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Item 7. Management’s Discussion and Analysis

2025-07-23 compared with 2024-07-24 · 136 added, 171 removed, 160 unchanged (66% of the section changed)

6 unchanged sentences

generally accepted accounting principles (“GAAP”).

We have also presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted Selling, General and Administrative expenses (“SG&A”), Adjusted Income from Operations, Adjusted Equity Method Investment Earnings, Adjusted Net Income, and Adjusted Diluted EPS, each of which is considered a non-GAAP financial measure, to supplement the financial information included in this report.

Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Adjusted Income from Operations, Adjusted Equity Method Investment Earnings, Adjusted Net Income, and Adjusted Diluted EPS, and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, net income, gross profit, SG&A, income from operations, equity method investment earnings, and diluted EPS, as applicable.

We have also presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted Selling, General and Administrative expenses (“SG&A”), and Adjusted Equity Method Investment Earnings, each of which is considered a non-GAAP financial measure, to supplement the financial information included in this report.

Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, and Adjusted Equity Method Investment Earnings, and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, net income, gross profit, SG&A, and equity method investment earnings, as applicable.

For more information, refer to the “Results of Operations” and “Non-GAAP Financial Measures” sections below.

Acquisitions of Joint Venture Interests

In February 2023, we completed the acquisition of the remaining 50% equity interest in LW EMEA (the “LW EMEA Acquisition”).

In addition, in July 2022, we acquired an additional 40% interest in LWAMSA (together with the LW EMEA Acquisition, the “Acquisitions”).

With the completion of the Acquisitions, we own 100% and 90% of the equity interests in LW EMEA and LWAMSA, respectively.

We acquired the remaining interest in LW EMEA for consideration consisting of €531.6 million ( $564.0 million ) in cash, which excludes settlement of pre-existing relationships and cash held by LW EMEA, and 1,952,421 shares of our common stock (valued at $197.3 million as of the acquisition closing date) .

We used $42.3 million of cash to acquire the additional equity interest in LWAMSA.

We began consolidating LW EMEA’s and LWAMSA’s results in our Consolidated Financial Statements following the respective acquisitions.

The results are included in our International segment.

We discuss the Acquisitions in more detail in Note 11, Acquisitions, in “Part II, Item 8.

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

Changes in our fiscal 2024 financial results compared to fiscal 2023 were primarily driven by the consolidation of the financial results of LW EMEA for the full year as compared to only the fourth quarter of fiscal 2023.

Lamb Weston is a leading global producer, distributor, and marketer of value-added frozen potato products.

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Executive Summary

The following highlights our financial results for fiscal 2024.

For more information, refer to the “Results of Operations” and “Non-GAAP Financial Measures” sections below.

In fiscal 2024, our net sales increased 21% as compared to the prior year, primarily driven by incremental sales related to the LW EMEA Acquisition, and to a significantly lesser extent, an incremental 40% interest in LWAMSA.

Excluding the incremental sales from the Acquisitions, our net sales increased modestly as inflation-driven pricing actions in each of our business segments were essentially offset by a decline in sales volume.

The sales volume decline primarily reflected the carryover impact of our decisions to strategically manage customer and product mix by exiting certain lower-priced and lower-margin business, customer share losses, and soft restaurant traffic and frozen potato demand trends across our key markets as consumers continued to adjust to higher menu prices.

In addition, sales volumes were negatively affected by lower order fulfillment rates related to the transition to a new ERP system in North America during our fiscal third quarter, as well as a voluntary product withdrawal during our fiscal fourth quarter.

Our net income in fiscal 2024 declined 28% as compared to the prior year, largely reflecting a non-cash gain in the prior year related to the LW EMEA Acquisition.

Our Adjusted EBITDA increased 13% as compared to the prior year, reflecting the benefit of pricing actions in each of our business segments, and incremental earnings from the consolidation of the financial results of LW EMEA, which more than offset input cost inflation, charges to write-off excess raw potatoes, the impact of lower sales and incremental costs associated with our ERP transition during the fiscal third quarter, lower sales volumes, and losses associated with the voluntary product withdrawal.

In fiscal 2024, we generated net cash from operating activities of $798.2 million, up $36.5 million versus the prior year, due to higher net income, adjusted for non-cash income and expenses, partially offset by increased working capital needs.

We ended fiscal 2024 with 71.4 million of cash and cash equivalents and $1.2 billion of availability under our global revolving credit facility.

In addition, we returned $384.0 million to our stockholders during fiscal 2024, including $174.0 million in cash dividends on our common stock and $210.0 million of share repurchases.

During fiscal 2024, our greenfield french fry processing facility in Ulanqab, Inner Mongolia, China and our capacity expansion and modernization in American Falls, Idaho, became operational.

Our capacity expansions in the Netherlands and Argentina are on schedule to be completed in fall 2024 and mid-calendar year 2025, respectively.

We expect fiscal 2025 to be another challenging year.

The operating environment has changed rapidly over the past 12 months as global restaurant traffic and frozen potato demand softened.

This has resulted in an increase in available capacity in North America and Europe.

We believe this supply-demand imbalance will persist through much, if not all, of fiscal 2025.

Accordingly, we are making some operating adjustments in the near term to manage through the current environment including focusing on driving volume growth, implementing targeted investments in price and trade support, pursuing additional cost and supply chain productivity savings, and rephasing investments to modernize production capabilities to better match the demand environment.

In fiscal 2025, we expect to deliver net sales and earnings growth, on a constant currency basis, as compared to fiscal 2024.

We expect sales growth will be primarily driven by higher sales volumes and improved mix.

Volume will likely decline during the first half of fiscal 2025 due to the impact of market share losses and menu price inflation, which we expect will continue to affect global restaurant traffic and demand for frozen potato products.

