What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-05 compared with 2023-04-06 · 141 added, 232 removed, 218 unchanged (63% of the section changed)

4 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

Cost of sales

4 unchanged sentences

Income tax expense

Equity method investment (loss) earnings

Equity method investment earnings

Earnings per share:

6 unchanged sentences

Thirteen Weeks Ended

February 26, 2023

February 27, 2022

Other comprehensive income (loss):

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

Unrealized currency translation gains (losses)

Comprehensive income

Thirty-Nine Weeks Ended

February 26, 2023

February 27, 2022

August 27, 2023

August 28, 2022

Other comprehensive income (loss):

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

Unrealized pension and post-employment benefit obligations

Unrealized currency translation gains (losses)

11 unchanged sentences

Operating lease assets

Equity method investments

Intangible assets, net

15 unchanged sentences

150,679,160 and 150,293,511 shares issued

Treasury stock, at cost, 5,752,260 and 4,627,828 common shares

Additional distributed capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock, at cost, 4,587,296 and 3,974,156 common shares

Total stockholders’ equity

4 unchanged sentences

(unaudited, in millions, except share data )

Thirteen Weeks Ended February 26, 2023 and February 27, 2022

Common Stock,

net of Treasury

(Distributed)

Comprehensive

Stockholders’

Income (Loss)

Balance at November 27, 2022

Dividends declared, $ 0.280 per share

Common stock issued

Stock-settled, stock-based compensation expense

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income

Balance at February 26, 2023

Balance at November 28, 2021

Dividends declared, $ 0.245 per share

Common stock issued

Stock-settled, stock-based compensation expense

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income

Balance at February 27, 2022

Thirty-Nine Weeks Ended February 26, 2023 and February 27, 2022

Thirteen Weeks Ended August 27, 2023 and August 28, 2022

Common Stock,

9 unchanged sentences

Repurchase of common stock and common stock withheld to cover taxes

Comprehensive income (loss)

Balance at February 26, 2023

( 1,124,432 )

Comprehensive income

Balance at August 27, 2023

Balance at May 29, 2022

3 unchanged sentences

Repurchase of common stock and common stock withheld to cover taxes

( 2,144,671 )

Comprehensive income (loss)

Balance at February 27, 2022

Comprehensive income

Balance at August 28, 2022

See Condensed Notes to Consolidated Financial Statements.

2 unchanged sentences

(unaudited, in millions)

Thirty-Nine Weeks Ended

Thirteen Weeks Ended

Cash flows from operating activities

1 unchanged sentence

Depreciation and amortization of intangibles and debt issuance costs

Loss on extinguishment of debt

Stock-settled, stock-based compensation expense

1 unchanged sentence

Deferred income taxes

Foreign currency remeasurement gain

Changes in operating assets and liabilities, net of acquisition:

Changes in operating assets and liabilities, net of acquisitions:

Income taxes payable/receivable, net

6 unchanged sentences

Additions to other long-term assets

Acquisition of interest in joint venture, net

Acquisition of interests in joint ventures, net

Net cash used for investing activities

1 unchanged sentence

Proceeds from issuance of debt

Repayments of short-term borrowings, net

Repayments of debt and financing obligations

1 unchanged sentence

Repurchase of common stock and common stock withheld to cover taxes

Payments of senior notes call premium

Net cash provided by (used for) financing activities

Net cash used for financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

5 unchanged sentences

Lamb Weston Holdings, Inc.

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

We have four reportable segments:

Global, Foodservice, Retail, and Other.

(“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 two reportable segments:

North America and International.

See Note 12, Segments, for additional information on our reportable segments.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen and thirty-nine weeks ended February 26, 2023 and February 27, 2022, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S”).

The accompanying unaudited Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen weeks ended August 27, 2023 and August 28, 2022, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”).

These consolidated financial statements are unaudited and include all adjustments that we consider necessary for a fair presentation of such financial statements and consist only of normal recurring adjustments.

