What changed in this filing

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Item 1. Financial Statements

2021-01-07 compared with 2020-10-07 · 118 added, 79 removed, 295 unchanged (40% of the section changed)

4 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Cost of sales

8 unchanged sentences

Lamb Weston Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Comprehensive Income

(unaudited, dollars in millions)

1 unchanged sentence

Thirteen Weeks Ended

August 30, 2020

August 25, 2019

November 29, 2020

November 24, 2019

Other comprehensive income (loss):

Reclassification of post-retirement benefits out of accumulated other comprehensive income

Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss)

Unrealized currency translation gains (losses)

Comprehensive income (loss)

Comprehensive income

Twenty-Six Weeks Ended

November 29, 2020

November 24, 2019

Other comprehensive income (loss):

Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss)

Unrealized currency translation gains (losses)

Comprehensive income

See Condensed Notes to Consolidated Financial Statements.

29 unchanged sentences

Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Treasury stock, at cost, 1,111,364 and 954,858 common shares

4 unchanged sentences

Consolidated Statements of Stockholders’ Equit y

(unaudited, dollars in millions, except shares and per share data )

Thirteen Weeks Ended August 30, 2020 and August 25, 2019

(unaudited, dollars in millions, except share data )

Thirteen Weeks Ended November 29, 2020 and November 24, 2019

Common Stock,

3 unchanged sentences

Income (Loss)

Balance at May 31, 2020

Balance at August 30, 2020

Dividends declared, $ 0.23 per share

3 unchanged sentences

Comprehensive income

Balance at November 29, 2020

Balance at August 25, 2019

Dividends declared, $ 0.20 per share

Common stock issued

Stock-settled, stock-based compensation expense

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income

Balance at November 24, 2019

Twenty-Six Weeks Ended November 29, 2020 and November 24, 2019

Common Stock,

net of Treasury

(Distributed)

Comprehensive

Income (Loss)

Balance at May 31, 2020

Dividends declared, $ 0.46 per share

Common stock issued

Stock-settled, stock-based compensation expense

Common stock withheld to cover taxes

Comprehensive income

Balance at November 29, 2020

Balance at May 26, 2019

Adoption of ASC 842 leases

3 unchanged sentences

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income (loss)

Balance at August 25, 2019

Comprehensive income

Balance at November 24, 2019

See Condensed Notes to Consolidated Financial Statements

2 unchanged sentences

(unaudited, dollars in millions)

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Cash flows from operating activities

4 unchanged sentences

Deferred income taxes

Changes in operating assets and liabilities, net of acquisitions:

Changes in operating assets and liabilities, net of acquisition:

Income taxes payable/receivable, net

5 unchanged sentences

Additions to property, plant and equipment

Additions to other long-term assets

Acquisition of business, net of cash acquired

Investment in equity method joint venture

Net cash used for investing activities

Cash flows from financing activities

Repayments of short-term borrowings, net

Proceeds (payments) of short-term borrowings, net

Repayments of debt and financing obligations

Dividends paid

Repurchase of common stock and common stock withheld to cover taxes

Repayments of debt and financing obligations

Payments of debt issuance costs

Proceeds from issuance of debt

13 unchanged sentences

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen weeks ended August 30, 2020 and August 25, 2019, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America.

The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen and twenty-six weeks ended November 29, 2020 and November 24, 2019, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America.

These financial statements include all adjustments that we consider necessary for a fair presentation of such financial statements and consist only of normal recurring adjustments.

The preparation of financial statements involves the use of estimates and accruals.

The inputs into our judgements and estimates consider the economic implications of COVID-19 on our critical and significant accounting estimates.

The inputs into our judgements and estimates consider the economic implications of COVID-19 on our critical accounting estimates and significant accounting policies.

The actual results that we experience may differ materially from those estimates.

7 unchanged sentences

This guidance replaces the existing incurred loss impairment model by requiring the use of forward-looking information to assess expected credit losses.

We adopted this guidance on June 1, 2020 (the beginning of fiscal 2021), and it did not to have a significant impact on our financial statements or condensed notes to consolidated financial statements.

We adopted this guidance on June 1, 2020 (the beginning of fiscal 2021), and it did not have a significant impact on our consolidated financial statements or our condensed notes to consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

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We are currently evaluating the potential impact of this standard on our financial statements.

Defined Benefit Plans

In August 2018 , the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20):

Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans .

This update removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of

disclosures, and adds disclosure requirements identified as relevant to defined benefit pension and other postretirement plans.

