upgrade the Company’s information systems and ERP infrastructure.
Capital Returned to Shareholders
In the second quarter of fiscal 2024, the Company returned USD 40.8 million to shareholders through cash dividends and USD 50.0 million through share repurchases, with an aggregate of 571,986 shares repurchased at an average price per share of USD 87.41. In the first half of fiscal 2024, the Company repurchased USD 150.0 million of its common stock, with an aggregate of 1,564,351 shares repurchased at an average price per share of USD 95.89.
On October 11, 2023, as previously announced, the Company increased the authorized amount under its existing share repurchase program to USD 500.0 million. In addition, on December 14, 2023, the Company increased its quarterly dividend by 29 percent to USD 0.36 per share, starting with its dividend payable on March 1, 2024 to stockholders of record on February 2, 2024.
Fiscal 2024 Outlook
The Company updated its financial targets for fiscal 2024, as follows:
The Company updated other financial targets, as follows:
End Notes
(1) Non-GAAP results include a USD 70.9 million charge (USD 53.9 million after-tax, or USD 0.37 per share) related to a write-off of excess raw potatoes. This includes a USD 64.6 million charge (USD 49.1 million after-tax, or USD 0.34 per share) in cost of sales, and a USD 6.3 million charge (USD 4.8 million after-tax, or USD 0.03 per share) recorded in equity method investment earnings (losses). The total charge to the reporting segments was as follows: USD 63.3 million to the North America segment and USD 7.6 million to the International segment.
(2) Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted EBITDA are non-GAAP financial measures. Please see the discussion of non-GAAP financial measures, including a discussion of guidance provided on a non-GAAP basis, and the associated reconciliations at the end of this press release for more information.
(3) The effective tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.
Tom Werner, President and CEO at Lamb Weston Holdings:
"We delivered solid financial results in the quarter by executing well across our customer channels in North America and in our key international markets."
"We continued to benefit from inflation-driven pricing actions primarily initiated last year, improvements in customer and product mix, and supply chain productivity cost savings."
"As expected, our volume performance in the quarter improved sequentially versus our fiscal first quarter, reflecting resilient global demand and the gradual addition of new business to replace lower-margin volume that we chose to exit in the prior fiscal year."
"We anticipate that the consumer and operating environment will remain generally stable through the remainder of fiscal 2024."
"Against this backdrop, we are reaffirming our fiscal 2024 sales estimate as well as our previously-raised Adjusted EBITDA target despite incurring significant costs associated with writing off excess raw potatoes in North America."
"We continue to expect to deliver strong sales and earnings growth for fiscal 2024, and to remain well-positioned to drive sustainable, profitable growth over the long term."
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Summary of Second Quarter FY 2024 Results
Q2 2024 Commentary
Net sales increased USD 455.6 million to USD 1,732.1 million, up 36 percent versus the prior year quarter, with the current year quarter including USD 375.8 million of incremental sales attributable to the consolidation of the financial results of Lamb-Weston/Meijer v.o.f., the Company’s former joint venture in Europe ("LW EMEA"), following the completion of the Company’s acquisition in February 2023 of the remaining interest in LW EMEA (the "LW EMEA Acquisition").
Net sales, excluding the incremental sales attributable to the LW EMEA Acquisition, grew 6 percent versus the prior year quarter. Price/mix increased 12 percent, reflecting the benefit of inflation-driven pricing actions across both of the Company’s business segments, and favorable mix, partially offset by lower customer transportation charges.
Volume declined 6 percent, primarily reflecting the carryover effect of the Company’s decisions to exit certain lower-priced and lower-margin business in the prior year to strategically manage customer and product mix. Volume elasticities in response to inflation-based pricing actions across the Company’s portfolio have continued to remain low.
Gross profit increased USD 94.0 million versus the prior year quarter to USD 475.6 million, and included USD 1.8 million of benefit (USD 1.3 million after-tax, or USD 0.01 per share) associated with the sale of inventory stepped-up to fair value in the LW EMEA Acquisition, and a USD 4.6 million (USD 3.5 million after-tax, or USD 0.02 per share) unrealized loss related to mark-to-market adjustments associated with commodity hedging contracts.
