8 unchanged sentences
The fiscal years for the Consolidated Financial Statements presented consist of a 52-week period for fiscal 2021 and a 53-week period for fiscal 2020.
−Removed: Lamb Weston, along with its joint venture partners, is a leading global producer, distributor, and marketer of value-added frozen potato products.
+Added: Lamb Weston, along with our joint venture partners, is a leading global producer, distributor, and marketer of value-added frozen potato products.
We, along with our joint venture partners, are the number one supplier of value-added frozen potato products in North America.
6 unchanged sentences
Our MD&A is based on financial data derived from the financial statements prepared in accordance with U.S.
−Removed: generally accepted accounting principles (“GAAP”) and certain other financial data (Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS) that is prepared using non-GAAP financial measures.
−Removed: See “Reconciliations of Non-GAAP Financial Measures to Reported Amounts” below for the definitions of Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS, and a reconciliation of these non-GAAP financial measures to net income or diluted earnings per share.
+Added: generally accepted accounting principles (“GAAP”) and certain other financial data (including product contribution margin on a consolidated basis, Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA including unconsolidated joint ventures, and Adjusted Diluted EPS) that is prepared using non-GAAP financial measures.
+Added: Refer to “Non-GAAP Financial Measures” below for the definitions of product contribution margin, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS, and a reconciliation of these non-GAAP financial measures to gross profit, net income or diluted earnings per share.
Executive Summary
−Removed: On March 11, 2020 (during our fiscal fourth quarter), the World Health Organization declared that the spread of COVID-19 qualified as a global pandemic.
−Removed: Local, state, and national governments emphasized the importance of food supply and asked that food manufacturers and retailers remain open to meet the needs of their communities.
−Removed: this pandemic, our primary focus and attention has remained directed towards the health and well-being of our employees, and we have taken numerous steps to keep our employees safe, including implementing enhanced sanitation protocols and preventative screenings at all our manufacturing facilities, providing masks and requiring social distancing for employees across all our facilities, providing benefits that help support our employees and their families, and implementing remote work arrangements for functional support areas to comply with shelter-in-place orders and federal and local government recommendations.
−Removed: If an employee at one of our manufacturing facilities tests positive for COVID-19, we have developed plans to temporarily close the facility at which the employee works in order to sanitize and disinfect the facility before allowing employees to return to the facility and restart operations.
−Removed: Lamb Weston delivered solid sales and earnings growth through the first three quarters of fiscal 2020.
−Removed: However, efforts by governments worldwide to control the spread of COVID-19 have resulted in significant social and economic restrictions, which included quarantines, travel bans, shutdowns, closures of many sit down restaurants, and shelter-in-place or stay-at-home orders.
−Removed: These restrictions have had, and continue to have, a negative effect on portions of our business and the U.S.
−Removed: and global economy.
−Removed: As a result, our sales in the fiscal fourth quarter declined, offsetting most of the growth that we generated earlier in our fiscal year.
−Removed: Following the government-imposed restrictions on restaurants and other foodservice operations and stay-at-home orders, we saw significant changes in french fry consumption and purchasing patterns.
−Removed: As a result, we experienced favorable revenue and earnings impacts within our Retail segment, which has historically contributed approximately 13% of total Lamb Weston sales, but these favorable impacts were more than offset by the unfavorable impacts within our food-away-from-home businesses in our Global and Foodservice segments.
−Removed: Specifically, through the end of fiscal 2020, we observed the following:
−Removed: ● In the United States, prior to the pandemic-related government-imposed restrictions, approximately 65% of all french fries were purchased at quick service restaurants (“QSRs”), with another approximately 20% purchased at full-service restaurants.
−Removed: The remaining approximately 15% of french fries were purchased at retail locations.
−Removed: Of the french fries purchased at QSRs, approximately two-thirds are purchased by consumers through drive-thru, carry-out or delivery options, with the remaining one-third consumed while dining in at restaurants.
−Removed: The availability of a drive-thru option has enabled QSRs to better weather the impact of government-imposed shelter-in-place restrictions than restaurants without that option.
−Removed: After pandemic-related restrictions were adopted, our weekly shipments to QSRs, in aggregate, fell to approximately 50% of pre-COVID levels in late-March through mid-April, then gradually recovered to approximately 85% of weekly pre-COVID levels by the end of May as consumer demand returned and customers restocked inventories as states began easing restrictions.
−Removed: While many full-service restaurants and other foodservice operations, which together represent approximately 80% of our Foodservice segment’s sales, have taken steps to increase take-out and delivery sales, consumer traffic at these operations, in aggregate, was significantly more affected.
−Removed: Our weekly shipments to these operations fell to approximately 20% of pre-COVID levels in late-March through mid-April, then gradually recovered to approximately 70% of weekly pre-COVID levels by the end of May.
−Removed: In contrast, retail demand for frozen french fries, in aggregate, has significantly increased as food-at-home consumption rose.
−Removed: Our weekly shipments to retail customers increased approximately 50% in late-March through mid-April, and gradually slowed to increasing approximately 30% by the end of May.
−Removed: During our fiscal fourth quarter for fiscal 2020, we increased production of our retail products in order to meet this higher demand.
−Removed: While we have realized improvements in shipments in each of our primary sales channels since year end, we believe these improvements may become less pronounced, cease or reverse as the spread of COVID-19 continues and states reinstate or otherwise postpone on-premises dining.
−Removed: ● In Europe, which is served by our Lamb-Weston/Meijer joint venture, a high percentage of our sales are to QSRs.
−Removed: Unlike the U.S., most consumption in Europe is dine-in or carry-out as drive-thru options are more limited.
−Removed: As a result, the effect of government-imposed restrictions on french fry demand in Europe was similar to what we observed for full-service restaurants and other foodservice operations in the U.S.
−Removed: Lamb-Weston/Meijer’s weekly shipments in April were approximately 35% of pre-COVID levels, and recovered to approximately 60% by the end of May.
−Removed: This negatively impacted Lamb-Weston/Meijer’s results, and ultimately, our equity method investment earnings, in our fiscal fourth quarter.
−Removed: ● In China, after the government placed severe social and movement restrictions that significantly reduced restaurant traffic, our monthly shipments declined approximately 50% in February, and recovered to approximately 70% of pre-COVID levels by the end of March.
−Removed: By the end of May, our monthly shipments recovered to approximately 80% of pre-COVID levels.
−Removed: ● In Australia, Mexico and other key markets in Asia, such as Japan, South Korea, Taiwan, and Singapore, french fry demand trends were mixed, with our shipments largely 70%-80% of pre-COVID levels through late April.
−Removed: Our shipments began to soften at the end of May in certain markets due to inventory destocking.
−Removed: For the full fiscal year, our earnings declined, largely due to lower sales and higher costs related to the pandemic.
−Removed: Our fiscal 2020 financial results include the benefit of an additional week (“53 rd week”) of sales, earnings and cash flow versus fiscal 2019.
−Removed: Compared with fiscal 2019:
−Removed: ● Net sales increased 1% to $3,792.4 million
+Added: In fiscal 2021, we navigated the impacts of the COVID-19 pandemic on our operations and global frozen potato demand, demonstrating the strength and resilience of our employees in a challenging environment.
+Added: Throughout the pandemic, our primary focus and attention has been directed towards the health and well-being of our employees and contractors, while continuing to support our customers and to invest in our manufacturing, supply chain, commercial and information technology operations to meet our long-term strategic objectives.
+Added: Our fiscal 2021 financial performance reflects the negative impact on frozen potato demand in our food-away-from-home sales channels.
+Added: While demand and shipment trends sequentially improved during the year in our food-away-from-home sales channels, shipments to restaurants and other foodservice outlets were below pre-pandemic levels.
+Added: The pandemic also significantly disrupted manufacturing and distribution operations across all industries, including ours, which resulted in higher costs.
+Added: As a result, our sales and earnings in fiscal 2021 declined as compared to fiscal 2020, which included the benefit of an additional week (“53 rd week”) of sales, earnings and cash flow.
+Added: Specifically:
+Added: ● Net sales declined 3% to $3,670.9 million
● Income from operations declined 15% to $474.8 million
−Removed: ● Net income attributable to Lamb Weston declined 24% to $365.9 million
−Removed: ● Diluted earnings per share declined 22% to $2.49, while Adjusted Diluted EPS declined 22% to $2.50
−Removed: ● Income from operations and Adjusted EBITDA including unconsolidated joint ventures included approximately $74 million of net costs related to the pandemic’s impact on our operations, as described below
+Added: ● Net income declined 13% to $317.8 million
+Added: ● Diluted earnings per share and Adjusted Diluted EPS each declined 13% and 14%, respectively, to $2.16
● Adjusted EBITDA including unconsolidated joint ventures declined 6% to $748.4 million
● Net cash provided by operating activities declined 4% to $553.2 million
−Removed: Comparing performance with fiscal 2019, the increase in net sales was driven by improved price/mix, largely due to pricing actions in our Foodservice and Retail segments.
