Lamb Weston Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ Lamb Weston Holdings, Inc. Consolidated Statements of Earnings (unaudited, dollars in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Twenty-Six Weeks Ended ​ November 29, November 24, November 29, November 24, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Net sales ​ $ 896.1 ​ $ 1,019.2 ​ $ 1,767.6 ​ $ 2,008.2 Cost of sales ​ ​ 672.6 ​ ​ 734.1 ​ ​ 1,330.3 ​ ​ 1,474.5 Gross profit ​ ​ 223.5 ​ ​ 285.1 ​ ​ 437.3 ​ ​ 533.7 Selling, general and administrative expenses ​ ​ 83.9 ​ ​ 91.6 ​ ​ 162.0 ​ ​ 170.2 Income from operations ​ ​ 139.6 ​ ​ 193.5 ​ ​ 275.3 ​ ​ 363.5 Interest expense, net ​ ​ 30.0 ​ ​ 25.4 ​ ​ 60.3 ​ ​ 53.6 Income before income taxes and equity method earnings ​ 109.6 ​ 168.1 ​ 215.0 ​ 309.9 Income tax expense ​ ​ 31.9 ​ ​ 42.7 ​ ​ 59.9 ​ ​ 79.4 Equity method investment earnings ​ ​ 19.2 ​ ​ 15.0 ​ ​ 31.1 ​ ​ 25.6 Net income ​ $ 96.9 ​ $ 140.4 ​ $ 186.2 ​ $ 256.1 Earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.66 ​ $ 0.96 ​ $ 1.27 ​ $ 1.75 Diluted ​ $ 0.66 ​ $ 0.95 ​ $ 1.27 ​ $ 1.74 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 3 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Comprehensive Income (unaudited, dollars in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirteen Weeks Ended ​ ​ November 29, 2020 ​ November 24, 2019 ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Amount Benefit Amount Amount Benefit Amount Net income ​ $ 128.8 ​ $ ( 31.9 ) ​ $ 96.9 ​ $ 183.1 ​ $ ( 42.7 ) ​ $ 140.4 Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss) ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.2 ​ ​ ( 0.1 ) ​ 0.1 Unrealized currency translation gains (losses) ​ ​ 8.1 ​ ​ ( 0.1 ) ​ ​ 8.0 ​ ​ ( 0.4 ) ​ 1.0 ​ 0.6 Comprehensive income ​ $ 136.9 ​ $ ( 32.0 ) ​ $ 104.9 ​ $ 182.9 ​ $ ( 41.8 ) ​ $ 141.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six Weeks Ended ​ Twenty-Six Weeks Ended ​ ​ November 29, 2020 ​ November 24, 2019 ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Amount Benefit Amount Amount Benefit Amount Net income ​ $ 246.1 ​ $ ( 59.9 ) ​ $ 186.2 ​ $ 335.5 ​ $ ( 79.4 ) ​ $ 256.1 Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss) ​ 0.1 ​ ​ — ​ 0.1 ​ 0.4 ​ ​ ( 0.1 ) ​ 0.3 Unrealized currency translation gains (losses) ​ 50.0 ​ ( 2.6 ) ​ 47.4 ​ ( 9.5 ) ​ 1.0 ​ ( 8.5 ) Comprehensive income ​ $ 296.2 ​ $ ( 62.5 ) ​ $ 233.7 ​ $ 326.4 ​ $ ( 78.5 ) ​ $ 247.9 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 4 Table of Contents Lamb Weston Holdings, Inc. Consolidated Balance Sheets (unaudited, dollars in millions, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ November 29, ​ May 31, ​ 2020 2020 ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents $ 763.9 ​ $ 1,364.0 Receivables, less allowance for doubtful accounts of $ 1.0 and $ 1.3 ​ 353.2 ​ 342.1 Inventories ​ 630.5 ​ 486.7 Prepaid expenses and other current assets ​ 38.2 ​ 109.8 Total current assets ​ 1,785.8 ​ 2,302.6 Property, plant and equipment, net ​ 1,485.2 ​ 1,535.0 Operating lease assets ​ ​ 155.1 ​ ​ 167.0 Equity method investments ​ ​ 291.4 ​ ​ 250.2 Goodwill ​ 325.1 ​ 303.8 Intangible assets, net ​ 37.9 ​ 38.3 Other assets ​ 78.6 ​ 65.4 Total assets ​ $ 4,159.1 ​ $ 4,662.3 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ Short-term borrowings ​ $ — ​ $ 498.7 Current portion of long-term debt and financing obligations ​ ​ 31.8 ​ ​ 48.8 Accounts payable ​ 377.4 ​ 244.4 Accrued liabilities ​ 205.1 ​ 233.0 Total current liabilities ​ 614.3 ​ 1,024.9 Long-term liabilities: ​ ​ ​ ​ ​ ​ Long-term debt and financing obligations, excluding current portion ​ 2,719.4 ​ 2,992.6 Deferred income taxes ​ ​ 158.0 ​ ​ 152.5 Other noncurrent liabilities ​ 258.5 ​ 252.3 Total long-term liabilities ​ ​ 3,135.9 ​ ​ 3,397.4 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Common stock of $ 1.00 par value, 600,000,000 shares authorized; 147,466,446 and 146,993,751 shares issued ​ 147.5 ​ 147.0 Additional distributed capital ​ ( 850.4 ) ​ ( 862.9 ) Retained earnings ​ 1,182.8 ​ 1,064.6 Accumulated other comprehensive income (loss) ​ 7.0 ​ ( 40.5 ) Treasury stock, at cost, 1,111,364 and 954,858 common shares ​ ​ ( 78.0 ) ​ ​ ( 68.2 ) Total stockholders' equity ​ 408.9 ​ 240.0 Total liabilities and stockholders’ equity ​ $ 4,159.1 ​ $ 4,662.3 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 5 Table of Contents ​ Lamb Weston Holdings, Inc. Consolidated Statements of Stockholders’ Equit y (unaudited, dollars in millions, except share data ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended November 29, 2020 and November 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 August 30, 2020 ​ ​ 146,324,943 ​ $ 147.4 ​ $ ( 77.8 ) ​ $ ( 856.5 ) ​ $ 1,119.9 $ ( 1.0 ) $ 332.0 Dividends declared, $ 0.23 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 33.7 ) ​ ​ — ​ ​ ( 33.7 ) Common stock issued ​ ​ 35,494 ​ ​ 0.1 ​ ​ — ​ ​ 0.4 ​ ​ — ​ ​ — ​ ​ 0.5 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 5.3 ​ ​ — ​ ​ — ​ ​ 5.3 Common stock withheld to cover taxes ​ ​ ( 5,355 ) ​ ​ — ​ ​ ( 0.2 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 0.2 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.4 ​ ​ ( 0.3 ) ​ ​ — ​ ​ 0.1 Comprehensive income ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 96.9 ​ ​ 8.0 ​ ​ 104.9 Balance at November 29, 2020 ​ ​ 146,355,082 ​ $ 147.5 ​ $ ( 78.0 ) ​ $ ( 850.4 ) ​ $ 1,182.8 ​ $ 7.0 ​ $ 408.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at August 25, 2019 ​ ​ 146,062,722 ​ $ 146.8 ​ $ ( 46.7 ) ​ $ ( 884.7 ) ​ $ 911.1 ​ $ ( 34.2 ) ​ $ 92.3 Dividends declared, $ 0.20 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 29.2 ) ​ ​ — ​ ​ ( 29.2 ) Common stock issued ​ ​ 76,787 ​ ​ — ​ ​ — ​ ​ 0.2 ​ ​ — ​ ​ — ​ ​ 0.2 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 7.2 ​ ​ — ​ ​ — ​ ​ 7.2 Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 136,305 ) ​ ​ — ​ ​ ( 10.4 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10.4 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.3 ​ ​ ( 0.4 ) ​ ​ — ​ ​ ( 0.1 ) Comprehensive income ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 140.4 ​ ​ 0.7 ​ ​ 141.1 Balance at November 24, 2019 ​ ​ 146,003,204 ​ $ 146.8 ​ $ ( 57.1 ) ​ $ ( 877.0 ) ​ $ 1,021.9 ​ $ ( 33.5 ) ​ $ 201.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six Weeks Ended November 29, 2020 and November 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 31, 2020 ​ ​ 146,038,893 ​ $ 147.0 ​ $ ( 68.2 ) ​ $ ( 862.9 ) ​ $ 1,064.6 $ ( 40.5 ) $ 240.0 Dividends declared, $ 0.46 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 67.4 ) ​ ​ — ​ ​ ( 67.4 ) Common stock issued ​ ​ 472,695 ​ ​ 0.5 ​ ​ — ​ ​ 0.6 ​ ​ — ​ ​ — ​ ​ 1.1 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 11.3 ​ ​ — ​ ​ — ​ ​ 11.3 Common stock withheld to cover taxes ​ ​ ( 156,506 ) ​ ​ — ​ ​ ( 9.8 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 9.8 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.6 ​ ​ ( 0.6 ) ​ ​ — ​ ​ — Comprehensive income ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 186.2 ​ ​ 47.5 ​ ​ 233.7 Balance at November 29, 2020 ​ ​ 146,355,082 ​ $ 147.5 ​ $ ( 78.0 ) ​ $ ( 850.4 ) ​ $ 1,182.8 ​ $ 7.0 ​ $ 408.