| NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
| May 28, 2017 |
| NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Presentation and Principles of Combination and Consolidation | Basis of Presentation and Principles of Combination and Consolidation
These Combined and Consolidated Financial Statements present the financial results of Lamb Weston for the fiscal years ended May 28, 2017, May 29, 2016, and May 31, 2015 (“fiscal 2017, 2016, and 2015”), and have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The fiscal year end of Lamb Weston ends the last Sunday in May. The fiscal years for the Combined and Consolidated Financial Statements presented consist of a 52-week period for fiscal 2017 and 2016, and a 53-week period for fiscal 2015.
The financial statements include all adjustments (consisting only of normal recurring adjustments) that management considers necessary for a fair presentation of such financial statements. The preparation of financial statements involves the use of estimates and accruals. Actual results may vary from those estimates.
Prior to Separation
Prior to the Separation from Conagra on November 9, 2016 (“Separation Date”), the combined financial statements of Lamb Weston were prepared using the specific accounting records of the entities within Conagra that comprised the business of Lamb Weston. In some cases, principally foreign locations, those business activities were contained within entities that were engaged in other business activities of Conagra. Because a direct ownership relationship did not exist among the various units comprising Lamb Weston, Conagra and its subsidiaries’ equity investment is shown in lieu of stockholders’ equity in the combined financial statements. Intercompany investments, accounts, and transactions between the various legal entities comprising the Lamb Weston business have been eliminated.
Prior to the Separation Date, Lamb Weston’s combined financial statements included accounts specifically attributed to Lamb Weston and a portion of Conagra’s shared corporate general and administrative expenses. These shared services included, but were not limited to, legal, finance, internal audit, financial reporting, income tax accounting and advisory, insurance, information technology, treasury, and human resources functions. Shared corporate general and administrative expenses not specifically identifiable to the Lamb Weston business were allocated to Lamb Weston. The allocations were determined on a basis that we consider were reasonable reflections of the utilization of services provided by Conagra. However, these allocations may not reflect the costs and expenses that Lamb Weston would have incurred as a stand-alone public company. A more detailed discussion of the relationship with Conagra, including a description of the costs which have been allocated to Lamb Weston and the methods of cost allocation, is included in Note 3, Related Party Transactions.
As further described in Note 3, prior to the Separation Date, Lamb Weston engaged in various intercompany transactions with Conagra and its affiliates, including the sale and purchase of certain products, the procurement of certain materials and services, cash transfers related to Conagra’s centralized cash management process and expense allocations. As Conagra did not settle intercompany transactions with its businesses on a routine basis, all amounts due to (from) Conagra are classified as “Parent companies’ invested equity” in the Combined and Consolidated Balance Sheet . Changes in parent companies’ equity investment arising from cash transactions are presented as “Net transfers (to) from Conagra” in financing activities in the accompanying Combined and Consolidated Statements of Cash Flows, notwithstanding that advances from Conagra were utilized to fund Lamb Weston’s working capital requirements.
After Separation
Subsequent to the Separation Date, our consolidated financial statements include the accounts of Lamb Weston and all of its majority-owned subsidiaries. In addition, the accounts of all variable interest entities for which we are the primary beneficiary are included in our Combined and Consolidated Financial Statements from the date such determination was made. Intercompany investments, accounts, and transactions have been eliminated.