−Removed: Volume was flat, as declines in our Foodservice segment, which was disproportionately affected by the government-imposed restrictions on restaurants and other foodservice operations, offset growth in our Retail and Global segments.
−Removed: Volume in both our Global and Foodservice segments was also negatively affected by customers destocking inventories as they adjusted to the abrupt change in the operating environment during our fiscal fourth quarter.
−Removed: Income from operations declined, largely due to costs related to the pandemic’s impact on our operations, and higher manufacturing costs due to input cost inflation, inefficiencies, higher depreciation expense and unfavorable mix.
−Removed: The effect of higher SG&A expenses was modest relative to the decline in gross profit.
−Removed: In fiscal 2020, we and our unconsolidated joint ventures incurred approximately $74 million of costs, net of employee retention credits provided by the CARES Act and other labor incentives, related to the pandemic’s impact on operations as follows:
−Removed: ● Approximately $25 million of factory utilization-related production costs and inefficiencies, such as labor retention costs;
−Removed: costs to shut down, sanitize, and restart manufacturing facilities after a production employee was infected by the virus;
−Removed: costs arising from modifying production schedules and reducing run-times;
−Removed: and costs to shift certain manufacturing lines from producing foodservice-oriented products to retail-oriented products;
−Removed: ● Approximately $22 million of non-factory utilization-related costs, primarily consisting of expensing crop year 2019 contracts for raw potatoes that could not be used due to the pandemic’s near-term effect on demand for frozen potato products, as well as incremental warehousing, transportation and supply chain costs due to lower product throughput;
−Removed: ● Approximately $11 million of incremental selling, general and administrative (“SG&A”) and other expenses, largely comprised of costs to adopt and maintain enhanced employee safety and sanitation protocols, including purchases of safety and health screening equipment, costs to retain certain sales employees, net of CARES Act retention credits and other labor incentives, and expensing certain capitalized costs for manufacturing facility expansion projects that were stopped;
−Removed: ● Approximately $16 million of production, raw potato contract, supply chain and SG&A costs (including $4 million of costs, net of labor incentives, that were factory utilization-related and $12 million that were non-factory utilization-related) at our unconsolidated joint ventures.
−Removed: We expect that we will continue to incur some of these costs until the COVID-19 pandemic no longer has an impact on our operations.
−Removed: During the fourth quarter, in response to the significant decrease in demand as the COVID-19 virus spread throughout the world, we reduced production at our factories to align with demand, instituted a company-wide hiring freeze, and delayed non-essential expenditures.
−Removed: We took actions to enhance our liquidity, including working capital management;
−Removed: significantly reducing our capital program;
−Removed: raising over $1 billion of liquidity, including borrowing $495.0 million from our previously undrawn revolving credit facility, entering into a new $325.0 million term loan facility, issuing $500.0 million of senior notes, and suspending future share repurchases.
−Removed: In addition, at May 31, 2020, we qualified for and recorded a $9.5 million receivable for employee retention credits under the CARES Act and other labor incentives.
−Removed: The CARES Act also allows us to defer payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021, and the remaining 50% due December 31, 2022.
−Removed: Considering the current environment, with a significant number of employees working remotely, we deferred work on the second phase of our new enterprise resource planning (“ERP”) system.
−Removed: As a result of these actions, our cash and cash equivalents balance at May 31, 2020, was $1,364.0 million.
−Removed: See Liquidity and Capital Resources in this MD&A below for more information.
−Removed: As discussed above, following the government-imposed restrictions on restaurants and other foodservice operations, which largely began during the fourth quarter of fiscal 2020, the demand for frozen potato products decreased in North America, Europe, and most of our key international markets.
−Removed: The outlook for the spread of COVID-19, as well as governments’ efforts to contain the virus, remains unpredictable, as does its potential impact on the global economy, restaurant traffic, customer and consumer demand, our supply chain, and availability of key commodities and other necessary services.
−Removed: Because of uncertainty around government actions and consumer behaviors related to the virus, we expect the impact of the COVID-19 pandemic on consumer demand and our sales volume may be pronounced in fiscal 2021, especially for full-service restaurants and other operations that have traditionally relied on on-premise dining traffic, and other non-commercial foodservice operations, such as hotels, schools and universities, and sporting venues.
−Removed: While governments began easing restrictions on restaurants, and we realized improvements in our shipments in each of our primary sales channels through the first seven weeks of the first quarter of fiscal 2021, we believe these improvements may become less pronounced, cease or reverse as the spread of COVID-19 continues and government authorities reinstate or otherwise postpone on-premises dining restrictions.
−Removed: We have taken actions, and will continue to evaluate various options, to lower our cost structure and maximize the efficiency of our manufacturing and commercial operations.
−Removed: As we disclosed in our Form 8-K filed with the SEC on May 7, 2020, we reduced contracting of raw potatoes by approximately 20%-25% for the 2020 crop year, compared with our 2019 crop year purchases.
−Removed: We believe that there will likely be adequate non-contracted processing potatoes available for purchase in the event that frozen potato demand exceeds our initial forecast.
−Removed: We will continue to evaluate various options to adjust our operations, including temporarily closing facilities and/or modifying production schedules to rebalance utilization rates across our manufacturing network.
−Removed: We expect that we will continue to incur costs as a result of the COVID-19 pandemic’s impact on our manufacturing, supply chain, commercial and functional support operations.
−Removed: For example, these may include:
−Removed: costs to adopt and maintain enhanced employee safety and sanitation protocols, such as purchasing personal protection and health screening equipment and services;
−Removed: costs to shut down, sanitize, and restart production facilities after a production employee has been infected by the virus;
−Removed: production inefficiencies and labor retention costs arising from modifying production schedules, reducing run-times, and lower overall factory utilization;
−Removed: incremental warehousing and transportation costs;
−Removed: and costs to retain sales and functional support employees.
−Removed: In fiscal 2021, we expect the rate of inflation for many of our commodity and manufacturing costs in the near term will be similar to what we experienced in fiscal 2020.
−Removed: While we have implemented a hiring and salary freeze for our U.S.
−Removed: salaried positions in the near term, we expect overall SG&A may be higher as a result of the completion of the first phase of our ERP project, as well as for continued investments in operations and other functional capabilities, which are designed to drive operating efficiencies and support growth over the long term.
+Added: Compared with fiscal 2020, the decline in net sales was driven by lower sales volume.
+Added: Our sales volume declined largely due to demand for frozen potato products outside the home falling after government-imposed social restrictions to slow the spread of COVID-19 reduced restaurant traffic and included restrictions for on-premise dining.
+Added: The decline in sales volume was most pronounced in our Foodservice segment, which has a higher proportion of its sales to on-premise dining establishments, including independent restaurants and non-commercial operations, such as lodging and hospitality, healthcare, schools and universities, sports and entertainment, and workplace environments.
+Added: The decline in sales volumes in our Global segment was less pronounced as consumers leveraged drive-thru, carry-out and delivery options at quick service restaurants in the U.S.
+Added: In our Retail segment, which sells products for food-at-home consumption, sales volume for our branded products was strong, but this was more than offset by lower sales volume of private label products resulting from losses of certain low-margin business.
+Added: Overall, our sales volume decline was partially offset by higher price/mix, which was largely due to favorable pricing in our Foodservice segment and favorable mix in our Retail segment, while price/mix in our Global segment was flat.
+Added: In Europe, which is served by our Lamb-Weston/Meijer joint venture, sales volumes also declined as demand fell following government-imposed social restrictions.
+Added: Although a high percentage of our sales are to quick service restaurants, unlike the U.S., most consumption in Europe is dine-in or carry-out as drive-thru options are more limited.
+Added: As a result, the effect of government-imposed restrictions on french fry demand in Europe was similar to what we observed for full-service restaurants operations in the U.S.
+Added: Overall international sales volumes, which are included in our Global segment, varied by market.
+Added: While demand in many of our key markets improved as fiscal 2021 progressed, the rate of improvement generally lagged that in the U.S.
+Added: In addition, our exports were hindered by pandemic-related congestion at U.S.
+Added: West Coast ports as well as the availability of shipping containers.
+Added: Income from operations declined due to lower sales, higher manufacturing and distribution costs, and higher selling, general and administrative (“SG&A”) expenses .
+Added: The increase in costs was largely due to incremental costs resulting from the pandemic’s disruptive effect on our production, transportation, and warehousing operations, including costs to address the safety and welfare of our employees and costs associated with a tighter labor market due to COVID-19 related absenteeism and labor-related restrictions.