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, $ 0.40 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 58.4 ) ​ ​ — ​ ​ ( 58.4 ) Common stock issued ​ ​ 182,197 ​ ​ 0.1 ​ ​ — ​ ​ 0.1 ​ ​ — ​ ​ — ​ ​ 0.2 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 12.6 ​ ​ — ​ ​ — ​ ​ 12.6 Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 248,026 ) ​ ​ — ​ ​ ( 17.8 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 17.8 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.6 ​ ​ 0.1 ​ ​ — ​ ​ 0.7 Comprehensive income ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 256.1 ​ ​ ( 8.2 ) ​ ​ 247.9 Balance at November 24, 2019 ​ ​ 146,003,204 ​ $ 146.8 ​ $ ( 57.1 ) ​ $ ( 877.0 ) ​ $ 1,021.9 ​ $ ( 33.5 ) ​ $ 201.1 ​ See Condensed Notes to Consolidated Financial Statements ​ 6 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Cash Flows (unaudited, dollars in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Twenty-Six Weeks Ended ​ November 29, November 24, ​ ​ 2020 ​ 2019 Cash flows from operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 186.2 ​ $ 256.1 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization of intangibles and debt issuance costs ​ ​ 95.7 ​ ​ 91.7 Stock-settled, stock-based compensation expense ​ ​ 11.3 ​ ​ 12.6 Earnings of joint ventures in excess of distributions ​ ​ ( 24.4 ) ​ ​ ( 7.6 ) Deferred income taxes ​ ​ 2.5 ​ ​ 17.2 Other ​ ​ 15.5 ​ ​ 2.0 Changes in operating assets and liabilities, net of acquisition: ​ ​ ​ ​ ​ ​ Receivables ​ ​ ( 8.5 ) ​ ​ ( 55.2 ) Inventories ​ ​ ( 140.3 ) ​ ​ ( 133.4 ) Income taxes payable/receivable, net ​ ​ 33.0 ​ ​ 17.5 Prepaid expenses and other current assets ​ ​ 51.8 ​ ​ 46.3 Accounts payable ​ ​ 138.5 ​ ​ 126.4 Accrued liabilities ​ ​ ( 42.5 ) ​ ​ ( 28.3 ) Net cash provided by operating activities ​ $ 318.8 ​ $ 345.3 Cash flows from investing activities ​ ​ ​ ​ ​ ​ Additions to property, plant and equipment ​ ​ ( 42.3 ) ​ ​ ( 88.1 ) Additions to other long-term assets ​ ​ ( 11.4 ) ​ ​ ( 19.3 ) Acquisition of business, net of cash acquired ​ ​ — ​ ​ ( 116.7 ) Investment in equity method joint venture ​ ​ — ​ ​ ( 17.1 ) Other ​ ​ 0.4 ​ ​ 1.0 Net cash used for investing activities ​ $ ( 53.3 ) ​ $ ( 240.2 ) Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds (payments) of short-term borrowings, net ​ ( 498.8 ) ​ 1.4 Repayments of debt and financing obligations ​ ​ ( 289.6 ) ​ ​ ( 318.1 ) Dividends paid ​ ​ ( 67.2 ) ​ ​ ( 58.5 ) Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 9.8 ) ​ ​ ( 17.8 ) Payments of debt issuance costs ​ ​ ( 2.8 ) ​ ​ — Proceeds from issuance of debt ​ ​ — ​ ​ 299.3 Other ​ ​ 1.0 ​ ​ 0.1 Net cash used for financing activities ​ $ ( 867.2 ) ​ $ ( 93.6 ) Effect of exchange rate changes on cash and cash equivalents ​ ​ 1.6 ​ ​ 0.1 Net increase (decrease) in cash and cash equivalents ​ ( 600.1 ) ​ 11.6 Cash and cash equivalents, beginning of the period ​ ​ 1,364.0 ​ ​ 12.2 Cash and cash equivalents, end of period ​ $ 763.9 ​ $ 23.8 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 7 Table of Contents Condensed Notes to Consolidated Financial Statement s ​ 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ Lamb Weston Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Lamb Weston”), along with our joint venture partners, is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho. We have four reportable segments: Global, Foodservice, Retail, and Other. See Note 