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Item 8. Financial Statements and Supplementary Data

2022-07-27 compared with 2021-07-27 · 301 added, 285 removed, 733 unchanged (44% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (KPMG, LLP, Seattle, WA, PCAOB ID No.

Consolidated Statements of Earnings for the fiscal years ended May 29, 2022, May 30, 2021, and May 31, 2020

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We have audited the accompanying consolidated balance sheets of Lamb Weston Holdings, Inc.

and subsidiaries (the Company) as of May 30, 2021 and May 31, 2020, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the fiscal years in the three-year period ended May 30, 2021, and the related notes and consolidated financial statement schedule (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of May 29, 2022 and May 30, 2021, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended May 29, 2022, and the related notes and consolidated financial statement schedule (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 29, 2022 and May 30, 2021, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended May 29, 2022, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 29, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July 27, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases for the fiscal year ended May 31, 2020 due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842), effective May 27, 2019.

Basis for Opinion

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Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Interest expense, net

Income before income taxes and equity method earnings

Income before income taxes and equity method earnings (loss)

Income tax expense

Equity method investment earnings

Income attributable to noncontrolling interests

Net income attributable to Lamb Weston Holdings, Inc.

Equity method investment earnings (loss)

Earnings per share:

Weighted average common shares outstanding:

See Notes to Consolidated Financial Statements.

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

Unrealized pension and post-retirement benefit obligations

Unrealized pension and post-retirement benefit obligations gain (loss)

Unrealized currency translation gains (losses)

Comprehensive income

Comprehensive income attributable to noncontrolling interests

Comprehensive income attributable to Lamb Weston Holdings, Inc.

See Notes to Consolidated Financial Statements.

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Current liabilities:

Short-term borrowings

Current portion of long-term debt and financing obligations

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Comprehensive

Stockholders'

Income (Loss)

Balance at May 26, 2019

Adoption of ASC 606 revenue from contracts with customers

Increase in redemption value of noncontrolling interests in excess of earnings allocated

Adoption of ASC 842 leases

Dividends declared, $ 0.86 per share

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Balance at May 31, 2020

Adoption of ASC 842 leases

Dividends declared, $ 0.93 per share

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Repurchase of common stock and common stock withheld to cover taxes

( 2,525,388 )

Comprehensive income

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Depreciation and amortization of intangibles and debt issuance costs

Loss on extinguishment of debt

Stock-settled, stock-based compensation expense

Earnings of joint ventures in excess of distributions

Loss (earnings) of joint ventures in excess of distributions

Deferred income taxes

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Acquisition of business, net of cash acquired

Investment in equity method joint venture

Investment in equity method investment

Net cash used for investing activities

Cash flows from financing activities

Proceeds (payments) of short-term borrowings, net

Proceeds from issuance of debt

Repayments of debt and financing obligations

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Repurchase of common stock and common stock withheld to cover taxes

Proceeds from issuance of debt

Acquisition of noncontrolling interest

Cash distributions paid to noncontrolling interest

Net cash provided by (used for) financing activities

Payments of senior notes call premium

(Repayments) proceeds of short-term borrowings, net

Net cash (used for) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

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Lamb Weston Holdings, Inc.

(“we,” “us,” “our,” the “Company,” or “Lamb Weston”), along with our joint venture partners, is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho.

(“we,” “us,” “our,” the “Company,” or “Lamb Weston”), along with our joint ventures, is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho.

We have four reportable segments:

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On November 9, 2016, Lamb Weston separated from Conagra Brands, Inc.

(formerly, ConAgra Foods, Inc., “Conagra”) and became an independent publicly traded company through the pro rata distribution by Conagra of 100 % of the outstanding common stock of Lamb Weston to Conagra stockholders (“Separation”).

Basis of Presentation

These Consolidated Financial Statements present the financial results of Lamb Weston for the fiscal years ended May 30, 2021, May 31, 2020, and May 26, 2019 (“fiscal 2021, 2020, and 2019”), and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America.

These Consolidated Financial Statements present the financial results of Lamb Weston for the fiscal years ended May 29, 2022, May 30, 2021, and May 31, 2020 (“fiscal 2022, 2021, and 2020”), and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”).

The fiscal year of Lamb Weston ends the last Sunday in May.

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The financial statements include all adjustments (consisting only of normal recurring adjustments) that we consider necessary for a fair presentation of such financial statements.

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

Actual results may vary from those estimates.

Our consolidated financial statements include the accounts of Lamb Weston and all of our majority-owned subsidiaries.

In addition, the accounts of all variable interest entities for which we are the primary beneficiary are included in our consolidated financial statements from the date such determination was made.

Intercompany investments, accounts, and transactions have been eliminated.

Certain amounts in the prior period consolidated financial statements have been reclassified to conform with the current period presentation.

The equity method of accounting is applied for investments when the Company has significant influence over the investee’s operations, or when the investee is structured with separate capital accounts and our investment is considered more than minor.

Our equity method investments are described in Note 4, Investments in Joint Ventures.

Our equity method investments are described in Note 4, Equity Method Investments.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported in our consolidated financial statements and the accompanying notes.

On an ongoing basis, we evaluate our estimates, including but not limited to those related to provisions for income taxes, estimates of sales incentives and trade promotion allowances, and the valuation of goodwill and intangible assets.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

We adjust such estimates and assumptions when facts and circumstances dictate.

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.

As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

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This is because once a customized product is manufactured pursuant to a purchase order, we have an enforceable right to payment for that product.

Our Global segment sells the majority of our customized products, for which revenue is

recognized when a purchase order is received to the extent the product has been manufactured, as opposed to sales of non-customized products, for which revenue is generally recognized upon shipment.

Our Global segment sells the majority of our customized products, for which revenue is recognized when a purchase order is received to the extent the product has been manufactured, as opposed to sales of non-

customized products, for which revenue is generally recognized upon shipment.

As a result, the timing of the receipt of a purchase order may create quarterly fluctuations in this segment.

The nature of our contracts vary based on the business, customer type, and region;

The nature of our contracts varies based on the business, customer type, and region;

however, in all instances it is our customary business practice to receive a valid order from the customer, in which each party’s rights and related payment terms are clearly identifiable.

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We have contract terms that give rise to variable consideration including, but not limited to, discounts, coupons, rebates, and volume-based incentives.

We estimate volume rebates based on the most likely amount method outlined in ASC 606, Revenue from Contracts with Customers .

We estimate volume rebates based on the most likely amount method outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers .

We estimate early payment discounts and other customer trade incentives based principally on historical sales and coupon utilization and redemption rates, influenced by judgments about current market conditions such as competitive activity in specific product categories, which is consistent with the expected value method outlined in ASC 606.

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Advertising and Promotion

Advertising and promotion expenses totaled $ 17.8 million, $ 23.0 million, and $ 32.4 million in fiscal 2021, 2020, and 2019, respectively, and are included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.

Advertising and promotion expenses totaled $ 18.9 million, $ 17.8 million, and $ 23.0 million in fiscal 2022, 2021, and 2020, respectively, and are included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings as the expenses are incurred.

Research and Development

Research and development costs are expensed as incurred and totaled $ 12.9 million in fiscal 2021 and $ 15.4 million in both fiscal 2020 and 2019, and are included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.

Research and development costs are expensed as incurred and totaled $ 16.2 million, $ 12.9 million, and $ 15.4 million in fiscal 2022, 2021, and 2020, respectively, and are included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.

Stock-Based Compensation

Compensation expense resulting from all stock-based compensation transactions is measured and recorded in the consolidated financial statements based on the grant date fair value of the equity instruments issued.

Compensation expense is recognized over the period the employee provides service in exchange for the award.

Compensation expense is recognized over the period the employee or non-employee director provides service in exchange for the award.

See Note 10, Stock-Based Compensation, for additional information.

