Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Aug. 27, 2017 | Sep. 29, 2017 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Lamb Weston Holdings, Inc. | |
Entity Central Index Key | 1,679,273 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 27, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --05-27 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 146,196,958 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 |
Condensed Combined and Consolid
Condensed Combined and Consolidated Statements of Earnings - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Condensed Combined and Consolidated Statements of Earnings | ||
Net sales | $ 817.5 | $ 776.3 |
Cost of sales | 620.8 | 595.7 |
Gross profit | 196.7 | 180.6 |
Selling, general and administrative expenses | 59.1 | 55.6 |
Income from operations | 137.6 | 125 |
Interest expense, net | 25.2 | 1.5 |
Income before income taxes and equity method earnings | 112.4 | 123.5 |
Income tax expense | 44.1 | 51 |
Equity method investment earnings | 20 | 10.6 |
Net income | 88.3 | 83.1 |
Less: Income attributable to noncontrolling interests | 4.9 | 3.5 |
Net income attributable to Lamb Weston Holdings, Inc. | $ 83.4 | $ 79.6 |
Earnings per share | ||
Basic (in dollars per share) | $ 0.56 | $ 0.54 |
Diluted (in dollars per share) | 0.56 | $ 0.54 |
Dividends declared per common share (in dollars per share) | $ 0.1875 |
Condensed Combined and Consoli3
Condensed Combined and Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Other comprehensive income (loss) Pre- Tax Amount : | ||
Net income | $ 132.4 | $ 134.1 |
Unrealized currency translation gains (losses) | 15.2 | (1.1) |
Comprehensive income (loss) | 147.6 | 133 |
Less: Comprehensive income attributable to noncontrolling interests | 4.9 | 3.5 |
Comprehensive income (loss) attributable to Lamb Weston | 142.7 | 129.5 |
Other comprehensive income (loss) Tax (Expense) Benefit : | ||
Net income | (44.1) | (51) |
Comprehensive income (loss) | (44.1) | (51) |
Comprehensive income (loss) attributable to Lamb Weston | (44.1) | (51) |
Other comprehensive income (loss) After Tax Amount : | ||
Net income | 88.3 | 83.1 |
Unrealized currency translation gains (losses) | 15.2 | (1.1) |
Comprehensive income (loss) | 103.5 | 82 |
Less: Comprehensive income attributable to noncontrolling interests | 4.9 | 3.5 |
Comprehensive income (loss) attributable to Lamb Weston | $ 98.6 | $ 78.5 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 69.8 | $ 57.1 |
Receivables, less allowance for doubtful accounts of $0.5 and $0.5 | 213.7 | 185.2 |
Inventories | 494.4 | 525 |
Prepaid expenses and other current assets | 60.5 | 90.9 |
Total current assets | 838.4 | 858.2 |
Property, plant and equipment, net | 1,309.5 | 1,271.2 |
Goodwill | 134.1 | 133 |
Intangible assets, net | 36.8 | 37.2 |
Equity method investments | 196 | 178.6 |
Other assets | 13 | 7.4 |
Total assets | 2,527.8 | 2,485.6 |
Current liabilities: | ||
Short-term borrowings | 32.3 | 22 |
Current portion of long-term debt and financing obligations | 39.1 | 37.9 |
Accounts payable | 261.6 | 295 |
Accrued liabilities | 183.9 | 200.5 |
Total current liabilities | 516.9 | 555.4 |
Long-term liabilities: | ||
Long-term debt, excluding current portion | 2,360.1 | 2,365 |
Deferred income taxes | 102 | 90.5 |
Other noncurrent liabilities | 70.4 | 71.2 |
Total long-term liabilities | 2,532.5 | 2,526.7 |
Commitments and contingencies | ||
Redeemable noncontrolling interest | 54.1 | 50.7 |
Stockholders' equity: | ||
Common stock of $1.00 par value, 600,000,000 shares authorized; 146,244,550 and 146,080,901shares issued | 146.2 | 146.1 |
Additional distributed capital | (902.6) | (904.8) |
Retained earnings | 176.9 | 121 |
Accumulated other comprehensive income (loss) | 5.9 | (9.3) |
Treasury stock, at cost, 47,592 and 6,143 common shares | (2.1) | (0.2) |
Total stockholders' equity (deficit) | (575.7) | (647.2) |
Total liabilities and stockholders’ equity | $ 2,527.8 | $ 2,485.6 |
Condensed Combined and Consoli5
Condensed Combined and Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Receivables | ||
Allowance for doubtful accounts | $ 0.5 | $ 0.5 |
Common stock | ||
Common stock, par value | $ 1 | $ 1 |
Common stock, authorized shares | 600,000,000 | 600,000,000 |
Common stock, issued issued | 146,244,550 | 146,080,901 |
Treasury stock | ||
Treasury stock, common shares | 47,592 | 6,143 |
Condensed Combined and Consoli6
Condensed Combined and Consolidated Statements of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Cash flows from operating activities | ||
Net income | $ 88.3 | $ 83.1 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization of intangibles and debt issuance costs | 31 | 25.5 |
Stock-based compensation expense | 3.5 | 2.7 |
Earnings of joint ventures in excess of distributions | (7.1) | (2.2) |
Deferred income taxes | 11.5 | 5.1 |
Other | (7.8) | (3.7) |
Changes in operating assets and liabilities, net of acquisitions: | ||
Receivables | (28.5) | (24) |
Inventories | 30.7 | 24.6 |
Income taxes payable/receivable, net | 3.4 | |
Prepaid expenses and other current assets | 26.8 | 20.7 |
Accounts payable | 12.9 | 15.7 |
Accrued liabilities | (21.2) | (32.5) |
Net cash provided by operating activities | 143.5 | 115 |
Cash flows from investing activities | ||
Additions to property, plant and equipment | (104.4) | (59.3) |
Proceeds from sale of assets | 1 | |
Net cash used for investing activities | (104.4) | (58.3) |
Cash flows from financing activities | ||
Proceeds (repayments) of short-term borrowings, net | 10.2 | (0.4) |
Debt repayments | (9.9) | (0.6) |
Net transfers to Conagra | (17.9) | |
Dividends paid | (27.4) | |
Cash distributions paid to noncontrolling interest | (2.3) | (2.5) |
Other | (1.1) | |
Net cash used for financing activities | (30.5) | (21.4) |
Effect of exchange rate changes on cash and cash equivalents | 4.1 | 0.7 |
Net increase in cash and cash equivalents | 12.7 | 36 |
Cash and cash equivalents, beginning of the period | 57.1 | 36.4 |
Cash and cash equivalents, end of period | $ 69.8 | $ 72.4 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Aug. 27, 2017 | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Lamb Weston Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Lamb Weston”), along with its joint venture partners, is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho. We have four reportable segments: Global, Foodservice, Retail, and Other. See Note 16, Segments, for additional information on our reportable segments. 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”). Each Conagra stockholder of record on November 1, 2016 (“record date”) received one share of Lamb Weston common stock for every three shares of Conagra common stock held on the record date. As a result, approximately 146 million shares of Lamb Weston common stock were distributed on November 9, 2016, to Conagra stockholders. Information related to the Separation and its effect on our financial statements are discussed throughout these Notes to Condensed Combined and Consolidated Financial Statements. Basis of Presentation The unaudited quarterly Condensed Combined and Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen week periods ended August 27, 2017 and August 28, 2016, and have been prepared in accordance with generally accepted accounting principles in the United States of America. The financial statements are unaudited but 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. Results for interim periods should not be considered indicative of results for our full fiscal year, which ends the last Sunday in May. In addition, the financial statements for periods prior to the Separation may not reflect what our results of operations would have been had we operated as a separate stand-alone company and may not be indicative of our future results of operations. These quarterly financial statements and notes should be read together with the combined and consolidated financial statements and notes 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 Securities and Exchange Commission (“SEC”) on July 25, 2017. 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 financial statements have been reclassified to conform with the current period presentation. Prior to Separation Prior to the Separation from Conagra on November 9, 2016 (the “Separation Date”), the combined financial statements were prepared using the specific accounting records of the entities which comprise 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 Lamb Weston 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 Lamb Weston were allocated to Lamb Weston. The allocations were determined on a basis which we consider being 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. Changes in parent companies’ equity investment arising from these cash transactions are presented as “Net transfers to Conagra” in financing activities in the Condensed Combined and Consolidated Statements of Cash Flows as of August 28, 2016, notwithstanding that advances from parent companies were utilized to fund Lamb Weston’s working capital requirements. New and Recently Issued Accounting Standards 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. This ASU is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. 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 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 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. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Aug. 27, 2017 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 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): Thirteen Weeks Ended August 27, August 28, 2017 2016 Numerator: Net income attributable to Lamb Weston Holdings, Inc. $ 83.4 $ 79.6 Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated 0.8 0.5 Net income available to Lamb Weston common stockholders $ 82.6 $ 79.1 Denominator (a): Basic weighted average common shares outstanding 146.2 146.1 Add: Dilutive effect of employee incentive plans (b) 0.6 — Diluted weighted average common shares outstanding 146.8 146.1 Earnings per share Basic $ 0.56 $ 0.54 Diluted $ 0.56 $ 0.54 (a) Earnings per share for the thirteen weeks ended August 28, 2016 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 dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards. As of August 27, 2017, we did not have any stock-based awards that were antidilutive. Lamb Weston had no share-based awards outstanding prior to the Separation. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Aug. 27, 2017 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 3. RELATED PARTY TRANSACTIONS Prior to the Separation, our business was included in the Commercial Foods segment of Conagra and thus 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 August 27, 2017, include $1.3 million of expenses related to the transition services agreement. The transition services agreement expires in March 2018. Information included in the remainder of this Note 3 with respect to Conagra is limited to our related party transactions with Conagra prior to the Separation Date. 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, etc.). Allocations based upon these metrics resulted in $4.3 million for the thirteen weeks ended August 28, 2016, 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 $8.9 million for the thirteen weeks ended August 28, 2016 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. The Condensed Combined and Consolidated Statements of Earnings for the period up to the Separation Date for the thirteen weeks ended August 28, 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 $25.2 million and $1.5 million for the thirteen weeks ended August 27, 2017 and August 28, 2016, respectively. Included in net sales are sales to Conagra of $4.4 million for the thirteen weeks ended August 28, 2016. The related cost of sales were $3.7 million for the thirteen weeks ended August 28, 2016. Lamb Weston also made purchases from Conagra of $5.3 million during the thirteen weeks ended August 28, 2016. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Aug. 27, 2017 | |
INCOME TAXES | |
INCOME TAXES | 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 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. 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 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 ended on or prior to November 9, 2016. Income tax expense for the thirteen weeks ended August 27, 2017 and August 28, 2016, was $44.1 million and $51.0 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% and 38% for the thirteen weeks ended August 27, 2017 and August 28, 2016, respectively, in our Condensed Combined and Consolidated Statements of Earnings. The higher rate in the thirteen weeks ended August 28, 2016, is primarily attributable to costs previously determined to be non-deductible. 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. 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. Income taxes paid, net of refunds, were $30.0 million and $46.6 million in the thirteen weeks ended August 27, 2017 and August 28, 2016, respectively. |
INVENTORIES
INVENTORIES | 3 Months Ended |
Aug. 27, 2017 | |
INVENTORIES | |
INVENTORIES | 5. 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): August 27, May 28, 2017 2017 Raw materials and packaging $ 50.0 $ 84.5 Finished goods 414.0 409.7 Supplies and other 30.4 30.8 Inventories $ 494.4 $ 525.0 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 3 Months Ended |
Aug. 27, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | 6. PROPERTY, PLANT AND EQUIPMENT The components of property, plant, and equipment were as follows (dollars in millions): August 27, May 28, 2017 2017 Land and land improvements $ 138.6 $ 139.8 Buildings, machinery, and equipment 2,134.6 1,917.7 Furniture, fixtures, office equipment, and other 62.9 62.6 Construction in progress 67.9 229.4 Property, plant and equipment, at cost 2,404.0 2,349.5 Less accumulated depreciation (1,094.5) (1,078.3) Property, plant and equipment, net $ 1,309.5 $ 1,271.2 Depreciation expense was $29.3 million and $24.7 million for the thirteen weeks ended August 27, 2017 and August 28, 2016, respectively. At August 27, 2017 and May 28, 2017, purchases of property, plant and equipment included in accounts payable were $14.1 million and $60.4 million, respectively. The amounts of interest capitalized in construction in progress for the thirteen weeks ended August 27, 2017 and August 28, 2016, were $2.3 million and $0.7 million, respectively. |
GOODWILL AND OTHER IDENTIFIABLE
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | 3 Months Ended |
Aug. 27, 2017 | |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | 7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS Changes in the carrying amount of goodwill were as follows (dollars in millions): Global Foodservice Retail Other Total Balance at May 28, 2017 $ 74.8 $ 42.8 $ 10.9 $ 4.5 $ 133.0 Foreign currency translation adjustment 1.1 — — — 1.1 Balance at August 27, 2017 $ 75.9 $ 42.8 $ 10.9 $ 4.5 $ 134.1 Other identifiable intangible assets were as follows (dollars in millions): August 27, 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 16.2 14 34.9 15.7 $ 53.0 $ 16.2 $ 52.9 $ 15.7 (a) Non-amortizing intangible assets are comprised of brands and trademarks. (b) Amortizing intangible assets are principally composed of customer relationships, licensing arrangements, and intellectual property. During the thirteen weeks ended August 27, 2017 and August 28, 2016, amortization expense was $0.5 million and $0.7 million, respectively. Total intangible assets, net of amortization, excluding goodwill, as of August 27, 2017 and May 28, 2017, were $36.8 million and $37.2 million, respectively. Foreign intangible assets are affected by foreign currency translation. |
INVESTMENTS IN JOINT VENTURES
INVESTMENTS IN JOINT VENTURES | 3 Months Ended |
Aug. 27, 2017 | |
INVESTMENTS IN JOINT VENTURES | |
INVESTMENTS IN JOINT VENTURES | 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 any of 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 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 $16.8 million and $24.2 million for the thirteen weeks ended August 27, 2017 and August 28, 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 $1.3 million and $1.2 million for the thirteen weeks ended August 27, 2017 and August 28, 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 redemption value as reported in our Condensed Consolidated Balance Sheets (dollars in millions): August 27, May 28, 2017 2017 Cash and equivalents $ 11.9 $ 10.9 Receivables, less allowance for doubtful accounts (a) 0.2 0.1 Inventories 1.7 1.9 Prepaid expenses and other current assets 0.2 0.4 Property, plant and equipment, net 48.8 49.4 Goodwill 18.8 18.8 Intangible assets, net 4.3 4.5 Total assets $ 85.9 $ 86.0 Current portion of long-term debt $ 1.6 $ 1.5 Accounts payable 14.6 11.6 Accrued liabilities 1.6 2.0 Long-term debt, excluding current portion 27.2 28.0 Total liabilities $ 45.0 $ 43.1 Redeemable noncontrolling interest (b) $ 54.1 $ 50.7 (a) As of August 27, 2017 and May 28, 2017, affiliate receivables of $31.0 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 August 27, 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 $3.5 million for both the thirteen weeks ended August 27, 2017 and August 28, 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 $17.8 million and $17.2 million at August 27, 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 $35.6 million and $34.4 million as of August 27, 2017 and May 28, 2017, respectively; and term borrowings from banks of $42.3 million and $59.3 million as of August 27, 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. Other Investments We also 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 August 27, 2017 and May 28, 2017, was $196.0 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 August 27, 2017 and August 28, 2016, we had sales and payments to our equity method investments of $5.0 million and $1.0 million, respectively, and $7.4 million and $3.1 million, respectively. Total dividends from our equity method investments were $12.9 million and $8.3 million for the thirteen weeks ended August 27, 2017 and August 28, 2016, respectively. |
EMPLOYEE BENEFIT PLANS AND OTHE
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS | 3 Months Ended |
Aug. 27, 2017 | |
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS | |
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS | 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 and postretirement benefit plans were as follows (dollars in millions): Thirteen Weeks Ended August 27, 2017 Postretirement Pension Plan Plans Service cost $ 1.9 $ — Interest cost 0.1 — Expected return on plan assets (0.1) — Net periodic benefit cost $ 1.9 $ — 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 August 27, August 28, 2017 2016 Cost of sales (a) $ 1.9 $ 2.9 Selling, general and administrative expenses (a) — (2.7) Total $ 1.9 $ 0.2 (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. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended |
Aug. 27, 2017 | |
ACCRUED LIABILITIES | |
ACCRUED LIABILITIES | 10. ACCRUED LIABILITIES The components of accrued liabilities were as follows (dollars in millions): August 27, May 28, 2017 2017 Compensation and benefits $ 45.3 $ 80.1 Accrued trade promotions 42.4 40.5 Dividends payable 27.4 27.4 Accrued interest 29.5 10.2 Franchise, property, and sales and use taxes 11.4 9.8 Income taxes payable 4.6 4.7 Other 23.3 27.8 Accrued liabilities $ 183.9 $ 200.5 |
DEBT AND FINANCING OBLIGATIONS
DEBT AND FINANCING OBLIGATIONS | 3 Months Ended |
Aug. 27, 2017 | |
DEBT AND FINANCING OBLIGATIONS | |
DEBT AND FINANCING OBLIGATIONS | 11. DEBT AND FINANCING OBLIGATIONS At August 27, 2017 and May 28, 2017, our debt, including financing obligations was as follows (dollars in millions): August 27, May 28, 2017 2017 Short-term borrowings: Revolving credit facility $ 8.9 $ 4.5 Other credit facilities 23.4 17.5 32.3 22.0 Long-term debt: Term loan facility, due 2021 658.1 666.6 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 2,352.9 2,362.1 Financing obligations: 4.35% lease financing obligation due May 2030 67.9 68.2 2.00% to 3.40% lease financing obligations due on various dates through 2040 12.4 7.7 80.3 75.9 Total debt and financing obligations 2,465.5 2,460.0 Debt issuance costs (34.0) (35.1) Short-term borrowings (32.3) (22.0) Current portion of long-term debt and financing obligations (39.1) (37.9) Long-term debt, excluding current portion $ 2,360.1 $ 2,365.0 At August 27, 2017, we had $8.9 million of borrowings outstanding under our Revolving Credit Facility (the “Facility”). At August 27, 2017, we had $489.3 million of availability under the Facility, which is net of outstanding letters of credit of $1.8 million. For the period from May 29, 2017 through August 27, 2017, borrowings under our the Facility ranged from $0.0 million to a high of $47.5 million and the weighted average interest rate for our outstanding borrowings under the Facility was 3.7%. For the thirteen weeks ended August 27, 2017, we paid $6.1 million of interest on debt. 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. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Aug. 27, 2017 | |
STOCK-BASED COMPENSATION | |
STOCK-BASED COMPENSATION | 12. STOCK-BASED COMPENSATION On October 29, 2016, 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 of stock options, cash, and stock-settled restricted stock units (“RSUs”), restricted stock awards, other awards based on our common stock, and performance-based long-term incentive awards (“Performance shares”). At August 27, 2017, we had 10.0 million shares authorized under the Stock Plan, and 7.9 million shares were available for future grant. The weighted average Black-Scholes assumptions for stock options granted during the thirteen-weeks ended August 27, 2017 were: Expected volatility (%) (a) 23.27 Dividend yield (%) 1.71 Risk-free interest rate (%) 1.51 Expected life of stock option (years) 4.4 (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. The following table summarizes stock option activity for the thirteen weeks ended August 27, 2017: 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 56,497 43.82 Exercised (33,345) 18.53 Forfeited/cancelled — — Outstanding at August 27, 2017 743,979 $ 27.59 7.5 $ 13.0 Exercisable at August 27, 2017 397,795 $ 21.96 6.2 $ 9.2 (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 first quarter, or August 25, 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 thirteen weeks ended August 27, 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) 250,283 43.83 — — 171 45.99 Performance condition adjustment (b) — — — — (818) 19.70 Vested (c) (113,738) 20.60 (168,233) 19.69 (15,228) 19.70 Forfeited/expired/cancelled — — (2,370) 27.03 — — Outstanding at August 27, 2017 626,149 $ 34.83 292,009 $ 28.56 41,815 $ 28.28 (a) Granted represents new grants and dividend equivalents accrued. (b) Amount represents additional Performance Shares earned during the thirteen weeks ended August 27, 2017 based on the performance condition adjustment. (c) The aggregate fair value of awards that vested during the thirteen weeks ended August 27, 2017 was $13.0 million, which represents the market value of our common stock on the date that the RSUs and Performance Shares vested. The number of RSUs 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 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 awards recognized in the Condensed Combined and Consolidated Statements of Earnings, net of forfeitures, was as follows (dollars in millions): Thirteen Weeks Ended August 27, August 28, 2017 2016 Stock options $ 0.6 $ 0.1 Stock-settled RSUs 1.9 0.8 Cash-settled RSUs (a) 0.9 1.5 Performance shares 0.1 0.3 Total compensation expense 3.5 2.7 Income tax benefit (b) (1.3) (1.0) Total compensation expense, net of tax benefit $ 2.2 $ 1.7 (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. Based on estimates at August 27, 2017, total unrecognized compensation expense related to share-based payments was as follows (dollars in millions): Remaining Weighted Unrecognized Average Compensation Recognition Expense Period (in years) Stock options $ 1.1 1.6 Stock-settled RSUs 16.1 2.5 Cash-settled RSUs 5.7 1.6 Performance shares 0.8 1.4 Total unrecognized stock-based compensation expense $ 23.7 2.2 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Aug. 27, 2017 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 13. FAIR VALUE MEASUREMENTS For more information about our fair value policies, methods 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 11, Fair Value Measurements, of the Notes to Combined and Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K. 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 August 27, 2017 and May 28, 2017 (dollars in millions): As of August 27, 2017 Level 1 Level 2 Level 3 Total Assets: Pension plan assets (a) $ 4.0 $ — $ — $ 4.0 Deferred compensation assets 0.6 — — 0.6 Derivative assets (b) — 1.4 — 1.4 Total assets 4.6 1.4 — 6.0 Liabilities: Derivative liabilities (b) — 0.1 — 0.1 Deferred compensation liabilities (c) — 10.3 — 10.3 Total liabilities $ — $ 10.4 $ — $ 10.4 As of May 28, 2017 Level 1 Level 2 Level 3 Total Assets: Pension plan assets (a) $ 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) The fair values of our Level 1 pension plan assets were determined using unadjusted quoted prices in active markets for identical assets. (b) The fair values of our Level 2 derivative 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 and liabilities included in Level 2 primarily represent commodity swap and option contracts. (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. 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 August 27, 2017, we had $1,688.1 million of fixed-rate and $697.1 million of variable-rate debt outstanding. Based on current market rates, the fair value of our fixed-rate debt at August 27, 2017 was estimated to be $1,742.3 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. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended |
Aug. 27, 2017 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | 14. DERIVATIVE FINANCIAL INSTRUMENTS 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 the 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 August 27, 2017 and May 28, 2017 (dollars in millions) in our Condensed Consolidated Balance Sheets : August 27, 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 $ 2.2 $ 0.8 $ 1.4 Prepaid expenses and other current assets $ 2.2 $ 0.8 $ 1.4 Liabilities: Commodity contracts $ 0.1 $ — $ 0.1 Accrued liabilities $ 0.1 $ — $ 0.1 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 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 Gain 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 Gain August 27, August 28, Instruments Recognized on Derivatives 2017 2016 Commodity contracts Cost of sales $ 3.2 $ 0.5 Total gains from derivative instruments not designed as hedging instruments $ 3.2 $ 0.5 Presentation of Derivative Gains (Losses) in our Segment Results Our derivatives are recognized at fair market value with realized and unrealized gains and losses recognized in cost of sales of our Other segment. The gains and losses are subsequently recognized in cost of sales 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 August 27, August 28, 2017 2016 Net derivative gains (losses) incurred $ 3.2 $ 0.5 Less: Net derivative losses allocated to reportable segments (0.3) 0.2 Net derivative gains (losses) recognized in our Other segment $ 3.5 $ 0.3 Open Commodity Contracts As of August 27, 2017, our open commodity contracts had a gross notional value (defined as notional quantity times market value per notional quantity unit) of $49.2 million and $51.5 million 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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Aug. 27, 2017 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 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 146,244,550 shares of common stock issued and outstanding as of August 27, 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 August 27, 2017. Dividends On July 20, 2017, our Board of Directors declared a dividend of $0.1875 per share of common stock. The dividend of $27.4 million was paid on September 1, 2017 to stockholders of record as of the close of business on August 4, 2017. On September 28, 2017, our Board of Directors declared a dividend of $0.1875 per share of common stock. The dividend will be paid on December 1, 2017 to stockholders of record as of the close of business on November 3, 2017. Accumulated Other Comprehensive 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. 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 15.2 — 15.2 Amounts reclassified out of AOCI, net of tax — — — Net current-period other comprehensive income 15.2 — 15.2 Balance as of August 27, 2017 $ 4.9 $ 1.0 $ 5.9 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). |
