What changed in this filing

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Item 1. Financial Statements

2021-10-07 compared with 2021-04-07 · 96 added, 165 removed, 247 unchanged (51% of the section changed)

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS (Unaudited)

Lamb Weston Holdings, Inc.

Consolidated Statements of Earnings

(unaudited, dollars in millions, except per share amounts)

(unaudited, in millions, except per share amounts)

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

Cost of sales

6 unchanged sentences

Earnings per share:

Weighted average common shares outstanding:

See Condensed Notes to Consolidated Financial Statements.

4 unchanged sentences

Thirteen Weeks Ended

February 28, 2021

February 23, 2020

Other comprehensive income (loss):

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

Unrealized currency translation gains (losses)

Comprehensive income

Thirty-Nine Weeks Ended

February 28, 2021

February 23, 2020

August 29, 2021

August 30, 2020

Other comprehensive income (loss):

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

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

Unrealized currency translation gains (losses)

15 unchanged sentences

Current liabilities:

Short-term borrowings

Current portion of long-term debt and financing obligations

13 unchanged sentences

Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Treasury stock, at cost, 1,955,617 and 1,448,768 common shares

5 unchanged sentences

(unaudited, dollars in millions, except share data )

Thirteen Weeks Ended February 28, 2021 and February 23, 2020

Common Stock,

net of Treasury

(Distributed)

Comprehensive

Income (Loss)

Balance at November 29, 2020

Dividends declared, $ 0.235 per share

Common stock issued

Stock-settled, stock-based compensation expense

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income

Balance at February 28, 2021

Balance at November 24, 2019

Dividends declared, $ 0.230 per share

Common stock issued

Stock-settled, stock-based compensation expense

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income

Balance at February 23, 2020

Thirty-Nine Weeks Ended February 28, 2021 and February 23, 2020

Thirteen Weeks Ended August 29, 2021 and August 30, 2020

Common Stock,

9 unchanged sentences

Comprehensive income

Balance at February 28, 2021

Balance at August 29, 2021

Balance at May 31, 2020

Adoption of ASC 842 leases

Dividends declared, $ 0.230 per share

1 unchanged sentence

Stock-settled, stock-based compensation expense

Repurchase of common stock and common stock withheld to cover taxes

Common stock withheld to cover taxes

Comprehensive income

Balance at February 23, 2020

Balance at August 30, 2020

See Condensed Notes to Consolidated Financial Statements.

2 unchanged sentences

(unaudited, dollars in millions)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

Cash flows from operating activities

2 unchanged sentences

Stock-settled, stock-based compensation expense

Earnings of joint ventures in excess of distributions

Distributions (earnings) of joint ventures, net

Deferred income taxes

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities:

Income taxes payable/receivable, net

6 unchanged sentences

Additions to other long-term assets

Acquisition of business, net of cash acquired

Investment in equity method joint venture

Net cash used for investing activities

Cash flows from financing activities

Proceeds (payments) of short-term borrowings, net

Repayments of debt and financing obligations

Dividends paid

Repurchase of common stock and common stock withheld to cover taxes

Proceeds from issuance of debt

Repayments of debt and financing obligations

Repayments of short-term borrowings, net

Net cash used for financing activities

1 unchanged sentence

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

See Condensed Notes to Consolidated Financial Statements.

Lamb Weston Holdings, Inc.

Condensed Notes to Consolidated Financial Statement s

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Basis of Presentation

The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen and thirty-nine weeks ended February 28, 2021 and February 23, 2020, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America.

The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen weeks ended August 29, 2021 and August 30, 2020, 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 the effects of the COVID-19 pandemic on our critical accounting estimates and significant accounting policies.

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

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

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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):

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update 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.

This guidance includes practical expedients and exceptions to the current guidance on contract modifications and hedge accounting.

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.

This guidance was effective immediately and generally can be applied through December 31, 2022.

We are currently evaluating the potential impact of the transition from LIBOR to alternative reference rates, but do not expect a significant impact on our financial statements related to this transition.

