ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of our results of operations and financial condition, which we refer to in this filing as “MD&A,” should be read in conjunction with the audited financial statements and the notes thereto. Discussions of fiscal 2023 items and fiscal year comparisons between fiscal 2024 and 2023 that are not included in this Form 10-K can be found in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended May 26, 2024, which we filed with the SEC on July 24, 2024. Results for the fiscal year ended May 25, 2025 are not necessarily indicative of results that may be attained in the future.
Our MD&A is based on financial data derived from the financial statements prepared in accordance with U.S. 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. For more information, refer to the “Results of Operations” and “Non-GAAP Financial Measures” sections below.
Overview
Lamb Weston is a leading global producer, distributor, and marketer of value-added frozen potato products. We are the number one supplier of value-added frozen potato products in North America and are a leading supplier of value-added frozen potato products internationally, with a strong and growing presence in high-growth emerging markets. We offer a broad product portfolio to a diverse channel and customer base in over 100 countries. French fries represent most of our value-added frozen potato product portfolio.
During fiscal 2025, we operated our business in two reportable segments: North America and International. We report net sales and adjusted EBITDA by segment and on a consolidated basis. Net sales and Segment Adjusted EBITDA are the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance. For additional information on our reportable segments, see “Non-GAAP Financial Measures” below and Note 13, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
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.
27
Table of Contents
Outlook
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
For the Fiscal Years Ended May
(in millions, except percentages) 2025 2024 %Increase (Decrease)
Segment net sales
Segment Adjusted EBITDA
Net Sales
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.
28
Table of Contents
Gross Profit
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 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 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, 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.
29
Table of Contents
Income Taxes
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.
For further information on income taxes, see Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” in this Form 10-K.
Equity Method Investment Earnings
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
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.
Cash Flows
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, except percentages) 2025 2024
Net cash flows provided by (used for):
Effect of exchange rate changes on cash and cash equivalents 4.0 0.5
Net decrease in cash and cash equivalents (0.7) (233.4)
Cash and cash equivalents, beginning of period 71.4 304.8
Cash and cash equivalents, end of period 70.7 71.4
30
Table of Contents
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.
Investing Activities
Investing activities used $648.0 million of cash in fiscal 2025, compared with $984.1 million in fiscal 2024. 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. 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. Financial Statements and Supplementary Data” of this Form 10-K. At May 25, 2025, we were in compliance with all covenants contained in our credit agreements.
Obligations and Commitments
As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements, lease agreements, potato supply agreements, and unconditional purchase obligations. The unconditional purchase obligations are enforceable and legally binding arrangements entered into in the normal course of business to ensure adequate levels of sourced product are available.
31
Table of Contents
A summary of our material cash requirements for our known contractual obligations as of May 25, 2025 are as follows:
(in millions) Total Payable within 12 Months
Interest on long-term debt (b) 876.9 184.4
Purchase obligations and capital commitments (a) 1,011.0 309.0
_____________________________________________________
(a)See the below Notes to the Consolidated Financial Statements included in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K for more information.
•Short-term borrowings and long-term debt, including current portion. See Note 8, Debt and Financing Obligations, for more information on debt payments and the timing of expected future payments.
•Leases. 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. See Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, for more information on our purchase obligations and the timing of future payments and capital commitments in connection with the expansion and replacement of existing facilities and equipment.
(b)Amounts represent estimated future interest payments assuming our long-term debt is held to maturity and using interest rates in effect as of May 25, 2025. This does not reflect a reduction for future estimated capitalized interest amounts.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of May 25, 2025 that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
Critical Accounting Estimates
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.
We have made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent there are differences between these estimates and actual results, our Consolidated Financial Statements may be affected.
Sales Incentives and Trade Promotion Allowances
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. 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.
32
Table of Contents
Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions, and other activities conducted by our customers to promote our products. The costs of these programs are recognized as a reduction to revenue with a corresponding accrued liability. The estimate of trade promotions is inherently difficult due to information limitations as the products move beyond distributors and through the supply chain to operators. Estimates made by management in accounting for these costs are based primarily on our historical experience with marketing programs, with consideration given to current circumstances and industry trends and include the following: 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 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. Because of the complexity of some of these trade promotions, the ultimate resolution may result in payments that are different from our estimates. As additional information becomes known, we may change our estimates. At May 25, 2025 and May 26, 2024, we had $88.2 million and $90.0 million, respectively, of accrued trade promotions payable recorded in “Accrued liabilities” on our Consolidated Balance Sheets.
Income Taxes
We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. We measure deferred tax assets and liabilities using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled.
Inherent in determining the annual tax rate are judgments regarding business plans, planning opportunities, and expectations about future outcomes. Management judgments are required for the following items:
•Management reviews deferred tax assets for realizability. Valuation allowances are established when management believes that it is more likely than not that some portion of the deferred tax assets will not be realized. 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. While it is difficult to predict the final outcome or timing of resolution for any particular matter, we believe that the accruals for unrecognized tax benefits at May 25, 2025, reflect the estimated outcome of known tax contingencies as of such date in accordance with accounting for uncertainty in income taxes under ASC 740.
•We recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost. We have not recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S. earnings or for outside basis differences in our subsidiaries, because we plan to indefinitely reinvest such earnings and basis differences. Remittances of non-U.S. earnings are based on estimates and judgments of projected cash flow needs, as well as the working capital and investment requirements of our non-U.S. and U.S. operations. Material changes in our estimates of cash, working capital, and investment needs in various jurisdictions could require repatriation of indefinitely reinvested non-U.S. earnings, which could be subject to applicable non-U.S. income and withholding taxes. While we believe the judgments and estimates discussed above and made by management are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts. Further information on income taxes is provided in Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
33
Table of Contents
New and Recently Issued Accounting Standards
For a listing of new and recently issued accounting standards, see Note 1, Nature of Operations and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
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. 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.
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. 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.
The following table reconciles net income to Adjusted EBITDA:
For the Fiscal Years Ended May
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
_____________________________________________________
(a)Net income included:
i.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.
ii.Shareholder activism expense of $5.2 million ($4.0 million after-tax, or $0.03 per share). for fiscal 2025.
34
Table of Contents
iii.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;
iv.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.
v.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;
vi.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;
vii.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; and
viii.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.
ix.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.
x.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 $8.2 million and $8.3 million for fiscal 2025 and 2024, respectively.
35
Table of Contents
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
Unrealized derivative gains and losses (13.4) 9.7 —
Foreign currency exchange losses — (15.2) —
Blue chip swap transaction gains — 21.1 —
Items impacting comparability:
Restructuring Plan and other expenses 75.3 — 10.5
Shareholder activism expense — (5.2) —
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:
Inventory step-up from acquisition 20.7 — —
Integration and acquisition-related items, net — (12.8) —
Total adjustments (8.0) (27.2) —
_____________________________________________________
(a)See the footnotes in the reconciliation of net income to Adjusted EBITDA above for a discussion of the items impacting comparability.
