UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November ~~26, 2017~~27, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ForFor the transition period from to

Commission File Number: 1-37830

LAMB WESTON HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		61-1797411
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

599 S. Rivershore Lane Eagle, Idaho		83616
(Address of principal executive offices)		(Zip Code)

~~(208)~~ (208) 938-1047

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

I~~ndicate~~

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	LW	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one)~~:


Large accelerated filer	☐☒		Accelerated filer	☐
Non-accelerated filer	☒☐	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 29, ~~2017,~~2022, the Registrant had ~~146,224,085~~143,870,590 shares of common stock, par value $1.00 per share, outstanding.

Table of Contents

Table of Contents

Part I. FINANCIAL INFORMATION
	Item 1	Financial Statements (Unaudited)
		~~Unaudited Condensed Combined and~~ Consolidated Statements of Earnings ~~for the Thirteen and Twenty-Six Weeks ended November 26, 2017 and November 27, 2016~~	3
		~~Unaudited Condensed Combined and~~ Consolidated Statements of Comprehensive Income ~~(Loss) for the Thirteen and Twenty-Six Weeks ended November 26, 2017 and November 27, 2016~~	4
		~~Unaudited Condensed~~ Consolidated Balance Sheets ~~as of November 26, 2017 and May 28, 201~~7	5
		~~Unaudited Condensed Combined and~~ Consolidated Statements of ~~Cash Flows for the Twenty-Six Weeks ended November 26, 2017 and November 27, 2016~~Stockholders’ Equity	6
		~~Notes to Condensed Combined and~~ Consolidated ~~Financial~~ Statements of Cash Flows	7
		Condensed Notes to Consolidated Financial Statements (Unaudited)	8
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	2620
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	3633
	Item 4	Controls and Procedures	3634

Part II. OTHER INFORMATION			3635
	Item 1	Legal Proceedings	3635
	Item 1A	Risk Factors	3635
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	35
	Item 3	Defaults Upon Senior Securities	35
	Item 4	Mine Safety Disclosures	35
	Item 5	Other Information	35
	Item 6	Exhibits	36

Signature			37
	~~Item 3~~	~~Defaults Upon Senior Securities~~	37
	~~Item 4~~	~~Mine Safety Disclosures~~	37
	~~Item 5~~	~~Other Information~~	37
	~~Item 6~~	~~Exhibits~~	38

All reports we file with the Securities and Exchange Commission (SEC) are available free of charge via the Electronic Data Gathering Analysis and Retrieval (EDGAR) System on the SEC’s website at www.sec.gov. We also provide copies of our SEC filings at no charge upon request and make electronic copies of our reports available through our website at ~~www.lambweston.com~~ ~~as soon as reasonably practicable after filing such material with the SEC.~~

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (Unaudited)

Lamb Weston Holdings, Inc.

~~Condensed Combined and~~ Consolidated Statements of Earnings

(unaudited, ~~dollars~~ in millions, except ~~per-share~~per share amounts)

Thirteen Weeks Ended

Twenty-Six Weeks Ended


November 26,

November 27,

November 26,

November 27,

2017

2016

2017

2016
Net sales

$
824.6

$
790.7

$
1,642.1

$
1,567.0
Cost of sales

615.4

591.8

1,236.2

1,187.5
Gross profit

209.2

198.9

405.9

379.5
Selling, general and administrative expenses

69.4

73.4

128.5

129.0
Income from operations

139.8

125.5

277.4

250.5
Interest expense, net

27.4

6.8

52.6

8.3
Income before income taxes and equity method earnings

112.4

118.7

224.8

242.2
Income tax expense

41.5

33.9

85.6

84.9
Equity method investment earnings

12.1

6.2

32.1

16.8
Net income

83.0

91.0

171.3

174.1
Less: Income attributable to noncontrolling interests

6.4

3.8

11.3

7.3
Net income attributable to Lamb Weston Holdings, Inc.

$
76.6

$
87.2

$
160.0

$
166.8
Earnings per share

Basic

$
0.52

$
0.59

$
1.08

$
1.14
Diluted

$
0.52

$
0.59

$
1.08

$
1.13
Dividends declared per common share

$
0.1875

$
—

$
0.3750

$
—


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 27,		November 28,		November 27,		November 28,
	2022		2021		2022		2021
Net sales	$	1,276.5	$	1,006.6	$	2,402.1	$	1,990.8
Cost of sales		894.9		801.1		1,747.2		1,634.0
Gross profit		381.6		205.5		654.9		356.8
Selling, general and administrative expenses		109.8		91.1		226.1		182.2
Income from operations		271.8		114.4		428.8		174.6
Interest expense, net		24.6		82.4		50.6		110.3
Income before income taxes and equity method earnings		247.2		32.0		378.2		64.3
Income tax expense		36.8		9.6		110.5		18.3
Equity method investment earnings (loss)		(107.3)		10.1		67.3		16.3
Net income	$	103.1	$	32.5	$	335.0	$	62.3
Earnings per share:
Basic	$	0.72	$	0.23	$	2.33	$	0.43
Diluted	$	0.71	$	0.22	$	2.32	$	0.42
Weighted average common shares outstanding:
Basic		144.0		146.0		144.0		146.1
Diluted		144.6		146.3		144.6		146.6

See Condensed Notes to ~~Condensed Combined and~~ Consolidated Financial Statements.

Table of Contents

Lamb Weston Holdings, Inc.

~~Condensed Combined and~~ Consolidated Statements of Comprehensive Income ~~(Loss)~~

(unaudited, ~~dollars~~ in millions)

Thirteen Weeks Ended

Thirteen Weeks Ended

November 26, 2017

November 27, 2016

Tax

Tax

Pre-Tax

(Expense)

After-Tax

Pre-Tax

(Expense)

After-Tax


Amount

Benefit

Amount

Amount

Benefit

Amount

Net income

$
124.5

$
(41.5)

$
83.0

$
124.9

$
(33.9)

$
91.0

Other comprehensive income (loss):



Unrealized currency translation gains (losses)

(0.4)

—

(0.4)

(11.9)

—

(11.9)

Comprehensive income (loss)

124.1

(41.5)

82.6

113.0

(33.9)

79.1

Less: Comprehensive income attributable to noncontrolling interests

6.4

—

6.4

3.8

—

3.8

Comprehensive income (loss) attributable to Lamb Weston

$
117.7

$
(41.5)

$
76.2

$
109.2

$
(33.9)

$
75.3


	Thirteen Weeks Ended						Thirteen Weeks Ended
	November 27, 2022						November 28, 2021
			Tax						Tax
	Pre-Tax		(Expense)		After-Tax		Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
Net income	$	139.9	$	(36.8)	$	103.1	$	42.1	$	(9.6)	$	32.5
Other comprehensive income (loss):
Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss)		—		—		—		0.1		—		0.1
Unrealized currency translation gains (losses)		(16.1)		0.5		(15.6)		(15.6)		0.7		(14.9)
Other		0.3		(0.1)		0.2		—		—		—
Comprehensive income	$	124.1	$	(36.4)	$	87.7	$	26.6	$	(8.9)	$	17.7

Twenty-Six Weeks Ended

Twenty-Six Weeks Ended

November 26, 2017

November 27, 2016

Tax

Tax

Pre-Tax

(Expense)

After-Tax

Pre-Tax

(Expense)

After-Tax


Amount

Benefit

Amount

Amount

Benefit

Amount
Net income

$
256.9

$
(85.6)

$
171.3

$
259.0

$
(84.9)

$
174.1
Other comprehensive income (loss):










Reclassification of pension and post-retirement benefits out of accumulated other comprehensive income (loss)

(0.1)

—

(0.1)

—

—

—
Unrealized currency translation gains (losses)

14.8

—

14.8

(13.0)

—

(13.0)
Comprehensive income (loss)

271.6

(85.6)

186.0

246.0

(84.9)

161.1
Less: Comprehensive income attributable to noncontrolling interests

11.3

—

11.3

7.3

—

7.3
Comprehensive income (loss) attributable to Lamb Weston

$
260.3

$
(85.6)

$
174.7

$
238.7

$
(84.9)

$
153.8


	Twenty-Six Weeks Ended						Twenty-Six Weeks Ended
	November 27, 2022						November 28, 2021
			Tax						Tax
	Pre-Tax		(Expense)		After-Tax		Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
Net income	$	445.5	$	(110.5)	$	335.0	$	80.6	$	(18.3)	$	62.3
Other comprehensive income (loss):
Reclassification of post-retirement benefits out of accumulated other comprehensive income (loss)		—		—		—		0.2		—		0.2
Unrealized currency translation gains (losses)		(47.8)		1.5		(46.3)		(39.4)		2.2		(37.2)
Other		0.5		(0.1)		0.4		—		—		—
Comprehensive income	$	398.2	$	(109.1)	$	289.1	$	41.4	$	(16.1)	$	25.3

See Condensed Notes to ~~Condensed Combined and~~ Consolidated Financial Statements.

Table of Contents

Lamb Weston Holdings, Inc.

~~Condensed~~ Consolidated Balance Sheets

(unaudited, ~~dollars~~ in millions, except share data)

November 26,

May 28,


2017

2017
ASSETS




Current assets:




Cash and cash equivalents

$
71.1

$
57.1
Receivables, less allowance for doubtful accounts of $0.6 and $0.5

224.4

185.2
Inventories

662.9

525.0
Prepaid expenses and other current assets

45.9

90.9
Total current assets

1,004.3

858.2
Property, plant and equipment, net

1,331.5

1,271.2
Goodwill

134.4

133.0
Intangible assets, net

36.3

37.2
Equity method investments

198.6

178.6
Other assets

9.8

7.4
Total assets

$
2,714.9

$
2,485.6

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:




  Short-term borrowings

$
88.2

$
22.0
Current portion of long-term debt and financing obligations

39.3

37.9
Accounts payable

342.7

295.0
Accrued liabilities

176.3

200.5
Total current liabilities

646.5

555.4
Long-term liabilities:

Long-term debt, excluding current portion

2,353.2

2,365.0
Deferred income taxes

115.8

90.5
Other noncurrent liabilities

74.3

71.2
Total long-term liabilities

2,543.3

2,526.7
Commitments and contingencies

Redeemable noncontrolling interest

56.5

50.7
Stockholders' equity:




Common stock of $1.00 par value, 600,000,000 shares authorized; 146,257,130 and 146,080,901 shares issued

146.3

146.1
Additional distributed capital

(906.7)

(904.8)
Retained earnings

225.8

121.0
Accumulated other comprehensive income (loss)

5.4

(9.3)
Treasury stock, at cost, 49,691 and 6,143 common shares

(2.2)

(0.2)
Total stockholders' deficit

(531.4)

(647.2)
Total liabilities and stockholders’ equity

$
2,714.9

$
2,485.6


	November 27,		May 29,
	2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	419.4	$	525.0
Receivables, less allowance for doubtful accounts of $1.4 and $1.1		508.9		447.3
Inventories		822.1		574.4
Prepaid expenses and other current assets		50.7		112.9
Total current assets		1,801.1		1,659.6
Property, plant and equipment, net		1,758.2		1,579.2
Operating lease assets		113.9		119.0
Equity method investments		263.7		257.4
Goodwill		347.5		318.0
Intangible assets, net		32.0		33.7
Other assets		253.2		172.9
Total assets	$	4,569.6	$	4,139.8

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	9.0	$	—
Current portion of long-term debt and financing obligations		32.2		32.2
Accounts payable		580.6		402.6
Accrued liabilities		296.7		264.3
Total current liabilities		918.5		699.1
Long-term liabilities:
Long-term debt and financing obligations, excluding current portion		2,701.1		2,695.8
Deferred income taxes		177.7		172.5
Other noncurrent liabilities		199.3		211.9
Total long-term liabilities		3,078.1		3,080.2
Commitments and contingencies
Stockholders’ equity:
Common stock of $1.00 par value, 600,000,000 shares authorized; 148,330,983 and 148,045,584 shares issued		148.3		148.0
Additional distributed capital		(785.5)		(813.3)
Retained earnings		1,569.2		1,305.5
Accumulated other comprehensive loss		(61.5)		(15.6)
Treasury stock, at cost, 4,460,674 and 3,974,156 common shares		(297.5)		(264.1)
Total stockholders’ equity		573.0		360.5
Total liabilities and stockholders’ equity	$	4,569.6	$	4,139.8

See Condensed Notes to ~~Condensed Combined and~~ Consolidated Financial Statements.

Table of Contents

Lamb Weston Holdings, Inc.

Consolidated Statements of Stockholders’ Equity
(unaudited, in millions, except share data)


	Thirteen Weeks Ended November 27, 2022 and November 28, 2021
							Additional				Accumulated
	Common Stock,		Common		Treasury		Paid-in				Other		Total
	net of Treasury		Stock		Stock		(Distributed)		Retained		Comprehensive		Stockholders’
	Shares		Amount		Amount		Capital		Earnings		Income (Loss)		Equity
Balance at August 28, 2022		143,830,587	$	148.3	$	(297.1)	$	(796.9)	$	1,501.8	$	(46.1)	$	510.0
Dividends declared, $0.245 per share		—		—		—		—		(35.3)		—		(35.3)
Common stock issued		44,008		—		—		1.1		—		—		1.1
Stock-settled, stock-based compensation expense		—		—		—		10.0		—		—		10.0
Repurchase of common stock and common stock withheld to cover taxes		(4,286)		—		(0.4)		—		—		—		(0.4)
Other		—		—		—		0.3		(0.4)		—		(0.1)
Comprehensive income		—		—		—		—		103.1		(15.4)		87.7
Balance at November 27, 2022		143,870,309	$	148.3	$	(297.5)	$	(785.5)	$	1,569.2	$	(61.5)	$	573.0

Balance at August 29, 2021		146,061,016	$	148.0	$	(137.7)	$	(830.2)	$	1,240.0	$	7.3	$	427.4
Dividends declared, $0.235 per share		—		—		—		—		(34.2)		—		(34.2)
Common stock issued		11,427		—		—		—		—		—		—
Stock-settled, stock-based compensation expense		—		—		—		4.4		—		—		4.4
Repurchase of common stock and common stock withheld to cover taxes		(871,795)		—		(50.1)		—		—		—		(50.1)
Comprehensive income		—		—		—		—		32.5		(14.8)		17.7
Balance at November 28, 2021		145,200,648	$	148.0	$	(187.8)	$	(825.8)	$	1,238.3	$	(7.5)	$	365.2


	Twenty-Six Weeks Ended November 27, 2022 and November 28, 2021
							Additional				Accumulated
	Common Stock,		Common		Treasury		Paid-in				Other		Total
	net of Treasury		Stock		Stock		(Distributed)		Retained		Comprehensive		Stockholders’
	Shares		Amount		Amount		Capital		Earnings		Income (Loss)		Equity
Balance at May 29, 2022		144,071,428	$	148.0	$	(264.1)	$	(813.3)	$	1,305.5	$	(15.6)	$	360.5
Dividends declared, $0.490 per share		—		—		—		—		(70.5)		—		(70.5)
Common stock issued		285,399		0.3		—		1.3		—		—		1.6
Stock-settled, stock-based compensation expense		—		—		—		17.6		—		—		17.6
Repurchase of common stock and common stock withheld to cover taxes		(486,518)		—		(33.4)		—		—		—		(33.4)
Other		—		—		—		8.9		(0.8)		—		8.1
Comprehensive income		—		—		—		—		335.0		(45.9)		289.1
Balance at November 27, 2022		143,870,309	$	148.3	$	(297.5)	$	(785.5)	$	1,569.2	$	(61.5)	$	573.0

Balance at May 30, 2021		146,191,864	$	147.6	$	(104.3)	$	(836.8)	$	1,244.6	$	29.5	$	480.6
Dividends declared, $0.470 per share		—		—		—		—		(68.6)		—		(68.6)
Common stock issued		387,428		0.4		—		1.5		—		—		1.9
Stock-settled, stock-based compensation expense		—		—		—		9.6		—		—		9.6
Repurchase of common stock and common stock withheld to cover taxes		(1,378,644)		—		(83.5)		—		—		—		(83.5)
Other		—		—		—		(0.1)		—		—		(0.1)
Comprehensive income		—		—		—		—		62.3		(37.0)		25.3
Balance at November 28, 2021		145,200,648	$	148.0	$	(187.8)	$	(825.8)	$	1,238.3	$	(7.5)	$	365.2

See Condensed ~~Combined and~~ Notes to Consolidated Financial Statements.

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 (dollars and shares in millions):~~ presented:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 27,		November 28,		November 27,		November 28,
(in millions, except per share amounts)	2022		2021		2022		2021
Numerator:
Net income	$	103.1	$	32.5	$	335.0	$	62.3

Denominator:
Basic weighted average common shares outstanding		144.0		146.0		144.0		146.1
Add: Dilutive effect of employee incentive plans (a)		0.6		0.3		0.6		0.5
Diluted weighted average common shares outstanding		144.6		146.3		144.6		146.6

Earnings per share:
Basic	$	0.72	$	0.23	$	2.33	$	0.43
Diluted	$	0.71	$	0.22	$	2.32	$	0.42

Thirteen Weeks Ended

Twenty-Six Weeks Ended


November 26,

November 27,

November 26,

November 27,

2017

2016

2017

2016
Numerator:








Net income attributable to Lamb Weston Holdings, Inc.

$
76.6

$
87.2

$
160.0

$
166.8
Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated

0.5

0.5

1.3

0.9
Net income available to Lamb Weston common stockholders

$
76.1

$
86.7

$
158.7

$
165.9

Denominator (a):








Basic weighted average common shares outstanding

146.3

146.0

146.3

146.0
Add: Dilutive effect of employee incentive plans (b)

0.6

0.3

0.5

0.3
Diluted weighted average common shares outstanding

146.9

146.3

146.8

146.3

Earnings per share

Basic

$
0.52

$
0.59

$
1.08

$
1.14
Diluted

$
0.52

$
0.59

$
1.08

$
1.13

(a)

~~(a)~~

For the periods prior to Separation, earnings per share was calculated based on approximately 146 million shares of Lamb Weston common stock that were distributed to Conagra stockholders on November 9, 2016.

~~(b)~~

~~Potentially~~Potential dilutive shares of common stock ~~from~~under employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards. As of November ~~26, 2017, we did not have any~~27, 2022, 0.6 million shares of stock-based awards ~~that~~ were excluded from the computation of diluted earnings per share because they would be antidilutive. ~~Lamb Weston had no share-based~~As of November 28, 2021, 0.3 million shares of stock-based awards ~~outstanding prior to~~were excluded from the ~~Separation.~~

computation of diluted earnings per share because they would be antidilutive.

~~Table of Contents~~

3. ~~RELATED PARTY TRANSACTIONS~~INCOME TAXES

~~Prior to the Separation, our business~~Income tax expense was included in the Commercial Foods segment of Conagra. As a result, our transactions with Conagra were considered related party transactions. In connection with the Separation, we entered into a separation and distribution agreement, as well as various other agreements that govern our relationships with Conagra going forward, including a transition services agreement, tax matters agreement, employee matters agreement, and trademark license agreement. Under the transition services agreement, Conagra provides a number of corporate staff services to us based on direct and indirect costs associated with rendering those services. These services include information technology, accounting, and human resource services. The thirteen weeks ended November 26, 2017 and November 27, 2016, include $0.8$36.8 million and $0.4 million, respectively, of expenses related to the transition services agreement. The twenty-six weeks ended November 26, 2017 and November 27, 2016, include $2.1 million and $0.4 million, respectively, of expenses related to the transition services agreement. The transition services agreement expires in April 2018.

Prior to the Separation Date, Conagra allocated certain selling, general and administrative costs to Lamb Weston based on specific metrics correlated with the cost of services it provided or costs incurred on behalf of the Company (e.g., employee headcount, net sales, and square footage of office space). Allocations based upon these metrics resulted in $3.4 million and $7.7 million for the thirteen and twenty-six weeks ended November 27, 2016, respectively, of selling, general and administrative costs allocated to Lamb Weston. Beginning in fiscal 2017, certain departmental charges, which were previously allocated, were directly absorbed by Lamb Weston.