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

2 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

Basic weighted average common shares outstanding

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

As of February 28, 2021, we did not have any stock-based awards that were antidilutive.

As of February 23, 2020, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Income tax expense was $ 16.3 million and $ 35.7 million for the thirteen weeks ended February 28, 2021 and February 23, 2020, respectively;

and $ 76.2 million and $ 115.1 million for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, 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 19.8 % and 24.3 % for the thirteen weeks ended February 28, 2021 and February 23, 2020, respectively;

and 23.2 % and 23.8 % for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, respectively, in our Consolidated Statements of Earnings.

The lower effective tax rate for the thirteen weeks ended February 28, 2021, as compared to the prior year period, is primarily due to discrete items originating during the quarter and a slightly lower annual effective tax rate.

As of August 29, 2021 and August 30, 2020, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Income tax expense was $ 8.7 million and $ 28.0 million for the thirteen weeks ended August 29, 2021 and August 30, 2020, 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 22.6 % and 23.9 % for the thirteen weeks ended August 29, 2021 and August 30, 2020, respectively, in our Consolidated Statements of Earnings.

The effective tax rate varies from the U.S.

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Income Taxes Paid

Income taxes paid, net of refunds were $ 44.4 million and $ 81.2 million during the thirty-nine weeks ended February 28, 2021 and February 23, 2020, respectively .

Income tax refunds, net of taxes paid were $ 2.9 million and $ 2.8 million during the thirteen weeks ended August 29, 2021 and August 30, 2020, respectively.

Unrecognized Tax Benefits

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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.

of the Form 10-K.

The expiration of statute of limitations could reduce the uncertain tax positions by approximately $ 7 million during the next 12 months.

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:

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Property, plant and equipment, net

Depreciation expense was $ 44.8 million and $ 44.2 million for the thirteen weeks ended February 28, 2021 and February 23, 2020, respectively;

and $ 134.9 million and $ 130.7 million for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, respectively.

At February 28, 2021 and May 31, 2020, purchases of property, plant and equipment included in accounts payable were $ 11.3 million and $ 9.9 million, respectively.

Interest capitalized within construction in progress for the thirteen weeks ended February 28, 2021 and February 23, 2020, was $ 0.5 million and $ 0.7 million, respectively;

and $ 1.5 million and $ 1.9 million for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, respectively.

INVESTMENTS IN JOINT VENTURES

Depreciation expense was $ 44.5 million and $ 44.9 million for the thirteen weeks ended August 29, 2021 and August 30, 2020, respectively.

At August 29, 2021 and May 30, 2021, purchases of property, plant and equipment included in accounts payable were $ 34.4 million and $ 23.1 million, respectively.

Interest capitalized within construction in progress for the thirteen weeks ended August 29, 2021 and August 30, 2020, was $ 1.2 million and $ 0.5 million, respectively.

EQUITY METHOD INVESTMENTS

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.

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

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 S.A., which is headquartered in Argentina.

(“LWAMSA”), a joint venture with Sociedad Comercial del Plata S.A., that is headquartered in Argentina.

LWAMSA manufactures and sells frozen potato products, principally in South America.

These investments are accounted for using equity method accounting.

The carrying value of our equity method investments, which includes Lamb-Weston/Meijer, Lamb Weston RDO, and LWAMSA at February 28, 2021 and May 31, 2020, was $ 303.1 million and $ 250.2 million, respectively, and are included in “Equity method investments” on our Consolidated Balance Sheets.

For the thirteen weeks ended February 28, 2021 and February 23, 2020, we had sales to our equity method investments of $ 5.5 million and $ 8.6 million, respectively, and payments to our equity method investments of $ 0.9 million and $ 1.9 million, respectively;

and for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, we had sales to our equity method investments of $ 12.4 million and $ 25.1 million and payments to our equity method investments of $ 4.2 million and $ 7.9 million, respectively.

Total dividends from our equity method investments were $ 5.8 million and $ 10.9 million for the thirteen weeks ended February 28, 2021 and February 23, 2020, respectively;

and $ 12.4 million and $ 28.9 million for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, respectively.