SEGMENTS
SEGMENTS | 3 Months Ended |
Aug. 27, 2017 | |
SEGMENTS | |
SEGMENTS | 16. SEGMENTS We have four operating segments, each of which is a reportable segment: Global, Retail, Foodservice 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 August 27, August 28, (in millions) 2017 2016 Net sales: Global $ 413.9 $ 399.2 Foodservice 279.4 260.2 Retail 92.0 89.6 Other 32.2 27.3 Total net sales 817.5 776.3 Product contribution margin (a): Global 74.7 73.7 Foodservice 90.9 79.4 Retail 16.5 19.6 Other 11.2 3.2 Total product contribution margin 193.3 175.9 Equity method investment earnings 20.0 10.6 Total product contribution margin plus equity method investment earnings 213.3 186.5 Other selling, general and administrative expenses (a) (b) 55.7 50.9 Interest expense, net 25.2 1.5 Income tax expense 44.1 51.0 Net income 88.3 83.1 Less: Income attributable to noncontrolling interests 4.9 3.5 Net income attributable to Lamb Weston Holdings, Inc. $ 83.4 $ 79.6 (a) Product contribution margin is defined as net sales, less cost of sales and advertising and promotion expenses. Other selling, general and administrative expenses include all selling, general and administrative expenses other than advertising and promotions expenses. (b) The thirteen weeks ended August 27, 2017 and August 28, 2016, include $2 . 2 million and $9.7 million, respectively, of pre-tax expenses related to the Separation. In all periods, the expenses related primarily to professional fees and other employee-related costs. Assets by Segment The manufacturing assets 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 in our Condensed Combined and Consolidated Statements of Earnings. |
COMMITMENTS, CONTINGENCIES, GUA
COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS | 3 Months Ended |
Aug. 27, 2017 | |
COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS | |
COMMITMENTS, CONTINGENCIES, GUARANTEES AND LEGAL PROCEEDINGS | 17. 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 (discussed below). Guarantees and Indemnifications We provide guarantees, indemnifications, and other assurances to third parties in the normal course of our business. There have been no material changes to the guarantees and indemnifications, disclosed in Note 15, 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. Legal Proceedings 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. |
NATURE OF OPERATIONS AND SUMM24
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Aug. 27, 2017 | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The unaudited quarterly Condensed Combined and Consolidated Financial Statements present the financial results of Lamb Weston for the thirteen week periods ended August 27, 2017 and August 28, 2016, and have been prepared in accordance with generally accepted accounting principles in the United States of America. The financial statements are unaudited but 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. Results for interim periods should not be considered indicative of results for our full fiscal year, which ends the last Sunday in May. In addition, the financial statements for periods prior to the Separation may not reflect what our results of operations would have been had we operated as a separate stand-alone company and may not be indicative of our future results of operations. These quarterly financial statements and notes should be read together with the combined and consolidated financial statements and notes 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 Securities and Exchange Commission (“SEC”) on July 25, 2017. 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 financial statements have been reclassified to conform with the current period presentation. |
New and Recently Issued Accounting Standards | New and Recently Issued Accounting Standards 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. This ASU is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. 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 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 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. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted earnings per common | The following table sets forth the computation of basic and diluted earnings per common share for the periods presented (dollars and shares in millions): Thirteen Weeks Ended August 27, August 28, 2017 2016 Numerator: Net income attributable to Lamb Weston Holdings, Inc. $ 83.4 $ 79.6 Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated 0.8 0.5 Net income available to Lamb Weston common stockholders $ 82.6 $ 79.1 Denominator (a): Basic weighted average common shares outstanding 146.2 146.1 Add: Dilutive effect of employee incentive plans (b) 0.6 — Diluted weighted average common shares outstanding 146.8 146.1 Earnings per share Basic $ 0.56 $ 0.54 Diluted $ 0.56 $ 0.54 (a) Earnings per share for the thirteen weeks ended August 28, 2016 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 dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards. As of August 27, 2017, we did not have any stock-based awards that were antidilutive. Lamb Weston had no share-based awards outstanding prior to the Separation. |
INVENTORIES (Tables)
INVENTORIES (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
INVENTORIES | |
Schedule of major classes of inventories | The components of inventories were as follows (dollars in millions): August 27, May 28, 2017 2017 Raw materials and packaging $ 50.0 $ 84.5 Finished goods 414.0 409.7 Supplies and other 30.4 30.8 Inventories $ 494.4 $ 525.0 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | |
Schedule of components of property, plant and equipment | The components of property, plant, and equipment were as follows (dollars in millions): August 27, May 28, 2017 2017 Land and land improvements $ 138.6 $ 139.8 Buildings, machinery, and equipment 2,134.6 1,917.7 Furniture, fixtures, office equipment, and other 62.9 62.6 Construction in progress 67.9 229.4 Property, plant and equipment, at cost 2,404.0 2,349.5 Less accumulated depreciation (1,094.5) (1,078.3) Property, plant and equipment, net $ 1,309.5 $ 1,271.2 |
GOODWILL AND OTHER IDENTIFIAB28
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | |
Schedule of changes in the carrying amount of goodwill | Changes in the carrying amount of goodwill were as follows (dollars in millions): Global Foodservice Retail Other Total Balance at May 28, 2017 $ 74.8 $ 42.8 $ 10.9 $ 4.5 $ 133.0 Foreign currency translation adjustment 1.1 — — — 1.1 Balance at August 27, 2017 $ 75.9 $ 42.8 $ 10.9 $ 4.5 $ 134.1 |
Schedule of other identifiable intangible assets | Other identifiable intangible assets were as follows (dollars in millions): August 27, 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 16.2 14 34.9 15.7 $ 53.0 $ 16.2 $ 52.9 $ 15.7 (a) Non-amortizing intangible assets are comprised of brands and trademarks. (b) Amortizing intangible assets are principally composed of customer relationships, licensing arrangements, and intellectual property. During the thirteen weeks ended August 27, 2017 and August 28, 2016, amortization expense was $0.5 million and $0.7 million, respectively. |
INVESTMENTS IN JOINT VENTURES (
INVESTMENTS IN JOINT VENTURES (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
INVESTMENTS IN JOINT VENTURES | |
Schedule of condensed combined and consolidated balance sheets | 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 redemption value as reported in our Condensed Consolidated Balance Sheets (dollars in millions): August 27, May 28, 2017 2017 Cash and equivalents $ 11.9 $ 10.9 Receivables, less allowance for doubtful accounts (a) 0.2 0.1 Inventories 1.7 1.9 Prepaid expenses and other current assets 0.2 0.4 Property, plant and equipment, net 48.8 49.4 Goodwill 18.8 18.8 Intangible assets, net 4.3 4.5 Total assets $ 85.9 $ 86.0 Current portion of long-term debt $ 1.6 $ 1.5 Accounts payable 14.6 11.6 Accrued liabilities 1.6 2.0 Long-term debt, excluding current portion 27.2 28.0 Total liabilities $ 45.0 $ 43.1 Redeemable noncontrolling interest (b) $ 54.1 $ 50.7 (a) As of August 27, 2017 and May 28, 2017, affiliate receivables of $31.0 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 August 27, 2017 and May 28, 2017. |
EMPLOYEE BENEFIT PLANS AND OT30
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS | |
Schedule of components of net periodic benefit cost for our pension and postretirement benefit plans | For the period after the Separation Date, the components of net periodic benefit cost for our pension and postretirement benefit plans were as follows (dollars in millions): Thirteen Weeks Ended August 27, 2017 Postretirement Pension Plan Plans Service cost $ 1.9 $ — Interest cost 0.1 — Expected return on plan assets (0.1) — Net periodic benefit cost $ 1.9 $ — |
Schedule of Pension costs incurred included in the Condensed Combined and Consolidated statements of earnings | 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 August 27, August 28, 2017 2016 Cost of sales (a) $ 1.9 $ 2.9 Selling, general and administrative expenses (a) — (2.7) Total $ 1.9 $ 0.2 (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. |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
