Lamb Weston Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) ​ Lamb Weston Holdings, Inc. Consolidated Statements of Earnings (unaudited, in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 28, August 29, ​ ​ 2022 ​ 2021 Net sales ​ $ 1,125.6 ​ $ 984.2 Cost of sales ​ ​ 852.3 ​ ​ 832.9 Gross profit ​ ​ 273.3 ​ ​ 151.3 Selling, general and administrative expenses ​ ​ 116.3 ​ ​ 91.1 Income from operations ​ ​ 157.0 ​ ​ 60.2 Interest expense, net ​ ​ 26.0 ​ ​ 27.9 Income before income taxes and equity method earnings ​ 131.0 ​ 32.3 Income tax expense ​ ​ 73.7 ​ ​ 8.7 Equity method investment earnings ​ ​ 174.6 ​ ​ 6.2 Net income ​ $ 231.9 ​ $ 29.8 Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 1.61 ​ $ 0.20 Diluted ​ $ 1.60 ​ $ 0.20 Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​ Basic ​ ​ 144.0 ​ ​ 146.3 Diluted ​ ​ 144.6 ​ ​ 146.9 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 3 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Comprehensive Income (unaudited, dollars in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirteen Weeks Ended ​ ​ August 28, 2022 ​ August 29, 2021 ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Amount Benefit Amount Amount Benefit Amount Net income ​ $ 305.6 ​ $ ( 73.7 ) ​ $ 231.9 ​ $ 38.5 ​ $ ( 8.7 ) ​ $ 29.8 Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reclassification of post-retirement benefits out of accumulated other comprehensive income ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.1 ​ ​ — ​ 0.1 Unrealized currency translation gains (losses) ​ ​ ( 31.7 ) ​ ​ 1.0 ​ ​ ( 30.7 ) ​ ​ ( 23.8 ) ​ 1.5 ​ ( 22.3 ) Other ​ ​ 0.2 ​ ​ — ​ ​ 0.2 ​ ​ — ​ ​ — ​ ​ — Comprehensive income ​ $ 274.1 ​ $ ( 72.7 ) ​ $ 201.4 ​ $ 14.8 ​ $ ( 7.2 ) ​ $ 7.6 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 4 Table of Contents Lamb Weston Holdings, Inc. Consolidated Balance Sheets (unaudited, dollars in millions, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, ​ May 29, ​ 2022 2022 ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents $ 485.3 ​ $ 525.0 Receivables, less allowance for doubtful accounts of $ 1.8 and $ 1.1 ​ 449.5 ​ 447.3 Inventories ​ 635.5 ​ 574.4 Prepaid expenses and other current assets ​ 59.9 ​ 112.9 Total current assets ​ 1,630.2 ​ 1,659.6 Property, plant and equipment, net ​ 1,690.9 ​ 1,579.2 Operating lease assets ​ ​ 112.3 ​ ​ 119.0 Equity method investments ​ ​ 372.5 ​ ​ 257.4 Goodwill ​ 352.2 ​ 318.0 Intangible assets, net ​ 32.8 ​ 33.7 Other assets ​ 218.8 ​ 172.9 Total assets ​ $ 4,409.7 ​ $ 4,139.8 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ Short-term borrowings ​ $ 9.1 ​ $ — Current portion of long-term debt and financing obligations ​ ​ 32.2 ​ ​ 32.2 Accounts payable ​ 462.7 ​ 402.6 Accrued liabilities ​ 276.3 ​ 264.3 Total current liabilities ​ 780.3 ​ 699.1 Long-term liabilities: ​ ​ ​ ​ ​ ​ Long-term debt and financing obligations, excluding current portion ​ 2,700.1 ​ 2,695.8 Deferred income taxes ​ ​ 218.7 ​ ​ 172.5 Other noncurrent liabilities ​ 200.6 ​ 211.9 Total long-term liabilities ​ ​ 3,119.4 ​ ​ 3,080.2 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Common stock of $ 1.00 par value, 600,000,000 shares authorized; 148,286,975 and 148,045,584 shares issued ​ 148.3 ​ 148.0 Additional distributed capital ​ ( 796.9 ) ​ ( 813.3 ) Retained earnings ​ 1,501.8 ​ 1,305.5 Accumulated other comprehensive loss ​ ( 46.1 ) ​ ( 15.6 ) Treasury stock, at cost, 4,456,388 and 3,974,156 common shares ​ ​ ( 297.1 ) ​ ​ ( 264.1 ) Total stockholders' equity ​ ​ 510.0 ​ ​ 360.5 Total liabilities and stockholders’ equity ​ $ 4,409.7 ​ $ 4,139.8 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 5 Table of Contents ​ Lamb Weston Holdings, Inc. Consolidated Statements of Stockholders’ Equit y (unaudited, dollars in millions, except share data ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended August 28, 2022 and August 29, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Accumulated ​ ​ ​ ​ Common Stock, ​ Common ​ Treasury ​ Paid-in ​ ​ ​ Other ​ Total ​ ​ net of Treasury ​ Stock ​ Stock ​ (Distributed) ​ Retained ​ Comprehensive ​ Stockholders’ ​ ​ Shares Amount Amount ​ Capital Earnings Income (Loss) Equity Balance at May 29, 2022 ​ ​ 144,071,428 ​ $ 148.0 ​ $ ( 264.1 ) ​ $ ( 813.3 ) ​ $ 1,305.5 ​ $ ( 15.6 ) $ 360.5 Dividends declared, $ 0.245 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 35.2 ) ​ ​ — ​ ​ ( 35.2 ) Common stock issued ​ ​ 241,391 ​ ​ 0.3 ​ ​ — ​ ​ 0.2 ​ ​ — ​ ​ — ​ ​ 0.5 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 7.6 ​ ​ — ​ ​ — ​ ​ 7.6 Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 482,232 ) ​ ​ — ​ ​ ( 33.0 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 33.0 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 8.6 ​ ​ ( 0.4 ) ​ ​ — ​ ​ 8.2 Comprehensive income ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 231.9 ​ ​ ( 30.5 ) ​ ​ 201.4 Balance at August 28, 2022 ​ ​ 143,830,587 ​ $ 148.3 ​ $ ( 297.1 ) ​ $ ( 796.9 ) ​ $ 1,501.8 ​ $ ( 46.1 ) ​ $ 510.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at May 30, 2021 ​ ​ 146,191,864 ​ $ 147.6 ​ $ ( 104.3 ) ​ $ ( 836.8 ) ​ $ 1,244.6 ​ $ 29.5 ​ $ 480.6 Dividends declared, $ 0.235 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 34.4 ) ​ ​ — ​ ​ ( 34.4 ) Common stock issued ​ ​ 376,001 ​ ​ 0.4 ​ ​ — ​ ​ 1.5 ​ ​ — ​ ​ — ​ ​ 1.9 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 5.2 ​ ​ — ​ ​ — ​ ​ 5.2 Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 506,849 ) ​ ​ — ​ ​ ( 33.4 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 33.4 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 0.1 ) ​ ​ — ​ ​ — ​ ​ ( 0.1 ) Comprehensive income ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 29.8 ​ ​ ( 22.2 ) ​ ​ 7.6 Balance at August 29, 2021 ​ ​ 146,061,016 ​ $ 148.0 ​ $ ( 137.7 ) ​ $ ( 830.2 ) ​ $ 1,240.0 ​ $ 7.3 ​ $ 427.4 ​ See Condensed Notes to Consolidated Financial Statements. ​ 6 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Cash Flows (unaudited, dollars in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 28, August 29, ​ ​ 2022 ​ 2021 Cash flows from operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 231.9 ​ $ 29.8 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization of intangibles and debt issuance costs ​ ​ 49.8 ​ ​ 47.3 Stock-settled, stock-based compensation expense ​ ​ 7.6 ​ ​ 5.2 Equity method investment (earnings) loss in excess of distributions ​ ​ ( 174.6 ) ​ ​ 3.5 Deferred income taxes ​ ​ 34.5 ​ ​ 1.7 Other ​ ​ ( 2.8 ) ​ ​ 1.5 Changes in operating assets and liabilities, net of acquisition: ​ ​ ​ ​ ​ ​ Receivables ​ ​ 9.9 ​ ​ ( 35.1 ) Inventories ​ ​ ( 51.5 ) ​ ​ 43.4 Income taxes payable/receivable, net ​ ​ 42.3 ​ ​ 9.7 Prepaid expenses and other current assets ​ ​ 45.5 ​ ​ 33.0 Accounts payable ​ ​ 24.3 ​ ​ 10.0 Accrued liabilities ​ ​ ( 24.8 ) ​ ​ 11.8 Net cash provided by operating activities ​ $ 192.1 ​ $ 161.8 Cash flows from investing activities ​ ​ ​ ​ ​ ​ Additions to property, plant and equipment ​ ​ ( 101.2 ) ​ ​ ( 78.9 ) Acquisition of interest in joint venture, net ​ ​ ( 42.3 ) ​ ​ — Additions to other long-term assets ​ ​ ( 20.0 ) ​ ​ — Other ​ ​ ( 3.4 ) ​ ​ 0.1 Net cash used for investing activities ​ $ ( 166.9 ) ​ $ ( 78.8 ) Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds from issuance of debt ​ ​ 13.8 ​ ​ — Repayments of debt and financing obligations ​ ​ ( 8.0 ) ​ ​ ( 7.9 ) Dividends paid ​ ​ ( 35.3 ) ​ ​ ( 34.4 ) Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 34.4 ) ​ ​ ( 33.4 ) Other ​ ​ 0.4 ​ ​ ( 0.1 ) Net cash used for financing activities ​ $ ( 63.5 ) ​ $ ( 75.8 ) Effect of exchange rate changes on cash and cash equivalents ​ ​ ( 1.4 ) ​ ​ ( 1.0 ) Net (decrease) increase in cash and cash equivalents ​ ( 39.7 ) ​ 6.2 Cash and cash equivalents, beginning of period ​ ​ 525.0 ​ ​ 783.5 Cash and cash equivalents, end of period ​ $ 485.3 ​ $ 789.7 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 7 Table of Contents Lamb Weston