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Item 7. Management’s Discussion and Analysis

2026-07-24 compared with 2025-07-23 · 171 added, 146 removed, 150 unchanged (68% of the section changed)

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generally accepted accounting principles (“GAAP”).

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.

We have also presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted Selling, General and Administrative expenses (“SG&A”), Adjusted Income Tax Expense (Benefit), 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.

We also present net sales excluding FX and net sales excluding FX and extra week.

Refer to “Non-GAAP Financial Measures” below for the definitions of Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Adjusted Income Tax Expense (Benefit), Adjusted Equity Method Investment Earnings, net sales excluding FX, and net sales excluding FX and extra week, 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 and net sales, as applicable.

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

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Executive Summary

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.

The following highlights our financial results for fiscal 2026.

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

In fiscal 2026, we delivered a solid year, led by strong volume and share growth in North America, while making meaningful progress in executing our Focus to Win strategy.

Internationally, volume grew in Asia Pacific, and Latin America, which more than offset volume losses in EMEA.

Increased competition, softer demand and the disruption of shipments in the Middle East due to the conflict in Iran resulted in a challenging year for the EMEA region.

We continue to actively manage these issues.

We are encouraged by our momentum with customers, including new wins and continued strengthening of existing relationships, notably in North America.

The quality and depth of our relationships combined with our focus on service, consistent delivery and exceptional product quality are contributing to share gains in North America.

We advanced our executing with excellence strategic pillar through supply chain and manufacturing operating improvements.

The significant productivity gains lowered our cost per pound and generated cost savings to offset inflation and unexpected costs.

Our Cost Savings Program exceeded its first year milestone of $100 million in savings.

Based on the success of the program to date in delivering structural savings to supply chain and reducing SG&A, we will continue to pursue additional opportunities to improve our cost structure and capital efficiency.

Our disciplined approach to working capital resulted in $942.9 million in cash provided by operating activities.

We have completed our capital growth initiatives, opening our new facility in Argentina to serve the growing Latin America market, and reduced structural capital intensity, lowering capital expenditures by $240.6 million from the prior year, to $410.1 million.

Finally, we returned a total of $320.7 million to shareholders through $207.5 million in cash dividends and $113.2 million in repurchases of common stock.

We have additional strategic work underway to focus our resources on our goal of generating sustainable long-term value for shareholders.

In fiscal 2027, we believe customers and consumers will continue to prioritize french fries as a menu and at home item.

Our outlook assumes global restaurant traffic will be flat.

We expect low single-digit sales volume growth and a low single-digit decline in price/mix for the full year.

Net sales are expected to be flat to up slightly on a comparable weeks basis.

As a result of cost savings, improved efficiencies and lapping one-time items, earnings growth is expected to outpace sales growth.

Fiscal 2027 is a 52-week period versus a 53-week period in fiscal 2026.

With growth investments behind us, cash used for capital expenditures, excluding acquisitions if any, is expected to be approximately $380 million to $410 million and cash from operations is expected in the range of $750 million to $800 million.

Results of Operations

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

For the Fiscal Years Ended May

(in millions, except percentages) 2025 2024 %

Increase (Decrease)

53-Week Fiscal Year Ended May 31, 2026 Compared to 52-Week Fiscal Year Ended May 25, 2025

Fiscal Year Ended

(in millions, except percentages) May 31, 2026

(53 weeks) May 25, 2025 %

Increase (Decrease) % Increase (Decrease) excl.

Segment net sales

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International $ 114.7 $ 257.6 (55)%

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.

Net sales for fiscal 2026 increased $161.0 million, or 2%, to $6,612.3 million compared to the prior year.

Fiscal 2026 benefited from a favorable foreign currency (“FX”) impact of $123.1 million or 1%.

Sales volume increased 7% driven by volume increases in North America, APAC, and Latin America.

Price/mix declined 6% driven by continued price and trade support for our customers and volume wins in lower priced, highly competitive channels.

Fiscal 2026 also benefited $127.1 million from the 53rd week in the fiscal year.

North America segment net sales for fiscal 2026, which includes all sales to customers in the U.S., Canada, and Mexico, increased $130.0 million, or 3%, to $4,395.2 million compared to fiscal 2025.

Sales volume increased 9% compared to the prior year driven by strong customer retention and contract wins in fiscal 2026.

Price/mix declined 6%, reflecting new contract prices and the carryover impact of fiscal 2025 customer support.

Fiscal 2026 also benefited $86.4 million from the 53rd week in the fiscal year.

