Lamb Weston Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) ​ Lamb Weston Holdings, Inc. Consolidated Statements of Earnings (unaudited, in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 27, August 28, ​ ​ 2023 ​ 2022 Net sales ​ $ 1,665.3 ​ $ 1,125.6 Cost of sales ​ ​ 1,165.8 ​ ​ 852.3 Gross profit ​ ​ 499.5 ​ ​ 273.3 Selling, general and administrative expenses ​ ​ 176.2 ​ ​ 116.3 Income from operations ​ ​ 323.3 ​ ​ 157.0 Interest expense, net ​ ​ 30.7 ​ ​ 26.0 Income before income taxes and equity method earnings ​ 292.6 ​ 131.0 Income tax expense ​ ​ 69.9 ​ ​ 73.7 Equity method investment earnings ​ ​ 12.1 ​ ​ 174.6 Net income ​ $ 234.8 ​ $ 231.9 Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 1.61 ​ $ 1.61 Diluted ​ $ 1.60 ​ $ 1.60 Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​ Basic ​ ​ 145.7 ​ ​ 144.0 Diluted ​ ​ 146.6 ​ ​ 144.6 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 3 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Comprehensive Income (unaudited, in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ Thirteen Weeks Ended ​ ​ August 27, 2023 ​ August 28, 2022 ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ ​ ​ Tax ​ ​ ​ ​ ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Pre-Tax ​ (Expense) ​ After-Tax ​ Amount Benefit Amount Amount Benefit Amount Net income ​ $ 304.7 ​ $ ( 69.9 ) ​ $ 234.8 ​ $ 305.6 ​ $ ( 73.7 ) ​ $ 231.9 Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized pension and post-employment benefit obligations ​ ​ ( 0.2 ) ​ ​ — ​ ​ ( 0.2 ) ​ ​ — ​ — ​ — Unrealized currency translation gains (losses) ​ ​ 0.8 ​ ​ 0.4 ​ ​ 1.2 ​ ​ ( 31.7 ) ​ ​ 1.0 ​ ( 30.7 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.2 ​ ​ — ​ ​ 0.2 Comprehensive income ​ $ 305.3 ​ $ ( 69.5 ) ​ $ 235.8 ​ $ 274.1 ​ $ ( 72.7 ) ​ $ 201.4 ​ ​ ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 4 Table of Contents Lamb Weston Holdings, Inc. Consolidated Balance Sheets (unaudited, in millions, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, ​ May 28, ​ 2023 2023 ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents $ 163.3 ​ $ 304.8 Receivables, less allowance for doubtful accounts of $ 2.5 and $ 2.6 ​ 725.7 ​ 724.2 Inventories ​ 872.9 ​ 932.0 Prepaid expenses and other current assets ​ 84.4 ​ 166.2 Total current assets ​ 1,846.3 ​ 2,127.2 Property, plant and equipment, net ​ 3,008.6 ​ 2,808.0 Operating lease assets ​ ​ 145.6 ​ ​ 146.1 Goodwill ​ 1,041.7 ​ 1,040.7 Intangible assets, net ​ 108.8 ​ 110.2 Other assets ​ 388.6 ​ 287.6 Total assets ​ $ 6,539.6 ​ $ 6,519.8 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ Short-term borrowings ​ $ 140.8 ​ $ 158.5 Current portion of long-term debt and financing obligations ​ ​ 55.1 ​ ​ 55.3 Accounts payable ​ 678.5 ​ 636.6 Accrued liabilities ​ 411.0 ​ 509.8 Total current liabilities ​ 1,285.4 ​ 1,360.2 Long-term liabilities: ​ ​ ​ ​ ​ ​ Long-term debt and financing obligations, excluding current portion ​ 3,248.5 ​ 3,248.4 Deferred income taxes ​ ​ 255.8 ​ ​ 252.1 Other noncurrent liabilities ​ 246.9 ​ 247.8 Total long-term liabilities ​ ​ 3,751.2 ​ ​ 3,748.3 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ Common stock of $ 1.00 par value, 600,000,000 shares authorized; 150,679,160 and 150,293,511 shares issued ​ 150.7 ​ 150.3 Treasury stock, at cost, 5,752,260 and 4,627,828 common shares ​ ​ ( 427.8 ) ​ ​ ( 314.3 ) Additional distributed capital ​ ( 548.7 ) ​ ( 558.6 ) Retained earnings ​ 2,354.6 ​ 2,160.7 Accumulated other comprehensive loss ​ ( 25.8 ) ​ ( 26.8 ) Total stockholders’ equity ​ ​ 1,503.0 ​ ​ 1,411.3 Total liabilities and stockholders’ equity ​ $ 6,539.6 ​ $ 6,519.8 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 5 Table of Contents ​ Lamb Weston Holdings, Inc. Consolidated Statements of Stockholders’ Equit y (unaudited, in millions, except share data ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended August 27, 2023 and August 28, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Accumulated ​ ​ ​ ​ Common Stock, ​ Common ​ Treasury ​ Paid-in ​ ​ ​ Other ​ Total ​ ​ net of Treasury ​ Stock ​ Stock ​ (Distributed) ​ Retained ​ Comprehensive ​ Stockholders’ ​ ​ Shares Amount Amount ​ Capital Earnings Income (Loss) Equity Balance at May 28, 2023 ​ ​ 145,665,683 ​ $ 150.3 ​ $ ( 314.3 ) ​ $ ( 558.6 ) ​ $ 2,160.7 ​ $ ( 26.8 ) $ 1,411.3 Dividends declared, $ 0.280 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 40.8 ) ​ ​ — ​ ​ ( 40.8 ) Common stock issued ​ ​ 385,649 ​ ​ 0.4 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.4 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 9.9 ​ ​ — ​ ​ — ​ ​ 9.9 Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 1,124,432 ) ​ ​ — ​ ​ ( 113.5 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 113.5 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 0.1 ) ​ ​ — ​ ​ ( 0.1 ) Comprehensive income ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 234.8 ​ ​ 1.0 ​ ​ 235.8 Balance at August 27, 2023 ​ ​ 144,926,900 ​ $ 150.7 ​ $ ( 427.8 ) ​ $ ( 548.7 ) ​ $ 2,354.6 ​ $ ( 25.8 ) ​ $ 1,503.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at May 29, 2022 ​ ​ 144,071,428 ​ $ 148.0 ​ $ ( 264.1 ) ​ $ ( 813.3 ) ​ $ 1,305.5 ​ $ ( 15.6 ) ​ $ 360.5 Dividends declared, $ 0.245 per share ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 35.2 ) ​ ​ — ​ ​ ( 35.2 ) Common stock issued ​ ​ 241,391 ​ ​ 0.3 ​ ​ — ​ ​ 0.2 ​ ​ — ​ ​ — ​ ​ 0.5 Stock-settled, stock-based compensation expense ​ ​ — ​ ​ — ​ ​ — ​ ​ 7.6 ​ ​ — ​ ​ — ​ ​ 7.6 Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 482,232 ) ​ ​ — ​ ​ ( 33.0 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 33.0 ) Other ​ ​ — ​ ​ — ​ ​ — ​ ​ 8.6 ​ ​ ( 0.4 ) ​ ​ — ​ ​ 8.2 Comprehensive income ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 231.9 ​ ​ ( 30.5 ) ​ ​ 201.4 Balance at August 28, 2022 ​ ​ 143,830,587 ​ $ 148.3 ​ $ ( 297.1 ) ​ $ ( 796.9 ) ​ $ 1,501.8 ​ $ ( 46.1 ) ​ $ 510.0 ​ ​ See Condensed Notes to Consolidated Financial Statements. ​ 6 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Cash Flows (unaudited, in millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 27, August 28, ​ ​ 2023 ​ 2022 Cash flows from operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 234.8 ​ $ 231.9 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization of intangibles and debt issuance costs ​ ​ 70.1 ​ ​ 49.8 Stock-settled, stock-based compensation expense ​ ​ 9.9 ​ ​ 7.6 Equity method investment earnings in excess of distributions ​ ​ ( 12.2 ) ​ ​ ( 174.6 ) Deferred income taxes ​ ​ 3.6 ​ ​ 34.5 Other ​ ​ 9.3 ​ ​ ( 2.8 ) Changes in operating assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ Receivables ​ ​ 0.4 ​ ​ 9.9 Inventories ​ ​ 60.2 ​ ​ ( 51.5 ) Income taxes payable/receivable, net ​ ​ 61.2 ​ ​ 42.3 Prepaid expenses and other current assets ​ ​ 62.8 ​ ​ 45.5 Accounts payable ​ ​ ( 22.4 ) ​ ​ 24.3 Accrued liabilities ​ ​ ( 143.1 ) ​ ​ ( 24.8 ) Net cash provided by operating activities ​ $ 334.6 ​ $ 192.1 Cash flows from investing activities ​ ​ ​ ​ ​ ​ Additions to property, plant and equipment ​ ​ ( 267.3 ) ​ ​ ( 101.2 ) Additions to other