The above allocations were consistent with historical allocations for Lamb Weston; however, Conagra did not historically allocate certain other corporate costs to its various segments. For any remaining indirect corporate costs that supported Lamb Weston, Conagra allocated additional selling, general and administrative costs using an equal weighting between Lamb Weston product contribution margin (net sales less cost of sales and advertising and promotion expenses) and Lamb Weston total assets relative to consolidated Conagra product contribution margin and total assets. Allocations of indirect corporate costs were $8.4 million and $17.3 million for the thirteen and twenty-six weeks ended November 27, 2016, respectively, of selling, general and administrative costs. Lamb Weston considers such allocations to have been made on a reasonable basis. The allocations discussed above ceased after the Separation Date.

For the period up to the Separation Date, our Condensed Combined and Consolidated Statements of Earnings for the thirteen weeks and twenty-six weeks ended November 27, 2016, includes only the interest expense of the legal entities of Lamb Weston, and does not include any allocated interest expense or third-party debt of Conagra. See Note 11, Debt and Financing Obligations, for a discussion of indebtedness incurred in connection with the Separation. The interest expense included in Lamb Weston’s results of operations was $27.4 million and $6.8$9.6 million for the thirteen weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively; and ~~$52.6~~$110.5 million and ~~$8.3~~$18.3 million for the twenty-six weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016, respectively.~~

~~Included in net sales are sales to Conagra of $4.0 million and $8.4 million for the thirteen and twenty-six weeks ended November 27, 2016,~~28, 2021, respectively. The related cost of sales were $3.4 million and $7.0 million for the thirteen and twenty-six weeks ended November 27, 2016, respectively. Lamb Weston also made purchases from Conagra of $2.6 million and $7.9 million during the thirteen and twenty-six weeks, ended November 27, 2016 respectively.

~~4. INCOME TAXES~~

~~For periods ended on or prior to the Separation Date, we were a member of Conagra’s consolidated group and our U.S. taxable~~effective income was included in the consolidated U.S. federal income tax return of Conagra as well as in returns filed by Conagra with certain state and local taxing jurisdictions. Our foreign income tax returns are filed on a separate company basis.

In connection with the Separation, we entered into a tax matters agreement with Conagra. Under the tax matters agreement, Conagra is generally responsible for all taxes associated with consolidated federal and state filings (and will be entitled to all related refunds of taxes) imposed on Conagra and its subsidiaries (including subsidiaries that were transferred to Lamb Weston at Separation) with respect to the taxable periods (or portions thereof) ended on or prior to

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November 9, 2016. Also, pursuant to this agreement, Lamb Weston is generally responsible for all taxes associated with separately filed foreign, state, and local tax filings (and will be entitled to all related refunds of taxes) imposed on Lamb Weston and its subsidiaries with respect to the taxable periods (or portions thereof) ended on or prior to November 9, 2016.

Income tax expense for the thirteen weeks ended November 26, 2017 and November 27, 2016, was $41.5 million and $33.9 million, respectively, and for the twenty-six weeks ended November 26, 2017 and November 27, 2016, was $85.6 million and $84.9 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was ~~approximately 33%~~26.3% and ~~27%~~22.8% for the thirteen weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively; and ~~33%~~24.8% and 22.7% for ~~both~~ the twenty-six weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively, in our ~~Condensed Combined and~~ Consolidated Statements of Earnings. The effective tax rate varies from the U.S. ~~federal~~ statutory tax rate of ~~35%~~21% principally due to the impact of U.S. state taxes, ~~the domestic manufacturers’ deduction,~~ foreign taxes, permanent differences, and ~~other permanent differences. The lower~~discrete items. Excluding the impact of the following items, our effective tax rate inwas 25.9% and 25.5% for the thirteen and twenty-six weeks ended November 27, 2016, is primarily attributable to an increase in Separation-related costs determined to be deductible, as well as a discrete benefit arising from a change in estimate relating to fiscal 2016 foreign taxes.2022, respectively:

●

Gain associated with the acquisition of an additional 40% interest in our Argentina joint venture, Lamb Weston Alimentos Modernos S.A. (“LWAMSA”), which is discussed in Note 6, Joint Venture Investments.

●

Gains related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining 50% ownership interest in our European joint venture, Lamb-Weston/Meijer v.o.f. (“LWM”), net of other acquisition-related costs. See Note 6, Joint Venture Investments, for more information.

●

Mark-to-market adjustments associated with changes in natural gas and electricity derivatives at LWM, which is discussed in Note 13, Segments.

~~There have been no material changes to the unrecognized tax benefits disclosed in Note 4,~~ Income Taxes of the Notes to Combined and Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K, and we do not expect any significant changes to unrecognized tax benefits in the next 12 months. Paid

Income taxes paid, net of refunds, were ~~$60.2~~$92.1 million and ~~$90.6~~$10.3 million induring the twenty-six weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively.

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4. INVENTORIES

On December 22, 2017, the President signed tax reform legislation (the “Act”), which is generally effective January 1, 2018. The Act lowers the U.S. corporate tax rate from 35 percent to 21 percent, which will result in a blended effective tax rate for us in fiscal 2018; allows for immediate write-off of qualified property placed in service after September 27, 2017, and before January 1, 2023, with a five year phase down by 20 percent per calendar year beginning in 2023; repeals the domestic production deduction for tax years after our fiscal 2018; and alters the landscape of taxation of foreign operations, executive compensation and employer provided benefits, among other provisions. In addition, the legislation has one-time financial statement tax effects including a tax benefit from remeasuring our net U.S. deferred tax liabilities on our balance sheet and a transition tax on post-1986 unremitted earnings of our non-U.S. subsidiaries. We are currently evaluating the impact of the Act. While we have not completed our evaluation of the potential impacts, we expect it to decrease our fiscal 2018 effective tax rate and cash taxes.

~~5. INVENTORIES~~

Inventories are valued at the lower of cost (determined using the first-in, first-out method) or ~~market~~net realizable value and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead. The components of inventories were as ~~follows (dollars in millions):~~follows:


	November 26,		May 28,
	2017		2017

					November 27,		May 29,
(in millions)					2022		2022
Raw materials and packaging	$	205.9	$	84.5	$	228.0	$	96.1
Finished goods		426.4		409.7		539.3		426.5
Supplies and other		30.6		30.8		54.8		51.8
Inventories	$	662.9	$	525.0	$	822.1	$	574.4

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6.5. PROPERTY, PLANT AND EQUIPMENT

The components of property, plant and equipment were as ~~follows (dollars in millions):~~follows:


	November 26,		May 28,
	2017		2017

					November 27,		May 29,
(in millions)					2022		2022
Land and land improvements	$	138.9	$	139.8	$	118.3	$	114.1
Buildings, machinery, and equipment		2,169.9		1,917.7		3,000.8		2,919.0
Furniture, fixtures, office equipment, and other		65.6		62.6		98.3		92.1
Construction in progress		71.9		229.4		321.5		156.1
Property, plant and equipment, at cost		2,446.3		2,349.5		3,538.9		3,281.3
Less accumulated depreciation		(1,114.8)		(1,078.3)		(1,780.7)		(1,702.1)
Property, plant and equipment, net	$	1,331.5	$	1,271.2	$	1,758.2	$	1,579.2

Depreciation expense was ~~$33.9~~$49.7 million and ~~$25.8~~$44.7 million for the thirteen weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively; and ~~$63.2~~$97.0 million and ~~$50.6~~$89.2 million for the twenty-six weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively. At November ~~26, 2017~~27, 2022 and May ~~28, 2017,~~29, 2022, purchases of property, plant and equipment included in accounts payable were ~~$19.0~~ $65.1million and ~~$60.4~~$38.3 million, respectively.

~~The amounts of interest~~Interest capitalized inwithin construction in progress for the thirteen weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016, were $0.5~~ 28, 2021, was $4.1million and ~~$1.2~~$1.6 million, ~~respectively,~~respectively; and ~~$2.8~~$6.1 million and ~~$1.9~~$2.8 million for the twenty-six weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016,~~28, 2021, respectively.

6. JOINT VENTURE INVESTMENTS

Consolidated Joint Venture

In July 2022, we acquired an additional 40% interest in LWAMSA, which increased our total ownership from 50% to 90%. We recorded LWAMSA’s assets and liabilities at fair value, which included remeasuring our previously held equity interest at fair value, and for the twenty-six weeks ended November 27, 2022, we recognized a $15.1 million gain in “Equity method investment earnings” in our Consolidated Statement of Earnings. The fair value was determined utilizing industry EBITDA multiples and control premium comparable information, which are unobservable inputs, or Level 3 in the fair value hierarchy. We recorded the preliminary fair values as of the date of acquisition.

In connection with the purchase of the additional interest in LWAMSA, we ceased equity method accounting and began consolidating LWAMSA’s financial statements. The net sales, income from operations, and total assets acquired were not material to our consolidated net sales, income from operations, and total assets. LWAMSA’s operating results are included in our Global segment.

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In September 2022, we announced an expansion of french fry processing capacity in Argentina with the planned construction of a new manufacturing facility in Mar del Plata. The new processing facility is expected to produce more than 200 million pounds of frozen french fries and other potato products per year. Construction of the new line is expected to be completed in fiscal 2025. The total investment is expected to be approximately $240 million. This investment will add to the capacity produced at LWAMSA’s existing production facility in Buenos Aires.

Noncontrolling Interest (“NCI”)

As of November 27, 2022, total LWAMSA interest not directly attributable to Lamb Weston, or NCI, was $8.1 million and was recorded in “Additional distributed capital” on our Consolidated Balance Sheet. For the thirteen and twenty-six weeks ended November 27, 2022, the net loss attributable to NCI was not significant and was recorded in “Selling, general and administrative expenses” in our Consolidated Statements of Earnings.

Unconsolidated Joint Ventures

Our equity method investments were as follows:


	November 27,		May 29,
(in millions)	2022		2022
LWM (a)	$	233.8	$	211.2
Lamb-Weston/RDO Frozen ("Lamb Weston RDO") (b)		29.2		19.4
LWAMSA (c)		—		26.1
Other		0.7		0.7
	$	263.7	$	257.4

(a)	We own 50% of LWM, a joint venture with Meijer Frozen Foods B.V. LWM is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe and the Middle East.

(b)	We own 50% of Lamb Weston RDO, a joint venture with RDO Frozen Co., that operates a potato processing facility in the U.S.

(c)	In July 2022, we acquired an additional 40% interest in LWAMSA, increasing our total ownership to 90% and began consolidating the joint venture.

In September 2022, LWM completed the previously announced withdrawal from its joint venture in Russia. In October 2022, we entered into an agreement to acquire the remaining interest in LWM for consideration consisting of €525.0 million in cash and €175.0 million in shares of our common stock. The number of shares of our common stock to be paid will be equal to the U.S. dollar equivalent of €175.0 million, valued at the volume weighted average of the trading price per share of our common stock for the five trading days immediately preceding the signing date of the agreement and the five trading days immediately preceding the closing date of the transaction. Upon completion of the transaction, we will own 100% of LWM. We expect to close the transaction in the fourth quarter of fiscal 2023, subject to customary regulatory approvals. Following closing of the transaction, we will include LWM’s operating results in our Global segment.

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7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

~~Changes~~The following table presents changes in goodwill balances, by segment, during the ~~carrying amount of goodwill were as follows (dollars in millions):~~twenty-six weeks ended November 27, 2022:


(in millions)	Global		Foodservice		Retail		Other		Total
Balance at May 29, 2022	$	259.8	$	42.8	$	10.9	$	4.5	$	318.0
Acquisition of interest in joint venture (a)		42.1		—		—		—		42.1
Foreign currency translation adjustment		(12.6)		—		—		—		(12.6)
Balance at November 27, 2022	$	289.3	$	42.8	$	10.9	$	4.5	$	347.5

Global

Foodservice

Retail

Other

Total
Balance at May 28, 2017

$
74.8

$
42.8

$
10.9

$
4.5

$
133.0
Foreign currency translation adjustment

1.4

—

—

—

1.4
Balance at November 26, 2017

$
76.2

$
42.8

$
10.9

$
4.5

$
134.4

(a)	In July 2022, we acquired an additional 40% interest in LWAMSA, which increased our total ownership from 50% to 90%, and we recorded $42.1 million of goodwill, that is not deductible for tax purposes, in our Global segment. See Note 6, Joint Venture Investments, for more information.

Other identifiable intangible assets were as ~~follows (dollars in millions):~~follows:


	November 27, 2022							May 29, 2022
	Weighted							Weighted
	Average	Gross						Average	Gross
	Useful Life	Carrying		Accumulated		Intangible		Useful Life	Carrying		Accumulated		Intangible
(in millions, except useful lives)	(in years)	Amount		Amortization		Assets, Net		(in years)	Amount		Amortization		Assets, Net
Non-amortizing intangible assets (a)	n/a	$	18.0	$	—	$	18.0	n/a	$	18.0	$	—	$	18.0
Amortizing intangible assets (b)	10		40.8		(26.8)		14.0	10		41.4		(25.7)		15.7
		$	58.8	$	(26.8)	$	32.0		$	59.4	$	(25.7)	$	33.7

November 26, 2017

May 28, 2017


Weighted





Weighted




Average

Gross

Average

Gross

Useful Life

Carrying

Accumulated

Useful Life

Carrying

Accumulated

(in years)

Amount

Amortization

(in years)

Amount

Amortization
Non-amortizing intangible assets (a)

n/a

$
18.0

$
—

n/a

$
18.0

$
—
Amortizing intangible assets (b)

14


35.0


16.7

14


34.9


15.7




$
53.0

$
16.7



$
52.9

$
15.7

(a)

~~(a)~~

Non-amortizing intangible assets ~~are comprised of~~represent brands and trademarks.

(b)

~~(b)~~

Amortizing intangible assets are principally composed of licensing agreements, brands, and customer ~~relationships, licensing arrangements,~~relationships. Developed technology, which is excluded from this balance, is recorded as “Other assets” on our Consolidated Balance Sheets. Amortization expense, including developed technology amortization expense, was $1.5 million and ~~intellectual property. During~~$1.5 million for the thirteen weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016, amortization expense was $0.6~~28, 2021, respectively; and $2.9 million and ~~$0.5~~$3.0 million ~~respectively. During~~for the twenty-six weeks ended November ~~26, 2017~~27, 2022 and November ~~27, 2016, amortization expense was $1.1 million and $1.3 million,~~28, 2021, respectively.

Foreign intangible assets are affected by foreign currency translation.

Total intangible assets, net of amortization, excluding goodwill, as of November 26, 2017 and May 28, 2017, were $36.3 million and $37.2 million, respectively. Foreign intangible assets are affected by foreign currency translation.

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8. ~~INVESTMENTS IN JOINT VENTURES~~

~~Variable Interest Entity - Consolidated~~

We hold a 49.99% interest in Lamb Weston BSW, LLC (“Lamb Weston BSW”), a potato processing venture with Ochoa Ag Unlimited Foods, Inc. (“Ochoa”). We provide all sales and marketing services to Lamb Weston BSW. Under certain circumstances, we could be required to compensate Ochoa for lost profits resulting from significant production shortfalls. Commencing on June 1, 2018, or on an earlier date under certain circumstances, we have a contractual right to purchase the remaining equity interest in Lamb Weston BSW from Ochoa (the “call option”). We are currently subject to a contractual obligation to purchase all of Ochoa’s equity investment in Lamb Weston BSW at the option of Ochoa (the “put option”). The purchase prices under the call option and the put option (collectively, the “options”) are based on the book value of Ochoa’s equity interest at the date of exercise, as modified by an agreed-upon rate of return for the holding period of the investment balance. The agreed-upon rate of return varies depending on the circumstances under which the options are exercised.

Our variable interests in Lamb Weston BSW include an equity investment in the venture, the options, certain fees paid to Lamb Weston by Lamb Weston BSW for sales and marketing services, the contingent obligation related to production shortfalls and the contingent obligation to fund additional equity contributions or purchase the underlying notes associated with certain Lamb Weston BSW financings. Our maximum exposure to loss as a result of our involvement with this venture is equal to our equity investment in the venture, the balance of any promissory notes extended to the venture which are subject to our purchase obligation, and the amount, if any, by which the put option exercise price exceeds the fair value of the non-controlling interest in Lamb Weston BSW upon its exercise. Also, in the event of a production shortfall, we could be required to compensate Ochoa for lost profits. It is not possible to determine the maximum exposure to losses from the potential exercise of the put option or from potential production shortfalls. However, we do not currently expect to incur material losses resulting from these potential exposures.

Lamb Weston and Lamb Weston BSW purchase potatoes from a shareholder of Ochoa. The aggregate amounts of such purchases were $12.5 million for both the thirteen weeks ended November 26, 2017 and November 27, 2016; and $29.3 million and $36.6 million for the twenty-six weeks ended November 26, 2017 and November 27, 2016, respectively. Additionally, Lamb Weston and Lamb Weston BSW utilize storage facilities and water treatment services from a shareholder of Ochoa. The aggregate amounts of such costs were $1.2 million for both the thirteen weeks ended November 26, 2017 and November 27, 2016; and $2.5 million and $2.4 million for the twenty-six weeks ended November 26, 2017 and November 27, 2016, respectively.

Lamb Weston BSW is a variable interest entity, and we have determined that we are the primary beneficiary of the entity. We consolidate the financial statements of Lamb Weston BSW. The amounts presented for Lamb Weston BSW in the table below exclude intercompany balances eliminated in consolidation and include the non-controlling interest at

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~~redemption value as reported in our Condensed Consolidated Balance Sheets (dollars in millions):~~

November 26,

May 28,

2017

2017
Cash and equivalents

$
19.8

$
10.9
Receivables, less allowance for doubtful accounts (a)

0.2

0.1
Inventories

2.0

1.9
Prepaid expenses and other current assets

0.1

0.4
Property, plant and equipment, net

48.2

49.4
Goodwill

18.8

18.8
Intangible assets, net

4.1

4.5
Total assets

$
93.2

$
86.0
Current portion of long-term debt

$
1.6

$
1.5
Accounts payable

14.2

11.6
Accrued liabilities

2.0

2.0
Long-term debt, excluding current portion

27.2

28.0
Total liabilities

$
45.0

$
43.1
Redeemable noncontrolling interest (b)

$
56.5

$
50.7

~~(a)~~

~~As of November 26, 2017 and May 28, 2017, affiliate receivables of $27.7 million and $24.0 million, respectively, are not included above as they are eliminated in consolidation.~~

~~(b)~~

~~Represents the amount that our joint venture partner, Ochoa, had the right to put its equity interest to Lamb Weston on November 26, 2017 and May 28, 2017.~~

The liabilities recognized as a result of consolidating the Lamb Weston BSW entity do not represent additional claims on Lamb Weston’s general assets. In connection with the Lamb Weston BSW long-term debt, we have entered into an agreement with the financial institution, which provides that in the event that Lamb Weston BSW fails to comply with certain financial covenants or repayment terms, we are required to either make certain additional equity contributions to Lamb Weston BSW or to purchase the underlying notes. The assets recognized as a result of consolidating Lamb Weston BSW are the property of the venture and are not available to Lamb Weston for any other purpose.

~~Variable Interest Entity - Not Consolidated~~

We hold a 50% interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a potato processing venture based in the United States. We provide all sales and marketing services to Lamb Weston RDO, and we receive a fee for these services based on a percentage of the net sales of the venture. The fees received were $3.4 million for both the thirteen weeks ended November 26, 2017 and November 27, 2016 and $6.9 million for both the twenty-six weeks ended November 26, 2017 and November 27, 2016. These fees are recorded as a reduction to selling, general, and administrative expense. Our ownership interest in this venture is included in “Equity method investments” in the Condensed Consolidated Balance Sheets. The balance of Lamb Weston’s investment was $17.4 million and $17.2 million at November 26, 2017 and May 28, 2017, respectively, representing our maximum exposure to loss as a result of our involvement with this venture. The capital structure of Lamb Weston RDO includes owners’ equity of $34.9 million and $34.4 million as of November 26, 2017 and May 28, 2017, respectively; and term borrowings from banks of $38.8 million and $59.3 million as of November 26, 2017 and May 28, 2017, respectively.

