Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Lamb Weston Holdings, Inc.
Consolidated Statements of Earnings
(unaudited, in millions, except per share amounts)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
February 25,
2024 February 26,
2023 February 25,
2024 February 26,
2023
Net sales $ 1,458.3 $ 1,253.6 $ 4,855.7 $ 3,655.7
Cost of sales 1,054.6 855.8 3,476.9 2,603.0
Gross profit 403.7 397.8 1,378.8 1,052.7
Selling, general and administrative expenses 179.8 131.5 526.0 357.6
Income from operations 223.9 266.3 852.8 695.1
Interest expense, net 35.7 25.8 95.5 76.4
Income before income taxes and equity method earnings 188.2 240.5 757.3 618.7
Income tax expense 43.1 42.1 179.3 152.6
Equity method investment earnings (loss) 1.0 ( 23.3 ) 17.8 44.0
Net income $ 146.1 $ 175.1 $ 595.8 $ 510.1
Earnings per share:
Basic $ 1.01 $ 1.22 $ 4.11 $ 3.54
Diluted $ 1.01 $ 1.21 $ 4.09 $ 3.53
Weighted average common shares outstanding:
Basic 144.5 144.0 145.0 144.0
Diluted 145.3 144.8 145.8 144.7
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
February 25, 2024 Thirteen Weeks Ended
February 26, 2023
Pre-Tax
Amount Tax
(Expense)
Benefit After-Tax
Amount Pre-Tax
Amount Tax
(Expense)
Benefit After-Tax
Amount
Net income $ 189.2 $ ( 43.1 ) $ 146.1 $ 217.2 $ ( 42.1 ) $ 175.1
Other comprehensive income (loss):
Unrealized pension and post-retirement benefit obligations loss ( 0.1 ) — ( 0.1 ) — — —
Unrealized currency translation gains (losses) ( 17.1 ) 0.1 ( 17.0 ) 8.4 0.1 8.5
Other ( 0.2 ) 0.1 ( 0.1 ) 0.1 — 0.1
Comprehensive income $ 171.8 $ ( 42.9 ) $ 128.9 $ 225.7 $ ( 42.0 ) $ 183.7
Thirty-Nine Weeks Ended
February 25, 2024 Thirty-Nine Weeks Ended
February 26, 2023
Pre-Tax
Amount Tax
(Expense)
Benefit After-Tax
Amount Pre-Tax
Amount Tax
(Expense)
Benefit After-Tax
Amount
Net income $ 775.1 $ ( 179.3 ) $ 595.8 $ 662.7 $ ( 152.6 ) $ 510.1
Other comprehensive income (loss):
Unrealized pension and post-retirement benefit obligations loss ( 0.5 ) 0.1 ( 0.4 ) — — —
Unrealized currency translation gains (losses) 14.2 ( 0.2 ) 14.0 ( 39.4 ) 1.6 ( 37.8 )
Other ( 0.4 ) 0.1 ( 0.3 ) 0.6 ( 0.1 ) 0.5
Comprehensive income $ 788.4 $ ( 179.3 ) $ 609.1 $ 623.9 $ ( 151.1 ) $ 472.8
See Condensed Notes to Consolidated Financial Statements.
4
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Balance Sheets
(unaudited, in millions, except share data)
February 25,
2024 May 28,
2023
ASSETS
Current assets:
Cash and cash equivalents $ 62.3 $ 304.8
Receivables, less allowance for doubtful accounts of $ 1.1 and $ 2.6
736.2 724.2
Inventories 1,210.0 932.0
Prepaid expenses and other current assets 150.6 166.2
Total current assets 2,159.1 2,127.2
Property, plant and equipment, net 3,406.4 2,808.0
Operating lease assets 135.9 146.1
Goodwill 1,056.6 1,040.7
Intangible assets, net 106.4 110.2
Other assets 381.3 287.6
Total assets $ 7,245.7 $ 6,519.8
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings $ 538.4 $ 158.5
Current portion of long-term debt and financing obligations 139.1 55.3
Accounts payable 684.1 636.6
Accrued liabilities 454.4 509.8
Total current liabilities 1,816.0 1,360.2
Long-term liabilities:
Long-term debt and financing obligations, excluding current portion 3,175.1 3,248.4
Deferred income taxes 254.6 252.1
Other noncurrent liabilities 241.8 247.8
Total long-term liabilities 3,671.5 3,748.3
Commitments and contingencies
Stockholders’ equity:
Common stock of $ 1.00 par value, 600,000,000 shares authorized; 150,727,425 and 150,293,511 shares issued
150.7 150.3
Treasury stock, at cost, 6,336,439 and 4,627,828 common shares
( 480.1 ) ( 314.3 )
Additional distributed capital ( 521.0 ) ( 558.6 )
Retained earnings 2,622.1 2,160.7
Accumulated other comprehensive loss ( 13.5 ) ( 26.8 )
Total stockholders’ equity 1,758.2 1,411.3
Total liabilities and stockholders’ equity $ 7,245.7 $ 6,519.8
See Condensed Notes to Consolidated Financial Statements.