long-term assets ​ ​ ( 37.4 ) ​ ​ ( 20.0 ) Acquisition of interests in joint ventures, net ​ ​ — ​ ​ ( 42.3 ) Other ​ ​ ( 0.1 ) ​ ​ ( 3.4 ) Net cash used for investing activities ​ $ ( 304.8 ) ​ $ ( 166.9 ) Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds from issuance of debt ​ ​ 15.1 ​ ​ 13.8 Repayments of short-term borrowings, net ​ ( 18.9 ) ​ — Repayments of debt and financing obligations ​ ​ ( 13.7 ) ​ ​ ( 8.0 ) Dividends paid ​ ​ ( 40.8 ) ​ ​ ( 35.3 ) Repurchase of common stock and common stock withheld to cover taxes ​ ​ ( 113.5 ) ​ ​ ( 34.4 ) Other ​ ​ 0.1 ​ ​ 0.4 Net cash used for financing activities ​ $ ( 171.7 ) ​ $ ( 63.5 ) Effect of exchange rate changes on cash and cash equivalents ​ ​ 0.4 ​ ​ ( 1.4 ) Net decrease in cash and cash equivalents ​ ( 141.5 ) ​ ( 39.7 ) Cash and cash equivalents, beginning of period ​ ​ 304.8 ​ ​ 525.0 Cash and cash equivalents, end of period ​ $ 163.3 ​ $ 485.3 ​ See Condensed Notes to Consolidated Financial Statements. ​ ​ 7 Table of Contents Lamb Weston Holdings, Inc. Condensed Notes to Consolidated Financial Statement s (Unaudited) ​ 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ​ Lamb Weston Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Lamb Weston”) 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 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. The preparation of financial statements involves the use of estimates and accruals. The actual results that we experience may differ materially from those estimates. Results for interim periods should not be considered indicative of results for our full fiscal year, which ends the last Sunday in May. ​ These financial statements and related condensed notes should be read together with the consolidated financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended May 28, 2023 (the “Form 10-K”), where we include additional information on our critical accounting estimates, policies, and the methods and assumptions used in our estimates. We filed the Form 10-K with the Securities and Exchange Commission on July 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. 8 Table of Contents 2. EARNINGS PER SHARE ​ The following table sets forth the computation of basic and diluted earnings per common share for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ August 27, August 28, (in millions, except per share amounts) ​ 2023 ​ 2022 Numerator: ​ ​ Net income ​ $ 234.8 ​ $ 231.9 ​ ​ ​ ​ ​ ​ ​ Denominator: ​ ​ Basic weighted average common shares outstanding ​ 145.7 ​ 144.0 Add: Dilutive effect of employee incentive plans (a) ​ 0.9 ​ 0.6 Diluted weighted average common shares outstanding ​ 146.6 ​ 144.6 ​ ​ ​ ​ ​ ​ ​ Earnings per share: ​ ​ ​ ​ ​ ​ Basic ​ $ 1.61 ​ $ 1.61 Diluted ​ $ 1.60 ​ $ 1.60 (a) Potential dilutive shares of common stock under employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards. As of August 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. ​ 3. INCOME TAXES ​ Income tax expense for the thirteen weeks ended August 27, 2023 and August 28, 2022 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended ​ ​ August 27, ​ August 28, (in millions) 2023 ​ 2022 Income before income taxes and equity method earnings ​ $ 292.6 ​ $ 131.0 Equity method investment earnings ​ ​ 12.1 ​ ​ 174.6 Income tax expense ​ ​ 69.9 ​ ​ 73.7 Effective tax rate (a) ​ ​ 22.9 % ​ ​ 24.1 % (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. statutory tax rate of 21 % principally due to the impact of U.S. state taxes, foreign taxes and currency, permanent differences, and discrete