Holdings, Inc. Condensed Notes to Consolidated Financial Statement s (Unaudited) ​ 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ Lamb Weston Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Lamb Weston”), along with our joint 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: Global, Foodservice, Retail, and Other. See Note 13, Segments, for additional information on our reportable segments. ​ Basis of Presentation ​ The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen weeks ended August 28, 2022 and August 29, 2021, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S”). ​ These consolidated financial statements are unaudited, and include all adjustments that we consider necessary for a fair presentation of such financial statements and consist only of normal recurring adjustments. The preparation of financial statements involves the use of estimates and accruals. The actual results that we experience may differ materially from those estimates. Results for interim periods should not be considered indicative of results for our full fiscal year, which ends the last Sunday in May. ​ These financial statements and condensed notes should be read together with the consolidated financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended May 29, 2022 (the “Form 10-K”), where we include additional information on our critical accounting estimates, policies, and the methods and assumptions used in our estimates. We filed the Form 10-K with the Securities and Exchange Commission on July 27, 2022. ​ There were no accounting pronouncements recently issued that had or are expected to have a material impact on our consolidated financial statements. ​ ​ 8 Table of Contents 2. EARNINGS PER SHARE ​ The following table sets forth the computation of basic and diluted earnings per common share for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 28, August 29, (in millions, except per share amounts) ​ 2022 ​ 2021 Numerator: ​ ​ Net income ​ $ 231.9 ​ $ 29.8 ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ Basic weighted average common shares outstanding ​ 144.0 ​ 146.3 Add: Dilutive effect of employee incentive plans (a) ​ 0.6 ​ 0.6 Diluted weighted average common shares outstanding ​ 144.6 ​ 146.9 ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 1.61 ​ $ 0.20 Diluted ​ $ 1.60 ​ $ 0.20 (a) Potential dilutive shares of common stock under employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards. As of August 28, 2022, 0.6 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive. As of August 29, 2021, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive. ​ ​ ​ 3. INCOME TAXES ​ Income tax expense was $ 73.7 million and $ 8.7 million for the thirteen weeks ended August 28, 2022 and August 29, 2021, respectively. The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 24.1 % and 22.6 % for the thirteen weeks ended August 28, 2022 and August 29, 2021, respectively, in our Consolidated Statements of Earnings. The effective tax rate varies from the U.S. statutory tax rate of 21 % principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items. Excluding the impact of both the gain associated with the acquisition of an additional 40 % interest in our Argentina joint venture, Lamb Weston Alimentos Modernos S.A. (“LWAMSA”), and the mark-to-market adjustments associated with changes in natural gas and electricity derivatives at our Lamb-Weston/Meijer v.o.f (“LWM”) joint venture, which are discussed at Note 6, Joint Venture Investments, and Note 13, Segments, respectively, our effective tax rate was 25.0 %. ​ Income Taxes Paid ​ Income tax refunds, net of taxes paid, were $ 3.2 million and $ 2.9 million during the thirteen weeks ended August 28, 2022 and August 29, 2021, respectively. ​ 9 Table of Contents 4. INVENTORIES ​ Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable value and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead. The components of inventories were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, ​ May 29, (in millions) ​ 2022 2022 Raw materials and packaging ​ $ 89.3 $ 96.1 Finished goods ​ 493.7 426.5 Supplies and other ​ 52.5 51.8 Inventories ​ $ 635.5 $ 574.4 ​ ​ ​ ​ 5. PROPERTY, PLANT AND EQUIPMENT ​ The components of property, plant and equipment were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, ​ May 29, (in millions) ​ 2022 2022 Land and land improvements ​ $ 118.2 ​ $ 114.1 Buildings, machinery, and equipment ​ 2,982.7 ​ 2,919.0 Furniture, fixtures, office equipment, and other ​ 98.2 ​ 92.1 Construction in progress ​ 236.5 ​ 156.1 Property, plant and equipment, at cost ​ 3,435.6 ​ 3,281.3 Less accumulated depreciation ​ ( 1,744.7 ) ​ ( 1,702.1 ) Property, plant and equipment, net ​ $ 1,690.9 ​ $ 1,579.2 ​ ​ Depreciation expense was $ 47.3 million and $ 44.5 million for the thirteen weeks ended August 28, 2022 and August 29, 2021, respectively. At August 28, 2022 and May 29, 2022, purchases of property, plant and equipment included in accounts payable were $ 64.4 million and $ 38.3 million, respectively. ​ Interest capitalized within construction in progress for the thirteen weeks ended August 28, 2022 and August 29, 2021, was $ 2.0 million and $ 1.2 million, respectively. ​ ​ 6. JOINT VENTURE INVESTMENTS ​ Consolidated Joint Ventures ​ In July 2022, we acquired an additional 40 % interest in LWAMSA, which increased our total ownership from 50 % to 90 %. We recorded LWAMSA’s assets and liabilities at fair value, which included remeasuring our previously held equity interest at fair value, and we recognized a $ 15.1 million gain in “Equity method investment earnings” in our Consolidated Statement of Earnings. The fair value was determined utilizing industry EBITDA multiples and control premium comparable information, which are unobservable inputs, or Level 3 in the fair value hierarchy. We recorded the preliminary fair values as of the date of acquisition. ​ In connection with the purchase of the additional interest in LWAMSA, we ceased equity method accounting and began consolidating LWAMSA’s financial statements. The net sales, income from operations, and total assets acquired were not material to our consolidated net sales, income from operations, and total assets. LWAMSA’s operating results are included in our Global segment. ​ 10 Table of Contents On September 6, 2022, we announced an expansion of french fry processing capacity in Argentina with the planned construction of a new manufacturing facility in Mar del Plata. The new processing facility is expected to produce more than 200 million pounds of frozen french fries and other potato products per year. Construction of the new line is expected to be completed in fiscal 2025. The total investment is expected to be approximately $ 240 million. This investment will add to the capacity produced at LWAMSA’s existing production facility in Buenos Aires. ​ Noncontrolling Interest ​ As of August 28, 2022, total LWAMSA interest not directly attributable to Lamb Weston, or NCI, was $ 8.2 million and was recorded in “Additional distributed capital” on our Consolidated Balance Sheet. For the thirteen weeks ended August 28, 2022, the net loss attributable to NCI was not significant and was recorded in “Selling, general and administrative expenses” in our Consolidated Statement of Earnings. ​ Unconsolidated Joint Ventures ​ Our equity method investments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, ​ May 29, (in millions) ​ 2022 ​ 2022 LWM (a) ​ $ 347.8 ​ $ 211.2 Lamb-Weston/RDO Frozen ("Lamb Weston RDO") (b) ​ 24.1 ​ ​ 19.4 LWAMSA (c) ​ — ​ ​ 26.1 Other ​ 0.6 ​ ​ 0.7 ​ ​ $ 372.5 ​ $ 257.4 (a) We own 50 % of LWM, 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. The investment balance includes $ 146.3 million of unrealized gains related to mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility during the thirteen weeks ended August 28, 2022. In September 2022, LWM completed the previously announced withdrawal from its joint venture in Russia. ​ (b) We own 50 % of Lamb Weston RDO, a joint venture with RDO Frozen Co., that operates a potato processing facility in the U.S. ​ (c) In July 2022, we acquired an additional 40 % interest in LWAMSA, increasing our total ownership to 90 % and began consolidating the joint venture. ​ ​ We have an agreement to share the costs of our global enterprise resource planning (“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. At August 28, 2022 and May 29, 2022, LWM’s portion of the ERP costs totaled $ 29.5 million and $ 23.4 million, respectively. We had $ 25.3 million and $ 20.5 million of receivables recorded in “Other assets” on our Consolidated Balance Sheets at August 28, 2022 and May 29, 2022, respectively. We expect the total receivable from LWM to increase as development and implementation of the next phase of our ERP system continues throughout fiscal 2023. ​ ​ 11 Table of Contents 7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS ​ The following table presents changes in goodwill balances, by segment, during the thirteen weeks ended August 28, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) Global Foodservice Retail Other Total Balance at May 29, 2022 ​ $ 259.8 ​ $ 42.8 ​ $ 10.9 ​ $ 4.5 ​ $ 318.0 Acquisition of interest in joint venture (a) ​ ​ 42.1 ​ ​ — ​ ​ — ​ ​ — ​ ​ 42.1 Foreign currency translation adjustment ​ ​ ( 7.9 ) ​ ​ — ​ ​ — ​ ​ — ​ ( 7.9 ) Balance at August 28, 2022 ​ $ 294.0 ​ $ 42.8 ​ $ 10.9 ​ $ 4.5 ​ $ 352.2 ​ (a) In July 2022, we acquired an additional 40 % interest in LWAMSA, which increased our total ownership from 50 % to 90 % , and we recorded $ 42.1 million of goodwill, that is not deductible for tax purposes, in our Global segment. See Note 6, Joint Venture Investments, for more information. ​ Other identifiable intangible assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, 2022 ​ May 29, 2022 ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Useful Life ​ Carrying ​ Accumulated ​ Intangible ​ Useful Life ​ Carrying ​ Accumulated ​ Intangible (dollars in millions) ​ (in years) ​ Amount ​ Amortization ​ Assets, Net ​ (in years) ​ Amount ​ Amortization ​ Assets, Net Non-amortizing intangible assets (a) n/a ​ $ 18.0 $ — $ 18.0 n/a $ 18.0 $ — $ 18.0 Amortizing intangible assets (b) 10 ​ 41.1 ​ ( 26.3 ) ​ 14.8 10 ​ 41.4 ​ ( 25.7 ) ​ 15.7 ​ ​ ​ $ 59.1 $ ( 26.3 ) $ 32.8 ​ $ 59.4 $ ( 25.7 ) $ 33.7 (a) Non-amortizing intangible assets represent brands and trademarks. ​ (b) Amortizing intangible assets are principally composed of licensing agreements, brands, and customer relationships. Developed technology, which is excluded from this balance, is recorded as “Other assets” on our Consolidated Balance Sheets. Amortization expense, including developed technology amortization expense, was $ 1.4 million and $ 1.5 million for the thirteen weeks ended August 28, 2022 and August 29, 2021, respectively. Foreign intangible assets are affected by foreign currency translation. ​ ​ ​ ​ 8. ACCRUED LIABILITIES ​ The components of accrued liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, ​ May 29, (in millions) ​ 2022 2022 Compensation and benefits ​ $ 84.6 $ 81.0 Accrued trade promotions ​ ​ 43.4 ​ ​ 41.2 Income taxes payable ​ ​ 36.1 ​ ​ 1.7 Dividends payable to shareholders ​ ​ 35.2 ​ ​ 35.3 Current portion of operating lease obligations ​ ​ 22.8 ​ ​ 22.4 Accrued interest ​ ​ 14.9 ​ ​ 42.1 Franchise, property, and sales and use taxes ​ ​ 14.1 10.4 Other ​ 25.2 30.2 Accrued liabilities ​ $ 276.3 $ 264.3 ​ ​ ​ ​ 12 Table of Contents 9. DEBT AND FINANCING OBLIGATIONS ​ The components of our debt, including financing obligations, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 28, May 29, (in millions) ​ 2022 ​ 2022 Short-term borrowings: ​ ​ ​ ​ ​ ​ Other credit facilities ​ $ 9.1 ​ $ — ​ ​ ​ ​ ​ ​ ​ Long-term debt: ​ ​ ​ ​ ​ ​ Term A-1 loan facility, due June 2024 ​ ​ 255.0 ​ 258.7 Term A-2 loan facility, due April 2025 ​ ​ 292.5 ​ ​ 296.6 RMB loan facility, due February 2027 (a) ​ ​ 31.0 ​ ​ 19.7 4.875 % senior notes, due May 2028 ​ ​ 500.0 ​ ​ 500.0 4.125 % senior notes, due January 2030 ​ ​ 970.0 ​ ​ 970.0 4.375 % senior notes, due January 2032 ​ ​ 700.0 ​ ​ 700.0 ​ ​ ​ 2,748.5 ​ ​ 2,745.0 Financing obligations: ​ ​ ​ ​ ​ ​ Lease financing obligations due on various dates through 2040 (b) ​ ​ 7.0 ​ 7.0 ​ ​ ​ ​ ​ ​ ​ Total debt and financing obligations ​ ​ 2,764.6 ​ 2,752.0 Debt issuance costs (c) ​ ​ ( 23.2 ) ​ ​ ( 24.0 ) Short-term borrowings ​ ​ ( 9.1 ) ​ ​ — Current portion of long-term debt and financing obligations ​ ( 32.2 ) ( 32.2 ) Long-term debt and financing obligations, excluding current portion ​ $ 2,700.1 $ 2,695.8 (a) The effective average interest rate on this facility was 4.60 % as of August 28, 2022. ​ (b) The interest rates on our lease financing obligations ranged from 2.08 % to 3.32 % as of August 28, 2022 and May 29, 2022. ​ (c) Excludes debt issuance costs of $ 3.1 million and $ 3.3 million as of August 28, 2022 and May 29, 2022, respectively, related to our revolving credit facility, which are recorded in “Other assets” on our Consolidated Balance Sheets. ​ ​ At August 28, 2022, we had no borrowings outstanding under our revolving credit facility and $ 994.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million. For the thirteen weeks ended August 28, 2022, we had no borrowings under the facility. ​ For the thirteen weeks ended August 28, 2022 and August 29, 2021, we paid $ 56.8 million and $ 2.7 million of interest on debt, respectively. ​ For more information on our debt and financing obligations, interest rates, and debt covenants, see Note 7, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K. ​ 13 Table of Contents 10. STOCK-BASED COMPENSATION ​ 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”), stock options, dividend equivalents, and other stock-based awards. As of August 28, 2022, 6.2 million shares were available for future grant under the plan. ​ ​ ​ RSUs ​ We grant RSUs to eligible employees and non-employee directors. 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 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 ​ Performance Shares are granted to certain executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. Awards actually earned range from 0 % to 200 % of the targeted number of Performance Shares for each of the performance periods. Awards, if earned, would be paid in shares of our common stock. Subject to limited exceptions set forth in our stock plan, any shares earned will generally vest over a three-year service period. The value of these 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 service period. ​ We have also granted Performance Shares with vesting contingent upon relative total shareholder return goals, and, under special circumstances, stock price growth goals. Awards actually earned range from 0 % to 200 % , in the case of awards contingent on total shareholder return goals, or 0 % to 300 % , in the case of awards contingent on stock price growth goals, of the targeted number of Performance Shares. These Performance Shares are equity-settled awards that vest over a three-year service period, and the number of units that actually vest is determined based on the achievement of the performance criteria set forth in the respective award agreement. The awards are measured based on estimated fair value as of the date of grant using a Monte Carlo simulation, and are amortized over the service period. ​ The weighted average Monte Carlo assumptions for Performance Shares granted during the thirteen weeks ended August 28, 2022 were: ​ ​ ​ ​ ​ ​ ​ Assumptions Dividend yield (%) ​ ​ 0.00 - 1.42 Expected volatility of stock (%) ​ ​ 42.99 Risk-free interest rate (%) ​ ​ 2.89 Expected life (years) ​ ​ 2.82 Weighted average grant date fair value per unit ​ $ 91.43 - $ 118.97 ​ ​ Stock Options ​ Under special circumstances, we have granted options to employees for the purchase of stock at exercise prices equal to the fair market value of the underlying stock on the grant date. Options generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of seven years . ​ 14 Table of Contents The weighted average Black-Sholes assumptions for stock options granted during the thirteen weeks ended August 28, 2022 were: ​ ​ ​ ​ ​ ​ ​ Assumptions Weighted average fair value ​ $ 25.90 Dividend yield (%) ​ ​ 1.22 Expected volatility of stock (%) ​ ​ 34.06 Risk-free interest rate (%) ​ ​ 2.82 Expected life of stock option (years) ​ ​ 5.75 Weighted average exercise price per share ​ $ 79.66 ​ ​ Stock Based Compensation Grants ​ During the thirteen weeks ended August 28, 2022, we granted 0.3 million, 0.3 million, and 0.6 million RSUs, Performance Shares, and stock options, respectively, at an average grant date fair value of $ 79.47 , $ 92.85 , and $ 25.90 , respectively. ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ August 28, ​ August 29, (in millions) ​ 2022 ​ 2021 Stock-settled RSUs ​ $ 4.7 ​ $ 3.6 Performance Shares ​ ​ 2.4 ​ ​ 1.6 Stock options ​ ​ 0.5 ​ ​ — Total compensation expense ​ $ 7.6 ​ $ 5.2 Income tax benefit (a) ​ ​ ( 1.3 ) ​ ​ ( 0.9 ) Total compensation expense, net of tax benefit ​ $ 6.3 ​ $ 4.3 (a) Income tax benefit represents the marginal tax rate, excluding non-deductible compensation. ​ Based on estimates at August 28, 2022, total unrecognized compensation expense related to stock-based awards was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ Weighted ​ ​ Unrecognized ​ Average ​ ​ Compensation ​ Recognition (in millions, except data in years) ​ Expense ​ Period (in years) Stock-settled RSUs ​ $ 44.6 ​ 1.9 Performance Shares ​ ​ 33.9 ​ 2.5 Stock options ​ ​ 13.8 ​ ​ 2.0 Total unrecognized compensation expense ​ $ 92.3 ​ ​ ​ ​ 15 Table of Contents 11. FAIR VALUE MEASUREMENTS ​ The fair values of cash equivalents, receivables, accounts payable, and short-term debt approximate their carrying amounts due to their short duration. ​ The following table presents our financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of August 28, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Assets (in millions) Level 1 Level 2 Level 3 (Liabilities) Derivative assets (a) ​ ​ — ​ ​ 3.5 ​ ​ — ​ ​ 3.5 Derivative liabilities (a) ​ ​ — ​ ​ ( 0.5 ) ​ ​ — ​ ​ ( 0.5 ) Deferred compensation liabilities (b) ​ ​ — ​ ​ ( 22.2 ) ​ ​ — ​ ​ ( 22.2 ) Fair value, net ​ $ — ​ $ ( 19.2 ) ​ $ — ​ $ ( 19.2 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of May 29, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Assets (in millions) Level 1 Level 2 Level 3 (Liabilities) Derivative assets (a) ​ ​ — ​ ​ 7.0 ​ ​ — ​ ​ 7.0 Deferred compensation liabilities (b) ​ ​ — ​ ​ ( 21.6 ) ​ ​ — ​ ​ ( 21.6 ) Fair value, net ​ $ — ​ $ ( 14.6 ) ​ $ — ​ $ ( 14.6 ) ​ (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. ​ (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. ​ ​ At August 28, 2022, we had $ 2,170.0 million of fixed-rate and $ 587.6 million of variable-rate debt outstanding. Based on current market rates, the fair value of our fixed-rate debt was estimated to be $ 2,006.2 million. Any differences between the book value and fair value are due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market prices. ​ 12. STOCKHOLDERS’ EQUITY ​ Share Repurchase Program ​ Our Board of Directors authorized a program, with no expiration date, to repurchase up to $ 500.0 million of our common stock. During the thirteen weeks ended August 28, 2022, we repurchased 404,476 shares for $ 28.4 million, or a weighted average price of $ 70.11 per share. As of August 28, 2022, $ 240.6 million remained authorized for repurchase under the program. ​ 16 Table of Contents Dividends ​ During the thirteen weeks ended August 28, 2022, we paid $ 35.3 million of dividends to common stockholders. On September 2, 2022, we paid $ 35.2 million of dividends to stockholders of record as of the close of business on August 5, 2022. On September 28, 2022 , our Board of Directors declared a dividend of $ 0.245 per share of common stock. The dividend will be paid on December 2, 2022 , to stockholders of record as of the close of business on November 4, 2022 . ​ Accumulated Other Comprehensive Income (“AOCI”) ​ Changes in AOCI, net of taxes, as of August 28, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ ​ ​ ​ ​ ​ Accumulated ​ ​ Currency ​ Pension and ​ ​ ​ Other ​ ​ Translation ​ Post-Retirement ​ ​ ​ Comprehensive (in millions) Gains (Losses) Benefits ​ Other Income (Loss) Balance as of May 29, 2022 ​ $ ( 12.9 ) $ ( 3.3 ) ​ $ 0.6 $ ( 15.6 ) Other comprehensive income before reclassifications, net of tax ​ ​ ( 30.7 ) ​ ​ — ​ ​ 0.2 ​ ​ ( 30.5 ) Amounts reclassified out of AOCI, net of tax ​ ​ — ​ ​ — ​ ​ — ​ ​ — Net current-period other comprehensive income (loss) ​ ( 30.7 ) — ​ 0.2 ​ ( 30.5 ) Balance as of August 28, 2022 ​ $ ( 43.6 ) $ ( 3.3 ) ​ $ 0.8 $ ( 46.1 ) ​ 17 Table of Contents 13. SEGMENTS ​ We have four operating segments, each of which is a reportable segment: Global, Foodservice, Retail, and Other. Our chief operating decision maker receives periodic management reports under this structure that generally focus on the nature and scope of our customers’ businesses, which enables operating decisions, performance assessment, and resource allocation decisions at the segment level. The reportable segments are each managed by a general manager and supported by a cross functional team assigned to support the segment. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 28, August 29, (in millions) ​ 2022 ​ 2021 Net sales ​ ​ Global ​ $ 559.7 ​ $ 501.2 Foodservice ​ 366.3 ​ 321.4 Retail ​ 169.6 ​ 132.5 Other ​ ​ 30.0 ​ ​ 29.1 Total net sales ​ $ 1,125.6 ​ $ 984.2 Product contribution margin (a) ​ ​ ​ ​ Global ​ $ 83.7 ​ $ 42.6 Foodservice ​ ​ 138.2 ​ ​ 96.4 Retail ​ ​ 48.7 ​ ​ 14.8 Other (b) ​ ​ ( 1.8 ) ​ ​ ( 6.6 ) ​ ​ ​ 268.8 ​ ​ 147.2 Add: Advertising and promotion expenses (a) ​ ​ 4.5 ​ ​ 4.1 Gross profit ​ ​ 273.3 ​ ​ 151.3 Selling, general and administrative expenses ​ ​ 116.3 ​ ​ 91.1 Income from operations ​ ​ 157.0 ​ ​ 60.2 Interest expense, net ​ ​ 26.0 ​ ​ 27.9 Income tax expense ​ ​ 73.7 ​ ​ 8.7 Equity method investment earnings (c) ​ ​ 174.6 ​ ​ 6.2 Net income ​ $ 231.9 ​ $ 29.8 (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. ​ (b) The Other segment primarily includes our vegetable and dairy businesses and unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts. ​ (c) Equity method investment earnings for the thirteen weeks ended August 28, 2022 and August 29, 2021 include a $ 146.3 million and $ 5.0 million unrealized gain, respectively, related to mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility. ​ In July 2022, we acquired an additional 40 % interest in LWAMSA, increasing our total ownership from 50 % to 90 %. See Note 6, Joint Venture Investments, for more information. ​ ​ ​ 18 Table of Contents 14. COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS ​ We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, lease obligations, purchase commitments for goods and services, and legal proceedings. There have been no material changes to the guarantees and indemnifications disclosed in Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K. ​ We are a party to legal actions arising in the ordinary course of our business. These claims, legal proceedings and litigation principally arise from alleged casualty, product liability, employment, and other disputes. In determining loss contingencies, we consider the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recognized when it is considered probable that a liability has been incurred and when the amount of loss can be reasonably estimated. While any claim, proceeding or litigation has an element of uncertainty, we believe the outcome of any of these matters that are pending or threatened will not have a material adverse effect on our financial condition, results of operations, or cash flows. ​ ​ 19 Table of Contents