36
Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, changes in currency rates, and interest rates. In the normal course of business, we may periodically enter into derivatives to minimize these risks, but not for trading purposes. All of the following potential changes are based on sensitivity analyses performed on our financial positions as of May 25, 2025 and May 26, 2024. Actual results may differ materially.
Commodity Price Risk
Certain commodities we use in the production and distribution of our products are exposed to market price risk. To manage that risk, we utilize derivative contracts, many of which qualify for the normal purchase and normal sales scope exception and are not recorded on the Consolidated Balance Sheets. We may use commodity swap or forward purchase contracts, in addition to sourcing from multiple providers, to manage risks associated with market fluctuations in oil and energy prices. Based on our open commodity contract hedge positions as of May 25, 2025, a hypothetical 10% decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of $6.8 million ($5.1 million after-tax). Based on our open commodity hedge positions as of May 26, 2024, a hypothetical 10% decline in market prices applied to the fair value of the instruments would have resulted in a charge to “Cost of sales” of $9.2 million ($6.9 million after-tax). It should be noted that any change in the fair value of the contracts, real or hypothetical, likely would be substantially offset by an inverse change in the value of the underlying hedged item.
Foreign Currency Exchange Rate Risk
We are subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries. Our operations in foreign countries export to, and compete with imports from, other regions. As such, currency movements can have a number of direct and indirect impacts on our financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities. Indirect impacts include the change in competitiveness of exports out of the United States (and the impact on local currency pricing of products that are traded internationally). The currency that has the most impact is the Euro. From time to time, we may economically hedge currency risk with foreign currency contracts, such as forward contracts. Based on monetary assets and liabilities denominated in foreign currencies, we estimate that a hypothetical 10% adverse change in exchange rates versus the U.S. dollar would result in losses of $68.5 million ($52.1 million after-tax) and $63.3 million ($48.1 million after-tax) as of May 25, 2025 and May 26, 2024, respectively.
Interest Rate Risk
We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions. Our exposure to market risk changes in interest rates relates primarily to the amount of interest expense we expect to pay with respect to our variable-rate debt, which is predominately tied to variable market rates including the Secured Overnight Financing Rate. At May 25, 2025, we had $2,976.6 million of fixed-rate and $1,166.4 million of variable-rate debt outstanding. At May 26, 2024, we had $2,495.0 million of fixed-rate and $1,341.7 million of variable-rate debt outstanding. A one percent increase in interest rates related to variable-rate debt would result in an annual increase in interest expense and a corresponding decrease in income before taxes of $11.8 million ($9.2 million after-tax) and $13.6 million($10.6 million after-tax) at May 25, 2025 and May 26, 2024, respectively.
For more information about our debt, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
37
Table of Contents
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Notes to Consolidated Financial Statements 47
38
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Lamb Weston Holdings, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Lamb Weston Holdings, Inc. and subsidiaries (the Company) as of May 25, 2025 and May 26, 2024, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended May 25, 2025, and the related notes and consolidated financial statement schedule (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 25, 2025 and May 26, 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended May 25, 2025, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 25, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July 23, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sufficiency of audit evidence over the finished goods inventory held at third-party warehouse locations
As discussed in Note 1 to the consolidated financial statements, the Company has recognized finished goods inventory of $755.7 million as of May 25, 2025, the majority of which is held at third-party warehouse locations. The tracking of the existence and completeness of finished goods inventory quantities held at third-party warehouse locations is reliant upon manual processes and automated processes within the Company’s enterprise resource planning system.
39
Table of Contents
We identified the evaluation of the sufficiency of audit evidence obtained related to the quantities of finished goods inventory held at third-party warehouse locations as a critical audit matter. Challenging auditor judgment was required to determine the nature and extent of procedures to be performed over the quantity of finished goods inventory held at third-party warehouse locations, including the determination of third-party warehouse locations at which to observe physical inventory counts and the need to involve information technology (IT) professionals with specialized skills and knowledge to assess the IT system involved.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the quantities of finished goods inventory held at third-party warehouse locations by evaluating:
•homogeneity of the locations
•historical results of physical counts of inventory
•inventory quantities by location.
We evaluated the design and tested the operating effectiveness of certain internal controls within the Company’s inventory process, including controls over finished goods inventory quantities held at third-party warehouse locations. We involved IT professionals with specialized skills and knowledge, who assisted in testing certain general IT and application controls related to the Company’s process of recording finished goods inventory quantities held at third-party warehouse locations. We tested the existence and completeness of finished goods inventory by observing a sample of physical inventory counts during the year. We also obtained external confirmation of inventory quantities held at certain third-party warehouse locations for a sample of locations. In addition, we evaluated the overall sufficiency of audit evidence obtained over finished goods inventory quantities held at third-party warehouse locations by assessing the results of procedures performed including the appropriateness of such evidence.
/s/ KPMG LLP
We have served as the Company’s auditor since 2016.
Seattle, Washington
July 23, 2025
40
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors
Lamb Weston Holdings, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Lamb Weston Holdings, Inc. and subsidiaries' (the Company) internal control over financial reporting as of May 25, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 25, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of May 25, 2025 and May 26, 2024, the related consolidated statements of earnings, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended May 25, 2025, and the related notes and consolidated financial statement schedule (collectively, the consolidated financial statements), and our report dated July 23, 2025 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Seattle, Washington
July 23, 2025
41
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Statements of Earnings
(dollars in millions, except per share amounts)
For the Fiscal Years Ended May
Selling, general and administrative expenses 633.5 701.4 550.0
Restructuring expense 100.0 — —
Income before income taxes and equity method earnings 485.1 929.5 772.9
Earnings per share:
Weighted average common shares outstanding:
See Notes to Consolidated Financial Statements.
42
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Statements of Comprehensive Income
(dollars in millions)
For the Fiscal Years Ended May
Other comprehensive income (loss):
See Notes to Consolidated Financial Statements.
43
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Balance Sheets
(dollars in millions, except share data)
ASSETS
Current assets:
Cash and cash equivalents $ 70.7 $ 71.4
Prepaid expenses and other current assets 145.0 136.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt and financing obligations 77.8 56.4
Long-term liabilities:
Commitments and contingencies
Stockholders’ equity:
Additional distributed capital (479.1) (508.9)
Accumulated other comprehensive income (loss) 54.5 (12.9)
Total liabilities and stockholders’ equity $ 7,392.6 $ 7,367.0
See Notes to Consolidated Financial Statements.
44
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
(dollars in millions, except share and per share data)
Dividends declared, $1.05 per share — — — — (151.6) — (151.6)
Stock-settled, stock-based compensation expense — — — 38.5 — — 38.5
Dividends declared, $1.28 per share — — — — (184.9) — (184.9)
Stock-settled, stock-based compensation expense — — — 46.8 — — 46.8
Dividends declared, $1.46 per share — — — — (206.9) — (206.9)
Stock-settled, stock-based compensation expense — — — 39.4 — — 39.4
See Notes to Consolidated Financial Statements.