We have determined that Lamb Weston RDO is a variable interest entity, but Lamb Weston is not the primary beneficiary. Lamb Weston does not have the power to direct the activities that most significantly impact the economic performance of the joint venture. Accordingly, we do not consolidate the financial statements of this entity. We use equity method accounting to account for our ownership in Lamb Weston RDO.

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~~Other Investments~~

We hold a 50% ownership interest in Lamb-Weston/Meijer v.o.f. (“Lamb-Weston/Meijer”), a joint venture with Meijer Frozen Foods B.V., which is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe. We account for this investment using equity method accounting.

~~Transactions with Joint Ventures~~

The carrying value of our equity method investments, which include Lamb Weston RDO and Lamb-Weston/Meijer, at November 26, 2017 and May 28, 2017, was $198.6 million and $178.6 million, respectively. These amounts are included in “Equity method investments” in our Condensed Consolidated Balance Sheets. For the thirteen weeks ended November 26, 2017 and November 27, 2016, we had sales and payments to our equity method investments of $5.9 million and $3.0 million, respectively, and $7.2 million and $3.6 million, respectively; and for the twenty-six weeks ended November 26, 2017 and November 27, 2016, we had sales and payments to our equity method investments of $11.0 million and $5.5 million, respectively, and $14.7 million and $6.7 million, respectively. Total dividends from our equity method investments were $9.9 million and $5.6 million for the thirteen weeks ended November 26, 2017 and November 27, 2016, respectively; and $22.8 million and $13.9 million for the twenty-six weeks ended November 26, 2017 and November 27, 2016, respectively.

~~9. EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS~~

~~Prior to Separation~~

Prior to the Separation Date, Conagra offered plans that were shared amongst its businesses, including Lamb Weston. The participation of Lamb Weston employees in Conagra’s plans until the Separation Date, is reflected in the financial statements as though Lamb Weston participated in a multiemployer plan with Conagra. Accordingly, a proportionate share of the service cost associated with these plans is reflected in the combined and consolidated financial statements. Additionally, the remaining cost elements (e.g., interest) are included in Conagra’s allocations of indirect costs (see Note 3, Related Party Transactions).

~~In Connection With and/or After Separation~~

In connection with the Separation, Conagra retained the pension liabilities related to Lamb Weston participants in the Conagra salaried employee pension plan and the vested benefits attributable to Lamb Weston hourly employee plan participants. On the Separation Date, Conagra transferred $7.4 million of qualified and nonqualified pension liabilities related to nonqualified benefits and Lamb Weston hourly participants’ unvested benefits. The liabilities were transferred to a new defined benefit pension plan for certain hourly employees that continue to accrue benefits and a new nonqualified defined benefit pension plan that provides unfunded supplemental retirement benefits to certain executives. The hourly plan is open to new participants. No assets were transferred to the plans.

~~For the period after the Separation Date, the components of net periodic benefit cost for our pension plan was as follows (dollars in millions):~~

Thirteen Weeks Ended

Twenty-Six Weeks Ended


November 26,

November 27,

November 26,

November 27,

2017

2016

2017

2016
Service cost

$
1.9

$
0.4

$
3.9

$
0.4
Interest cost

0.1

—

0.2

—
Expected return on plan assets

(0.1)

—

(0.2)

—
Net periodic benefit cost

$
1.9

$
0.4

$
3.9

$
0.4

~~Components of net periodic benefit cost for our post-retirement benefits were insignificant for the periods after the Separation Date.~~

~~Table of Contents~~

We will make pension plan contributions sufficient to fund our actuarially determined requirements, generally equal to the minimum amounts required by the Employee Retirement Income Security Act. We are required to make $1.7 million of minimum qualified contributions during the remainder of fiscal 2018.

~~Pension Cost Financial Statement Presentation~~

Allocated pension costs (benefits) incurred by Conagra prior to November 9, 2016 and pension costs recognized after the Separation Date are included in the Condensed Combined and Consolidated Statements of Earnings as follows (dollars in millions):

Thirteen Weeks Ended

Twenty-Six Weeks Ended


November 26,

November 27,

November 26,

November 27,

2017

2016

2017

2016
Cost of sales (a)

$
1.9

$
2.6

$
3.9

$
5.5
Selling, general and administrative expenses (a)

—

(2.8)

—

(5.5)
Total

$
1.9

$
(0.2)

$
3.9

$
—

~~(a)~~

Pension service costs are allocated to operations as reflected in cost of sales above. Expected returns on pension assets and interest costs are reflected in “Selling, general and administrative expenses” in the Combined and Consolidated Statements of Earnings.

~~10.~~ ACCRUED LIABILITIES

The components of accrued liabilities were as ~~follows (dollars in millions):~~follows:


	November 26,		May 28,
	2017		2017

					November 27,		May 29,
(in millions)					2022		2022
Compensation and benefits	$	56.5	$	80.1	$	107.7	$	81.0
Accrued trade promotions		42.8		40.5		48.0		41.2
Dividends payable		27.4		27.4
Dividends payable to shareholders						35.2		35.3
Accrued interest						26.6		42.1
Other						26.4		30.2
Current portion of operating lease obligations						23.3		22.4
Income taxes payable						17.1		1.7
Franchise, property, and sales and use taxes		10.9		9.8		12.4		10.4
Accrued interest		10.0		10.2
Income taxes payable		4.4		4.7
Other		24.3		27.8
Accrued liabilities	$	176.3	$	200.5	$	296.7	$	264.3

1612

Table of Contents

~~11.~~9. DEBT AND FINANCING OBLIGATIONS

~~At November 26, 2017 and May 28, 2017,~~The components of our debt, including financing obligations, ~~was~~were as ~~follows (dollars in millions):~~follows:


	November 27,		May 29,
(in millions)	2022		2022
Short-term borrowings:
Other credit facilities	$	9.0	$	—

Long-term debt:
Term A-1 loan facility, due June 2024		251.3		258.7
Term A-2 loan facility, due April 2025		288.4		296.6
RMB loan facility, due February 2027		39.3		19.7
4.875% senior notes, due May 2028		500.0		500.0
4.125% senior notes, due January 2030		970.0		970.0
4.375% senior notes, due January 2032		700.0		700.0
		2,749.0		2,745.0
Financing obligations:
Lease financing obligations due on various dates through 2040		6.5		7.0

Total debt and financing obligations		2,764.5		2,752.0
Debt issuance costs (a)		(22.2)		(24.0)
Short-term borrowings		(9.0)		—
Current portion of long-term debt and financing obligations		(32.2)		(32.2)
Long-term debt and financing obligations, excluding current portion	$	2,701.1	$	2,695.8

November 26,

May 28,

2017

2017
Short-term borrowings:

Revolving credit facility

$
62.2

$
4.5
Other credit facilities

26.0

17.5

88.2

22.0
Long-term debt:

Term loan facility, due 2021

649.7

666.6
4.625% senior notes, due 2024

833.0

833.0
4.875% senior notes, due 2026

833.0

833.0
LIBOR plus a margin (1.90% to 2.30%) and 4.34%, installment notes due on various dates through June 2031

28.8

29.5

2,344.5

2,362.1
Financing obligations:

4.35% lease financing obligation due May 2030

67.5

68.2
2.00% to 3.32% lease financing obligations due on various dates through 2040

13.3

7.7

80.8

75.9

Total debt and financing obligations

2,513.5

2,460.0
Debt issuance costs

(32.8)

(35.1)
Short-term borrowings

(88.2)

(22.0)
Current portion of long-term debt and financing obligations

(39.3)

(37.9)
Long-term debt, excluding current portion

$
2,353.2

$
2,365.0

(a)	Excludes debt issuance costs of $2.9 million and $3.3 million as of November 27, 2022 and May 29, 2022, respectively, related to our revolving credit facility, which are recorded in “Other assets” on our Consolidated Balance Sheets.

At November ~~26, 2017,~~27, 2022, we had ~~$62.2 million of~~no borrowings outstanding under our ~~Revolving Credit Facility (the “Facility”). At November 26, 2017, we had $436.0~~revolving credit facility and $994.6 million of availability under the ~~Facility,~~facility, which is net of outstanding letters of credit of ~~$1.8~~$5.4 million. For the twenty-six weeks ended November ~~26, 2017,~~27, 2022, we had no material borrowings under the ~~Facility ranged from $0.0 million to $77.8 million and the weighted average interest rate for our outstanding borrowings under the Facility was 3.5%.~~facility.

For the ~~thirteen and~~ twenty-six weeks ended November ~~26, 2017,~~27, 2022 and November 28, 2021, we paid ~~$45.5~~$76.6 million and ~~$51.6~~$61.4 million of interest on debt, respectively.

For more information on our debt and financing obligations, interest rates, and debt covenants, see Note 9,7, Debt and Financing Obligations, of the Notes to ~~Combined and~~ Consolidated Financial Statements in ~~"Part~~“Part II, Item 8. Financial Statements and Supplementary ~~Data"~~Data” of the Form 10-K.

~~12.~~10. STOCK-BASED COMPENSATION

~~On October 29, 2016,~~The Compensation and Human Capital Committee (“the Committee”) of our Board of Directors ~~adopted the Lamb Weston Holdings, Inc. 2016 Stock Plan (“Stock Plan”). Under the Stock Plan, we may grant eligible employees and non-employee directors awards~~administers our stock compensation plan. The Committee, in its discretion, authorizes grants of ~~stock options, cash, and stock-settled~~ restricted stock units (“RSUs”), ~~restricted~~performance awards payable upon the attainment of specified performance goals (“Performance Shares”), stock ~~awards,~~options, dividend equivalents, and other ~~awards based on our common stock, and performance-based long-term incentive awards (“Performance shares”). At~~stock-based awards. As of November ~~26, 2017, we had 10.0 million shares authorized under the Stock Plan, and 7.9~~27, 2022, 6.0 million shares were available for future ~~grant.~~grant under the plan.

RSUs

We grant RSUs to eligible employees and non-employee directors. The employee RSUs generally vest over a three-year period following the grant date, while the non-employee director RSUs generally vest one year after the grant date. We estimate the fair value of the RSUs based upon the market price of our common stock on the date of grant.

1713

Table of Contents

Compensation expense is recognized over the period the employee or non-employee director provides service in exchange for the award.

Performance Shares

Performance Shares are granted to certain executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. Awards actually earned range from 0% to 200% of the targeted number of Performance Shares for each of the performance periods. Awards, if earned, would be paid in shares of our common stock. Subject to limited exceptions set forth in our stock plan, any shares earned will generally vest over a three-year service period following the grant date. The value of these Performance Shares is adjusted based upon the market price of our common stock and the anticipated attainment of Company-wide performance goals at the end of each reporting period and amortized as compensation expense over the service period.

We have also granted Performance Shares with vesting contingent upon relative total shareholder return goals, and, under special circumstances, stock price growth goals. Awards actually earned range from 0% to 200%, in the case of awards contingent on total shareholder return goals, or 0% to 300%, in the case of awards contingent on stock price growth goals, of the targeted number of Performance Shares. These Performance Shares are equity-settled awards that vest over a three-year service period following the grant date, and the number of units that actually vest is determined based on the achievement of the performance criteria set forth in the respective award agreement. The awards are measured based on estimated fair value as of the date of grant using a Monte Carlo simulation, and are amortized over the service period.

The weighted average Monte Carlo assumptions for Performance Shares granted during the twenty-six weeks ended November 27, 2022 were:


	Assumptions
Dividend yield (%)		0.00 - 1.42
Expected volatility of stock (%)		42.99
Risk-free interest rate (%)		2.89
Expected life (years)		2.82
Weighted average grant date fair value per unit	$	91.43 - $118.97

Stock Options

Under special circumstances, we have granted options to employees and non-employee directors for the purchase of stock at exercise prices equal to the fair market value of the underlying stock on the grant date. Options granted to employees generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of seven years. Options granted to non-employee directors generally vest one year after the grant date and have a term of ten years.

The weighted average Black-Scholes assumptions for stock options granted during the twenty-six weeks ended November ~~26, 2017~~27, 2022 were:


			Assumptions
~~Expected volatility (%) (a)~~Weighted average fair value	$	~~23.27~~25.90 - $29.25
Dividend yield (%)		~~1.71~~1.20 - 1.22
Expected volatility of stock (%)		33.73 - 34.06
Risk-free interest rate (%)		~~1.51~~2.82 - 4.42
Expected life of stock option (years)		~~4.4~~5.74 - 5.75

Weighted average exercise price per share

~~(a)~~

~~Because our equity shares have been traded for a relatively short period of time, we based our expected volatility assumptions on the volatility of related industry stocks.~~79.66 - $82.73

Table of Contents

Stock Based Compensation Grants

~~The following table summarizes stock option activity for~~During the twenty-six weeks ended November ~~26, 2017:~~27, 2022, we granted 0.4 million, 0.3 million, and 0.6 million RSUs, Performance Shares, and stock options, respectively, at an average grant date fair value of $79.48, $92.83, and $25.93, respectively.

Weighted-

Weighted-


Average

Average

Aggregate

Exercise

Remaining

Intrinsic

Price

Contractual

Value (a)

Shares

(per share)

Term (Years)

(in millions)
Outstanding at May 28, 2017

720,827

25.90


Granted

56,496

43.82


Exercised

(39,887)

18.71

Forfeited/cancelled

—

—

Outstanding at November 26, 2017

737,436

$
27.66

7.3

$
19.7

Exercisable at November 26, 2017

486,394

$
24.20

6.6

$
14.7

~~(a)~~

The aggregate intrinsic values represent the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of our fiscal 2018 second quarter, or November 24, 2017, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at the end of the quarter. The amount changes based on the fair market value of our stock.

~~The following table summarizes RSU and Performance Share activity for the twenty-six weeks ended November 26, 2017:~~

Stock-Settled

Cash-Settled

Performance Shares




Weighted-



Weighted-



Weighted-

Average

Average

Average

Grant-

Grant-

Grant-

Date Fair

Date Fair

Date Fair

Shares

Value

Shares

Value

Shares

Value
Outstanding at May 28, 2017

489,604

$
26.92


462,612

$
25.33

57,690

$
25.84
Granted (a)

276,369

44.34


—

—

124,341

43.83
Performance condition adjustment (b)

—

—

—

—

(818)

19.70
Vested (c)

(119,913)

20.99


(169,335)

19.76

(15,228)

19.70
Forfeited/expired/cancelled

(456)

43.82

(3,198)

27.75

—

—
Outstanding at November 26, 2017

645,604

$
35.47

290,079

$
28.55

165,985

$
39.91

~~(a)~~

~~Granted represents new grants and dividend equivalents accrued.~~

~~(b)~~

~~Amount represents adjustment for performance results attained on Performance Shares during the twenty-six weeks ended November 26, 2017.~~

~~(c)~~

The aggregate fair value of awards that vested during the twenty-six weeks ended November 26, 2017 was $13.4 million, which represents the market value of our common stock on the date that the RSUs and Performance Shares vested. The number of RSUs

~~Table of Contents~~

and Performance Shares vested includes shares of common stock that we withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. RSUs that are expected to vest are net of estimated future forfeitures.

Compensation Expense

~~Prior to the Separation Date, Conagra charged us for the costs related to the portion of Conagra’s incentive plans in which Lamb Weston employees participated and an allocation of~~Our stock-based ~~compensation costs of certain Conagra employees who provided general and administrative services on our behalf (see Note 3, Related Party Transactions). Our share-based~~ compensation expense is recorded in “Selling, general and administrative expenses.” Compensation expense for ~~share-based~~stock-based awards recognized in the ~~Condensed Combined and~~ Consolidated Statements of Earnings, net of forfeitures, was as ~~follows (dollars in millions):~~follows:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 27,		November 28,		November 27,		November 28,
(in millions)	2022		2021		2022		2021
Stock-settled RSUs	$	5.0	$	3.5	$	9.7	$	7.1
Performance Shares		3.7		0.9		6.1		2.5
Stock options		1.3		—		1.8		—
Total compensation expense	$	10.0	$	4.4	$	17.6	$	9.6
Income tax benefit (a)		(1.9)		(0.9)		(3.2)		(1.8)
Total compensation expense, net of tax benefit	$	8.1	$	3.5	$	14.4	$	7.8

Thirteen Weeks Ended

Twenty-Six Weeks Ended


November 26,

November 27,

November 26,

November 27,

2017

2016

2017

2016
Stock options

$
0.4

$
0.1

$
1.0

$
0.3
Stock-settled RSUs

2.5

0.9

4.4

1.6
Cash-settled RSUs (a)

2.8

1.8

3.7

3.3
Performance shares

0.9

(0.3)

1.1

—
Total compensation expense

6.6

2.5

10.2

5.2
Income tax benefit (b)

(2.4)

(0.9)

(3.8)

(1.9)
Total compensation expense, net of tax benefit

$
4.2

$
1.6

$
6.4

$
3.3

(a)

~~(a)~~

~~All cash-settled RSUs are marked-to-market and presented within “Accrued liabilities” and “Other noncurrent liabilities” in our Condensed Consolidated Balance Sheets.~~

~~(b)~~

Income tax benefit represents the marginal tax ~~rate.~~

rate, excluding non-deductible compensation.

Based on estimates at November ~~26, 2017,~~27, 2022, total unrecognized compensation expense related to ~~share-based payments~~stock-based awards was as ~~follows (dollars in millions):~~follows:

Remaining

Weighted

Unrecognized

Average

Compensation

Recognition

Expense

Period (in years)
Stock options

$
0.6


1.3
Stock-settled RSUs

14.8


2.4
Cash-settled RSUs

5.6


1.3
Performance shares

8.8


2.5
Total unrecognized stock-based compensation expense

$
29.8


2.2


			Remaining
			Weighted
	Unrecognized		Average
	Compensation		Recognition
(in millions, except data in years)	Expense		Period (in years)
Stock-settled RSUs	$	40.5		1.6
Performance Shares		30.7		2.3
Stock options		12.6		1.8
Total unrecognized compensation expense	$	83.8

~~13.~~15

Table of Contents

11. FAIR VALUE MEASUREMENTS

~~For information about our~~The fair ~~value policies, methods~~values of cash equivalents, receivables, accounts payable, and ~~assumptions used in estimating the fair value of our financial assets and liabilities, see Note 1, Nature of Operations and Summary of Significant Accounting Policies and Note~~

~~Table of Contents~~

~~11, Fair Value Measurements, of the Notes~~short-term debt approximate their carrying amounts due to ~~Combined and Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K.~~their short duration.

The following table presents our financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements ~~fall, as of November 26, 2017 and May 28, 2017 (dollars in millions):~~ fall:


	As of November 27, 2022
							Fair Value
							of Assets
(in millions)	Level 1		Level 2		Level 3		(Liabilities)
Derivative assets (a)	$	—	$	16.9	$	—	$	16.9
Deferred compensation liabilities (b)		—		(22.6)		—		(22.6)
Fair value, net	$	—	$	(5.7)	$	—	$	(5.7)


	As of May 29, 2022
							Fair Value
							of Assets
(in millions)	Level 1		Level 2		Level 3		(Liabilities)
Derivative assets (a)	$	—	$	7.0	$	—	$	7.0
Deferred compensation liabilities (b)		—		(21.6)		—		(21.6)
Fair value, net	$	—	$	(14.6)	$	—	$	(14.6)

As of November 26, 2017


Level 1

Level 2

Level 3

Total
Assets:








Deferred compensation assets

$
0.6

$
—

$
—

$
0.6
Pension plan assets (a)

—

3.9

—

3.9
Derivative assets (b)

—

0.6

—

0.6
Total assets

0.6

4.5

—

5.1
Liabilities:








Deferred compensation liabilities (c)

—


11.3


—


11.3
Total liabilities

$
—

$
11.3

$
—

$
11.3

As of May 28, 2017


Level 1

Level 2

Level 3

Total
Assets:








Pension plan assets (d)

$
4.5

$
—

$
—

$
4.5
Deferred compensation assets

0.6

—

—

0.6
Total assets

5.1

—

—

5.1
Liabilities:








Derivative liabilities (b)

—

2.4

—

2.4
Deferred compensation liabilities (c)

—


8.8


—


8.8
Total liabilities

$
—

$
11.2

$
—

$
11.2

(a)

~~(a)~~

~~The fair values of our~~Derivative assets included in Level 2 ~~pension plan assets were valued using third-party valuations, which are based on the net asset values. While the underlying assets are actively traded on an exchange, the funds are not.~~

~~(b)~~

primarily represent commodity swaps, option contracts, and currency contracts. The fair values of our Level 2 derivative assets ~~and liabilities~~ were determined using valuation models that use market observable inputs including ~~interest rate curves and~~ both forward and spot prices for ~~currencies and~~ commodities. Derivative assets are presented within “Prepaid expenses and ~~liabilities included in Level 2 primarily represent commodity swap and option contracts.~~

other current assets” on our Consolidated Balance Sheets.