The prior year quarter included a USD 0.4 million (USD 0.3 million after-tax, with no per share impact) unrealized gain related to mark-to-market adjustments associated with commodity hedging contracts. The Company has identified LW EMEA integration and acquisition-related items as items impacting comparability.
Excluding unrealized mark-to-market gains and losses related to commodity derivatives and items impacting comparability, gross profit increased USD 97.2 million. Gross profit also included a USD 64.6 million pre-tax charge(1) for the write-off of excess raw potatoes.
The charge for excess raw potatoes largely reflected a reduction to the Company’s sales volume estimate as compared with the January 2023 estimate that the Company used to determine the number of acres to contract, as well as a solid potato crop in the Company’s growing regions in North America.
The increase in gross profit was also partially offset by higher costs per pound, which largely reflected mid-single-digit cost inflation, in aggregate, for key inputs, including: raw potatoes; ingredients such as grains and starches used in product coatings; and labor. The increase in per pound costs was partially offset by supply chain productivity savings as well as lower costs for edible oils.
Selling, general and administrative expenses ("SG&A") increased USD 60.2 million versus the prior year quarter to USD 170.0 million, and included: USD 4.8 million (USD 3.6 million after-tax, or USD 0.02 per share) of LW EMEA integration and acquisition-related expenses; USD 3.0 million (USD 2.2 million after-tax, or USD 0.01 per share) of unrealized gains related to mark-to-market adjustments associated with currency hedging contracts; and USD 9.2 million (USD 6.9 million after-tax, or USD 0.05 per share) of foreign currency exchange gains.
The prior year quarter included USD 26.5 million (USD 19.2 million after-tax, or USD 0.13 per share) of LW EMEA integration and acquisition-related net gains and USD 1.4 million (USD 1.0 million after-tax, or USD 0.01 per share) of foreign currency exchange losses.
Excluding these items, SG&A increased USD 42.5 million to USD 177.4 million, primarily due to: incremental expenses attributable to the consolidation of the financial results of LW EMEA; higher expenses related to improving the Company’s information systems and enterprise resource planning ("ERP") infrastructure; and higher compensation and benefits expenses.
Income from operations increased USD 33.8 million to USD 305.6 million, up 12 percent versus the prior year quarter. Adjusted Income from Operations(2), which excludes foreign currency exchange and unrealized mark-to-market derivative gains and losses and items impacting comparability, increased USD 54.7 million to USD 301.0 million, up 22 percent versus the prior year quarter.
The increases were driven by higher sales and gross profit, which included a USD 64.6 million pre-tax charge(1) for the write-off of excess raw potatoes, partially offset by higher SG&A.
Net income was USD 215.0 million, up USD 111.9 million versus the prior year quarter, and Diluted EPS was USD 1.48, up 108 percent from the prior year quarter. Net income in the current quarter included a total net gain of USD 3.3 million (USD 4.6 million before tax, or USD 0.03 per share) for foreign currency exchange and unrealized mark-to-market derivative gains and losses, and items impacting comparability.
Net income in the prior year quarter included a total net loss of USD 78.0 million (USD 104.6 million before tax, or USD 0.55 per share), including USD 96.2 million (USD 129.7 million before tax, or USD 0.67 per share) in unrealized mark-to-market adjustments associated with commodity and currency hedging contracts (primarily at LW EMEA), USD 1.0 million (USD 1.4 million before tax, or USD 0.01 per share) in foreign currency exchange losses, and items impacting comparability.
Adjusted EBITDA(2) increased USD 48.0 million to USD 376.9 million, up 15 percent compared to the prior year quarter, and included a USD 70.9 million pre-tax charge(1) for the write-off of excess raw potatoes, of which USD 6.3 million(1) was recorded in Equity Method Investment Earnings. Higher income from operations, which includes the benefit of incremental earnings from LW EMEA, drove the increases.
The Company’s effective tax rate(3) in the second quarter was 23.5 percent, versus 26.3 percent in the prior year quarter. The Company’s effective tax rate varies from the U.S. statutory tax rate of 21 percent principally due to the impact of U.S. state taxes, foreign taxes and currency, permanent differences, and discrete items.