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We maintain various banking relationships with high quality financial institutions and believe we are not exposed to any significant credit risk for our cash and cash equivalents.

Cash and cash equivalents totaled $ 783.5 million and $ 1,364.0 million at May 30, 2021 and May 31, 2020, respectively.

We invest available cash in money market funds that are backed by U.S.

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If collection experience deteriorates, the estimate of the recoverability of amounts due could be reduced.

We periodically review our allowance for doubtful accounts and adjustments to the valuation allowance are recorded as income or expense.

We periodically review our allowance for doubtful accounts and adjustments to the valuation allowance are recorded as income or expense in “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

Trade accounts receivable balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

At May 30, 2021 and May 31, 2020, the allowance for doubtful accounts was $ 0.9 million and $ 1.3 million, respectively.

Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable value and include all costs directly associated with manufacturing products:

materials, labor, and manufacturing overhead.

The components of inventories were as follows (dollars in millions):

The components of inventories were as follows:

(in millions)

Raw materials and packaging

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Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from these leases.

Effective May 27, 2019 , the beginning of our fiscal 2020, we adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) .

Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of the lease payments over the lease term.

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As the implicit rate is not readily determinable for most of our leases, we use an incremental borrowing rate to determine the initial present value of lease payments over the lease terms on a collateralized basis over a similar term, which is based on market and company specific information.

This is updated quarterly for measurement of new lease liabilities.

This rate is updated quarterly for measurement of new lease liabilities.

Leases having a lease term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease.

In addition, we applied the practical expedient to account for

the lease and non-lease components as a single lease component for all of our leases.

In addition, we account for lease and non-lease components as a single lease component for all of our leases.

See Note 8, Leases, for more information.

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Repairs and maintenance costs are expensed as incurred.

The components of property, plant and equipment were as follows (dollars in millions):

The components of property, plant and equipment were as follows:

(in millions)

Land and land improvements

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Property, plant and equipment, net

Depreciation is computed on the straight-line method over the estimated useful lives of the respective classes of assets as follows:

Depreciation is computed on a straight-line basis over the estimated useful lives of the respective classes of assets as follows:

Land improvements

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Gains and losses resulting from the translation of Consolidated Balance Sheets are recorded as a component of “Accumulated other comprehensive income (loss).”

Foreign currency transactions resulted in a gain of $ 1.3 million, and losses of $ 0.1 million, and $ 3.3 million in fiscal 2021, 2020, and 2019, respectively.

Foreign currency transactions resulted in a loss of $ 3.3 million, a gain of $ 1.3 million, and a loss of $ 0.1 million in fiscal 2022, 2021, and 2020, respectively.

These amounts were recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.

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If the NPNS exception is elected, the fair values of such contracts are not recognized.

Changes in derivative instrument values are recognized in “Cost of sales” in our Consolidated Statements of Earnings.

We do not designate commodity derivatives to achieve hedge accounting treatment.

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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 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 notes to consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as interbank offered rates and the London Interbank Offered Rate (“LIBOR”).

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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.

Our current contracts that reference LIBOR include certain debt instruments.

The amendments in this guidance are effective for eligible contract modifications through December 31, 2022.

The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.

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

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per common share for the periods presented (dollars and shares in millions, except per share amounts):

The following table sets forth the computation of basic and diluted earnings per common share for the periods presented:

For the Fiscal Years Ended May

Net income attributable to Lamb Weston Holdings, Inc.

Increase in redemption value of noncontrolling interests in excess of earnings allocated, net of tax benefits (a)

Net income available to Lamb Weston common stockholders

(in millions, except per share amounts)

Basic weighted average common shares outstanding

Dilutive effect of employee incentive plans (b)

Dilutive effect of employee incentive plans (a)

Diluted weighted average common shares outstanding

Earnings per share (a)

(a) In November 2018, we entered into an agreement to acquire the remaining 50.01 % interest in Lamb Weston BSW, LLC (“Lamb Weston BSW”).

Our Consolidated Statements of Earnings includes 100 % of Lamb Weston BSW’s earnings beginning November 2, 2018.

During fiscal 2019, net income available to common stockholders and earnings per share included accretion expense, net of estimated tax benefits, of $ 9.4 million, or $ 0.06 per share, to increase the redeemable noncontrolling interest to the amount we agreed to pay to acquire the remaining interest in Lamb Weston BSW.

While the accretion, net of estimated 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.

See Note 6, Investments in Joint Ventures, in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020, which we filed with the Securities and Exchange Commission on July 28, 2020.

(b) 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 May 30, 2021, we did not have any stock-based awards that were antidilutive.

As of May 31, 2020 and May 26, 2019, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Pre-tax income, inclusive of equity method investment earnings, consisted of the following (dollars in millions):

Earnings per share:

(a) Potential 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 May 29, 2022 and May 30, 2021, we did not have any stock-based awards that were antidilutive .

As of May 31, 2020, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Pre-tax income (loss), inclusive of equity method investment earnings, consisted of the following:

For the Fiscal Years Ended May

(in millions)

United States

Total pre-tax income

The provision for income taxes included the following (dollars in millions):

The provision for income taxes included the following:

For the Fiscal Years Ended May

(in millions)

State and local

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A reconciliation of income tax expense using the 21 % U.S.

statutory tax rate on income from operations, including equity method earnings and before income taxes, compared with the actual provision for income taxes follows (dollars in millions):

statutory tax rate on income from operations, including equity method earnings and before income taxes, compared with the actual provision for income taxes follows:

For the Fiscal Years Ended May

(in millions)

Provision computed at U.S.

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Effect of taxes on foreign operations

Total provision for taxes

Effective income tax rate (a)

(a) The effective income tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.

Write-off of net investment in Russia (a)

Total income tax expense

Effective income tax rate (b)

(a) In connection with Lamb-Weston/Meijer v.o.f.’s (“LWM”) intent to withdraw from Russia, we reflected a $ 13.2 million tax detriment as any loss realized upon the sale of shares is a non-deductible permanent difference.

(b) The effective income tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.

Excluding the write-off of our portion of LWM’s net investment in Russia, our effective tax rate was 21.4% in fiscal 2022 .

Income Taxes Paid

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

Significant components of our deferred income tax assets and liabilities were as follows (dollars in millions):

Significant components of our deferred income tax assets and liabilities were as follows:

(in millions)

Property, plant and equipment

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Debt issuance costs

Investment in joint ventures

Equity method investments

Valuation allowance (b)

Net deferred taxes (c)

(a) At May 30, 2021, Lamb Weston had approximately $ 14.1 million of gross ($ 3.1 million after-tax) foreign net operating loss carryforwards, of which the majority expire during fiscal 2022.

Lamb Weston also has a foreign tax credit carryforward of $ 0.5 million, which will expire by fiscal 2031.

(b) The valuation allowance is predominantly related to non-amortizable intangibles and the portion of the net operating loss carryforwards that we are not more likely than not to realize.

The net impact on income tax expense related to changes in the valuation allowance, including net operating loss carryforwards, was zero in fiscal 2021 and 2020, and $ 1.1 million of benefit in fiscal 2019.

(a) At May 29, 2022, Lamb Weston had approximately $ 7.6 million of gross ($ 1.6 million after-tax) foreign net operating loss carryforwards, which will not expire.

Lamb Weston also had a foreign tax credit carryforward of $ 1.2 million, which will expire by fiscal 2032, and a state business credit carryforward of $ 1.7 million, which will expire by fiscal 2036.

(b) The valuation allowance is predominantly related to non-amortizable intangible assets.

The net impact on income tax expense related to changes in the valuation allowance, including net operating loss carryforwards, was zero in fiscal 2022, 2021, and 2020.

(c) Deferred tax assets of $ 2.7 million and $ 2.2 million as of May 29, 2022 and May 30, 2021, respectively, were presented in “Other assets.” Deferred tax liabilities of $ 172.5 million and $ 159.7 million as of May 29, 2022 and May 30, 2021, respectively, were presented in “Deferred income taxes” as “Long-term liabilities” on the Consolidated Balance Sheets.