13, Segments, for additional information on our reportable segments. ​ Basis of Presentation ​ 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 accounting estimates and significant accounting policies. The actual results that we experience may differ materially from those estimates. Results for interim periods should not be considered indicative of results for our full fiscal year, which ends the last Sunday in May. ​ These financial statements and condensed notes should be read together with the consolidated financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020 (the “Form 10-K”), which we filed with the Securities and Exchange Commission on July 28, 2020. ​ New and Recently Issued Accounting Pronouncements ​ Recently Adopted Accounting Pronouncements ​ Receivables – Credit Losses ​ In June 2016 , the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . 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 have a significant impact on our consolidated financial statements or our condensed notes to consolidated financial statements. ​ Accounting Pronouncements Not Yet Adopted ​ Reference Rate Reform ​ In March 2020 , the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and the London Interbank Offered Rate (“LIBOR”). This guidance includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date. This guidance is effective immediately and generally can be applied through December 31, 2022 . We are currently evaluating the potential impact of this standard on our financial statements. ​ There were no other accounting pronouncements recently issued that had or are expected to have a material impact on our financial statements. ​ ​ 8 Table of Contents 2. EARNINGS PER SHARE ​ The following table sets forth the computation of basic and diluted earnings per common share for the periods presented (dollars and shares in millions, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Twenty-Six Weeks Ended ​ November 29, November 24, November 29, November 24, ​ ​ 2020 ​ 2019 ​ 2020 ​ 2019 Numerator: ​ ​ ​ ​ Net income ​ $ 96.9 ​ $ 140.4 ​ $ 186.2 ​ $ 256.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ ​ ​ Basic weighted average common shares outstanding ​ 146.5 ​ 146.2 ​ 146.4 ​ 146.2 Add: Dilutive effect of employee incentive plans (a) ​ 0.6 ​ 0.9 ​ 0.7 ​ 0.9 Diluted weighted average common shares outstanding ​ 147.1 ​ 147.1 ​ 147.1 ​ 147.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 0.66 ​ $ 0.96 ​ $ 1.27 ​ $ 1.75 Diluted ​ $ 0.66 ​ $ 0.95 ​ $ 1.27 ​ $ 1.74 (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 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. ​ ​ ​ 3. INCOME TAXES ​ 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. statutory tax rate of 21 % principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items. ​ Income Taxes Paid ​ 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 ​ There have been no material changes to the unrecognized tax benefits disclosed in Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K, and we do not expect any significant changes to unrecognized tax benefits in the next 12 months. ​ ​ 9 Table of Contents 4. INVENTORIES ​ Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable value and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead. The components of inventories were as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ November 29, ​ May 31, ​ ​ 2020 2020 Raw materials and packaging ​ $ 208.2 $ 106.2 Finished goods ​ 382.7 339.2 Supplies and other ​ 39.6 41.3 Inventories ​ $ 630.5 $ 486.7 ​ ​ 