This guidance is effective for our fiscal 2021.

The adoption of this standard is not expected to have a significant impact on our notes to consolidated financial statements.

There were no other accounting pronouncements recently issued that had or are expected to have a material impact on our financial statements.

2 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Basic weighted average common shares outstanding

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(a) Potentially dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards.

As of August 30, 2020, and August 25, 2019, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Income tax expense was $ 28.0 million and $ 36.7 million for the thirteen weeks ended August 30, 2020 and August 25, 2019, respectively.

The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 23.9 % and 24.1 % for the thirteen weeks ended August 30, 2020 and August 25, 2019, respectively, in our Consolidated Statements of Earnings.

As of November 29, 2020, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

As of November 24, 2019, we did not have any stock-based awards that were antidilutive.

Income tax expense was $ 31.9 million and $ 42.7 million for the thirteen weeks ended November 29, 2020 and November 24, 2019, respectively;

and $ 59.9 million and $ 79.4 million for the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively.

The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 24.8 % and 23.3 % for the thirteen weeks ended November 29, 2020 and November 24, 2019, respectively;

and 24.3 % and 23.7 % for the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively, in our Consolidated Statements of Earnings.

The effective tax rate varies from the U.S.

2 unchanged sentences

Income Taxes Paid

Income tax refunds, net of taxes paid were $ 2.8 million during the thirteen weeks ended August 30, 2020.

Income taxes paid , net of refunds, were $ 1.5 million during the thirteen weeks ended August 25, 2019 .

Income taxes paid, net of refunds were $ 24.0 million and $ 44.4 million during the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively .

Unrecognized Tax Benefits

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Property, plant and equipment, net

Depreciation expense was $ 44.9 million and $ 42.6 million for the thirteen weeks ended August 30, 2020 and August 25, 2019, respectively.

At August 30, 2020 and May 31, 2020, purchases of property, plant and equipment included in accounts payable were $ 6.2 million and $ 9.9 million, respectively.

Interest capitalized within construction in progress for both the thirteen weeks ended August 30, 2020 and August 25, 2019, was $ 0.5 million.

Depreciation expense was $ 45.2 million and $ 43.9 million for the thirteen weeks ended November 29, 2020 and November 24, 2019, respectively;

and $ 90.1 million and $ 86.5 million for the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively.

At November 29, 2020 and May 31, 2020, purchases of property, plant and equipment included in accounts payable were $ 5.2 million and $ 9.9 million, respectively.

Interest capitalized within construction in progress for the thirteen weeks ended November 29, 2020 and November 24, 2019, was $ 0.5 million and $ 0.7 million, respectively;

and $ 1.0 million and $ 1.2 million for the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively.

INVESTMENTS IN JOINT VENTURES

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(“Lamb-Weston/Meijer”), a joint venture with Meijer Frozen Foods B.V., which is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe.

We hold a 50 % interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a potato processing venture based in the United States.

We hold a 50 % interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a potato processing joint venture based in the United States.

We also hold a 50 % interest in Lamb Weston Alimentos Modernos S.A.

2 unchanged sentences

These investments are accounted for using equity method accounting.

The carrying value of our equity method investments, which includes Lamb-Weston/Meijer, Lamb Weston RDO, and LWAMSA at August 30, 2020 and May 31, 2020, was $ 275.0 million and $ 250.2 million, respectively, and are included in “Equity method investments” on our Consolidated Balance Sheets.

For the thirteen weeks ended August 30, 2020 and August 25, 2019, we had sales to our equity method investments of $ 3.0 million and $ 7.3 million, respectively, and payments to our equity method investments of $ 1.1 million and $ 3.2 million, respectively.

Total dividends from our equity method investments were $ 2.7 million and $ 10.2 million for the thirteen weeks ended August 30, 2020 and August 25, 2019, respectively.

The carrying value of our equity method investments, which includes Lamb-Weston/Meijer, Lamb Weston RDO, and LWAMSA at November 29, 2020 and May 31, 2020, was $ 291.4 million and $ 250.2 million, respectively, and are included in “Equity method investments” on our Consolidated Balance Sheets.

For the thirteen weeks ended November 29, 2020 and November 24, 2019, we had sales to our equity method investments of $ 3.9 million and $ 9.3 million, respectively, and payments to our equity method investments of $ 2.2 million and $ 2.8 million, respectively;

and for the twenty-six weeks ended November 29, 2020 and November 24, 2019, we had sales to our equity method investments of $ 6.9 million and $ 16.6 million and payments to our equity method investments of $ 3.3 million and $ 6.0 million, respectively.