We anticipate that volume will increase in the second half of fiscal 2025 as we lap the prior-year impact of our ERP transition, and benefit from recent customer contract wins.

We expect our earnings growth will largely be driven by sales and gross profit growth, although we expect gross profit as a percentage of sales to decline.

We expect the benefits of volume growth, improved mix, and supply chain productivity savings will more than offset higher costs per pound driven by input cost inflation and higher depreciation expense associated with our recent capacity expansion efforts.

We anticipate that input cost inflation, in aggregate, will moderate as compared to fiscal 2024 inflation rates.

We expect that the increase in gross profit will be partially offset by higher SG&A, largely reflecting higher compensation and benefits expense, and to a lesser extent, incremental non-cash amortization of prior investments in our ERP infrastructure.

Despite a challenging near-term operating environment, we believe the actions we are taking to continue to strengthen our portfolio and capabilities, including investments to modernize our asset base, position us to continue to support our customers and create value for our stakeholders over the long term.

We ended the year with improved trends in customer wins and retention, leading to volume growth for the full year.

Inflationary pressure persisted in fiscal 2025, which contributed to consumer uncertainty and lower overall restaurant traffic and frozen potato demand.

To compete in this highly competitive environment, we supported our customers with price and trade investments.

Halfway through the year, we made important changes to adapt to the evolving environment and put our business on a path back to growth.

We announced our FY25 Restructuring Plan, which included the permanent closure of one of our manufacturing facilities, temporarily curtailing certain production lines across our manufacturing network in North America, and other operating and capital expense reductions.

We continue to make important changes to adapt to the evolving environment.

On July 23, 2025, we outlined “Focus to Win,” a new strategic plan to focus on four pillars including (1) prioritizing markets and channels, (2) strengthening customer partnerships, (3) achieving executional excellence and (4) setting the pace for industry-leading innovation.

This strategic plan includes our Cost Savings Program which is expected to deliver at least $250 million of annualized run rate savings by the end of fiscal year 2028.

Approximately $200 million of these annualized cost savings are expected by the end of fiscal year 2027.

In addition, we expect to generate approximately $120 million of working capital improvements, compared to current levels, by the end of fiscal 2027.

In connection with the Cost Savings Program, we expect to recognize total pre-tax cash charges of $70 million to $100 million, most of which will be paid in fiscal 2026.

A detailed review of our fiscal 2025 performance compared to fiscal 2024 is included in the “Results of Operations” and “Non-GAAP Financial Measures” sections below.

For more information related to the FY25 Restructuring Plan, see Note 4, Restructuring, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

Financial Statements” of this Form 10-K.

In fiscal 2026, we expect continued pressure on consumers from macroeconomic and geopolitical factors and that global restaurant traffic will remain approximately even with fiscal 2025 levels.

We believe customers and consumers will continue to prioritize french fries as a menu and at home item and that our customer win momentum that began in the second half of fiscal 2025 and the contribution of a 53rd week in fiscal 2026, with the additional week falling in the fourth quarter, will increase sales volumes, despite continued soft restaurant traffic.

We expect earnings will decline as they are pressured by carryover price investments and new investments in fiscal 2026, overall input cost increases, net of the benefit of lower raw potato costs, incremental depreciation from the capacity expansions in the Netherlands and Argentina, and increased compensation and benefits as we normalize incentives, which will only be partially offset by benefits from the FY25 Restructuring Plan and Cost Savings Program.

Our outlook does not include additional impacts of evolving trade policies, including additional changes in tariffs and retaliatory countermeasures.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”).

Accounting Standards Codification (“ASC”) 740, Income Taxes , requires the effects of changes in tax rates and laws to be recognized in the period in which the legislation is enacted.

We expect the OBBBA to primarily provide cash tax timing benefits with no material impact to the effective tax rate.

We are evaluating the OBBBA impact and will provide further information related to the estimated effect on our fiscal 2026 financials in our Form 10-Q for the quarter ending August 24, 2025.

Results of Operations

Fiscal Year Ended May 25, 2025 Compared to Fiscal Year Ended May 26, 2024

(in millions, except percentages) May 26, 2024 May 28, 2023 %

For the Fiscal Years Ended May

(in millions, except percentages) 2025 2024 %

Increase (Decrease)

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International $ 253.7 $ 331.9 (24)%

Lamb Weston’s net sales for fiscal 2024 increased $1,117.0 million, or 21%, to $6,467.6 million, and included $1,107.4 million of incremental sales attributable to the consolidation of the financial results of LW EMEA and LWAMSA beginning in our fiscal fourth and first quarters of fiscal 2023, respectively.

Net sales, excluding the incremental sales attributable to the Acquisitions, increased $9.6 million or less than 1% versus the prior year, with sales growth reduced by an estimated $135 million due to impacts associated with the ERP transition.

Price/mix increased 10%, reflecting the carryover benefit of inflation-driven pricing actions taken in fiscal 2023, as well as pricing actions taken in fiscal 2024, across each of our business segments, partially offset by lower customer transportation charges that were driven by lower volume and the pass-through of lower freight rates.

Volume excluding the incremental sales attributable to the Acquisitions declined 10%.

Approximately 3.5 percentage points of the volume decline reflects the carryover effect of our decision to exit certain lower-priced and lower-margin business in the prior year to strategically manage customer and product mix.

Another approximately 3.5 percentage points of the volume decline was largely driven by soft restaurant traffic trends in North America and other key international markets, and to a much smaller extent, lost sales related to the voluntary product withdrawal.

The remaining approximately 3 percentage points of the decline reflects share losses and the impact of unfilled customer orders related to the ERP transition in the fiscal third quarter.

North America segment net sales increased $113.8 million, or 3%, to $4,363.2 million, with sales growth reduced by an estimated $123 million due to impacts associated with the ERP transition, in the fiscal third quarter.