The carrying value of these equity method investments at August 29, 2021 and May 30, 2021, was $ 298.8 million and $ 310.2 million, respectively, and are included in “Equity method investments” on our Consolidated Balance Sheets.

For the thirteen weeks ended August 29, 2021 and August 30, 2020, we had sales to our equity method investments of $ 4.9 million and $ 3.0 million, respectively, and payments to our equity method investments of $ 1.4 million and $ 1.1 million, respectively.

Total dividends received from our equity method investments were $ 9.7 million and $ 2.7 million for the thirteen weeks ended August 29, 2021 and August 30, 2020, 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 its 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 February 28, 2021, Lamb-Weston/Meijer’s portion of the ERP costs totaled $ 15.8 million.

We had $ 12.6 million and $ 12.0 million of receivables recorded on our Consolidated Balance Sheets as of February 28, 2021 and May 31, 2020, respectively.

Of the $ 12.6 million and $ 12.0 million of receivables, $ 0.2 million and $ 1.8 million were recorded in “Receivables, net” and $ 12.4 million and $ 10.2 million were recorded in “Other assets,” respectively.

As of August 29, 2021 and May 30, 2021, Lamb-Weston/Meijer’s portion of the ERP costs totaled $ 17.0 million and $ 16.8 million, respectively.

Related to this project, we had $ 13.6 million and $ 13.2 million of receivables recorded in “Other assets” on our Consolidated Balance Sheets as of August 29, 2021 and May 30, 2021, respectively.

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

In December 2020, Lamb-Weston/Meijer increased its interest in its Russian joint venture from 35.5 % to 74.9 %, and now consolidates that joint venture in its results.

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The following table presents changes in goodwill balances, by segment, during the thirty-nine weeks ended February 28, 2021 (dollars in millions):

The following table presents changes in goodwill balances, by segment, during the thirteen weeks ended August 29, 2021 (dollars in millions):

Balance at May 30, 2021

Foreign currency translation adjustment

Balance at February 28, 2021

Balance at August 29, 2021

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

February 28, 2021

August 29, 2021

Non-amortizing intangible assets (a)

2 unchanged sentences

(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 $ 1.5 million and $ 0.6 million for the thirteen weeks ended February 28, 2021 and February 23, 2020, respectively;

and $ 3.6 million and $ 1.9 million for the thirty-nine weeks ended February 28, 2021 and February 23, 2020, respectively.

Developed technology, which is excluded from this balance, is recorded as “Other assets” on our Consolidated Balance Sheet.

Amortization expense, including developed technology amortization expense, was $ 1.5 million and $ 0.7 million for the thirteen weeks ended August 29, 2021 and August 30, 2020, respectively.

Foreign intangible assets are affected by foreign currency translation.

5 unchanged sentences

Accrued interest

Current portion of operating lease liabilities

Current portion of operating lease obligations

Franchise, property, and sales and use taxes

Income taxes payable

Accrued liabilities

DEBT AND FINANCING OBLIGATIONS

At February 28, 2021 and May 31, 2020, our debt, including financing obligations, was as follows (dollars in millions):

Short-term borrowings:

Revolving credit facility

Other credit facilities

At August 29, 2021 and May 30, 2021, our debt, including financing obligations, was as follows (dollars in millions):

Long-term debt:

Term loan facility, due November 2021

Term A-1 loan facility, due June 2024

6 unchanged sentences

Total debt and financing obligations

Debt issuance costs

Short-term borrowings

Debt issuance costs (b)

Current portion of long-term debt and financing obligations

Long-term debt and financing obligations, excluding current portion

(a) The interest rates on our lease financing obligations range from 2.49 % to 4.10 % as of February 28, 2021, 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 available revolving credit facility borrowings to $ 750.0 million and extended the maturity date to September 17, 2023 .

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

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

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

(a) The interest rates on our lease financing obligations ranged from 2.49 % to 4.10 % as of August 29, 2021 and May 30, 2021.