Total dividends from our equity method investments were $ 3.9 million and $ 7.8 million for the thirteen weeks ended November 29, 2020 and November 24, 2019, respectively;

and $ 6.6 million and $ 18.0 million for the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively.

We have an agreement to share the costs of our global enterprise resource planning (“ERP”) system and related software and services with Lamb-Weston/Meijer.

Under the terms of the agreement, Lamb-Weston/Meijer will pay us for the majority of their portion of the ERP costs in five equal annual payments, plus interest, beginning in the period the system is deployed at Lamb-Weston/Meijer.

As of August 30, 2020, Lamb-Weston/Meijer’s portion of the ERP costs totaled $ 15.7 million.

During fiscal 2021 and 2020, we received $ 2.0 million and $ 1.0 million from Lamb-Weston/Meijer, and we had $ 12.6 million and $ 12.0 million of receivables recorded on our Consolidated Balance Sheets as of August 30, 2020 and May 31, 2020.

Of the $ 12.6 million and $ 12.0 million of receivables, $ 0.3 and $ 1.8 million were recorded in “Receivables, net” and $ 12.3 million and $ 10.2 million were recorded in “Other assets,” respectively.

As of November 29, 2020, Lamb-Weston/Meijer’s portion of the ERP costs totaled $ 15.4 million.

We had $ 12.3 million and $ 12.0 million of receivables recorded on our Consolidated Balance Sheets as of November 29, 2020 and May 31, 2020, respectively.

Of the $ 12.3 million and $ 12.0 million of receivables, $ 0.2 million and $ 1.8 million were recorded in “Receivables, net” and $ 12.1 million and $ 10.2 million were recorded in “Other assets,” respectively.

We expect the total receivable from Lamb-Weston/Meijer to increase as development and implementation of the ERP system progresses.

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The following table presents changes in goodwill balances, by segment, during the thirteen weeks ended August 30, 2020 (dollars in millions):

The following table presents changes in goodwill balances, by segment, during the twenty-six weeks ended November 29, 2020 (dollars in millions):

Balance at May 31, 2020

Foreign currency translation adjustment

Balance at August 30, 2020

Balance at November 29, 2020

Other identifiable intangible assets were as follows (dollars in millions):

August 30, 2020

November 29, 2020

Non-amortizing intangible assets (a)

2 unchanged sentences

(b) Amortizing intangible assets are principally composed of licensing agreements, brands, and customer relationships.

Amortization expense was $ 0.7 million and $ 0.5 million for the thirteen weeks ended August 30, 2020 and August 25, 2019, respectively.

In addition, developed technology is recorded as “Other assets” on our Consolidated Balance Sheet.

Amortization expense was $ 1.4 million and $ 0.8 million for the thirteen weeks ended November 29, 2020 and November 24, 2019, respectively;

and $ 2.1 million and $ 1.3 million for the twenty-six weeks ended November 29, 2020 and November 24, 2019, respectively.

Foreign intangible assets are affected by foreign currency translation.

3 unchanged sentences

Accrued trade promotions

Accrued interest

Dividends payable to shareholders

Current portion of operating lease liabilities

Franchise, property, and sales and use taxes

Income taxes payable

Franchise, property, and sales and use taxes

Accrued interest

Accrued liabilities

DEBT AND FINANCING OBLIGATIONS

At August 30, 2020 and May 31, 2020, our debt, including financing obligations was as follows (dollars in millions):

At November 29, 2020 and May 31, 2020, our debt, including financing obligations was as follows (dollars in millions):

Short-term borrowings:

2 unchanged sentences

Long-term debt:

Term loan facility, due 2021

Term A-1 loan facility, due 2024

Term A-2 loan facility, due 2025

4.625 % senior notes, due 2024

4.875 % senior notes, due 2026

4.875 % senior notes, due 2028

Term loan facility, due November 2021

Term A-1 loan facility, due June 2024

Term A-2 loan facility, due April 2025

4.625 % senior notes, due November 2024

4.875 % senior notes, due November 2026

4.875 % senior notes, due May 2028

Financing obligations:

5 unchanged sentences

Long-term debt and financing obligations, excluding current portion

(a) The interest rates on our lease financing obligations range from 2.31 % to 4.10 % at both August 30, 2020 and May 31, 2020.