45
Table of Contents
Lamb Weston Holdings, Inc.
Consolidated Statements of Cash Flows
(dollars in millions)
For the Fiscal Years Ended May
Cash flows from operating activities
Stock-settled, stock-based compensation expense 39.5 46.8 38.5
Gain on acquisition of investments in joint ventures — — (425.8)
Deferred income taxes 0.6 (1.3) 0.4
Blue chip swap transaction gains (21.1) (18.0) —
Changes in operating assets and liabilities:
Income taxes payable/receivable, net (10.3) 20.1 (12.3)
Prepaid expenses and other current assets 9.5 9.7 1.8
Net cash provided by operating activities $ 868.3 $ 798.2 $ 761.7
Cash flows from investing activities
Additions to property, plant and equipment (638.2) (929.5) (654.0)
Additions to other long-term assets (33.6) (62.3) (82.0)
Acquisition of interests in joint venture, net — — (610.4)
Acquisition of business, net of cash acquired — (10.5) —
Proceeds from blue chip swap transactions, net of purchases 21.1 18.0 —
Net cash used for investing activities $ (648.0) $ (984.1) $ (1,340.9)
Cash flows from financing activities
Repayments of debt and financing obligations (276.6) (401.1) (32.6)
Net cash used in financing activities $ (225.0) $ (48.0) $ 340.8
Effect of exchange rate changes on cash and cash equivalents 4.0 0.5 18.2
Net decrease in cash and cash equivalents (0.7) (233.4) (220.2)
Cash and cash equivalents, beginning of period 71.4 304.8 525.0
Cash and cash equivalents, end of period $ 70.7 $ 71.4 $ 304.8
See Notes to Consolidated Financial Statements.
46
Table of Contents
Notes to Consolidated Financial Statements
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Lamb Weston Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Lamb Weston”) is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho. We have two reportable segments: North America and International.
Basis of Presentation
These Consolidated Financial Statements present the financial results of Lamb Weston for the fiscal years ended May 25, 2025, May 26, 2024, and May 28, 2023 (“fiscal 2025, 2024, and 2023”), and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”). The fiscal year of Lamb Weston ends the last Sunday in May. The fiscal years for the Consolidated Financial Statements presented consist of 52- week periods.
The financial statements include all adjustments (consisting only of normal recurring adjustments) that we consider necessary for a fair presentation of such financial statements. Our Consolidated Financial Statements include the accounts of Lamb Weston and all of our majority-owned subsidiaries. Intercompany investments, accounts, and transactions have been eliminated.
Certain amounts in the prior year period consolidated financial statements have been reclassified to conform with the current period presentation. These reclassifications had no financial impact on previously reported net income, cash flows, or stockholders’ equity.
The equity method of accounting is applied for investments when the Company has significant influence over the investee’s operations, or when the investee is structured with separate capital accounts and our investment is considered more than minor. Our equity method investments are described in Note 6, Other Assets.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported in our Consolidated Financial Statements and the accompanying notes. On an ongoing basis, we evaluate our estimates, including but not limited to those related to the measurement of assets acquired and the liabilities assumed based on the fair value at the acquisition date, provisions for income taxes, estimates of sales incentives and trade promotion allowances. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the Consolidated Financial Statements in future periods.
Revenue from Contracts with Customers
Generally, we recognize revenue on a point-in-time basis when the customer takes title to the product and assumes the risks and rewards for the product. However, for customized products, which are products manufactured to customers’ unique specifications, we recognize revenue over time, utilizing an output method, which is generally as the products are produced. This is because once a customized product is manufactured pursuant to a purchase order, we have an enforceable right to payment for that product. Conversely, for non-customized products, revenue is generally recognized upon shipment. As a result, the timing of the receipt of a purchase order may create quarterly fluctuations.
The nature of our contracts varies based on the business, customer type, and region; however, in all instances it is our customary business practice to receive a valid order from the customer, in which each party’s rights and related payment terms are clearly identifiable. Our payment terms are consistent with industry standards and generally include early pay discounts. Amounts billed and due from customers are short-term in nature and are classified as receivables, since payments are unconditional and only the passage of time is required before payments are due. As of May 25, 2025 and May 26, 2024, we had $132.7 million and $104.3 million, respectively, of unbilled receivables for customized products for which we recognize revenue as performance obligations are met and record the amounts in “Receivables” on our Consolidated Balance Sheets. We generally do not offer financing to our customers. We also do not provide a general right of return. However, customers may seek to return defective or non-conforming products. Following a customer return, we
47
Table of Contents
may offer remedies, including cash refunds, credit towards future purchases, or product replacement. As a result, customers’ right of return and related refund or product liabilities are estimated and recorded as reductions in revenue.
We have contract terms that give rise to variable consideration including, but not limited to, discounts, coupons, rebates, and volume-based incentives. We estimate volume rebates based on the most likely amount method outlined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. We estimate early payment discounts and other customer trade incentives based principally on historical sales and coupon utilization and redemption rates, influenced by judgments about current market conditions such as competitive activity in specific product categories, which is consistent with the expected value method outlined in ASC 606. We have concluded that these methods result in the best estimate of the consideration we are entitled to from our customers. Because of the complexity of some of these trade promotions, however, the ultimate resolution may result in payments that are materially different from our estimates. As additional information becomes known, we may change our estimates. At May 25, 2025 and May 26, 2024, we had $88.2 million and $90.0 million, respectively, of sales incentives and trade promotions payable recorded in “Accrued liabilities” on our Consolidated Balance Sheets.
We have elected to present all sales taxes on a net basis, account for shipping and handling activities as fulfillment activities, recognize the incremental costs of obtaining a contract as expense when incurred if the amortization period of the asset we would recognize is one year or less, and not record interest income or interest expense when the difference in timing of control or transfer and customer payment is one year or less.
Advertising and Promotion
Advertising and promotion expenses totaled $35.8 million, $49.7 million, and $34.4 million in fiscal 2025, 2024, and 2023, respectively, and are included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings as the expenses are incurred.
Research and Development
Research and development costs are expensed as incurred and totaled $22.0 million, $26.4 million, and $17.2 million in fiscal 2025, 2024, and 2023, respectively, and are included in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.
Stock-Based Compensation
Compensation expense resulting from all stock-based compensation transactions is measured and recorded in the Consolidated Financial Statements based on the grant date fair value of the equity instruments issued. Compensation expense is recognized over the period the employee or non-employee director provides service in exchange for the award. See Note 10, Stock-Based Compensation, for additional information.