5
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(unaudited, in millions, except share data )
Thirteen Weeks Ended February 25, 2024 and February 26, 2023
Common Stock,
net of Treasury
Shares Common
Stock
Amount Treasury
Stock
Amount Additional
Paid-in
(Distributed)
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Stockholders’
Equity
Balance at November 26, 2023 144,368,320 $ 150.7 $ ( 479.4 ) $ ( 535.9 ) $ 2,528.6 $ 3.7 $ 1,667.7
Dividends declared, $ 0.360 per share
— — — — ( 52.0 ) — ( 52.0 )
Common stock issued 32,586 — — 0.5 — — 0.5
Stock-settled, stock-based compensation expense — — — 12.2 — — 12.2
Repurchase of common stock and common stock withheld to cover taxes ( 9,920 ) — ( 0.8 ) — — — ( 0.8 )
Other — — 0.1 2.2 ( 0.6 ) — 1.7
Comprehensive income (loss) — — — — 146.1 ( 17.2 ) 128.9
Balance at February 25, 2024 144,390,986 $ 150.7 $ ( 480.1 ) $ ( 521.0 ) $ 2,622.1 $ ( 13.5 ) $ 1,758.2
Balance at November 27, 2022 143,870,309 $ 148.3 $ ( 297.5 ) $ ( 785.5 ) $ 1,569.2 $ ( 61.5 ) $ 573.0
Dividends declared, $ 0.280 per share
— — — — ( 40.3 ) — ( 40.3 )
Common stock issued 8,059 — — 0.1 — — 0.1
Stock-settled, stock-based compensation expense — — — 10.4 — — 10.4
Repurchase of common stock and common stock withheld to cover taxes ( 126,622 ) — ( 12.4 ) — — — ( 12.4 )
Other — — — 1.0 ( 0.7 ) — 0.3
Comprehensive income — — — — 175.1 8.6 183.7
Balance at February 26, 2023 143,751,746 $ 148.3 $ ( 309.9 ) $ ( 774.0 ) $ 1,703.3 $ ( 52.9 ) $ 714.8
Thirty-Nine Weeks Ended February 25, 2024 and February 26, 2023
Common Stock,
net of Treasury
Shares Common
Stock
Amount Treasury
Stock
Amount Additional
Paid-in
(Distributed)
Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Stockholders’
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, $ 0.920 per share
— — — — ( 133.2 ) — ( 133.2 )
Common stock issued 433,914 0.4 — 0.3 — — 0.7
Stock-settled, stock-based compensation expense — — — 34.4 — — 34.4
Repurchase of common stock and common stock withheld to cover taxes ( 1,708,611 ) — ( 165.1 ) — — — ( 165.1 )
Other — — ( 0.7 ) 2.9 ( 1.2 ) — 1.0
Comprehensive income — — — — 595.8 13.3 609.1
Balance at February 25, 2024 144,390,986 $ 150.7 $ ( 480.1 ) $ ( 521.0 ) $ 2,622.1 $ ( 13.5 ) $ 1,758.2
Balance at May 29, 2022 144,071,428 $ 148.0 $ ( 264.1 ) $ ( 813.3 ) $ 1,305.5 $ ( 15.6 ) $ 360.5
Dividends declared, $ 0.770 per share
— — — — ( 110.8 ) — ( 110.8 )
Common stock issued 293,458 0.3 — 1.4 — — 1.7
Stock-settled, stock-based compensation expense — — — 28.0 — — 28.0
Repurchase of common stock and common stock withheld to cover taxes ( 613,140 ) — ( 45.8 ) — — — ( 45.8 )
Other — — — 9.9 ( 1.5 ) — 8.4
Comprehensive income (loss) — — — — 510.1 ( 37.3 ) 472.8
Balance at February 26, 2023 143,751,746 $ 148.3 $ ( 309.9 ) $ ( 774.0 ) $ 1,703.3 $ ( 52.9 ) $ 714.8
See Condensed Notes to Consolidated Financial Statements.