International segment net sales for fiscal 2026, which includes all sales to customers outside of North America, increased $31.0 million, or 1%, to $2,217.1 million year-over-year, including a favorable $115.3 million, or 5%, impact from FX.

Sales volume increased 2%, as growth in Asia Pacific and Latin America offset losses in EMEA driven by challenging market conditions.

Price/mix declined 6%, reflecting increased competitive pricing across the segment.

Fiscal 2026 also benefited $40.7 million from the 53rd week in the fiscal year.

Gross profit declined $38.9 million versus fiscal 2025 to $1,359.7 million.

Adjusted Gross Profit declined $123.3 million versus the prior year to $1,337.2 million primarily reflecting unfavorable global price/mix, as well as an incremental $33.1 million pre-tax charge related to the write-offs of excess raw potatoes in our International segment due to lower than planned sales volumes.

These costs were partially offset by higher volumes, lower manufacturing costs per pound, and improved operational efficiencies across the organization.

Selling, General and Administrative Expenses

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.

SG&A increased $31.1 million versus fiscal 2025 to $664.6 million.

Adjusted SG&A declined $6.0 million versus the prior year to $598.4 million.

Cost savings associated with our Focus to Win strategy were partially offset by higher operating expenses and $18.8 million of write-offs related to previously capitalized costs associated with projects no longer under development.

Net Income, Adjusted EBITDA and Segment Adjusted EBITDA

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.

Net income declined $67.2 million from fiscal 2025 to $290.0 million.

Adjusted EBITDA declined $112.8 million versus fiscal 2025 to $1,147.2 million.

Adjusted EBITDA benefited $28.9 million from the 53rd week in fiscal 2026.

North America Segment Adjusted EBITDA increased $32.9 million to $1,142.3 million in fiscal 2026.

Higher sales volumes, along with lower manufacturing costs per pound and the benefit of cost savings more than offset inflation and customer investments.

North America Segment Adjusted EBITDA benefited $25.5 million from the 53rd week in fiscal 2026.

International Segment Adjusted EBITDA declined $142.9 million to $114.7 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.

The decrease primarily reflects lower sales excluding FX, price/mix and higher manufacturing costs per pound, driven by a an incremental $33.1 million charge related to the write-offs of excess raw potatoes, lower utilization of our international production facilities, and start-up expenses for our new plant in Argentina.

These were partially offset by benefits from cost savings initiatives.

International Segment Adjusted EBITDA benefited $4.0 million from the 53rd week in fiscal 2026.

Interest Expense, Net

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

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.

Interest expense, net increased $0.5 million, versus fiscal 2025, to $180.5 million.

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 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.

statutory tax rate of 21% primarily due to the impact of U.S.

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

Income tax expense for fiscal 2026 was $128.1 million compared to $143.1 million in the prior year period.

The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 30.6% and 28.6% for fiscal 2026 and 2025, respectively.

For further information on income taxes, see Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.

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Equity method investment earnings from unconsolidated joint ventures were $7.5 million and $15.2 million for fiscal 2026 and 2025, 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.

Adjusted Equity Method Investment Earnings were $7.5 million and $25.7 million for fiscal 2026 and 2025, respectively.

The decline of $18.2 million in earnings was primarily the result of lower gross profit, with higher volumes more than offset by unfavorable price/mix.

The results for the current and prior year reflect earnings associated with our 50% interest in Lamb Weston/RDO Frozen.

Fiscal 2026 Compared to Fiscal 2025 Balance Sheet Changes

Changes to our Consolidated Balance Sheet compared with May 25, 2025, were driven by a decline in inventories as we continued to align our global supply chain organization and our focus on optimizing inventory levels globally to meet customer needs, a decline in outstanding debt, including a reduction in the use of our revolving credit facility and long-term debt, and an increase in our treasury stock related to our stock repurchase program.

These were mostly offset by an increase in accrued liabilities and deferred tax liabilities.

Liquidity and Capital Resources

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.

As of May 31, 2026, we had $68.2 million of cash and cash equivalents, with $1,284.3 million additional amounts available for borrowing under our revolving credit facility.

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

Cash generated by operations, supplemented by our cash and cash equivalents and availability under our revolving credit facility , are our primary sources of liquidity for funding our business requirements.

Our funding requirements include capital expenditures, changes in working capital, and returning cash to stockholders in the form of cash dividends and share repurchases.

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

At May 31, 2026, we had commitments for capital expenditures of $152.8 million.