Price/mix increased 11%, reflecting the carryover benefit of inflation-driven pricing actions taken in fiscal 2023, as well as pricing actions for contracts with large and regional chain restaurant customers in fiscal 2024.

The increase in price/mix was partially offset by lower customer transportation charges that were driven by lower volume and the pass-through of lower freight rates, and unfavorable mix.

Volume declined 8%, with approximately 3 percentage points of the volume decline reflecting the carryover effect our decision to exit certain lower-price and lower-margin business in the prior year.

Approximately 2.5 percentage points of the decline reflect market share losses, and approximately 2.5 percentage points was largely driven by soft restaurant traffic trends in the U.S.

International segment net sales increased $1,003.2 million, or 91%, to $2,104.4 million, and included $1,107.4 million of incremental sales attributable to the consolidation of the financial results of LW EMEA and LWAMSA.

International segment net sales, excluding the incremental sales attributable to the Acquisitions, declined $104.2 million, or 9% compared to the prior year, with sales growth reduced by an estimated $12 million due to impacts associated with the ERP transition.

Volume, excluding the benefit from the Acquisitions, declined 15%.

Approximately 10 percentage points of the volume decline reflects share losses, which are due in part to our decision to exit certain lower-priced and lower-margin business in LW EMEA earlier in the year, the carryover effect of our decision to exit certain lower-priced and lower-margin business in the prior year to strategically manage customer and product mix, and an estimated $12 million impact of unfilled customer orders related to the ERP transition in the fiscal third quarter.

The remaining approximately 5 percentage points of the volume decline was largely driven by soft restaurant traffic trends in our key international markets, and to a smaller extent, the voluntary product withdrawal.

Price/mix increased 6% as the carryover benefit of inflation-driven pricing actions taken in fiscal 2023 and pricing actions taken in fiscal 2024 was partially offset by lower customer transportation charges and investments in trade support.

Gross profit in fiscal 2024 increased $334.6 million, or 23%, to $1,766.7 million, and included $20.7 million of costs ($15.4 million after-tax, or $0.11 per share) associated with the sale of inventory stepped-up to fair value following completion of the LW EMEA Acquisition, and a $28.7 million ($21.4 million after-tax, or $0.15 per share) unrealized gain related to mark-to-market adjustments associated with commodity hedging contracts.

The prior fiscal year included $27.0 million of costs ($20.0 million after-tax, or $0.14 per share) associated with the sale of inventory stepped-up to fair value following completion of the LW EMEA Acquisition and a $37.5 million ($28.0 million after-tax, or $0.19 per share impact) unrealized loss related to mark-to-market adjustments associated with commodity hedging contracts.

Adjusted Gross Profit increased $262.1 million, or 17.5%, to $1,758.7 million, driven primarily by incremental earnings from the consolidation of the financial results of LW EMEA, and benefits from inflation-driven pricing actions.

Gross profit and Adjusted Gross Profit in the current fiscal year was impacted by:

• An estimated $88 million of pre-tax losses related to lower customer order fulfillment rates and other pre-tax costs associated with the ERP transition in the fiscal third quarter;

• An $85.1 million pre-tax charge for the write-off of excess raw potatoes ($64.6 million in the fiscal second quarter and $20.5 million in the fiscal third quarter), largely attributable to soft restaurant traffic trends in North America and other key international markets;

• An estimated $40 million of pre-tax losses related to the voluntary product withdrawal, of which approximately $21 million was allocated to the International segment and approximately $19 million was allocated to the North America segment in the fiscal fourth quarter.

We expect to incur an additional $20 million to $30 million of pre-tax losses associated with the voluntary product withdrawal in the first quarter of fiscal 2025.

The higher manufacturing costs per pound largely reflected mid-single-digit cost inflation, in aggregate, for key inputs, including:

raw potatoes, ingredients such as grains and starches used in product coatings, and labor.

The increase in per pound costs was partially offset by lower cost of edible oils.

Lamb Weston’s net sales declined $16.3 million to $6,451.3 million in fiscal 2025.

Price/mix declined 2%, reflecting the impact of planned investments in price and trade support in a competitive environment to attract and retain customers globally.

The decrease in price/mix was mostly offset by a 2% increase in volume, primarily in the International segment and included fully replacing the combined regional, small, and retail customer volume lost, primarily in North America, in the prior year during the Company’s transition to a new ERP system in the second half of fiscal 2024.

Volume increased despite a decrease in global restaurant traffic in fiscal 2025, compared to fiscal 2024.

North America segment net sales declined $98.0 million, or 2%, to $4,265.2 million.

Price/mix declined 3%, reflecting planned investments in price and trade driven by an increasingly competitive market, with moderate offsets in channel and product mix.

Despite a low single-digit percentage point decline related to softer North America restaurant traffic in fiscal 2025, compared with fiscal 2024, volume increased 1%.

Increased regional, small, and retail customer volume more than offset low single-digit volume declines with large chain customers, in North America, which were primarily in the first half of the year.

International segment net sales increased $81.7 million, or 4%, to $2,186.1 million.

Volume increased 5%, which reflects growth related to new customer wins and growth with existing customers in all regions.

Price/mix declined 1%, which reflects pricing actions in key international markets in response to the continued competitive environment.

Gross profit declined $368.1 million versus the prior fiscal year to $1,398.6 million.

Adjusted Gross Profit declined $298.2 million versus the prior fiscal year to $1,460.5 million, driven primarily by increased manufacturing costs per pound, including higher factory burden absorption.

In response to softer restaurant traffic and to reduce inventory levels, we temporarily curtailed production in fiscal 2025.

In addition, key input costs increased low-single-digits, including:

potato, labor, and packaging costs, as well as $57.6 million of incremental depreciation expense largely associated with the Company’s recent capacity expansions in China, the U.S.

and the Netherlands.