items. ​ 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. ​ 9 Table of Contents Income Taxes Paid ​ 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. ​ 4. INVENTORIES ​ Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable value and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead. The components of inventories were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, ​ May 28, (in millions) ​ 2023 2023 Raw materials and packaging ​ $ 111.2 $ 145.7 Finished goods ​ 682.9 708.3 Supplies and other ​ 78.8 78.0 Inventories ​ $ 872.9 $ 932.0 ​ 5. PROPERTY, PLANT AND EQUIPMENT ​ The components of property, plant and equipment were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, ​ May 28, (in millions) ​ 2023 2023 Land and land improvements ​ $ 164.0 ​ $ 163.2 Buildings, machinery and equipment ​ 3,621.8 ​ 3,576.6 Furniture, fixtures, office equipment and other ​ 113.5 ​ 112.0 Construction in progress ​ 1,045.9 ​ 832.0 Property, plant and equipment, at cost ​ 4,945.2 ​ 4,683.8 Less accumulated depreciation ​ ( 1,936.6 ) ​ ( 1,875.8 ) Property, plant and equipment, net ​ $ 3,008.6 ​ $ 2,808.0 ​ 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. ​ 6. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS ​ The following table presents changes in goodwill balances, by segment, during the thirteen weeks ended August 27, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) North America International Total Balance at May 28, 2023 (a) ​ $ 722.4 ​ $ 318.3 ​ $ 1,040.7 Foreign currency translation adjustment ​ ​ — ​ ​ 1.0 ​ 1.0 Balance at August 27, 2023 ​ $ 722.4 ​ $ 319.3 ​ $ 1,041.7 ​ (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. ​ 10 Table of Contents ​ Other identifiable intangible assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, 2023 ​ May 28, 2023 ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ ​ Average ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Useful Life ​ Carrying ​ Accumulated ​ Intangible ​ Useful Life ​ Carrying ​ Accumulated ​ Intangible (in millions, except useful lives) ​ (in years) ​ Amount ​ Amortization ​ Assets, Net ​ (in years) ​ Amount ​ Amortization ​ Assets, Net Non-amortizing intangible assets (a) n/a ​ $ 18.0 $ — $ 18.0 n/a $ 18.0 $ — $ 18.0 Amortizing intangible assets (b) 14 ​ 121.9 ​ ( 31.1 ) ​ 90.8 14 ​ 121.4 ​ ( 29.2 ) ​ 92.2 ​ ​ ​ $ 139.9 $ ( 31.1 ) $ 108.8 ​ $ 139.4 $ ( 29.2 ) $ 110.2 (a) Non-amortizing intangible assets represent brands and trademarks. ​ (b) Amortizing intangible assets are principally composed of licensing agreements, brands, and customer relationships. 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. ​ ​ 7. OTHER ASSETS ​ The components of other assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, May 28, (in millions) 2023 ​ 2023 Capitalized software costs ​ $ 199.9 $ 175.4 Property, plant and equipment deposits ​ ​ 101.2 ​ ​ 30.5 Equity method investments ​ ​ 55.5 ​ ​ 43.5 Other ​ ​ 32.0 ​ ​ 38.2 Other assets ​ $ 388.6 $ 287.6 ​ 8. ACCRUED LIABILITIES ​ The components of accrued liabilities were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ August 27, ​ May 28, (in millions) ​ 2023 2023 Compensation and benefits ​ $ 101.9 $ 187.5 Accrued trade promotions ​ ​ 86.6 ​ ​ 86.1 Taxes payable ​ ​ 65.5 21.2 Dividends payable to shareholders ​ ​ 40.8 ​ ​ 40.8 Current portion of operating lease obligations ​ ​ 28.9 ​ ​ 28.5 Derivative liabilities and payables ​ ​ 23.1 ​ ​ 53.9 Accrued interest ​ ​ 18.9 ​ ​ 31.1 Plant utilities and accruals ​ ​ 15.3 ​ ​ 27.2 Other ​ ​ 30.0 33.5 Accrued liabilities ​ $ 411.0 $ 509.8 ​ 11 Table of Contents 9. DEBT AND FINANCING OBLIGATIONS ​ The components of our debt, including financing obligations, were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) ​ August 27, 2023 ​ May 28, 2023 ​ ​ ​ Amount ​ Interest Rate ​ ​ ​ Amount ​ Interest Rate ​ Short-term borrowings: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. revolving credit facility ​ $ — ​ — % ​ $ — ​ 7.710 % Euro revolving credit facility ​ ​ 124.2 ​ 4.523 ​ ​ ​ 149.2 ​ 4.230 ​ Other credit facilities ​ ​ 19.4 ​ (a) ​ ​ ​ 11.4 ​ (a) ​ ​ ​ ​ 143.6 ​ ​ ​ ​ ​ 160.6 ​ ​ ​ Long-term debt: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Term A-1 loan facility, due June 2026 (b) ​ ​ 240.0 7.133 ​ ​ ​ 243.8 ​ 5.210 ​ Term A-2 loan facility, due April 2025 (b) ​ ​ 276.2 ​ 7.133 ​ ​ ​ 280.3 ​ 5.380 ​ Term A-3 loan facility, due January 2030 (b) ​ ​ 444.4 ​ 7.283 ​ ​ ​ 450.0 ​ 6.850 ​ RMB loan facility, due February 2027 ​ ​ 106.7 ​ 4.546 ​ ​ ​ 94.7 ​ 4.600 ​ Euro loan facility, due December 2024 ​ ​ 81.0 ​ 3.920 ​ ​ ​ 80.4 ​ 2.010 ​ 4.875 % senior notes, due May 2028 ​ ​ 500.0 ​ 4.875 ​ ​ ​ 500.0 ​ 4.875 ​ 4.125 % senior notes, due January 2030 ​ ​ 970.0 ​ 4.125 ​ ​ ​ 970.0 ​ 4.125 ​ 4.375 % senior notes, due January 2032 ​ ​ 700.0 ​ 4.375 ​ ​ ​ 700.0 ​ 4.375 ​ ​ ​ ​ 3,318.3 ​ ​ ​ ​ ​ 3,319.2 ​ ​ ​ Financing obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Lease financing obligations due on various dates through 2040 ​ ​ 7.4 ​ ​ ​ ​ 7.7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total debt and financing obligations ​ ​ 3,469.3 ​ ​ ​ ​ 3,487.5 ​ ​ ​ Debt issuance costs and debt discounts (c) ​ ​ ( 24.9 ) ​ ​ ​ ​ ​ ( 25.3 ) ​ ​ ​ Short-term borrowings, net of debt discounts ​ ​ ( 140.8 ) ​ ​ ​ ​ ​ ( 158.5 ) ​ ​ ​ Current portion of long-term debt and financing obligations ​ ( 55.1 ) ​ ​ ​ ( 55.3 ) ​ ​ ​ Long-term debt and financing obligations, excluding current portion ​ $ 3,248.5 ​ ​ ​ $ 3,248.4 ​ ​ ​ (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. ​ ​ ​ 12 Table of Contents 10. FAIR VALUE MEASUREMENTS ​ The fair values of cash equivalents, receivables, accounts payable, and short-term debt approximate their carrying amounts due to their short duration. ​ The following table presents our financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of August 27, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Assets (in millions) Level 1 Level 2 Level 3 (Liabilities) Derivative assets (a) ​ $ — ​ $ 6.2 ​ $ — ​ $ 6.2 Derivative liabilities (a) ​ ​ — ​ ​ ( 23.1 ) ​ ​ — ​ ​ ( 23.1 ) Deferred compensation liabilities (b) ​ ​ — ​ ​ ( 25.0 ) ​ ​ — ​ ​ ( 25.0 ) Fair value, net ​ $ — ​ $ ( 41.9 ) ​ $ — ​ $ ( 41.9 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of May 28, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ of Assets (in millions) Level 1 Level 2 Level 3 (Liabilities) Derivative assets (a) ​ $ — ​ $ 3.0 ​ $ — ​ $ 3.0 Derivative liabilities (a) ​ ​ — ​ ​ ( 46.6 ) ​ ​ — ​ ​ ( 46.6 ) Deferred compensation liabilities (b) ​ ​ — ​ ​ ( 22.6 ) ​ ​ — ​ ​ ( 22.6 ) Fair value, net ​ $ — ​ $ ( 66.2 ) ​ $ — ​ $ ( 66.2 ) ​ (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. While the underlying assets are actively traded on an exchange, the funds are not. Deferred compensation liabilities are primarily presented within “Other noncurrent liabilities” on our Consolidated Balance Sheets. ​ ​ 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. Any differences between the book value and fair value are due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market prices. ​ 13 