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:

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Financing activities (569.1) (225.0)

(4.7) (233.9)

Effect of exchange rate changes on cash and cash equivalents 3.9 4.0

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Operating Activities

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 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.

During fiscal 2026, cash provided by operating activities increased $74.6 million to $942.9 million.

The increase largely relates to $55.1 million of favorable changes in working capital, led by higher accrued liabilities tied to compensation and benefit accruals due to better performance achievement, lower inventories, and a $19.5 million increase in net income, adjusted for non-cash items.

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

Investing Activities

Investing activities used $380.2 million of cash in fiscal 2026, compared with $648.0 million in fiscal 2025.

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.

Expenditures in fiscal 2026 primarily related to our investments to expand our french fry capacity in Argentina and other production facility modernization efforts.

Expenditures in fiscal 2025 primarily related to our investments to expand our french fry capacity in the Netherlands, the U.S., and Argentina.

The expansion in the U.S.

was completed during the fourth quarter of fiscal 2024, the expansion in the Netherlands was completed during the second quarter of fiscal 2025, and the expansion in Argentina was completed in the first quarter of fiscal 2026.

In addition, we had $26.0 million of proceeds from the sale of property, plant and equipment in fiscal 2026, an increase of $24.0 million over fiscal 2025.

The prior year also included $21.1 million of gains from Argentina blue chip swap transactions.

Financing Activities

During fiscal 2026, we used $569.1 million of cash for financing activities.

We had net repayments of $240.7 million related to short-term and long-term debt.

In addition, we paid $207.5 million in cash dividends to common stockholders.

We used $113.2 million to repurchase 2,344,468 shares of our common stock at a weighted-average price of $48.28 per share.

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

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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.

We repaid $401.1 million of debt and financial obligations, which primarily included repayments towards the Term A-2 loan facility and Euro loan facility in connection with entering into new term loan and revolving credit agreements.

We used $225.3 million of cash to repurchase 2,294,654 shares of our common stock at an average price of $91.51 per share, and we withheld 146,259 shares from employees to cover income and payroll taxes on equity awards that vested during the year.

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

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.

For more information about our debt, including among other items, our revolving credit facility, 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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(in millions) Total Payable within 12 Months

Short-term borrowings and long-term debt, including current portion (a) $ 4,148.2 $ 448.6

Total debt and financing obligations (a) $ 3,928.7 $ 320.0

Interest on long-term debt (b) 691.1 174.7

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

• Short-term borrowings and long-term debt, including current portion .

• Total debt and financing obligations .

See Note 8, Debt and Financing Obligations, for more information on debt payments and the timing of expected future payments.

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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We promote our products with advertising, consumer incentives, and trade promotions.

Sales promotions include, but are not limited to, discounts, coupons, rebates, and volume-based incentives.

Sales incentives include, but are not limited to, discounts, coupons, rebates, and volume-based incentives.

The estimates for sales incentives are based principally on historical sales and redemption rates, influenced by judgments about current market conditions such as competitive activity in specific product categories.

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

As of May 31, 2026, we had $1,130.1 million of goodwill recorded on our consolidated balance sheet.

Goodwill is not amortized but is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

Our annual impairment test is typically performed in the fourth quarter of each fiscal year.

We perform goodwill impairment tests at the reporting unit level, which represents an operating segment or a component of an operating segment.

Our reporting units align with our operating segments.

The impairment test may involve either a qualitative assessment or a quantitative assessment.

In a qualitative assessment, we evaluate various factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

If the qualitative assessment indicates a potential impairment, or if we elect to bypass the qualitative assessment, we proceed to a quantitative test.

For quantitative goodwill impairment tests, we determine the fair value of our reporting units using an income approach.

Under the income approach, we calculate the fair value of each reporting unit based on the present value of estimated future cash flows.

Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes to estimate the future cash flows used to determine the fair value of each reporting unit.

Management’s estimates rely on various assumptions, including:

future cash flows, projections of revenue growth rates, operating margins, capital expenditures, and working capital requirements.

These are based on historical performance, current market conditions, our internal operating plans and strategies, discount rates, and a weighted-average cost of capital (WACC) that reflects the risk inherent in the projected cash flows.

This rate is derived from market data for comparable companies and adjusted for specific reporting unit risk, country risk, or asset risks.

The key assumptions used in our impairment tests are inherently uncertain and require a high degree of estimation.

Changes in economic and operating conditions, industry trends, competitive pressures, or our ability to execute strategic initiatives could materially impact these assumptions and, consequently, the estimated fair values.