Transportation and warehousing costs increased in the low double-digits, primarily related to higher warehouse inventories.

The increased costs were partially offset by lapping an estimated $88 million of pre-tax losses associated with the ERP transition in fiscal 2024;

$85.1 million pre-tax charge for the write-off of excess raw potatoes;

and an estimated $9 million incremental pre-tax loss related to the voluntary product withdrawal initiated in the fourth quarter of the prior year.

Selling, General and Administrative Expenses

SG&A in fiscal 2024 increased $151.4 million, or 28%, to $701.4 million, and included:

$12.8 million ($9.6 million, or $0.07 per share) of LW EMEA integration and acquisition-related expenses;

$3.8 million ($2.8 million after-tax, or $0.02 per share) of unrealized loss related to mark-to-market adjustments associated with currency hedging contracts;

and $10.6 million ($8.0 million after-tax, or $0.05 per share) of foreign currency exchange losses.

The prior fiscal year included a net $21.8 million ($12.2 million after-tax, or $0.08 per share) of gain related to actions taken to mitigate the effect of changes in currency rates on the purchase price of LW EMEA, net of other acquisition-related costs;

$4.2 million ($3.1 million after-tax, or $0.02 per share) of unrealized loss related to mark-to-market adjustments associated with currency hedging contracts;

and $5.5 million ($4.1 million after-tax, or $0.03 per share) of foreign currency exchange losses.

Adjusted SG&A increased $112.1 million, or 20%, to $674.2 million, primarily due to incremental expenses attributable to the consolidation of the financial results of LW EMEA, and higher expenses associated with information technology investments, including an incremental $11.5 million of non-cash amortization related to the new ERP system.

The increase in Adjusted SG&A was partially offset by a reduction in performance-based compensation and benefit accruals.

SG&A declined $67.9 million versus the prior fiscal year to $633.5 million.

Adjusted SG&A declined $30.3 million to $643.9 million, primarily related to lapping higher expenses associated with the ERP transition in the prior year, a $13.9 million decrease in advertising and promotion expenses, and the benefit of cost savings associated with the FY25 Restructuring Plan, partially offset by $14.6 million of incremental depreciation and amortization expense primarily related to our ERP transition in the prior year and higher compensation and benefit expenses.

Restructuring Expense

Restructuring expense was $100.0 million, which was related to the FY25 Restructuring Plan.

For more information, see Note 4, Restructuring, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

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

Net Income, Adjusted EBITDA and Segment Adjusted EBITDA

Net income in fiscal 2024 declined $283.4 million, or 28%, to $725.5 million.

Net income in the current fiscal year included a total net loss of $14.4 million ($19.2 million before tax, or $0.10 per share) for foreign currency exchange and unrealized mark-to-market derivative gains and losses, and items impacting comparability.

Net income in the prior fiscal year included a total net gain of $312.2 million ($340.7 million before tax, or $2.15 per share) most of which is a non-cash net benefit related to the LW EMEA Acquisition with the remaining from foreign currency exchange and unrealized mark-to-market derivative gains and losses, and items impacting comparability.

Adjusted EBITDA in fiscal 2024 increased $167.3 million, or 13%, to $1,416.7 million, reflecting the benefit of inflation-driven pricing actions and incremental earnings from the consolidation of the financial results of LW EMEA more than offsetting higher manufacturing costs per pound, a $95.9 million pre-tax charge for the write-off of excess raw potatoes (of which $10.8 million was recorded in Equity Method Investment Earnings), an approximately $95 million

negative impact related to the ERP transition, lower sales volumes, and an estimated $40 million pre-tax loss related to the voluntary product withdrawal.

North America Segment Adjusted EBITDA increased $100.8 million, or 9%, to $1,263.1 million, reflecting the benefit of inflation-driven pricing actions more than offsetting higher manufacturing costs per pound, an $86.0 million charge for the write-off of excess raw potatoes, an approximately $83 million negative impact of the ERP transition, lower sales volumes, unfavorable mix, and an approximately $19 million loss related to the voluntary product withdrawal related to products manufactured in North America.

International Segment Adjusted EBITDA increased $100.9 million, or 44%, to $331.9 million.

Incremental earnings from the consolidation of the financial results of LW EMEA drove the increase.

Excluding the benefit from the Acquisitions, the impact of higher costs per pound, lower sales volumes, and approximately $21 million of allocated losses related to the voluntary product withdrawal, $9.9 million charge for the write-off of excess raw potatoes, and an approximately $5 million negative impact related to the ERP transition, more than offset the benefit of inflation-driven pricing actions.

Net income was $357.2 million, down $368.3 million versus the prior fiscal year, and diluted EPS was $2.50, down $2.48 from the prior fiscal year.

Adjusted EBITDA declined $196.2 million from the prior fiscal year to $1,220.5 million, reflecting lower Adjusted Gross Profit partially offset by lower Adjusted SG&A.

North America Segment Adjusted EBITDA declined $161.7 million to $1,101.4 million, reflecting investments in price and trade, higher manufacturing costs per pound (which largely reflected higher factory burden absorption related to temporarily curtailed production as part of our effort to reduce inventory to current demand levels), and higher transportation and warehousing costs per pound.

These cost increases were partially offset by lapping an approximately $83 million negative impact of the ERP transition in the prior year and lower Adjusted SG&A in fiscal 2025, including a $9.5 million decrease in advertising and promotion expenses.

International Segment Adjusted EBITDA declined $78.2 million to $253.7 million.

Higher net sales and lower Adjusted SG&A were offset by an increase in manufacturing costs per pound, including mid-to-high single-digit increases in raw potato costs, primarily in the first half of the year and incremental costs related to the start-up of the new production line in the Netherlands.