Table of Contents 11. STOCKHOLDERS’ EQUITY ​ Share Repurchase Program ​ Our Board of Directors authorized a program, with no expiration date, to repurchase up to $ 500.0 million of our common stock. During the thirteen weeks ended August 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. ​ Dividends ​ 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 August 27, 2023 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Foreign ​ ​ ​ ​ ​ ​ Accumulated ​ ​ Currency ​ Pension and ​ ​ ​ Other ​ ​ Translation ​ Post-Retirement ​ ​ ​ Comprehensive (in millions) Losses Benefits ​ Other Loss Balance as of May 28, 2023 ​ $ ( 27.1 ) $ ( 0.7 ) ​ $ 1.0 $ ( 26.8 ) Other comprehensive income before reclassifications, net of tax ​ ​ 1.2 ​ ​ ( 0.2 ) ​ ​ — ​ ​ 1.0 Net current-period other comprehensive income ​ 1.2 ( 0.2 ) ​ — ​ 1.0 Balance as of August 27, 2023 ​ $ ( 25.9 ) $ ( 0.9 ) ​ $ 1.0 $ ( 25.8 ) 14 Table of Contents 12. SEGMENTS ​ 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 ​ August 27, August 28, (in millions) ​ 2023 ​ 2022 Segment net sales ​ ​ North America ​ $ 1,135.4 ​ $ 955.6 International (a) ​ 529.9 ​ 170.0 ​ ​ $ 1,665.3 ​ $ 1,125.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended August 27, 2023 ​ ​ North America ​ ​ International (a) ​ ​ Unallocated Corporate Costs (c) ​ ​ Total Company Adjusted EBITDA ​ $ 379.4 ​ $ 89.6 ​ $ ( 56.2 ) ​ $ 412.8 Unrealized derivative losses (gains) ​ ​ — ​ ​ — ​ ​ ( 27.3 ) ​ ​ ( 27.3 ) Foreign currency exchange losses ​ ​ — ​ ​ — ​ ​ 7.4 ​ ​ 7.4 Items impacting comparability: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Inventory step-up from acquisition ​ ​ — ​ ​ 22.5 ​ ​ — ​ ​ 22.5 Integration and acquisition-related items, net ​ ​ — ​ ​ — ​ ​ 4.0 ​ ​ 4.0 Depreciation and amortization (d) ​ ​ 43.7 ​ ​ 26.2 ​ ​ 0.9 ​ ​ 70.8 Income (loss) from operations including equity method investment earnings ​ $ 335.7 ​ $ 40.9 ​ $ ( 41.2 ) ​ ​ 335.4 Interest expense, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 30.7 Income tax expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 69.9 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 234.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Thirteen Weeks Ended August 28, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA ​ $ 231.8 ​ $ 33.1 ​ $ ( 30.3 ) ​ $ 234.6 Unrealized derivative losses ​ ​ — ​ ​ — ​ ​ 4.0 ​ ​ 4.0 Foreign currency exchange losses ​ ​ — ​ ​ — ​ ​ 1.0 ​ ​ 1.0 Unconsolidated joint venture unrealized derivative losses (gains) ​ ​ — ​ ​ — ​ ​ ( 144.5 ) ​ ​ ( 144.5 ) Item impacting comparability: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on acquisition of interest in joint ventures (b) ​ ​ — ​ ​ ( 15.1 ) ​ ​ — ​ ​ ( 15.1 ) Depreciation and amortization (d) ​ ​ 41.3 ​ ​ 15.8 ​ ​ 0.5 ​ ​ 57.6 Income from operations including equity method investment earnings ​ $ 190.5 ​ $ 32.4 ​ $ 108.7 ​ ​ 331.6 Interest expense, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 26.0 Income tax expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 73.7 Net income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 231.9 (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. 15 Table of Contents (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. ​ 13. COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS ​ We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, lease obligations, purchase commitments for goods and services, and legal proceedings. There have been no material changes to the 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. ​ 16 Table of Contents