Variations between actual operating results and our forecasts, or unfavorable changes in market factors such as interest rates or comparable company earnings multiples, could lead to future impairment charges.

As of May 31, 2026, we performed a quantitative impairment test for the International reporting unit and a qualitative assessment for the North America reporting unit.

The International reporting unit’s estimated fair value exceeded its carrying value;

however, its fair value is more sensitive to changes in projected operating results and key assumptions, including discount rates.

In a future period, lower-than-expected sales or profitability and/or an increase in the WACC could reduce the International reporting unit’s estimated fair value and result in a goodwill impairment.

Our qualitative assessment indicated that it is more likely than not that the North America reporting unit’s fair value exceeded its carrying value as of May 31, 2026.

New and Recently Issued Accounting Standards

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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, 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, we have presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Adjusted Income Tax Expense (Benefit), and Adjusted Equity Method Investment Earnings, each of which is considered a non-GAAP financial measure.

We also present net sales excluding FX and net sales excluding FX and extra week, which provide information on net sales as if foreign currency exchange rates had remained constant between the current and prior-year periods, and as if there were only fifty-two weeks in the current fiscal year.

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.

Management believes that presenting these non-GAAP financial measures provide investors with useful supplemental information because they (i) provide meaningful supplemental information regarding financial performance by excluding impacts of foreign currency exchange rates and unrealized mark-to-market derivative gains and losses and other items affecting comparability between periods, (ii) permit investors to view performance using the same tools that management uses to budget, make operating and strategic decisions, and evaluate our core operating performance across periods, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our financial results.

In addition, we believe that the presentation of these non-GAAP financial measures, when considered together with their most directly comparable GAAP financial measure and the reconciliations to those GAAP financial measures, provides investors with additional tools to understand the factors and trends affecting our underlying business than could be obtained absent these disclosures.

Management believes that presenting these non-GAAP financial measures provides investors with useful supplemental information because they (i) provide meaningful supplemental information regarding financial performance by excluding impacts of foreign currency exchange translation and unrealized mark-to-market derivative gains and losses and other items affecting comparability between periods, (ii) permit investors to view our operating and financial performance using the same tools that management uses to evaluate performance across periods and to make budgeting, operating and strategic decisions, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our operating and financial performance.

In addition, we believe that the presentation of these non-GAAP financial measures, when considered together with their most directly comparable GAAP financial measure and corresponding reconciliations to those GAAP financial measures, provides investors with additional tools to understand the factors and trends affecting our underlying business than could be obtained absent these disclosures.

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, equity method investment earnings, 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, income tax expense, equity method investment earnings, net sales, 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.

1 unchanged sentence

For the Fiscal Years Ended May

(in millions) 2025 2024

Net income (a) $ 290.0 $ 357.2

4 unchanged sentences

Unrealized derivative gains (20.1) (23.1)

Foreign currency exchange losses 15.2 28.6

Foreign currency exchange (gains) losses (8.2) 15.2

Blue chip swap transaction gains — (21.1)

Stock based compensation 46.2 39.5

Items impacting comparability:

Restructuring Plan and other expenses 185.8 —

Cost Savings Program, Restructuring Plan, and other expenses 111.6 185.8

Shareholder activism expense 4.0 5.2

Inventory step-up from acquisition — 20.7

Integration and acquisition-related items, net — 12.8

Pension termination 14.2 —

Adjusted EBITDA $ 1,147.2 $ 1,260.0

_____________________________________________________

(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.

(a) Net income included the following:

Fiscal 2026 included Cost Savings Program, Restructuring Plan, and other expenses of $111.6 million ($98.1 million after-tax, or $0.71 per share) related to the Cost Savings Program announced on July 23, 2025 and the Restructuring Plan announced on October 1, 2024.

Fiscal 2025 included $185.8 million ( $143.7 million after-tax, or $1.01 per share) of expenses related to the Cost Savings Program, Restructuring Plan, and other expenses;

Unrealized gains of $20.1 million ($15.2 million after-tax, or $0.11 per share) and $23.1 million ($17.2 million after-tax, or $0.12 per share) related to mark-to-market adjustments associated with commodity and currency hedging contracts for fiscal 2026 and 2025, respectively;

Foreign currency exchange losses of $8.2 million ($5.7 million after-tax, or $0.05 per share) and gains of $15.2 million ($10.9 million after-tax, or $0.07 per share) for fiscal 2026 and 2025, respectively;

Fiscal 2025 included blue chip swap transaction gains of $21.1 million ($20.0 million after-tax or $0.14 per share);