Certain amounts in the prior period Combined and Consolidated Financial Statements and Notes to Combined and Consolidated Financial Statements have been reclassified to conform with the current period presentation. To conform with the current year presentation, we reclassified the amount associated with the redeemable noncontrolling interest in Lamb Weston BSW, LLC from “Other noncurrent liabilities” to “Redeemable noncontrolling interest” on the May 29, 2016 Combined and Consolidated Balance Sheet. For additional information, see Note 6, Investments in Joint Ventures. |
| Use of Estimates | Use of Estimates
The preparation of the combined and consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, including allocations from Conagra. On an ongoing basis, we evaluate our estimates, including but not limited to those related to provisions for income taxes, estimates of sales incentives and trade promotion allowances, and the valuation of goodwill and intangible assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the consolidated financial statements in future periods. |
| Revenue Recognition | Revenue Recognition
Revenue is recognized when title and risk of loss are transferred to customers upon delivery based on terms of sale and collectibility is reasonably assured. Revenue is recognized as the net amount to be received after deducting estimated amounts for discounts, trade allowances, and returns of damaged and out-of-date products. |
| Shipping and Handling | Shipping and Handling
Shipping and handling costs, such as freight to our customers’ destinations, are included in “Cost of sales” in the Combined and Consolidated Statements of Earnings. When shipping and handling costs are included in the sales price charged for our products, they are recognized in “Net sales”. |
| Sales Incentives and Trade Promotion Allowances | Sales Incentives and Trade Promotion Allowances
We promote our products with advertising, consumer incentives, and trade promotions. Sales promotions include, but are not limited to, discounts, coupons, rebates, and volume-based incentives. The estimates for sales incentives are based principally on historical sales and coupon utilization and redemption rates, influenced by judgments about current market conditions such as competitive activity in specific product categories.
Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions, and other activities conducted by our customers to promote our products. The cost of these programs are recognized as a reduction to revenue with a corresponding accrued liability based on estimates made at the time of shipment or coupon release. Estimates of trade promotion liabilities for promotional program costs incurred, but unpaid, are generally based on estimates of the quantity of customer sales, timing of promotional activities, current and past trade-promotion spending patterns, the interpretation of historical spending trends by customer and category, and forecasted costs for activities within the promotional programs. Estimates made by management in accounting for these costs are based primarily on our historical experience with marketing programs, with consideration given to current circumstances and industry trends.
The determination of sales incentive and trade promotion costs requires judgment and may change in the future as a result of changes in customer promotion participation, particularly for new programs related to the introduction of new products. Final determination of the total cost of promotion is dependent upon customers providing information about proof of performance and other information related to the promotional event. |
| Advertising and Promotion | Advertising and Promotion
Advertising and promotion expenses totaled $22.6 million, $25.6 million, and $19.4 million in fiscal 2017, 2016, and 2015, respectively, and are included in selling, general and administrative expenses. |
| Research and Development | Research and Development
Research and development costs are expensed as incurred and totaled $10.6 million, $6.7 million, and $7.2 million in fiscal 2017, 2016, and 2015, respectively. |
| Stock-Based Payments | Stock-Based Payments
Compensation expense resulting from all stock-based compensation transactions are measured and recorded in the combined and consolidated financial statements based on the grant date fair value of the equity or liability instruments issued. Compensation expense is recognized over the period the employee provides service in exchange for the award. |
| Cash and Cash Equivalents | Cash and Cash Equivalents
Cash and all highly liquid investments with an original maturity of three months or less at the date of acquisition, including short-term time deposits and government agency and corporate obligations, are classified as cash and cash equivalents. Book overdraft balances are classified in “Accounts payable” in our Combined and Consolidated Balance Sheets and are reported as a component of operating cash flows for accounts payable in our Combined and Consolidated Statements of Cash Flows as they do not represent bank overdrafts. Cash equivalents are stated at cost, which approximates market. Cash equivalents totaled $57.1 million and $36.4 million at May 28, 2017 and May 29, 2016, respectively. At May 28, 2017 and May 29, 2016, we had $35.1 million and $33.6 million, respectively, of cash at our operations outside the United States. |
| Trade Accounts Receivable and Allowance for Doubtful Accounts | Trade Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are stated at the amount we expect to collect based on our past experience, as well as reliance on the Perishable Agricultural Commodities Act, which was enacted to help promote fair trade in the fruit and vegetable industry by establishing a code of fair business practices. The collectability of our accounts receivable is based upon a combination of factors. In circumstances where a specific customer is unable to meet its financial obligations (e.g., bankruptcy filings, substantial downgrading of credit sources), a specific reserve for bad debts is recorded against amounts due to the Company to reduce the net recorded receivable to the amount that we reasonably believe will be collected. For all other customers, reserves for bad debts are recognized based on historical collection experience. If collection experience deteriorates, the estimate of the recoverability of amounts due could be reduced. We periodically review our allowance for doubtful accounts and adjustments to the valuation allowance are recorded as income or expense. Trade accounts receivable balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At both May 28, 2017 and May 29, 2016, the allowance for doubtful accounts was $0.5 million. |
| Inventories | Inventories
Inventories are valued at the lower of cost (determined using the first-in, first-out method) or market and include all costs directly associated with manufacturing products: materials, labor, and manufacturing overhead.