Pension and Post-Retirement Benefits
In fiscal 2026, we plan to terminate our defined benefit pension plan (the “Pension Plan”), which is now frozen for all participants. In connection with the termination, we offered participants two options to receive their benefits, a lump-sum payout or through the purchase of group annuity contracts from a highly-rated insurance company which will irrevocably transfer the remaining balance of the Pension Plan’s obligations and related assets. As of July 16, 2025, the Pension Plan made approximately $27 million of payments to eligible participants electing the lump-sum option. As a result of the Pension Plan termination, we expect to record a pre-tax pension settlement charge of approximately $10 million in fiscal 2026 of which we estimate 40% and 60% to be cash and non-cash, respectively.
In early fiscal 2026, we contributed $13.5 million to the plan in connection with the Pension Plan termination. In fiscal 2025 and 2024, we made $0.6 million and $6.1 million, respectively, of contributions to our qualified plan.
We also have a nonqualified defined benefit pension plan that provides unfunded supplemental retirement benefits to certain U.S. executives. This plan is closed to new participants and pension benefit accruals are frozen for active participants.
48
Table of Contents
U.S. employees are eligible to participate in a defined contribution savings plans with employer matching provisions. Eligible employees participate in a contributory defined contribution plan (“the 401(k) Plan”), which permits participants to make contributions by salary reduction pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. Regardless of employee participation level, we generally provide a 3% contribution to the 401(k) Plan. In addition to this, we will generally match 100% of the first 6% of the participating employee’s contribution election to the 401(k) Plan. The Plan’s matching contributions have a five-year graded vesting with 20% vesting each year. We made employer contributions of $41.5 million, $48.1 million, and $38.7 million in fiscal 2025, 2024, and 2023, respectively.
We sponsor a non-qualified deferred compensation savings plan that permits eligible U.S. employees to continue to make deferrals and receive company matching contributions when their contributions to the 401(k) Plan are stopped due to limitations under U.S. tax law. In addition, we sponsor a non-qualified deferred compensation plan for non-employee directors that allow directors to defer their cash compensation and stock awards. Both deferred compensation plans are unfunded nonqualified defined contribution plans. Participant deferrals and company matching contributions (for the employee deferred compensation plan only) are not invested in separate trusts, but are paid directly from our general assets at the time benefits become due and payable. At May 25, 2025 and May 26, 2024, we had $27.0 million and $27.6 million, respectively, of liabilities attributable to participation in our deferred compensation plans recorded on our Consolidated Balance Sheets.
Cash and Cash Equivalents
Cash and all highly liquid investments with an original maturity of three months or less at the date of acquisition are classified as cash and cash equivalents and stated at cost, which approximates market value. We maintain various banking relationships with high quality financial institutions, and, from time to time, we invest available cash in money market funds that are backed by U.S. Treasury securities and can be redeemed without notice. Cash held in money market funds are treated as cash equivalents.
Trade Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are stated at the amount we expect to collect based on our past experience, as well as reliance on the Perishable Agricultural Commodities Act, which was enacted to help promote fair trade in the fruit and vegetable industry by establishing a code of fair business practices. The collectability of our accounts receivable is based upon a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations (e.g., bankruptcy filings, substantial downgrading of credit sources), a specific reserve for bad debts is recorded against amounts due to the Company to reduce the net recorded receivable to the amount that we reasonably believe will be collected. For all other customers, reserves for bad debts are recognized based on forward-looking information to assess expected credit losses. If collection experience deteriorates, the estimate of the recoverability of amounts due could be reduced. We periodically review our allowance for doubtful accounts and adjustments to the valuation allowance are recorded as income or expense in “Selling, general and administrative expenses” in our Consolidated Statements of Earnings. Trade accounts receivable balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.
Inventories
Inventories are valued at the lower of cost (determined using the first-in, first-out method) or net realizable value and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead. Inventories are reduced to net realizable value after consideration of excess, obsolete, and unsaleable inventories based on quantities on hand and estimated future usage and sales. The majority of our finished goods inventories are held at third-party warehouses not owned or leased by the Company.The components of inventories were as follows:
Raw materials and packaging $ 171.5 $ 178.7
49
Table of Contents
Leased Assets
Leases consist of real property and machinery and equipment. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of the lease payments over the lease term. Our leases may include options to extend or terminate. Options to extend are included in the lease term when it is reasonably certain that we will exercise the option. Some leases have variable payments, however, because they are not based on an index or rate, they are not included in lease assets and liabilities. Variable payments for leases of land and buildings primarily relate to common area maintenance, insurance, taxes, and utilities. Variable payments for equipment, vehicles, and leases within supply agreements primarily relate to usage, repairs, and maintenance. As the implicit rate is not readily determinable for most of our leases, we use an incremental borrowing rate to determine the initial present value of lease payments over the lease terms on a collateralized basis over a similar term, which is based on market and company specific information. Assets and liabilities related to leases having a lease term of twelve months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the term of the lease. In addition, we account for lease and non-lease components as a single lease component for all of our leases. See Note 9, Leases, for more information.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Cost includes expenditures for major improvements and replacements and the amount of interest cost associated with significant capital additions. The amount of interest capitalized from construction in progress was $25.9 million, $49.5 million, and $17.5 million in fiscal 2025, 2024, and 2023, respectively. Construction in progress does not include deposits made on equipment, materials, and services yet to be received. Repairs and maintenance costs are expensed as incurred.The components of property, plant and equipment were as follows:
Land and land improvements $ 191.6 $ 186.2
Furniture, fixtures, office equipment and other 161.9 127.7
Property, plant and equipment, at cost 6,041.5 5,710.9
Property, plant and equipment, net $ 3,687.9 $ 3,582.8
Depreciation is computed on a straight-line basis over the estimated useful lives of the respective classes of assets as follows:
Land improvements 1-30 years
Buildings 10-40 years
Machinery and equipment 5-20 years
Furniture, fixtures, office equipment, and other 3-15 years
Below is a breakout between Cost of sales (“COS”) and Selling, general and administrative expenses (“SG&A”) for depreciation and total amortization for fiscal 2025, 2024, and 2023.
For the Fiscal Years Ended May
Depreciation - Restructuring expense (a) 32.8 — —
___________________________________________
(a)See Note 4, Restructuring, of these Notes to Consolidated Financial Statements for additional information.
50
Table of Contents
At May 25, 2025 and May 26, 2024, purchases of property, plant and equipment included in accounts payable were $85.4 million and $292.0 million, respectively.
Long-Lived Asset Impairment
We review long-lived assets for impairment upon the occurrence of events or changes in circumstances which indicate that the carrying amount of the assets may not be fully recoverable, measured by comparing their net book value to the undiscounted projected future cash flows generated by their use. Impaired assets are recorded at their estimated fair value.
Goodwill and Other Identifiable Intangible Assets
We perform an annual impairment assessment of goodwill at the reporting unit level in the fourth quarter of each year, or more frequently if indicators of potential impairment exist. We have an option to evaluate goodwill for impairment by first performing a qualitative assessment of events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amounts, then a quantitative goodwill impairment test is not required to be performed. The quantitative assessment requires us to estimate the fair value of our reporting units using a weighted approach based on discounted future cash flows, market multiples and transaction multiples. If the carrying amount of the reporting units is in excess of their estimated fair value, the reporting unit will record an impairment charge by the amount that the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit.
We amortize intangible assets with finite lives over their estimated useful life. We perform a review of significant finite-lived identified intangible assets to determine whether facts and circumstances indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in our business strategy and our forecasts for our products lines.
See Note 5, Goodwill and Other Identifiable Intangible Assets, for additional information.
Fair Values of Financial Instruments
When determining fair value, we consider the principal or most advantageous market in which we would transact, as well as assumptions that market participants would use when pricing the asset or liability. The three levels of inputs that may be used to measure fair value are:
Level 1—Quoted market prices in active markets for identical assets or liabilities. We evaluate security-specific market data when determining whether a market is active.
Level 2—Observable market-based inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3—Unobservable inputs for the asset or liability reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.
See Note 11, Fair Value Measurements, for additional information.
Foreign Currency
Most of our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates. Revenues and expenses are translated into U.S. dollars using daily and monthly average exchange rates. Gains and losses resulting from the translation of Consolidated Balance Sheets are recorded as a component of “Accumulated other comprehensive income (loss).”
Foreign currency transactions resulted in losses of $15.2 million and $28.6 million in fiscal 2025 and 2024, respectively, and a gain of $19.7 million in fiscal 2023. Fiscal 2023 includes a $25.2 million foreign currency transaction gain related to actions taken to mitigate the effect of changes in currency rates on the purchase price of our former European joint venture, Lamb-Weston/Meijer v.o.f. (“LW EMEA”). These amounts were recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.
51
Table of Contents
In fiscal 2024, we began entering into blue chip swap transactions in Argentina as a way to mitigate the impact of fluctuations in the currency rate of the Argentinian peso. We recorded gains of $21.1 million and $18.0 million in fiscal 2025 and 2024, respectively. These amounts were recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Earnings.
Derivative Financial Instruments
We use derivatives and other financial instruments to hedge a portion of our commodity and interest rate risks. We do not hold or issue derivatives and other financial instruments for trading purposes. Derivative instruments are reported in our Consolidated Balance Sheets at their fair values, unless the derivative instruments qualify for the normal purchase normal sale exception (“NPNS”) under GAAP and such exception has been elected. If the NPNS exception is elected, the fair values of such contracts are not recognized. Changes in commodity derivative instrument values are recognized in “Cost of sales” in our Consolidated Statements of Earnings. We do not designate commodity derivatives to achieve hedge accounting treatment.
Income Taxes
We recognize current tax liabilities and assets based on an estimate of taxes payable or refundable in the current year for each of the jurisdictions in which we transact business. As part of the determination of our current tax liability, management exercises judgment in evaluating positions taken in the tax returns. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than a 50% likelihood of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
We also recognize deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences (e.g., the difference in book basis versus tax basis of fixed assets resulting from differing depreciation methods). Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are remeasured to reflect new tax rates in the periods rate changes are enacted. If appropriate, we recognize valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be ultimately realized, based on our assessment of estimated future taxable income.
See Note 3, Income Taxes, for more information.
New and Recently Issued Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires companies to disclose incremental segment information on an annual and interim basis. It expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. We adopted this ASU in the fourth quarter of fiscal 2025 and added disclosures in Note 13, Segments. The disclosures were applied retrospectively and impacted all prior periods presented.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance transparency and decision usefulness of income tax disclosures, particularly around rate reconciliations and income taxes paid information. ASU 2023-09 is effective for our Annual Report on Form 10-K for the fiscal year ending May 31, 2026, on a prospective basis, with early adoption permitted. We adopted this guidance as of May 26, 2025, and will update disclosures within our fiscal 2026 Annual Report on Form 10-K.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires companies to provide more detailed information of certain income statement expenses within the footnotes to the financial statements. ASU 2024-03 is effective for our fiscal 2028 Annual Report on Form 10-K, and interim periods beginning in our fiscal 2029, on a prospective basis, with early adoption permitted. We are evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
There were no other accounting pronouncements recently issued that had or are expected to have a material impact on our Consolidated Financial Statements.
52
Table of Contents
2. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per common share for the periods presented:
For the Fiscal Years Ended May
Numerator:
Denominator:
Basic weighted average common shares outstanding 142.2 144.9 144.5
Add: Dilutive effect of employee incentive plans (a) 0.5 0.8 0.7
Diluted weighted average common shares outstanding 142.7 145.6 145.2
Earnings per share:
_____________________________________________________
(a)Potential dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance share awards. As of May 25, 2025, 0.8 million shares of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive. As of May 26, 2024, and May 28, 2023, an insignificant number of stock-based awards were excluded from the computation of diluted earnings per share because they would be antidilutive.
3. INCOME TAXES
Pre-tax income, inclusive of equity method investment earnings, consisted of the following:
For the Fiscal Years Ended May
The provision for income taxes included the following:
For the Fiscal Years Ended May
Current
Deferred
Total deferred provision for taxes $ 0.4 $ (1.4) $ 0.4
53
Table of Contents
A reconciliation of income tax expense using the 21% U.S. statutory tax rate on income from operations, including equity method earnings and before income taxes, compared with the actual provision for income taxes follows:
For the Fiscal Years Ended May
Provision computed at U.S. statutory rate $ 105.1 $ 200.7 $ 259.0
Increase (decrease) in rate resulting from:
State and local taxes, net of federal benefit 5.1 20.1 21.2
Change in valuation allowance (b) 14.7 3.6 (0.7)
Consolidation of previously held equity interests (c) — — (43.1)
Effective income tax rate (b)(d) 28.6 % 24.1 % 18.2 %
_____________________________________________________
(a)We derive the effective tax rate expense or (benefit) attributed to non-U.S. income taxed at different rates, including the impact of permanent items. The statutory tax rates range from 8.25% to 35%.
(b)The predominant change in the valuation allowance and effective income tax rate in fiscal 2025 is attributable to the establishment of a valuation allowance against certain international deferred tax assets and international permanent differences.
(c)In connection with the joint venture acquisitions, we recorded a $43.1 million rate benefit based on a $425.8 million non-cash gain ($379.5 million after-tax) related to the remeasurement of our initial equity interests to fair value.
(d)The effective income tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings. The effective tax rate in fiscal 2023 included the tax impact of the remeasurement of our initial 50% equity interests in LW EMEA and our joint venture in Argentina, Lamb Weston Alimentos Modernos S.A (“LWAMSA”), and other acquisition-related items. The fiscal 2023 tax rates were affected by mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe experienced significant volatility. Excluding these items, our effective tax rate was 21.8% in fiscal 2023.