4 unchanged sentences

We filed the Form 10-K with the Securities and Exchange Commission on July 25, 2023.

Effective May 29, 2023, in connection with our recent acquisitions and to align with our expanded global footprint, we began managing our operations in two reportable segments, North America and International, as further described in Note 12, Segments.

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

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

2 unchanged sentences

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(in millions, except per share amounts)

4 unchanged sentences

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

As of February 26, 2023, 0.6 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

As of February 27, 2022, 0.1 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Income tax expense was $ 42.1 million and $ 31.1 million for the thirteen weeks ended February 26, 2023 and February 27, 2022, respectively;

and $ 152.6 million and $ 49.4 million for the thirty-nine weeks ended February 26, 2023 and February 27, 2022, respectively.

The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 19.4 % and 22.6 % for the thirteen weeks ended February 26, 2023 and February 27, 2022, respectively;

and 23.0 % and 22.6 % for the thirty-nine weeks ended February 26, 2023 and February 27, 2022, respectively, in our Consolidated Statements of Earnings.

As of August 27, 2023, 0.2 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

As of August 28, 2022, 0.6 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.

Income tax expense for the thirteen weeks ended August 27, 2023 and August 28, 2022 was as follows:

Thirteen Weeks Ended

(in millions)

Income before income taxes and equity method earnings

Equity method investment earnings

Income tax expense

Effective tax rate (a)

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

The effective tax rate varies from the U.S.

1 unchanged sentence

state taxes, foreign taxes and currency, permanent differences, and discrete items.

Excluding the impact of the following items, our effective tax rate was 23.4 % for the thirty-nine weeks ended February 26, 2023:

● Gain associated with the acquisition of an additional 40 % interest in our Argentina joint venture, Lamb Weston Alimentos Modernos S.A.

(“LWAMSA”), which is discussed in Note 6, Joint Venture Investments.

● Gains related to actions taken to mitigate the effect of changes in currency rates on our purchase of the remaining 50 % equity interest in Lamb-Weston/Meijer v.o.f.

(“LW EMEA”), net of other acquisition-related costs (“New Acquisition Gain”).

See Note 6, Joint Venture Investments, for more information.

● Mark-to-market adjustments associated with changes in natural gas and electricity derivatives at LW EMEA, which is discussed in Note 13, Segments.

Excluding the impact of the New Acquisition Gain and LW EMEA mark-to-market adjustments during the thirteen weeks ended February 26, 2023, our effective tax rate was 20.3 %.

Excluding the impact of the following items, our effective tax rate was 23.1 % for the thirteen weeks ended August 27, 2023:

● Integration and acquisition-related expenses recognized in connection with our acquisition of the remaining 50 % equity interest (the “LW EMEA Acquisition”) in Lamb-Weston/Meijer v.o.f., our former European joint venture (“LW EMEA”).

● The step-up and sale of inventory related to the LW EMEA Acquisition.

● Mark-to-market adjustments associated with changes in commodity and currency derivatives.

● Foreign currency exchange losses.

Excluding the impact of mark-to-market adjustments associated with changes in commodity and currency derivatives, our effective tax rate was 25.0 % for the thirteen weeks ended August 28, 2022.

Income Taxes Paid

Income taxes paid, net of refunds, were $ 168.5 million and $ 17.2 million during the thirty-nine weeks ended February 26, 2023 and February 27, 2022, respectively.

Income taxes paid, net of refunds, were $ 4.2 million during the thirteen weeks ended August 27, 2023.

Income tax refunds, net of taxes paid, were $ 3.2 million during the thirteen weeks ended August 28, 2022.

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

15 unchanged sentences

Property, plant and equipment, net

Depreciation expense was $ 48.8 million and $ 45.3 million for the thirteen weeks ended February 26, 2023 and February 27, 2022, respectively;

and $ 145.8 million and $ 134.5 million for the thirty-nine weeks ended February 26, 2023 and February 27, 2022, respectively.