The components of inventories were as follows: (dollars in millions):
May 28,
May 29,
2017
2016
Raw materials and packaging
$
84.5
$
86.2
Finished goods
409.7
384.3
Supplies and other
30.8
28.4
Inventories
$
525.0
$
498.9 |
| Property, Plant and Equipment | Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Cost includes expenditures for major improvements and replacements and the amount of interest cost associated with significant capital additions. The amount of interest capitalized from construction in progress was $5.2 million, $2.7 million, and $1.5 million in fiscal 2017, 2016, and 2015, respectively. Repairs and maintenance costs are expensed as incurred.
The components of property, plant and equipment were as follows (dollars in millions):
May 28,
May 29,
2017
2016
Land and land improvements
$
139.8
$
136.5
Buildings, machinery, and equipment
1,917.7
1,776.1
Furniture, fixtures, office equipment, and other
62.6
53.1
Construction in progress
229.4
68.5
Property, plant and equipment, at cost
2,349.5
2,034.2
Less accumulated depreciation
(1,078.3)
(991.1)
Property, plant and equipment, net
$
1,271.2
$
1,043.1
Depreciation is computed on the straight-line method over the estimated useful lives of the respective classes of assets as follows:
Land improvements
1-40 years
Buildings
15-40 years
Machinery and equipment
3-20 years
Furniture, fixtures, office equipment, and other
5-15 years
We recorded $104.3 million, $93.9 million, and $93.8 million of depreciation expense in fiscal 2017, 2016, and 2015, respectively. At May 28, 2017 and May 29, 2016, purchases of property, plant and equipment included in accounts payable were $60.4 million and $15.5 million, respectively. |
| Long-Lived Asset Impairment | Long-Lived Asset Impairment
We review long-lived assets for impairment upon the occurrence of events or changes in circumstances which indicate that the carrying amount of the assets may not be fully recoverable, measured by comparing their net book value to the undiscounted projected future cash flows generated by their use. Impaired assets are recorded at their estimated fair value. |
| Goodwill and Other Identifiable Intangible Assets | Goodwill and Other Identifiable Intangible Assets
We capitalize certain intangible assets, primarily goodwill, customer relationships, and brands and trademarks, based on their estimated fair value at the date of acquisition. Amortization is provided for customer relationships, licensing arrangements, and intellectual property on a straight-line basis over periods ranging from one to 16 years. Amortization for land rights are over 44 years.
Goodwill and other identifiable intangible assets with indefinite lives (e.g., brands or trademarks) are not amortized. We test for impairment annually in the fourth quarter or sooner if events or changes in circumstances indicate the carrying amount of the asset may be impaired. Additionally, we evaluate the remaining useful lives of our finite-lived purchased intangible assets to determine whether any adjustments to the useful lives are necessary. We concluded that none of the goodwill or intangible assets were impaired in the fiscal 2017, 2016, and 2015 annual impairment tests. See Note 5, Goodwill and Other Identifiable Intangible Assets, for additional information. |
| Fair Values of Financial Instruments | Fair Values of Financial Instruments
Unless otherwise specified, Lamb Weston believes the carrying value of financial instruments approximates their fair value. See Note 11, Fair Value Measurements, for additional information. |
| Foreign Currency | Foreign Currency
Most of our foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates. Revenues, costs, and expenses are translated into U.S. dollars using daily exchange rates. Gains and losses resulting from the translation of our combined and consolidated balance sheets are recorded as a component of accumulated other comprehensive income.