(b) Excludes debt issuance costs of $ 3.9 million and $ 2.1 million as of August 29, 2021 and May 30, 2021, respectively, related to our Amended Revolving Credit Facility, which are presented in “Other assets” on the Consolidated Balance Sheets.

Amended Revolving Credit Facility

On August 11, 2021, 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 available revolving credit facility borrowings to $ 1.0 billion and extended the maturity date to August 11, 2026 .

In addition, we may add incremental term loan facilities, increase commitments and/or add new revolving commitments in an aggregate principal amount of $ 650.0 million or greater based on conditions described in the agreement.

Borrowings under the Amended Revolving Credit Facility bear interest at LIBOR, the Base Rate, the Alternative Currency Daily Rate, or the Alternative Currency Term Rate (each as defined in the Amended Revolving Credit Facility) plus an applicable rate ranging from 1.125 % to 1.75 % for LIBOR-based loans, Alternative Currency Daily Rate-based loans, and Alternative Currency Term Rate-based loans and from 0.125 % to 0.75 % 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 0.15 % to 0.25 %, depending on our consolidated net leverage ratio.

The Amended Revolving Credit Facility requires us to maintain a consolidated net leverage ratio no greater than 5.00 to 1.00, decreasing ratably to 4.50 to 1.00 on February 26, 2022 through maturity;

The Amended Revolving Credit Facility requires us to maintain a consolidated net leverage ratio no greater than 5.00 to 1.00, decreasing to 4.75 to 1.00 on February 23, 2025 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 thirty-nine weeks ended February 28, 2021, 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 February 28, 2021, we had no borrowings outstanding under the Amended Revolving Credit Facility and $ 744.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million.

For the thirty-nine weeks ended February 28, 2021, 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 %.

In connection with the Amended Revolving Credit Facility, we capitalized $ 2.0 million of debt issuance costs as “Other assets” on our Consolidated Balance Sheet.

At August 29, 2021, we had no borrowings outstanding under the Amended Revolving Credit Facility and $ 994.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million.

For the thirteen weeks ended August 29, 2021, we had no borrowings under the facility.

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 us to maintain 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 .

For the thirty-nine weeks ended February 28, 2021 and February 23, 2020, we paid $ 65.2 million and $ 58.0 million of interest on debt, respectively.

On August 11, 2021, 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 covenants under the agreement.

Under the amended Term Loan Facilities, we are required to maintain a consolidated net leverage ratio no greater than 5.00 to 1.00 , decreasing to 4.75 to 1.00 on February 23, 2025 through maturity;

and an interest coverage ratio no less than 2.75 to 1.00 .

For the thirteen weeks ended August 29, 2021 and August 30, 2020, we paid $ 2.7 million and $ 5.7 million of interest on debt, respectively.

For more information on our debt and financing obligations, interest rates, and debt covenants, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

Financial Statements and Supplementary Data” of the Form 10-K.

STOCK-BASED COMPENSATION

The Compensation Committee (“the Committee”) of our Board of Directors administers our stock compensation plan.

The Compensation and Human Capital 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 thirty-nine weeks ended February 28, 2021, we granted 0.3 million and 0.1 million RSUs and Performance Shares, respectively, at an average grant date fair value of $ 62.46 .

As of February 28, 2021, 7.4 million shares were available for future grant under the plan.

During the thirteen weeks ended August 29, 2021, we granted 0.3 million and 0.1 million RSUs and Performance Shares, respectively, at an average grant date fair value of $ 67.41 .

As of August 29, 2021, 7.1 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

Thirty-Nine Weeks Ended

Stock-settled RSUs

Performance Shares

Stock options

Stock-settled compensation expense

Cash-settled RSUs (a)

Total compensation expense

Income tax benefit (b)

Income tax benefit (a)

Total compensation expense, net of tax benefit

(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 February 28, 2021, total unrecognized compensation expense related to stock-based awards was as follows (dollars in millions):

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

Based on estimates at August 29, 2021, total unrecognized compensation expense related to stock-based awards was as follows (dollars in millions):

Period (in years)

8 unchanged sentences

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 February 28, 2021

As of August 29, 2021

Fair Value of Assets (Liabilities)

Derivative assets (a)

Deferred compensation liabilities (b)

Total liabilities

Fair value, net

As of May 30, 2021

Deferred compensation assets

Derivative liabilities (a)

Fair Value of Assets (Liabilities)

Derivative assets (a)

Deferred compensation liabilities (b)

Total liabilities

(a) Derivative assets and liabilities included in Level 2 primarily represent commodity swap and option contracts.

