Lamb Weston Holdings, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (Unaudited) Lamb Weston Holdings, Inc. Consolidated Statements of Earnings (unaudited, dollars in millions, except per share amounts) Thirteen Weeks Ended August 25, 2024 August 27, 2023 Net sales $ 1,654.1 $ 1,665.3 Cost of sales 1,298.1 1,165.8 Gross profit 356.0 499.5 Selling, general and administrative expenses 143.9 176.2 Income from operations 212.1 323.3 Interest expense, net 45.2 30.7 Income before income taxes and equity method earnings 166.9 292.6 Income tax expense 50.8 69.9 Equity method investment earnings 11.3 12.1 Net income $ 127.4 $ 234.8 Earnings per share: Basic $ 0.89 $ 1.61 Diluted $ 0.88 $ 1.60 Weighted average common shares outstanding: Basic 143.6 145.7 Diluted 144.2 146.6 See Condensed Notes to Consolidated Financial Statements. 3 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Comprehensive Income (unaudited, dollars in millions) Thirteen Weeks Ended August 25, 2024 Thirteen Weeks Ended August 27, 2023 Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Pre-Tax Amount Tax (Expense) Benefit After-Tax Amount Net income $ 178.2 $ ( 50.8 ) $ 127.4 $ 304.7 $ ( 69.9 ) $ 234.8 Other comprehensive income (loss): Unrealized pension and post-retirement benefit obligations loss ( 0.2 ) — ( 0.2 ) ( 0.2 ) — ( 0.2 ) Unrealized currency translation gains 56.6 ( 0.6 ) 56.0 0.8 0.4 1.2 Other ( 0.2 ) 0.1 ( 0.1 ) — — — Comprehensive income $ 234.4 $ ( 51.3 ) $ 183.1 $ 305.3 $ ( 69.5 ) $ 235.8 See Condensed Notes to Consolidated Financial Statements. 4 Table of Contents Lamb Weston Holdings, Inc. Consolidated Balance Sheets (unaudited, dollars in millions, except share data) August 25, 2024 May 26, 2024 ASSETS Current assets: Cash and cash equivalents $ 120.8 $ 71.4 Receivables, net of allowances of $ 0.9 and $ 0.9 720.9 743.6 Inventories 1,135.7 1,138.6 Prepaid expenses and other current assets 86.2 136.4 Total current assets 2,063.6 2,090.0 Property, plant and equipment, net 3,691.8 3,582.8 Operating lease assets 127.3 133.0 Goodwill 1,087.5 1,059.9 Intangible assets, net 108.3 104.9 Other assets 434.0 396.4 Total assets $ 7,512.5 $ 7,367.0 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Short-term borrowings $ 530.4 $ 326.3 Current portion of long-term debt and financing obligations 63.2 56.4 Accounts payable 688.7 833.8 Accrued liabilities 448.0 407.6 Total current liabilities 1,730.3 1,624.1 Long-term liabilities: Long-term debt and financing obligations, excluding current portion 3,437.3 3,440.7 Deferred income taxes 257.2 256.2 Other noncurrent liabilities 251.0 258.2 Total long-term liabilities 3,945.5 3,955.1 Commitments and contingencies Stockholders’ equity: Common stock of $ 1.00 par value, 600,000,000 shares authorized; 151,255,891 and 150,735,397 shares issued 151.3 150.7 Treasury stock, at cost, 8,660,534 and 7,068,741 common shares ( 633.7 ) ( 540.9 ) Additional distributed capital ( 499.0 ) ( 508.9 ) Retained earnings 2,775.3 2,699.8 Accumulated other comprehensive income (loss) 42.8 ( 12.9 ) Total stockholders’ equity 1,836.7 1,787.8 Total liabilities and stockholders’ equity $ 7,512.5 $ 7,367.0 See Condensed Notes to Consolidated Financial Statements. 5 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Stockholders’ Equity (unaudited, dollars in millions, except share and per share data ) Thirteen Weeks Ended August 25, 2024 and August 27, 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 26, 2024 143,666,656 $ 150.7 $ ( 540.9 ) $ ( 508.9 ) $ 2,699.8 $ ( 12.9 ) $ 1,787.8 Dividends declared, $ 0.36 per share — — — — ( 51.6 ) — ( 51.6 ) Common stock issued 520,494 0.6 — ( 0.6 ) — — — Stock-settled, stock-based compensation expense — — — 9.5 — — 9.5 Repurchase of common stock and common stock withheld to cover taxes ( 1,591,793 ) — ( 92.2 ) — — — ( 92.2 ) Other — — ( 0.6 ) 1.0 ( 0.3 ) — 0.1 Comprehensive income — — — — 127.4 55.7 183.1 Balance at August 25, 2024 142,595,357 $ 151.3 $ ( 633.7 ) $ ( 499.0 ) $ 2,775.3 $ 42.8 $ 1,836.7 Balance at May 28, 2023 145,665,683 $ 150.3 $ ( 314.3 ) $ ( 558.6 ) $ 2,160.7 $ ( 26.8 ) $ 1,411.3 Dividends declared, $ 0.28 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 See Condensed Notes to Consolidated Financial Statements. 