Foreign currency transactions resulted in losses of $2.7 million and $2.6 million in fiscal 2017 and 2016, respectively, and a gain of $0.6 million in fiscal 2015. These amounts were recorded in “Selling, general and administrative expenses” in the Combined and Consolidated Statements of Earnings. |
| Income Taxes | Income Taxes
We recognize current tax liabilities and assets based on an estimate of taxes payable or refundable in the current year for each of the jurisdictions in which we transact business. As part of the determination of our current tax liability, management exercises considerable judgment in evaluating positions taken in the tax returns. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
We also recognize deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences (e.g., the difference in book basis versus tax basis of fixed assets resulting from differing depreciation methods). If appropriate, we recognize valuation allowances to reduce deferred tax assets to amounts that are more likely than not to be ultimately realized, based on our assessment of estimated future taxable income, including the consideration of available tax planning strategies. |
| New and Recently Issued Accounting Standards | New and Recently Issued Accounting Standards
Accounting Standards Adopted
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting , which simplified the accounting for income taxes, among other changes, related to stock based compensation. Conagra (and therefore Lamb Weston) early adopted ASU 2016-09 in the first quarter of fiscal 2017, with an effective date of May 30, 2016. The adoption did not have a material impact on our financial statements.
In November 2015, the FASB issued ASU 2015-17 Balance Sheet Classification of Deferred Taxes . This ASU requires entities to present all deferred tax assets and liabilities as noncurrent. Conagra (and therefore Lamb Weston) early adopted ASU 2015-17 effective May 30, 2016, and we have reflected our deferred tax assets and liabilities as noncurrent in our Combined and Consolidated Balance Sheets.
In April 2015, the FASB issued ASU 2015-03 (Topic 835): Simplifying the Presentation of Debt Issuance Costs . This ASU conforms the presentation of debt issuance costs with that required for debt discounts under U.S. GAAP. Under the ASU, debt issuance costs are presented in the balance sheet as a direct deduction from the related liability rather than as an asset. We applied this guidance retrospectively, as required. No reclassifications of balances at May 29, 2016, were necessary with the adoption of ASU 2015-03. See Note 9, Debt and Financing Obligations, for more information.
Accounting Standards Not Yet Adopted
In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . This ASU requires employers to disaggregate the service cost component from the other components of net benefit cost and report it in the same line item(s) as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. These components will not be eligible for capitalization in assets. Employers are also required to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. It is effective for fiscal years beginning after December 15, 2017 . We will adopt this standard at the beginning of fiscal 2019 and do not expect it to have a material impact on our financial statements.
In January 2017, the FASB issued Accounting Standards Update ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment . This ASU is intended to simplify the accounting for goodwill impairment by removing the requirement to perform a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which the reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. This new standard will be applied prospectively and is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted after January 1, 2017. We do not expect this guidance to have a material impact on our financial statements.
In August 2016, the FASB issued Accounting Standards Update ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . This ASU adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. It is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted. We do not expect this guidance to have a material impact on our financial statements.
In February 2016, the FASB issued FASB Accounting Standard Codification (“ASC”) Topic 842, Leases , which requires lessees to reflect most leases on their balance sheet as assets and obligations. The effective date for the standard is for fiscal years beginning after December 15, 2018. Early adoption is permitted. The standard is to be applied under the modified retrospective method, with elective reliefs, which requires application of the new guidance for all periods presented. We expect the adoption will result in a material increase in the assets and liabilities on our consolidated balance sheets due to the recognition of right-of-use assets and lease liabilities principally for certain leases currently accounted for as operating leases. We are continuing to evaluate the magnitude and other potential impacts of the standard on our financial statements and notes to the financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which was issued to achieve a consistent application of revenue recognition within the United States, resulting in a single revenue model to be applied by reporting companies under U.S. GAAP. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue, and cash flows arising from contracts with customers. We have established a transition team to analyze the impact of the standard on our revenue contracts by reviewing our current accounting policies and practices and identifying potential differences that would result from applying the requirements of the new standard. We expect to finalize our assessment and determine our adoption method by December 31, 2017. The new standard becomes effective for our fiscal year beginning May 28, 2018. We do not plan to early adopt.
There were no other accounting standards recently issued that had or are expected to have a material impact on our financial statements . |