Income Taxes Paid
Income taxes paid, net of refunds, were $149.7 million, $188.8 million, and $226.5 million in fiscal 2025, 2024, and 2023, respectively.
54
Table of Contents
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred income tax assets and liabilities were as follows:
(in millions) Assets Liabilities Assets Liabilities
Property, plant and equipment $ — $ 297.9 $ — $ 322.6
Goodwill and other intangible assets 17.1 — 17.4 —
Compensation and benefit related liabilities 26.3 — 27.8 —
Net operating loss and credit carryforwards (a) 34.1 — 22.9 —
Accrued expenses and other liabilities 12.2 — 20.1 —
Inventory and inventory reserves 8.7 — 17.7 —
Lease obligations 28.9 — 31.4 —
Operating lease assets — 26.6 — 28.9
Research and development expenditures 18.4 — 21.4 —
Equity method investments — 5.7 — 7.1
Less: Valuation allowance (b) (65.7) — (53.1) —
_____________________________________________________
(a)At May 25, 2025, Lamb Weston had approximately $76.4 million of gross ($19.7 million after-tax) non-U.S. net operating loss carryforwards, of which $6.0 million (after-tax) will expire by fiscal 2031. The remaining $13.7 million (after-tax) non-U.S. net operating loss carryforwards will not expire. Lamb Weston also had a non-U.S. tax credit carryforward of $0.6 million, which will expire by fiscal 2033, and a state business credit carryforward of $13.7 million, which will expire by fiscal 2039.
(b)The valuation allowance is predominantly related to non-amortizable intangibles in the United States, with a lesser portion attributable to valuation allowances against certain international deferred tax assets.
(c)Deferred tax assets of $1.1 million and $8.2 million, as of May 25, 2025 and May 26, 2024, respectively, were presented in “Other assets.” Deferred tax liabilities of $253.5 million and $256.2 million as of May 25, 2025 and May 26, 2024, respectively, were presented in “Deferred income taxes” as“Long-term liabilities” on the Consolidated Balance Sheets. The deferred tax asset and liability net position is determined by tax jurisdiction.
The accounting standards allow companies to adopt an accounting policy to either recognize deferred taxes for global intangible low-taxed income (“GILTI”) or treat such as a tax cost in the year incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. Under this policy, we have not provided deferred taxes on temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.
We have not established deferred income taxes on accumulated undistributed earnings and other basis differences for operations outside the U.S., as such earnings and basis differences are indefinitely reinvested. Determining the unrecognized deferred tax liability for these earnings is not practicable. Generally, no significant U.S. federal income taxes will be imposed on future distributions of non-U.S. earnings under the current law. However, distributions to the U.S. or other jurisdictions could be subject to withholding and other local taxes, and these taxes would not be material.
55
Table of Contents
Uncertain Tax Positions
The aggregate changes in the gross amount of unrecognized tax benefits, excluding interest and penalties, recorded in the accompanying Balance Sheets, consisted of the following:
For the Fiscal Years Ended May
Decreases from positions established during prior fiscal years (1.5) (3.6) —
Decreases relating to settlements with taxing authorities (1.7) (0.5) (4.9)
Expiration of statute of limitations (10.4) (5.3) (2.2)
_____________________________________________________
(a)If we were to prevail on the unrecognized tax benefits recorded as of May 25, 2025 and May 26, 2024, it would result in a tax benefit of $71.4 million and $69.0 million, respectively, and a reduction in the effective tax rate. The ending balances exclude $17.8 million and $15.3 million of gross interest and penalties in fiscal 2025 and 2024, respectively. We accrue interest and penalties associated with uncertain tax positions as part of income tax expense.
Lamb Weston conducts business and files tax returns in numerous countries, states, and local jurisdictions. We do not have any significant open tax audits. Major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years. Statute of limitation expirations could reduce the uncertain tax positions by approximately $16 million during the next 12 months.
Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S. federal, state, and non-U.S. tax audits may be concluded within the next 12 months. This process could increase or decrease the balance of our gross unrecognized tax benefits. The estimated impact on income tax expense and net income is not expected to be significant.
4. RESTRUCTURING
On October 1, 2024, we announced a restructuring plan (the “FY25 Restructuring Plan”), which was designed to drive operational and cost efficiencies and improve cash flows. The FY25 Restructuring Plan included the permanent closure of our manufacturing facility in Connell, Washington, the temporary curtailment of certain production lines and schedules across our manufacturing network in North America, and reductions in employee headcount, other operating expenses, and capital expenditures.
In fiscal 2025, we recorded $185.8 million of pre-tax charges, of the total charges, $137.1 million were cash and $48.7 million were non-cash.
(in millions) For the year ended May 25, 2025
Restructuring Plan expenses related to (a):
Potato contract terminations (c) 59.3
Inventory write-off (c) 26.5
Employee-related costs (d) 17.5
Other restructuring charges 27.2
___________________________________________
(a) These charges were included as “unallocated corporate costs” before being reconciled in the Segment Adjusted EBITDA to Net income table in Note 13, Segments, of these Notes to the Consolidated Financial Statements.
(b) Includes charges related to accelerating depreciation of the manufacturing facility permanently closed under the FY25 Restructuring Plan, other asset retirements, and plant charges.
(c) Includes the cost of contracted raw potatoes that will not be used due to curtailed production and the write-off of inventories, including spare parts, related to the production curtailment under the FY25 Restructuring Plan.
(d) Includes employee severance and other one-time termination benefits related to the reduction in headcount under the FY25 Restructuring Plan.
56
Table of Contents
The following amounts related to the FY25 Restructuring Plan are included in the Company’s Consolidated Statements of Earnings:
(in millions) For the year ended May 25, 2025
Restructuring Plan expenses included in:
Cost of sales $ 75.3
Restructuring expense 100.0
Equity method investment earnings 10.5
During fiscal 2025, we paid $115.6 million in FY25 Restructuring Plan expenses; accruals remaining under the FY25 Restructuring Plan of $21.5 million are recorded as current liabilities within “Accounts payable” and “Accrued liabilities” in the accompanying Consolidated Balance Sheet at May 25, 2025.
The actions in connection with the FY25 Restructuring Plan were substantially complete by the end of fiscal 2025, and the majority of the remaining charges that will occur in fiscal 2026 relate to facility closure, including demolition, and employee-related costs. Any changes to these estimates or timing will be reflected in our results of operations in future periods.
5. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS
The following table presents changes in goodwill balances, by segment, for fiscal years 2025 and 2024:
(in millions) North America International Total
Acquisitions — 8.5 8.5
Foreign currency translation adjustments 6.4 4.3 10.7
Foreign currency translation adjustments 24.4 5.9 30.3
_____________________________________________________
(a)As a result of our change in segments, effective May 29, 2023, goodwill was reassigned to the North America and International segments based on relative fair value using a market-based approach. Before and after the reassignment of our goodwill, we completed impairment assessments and concluded there were no indications of impairment in our segments. Please refer to Note 13, Segments, and our Current Report on Form 8-K, which we filed with the Securities and Exchange Commission on August 24, 2023 for further information regarding our segment structure.