The deferred tax asset and liability net position is determined by tax jurisdiction.

The FASB allows companies to adopt an accounting policy to either recognize deferred taxes for global intangible low-taxed income (“GILTI”) or treat such as a tax cost in the year incurred.

The FASB allows companies to adopt an accounting policy to either recognize deferred taxes for global intangible low-taxed income (“GILTI”) or treat them as a tax cost in the year incurred.

We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred.

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Uncertain Tax Positions

The aggregate changes in the gross amount of unrecognized tax benefits, excluding interest and penalties consisted of the following (dollars in millions):

The aggregate changes in the gross amount of unrecognized tax benefits, excluding interest and penalties consisted of the following:

For the Fiscal Years Ended May

(in millions)

Beginning balance

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We do not have any significant open tax audits.

As part of the tax matters agreement we entered into with Conagra in connection with the Separation, Conagra has responsibility for tax audits associated with pre-Separation periods, including any associated adjustments for consolidated federal and state filings.

Major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years .

The expiration of statute of limitations could reduce the uncertain tax positions by $ 6.5 million during the next 12 months.

The expiration of statute of limitations could reduce the uncertain tax positions by approximately $ 5 million during the next 12 months.

Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S.

federal and non-U.S.

federal, state, and non-U.S.

tax audits may be concluded within the next 12 months, which could increase or decrease the balance of our gross unrecognized tax benefits.

The estimated impact on income tax expense and net income is not expected to be significant.

INVESTMENTS IN JOINT VENTURES

Lamb Weston holds equity interests in three potato processing joint ventures, including 50 % of Lamb-Weston/Meijer v.o.f.

(“Lamb-Weston/Meijer”), Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), and Lamb Weston Alimentos Modernos S.A.

(“LWAMSA”), which it accounts for its ownership under the equity method of accounting.

The carrying value of these equity method investments at May 30, 2021 and May 31, 2020, was $ 310.2 million and $ 250.2 million, respectively, and are included in “Equity method investments” on our Consolidated Balance Sheets.

In fiscal 2021, 2020, and 2019, we had sales to our equity method investments of $ 15.3 million, $ 27.8 million, and $ 29.9 million, respectively, and payments to our equity method investments of $ 5.2 million, $ 8.6 million, and $ 10.9 million, respectively.

Total dividends from our equity method investments were $ 18.8 million, $ 29.0 million, and $ 45.7 million for fiscal 2021, 2020, and 2019, respectively.

As of May 30, 2021 and May 31, 2020, we had receivables included in “Receivables” on our Consolidated Balance Sheet from our joint ventures of $ 6.3 million and $ 7.1 million, respectively.

Summarized combined financial information for our equity method investments based on 100 %of their operations is as follows (dollars in millions):

EQUITY METHOD INVESTMENTS

Our equity method investments were as follows:

(in millions, except ownership interest)

Lamb Weston Alimentos Modernos S.A.

("LWAMSA") (b)

Lamb-Weston/RDO Frozen ("Lamb Weston RDO") (c)

(a) LWM is a joint venture with Meijer Frozen Foods B.V., headquartered in the Netherlands that manufactures and sells frozen potato products principally in Europe and the Middle East.

(b) LWAMSA is a joint venture with Selprey S.A., a wholly owned subsidiary of Sociedad Comercial del Plata S.A., that is headquartered in Argentina.

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

Summarized combined financial information for our equity method investments were as follows:

For the Fiscal Years Ended May

(in millions)

Income from operations

Net income (loss) (a)

(in millions)

Current assets

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Noncurrent liabilities

Lamb-Weston/Meijer

We hold a 50 % ownership interest in 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 receive a royalty from Lamb-Weston/Meijer based on a per ton rate of the sales volumes of the venture.

The fees received were $ 1.6 million in both fiscal years 2021 and 2020 and $ 1.8 million in fiscal 2019.

These fees are recorded as a reduction to “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

Our ownership interest in this venture is included in “Equity method investments” on our Consolidated Balance Sheets.

The balance of our investment was $ 263.3 million and $ 207.4 million at May 30, 2021 and May 31, 2020, respectively.

We account for this investment using equity method accounting.

We have an agreement to share the costs of our global 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 May 30, 2021 and May 31, 2020, Lamb-Weston/Meijer’s portion of the ERP costs totaled $ 16.8 million and $ 13.0 million, respectively.

We had $ 13.3 million and $ 12.0 million of receivables recorded on our Consolidated Balance Sheets at May 30, 2021 and May 31, 2020, respectively.

Of the $ 13.3 million and $ 12.0 million of receivables, $ 0.1 million and $ 1.8 million were recorded in “Receivables, net” and $ 13.2 million and $ 10.2 million were recorded in “Other assets,” respectively.

We expect the total receivable from Lamb-Weston/Meijer to increase as development and implementation of the next phase of our ERP system commences in fiscal 2022.

Lamb Weston RDO

We hold a 50 % interest in Lamb Weston RDO, a joint venture with RDO Frozen Co.

This joint venture operates a potato processing plant in Minnesota.

We provide all sales and marketing services to Lamb Weston RDO, and we receive a fee for these services based on a percentage of the net sales of the venture.

The fees received were $ 14.3 million, $ 14.1 million, and $ 14.8 million in fiscal 2021, 2020, and 2019, respectively.

These fees are recorded as a reduction to “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

Our ownership interest in this venture is included in “Equity method investments” on our Consolidated Balance Sheets.

The balance of our investment was $ 17.4 million and $ 15.4 million at May 30, 2021 and May 31, 2020, respectively.

We account for this investment using equity method accounting.

We hold a 50 % ownership interest in 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.

During fiscal year 2020, we paid $ 22.6 million and will pay the remaining amount of the purchase price, less any amounts for indemnified losses, in October 2024.

At May 30, 2021, we had $ 5.5 million, recorded for the remaining amount of the purchase price, which includes accretion and translation, in “Other noncurrent liabilities” on our Consolidated Balance Sheet.

We account for the investment using equity method accounting.

Included in the initial carrying value of $ 27.3 million, which represents the fair value on the transaction date, was a basis difference of $ 4.8 million due to the difference between the cost of the investment and our proportionate share of LWAMSA’s net assets.

This basis difference is comprised of equity method goodwill and will not be amortized.

The balance of our investment was $ 28.8 million and $ 26.5 million as of May 30, 2021 and May 31, 2020, respectively.

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.

These acquisitions added approximately 70 million and 50 million pounds of production capacity, respectively, to our manufacturing network and expanded our geographic reach.

Net sales, income from operations, and total assets from the acquisitions are not material to our consolidated net sales, income from operations, and total assets.

The operating results for the acquisitions are included in our Global segment.

We allocated the purchase prices of the July 2019 and December 2018 acquisitions to the assets acquired and liabilities assumed based on estimates of the fair value at the respective date of the acquisition, of which $ 106.1 million and $ 75.1 million, respectively, after final working capital adjustments, was allocated to goodwill (which is not deductible for tax purposes) and $ 3.7 million and $ 4.4 million, respectively, was allocated to intangible assets (both to be amortized on a straight-line basis over a weighted average life of 10 years ).

In both acquisitions, the intangible assets primarily related to brand names.

The purchase price allocations are complete.

(a) LWM recorded a $ 125.4 million charge to write-off its net investment in its joint venture in Russia, which is included in the fiscal 2022 net loss and the current and noncurrent assets and liabilities.

Our portion of the non-cash impairment charge was $ 62.7 million.

We made the following sales to and purchases from our equity method affiliates, primarily for finished products sold to or purchased from our joint ventures.

We also provided services, such as sales and marketing services, to our joint ventures that are recorded as a reduction to “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

We also received dividends.