ACCRUED LIABILITIES | |
Schedule of components of accrued liabilities | August 27, May 28, 2017 2017 Compensation and benefits $ 45.3 $ 80.1 Accrued trade promotions 42.4 40.5 Dividends payable 27.4 27.4 Accrued interest 29.5 10.2 Franchise, property, and sales and use taxes 11.4 9.8 Income taxes payable 4.6 4.7 Other 23.3 27.8 Accrued liabilities $ 183.9 $ 200.5 |
DEBT AND FINANCING OBLIGATIONS
DEBT AND FINANCING OBLIGATIONS (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
DEBT AND FINANCING OBLIGATIONS | |
Schedule of debt, including financing obligations | At August 27, 2017 and May 28, 2017, our debt, including financing obligations was as follows (dollars in millions): August 27, May 28, 2017 2017 Short-term borrowings: Revolving credit facility $ 8.9 $ 4.5 Other credit facilities 23.4 17.5 32.3 22.0 Long-term debt: Term loan facility, due 2021 658.1 666.6 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 2,352.9 2,362.1 Financing obligations: 4.35% lease financing obligation due May 2030 67.9 68.2 2.00% to 3.40% lease financing obligations due on various dates through 2040 12.4 7.7 80.3 75.9 Total debt and financing obligations 2,465.5 2,460.0 Debt issuance costs (34.0) (35.1) Short-term borrowings (32.3) (22.0) Current portion of long-term debt and financing obligations (39.1) (37.9) Long-term debt, excluding current portion $ 2,360.1 $ 2,365.0 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
STOCK-BASED COMPENSATION | |
Schedule of weighted average Black-Scholes assumptions for stock options | Expected volatility (%) (a) 23.27 Dividend yield (%) 1.71 Risk-free interest rate (%) 1.51 Expected life of stock option (years) 4.4 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. |
The Schedule of stock option activity | 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 56,497 43.82 Exercised (33,345) 18.53 Forfeited/cancelled — — Outstanding at August 27, 2017 743,979 $ 27.59 7.5 $ 13.0 Exercisable at August 27, 2017 397,795 $ 21.96 6.2 $ 9.2 (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 first quarter, or August 25, 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 schedule of RSU and Performance Share activity | 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) 250,283 43.83 — — 171 45.99 Performance condition adjustment (b) — — — — (818) 19.70 Vested (c) (113,738) 20.60 (168,233) 19.69 (15,228) 19.70 Forfeited/expired/cancelled — — (2,370) 27.03 — — Outstanding at August 27, 2017 626,149 $ 34.83 292,009 $ 28.56 41,815 $ 28.28 (a) Granted represents new grants and dividend equivalents accrued. (b) Amount represents additional Performance Shares earned during the thirteen weeks ended August 27, 2017 based on the performance condition adjustment. (c) The aggregate fair value of awards that vested during the thirteen weeks ended August 27, 2017 was $13.0 million, which represents the market value of our common stock on the date that the RSUs and Performance Shares vested. The number of RSUs 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. |
Schedule of compensation expenses for stock-based awards recognized, net of forfeitures | Condensed Combined and Consolidated Statements of Earnings, net of forfeitures, was as follows (dollars in millions): Thirteen Weeks Ended August 27, August 28, 2017 2016 Stock options $ 0.6 $ 0.1 Stock-settled RSUs 1.9 0.8 Cash-settled RSUs (a) 0.9 1.5 Performance shares 0.1 0.3 Total compensation expense 3.5 2.7 Income tax benefit (b) (1.3) (1.0) Total compensation expense, net of tax benefit $ 2.2 $ 1.7 (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. |
Schedule of total unrecognized compensation expense, net of estimated forfeitures, related to stock-based payments | Based on estimates at August 27, 2017, total unrecognized compensation expense related to share-based payments was as follows (dollars in millions): Remaining Weighted Unrecognized Average Compensation Recognition Expense Period (in years) Stock options $ 1.1 1.6 Stock-settled RSUs 16.1 2.5 Cash-settled RSUs 5.7 1.6 Performance shares 0.8 1.4 Total unrecognized stock-based compensation expense $ 23.7 2.2 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
FAIR VALUE MEASUREMENTS | |
Schedule of financial assets and liabilities measured at fair value on recurring basis | As of August 27, 2017 Level 1 Level 2 Level 3 Total Assets: Pension plan assets (a) $ 4.0 $ — $ — $ 4.0 Deferred compensation assets 0.6 — — 0.6 Derivative assets (b) — 1.4 — 1.4 Total assets 4.6 1.4 — 6.0 Liabilities: Derivative liabilities (b) — 0.1 — 0.1 Deferred compensation liabilities (c) — 10.3 — 10.3 Total liabilities $ — $ 10.4 $ — $ 10.4 As of May 28, 2017 Level 1 Level 2 Level 3 Total Assets: Pension plan assets (a) $ 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) The fair values of our Level 1 pension plan assets were determined using unadjusted quoted prices in active markets for identical assets. (b) The fair values of our Level 2 derivative 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 and liabilities included in Level 2 primarily represent commodity swap and option contracts. (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. |
DERIVATIVE FINANCIAL INSTRUME35
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of derivative assets and liabilities | The following table presents the fair value of derivatives at August 27, 2017 and May 28, 2017 (dollars in millions) in our Condensed Consolidated Balance Sheets : August 27, 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 $ 2.2 $ 0.8 $ 1.4 Prepaid expenses and other current assets $ 2.2 $ 0.8 $ 1.4 Liabilities: Commodity contracts $ 0.1 $ — $ 0.1 Accrued liabilities $ 0.1 $ — $ 0.1 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 |
Schedule of location and amount of gains (losses) from derivatives not designated as hedging instruments | 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 Gain 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 Gain August 27, August 28, Instruments Recognized on Derivatives 2017 2016 Commodity contracts Cost of sales $ 3.2 $ 0.5 Total gains from derivative instruments not designed as hedging instruments $ 3.2 $ 0.5 |
Commodity contracts | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of location and amount of gains (losses) from derivatives not designated as hedging instruments | Thirteen Weeks Ended August 27, August 28, 2017 2016 Net derivative gains (losses) incurred $ 3.2 $ 0.5 Less: Net derivative losses allocated to reportable segments (0.3) 0.2 Net derivative gains (losses) recognized in our Other segment $ 3.5 $ 0.3 |
STOCKHOLDERS_ EQUITY (Tables)
STOCKHOLDERS’ EQUITY (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
STOCKHOLDERS' EQUITY | |
Changes in AOCI, net of tax | Changes in AOCI, net of taxes, by component follows (dollars in millions). Amounts in parentheses indicate losses. 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 15.2 — 15.2 Amounts reclassified out of AOCI, net of tax — — — Net current-period other comprehensive income 15.2 — 15.2 Balance as of August 27, 2017 $ 4.9 $ 1.0 $ 5.9 |
SEGMENTS (Tables)
SEGMENTS (Tables) | 3 Months Ended |
Aug. 27, 2017 | |
SEGMENTS | |
Schedule of segment information | Thirteen Weeks Ended August 27, August 28, (in millions) 2017 2016 Net sales: Global $ 413.9 $ 399.2 Foodservice 279.4 260.2 Retail 92.0 89.6 Other 32.2 27.3 Total net sales 817.5 776.3 Product contribution margin (a): Global 74.7 73.7 Foodservice 90.9 79.4 Retail 16.5 19.6 Other 11.2 3.2 Total product contribution margin 193.3 175.9 Equity method investment earnings 20.0 10.6 Total product contribution margin plus equity method investment earnings 213.3 186.5 Other selling, general and administrative expenses (a) (b) 55.7 50.9 Interest expense, net 25.2 1.5 Income tax expense 44.1 51.0 Net income 88.3 83.1 Less: Income attributable to noncontrolling interests 4.9 3.5 Net income attributable to Lamb Weston Holdings, Inc. $ 83.4 $ 79.6 (a) Product contribution margin is defined as net sales, less cost of sales and advertising and promotion expenses. Other selling, general and administrative expenses include all selling, general and administrative expenses other than advertising and promotions expenses. (b) The thirteen weeks ended August 27, 2017 and August 28, 2016, include $2 . 2 million and $9.7 million, respectively, of pre-tax expenses related to the Separation. In all periods, the expenses related primarily to professional fees and other employee-related costs. |
NATURE OF OPERATIONS AND SUMM38
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reportable Segments (Details) - segment | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Number of reportable segments | 4 | 4 |
NATURE OF OPERATIONS AND SUMM39
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - General Information (Details) shares in Millions | Nov. 09, 2016shares |
Related Party Transactions | |
Divestiture of stock pro rata distribution (as a percent) | 100.00% |
Conagra | |
Related Party Transactions | |
Stock issuance ratio on divestiture of business | 0.33 |
Common stock held on the record date | 146 |
EARNINGS PER SHARE - Computatio
EARNINGS PER SHARE - Computation of Basic and Diluted Earnings per Common Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Numerator: | ||
Net income attributable to Lamb Weston Holdings, Inc. | $ 83.4 | $ 79.6 |
Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated | 0.8 | 0.5 |
Net income available to Lamb Weston common stockholders | $ 82.6 | $ 79.1 |
Denominator: | ||
Basic weighted average common shares outstanding | 146.2 | 146.1 |
Add: Dilutive effect of employee incentive plans | 0.6 | |
Diluted weighted average common shares outstanding | 146.8 | 146.1 |
Earnings per share | ||
Basic (in dollars per share) | $ 0.56 | $ 0.54 |
Diluted (in dollars per share) | $ 0.56 | $ 0.54 |
EARNINGS PER SHARE - Additional
EARNINGS PER SHARE - Additional Information (Details) shares in Millions | Nov. 09, 2016shares |
Conagra | |
Related Party Transactions | |
Common stock held on the record date | 146 |
EARNINGS PER SHARE - Antidiluti
EARNINGS PER SHARE - Antidilutive Securities (Details) | 3 Months Ended |
Aug. 27, 2017shares | |
Stock options | |
EARNINGS PER SHARE | |
Antidilutive securities (in shares) | 0 |
Stock-settled restricted stock units | |
EARNINGS PER SHARE | |
Antidilutive securities (in shares) | 0 |
Cash-settled restricted stock units | |
EARNINGS PER SHARE | |
Antidilutive securities (in shares) | 0 |
Performance Shares | |
EARNINGS PER SHARE | |
Antidilutive securities (in shares) | 0 |
EARNINGS PER SHARE - Share-base
EARNINGS PER SHARE - Share-based Awards Outstanding (Details) - shares | Aug. 27, 2017 | May 28, 2017 | Nov. 08, 2016 |
Stock options | |||
Stock-based Compensation | |||
Options outstanding (in shares) | 743,979 | 720,827 | 0 |
Stock-settled restricted stock units | |||
Stock-based Compensation | |||
RSUs and performance shares (in shares) | 626,149 | 489,604 | 0 |
Cash-settled restricted stock units | |||
Stock-based Compensation | |||
RSUs and performance shares (in shares) | 292,009 | 462,612 | 0 |
Performance Shares | |||
Stock-based Compensation | |||
RSUs and performance shares (in shares) | 41,815 | 57,690 | 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - Conagra - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Related Party Transactions | ||
Interest expense | $ 25.2 | $ 1.5 |
Net sales | 4.4 | |
Cost of sales | 3.7 | |
Purchases | 5.3 | |
Transition services agreement | ||
Related Party Transactions | ||
Related party transaction expenses | $ 1.3 | |
Allocations based upon certain metrics | ||
Related Party Transactions | ||
Selling, general and administrative costs | 4.3 | |
Allocations based upon indirect corporate costs | ||
Related Party Transactions | ||
Selling, general and administrative costs | $ 8.9 |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of Income Tax Expenses (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Reconciliation of income tax expense | ||
Income tax expense | $ 44.1 | $ 51 |
Effective tax rate | 33.00% | 38.00% |
Federal statutory tax rate | 35.00% | |
Income taxes paid, net of refunds | $ 30 | $ 46.6 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Major classes of inventories | ||
Raw materials and packaging | $ 50 | $ 84.5 |
Finished goods | 414 | 409.7 |
Supplies and other | 30.4 | 30.8 |
Total | $ 494.4 | $ 525 |
PROPERTY, PLANT, AND EQUIPMENT
PROPERTY, PLANT, AND EQUIPMENT - Tabular Disclosure (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Property, Plant and Equipment | ||
Property, plant, and equipment, at cost | $ 2,404 | $ 2,349.5 |
Less accumulated depreciation | (1,094.5) | (1,078.3) |
Property, plant, and equipment, net | 1,309.5 | 1,271.2 |
Land and land improvements | ||
Property, Plant and Equipment | ||
Property, plant, and equipment, at cost | 138.6 | 139.8 |
Buildings, machinery, and equipment | ||
Property, Plant and Equipment | ||
Property, plant, and equipment, at cost | 2,134.6 | 1,917.7 |
Furniture, fixtures, office equipment and other | ||
Property, Plant and Equipment | ||
Property, plant, and equipment, at cost | 62.9 | 62.6 |
Construction in progress | ||
Property, Plant and Equipment | ||
Property, plant, and equipment, at cost | $ 67.9 | $ 229.4 |
PROPERTY, PLANT, AND EQUIPMEN48
PROPERTY, PLANT, AND EQUIPMENT - Depreciation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Depreciation expense | $ 29.3 | $ 24.7 |
PROPERTY, PLANT, AND EQUIPMEN49
PROPERTY, PLANT, AND EQUIPMENT - Purchases in Accounts Payable (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Aug. 27, 2017 | May 28, 2017 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Purchases of property, plant and equipment included in accounts payable | $ 14.1 | $ 60.4 |
PROPERTY, PLANT, AND EQUIPMEN50
PROPERTY, PLANT, AND EQUIPMENT - Interest Capitalized (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Construction in progress | ||
Property, Plant and Equipment | ||
Interest capitalized | $ 2.3 | $ 0.7 |
GOODWILL AND OTHER IDENTIFIAB51
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS - Carrying Amount of Goodwill (Details) $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
Goodwill | |
Balance at the beginning period | $ 133 |
Foreign currency translation adjustment | 1.1 |
Balance at the end of the period | 134.1 |
Global | |
Goodwill | |
Balance at the beginning period | 74.8 |
Foreign currency translation adjustment | 1.1 |
Balance at the end of the period | 75.9 |
Foodservice | |
Goodwill | |
Balance at the beginning period | 42.8 |
Balance at the end of the period | 42.8 |
Retail | |
Goodwill | |
Balance at the beginning period | 10.9 |
Balance at the end of the period | 10.9 |
Other | |
Goodwill | |
Balance at the beginning period | 4.5 |
Balance at the end of the period | $ 4.5 |
GOODWILL AND OTHER IDENTIFIAB52
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS - Weighted Average Useful Life (Details) | 3 Months Ended | 12 Months Ended |
Aug. 27, 2017 | May 28, 2017 | |
Weighted Average | ||
Amortizing Intangible Assets | ||
Weighted Average Useful Life, amortizing intangible assets (in years) | 14 years | 14 years |
GOODWILL AND OTHER IDENTIFIAB53
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS - Other Identifiable Intangible Assets (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | ||
Gross Carrying Amount, non-amortizing intangible assets | $ 18 | $ 18 |
Gross Carrying Amount, amortizing intangible assets | 35 | 34.9 |
Accumulated Amortization, amortizing intangible assets | 16.2 | 15.7 |
Total intangible assets, excluding goodwill | $ 53 | $ 52.9 |
GOODWILL AND OTHER IDENTIFIAB54
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS - Amortization Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | ||
Amortization expense | $ 0.5 | $ 0.7 |
GOODWILL AND OTHER IDENTIFIAB55
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS - Total Intangible Assets, Net (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS | ||
Intangible assets, net | $ 36.8 | $ 37.2 |
INVESTMENTS IN JOINT VENTURES -
INVESTMENTS IN JOINT VENTURES - Variable Interest Entity - Consolidated - General Information (Details) | 3 Months Ended |
Aug. 27, 2017 | |
Lamb Weston BSW | |
Investments in Joint Ventures | |
Ownership interest (as a percent) | 49.99% |
INVESTMENTS IN JOINT VENTURES57
INVESTMENTS IN JOINT VENTURES - Variable Interest Entity - Consolidated - Transactions (Details) - Co-venturer - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Related Party Transactions | ||
Purchases | $ 16.8 | $ 24.2 |
Costs | $ 1.3 | $ 1.2 |
INVESTMENTS IN JOINT VENTURES58
INVESTMENTS IN JOINT VENTURES - Variable Interest Entity - Consolidated - Reported in Condensed Combined and Consolidated Balance Sheets (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 | Aug. 28, 2016 | May 29, 2016 |
Condensed Consolidated Balance Sheets | ||||
Cash and equivalents | $ 69.8 | $ 57.1 | $ 72.4 | $ 36.4 |
Receivables, less allowance for doubtful accounts | 213.7 | 185.2 | ||
Inventories | 494.4 | 525 | ||
Prepaid expenses and other current assets | 60.5 | 90.9 | ||
Property, plant and equipment, net | 1,309.5 | 1,271.2 | ||
Goodwill | 134.1 | 133 | ||
Intangible assets, net | 36.8 | 37.2 | ||
Accounts payable | 261.6 | 295 | ||
Accrued liabilities | 183.9 | 200.5 | ||
Redeemable noncontrolling interest | 54.1 | 50.7 | ||
Lamb Weston BSW | ||||
Condensed Consolidated Balance Sheets | ||||
Cash and equivalents | 11.9 | 10.9 | ||
Receivables, less allowance for doubtful accounts | 0.2 | 0.1 | ||
Inventories | 1.7 | 1.9 | ||
Prepaid expenses and other current assets | 0.2 | 0.4 | ||
Property, plant and equipment, net | 48.8 | 49.4 | ||
Goodwill | 18.8 | 18.8 | ||
Intangible assets, net | 4.3 | 4.5 | ||
Total assets | 85.9 | 86 | ||
Current portion of long-term debt | 1.6 | 1.5 | ||
Accounts payable | 14.6 | 11.6 | ||
Accrued liabilities | 1.6 | 2 | ||
Long-term debt, excluding current portion | 27.2 | 28 | ||
Total liabilities | 45 | 43.1 | ||
Redeemable noncontrolling interest | 54.1 | $ 50.7 | ||
Lamb Weston BSW | Eliminated in consolidation | ||||
Condensed Consolidated Balance Sheets | ||||
Receivables, less allowance for doubtful accounts | $ 31 | $ 24 |
INVESTMENTS IN JOINT VENTURES59
INVESTMENTS IN JOINT VENTURES - Variable Interest Entity - Not Consolidated (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 27, 2017 | Aug. 28, 2016 | May 28, 2017 | |
Investments in Joint Ventures | |||
Equity method investments | $ 196 | $ 178.6 | |
Stockholders' equity | $ (575.7) | (647.2) | |
Lamb Weston RDO | |||
Investments in Joint Ventures | |||
Ownership interest (as a percent) | 50.00% | ||
Equity method investments | $ 17.8 | 17.2 | |
Term borrowings from banks | 42.3 | 59.3 | |
Selling, general and administrative | Lamb Weston RDO | |||
Investments in Joint Ventures | |||
Fees received | 3.5 | $ 3.5 | |
Lamb Weston RDO | |||
Investments in Joint Ventures | |||
Stockholders' equity | $ 35.6 | $ 34.4 |
INVESTMENTS IN JOINT VENTURES60
INVESTMENTS IN JOINT VENTURES - Other Investments (Details) | Aug. 27, 2017 |