(b)

~~(c)~~

The fair values of our Level 2 deferred compensation liabilities were valued using third-party valuations, which are based on the net asset values of mutual funds in our retirement plans. While the underlying assets are actively traded on an exchange, the funds are not.

Deferred compensation liabilities are primarily presented within “Other noncurrent liabilities” on our Consolidated Balance Sheets.

~~(d)~~

~~The fair values of our Level 1 pension plan assets were determined using unadjusted quoted prices in active markets for identical assets.~~

Certain assets and liabilities, including long-lived assets, intangible assets, goodwill, asset retirement obligations, and cost and equity investments are measured at fair value on a non-recurring basis.

At November ~~26, 2017,~~27, 2022, we had ~~$1,688.1~~$2,170.0 million of fixed-rate and ~~$744.6~~$588.0 million of variable-rate debt outstanding. Based on current market rates, the fair value of our fixed-rate debt ~~at November 26, 2017,~~ was estimated to be ~~$1,758.9~~$1,944.7 million. Any differences between the book value and fair value are due to the difference between the period-end market interest rate and the stated rate of our fixed-rate debt. ~~We estimated the fair value of our fixed-rate debt using quoted market prices (Level 2 inputs) within the fair value hierarchy.~~ The fair value of our variable-rate term debt approximates the carrying amount as our cost of borrowing is variable and approximates current market prices.

~~Table of Contents~~

12. STOCKHOLDERS’ EQUITY

~~14. DERIVATIVE FINANCIAL INSTRUMENTS~~

Share Repurchase Program

We use derivatives and other financial instruments to hedge exposures to commodity and currency risks. We do not hold or issue derivatives and other financial instruments for trading purposes. Prior to the Separation, Conagra exited all derivative instruments related to our businesses. The effect of exiting the positions was not significant to our financial results.

Certain raw materials used in our production processes are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. To address the volatility due to price ~~fluctuations, we may utilize swap contracts, option contracts, or forward purchase contracts.~~

~~Derivative instruments are reported in our Condensed 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.

We do not designate commodity derivatives to achieve hedge accounting treatment. The change in the fair value of the instruments used to reduce commodity price volatility is immediately recognized in earnings in cost of sales. In accordance with GAAP, we offset our derivative asset and liability balances where master netting arrangements with various counterparties provide for legal right of setoff. Our contracts are subject to enforceable master netting arrangements that provide rights of offset with each counterparty when amounts are payable on the same date in the same currency or in the case of certain specified defaults. As a result, we offset the fair value of recognized derivative assets and derivative liabilities in our ~~Condensed Consolidated~~ ~~Balance Sheets. No collateral was received or pledged in connection with these agreements.~~

~~The following table presents the fair value of derivatives at November 26, 2017 and May 28, 2017 (dollars in millions) in our Condensed~~ ~~Consolidated Balance Sheets~~:

November 26, 2017

Net Amounts

Gross Amounts

Gross Amounts Offset

Presented in the
Derivative subject to master netting arrangements

Recognized

in the Balance Sheet

Balance Sheet
Assets:

Commodity contracts

$
1.1

$
0.5

$
0.6
Prepaid expenses and other current assets

$
1.1

$
0.5

$
0.6

May 28, 2017

Net Amounts

Gross Amounts

Gross Amounts Offset

Presented in the
Derivative subject to master netting arrangements

Recognized

in the Balance Sheet

Balance Sheet
Liabilities:

Commodity contracts

$
3.8

$
1.4

$
2.4
Accrued liabilities

$
3.8

$
1.4

$
2.4

~~Table of Contents~~

~~The location and amount of gains (losses) from derivatives in our Condensed Combined and Consolidated Statements of Earnings were as follows (dollars in millions):~~

Amount of Loss Recognized on

Derivatives in Condensed Combined


and Consolidated Statement of Earnings

Location in Condensed Combined and

for the Thirteen Weeks Ended

Derivatives Not Designated as Hedging

Consolidated Statement of Earnings of Loss

November 26,

November 27,

Instruments

Recognized on Derivatives

2017

2016

Commodity contracts

Cost of sales

$
(0.7)

$
(0.5)

Foreign exchange contracts

Selling, general and administrative expenses

—

(0.1)

Total loss from derivative instruments not designed as hedging instruments



$
(0.7)

$
(0.6)

Amount of Gain (Loss) Recognized on

Derivatives in Condensed Combined

and Consolidated Statement of Earnings

Location in Condensed Combined and

for the Twenty-Six Weeks Ended
Derivatives Not Designated as Hedging

Consolidated Statement of Earnings of Gain

November 26,

November 27,
Instruments

(Loss) Recognized on Derivatives

2017

2016
Commodity contracts

Cost of sales

$
2.5

$
(0.1)
Foreign exchange contracts

Selling, general and administrative expenses

—

(0.1)
Total gain (loss) from derivative instruments not designed as hedging instruments



$
2.5

$
(0.2)

~~Presentation of Derivative Gains (Losses) in our Segment Results~~

Our ~~derivatives are recognized at fair market value~~Board of Directors authorized a program, with ~~realized and unrealized gains and losses recognized in cost of sales~~no expiration date, to repurchase up to $500.0 million of our ~~Other segment. The gains and losses are subsequently recognized in cost~~common stock. During the thirteen weeks ended November 27, 2022, there were no share repurchases. During the twenty-six weeks ended November 27, 2022, we repurchased 404,476 shares for an aggregate purchase price of ~~sales~~$28.4 million, or a weighted average price of ~~the reporting segments in the period in which the underlying transaction being economically hedged is included in earnings.~~

~~The following table presents the net derivative gains (losses) from commodity contracts under this methodology:~~

Thirteen Weeks Ended

Twenty-Six Weeks Ended

November 26,

November 27,

November 26,

November 27,

2017

2016

2017

2016
Net derivative gains (losses) incurred

$
(0.7)

$
(0.6)

$
2.5

$
(0.2)
Less: Net derivative gains (losses) allocated to reportable segments

(0.3)

0.4

(0.6)

0.6
Net derivative gains (losses) recognized in our Other segment

$
(0.4)

$
(1.0)

$
3.1

$
(0.8)

~~Open Commodity Contracts~~

$70.11 per share. As of November ~~26, 2017, our open commodity contracts had a gross notional value (defined as notional quantity times market value per notional quantity unit) of $41.5~~27, 2022, $240.6 million ~~and $30.7 million~~remained authorized for purchase and sales contracts, respectively. As of May 28, 2017, our open commodity contracts had a gross notional value of $56.0 million and $88.6 million for purchase and sales contracts, respectively.repurchase under the program.

~~15. STOCKHOLDERS’ EQUITY~~

In connection with the Separation, we amended and restated our certificate of incorporation to authorize 600,000,000 shares of common stock and 60,000,000 shares of preferred stock. We had 146,257,130 shares of common stock issued and outstanding as of November 26, 2017. Each share of common stock entitles the holder to one vote on matters to be voted on by our stockholders. No preferred stock was issued or outstanding on November 26, 2017.

2216

Table of Contents

Dividends

~~Dividends~~

During the ~~first half of fiscal 2018,~~twenty-six weeks ended November 27, 2022, we paid ~~$54.8~~$70.6 million of dividends to our common stockholders.

On December ~~21, 2017,~~2, 2022, we paid $35.2 million of dividends to stockholders of record as of the close of business on November 4, 2022. On December 14, 2022, our Board of Directors declared a dividend of ~~$0.19125~~$0.28 per share of common stock. ~~The~~This dividend will be paid on March ~~2, 2018~~3, 2023, to stockholders of record as of the close of business on February ~~2, 2018.~~3, 2023.

Accumulated Other Comprehensive Income ~~(Loss)~~ (“AOCI”)

Comprehensive income includes net income, currency translation adjustments, and changes in prior service cost and net actuarial gains (losses) from pension and post-retirement plans. We generally deem our foreign investments to be essentially permanent in nature and we do not provide for taxes on currency translation adjustments arising from converting the investment denominated in a foreign currency to the U.S. dollar. When we determine that a foreign investment, as well as undistributed earnings, are no longer permanent in nature, estimated taxes are provided for the related deferred tax liability (asset), if any, resulting from currency translation adjustments.

~~The following table details the accumulated balances for each component of other comprehensive income (loss), net of tax (except for currency translation adjustments):~~

Changes in AOCI, net of taxes, ~~by component follows (dollars in millions). Amounts in parentheses indicate losses.~~as of November 27, 2022 were as follows:


	Foreign						Accumulated
	Currency		Pension and				Other
	Translation		Post-Retirement				Comprehensive
(in millions)	Losses		Benefits		Other		Loss
Balance as of May 29, 2022	$	(12.9)	$	(3.3)	$	0.6	$	(15.6)
Other comprehensive income (loss) before reclassifications, net of tax		(46.3)		—		0.4		(45.9)
Amounts reclassified out of AOCI, net of tax		—		—		—		—
Net current-period other comprehensive income (loss)		(46.3)		—		0.4		(45.9)
Balance as of November 27, 2022	$	(59.2)	$	(3.3)	$	1.0	$	(61.5)

Foreign

Currency

Pension and

Translation

Post-Retirement


Gains (Losses)

Benefits

Total
Balance as of May 28, 2017

$
(10.3)

$
1.0

$
(9.3)
Other comprehensive income before reclassifications, net of tax

14.8

—

14.8
Amounts reclassified out of AOCI, net of tax

—

(0.1)

(0.1)
Net current-period other comprehensive income

14.8


(0.1)

14.7
Balance as of November 26, 2017

$
4.5

$
0.9

$
5.4

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13. SEGMENTS

~~The net amount of settlement gains on pension and post-retirement benefits included in accumulated OCI to be amortized over the next 12 months is a net gain of $0.2 million ($0.1 million after-tax).~~

~~16. SEGMENTS~~

We have four operating segments, each of which is a reportable segment: Global, Foodservice, Retail, and Other. Our chief operating decision maker receives periodic management reports under this structure that generally focus on the nature and scope of our customers’ businesses, which enables operating decisions, performance assessment, and resource allocation decisions at the segment level. The reportable segments are each managed by a general manager and supported by a cross functional team assigned to support the segment. We measure our segments’ product contribution margin, which is defined as net sales, less cost of sales and advertising and promotion expenses and excludes general corporate expenses, interest, and taxes. See Note 14, Segments, of the Notes to Combined and Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K for more information.


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 27,		November 28,		November 27,		November 28,
(in millions)	2022		2021		2022		2021
Net sales
Global	$	692.8	$	516.7	$	1,252.5	$	1,017.9
Foodservice		357.9		313.9		724.3		635.3
Retail		191.5		142.6		361.0		275.1
Other		34.3		33.4		64.3		62.5
Total net sales	$	1,276.5	$	1,006.6	$	2,402.1	$	1,990.8
Product contribution margin (a)
Global	$	171.0	$	80.9	$	254.7	$	123.5
Foodservice		130.8		104.4		269.1		200.8
Retail		65.7		21.4		114.4		36.2
Other (b)		7.5		(6.2)		5.6		(12.8)
		375.0		200.5		643.8		347.7
Add: Advertising and promotion expenses (a)		6.6		5.0		11.1		9.1
Gross profit		381.6		205.5		654.9		356.8
Selling, general and administrative expenses (c)		109.8		91.1		226.1		182.2
Income from operations		271.8		114.4		428.8		174.6
Interest expense, net (d)		24.6		82.4		50.6		110.3
Income tax expense		36.8		9.6		110.5		18.3
Equity method investment earnings (loss) (e)		(107.3)		10.1		67.3		16.3
Net income	$	103.1	$	32.5	$	335.0	$	62.3

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Thirteen Weeks Ended

Twenty-Six Weeks Ended


November 26,

November 27,

November 26,

November 27,
(in millions)

2017

2016

2017

2016
Net sales:








Global

$
416.9

$
412.6

$
830.8

$
811.8
Foodservice

272.8

250.6

552.2

510.9
Retail

102.0

96.5

194.0

186.1
Other

32.9

31.0

65.1

58.2
Total net sales

824.6

790.7

1,642.1

1,567.0
Product contribution margin (a):








Global

88.2

92.3

162.9

165.9
Foodservice

92.2

80.2

183.1

159.7
Retail

19.4

20.9

35.9

40.5
Other

3.9

(0.4)

15.0

2.8
Total product contribution margin

203.7

193.0

396.9

368.9
Equity method investment earnings

12.1

6.2

32.1

16.8
Total product contribution margin plus equity method investment earnings

215.8

199.2

429.0

385.7
Other selling, general and administrative expenses (a) (b)

63.9

67.5

119.5

118.4
Interest expense, net

27.4

6.8

52.6

8.3
Income tax expense

41.5

33.9

85.6

84.9
Net income

83.0

91.0

171.3

174.1
Less: Income attributable to noncontrolling interests

6.4

3.8

11.3

7.3
Net income attributable to Lamb Weston Holdings, Inc.

$
76.6

$
87.2

$
160.0

$
166.8

(a)

~~(a)~~

Product contribution margin ~~is defined as~~represents net sales less cost of sales and advertising and promotion expenses. Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with segment performance.

(b)	The Other ~~selling,~~segment primarily includes our vegetable and dairy businesses and unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts.

(c)	Selling, general and administrative expenses ~~include all selling, general and administrative expenses other than advertising and promotions expenses.~~

~~(b)~~

~~The~~for the thirteen and ~~twenty six weeks ended November 26, 2017, include $4.0 million and $6.2 million, respectively, of pre-tax expenses related to the Separation. The thirteen and twenty six~~twenty-six weeks ended November 27, ~~2016, include $9.0~~2022 included a net $26.5 million gain related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM, net of other acquisition-related costs.

(d)

The thirteen and twenty-six weeks ended November 28, 2021 included a loss on the extinguishment of debt of $53.3 million, which includes an aggregate call premium of $39.6 million related to the redemption of our outstanding 4.625% senior notes due 2024 and 4.875% senior notes due 2026, and the write-off of $13.7 million of previously unamortized debt issuance costs associated with those notes.

(e)

Equity method investment earnings (loss) included a $136.8 million unrealized loss and a $6.3 million unrealized gain for the thirteen weeks ended November 27, 2022 and November 28, 2021, respectively; and a $9.5 million and ~~$18.7~~$11.3 million unrealized gain for the twenty-six weeks ended November 27, 2022 and November 28, 2021, respectively, ~~of Separation-related expenses. In all periods, the expenses~~ related ~~primarily~~ to ~~professional fees~~mark-to-market adjustments associated with changes in natural gas and ~~other employee-related costs.~~

electricity derivatives as commodity markets in Europe have experienced significant volatility.

~~Assets by Segment~~

~~The manufacturing assets~~Equity method investment earnings for the twenty-six weeks ended November 27, 2022 also included a $15.1 million gain recognized in connection with our acquisition of Lamb Weston are shared across all reporting segments. Output from these facilities used by each reporting segment can change from fiscal year to fiscal year. Therefore, it is impracticable to allocate those assets to the reporting segments, as well as disclose total assets by segment.

~~Other Information~~

~~Lamb Weston’s largest customer, McDonald’s Corporation, accounted for approximately 11% of consolidated “Net sales” in all periods presented~~an additional 40% interest in our ~~Condensed Combined and Consolidated Statements of Earnings.~~Argentina joint venture, increasing our ownership from 50% to 90%.

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~~17.~~14. COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS

We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt, ~~(discussed in Note 11, Debt and Financing Obligations),~~ lease obligations, purchase commitments for goods and services, and legal proceedings. ~~There~~Except for the agreement to acquire the remaining interest in LWM for consideration of €525.0 million in cash and €175.0 million in shares of our common stock discussed in Note 6, Joint Venture Investments, there have been no material changes to the commitments, contingencies, guarantees and ~~indemnifications~~legal proceedings disclosed in Note ~~15,~~14, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to ~~Combined and~~ Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K.

We are a party to legal actions arising in the ordinary course of our business. These legal actions include commercial liability claims, premises liability claims, and employment-related claims, among others. As of the date of this filing, we do not believe that any of the legal actions against us would, either individually or in the aggregate, have a material adverse effect on our financial condition, results of operations, or cash flows. Costs of legal services associated with the foregoing matters are recognized in earnings as services are provided.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Forward-Looking Statements~~

~~This report, including Management's Discussion~~The following discussion and ~~Analysis~~analysis of ~~Financial Condition~~our financial condition and ~~Results~~results of ~~Operations,~~operations, which we refer to as “MD&A,” should be read in conjunction with our condensed consolidated financial statements and related notes included in "Financial Information" of this Quarterly Report on Form 10-Q (this "Form 10-Q") and in “Financial Statements and Supplementary Data” of the Company's Annual Report on Form 10-K for the fiscal year ended May 29, 2022 (the “Form 10-K”), which we filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on July 27, 2022.

Forward-Looking Statements

This report, including the MD&A, contains forward-looking statements within the meaning of the federal securities laws. Words such as “will,” “continue,” “may,” “expect,” “would,” “believe,” ~~“will,~~“acquire,” ~~“intend,~~“increase,” “implement,” “improve,” “outlook,” and variations of such words and similar expressions are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements regarding our plans, execution, capital investments, operational costs, pricing actions, cash flows, liquidity, dividends, ~~taxes,~~enterprise resource planning (“ERP”) system implementation, pending acquisition of the remaining equity interest in our European joint venture, Lamb-Weston/Meijer v.o.f. (“LWM”), including the anticipated benefits of the transaction, the expected timing of the completion of the transaction, related financing and the ability of the parties to complete the transaction, and business and financial outlook and ~~prospects.~~prospects, as well as supply chain constraints, inflation, our industry, and global economic conditions. These forward-looking statements are based on management’s current expectations and are subject to ~~uncertainty~~uncertainties and changes in circumstances. Readers of this report should understand that these statements are not guarantees of performance or results. Many factors could affect these forward-looking statements and our actual financial results and cause them to vary materially from the expectations contained in the forward-looking statements, including those set forth in this report. These risks and uncertainties include, among other things: the availability and prices of raw materials and other commodities; labor shortages and other operational challenges; an uncertain general economic environment, including inflationary pressures and recessionary concerns, any of which could adversely impact our business, financial condition or results of operations, including the demand and prices for our products; the occurrence of any event, change or other circumstances that could give rise to the termination of our agreement to acquire the remaining equity interest in LWM; the risk that the necessary regulatory approvals for the LWM acquisition may not be obtained or may be obtained subject to conditions that are not anticipated; the risk that the LWM acquisition will not be consummated in a timely manner or at all; risks that any of the closing conditions to the LWM acquisition may not be satisfied or may not be satisfied in a timely manner; risks related to disruption of management time from ongoing business operations due to the LWM acquisition; failure to realize the benefits expected from the LWM acquisition; and the effect of the announcement of the LWM acquisition on our ability to retain customers and retain and hire key personnel, maintain relationships with suppliers and on our operating results and businesses generally; risks associated with integrating acquired businesses, including LWM; disruptions in the global economy caused by the war in Ukraine and the possible related heightening of our other known risks; impacts on our business due to health pandemics or other contagious outbreaks, such as the COVID-19 pandemic, including impacts on demand for our products, increased costs, disruption of supply, other constraints in the availability of key commodities and other necessary services or restrictions imposed by public health authorities or governments; levels of pension, labor and people-related expenses; our ability to successfully execute our long-term value creation strategies; our ability to execute on large capital projects, including construction of new production lines or facilities; the competitive environment and related conditions in the markets in which we and our joint ventures operate; political and economic conditions of the countries in which we and our joint ventures conduct business and other factors related to our international operations; disruption of our access to export mechanisms; risks associated with other possible acquisitions; our ~~ability to complete proposed acquisitions or integrate acquired businesses or execute on large capital projects; our future~~ debt levels; ~~the availability and prices of raw materials;~~ changes in our relationships with our growers or significant customers; the success of our joint ventures; actions of governments and regulatory factors affecting our businesses or joint ventures; the ultimate outcome of litigation or any product recalls; ~~levels of pension, labor and people-related expenses;~~ our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends; and other risks described in our reports filed from time to time with the ~~Securities and Exchange Commission (“SEC”).~~SEC. We caution readers not to place undue reliance on any forward-looking statements included in this report, which speak only as of the date of this report. We undertake no responsibility for updating these statements, except as required by law.