The following table summarizes the activity with all our equity method affiliates:

For the Fiscal Years Ended May

(in millions)

Services provided

Dividends received

As of May 29, 2022 and May 30, 2021, we had receivables included in “Receivables” on our Consolidated Balance Sheets from our joint ventures of $ 11.0 million (which includes a $ 5.0 million note to Lamb Weston RDO) and $ 6.3 million, respectively.

We have an agreement to share the costs of our global ERP system and related software and services with LWM.

Under the terms of the agreement, LWM 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 LWM.

As of May 29, 2022 and May 30, 2021, LWM’s portion of the ERP costs totaled $ 23.4 million and $ 16.8 million, respectively.

We had $ 20.5 million and $ 13.2 million of receivables recorded in ‘Other assets” on our Consolidated Balance Sheets at May 29, 2022 and May 30, 2021, respectively.

We expect the total receivable from LWM to increase as development and implementation of the next phase of our ERP continues in fiscal 2023.

On July 5, 2022, we acquired an additional forty percent interest in LWAMSA for approximately $ 42 million, increasing our total ownership of LWAMSA from fifty percent to ninety percent.

Following this acquisition, we will consolidate LWAMSA’s results in our consolidated financial statements.

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The following table presents changes in goodwill balances, by segment, for fiscal years 2021 and 2020 (dollars in millions):

The following table presents changes in goodwill balances, by segment, for fiscal years 2022 and 2021:

(in millions)

Balance at May 31, 2020

Acquisition (a)

Foreign currency translation adjustment

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Balance at May 29, 2022

(a) In July 2019, we acquired a frozen potato processor in Australia and recorded $ 106.1 million of goodwill in our Global segment.

See Note 5, Acquisitions, for more information.

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

Other identifiable intangible assets were as follows:

(dollars in millions)

Non-amortizing intangible assets (a)

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

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

Amortization expense was $ 5.0 million, $ 2.5 million, and $ 2.2 million in fiscal 2021, 2020, and 2019, respectively.

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

Amortization expense, including developed technology, was $ 5.8 million, $ 5.0 million, and $ 2.5 million in fiscal 2022, 2021, and 2020, respectively.

Foreign intangible assets are affected by foreign currency translation.

Based on current intangibles subject to amortization, we expect intangible asset amortization expense, excluding developed technology, will be approximately $ 2.7 million, $ 2.6 million, and $ 2.1 million in fiscal 2022, 2023, and 2024, respectively, $ 1.8 million in fiscal 2025 and 2026 , and approximately $ 7.9 million thereafter.

Based on current intangibles subject to amortization, we expect intangible asset amortization expense, excluding developed technology, will be approximately $ 2.6 million and $ 2.0 million in fiscal 2023 and 2024, respectively, $ 1.8 million in fiscal 2025, 2026 , and 2027 , and approximately $ 5.7 million thereafter.

Impairment Testing

We test goodwill and non-amortizing intangible assets for impairment annually in the fourth quarter or sooner if events or changes in circumstances indicate that the carrying value of the asset may exceed fair value.

Additionally, when we experience changes to our business or operating environment, we evaluate the remaining useful lives of our finite-lived purchased intangible assets to determine whether any adjustments to the useful lives are necessary.

During the annual goodwill impairment test we performed in the fourth quarter of fiscal 2022, we assessed qualitative factors to determine whether it was more likely than not that the fair value of each reporting unit was less than its carrying value.

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ACCRUED LIABILITIES

The components of accrued liabilities were as follows (dollars in millions):

The components of accrued liabilities were as follows:

(in millions)

Compensation and benefits

Accrued interest

Accrued trade promotions

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Franchise, property, and sales and use taxes

Accrued interest

Income taxes payable

Accrued liabilities

DEBT AND FINANCING OBLIGATIONS

At May 30, 2021 and May 31, 2020, our debt and financing obligations were as follows (dollars in millions):

Short-term borrowings:

Revolving credit facility

Other credit facilities

The components of our debt, including financing obligations, were as follows:

(in millions)

Long-term debt:

Term loan facility, due November 2021

Term A-1 loan facility, due June 2024

Term A-2 loan facility, due April 2025

RMB loan facility, due February 2027

4.625 % senior notes, due November 2024

1 unchanged sentence

4.875 % senior notes, due May 2028

4.125 % senior notes, due January 2030

4.375 % senior notes, due January 2032

Financing obligations:

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Debt issuance costs (b)

Short-term borrowings

Current portion of long-term debt and financing obligations

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For more information on our lease financing obligations, see Note 8, Leases.

(b) We amortize debt issuance costs into interest expense using the effective interest method over the life of the loan facilities.

(b) Excludes debt issuance costs of $ 3.3 million and $ 2.1 million as of May 29, 2022 and May 30, 2021, respectively, related to our Amended Revolving Credit Facility, which are recorded in “Other assets” on our Consolidated Balance Sheets.

In fiscal 2022, 2021, and 2020, we recorded $ 4.8 million, $ 6.1 million, and $ 6.2 million, respectively, of amortization expense in “Interest expense” in our Consolidated Statements of Earnings.

Fiscal 2021 included a $ 1.0 million write-off of debt issuance cost in connection with the Amended Revolving Credit Facility.

Fiscal 2020 included a $ 1.7 million write-off of debt issuance costs in connection with the $ 300.0 million payment on the term loan facility due in 2021.

Amended Revolving Credit Facility

Fiscal 2022 also included a $ 13.7 million write-off of debt issuance costs associated with our senior notes due 2024 and 2026 which were redeemed.

Revolving Credit Facility

We are party to a senior secured credit agreement, dated as of November 9, 2016, with a syndicate of lenders.

On September 17, 2020, we amended the credit agreement to, among other things, increase the aggregate principal amount of available revolving credit facility borrowings to $ 750.0 million and extend the maturity date to September 17, 2023 (“Amended Revolving Credit Facility”).

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.

On August 11, 2021, we amended the credit agreement to, among other things, increase the aggregate principal amount of available revolving credit facility borrowings to $ 1.0 billion and extend the maturity date to August 11, 2026 (“Amended Revolving Credit Facility”).

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 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.

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The credit agreement is secured by security interests and liens on substantially all of our and each of our subsidiary guarantor’s assets, unless Lamb Weston is rated investment grade by at least two of Fitch Ratings, Inc., Moody’s Investors Service, Inc., and Standard & Poor’s Ratings Services.

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 and capitalized $ 2.4 million of debt issuance costs as “Other assets” on our Consolidated Balance Sheet.

During fiscal 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 May 29, 2022, we had no borrowings outstanding under our Amended Revolving Credit Facility.

At May 29, 2022, we had $ 994.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million.

For the period from June 1, 2020 through May 30, 2021, borrowings under our revolving credit facility ranged from zero dollars to a high of $ 495.0 million.

For the period from June 1, 2020 through May 30, 2021 and May 27, 2019 through May 31, 2020, the weighted average interest rate for our outstanding borrowings under the revolving credit facility was 1.68 % and 2.35 %, respectively.

In March 2020, we drew $ 495.0 million available under the revolving credit facility and in June and July 2020, we repaid $ 100.0 million and $ 395.0 million, respectively.

During the fifty-two weeks ended May 29, 2022, we had no borrowings under our revolving credit facility.

For the period from June 1, 2020 through May 30, 2021, the weighted average interest rate for our outstanding borrowings under the revolving credit facility was 1.68 %.

Term A-1 and A-2 Loan Facilities

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We have received and expect to continue receiving patronage dividends under the Term A-1 Loan Facility.

After giving effect to expected patronage distributions, the effective average interest rate on the Term A-1 Loan Facility was approximately 0.95 % and 2.52 %, for the years ended May 30, 2021 and May 31, 2020, respectively.

After giving effect to expected patronage dividends, the effective average interest rate on the Term A-1 Loan Facility was approximately 0.98 % and 0.95 %, for the years ended May 29, 2022 and May 30, 2021, respectively.