Higher warehouse inventories also led a mid-to-high single-digit increase in warehousing costs.

These costs more than offset lapping a $9.9 million charge for the write-off of excess raw potatoes, approximately $9 million, net of allocated losses related to the voluntary product withdrawal, and an approximately $5 million negative impact related to the ERP transition in the prior year.

Interest Expense, Net

Interest expense, net in fiscal 2025 increased $44.2 million, or 33%, to $180.0 million.

The increase in interest expense was driven by higher total debt and higher borrowing rates associated with our variable-rate credit facilities, partially reduced by $49.5 million of capitalized interest in fiscal 2024, an increase of $32.0 million over the prior year.

The increase in our total debt reflected increased borrowing under our credit facilities, predominantly to finance working capital requirements and capital projects.

The increase in interest expense, net was driven by a decline of $23.6 million of capitalized interest in fiscal 2025, compared to the prior fiscal year, and higher borrowings during the year.

The increase in our total debt reflected increased borrowing under a new term loan agreement.

For more information, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

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

Our effective tax rate was 24.1% for fiscal 2024, compared to 18.2% in fiscal 2023.

Excluding a $4.8 million tax benefit and a $28.5 million of net tax expense from items impacting comparability in fiscal 2024 and 2023, respectively, our effective tax rate was 24.1% for fiscal 2024 and 22.0% in fiscal 2023.

Our effective tax rate for fiscal 2025 was 28.6%, versus 24.1% in fiscal 2024, with the increase largely attributable to foreign losses without tax benefits and a higher proportion of overall earnings in our International segment.

Our effective tax rate varies from the U.S.

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Equity Method Investment Earnings

We conducted business through unconsolidated joint ventures during fiscal 2024 and 2023.

The results in the current year include earnings associated with our 50% interest in Lamb Weston RDO, while results in the prior year also included earnings associated with our then 50% interest in LW EMEA and LWAMSA.

The results in the prior year include non-cash gains on the acquisitions of interests in our LW EMEA and LWAMSA joint ventures of $425.8 million ($379.5 million after-tax or $2.62 per share), as well as a $32.7 million ($24.3 million after-tax, or $0.17 per share) unrealized loss related to mark-to-market adjustments associated with currency and commodity hedging contracts at LW EMEA.

Adjusted Equity Method Investment Earnings declined $41.5 million compared to the prior year, largely due to LW EMEA earnings being reflected as equity method investment earnings in the first three quarters of fiscal 2023.

The results in the current year also include a $10.8 million charge for the write-off of excess raw potatoes at Lamb Weston RDO.

Fiscal 2024 Compared to Fiscal 2023 Balance Sheet Changes

The changes in our Consolidated Balance Sheet, compared with May 28, 2023, related primarily to the investment in production facilities in American Falls, Idaho and Ulanqab, Inner Mongolia, China and ongoing projects across our facilities.

Our short-term borrowings also increased as a result of additional borrowings under our new global revolving credit facility to support our expansion projects.

Equity method investment earnings from unconsolidated joint ventures were $15.2 million and $26.0 million for fiscal 2025 and 2024, respectively.

The results for the current and prior fiscal years reflect earnings associated with the Company's 50 percent interest in Lamb Weston/RDO Frozen, an unconsolidated potato processing joint venture in Minnesota.

Adjusted Equity Method Investment Earnings was slightly down at $25.7 million compared to $26.0 million the prior fiscal year.

The prior fiscal year included a $10.8 million charge for the write-off of excess raw potatoes.

The decrease in equity method investment earnings reflects lower net sales and higher manufacturing costs per pound, primarily related to softer restaurant traffic contributing to lower production and increased factory burden absorption.

Liquidity and Capital Resources

We ended fiscal 2024 with $71.4 million of cash and cash equivalents and $1.2 billion of undrawn availability under our global revolving credit facility.

We believe we have sufficient liquidity to meet our business requirements for at least the next 12 months.

Cash generated by operations, supplemented by our total cash and availability under our credit facilities, is our primary source of liquidity for funding business requirements.

Our funding requirements include capital expenditures for announced manufacturing expansions in the Netherlands and Argentina, as well as capital investments to upgrade information systems and ERP infrastructure, working capital requirements, and dividends.

These expenditures could increase or decrease as a result of a number of factors, including our financial results, future economic conditions, supply chain constraints for equipment, and our regulatory compliance requirements.

At May 26, 2024, we had commitments for capital expenditures of $402.7 million.

The primary source of our liquidity is from cash flow from operations.

We generated $868.3 million of cash from operations in fiscal 2025.

We use cash from operations to fund our capital expenditures, acquisitions, and debt service.

A substantial portion of our operating cash flow has been returned to shareholders through dividends and share repurchases.

We ended fiscal 2025 with $70.7 million of cash and cash equivalents and approximately $1.2 billion of availability under our revolving credit facility.

We believe we have sufficient liquidity to meet our business requirements for at least the next 12 months and the foreseeable future thereafter.

Below is a summary table of our cash flows, followed by a discussion of the sources and uses of cash through operating, investing, and financing activities:

For the Fiscal Years Ended May

(in millions) 2024 2023

(in millions, except percentages) 2025 2024

Net cash flows provided by (used for):

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During fiscal 2025, cash provided by operating activities increased $70.1 million to $868.3 million, compared to $798.2 million for fiscal 2024.

The increase included a $257.9 million increase in net income, adjusted for non-cash income and expenses, partially offset by unfavorable changes in working capital of $221.4 million primarily related to changes in performance-based compensation and benefit accruals and increased inventory balances due to cost inflation, as well as lower than expected sales volumes in the second half of the year related to the ERP transition and soft restaurant traffic trends in North America and other key international markets.