At February 26, 2023 and May 29, 2022, purchases of property, plant and equipment included in accounts payable were $ 71.8 million and $ 38.3 million, respectively.

Interest capitalized within construction in progress for the thirteen weeks ended February 26, 2023 and February 27, 2022, was $ 5.8 million and $ 1.2 million, respectively;

and $ 11.9 million and $ 4.0 million for the thirty-nine weeks ended February 26, 2023 and February 27, 2022, respectively.

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

As of February 26, 2023 and May 29, 2022, deposits for construction in progress were $ 139.0 million and $ 57.8 million, respectively, and were recorded in “Other assets” on our Consolidated Balance Sheets.

JOINT VENTURE INVESTMENTS

Consolidated Joint Venture

In July 2022 , we acquired an additional 40 % equity interest in LWAMSA, which increased our total equity ownership from 50 % to 90 %.

We recorded LWAMSA’s assets and liabilities at fair value, which included remeasuring our previously held equity interest at fair value, and for the thirty-nine weeks ended February 26, 2023, we recognized a $ 15.1 million gain in “Equity method investment earnings” in our Consolidated Statement of Earnings.

The fair value was determined utilizing industry EBITDA multiples and control premium comparable information, which are unobservable inputs, or Level 3 in the fair value hierarchy.

We recorded the preliminary fair values as of the date of acquisition.

In connection with our purchase of the additional equity interest in LWAMSA, we ceased equity method accounting and began consolidating LWAMSA’s financial results in our consolidated financial statements during our fiscal first quarter.

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.

LWAMSA’s operating results are included in our Global segment.

In September 2022, we announced an expansion of french fry processing capacity in Argentina with the planned construction of a new manufacturing facility in Mar del Plata.

The new production facility is expected to have the capacity to produce more than 200 million pounds of frozen french fries and other potato products per year.

Construction of the new line is expected to be completed in fiscal 2025.

Our total investment in this new production facility is expected to be approximately $ 240 million.

This investment will add to the capacity produced at LWAMSA’s existing production facility in Buenos Aires.

Noncontrolling Interest (“NCI”)

As of February 26, 2023, total LWAMSA interest not directly attributable to Lamb Weston, or NCI, was $ 8.4 million and was recorded in “Additional distributed capital” on our Consolidated Balance Sheet.

For the thirteen and thirty-nine weeks ended February 26, 2023, the net loss attributable to NCI was not significant and was recorded in “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

Unconsolidated Joint Ventures

Our equity method investments were as follows:

(in millions)

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

(a) As of the end of our fiscal third quarter, we owned 50 % of LW EMEA, a joint venture with Meijer Frozen Foods B.V.

LW EMEA is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe and the Middle East.

In September 2022, LW EMEA completed the previously announced withdrawal from its joint venture in Russia.

(b) We own 50 % of Lamb Weston RDO, a joint venture with RDO Frozen Co., that operates a potato production facility in the U.S.

(c) In July 2022, we acquired an additional 40 % equity interest in LWAMSA, increasing our total equity ownership to 90 % and began consolidating LWAMSA’s financial results in our consolidated financial statements.

On February 28, 2023, we purchased the remaining 50 % equity interest in LW EMEA.

The purchase price consisted of € 531.6 million ($ 564.0 million) in cash, subject to certain post-closing adjustments pursuant to the purchase agreement, and 1,952,421 shares of our common stock.

With the completion of the transaction, we own 100 % of LW EMEA, and we will consolidate LW EMEA’s financial results in our consolidated financial statements and include its results in our Global segment beginning with our 2023 fiscal fourth quarter.

We are in the process of allocating our purchase price based on the fair value of acquired assets and assumed liabilities, and, as of the date of issuance of these consolidated financial statements, this analysis has not been completed given the proximity of the acquisition date.

Depreciation expense was $ 65.9 million and $ 47.3 million for the thirteen weeks ended August 27, 2023 and August 28, 2022, respectively.