Stock-based compensation expense of $46.2 million ($38.5 million after-tax, or $0.28 per share) and $39.5 million ($33.4 million after-tax, or $0.23 per share) for fiscal 2026 and 2025, respectively;

Advisory fees related to shareholder activism matters of $4.0 million ($3.1 million after-tax, or $0.02 per share) and $5.2 million ($4.0 million after-tax, or $0.03 per share) for for fiscal 2026 and 2025, respectively;

Fiscal 2026 included pension settlement charges of $14.2 million ($11.0 million after-tax, or $0.08 per share) to fully fund the Company’s defined benefit pension plan, enabling lump sum payments to participants and transferring the remaining obligations and related plan assets to an insurer through a group annuity contract;

Fiscal 2025 included an estimated $31 million loss related to the voluntary product withdrawal that occurred 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.

(b) Depreciation and amortization included interest expense, income tax expense, and depreciation and amortization from equity method investments of $8.8 million and $8.2 million for fiscal 2026 and 2025, 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

The following tables reconcile gross profit to Adjusted Gross Profit, SG&A to Adjusted SG&A, income tax expense (benefit) to Adjusted Income Tax Expense (Benefit), and equity method investment earnings to Adjusted Equity Method Investment Earnings:

Fiscal Year Ended May 31, 2026 Gross Profit SG&A Income

(Benefit) (a) Equity Method

Investment Earnings

As reported $ 1,359.7 $ 664.6 $ 128.1 $ 7.5

Unrealized derivative gains and losses (13.4) 9.7 —

Foreign currency exchange losses — (15.2) —

Blue chip swap transaction gains — 21.1 —

Unrealized derivative gains and losses (b) (30.1) (10.0) (4.9) —

Foreign currency exchange gains (b) — 8.2 (2.5) —

Stock-based compensation (b) — (46.2) 7.7 —

Items impacting comparability:

Restructuring Plan and other expenses 75.3 — 10.5

Cost Savings Program, Restructuring Plan, and other expenses 7.6 — 13.5 —

Shareholder activism expense — (4.0) 0.9 —

Pension settlement — (14.2) 3.2 —

Total adjustments (22.5) (66.2) 17.9 —

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

Adjusted $ 1,337.2 $ 598.4 $ 146.0 $ 7.5

Fiscal Year Ended May 25, 2025

As reported $ 1,398.6 $ 633.5 $ 143.1 $ 15.2

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

Foreign currency exchange losses — (28.6) —

Blue chip swap transaction gains — 18.0 —

Unrealized derivative gains (b) (13.4) 9.7 (5.9) —

Foreign currency exchange losses (b) — (15.2) 4.3 —

Blue chip swap transaction gains (b) — 21.1 (1.1) —

Stock-based compensation (b) — (39.5) 6.1 —

Items impacting comparability:

Inventory step-up from acquisition 20.7 — —

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

Restructuring Plan expenses 75.3 — 42.1 10.5

Shareholder activism expense — (5.2) 1.2 —

Total adjustments 61.9 (29.1) 46.7 10.5

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

Adjusted $ 1,460.5 $ 604.4 $ 189.8 $ 25.7

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

(a) Items are tax effected at the marginal rate based on the applicable tax jurisdiction.

(b) See footnotes in the reconciliation of net income to Adjusted EBITDA above for further discussion.

The following table reconciles net sales to net sales excluding FX and net sales excluding FX and extra week.

Fifty-Three Weeks Ended May 31, 2026 Net Sales FX Net Sales excluding FX Extra Week Net Sales excluding FX and Extra Week

North America $ 4,395.2 $ (7.8) $ 4,387.4 $ (86.4) $ 4,301.0

International 2,217.1 (115.3) 2,101.8 (40.7) 2,061.1

$ 6,612.3 $ (123.1) $ 6,489.2 $ (127.1) $ 6,362.1

The following table reconciles Segment Adjusted EBITDA to Segment Adjusted EBITDA excluding extra week.

Fifty-Three Weeks Ended May 31, 2026 (a) Segment Adjusted EBITDA Extra Week Segment Adjusted EBITDA excluding Extra Week

North America $ 1,142.3 $ (25.5) $ 1,116.8

International 114.7 (4.0) 110.7

Unallocated corporate costs (109.8) 0.6 (109.2)

$ 1,147.2 $ (28.9) $ 1,118.3

_____________________________________________________

(a) Foreign currency impact on Segment Adjusted EBITDA is immaterial as favorable net sales impact is offset by unfavorable operating expense impact.

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