Lamb-Weston Meijer | |
Investments in Joint Ventures | |
Ownership interest (as a percent) | 50.00% |
INVESTMENTS IN JOINT VENTURES61
INVESTMENTS IN JOINT VENTURES - Transactions with Ventures - General Information (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Aug. 27, 2017 | Aug. 28, 2016 | May 28, 2017 | |
INVESTMENTS IN JOINT VENTURES | |||
Carrying value of equity method investments | $ 196 | $ 178.6 | |
Dividends received from equity method investments | $ 12.9 | $ 8.3 |
INVESTMENTS IN JOINT VENTURES62
INVESTMENTS IN JOINT VENTURES - Transactions with Ventures - Sales and Payments (Details) - Joint Ventures - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Related Party Transactions | ||
Net sales | $ 5 | $ 7.4 |
Payments | ||
Related Party Transactions | ||
Payments | $ 1 | $ 3.1 |
EMPLOYEE BENEFIT PLANS AND OT63
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS - Pension Plans in Connection With and/or After Separation (Details) - Pension Plan $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
Employee Benefit Plans and Other Post-retirement Benefits | |
Pension liabilities | $ 7.4 |
Assets transferred to the plan | $ 0 |
EMPLOYEE BENEFIT PLANS AND OT64
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS - Components of Net Periodic Benefit Cost (Details) $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
Contribution | |
Required minimum contribution reminder of fiscal 2018 | $ 1.7 |
Pension Plan | |
Components of net periodic benefit cost for our pension and postretirement benefit plans | |
Service cost | 1.9 |
Interest cost | 0.1 |
Expected return on plan assets | (0.1) |
Net periodic benefit cost | $ 1.9 |
EMPLOYEE BENEFIT PLANS AND OT65
EMPLOYEE BENEFIT PLANS AND OTHER POST-RETIREMENT BENEFITS - Condensed Combined and Consolidated Statements of Earnings (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Employee Benefit Plans and Other Post-retirement Benefits | ||
Pension cost incurred | $ 1.9 | $ 0.2 |
Cost of sales | ||
Employee Benefit Plans and Other Post-retirement Benefits | ||
Pension cost incurred | $ 1.9 | 2.9 |
Selling, general and administrative | ||
Employee Benefit Plans and Other Post-retirement Benefits | ||
Pension cost incurred | $ (2.7) |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
ACCRUED LIABILITIES | ||
Compensation and benefits | $ 45.3 | $ 80.1 |
Accrued trade promotions | 42.4 | 40.5 |
Dividends payable | 27.4 | 27.4 |
Accrued interest | 29.5 | 10.2 |
Franchise, property, and sales and use taxes | 11.4 | 9.8 |
Income taxes payable | 4.6 | 4.7 |
Other | 23.3 | 27.8 |
Accrued liabilities | $ 183.9 | $ 200.5 |
DEBT AND FINANCING OBLIGATION67
DEBT AND FINANCING OBLIGATIONS - Debt, Including Financing Obligations (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Aug. 27, 2017 | May 28, 2017 | |
Debt and Financing Obligations | ||
Short-term borrowings | $ 32.3 | $ 22 |
Long-term debt | 2,352.9 | 2,362.1 |
Financing obligations: | 80.3 | 75.9 |
Long-term Debt, Current and Noncurrent | ||
Total debt and financing obligations | 2,465.5 | 2,460 |
Debt issuance costs | (34) | (35.1) |
Short-term borrowings | (32.3) | (22) |
Current portion of long-term debt and financing obligations | (39.1) | (37.9) |
Long-term debt, excluding current portion | 2,360.1 | 2,365 |
4.34%, installment notes due 2031 | ||
Debt and Financing Obligations | ||
Long-term debt | $ 28.8 | $ 29.5 |
4.34%, installment notes due 2031 | Minimum | ||
Debt and Financing Obligations | ||
Variable interest rate spread (as a percent) | 1.90% | 1.90% |
4.34%, installment notes due 2031 | Maximum | ||
Debt and Financing Obligations | ||
Variable interest rate spread (as a percent) | 2.30% | 2.30% |
4.34%, installment notes due 2031 | LIBOR | ||
Debt and Financing Obligations | ||
Interest rate (as a percent) | 4.34% | 4.34% |
4.35% lease financing obligation due May 2030 | ||
Debt and Financing Obligations | ||
Financing obligations: | $ 67.9 | $ 68.2 |
Interest rate (as a percent) | 4.35% | 4.35% |
2.00% to 3.40% lease financing obligations due on various dates through 2040 | ||
Debt and Financing Obligations | ||
Financing obligations: | $ 12.4 | $ 7.7 |
2.00% to 3.40% lease financing obligations due on various dates through 2040 | Minimum | ||
Debt and Financing Obligations | ||
Interest rate (as a percent) | 2.00% | 2.00% |
2.00% to 3.40% lease financing obligations due on various dates through 2040 | Maximum | ||
Debt and Financing Obligations | ||
Interest rate (as a percent) | 3.40% | 3.40% |
Senior notes | 4.625% senior notes, due 2024 | ||
Debt and Financing Obligations | ||
Long-term debt | $ 833 | $ 833 |
Interest rate (as a percent) | 4.625% | 4.625% |
Senior notes | 4.875% senior notes, due 2026 | ||
Debt and Financing Obligations | ||
Long-term debt | $ 833 | $ 833 |
Interest rate (as a percent) | 4.875% | 4.875% |
Revolving credit facilities | ||
Debt and Financing Obligations | ||
Short-term borrowings | $ 8.9 | $ 4.5 |
Long-term Debt, Current and Noncurrent | ||
Short-term borrowings | (8.9) | (4.5) |
Other credit facilities | ||
Debt and Financing Obligations | ||
Short-term borrowings | 23.4 | 17.5 |
Long-term Debt, Current and Noncurrent | ||
Short-term borrowings | (23.4) | (17.5) |
Term loan facility, due 2021 | ||
Debt and Financing Obligations | ||
Long-term debt | $ 658.1 | $ 666.6 |
DEBT AND FINANCING OBLIGATION68
DEBT AND FINANCING OBLIGATIONS - Credit Facilities (Details) $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
Debt and Financing Obligations | |
Interest paid | $ 6.1 |
Revolving credit facilities | |
Debt and Financing Obligations | |
Maximum borrowing capacity | 8.9 |
Available amount | 489.3 |
Letter of credit outstanding | $ 1.8 |
Average interest rate | 3.70% |
Minimum | Revolving credit facilities | |
Debt and Financing Obligations | |
Borrowings | $ 0 |
Maximum | Revolving credit facilities | |
Debt and Financing Obligations | |
Borrowings | $ 47.5 |
STOCK-BASED COMPENSATION - Stoc
STOCK-BASED COMPENSATION - Stock Option Activity (Details) $ / shares in Units, $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($)$ / sharesshares | |
Stock-based Compensation | |
Shares authorized under our equity incentive plans (in shares) | 10,000,000 |
Available for future grant (in shares) | 7,900,000 |
Weighted average Black-Scholes assumptions: | |
Expected volatility (%) | 23.27% |
Dividend yield (%) | 1.71% |
Risk-free interest rate (%) | 1.51% |
Expected life of stock option (years) | 4 years 4 months 24 days |
Stock options | |
Shares | |
Outstanding at beginning of the period (in shares) | 720,827 |
Granted (in shares) | 56,497 |
Exercised (in shares) | (33,345) |
Outstanding at end of the period (in shares) | 743,979 |
Exercisable at end of year (in shares) | 397,795 |
Weighted - Average Exercise Price (Per share) | |
Outstanding at beginning of the period (in dollars per share) | $ / shares | $ 25.90 |
Granted (in dollars per share) | $ / shares | 43.82 |
Exercised (in dollars per share) | $ / shares | 18.53 |
Outstanding at end of the period (in dollars per share) | $ / shares | 27.59 |
Exercisable at end of year (in dollars per share) | $ / shares | $ 21.96 |
Weighted - Average Remaining Contractual Term (Years) | |
Outstanding (in years) | 7 years 6 months |
Exercisable (in years) | 6 years 2 months 12 days |
Exercisable aggregate intrinsic value | $ | $ 13 |
Outstanding aggregate intrinsic value | $ | $ 9.2 |
STOCK-BASED COMPENSATION - Rest
STOCK-BASED COMPENSATION - Restricted Stock Unit and Performance-based Restricted Stock Unit (Details) $ / shares in Units, $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($)$ / sharesshares | |
Stock-based Compensation | |
Aggregate fair value of awards vested | $ | $ 13 |
Stock-settled restricted stock units | |
Shares | |
Outstanding at beginning of the period (in shares) | shares | 489,604 |
Granted (in shares) | shares | 250,283 |
Vested (in shares) | shares | (113,738) |
Outstanding at end of the period (in shares) | shares | 626,149 |
Weighted-Average Grant-Date Fair Value | |
Outstanding at beginning of the period (in dollars per share) | $ / shares | $ 26.92 |
Granted (in dollars per share) | $ / shares | 43.83 |
Vested (in dollars per share) | $ / shares | 20.60 |
Outstanding at end of the period (in dollars per share) | $ / shares | $ 34.83 |
Cash-settled restricted stock units | |
Shares | |
Outstanding at beginning of the period (in shares) | shares | 462,612 |
Vested (in shares) | shares | (168,233) |
Forfeited/expired/cancelled (in shares) | shares | (2,370) |
Outstanding at end of the period (in shares) | shares | 292,009 |
Weighted-Average Grant-Date Fair Value | |
Outstanding at beginning of the period (in dollars per share) | $ / shares | $ 25.33 |
Vested (in dollars per share) | $ / shares | 19.69 |
Forfeited/expired/cancelled (in dollars per share) | $ / shares | 27.03 |
Outstanding at end of the period (in dollars per share) | $ / shares | $ 28.56 |
Performance Shares | |
Shares | |
Outstanding at beginning of the period (in shares) | shares | 57,690 |
Granted (in shares) | shares | 171 |
Performance condition adjustment | shares | (818) |
Vested (in shares) | shares | (15,228) |
Outstanding at end of the period (in shares) | shares | 41,815 |
Weighted-Average Grant-Date Fair Value | |
Outstanding at beginning of the period (in dollars per share) | $ / shares | $ 25.84 |
Granted (in dollars per share) | $ / shares | 45.99 |
Performance condition adjustment (in dollars per share) | $ / shares | 19.70 |
Vested (in dollars per share) | $ / shares | 19.70 |