At August 27, 2023 and May 28, 2023, purchases of property, plant and equipment included in accounts payable were $ 159.3 million and $ 82.6 million, respectively.

Interest capitalized within construction in progress for the thirteen weeks ended August 27, 2023 and August 28, 2022, was $ 10.5 million and $ 2.0 million, respectively.

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The following table presents changes in goodwill balances, by segment, during the thirty-nine weeks ended February 26, 2023:

The following table presents changes in goodwill balances, by segment, during the thirteen weeks ended August 27, 2023:

(in millions)

Balance at May 29, 2022

Acquisition of interest in joint venture (a)

North America

International

Balance at May 28, 2023 (a)

Foreign currency translation adjustment

Balance at February 26, 2023

(a) In July 2022, we acquired an additional 40 % equity interest in LWAMSA, which increased our total equity ownership from 50 % to 90 % , and we recorded $ 42.1 million of goodwill, that is no t deductible for tax purposes, in our Global segment.

See Note 6, Joint Venture Investments, for more information.

Balance at August 27, 2023

(a) As a result of our change in segments, effective May 29, 2023, goodwill was reassigned to the North America and International segments based on relative fair value using a market approach.

Before and after the reassignment of our goodwill, we completed impairment assessments and concluded there were no indications of impairment in our segments.

See Note 12, Segments, for more information related to the change in segments.

Other identifiable intangible assets were as follows:

February 26, 2023

August 27, 2023

(in millions, except useful lives)

3 unchanged sentences

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

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

Amortization expense, including developed technology amortization expense, was $ 1.4 million and $ 1.3 million for the thirteen weeks ended February 26, 2023 and February 27, 2022, respectively;

and $ 4.3 million for both the thirty-nine weeks ended February 26, 2023 and February 27, 2022, respectively.

Amortization expense, including developed technology amortization expense, was $ 2.7 million and $ 1.4 million for the thirteen weeks ended August 27, 2023 and August 28, 2022, respectively.

Foreign intangible assets are affected by foreign currency translation.

The components of other assets were as follows:

(in millions)

Capitalized software costs

Property, plant and equipment deposits

Equity method investments

ACCRUED LIABILITIES

2 unchanged sentences

Compensation and benefits

Dividends payable to shareholders

Accrued trade promotions

Taxes payable

Dividends payable to shareholders

Current portion of operating lease obligations

Derivative liabilities and payables

Accrued interest

Franchise, property, and sales and use taxes

Income taxes payable

Plant utilities and accruals

Accrued liabilities

2 unchanged sentences

(in millions)

August 27, 2023

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 2026

Term A-2 loan facility, due April 2025

Term A-3 loan facility, due January 2030

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

Euro loan facility, due December 2024

4.875 % senior notes, due May 2028

4 unchanged sentences

Total debt and financing obligations

Debt issuance costs (a)

Short-term borrowings

Debt issuance costs and debt discounts (c)

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) Excludes debt issuance costs of $ 2.7 million and $ 3.3 million as of February 26, 2023 and May 29, 2022, respectively, related to our revolving credit facility, which are recorded in “Other assets” on our Consolidated Balance Sheets.

Amended Term Loan Facilities

On January 31, 2023 , we amended our credit agreement, dated as of June 28, 2019, relating to our term loan facilities with certain lenders and AgWest Farm Credit, PCA (as successor by merger to Northwest Farm Credit Services, PCA), as administrative agent (“Amended Term Loan Agreement”).

The Amended Term Loan Agreement, among other things, established a new $ 450.0 million term loan facility with a maturity date of January 31, 2030 (“Term A-3 Loan”) and extended the maturity of our existing Term A-1 loan from June 28, 2024 to June 28, 2026 .

Borrowings under the Term A-3 Loan were used to purchase the remaining equity interest in LW EMEA, and bear interest, before anticipated patronage dividends, at the Adjusted Term Secured Overnight Financing Rate (“SOFR”) or the Base Rate (as defined in the Amended Term Loan Agreement) plus an applicable rate ranging from 2.00 % to 2.75 % for Adjusted Term SOFR-based loans and from 1.00 % to 1.75 % for Base Rate-based loans, depending upon our consolidated net leverage ratio.