See “Results of Operations” in this MD&A for more information related to the increase in income from operations.

The increase primarily related to $349.1 million of favorable changes in working capital, primarily attributable to reduced inventories and a favorable change in accrued liabilities related to changes in compensation and benefit accruals in the prior year.

Inventory days on hand at the end of fiscal 2025 declined eight days compared with fiscal 2024.

This was partially offset by a $279.0 million decrease in net income, adjusted for non-cash income and expenses .

See “Results of Operations” in this MD&A for more information related to the decrease in income from operations.

Investing Activities

Investing activities used $648.0 million of cash in fiscal 2025, compared with $984.1 million in fiscal 2024.

The decrease primarily relates to $610.4 million of cash used to purchase the remaining equity interest in LW EMEA and an additional 40% equity interest in LWAMSA during fiscal 2023.

Fiscal 2024 included expenditures to expand our french fry and chopped and formed capacity and other facility modernization efforts in American Falls, Idaho, which became operational in May 2024;

the construction of a greenfield french fry processing facility in Ulanqab, Inner Mongolia, China, which became operational in November 2023;

and expenditures for the construction of french fry processing facilities in Kruiningen, the Netherlands and Mar del Plata, Argentina which are scheduled to be completed in fall 2024 and mid-calendar year 2025, respectively.

We expect to use approximately $850 million, excluding acquisitions, if any, for investing activities, in fiscal 2025 as we continue construction of our capacity expansion efforts in the Netherlands and Argentina, as well as capital investments to upgrade our information systems and ERP infrastructure.

The decrease was primarily attributable to reduced cash expenditures in fiscal 2025 as our strategic capacity expansion projects in China and the U.S.

were completed in fiscal 2024 and our capacity expansion in the Netherlands was completed in the first half of fiscal 2025.

We expect our capacity expansion project in Argentina will begin production in August 2025.

We expect to use approximately $500 million for investing activities in fiscal 2026, primarily related to maintenance and facility modernization, as well as expenditures related to environmental projects largely focused on wastewater treatment at our production facilities.

Financing Activities

During fiscal 2025, we used $225.0 million of net cash for financing activities.

We had net proceeds of $42.8 million from our revolving credit facility and other short-term credit facilities held by subsidiaries and $500 million of proceeds from our amended term loan facility that was used primarily to repay an existing term loan facility and outstanding borrowings under our revolving credit facility.

We used $294.4 million to repurchase an aggregate of 4,867,449 shares at a weighted-average price of $57.94 per share and withheld 216,317 shares from employees to cover income and payroll taxes on equity awards that vested during the period.

In addition, we paid $206.9 million in cash dividends to common stockholders.

During fiscal 2024, proceeds from short-term borrowings and debt issuances were $756.9 million, of which $164.9 million were short-term and $592.0 million related to upsizing our term loan borrowing capacity in connection with entering into a new term loan credit agreement in May 2024.

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In addition, we paid $174.0 million in cash dividends to common stockholders.

During fiscal 2023, financing activities included $529.5 million of proceeds from debt issuances including a new $450.0 million term loan facility to fund a portion of the LW EMEA Acquisition and $79.5 million of borrowings on other credit facilities.

We also had proceeds of $41.4 million from short-term borrowings on other facilities.

These activities were partially offset by the payment of $146.1 million of cash dividends to common stockholders and $32.6 million of debt and financing obligation repayments.

In addition, we used $51.6 million of cash to repurchase 569,698 shares of our common stock at an average price of $78.99 per share and withheld 83,974 shares from employees to cover income and payroll taxes on equity awards that vested during the year.

For more information about our debt, including among other items, our new global revolving credit agreement and term loan facilities, interest rates, maturity dates, and covenants, see Note 6, Debt and Financing Obligations, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.

For more information about our debt, including among other items, our revolving credit agreement, term loan facilities, interest rates, maturity dates, and covenants, see Note 8, Debt and Financing Obligations, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.

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

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See Note 9, Leases, for more information on our operating and finance lease obligations and timing of expected future payments.

The total obligation amount for leases includes imputed interest.

• Purchase obligations and capital commitments .

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Critical Accounting Estimates

Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s Consolidated Financial Statements, which have been prepared in accordance with U.S.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates, including those related to our trade promotions, income taxes, and impairment, among others.

We base our estimates on historical experiences combined with management’s understanding of current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting estimates are those that are most important to the portrayal of our financial condition and operating results.

These estimates require management’s most difficult, subjective, or complex judgments.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP with no need for the application of our judgment.

In certain circumstances, however, the preparation of the Consolidated Financial Statements in conformity with GAAP requires us to use our judgment to make certain estimates and assumptions.

These estimates affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of net sales and expenses during the reporting period.

We have identified the estimates described below as our critical accounting estimates.

See Note 1 to the Consolidated Financial Statements for a detailed discussion of significant accounting policies.

We review the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of our Board.

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To the extent there are differences between these estimates and actual results, our Consolidated Financial Statements may be affected.

From time to time, we may enter into business combinations.

In July 2022 and February 2023, we acquired an additional 40% interest in LWAMSA and the remaining 50% equity interest in LW EMEA, respectively.

With the completion of the Acquisitions, we own 90% and 100% of the equity interests in LWAMSA and LW EMEA, respectively.

We recorded the assets acquired and the liabilities assumed at their estimated acquisition date fair values with the excess purchase price recorded as goodwill.

The acquisition method of accounting requires us to make significant estimates and assumptions regarding the fair values of the elements of a business combination as of the date of acquisition, including the fair values (fair value is determined using the income approach, cost approach and/or market approach) of inventory, property, plant and equipment, identifiable intangible assets, deferred tax asset valuation allowances, and liabilities related to uncertain tax positions, among others.