On April 20, 2020, we amended the Term A-1 Loan Facility agreement to, among other things, provide for a new $ 325.0 million term loan facility (“Term A-2 Loan Facility”).

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We have received and expect to continue receiving patronage dividends under the Term A-2 Loan

After giving effect to expected patronage distributions, the effective average interest rate on the Term A-2 Loan Facility was approximately 1.53 % and 2.03 %, for the years ended May 30, 2021 and May 31, 2020, respectively.

After giving effect to expected patronage dividends, the effective average interest rate on the Term A-2 Loan Facility was approximately 1.33 % and 1.53 %, for the years ended May 29, 2022 and May 30, 2021, respectively.

The Term A-1 and A-2 Loan Facilities are unconditionally guaranteed by the same subsidiaries as the Amended Revolving Credit Facility.

Borrowings under the Term A-1 and A-2 Loan Facilities may be prepaid without premium or penalty and once repaid, cannot be reborrowed.

On September 23, 2020, in connection with the Amended Revolving Credit Facility, we amended the credit agreement relating to the Term A-1 and A-2 Loan Facilities, to, among other things, modify the term loan facilities to make conforming changes to the affirmative and negative covenants under the facilities.

As such, the covenants, events of default, securities and liens under the Term A-1 and A-2 Loan Facilities are consistent with the Amended Revolving Credit Facility.

The financial covenants under the Term A-1 and A-2 Loan Facilities, however, 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 .

4.625 % Senior Notes due 2024 and 4.875 % Senior Notes due 2026

In November 2016, we issued (i) $ 833.0 million aggregate principal amount of 4.625 % senior notes due 2024 (“2024 Notes”) and (ii) $ 833.0 million aggregate principal amount of 4.875 % senior notes due 2026 (“2026 Notes”) pursuant to indentures, dated as of November 9, 2016, among Lamb Weston, certain of our subsidiaries as guarantors and Wells Fargo Bank, National Association, as trustee.

Our obligations under the 2024 Notes and 2026 Notes are unconditionally guaranteed on a senior unsecured basis by each of our subsidiaries that guarantee our obligations under the Amended Revolving Credit Facility and Term A-1 and A-2 Loan Facilities.

The 2024 Notes and 2026 Notes are senior unsecured obligations and rank equally with all of our current and future senior indebtedness, rank senior to all our current and future subordinated indebtedness and are subordinated to all of our current and future secured indebtedness (including all borrowings with respect to the Amended Revolving Credit Facility and Term A-1 and A-2 Loan Facilities to the extent of the value of the assets securing such indebtedness).

Interest on the 2024 Notes and 2026 Notes is due semiannually.

The 2024 Notes mature on November 1, 2024 and the 2026 Notes mature on November 1, 2026 , unless either is redeemed or repurchased.

Upon a change of control (as defined in the indentures governing the 2024 Notes and 2026 Notes), we must offer to repurchase the 2024 Notes and 2026 Notes at 101 % of the principal amount of such notes, plus accrued and unpaid interest.

We may redeem all or a portion of the 2024 Notes at any time on or after November 1, 2021, at declining prices starting at 102.313 %, plus accrued and unpaid interest.

We may redeem all or a portion of the 2026 Notes at any time on or after November 1, 2021, at declining prices starting at 102.438 %, plus accrued and unpaid interest.

Prior to November 1, 2021, we may redeem notes of either series, in whole at any time or in part, from time to time, at a price equal to 100 % of the principal amount thereof, plus a make-whole premium, plus accrued and unpaid interest.

The indentures governing the 2024 Notes and 2026 Notes contain covenants that, subject to exceptions, limit our ability and the ability of our subsidiaries to, among other things, incur, assume or guarantee additional indebtedness, pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt, make loans and investments, incur or suffer to exist liens, sell, transfer or otherwise dispose of assets, enter into agreements that restrict distributions or other payments from restricted subsidiaries to us, engage in transactions with affiliates, designate subsidiaries as unrestricted or restricted, and consolidate, merge, amalgamate or transfer all or substantially all of our assets.

On August 11, 2021, in connection with the Amended Revolving Credit Facility, we amended the credit agreement relating to our Term A-1 and A-2 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 A-1 and A-2 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 .

RMB Loan Facility

On February 18, 2022 , our wholly owned subsidiary, Ulanqab Lamb Weston Food Co., Ltd., entered into a facility agreement with certain lenders and HSBC Bank (China) Company Limited, Shanghai Branch, as the facility agent, providing for a RMB 1,079.0 million (approximately $ 161 million based on prevailing interest exchange rates on May 29, 2022) term loan facility (the “RMB Loan Facility”).

Borrowings under the RMB Loan Facility bear interest at the prime rate for five-year loans published by the PRC National Interbank Funding Center plus 0.30 %.

The RMB Loan Facility matures on February 18, 2027 .

The RMB Loan Facility contains covenants that are standard for credit facilities originated in the People’s Republic of China, including, among others, covenants with regards to mergers and consolidations and asset sales, and is subject to acceleration upon various events of default.

Payment obligations under the RMB Loan Facility are unconditionally guaranteed by Lamb Weston.

The effective average interest rate on this facility was 4.75 % for the year ended May 29, 2022.

4.875 % Senior Notes due 2028

1 unchanged sentence

Our obligations under the 2028 Notes are unconditionally guaranteed on a senior unsecured basis by each of our subsidiaries that guarantee our obligations under the Amended Revolving Credit Facility and Term A-1 and A-2 Loan Facilities.

The 2028 Notes bear interest at a rate of 4.875 % per

year and mature on May 15, 2028 , unless earlier redeemed or repurchased.

The 2028 Notes bear interest at a rate of 4.875 % per year and mature on May 15, 2028 , unless earlier redeemed or repurchased.

We capitalized approximately $ 6.2 million of debt issuance costs associated with this offering.

4 unchanged sentences

On and after November 15, 2027, we may redeem all or any portion of the 2028 Notes, at once or over time, at a price equal to 100 % of the principal amount thereof, plus accrued and unpaid interest.

The covenants and events of default are substantially similar to the 2024 and 2026 Notes discussed above.

The indenture governing the 2028 Notes contain covenants that, subject to exceptions, limit our ability and the ability of our restricted subsidiaries to, among other things:

incur, assume or guarantee additional indebtedness;

pay distributions on, redeem or repurchase capital stock or redeem or repurchase subordinated debt;

make loans and investments;

incur or suffer to exist liens;

sell, transfer or otherwise dispose of assets;

enter into agreements that restrict distributions or other payments from restricted subsidiaries to us;

engage in transactions with affiliates;

subsidiaries as unrestricted or restricted;

and consolidate, merge, amalgamate or transfer all or substantially all of our assets.

If in the future the 2028 Notes have an investment grade credit rating by both Moody’s Investors Services, Inc.

and Standard & Poor’s Ratings Services, and no default or event of default has occurred and is continuing under the indenture, certain of these covenants will, thereafter, no longer apply to the 2028 Notes for so long as the 2028 Notes are rated investment grade by the two rating agencies.

The indenture contains customary events of default that are substantially similar to the 2030 Notes and 2032 Notes discussed below.

4.125 % Senior Notes due 2030 and 4.375 % Senior Notes due 2032

On November 8, 2021 , we issued (i) $ 970.0 million aggregate principal amount of 4.125 % senior notes due 2030 (“2030 Notes”) and (ii) $ 700.0 million aggregate principal amount of 4.375 % senior notes due 2032 (“2032 Notes” and, together with the 2030 Notes, the “Notes”) pursuant to indentures, dated as of November 8, 2021 (together, the “Indentures”), among Lamb Weston, as issuer, certain of our subsidiaries named therein as guarantors and Computershare Trust Company, N.A., as trustee.

Our obligations under the Notes are unconditionally guaranteed on a senior unsecured basis by each of our subsidiaries that guarantee our obligations under our existing credit facilities.