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 will be SOFR based (with a SOFR adjustment) and Base Rate-based loans and the Term A-1 loan applicable margin will increase to match the applicable margin of our Term A-2 loan.

Borrowings under the Term A-1 and A-2 loans 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 ranging from 1.85 % to 2.60 % for Adjusted Term SOFR-based loans and from 0.85 % to 1.60 % for Base Rate-based loans, depending upon our consolidated net leverage ratio.

Revolving Credit Facility

At February 26, 2023, we had no borrowings outstanding under our revolving credit facility and $ 994.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million.

For the thirty-nine weeks ended February 26, 2023, borrowings under the revolving credit facility ranged from zero to $ 55.0 million and the weighted average interest rate for our outstanding borrowings was 7.71 %.

For the thirty-nine weeks ended February 26, 2023 and February 27, 2022, we paid $ 120.6 million and $ 64.7 million of interest on debt, respectively.

For more information on our debt and financing obligations, interest rates, and debt covenants, see Note 7, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

(a) 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) Excludes debt issuance costs of $ 2.3 million and $ 2.5 million as of August 27, 2023 and May 28, 2023, respectively, related to our U.S.

revolving credit facility, which are recorded in “Other assets” on our Consolidated Balance Sheets.

As of August 27, 2023, we had no borrowings outstanding under our U.S.

revolving credit facility and $ 994.6 million of availability under the facility, which is net of outstanding letters of credit of $ 5.4 million.

For the thirteen weeks ended August 27, 2023 and August 28, 2022, we paid $ 56.9 million and $ 56.8 million of interest on debt, respectively.

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

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

STOCK-BASED COMPENSATION

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

The Committee, in its discretion, authorizes grants of restricted stock units (“RSUs”), performance awards payable upon the attainment of specified performance goals (“Performance Shares”), stock options, dividend equivalents, and other stock-based awards.

As of February 26, 2023, 6.0 million shares of our common stock were available for future grant under the plan.

We grant RSUs to eligible employees and non-employee directors.

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.

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

Performance Shares

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

Awards actually earned range from 0 % to 200 % of the targeted number of Performance Shares for each of the performance periods.

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

Subject to limited exceptions set forth in our stock compensation plan, any shares earned will generally vest over a three-year service 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 using a Monte Carlo simulation, and are amortized over the service period.

The weighted average Monte Carlo assumptions for Performance Shares granted during the thirty-nine weeks ended February 26, 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

Stock Options

Under some circumstances, we grant 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 .

The weighted average Black-Scholes assumptions for stock options granted during the thirty-nine weeks ended February 26, 2023 were:

Weighted average fair value

25.90 - $ 29.25

Dividend yield (%)

Expected volatility of stock (%)

33.73 - 34.06

Risk-free interest rate (%)

Expected life of stock option (years)

Weighted average exercise price per share

79.66 - $ 82.73

Stock Based Compensation Grants

During the thirty-nine weeks ended February 26, 2023, we granted 0.4 million, 0.3 million, and 0.6 million RSUs, Performance Shares, and stock options, respectively, at an average grant date fair value of $ 79.77 , $ 92.75 , and $ 25.93 per share, respectively.

Compensation Expense

Our stock-based compensation expense is recorded in “Selling, general and administrative expenses.” Compensation expense for stock-based awards recognized in the Consolidated Statements of Earnings, net of forfeitures, was as follows:

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(in millions)

Stock-settled RSUs

Performance Shares

Stock options

Total compensation expense

Income tax benefit (a)

Total compensation expense, net of tax benefit

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

Based on estimates at February 26, 2023, total unrecognized compensation expense related to stock-based awards was as follows:

(in millions, except data in years)

Period (in years)

Stock-settled RSUs

Performance Shares

Stock options

Total unrecognized compensation expense

FAIR VALUE MEASUREMENTS

1 unchanged sentence

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 February 26, 2023

As of August 27, 2023

(in millions)

8 unchanged sentences

Derivative assets (a)

Derivative liabilities (a)

Deferred compensation liabilities (b)

Fair value, net

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

(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.