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Overview

This Item 2 is intended to supplement, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended May 28, 2017 (the “Form 10-K”), which we filed with the SEC on July 25, 2017.

~~Overview~~

Lamb Weston Holdings, Inc. (“we,” “us,” “our,” “the Company,” or “Lamb Weston”), along with our joint ~~venture partners,~~ventures, is a leading global producer, distributor, and marketer of value-added frozen potato products. We, along with our joint ventures, are the number one supplier of value-added frozen potato products in North ~~America—the largest market for frozen potato products in the world. We are also~~America and a leading supplier of value-added frozen potato products internationally, with a strong and growing presence in high-growth emerging markets. We, along with our joint ventures, offer a broad product portfolio to a diverse channel and customer base in over 100 countries. French fries represent the majority of our ~~valued-added~~value-added frozen potato product portfolio.

On November 9, 2016, Lamb Weston separated from Conagra Brands, Inc. (formerly, ConAgra Foods, Inc., “Conagra”) and became an independent publicly traded company through the pro rata distribution by Conagra of 100% of the outstanding common stock of Lamb Weston to Conagra stockholders (“Separation”). Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “Lamb Weston” refer to Lamb Weston Holdings, Inc. and its consolidated subsidiaries or, in the case of information as of dates or for periods prior to the Separation, the combined and consolidated entities of the Lamb Weston business of Conagra and certain other assets and liabilities that had been historically held at the Conagra corporate level but were specifically identifiable and attributable to the Lamb Weston business.

~~Table of Contents~~

~~Management’s discussion and analysis of our results of operations and financial condition~~This MD&A is provided as a supplement to the ~~condensed combined and~~ consolidated financial statements and related condensed notes included elsewhere herein to help provide an understanding of our financial condition, changes in financial condition and results of our operations. Our MD&A is based on financial data derived from the financial statements prepared in accordance with ~~the United States (“~~U.S.”) generally accepted accounting principles (“GAAP”) and certain other financial data ~~(Adjusted~~(including product contribution margin, on a consolidated basis, Adjusted EBITDA, ~~and~~ Adjusted EBITDA including unconsolidated joint ~~ventures)~~ventures, Adjusted Income from Operations, Adjusted Net Income, and Adjusted Diluted EPS) that is prepared using non-GAAP financial measures. Refer to ~~“Reconciliations of Non-GAAP~~“Non-GAAP Financial ~~Measures to Reported Amounts”~~Measures” below for the ~~definition~~definitions of product contribution margin, Adjusted EBITDA, ~~and~~ Adjusted EBITDA including unconsolidated joint ventures, Adjusted Income from Operations, Adjusted Net Income, and Adjusted Diluted EPS, and a reconciliation of these non-GAAP financial measures to gross profit, income from operations, net ~~income.~~income, or diluted earnings per share, as applicable.

~~Lamb Weston’s management uses~~Executive Summary

The following highlights our financial results in the second quarter of fiscal 2023, compared with the prior year quarter. For more information, refer to the “Results of Operations” section below.

●

Net sales increased 27% to $1,276.5 million

●

Income from operations increased 138% to $271.8 million

●

Net income increased 217% to $103.1 million, and diluted earnings per share increased 223% to $0.71, including items impacting comparability, as discussed below, of $110.3 million ($82.3 million after-tax, or $0.57 per share)

●

Adjusted Income from Operations increased 114% to $245.3 million

●

Adjusted Net Income increased 171% to $185.4 million, and Adjusted Diluted EPS increased 172% to $1.28

●

Adjusted EBITDA including unconsolidated joint ventures increased 92% to $334.6 million

●

We returned $35.2 million of cash to stockholders through dividends

We drove strong sales growth, earnings growth, and gross margin expansion in the quarter by continuing to execute pricing actions across each of our business segments to counter significant input, manufacturing, and supply chain cost inflation. The increase in net sales was partially offset by a decline in sales volume, primarily reflecting an inability to fully serve customer demand in our foodservice and retail channels due to the impact of supply chain disruptions on run-rates and throughput in our production facilities, and to a lesser extent, softer restaurant traffic and demand trends in the U.S., especially at casual dining and full-service restaurants, as consumers adjusted to the severe inflationary environment. Overall traffic at large quick service restaurants (“QSR”) in the U.S. remained solid.

The increase in net income was driven by higher sales and gross profit and lower interest expense, and was partially offset by sharply lower equity method investment earnings and higher selling, general and administrative expenses (“SG&A”). The following items impacted comparability of our second quarter results and were excluded when providing Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA, and Adjusted EBITDA including unconsolidated joint ventures:

●

Interest expense in the prior year quarter included a loss of $53.3 million ($40.5 million after-tax, or $0.28 per share) associated with the extinguishment of debt (see “Liquidity and Capital Resources”).

●

The decrease in equity method investment earnings included a $136.8 million unrealized loss ($101.5 million after-tax, or $0.70 per share) in the second quarter of fiscal 2023 related to mark-to-market adjustments associated

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with natural gas and electricity hedging contracts in Europe, reflecting the volatility of those energy markets in that region, and a $6.3 million unrealized gain ($4.7 million after-tax, or $0.03 per share) in the prior year quarter.

●

SG&A included a net $26.5 million gain ($19.2 million after-tax, or $0.13 per share), related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM, net of other acquisition-related costs.

In October 2022, we entered into an agreement to acquire the remaining interest in LWM for consideration consisting of €525.0 million in cash and €175.0 million in shares of our common stock. Upon completion of the transaction, we will own 100% of LWM. We expect to close this transaction in the fourth quarter of fiscal 2023, subject to customary regulatory approvals. After closing, we will include LWM’s operating results within our Global segment.

Outlook

During the second half of fiscal 2023, we expect increases in price/mix in each of our core business segments to be the primary driver of net sales growth versus the prior year period. We expect supply chain disruptions, including the effects of commodities shortages and onboarding new production workers, and changes in product mix will continue to impact run-rates and throughput in our production facilities, and affect our customer fulfillment rates. We also expect sales volume trends and demand will continue to be volatile as consumers in the U.S. and our key international markets continue to respond to the current inflationary environment. We expect our gross margins will be largely consistent with the levels that we delivered in the first half of the year due to the carryover benefits of pricing actions taken in fiscal 2022, as well as actions being taken in fiscal 2023 to offset input cost inflation, including an increase in raw potato costs as a result of higher contract rates and the impact of below-average crop yields as a result of significant heat waves late in the season in our growing regions in the Pacific Northwest. We expect LWM’s earnings may improve as compared to the prior year period as a result of the continued implementation of pricing actions to counter cost inflation.

While the near-term global demand trends may be volatile as consumers navigate the current challenging macroenvironment, our investments to expand capacity in Idaho, China, and Argentina, along with our intent to acquire the remaining equity interest in our LWM joint venture, reflect our belief in the long-term health and growth outlook of the frozen potato category.

Results of Operations

We have four reportable segments: Global, Foodservice, Retail, and Other. We report net sales and product contribution margin by segment and on a consolidated basis. Product contribution margin, when presented on a consolidated basis, is a non-GAAP financial measure. Product contribution margin represents net sales less cost of sales and advertising and promotion (“A&P”) expenses. Product contribution margin includes A&P expenses because those expenses are directly associated with the performance of the Company’s segments. Net sales and product contribution margin 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 and product contribution margin, see “Non-GAAP Financial Measures” below and Note 13, Segments, of the Condensed Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this report.

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Thirteen Weeks Ended November 27, 2022 compared to Thirteen Weeks Ended November 28, 2021

Net Sales, Gross Profit, and Product Contribution Margin


	Thirteen Weeks Ended
	November 27,		November 28,		%
(in millions, except percentages)	2022		2021		Increase
Segment net sales
Global	$	692.8	$	516.7	34%
Foodservice		357.9		313.9	14%
Retail		191.5		142.6	34%
Other		34.3		33.4	3%
	$	1,276.5	$	1,006.6	27%

Segment product contribution margin
Global	$	171.0	$	80.9	111%
Foodservice		130.8		104.4	25%
Retail		65.7		21.4	207%
Other		7.5		(6.2)	221%
		375.0		200.5	87%
Add: Advertising and promotion expenses		6.6		5.0	32%
Gross profit	$	381.6	$	205.5	86%

Net Sales

Compared to the prior year quarter, net sales for the second quarter of fiscal 2023 increased $269.9 million, or 27%, to $1,276.5 million. Price/mix increased 30%, reflecting the benefit of pricing actions across each of our core business segments to counter input, manufacturing, and transportation cost inflation. Volume declined 3%, primarily reflecting an inability to fully serve customer demand in our foodservice and retail channels. The impact of supply chain disruptions during the quarter, including the effects of commodities shortages and onboarding new production workers, continued to affect production run-rates and throughput in our production facilities as well as customer order fulfillment rates. To a lesser extent, softer casual dining and full-service restaurant traffic in the U.S. also contributed to the decline as consumers face a challenging macroeconomic environment.

Global segment net sales increased $176.1 million, or 34%, to $692.8 million. Price/mix increased 31% and volume increased 3%. The benefit of domestic and international product and freight pricing actions to offset inflation, as well as favorable mix, drove the increase in price/mix. The impact of acquiring a controlling interest in Lamb Weston Alimentos Modernos S.A. (“LWAMSA”) in early fiscal 2023, growth in international shipments, and strength in domestic QSR limited time product offerings largely drove the increase in volume.

Foodservice segment net sales increased $44.0 million, or 14%, to $357.9 million. Price/mix increased 25%, while volume decreased 11%. The carryover benefits of product and freight pricing actions taken in the prior year, as well as actions taken in fiscal 2023 to counter inflation, drove the increase in price/mix. Volume fell, reflecting a combination of: the supply chain disruptions on run-rates and throughput in our production facilities; incremental losses of certain low-margin business; and, to a lesser extent, a slowdown in restaurant traffic and consumer demand in casual dining and other full-service restaurants.

Retail segment net sales increased $48.9 million, or 34%, to $191.5 million. Price/mix increased 43%, while volume decreased 9%. The carryover benefits of product and freight pricing actions across the branded and private label portfolios taken in the prior year, as well as actions taken in fiscal 2023 to counter inflation, drove the increase in price/mix. While consumer demand for frozen potato products remained strong, volume fell largely due to the impact of supply chain disruptions on run-rates and throughput in our production facilities, as well as incremental losses of certain low-margin, private label business.

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Other segment net sales increased $0.9 million, or 3%, to $34.3 million. Price/mix increased 5% and was driven by higher prices in our vegetable business. Volume decreased 2%, reflecting the negative effect of the extreme summer heat on the yield and quality of the vegetable crops.

Gross Profit and Product Contribution Margin

Gross profit increased $176.1 million, or 86%, to $381.6 million, as benefits from pricing actions more than offset the impact of higher manufacturing and distribution costs on a per-pound basis, as well as lower sales volumes. The higher costs per pound primarily reflected double-digit cost inflation from key inputs, including: edible oils, ingredients such as grains and starches used in product coatings, labor, and transportation and warehousing. The increase in costs per pound also reflected higher costs associated with the impact of extreme summer heat that negatively affected the yield and quality of potato crops in the Pacific Northwest in fall 2021, as well as the effects of supply chain disruptions on run-rates and throughput in our production facilities. The increase in gross profit also included a $6.5 million increase in unrealized mark-to-market adjustments associated with commodity hedging contracts, which includes a $0.4 million gain in the second quarter, compared with a $6.1 million loss related to these items in the prior year quarter.

Our overall product contribution margin, defined as gross profit less A&P expenses, increased $174.5 million, or 87%, to $375.0 million. The increase was largely driven by higher sales and gross profit (as described above).

Global segment product contribution margin increased $90.1 million, or 111%, to $171.0 million. Pricing actions and favorable mix drove the increase, more than offsetting higher manufacturing and distribution costs per pound. As a result of the cumulative benefit of pricing actions and mix improvement efforts during the past two years to counter input cost inflation, the Global segment’s product contribution margin percentage in the second quarter approached pre-pandemic levels. Global segment cost of sales was $520.5 million, up 20% compared to the second quarter of fiscal 2022, primarily due to higher manufacturing and distribution costs, as well as higher sales volumes.

Foodservice segment product contribution margin increased $26.4 million, or 25%, to $130.8 million. Pricing actions drove the increase, and was partially offset by higher manufacturing and distribution costs per pound, unfavorable mix, and the impact of lower sales volumes. Foodservice segment cost of sales was $225.4 million, up 8% compared to the second quarter of fiscal 2022, primarily due to higher manufacturing and distribution costs, partially offset by lower sales volumes.

Retail segment product contribution margin increased $44.3 million, or 207%, to $65.7 million. Pricing actions drove the increase, partially offset by higher manufacturing and distribution costs per pound. Retail segment cost of sales was $122.2 million, a 3% increase compared to the second quarter of fiscal 2022, primarily due to higher manufacturing and distribution costs, partially offset by lower sales volumes.

Other segment product contribution margin increased $13.7 million to $7.5 million in the second quarter of fiscal 2023, as compared to a loss of $6.2 million in the second quarter of fiscal 2022. These amounts include a $2.0 million gain and an $8.6 million loss related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts reported in the Other segment in fiscal 2023 and 2022, respectively. Excluding these mark-to-market adjustments and realized settlements, Other segment product contribution margin increased $3.1 million, largely due to pricing actions in our vegetable business.

Selling, General and Administrative Expenses

SG&A increased $18.7 million to $109.8 million in the second quarter of fiscal 2023, and includes a net $26.5 million gain ($19.2 million after-tax, or $0.13 per share) related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM, net of other acquisition-related costs. Excluding items impacting comparability, SG&A increased $45.2 million to $136.3 million, primarily due to higher compensation and benefits expense, and to a lesser extent, higher expenses related to improving our information systems and ERP infrastructure.

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Interest Expense, Net

Compared with the prior year quarter, interest expense, net decreased $57.8 million to $24.6 million, primarily reflecting a loss on extinguishment of debt in the prior year quarter of $53.3 million ($40.5 million after-tax, or $0.28 per share) associated with the redemption in full of our outstanding 4.625% senior notes due 2024 (the “2024 Notes”) and 4.875% senior notes due 2026 (the “2026 Notes”). In addition, capitalized interest and interest income were each higher versus the prior year quarter.

Income Tax Expense

Income tax expense for the second quarter of fiscal 2023 and 2022 was $36.8 million and $9.6 million, respectively. The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 26.3% and 22.8% for the second quarter of fiscal 2023 and 2022, respectively. Excluding items impacting comparability, our effective tax rate for the second quarter of fiscal 2023 and 2022 was 25.9% and 23.4%, respectively. The effective tax rate varies from the U.S. statutory tax rate of 21%, principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items.

Equity Method Investment Earnings (Loss)

We conduct business through unconsolidated joint ventures in Europe and the U.S. and include our share of the earnings (loss) based on our economic ownership interest in them. Our share of earnings and loss from our equity method investments was a loss of $107.3 million and earnings of $10.1 million for the second quarter of fiscal 2023 and 2022, respectively. Equity method investment earnings (loss) included a $130.1 million unrealized loss related to mark-to-market adjustments associated with currency and commodity hedging contracts in the second quarter of fiscal 2023, of which $136.8 million ($101.5 million after-tax, or $0.70 per share) related to losses in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility. Equity method investment earnings in the prior year quarter included a $3.6 million unrealized gain for mark-to-market adjustments, of which $6.3 million ($4.7 million after-tax, or $0.03 per share) related to gains in natural gas and electricity derivatives.

Excluding the items impacting comparability noted above (mark-to-market adjustments related to natural gas and electricity derivatives) and the other mark-to-market adjustments, earnings from equity method investments increased $16.3 million compared to the prior year quarter, reflecting favorable price/mix, partially offset by higher manufacturing and distribution costs, in both Europe and the U.S.

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Twenty-Six Weeks Ended November 27, 2022 compared to Twenty-Six Weeks Ended November 28, 2021

Net Sales, Gross Profit, and Product Contribution Margin


	Twenty-Six Weeks Ended
	November 27,		November 28,		%
(in millions, except percentages)	2022		2021		Increase
Segment net sales
Global	$	1,252.5	$	1,017.9	23%
Foodservice		724.3		635.3	14%
Retail		361.0		275.1	31%
Other		64.3		62.5	3%
	$	2,402.1	$	1,990.8	21%

Segment product contribution margin
Global	$	254.7	$	123.5	106%
Foodservice		269.1		200.8	34%
Retail		114.4		36.2	216%
Other		5.6		(12.8)	144%
		643.8		347.7	85%
Add: Advertising and promotion expenses		11.1		9.1	22%
Gross profit	$	654.9	$	356.8	84%

Net Sales

Compared to the first half of fiscal 2022, net sales increased $411.3 million, or 21%, to $2,402.1 million. Price/mix increased 26%, reflecting the benefit of product and freight pricing actions across each of our core business segments to counter input, manufacturing, and transportation cost inflation. Volume declined 5%, primarily reflecting an inability to fully serve customer demand in our foodservice and retail channels. The impact of supply chain disruptions during the first half of fiscal 2023, including the effects of commodities shortages and onboarding new production workers, continued to affect production run-rates and throughput in our production facilities as well as customer order fulfillment rates. To a lesser extent, softer casual dining and full-service restaurant traffic in the U.S. as consumers face a challenging macroeconomic environment.

Global segment net sales increased $234.6 million, or 23%, to $1,252.5 million. Price/mix increased 23%, while volume was flat. The benefit of domestic and international product and freight pricing actions to offset inflation drove the increase in price/mix. The impact of acquiring a controlling interest in LWAMSA in early fiscal 2023 and growth in international shipments offset a decline in domestic volumes.

Foodservice segment net sales increased $89.0 million, or 14%, to $724.3 million. Price/mix increased 25%, while volume decreased 11%. The carryover benefits of product and freight pricing actions taken in the prior year, as well as actions taken in fiscal 2023 to counter inflation, drove the increase in price/mix. Volume fell, reflecting a combination of: the impact of supply chain disruptions on run-rates and throughput in our production facilities; incremental losses of certain low-margin business; and a slowdown in restaurant traffic and consumer demand in casual dining and other full-service restaurants.

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Retail segment net sales increased $85.9 million, or 31%, to $361.0 million. Price/mix increased 38%, while volume decreased 7%. The carryover benefits of product and freight pricing actions across the branded and private label portfolios taken in the prior year, as well as actions taken in fiscal 2023 to counter inflation, largely drove the increase in price/mix. While consumer demand for frozen potato products remained strong, the decline in the segment’s overall volume was due largely to the impact of supply chain disruptions on run-rates and throughput in our production facilities for branded products, as well as incremental losses of certain low-margin, private label business.