6
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited, in millions)
Thirty-Nine Weeks Ended
February 25,
2024 February 26,
2023
Cash flows from operating activities
Net income $ 595.8 $ 510.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles and debt issuance costs 220.0 153.3
Stock-settled, stock-based compensation expense 34.4 28.0
Equity method investment earnings in excess of distributions ( 4.8 ) ( 44.3 )
Deferred income taxes 1.3 ( 25.5 )
Foreign currency remeasurement gain ( 0.1 ) ( 21.2 )
Other ( 2.9 ) ( 22.3 )
Changes in operating assets and liabilities, net of acquisitions:
Receivables ( 8.6 ) ( 47.2 )
Inventories ( 275.0 ) ( 254.3 )
Income taxes payable/receivable, net 36.3 13.1
Prepaid expenses and other current assets ( 5.9 ) 5.9
Accounts payable ( 25.6 ) 16.7
Accrued liabilities ( 83.4 ) 22.8
Net cash provided by operating activities $ 481.5 $ 335.1
Cash flows from investing activities
Additions to property, plant and equipment ( 763.4 ) ( 429.4 )
Additions to other long-term assets ( 64.9 ) ( 67.6 )
Acquisition of interests in joint venture, net — ( 42.3 )
Acquisition of business, net of cash acquired ( 11.2 ) —
Other 14.7 3.6
Net cash used for investing activities $ ( 824.8 ) $ ( 535.7 )
Cash flows from financing activities
Proceeds from short-term borrowings, net 379.1 —
Proceeds from issuance of debt 50.1 510.8
Repayments of debt and financing obligations ( 42.0 ) ( 24.6 )
Dividends paid ( 122.0 ) ( 105.8 )
Repurchase of common stock and common stock withheld to cover taxes ( 165.1 ) ( 47.2 )
Other — ( 1.9 )
Net cash provided by financing activities $ 100.1 $ 331.3
Effect of exchange rate changes on cash and cash equivalents 0.7 19.3
Net (decrease) increase in cash and cash equivalents ( 242.5 ) 150.0
Cash and cash equivalents, beginning of period 304.8 525.0
Cash and cash equivalents, end of period $ 62.3 $ 675.0
See Condensed Notes to Consolidated Financial Statements.
7
Table of Contents
Lamb Weston Holdings, Inc.
Condensed Notes to Consolidated Financial Statements
(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. Beginning in fiscal 2024, 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. 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 and its consolidated subsidiaries for the thirteen and thirty-nine weeks ended February 25, 2024 and February 26, 2023, 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 (the “SEC”) on July 25, 2023.
Certain amounts from prior period consolidated financial statements have been reclassified to conform with current period presentation.
Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. ASU 2023-07 is effective for our Annual Report on Form 10-K for the fiscal year ending May 25, 2025, and subsequent interim periods, with early adoption permitted. We are evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , to enhance transparency and decision usefulness of income tax disclosures, particularly around rate reconciliations and income taxes paid information. ASU 2023-09 is effective for our Annual Report on Form 10-K for the fiscal year ending May 25, 2025, on a prospective basis, with early adoption permitted. We are evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
There were no other 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 Thirty-Nine Weeks Ended
(in millions, except per share amounts) February 25,
2024 February 26,
2023 February 25,
2024 February 26,
2023
Numerator:
Net income $ 146.1 $ 175.1 $ 595.8 $ 510.1
Denominator:
Basic weighted average common shares outstanding 144.5 144.0 145.0 144.0
Add: Dilutive effect of employee incentive plans (a) 0.8 0.8 0.8 0.7
Diluted weighted average common shares outstanding 145.3 144.8 145.8 144.7
Earnings per share:
Basic $ 1.01 $ 1.22 $ 4.11 $ 3.54
Diluted $ 1.01 $ 1.21 $ 4.09 $ 3.53
___________________________________________
(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 25, 2024, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive. 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.