Fair value, net

(a) Derivative assets 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 both forward and spot prices for commodities.

Derivative assets are presented within “Prepaid expenses and other current assets” and derivative liabilities are presented within “Accrued liabilities” on our Consolidated Balance Sheets.

Derivative assets are presented within “Prepaid expenses and other current assets” on our Consolidated Balance Sheets.

(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 February 28, 2021, we had $ 2,166.0 million of fixed-rate and $ 594.4 million of variable-rate debt outstanding.

Based on current market rates, the fair value of our fixed-rate debt at February 28, 2021, was estimated to be $ 2,278.4 million.

At August 29, 2021, we had $ 2,166.0 million of fixed-rate and $ 578.8 million of variable-rate debt outstanding.

Based on current market rates, the fair value of our fixed-rate debt at August 29, 2021, was estimated to be $ 2,273.6 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.

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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.

During the thirteen and thirty-nine weeks ended February 28, 2021, we repurchased 164,678 shares for $ 12.7 million, or a weighted-average price of $ 77.04 per share.

As of February 28, 2021, $ 182.6 million remained authorized for repurchase under the program.

During the thirty-nine weeks ended February 28, 2021, we paid $ 100.9 million of dividends to common stockholders.

On March 5, 2021, we paid $ 34.4 million of dividends to stockholders of record as of the close of business on February 5, 2021.

On March 25, 2021 , our Board of Directors declared a dividend of $ 0.235 per share of common stock.

The dividend will be paid on June 4, 2021 , to stockholders of record as of the close of business on May 7, 2021 .

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

Changes in AOCI, net of taxes, as of February 28, 2021 were as follows (dollars in millions):

During the thirteen weeks ended August 29, 2021, we repurchased 395,361 shares for $ 26.0 million, or a weighted-average price of $ 65.86 per share.

As of August 29, 2021, $ 143.6 million remained authorized for repurchase under the program.

We paid $ 34.4 million of dividends on both September 3, 2021 and June 4, 2021 to stockholders of record as of the close of business on August 6, 2021 and May 7, 2021, respectively.

On September 23, 2021 , our Board of Directors declared a dividend of $ 0.235 per share of common stock.

The dividend will be paid on December 3, 2021 , to stockholders of record as of the close of business on November 5, 2021 .

Accumulated Other Comprehensive Income (“AOCI”)

Changes in AOCI, net of taxes, as of August 29, 2021 were as follows (dollars in millions):

Post-Retirement

6 unchanged sentences

Net current-period other comprehensive income (loss)

Balance as of February 28, 2021

Balance as of August 29, 2021

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

3 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

Total net sales

Product contribution margin (b)

Advertising and promotion expenses (b)

Product contribution margin (a)

Advertising and promotion expenses (a)

Selling, general and administrative expenses

3 unchanged sentences

Equity method investment earnings

(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, and earnings of our joint ventures, resulting in a negative impact on 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.

(a) Product contribution margin represents net sales less cost of sales and advertising and promotion expenses.

Product contribution margin includes advertising and promotion expenses because those expenses are 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 12 %of consolidated “Net sales” for both the thirteen and thirty-nine weeks ended February 28, 2021;

and 10 % for both the thirteen and thirty-nine weeks ended February 23, 2020.

No customer accounted for more than 10% of our consolidated accounts receivable as of February 28, 2021 or May 31, 2020.

(b) 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 10 % of consolidated “Net sales” for the thirteen weeks ended August 29, 2021;

and 11 % for the thirteen weeks ended August 30, 2020.

COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS

9 unchanged sentences

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What changed 10-Q

Item 1. Financial Statements