+Added: The COVID-19 environment also caused freight rates to increase due to tighter capacity and stronger demand in the trucking and cargo container markets resulting from higher shipping volume of products.
+Added: We also experienced higher input cost inflation, particularly for edible oils because of low supply as well as higher demand for raw materials by alternative end markets, such as biofuels.
+Added: Despite these challenges, we continued to invest in our supply chain operations, and completed the initial phase of our new ERP system, which we expect will benefit our operations over the long term.
+Added: We also announced capital expansions in the U.S.
+Added: and China, and with our joint venture in Europe, announced expansions in Russia and the Netherlands.
+Added: We generated full-year cash from operations of $553.2 million and cash flow after investing activities, including information technology initiatives, of $390.7 million.
+Added: Given the significant economic uncertainty, we took prudent and early actions to reinforce and enhance our financial strength (see “Liquidity and Capital Resources” in this MD&A for more information).
+Added: We ended the year with $783.5 million of cash and cash equivalents and no borrowings on our
+Added: revolving credit facility.
+Added: In addition, we returned $161.0 million to our stockholders, through a combination of dividends and share repurchases.
+Added: We remain committed to prioritizing the health and well-being of our employees and contractors, to supporting our customers, and to maintaining our financial strength as the pandemic continues to impact the global economy.
+Added: In fiscal 2022, while the degree of the impact of the pandemic on our business remains uncertain, we believe its effect on global frozen potato demand will continue to lessen as vaccination rates increase in the U.S.
+Added: and our key international markets and as governments continue to ease social restrictions in their respective jurisdictions.
+Added: We believe this will likely have a favorable impact on restaurant traffic, especially for full-service restaurants and other operations that have traditionally relied on on-premise dining, as well as for other non-commercial operations, such as hotels, schools and universities, and sporting venues.
+Added: In the U.S., by the end of fiscal 2021, we saw shipments to large chain restaurants as well as in our Foodservice segment, in aggregate, approach pre-pandemic levels as more governments eased social restrictions.
+Added: Accordingly, we continue to believe that overall frozen potato demand may approach pre-pandemic levels, on a run-rate basis, by the end of the calendar year.
+Added: However, we expect the ongoing effects of the pandemic and the rapid resurgence of the broader economy will pressure and disrupt our global supply chain operations in the near-term, which will result in volatile operating conditions and incremental manufacturing and distribution costs.
+Added: In addition, in fiscal 2022, we expect the rate of inflation for many of our manufacturing, commodity and distribution costs, including, but not limited to edible oils, rail, trucking, ocean freight, and packaging, will increase compared to what we experienced in fiscal 2021.
+Added: We expect to increase the selling price of our products to offset, in whole or in part, these higher costs.
+Added: We expect overall SG&A to be higher as a result of increased compensation and benefits expense largely resulting from inflation, as well as continued investments to improve our manufacturing, supply chain, commercial and information technology operations over the long term.
+Added: This includes resuming our efforts to implement the next phase of a new ERP system, which we deferred due to the disruptive impact of the pandemic on our operations, as well as the significant number of employees working remotely.
+Added: While the near-term impact of the pandemic on sales volume and costs is volatile, we believe we have sufficient liquidity to manage through the uncertainty, and remain focused on our business and plans to drive long-term value creation.
Results of Operations
1 unchanged sentence
Global, Foodservice, Retail, and Other.
−Removed: For each period presented, we report net sales and product contribution margin by segment.
+Added: We report net sales and product contribution margin by segment and on a consolidated basis.
+Added: Product contribution margin, when presented on a consolidated basis, is a non-GAAP financial measure.
Net sales and product contribution margin are the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance.
−Removed: We define product contribution margin as net sales less cost of sales and advertising and promotion expenses.
−Removed: Product contribution margin excludes general corporate expenses and interest expense because management believes these amounts are not directly associated with segment performance for the period.
−Removed: For additional information on our reportable segments, see Note 14, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
+Added: Product contribution margin represents net sales less cost of sales and advertising and promotion expenses.
+Added: Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with the performance of the Company’s segments.
+Added: For additional information on our reportable segments and product contribution margin, see “Non-GAAP Financial Measures” below and Note 14, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Financial Statements and Supplementary Data” in this Form 10-K.
−Removed: Fiscal Year Ended May 31, 2020 Compared to Fiscal Year Ended May 26, 2019
−Removed: Net Sales and Product Contribution Margin (dollars in millions)
+Added: Fiscal Year Ended May 30, 2021 Compared to Fiscal Year Ended May 31, 2020 (dollars in millions)
+Added: Net Sales and Product Contribution Margin
Segment sales
1 unchanged sentence
Advertising and promotion expenses
−Removed: Lamb Weston’s net sales for fiscal 2020 increased $35.9 million, or 1%, to $3,792.4 million, compared with $3,756.5 million in fiscal 2019.
−Removed: Excluding the benefit of the 53 rd week, net sales declined 1%.
−Removed: Price/mix increased 1% due to pricing actions and favorable mix, largely due to pricing actions in our Foodservice and Retail segments.
−Removed: Volume was flat, or down 3% excluding the benefit of the 53 rd week, as strong growth through the first three fiscal quarters was offset by the sharp and abrupt decline in demand for frozen potato products outside the home during the fiscal fourth quarter as a result of government-imposed restrictions on restaurants and other foodservice operations to slow the spread of the COVID-19 virus, as well as customers destocking inventories as they adjusted to abrupt change in the business environment.
−Removed: Global net sales increased $12.1 million, or 1%, to $1,973.6 million, compared with $1,961.5 million in fiscal 2019.
−Removed: Excluding the benefit of the 53 rd week, net sales declined 1%.
−Removed: Volume increased 1%, or down 1% excluding the benefit of the 53 rd week, driven by growth in sales to strategic customers in the U.S.
−Removed: and key international markets during the first three quarters of the fiscal year.
−Removed: Volume growth was partially offset by the sharp decline in demand for frozen potato products outside the home during the fourth quarter, primarily attributable to government-imposed restrictions on restaurant and other foodservice-related operations.
+Added: Lamb Weston’s net sales for fiscal 2021 declined $121.5 million, or 3%, to $3,670.9 million, compared with $3,792.4 million in fiscal 2020.
+Added: Volume declined 6% while price/mix increased 3%.
+Added: Net sales and volume declined 2% and 6%, respectively, excluding the benefit of the 53 rd week in the prior year.
+Added: The decline in sales volume reflected soft demand for much of the first three fiscal quarters following government-imposed pandemic-related social restrictions, including on restaurants and other foodservice operations.
+Added: Sales volumes increased in the fiscal fourth quarter due to a recovery in demand, as well as a comparison to reduced shipments in the prior year quarter when customers were destocking inventories as they adjusted to the abrupt change in the business environment.
+Added: The increase in price/mix was driven primarily by favorable pricing in our Foodservice segment and favorable mix in our Retail segment, while price/mix in our Global segment was flat.
+Added: Global net sales declined $62.1 million, or 3%, to $1,911.5 million, compared with $1,973.6 million in fiscal 2020.
+Added: Volume declined 3% while price/mix was flat.
+Added: Net sales and volume each declined 2% excluding the benefit of the 53 rd week in the prior year.
+Added: Sales volumes in the first half of the year declined as compared to the prior year, but largely stabilized beginning in the fiscal third quarter behind strength in shipments to large, quick service chain restaurant customers in the U.S.
+Added: Sales volumes for the segment increased in the fiscal fourth quarter due to a recovery in demand in the U.S.
+Added: and in our key international markets, as well as a comparison to reduced shipments in the prior year quarter when customers were destocking inventories.
Price/mix was flat as positive pricing actions were offset by unfavorable customer mix.
−Removed: Foodservice net sales decreased $87.0 million, or 8%, to $1,069.1 million, compared with $1,156.1 million in fiscal 2019.
−Removed: Excluding the benefit of the 53 rd week, net sales declined 8%.
−Removed: Price/mix increased 2%, primarily reflecting pricing actions initiated in the fall of 2019.
−Removed: Volume decreased 10%, or 10% excluding the benefit of the 53 rd week.
−Removed: Volume growth of distributor private label and Lamb Weston branded products was solid during the first three quarters of the fiscal year, but fell as demand for frozen potato products outside the home, especially at full-service restaurants and non-commercial operations (e.g., hotels, schools and universities, sporting venues) dropped sharply during the fourth quarter following government-imposed restrictions on restaurant and other foodservice operations, as well as customers destocking inventories as they adjusted to the abrupt change in the business environment.
+Added: Foodservice net sales declined $51.8 million, or 5%, to $1,017.3 million, compared with $1,069.1 million in fiscal 2020.
+Added: Volume declined 12% while price/mix increased 7%.