Other segment net sales increased $1.8 million, or 3%, to $64.3 million. Price/mix increased 8% and was driven by higher prices in our vegetable business. Volume decreased 5%, reflecting the negative effect of the extreme summer heat on the yield and quality of the vegetable crops.

Gross Profit and Product Contribution Margin

Gross profit increased $298.1 million, or 84%, to $654.9 million, as benefits from pricing actions more than offset the impact of higher manufacturing and distribution costs on a per-pound basis, as well as lower sales volumes. The higher costs per pound predominantly reflected double-digit cost inflation from key inputs, including: edible oils; ingredients, such as grains and starches used in product coatings; transportation; and labor. The increase in costs per pound also reflected higher costs associated with the impact of extreme summer heat that negatively affected the yield and quality of potato crops in the Pacific Northwest in fall 2021, as well as the effects of supply chain disruptions on run-rates and throughput in our production facilities. The increase in per pound costs was partially offset by supply chain productivity savings.

Our overall product contribution margin increased $296.1 million, or 85%, to $643.8 million. The increase was largely due to higher sales and gross profit (as described above).

Global segment product contribution margin increased $131.2 million, or 106%, to $254.7 million. Pricing actions drove the increase, more than offsetting higher manufacturing and distribution costs per pound, as well as unfavorable mix. Global segment cost of sales was $995.6 million, up 12% compared to the first half of fiscal 2022, primarily due to higher manufacturing and distribution costs.

Foodservice segment product contribution margin increased $68.3 million, or 34%, to $269.1 million. Pricing actions drove the increase, and was partially offset by higher manufacturing and distribution costs per pound, unfavorable mix, and the impact of lower sales volumes. Foodservice segment cost of sales was $452.3 million, up 5% compared to the first half of fiscal 2022, due to higher manufacturing and distribution costs, partially offset by lower sales volumes.

Retail segment product contribution margin increased $78.2 million, or 216%, to $114.4 million. Pricing actions drove the increase, partially offset by higher manufacturing and distribution costs per pound. Retail segment cost of sales was $240.9 million, up 3% compared to the first half of fiscal 2022, primarily due to higher manufacturing and distribution costs, partially offset by lower sales volumes.

Other segment product contribution margin increased $18.4 million to $5.6 million in the first half of fiscal 2023, as compared to a loss of $12.8 million in the first half of fiscal 2022. These amounts include a $6.9 million loss related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts, and a $16.9 million loss related to the contracts in fiscal 2022. Excluding these mark-to-market adjustments and realized settlements, Other segment product contribution margin increased $8.4 million, largely due to pricing actions in our vegetable business.

Selling, General and Administrative Expenses

SG&A increased $43.9 million to $226.1 million in the first half of fiscal 2023, and includes a net $26.5 million gain ($19.2 million after-tax, or $0.13 per share) related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM, net of other acquisition-related costs. Excluding items impacting comparability, SG&A increased $70.4 million to $252.6 million, primarily due to higher compensation and benefits expense, and higher expenses related to improving our information systems and ERP infrastructure.

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Interest Expense, Net

Compared with the first half of fiscal 2022, interest expense, net decreased $59.7 million to $50.6 million. The first half of fiscal year 2022 includes a $53.3 million ($40.5 million after-tax or $0.28 per share) loss on extinguishment of debt associated with the redemption in full of our 2024 Notes and 2026 Notes.

Income Tax Expense

Income tax expense for the first half of fiscal 2023 and 2022 was $110.5 million and $18.3 million, respectively. The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 24.8% and 22.7% for the first half of fiscal 2023 and 2022, respectively. Excluding items impacting comparability, our effective tax rates for the first half of fiscal 2023 and 2022 were 25.5% and 23.0%. The effective tax rate varies from the U.S. statutory tax rate of 21%, principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items.

Equity Method Investment Earnings

Equity method investments earnings were $67.3 million and $16.3 million for the first half of fiscal 2023 and 2022, respectively. Equity method investment earnings included a $14.4 million unrealized gain related to mark-to-market adjustments associated with currency and commodity hedging contracts in the first half of fiscal 2023, of which $9.5 million ($7.0 million after-tax, or $0.05 per share) related to gains in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility. Equity method investment earnings in the first half of fiscal 2022 included a $7.9 million unrealized gain for mark-to-market adjustments, of which $11.3 million ($8.4 million after-tax, or $0.06 per share) related to gains in natural gas and electricity derivatives. Equity method investment earnings in the first half of fiscal 2023 also included a $15.1 million gain (before and after-tax, or $0.10 per share) recognized in connection with remeasuring our previously held 50% ownership interest in LWAMSA to fair value.

Excluding the items impacting comparability noted above (mark-to-market adjustments related to natural gas and electricity derivatives and the remeasurement of our previously held ownership interest in LWAMSA) and the other mark-to-market adjustments, earnings from equity method investments increased $29.4 million compared to the prior year, reflecting favorable price/mix, partially offset by higher manufacturing and distribution costs, in both Europe and the U.S.

Liquidity and Capital Resources

Sources and Uses of Cash

We ended the first half of fiscal 2023 with $419.4 million of cash and cash equivalents and $994.6 million of availability under our revolving credit facility, net of letters of credit. As of November 27, 2022, no borrowings were outstanding under the revolving credit facility.

In October 2022, we entered into an agreement to acquire the remaining interest in LWM for consideration consisting of €525.0 million in cash and €175.0 million in shares of our common stock. We expect to close the transaction in the fourth quarter of fiscal 2023, subject to customary regulatory approvals. We expect to fund the cash portion of this acquisition with new borrowings and cash on hand.

We believe we have sufficient liquidity to meet projected capital expenditures, service existing debt and meet working capital requirements for at least the next 12 months with current cash balances and cash from operations, and in the longer term, supplemented as necessary by available borrowings under our currently undrawn revolving credit facility.

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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:


	Twenty-Six Weeks Ended
	November 27,		November 28,
(in millions)	2022		2021
Net cash flows provided by (used for):
Operating activities	$	288.0	$	207.5
Investing activities		(311.0)		(147.6)
Financing activities		(96.6)		(219.3)
		(119.6)		(159.4)
Effect of exchange rate changes on cash and cash equivalents		14.0		(2.2)
Net decrease in cash and cash equivalents	$	(105.6)	$	(161.6)

Operating Activities

In the first half of fiscal 2023, cash provided by operating activities increased $80.5 million to $288.0 million, compared with $207.5 million in the same period a year ago. The increase related to a $128.5 million increase in income from operations, adjusted for non-cash income and expenses, offset by $48.0 million of cash used for unfavorable changes in working capital. See “Results of Operations” in this MD&A for more information related to the increase in income from operations. Unfavorable changes in working capital primarily related to higher-cost finished goods inventories, due primarily to increased potato and input cost inflation. These unfavorable changes were partially offset by an increase in accounts payable due to timing, an increase in accrued liabilities due to higher compensation and benefits accrued in fiscal 2023, compared with the prior year period, and an increase in income taxes payable due to higher taxable income in fiscal 2023, compared with the prior year period.

Investing Activities

Investing activities used $311.0 million of cash in the first half of fiscal 2023, compared with $147.6 million in the same period in the prior year. The increase primarily relates to our investments in our chopped and formed capacity expansion and our french fry processing line in American Falls, Idaho, and our greenfield french fry processing facility in Ulanqab, Inner Mongolia, China. We expect to use approximately $475 million to $525 million for capital expenditures, excluding our pending acquisition of LWM and other acquisitions, if any, in fiscal 2023. We also used $42.3 million to acquire an additional ownership interest in our joint venture in Argentina and used $37.4 million to acquire assets associated with the improvement of our information and technology services infrastructure.

Financing Activities

In the first half of fiscal 2023, cash used for financing activities decreased $122.7 million to $96.6 million, compared with $219.3 million used during the same period a year ago. During the first half of fiscal 2023, financing activities primarily related to $23.3 million of additional borrowings under our RMB-denominated loan facility, offset by $16.7 million of debt and financing obligation repayments, and the payment of $70.6 million of cash dividends to our common stockholders. In addition, we used $34.9 million of cash to repurchase 404,476 shares of our common stock at an average price of $70.11 per share and withheld 82,042 shares from employees to cover income and payroll taxes on equity awards that vested during the period.

In the first half of fiscal 2022, financing activities primarily related to issuing senior notes, which generated net proceeds of $1,655.4 million, debt and financing obligation repayments of $1,682.1 million, including the redemption of the 2024 Notes and 2026 Notes, the payment of $68.7 million of cash dividends to our common stockholders, and the payment of an aggregate redemption premium of $39.6 million relating to the notes redemption. In addition, $83.5 million related to the repurchase of 1,264,114 shares of our common stock at an average price of $60.15 per share and withholding 114,530 shares from employees to cover income and payroll taxes on equity awards that vested during the period.

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For more information about our debt, interest rates, maturity dates, and covenants, see Note 9, Debt and Financing Obligations, of the Condensed Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this report and Note 7, Debt and Financing Obligations of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K. At November 27, 2022, we were in compliance with the financial covenant ratios and other covenants contained in our credit agreements.

Obligations and Commitments

Except for our pending acquisition of the remaining ownership interest in LWM as discussed in this MD&A, there have been no material changes to the contractual obligations disclosed in “Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K.

Non-GAAP Financial Measures

To supplement the financial information included in this report, we have presented product contribution margin on a consolidated basis, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures, Adjusted Income from Operations, Adjusted Net Income, and Adjusted Diluted EPS, each of which is considered a non-GAAP financial measure.

Product contribution margin is one of the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance. Product contribution margin represents net sales less cost of sales and A&P expenses. Product contribution margin includes A&P expenses because those expenses are directly associated with the performance of our segments. Our management also uses Adjusted Income from Operations, Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures. These non-GAAP financial measures reflect management’s exclusion of items impacting comparability between periods as management believes these items are not necessarily reflective of the underlying operating trends of our business. We use these non-GAAP financial measures as a means to evaluate the ~~Company’s~~underlying performance ~~excluding~~of our business on an ongoing basis, and we believe these measures, when considered together with the ~~impact of certain non-cash charges~~corresponding GAAP financial measures and ~~other special items in order~~the reconciliations to ~~have comparable financial results to analyze changes in our underlying~~those measures, provide useful supplemental information regarding the factors and trends affecting Lamb Weston’s business ~~between reporting periods. The Company includes~~than could be obtained absent these disclosures. We include these non-GAAP financial measures because management believes ~~it is~~they provide useful information to investors in that ~~it provides~~they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making. We believe that the presentation of these non-GAAP financial measures, when ~~read~~used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing ~~the Company’s~~our operating performance and underlying prospects. ~~Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures should not be considered a substitute for net income.~~

~~Executive Summary~~

~~In the second quarter of fiscal 2018:~~

Net sales increased $33.9 million or 4%, to $824.6 million, compared with the second quarter of fiscal 2017. Price/mix increased 5% due to pricing actions and favorable product and customer mix. Volume declined 1%, as compared to a 4% increase in the prior year period.

Net income attributable to Lamb Weston declined $10.6 million, or 12%, to $76.6 million, and diluted earnings per share declined $0.07 to $0.52. The decline was driven by higher interest expense; commodity, manufacturing, transportation and warehousing cost inflation; higher income tax and depreciation expenses; and approximately $3 million of costs related to the start-up of our new french fry production line in Richland, Washington. This was partially offset by net sales growth, higher equity method investment earnings and lower expenses related to the Separation.

Excluding $4.0 million and $9.0 million of costs related to the Separation in the second quarter of fiscal 2018 and 2017, respectively, net income attributable to Lamb Weston declined $13.8 million. Adjusted Diluted EPS declined $0.09 to $0.54.

~~Adjusted EBITDA including unconsolidated joint ventures increased $20.8 million, or 12%, to $188.9 million, mainly reflecting growth in income from operations and equity method investment earnings.~~

Gross profit increased $10.3 million, or 5%, to $209.2 million, and included higher depreciation expense and approximately $3 million of costs related to the start-up of our new french fry production line in Richland, Washington.

~~Equity method investment earnings increased $5.9 million to $12.1 million, and included a $2.7 million unrealized loss related to mark-to-market adjustments associated with currency hedging contracts.~~

Cash from operations through the first half of fiscal 2018 was $182.2 million, compared with $162.4 million in the prior year period. During the first half of fiscal 2018, we added $155.8 million of capital assets and paid $54.8 million in dividends to stockholders.

The Global segment’s net sales increased to $416.9 million, up $4.3 million, with price/mix up 3% and volume down 2%, compared with the second quarter of fiscal 2017. Segment product contribution margin decreased $4.1 million to $88.2 million.

~~The Foodservice segment’s net sales increased $22.2 million to $272.8 million, with price/mix up 8% and volume up 1%. Segment product contribution margin increased $12.0 million to $92.2 million.~~

~~The Retail segment’s net sales increased $5.5 million to $102.0 million, with price/mix up 4% and volume up 2%. Segment product contribution margin decreased $1.5 million to $19.4 million.~~

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The Other segment’s net sales increased $1.9 million to $32.9 million, with price/mix up 11% and volume down 5%. Segment product contribution margin was $3.9 million, compared to a loss of $0.4 million in the prior year period.

Demand for frozen potato products continues to grow around the world. We expect to address the increase in demand by investing in additional capacity. We began operating a new line in Boardman, Oregon during the third quarter of fiscal 2017 as well as a new line in Richland, Washington during the second quarter of fiscal 2018. In December 2017, we announced our plan to construct a new processing line in Hermiston, Oregon with a total production capacity of approximately 300 million pounds. We anticipate this new line to be operational in the fourth quarter of fiscal 2019. Additionally, through our Lamb-Weston/Meijer joint venture, we recently expanded capacity in our facility at Bergen op Zoom, the Netherlands. Lamb-Weston/Meijer is participating in a joint venture that is constructing a new production facility in Lipetsk, a special economic zone in south Moscow, the Russian Federation. We expect the Lipetsk plant to be operational in the second half of fiscal 2018. In June 2017, our Lamb-Weston/Meijer joint venture also acquired the potato processing business of Oerlemans Foods, which included a potato processing facility located in Broekhuizenvorst, the Netherlands.

~~Outlook~~

For the remainder of fiscal 2018, we expect the operating environment to be generally favorable given the continued growth in volume demand and high industry manufacturing capacity utilization levels. A number of manufacturers, including Lamb Weston, have announced intentions to add production capacity over the next five years, largely in Europe, North America and China, which is likely to ease the industry’s near-term production constraints. In addition, compared with fiscal 2017, we are experiencing a higher rate of inflation for many of our commodity and input costs, such as packaging and edible oils, as well as for other manufacturing, transportation and warehousing costs. We also have higher interest expense associated with our capital structure after the Separation and higher selling, general and administrative costs as a result of a full year of stand-alone public company costs.

Based on actual yields, processing quality and indications of storability, we consider the potato crop in the Columbia River Basin and Idaho, where the majority of our production capacity resides, that was harvested in the fall of fiscal 2018, to be consistent overall with historical averages.

~~Operating Results~~

We have four reportable segments: Global, Foodservice, Retail, and Other. For each period presented, we report product contribution margin by segment. Product contribution margin is the primary measure reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance. We define product contribution margin as net sales less cost of sales and advertising and promotion expenses. For additional information on our reportable segments, see Note 14, Segments, ~~of the~~ ~~Notes to Combined and Consolidated Financial Statements in the Form 10-K.~~

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~~Thirteen Weeks Ended November 26, 2017 compared to Thirteen Weeks Ended November 27, 2016~~

~~Net Sales and Product Contribution Margin~~

~~(dollars in millions)~~

Thirteen Weeks Ended

Net Sales

Product Contribution Margin


November 26,

November 27,

% Inc

November 26,

November 27,

% Inc

2017

2016

(Dec)

2017

2016

(Dec)
Global

$
416.9

$
412.6

1%

$
88.2

$
92.3

(4%)
Foodservice

272.8


250.6

9%


92.2


80.2

15%
Retail

102.0

96.5

6%

19.4

20.9

(7%)
Other

32.9

31.0

6%

3.9

(0.4)

NM
Total

$
824.6

$
790.7

4%

$
203.7

$
193.0

6%

~~Net Sales~~

~~Lamb Weston’s net sales for the second quarter of fiscal 2018 were $824.6 million, an increase of $33.9 million, or 4%, compared to the second quarter of fiscal 2017.~~

Global net sales increased $4.3 million, or 1%, to $416.9 million, compared with $412.6 million in the second quarter of fiscal 2017. Fiscal 2018 second quarter net sales reflect a 3% increase in price/mix associated with actions to increase prices across the customer base, as well as actions to improve customer and product mix. Volume declined 2 percent, as compared to a 5 percent increase in the prior year quarter. The decline in volume is attributable to our elimination of less-profitable volume in North America and international as well as lower shipments to certain export markets. This was partially offset by increased shipments to strategic customers in the U.S.

Foodservice net sales increased $22.2 million, or 9%, to $272.8 million, compared with $250.6 million in the second quarter of fiscal 2017. Fiscal 2018 second quarter net sales reflect an 8% increase in price/mix, primarily reflecting the favorable carryover effect of pricing actions taken in fiscal 2017, pricing actions implemented in the current year, and improvement in customer and product mix. Additionally, fiscal 2018 second quarter net sales reflect a 1% increase in sales volume, as compared to a 5 percent increase in the prior year quarter, driven by broad-based growth across the segment’s customer base.

Retail net sales increased $5.5 million, or 6%, to $102.0 million, compared with $96.5 million in the second quarter of fiscal 2017. Fiscal 2018 second quarter net sales reflect a 4% increase in price/mix, due to higher prices across the branded and private label portfolio, as well as improved mix, partially offset by higher trade spending in support of ~~Grown in Idaho~~ ~~branded products. Volume increased 2 percent, primarily driven by distribution gains of~~ ~~Grown in Idaho~~ ~~as well as growth of~~ ~~Alexia~~ ~~and other branded products.~~

Net sales in our Other segment increased $1.9 million, or 6%, to $32.9 million, compared with $31.0 million in the second quarter of fiscal 2017. The increase primarily reflects improved pricing and sales mix in our vegetable business.

~~Product Contribution Margin~~

~~Lamb Weston’s product contribution margin for the second quarter of fiscal 2018 was $203.7 million, an increase of $10.7 million, or 6%, compared to the second quarter of fiscal 2017.~~

Global product contribution margin declined $4.1 million, or 4%, to $88.2 million in the second quarter of fiscal 2018. Global cost of sales was $327.7 million, up 3% compared to the second quarter of fiscal 2017, due to commodity, manufacturing, transportation and warehousing cost inflation, as well as higher depreciation expense and start-up costs associated with the new Richland production line, partially offset by lower sales volumes. While favorable price/mix offset product cost inflation, the additional costs related to the new Richland line drove the earnings decline. In addition,

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~~advertising and promotion spending decreased in the second quarter of 2018 as compared to the second quarter of fiscal 2017.~~

Foodservice product contribution margin increased $12.0 million, or 15%, to $92.2 million in the second quarter of fiscal 2018, largely as a result of favorable price/mix. Cost of sales was $179.2 million, or 6% higher than in the second quarter of fiscal 2017, primarily driven by commodity, manufacturing, transportation and warehousing cost inflation; higher depreciation expense and start-up costs associated with the new Richland production line; and an increase in sales volumes. Advertising and promotion spending decreased in the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017.

Retail product contribution margin decreased $1.5 million, or 7%, to $19.4 million, mainly due to higher trade spending as well as commodity, manufacturing, transportation and warehousing cost inflation. Cost of sales was $79.7 million, up 9% compared to the second quarter of fiscal 2017, primarily due to commodity, manufacturing, transportation and warehousing cost inflation, as well as an increase in sales volumes. Advertising and promotion spending increased in the second quarter of fiscal 2018 as compared to the second quarter of fiscal 2017, driven by marketing spend in support of ~~Grown in Idaho~~.