Additionally, for acquisitions of previously held equity interests, we remeasure the previously held equity interest to fair value based on consideration at the acquisition date utilizing a market approach based on comparable control premiums within our industry.

This method also requires us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

If we are required to retroactively adjust provisional amounts that we have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a material impact on our financial condition and results of operations.

Significant estimates and assumptions in determining the fair value of brands and other identifiable intangible assets include future cash flows that we expect to generate from the acquired assets.

If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could record impairment charges.

In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense.

If our estimates of the economic lives change, depreciation or amortization expenses could increase or decrease.

Sales Incentives and Trade Promotion Allowances

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quantity of customer sales, timing of promotional activities, current and past trade-promotion spending patterns, the interpretation of historical spending trends by customer and category, and forecasted costs for activities within the promotional programs.

The determination of sales incentive and trade promotion costs requires judgment and may change in the future as a result of changes in customer demand for our products, promotion participation, particularly for new programs related to the introduction of new products.

The determination of sales incentive and trade promotion costs requires judgment and may change in the future as a result of changes in customer demand for our products and promotion participation, particularly for new programs related to the introduction of new products.

Final determination of the total cost of promotion is dependent upon customers providing information about proof of performance and other information related to the promotional event.

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Changes in valuation allowances from period to period are included in the tax provision.

• We establish accruals for unrecognized tax benefits when, despite the belief that our tax return positions are fully supported, we believe that an uncertain tax position does not meet the recognition threshold of Accounting Standards Codification (“ASC”) 740, Income Taxes .

These contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, the expiration of the statute of limitations for the relevant taxing authority to examine a tax return, case law and emerging legislation.

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Non-GAAP Financial Measures

To supplement the financial information included in this report, we have presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Adjusted Income from Operations, Adjusted Equity Method Investment Earnings, Adjusted Net Income, and Adjusted Diluted EPS, each of which is considered a non-GAAP financial measure.

To supplement the financial information included in this report, we have presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, and Adjusted Equity Method Investment Earnings, each of which is considered a non-GAAP financial measure.

Management uses these non-GAAP financial measures to assist in analyzing what management views as our core operating performance for purposes of business decision making.

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The non-GAAP financial measures presented in this report should be viewed in addition to, and not as alternatives for, financial measures prepared in accordance with GAAP that are also presented in this report.

These measures are not substitutes for their comparable GAAP financial measures, such as net income, gross profit, SG&A, income from operations, equity method investment earnings, diluted EPS, or other measures prescribed by GAAP, and there are limitations to using non-GAAP financial measures.

These measures are not substitutes for their comparable GAAP financial measures, such as net income, gross profit, SG&A, equity method investment earnings, or other measures prescribed by GAAP, and there are limitations to using non-GAAP financial measures.

For example, the non-GAAP financial measures presented in this report may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures the same way we do.

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For the Fiscal Years Ended May

2024 (a) 2023

Net income (b) $ 725.5 $ 1,008.9

(in millions) 2025 2024

Net income (a) $ 357.2 $ 725.5

Interest expense, net 180.0 135.8

Income tax expense 143.1 230.0

Income from operations including equity method investment earnings (c) 1,091.3 1,342.7

Depreciation and amortization 306.2 247.4

Unrealized derivative (gains) and losses (24.9) 41.7

Unconsolidated joint venture unrealized derivative losses — 32.7

Income from operations including equity method investment earnings 680.3 1,091.3

Depreciation and amortization (b) 378.2 306.2

Unrealized derivative gains (23.1) (24.9)

Foreign currency exchange losses 15.2 28.6

Blue chip swap transaction gains (21.1) (18.0)

Items impacting comparability:

Restructuring Plan and other expenses 185.8 —

Shareholder activism expense 5.2 —

Inventory step-up from acquisition — 20.7

Integration and acquisition-related items, net — 12.8

Gain on acquisition of interest in joint venture (d) — (425.8)

Adjusted EBITDA $ 1,220.5 $ 1,416.7

_____________________________________________________

(a) Fiscal 2024 included the consolidated financial statements of LW EMEA whereas in the first three quarters of fiscal 2023, LW EMEA’s financial results were recorded in “Equity method investment earnings.” For more information about the LW EMEA Acquisition, see Note 11, Acquisitions, of the Notes to Consolidated Financial Statements.

(b) Net income for fiscal 2024 included the following:

Approximately $95 million of losses ($72 million after-tax) related to the ERP transition in the fiscal third quarter, including approximately $83 million in the North America segment, approximately $5 million in the International segment, and $7 million of unallocated corporate costs.

A $95.9 million charge ($72.9 million after-tax, or $0.50 per share) related to a write-off of excess raw potatoes.

(a) Net income included:

Restructuring plan expenses of $185.8 million ($143.7 million after-tax, or $1.01 per share) related to the FY25 Restructuring Plan announced on October 1, 2024, for fiscal 2025.

Further information on the FY25 Restructuring Plan is provided in Note 4, Restructuring, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

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

Shareholder activism expense of $5.2 million ($4.0 million after-tax, or $0.03 per share).

for fiscal 2025.

A $23.1 million unrealized gain ($17.2 million after-tax, or $0.12 per share) and a $24.9 million unrealized gain ($18.6 million after-tax, or $0.13 per share) related to mark-to-market adjustments associated with commodity and currency hedging contracts for fiscal 2025 and 2024, respectively;

Foreign currency exchange losses of $15.2 million ($10.9 million after-tax, or $0.07 per share) and $28.6 million ($21.4 million after-tax, or $0.14 per share) for fiscal 2025 and 2024, respectively.