3 unchanged sentences

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

At February 26, 2023, we had $ 2,170.0 million of fixed-rate and $ 1,065.7 million of variable-rate debt outstanding.

As of August 27, 2023, we had $ 2,170.0 million of fixed-rate and $ 1,291.9 million of variable-rate debt outstanding.

Based on current market rates, the fair value of our fixed-rate debt was estimated to be $ 1,926.9 million.

4 unchanged sentences

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

During the thirteen weeks ended February 26, 2023, we repurchased 124,691 shares for an aggregate purchase price of $ 12.2 million, or a weighted-average price of $ 97.92 per share.

During the thirty-nine weeks ended February 26, 2023, we repurchased 529,167 shares for an aggregate purchase price of $ 40.6 million, or a weighted-average price of $ 76.66 per share.

As of February 26, 2023, $ 228.4 million remained authorized for repurchase under the program.

During the thirty-nine weeks ended February 26, 2023, we paid $ 105.8 million of dividends to our common stockholders.

On March 3, 2023, we paid $ 40.3 million of dividends to stockholders of record as of the close of business on February 3, 2023.

On March 23, 2023 , our Board of Directors declared a dividend of $ 0.28 per share of common stock.

This dividend will be paid on June 2, 2023 , to stockholders of record as of the close of business on May 5, 2023 .

During the thirteen weeks ended August 27, 2023, we repurchased 992,365 shares for an aggregate purchase price of $ 100.0 million, or a weighted-average price of $ 100.77 per share.

As of August 27, 2023, $ 123.9 million remained authorized for repurchase under the program.

During the thirteen weeks ended August 27, 2023, we paid $ 40.8 million of dividends to our common stockholders.

On September 1, 2023, we paid $ 40.8 million of dividends to stockholders of record as of the close of business on August 4, 2023.

On September 28, 2023 , our Board of Directors declared a dividend of $ 0.28 per share of our common stock.

This dividend will be paid on December 1, 2023 , to stockholders of record as of the close of business on November 3, 2023 .

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss), net of taxes, as of February 26, 2023 were as follows:

Changes in accumulated other comprehensive income (loss), net of taxes, as of August 27, 2023 were as follows:

Post-Retirement

2 unchanged sentences

Balance as of May 28, 2023

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

Balance as of February 26, 2023

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

Global, Foodservice, Retail, and Other.

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

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

Other comprehensive income before reclassifications, net of tax

Net current-period other comprehensive income

Balance as of August 27, 2023

Effective May 29, 2023, to align with our expanded global footprint following the completion of the LW EMEA Acquisition, management, including our chief executive officer (who is our chief operating decision maker), began managing operations in two business segments based on management’s change to the way it monitors performance, aligns strategies, and allocates resources.

As a result of this change, we now have two operating segments, each of which is a reportable segment:

North America and International.

Our chief operating decision maker receives periodic management reports under this structure, which, as discussed above, informs operating decisions, performance assessment, and resource allocation decisions at the segment level.

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

Thirteen Weeks Ended

Thirty-Nine Weeks Ended

(in millions)

Total net sales

Product contribution margin (a)

Advertising and promotion expenses (a)

Selling, general and administrative expenses (c)

Income from operations

Interest expense, net (d)

Segment net sales

North America

International (a)

Thirteen Weeks Ended August 27, 2023

North America

International (a)

Unallocated Corporate Costs (c)

Total Company

Adjusted EBITDA

Unrealized derivative losses (gains)

Foreign currency exchange losses

Items impacting comparability:

Inventory step-up from acquisition

Integration and acquisition-related items, net

Depreciation and amortization (d)

Income (loss) from operations including equity method investment earnings

Interest expense, net

Income tax expense

Equity method investment earnings (loss) (e)

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

Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with segment performance.