Interest payments on the Notes are due semi-annually each January 31 and July 31, with the first interest payment due on July 31, 2022.

The 2030 Notes and 2032 Notes will mature on January 31, 2030 and 2032 , respectively, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the applicable Indenture.

We may redeem some or all of the Notes at the redemption prices and on the terms specified in the applicable Indenture.

If we experience specific kinds of changes in control and certain negative actions are taken with respect to the ratings of the Notes of a series, we must offer to repurchase such Notes on the terms set forth in the applicable Indenture.

The Notes are effectively subordinated to all of our existing and future secured debt, rank equally with all of our existing and future senior debt and rank senior to all of our existing and future subordinated debt.

The guarantees of the Notes are effectively subordinated to all of the guarantors’ existing and future secured debt, rank equally with all of their existing and future senior debt and rank senior to all of their existing and future subordinated debt.

The Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

The Indentures limit our ability and the ability of our subsidiaries to, among other things, incur or suffer to exist liens and consolidate, merge, amalgamate or transfer all or substantially all of our assets.

The Indentures contain customary events of default that include, among other things (subject in certain cases to customary grace and cure periods):

non-payment of principal, interest or premium;

failure to perform or observe covenants;

cross-acceleration with certain other indebtedness;

certain judgments;

and certain events of bankruptcy or insolvency.

Generally, if an event of default occurs (subject to certain exceptions), the trustee or the holders of at least 25 % in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately.

In connection with the 2030 Notes and 2032 Notes issuance, we capitalized $ 17.5 million of debt issuance costs within long-term debt on our Consolidated Balance Sheet.

4.625 % Senior Notes due 2024 and 4.875 % Senior Notes due 2026

On November 18, 2021, we used the net proceeds of the issuance of the 2030 Notes and 2032 Notes, together with cash on hand, to redeem all of our outstanding $ 833.0 million aggregate principal amount of 4.625 % senior notes due 2024 (the “2024 Notes”) and $ 833.0 million aggregate principal amount of 4.875 % senior notes due 2026 (the “2026 Notes”).

The 2024 Notes were redeemed at a price of 102.313 % of the principal amount and the 2026 Notes were redeemed at a price of 102.438 % of the principal amount.

The call premium for the 2024 Notes and 2026 Notes was $ 39.6 million (included in the redemption prices noted above) and in connection with these redemptions, we also wrote off $ 13.7 million of previously unamortized debt issuance costs.

Both of these amounts are included as “Interest Expense, net” in our Consolidated Statements of Earnings for the fifty-two weeks ended May 29, 2022.

Other Credit Facilities

At May 29, 2022 and May 30, 2021, one of our subsidiaries had $ 53.7 million and $ 56.5 million, respectively, of availability under an overdraft line of credit facility with a financial institution with no borrowings outstanding.

Borrowings under this facility bear interest at an effective rate of 3.915 % as of both May 29, 2022 and May 30, 2021, and may be prepaid without penalty.

We guarantee the full amount of our subsidiary’s obligations to the financial institution up to the maximum amount of borrowings under the credit facility.

Debt Maturities

The aggregate minimum principal maturities of our long-term debt, including current portion, for the next five fiscal years and thereafter, are as follows (dollars in millions):

The aggregate minimum principal maturities of our long-term debt, including current portion, for the next five fiscal years and thereafter, are as follows:

(in millions)

(a) See Note 8, Leases, for maturities of our lease financing obligations.

During fiscal 2022, 2021, and 2020, we paid $ 80.6 million, $ 120.6 million, and $ 105.7 million, respectively, of interest on debt.

Other Credit Facilities

At May 30, 2021, one of our subsidiaries had $ 56.5 million of availability under an overdraft line of credit facility with a financial institution with no borrowings outstanding.

At May 31, 2020, we had $ 30.8 million of availability under this facility and another credit facility with the same financial institution, with $ 3.7 million of borrowings outstanding.

Borrowings under these facilities bear interest at an effective rate of 3.915 % and 3.560 % at May 30, 2021 and May 31, 2020, respectively, and may be prepaid without penalty.

We guarantee the full amount of our subsidiary’s obligations to the financial institution up to the maximum amount of borrowings under the credit facilities.

We lease various real estate, including certain operating facilities, warehouses, office space, and land.

1 unchanged sentence

Our leases have remaining lease terms of one to 18 years .

The components of total lease costs, net, consisted of the following (dollars in millions):

The components of total lease costs, net, consisted of the following:

For the Fiscal Year Ended May (a)

(in millions)

Operating lease costs

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Total lease costs, net

(a) Supply-chain-related lease costs are included in “Cost of sales” and the remainder is recorded in “Selling, general, and administrative expenses.” Interest on finance lease obligations is included in “Interest expense, net,” in our Consolidated Statements of Earnings.

Rent expense, prior to the adoption of ASC 842, was $ 24.3 million in fiscal 2019.

Operating and finance leases, with initial terms greater than one year, were as follows (dollars in millions):

(a) Supply-chain-related lease costs are included in “Cost of sales,” and the remainder is recorded in “Selling, general, and administrative expenses,” in our Consolidated Statements of Earnings.

Interest on finance lease obligations is included in “Interest expense, net,” in our Consolidated Statements of Earnings.

Operating and finance leases, with initial terms greater than one year, were as follows:

(in millions)

Classification

2 unchanged sentences

Finance lease assets

Property, plant and equipment, net (a) (b)

Property, plant and equipment, net (a)

Total leased assets

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Finance lease obligations

Current portion of long-term debt and financing obligations (b)

Current portion of long-term debt and financing obligations

Long-term lease obligations:

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Finance lease obligations

Long-term debt and financing obligations, excluding current portion (b)

Long-term debt and financing obligations, excluding current portion

Total lease obligations

(a) Finance leases are net of accumulated amortization of $ 5.8 million and $ 4.7 million at May 29, 2022 and May 30, 2021, respectively.

(b) During fiscal 2021, we modified certain finance leases in the normal course of business resulting in a reduction of approximately $ 4.3 million of finance lease assets and short-term and long-term finance lease obligations recorded on our Consolidated Balance Sheet.

The maturities of our lease obligations for operating and finance leases at May 30, 2021 for the next five fiscal years and thereafter are as follows (dollars in millions):

The maturities of our lease obligations for operating and finance leases at May 29, 2022 for the next five fiscal years and thereafter are as follows:

(in millions, except for lease term and discount rate amounts)

Total lease payments

2 unchanged sentences

Weighted-average discount rate

Supplemental cash flow information related to leases was as follows (dollars in millions):

Supplemental cash flow information related to leases was as follows:

For the Fiscal Years Ended May

(in millions)

Cash paid for amounts included in the measurement of lease obligations:

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The Plan permits participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended.

We generally match 100 % of the first 6 % of the employee’s contribution election and provide an additional 3 % contribution to eligible participants, regardless of employee participation level.

Regardless of employee participation level, we generally provide a 3 % contribution.

In addition to this, we will generally match 100 % of the first 6 % of the participating employee’s contribution election.

The Plan’s matching contributions have a five-year graded vesting with 20 % vesting each year.

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The following table, which includes only company-sponsored defined benefit and other post-retirement benefit plans, reconciles the beginning and ending balances of the projected benefit obligation and the fair value of plan assets.

We recognize the unfunded status of these plans on the Consolidated Balance Sheets, and we recognize changes in funded status in the year changes occur through the Consolidated Statements of Comprehensive Income (dollars in millions):

For the Fiscal Years Ended May

(in millions)

Pension Plans

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Participant contributions

Plan amendments

Benefits paid

Plan settlements (a)

Actuarial (gain) loss

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Amounts recognized in Accumulated Other Comprehensive (Income) Loss (Pre-tax)

Actuarial loss

(a) In fiscal 2020, plan settlements of $ 0.4 million were paid to certain participants from our rabbi trust plan assets.