+Added: Net sales and volume declined 4% and 11%, respectively, excluding the benefit of the 53 rd week in the prior year.
+Added: Sales volumes during the first three quarters of the year declined as compared to the prior year as demand at full-service restaurants and non-commercial customers were significantly affected by government-imposed social restrictions.
+Added: Sales volumes for the segment increased in the fiscal fourth quarter due to a recovery in most of the segment’s customer channels, as well as a comparison to reduced shipments in the prior year quarter when customers were destocking inventories.
+Added: The increase in price/mix primarily reflected the carryover benefit of pricing actions implemented during fiscal 2020, partially offset by unfavorable mix as sales of Lamb Weston branded and premium products softened during the height of the pandemic.
Retail net sales increased $7.9 million, or 1%, to $603.4 million, compared with $595.5 million in fiscal 2020.
−Removed: Excluding the benefit of the 53 rd week, net sales increased 16%.
−Removed: Volume increased 13%, or 10% excluding the benefit of the 53 rd week, due to increased in-home consumption of frozen potato products following government-imposed stay-at-home orders during the fiscal fourth quarter.
−Removed: Demand was strong across our premium and mainstream branded offerings, as well as for our private label products.
−Removed: Price/mix increased 7%, largely driven by favorable mix from increased sales of branded products, and pricing actions.
−Removed: Net sales in our Other segment increased $13.6 million, or 10%, to $154.2 million, compared with $140.6 million in fiscal 2019.
−Removed: The increase primarily reflects higher volume in our vegetable business.
−Removed: Product Contribution Margin
−Removed: Lamb Weston’s product contribution margin for fiscal 2020 decreased $98.9 million, or 10%, to $872.2 million, compared with $971.1 million in fiscal 2019.
−Removed: The decline primarily related to lower sales due to the pandemic and approximately $47 million of pandemic-related costs, net of CARES Act retention credits and other labor incentives, resulting from lower factory utilization and production inefficiencies, manufacturing and operational disruptions directly attributable to the pandemic, expensing of excess crop year 2019 raw potato purchase contracts, and other supply chain costs discussed above.
−Removed: The remainder of the decline was driven by higher manufacturing costs due to input cost inflation, inefficiencies, higher depreciation expense primarily associated with our new french fry production line in Hermiston, Oregon, and unfavorable mix.
−Removed: Global product contribution margin decreased $71.8 million, or 16%, to $374.5 million in fiscal 2020.
−Removed: The decline primarily related to lower sales due to the pandemic and approximately $29 million of pandemic-related costs, net of CARES Act retention credits and other labor incentives.
−Removed: The remainder of the decline was largely driven by an increase in cost of sales, which rose 6% to $1,592.8 million, reflecting unfavorable mix, inefficiencies and input cost inflation, as well as higher depreciation expense primarily associated with the addition of the new production line in Hermiston, Oregon.
−Removed: Advertising and promotion spending was modestly lower in 2020, as compared to fiscal 2019.
−Removed: Foodservice product contribution margin decreased $46.4 million, or 12%, to $356.0 million in fiscal 2020.
−Removed: Lower sales due to the pandemic and approximately $8 million of pandemic-related costs, net of CARES Act retention credits and other labor incentives.
−Removed: Cost of sales declined 5% to $705.9 million due to lower sales volumes, partially offset by inefficiencies and input cost inflation, as well as higher depreciation expense primarily associated with the addition of the new production line in Hermiston, Oregon.
−Removed: Advertising and promotion spending was modestly lower in fiscal 2020, as compared with fiscal 2019.
−Removed: Retail product contribution margin increased $18.8 million, or 19%, to $117.6 million in fiscal 2020 due to higher sales volumes as consumers modified their purchasing habits in response to the imposition of stay-at-home orders, favorable product mix and an $8.3 million decline in advertising and promotional expenses as we stopped all non-essential expenditures in response to the pandemic.
−Removed: The increase was partially offset by approximately $10 million of pandemic-related costs, net of CARES Act retention credits and other labor incentives.
−Removed: Cost of sales was $468.6 million, or 23% higher in fiscal 2020 as compared to fiscal 2019, largely due to higher sales volume and input cost inflation.
+Added: Price/mix increased 5% while volume declined 4%.
+Added: Excluding the benefit of the 53 rd week in the prior year, net sales increased 4% and volume declined 2%.
+Added: The increase in price/mix was largely driven by favorable mix from higher sales of premium and mainstream branded offerings.
+Added: The decline in sales volumes reflected lower shipments of private label products resulting from incremental losses of certain low-margin business, partially offset by strong growth in branded products, which have historically comprised approximately 40 percent of the segment’s volume.
+Added: In addition, the sales volume decline reflects a comparison to the fourth quarter of fiscal 2020 which included a surge in demand for in-home consumption of frozen potato products following government-imposed social restrictions.
+Added: Net sales in our Other segment declined $15.5 million, or 10%, to $138.7 million, compared with $154.2 million in fiscal 2020.
+Added: The decline primarily reflects lower volume in our vegetable business, partially offset by favorable price/mix.
+Added: Gross Profit and Product Contribution Margin
+Added: Gross profit declined $63.2 million, or 7%, to $832.0 million in fiscal 2021.
+Added: The decline was driven by lower sales and higher manufacturing and distribution costs on a per pound basis, which largely included:
+Added: incremental costs and inefficiencies related to the pandemic’s disruptive effect on our production, transportation, and warehousing operations;
+Added: and input and transportation cost inflation.
+Added: The increase in costs was partially offset by supply chain productivity savings.
+Added: In addition, gross profit included a $40.4 million change in unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts, which reflects a $37.9 million gain in the current year, compared with a $2.5 million loss related to these items in the prior year.
+Added: Lamb Weston’s overall product contribution margin in fiscal 2021 declined $58.0 million, or 7%, to $814.2 million, compared with $872.2 million in fiscal 2020.
+Added: The decline was driven by lower sales and higher manufacturing and distribution costs, as described above.
+Added: Global segment product contribution margin declined $68.3 million, or 18%, to $306.2 million in fiscal 2021.
+Added: Higher manufacturing and distribution costs, as well as lower sales volumes, largely drove the decline.
+Added: Global segment cost of sales was $1,601.4 million, up 1% compared to fiscal 2020, as higher manufacturing and distribution costs were largely offset by the impact of lower sales volumes.
+Added: Advertising and promotion spending declined $2.4 million in fiscal 2021, as compared to fiscal 2020.
+Added: Foodservice product contribution margin declined $16.0 million, or 4%, to $340.0 million in fiscal 2021.
+Added: Lower sales volumes and higher manufacturing and distribution costs more than offset the benefit of favorable price/mix.
+Added: Cost of sales was $672.4 million, down 5% compared to fiscal 2020, due to lower sales volumes, partially offset by higher manufacturing and distribution costs.
+Added: Advertising and promotion spending declined $2.3 million in fiscal 2021, as compared with fiscal 2020.
+Added: Retail product contribution margin increased $2.6 million, or 2%, to $120.2 million in fiscal 2021.
+Added: Favorable product mix and a $0.4 million decrease in advertising and promotion spending more than offset the impact of higher manufacturing and distribution costs and lower sales volumes of private label products.
+Added: Cost of sales was $474.3 million, up 1% compared to fiscal 2020, primarily due to higher manufacturing and distribution costs, partially offset by lower sales volumes.
Other product contribution margin increased $23.7 million to $47.8 million in fiscal 2021, as compared to $24.1 million in fiscal 2020.
−Removed: These amounts include a $0.2 million loss related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts in fiscal 2020, and a $3.3 million loss related to the
−Removed: contracts in fiscal 2019.
−Removed: Excluding these adjustments, Other segment product contribution margin decreased $2.6 million, largely due to unfavorable price/mix in our vegetable business.
+Added: These amounts include a $27.8 million gain related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts, and a $0.2 million loss related to the contracts in fiscal 2020.
+Added: Excluding these mark-to-market adjustments, Other segment product contribution margin declined $4.3 million, largely due to higher manufacturing costs and lower sales volumes in our vegetable business.
Selling, General and Administrative Expenses
SG&A expenses were $357.2 million, up $18.9 million, or 6%, in fiscal 2021 compared with fiscal 2020.
−Removed: The increase in SG&A was largely driven by approximately $11 million of net pandemic-related SG&A and other expenses described above, higher expenses related to our information technology services and infrastructure (including approximately $8 million of non-recurring expenses, excluding expenses payable to us by Lamb-Weston/Meijer under the cost sharing agreement, that primarily relates to consulting expenses associated with developing and implementing a new ERP system), and investments in our sales, marketing and operating capabilities.
−Removed: The increase was partially offset by lower incentive compensation accruals, a $9.5 million reduction in advertising and promotional expenses, lower travel and meeting expenses, and suspending contributions to our charitable foundation.