Q2 2024 Segment Highlights
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North America Summary
Net sales for the North America segment, which includes all sales to customers in the U.S., Canada and Mexico, increased USD 104.6 million to USD 1,167.1 million, up 10 percent versus the prior year quarter. Price/mix increased 14 percent, reflecting the carryover benefit of inflation-driven pricing actions taken in fiscal 2023, and favorable mix, partially offset by lower customer transportation charges.
Volume declined 4 percent, primarily reflecting the carryover impact of the Company’s decisions to exit certain lower-priced and lower-margin business in the prior fiscal year.
North America Segment Adjusted EBITDA increased USD 21.7 million to USD 321.3 million. The carryover benefit of inflation-driven pricing actions and favorable mix drove the increases, which were partially offset by a USD 63.3 million charge(1) for the write-off of excess raw potatoes, higher costs per pound, and the impact of lower volumes.
(Click to enlarge)
International Summary
Net sales for the International segment, which includes all sales to customers outside of North America, increased USD 351.0 million to USD 565.0 million, with the current quarter including USD 375.8 million of incremental sales attributable to the consolidation of the financial results of LW EMEA.
International net sales, excluding the incremental sales attributable to the LW EMEA Acquisition, declined 12 percent compared to the prior year quarter. Price/mix increased 10 percent, driven by the carryover benefit of inflation-driving pricing actions taken in fiscal 2023, as well as favorable mix, partially offset by lower customer transportation charges.
Volume, excluding the benefit from the LW EMEA Acquisition, declined 22 percent, primarily reflecting the Company’s decisions to exit certain lower-priced and lower-margin business as well as lapping a strong prior year comparison.
International Segment Adjusted EBITDA increased USD 40.0 million to USD 100.2 million and excluded a net benefit from comparability items of USD 1.8 million (USD 1.3 million after tax, or USD 0.01 per share) associated with the sale of inventory stepped-up to fair value in the LW EMEA Acquisition. Incremental earnings from the consolidation of the financial results of LW EMEA drove the increase.
Excluding the benefit from the LW EMEA Acquisition, higher costs per pound, including a USD 7.6 million allocated charge(1) for the write-off of excess raw potatoes, and the impact of lower volumes, more than offset favorable price/mix.
Equity Method Investment Earnings (Loss)
Equity method investment earnings (loss) from unconsolidated joint ventures were earnings of USD 4.7 million and a loss of USD 107.3 million for the second quarter of fiscal 2024 and 2023, respectively.
The results in the current quarter include earnings associated with the Company’s 50 percent interest in Lamb Weston/RDO Frozen, an unconsolidated joint venture in Minnesota ("Lamb Weston RDO"), while results in the prior year quarter also included earnings associated with the Company’s 50 percent interest in LW EMEA.
The results in the prior year quarter include a USD 130.1 million (USD 96.5 million after-tax, or USD 0.67 per share) unrealized loss related to mark-to-market adjustments associated with currency and commodity hedging contracts in LW EMEA. Excluding these items, equity method investment earnings declined USD 18.1 million compared to the prior year quarter, largely due to LW EMEA earnings being reflected as equity method investment earnings in the prior year quarter. The results in the current quarter also include a USD 6.3 million charge(1) for the write-off of excess raw potatoes at Lamb Weston RDO.
Liquidity and Cash Flows
As of November 26, 2023, the Company had USD 78.3 million of cash and cash equivalents, with USD 175.0 million in borrowings outstanding under its USD 1.0 billion U.S. revolving credit facility.
Net cash provided by operating activities for the first half of fiscal 2024 was USD 455.2 million, up USD 167.2 million versus the prior year period, primarily due to higher earnings.
Capital expenditures during the first half of fiscal 2024 were USD 566.5 million, up USD 296.2 million versus the prior year period, primarily reflecting increased investments to support capacity expansion projects and to upgrade the Company’s information systems and ERP infrastructure.