6 Table of Contents Lamb Weston Holdings, Inc. Consolidated Statements of Cash Flows (unaudited, dollars in millions) Thirteen Weeks Ended August 25, 2024 August 27, 2023 Cash flows from operating activities Net income $ 127.4 $ 234.8 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of intangibles and debt issuance costs 90.5 70.1 Stock-settled, stock-based compensation expense 9.5 9.9 Equity method investment earnings in excess of distributions ( 0.1 ) ( 12.2 ) Deferred income taxes ( 2.9 ) 3.6 Blue chip swap transaction gains ( 16.6 ) — Other ( 14.4 ) 9.3 Changes in operating assets and liabilities: Receivables 31.9 0.4 Inventories 10.2 60.2 Income taxes payable/receivable, net 49.1 61.2 Prepaid expenses and other current assets 50.1 62.8 Accounts payable 9.5 ( 22.4 ) Accrued liabilities ( 14.0 ) ( 143.1 ) Net cash provided by operating activities $ 330.2 $ 334.6 Cash flows from investing activities Additions to property, plant and equipment ( 325.9 ) ( 267.3 ) Additions to other long-term assets ( 26.3 ) ( 37.4 ) Proceeds from blue chip swap transactions, net of purchases 16.6 — Other — ( 0.1 ) Net cash used for investing activities $ ( 335.6 ) $ ( 304.8 ) Cash flows from financing activities Proceeds from short-term borrowings 398.0 14.0 Repayments of short-term borrowings ( 194.4 ) ( 32.9 ) Proceeds from issuance of debt 3.3 15.1 Repayments of debt and financing obligations ( 10.2 ) ( 13.7 ) Dividends paid ( 51.7 ) ( 40.8 ) Repurchase of common stock and common stock withheld to cover taxes ( 92.2 ) ( 113.5 ) Other ( 0.6 ) 0.1 Net cash provided by (used for) financing activities $ 52.2 $ ( 171.7 ) Effect of exchange rate changes on cash and cash equivalents 2.6 0.4 Net increase (decrease) in cash and cash equivalents 49.4 ( 141.5 ) Cash and cash equivalents, beginning of period 71.4 304.8 Cash and cash equivalents, end of period $ 120.8 $ 163.3 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. 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 and its consolidated subsidiaries for the thirteen weeks ended August 25, 2024 and August 27, 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 26, 2024 (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 24, 2024. 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 24, 2026, 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 (in millions, except per share amounts) August 25, 2024 August 27, 2023 Numerator: Net income $ 127.4 $ 234.8 Denominator: Basic weighted average common shares outstanding 143.6 145.7 Add: Dilutive effect of employee incentive plans (a) 0.6 0.9 Diluted weighted average common shares outstanding 144.2 146.6 Earnings per share: Basic $ 0.89 $ 1.61 Diluted $ 0.88 $ 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 25, 2024, 0.8 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive. 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. 3. INCOME TAXES Income tax expense for the periods presented were as follows: Thirteen Weeks Ended (in millions) August 25, 2024 August 27, 2023 Income before income taxes and equity method earnings $ 166.9 $ 292.6 Equity method investment earnings (loss) 11.3 12.1 Income tax expense 50.8 69.9 Effective tax rate (a) 28.5 % 22.9 % ___________________________________________ (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. Our effective tax rate increased during the first quarter of fiscal 2025, primarily due to a higher proportion of earnings from our international locations with higher tax rates and discrete tax items. Income Taxes Paid Income taxes paid, net of refunds, were $ 6.0 million and $ 4.2 million during the thirteen weeks ended August 25, 2024 and August 27, 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) August 25, 2024 May 26, 2024 Raw materials and packaging $ 130.4 $ 178.7 Finished goods 908.4 867.9 Supplies and other 96.9 92.0 Inventories $ 1,135.7 $ 1,138.6 5. PROPERTY, PLANT AND EQUIPMENT The components of property, plant and equipment were as follows: (in millions) August 25, 2024 May 26, 2024 Land and land improvements $ 185.2 $ 186.2 Buildings, machinery and equipment 4,777.2 4,708.8 Furniture, fixtures, office equipment and other 128.4 127.7 Construction in progress 813.4 688.2 Property, plant and equipment, at cost 5,904.2 5,710.9 Less accumulated depreciation ( 2,212.4 ) ( 2,128.1 ) Property, plant and equipment, net $ 3,691.8 $ 3,582.8 At August 25, 2024 and May 26, 2024, purchases of property, plant and equipment included in accounts payable were $ 148.8 million and $ 292.0 million, respectively. Below is a breakdown of depreciation and amortization between cost of sales (“COS”) and selling, general and administrative expenses (“SG&A”). (in millions) August 25, 2024 August 27, 2023 Depreciation - COS $ 78.5 $ 62.9 Depreciation - SG&A 3.4 3.0 $ 81.9 $ 65.9 Amortization - SG&A $ 7.4 $ 2.7 Interest capitalized within construction in progress for the thirteen weeks ended August 25, 2024 and August 27, 2023, was $ 6.7 million and $ 10.5 million, respectively. 6. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS The following table presents changes in goodwill balances, by segment, for the thirteen weeks ended August 25, 2024: (in millions) North America International Total Balance at May 26, 2024 $ 728.8 $ 331.1 $ 1,059.9 Foreign currency translation adjustment 19.0 8.6 27.6 Balance at August 25, 2024 $ 747.8 $ 339.7 $ 1,087.5 10 Table of Contents Other identifiable intangible assets were as follows: August 25, 2024 May 26, 2024 (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) 14 129.3 ( 39.0 ) 90.3 13 123.6 ( 36.7 ) 86.9 $ 147.3 $ ( 39.0 ) $ 108.3 $ 141.6 $ ( 36.7 ) $ 104.9 ___________________________________________ (a) Non-amortizing intangible assets represent brands and trademarks. (b) Amortizing intangible assets are principally composed of licensing agreements, brands, and customer relationships. Foreign intangible assets are affected by foreign currency translation. 7. OTHER ASSETS The components of other assets were as follows: (in millions) August 25, 2024 May 26, 2024 Capitalized software costs $ 233.9 $ 227.9 Property, plant and equipment deposits 74.2 52.6 Equity method investments 59.7 59.2 Other 66.2 56.7 Other assets $ 434.0 $ 396.4 8. ACCRUED LIABILITIES The components of accrued liabilities were as follows: (in millions) August 25, 2024 May 26, 2024 Compensation and benefits $ 86.9 $ 72.8 Taxes payable 78.7 24.8 Accrued trade promotions 73.0 90.0 Dividends payable to shareholders 51.6 51.7 Current portion of operating lease obligations 31.1 29.3 Accrued interest 25.5 31.7 Plant utilities and accruals 20.7 23.9 Derivative liabilities and payables 19.3 24.6 Other 61.2 58.8 Accrued liabilities $ 448.0 $ 407.6 11 Table of Contents 9. DEBT AND FINANCING OBLIGATIONS The components of our debt, including financing obligations, were as follows: (in millions) August 25, 2024 May 26, 2024 Amount Interest Rate Amount Interest Rate Short-term borrowings: Global revolving credit facility $ 490.6 6.620 % $ 291.3 6.580 % Other credit facilities (a) 39.8 35.0 530.4 326.3 Long-term debt: Term A-1 loan facility, due June 2026 (b) 225.0 7.290 228.8 7.240 Term A-3 loan facility, due January 2030 (b) 421.9 7.440 427.5 7.390 Term A-4 loan facility, due May 2029 (b) 325.0 6.540 325.0 6.540 RMB loan facility, due February 2027 147.6 4.240 142.2 4.450 Euro term loan facility, due May 2029 223.8 5.030 216.9 5.080 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 3,513.3 3,510.4 Financing obligations: Lease financing obligations due on various dates through 2040 5.2 5.7 Total debt and financing obligations 4,048.9 3,842.4 Debt issuance costs (c) ( 18.0 ) ( 19.0 ) Short-term borrowings ( 530.4 ) ( 326.3 ) Current portion of long-term debt and financing obligations ( 63.2 ) ( 56.4 ) Long-term debt and financing obligations, excluding current portion $ 3,437.3 $ 3,440.7 ___________________________________________ (a) Other credit facilities consist of short-term facilities at our subsidiaries used for working capital purposes. Borrowings under these facilities bear interest at various rates. (b) The interest rates applicable to the Term A-1, A-3, and A-4 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 $ 4.7 million and $ 4.9 million as of August 25, 2024 and May 26, 2024, respectively, related to our Global revolving credit facility, which are recorded in “Other assets” on our Consolidated Balance Sheets. As of August 25, 2024, we had $ 1,004.0 million of available liquidity under our committed global revolving credit facility. For the thirteen weeks ended August 25, 2024 and August 27, 2023, we paid $ 56.7 million and $ 56.9 million of interest on debt, respectively. On September 27, 2024, we amended our credit agreement, dated as of May 3, 2024, relating to our term loan facilities with certain lenders and AgWest Farm Credit, PCA, as administrative agent (the “Amended Term Loan Agreement”). The Amended Term Loan Agreement, among other things, established a new $ 500 million term loan facility with a maturity date of September 2031 (“Term A-5 Loan”). We used the proceeds of the Term A-5 Loan to repay the Term A-1 loan facility in full and $ 275 million of borrowings under our global revolving credit facility. 