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

(c) Selling, general and administrative expenses for the thirteen and thirty-nine weeks ended February 26, 2023 included a net $ 4.3 million gain and a net $ 30.8 million gain, respectively, 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.

(d) The thirty-nine weeks ended February 27, 2022 included a loss on the extinguishment of debt of $ 53.3 million, which included an aggregate call premium of $ 39.6 million related to the redemption of our outstanding 4.625 % senior notes due 2024 and 4.875 % senior notes due 2026, and the write-off of $ 13.7 million of previously unamortized debt issuance costs associated with those notes.

(e) E quity method investment earnings (loss) included a $ 47.3 million unrealized loss and a $ 19.3 million unrealized gain for the thirteen weeks ended February 26, 2023 and February 27, 2022, respectively;

and a $ 37.8 million unrealized loss and a $ 30.6 million unrealized gain for the thirty-nine weeks ended February 26, 2023 and February 27, 2022, 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.

Equity method investment earnings for the thirty-nine weeks ended February 26, 2023 also included a $ 15.1 million gain recognized in connection with our acquisition of an additional 40 % equity interest in our Argentina joint venture, increasing our ownership from 50 % to 90 %.

Thirteen Weeks Ended August 28, 2022

Adjusted EBITDA

Unrealized derivative losses

Foreign currency exchange losses

Unconsolidated joint venture unrealized derivative losses (gains)

Item impacting comparability:

Gain on acquisition of interest in joint ventures (b)

Depreciation and amortization (d)

Income from operations including equity method investment earnings

Interest expense, net

Income tax expense

(a) We acquired the remaining interest in LW EMEA in the fourth quarter of fiscal 2023.

Accordingly, LW EMEA’s adjusted EBITDA is reported in the International segment for the thirteen weeks ended August 27, 2023, whereas in the same period in the prior year, our 50 % equity interest in LW EMEA was recorded using equity method accounting.

As a result, only 50 % of LW EMEA’s adjusted EBITDA is reported in the International segment for the thirteen weeks ended August 28, 2022.

(b) The thirteen weeks ended August 28, 2022 included a $ 15.1 million (before and after-tax) gain recognized in connection with our acquisition of an additional 40 % equity interest in Lamb Weston Alimentos Modernos S.A.

(“LWAMSA”) in July 2022.

This gain related to remeasuring our previously held 50 % equity interest to fair value, recorded in “Equity method investment earnings” in the Consolidated Statements of Earnings, and is excluded from the financial results of our International segment.

(c) Unallocated corporate costs included costs related to corporate support staff and support services, foreign exchange gains and losses and unrealized mark-to-market derivative gains and losses.

Support services include, but are not limited to, our administrative, information technology, human resources, finance, and accounting functions that are not specifically allocated to the segments.

Unallocated corporate costs for the thirteen weeks ended August 27, 2023 included unallocated corporate costs of LW EMEA whereas in the same period in the prior year, our portion of LW EMEA’s unallocated corporate costs were recorded in “Equity method investment earnings” in the International segment

(d) Depreciation and amortization included interest expense, income tax expense, and depreciation and amortization from equity method investments of $ 2.2 million and $ 8.9 million for the thirteen weeks ended August 27, 2023 and August 28, 2022, respectively.

COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS

1 unchanged sentence

These include long-term debt, lease obligations, purchase commitments for goods and services, and legal proceedings.

Except for our acquisition of the remaining equity interest in LW EMEA as discussed in Note 6, Joint Venture Investments, and the related liabilities assumed from the acquisition, there have been no material changes to the commitments, contingencies, guarantees and legal proceedings disclosed in Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

There have been no material changes to the commitments, contingencies, guarantees and legal proceedings disclosed in Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

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

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-Q

Item 1. Financial Statements