5. PROPERTY, PLANT AND EQUIPMENT ​ The components of property, plant and equipment were as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ November 29, ​ May 31, ​ ​ 2020 2020 Land and land improvements ​ $ 107.8 ​ $ 107.2 Buildings, machinery, and equipment ​ 2,696.6 ​ 2,670.1 Furniture, fixtures, office equipment, and other ​ 95.7 ​ 107.1 Construction in progress ​ 73.8 ​ 58.3 Property, plant and equipment, at cost ​ 2,973.9 ​ 2,942.7 Less accumulated depreciation ​ ( 1,488.7 ) ​ ( 1,407.7 ) Property, plant and equipment, net ​ $ 1,485.2 ​ $ 1,535.0 ​ ​ 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. ​ ​ 6. INVESTMENTS IN JOINT VENTURES ​ We hold a 50 % ownership interest in Lamb-Weston/Meijer v.o.f. (“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 joint venture based in the United States. We also hold a 50 % interest in Lamb Weston Alimentos Modernos S.A. (“LWAMSA”), a joint venture with Sociedad Commercial del Plata, which is headquartered in Argentina. This joint venture manufactures and sells frozen potato products principally in South America. These investments are accounted for using equity method accounting. ​ 10 Table of Contents 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 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. ​ 7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS ​ The following table presents changes in goodwill balances, by segment, during the twenty-six weeks ended November 29, 2020 (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Global Foodservice Retail Other Total Balance at May 31, 2020 ​ $ 245.6 ​ $ 42.8 ​ $ 10.9 ​ $ 4.5 ​ $ 303.8 Foreign currency translation adjustment ​ ​ 21.3 ​ ​ — ​ ​ — ​ ​ — ​ 21.3 Balance at November 29, 2020 ​ $ 266.9 ​ $ 42.8 ​ $ 10.9 ​ $ 4.5 ​ $ 325.1 ​ ​ Other identifiable intangible assets were as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ November 29, 2020 ​ May 31, 2020 ​ 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 ​ 43.5 ​ ( 23.6 ) ​ 19.9 11 ​ 42.4 ​ ( 22.1 ) ​ 20.3 ​ ​ $ 61.5 $ ( 23.6 ) $ 37.9 ​ $ 60.4 $ ( 22.1 ) $ 38.3 (a) Non-amortizing intangible assets represent brands and trademarks. ​ (b) Amortizing intangible assets are principally composed of licensing agreements, brands, and customer relationships. 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. ​ ​ ​ 11 Table of Contents 8. ACCRUED LIABILITIES ​ The components of accrued liabilities were as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ November 29, ​ May 31, ​ ​ 2020 2020 Compensation and benefits ​ $ 54.6 $ 74.5 Accrued trade promotions ​ ​ 36.6 ​ ​ 42.5 Dividends payable to shareholders ​ ​ 33.7 ​ ​ 33.6 Current portion of operating lease liabilities ​ ​ 28.7 ​ ​ 28.4 Income taxes payable ​ ​ 13.8 ​ ​ 1.3 Franchise, property, and sales and use taxes ​ 10.8 9.4 Accrued interest ​ ​ 8.9 ​ ​ 8.7 Other ​ 18.0 34.6 Accrued liabilities ​ $ 205.1 $ 233.0 ​ ​ ​ 9. DEBT AND FINANCING OBLIGATIONS ​ At November 29, 2020 and May 31, 2020, our debt, including financing obligations was as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ November 29, May 31, ​ ​ 2020 ​ 2020 Short-term borrowings: ​ ​ ​ ​ ​ ​ Revolving credit facility ​ $ — ​ $ 495.0 Other credit facilities ​ ​ — ​ ​ 3.7 ​ ​ ​ — ​ ​ 498.7 Long-term debt: ​ ​ ​ ​ ​ ​ Term loan facility, due November 2021 ​ ​ — ​ 276.6 Term A-1 loan facility, due June 2024 ​ ​ 281.3 ​ ​ 288.7 Term A-2 loan facility, due April 2025 ​ ​ 320.9 ​ ​ 325.0 4.625 % senior notes, due November 2024 ​ 833.0 833.0 4.875 % senior notes, due November 2026 ​ ​ 833.0 ​ ​ 833.0 