Company: LW
Filing Date: 2025-09-30
Form Type: 10-Q
Source: 0001679273-25-000070
Chunk: 75

Company: Lamb Weston Holdings, Inc.
Filing Date: 2025-09-30
Form: 10-Q
Item: Part I, Item 2
Chunk 75
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 data derived from the financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). We have also presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted Selling, General and Administrative expenses (“SG&A”), and Adjusted Income Tax Expense, each of which is considered a non-GAAP financial measure, to supplement the financial information included in this report. Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, and Adjusted Income Tax Expense and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, net income, gross profit, SG&A, or income tax expense, as applicable. For more information, refer to the “Results of Operations” and “Non-GAAP Financial Measures” sections below.

Executive Summary

During the quarter, we saw volume growth and positive customer momentum. While the operating environment remains competitive, we believe our disciplined execution and strategic plans are better enabling us to expand our customer base and drive long-term growth. We are focused on executional excellence, including delivering our Cost Savings Program. Actions taken over the past two fiscal years have improved our manufacturing costs per pound and lowered SG&A. We are focused on strengthening customer partnerships and innovating across our business.

Our operational improvements also drove favorable working capital changes, primarily from lower inventories. Operating cash flow and cash on hand increased at the end of the period, and capital expenditures declined as we near completion of our growth-related investments in our production facilities, with the startup of a new production facility in Argentina during the first quarter. 

Outlook

In fiscal 2026, we anticipate that global consumers will continue to face macroeconomic and geopolitical pressures, alongside a competitive environment, particularly in our international markets. We expect global restaurant traffic to remain roughly in line with fiscal 2025 levels. We believe customers and consumers will continue to prioritize french fries both on menus and at home. Momentum from customer wins in the second half of fiscal 2025 and the contribution of a 53rd week in fiscal 2026, with the additional week falling in the fourth quarter, is expected to drive increased sales volumes. 

We expect earnings will decline as they are pressured by the impact of pricing and mix, higher overall input costs, net of the benefit of lower raw potato costs, incremental depreciation and start-up costs from the capacity expansions in the Netherlands and Argentina, and increased compensation and benefits as incentive programs normalize. These factors will only