Other product contribution margin was $3.9 million, an increase of $4.3 million as compared to a $0.4 million loss in the second quarter of fiscal 2017. The increase primarily relates to an expense in the prior year related to a recall of some vegetable products that were produced by a third party, as well as improved pricing in the vegetable business.

~~Selling, General and Administrative Expenses~~

~~Selling, general, and administrative expenses decreased $4.0 million, or 5%, to $69.4 million in the second quarter of fiscal 2018 compared with the same period in 2017.~~ The second quarter of fiscal 2018 and fiscal 2017 included $4.0 million and $9.0 million, respectively, of expense for costs related to the Separation. Excluding these costs, selling, general and administrative expenses increased $1.0 million, or 2%, largely due to ~~incremental costs associated with being a stand-alone public company.~~

~~Interest Expense, Net~~

Interest expense, net was $27.4 million for the second quarter of fiscal 2018, an increase of $20.6 million compared with the same period in fiscal 2017. The increase in interest expense, net was the result of the debt incurred in connection with the Separation. For more information, see Note 11~~, Debt and Financing Obligations in the~~ Notes to Condensed Combined and Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this report. For the period prior to the Separation, interest expense was included only for the legal entities that comprised Lamb Weston, and did not include any allocated interest expense from Conagra.

~~Income Taxes~~

Income tax expense for the second quarter of fiscal 2018 and 2017 was $41.5 million and $33.9 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 33% for the second quarter of fiscal 2018 and 27% for the second quarter of fiscal 2017. The lower rate in the second quarter of fiscal 2017 is primarily attributable to an increase in Separation-related costs determined to be deductible, as well as a discrete benefit from fiscal 2016 foreign taxes. The effective tax rate varies from the U.S. federal statutory tax rate of 35% principally due to the impact of U.S. state taxes, the domestic manufacturers’ deduction, foreign taxes and other permanent differences.

~~Equity Method Investment Earnings~~

We conduct meaningful business through unconsolidated joint ventures in the U.S. and Europe and include our share of the earnings based on our economic ownership interest in them. Lamb Weston’s share of earnings from its equity method investments was $12.1 million and $6.2 million for the second quarter of fiscal 2018 and 2017, respectively. These ~~amounts included a $2.7 million unrealized loss related to mark-to-market adjustments associated with currency hedging~~

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contracts in the current quarter, and a $0.7 million gain related to the contracts in the prior year period. Excluding these adjustments, earnings from equity method investments increased $9.3 million, largely due to favorable price/mix in the U.S. and Europe, as well as the benefit of lower raw potato costs in Europe. For more information about our joint ventures, see Note 8, Investments in Joint Ventures, of the Notes to Condensed Combined and Consolidated Financial Statements in “Part, Item 1. Financial Statements” of this report.

~~Twenty-Six Weeks Ended November 26, 2017 compared to Twenty-Six Weeks Ended November 27, 2016~~

~~Net Sales and Product Contribution Margin~~

~~(dollars in millions)~~

Twenty-Six Weeks Ended

Net Sales

Product Contribution Margin


November 26,

November 27,

% Inc

November 26,

November 27,

% Inc

2017

2016

Inc/(Dec)

2017

2016

Inc/(Dec)
Global

$
830.8

$
811.8

2%

$
162.9

$
165.9

(2%)
Foodservice

552.2


510.9

8%


183.1


159.7

15%
Retail

194.0

186.1

4%

35.9

40.5

(11%)
Other

65.1

58.2

12%

15.0

2.8

NM
Total

$
1,642.1

$
1,567.0

5%

$
396.9

$
368.9

8%

~~Net Sales~~

~~Lamb Weston’s net sales for the first half of fiscal 2018 were $1,642.1 million, an increase of $75.1 million, or 5%, compared to the first half of fiscal 2017.~~

Global net sales increased $19.0 million, or 2%, to $830.8 million, compared with $811.8 million in the first half of fiscal 2017. Fiscal 2018 first half net sales reflect a 2% increase in price/mix associated with actions to increase prices across the customer base, as well as actions to improve customer and product mix. Sales volumes were flat, with volume growth in the U.S. largely driven by strategic customers offset by the elimination of less-profitable volume in North America and international as well as lower shipments to certain export markets.

Foodservice net sales increased $41.3 million, or 8%, to $552.2 million, compared with $510.9 million in the first half of fiscal 2017. Fiscal 2018 first half net sales reflect a 7% increase in price/mix, primarily reflecting the favorable carryover effect of pricing actions taken in fiscal 2017, pricing actions implemented in the current year, and improvement in customer and product mix. Additionally, fiscal 2018 first half net sales reflect a 1% increase in sales volume, driven by broad-based growth across the segment’s customer base.

Retail net sales increased $7.9 million, or 4%, to $194.0 million, compared with $186.1 million in the first half of fiscal 2017. Fiscal 2018 first half net sales reflect a 5% increase in sales volume, largely reflecting distribution gains of ~~Grown in Idaho~~ ~~branded products and growth of~~ ~~Alexia~~ ~~branded, other branded and private label products. Price/mix declined 1%, with higher trade spending behind~~ ~~Grown in Idaho, partially offset by higher prices across our branded and private label products.~~

Net sales in our Other segment increased $6.9 million, or 12%, to $65.1 million, compared with $58.2 million in the first half of fiscal 2017. Compared with the first half of fiscal 2017, the increase in net sales primarily reflects improved sales volume and mix in our vegetable business.

~~Product Contribution Margin~~

~~Lamb Weston’s product contribution margin for the first half of fiscal 2018 was $396.9 million, an increase of $28.0 million, or 8%, compared to the first half of fiscal 2017.~~

~~Table of Contents~~

Global product contribution margin decreased $3.0 million, or 2%, to $162.9 million in the first half of fiscal 2018, with higher manufacturing and supply chain costs more than offsetting favorable price/mix. Global cost of sales was $666.2 million, up 4% as compared to the first half of fiscal 2017, primarily driven by inflation on commodity, manufacturing, transportation and warehousing costs, as well as higher depreciation expense and start-up costs associated with the new Richland production line. Advertising and promotion spending decreased in the first half of 2018 as compared to the first half of fiscal 2017.

Foodservice product contribution margin increased $23.4 million, or 15%, to $183.1 million in the first half of fiscal 2018, largely as a result of favorable price/mix. Cost of sales was $366.2 million, or 5% higher than in the first half of fiscal 2017, primarily driven by inflation on commodity, manufacturing, transportation and warehousing costs; higher depreciation expense and start-up costs associated with the new Richland production line; and an increase in sales volumes. Advertising and promotion spending decreased in the first half of fiscal 2018 as compared to the first half of fiscal 2017.

~~Retail product contribution margin decreased $4.6 million, or 11%, to $35.9 million, largely due to higher trade spending in support of distribution gains of~~ ~~Grown in Idaho~~ branded products. Cost of sales was $150.0 million, up 9% as compared to the first half of fiscal 2017, primarily due to commodity, manufacturing transportation and warehousing cost inflation, as well as an increase in sales volumes. Advertising and promotion spending increased modestly in the first half of fiscal 2018 as compared to the first half of fiscal 2017, driven by marketing spend in support of ~~Grown in Idaho~~.

Other product contribution margin increased $12.2 million to $15.0 million. The increase primarily relates to an expense in the prior year related to a recall of some vegetable products that were produced by a third party, a change in mark-to-market adjustments of approximately $4 million associated with commodity contracts, and improved pricing in the vegetable business.

~~Selling, General and Administrative Expenses~~

~~Selling, general, and administrative expenses decreased $0.5 million, or less than 1%, to $128.5 million in the first half of fiscal 2018 compared with the same period in 2017.~~ ~~The first~~ ~~half~~ of fiscal 2018 and fiscal 2017 included $6.2 million and $18.7 million, respectively, of expense for costs related to the Separation. Excluding costs recorded in connection with the Separation, selling, general and administrative expenses increased $12.0 million, or 11%, largely due to ~~incremental costs associated with being a stand-alone public company.~~

~~Interest Expense, Net~~

Interest expense, net was $52.6 million for the first half of fiscal 2018, an increase of $44.3 million compared with the same period in fiscal 2017. The increase in interest expense, net was the result of the debt incurred in connection with the Separation. For more information, see Note 11~~, Debt and Financing Obligations in the~~ Notes to Condensed Combined and Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this report. For the period prior to the Separation, interest expense was included only for the legal entities that comprised Lamb Weston, and did not include any allocated interest expense from Conagra.

~~Income Taxes~~

Income tax expense for the first half of fiscal 2018 and 2017 was $85.6 million and $84.9 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 33% for both the first half of fiscal 2018 and 2017. The effective tax rate varies from the U.S. federal statutory tax rate of 35% principally due to the impact of U.S. state taxes, the domestic manufacturers’ deduction, foreign taxes and other permanent differences.

~~Equity Method Investment Earnings~~

Lamb Weston’s share of earnings from its equity method investments was $32.1 million and $16.8 million for the first half of fiscal 2018 and 2017, respectively. The increase was due to favorable price/mix in the U.S. and Europe, and the benefit of lower raw potato costs in Europe. The year-over-year increase in unrealized gains related to mark-to-

~~Table of Contents~~

market adjustments associated with currency hedging contracts was insignificant. For more information about our joint ventures, see Note 8, Investments in Joint Ventures, of the Notes to Condensed Combined and Consolidated Financial Statements in “Part, Item 1. Financial Statements” of this report.

~~Liquidity and Capital Resources~~

~~Sources and Uses of Cash~~

Our primary sources of liquidity are net cash provided by operating activities and borrowings under our revolving credit facility. At November 26, 2017, we had $71.1 million of cash and cash equivalents, which included $48.7 million and $35.1 million, respectively, of cash at our operations outside the United States, and $436.0 million of available borrowing capacity. Currently, our primary uses of cash are for operations, capital expenditures, dividends on our common stock and debt service. We believe that net cash generated from operating activities, cash on hand, available borrowings under our revolving credit facility, and available capital through access to capital markets will be adequate to meet our liquidity and capital requirements, including payment of any dividends declared for at least the next twelve months.

~~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:~~

Twenty-Six Weeks Ended

November 26,

November 27,


2017

2016


Inc (Dec)
Net cash flows provided by (used for):






Operating activities

$
182.2

$
162.4

$
19.8
Investing activities

(155.7)

(125.8)

(29.9)
Financing activities

(15.9)

(2.8)

(13.1)

10.6

33.8

(23.2)
Effect of exchange rate changes on cash and cash equivalents

3.4


(0.8)


4.2
Net increase (decrease) in cash and cash equivalents

$
14.0

$
33.0

$
(19.0)

~~Operating Activities~~

In the first half of fiscal 2018, cash provided by operating activities increased $19.8 million to $182.2 million, compared with $162.4 million in the same period a year ago. Compared with the first half of fiscal 2017, earnings from operations, adjusted for non-cash income and expense and other items, increased $36.1 million due primarily to favorable price/mix, volume, and an increase in earnings from our equity method investments. Changes in operating assets and liabilities used $16.3 million more cash in the first half of fiscal 2018, compared with 2017. The decrease in cash provided by changes in operating assets and liabilities was driven primarily by the timing of payments for accrued expenses relating to employee compensation and interest in fiscal 2018, as well as the build-up of raw product and finished goods inventories, largely due to the start-up of the Richland french fry production line. These cash outflows were offset partially by the timing of payments for accounts payable.

~~Investing Activities~~

Investing activities used $155.7 million of cash in the first half of fiscal 2018, compared with $125.8 million in the same period in the prior year. The increase related primarily to our plant capacity expansions at our Boardman, Oregon and Richland, Washington facilities in fiscal 2018, compared with fiscal 2017. Cash used for capital expenditures is expected to be approximately $250 million for fiscal 2018, an increase of $25 million versus our previous estimate of $225 million. This increase primarily relates to costs associated with the initial phase of construction of a new production line at our Hermiston, Oregon facility announced on December 21, 2017.

~~Table of Contents~~

~~Financing Activities~~

During the first half of fiscal 2018, cash used for financing activities totaled $15.9 million, compared with cash used for financing activities of $2.8 million during the same period a year ago. During the first half of fiscal 2018, financing activities primarily related to the payment of $54.8 million to stockholders for dividends and $19.3 million of debt payments, primarily under our term loan facility, offset partially by $66.1 million of short-term borrowings.

During the first half of fiscal 2017, cash used for financing activities primarily related to the Separation. In fiscal 2017, we issued $2,341.0 million of debt in connection with the Separation, of which $1,542.9 million of proceeds were distributed directly to Conagra (including $25.4 million that Conagra used to pay debt issuance costs) and are considered a noncash financing activity for Lamb Weston. We received $798.1 million of cash proceeds from the debt issuance. We used the $798.1 million of proceeds, together with borrowings on the revolving credit facility, to fund an $823.5 million cash payment to Conagra on the Separation Date. At November 27, 2016, we had $80.0 million of borrowings outstanding under the revolving credit facility. We paid $9.6 million of debt issuance costs and accrued another $2.3 million in our Condensed Combined and Consolidated Balance Sheet at November 27, 2016. Cash distributions to noncontrolling interests were $5.6 million in the first half of fiscal 2017, and we made $3.4 million of debt repayments.

For more information about our debt, interest rates, maturity dates, and covenants, see Note 11, Debt and Financing Obligations of the Notes to Condensed Combined and Consolidated Financial Statements in “Part I., Item 1. Financial Statements” of this report. At November 26, 2017, we were in compliance with the financial covenant ratios and other covenants contained in our credit agreement.

~~Obligations and Commitments~~

~~There have been no material changes to the contractual obligations disclosed in “Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Form 10-K.~~

~~Reconciliations of Non-GAAP Financial Measures to Reported Amounts~~

~~To supplement the financial information included in this report, we have presented Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures, each of which is considered a~~ non-GAAP financial ~~measure. The non-GAAP financial~~ measures ~~provided~~ should be viewed in addition to, and not as ~~an alternative~~alternatives for, financial measures prepared in accordance with GAAP. These measures are not a substitute for their comparable GAAP financial measures, such as gross profit, income from operations, net income, or diluted earnings per share, and there are limitations to using non-GAAP financial measures. These non-GAAP financial measures 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. ~~These measures are not~~

See “Results of Operations – Thirteen Weeks Ended November 27, 2022 compared to Thirteen Weeks Ended November 28, 2021 – Net Sales, Gross Profit, and Product Contribution Margin” and “Results of Operations – Twenty-Six Weeks Ended November 27, 2022 compared to Twenty-Six Weeks Ended November 28, 2021 – Net Sales, Gross Profit, and Product Contribution Margin” above for a ~~substitute for their comparable GAAP financial measure, such as net income (loss), and there are limitations~~reconciliation of product contribution margin on a consolidated basis to ~~using non-GAAP financial measures.~~ gross profit.

3430

Table of Contents

The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ~~ventures~~. ventures:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 27,		November 28,		November 27,		November 28,
(in millions)	2022		2021		2022		2021
Net income	$	103.1	$	32.5	$	335.0	$	62.3
Equity method investment loss (earnings)		107.3		(10.1)		(67.3)		(16.3)
Interest expense, net		24.6		82.4		50.6		110.3
Income tax expense		36.8		9.6		110.5		18.3
Income from operations		271.8		114.4		428.8		174.6
Depreciation and amortization		51.2		46.2		99.9		92.2
Adjusted EBITDA		323.0		160.6		528.7		266.8

Unconsolidated Joint Ventures
Equity method investment earnings (loss)		(107.3)		10.1		67.3		16.3
Interest expense, income tax expense, and depreciation and
amortization included in equity method investment earnings		8.6		10.2		17.6		21.2
Items impacting comparability
Impact of LWM natural gas and electricity derivatives (a)		136.8		(6.3)		(9.5)		(11.3)
LWM acquisition-related items, net (b)		(26.5)		—		(26.5)		—
Gain on acquisition of interest in joint venture (c)		—		—		(15.1)		—
Add: Adjusted EBITDA from unconsolidated joint ventures		11.6		14.0		33.8		26.2

Adjusted EBITDA including unconsolidated joint ventures	$	334.6	$	174.6	$	562.5	$	293.0

Thirteen Weeks Ended

Twenty-Six Weeks Ended

November 26,

November 27,

November 26,

November 27,


2017

2016

2017

2016
Net income attributable to Lamb Weston Holdings, Inc.

$
76.6

$
87.2

$
160.0

$
166.8
Income attributable to noncontrolling interests

6.4

3.8

11.3

7.3
Equity method investment earnings

(12.1)

(6.2)

(32.1)

(16.8)
Interest expense, net

27.4

6.8

52.6

8.3
Income tax expense

41.5

33.9

85.6

84.9
Income from operations

139.8

125.5

277.4

250.5
Depreciation and amortization

34.5

26.4

64.3

51.8
Items impacting comparability (a)

Expenses related to the Separation

4.0

9.0

6.2

18.7
Adjusted EBITDA (b)

178.3

160.9

347.9

321.0

Unconsolidated Joint Ventures

—

Equity method investment earnings

12.1

6.2

32.1

16.8
Interest expense, income tax expense, and depreciation and amortization

—

included in equity method investment earnings

5.9

5.7

13.6

11.2
Add: EBITDA from unconsolidated joint ventures

18.0

11.9

45.7

28.0

Consolidated Joint Ventures

Income attributable to noncontrolling interests

(6.4)

(3.8)

(11.3)

(7.3)
Interest expense, income tax expense, and depreciation and amortization

included in income attributable to noncontrolling interests

(1.0)

(0.9)

(2.0)

(1.8)
Subtract: EBITDA from consolidated joint ventures

(7.4)

(4.7)

(13.3)

(9.1)

Adjusted EBITDA including unconsolidated joint ventures

$
188.9

$
168.1

$
380.3

$
339.9

(a)

~~(a)~~

~~The~~Equity method investment earnings (loss) for the thirteen ~~weeks and twenty six weeks ended November 26, 2017, include $4.0 million and $6.2 million, respectively, of pre-tax expenses related to the Separation. The thirteen weeks and twenty six~~ weeks ended November 27, ~~2016, include $9.0~~2022 and November 28, 2021 included a $136.8 million unrealized loss ($101.5 million after-tax, or $0.70 per share) and a $6.3 million unrealized gain ($4.7 million after-tax, or $0.03 per share), respectively; and for the twenty-six weeks ended November 27, 2022 and November 28, 2021, included unrealized gains of $9.5 million ($7.0 million after-tax, or $0.05 per share) and $11.3 million ($8.4 million after-tax, or $0.06 per share), respectively, related to mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility.

(b)

Income from operations for the thirteen and twenty-six weeks ended November 27, 2022 included a net $26.5 million gain ($19.2 million after-tax, or $0.13 per share) related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM, net of other acquisition-related costs.

(c)

Equity method investment earnings for the twenty-six weeks ended November 27, 2022 included a $15.1 million gain (before and after-tax, or $0.10 per share) recognized in connection with our acquisition of an additional 40% interest in our Argentina joint venture, increasing our ownership from 50% to 90%. The gain related to the remeasuring of our previously held 50% ownership interest to fair value.