12 Table of Contents Borrowings of the Term A-5 Loan bear interest at a per annum rate equal to (i) an applicable rate plus (ii) the Adjusted Term SOFR Rate, the Base Rate or the Fixed Rate (each as defined in the Amended Term Loan Agreement). The applicable rate is based on the Company’s consolidated net leverage ratio and ranges between 1.85 % to 2.85 % (or, in the case of Base Rate-based loans, 0.85 % to 1.85 %). For more information about our debt and financing obligations, interest rates, and debt covenants, see Note 6, 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. 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 25, 2024 (in millions) Level 1 Level 2 Level 3 Fair Value of Assets (Liabilities) Derivative assets (a) $ — $ 3.3 $ — $ 3.3 Derivative liabilities (a) — ( 15.6 ) — ( 15.6 ) Deferred compensation liabilities (b) — ( 28.0 ) — ( 28.0 ) Fair value, net $ — $ ( 40.3 ) $ — $ ( 40.3 ) As of May 26, 2024 (in millions) Level 1 Level 2 Level 3 Fair Value of Assets (Liabilities) Derivative assets (a) $ — $ 1.4 $ — $ 1.4 Derivative liabilities (a) — ( 21.7 ) — ( 21.7 ) Deferred compensation liabilities (b) — ( 27.6 ) — ( 27.6 ) Fair value, net $ — $ ( 47.9 ) $ — $ ( 47.9 ) ___________________________________________ (a) Derivative assets and liabilities included in Level 2 primarily represent commodity swaps, option contracts, interest rate swap and currency contracts. The fair value of these derivatives were determined using valuation models that use market observable inputs including both forward and spot prices. 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 25, 2024, we had $ 2,495.0 million of fixed-rate and $ 1,548.7 million of variable-rate debt outstanding. Based on current market rates, the fair value of our fixed-rate debt was estimated to be $ 2,370 million as of August 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. 13 Table of Contents 11. STOCKHOLDERS’ EQUITY Share Repurchase Program During the thirteen weeks ended August 25, 2024, we repurchased 1,412,852 shares of our common stock for an aggregate purchase price of $ 82.0 million, or a weighted-average price of $ 58.04 per share. As of August 25, 2024, $ 308.0 million remained authorized for repurchase under our share repurchase program. Dividends During the thirteen weeks ended August 25, 2024, we paid $ 51.7 million of cash dividends to our common stockholders. In addition, on August 30, 2024, we paid $ 51.6 million of cash dividends to common stockholders of record as of the close of business on August 2, 2024. On September 26, 2024, our Board of Directors declared a cash dividend of $ 0.36 per share of our common stock. This dividend will be paid on November 29, 2024, to common stockholders of record as of the close of business on November 1, 2024. Accumulated Other Comprehensive Income (Loss) Changes in accumulated other comprehensive income (loss), net of taxes, as of August 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 26, 2024 $ ( 8.2 ) $ ( 5.3 ) $ 0.6 $ ( 12.9 ) Other comprehensive income before reclassifications, net of tax 56.0 ( 0.2 ) ( 0.1 ) 55.7 Net current-period other comprehensive income 56.0 ( 0.2 ) ( 0.1 ) 55.7 Balance as of August 25, 2024 $ 47.8 $ ( 5.5 ) $ 0.5 $ 42.8 12. SEGMENTS We 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 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 (in millions) August 25, 2024 August 27, 2023 Segment net sales North America $ 1,103.7 $ 1,135.4 International 550.4 529.9 $ 1,654.1 $ 1,665.3 14 Table of Contents Thirteen Weeks Ended (in millions) August 25, 2024 August 27, 2023 Segment Adjusted EBITDA North America $ 276.1 $ 379.4 International 50.5 89.6 Total Reportable Segments Adjusted EBITDA 326.6 469.0 Unallocated corporate costs (a) ( 36.7 ) ( 56.2 ) Depreciation and amortization (b) 91.4 70.8 Unrealized derivative gains ( 8.9 ) ( 27.3 ) Foreign currency exchange losses 0.6 7.4 Blue chip swap transaction gains (c) ( 16.6 ) — Items impacting comparability: Inventory step-up from acquisition — 22.5 Integration and acquisition-related items, net — 4.0 Interest expense, net 45.2 30.7 Income before income taxes 178.2 304.7 Income tax expense 50.8 69.9 Net income $ 127.4 $ 234.8 ___________________________________________ (a) Unallocated corporate costs include 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. (b) Depreciation and amortization include interest expense, income tax expense, and depreciation and amortization from equity method investments of $ 2.1 million and $ 2.2 million for the thirteen weeks ended August 25, 2024 and August 27, 2023. (c) We enter into blue chip swap transactions to transfer U.S. dollars into Argentina primarily related to funding our announced capacity expansion in Argentina. The blue chip swap rate can diverge significantly from Argentina's official exchange rate. 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, and purchase commitments for goods and services. There have been no material changes to the commitments, contingencies, and guarantees 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. In June 2024, an alleged purchaser of the Company's common stock filed a lawsuit against the Company and certain of our executive officers in the U.S. District Court for the District of Idaho on behalf of a putative class of stock purchasers for alleged violations of the federal securities laws. A similar lawsuit was filed in the same court in August 2024. Plaintiffs allege that the defendants made misrepresentations and omissions regarding the design and implementation of our enterprise resource planning system. We believe the lawsuits lack merit and intend to vigorously defend against the allegations. In addition, in August 2024, an alleged shareholder filed a derivative lawsuit purportedly on behalf of the Company against certain of our executive officers and directors, alleging breaches of fiduciary and other duties owed to the Company, based on the same matters alleged in the securities lawsuits. A similar derivative lawsuit was filed in September 2024. We intend to vigorously defend against the allegations. We are also a party to various other legal actions arising in the ordinary course of our business. These claims, legal proceedings and litigation principally arise from alleged casualty, product liability, employment, and other disputes. In determining loss contingencies, we consider the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recognized when it is considered probable that a liability has been incurred and when the amount of loss can be reasonably estimated. While any claim, proceeding or litigation has an element of uncertainty, we believe the outcome of any of these that are pending or threatened will not have a material adverse effect on our financial condition, results of operations, or cash flows. 15 Table of Contents 14. SUBSEQUENT EVENTS On October 1, 2024, we announced a restructuring plan that is designed to drive operational and cost efficiencies and improve cash flows. The restructuring plan includes: • The permanent closure of our manufacturing facility in Connell, Washington, effective October 1, 2024; • The temporary curtailment of certain production lines and schedules across our manufacturing network in North America; • A reduction in operating expenses, including headcount reductions approximating 4 % of our global workforce, and the elimination of certain unfilled job positions; and • A reduction in fiscal 2025 capital expenditures In connection with this restructuring plan, we expect to record total pre-tax charges of $ 200 million to $ 250 million primarily relate to costs associated with contracted raw potatoes that will not be used due to production line curtailments, accelerating depreciation of assets, the write-down of inventory and long-lived assets, employee severance and other one-time termination benefits, and other costs. We expect to record most of the pre-tax charges in the second quarter of fiscal 2025, with the remainder expected to be recorded during the second half of fiscal 2025. 16 Table of Contents