4.875 % senior notes, due May 2028 ​ ​ 500.0 ​ ​ 500.0 ​ ​ ​ 2,768.2 ​ ​ 3,056.3 Financing obligations: ​ ​ ​ ​ ​ ​ Lease financing obligations due on various dates through 2040 (a) ​ 7.6 13.3 ​ ​ ​ 7.6 ​ ​ 13.3 ​ ​ ​ ​ ​ ​ ​ Total debt and financing obligations ​ 2,775.8 3,568.3 Debt issuance costs ​ ​ ( 24.6 ) ​ ​ ( 28.2 ) Short-term borrowings ​ ​ — ​ ​ ( 498.7 ) Current portion of long-term debt and financing obligations ​ ( 31.8 ) ( 48.8 ) Long-term debt and financing obligations, excluding current portion ​ $ 2,719.4 $ 2,992.6 (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 ​ 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 12 Table of Contents 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. In addition to paying interest, we will pay an annual commitment fee for undrawn amounts at a rate of 0.20 % to 0.40 %, depending on our consolidated net leverage ratio. The Amended Revolving Credit Facility requires us to maintain a consolidated net leverage ratio no greater than 5.25 to 1.00, decreasing ratably to 4.50 to 1.00 on February 26, 2022 through maturity; and an interest coverage ratio no less than 2.75 to 1.00. ​ 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. 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 ​ On September 23, 2020, in connection with the Amended Revolving Credit Facility, we amended the credit agreement, dated as of June 28, 2019, relating to our Term A-1 and A-2 Loan Facilities (“Term Loan Facilities”), to, among other things, modify the Term Loan Facilities to make conforming changes to the affirmative and negative covenants under the Term Loan Facilities. The financial covenants under the Term Loan Facilities remain unchanged, requiring a consolidated net leverage ratio no greater than 4.50 to 1.00 and an interest coverage ratio no less than 2.75 to 1.00 . ​ 13 Table of Contents 10. STOCK-BASED COMPENSATION ​ The Compensation Committee (“the Committee”) of our Board of Directors administers our stock compensation plan. 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 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 ​ ​ November 29, ​ November 24, ​ ​ November 29, ​ November 24, ​ ​ 2020 ​ 2019 ​ ​ 2020 ​ 2019 Stock-settled RSUs ​ $ 3.2 ​ $ 3.5 ​ ​ $ 6.7 ​ $ 6.3 Performance Shares ​ ​ 2.1 ​ ​ 3.7 ​ ​ ​ 4.6 ​ ​ 6.2 Stock options ​ ​ — ​ ​ — ​ ​ ​ — ​ ​ 0.1 Stock-settled compensation expense ​ ​ 5.3 ​ ​ 7.2 ​ ​ ​ 11.3 ​ ​ 12.6 Cash-settled RSUs (a) ​ ​ — ​ ​ — ​ ​ ​ — ​ ​ 1.0 Total compensation expense ​ ​ 5.3 ​ ​ 7.2 ​ ​ ​ 11.3 ​ ​ 13.6 Income tax benefit (b) ​ ​ ( 0.9 ) ​ ​ ( 1.4 ) ​ ​ ​ ( 2.0 ) ​ ​ ( 2.6 ) Total compensation expense, net of tax benefit ​ $ 4.4 ​ $ 5.8 ​ ​ $ 9.3 ​ $ 11.0 (a) All cash-settled RSUs are marked-to-market and presented within “Accrued liabilities” on our Consolidated Balance Sheets. ​ (b) Income tax benefit represents the marginal tax rate, excluding non-deductible compensation. ​ Based on estimates at November 29, 2020, total unrecognized compensation expense related to stock-based awards was as follows (dollars in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ Weighted ​ ​ Unrecognized ​ Average ​ ​ Compensation ​ Recognition ​ ​ Expense ​ Period (in years) Stock-settled RSUs ​ $ 23.8 ​ 2.1 Performance Shares ​ ​ 11.9 ​ 1.9 Total unrecognized stock-based expense ​ $ 35.7 ​ 2.0 ​ ​ 14 Table of Contents 11. FAIR VALUE MEASUREMENTS ​ For information about our fair value policies, methods and assumptions used in estimating the fair value of our financial assets and liabilities, see Note 1, Nature