3. INCOME TAXES
Income tax expense for the thirteen and thirty-nine weeks ended February 25, 2024 and February 26, 2023 was as follows:
Thirteen Weeks Ended Thirty-Nine Weeks Ended
(in millions) February 25,
2024 February 26,
2023 February 25,
2024 February 26,
2023
Income before income taxes and equity method earnings $ 188.2 $ 240.5 $ 757.3 $ 618.7
Equity method investment earnings (loss) 1.0 ( 23.3 ) 17.8 44.0
Income tax expense 43.1 42.1 179.3 152.6
Effective tax rate (a) 22.8 % 19.4 % 23.1 % 23.0 %
___________________________________________
(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.
Income Taxes Paid
Income taxes paid, net of refunds, were $ 140.4 million and $ 168.5 million during the thirty-nine weeks ended February 25, 2024 and February 26, 2023, respectively.
9
Table of Contents
4. INVENTORIES
Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable value and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead. The components of inventories were as follows:
(in millions) February 25,
2024 May 28,
2023
Raw materials and packaging $ 265.2 $ 145.7
Finished goods 855.3 708.3
Supplies and other 89.5 78.0
Inventories $ 1,210.0 $ 932.0
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment were as follows:
(in millions) February 25,
2024 May 28,
2023
Land and land improvements $ 168.7 $ 163.2
Buildings, machinery and equipment 4,001.4 3,576.6
Furniture, fixtures, office equipment and other 120.2 112.0
Construction in progress 1,188.4 832.0
Property, plant and equipment, at cost 5,478.7 4,683.8
Less accumulated depreciation ( 2,072.3 ) ( 1,875.8 )
Property, plant and equipment, net $ 3,406.4 $ 2,808.0
Depreciation expense was $ 70.8 million and $ 48.8 million for the thirteen weeks ended February 25, 2024 and February 26, 2023, respectively; and $ 203.2 million and $ 145.8 million for the thirty-nine weeks ended February 25, 2024 and February 26, 2023, respectively. At February 25, 2024 and May 28, 2023, purchases of property, plant and equipment included in accounts payable were $ 156.9 million and $ 82.6 million, respectively.
Interest capitalized within construction in progress for the thirteen weeks ended February 25, 2024 and February 26, 2023, was $ 13.8 million and $ 5.8 million, respectively; and $ 37.3 million and $ 11.9 million for the thirty-nine weeks ended February 25, 2024 and February 26, 2023, respectively.
6. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS
The following table presents changes in goodwill balances, by segment, for the thirty-nine weeks ended February 25, 2024:
(in millions) North America International Total
Balance at May 28, 2023 (a) $ 722.4 $ 318.3 $ 1,040.7
Acquisition — 8.5 8.5
Foreign currency translation adjustment 4.2 3.2 7.4
Balance at February 25, 2024 $ 726.6 $ 330.0 $ 1,056.6
___________________________________________
(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-based 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:
February 25, 2024 May 28, 2023
(in millions, except useful lives) Weighted
Average
Useful Life
(in years) Gross
Carrying
Amount Accumulated
Amortization Intangible
Assets, Net Weighted
Average
Useful Life
(in years) Gross
Carrying
Amount Accumulated
Amortization Intangible
Assets, Net
Non-amortizing intangible assets (a) n/a $ 18.0 $ — $ 18.0 n/a $ 18.0 $ — $ 18.0
Amortizing intangible assets (b) 13 123.2 ( 34.8 ) 88.4 14 121.4 ( 29.2 ) 92.2
$ 141.2 $ ( 34.8 ) $ 106.4 $ 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 $ 7.1 million and $ 1.4 million for the thirteen weeks ended February 25, 2024 and February 26, 2023, respectively; and $ 12.4 million and $ 4.3 million for the thirty-nine weeks ended February 25, 2024 and February 26, 2023, respectively. Foreign intangible assets are affected by foreign currency translation.