Capital Returned to Shareholders
In the second quarter of fiscal 2024, the Company returned USD 40.8 million to shareholders through cash dividends and USD 50.0 million through share repurchases, with an aggregate of 571,986 shares repurchased at an average price per share of USD 87.41. In the first half of fiscal 2024, the Company repurchased USD 150.0 million of its common stock, with an aggregate of 1,564,351 shares repurchased at an average price per share of USD 95.89.
On October 11, 2023, as previously announced, the Company increased the authorized amount under its existing share repurchase program to USD 500.0 million. In addition, on December 14, 2023, the Company increased its quarterly dividend by 29 percent to USD 0.36 per share, starting with its dividend payable on March 1, 2024 to stockholders of record on February 2, 2024.
Fiscal 2024 Outlook
The Company updated its financial targets for fiscal 2024, as follows:
- The Company reaffirmed its net sales target of USD 6.8 billion to USD 7.0 billion, including USD 1.1 billion to USD 1.2 billion of incremental sales attributable to the consolidation of the financial results of LW EMEA during the first three quarters of the fiscal year. The Company continues to target net sales, excluding incremental sales attributable to the LW EMEA Acquisition, to grow 6.5 percent to 8.5 percent, with price/mix expected to increase low-double-digits percentage points.
The Company continues to target sales volumes to decline mid-single-digits percentage points, largely reflecting the carryover impact of the Company’s decisions to strategically manage customer and product mix by exiting certain lower-priced and lower-margin business in the prior year. - The Company increased its targets for GAAP net income to USD 830 million to USD 900 million and Diluted EPS of USD 5.70 to USD 6.15, including a net loss from foreign currency exchange and unrealized mark-to-market derivative gains and losses and items impacting comparability of USD 2.0 million (USD 1.4 million after-tax, or USD 0.01 per share) during the first half of fiscal 2024. The Company previously expected to deliver net income of USD 800 million to USD 870 million and Diluted EPS of USD 5.47 to USD 5.92.
- The Company reaffirmed its target range for Adjusted EBITDA(2) to USD 1,540 million to USD 1,620 million (+27 percent compared to fiscal 2023 using the mid-point), which includes a USD 70.9 million pre-tax charge(1) for the write-off of excess raw potatoes.
The Company expects higher forecasted sales and gross profit will largely drive anticipated earnings growth in fiscal 2024. The Company expects gross profit growth will be partially offset by SG&A of USD 745 million to USD 755 million. The Company previously estimated SG&A of USD 765 to USD 775 million. - The Company raised its Adjusted Net Income(2) target to USD 830 million to USD 900 million and its Adjusted Diluted EPS(2) target to USD 5.70 to USD 6.15. The increases in these targets reflect the lower SG&A expense estimate as well as a lower interest expense estimate of USD 140 million to account for revised project-related capitalized interest.
The Company previously estimated Adjusted Net Income(2) of USD 805 million to USD 875 million, Adjusted Diluted EPS(2) of USD 5.50 to USD 5.95, and interest expense of USD 155 million.
The Company updated other financial targets, as follows:
- Depreciation and amortization expense of approximately USD 305 million, down from its previous estimate of USD 325 million; and
- Cash used for capital expenditures of USD 900 million to USD 950 million, up from the Company’s previous estimate of USD 800 million to USD v900 million, reflecting the timing of expenditures related to the construction of previously-announced capacity expansion efforts in China, Idaho, the Netherlands and Argentina.
- The Company continues to target an effective tax rate(3) (full year) of 23 percent to 24 percent.
End Notes
(1) Non-GAAP results include a USD 70.9 million charge (USD 53.9 million after-tax, or USD 0.37 per share) related to a write-off of excess raw potatoes. This includes a USD 64.6 million charge (USD 49.1 million after-tax, or USD 0.34 per share) in cost of sales, and a USD 6.3 million charge (USD 4.8 million after-tax, or USD 0.03 per share) recorded in equity method investment earnings (losses). The total charge to the reporting segments was as follows: USD 63.3 million to the North America segment and USD 7.6 million to the International segment.
(2) Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted EBITDA are non-GAAP financial measures. Please see the discussion of non-GAAP financial measures, including a discussion of guidance provided on a non-GAAP basis, and the associated reconciliations at the end of this press release for more information.
(3) The effective tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.
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