These assets are excluded from our pension plan assets.

Actuarial (gain) loss

Prior service benefit

Components of Net Periodic Benefit Cost and Other Comprehensive (Income) Loss

The components of net periodic benefit cost were as follows (dollars in millions):

The components of net periodic benefit cost were as follows:

For the Fiscal Years Ended May

2 unchanged sentences

Post-Retirement

(in millions)

Interest cost

4 unchanged sentences

Changes in plan assets and benefit obligations recognized in other comprehensive (income) loss

Prior service cost

Actuarial (gain) loss

1 unchanged sentence

Total recognized in other comprehensive loss (income)

Total recognized in net periodic benefit cost and other comprehensive loss (income) (pre-tax) (c)

Total recognized in net periodic benefit cost and other comprehensive loss (income) (pre-tax)

(a) Pension service costs are allocated to operations and reflected in “Cost of sales” and expected returns on pension assets and interest costs are reflected in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.

The decrease in fiscal 2021 and 2020 net periodic pension cost, compared with fiscal 2019, reflects amendments to the pension plans so that no future benefits accrue after certain dates.

The decrease in fiscal 2022 net periodic benefit cost, compared with fiscal 2021 and 2020, reflects amendments to the pension plans so that no future benefits accrue after certain dates.

We did not recognize a curtailment gain or loss with any of the amendments.

(b) Accumulated losses in excess of 10% of the greater of the projected benefit obligation or the market-related value of assets will be recognized on a straight-line basis over the average remaining service period of active employees in our plans (which is between seven to ten years for our pension plans and approximately two years for our post-retirement benefit plan), to the extent that losses are not offset by gains in subsequent years.

(b) Accumulated losses in excess of 10% of the greater of the projected benefit obligation or the market-related value of assets will be recognized on a straight-line basis over the average remaining service period of active employees in our plans (which is between six to ten years for our pension plans and approximately two years for our post-retirement benefit plan), to the extent that losses are not offset by gains in subsequent years.

The actuarial assumptions used in determining the benefit obligations and net periodic pension cost for our defined benefit and post-retirement plans are as follows:

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Asset Return Assumption:

Our investment strategies are governed by our Employee Benefit Investments Council.

Our investment strategies are governed by our Employee Benefits Investment Committee.

The expected return on plan assets reflects the expected long-term rates of return for the categories of investments currently held in the plan as well as anticipated returns for additional contributions made in the future.

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Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility risk, all of which are subject to change.

Due to the level of risk associated with some investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term, and such changes could materially affect the reported amounts (dollars in millions):

Fair Value Measurements at May 29, 2022

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Significant Unobservable Inputs

(in millions)

Cash and cash equivalents

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Significant Unobservable Inputs

(in millions)

Cash and cash equivalents

Equity securities:

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We continually reassess the amount and timing of discretionary contributions, if any.

The following are estimated benefit payments to be paid to current plan participants by fiscal year (dollars in millions).

The following are estimated benefit payments to be paid to current plan participants by fiscal year.

Qualified pension benefit payments are paid from plan assets, while nonqualified pension benefit payments are paid by the Company.

(in millions)

Pension Plans

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2016 Stock Plan, which was amended in July 2017 (“Stock Plan”).

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.

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The employee RSUs generally vest over a three-year period while the non-employee director RSUs generally vest after one year .

We estimate the fair value of the RSUs based upon the market price of our common stock at the date of grant.

We estimate the fair value of the RSUs based upon the market price of our common stock on the date of grant.

Compensation expense is recognized over the period the employee or non-employee director provides service in exchange for the award.

Performance Shares are granted to certain executives and other key employees with vesting contingent upon meeting various Company-wide performance goals.

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Awards, if earned, will be paid in shares of our common stock.

Subject to limited exceptions set forth in the Stock Plan, any shares earned will be distributed at the end of the three-year performance period.

The value of the Performance Shares is adjusted based upon the market price of our common stock at the end of each reporting period and amortized as compensation expense over the vesting period.

The following table summarizes RSU and Performance Share activity for fiscal 2021:

Stock-Settled

Subject to limited exceptions set forth in the Stock Plan, any shares earned will generally vest over a three-year period.

The value of the Performance Shares is adjusted based upon the market price of our common stock and the anticipated attainment of Company-wide performance goals at the end of each reporting period and amortized as compensation expense over the vesting period.

The following table summarizes stock-based compensation activity for fiscal 2022:

Performance Shares

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Compensation Expense

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):

For the Fiscal Years Ended May

(in millions)

Stock-settled RSUs

Performance Shares

Stock options

Stock-settled compensation expense

Cash-settled RSUs

Total compensation expense

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

Based on estimates at May 30, 2021, total unrecognized compensation expense related to stock-based awards was as follows (dollars in millions):

Based on estimates at May 29, 2022, total unrecognized compensation expense related to stock-based awards was as follows:

(in millions, except data in years)

Period (in years)

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Performance Shares

Total unrecognized stock-based expense

Total unrecognized compensation expense

FAIR VALUE MEASUREMENTS

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, as of May 30, 2021 and May 31, 2020 (dollars in millions):

As of May 29, 2022

(in millions)

(Liabilities)

Pension plan assets

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Deferred compensation liabilities (b)

Total liabilities

Fair value, net

As of May 30, 2021

(in millions)

(Liabilities)

Pension plan assets

Deferred compensation assets

Derivative liabilities (a)

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.

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.

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 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” 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.

Deferred compensation liabilities are primarily presented within “Other noncurrent liabilities” on our Consolidated Balance Sheets.

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

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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, on an opportunistic basis.

In December 2021, our Board of Directors authorized the repurchase of an additional $ 250.0 million of our common stock under this share repurchase program.

During fiscal 2022, we purchased 2,407,184 shares for $ 150.7 million, or a weighted-average price of $ 62.59 per share.

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If we determine that a foreign investment, as well as undistributed earnings, are no longer indefinite in nature, estimated taxes are provided for the related deferred tax liability (asset), if any, resulting from currency translation adjustments.

Changes in AOCI, net of taxes, as of May 30, 2021, were as follows (dollars in millions):

Changes in AOCI, net of tax, as of May 29, 2022, were as follows:

Post-Retirement

Comprehensive

(in millions)

Gains (Losses)

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Our chief operating decision maker receives periodic management reports under this structure that generally focus on the nature and scope of our customers’ businesses, which enables operating decisions, performance assessment, and resource allocation decisions at the segment level.

The reportable segments are each managed by a general manager and supported by a cross functional team assigned to support the segment (dollars in millions).

The reportable segments are each managed by a general manager and supported by a cross functional team assigned to support the segment.

See “Part I, Item 1.

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For the Fiscal Years Ended May

(in millions)

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

Income from operations

Interest expense, net

Income tax expense (d)

Equity method investment earnings

Income attributable to noncontrolling interests (e)

Net income attributable to Lamb Weston Holdings, Inc.

(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 in fiscal 2021 and 2020.

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.

Interest expense, net (c)

Income tax expense

Equity method investment earnings (loss) (d)

(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.

(d) In fiscal 2019, the Tax Act decreased income tax expense and increased net income by $ 27.2 million, or $ 0.19 per share, including a $ 24.8 million, or $ 0.17 per share, tax benefit related to a lower U.S.

corporate tax rate and a $ 2.4 million, or $ 0.02 per share, benefit from the true-up of the transition tax on previously untaxed foreign earnings.

We completed our analysis of the one-time impacts of the Tax Act in fiscal 2019.

(e) In November 2018, we entered into an agreement to acquire the remaining 50.01 % interest in Lamb Weston BSW.

Our Consolidated Statements of Earnings includes 100 % of Lamb Weston BSW’s earnings beginning November 2, 2018.

See Note 6, Investments in Joint Ventures, in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020, which we filed with the Securities and Exchange Commission on July 28, 2020.

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

(c) The fiscal year ended May 29, 2022, includes a loss on extinguishment of debt of $ 53.3 million, which includes a call premium of $ 39.6 million related to the redemption of the 2024 Notes and 2026 Notes, and the write-off of $ 13.7 million of previously unamortized debt issuance costs associated with those notes.

(d) I n May 2022, LWM announced its intent to withdraw from its joint venture investment in Russia.

As a result, LWM determined that its net investment in Russia was impaired and recognized a non-cash impairment charge, of which our portion was $ 62.7 million.

Assets by Segment

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Concentrations

Lamb Weston’s largest customer, McDonald’s Corporation, accounted for approximately 11 % of our consolidated net sales in fiscal 2021, and 10 %of our consolidated net sales in both fiscal 2020 and 2019.

No customer accounted for 10% of our consolidated accounts receivable at May 30, 2021 or May 31, 2020.

Lamb Weston’s largest customer, McDonald’s Corporation, accounted for approximately 10 % of our consolidated net sales in fiscal 2022, 11 % of our consolidated net sales in fiscal 2021, and 10 % of our consolidated net sales in fiscal 2020.

Sales to McDonald’s Corporation are included in our Global segment.

Other Information

The net sales of each of our Global, Foodservice, and Retail reporting segments are comprised of sales of frozen potato and frozen sweet potato products.

The net sales of our Other reporting segment included vegetable sales of $ 91.3 million, $ 104.9 million, and $ 88.5 million, various byproduct sales of $ 36.1 million, $ 36.4 million, and $ 40.2 million, and dairy product sales of $ 11.3 million, $ 12.9 million, and $ 11.9 million in fiscal 2021, 2020, and 2019, respectively.

Our operations are principally in the United States.

With respect to operations outside of the United States, no single foreign country or geographic region was significant with respect to consolidated operations in fiscal 2021, 2020, and 2019.

Foreign net sales, including sales by domestic segments to customers located outside of the United States, were $ 700.2 million, $ 776.4 million, and $ 742.7 million in fiscal 2021, 2020, and 2019, respectively.

Our long-lived assets located outside of the United States are not significant.

At May 30, 2021, we had approximately 7,800 employees, of which approximately 800 of these employees work outside of the United States.

Approximately 27 % of our employees are parties to collective bargaining agreements on terms that we believe are typical for the industry in which we operate.

Most of the union workers at our facilities are represented under contracts that expire at various times throughout the next several years.

Collective bargaining agreements that represent 55 % of our hourly employees, who are parties to collective bargaining agreements, are scheduled to expire over the course of fiscal 2022.

As these agreements expire, we believe they will be renegotiated on terms satisfactory to us.

The net sales of our Other reporting segment include:

For the Fiscal Years Ended May

(in millions)

Total net sales

Our operations are principally in the U.S.

With respect to operations outside of the U.S., no single foreign country or geographic region was significant with respect to consolidated operations in fiscal 2022, 2021, and 2020.

Foreign net sales, including sales by domestic segments to customers located outside of the U.S., were $ 682.7 million, $ 700.2 million, and $ 776.4 million in fiscal 2022, 2021, and 2020, respectively.

Our long-lived assets located outside of the U.S.

are not significant.

At May 29, 2022, we had approximately 8,000 employees, of which approximately 800 of these employees work outside of the U.S.

Approximately 22 % of our employees are parties to collective bargaining agreements with terms that we believe are typical for the industry in which we operate.

Most of the union workers at our facilities are represented under contracts that expire at various times over the next several years.

COMMITMENTS, CONTINGENCIES, GUARANTEES, AND LEGAL PROCEEDINGS

We have financial commitments and obligations that arise in the ordinary course of our business.

These include long-term debt (discussed in Note 8, Debt and Financing Obligations), lease obligations, purchase commitments for goods and services, and legal proceedings (discussed below).

Capital Commitments

We had capital commitments of approximately $ 75.0 million and $ 36.5 million as of May 30, 2021 and May 31, 2020, respectively, in connection with the expansion and replacement of existing facilities and equipment.

These include long-term debt (discussed in Note 7, Debt and Financing Obligations), lease obligations (discussed in Note 8, Leases), purchase obligations and capital commitments for goods and services, and legal proceedings (discussed below).

Purchase Obligations and Capital Commitments

A summary of our purchase obligations, excluding capital commitments, as of May 29, 2022 are as follows.

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:

(in millions)

Purchase Obligations

(a) The amounts in the table above 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 $ 717.6 million, $ 621.4 million, and $ 646.5 million in fiscal 2022, 2021, and 2020, respectively.

We had capital commitments of approximately $ 304.7 million and $ 75.0 million as of May 29, 2022 and May 30, 2021, respectively, that represent commitments for construction of a previously announced french fry production line and plant modernization investments.

Capital commitments were not recorded as liabilities on our Consolidated Balance Sheets as of May 29, 2022 as we had not yet received the related goods nor taken title to the property.

Guarantees and Indemnifications

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If the fair value of such liability becomes material, we will accrue for it at that time.

Lamb Weston is a party to various potato purchase supply agreements with partner growers, under which they deliver their potato crop from the contracted acres to Lamb Weston during the harvest season, and pursuant to the potato supply agreements, pricing for this inventory is determined after delivery, taking into account crop size and quality, among other factors.

We are a party to various potato purchase supply agreements with partner growers, under which they deliver their potato crop from the contracted acres to Lamb Weston during the harvest season, and pursuant to the potato supply agreements, pricing for this inventory is determined after delivery, taking into account crop size and quality, among other factors.

Total purchases under these agreements were $ 146.6 million, $ 139.8 million, and $ 142.7 million in fiscal 2022, 2021, and 2020, respectively, under the terms of the potato supply agreements.

These purchases are initially recorded in inventory and charged to cost of sales as related inventories are produced and subsequently sold.

Under the terms of these potato supply agreements, Lamb Weston has guaranteed repayment of short-term bank loans of the potato suppliers, under certain conditions.

At May 30, 2021, Lamb Weston has effectively guaranteed $ 35.6 million of supplier loans.

Lamb Weston has not established a liability for these guarantees, as Lamb Weston has determined that the likelihood of Lamb Weston’s required performance under the guarantees is remote.

Under certain other potato supply agreements, Lamb Weston makes advances to growers prior to the delivery of potatoes.

The aggregate amounts of these advances were $ 23.9 million and $ 31.9 million at May 30, 2021 and May 31, 2020, respectively.

Lamb Weston and Lamb Weston’s partner are jointly and severally liable for all legal liabilities of Lamb-Weston/Meijer.

See Note 4, Investments in Joint Ventures, for further information on Lamb-Weston/Meijer’s liabilities and capital structure.

After taking into account liabilities recognized for all of the foregoing matters, management believes the ultimate resolution of such matters would not have a material adverse effect on Lamb Weston’s financial condition, results of operations, or cash flows.

Under the terms of these potato supply agreements, we have guaranteed repayment of short-term bank loans of the potato suppliers, under certain conditions.

At May 29, 2022, we have effectively guaranteed $ 35.9 million of supplier loans.

We have not established a liability for these guarantees, as we have determined that the likelihood of our required performance under the guarantees is remote.

Under certain other potato supply agreements, we make advances to growers prior to the delivery of potatoes.

The aggregate amounts of these advances were $ 28.1 million and $ 23.9 million at May 29, 2022 and May 30, 2021, respectively, and were recorded in “Prepaid expenses and other current assets,” on our Consolidated Balance Sheets.

We and our partner are jointly and severally liable for all legal liabilities of LWM.

See Note 4, Equity Method Investments, for further information on LWM’s liabilities and capital structure.

After taking into account liabilities recognized for all of the foregoing matters, management believes the ultimate resolution of such matters would not have a material adverse effect on our financial condition, results of operations, or cash flows.

It is reasonably possible that a change to an estimate of the foregoing matters may occur in the future.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data