7. OTHER ASSETS
The components of other assets were as follows:
(in millions) February 25,
2024 May 28,
2023
Capitalized software costs $ 232.3 $ 175.4
Property, plant and equipment deposits 58.1 30.5
Equity method investments 49.2 43.5
Other 41.7 38.2
Other assets $ 381.3 $ 287.6
8. ACCRUED LIABILITIES
The components of accrued liabilities were as follows:
(in millions) February 25,
2024 May 28,
2023
Compensation and benefits $ 102.8 $ 187.5
Accrued trade promotions 67.1 86.1
Derivative liabilities and payables 52.4 53.9
Dividends payable to shareholders 52.0 40.8
Taxes payable 39.6 21.2
Current portion of operating lease obligations 28.2 28.5
Plant utilities and accruals 21.8 27.2
Accrued interest 20.7 31.1
Other 69.8 33.5
Accrued liabilities $ 454.4 $ 509.8
11
Table of Contents
9. DEBT AND FINANCING OBLIGATIONS
The components of our debt, including financing obligations, were as follows:
(in millions) February 25, 2024 May 28, 2023
Amount Interest Rate Amount Interest Rate
Short-term borrowings:
U.S. revolving credit facility $ 405.0 6.681 % $ — 7.710 %
Euro revolving credit facility 113.6 4.772 149.2 4.230
Other credit facilities 22.2 (a) 11.4 (a)
540.8 160.6
Long-term debt:
Term A-1 loan facility, due June 2026 (b) 232.5 7.233 243.8 5.210
Term A-2 loan facility, due April 2025 (b) 268.1 7.233 280.3 5.380
Term A-3 loan facility, due January 2030 (b) 433.1 7.383 450.0 6.850
RMB loan facility, due February 2027 143.1 4.528 94.7 4.600
Euro loan facility, due December 2024 81.2 4.184 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
3,328.0 3,319.2
Financing obligations:
Lease financing obligations due on various dates through 2040 6.0 7.7
Total debt and financing obligations 3,874.8 3,487.5
Debt issuance costs and debt discounts (c) ( 22.2 ) ( 25.3 )
Short-term borrowings, net of debt discounts ( 538.4 ) ( 158.5 )
Current portion of long-term debt and financing obligations ( 139.1 ) ( 55.3 )
Long-term debt and financing obligations, excluding current portion $ 3,175.1 $ 3,248.4
___________________________________________
(a) Other credit facilities consist of several short-term facilities at one of our subsidiaries used for working capital purposes and have various interest rates.
(b) The interest rates applicable to 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 $ 1.9 million and $ 2.5 million as of February 25, 2024 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 February 25, 2024, we had $ 908.8 million of available liquidity under our committed revolving credit facilities in the U.S. and LW EMEA.
For the thirty-nine weeks ended February 25, 2024 and February 26, 2023, we paid $ 151.3 million and $ 120.6 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 February 25, 2024
(in millions) Level 1 Level 2 Level 3 Fair Value
of Assets
(Liabilities)
Derivative assets (a) $ — $ 1.8 $ — $ 1.8
Derivative liabilities (a) — ( 48.4 ) — ( 48.4 )
Deferred compensation liabilities (b) — ( 27.2 ) — ( 27.2 )
Fair value, net $ — $ ( 73.8 ) $ — $ ( 73.8 )
As of May 28, 2023
(in millions) Level 1 Level 2 Level 3 Fair Value
of Assets
(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 February 25, 2024, we had $ 2,170.0 million of fixed-rate and $ 1,698.8 million of variable-rate debt outstanding. Based on current market rates, the fair value of our fixed-rate debt was estimated to be $ 1,995.9 million as of February 25, 2024. 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 and approximates current market prices.
11. STOCKHOLDERS’ EQUITY
Share Repurchase Program
On October 11, 2023, we announced that our Board of Directors increased our share repurchase authorization to an aggregate amount of $ 500.0 million. The program has no expiration date. During the thirteen weeks ended February 25, 2024, we did not repurchase any shares under the program. During the thirty-nine weeks ended February 25, 2024, we repurchased 1,564,351 shares for an aggregate purchase price of $ 150.0 million, or a weighted-average price of $ 95.89 per share. As of February 25, 2024, $ 450.0 million remained authorized for repurchase under the program.
13
Table of Contents
Dividends
During the thirty-nine weeks ended February 25, 2024, we paid $ 122.0 million of cash dividends to our common stockholders. In addition, on March 1, 2024, we paid $ 52.0 million of cash dividends to common stockholders of record as of the close of business on February 2, 2024. On March 20, 2024, our Board of Directors declared a cash dividend of $ 0.36 per share of our common stock. This dividend will be paid on May 31, 2024, to common stockholders of record as of the close of business on May 3, 2024.