Outstanding at end of the period (in dollars per share) | $ / shares | $ 28.28 |
STOCK-BASED COMPENSATION - Comp
STOCK-BASED COMPENSATION - Compensation Expense (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Compensation expense | ||
Share-based compensation expense | $ 3.5 | $ 2.7 |
Income tax benefit | (1.3) | (1) |
Total compensation expense, net of tax benefit | 2.2 | 1.7 |
Stock options | ||
Compensation expense | ||
Share-based compensation expense | 0.6 | 0.1 |
Stock-settled restricted stock units | ||
Compensation expense | ||
Share-based compensation expense | 1.9 | 0.8 |
Cash-settled restricted stock units | ||
Compensation expense | ||
Share-based compensation expense | 0.9 | 1.5 |
Performance Shares | ||
Compensation expense | ||
Share-based compensation expense | $ 0.1 | $ 0.3 |
STOCK-BASED COMPENSATION - Unre
STOCK-BASED COMPENSATION - Unrecognized Compensation Expense, Net of Estimated Forfeitures (Details) $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
Unrecognized compensation expense, net of estimated forfeitures | |
Unrecognized Compensation Expense | $ 23.7 |
Remaining Weighted Average Recognition Period (in years) | 2 years 2 months 12 days |
Stock options | |
Unrecognized compensation expense, net of estimated forfeitures | |
Unrecognized Compensation Expense | $ 1.1 |
Remaining Weighted Average Recognition Period (in years) | 1 year 7 months 6 days |
Stock-settled restricted stock units | |
Unrecognized compensation expense, net of estimated forfeitures | |
Unrecognized Compensation Expense | $ 16.1 |
Remaining Weighted Average Recognition Period (in years) | 2 years 6 months |
Cash-settled restricted stock units | |
Unrecognized compensation expense, net of estimated forfeitures | |
Unrecognized Compensation Expense | $ 5.7 |
Remaining Weighted Average Recognition Period (in years) | 1 year 7 months 6 days |
Performance Shares | |
Unrecognized compensation expense, net of estimated forfeitures | |
Unrecognized Compensation Expense | $ 0.8 |
Remaining Weighted Average Recognition Period (in years) | 1 year 4 months 24 days |
FAIR VALUE MEASUREMENTS - Fair
FAIR VALUE MEASUREMENTS - Fair Value Hierarchy (Details) - Recurring - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Assets: | ||
Pension plan assets | $ 4 | $ 4.5 |
Deferred compensation assets | 0.6 | 0.6 |
Derivative assets | 1.4 | |
Total assets | 6 | 5.1 |
Liabilities: | ||
Derivative liabilities | 0.1 | 2.4 |
Deferred compensation liabilities | 10.3 | 8.8 |
Total liabilities | 10.4 | 11.2 |
Level 1 | ||
Assets: | ||
Pension plan assets | 4 | 4.5 |
Deferred compensation assets | 0.6 | 0.6 |
Total assets | 4.6 | 5.1 |
Level 2 | ||
Assets: | ||
Derivative assets | 1.4 | |
Total assets | 1.4 | |
Liabilities: | ||
Derivative liabilities | 0.1 | 2.4 |
Deferred compensation liabilities | 10.3 | 8.8 |
Total liabilities | $ 10.4 | $ 11.2 |
FAIR VALUE MEASUREMENTS - Debt
FAIR VALUE MEASUREMENTS - Debt Outstanding (Details) $ in Millions | Aug. 27, 2017USD ($) |
Fixed rate debt | Carrying Value | |
Fair Value Measurements | |
Debt | $ 1,688.1 |
Variable rate debt | Carrying Value | |
Fair Value Measurements | |
Debt | 697.1 |
Level 2 | Fixed rate debt | Fair Value | |
Fair Value Measurements | |
Debt | $ 1,742.3 |
DERIVATIVE FINANCIAL INSTRUME75
DERIVATIVE FINANCIAL INSTRUMENTS - Fair Value of Derivative Assets (Details) $ in Millions | Aug. 27, 2017USD ($) |
Commodity contracts | |
Derivative subject to master netting arrangements | |
Gross Amounts Recognized | $ 2.2 |
Gross Amounts Offset in the Balance Sheet | 0.8 |
Net Amounts Presented in the Balance Sheet | 1.4 |
Prepaid expenses and other current assets | |
Derivative subject to master netting arrangements | |
Gross Amounts Recognized | 2.2 |
Gross Amounts Offset in the Balance Sheet | 0.8 |
Net Amounts Presented in the Balance Sheet | $ 1.4 |
DERIVATIVE FINANCIAL INSTRUME76
DERIVATIVE FINANCIAL INSTRUMENTS - Fair Value of Derivative Liabilities (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Commodity contracts | ||
Derivative subject to master netting arrangements | ||
Gross Amounts Recognized | $ 0.1 | $ 3.8 |
Gross Amounts Offset in the Balance Sheet | 1.4 | |
Net Amounts Presented in the Balance Sheet | 0.1 | 2.4 |
Accrued Liabilities | ||
Derivative subject to master netting arrangements | ||
Gross Amounts Recognized | 0.1 | 3.8 |
Gross Amounts Offset in the Balance Sheet | 1.4 | |
Net Amounts Presented in the Balance Sheet | $ 0.1 | $ 2.4 |
DERIVATIVE FINANCIAL INSTRUME77
DERIVATIVE FINANCIAL INSTRUMENTS - Gains (Losses) from Derivatives not Designated as Hedging Instruments (Details) - Derivatives not designated as hedging instruments - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Derivative Instruments, Gain (Loss) | ||
Amount of Gain or (Loss) Recognized on Derivative | $ 3.2 | $ 0.5 |
Commodity contracts | Other | ||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain or (Loss) Recognized on Derivative | 3.5 | 0.3 |
Commodity contracts | Reportable segments | ||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain or (Loss) Recognized on Derivative | (0.3) | 0.2 |
Commodity contracts | Cost of sales | ||
Derivative Instruments, Gain (Loss) | ||
Amount of Gain or (Loss) Recognized on Derivative | $ 3.2 | $ 0.5 |
DERIVATIVE FINANCIAL INSTRUME78
DERIVATIVE FINANCIAL INSTRUMENTS - Notional Values (Details) - USD ($) $ in Millions | Aug. 27, 2017 | May 28, 2017 |
Open commodity purchase contracts | ||
Derivative Financial Instruments | ||
Notional amount | $ 49.2 | $ 56 |
Open commodity sale contracts | ||
Derivative Financial Instruments | ||
Notional amount | $ 51.5 | $ 88.6 |
STOCKHOLDERS' EQUITY - Common a
STOCKHOLDERS' EQUITY - Common and Preferred Stock (Details) $ / shares in Units, $ in Millions | Sep. 28, 2017$ / shares | Jul. 20, 2017USD ($)$ / shares | Aug. 27, 2017USD ($)Vote$ / sharesshares | May 28, 2017shares |
STOCKHOLDERS' EQUITY | ||||
Common stock, authorized shares | 600,000,000 | 600,000,000 | ||
Preferred stock, authorized shares | 60,000,000 | |||
Common stock, issued shares | 146,244,550 | 146,080,901 | ||
Common stock, outstanding shares | 146,244,550 | |||
Number of votes that each share holder is entitled | Vote | 1 | |||
Preferred stock, issued shares | 0 | |||
Preferred stock, outstanding shares | 0 | |||
Cash dividends declared per common share | $ / shares | $ 0.1875 | $ 0.1875 | $ 0.1875 | |
Payments of Dividends | $ | $ 27.4 | $ 27.4 |
STOCKHOLDERS' EQUITY - Changes
STOCKHOLDERS' EQUITY - Changes in AOCI (Details) $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
Changes in AOCI: | |
Balance at the beginning of the period | $ (647.2) |
Balance at the end of the period | (575.7) |
Accumulated Other Comprehensive Loss | |
Changes in AOCI: | |
Balance at the beginning of the period | (9.3) |
Other comprehensive income before reclassifications, net of tax | 15.2 |
Net current-period other comprehensive income | 15.2 |
Balance at the end of the period | 5.9 |
Foreign Currency Translation Gains (Losses) | |
Changes in AOCI: | |
Balance at the beginning of the period | (10.3) |
Other comprehensive income before reclassifications, net of tax | 15.2 |
Net current-period other comprehensive income | 15.2 |
Balance at the end of the period | 4.9 |
Pension and Other Post-employment Benefits | |
Changes in AOCI: | |
Balance at the beginning of the period | 1 |
Balance at the end of the period | $ 1 |
STOCKHOLDERS' EQUITY - AOCI - S
STOCKHOLDERS' EQUITY - AOCI - Settlement Gains on Pension and Post-retirement Benefits (Details) $ in Millions | 3 Months Ended |
Aug. 27, 2017USD ($) | |
STOCKHOLDERS' EQUITY | |
Net amount of settlement gains on pension and post-retirement benefits included in accumulated OCI to be amortized over the next 12 months, before tax | $ 0.2 |
Net amount of settlement gains on pension and post-retirement benefits included in accumulated OCI to be amortized over the next 12 months, after tax | $ 0.1 |
SEGMENTS - General Information
SEGMENTS - General Information (Details) - segment | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
SEGMENTS | ||
Number of operating segments | 4 | 4 |
SEGMENTS - General Financial In
SEGMENTS - General Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Revenue information | ||
Net sales | $ 817.5 | $ 776.3 |
Product contribution margin | 193.3 | 175.9 |
Equity method investment earnings | 20 | 10.6 |
Total product contribution margin plus equity method investment earnings | 213.3 | 186.5 |
Other selling, general and administrative expenses | 55.7 | 50.9 |
Interest expense, net | 25.2 | 1.5 |
Income tax expense | 44.1 | 51 |
Net income | 88.3 | 83.1 |
Less: Income attributable to noncontrolling interests | 4.9 | 3.5 |
Net income attributable to Lamb Weston Holdings, Inc. | 83.4 | 79.6 |
Pretax professional fees expenses | 2.2 | 9.7 |
Global | ||
Revenue information | ||
Net sales | 413.9 | 399.2 |
Product contribution margin | 74.7 | 73.7 |
Foodservice | ||
Revenue information | ||
Net sales | 279.4 | 260.2 |
Product contribution margin | 90.9 | 79.4 |
Retail | ||
Revenue information | ||
Net sales | 92 | 89.6 |
Product contribution margin | 16.5 | 19.6 |
Other | ||
Revenue information | ||
Net sales | 32.2 | 27.3 |
Product contribution margin | $ 11.2 | $ 3.2 |
SEGMENTS - Other information (D
SEGMENTS - Other information (Details) | 3 Months Ended | |
Aug. 27, 2017 | Aug. 28, 2016 | |
Sales Revenue, Goods, Net | Customer Concentration Risk | McDonald's Corporation | ||
Other information | ||
Concentration risk, percentage | 11.00% | 11.00% |