−Removed: For more information related to the agreement with Lamb-Weston/Meijer to share the costs of a single, global ERP platform, and related software and services, see Note 6, Investments in Joint Ventures, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
−Removed: Financial Statements and Supplementary Data” of this Form 10-K.
+Added: The increase was largely driven by investments to improve our manufacturing, supply chain, commercial and information
+Added: technology operations over the long term, and included approximately $9 million of non-recurring expenses (primarily consulting and employee training expenses) associated with implementing the first phase of a new ERP system, compared to approximately $8 million in the prior year.
+Added: The increase in SG&A was also driven by higher compensation and benefits expense, partially offset by a $5.2 million decline in A&P expense, as well as by cost management efforts.
Interest Expense, Net
Interest expense, net was $118.3 million in fiscal 2021, an increase of $10.3 million compared with fiscal 2020.
−Removed: The increase in interest expense, net was the result of higher average total debt versus the prior year.
+Added: The increase in interest expense, net was the result of a higher level of average total debt versus the prior year resulting from our actions in late fiscal 2020 and early fiscal 2021 to enhance our liquidity position during the pandemic.
For more information, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
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Our effective tax rate was 22.2% for fiscal 2021, compared to 23.5% in fiscal 2020.
−Removed: Fiscal 2019 includes a $2.4 million decrease in income tax expense related to the true-up of the transition tax on previously untaxed foreign earnings under the Tax Act.
−Removed: Excluding this comparability item, our effective tax rate for fiscal 2019 was 21.9%.
The difference between our effective tax rates in fiscal 2021 and 2020 is primarily due to permanent differences and discrete items.
−Removed: The effective tax rate varies from the U.S.
+Added: Our 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.
−Removed: For further information on the Tax Act and its impact, see Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
+Added: For further information on income taxes, see Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Financial Statements and Supplementary Data” in this Form 10-K.
3 unchanged sentences
Earnings in fiscal 2020 included a $2.6 million loss related to the withdrawal from a multiemployer pension plan by Lamb Weston RDO.
−Removed: Equity method investment earnings also included a $6.3 million unrealized loss related to mark-to-market adjustments associated with currency and commodity hedging contracts in fiscal 2020 and a $2.6 million loss related to these items in fiscal 2019.
−Removed: Excluding the Lamb Weston RDO pension-related comparability item and the mark-to-market adjustments, earnings from equity method investments declined $23.9 million compared to the prior year period.
−Removed: Pandemic-related costs accounted for approximately $16 million of the decline, with the remainder largely driven by lower sales as a result of government-imposed restrictions on restaurant and other foodservice operations.
−Removed: Impact of New Lease Standard
−Removed: The adoption of the new lease standard resulted in the recognition of approximately $155 million of operating lease assets and short-term and long-term operating lease obligations recorded on our consolidated balance sheet related to operating leases.
−Removed: The adoption also resulted in a $26.6 million ($20.5 million, net of tax) cumulative-effect adjustment to the opening balance of retained earnings for the elimination of $38.7 million of land and $65.3 million of finance lease obligations related to a sale leaseback.
−Removed: See Note 4, Leases, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
−Removed: Financial Statements and Supplementary Data” in this Form 10-K.
−Removed: On July 2, 2019 and December 21, 2018, we acquired 100% of the outstanding shares of two different frozen potato processors in Australia for $116.7 million and $88.6 million, respectively, net of cash acquired.
−Removed: These acquisitions added approximately 70 million and 50 million pounds of production capacity, respectively, to our manufacturing network and expanded our geographic reach.
−Removed: Net sales, income from operations, and total assets from either of these acquisitions are not material to our consolidated net sales, income from operations, and total assets.
−Removed: The operating results for the acquisitions are included in our Global segment.
−Removed: We allocated the purchase price of the July 2019 and December 2018 acquisitions to the assets acquired and liabilities assumed based on estimates of the fair value at the dates of the acquisitions, of which $106.1 million and $75.1 million, after final working capital adjustments, was allocated to goodwill (which is not deductible for tax purposes).
+Added: Equity method investment earnings also included an $11.3 million unrealized gain related to mark-to-market adjustments associated with currency and commodity hedging contracts in fiscal 2021 and a $6.3 million loss related to these items in fiscal 2020.
+Added: In addition, in December 2020, Lamb-Weston/Meijer increased its ownership interest in its Russian joint venture from 35.5% to 74.9%, and now consolidates that joint venture in its results.
+Added: Excluding the Lamb Weston RDO pension-related comparability item and the mark-to-market adjustments, earnings from equity method investments increased $2.3 million compared to the prior year period, largely driven by Lamb-Weston/Meijer’s increased ownership interest in its Russian joint venture and higher manufacturing costs per pound in the prior year, partially offset by lower frozen potato demand in Europe following government-imposed restrictions on restaurant and other foodservice operations.
Liquidity and Capital Resources
−Removed: The recent COVID-19 pandemic has disrupted our business and operating results.
−Removed: As a result of the uncertainties caused by the COVID-19 pandemic, we have taken, and are continuing to take, actions to enhance liquidity including:
−Removed: working capital management and limiting discretionary expenses across the Company;
−Removed: implementing a hiring and salary freeze for our U.S.
−Removed: salaried positions;
−Removed: significantly reducing our capital program;
−Removed: raising over $1 billion of liquidity, including borrowing $495.0 million from our previously undrawn revolving credit facility, entering into a new $325.0 million term loan facility, and issuing $500.0 million of senior notes;
−Removed: and suspending future share repurchases.
−Removed: In addition, at May 31, 2020, we qualified for and recorded a $9.5 million receivable for employee retention credits under the CARES Act and other labor incentives.
−Removed: The CARES Act also allows us to defer payment of the employer portion of social security taxes through the end of 2020, with 50% of the deferred amount due December 31, 2021, and the remaining 50% due December 31, 2022.
−Removed: This is expected to provide us with approximately $14 million of additional liquidity during fiscal 2021.
−Removed: Considering the current environment, with a significant number of employees working remotely, we have also deferred the second phase of our new ERP system.
−Removed: As a result of our actions, our cash and cash equivalents balance at May 31, 2020, was $1,364.0 million.
−Removed: We believe our cash on hand, cash flows from operations and our current credit facilities will be sufficient to satisfy our future working capital requirements, interest payments, capital expenditures, dividends on our common stock, and other financing requirements for the foreseeable future.
−Removed: We continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times.
−Removed: If we are unable to generate sufficient cash flows from operations, or are otherwise unable to comply with the terms of our credit facilities, we may be required to seek additional financing alternatives, which may require waivers under our credit agreement governing our senior secured debt and indentures governing our senior notes, in order to generate additional cash.
−Removed: There can be no assurance that we would be able to obtain additional financing or any such waivers on terms acceptable to us or at all.
−Removed: For additional information on our debt, see Note 9, Debt, of the Notes to Consolidated Financial Statements in “Part II.
−Removed: Financial Statements and Supplementary Data” in this Form 10-K.”
+Added: We ended fiscal 2021 in a strong financial position with resources available for reinvesting in our business, including our strategic growth initiatives, pursuing acquisition opportunities that we may identify, and managing our capital structure on a short-term and long-term basis.
+Added: At May 30, 2021, we had $783.5 million of cash and cash equivalents and $744.6 million of availability under our revolving credit facility.
+Added: While we expect the near-term impact of the pandemic on sales volume and costs to remain volatile, we believe we have sufficient liquidity to meet projected capital expenditures, service existing debt and meet working capital requirements for the next 12 months with current cash balances and cash from operations, supplemented as necessary by available borrowings under our existing revolving credit facility.
Below is a summary table of our cash flows, followed by a discussion of the sources and uses of cash through operating, investing, and financing activities (dollars in millions):
7 unchanged sentences
Operating Activities
−Removed: Fiscal 2020 Compared with Fiscal 2019
−Removed: The major components of cash provided by operations are earnings from operations adjusted for non-cash income and expense items and changes in working capital.
−Removed: Cash generated from operating activities decreased $106.9 million to $574.0 million in fiscal 2020, compared with $680.9 million in fiscal 2019.
−Removed: Earnings from continuing operations, adjusted for non-cash income and expenses, decreased $84.2 million, primarily due to lower sales during the pandemic and approximately $74 million of pandemic-related costs, net of CARES Act retention credits and other labor incentives.
+Added: During fiscal 2021, cash provided by operating activities decreased $20.8 million to $553.2 million, compared with $574.0 million in the same period a year ago.
+Added: The decrease related to a $99.2 million decrease in net income, adjusted for non-cash income and expenses, partially offset by $78.4 million of cash provided by favorable changes in working capital.