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss), net of taxes, as of February 25, 2024 were as follows:
(in millions) Foreign
Currency
Translation
Gain (Loss) Pension and
Post-Retirement
Benefits Other Accumulated
Other
Comprehensive
Income (Loss)
Balance as of May 28, 2023 $ ( 27.1 ) $ ( 0.7 ) $ 1.0 $ ( 26.8 )
Other comprehensive income before reclassifications, net of tax 14.0 ( 0.4 ) ( 0.3 ) 13.3
Net current-period other comprehensive income 14.0 ( 0.4 ) ( 0.3 ) 13.3
Balance as of February 25, 2024 $ ( 13.1 ) $ ( 1.1 ) $ 0.7 $ ( 13.5 )
12. SEGMENTS
Effective May 29, 2023, to align with our expanded global footprint following the completion of our acquisition of the remaining 50 % equity interest in Lamb-Weston/Meijer v.o.f., our former European joint venture (“LW EMEA”), 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) February 25, 2024 (a) February 26,
2023 February 25, 2024 (a) February 26,
2023
Segment net sales
North America $ 947.5 $ 1,070.8 $ 3,250.0 $ 3,088.9
International (b) 510.8 182.8 1,605.7 566.8
$ 1,458.3 $ 1,253.6 $ 4,855.7 $ 3,655.7
14
Table of Contents
Thirteen Weeks Ended Thirty-Nine Weeks Ended
(in millions) February 25, 2024 (a)(d) February 26,
2023 February 25, 2024 (a)(d) February 26,
2023
Segment Adjusted EBITDA
North America $ 285.9 $ 333.0 $ 986.6 $ 864.4
International (b) 101.7 54.1 291.5 147.4
Total Reportable Segments Adjusted EBITDA 387.6 387.1 1,278.1 1,011.8
Unallocated corporate costs (c) ( 44.0 ) ( 34.9 ) ( 144.7 ) ( 96.1 )
Depreciation and amortization (e) 80.0 59.5 222.0 176.9
Unrealized derivative losses 27.3 5.1 1.6 8.7
Unconsolidated joint venture unrealized derivative losses — 47.1 — 32.7
Foreign currency exchange losses 9.0 1.8 7.3 4.2
Items impacting comparability:
Inventory step-up from acquisition — — 20.7 —
Integration and acquisition-related items, net 2.4 ( 4.3 ) 11.2 ( 30.8 )
Gain on acquisition of interest in joint ventures (f) — — — ( 15.1 )
Interest expense, net 35.7 25.8 95.5 76.4
Income before income taxes 189.2 217.2 775.1 662.7
Income tax expense 43.1 42.1 179.3 152.6
Net income $ 146.1 $ 175.1 $ 595.8 $ 510.1
___________________________________________
(a) During the thirteen and thirty-nine weeks ended February 25, 2024, we transitioned certain central systems and functions, including order to cash, produce to deliver, source to pay, and inventory management, among others in North America, to a new enterprise resource planning system. After the transition, we experienced reduced visibility into finished goods inventories at our distribution centers, resulting in a higher-than-expected effect on customer order fulfillment rates. By the end of the quarter, we restored the visibility into our finished goods inventories and customer order fulfillment rates to pre-transition levels.
(b) 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 and thirty-nine weeks ended February 25, 2024, 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 and thirty-nine weeks ended February 26, 2023.
(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 and thirty-nine weeks ended February 25, 2024 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 Consolidated Statements of Earnings in the International segment.
(d) The thirteen weeks ended February 25, 2024 included a $ 25.0 million charge ($ 19.0 million after-tax, or $ 0.13 per share) related to a write-off of excess raw potatoes. The total charge to the reporting segments was as follows: $ 22.7 million to the North America segment and $ 2.3 million to the International segment. The thirty-nine weeks ended February 25, 2024 included a $ 95.9 million charge ($ 72.9 million after-tax, or $ 0.50 per share) related to a write-off of excess raw potatoes. The total charge to the reporting segments was as follows: $ 86.0 million to the North America segment and $ 9.9 million to the International segment.
(e) Depreciation and amortization included interest expense, income tax expense, and depreciation and amortization from equity method investments of $ 2.1 million and $ 9.3 million for the thirteen weeks ended February 25, 2024 and February 26, 2023, respectively; and $ 6.4 million and $ 26.9 million for the thirty-nine weeks ended February 25, 2024 and February 26, 2023, respectively.
(f) The thirty-nine weeks ended February 26, 2023 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 in LWAMSA 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.
15
Table of Contents
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
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.