of Operations and Summary of Significant Accounting Policies and Note 12, Fair Value Measurements, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K. ​ 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 November 29, 2020 ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ Deferred compensation assets ​ $ 0.1 ​ $ — ​ $ — ​ $ 0.1 Derivative assets (a) ​ ​ — ​ ​ 5.4 ​ ​ — ​ ​ 5.4 Total assets ​ $ 0.1 ​ $ 5.4 ​ $ — ​ $ 5.5 Liabilities: ​ ​ ​ ​ Deferred compensation liabilities (b) ​ ​ — ​ 22.9 ​ — ​ 22.9 Total liabilities ​ $ — ​ $ 22.9 ​ $ — ​ $ 22.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of May 31, 2020 ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ Deferred compensation assets ​ $ 0.1 ​ $ — ​ $ — ​ $ 0.1 Total assets ​ $ 0.1 ​ $ — ​ $ — ​ $ 0.1 Liabilities: ​ ​ ​ ​ Derivative liabilities (a) ​ $ — ​ $ 4.7 ​ $ — ​ $ 4.7 Deferred compensation liabilities (b) ​ — 18.0 — 18.0 Total liabilities ​ $ — ​ $ 22.7 ​ $ — ​ $ 22.7 (a) Derivative assets and liabilities included in Level 2 primarily represent commodity swap and option contracts. The fair values of our Level 2 derivative assets and liabilities were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for commodities. ​ (b) The fair values of our Level 2 deferred compensation liabilities were valued using third-party valuations, which are based on the net asset values of mutual funds in our retirement plans. While the underlying assets are actively traded on an exchange, the funds are not. ​ ​ Non-financial assets such as property, plant and equipment, and intangible assets are recorded at fair value only if an impairment is recognized. Cost and equity investments are measured at fair value on a non-recurring basis. ​ 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. The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market prices. ​ 15 Table of Contents 12. STOCKHOLDERS’ EQUITY ​ Share Repurchase Program ​ 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 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. ​ Dividends ​ 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 November 29, 2020 were as follows (dollars in millions). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ ​ ​ ​ Accumulated ​ ​ Currency ​ Pension and ​ Other ​ ​ Translation ​ Post-Retirement ​ Comprehensive ​ Gains (Losses) Benefits Income (Loss) Balance as of May 31, 2020 ​ $ ( 36.3 ) $ ( 4.2 ) $ ( 40.5 ) Other comprehensive income before reclassifications, net of tax ​ ​ 47.4 ​ ​ — ​ ​ 47.4 Amounts reclassified out of AOCI, net of tax ​ ​ — ​ ​ 0.1 ​ ​ 0.1 Net current-period other comprehensive income (loss) ​ 47.4 0.1 ​ 47.5 Balance as of November 29, 2020 ​ $ 11.1 $ ( 4.1 ) $ 7.0 ​ ​ ​ 16 Table of Contents 13. SEGMENTS ​ We have four operating segments, each of which is a reportable segment: Global, Foodservice, Retail, and Other. Our chief operating decision maker receives periodic management reports under this structure that generally focus on the nature and scope of our customers’ businesses, which enables operating decisions, performance assessment, and resource allocation decisions at the segment level. The reportable segments are each managed by a general manager and supported by a cross functional team assigned to support the segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Twenty-Six Weeks Ended ​ November 29, November 24, November 29, November 24, (in millions) ​ 2020 (a) ​ 2019 ​ 2020 (a) ​ 2019 Net sales ​ ​ ​ ​ Global ​ $ 475.9 ​ $ 539.6 ​ $ 923.4 ​ $ 1,057.2 Foodservice ​ 241.1 ​ 304.9 ​ 477.8 ​ 610.3 Retail ​ 140.7 ​ 132.1 ​ 294.6 ​ 261.4 Other ​ ​ 38.4 ​ ​ 42.6 ​ ​ 71.8 ​ ​ 79.3 Total net sales ​ ​ 896.1 ​ ​ 1,019.2 ​ ​ 1,767.6 ​ ​ 2,008.2 Product contribution margin (b) ​ ​ ​ ​ ​ ​ ​ ​ Global ​ ​ 92.7 ​ ​ 128.9 ​ ​ 170.5 ​ ​ 231.6 Foodservice ​ ​ 87.7 ​ ​ 111.3 ​ ​ 173.5 ​ ​ 213.8 Retail ​ ​ 30.1 ​ ​ 28.5 ​ ​ 65.9 ​ ​ 57.4 Other (c) ​ ​ 10.5 ​ ​ 10.4 ​ ​ 23.7 ​ ​ 20.1 ​ ​ ​ 221.0 ​ ​ 279.1 ​ ​ 433.6 ​ ​ 522.9 Advertising and promotion expenses (b) ​ ​ 2.5 ​ ​ 6.0 ​ ​ 3.7 ​ ​ 10.8 Gross profit ​ ​ 223.5 ​ ​ 285.1 ​ ​ 437.3 ​ ​ 533.7 Selling, general and administrative expenses ​ ​ 83.9 ​ ​ 91.6 ​ ​ 162.0 ​ ​ 170.2 Income from operations ​ ​ 139.6 ​ ​ 193.5 ​ ​ 275.3 ​ ​ 363.5 Interest expense, net ​ ​ 30.0 ​ ​ 25.4 ​ ​ 60.3 ​ ​ 53.6 Income tax expense ​ ​ 31.9 ​ ​ 42.7 ​ ​ 59.9 ​ ​ 79.4 Equity method investment earnings ​ ​ 19.2 ​ ​ 15.0 ​ ​ 31.1 ​ ​ 25.6 Net income ​ $ 96.9 ​ $ 140.4 ​ $ 186.2 ​ $ 256.1 (a) On March 11, 2020, the World Health Organization declared the spread of COVID-19 a global pandemic. In an attempt to minimize the transmission of COVID-19, significant social and economic restrictions, including restrictions on dine-in purchases and the imposition of stay-at-home orders, were imposed in the United States and in our international markets. These restrictions had a negative impact on our sales, costs, earnings of our joint ventures, and therefore our net income. The increase in our costs, and the costs of our joint ventures, related to factory utilization and production inefficiencies, manufacturing and operational disruptions directly attributable to the pandemic, as well as incremental warehousing and transportation costs, and costs to enhance employee safety measures, including purchases of safety and health screening equipment, retaining sales employees, and expensing certain capitalized manufacturing facility expansion projects that were stopped. ​ (b) Product contribution margin represents net sales less cost of sales and advertising and promotion expenses. Product contribution margin includes advertising and promotion expenses because the amounts are directly associated with segment performance; it excludes general corporate expenses and interest expense because management believes these amounts are not directly associated with segment performance. ​ (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 %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. ​ 17 Table of Contents 14. COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS ​ We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, lease obligations, purchase commitments for goods and services, and legal proceedings. There have been no material changes to the guarantees and indemnifications disclosed in Note 15, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K. ​ We are a party to legal actions arising in the ordinary course of our business. These claims, legal proceedings and litigation principally arise from alleged casualty, product liability, employment, and other disputes. In determining loss contingencies, we consider the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recognized when it is considered probable that a liability has been incurred and when the amount of loss can be reasonably estimated. While any claim, proceeding or litigation has an element of uncertainty, we believe the outcome of any of these that are pending or threatened will not have a material adverse effect on our financial condition, results of operations, or cash flows. ​ ​ 18 Table of Contents