Selling, general and administrative expenses (“SG&A”) increased $60.2 million versus the prior year quarter to $170.0 million, and included: $4.8 million ($3.6 million after-tax, or $0.02 per share) of LW EMEA integration and acquisition-related expenses; $3.0 million ($2.2 million after-tax, or $0.01 per share) of unrealized gains related to mark-to-market adjustments associated with currency hedging contracts; and $9.2 million ($6.9 million after-tax, or $0.05 per share) of foreign currency exchange gains. The prior year quarter included $26.5 million ($19.2 million after-tax, or $0.13 per share) of LW EMEA integration and acquisition-related net gains and $1.4 million ($1.0 million after-tax, or $0.01 per share) of foreign currency exchange losses.
Excluding these items, SG&A increased $42.5 million to $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 $33.8 million to $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 $54.7 million to $301.0 million, up 22 percent versus the prior year quarter. The increases were driven by higher sales and gross profit, which included a $64.6 million pre-tax charge(1) for the write-off of excess raw potatoes, partially offset by higher SG&A.
Net income was $215.0 million, up $111.9 million versus the prior year quarter, and Diluted EPS was $1.48, up 108 percent from the prior year quarter. Net income in the current quarter included a total net gain of $3.3 million ($4.6 million before tax, or $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 $78.0 million ($104.6 million before tax, or $0.55 per share), including $96.2 million ($129.7 million before tax, or $0.67 per share) in unrealized mark-to-market adjustments associated with commodity and currency hedging contracts (primarily at LW EMEA), $1.0 million ($1.4 million before tax, or $0.01 per share) in foreign currency exchange losses, and items impacting comparability.
Adjusted EBITDA(2) increased $48.0 million to $376.9 million, up 15 percent compared to the prior year quarter, and included a $70.9 million pre-tax charge(1) for the write-off of excess raw potatoes, of which $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
North America Summary
| | | | | | | | | |
| | | | | Year-Over-Year | | | | |
| | | Q2 2024 | | Growth Rates | | Price/Mix | | Volume |
| | | (dollars in millions) | | | | | | |
Net sales | | $ | 1,167.1 | | 10% | | 14% | | (4%) |
Segment Adjusted EBITDA | | $ | 321.3 | | 7% | | | | |
Net sales for the North America segment, which includes all sales to customers in the U.S., Canada and Mexico, increased $104.6 million to $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 $21.7 million to $321.3 million. The carryover benefit of inflation-driven pricing actions and favorable mix drove the increases, which were partially offset by a $63.3 million charge(1) for the write-off of excess raw potatoes, higher costs per pound, and the impact of lower volumes.