Other identifiable intangible assets were as follows:
Non-amortizing intangible assets (a) n/a $ 18.0 $ — $ 18.0 n/a $ 18.0 $ — $ 18.0
_____________________________________________________
(a)Non-amortizing intangible assets represent brands and trademarks.
(b)Amortizing intangible assets are primarily comprised of licensing agreements, brands, and customer relationships. Foreign intangible assets are affected by foreign currency translation.
57
Table of Contents
Based on current intangibles subject to amortization, we expect intangible asset amortization expense, excluding developed technology, will be approximately $8.7 million in fiscal 2026, $8.6 million in fiscal 2027, $8.6 million in fiscal 2028, $8.5 million in fiscal 2029, and $7.7 million in fiscal 2030, and approximately $53.9 million cumulatively thereafter.
Impairment Testing
During the annual goodwill impairment test we performed in the fourth quarter of fiscal 2025, we assessed qualitative and quantitative factors to determine whether it was more likely than not that the fair value of each reporting unit was less than its carrying value. Based on the results of the qualitative and quantitative impairment test, we determined that it was not more likely than not that the fair value was less than the carrying value of our North America and International reporting units. Additionally, we completed our tests of our non-amortizing intangibles in the fourth quarter of fiscal 2025 and there was no indication of intangible asset impairment.
6. OTHER ASSETS
The components of other assets were as follows:
Capitalized software costs (a) $ 208.7 $ 227.9
Equity method investments (b) 47.5 59.2
Property, plant, and equipment deposits 30.3 52.6
_____________________________________________________
(a)Capitalized software costs are generally amortized over three to seven years once implemented.
(b)Equity method investments include our 50% ownership in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), our joint venture with RDO Frozen Co., which is included in our North America segment.
Summarized financial information for our equity method investments are as follows:
For the Fiscal Years Ended May
Noncurrent liabilities 46.7 55.5
____________________________
(a) Reflects Lamb Weston RDO only
(b) The fiscal 2023 financial information includes the financial results for the parts of the fiscal year when LW EMEA and LWAMSA were being accounted for as unconsolidated joint ventures.
58
Table of Contents
We made the following sales to and purchases from our equity method investments, primarily for finished products sold to or purchased from our joint ventures. We also provided services, such as sales and marketing services, to our equity method investments that are recorded as a reduction to “Selling, general and administrative expenses” in our Consolidated Statements of Earnings. We also received dividends. The following table summarizes the activity with our equity method investments:
For the Fiscal Years Ended May
As of May 25, 2025 and May 26, 2024, we had receivables included in “Receivables” on our Consolidated Balance Sheets from our equity method investments of $6.2 million and $8.2 million, respectively.
7. ACCRUED LIABILITIES
The components of accrued liabilities were as follows:
Compensation and benefits $ 104.5 $ 72.8
Accrued trade promotions 88.2 90.0
Dividends payable to shareholders 51.7 51.7
Current portion of operating lease obligations 23.9 29.3
Plant utilities and accruals 23.0 23.9
Derivative liabilities and payables 7.0 24.6
59
Table of Contents
8. DEBT AND FINANCING OBLIGATIONS
The components of our debt, including financing obligations, were as follows:
Amount Interest Rate Amount Interest Rate
Short-term borrowings:
Other credit facilities (a) 37.6 (a) 35.0 (a)
Long-term debt:
Financing obligations:
Lease financing obligations due on various dates through 2040 (d) 5.2 5.7
Total debt and financing obligations 4,148.2 3,842.4
Debt issuance costs (e) (16.8) (19.0)
Current portion of long-term debt and financing obligations (77.8) (56.4)
_____________________________________________________
(a)Other credit facilities consist of short-term facilities at our subsidiaries used for working capital purposes. Borrowings under these facilities bear interest at various rates.
(b)The interest rates applicable to the Term A-1, A-3, A-4, and A-5 loans do not include anticipated patronage dividends. We have received and expect to continue receiving patronage dividends under the outstanding term loan facilities.
(c)The Term A-1 loan facility was repaid in full in connection with our entry into the Term Loan Amendment discussed below.
(d)The interest rates on our lease financing obligations ranged from 2.08% to 6.19% at May 25, 2025 and May 26, 2024. For more information on our lease financing obligations, see Note 9, Leases.
(e)Excludes debt issuance costs of $3.9 million and $4.9 million as of May 25, 2025 and May 26, 2024, respectively, related to our Revolving Credit Facility, which are recorded in “Other assets” on our Consolidated Balance Sheets. In fiscal 2025, 2024, and 2023, we recorded $4.8 million, $4.5 million, and $4.1 million, respectively, of amortization expense in “Interest expense” in our Consolidated Statements of Earnings.
Revolving Credit Facility
On May 3, 2024, we entered into an amended and restated credit agreement (the “Revolving Credit Agreement”), which replaced our then-existing credit agreement, dated as of November 9, 2016. The Revolving Credit Agreement modified the former revolving credit agreement for the purpose of, among other things, (i) increasing the commitments under the Revolving Credit Facility to $1.5 billion, (ii) extending the maturity date of the Revolving Credit Facility from August 2026 to May 2029, and (iii) establishing a new €200.0 million term loan facility maturing May 2029 (the “Euro Term Loan Facility”).
60
Table of Contents
Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to (i) an applicable rate described in the table below plus (ii)(a) for U.S. dollar denominated loans, Term SOFR, Adjusted Daily Simple SOFR or the Base Rate (each as defined in the Revolving Credit Agreement), and (b) for Alternative Currency denominated loans, the Alternative Currency Term Rate or the Alternative Currency Daily Rate (each as defined in the Revolving Credit Agreement). Borrowings under the Euro Term Loan Facility bear interest at a per annum rate equal to (i) an applicable rate described in the table below plus (ii) the Alternative Currency Term Rate applicable to Euro denominated loans. The Revolving Credit Agreement contains certain covenant restrictions, a consolidated net leverage ratio and an interest coverage ratio and customary events of default.
At May 25, 2025, we had approximately $1,166.8 million of availability under the Revolving Credit Facility.
Term Loan Facilities
On May 3, 2024, we entered into an amended and restated credit agreement (the “Term Loan Credit Agreement”), which replaced our then-existing credit agreement, dated as of June 28, 2019. The former term loan credit agreement provided for, among other things, (i) a $300.0 million term loan facility due June 2026 (the “Term A-1 Loan Facility”), (ii) a $325.0 million term loan facility due April 2025 (the “Term A-2 Loan Facility”) and (iii) a $450.0 million term loan facility due January 2030 (the “Term A-3 Loan Facility”). The Term Loan Credit Agreement modified the former term loan agreement for the purpose of, among other things, establishing an additional $325.0 million term loan facility due May 2029 (the “Term A-4 Loan Facility”). Borrowings under the Term A-4 Loan Facility were used in part to repay the Term A-2 Loan Facility in full.
On September 27, 2024, we amended the Term Loan Credit Agreement (the “Term Loan Amendment”) to, among other things, establish a new $500 million term loan facility with a maturity date of September 2031 (“Term A-5 Loan Facility”). Borrowings under the Term A-5 Loan Facility were used to repay the Term A-1 Loan Facility in full and to pay down borrowings under our Revolving Credit Facility. Borrowings under the Term Loan Credit Agreement bear interest, before anticipated patronage dividends, at a per annum rate equal to (i) an applicable rate described in the table below plus (ii) the Adjusted Term SOFR Rate, the Base Rate or, in the case of Term A-4 and Term A-5 Loan Facilities, the Fixed Rate (each as defined in the Term Loan Credit Agreement). The Term Loan Credit Agreement contains certain covenant restrictions, a consolidated net leverage ratio and an interest coverage ratio and customary events of default.
RMB Loan Facilities
On February 18, 2022, our wholly owned subsidiary, Ulanqab Lamb Weston Food Co., Ltd., entered into a facility agreement providing for a RMB 1,079.0 million ($150.3 million based on prevailing exchange rates on May 25, 2025) term loan facility (the “RMB Loan Facility”). The RMB Loan Facility matures on February 25, 2027. The RMB Loan Facility contains covenants that are standard for credit facilities originated in the People’s Republic of China. Payment obligations under the RMB Loan Facility are unconditionally guaranteed by Lamb Weston.
On August 22, 2024, Ulanqab Lamb Weston Food Co., Ltd., entered into a facility agreement providing for a RMB 200 million ($27.9 million based on prevailing exchange rates on May 25, 2025) term loan facility (the “RMB 2024 Loan Facility”). The RMB 2024 Loan Facility matures on August 28, 2029. The RMB 2024 Loan Facility contains covenants that are standard for credit facilities originated in the People’s Republic of China. Payment obligations under the RMB 2024 Loan Facility are unconditionally guaranteed by Lamb Weston.
4.875% Senior Notes due 2028
In May 2020, we issued $500.0 million aggregate principal amount of 4.875% senior notes due May 15, 2028 (“2028 Notes”). Our obligations under the 2028 Notes are unconditionally guaranteed on a senior unsecured basis by the same subsidiaries as the Revolving Credit Facility. The 2028 Notes are senior unsecured obligations and rank equally with all of our current and future senior indebtedness (including the 2030 and 2032 Notes), rank senior to all our current and future subordinated indebtedness and are subordinated to all of our current and future secured indebtedness (including all borrowings with respect to the Revolving Credit Facility and Term A-3, A-4 and A-5 Loan Facilities to the extent of the value of the assets securing such indebtedness). Upon a change of control (as defined in the indenture governing the 2028 Notes), we must offer to repurchase the 2028 Notes at 101% of the principal amount of the notes, plus accrued and unpaid interest.
61
Table of Contents
4.125% Senior Notes due 2030 and 4.375% Senior Notes due 2032
On November 8, 2021, we issued (i) $970.0 million aggregate principal amount of 4.125% senior notes due January 31, 2030 (“2030 Notes”) and (ii) $700.0 million aggregate principal amount of 4.375% senior notes due January 31, 2032 (“2032 Notes”) pursuant to indentures, each dated as of November 8, 2021 (together, the “Indentures”). Our obligations under the 2030 Notes and 2032 Notes are unconditionally guaranteed on a senior unsecured basis by the same subsidiaries as the Revolving Credit Facility.
The 2030 Notes and 2032 Notes are effectively subordinated to all of our existing and future secured debt, rank equally with all of our existing and future senior debt and rank senior to all of our existing and future subordinated debt. The guarantees of the 2030 Notes and 2032 Notes are effectively subordinated to all of the guarantors’ existing and future secured debt, rank equally with all of their existing and future senior debt and rank senior to all of their existing and future subordinated debt. The 2030 Notes and 2032 Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.
Other Credit Facilities
At May 25, 2025 and May 26, 2024, two of our subsidiaries had $50.1 million and $58.3 million, respectively, of availability under their respective line of credit facilities with financial institutions, with borrowings outstanding of $37.6 million and $35.0 million, respectively. We guarantee the full amount of one of our subsidiaries’ obligations to the financial institutions up to the maximum amount of borrowings under the credit facility.
Variable Rate Interest
Additional information regarding our variable rate debt modifiers is shown below:
Fixed Rate Loans Reference Rate-Based Loans Base Rate-Based Loans
_____________________________________________________
(a)Borrowings under the Revolving Credit Facility have the same margin whether loans are denominated in U.S. dollars or non-U.S. currencies.
(b)The Term A-1 Loan Facility was repaid in full in connection with our entry into the Term Loan Amendment.
(c)The Term A-4 Loan Facility is considered fixed-rate debt. Under the terms of the facility, on May 1, 2028, we may make an election to treat the remaining year of the term loan as a fixed or variable rate loan. The election can be made for a period that is less than twelve months, which would then initiate a separate election at the end of the period.
(d)The Term A-5 Loan Facility is considered fixed-rate debt. Under the terms of the facility, on October 1, 2026, we may make an election to treat the term loan as a fixed or variable rate loan. The election can be made for a period that is less than the remainder of the term loan, which would then initiate a separate election at the end of the period.
Reference Rate-Based Loans PRC Prime Rate-Based Loans
RMB loan facility, due February 2027 N/A Prime + 0.300%
RMB loan facility, due August 2029 N/A Prime + 0.300%
62
Table of Contents
Debt Maturities
The aggregate minimum principal maturities of our long-term debt, including current portion of long-term debt, for the next five fiscal years and thereafter, are as follows:
(in millions) Debt (a)
_____________________________________________________
(a)See Note 9, Leases, for maturities of our lease financing obligations.
Other
During fiscal 2025, 2024, and 2023, we paid $210.7 million, $191.3 million, and $151.8 million, respectively, of interest on debt.
9. LEASES
We lease various real estate, including certain operating facilities, warehouses, office space, and land. We also lease material handling equipment, vehicles, and certain other equipment. Our leases have remaining lease terms of one to 15 years.
The components of total lease costs, net, consisted of the following:
For the Fiscal Year Ended May (a)
Short-term and variable lease costs 13.5 15.6 10.4
Sublease income (4.3) (4.7) (5.0)
Finance lease costs:
Amortization of lease assets 1.3 1.4 1.0
Interest on lease obligations 0.3 0.3 0.2
_____________________________________________________
(a)Supply-chain-related lease costs are included in “Cost of sales,” and the remainder is recorded in “Selling, general and administrative expenses,” in our Consolidated Statements of Earnings. Interest on finance lease obligations is included in “Interest expense, net,” in our Consolidated Statements of Earnings.
63