+Added: Lower income from operations related to government-imposed restrictions on restaurants and other foodservice operations to slow the spread of COVID-19.
See “Results of Operations” in this MD&A for more information.
−Removed: Changes in operating assets and liabilities used $17.3 million more cash in fiscal 2020, compared with fiscal 2019.
−Removed: The increase in cash used for changes in operating assets and liabilities was driven primarily by the timing of payments for accounts payable, and lower expected payments for incentive compensation and trade programs.
−Removed: These cash outflows were partially offset by lower receivables due to fewer sales at the end of fiscal 2020, compared with the end of fiscal 2019, the timing of payments for income taxes, and lower finished goods inventory due to declines in demand during the fiscal fourth quarter as a result of the pandemic-related government-imposed restrictions.
+Added: Favorable changes in working capital primarily related to an increase in accounts payable, due to timing, and an increase in our accrued liabilities, primarily related to higher compensation and benefits accruals.
+Added: This favorability was partially offset by higher finished goods inventory due to building more pounds of inventory to meet expected demand as sales began to reach pre-pandemic levels, compared with lower inventories at the end of fiscal 2020, when demand decreased due to the COVID-19 pandemic, as well as incremental costs related to rising input and other costs, higher receivables due to more sales at the end of fiscal 2021, compared with the end of fiscal 2020, and an increase in prepaid and other current assets primarily due to an increase in favorable open commodity contract hedge positions at the end of fiscal 2021, driven by a rise in edible oil prices.
Investing Activities
−Removed: Fiscal 2020 Compared with Fiscal 2019
Investing activities used $162.5 million of cash in fiscal 2021, compared with $346.0 million in fiscal 2020.
−Removed: Fiscal 2020 includes the acquisition of a frozen potato processor in Australia for $116.7 million.
−Removed: We also acquired a 50% ownership interest in Lamb Weston Alimentos Modernos S.A., a manufacturer of frozen potato products in South America, for $27.3 million.
−Removed: We paid $22.6 million in fiscal year 2020 and will pay the remaining $4.7 million, less any amounts for indemnified losses, in October 2024.
−Removed: In response to the COVID-19 pandemic, we reduced capital expenditures, including information technology, from a planned level of $300.0 million to $208.4 million.
−Removed: In order to preserve liquidity throughout the COVID-19 pandemic, we deferred substantially all of our previously planned fiscal 2021 strategic capital expenditures.
−Removed: We expect capital investments in fiscal 2021 to be approximately $140 million, excluding acquisitions.
+Added: Excluding cash used for the acquisition of a frozen potato processor in Australia and for an investment in an equity method joint venture in the prior year, cash used for investing activities decreased $44.2 million, compared to fiscal 2020.
+Added: The decrease represents our concerted effort to control spending at the onset of the pandemic to preserve liquidity.
+Added: We expect capital investments in fiscal 2022 to be approximately $650 million to $700 million, depending on timing of projects, which include among other items:
+Added: completion of our chopped and formed capacity expansion in American Falls, Idaho;
+Added: initial construction of a new french fry processing line and plant modernization investments in American Falls, Idaho;
+Added: and initial construction of a greenfield french fry processing facility in Ulanqab, Inner Mongolia, China.
These expenditures could increase or decrease as a result of a number of factors, including our financial results, future economic conditions, including the impact of COVID-19, and our regulatory compliance requirements.
At May 30, 2021, we had commitments for capital expenditures of $75.0 million.
−Removed: Investing activities used $423.0 million of cash in fiscal 2019.
−Removed: These expenditures included the plant capacity expansions in Hermiston, Oregon in fiscal 2019.
−Removed: Additionally, in December 2018, we acquired 100% of the outstanding shares of a frozen potato processor in Australia for $88.6 million, net of cash acquired.
Financing Activities
−Removed: Fiscal 2020 Compared with Fiscal 2019
−Removed: During fiscal 2020, cash provided by financing activities totaled $1,125.0 million, compared with cash used for financing activities of $299.6 million in fiscal 2019.
−Removed: In light of the current uncertainty in the global economy resulting from the COVID-19 pandemic, in the fourth quarter of fiscal 2020, we raised over $1 billion of liquidity including borrowing $495.0 million on our revolving credit facility, entering into a new $325.0 million term loan facility, and issuing $500.0 million of senior notes due in 2028.
+Added: We took various actions to further strengthen our liquidity position in response to the COVID-19 pandemic, which included raising over $1 billion of liquidity in the last quarter of fiscal 2020, including borrowing $495.0 million under our revolving credit facility, entering into a new $325.0 million term loan facility, and issuing $500.0 million of senior notes due in 2028.
+Added: These actions also included deferring the payment of our payroll taxes as allowed under the Coronavirus Aid, Relief and Economic Security Act (“CARES”) Act.
+Added: The CARES Act allows for the deferral of the payment of the employer portion of Social Security taxes accrued between March 27, 2020, and December 31, 2020.
+Added: Under the CARES Act, 50% of the deferred payroll taxes will be paid by December 31, 2021 and the remainder will be paid by December 31, 2022.
In addition, in June 2019, we entered into a new $300.0 million term loan facility due in June 2024 and used the proceeds to repay $300.0 million of the term loan facility that was due in 2021.
−Removed: Repayments in fiscal 2020 also included $36.3 million of quarterly installments due under our debt and financing obligations.
−Removed: In July, we paid the balance on our revolving credit facility and have $495.1 million of available borrowing under the credit facility, net of $4.9 million of outstanding letters of credit.
−Removed: During fiscal 2020, we returned $144.2 million of capital to our shareholders, including $121.3 million in dividends on our common stock and $22.9 million related to 287,239 shares we repurchased for a weighted-average price of $79.56 per share.
−Removed: Financing activities also included $5.9 million for the repurchase of 80,673 shares of our common stock for restricted stock tax withholdings.
−Removed: Economic conditions, changes in cash flows, tax laws and other laws, and the market price of our common stock can limit or alter the amount and frequency of our stock repurchases.
−Removed: Given the uncertainty of demand with the COVID-19 pandemic, we temporarily suspended share repurchases to provide us with additional liquidity.
−Removed: As of May 31, 2020, $195.3 million remained authorized for repurchase under the program.
−Removed: During fiscal 2019, financing activities primarily related to the payment of $113.3 million in dividends on our common stock, $78.2 million to acquire the noncontrolling interest in Lamb Weston BSW, and $66.7 million of debt payments, primarily scheduled payments under our term loan facility and the repayment of the Lamb Weston BSW installment notes.
−Removed: Financing activities during 2019 also included the repurchase of 522,260 shares of our common stock, including restricted stock tax withholdings.
−Removed: Repurchases of common stock and payments of restricted stock withholding taxes totaled $36.4 million, including $31.8 million related to shares repurchased at an average price of $69.40 per share under our share repurchase program.
+Added: During fiscal 2021, we repaid the $495.0 million we borrowed under our revolving credit facility at the onset of the pandemic, and we repaid $ 305.5 million of other debt and financing obligations (including the repayment of the $271.9 million term loan facility that was scheduled to mature in November 2021).
+Added: We also paid $135.3 million in cash dividends to common stockholders.
+Added: During fiscal 2021, we repurchased 328,918 shares of our common stock at an average price of $78.19 and withheld 164,992 shares of common stock from employees to cover income and payroll taxes on equity awards that vested during the period.
+Added: As of May 30, 2021, $169.6 million remained authorized for repurchase under our share repurchase program.
+Added: During fiscal 2020, we paid $121.3 million in cash dividends to common stockholders.
+Added: We also repurchased 287,239 shares of our common stock at an average price of $79.56 per share and withheld 80,673 shares of common stock from employees to cover income and payroll taxes on equity awards that vested during the period.
+Added: We assess our financing alternatives periodically and expect to access credit or debt capital markets opportunistically, within targeted levels, as part of our plans to fund our capital programs, including capital expenditures and cash returns to stockholders through dividends and share repurchases.
+Added: These transactions may include refinancing of existing debt or the incurrence of new debt, subject to financing options that may be available to us from time to time, as well as conditions in the credit and debt capital markets generally.
For more information about our debt, including among other items, interest rates, maturity dates, and covenants, see Note 8, Debt and Financing Obligations, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
Financial Statements and Supplementary Data” of this Form 10-K.
−Removed: At May 31, 2020, we were in compliance with the financial covenant ratios and other covenants contained in our credit agreement.
+Added: At May 30, 2021, we were in compliance with the financial covenant ratios and other covenants contained in our credit agreements.
Off-Balance Sheet Arrangements
5 unchanged sentences
Obligations and Commitments
−Removed: As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as lease agreements, debt agreements, potato supply agreements, and unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum
+Added: As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as lease agreements, debt agreements, potato supply agreements, and unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum prices).
The unconditional purchase obligation arrangements are entered into in the normal course of business in order to ensure adequate levels of sourced product are available.
−Removed: A summary of our contractual obligations as of May 31, 2020 are as follows.
+Added: A summary of our contractual obligations as of May 30, 2021 are as follows (dollars in millions).
The expected timing of payments of the obligations in the table are estimated based on current information.
Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations.
−Removed: Payments Due by Period (a)
+Added: Payments Due by Fiscal Year
Contractual Obligations
−Removed: Short-term borrowings (b)
−Removed: Long-term debt, including current portion, excluding financing obligations (c)
−Removed: Interest on long-term debt (d)
−Removed: Purchase obligations (e)
−Removed: Capital commitments (f)
−Removed: Other long-term liabilities reflected on our Consolidated Balance Sheet (g):
−Removed: Operating leases (h)
−Removed: Financing obligations, including current portion (i)
−Removed: Compensation and benefits (j)
−Removed: (a) The table assumes amounts included in the “Less than 1 Year” column represent obligations for our fiscal year 2021.
−Removed: The remaining columns correspond to our fiscal years as follows:
−Removed: “1-3 Years” represents fiscal 2022 and 2023, “3-5 Years” represents fiscal 2024 and 2025, and “After 5 Years” represents fiscal 2026 and thereafter.
−Removed: (b) The $495.0 million borrowed under our revolving credit facility was fully repaid in July 2020.
−Removed: (c) The table is based on our long-term debt maturities at May 31, 2020, and includes the current portion of long-term debt.
+Added: Long-term debt, including current portion, excluding financing obligations (a)
+Added: Interest on long-term debt (b)
+Added: Purchase obligations and capital commitments (d) (e)
+Added: (a) The table is based on our long-term debt maturities at May 30, 2021, and includes the current portion of long-term debt.
Amounts are reported gross.
Balances have not been reduced by the $22.5 million of unamortized debt issuance costs at May 30, 2021.
−Removed: (d) Amounts represent estimated future interest payments as of May 31, 2020, assuming our long-term debt and financing obligations are held to maturity and using interest rates in effect at May 31, 2020.
−Removed: (e) Amounts exclude purchase commitments under potato supply agreements due to uncertainty of pricing and quantity.
+Added: (b) Amounts represent estimated future interest payments as of May 30, 2021, assuming our long-term debt is held to maturity and using interest rates in effect at May 30, 2021.
+Added: (c) We enter into leases in the normal course of business .
+Added: S ee Note 9, Leases, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
+Added: Financial Statements and Supplementary Data” of this Form 10 K.
+Added: The total amount includes operating and finance lease obligations and estimated interest costs of $23.1 million.
+Added: (d) Amounts exclude purchase commitments under potato supply agreements due to uncertainty of pricing and quantity.
Potato supply agreements have maximum contracted pricing with deductions for certain quality attributes, and quantities purchased are determined by the yields produced on contracted acres.
Total purchases under all our potato supply agreements were $621.4 million, $646.5 million, and $592.3 million in fiscal 2021, 2020, and 2019, respectively.
−Removed: (f) Capital commitments represent commitments for the construction or purchase of property, plant and equipment.
+Added: (e) Capital commitments represent commitments for the construction or purchase of property, plant and equipment.
They were not recorded as liabilities on our Consolidated Balance Sheet as of May 30, 2021, as we had not yet received the related goods nor taken title to the property.
−Removed: (g) Deferred income taxes of $152.5 million, uncertain tax positions of $30.5 million, and long-term workers compensation of $8.2 million are excluded from this table, because the timing of their future cash outflows are uncertain.
−Removed: This amount also excludes $9.9 million of a deferred gain as the amount is non-cash.
−Removed: (h) We enter into operating leases in the normal course of business.
−Removed: We lease some of our warehouses and operating facilities, as well as other property and equipment, under operating leases.
−Removed: This amount includes estimated interest costs of $28.4 million.
−Removed: (i) This table is based on our financing obligation maturities at May 31, 2020, and assumes our financing obligations are held to maturity, includes the current portion of financing obligations, and includes $2.5 million of interest payments associated with financing obligations.
−Removed: Amounts are reported gross.
−Removed: (j) Amounts consist of our pension, post-retirement benefit obligations, deferred compensation liabilities, and deferred payments for the employer portion of social security taxes under the CARES Act.
−Removed: Actuarially determined liabilities related to pension benefits are recorded based on estimates and assumptions.
−Removed: Key factors used in developing estimates of these liabilities include assumptions related to discount rates, expected rate of compensation increases, retirement and mortality rates, and other factors.
−Removed: Changes in estimates and assumptions related to the measurement of funded status will impact the amounts reported.
−Removed: In the table above, we allocated our pension obligations by year based on the future required minimum pension contributions, as determined by our actuaries.
−Removed: See Note 10, Employee Benefit Plans and Other Post-Retirement Benefits, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
−Removed: Financial Statements and Supplementary Data” of this Form 10-K.
−Removed: For the majority of restricted stock units (“RSUs”) granted, the number of shares of common stock issued on the date the RSUs vest is net of the minimum statutory withholding requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees.
−Removed: The obligation to pay the relevant taxing authority is excluded from the table above, as the amount is contingent upon continued employment.
−Removed: In addition, the amount of the obligation is unknown, as it is based in part on the market price of our common stock when the awards vest.
−Removed: Reconciliations of Non-GAAP Financial Measures to Reported Amounts
−Removed: To supplement the financial information included in this report, we have presented Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS, each of which is considered a non-GAAP financial measure.
−Removed: Our management uses Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS to evaluate the Company’s performance excluding the impact of certain non-cash charges and other special items in order to have comparable financial results to analyze changes in our underlying business between reporting periods.
−Removed: We include these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.
−Removed: We believe that the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the Company’s operating performance and underlying prospects.
−Removed: These non-GAAP financial measures should be viewed in addition to, and not as alternatives for, financial measures prepared in accordance with GAAP.
−Removed: These non-GAAP financial measures may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures the same way.
−Removed: These measures are not a substitute for their comparable GAAP financial measures, such as net income (loss) or diluted earnings per share, and there are limitations to using non-GAAP financial measures.
−Removed: The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures.
−Removed: For the Fiscal Years Ended May
−Removed: Net income attributable to Lamb Weston Holdings, Inc.
−Removed: Income attributable to noncontrolling interests
−Removed: Equity method investment earnings
−Removed: Interest expense, net
−Removed: Income tax expense
−Removed: Income from operations
−Removed: Depreciation and amortization
−Removed: Items impacting comparability (b)
−Removed: Expenses related to the Separation
−Removed: Non-cash gain on assets
−Removed: Expense related to actuarial losses in excess of 10% of related pension liability
−Removed: Expenses related to SCAE Plan
−Removed: Adjusted EBITDA (b) (c)
−Removed: Unconsolidated Joint Ventures
−Removed: Equity method investment earnings
−Removed: Interest expense, income tax expense, and depreciation and
−Removed: amortization included in equity method investment earnings
−Removed: Items impacting comparability
−Removed: Loss on withdrawal from multiemployer pension plan (d)
−Removed: Gain related to pension plan settlement (e)
−Removed: Adjusted EBITDA from unconsolidated joint ventures
−Removed: Consolidated Joint Ventures
−Removed: Income attributable to noncontrolling interests
−Removed: Interest expense, income tax expense, and depreciation and
−Removed: amortization included in equity method investment earnings
−Removed: EBITDA from consolidated joint ventures
−Removed: Adjusted EBITDA including unconsolidated joint ventures
−Removed: (a) See Results of Operations in this MD&A for a discussion of the impact of government efforts to control the spread of COVID-19, including restrictions on restaurants and other foodservice operations and stay-at-home orders, on our financial results.
−Removed: (b) Fiscal 2018, 2017 and 2016 include $8.7 million, $26.5 million and $5.3 million, respectively, of expenses related to the Separation.
−Removed: In fiscal 2018, the expenses related primarily to professional fees and other employee-related costs.
−Removed: In fiscal 2017 and 2016, the expenses related primarily to professional fees.
−Removed: Fiscal 2017 includes a $3.1 million non-cash gain on assets.
−Removed: Fiscal 2016 includes $59.5 million of charges reflecting Lamb Weston’s portion of actuarial losses in excess of 10% of Conagra’s pension liability for Conagra sponsored plans.
−Removed: Fiscal 2016 includes $0.1 million related to costs incurred in connection with Conagra’s initiative to improve selling, general and administrative effectiveness and efficiencies, which is referred to as the Supply Chain and Administrative Efficiency Plan (“SCAE Plan”).
−Removed: (c) Adjusted EBITDA includes EBITDA from consolidated joint ventures.
−Removed: (d) Fiscal 2020 includes a $2.6 million loss related to the withdrawal from a multiemployer pension plan by Lamb Weston RDO.
−Removed: (e) Fiscal 2016 includes a $17.7 million non-cash gain related to the settlement of a pension plan at our Lamb-Weston/Meijer joint venture.
−Removed: The following table reconciles diluted earnings per share to Adjusted Diluted EPS:
−Removed: For the Fiscal Years Ended May
−Removed: Items impacting comparability:
−Removed: Loss on withdrawal from multiemployer pension plan (b)
−Removed: Increase in redemption value of noncontrolling interests, net of tax benefits (c)
−Removed: Expenses related to the Separation (d)
−Removed: Tax reform (e)
−Removed: Total items impacting comparability
−Removed: (a) Diluted weighted average common shares were 147.1 million, 147.3 million, and 147.0 million for fiscal 2020, 2019, and 2018, respectively.
−Removed: (b) Fiscal 2020 included a $2.6 million loss related to the withdrawal from a multiemployer pension plan by Lamb Weston RDO.
−Removed: (c) Fiscal 2019 included accretion, net of tax benefits, of $9.4 million, or $0.06 per share, which we recorded to increase the redeemable noncontrolling interest to the amount we paid to acquire the remaining 50.01% interest in Lamb Weston BSW.
−Removed: While the accretion, net of tax benefits, reduced net income available to Lamb Weston common stockholders and earnings per share, it did not impact net income in the Consolidated Statements of Earnings.
−Removed: Net income includes 100% of Lamb Weston BSW’s earnings beginning November 2, 2018.
−Removed: For more information about our investments in joint ventures, see Note 6, Investments in Joint Ventures, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
−Removed: Financial Statements and Supplementary Data” of this Form 10-K.
−Removed: (d) Fiscal 2018 included $8.7 million of pre-tax expenses ($5.7 million after tax) related to the Separation.
−Removed: The expenses related primarily to professional fees and other employee-related costs.
−Removed: (e) In fiscal 2019, we recorded a $2.4 million, or $0.02 per share, benefit from the true-up of the transition tax on previously untaxed foreign earnings under the Tax Act.
−Removed: We completed our analysis of the one-time impacts of the Tax Act in fiscal 2019.
−Removed: In connection with our initial analysis of the impact of the Tax Act in fiscal 2018, we decreased income tax expense and increased net income $28.4 million, or $0.19 per share for one-time items, including a $39.9 million net provisional tax benefit from the estimated impact of remeasuring our net U.S.
−Removed: deferred tax liabilities with a new lower U.S.
−Removed: federal statutory rate, partially offset by an $11.5 million transition tax on our previously untaxed foreign earnings.
+Added: (f) Amount primarily consists of long-term compensation and benefits, such as deferred compensation liabilities, pension, and post-retirement benefit obligations.
Critical Accounting Estimates
7 unchanged sentences
We review the development, selection, and disclosure of our critical accounting estimates with the Audit and Finance Committee of our Board of Directors.
−Removed: We believe that of our significant accounting policies, the following involve a higher degree of judgment and/or complexity.
+Added: While we have taken into account certain impacts arising from COVID-19 in connection with the accounting estimates reflected in this Form 10-K, the full impact of COVID-19 is unknown and cannot be reasonably estimated.
+Added: However, we have made appropriate accounting estimates based on the facts and circumstances available as of the
+Added: reporting date.
+Added: To the extent there are differences between these estimates and actual results, our consolidated financial statements may be affected.
Sales Incentives and Trade Promotion Allowances
7 unchanged sentences
quantity of customer sales, timing of promotional activities, current and past trade-promotion spending patterns, the interpretation of historical spending trends by customer and category, and forecasted costs for activities within the promotional programs.
−Removed: The determination of sales incentive and trade promotion costs requires judgment and may change in the future as a result of changes in customer promotion participation, particularly for new programs related to the introduction of new products.
+Added: The determination of sales incentive and trade promotion costs requires judgment and may change in the future as a result of changes in customer demand for our products, promotion participation, particularly for new programs related to the introduction of new products.
Final determination of the total cost of promotion is dependent upon customers providing information about proof of performance and other information related to the promotional event.
11 unchanged sentences
These contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, the expiration of the statute of limitations for the relevant taxing authority to examine a tax return, case law and emerging legislation.
−Removed: While it is difficult to predict the final outcome or timing of resolution for any particular matter, we believe that the accruals for unrecognized tax benefits at May 31, 2020, reflect the likely outcome of known tax contingencies as of such date in accordance with accounting for uncertainty in income taxes under ASC 740.
+Added: While it is difficult to predict the final outcome or timing of resolution for any particular matter, we believe that the accruals for unrecognized tax benefits at May 30, 2021, reflect the estimated outcome of known tax contingencies as of such date in accordance with accounting for uncertainty in income taxes under ASC 740.
● We recognize the tax impact of including certain foreign earnings in U.S.
3 unchanged sentences
Remittances of non-U.S.
−Removed: earnings are based on
−Removed: estimates and judgments of projected cash flow needs, as well as the working capital and investment requirements of our non-U.S.
+Added: earnings are based on estimates and judgments of projected cash flow needs, as well as the working capital and investment requirements of our non-U.S.
Material changes in our estimates of cash, working capital, and investment needs in various jurisdictions could require repatriation of indefinitely reinvested non-U.S.
1 unchanged sentence
income and withholding taxes.
−Removed: While we believe the judgements and estimates discussed above and made by management are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.
+Added: While we believe the judgments and estimates discussed above and made by management are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts.
Further information on income taxes is provided in Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
5 unchanged sentences
If we are required to retroactively adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and results of operations.
−Removed: Additionally, we expense any acquisition-related costs as incurred in connection with each business combination.
−Removed: Significant estimates and assumptions in estimating the fair value of brands and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets.
+Added: Significant estimates and assumptions in determining the fair value of brands and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets.
If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges.
4 unchanged sentences
Financial Statements and Supplementary Data” of this Form 10-K.
+Added: Non-GAAP Financial Measures
+Added: To supplement the financial information included in this report, we have presented product contribution margin on a consolidated basis, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS, each of which is considered a non-GAAP financial measure.
+Added: Product contribution margin is one of the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance.
+Added: Product contribution margin represents net sales less cost of sales and advertising and promotion expenses.
+Added: Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with the performance of our segments.
+Added: Our management also uses Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures and Adjusted Diluted EPS to evaluate our performance excluding the impact of certain non-cash charges and other special items in order to have comparable financial results to analyze changes in our underlying business between reporting periods.
+Added: these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.
+Added: We believe that the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing our operating performance and underlying prospects.
+Added: These non-GAAP financial measures should be viewed in addition to, and not as alternatives for, financial measures prepared in accordance with GAAP.
+Added: These non-GAAP financial measures may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures the same way.
+Added: These measures are not a substitute for their comparable GAAP financial measures, such as gross profit, net income (loss) or diluted earnings per share, and there are limitations to using non-GAAP financial measures.
+Added: See “Results of Operations – Fiscal Year Ended May 30, 2021 Compared to Fiscal Year Ended May 31, 2020 (dollars in millions) – Net Sales and Product Contribution Margin” above for a reconciliation of product contribution margin on a consolidated basis to gross profit.
+Added: The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures.
+Added: For the Fiscal Years Ended May
+Added: Equity method investment earnings
+Added: Interest expense, net
+Added: Income tax expense
+Added: Income from operations
+Added: Depreciation and amortization
+Added: Adjusted EBITDA (b)
+Added: Unconsolidated Joint Ventures
+Added: Equity method investment earnings
+Added: Interest expense, income tax expense, and depreciation and
+Added: amortization included in equity method investment earnings
+Added: Items impacting comparability
+Added: Loss on withdrawal from multiemployer pension plan
+Added: Adjusted EBITDA from unconsolidated joint ventures
+Added: Adjusted EBITDA including unconsolidated joint ventures
+Added: (a) Fiscal 2021 and 2020 include incremental costs resulting from the pandemic’s effect on our manufacturing and supply chain operations, as well as incremental warehousing and transportation costs, and costs to enhance employee safety measures, including purchases of safety and health screening equipment, and retaining sales employees.
+Added: In addition, fiscal 2021 includes higher costs related to processing raw potatoes out of storage longer than prior years .
+Added: (b) Adjusted EBITDA includes EBITDA from consolidated joint ventures.
+Added: The following table reconciles diluted earnings per share to Adjusted Diluted EPS:
+Added: For the Fiscal Years Ended May
+Added: Item impacting comparability:
+Added: Loss on withdrawal from multiemployer pension plan
+Added: (a) Diluted weighted average common shares were 147.1 million in both fiscal 2021 and 2020.
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.