Table of Contents

The following tables reconcile income from operations to Adjusted Income from Operations, net income to Adjusted Net Income, and diluted EPS to Adjusted Diluted EPS:


	For the Thirteen Weeks Ended
	November 27,		November 28,		November 27,		November 28,		November 27,		November 28,
	2022		2021		2022		2021		2022 (a)		2021 (a)
(in millions, except per share amounts)	Income from Operations				Net Income				Diluted EPS
As reported	$	271.8	$	114.4	$	103.1	$	32.5	$	0.71	$	0.22
Items impacting comparability:
Impact of LWM natural gas and electricity derivatives (b)		—		—		101.5		(4.7)		0.70		(0.03)
LWM acquisition-related items, net (c)		(26.5)		—		(19.2)		—		(0.13)		—
Loss on extinguishment of debt (e)		—		—		—		40.5		—		0.28
Total items impacting comparability		(26.5)		—		82.3		35.8		0.57		0.25
Adjusted	$	245.3	$	114.4	$	185.4	$	68.3	$	1.28	$	0.47


	For the Twenty-six Weeks Ended
	November 27,		November 28,		November 27,		November 28,		November 27,		November 28,
	2022		2021		2022		2021		2022 (a)		2021 (a)
(in millions, except per share amounts)	Income from Operations				Net Income				Diluted EPS
As reported	$	428.8	$	174.6	$	335.0	$	62.3	$	2.32	$	0.42
Items impacting comparability:
Impact of LWM natural gas and electricity derivatives (b)		—		—		(7.0)		(8.4)		(0.05)		(0.06)
LWM acquisition-related items, net (c)		(26.5)		—		(19.2)		—		(0.13)		—
Gain on acquisition of interest in joint venture (d)		—		—		(15.1)		—		(0.10)		—
Loss on extinguishment of debt (e)		—		—		—		40.5		—		0.28
Total items impacting comparability		(26.5)		—		(41.3)		32.1		(0.28)		0.22
Adjusted	$	402.3	$	174.6	$	293.7	$	94.4	$	2.04	$	0.64

(a)

Diluted weighted average common shares were 144.6 million and ~~$18.7~~146.3 million for the thirteen weeks ended November 27, 2022 and November 28, 2021, respectively, ~~of Separation-related expenses. In all periods,~~and 144.6 million and 146.6 million for the ~~expenses related primarily to professional fees~~twenty-six weeks ended November 27, 2022 and ~~other employee-related costs.~~

November 28, 2021, respectively.

(b)

~~(b)~~

See footnote (a) to the reconciliation of net income to Adjusted EBITDA ~~includes~~and Adjusted EBITDA ~~from consolidated~~ including unconsolidated joint ventures.

above for a discussion of the item impacting comparability.

(c)	See footnote (b) to the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures above for a discussion of the item impacting comparability.

(d)

See footnote (c) to the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures above for a discussion of the item impacting comparability. There was no tax on the gain associated with purchasing an additional 40% interest in our Argentina joint venture.

(e)

The thirteen and twenty-six weeks ended November 28, 2021, include a loss on the extinguishment of debt of $53.3 million ($40.5 million after-tax), which consists of an aggregate redemption premium of $39.6 million related to the redemption of the 2024 Notes and 2026 Notes and the write-off of $13.7 million of debt issuance costs associated with those notes.

Off-Balance Sheet Arrangements

There have been no material changes to the off-balance sheet arrangements disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Form 10-K.

Table of Contents

Critical Accounting Policies and Estimates

A discussion of our critical accounting policies and estimates can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Form 10-K. There were no material changes to these critical accounting policies and estimates during the first half of fiscal ~~2018.~~ 2023.

New and Recently Adopted Accounting ~~Standards~~Pronouncements

There were no accounting pronouncements recently issued that had or are expected to have a material impact on our consolidated financial statements. For a ~~listing~~list of our new and recently adopted accounting ~~standards,~~pronouncements, see Note 1, Nature of Operations and Summary of Significant Accounting Policies, of the Notes to ~~Condensed Combined and~~ Consolidated Financial Statements in “Part I,II, Item 1.8. Financial ~~Statements” of this report.~~Statements and Supplementary Data” included in the Form 10-K.

~~Table of Contents~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Lamb Weston’s~~Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, foreign currency exchange rates, and interest rates. In the normal course of business, we may periodically enter into ~~derivatives~~derivative contracts to ~~minimize~~mitigate these risks, but not for trading purposes. The disruptions in the global economy caused by the war in Ukraine have resulted in volatility and uncertainty in the markets in which we operate. At the time of this filing, we are unable to predict or determine the impacts that these events may continue to have on our exposure to market risk from commodity prices, foreign currency exchange rates, and interest rates, among other factors. For more information, refer to “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in the Form 10-K.

Commodity Price Risk

Based on our open commodity contract hedge positions as of November ~~26, 2017,~~27, 2022, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of ~~approximately $3.2~~$5.4 million ($~~2.0~~4.1 million ~~net~~after-tax). Additionally, based on our LWM joint venture’s open commodity contract hedge positions as of ~~income tax benefit)~~November 27, 2022, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Equity method investment earnings (loss)” of $8.5 million ($6.3 million after-tax). ~~It should be noted that any~~Any change in the fair value of ~~the~~these contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item.

Foreign Currency Exchange Rate Risk

Substantially all of our revenue is transacted in U.S. dollars. However, a portion of our operating expenditures and capital purchases are incurred in other currencies, including the Chinese yuan, and our joint ventures outside the U.S. transact in euros and Argentine pesos. 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 percent adverse change in exchange rates versus the U.S. dollar would result in losses of $41.8 million ($31.7 million after-tax) and $6.5 million ($5.0 million after-tax) as of November 27, 2022 and May 29, 2022, respectively. The increased hypothetical risk from May 29, 2022 is primarily related to actions taken to mitigate the effect of changes in currency rates on the pending purchase of the remaining ownership interest in LWM discussed in “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.

Interest Rate Risk

At November ~~26, 2017,~~27, 2022, we had ~~$1,688.1~~$2,170.0 million of fixed-rate and ~~$744.6~~$588.0 million of variable-rate debt outstanding. We have interest rate risk associated with our variable-rate debt. A one percent increase in interest rates related to variable-rate debt would have resulted in an increase in interest expense and a corresponding decrease in income before taxes of ~~approximately $7.5~~$6.0 million ~~annually.~~annually ($4.6 million after-tax) at November 27, 2022.

~~See~~33

Table of Contents

For more information about our market risks, see Note ~~14, Derivative Financial Instruments, and Note 11,~~9, Debt and Financing Obligations, of the Condensed Notes to ~~Condensed Combined and~~ Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this report. Additionally, for more information on our debt and financing obligations, interest rates, and debt covenants, see Note 9, Debt and Financing Obligations, of the Notes to Combined and Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

~~Disclosure~~Inherent Limitations on Effectiveness of Controls ~~and Procedures~~

~~The Company's~~Our management, ~~carried out an evaluation, with the participation of the Company's~~including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of ~~the Company's~~our disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of November ~~26, 2017.~~27, 2022. Based ~~upon~~on that evaluation, ~~the~~our Chief Executive Officer and Chief Financial Officer, concluded that, as of the end of the period covered by this report, ~~the Company's~~our disclosure controls and procedures were ~~effective.~~effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

~~The Company's~~Our management, with the participation of ~~the Company's~~our Chief Executive Officer and Chief Financial Officer, evaluated any change in ~~the Company's~~our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter covered by this report and determined that there was no change in our internal control over financial reporting during the quarter ~~covered by this report~~ended November 27, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

Part II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note ~~17,~~14, Commitments, Contingencies, Guarantees and Legal Proceedings, of the Condensed Notes to ~~Condensed Combined and~~ Consolidated Financial Statements in “Part I, Item 1. Financial Statements” of this report for information regarding our legal proceedings.

ITEM 1A. RISK FACTORS

We are subject to various risks and uncertainties in the course of our business. The discussion of these risks and uncertainties may be found under ~~“Risk~~“Part I, Item 1A. Risk Factors” in the Form 10-K. There have been no material changes to the risk ~~factors.~~factors discussed in the Form 10-K.

~~Table of Contents~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~The following table presents information related to our repurchases~~Total shares of Lamb Weston common stock ~~made~~purchased by the Company during the thirteen weeks ended November 26~~, 2017:~~27, 2022 were as follows:


							Approximate Dollar
					Total Number of		Value of Maximum
	Total Number		Average		Shares (or Units)		Number of Shares that
	of Shares (or		Price Paid		Purchased as Part of		May Yet be Purchased
	Units)		Per Share		Publicly Announced		Under Plans or Programs
Period	Purchased (a)		(or Unit)		Plans or Programs (b)		(in millions) (b)
August 29, 2022 through September 25, 2022		275	$	78.23		—	$	240.6
September 26, 2022 through October 23, 2022		665	$	83.24		—	$	240.6
October 24, 2022 through November 27, 2022		3,346	$	81.84		—	$	240.6
Total		4,286

Total Number of

Approximate Dollar

Total Number

Average

Shares

Value of Maximum

of Shares (or

Price Paid

Purchased as Part of

Number of Shares that

units)

per Share

Publicly Announced

May Yet be Purchased
Period

Purchased (a)

(or unit)

Plans or Programs

Under the Program
August 28, 2017 through September 24, 2017

—

—

—

—
September 25, 2017 through October 22, 2017

1,616

50.00

—

—
October 23, 2017 through November 26, 2017

483

50.72

—

—
Total

2,099

$
50.17

—

—

(a)

~~(a)~~

Represents shares withheld from employees to cover income and payroll taxes on equity awards that vested during the period.

(b)

On December 20, 2018, we announced that our Board of Directors had authorized a $250.0 million share repurchase program, with no expiration date. On December 17, 2021, we announced that our Board of Directors had authorized the repurchase of an additional $250.0 million of our common stock under this program, bringing the total amount authorized under the program to $500.0 million of our common stock. Repurchases under the program may be made at our discretion from time to time on the open market, subject to applicable laws, including pursuant to a repurchase plan administered in accordance with Rule 10b5-1 under the Exchange Act, or through privately negotiated transactions.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3735

Table of Contents

ITEM 6. EXHIBITS

Exhibit Number		Exhibit Description

2.1		Sale and Purchase Agreement, by and among Lamb Weston Holdings, Inc., Lamb Weston Holland B.V., Meijer Beheer B.V. and Mr. Kees Meijer, dated as of October 19, 2022, incorporated by reference to Exhibit 2.1 of Lamb Weston Holdings, Inc.’s Current Report on Form 8-K/A filed on October 21, 2022 (File No. 001-37830)*

10.1		Amendment No. 2, dated as of December 1, 2017, to Credit Agreement, dated as of November 9, 2016, among Lamb Weston Holdings, Inc., the guarantors party thereto, the lenders named therein, and Bank of America, N.A., as administrative agent

~~10.2~~		~~Amended and Restated Lamb Weston Holdings, Inc. 2016 Stock Plan~~*

~~10.3~~		Form of Lamb Weston Holdings, Inc. ~~Restricted~~Nonqualified Stock ~~Unit~~Option Agreement for Non-Employee Directors ~~(post-September 2017)~~*

~~10.4~~		~~Form of Lamb Weston Holdings, Inc. Performance Share Agreement~~*

31.1		Section 302 Certificate of Chief Executive Officer

31.2		Section 302 Certificate of Chief Financial Officer

32.1		Section 906 Certificate of Chief Executive Officer

32.2		Section 906 Certificate of Chief Financial Officer

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
~~101.1~~
101.SCH		~~The following materials from Lamb Weston Holdings, Inc.’s Quarterly Report on Form 10-Q for~~XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*)

* Certain portions of this exhibit have been redacted pursuant to Regulation S-K, Item 601(a)(6). This exhibit excludes certain immaterial schedules and exhibits pursuant to the ~~quarter ended November 26, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i)~~provisions of Regulation S-K, Item 601(a)(5). A copy of any of the ~~Condensed Combined~~omitted information, schedules and ~~Consolidated Statements of Earnings, (ii)~~exhibits pursuant to Regulation S-K, Item 601(a)(5) and Item 601(a)(6) will be furnished to the ~~Condensed Combined~~Securities and Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Combined and Consolidated Statements of Cash Flows, (v) Notes to Condensed Combined and Consolidated Financial Statements, and (vi) document and entity information.Exchange Commission upon request.

* Management contract or compensatory plan.

3836

Table of Contents

SIGNATURE

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LAMB WESTON HOLDINGS, INC.

	By:	/s/ ~~ROBERT~~BERNADETTE M. ~~MCNUTT~~MADARIETA
		~~ROBERT~~BERNADETTE M. ~~MCNUTT~~MADARIETA
		Senior Vice President and Chief Financial Officer
		(Principal Financial Officer)



Dated this ~~4th~~5th day of January, ~~2018.~~2023.

3937


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 26,		November 27,		November 26,		November 27,
	2017		2016		2017		2016
Net sales	$	824.6	$	790.7	$	1,642.1	$	1,567.0
Cost of sales		615.4		591.8		1,236.2		1,187.5
Gross profit		209.2		198.9		405.9		379.5
Selling, general and administrative expenses		69.4		73.4		128.5		129.0
Income from operations		139.8		125.5		277.4		250.5
Interest expense, net		27.4		6.8		52.6		8.3
Income before income taxes and equity method earnings		112.4		118.7		224.8		242.2
Income tax expense		41.5		33.9		85.6		84.9
Equity method investment earnings		12.1		6.2		32.1		16.8
Net income		83.0		91.0		171.3		174.1
Less: Income attributable to noncontrolling interests		6.4		3.8		11.3		7.3
Net income attributable to Lamb Weston Holdings, Inc.	$	76.6	$	87.2	$	160.0	$	166.8
Earnings per share
Basic	$	0.52	$	0.59	$	1.08	$	1.14
Diluted	$	0.52	$	0.59	$	1.08	$	1.13
Dividends declared per common share	$	0.1875	$	—	$	0.3750	$	—


	Thirteen Weeks Ended						Thirteen Weeks Ended
	November 26, 2017						November 27, 2016
			Tax						Tax
	Pre-Tax		(Expense)		After-Tax		Pre-Tax		(Expense)		After-Tax
	Amount		Benefit		Amount		Amount		Benefit		Amount
Net income	$	124.5	$	(41.5)	$	83.0	$	124.9	$	(33.9)	$	91.0
Other comprehensive income (loss):
Unrealized currency translation gains (losses)		(0.4)		—		(0.4)		(11.9)		—		(11.9)
Comprehensive income (loss)		124.1		(41.5)		82.6		113.0		(33.9)		79.1
Less: Comprehensive income attributable to noncontrolling interests		6.4		—		6.4		3.8		—		3.8
Comprehensive income (loss) attributable to Lamb Weston	$	117.7	$	(41.5)	$	76.2	$	109.2	$	(33.9)	$	75.3


	November 26, 2017					May 28, 2017
	Weighted					Weighted
	Average	Gross				Average	Gross
	Useful Life	Carrying		Accumulated		Useful Life	Carrying		Accumulated
	(in years)	Amount		Amortization		(in years)	Amount		Amortization
Non-amortizing intangible assets (a)	n/a	$	18.0	$	—	n/a	$	18.0	$	—
Amortizing intangible assets (b)	14		35.0		16.7	14		34.9		15.7
		$	53.0	$	16.7		$	52.9	$	15.7


			Weighted-		Weighted-
			Average		Average		Aggregate
			Exercise		Remaining		Intrinsic
			Price		Contractual		Value (a)
	Shares		(per share)		Term (Years)		(in millions)
Outstanding at May 28, 2017		720,827		25.90
Granted		56,496		43.82
Exercised		(39,887)		18.71
Forfeited/cancelled		—		—
Outstanding at November 26, 2017		737,436	$	27.66		7.3	$	19.7

Exercisable at November 26, 2017		486,394	$	24.20		6.6	$	14.7


	Stock-Settled				Cash-Settled				Performance Shares
			Weighted-				Weighted-				Weighted-
			Average				Average				Average
			Grant-				Grant-				Grant-
			Date Fair				Date Fair				Date Fair
	Shares		Value		Shares		Value		Shares		Value
Outstanding at May 28, 2017		489,604	$	26.92		462,612	$	25.33		57,690	$	25.84
Granted (a)		276,369		44.34		—		—		124,341		43.83
Performance condition adjustment (b)		—		—		—		—		(818)		19.70
Vested (c)		(119,913)		20.99		(169,335)		19.76		(15,228)		19.70
Forfeited/expired/cancelled		(456)		43.82		(3,198)		27.75		—		—
Outstanding at November 26, 2017		645,604	$	35.47		290,079	$	28.55		165,985	$	39.91


			Remaining
			Weighted
	Unrecognized		Average
	Compensation		Recognition
	Expense		Period (in years)
Stock options	$	0.6		1.3
Stock-settled RSUs		14.8		2.4
Cash-settled RSUs		5.6		1.3
Performance shares		8.8		2.5
Total unrecognized stock-based compensation expense	$	29.8		2.2


	As of November 26, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Deferred compensation assets	$	0.6	$	—	$	—	$	0.6
Pension plan assets (a)		—		3.9		—		3.9
Derivative assets (b)		—		0.6		—		0.6
Total assets		0.6		4.5		—		5.1
Liabilities:
Deferred compensation liabilities (c)		—		11.3		—		11.3
Total liabilities	$	—	$	11.3	$	—	$	11.3


	As of May 28, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Pension plan assets (d)	$	4.5	$	—	$	—	$	4.5
Deferred compensation assets		0.6		—		—		0.6
Total assets		5.1		—		—		5.1
Liabilities:
Derivative liabilities (b)		—		2.4		—		2.4
Deferred compensation liabilities (c)		—		8.8		—		8.8
Total liabilities	$	—	$	11.2	$	—	$	11.2


	November 26, 2017
					Net Amounts
	Gross Amounts		Gross Amounts Offset		Presented in the
Derivative subject to master netting arrangements	Recognized		in the Balance Sheet		Balance Sheet
Assets:
Commodity contracts	$	1.1	$	0.5	$	0.6
Prepaid expenses and other current assets	$	1.1	$	0.5	$	0.6


		Amount of Loss Recognized on
		Derivatives in Condensed Combined
		and Consolidated Statement of Earnings
	Location in Condensed Combined and	for the Thirteen Weeks Ended
Derivatives Not Designated as Hedging	Consolidated Statement of Earnings of Loss	November 26,		November 27,
Instruments	Recognized on Derivatives	2017		2016
Commodity contracts	Cost of sales	$	(0.7)	$	(0.5)
Foreign exchange contracts	Selling, general and administrative expenses		—		(0.1)
Total loss from derivative instruments not designed as hedging instruments		$	(0.7)	$	(0.6)


		Amount of Gain (Loss) Recognized on
		Derivatives in Condensed Combined
		and Consolidated Statement of Earnings
	Location in Condensed Combined and	for the Twenty-Six Weeks Ended
Derivatives Not Designated as Hedging	Consolidated Statement of Earnings of Gain	November 26,		November 27,
Instruments	(Loss) Recognized on Derivatives	2017		2016
Commodity contracts	Cost of sales	$	2.5	$	(0.1)
Foreign exchange contracts	Selling, general and administrative expenses		—		(0.1)
Total gain (loss) from derivative instruments not designed as hedging instruments		$	2.5	$	(0.2)


	Foreign
	Currency		Pension and
	Translation		Post-Retirement
	Gains (Losses)		Benefits		Total
Balance as of May 28, 2017	$	(10.3)	$	1.0	$	(9.3)
Other comprehensive income before reclassifications, net of tax		14.8		—		14.8
Amounts reclassified out of AOCI, net of tax		—		(0.1)		(0.1)
Net current-period other comprehensive income		14.8		(0.1)		14.7
Balance as of November 26, 2017	$	4.5	$	0.9	$	5.4


	Thirteen Weeks Ended
	Net Sales					Product Contribution Margin
	November 26,		November 27,		% Inc	November 26,		November 27,		% Inc
	2017		2016		(Dec)	2017		2016		(Dec)
Global	$	416.9	$	412.6	1%	$	88.2	$	92.3	(4%)
Foodservice		272.8		250.6	9%		92.2		80.2	15%
Retail		102.0		96.5	6%		19.4		20.9	(7%)
Other		32.9		31.0	6%		3.9		(0.4)	NM
Total	$	824.6	$	790.7	4%	$	203.7	$	193.0	6%


					Total Number of		Approximate Dollar
	Total Number		Average		Shares		Value of Maximum
	of Shares (or		Price Paid		Purchased as Part of		Number of Shares that
	units)		per Share		Publicly Announced		May Yet be Purchased
Period	Purchased (a)		(or unit)		Plans or Programs		Under the Program
August 28, 2017 through September 24, 2017		—		—		—		—
September 25, 2017 through October 22, 2017		1,616		50.00		—		—
October 23, 2017 through November 26, 2017		483		50.72		—		—
Total		2,099	$	50.17		—		—