(a) The interest rates on our lease financing obligations range from 2.49 % to 4.10 % as of November 29, 2020, and 2.31 % to 4.10 % as of May 31, 2020.

Revolving Credit Facility

At August 30, 2020, we had no borrowings outstanding under our revolving credit facility and $ 495.1 million of availability under the facility, which is net of outstanding letters of credit of $ 4.9 million.

For the thirteen weeks ended August 30, 2020, borrowings under the facility ranged from zero to $ 495.0 million and the weighted average interest rate for our outstanding borrowings under the facility was 1.68 %.

We paid $ 5.7 million of interest on debt for both the thirteen weeks ended August 30, 2020 and August 25, 2019.

On September 17, 2020, we amended our credit agreement, dated as of November 9, 2016, relating to our existing revolving credit facility discussed above (“Amended Revolving Credit Facility”).

The Amended Revolving Credit Facility, among other things, increases the aggregate principal amount to $ 750.0 million and extends the maturity date to September 17, 2023 .

In addition, we may add incremental term loan facilities, increase commitments and/or add new revolving commitments in an aggregate principal amount not to exceed the sum of (A) the greater of $ 600.0 million or 75 % of our Consolidated EBITDA (as defined in the Amended Revolving Credit Facility) and (B) an amount based on our consolidated net leverage ratio.

On September 17, 2020, we amended our credit agreement, dated as of November 9, 2016 (“Amended Revolving Credit Facility”).

The Amended Revolving Credit Facility, among other things, increased the aggregate principal amount of the revolving credit facility to $ 750.0 million and extended the maturity date to September 17, 2023 .

In addition, we may add incremental term loan facilities, increase commitments and/or add new revolving commitments in an aggregate

principal amount not to exceed the sum of (A) the greater of $ 600.0 million or 75 % of our Consolidated EBITDA (as defined in the Amended Revolving Credit Facility) and (B) an amount based on our consolidated net leverage ratio.

Borrowings under the Amended Revolving Credit Facility bear interest at LIBOR or the Base Rate (each as defined in the Amended Revolving Credit Facility) plus an applicable rate ranging from 1.25 % to 2.25 % for LIBOR-based loans and from 0.25 % to 1.25 % for Base Rate-based loans, depending upon our consolidated net leverage ratio.

3 unchanged sentences

In connection with the Amended Revolving Credit Facility, we repaid the outstanding $ 271.9 million term loan facility due in November 2021 with cash on hand.

As of our fiscal month ended September 27, 2020, no borrowings were outstanding under the Amended Revolving Credit Facility.

In connection with the amendment, we capitalized $ 2.4 million of debt issuance costs as “Other assets” on our Consolidated Balance Sheet.

During the thirteen and twenty-six weeks ended November 29, 2020, we recognized $ 1.0 million of expenses, in “Interest expense, net” for the write-off of debt issuance costs related to the payoff of the term loan facility.

At November 29, 2020, we had no borrowings outstanding under the Amended Revolving Credit Facility and $ 745.1 million of availability under the facility, which is net of outstanding letters of credit of $ 4.9 million.

For the twenty-six weeks ended November 29, 2020, borrowings under the facility ranged from zero to $ 495.0 million and the weighted average interest rate for our outstanding borrowings under the facility was 1.68 %.

For the twenty-six weeks ended November 29, 2020 and November 24, 2019, we paid $ 60.5 million and $ 52.6 million of interest on debt, respectively.

Term A-1 and A-2 Loan Facilities

4 unchanged sentences

The Committee, in its discretion, authorizes grants of restricted stock units (“RSUs”), performance awards payable upon the attainment of specified performance goals (“Performance Shares”), dividend equivalents, and other stock-based awards.

During the thirteen weeks ended August 30, 2020, we granted 0.2 million RSUs at an average grant date fair value of $ 59.45 .

As of August 30, 2020, 7.4 million shares were available for future grant under the plan.

During the twenty-six weeks ended November 29, 2020, we granted 0.3 million and 0.1 million RSUs and Performance Shares, respectively, at an average grant date fair value of $ 61.62 .

As of November 29, 2020, 7.4 million shares were available for future grant under the plan.

Our stock-based compensation expense is recorded in “Selling, general and administrative expenses.” Compensation expense for stock-based awards recognized in the Consolidated Statements of Earnings, net of forfeitures, was as follows (dollars in millions):

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Stock-settled RSUs

8 unchanged sentences

(b) Income tax benefit represents the marginal tax rate, excluding non-deductible compensation.

Based on estimates at August 30, 2020, total unrecognized compensation expense related to stock-based awards was as follows (dollars in millions):

Based on estimates at November 29, 2020, total unrecognized compensation expense related to stock-based awards was as follows (dollars in millions):

Period (in years)

6 unchanged sentences

of the Form 10-K.

The fair values of cash and cash equivalents, receivables, accounts payable and short-term debt approximate their carrying amounts due to their short duration.

The fair values of cash equivalents, receivables, accounts payable and short-term debt approximate their carrying amounts due to their short duration.

The following table presents our financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall (dollars in millions):

As of August 30, 2020

As of November 29, 2020

Deferred compensation assets

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Cost and equity investments are measured at fair value on a non-recurring basis.

At August 30, 2020, we had $ 2,166.0 million of fixed-rate and $ 882.6 million of variable-rate debt outstanding.

Based on current market rates, the fair value of our fixed-rate debt at August 30, 2020, was estimated to be $ 2,297.5 million.

At November 29, 2020, we had $ 2,166.0 million of fixed-rate and $ 602.2 million of variable-rate debt outstanding.

Based on current market rates, the fair value of our fixed-rate debt at November 29, 2020, was estimated to be $ 2,297.6 million.

Any differences between the book value and fair value are due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt.

3 unchanged sentences

In December 2018, our Board of Directors authorized a program, with no expiration date, to repurchase shares of our common stock in an amount not to exceed $ 250.0 million in the aggregate, on an opportunistic basis.

During the thirteen weeks ended August 30, 2020, we did not repurchase any shares.

As of August 30, 2020, $ 195.3 million remained authorized for repurchase under the program.

During the thirteen weeks ended August 30, 2020, we paid $ 33.6 million of dividends to common stockholders.

On September 4, 2020, we paid $ 33.7 million of dividends to stockholders of record as of the close of business on August 7, 2020.

On September 24, 2020 , our Board of Directors declared a dividend of $ 0.23 per share of common stock.

The dividend will be paid on December 4, 2020 , to stockholders of record as of the close of business on November 6, 2020 .

During the thirteen and twenty-six weeks ended November 29, 2020, we did not repurchase any shares.

As of November 29, 2020, $ 195.3 million remained authorized for repurchase under the program.

During the twenty-six weeks ended November 29, 2020, we paid $ 67.2 million of dividends to common stockholders.

On December 4, 2020, we paid $ 33.7 million of dividends to stockholders of record as of the close of business on November 6, 2020.

On December 17, 2020 , our Board of Directors declared a dividend of $ 0.235 per share of common stock.

The dividend will be paid on March 5, 2021 , to stockholders of record as of the close of business on February 5, 2021 .

Accumulated Other Comprehensive Income (Loss) (“AOCI”)

Changes in AOCI, net of taxes, as of August 30, 2020 were as follows (dollars in millions).

Changes in AOCI, net of taxes, as of November 29, 2020 were as follows (dollars in millions).

Post-Retirement

1 unchanged sentence

Gains (Losses)

Income (Loss)

Balance as of May 31, 2020

2 unchanged sentences

Net current-period other comprehensive income (loss)

Balance as of August 30, 2020

(a) Actuarial losses on pension and post-retirement benefits included in AOCI to be amortized over the next 12 months is a net loss of $ 0.3 million ($ 0.2 million after tax).

Balance as of November 29, 2020

We have four operating segments, each of which is a reportable segment:

3 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

(in millions)

15 unchanged sentences

(c) The Other segment primarily includes our vegetable and dairy businesses and unrealized mark-to-market adjustments associated with commodity hedging contracts.

Lamb Weston’s largest customer, McDonald’s Corporation, accounted for approximately 11 %and 10 % of consolidated “Net sales” for the thirteen weeks ended August 30, 2020 and August 25, 2019, respectively.

No customer accounted for more than 10% of our consolidated accounts receivable as of August 30, 2020 or May 31, 2020.

Lamb Weston’s largest customer, McDonald’s Corporation, accounted for approximately 11 %of consolidated “Net sales” for both the thirteen and twenty-six weeks ended November 29, 2020;

and 10 % for both the thirteen and twenty-six weeks ended November 24, 2019.

No customer accounted for more than 10% of our consolidated accounts receivable as of November 29, 2020 or May 31, 2020.

COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements