What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-07-25 compared with 2022-07-27 · 390 added, 401 removed, 633 unchanged (56% of the section changed)

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and subsidiaries (the Company) as of May 28, 2023 and May 29, 2022, 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 28, 2023, 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.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 28, 2023 and May 29, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended May 28, 2023, in conformity with U.S.

generally accepted accounting principles.

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of certain sales incentives and trade promotion allowances

As discussed in Note 1 to the consolidated financial statements, the Company offers sales incentives and trade promotion allowances through various programs.

The Company records accruals based on sales incentive agreements and expectations regarding customer participation and performance levels.

Customer participation and performance levels are primarily based on historical sales and redemption rates, current customer sales, and industry trends.

We identified the evaluation of certain accruals for sales incentive and trade promotion allowances as a critical audit matter.

Subjective and complex auditor judgment was required in evaluating these accruals as a result of the timing difference between when the product is delivered and when the incentive will be claimed by the end consumer, coupled with customer participation expectations.

This specifically related to the impact of historical sales, payments, and redemption rates on the Company’s accrual.

Acquisition date fair value of the previously held equity interest in Lamb Weston EMEA

As described in Note 3 to the consolidated financial statements, on February 28, 2023, the Company acquired the remaining 50% interest in Lamb Weston EMEA, increasing the Company’s ownership interest to 100%.

As a result of the transaction, the Company remeasured its previously held equity interest at the acquisition date fair value of $634.4 million and recognized a gain of $410.7 million, which is included in equity method investment earnings (loss) in the consolidated statement of earnings.

The Company determined the estimated fair value of its previously held equity interest using the market approach, which included a control premium assumption.

We identified the evaluation of the acquisition date fair value of the previously held equity interest in Lamb Weston EMEA as a critical audit matter.

Specifically, challenging auditor judgment was required to evaluate the control premium used to determine the acquisition date fair value.

Additionally, specialized skills and knowledge were required to evaluate the relevance of comparable transactions in a similar industry.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s sales incentive and trade promotion allowance process, including the accrual methodology, and evaluation of the use of historic data.

To evaluate the Company’s accrual for certain sales incentives and trade promotions allowances we (1) assessed the Company’s ability to accurately estimate its sales incentive accrual by comparing previously established accruals to actual settlements, (2) evaluated conditions in the current operating environment which may affect the use of historical sales, payments, and redemption rates as inputs to the projected accrual, (3) evaluated a sample of customer and end consumer incentive payments, which are the basis for certain portions of the Company’s accrual for sales incentives and trade promotions, based on volumes sold and the terms of the sales incentives to validate the accuracy of the payment made and the lag time between product invoice and incentive redemption, and (4) evaluated certain customer and end consumer incentive accruals based on volumes sold, historic payments, and the terms of the sales incentives to test the basis of the specific customer’s projected accrual.

We evaluated the design and tested the operating effectiveness of an internal control over the Company’s determination and selection of the control premium.

We performed a sensitivity analysis over the control premium assumption to assess the impact of changes to that assumption on the Company’s determination of fair value.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating:

• the relevance of comparable transactions, including the industry and time period of the identified transactions

• the control premium by comparing it to relevant publicly available data for comparable transactions.

We have served as the Company’s auditor since 2016.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

To the Stockholders and the Board of Directors

Lamb Weston Holdings, Inc.:

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 28, 2023 and May 29, 2022, 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 28, 2023, and the related notes and consolidated financial statement schedule (collectively, the consolidated financial statements), and our report dated July 25, 2023 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired the remaining interest in Lamb-Weston/Meijer v.o.f.

(Lamb Weston EMEA), its joint venture in Europe, during the year ended May 28, 2023, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of May 28, 2023, Lamb Weston EMEA’s internal control over financial reporting associated with 30% of total assets and 7% of total net sales included in the consolidated financial statements of the Company as of and for the year ended May 28, 2023.

Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Lamb Weston EMEA.

Basis for Opinion

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Interest expense, net

Income before income taxes and equity method earnings (loss)

Income before income taxes and equity method earnings

Income tax expense

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Other comprehensive income (loss):

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

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

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Current liabilities:

Short-term borrowings

Current portion of long-term debt and financing obligations

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150,293,511 and 148,045,584 shares issued

Treasury stock, at cost, 4,627,828 and 3,974,156 common shares

Additional distributed capital

Retained earnings

Accumulated other comprehensive income (loss)

Treasury stock, at cost, 3,974,156 and 1,448,768 common shares

Accumulated other comprehensive loss

Total stockholders’ equity

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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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Repurchase of common stock and common stock withheld to cover taxes

( 2,525,388 )

Comprehensive income

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Stock-settled, stock-based compensation expense

Loss (earnings) of joint ventures in excess of distributions

Gain on acquisition of interests in joint ventures

Equity method investment earnings in excess of distributions

Deferred income taxes

Changes in operating assets and liabilities, net of acquisition:

Foreign currency remeasurement (gain) loss

Changes in operating assets and liabilities, net of acquisitions:

Income taxes payable/receivable, net

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Additions to other long-term assets

Acquisition of business, net of cash acquired

Investment in equity method investment

Acquisition of interests in joint ventures, net

Net cash used for investing activities

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Payments of senior notes call premium

(Repayments) proceeds of short-term borrowings, net

Net cash (used for) provided by financing activities

Proceeds (repayments) of short-term borrowings, net

Net cash provided by (used for) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

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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,” “us,” “our,” the “Company,” or “Lamb Weston”) 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.

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.

Basis of Presentation

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

The fiscal years for the Consolidated Financial Statements presented consist of 52 -week periods for fiscal 2022 and 2021, and a 53 -week period for fiscal 2020.

The fiscal years for the Consolidated Financial Statements presented consist of 52 -week periods.

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

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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, Equity Method Investments.

Our equity method investments are described in Note 4, Joint Venture 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, long-lived assets, and equity method investments.

On an ongoing basis, we evaluate our estimates, including but not limited to those related to the measurement of assets acquired and the liabilities assumed based on fair value at the acquisition date, provisions for income taxes, estimates of sales incentives and trade promotion allowances.

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

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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.

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

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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.

Our payment terms are consistent with industry standards and generally include early pay discounts.

Our payment terms are consistent with industry standards and generally include

early pay discounts.

Amounts billed and due from customers are short-term in nature and are classified as receivables, since payments are unconditional and only the passage of time is required before payments are due.

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

Pension and Post-Retirement Benefits

employees covered by collective bargaining agreements are covered by defined benefit pension plans.

We make pension plan contributions that are sufficient to fund our actuarially determined costs, generally equal to the minimum amounts required by the Employee Retirement Income Security Act of 1974, as amended.

From time to time, we may make discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors.

In fiscal 2023 and 2022, we made $ 2.0 million of discretionary contributions to our qualified plan.

There are no minimum required contributions in fiscal 2024, however, in July 2023, we made a $ 2.5 million discretionary contribution to our qualified pension plan.

We also have a nonqualified defined benefit pension plan that provides unfunded supplemental retirement benefits to certain U.S.

This plan is closed to new participants and pension benefit accruals are frozen for active participants.

Our pension benefit obligations and post-retirement benefit obligations, and the related costs, are calculated using actuarial concepts.

The measurement of such obligations and expenses requires that certain assumptions be made regarding several factors, most notably including the discount rate and the expected rate of return on plan assets.

We evaluate these assumptions on an annual basis.

The funded status of our plans are based on company contributions, benefit payments, the plan asset investment return, the discount rate used to measure the liability, and expected participant longevity.

The benefit obligations of the plans exceeded the assets by $ 9.3 million and $ 11.0 million for the pension plan and $ 4.3 million and $ 5.5 million for the other post-retirement benefit plan for the years ended May 28, 2023 and May 29, 2022, respectively.

We recognize the unfunded status of these plans in “Other noncurrent liabilities” on the Consolidated Balance Sheets, and we recognize changes in funded status in the year changes occur through the Consolidated Statements of Comprehensive Income.

Net periodic benefit costs were $ 2.5 million, $ 2.7 million, and $ 3.8 million in fiscal 2023, 2022, and 2021, respectively.

Participants that do not actively participate in a pension plan are eligible to participate in defined contribution savings plans with employer matching provisions.

Eligible U.S.

employees participate in a contributory defined contribution plan (“the 401(k) Plan”), which permits participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended.

Regardless of employee participation level, we generally provide a 3 % contribution to the 401(k) Plan.

In addition to this, we will generally match 100 % of the first 6 % of the participating employee’s contribution election to the 401(k) Plan.

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

We made employer-matching contributions of $ 38.7 million, $ 30.5 million, and $ 28.8 million in fiscal 2023, 2022, and 2021, respectively.

We sponsor a non-qualified deferred compensation savings plan that permits eligible U.S.

employees to continue to make deferrals and receive company matching contributions when their contributions to the 401(k) Plan are stopped due to limitations under U.S.

In addition, we sponsor a non-qualified deferred compensation plan for non-employee directors that allow directors to defer their cash compensation and stock awards.

Both deferred compensation plans are unfunded nonqualified defined contribution plans.

Participant deferrals and company matching contributions (for the employee deferred compensation plan only) are not invested in separate trusts, but are paid directly from our general assets at the time benefits become due and payable.

At May 28, 2023 and May 29, 2022, we had $ 22.6 million and $ 21.6 million, respectively, of liabilities attributable to participation in our deferred compensation plans recorded on our Consolidated Balance Sheets.

Cash and Cash Equivalents

Cash and all highly liquid investments with an original maturity of three months or less at the date of acquisition are classified as cash and cash equivalents and stated at cost, which approximates market value.

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.

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

We maintain various banking relationships with high quality financial institutions, and we invest available cash in money market funds that are backed by U.S.

Treasury securities and can be redeemed without notice.

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materials, labor, and manufacturing overhead.

Inventories are reduced to net realizable value after consideration of excess, obsolete, and unsaleable inventories based on quantities on hand and estimated future usage and sales.

The components of inventories were as follows:

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Leased Assets

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.

Leases consist of real property and machinery and equipment.

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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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.

Assets and liabilities related to 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 account for lease and non-lease components as a single lease component for all of our leases.

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The amount of interest capitalized from construction in progress was $ 17.5 million, $ 6.0 million, and $ 1.9 million in fiscal 2023, 2022, and 2021, respectively.

Construction in progress does not include deposits made on equipment, materials, and services yet to be received.

As of May 28, 2023 and May 29, 2022, deposits for construction in progress were $ 30.5 million and $ 57.8 million, respectively, and were recorded in “Other assets” on our Consolidated Balance Sheets.

Repairs and maintenance costs are expensed as incurred.

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If the carrying amount of the reporting units is in excess of their estimated fair value, the reporting unit will record an impairment charge by the amount that the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

We amortize acquisition-related intangible assets with finite lives over their estimated useful life.

We amortize intangible assets with finite lives over their estimated useful life.

We perform a review of significant finite-lived identified intangible assets to determine whether facts and circumstances indicate that the carrying amount may not be recoverable.

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When determining fair value, we consider the principal or most advantageous market in which we would transact, as well as assumptions that market participants would use when pricing the asset or liability.

Unless otherwise specified, we believe the carrying value of financial instruments approximates their fair value.

The three levels of inputs that may be used to measure fair value are:

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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 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.

Foreign currency transactions resulted in a gain of $ 19.7 million, a loss of $ 3.3 million, and a gain of $ 1.3 million in fiscal 2023, 2022, and 2021, respectively.

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

Derivative Financial Instruments

We use derivatives and other financial instruments to hedge a portion of our commodity risks.

We use derivatives and other financial instruments to hedge a portion of our commodity and interest rate risks.

We do not hold or issue derivatives and other financial instruments for trading purposes.

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We recognize current tax liabilities and assets based on an estimate of taxes payable or refundable in the current year for each of the jurisdictions in which we transact business.

As part of the determination of our current tax liability, management exercises considerable judgment in evaluating positions taken in the tax returns.

As part of the determination of our current tax liability, management exercises judgment in evaluating positions taken in the tax returns.

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained.

Recognized income tax positions

are measured at the largest amount that is greater than 50% likely of being realized.

Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized.

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

We also recognize deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences (e.g., the difference in book basis versus tax basis of fixed assets resulting from differing depreciation methods).

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are remeasured to reflect new tax rates in the periods rate changes are enacted.

If appropriate, we recognize valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be ultimately realized, based on our assessment of estimated future taxable income.

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New and Recently Issued Accounting Pronouncements

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”).

This guidance includes practical expedients for contract modifications due to reference rate reform.

Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date.

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.

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

EARNINGS PER SHARE

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(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 28, 2023, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

As of May 29, 2022 and May 30, 2021, we did no t have any stock-based awards that were antidilutive .

On July 5, 2022, we acquired an additional 40 % equity interest in Lamb Weston Alimentos Modernos S.A.

(“LWAMSA”), which increased our total equity ownership from 50 % to 90 % , and on February 28, 2023, we purchased the remaining 50 % equity interest in Lamb-Weston/Meijer v.o.f.

(“LW EMEA”), and now own 100 %.

After the acquisitions, we began consolidating the results of operations in our Global segment in our fiscal first and fourth quarters, respectively.

Prior to the acquisitions, the results of each of LWAMSA and LW EMEA were recorded in “Equity method investment earnings (loss).”

We recorded the assets and liabilities of both acquisitions at fair value based on a market approach.

We remeasured our initial equity interests at fair value, after considering control premiums in our industry, which are unobservable inputs, or Level 3, in the fair value hierarchy.

The purchase price allocation for LWAMSA is complete while the LW EMEA purchase price allocation is preliminary.

We estimated the provisional fair value of the assets acquired and liabilities assumed of LW EMEA and its subsidiaries as of the acquisition date.

These provisional amounts could change as additional information becomes available for contingent consideration;

property, plant and equipment;

intangible assets;

and residual goodwill while appraisal reports are finalized .

Fiscal 2023 net income included $ 371.7 million of after-tax ( $ 420.6 million before tax) net gains related to the acquisitions, as follows:

$ 379.5 million after-tax ( $ 425.8 million before tax) non-cash gain recorded in “Equity method investment earnings.”

$ 20.0 million of after-tax ( $ 27.0 million before tax) costs related to the step-up and sale of inventory recorded in “Cost of sales.”

$ 12.2 million of after-tax ( $ 21.8 million before tax) net gain from acquisition-related expenses (foreign currency gain related to actions taken to mitigate the effect of changes in currency rates on the purchase price, net of advisory, legal, valuation and other professional or consulting expenses).

The LWAMSA purchase price consisted of $ 42.3 million in cash.

We recorded LWAMSA’s assets and liabilities at fair value, which included remeasuring our initial equity interest at fair value.

The net sales, income from operations, and total assets acquired were not material to our consolidated net sales, income from operations, and total assets for the periods presented in this report, and therefore LWAMSA is not included in our unaudited pro forma information presented below.

As of May 28, 2023, total LWAMSA interest not directly attributable to Lamb Weston was $ 8.2 million and was recorded in “Additional distributed capital” on our Consolidated Balance Sheet.

For the fiscal year ended May 28, 2023, the net income attributable to noncontrolling interest was not significant and was recorded in “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

The total consideration for our acquisition of the remaining interest in LW EMEA (“the LW EMEA Acquisition”) was $ 1,447.5 million, which consisted of € 531.6 million ($ 564.0 million) in cash, which excluded settlement of pre-existing relationships of $ 32.3 million and cash held by LW EMEA of $ 28.2 million, and 1,952,421 shares of our common stock ($ 197.3 million on the acquisition date).

The total consideration also included $ 634.4 million for the fair value of our initial equity investment and $ 51.8 million of other non-cash consideration (the majority being settlement of preexisting relationships).

We recorded LW EMEA’s assets and liabilities at fair value.

In fiscal 2023, LW EMEA contributed $ 364.0 million of net sales and a $ 13.6 million loss from operations, which included $ 45.7 million of acquisition-related items ($ 27.0 million before tax expenses related to the sale of inventory stepped up in the acquisition and $ 18.7 million of derivative losses , before taxes).

We do not allocate interest expense and taxes to the acquired operations and therefore, the post-acquisition net earnings are not discernible.

As of May 28, 2023, total LW EMEA interest not directly attributable to Lamb Weston was $ 9.1 million and represented LW EMEA’s 75 percent ownership in a production facility in Austria, and was recorded in “Additional distributed capital” on our Consolidated Balance Sheet.

For the fiscal year ended May 28, 2023, the net loss attributable to noncontrolling interest was not significant and was recorded in “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

We have substantially completed our estimates of fair value of assets acquired and liabilities assumed.

Our estimates are subject to revisions, which may result in adjustments to the preliminary values discussed below.

The total purchase price consideration was allocated to the net assets acquired based upon their respective estimated fair values as follows:

(in millions)

Cash and cash equivalents

Prepaid expenses and other current assets

Property, plant and equipment (a)

Intangible assets (c)

Assets acquired

Accounts payable

Accrued liabilities

Short-term borrowings

Deferred income taxes

Long-term debt

Other non-current liabilities

Liabilities assumed

Net assets acquired

(a) Property, plant and equipment acquired are being depreciated on a straight-line basis over their estimated remaining lives, which range from 1 to 30 years .

(b) Goodwill is calculated as the excess of the purchase price over the fair values of the identifiable net assets acquired and recorded in our Global segment.

The goodwill is primarily attributable to future growth opportunities in Europe, the Middle East, and Africa.

For tax purposes, the acquisition of the remaining LW EMEA interest was treated as a stock acquisition and is not deductible for tax purposes.

For more information, see Note 5, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

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

Based on the carrying value of these finite-lived assets as of May 28, 2023, amortization expense for each of the next five years is estimated to be approximately $ 5.0 million.

The following unaudited pro forma financial information presents the combined results of operations as if we had acquired the remaining interest of LW EMEA on May 31, 2021.

These unaudited pro forma results are included for informational purposes only and do not purport to represent what the combined companies’ results of operations would have been had the acquisition occurred on that date, nor are they necessarily indicative of future results of operations.

They also do not reflect any cost savings, operational synergies, or revenue enhancements that we may achieve or the costs necessary to achieve those cost savings, operational synergies, revenue enhancements, or integration efforts.

For the Fiscal Years Ended May

Unaudited Pro Forma Information (in millions)

Net income (a) (b)

(a) The fiscal 2023 and 2022 unaudited pro forma financial information has been adjusted to give effect to adjustments that are directly related to the acquisition and factually supportable.

These adjustments include, but are not limited to, the application of our accounting policies;

elimination of related party transactions;

depreciation and amortization related to fair value adjustments to property, plant, and equipment and intangible assets;

and interest expense on acquisition-related debt.

(b) The fiscal 2023 unaudited pro forma net income was also adjusted to exclude a $ 410.7 million ( $ 364.4 million after-tax) non-cash gain related to the LW EMEA Acquisition, $ 27.0 million ( $ 20.0 million after-tax) of acquisition inventory step-up expense and a $ 21.8 million ( $ 12.2 million after-tax) gain from acquisition-related expenses (foreign currency gain related to actions taken to mitigate the effect of changes in currency rates on the purchase price, net of advisory, legal, valuation and other professional or consulting expenses).

These items were included in fiscal 2022 unaudited pro forma net income, along with a non-cash impairment charge of $ 62.7 million (before and after-tax) related to LW EMEA’s withdrawal from its joint venture in Russia.

JOINT VENTURE INVESTMENTS

In fiscal 2023, we purchased additional equity interests in LW EMEA and LWAMSA, and began consolidating financial results in our consolidated financial statements.

Prior to acquiring these incremental equity interests, we accounted for these investments under the equity method of accounting.

LW EMEA has a 75 percent ownership interest in a joint venture that owns a production facility in Austria, which is included in our consolidated results.

For more information, see Note 3, Acquisitions.

At May 28, 2023, Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), our joint venture with RDO Frozen Co., was the only equity method potato processing joint venture accounted for under the equity method of accounting.

Our equity method investments were as follows:

(in millions)

Lamb Weston RDO

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

For the Fiscal Years Ended May

(in millions)

Income from operations

Net income (loss) (b)

(in millions)

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

(a) The fiscal 2023 financial information includes the financial results for the parts of the fiscal year when LW EMEA and LWAMSA were being accounted for as unconsolidated joint ventures.

(b) In fiscal 2022, LW EMEA recorded a $ 125.4 million charge to write-off its net investment in its former 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

(a) The fiscal 2023 financial information includes the financial results for the part of the fiscal year when LW EMEA and LWAMSA were accounted for as unconsolidated joint ventures.

As of May 28, 2023 and May 29, 2022, we had receivables included in “Receivables” on our Consolidated Balance Sheets from our joint ventures of $ 4.5 million and $ 11.0 million, respectively.

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

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statutory rate

Increase (reduction) in rate resulting from:

Increase (decrease) in rate resulting from:

State and local taxes, net of federal benefit

Effect of taxes on foreign operations

Write-off of net investment in Russia (a)

operations (a)

Consolidation of previously held equity interests (b)

Write-off of net investment in Russia (c)

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 .

Effective income tax rate (d)

(a) We derive the effective tax rate benefit attributed to non-U.S.

income taxed at different rates, including the impact of permanent items.

The statutory tax rates range from 0 % to 35 % .

(b) In connection with the joint venture acquisitions discussed in Note 3, Acquisitions, we recorded a $ 43.1 million rate benefit based on a $ 425.8 million non-cash gain ( $ 379.5 million after-tax) related to the remeasurement of our initial 50 % equity interests to fair value.

(c) In connection with LW EMEA’s withdrawal from Russia, we reflected a $ 13.2 million tax detriment as any loss realized upon the sale of shares of the Russian joint venture is a non-deductible permanent difference.

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

The effective tax rate in fiscal 2023 included the tax impact of the remeasurement of our initial 50 % equity interests in LW EMEA and LWAMSA and other acquisition-related items.

The fiscal 2023 and 2022 tax rates were both affected by mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe experienced significant volatility.

Fiscal 2022 also included taxes related to the write-off of our portion of LW EMEA’s net investment in its former joint venture in Russia.

Excluding these items, our effective tax rate was 21.8 % and 21.4 % in fiscal 2023 and 2022, respectively.

Income Taxes Paid

4 unchanged sentences

(in millions)

Property, plant and equipment

Goodwill and other intangible assets

Property, plant and equipment (a)

Goodwill and other intangible assets (a)

Compensation and benefit related liabilities

Net operating loss and credit carryforwards (a)

Net operating loss and credit carryforwards (b)

Accrued expenses and other liabilities

1 unchanged sentence

Lease obligations

Debt issuance costs

Operating lease assets

R&D expenditures capitalization

Equity method investments

Valuation allowance (b)

Net deferred taxes (c)

(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.

Valuation allowance (c)

Net deferred taxes (d)

(a) In connection with our acquisition of LW EMEA, deferred tax liabilities increased $ 82.4 million associated with property, plant and equipment and deferred tax assets decreased $ 25.4 million associated with intangible assets.

(b) At May 28, 2023, Lamb Weston had approximately $ 7.2 million of gross ( $ 1.6 million after-tax) non-U.S.

net operating loss carryforwards, of which $ 0.8 million (after-tax) will expire by fiscal 2029.

The remaining $ 0.8 million (after-tax) non-U.S.

net operating loss carryforwards will not expire.

Lamb Weston also had a non-U.S.

tax credit carryforward of $ 1.6 million, which will expire by fiscal 2033, and a state business credit carryforward of $ 1.2 million, which will expire by fiscal 2036.

There was no impact on income tax expense related to changes in the valuation allowance, including net operating loss carryforwards, in fiscal 2023, 2022, and 2021.

(d) Deferred tax assets of $ 3.3 million and $ 2.7 million, as of May 28, 2023 and May 29, 2022, respectively, were presented in “Other assets.” Deferred tax liabilities of $ 252.1 million and $ 172.5 million as of May 28, 2023 and May 29, 2022, 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.

5 unchanged sentences

Generally, no U.S.

federal income taxes will be imposed on future distributions of foreign earnings under the current law.

federal income taxes will be imposed on future distributions of non-U.S.

earnings under the current law.

However, distributions to the U.S.

or other foreign jurisdictions could be subject to withholding and other local taxes, and these taxes would not be material.

or other jurisdictions could be subject to withholding and other local taxes, and these taxes would not be material.

Uncertain Tax Positions

4 unchanged sentences

Decreases from positions established during prior fiscal years

Increases from positions established during current and prior fiscal years

Increases from positions established during current and prior fiscal years (a)

Decreases relating to settlements with taxing authorities

Expiration of statute of limitations

Ending balance (a)

(a) If we were to prevail on the unrecognized tax benefits recorded as of May 29, 2022 and May 30, 2021, it would result in a tax benefit of $ 34.3 million and $ 31.6 million, respectively, and a reduction in the effective tax rate.

Ending balance (b)

(a) In connection with our acquisition of LW EMEA, we recognized $ 8.9 million of gross unrecognized tax benefits with a corresponding increase to goodwill.

(b) If we were to prevail on the unrecognized tax benefits recorded as of May 28, 2023 and May 29, 2022, it would result in a tax benefit of $ 52.2 million and $ 34.3 million, respectively, and a reduction in the effective tax rate.

The ending balances exclude $ 9.2 million and $ 7.3 million of gross interest and penalties in fiscal 2023 and 2022, respectively.

6 unchanged sentences

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.

tax audits may be concluded within the next 12 months.

This process 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.

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

Noncurrent assets

Current liabilities

Noncurrent liabilities

(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 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

4 unchanged sentences

Balance at May 29, 2022

Acquisitions of interests in joint ventures (a)

Foreign currency translation adjustment

Balance at May 28, 2023

(a) In fiscal 2023, we recorded $ 691.2 million and $ 42.1 million of goodwill related to the acquisition of incremental equity interests of LW EMEA and LWAMSA, respectively, that is no t deductible for tax purposes.

See Note 3, Acquisitions, for more information.

Other identifiable intangible assets were as follows:

(dollars in millions)

(in millions, except useful lives)

Non-amortizing intangible assets (a)

2 unchanged sentences

(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 Sheets.

In addition, $ 175.4 million and $ 69.6 million of developed technology at May 28, 2023 and May 29, 2022, respectively, is recorded as “Other assets” on our Consolidated Balance Sheets and will generally be amortized over seven years once implemented.

Amortization expense, including developed technology, was $ 7.0 million, $ 5.8 million, and $ 5.0 million in fiscal 2023, 2022, and 2021, 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 $ 2.6 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.

Based on current intangibles subject to amortization, we expect intangible asset amortization expense, excluding developed technology, will be approximately $ 7.3 million in fiscal 2024, $ 7.1 million in fiscal 2025, $ 7.2 million in fiscal 2026, $ 7.1 million in each of fiscal 2027 and 2028, and approximately $ 56.4 million thereafter.

Impairment Testing

6 unchanged sentences

Compensation and benefits

Accrued interest

Accrued trade promotions

Derivative liabilities and payables

Dividends payable to shareholders

Accrued interest

Current portion of operating lease obligations

Franchise, property, and sales and use taxes

Plant utilities and accruals

Taxes payable

Accrued liabilities

2 unchanged sentences

(in millions)

Interest Rate

Short-term borrowings:

revolving credit facility

Euro revolving credit facility

Other credit facilities

Long-term debt:

Term A-1 loan facility, due June 2024

Term A-2 loan facility, due April 2025

Term A-1 loan facility, due June 2026 (b)

Term A-2 loan facility, due April 2025 (b)

Term A-3 loan facility, due January 2030 (b)

RMB loan facility, due February 2027

4.625 % senior notes, due November 2024

4.875 % senior notes, due November 2026

Euro loan facility, due December 2024

4.875 % senior notes, due May 2028

2 unchanged sentences

Financing obligations:

Lease financing obligations due on various dates through 2040 (a)

Lease financing obligations due on various dates through 2040 (c)

Total debt and financing obligations

Debt issuance costs (b)

Debt issuance costs and debt discounts (d)

Short-term borrowings, net of debt discounts

Current portion of long-term debt and financing obligations

Long-term debt and financing obligations, excluding current portion

(a) The interest rates on our lease financing obligations ranged from 2.08 % to 3.32 % at May 29, 2022 and 2.49 % to 4.10 % at May 30, 2021, respectively.

(a) The other credit facilities consist of several short-term facilities at one of our subsidiaries used for working capital needs and have various interest rates.

(b) The interest rates on the Term A-1, A-2, and A-3 loans do not include anticipated patronage dividends.

We have received and expect to continue receiving patronage dividends under all three Term Loan Facilities.

(c) The interest rates on our lease financing obligations ranged from 2.08 % to 6.19 % at May 28, 2023 and 2.08 % to 3.32 % at May 29, 2022.

For more information on our lease financing obligations, see Note 9, Leases.

(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.

(d) Excludes debt issuance costs of $ 2.5 million and $ 3.3 million as of May 28, 2023 and May 29, 2022, respectively, related to our U.S.

Revolving Credit Facility, which are recorded in “Other assets” on our Consolidated Balance Sheets.

In fiscal 2023, 2022, and 2021, we recorded $ 4.1 million, $ 4.8 million, and $ 6.1 million, respectively, of amortization expense in “Interest expense” in our Consolidated Statements of Earnings.

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.

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

Revolving Credit Facility

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

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 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.

The Amended Revolving Credit Facility also contains 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.

Upon the occurrence of an event of default, among other things, amounts outstanding under the credit facility may be accelerated and the commitments may be terminated.

Our obligations under the Amended Revolving Credit Facility are unconditionally guaranteed by certain of our direct and indirect domestic subsidiaries on the terms set forth in the credit agreement.

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.

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

We are party to a senior secured credit agreement, dated as of November 9, 2016, as amended, that provides available revolving credit facility borrowings of $ 1.0 billion through August 11, 2026 (“U.S.

Revolving Credit Facility”).

In June 2023, we further amended our U.S.

Revolving Credit Facility to fully transition from LIBOR to a Secured Overnight Financing Rate (“SOFR”).

As part of that amendment, the SOFR Adjustment with respect to Term SOFR was set at 0.10 % for any interest period.

Borrowings under the U.S.

Revolving Credit Facility bear interest at SOFR (including the SOFR Adjustment), the Base Rate, the Alternative Currency Daily Rate, or the Alternative Currency Term Rate (each as defined in the U.S.

Revolving Credit Facility) plus an applicable rate stated in the table below.

Revolving Credit Facility contains certain covenant restrictions, a consolidated net leverage ratio and an interest coverage ratio and customary events of default.

At May 28, 2023 and May 29, 2022, we had no borrowings outstanding under the U.S.

Revolving Credit Facility.

At May 28, 2023, we had $ 994.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million.

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

On June 28, 2019, we entered into a credit agreement, among Lamb Weston, certain of our subsidiaries as guarantors, certain lenders, and Northwest Farm Credit Services, PCA, as administrative agent for the lenders, providing for a $ 300.0 million term loan facility and, under certain circumstances, the ability to add incremental facilities in an aggregate amount of up to $ 100.0 million (collectively, “Term A-1 Loan Facility”).

Borrowings on the Term A-1 Loan Facility amortize in equal quarterly installments for a total of 5 % annually, with the balance payable in June 2024.

Borrowings under the Term A-1 Loan Facility bear interest, before anticipated patronage dividends, at LIBOR or the Base Rate (as defined in the Term A-1 Loan Facility agreement) plus an applicable margin ranging from 1.625 % to 2.375 % for LIBOR-based loans and from 0.625 % to 1.375 % for Base Rate-based loans, depending upon our consolidated net leverage ratio.

During the years ended May 29, 2022 and May 30, 2021, the average interest rate on the Term A-1 Loan Facility was approximately 1.86 % and 1.77 %, respectively.

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

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”).

Borrowings under the Term A-2 Loan Facility bear interest, before anticipated patronage dividends, at LIBOR or the Base Rate (as defined in the Term A-2 Loan Facility agreement) plus an applicable rate ranging from 1.850 % to 2.600 % for LIBOR-based loans and from 0.850 % to 1.600 % for Base Rate-based loans, depending on our consolidated net leverage ratio.

Borrowings on the Term A-2 Loan Facility amortize in equal quarterly installments for a total of 5 % annually, with the balance payable in April 2025.

During the years ended May 29, 2022 and May 30, 2021, the average interest rate on the Term A-2 Loan Facility was approximately 2.15 % and 2.34 %, respectively.

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

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 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 .

Term A-1, A-2 and A-3 Loan Facilities

We are party to a credit agreement, dated as of June 28, 2019, as amended, that provides for (i) a $ 300.0 million term loan facility and, under certain circumstances, the ability to add incremental facilities in an aggregate amount of up to $ 100.0 million (collectively, “Term A-1 Loan Facility”), and (ii) a $ 325.0 million term loan facility due April 2025 (“Term A-2 Loan Facility”).

On January 31, 2023 , we further amended the credit agreement relating to our Term A-1 and A-2 Loan Facilities (“Amended Term Loan Agreement”) to, among other things, establish a new $ 450.0 million term loan facility with a maturity date of January 31, 2030 (“Term A-3 Loan Facility”) and extend the maturity of our existing Term A-1 loan from June 28, 2024 to June 28, 2026 .

Borrowings under the Term A-3 Loan Facility were used to purchase the remaining equity interest in LW EMEA, and bear interest, before anticipated patronage dividends, at the Adjusted Term SOFR or the Base Rate (as defined in the Amended Term Loan Agreement) plus an applicable rate noted in the table below.

Under the Amended Term Loan Agreement, LIBOR-based rates have been replaced with SOFR-based rates.

Effective February 28, 2023, the Term A-1 and A-2 loan interest rates are SOFR based (with a SOFR adjustment) and Base Rate-based loans and the Term A-1 loan applicable margin increased to match the applicable margin of our Term A-2 loan.

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 %.

On February 18, 2022 , our wholly owned subsidiary, Ulanqab Lamb Weston Food Co., Ltd., entered into a facility agreement providing for a RMB 1,079.0 million (approximately $ 152.7 million based on prevailing interest exchange rates on May 28, 2023) term loan facility (the “RMB Loan Facility”).

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.

The RMB Loan Facility contains covenants that are standard for credit facilities originated in the People’s Republic of China.

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

In May 2020, we issued $ 500.0 million aggregate principal amount of 4.875 % senior notes due in 2028 (“2028 Notes”) pursuant to an indenture, dated as of May 12, 2020, among Lamb Weston, certain of our subsidiaries as guarantors and Wells Fargo Bank, National Association, as trustee.

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.

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

The 2028 Notes are senior unsecured obligations and rank equally with all of our current and future senior indebtedness (including the 2030 and 2032 Notes), 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 2028 Notes is due semiannually.

In May 2020, we issued $ 500.0 million aggregate principal amount of 4.875 % senior notes due May 15, 2028 (“2028 Notes”).

Our obligations under the 2028 Notes are unconditionally guaranteed on a senior unsecured basis by the same subsidiaries as the U.S.

Revolving Credit Facility.

Revolving Credit Facility and Term A-1, A-2, and A-3 Loan Facilities to the extent of the value of the assets securing such indebtedness).

Upon a change of control (as defined in the indenture governing the 2028 Notes), we must offer to repurchase the 2028 Notes at 101 % of the principal amount of the notes, plus accrued and unpaid interest.

Prior to November 15, 2027, we may redeem the 2028 Notes, 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.

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 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.

On November 8, 2021 , we issued (i) $ 970.0 million aggregate principal amount of 4.125 % senior notes due January 31, 2030 (“2030 Notes”) and (ii) $ 700.0 million aggregate principal amount of 4.375 % senior notes due January 31, 2032 (“2032 Notes”) pursuant to indentures, each dated as of November 8, 2021 (together, the “Indentures”).

Our obligations under the 2030 Notes and 2032 Notes are unconditionally guaranteed on a senior unsecured basis by the same subsidiaries as the U.S.

Revolving Credit Facility .

The 2030 Notes and 2032 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 2030 Notes and 2032 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 2030 Notes and 2032 Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

Euro Revolving Credit Facility and Loan Facility

In connection with the LW EMEA Acquisition, we assumed the liability associated with a term loan (“Euro Loan”) and a revolving credit facility (“Euro Revolving Credit Facility”).

On December 10, 2021 , LW EMEA entered into the Euro Loan for € 75.0 million and Euro Revolving Credit Facility for € 400.0 million with certain lenders for a total amount of € 475.0 million (approximately $ 509.3 million based on prevailing interest exchange rates on May 28, 2023).

The Euro Loan and Euro Revolving Credit Facility contain covenants that are standard for credit facilities including, among others, financial covenants, covenants with regards to mergers and consolidations and asset sales, and is subject to acceleration upon various events of default.

The Euro Loan interest rate is dependent on the ratio of consolidated net borrowing to adjusted consolidated EBITDA, and matures on December 10, 2024 .

The Euro Revolving Credit Facility interest rate is dependent on the ratio of consolidated total net borrowings to adjusted consolidated EBITDA.

It matures on December 10, 2026 , with an option to extend for two individual years.

For the three months ended May 28, 2023, we drew € 45.0 million available under the Euro Revolving Credit Facility and repaid € 10.0 million.

At May 28, 2023, we had € 260.0 million of availability under the facility.

Other Credit Facilities

At May 28, 2023 and May 29, 2022, one of our subsidiaries had $ 51.0 million and $ 53.7 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.

Variable Rate Interest

Additional information regarding our variable rate debt modifiers is shown below:

SOFR/LIBOR Rate-Based Loans

Base Rate-Based Loans

Revolving Credit Facility

1.125 - 1.750 %

0.125 - 0.750 %

Term A-1 Loan Facility

1.850 - 2.600 %

0.850 - 1.600 %

Term A-2 Loan Facility

1.850 - 2.600 %

0.850 - 1.600 %

Term A-3 Loan Facility

2.000 - 2.750 %

1.000 - 1.750 %

Reference Rate-Based Loans

PRC Prime Rate-Based Loans

RMB Loan Facility

Prime + 0.300 %

Euro Loan Facility

0.400 - 1.100 %

Euro Revolving Credit Facility (British Pound Loans)

1.250 - 2.100 %

Euro Revolving Credit Facility (Other Loans)

1.050 - 1.900 %

Debt Maturities

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During fiscal 2023, 2022, and 2021, we paid $ 151.8 million, $ 80.6 million, and $ 120.6 million, respectively, of interest on debt.

The increase in fiscal 2023 relates to higher interest rates on variable rate debt and debt facilities associated with the LW EMEA Acquisition.

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

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Financing cash flows for finance leases

Noncash investing and financing activities:

Non-cash investing and financing activities:

Assets obtained in exchange for new operating lease obligations

Assets obtained in exchange for new finance lease obligations

EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS

Only certain hourly employees covered by certain collective bargaining agreements continue to accrue pension benefits.

Participants that do not actively participate in a pension plan are eligible to participate in defined contribution savings plans with employer matching provisions consistent with other employees without pension benefits.

We also have a nonqualified defined benefit pension plan that provides unfunded supplemental retirement benefits to certain executives.

This plan is closed to new participants and pension benefit accruals are frozen for active participants.

Eligible U.S.

employees participate in a contributory defined contribution plan (“the Plan”).

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

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.

We made employer-matching contributions of $ 30.5 million, $ 28.8 million, and $ 28.7 million in fiscal 2022, 2021, and 2020, respectively.

We sponsor a deferred compensation savings plan that permits eligible employees to continue to make deferrals and receive company matching contributions when their contributions to the defined contribution plan are stopped due to limitations under U.S.

In addition, we sponsor a deferred compensation plan for non-employee directors that allow directors to defer their cash compensation and stock awards.

Both deferred compensation plans are unfunded nonqualified defined contribution plans.

At May 29, 2022 and May 30, 2021, we had $ 21.6 million and $ 23.5 million, respectively, of liabilities attributable to participation in our deferred compensation plan recorded on our Consolidated Balance Sheets.

Obligations and Funded Status of Defined Benefit Pension and Other Post-retirement Benefit Plans

The funded status of our plans is based on company contributions, benefit payments, the plan asset investment return, the discount rate used to measure the liability, and expected participant longevity.

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:

For the Fiscal Years Ended May

(in millions)

Pension Plans

Post-Retirement Plan

Pension Plans

Post-Retirement Plan

Change in benefit obligation

Benefit obligation at beginning of year

Interest cost

Participant contributions

Plan amendments

Benefits paid

Actuarial (gain) loss

Benefit obligation at fiscal year end

Accumulated benefit obligation portion of above

Change in fair value of plan assets

Fair value of plan assets at beginning of year

Actual return on plan assets

Company contributions

Participant contributions

Benefits paid

Fair value of plan assets at end of year

Underfunded status

Amounts recognized on Consolidated Balance Sheets

Accrued liabilities

Other noncurrent liabilities

Accrued obligation recognized

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

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:

For the Fiscal Years Ended May

Post-Retirement

(in millions)

Interest cost

Expected return on plan assets

Net amortization of unrecognized amounts

Actuarial loss

Net periodic benefit cost (a)

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

Prior service cost

Actuarial (gain) loss

Amortization of actuarial loss (b)

Total recognized in other comprehensive loss (income)

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 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 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:

For the Fiscal Years Ended May

Pension Plans

Post-Retirement Plan

Pension Plans

Post-Retirement Plan

Pension Plans

Post-Retirement Plan

Weighted-average assumptions used to determine benefit obligations:

Discount rate

Weighted-average assumptions used to determine net periodic benefit cost:

Discount rate

Expected return on plan assets

Discount Rate Assumption.

The discount rate reflects the current rate at which the pension and post-retirement benefit obligations could be settled on the measurement date:

May 29, 2022.

The discount rate assumption used to calculate the present value of pension and post-retirement benefit obligations reflects the rates available on high-quality bonds on May 29, 2022.

The bonds included in the models reflect anticipated investments that would be made to match the expected monthly benefit payments over time.

The plans’ projected cash flows were duration-matched to these models to develop an appropriate discount rate.

The discount rate we will use in fiscal 2023 to calculate the net periodic pension benefit cost and post-retirement benefit cost is 4.42 % and 4.41 %, respectively.

Asset Return Assumption:

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.

The expected long-term rate of return is adjusted when there are fundamental changes in expected returns on the plan investments.

The weighted-average expected return on plan assets we will use in our calculation of fiscal 2023 net periodic pension benefit cost is 2.00 %.

Health Care Cost Trend Rate Assumptions.

We review external data and historical trends for health care costs to determine our health care cost trend rate assumptions .

We assumed health care cost trend rates for our post-retirement benefit plan obligation as follows:

Health care cost trend rate assumed for next year (Pre65)

Ultimate health care cost trend rate

Year that the rate reaches the ultimate trend rate

Investment Policies and Strategies and Fair Value Measurements of Plan Assets

We utilize professional advisors to oversee pension investments and provide recommendations regarding investment strategy.

Our overall strategy and related apportionments between equity and debt securities may change from time to time based on market conditions, external economic factors, timing of contributions and the funded status of the plans.

The general investment objective for all of our plan assets is to optimize growth of the pension plan trust assets, while minimizing the risk of significant losses to enable the plans to satisfy their benefit payment obligations over time.

The objectives consider the long-term nature of the benefit obligations, the liquidity needs of the plans, and the expected risk/return trade-offs of the asset classes in which the plans may choose to invest.

Our current investment policy is to invest 30 % in equity securities and 70 % in fixed income securities.

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:

Fair Value Measurements at May 29, 2022

Quoted Market Prices in Active Markets for Identical Assets

Significant Observable Market-Based Inputs

Significant Unobservable Inputs

(in millions)

Cash and cash equivalents

Equity securities:

equity securities (a)

International equity securities (a)

Fixed income securities:

Government securities (b)

Fair Value Measurements at May 30, 2021

Quoted Market Prices in Active Markets for Identical Assets

Significant Observable Market-Based Inputs

Significant Unobservable Inputs

(in millions)

Cash and cash equivalents

Equity securities:

equity securities (a)

International equity securities (a)

Fixed income securities:

Government securities (b)

(a) Includes investments in common/collective trust funds that are valued using net asset values (“NAV”) provided by the administrator of the funds.

The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of units outstanding.

While the underlying assets are actively traded on an exchange, the funds are not.

There are currently no redemption restrictions or unfunded commitments on these investments.

There are certain funds with thirty-day redeemable notice requirements.

(b) Includes investments in exchange-traded funds based on quoted prices in active markets.

Funding and Cash Flows

From time to time, we may make discretionary contributions based on the funded status of the plans, tax deductibility, income from operations, and other factors.

In fiscal 2022, we made $ 2.0 million of discretionary contributions to our qualified plan.

There are no minimum required contributions in fiscal 2023, however, in July 2022, we made a $ 2.0 million discretionary contribution to our qualified pension plan.

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.

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

(in millions)

Pension Plans

Post-Retirement Plan

STOCK-BASED COMPENSATION

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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 .

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

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

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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 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:

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

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 following the grant date, 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 determined using a Monte Carlo simulation, and are amortized over the service period.

The weighted average Monte Carlo assumptions for Performance Shares granted during the fiscal year ended May 28, 2023 were:

Dividend yield (%)

Expected volatility of stock (%)

Risk-free interest rate (%)

Expected life (years)

Weighted average grant date fair value per unit

91.43 - $ 118.97

The following table summarizes RSU and Performance Shares activity for fiscal 2023:

Performance Shares

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RSUs that are expected to vest are net of estimated future forfeitures.

Stock Options

Under some circumstances, we have granted options to employees and non-employee directors to purchase shares of our common stock at exercise prices equal to the fair market value of the underlying common stock on the grant date.

Options granted to employees generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of seven years .

Options granted to non-employee directors generally vest one year after the grant date and have a term of ten years .

During the fifty-two weeks ended May 28, 2023, we granted 0.6 million stock options at a weighted-average grant date fair value of $ 25.93 .

The following table provides the related assumptions used in the Black-Scholes model used to determine the fair value of stock options granted during the fiscal year ended May 28, 2023:

Dividend yield (%)

Expected volatility of stock (%)

33.73 - 34.06

Risk-free interest rate (%)

Expected life of stock option (years)

The following table summarizes stock option activity for fiscal 2023:

(in millions)

Outstanding at May 29, 2022

Forfeited/cancelled

Outstanding at May 28, 2023

Exercisable at May 28, 2023

(a) The aggregate intrinsic values represent the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of our fiscal 2023, or $ 109.45 as of May 26, 2023, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at the end of the fiscal year.

The amount changes based on the fair market value of our common stock.

Compensation Expense

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Stock-settled compensation expense

Cash-settled RSUs

Total compensation expense

Income tax benefit (a)

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Performance Shares

Stock options

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 29, 2022 and May 30, 2021:

As of May 28, 2023

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Derivative assets (a)

Derivative liabilities (a)

Deferred compensation liabilities (b)

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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.

(a) Derivative assets and liabilities included in Level 2 primarily represent commodity swaps, option contracts, interest rate swaps and currency 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 and foreign currencies.

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

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Share Repurchase Program

In December 2018, our Board of Directors authorized a program, with no expiration date, to repurchase shares of our common stock in an amount not to exceed $ 250.0 million in the aggregate, on an opportunistic basis.

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.

Our Board of Directors has authorized a program, with no expiration date, to repurchase up to $500.0 million of our common stock.

During fiscal 2023, we purchased an aggregate of 569,698 shares for $ 45.0 million, or a weighted-average price of $ 78.99 per share.

As of May 28, 2023, $ 223.9 million remained authorized for repurchase under the program.

During fiscal 2022, 2021, and 2020, we paid $ 138.4 million, $ 135.3 million, and $ 121.3 million, respectively, of dividends to common stockholders.

On July 20, 2022 , our Board of Directors declared a dividend of $ 0.245 per share of common stock.

The dividend will be paid on September 2, 2022 , to stockholders of record as of the close of business on August 5, 2022 .

During fiscal 2023, 2022, and 2021, we paid $ 146.1 million, $ 138.4 million, and $ 135.3 million, respectively, of cash dividends to common stockholders.

On June 2, 2023, we paid $ 40.8 million of dividends to stockholders of record as of the close of business on May 5, 2023.

On July 19, 2023 , our Board of Directors declared a cash dividend of $ 0.280 per share of common stock.

This dividend will be paid on September 1, 2023 , to stockholders of record as of the close of business on August 4, 2023 .

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

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(in millions)

Gains (Losses)

Income (Loss)

Balance as of May 29, 2022

Other comprehensive income before reclassifications, net of tax

Amounts reclassified out of AOCI, net of tax

Other comprehensive income (loss) before reclassifications, net of tax

Net current-period other comprehensive income (loss)

Balance as of May 28, 2023

(a) These AOCI components are included in the computation of net pension and postretirement benefit costs.

See Note 9, Employee Benefit Plans and Other Post-Retirement Benefits, for additional information.

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

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Advertising and promotion expenses (a)

Selling, general and administrative expenses

Selling, general and administrative expenses (d)

Income from operations

Interest expense, net (c)

Interest expense, net (e)

Income tax expense

Equity method investment earnings (loss) (d)

Equity method investment earnings (loss) (f)

(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 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.

(b) The fiscal year ended May 28, 2023 included a charge of $ 27.0 million ( $ 20.0 million after-tax) related to the step-up and sale of inventory acquired from LW EMEA.

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

(d) Selling, general and administrative expenses for the fiscal year ended May 28, 2023 included a net $ 21.8 million ( $ 12.2 million after-tax) gain related to actions taken to mitigate the effect of changes in currency rates on our purchase of the remaining equity interest in LW EMEA, net of other acquisition-related costs.

(e) The fiscal year ended May 29, 2022 included a loss on extinguishment of debt of $ 53.3 million ( $ 40.5 million after-tax), which includes a call premium of $ 39.6 million related to the redemption of our senior notes due 2024 and 2026, and the write-off of $ 13.7 million of previously unamortized debt issuance costs associated with those notes.

(f) Equity method investment earnings (loss) for the fiscal year ended May 28, 2023 included a $ 425.8 million ( $ 379.5 million after-tax) gain recognized in connection with our purchase of an additional 50 % equity interest in LW EMEA, increasing our equity ownership from 50 % to 100 % , and our purchase of an additional 40 % equity interest in LWAMSA, increasing our equity ownership from 50 % to 90 % .

The gains related to remeasuring our initial equity interests in LW EMEA and LWAMSA to fair value.

See Note 3, Acquisitions, for additional information.

Equity method investment earnings (loss) also included a $ 37.8 million ($ 28.0 million after-tax) unrealized loss, a $ 31.7 million ($ 23.5 million after-tax) unrealized gain, and a $ 8.6 million ($ 6.4 million after-tax) unrealized gain for the fiscal years ended May

28, 2023, May 29, 2022, and May 30, 2021, 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.

I n May 2022, LW EMEA announced its intent to withdraw from its joint venture investment in Russia.

As a result, LW EMEA determined that its net investment in Russia was impaired and recognized a non-cash impairment charge, of which our portion was $ 62.7 million (before and after-tax).

Assets by Segment

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Concentrations

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.

Lamb Weston’s largest customer, McDonald’s Corporation, accounted for approximately 13 %, 10 %, and 11 % of our consolidated net sales in fiscal 2023, 2022, and 2021, respectively.

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

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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.

With respect to operations outside of the U.S., no single foreign country was significant with respect to consolidated operations in fiscal 2023, 2022, and 2021, however our international presence is growing.

Foreign net sales, including sales by domestic segments to customers located outside of the U.S., were $ 1,225.2 million, $ 682.7 million, and $ 700.2 million in fiscal 2023, 2022, and 2021, respectively.

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

are not significant.

Foreign long-lived assets are $ 1,195.8 million as of May 28, 2023.

Foreign long-lived assets were not significant as of May 29, 2022.

At May 28, 2023, we had approximately 10,200 employees, of which approximately 2,500 of these employees work outside of the U.S.

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

Fiscal 2024 Segment Realignment

Effective May 29, 2023, in connection with our recent acquisitions and to align with our expanded global footprint, our management, including our chief executive officer, who is our chief operating decision maker, began managing our operations as two business segments based on management’s change to the way it monitors performance, aligns strategies, and allocates resources.

This resulted in a change from four reportable segments to two (North America and International), effective the beginning of fiscal 2024.

All summary financial information on a prospective basis will be presented under the new reportable segments beginning with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ending August 27, 2023.

COMMITMENTS, CONTINGENCIES, GUARANTEES, AND LEGAL PROCEEDINGS

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Total purchases under all our potato supply agreements were $ 844.6 million, $ 717.6 million, and $ 621.4 million in fiscal 2023, 2022, and 2021, 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.

We had capital commitments of approximately $ 623.9 million and $ 304.7 million as of May 28, 2023 and May 29, 2022, respectively, that represent commitments for construction of previously announced plants, french fry production lines, or plant modernization investments.

Capital commitments were not recorded as liabilities on our Consolidated Balance Sheets as of May 28, 2023 as we had not yet received the related goods nor taken title to the property.

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The aggregate amounts of these advances were $ 22.5 million and $ 28.1 million at May 28, 2023 and May 29, 2022, 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.

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Legal Proceedings

We are a party to legal actions arising in the ordinary course of our business.

We are a party to various 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.

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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