Blue chip swap transaction gains of $21.1 million ($20.0 million after-tax, or $0.14 per share) and $18.0 million ($13.4 million after-tax or $0.09 per share) for fiscal 2025 and 2024, respectively;

In fiscal 2024, we recorded a $12.8 million loss ($9.6 million after-tax, or $0.07 per share) related to actions taken to mitigate the effect of changes in currency rates on the purchase of the remaining equity interest in LW EMEA, net of other acquisition-related costs;

In fiscal 2024, we recorded a $20.7 million ($15.4 million after-tax, or $0.11 per share) charge related to the step-up and sale of inventory following completion of the LW EMEA Acquisition;

In fiscal 2025, we recorded an estimated $31 million loss related to the voluntary product withdrawal that was initiated in the fourth quarter of fiscal 2024.

The total charge to reporting segments was approximately $19 million to the North America segment and approximately $12 million to the International segment.

Fiscal year 2024 included an estimated $40 million loss ($30 million after-tax, or $0.20 per share) related to the voluntary product withdrawal.

The total charge to the reporting segments was approximately $19 million to the North America segment and approximately $21 million to the International segment.

In fiscal 2024, we estimate that we incurred approximately $95 million of losses ($72 million after-tax) related to the ERP transition in the fiscal third quarter, including approximately $83 million in the North America segment, approximately $5 million in the International segment, and $7 million of unallocated corporate costs.

In fiscal 2024, we recorded 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.

An estimated $40 million loss ($30 million after-tax, or $0.20 per share) related to the voluntary product withdrawal.

The total charge to the reporting segments was approximately $19 million to the North America segment and approximately $21 million to the International segment.

Net integration and acquisition-related items were a loss of $12.8 million ($9.6 million after-tax, or $0.07 per share) and a gain of $21.8 million ($12.2 million after-tax, or $0.08 per share) related to actions taken to mitigate the effect of changes in currency rates on the purchase of the remaining equity interest in LW EMEA, net of other acquisition-related costs, for fiscal 2024 and 2023, respectively;

A $20.7 million ($15.4 million after-tax, or $0.11 per share) and $27.0 million ($20.0 million after-tax, or $0.14 per share) charge related to the step-up and sale of inventory following completion of the LW EMEA Acquisition for fiscal 2024 and 2023, respectively;

A $24.9 million unrealized gain ($18.6 million after-tax, or $0.13 per share) and a $74.4 million unrealized loss ($55.4 million after-tax, or $0.38 per share) related to mark-to-market adjustments associated with commodity and currency hedging contracts for fiscal 2024 and 2023, respectively;

Foreign currency exchange losses of $10.6 million ($8.0 million after-tax, or $0.05 per share) and $5.5 million ($4.1 million after-tax, or $0.03 per share) for fiscal 2024 and 2023, respectively.

(d) Included in Adjusted EBITDA is a gain on acquisition interest in joint ventures of $425.8 million ($379.5 million, or $2.62 per share) of non-cash gains related to the remeasurement of our initial equity interests to fair value, including a $410.7 million non-cash gain ($364.4 million after-tax, or $2.52 per share) for LW EMEA and a $15.1 million non-cash gain (before and after-tax, or $0.10 per share) for LWAMSA.

The following tables reconcile gross profit to Adjusted Gross Profit, SG&A to Adjusted SG&A, income from operations to Adjusted Income from Operations, equity method investment earnings to Adjusted Equity Method Investment Earnings, net income to Adjusted Net Income, and diluted EPS to Adjusted Diluted EPS:

Fiscal Year Ended May 26, 2024 Gross Profit SG&A Income

Operations Equity

Earnings (Loss) Net Income Diluted

(b) Depreciation and amortization included interest expense, income tax expense, and depreciation and amortization from equity method investments of $8.2 million and $8.3 million for fiscal 2025 and 2024, respectively.

The following tables reconcile gross profit to Adjusted Gross Profit, SG&A to Adjusted SG&A, and Equity Method Investment Earnings to Adjusted Equity Method Investment Earnings:

(in millions) Gross Profit SG&A Equity Method Investment Earnings

Fiscal Year Ended May 25, 2025

As reported $ 1,398.6 $ 633.5 $ 15.2

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Foreign currency exchange losses — (15.2) —

Blue chip swap transaction gains — 21.1 —

Items impacting comparability:

Inventory step-up from acquisition 20.7 — 20.7 — 15.4 0.11

Integration and acquisition-related items, net — (12.8) 12.8 — 9.6 0.07

Restructuring Plan and other expenses 75.3 — 10.5

Shareholder activism expense — (5.2) —

Total adjustments 61.9 10.4 10.5

Adjusted (b) $ 1,758.7 $ 674.2 $ 1,084.5 $ 26.0 $ 739.9 $ 5.08

Adjusted (a) $ 1,460.5 $ 643.9 $ 25.7

Fiscal Year Ended May 26, 2024

As reported $ 1,766.7 $ 701.4 $ 26.0

Unrealized derivative losses 37.5 (4.2) 41.7 32.7 55.4 0.38

Unrealized derivative gains and losses (28.7) (3.8) —

Foreign currency exchange losses — (28.6) —

Blue chip swap transaction gains — 18.0 —

Items impacting comparability:

Gain on acquisition of interest in joint ventures — — — (425.8) (379.5) (2.62)

Inventory step-up from acquisition 20.7 — —

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Total adjustments (8.0) (27.2) —

Adjusted (b) $ 1,496.6 $ 562.1 $ 934.5 $ 67.5 $ 696.7 $ 4.80

Adjusted (a) $ 1,758.7 $ 674.2 $ 26.0

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(a) Diluted weighted average common shares were 145.6 million and 145.2 million at the end of fiscal 2024 and 2023, respectively.

(b) See footnotes in the reconciliation of net income to Adjusted EBITDA above for a discussion of the items impacting comparability.

(a) See the footnotes in the reconciliation of net income to Adjusted EBITDA above for a discussion of the items impacting comparability.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis