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Lamb Weston

Lamb WestonLW财报

NYSE · Consumer Staples · Packaged Foods & Meats

Lamb Weston Holdings, Inc. is an American food processing company that is one of the world's largest producers and processors of frozen french fries, waffle fries, and other frozen potato products. It is headquartered in Eagle, Idaho, a suburb of Boise.

What changed in Lamb Weston's 10-K — 2022 vs 2023

Top changes in Lamb Weston's 2023 10-K

317 paragraphs added · 296 removed · 199 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+18 added−10 removed34 unchanged
Our capital and operating budgets include costs and expenses associated with complying with these laws and other requirements. ​ 10 Table of Contents Available Information ​ We make available, free of charge on our website at www.lambweston.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.
Our capital and operating budgets include costs and expenses associated with complying with these laws and other requirements. ​ Available Information ​ We make available, free of charge on our website at www.lambweston.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.
In general, net sales and cash flows tend to be higher in our fiscal fourth quarter, reflecting customer and consumer buying patterns. ​ Due to severe impacts of the government mandated shutdowns in response to COVID-19, seasonal variation in the demand for our products in the fourth quarter of fiscal 2020 and 2021, differed from prior years. ​ Human Capital Resources ​ We believe that our employees and our workplace culture are among our most important assets, and that our employees are integral to our ability to achieve our strategic objectives.
In general, net sales and cash flows tend to be higher in our fiscal fourth quarter, reflecting customer and consumer buying patterns. ​ Due to severe impacts of the government mandated shutdowns in response to COVID-19, seasonal variation in the demand for our products in fiscal 2021 differed from prior and subsequent years. ​ Human Capital Resources ​ We believe that our employees and our workplace culture are among our most important assets, and that our employees are integral to our ability to achieve our strategic objectives.
We typically hold 50 to 60 days of finished goods inventory on a first-in-first-out basis, so the costs incurred from our fiscal second quarter harvest, which are generally favorable, will flow through our income statement in our fiscal third quarter. Inventory levels also tend to be higher in our fiscal third quarter, requiring more working capital at that time.
We typically hold 50 to 90 days of finished goods inventory on a first-in-first-out basis, so the costs incurred from our fiscal second quarter harvest, which are generally favorable, will flow through our income statement in our fiscal third quarter. Inventory levels also tend to be higher in our fiscal third quarter, requiring more working capital at that time.
To understand employee sentiments, we conduct a bi-annual engagement survey of our global workforce. This survey was completed in fiscal 2022 and was administered and analyzed by an independent third-party. The survey results are then reviewed by our executive leadership team and our Compensation and Human Capital Committee of the Board of Directors.
To understand employee sentiments, we conduct a bi-annual engagement survey of our global workforce. This survey was completed in fiscal 2022 and was administered and analyzed by an independent third-party. The survey results were then reviewed by our executive leadership team and our Compensation and Human Capital Committee of the Board of Directors.
Some of our competitors are larger and have substantially more financial, sales and marketing, and other resources. We compete with producers of similar products on the basis of, among other things, customer service, value, product innovation, product quality, brand recognition and loyalty, price, and the ability to identify and satisfy customer preferences.
Some of our competitors are larger and have substantially more financial, sales and marketing, and other resources than us. We compete with producers of similar products on the basis of, among other things, customer service, value, product innovation, product quality, brand recognition and loyalty, price, and the ability to identify and satisfy customer preferences.
Benefits for employees include an employee savings 401(k) plan and company matching contributions, health insurance, disability insurance, life insurance, health savings and flexible spending accounts, wellness incentives, annual on-site health screenings, paid time-off, family leave, parental leave, employee assistance programs, and tuition reimbursement opportunities.
Benefits for U.S. employees include an employee savings 401(k) plan and company matching contributions, health insurance, disability insurance, life insurance, health savings and flexible spending accounts, wellness incentives, annual on-site health screenings, paid time-off, family leave, parental leave, employee assistance programs, and tuition reimbursement opportunities.
In general, our product contribution margin percentage tends to be highest in our fiscal third quarter, reflecting the cost benefit of freshly-harvested potatoes. We typically harvest potatoes in the Pacific Northwest of the U.S. in July through October, which is primarily in our fiscal second quarter.
In general, our product contribution margin percentage tends to be highest in our fiscal third quarter, reflecting the cost benefit of freshly-harvested potatoes. We typically harvest potatoes in the Pacific Northwest of the U.S. and Europe in July through October, which is primarily in our fiscal second quarter.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion. ​ Manufacturing ​ We operate 18 production facilities for our products. See "Item 2. Properties" for more information about our production facilities.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for further discussion. ​ Manufacturing ​ We operate 26 production facilities for our products. See "Item 2. Properties" for more information about our production facilities.
The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage as determined by the patent office or courts in the country, and the availability of legal remedies in the country. ​ Raw Materials ​ Our primary raw materials are potatoes, edible oils, packaging, grains, starches, and energy inputs.
The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage as determined by the patent office or courts in the country, and the availability of legal remedies in the country. ​ 5 Table of Contents Raw Materials ​ Our primary raw materials are potatoes, edible oils, packaging, grains, starches, and energy inputs.
Competitors include large North American and European frozen potato product companies that compete globally, as well as local and regional companies. Significant competitors include Agristo NV, Aviko B.V., Cavendish Farms Corporation, Clarebout Potatoes NV, Farm Frites International B.V., J.R. Simplot Company, The Kraft Heinz Company, McCain Foods Limited, and Mydibel S.A.
Competitors include large North American and European frozen potato product companies that compete globally, as well as local and regional companies. Significant competitors include Agristo NV, Aviko B.V., Cavendish Farms Corporation, Clarebout Potatoes NV, Farm Frites International B.V., J.R. Simplot Company, The Kraft Heinz Company, and McCain Foods Limited.
Through ongoing communications, routine assessments of our safety programs, safety and job-related training, daily risk assessments at facilities, defined standards, and safety measures, we strive to improve our safety performance each year. ​ Total Rewards. Our compensation and benefits are designed to support the financial, mental, and physical well-being of our employees.
Through ongoing communications, routine assessments of our safety programs, safety and job-related training, daily risk assessments at facilities, defined standards, and safety measures, we strive to improve our safety performance each year. ​ 7 Table of Contents Total Rewards ​ Our compensation and benefits are designed to support the financial, mental, and physical well-being of our employees.
Werner served as Senior Vice President of Finance for Conagra’s Private Brands and Commercial Foods operating segments from June 2013 to April 2015, and Senior Vice President of Finance for Lamb Weston from May 2011 until June 2013. ​ Bernadette M. Madarieta has served as our Senior Vice President and Chief Financial Officer since August 2021.
Werner served as Senior Vice President of Finance for Conagra’s Private Brands and Commercial Foods operating segments from June 2013 to April 2015, and Senior Vice President of Finance for Lamb Weston from May 2011 until June 2013. ​ 9 Table of Contents Bernadette M. Madarieta has served as our Chief Financial Officer since August 2021.
Younes has more than 30 years of experience in human resources and employment law. ​ 9 Table of Contents Ethics and Governance ​ We have adopted a code of conduct that applies to all of our employees, as well as a code of ethics for senior corporate financial officers that applies to our Chief Executive Officer, Chief Financial Officer, and Controller.
Younes has more than 30 years of experience in human resources and employment law. ​ Ethics and Governance ​ We have adopted a code of conduct that applies to all of our employees, as well as a code of ethics for senior corporate financial officers that applies to our Chief Executive Officer, Chief Financial Officer, and Controller.
Younes has served as our Senior Vice President and Chief Human Resources Officer since January 2022. He joined Lamb Weston from Loews Hotels & Co., a hospitality company, where he served as Executive Vice President and Chief Human Resources Officer from April 2019 through December 2021. Prior to that, Mr.
Younes has served as our Chief Human Resources Officer since January 2022. He also served as Senior Vice President from January 2022 to May 2023. Mr. Younes joined Lamb Weston from Loews Hotels & Co., a hospitality company, where he served as Executive Vice President and Chief Human Resources Officer from April 2019 through December 2021. Prior to that, Mr.
We believe that our practices are sufficient to maintain compliance with applicable government regulations. ​ Environmental, Health and Safety Regulations ​ We are subject to a number of foreign, domestic, federal, state, and local laws and other regulations relating to the protection of human health, the environment and the safety and health of personnel.
We believe that our practices are sufficient to maintain compliance with applicable government regulations. ​ 11 Table of Contents Environmental, Health and Safety Regulations ​ We are subject to a number of foreign, domestic, federal, state, and local laws and other regulations relating to the protection of human health, the environment and the safety and health of personnel.
Department leaders are also given the engagement survey results and are tasked with taking action based on their employees’ anonymous feedback (both quantitative and qualitative).
Department leaders were also given the engagement survey results and tasked with taking action based on their employees’ anonymous feedback (both quantitative and qualitative).
We are committed to equal pay for equal work, regardless of gender, race, ethnicity, or other personal characteristics. To deliver on that commitment, we benchmark and set pay ranges based on market data and consider various factors such as an employee’s role and experience, job location, and performance.
We are committed to equal pay for equal work, regardless of gender, race, ethnicity, or other personal characteristics. As part of this commitment, we benchmark and set pay ranges based on market data and consider various factors such as an employee’s role and experience, job location, and performance.
Patents, issued or applied for, cover inventions, including packaging, manufacturing processes, equipment, formulations, and designs. Our issued patents extend for varying periods according to the date of the patent application filing or grant and the legal term of patents in the various countries where patent protection is obtained.
Patents, issued or applied for, cover inventions, including packaging, manufacturing processes, equipment, formulations, and designs. Our issued patents extend for varying periods according to the date of the patent application filing or grant, the legal term of patents in the various countries where patent protection is obtained, and, in most countries, the payment of fees to maintain the patents.
While the quality of potatoes affects production 6 Table of Contents efficiency, overall, freshly-harvested potatoes process more efficiently in our production lines and are not subject to storage or secondary transport costs.
While the quality of potatoes affects production efficiency, overall, freshly-harvested potatoes process more efficiently in our production lines and are not subject to storage or secondary transport costs.
By paying close attention to the results, both at an aggregate enterprise level as well as at department, business, and work group levels, we believe that we have been able to enhance our workplace culture and improve overall employee engagement levels. ​ We are also committed to creating and building a culture of giving.
By paying close attention to the results of both surveys and implementing actions based on our findings, both at an aggregate enterprise level as well as at department, business, and work group levels, we believe that we have been able to enhance our workplace culture and improve overall employee engagement levels. ​ We are also committed to creating and building a culture of giving.
Of the hourly employees who are represented by these contracts, 18% are party to a collective bargaining agreement scheduled to expire over the course of the next twelve months. As the agreement expires, we believe it will be renegotiated on terms satisfactory to the parties. ​ Health and Safety. Our employees’ health, safety, and well-being are our highest priority.
Of the hourly employees who are represented by these contracts, 51% are party to a collective bargaining agreement scheduled to expire over the course of the next twelve months. As the agreements expire, we believe they will be renegotiated on terms satisfactory to the parties. ​ Health and Safety ​ Our employees’ health, safety, and well-being are our highest priority.
As of July 18, 2022, approximately 22% of our employees are parties to collective bargaining agreements with terms that we believe are typical for the industry in which we operate. Most of the union workers at our facilities are represented under contracts that expire at various times over the next several years.
As of July 17, 2023, approximately 30% of our employees are parties to collective bargaining agreements with terms that we believe are typical for the industry in which we operate. Most of the union workers at our facilities are represented under contracts that expire at various times over the next several years.
Our significant trademarks include: Lamb Weston, Lamb Weston Supreme, Lamb Weston Seeing Possibilities in Potatoes (and design), Lamb Weston Seasoned, Lamb Weston Private Reserve, Lamb Weston Stealth Fries, Lamb Weston Colossal Crisp, Lamb Weston Crispy on Delivery, and Sweet Things.
Our significant trademarks include: Lamb Weston, Lamb Weston Supreme, Lamb Weston Seeing Possibilities in Potatoes (and design), Lamb Weston Seasoned, Lamb Weston Private Reserve, Lamb Weston Stealth Fries, Lamb Weston Colossal Crisp, Lamb Weston Crispy on Delivery, Lamb Weston Twisters, Lamb Weston Twister Fries, Lamb Weston Crisscuts, Sweet Things, and Butler.
Our joint ventures operate a total of eight production facilities. ​ In addition to our own production facilities, we source a portion of our products under “co-packing” agreements, a common industry practice in which manufacturing is outsourced to other companies.
In addition to our own production facilities, we source a portion of our products under “co-packing” agreements, a common industry practice in which manufacturing is outsourced to other companies.
We have long-tenured relationships with leading quick service and fast casual restaurant chains, global foodservice distributors, large grocery retailers, and mass merchants. ​ Our largest customer, McDonald’s Corporation, accounted for approximately 10% of our consolidated net sales in fiscal 2022, 11% of our consolidated net sales in fiscal 2021, and 10% of our consolidated net sales in fiscal 2020.
We have long-tenured relationships with leading quick service and fast casual restaurant chains, global foodservice distributors, large grocery retailers, and mass merchants. ​ Our largest customer, McDonald’s Corporation, accounted for approximately 13%, 10%, and 11% of our consolidated net sales in fiscal 2023, 2022, and 2021, respectively. Sales to McDonald’s Corporation are included in our Global segment.
The prices of raw materials can fluctuate as a result of these factors. ​ During fiscal 2022, we faced increased costs for our primary raw materials, including potatoes, edible oils, packaging, grains, starches, and energy inputs.
The prices of raw materials can fluctuate as a result of these factors. ​ During fiscal 2023, we continued to face increased costs for our primary raw materials, including potatoes, edible oils, packaging, grains, starches, and energy inputs.
We regularly evaluate our co-packing arrangements to ensure the most cost-effective manufacturing of our products and to utilize company-owned production facilities most effectively. ​ International Operations ​ At May 29, 2022, we had operations in seventeen countries, with sales support in each of these countries and production and processing facilities in four countries.
We regularly evaluate our co-packing arrangements to ensure the most cost-effective manufacturing of our products and to utilize company-owned production facilities most effectively. ​ International Operations ​ At May 28, 2023, we had operations in 31 countries, with sales support in each of these countries and production and processing facilities in 8 countries.
These offerings are designed to position employees to execute with excellence in their current roles, accelerate their learning curves, and grow their careers by taking advantage of continuing learning opportunities. For example, in our production facilities, we provide multiple training sessions focused on quality and safety. We also hold multi-day courses focused on leadership development for managers throughout our organization.
These offerings are designed to position employees to execute with excellence in their current roles, accelerate their learning curves, and grow their careers by taking advantage of continuing learning opportunities. For example, in our production facilities, we provide multiple training sessions focused on quality and safety.
Attracting, developing, and retaining the best talent globally with the right skills to drive our mission, vision, and values are central components of our strategies for long-term growth. As of July 18, 2022, we had approximately 8,000 employees, of which approximately 800 employees work outside of the U.S.
Attracting, developing, and retaining the best talent globally with the right skills to drive our mission, vision, and values are central components of our strategies for long-term growth. As of July 17, 2023, we had approximately 10,300 employees, of which approximately 2,600 employees work outside of the U.S.
In addition, with our e-learning resources, employees can also focus on timely and topical development areas, including leadership, management excellence, functional capabilities, and diversity, equity, and inclusion. ​ Employee Engagement. We believe that having a workplace culture that supports and values all employees is critical to our success.
In addition, with both in-person and our e-learning resources, employees can also focus on timely and topical development areas, including leadership capabilities, management excellence, functional skill building, and DEI. ​ 8 Table of Contents Employee Engagement ​ We believe that having a workplace culture that supports and values all employees is critical to our success.
We, along with our joint ventures, are also a leading supplier of value-added frozen potato products internationally, with a strong presence in high-growth emerging markets. Together with our joint ventures, we offer a broad product portfolio to a diverse channel and customer base in over 100 countries.
We are the number one supplier of value-added frozen potato products in North America and a leading supplier of value-added frozen potato products internationally, with a strong presence in high-growth emerging markets. We offer a broad product portfolio to a diverse channel and customer base in over 100 countries.
Smith held various brand management roles at Dean Foods Company, a food and beverage company, and its WhiteWave division from May 2003 until December 2007. ​ Eryk J. Spytek has served as our Senior Vice President, General Counsel, and Chief Compliance Officer since October 2016. He also served as our Corporate Secretary from October 2016 to November 2020.
Smith held various brand management roles at Dean Foods Company, a food and beverage company, and its WhiteWave division from May 2003 until December 2007. ​ 10 Table of Contents Eryk J. Spytek has served as our General Counsel and Chief Compliance Officer since October 2016.
Sales to McDonald’s Corporation are included in our Global segment. No other customer accounted for more than 10% of our fiscal 2022, 2021, or 2020 consolidated net sales. ​ Research and Development ​ We leverage our research and development resources for both growth and efficiency initiatives.
No other customer accounted for more than 10% of our fiscal 2023, 2022, or 2021 consolidated net sales. ​ Research and Development ​ We leverage our research and development resources for both growth and efficiency initiatives.
ITEM 1. BUSINESS ​ Lamb Weston Holdings, Inc. (“we,” “us,” “our,” “the Company,” or “Lamb Weston”), along with our joint ventures, is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho. We, along with our joint ventures, are the number one supplier of value-added frozen potato products in North America.
ITEM 1. BUSINESS ​ Lamb Weston Holdings, Inc. (“we,” “us,” “our,” “the Company,” or “Lamb Weston”) is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho.
We source a significant amount of our raw potatoes under both strategic, long-term grower relationships and short-term annual contracts. In the U.S., most of the potato crop used in our products is grown in Washington, Idaho, and Oregon.
We source a significant amount of our raw potatoes under both strategic, long-term grower relationships and short-term annual contracts. In the U.S., most of the potato crop used in our products is grown in Washington, Idaho, and Oregon. In Europe, growing regions for the necessary potatoes are concentrated in the Netherlands, Austria, Belgium, Germany, France, and the United Kingdom.
We regularly review our compensation and benefit programs with the aim of keeping them competitive and designed to meet our employees’ health and wellness needs, which we believe is important to attract and retain the best available talent. ​ Diversity, Equity, and Inclusion.
We regularly review our compensation and benefit programs with the aim of keeping them competitive and designed to meet our employees’ health and wellness needs, which we believe is important to attract and retain the best available talent. ​ Diversity, Equity, and Inclusion (“DEI”) ​ As a global company, we strive to honor and celebrate diversity in our team, which we believe enriches our work lives and drives diversity of perspectives in our decision-making as a company.
We also regularly review our compensation practices to promote fair and equitable pay, and in fiscal 2022, applied a mid-year base salary increase for certain employees in response to the current competitive labor market. In addition to base salaries, many employees also participate in an annual short-term incentive program and may also receive long-term equity awards.
We also regularly review our compensation practices to promote fair and equitable pay. In addition to base salaries, many employees also participate in an annual short-term incentive program and may also receive long-term equity awards.
She joined Lamb Weston in October 2016 as our Vice President and Controller and Principal Accounting Officer. Before that, Ms.
She also served as Senior Vice President from August 2021 to May 2023. Ms. Madarieta joined Lamb Weston in October 2016 as our Vice President and Controller and Principal Accounting Officer. Before that, Ms.
Financial Statements and Supplementary Data” of this Form 10-K. ​ Global ​ Our Global segment includes frozen potato products sold in North America and international markets generally to the top 100 North American based restaurant chains and international customers comprised of global and regional quick service and full-service restaurant chains, foodservice distributors, and retailers.
This resulted in a change from four reportable segments to two (North America and International), effective the beginning of fiscal 2024. ​ Global ​ Our Global segment includes frozen potato products sold in North America and international markets generally to the top 100 North American based restaurant chains and international customers comprised of global and regional quick service and full-service restaurant chains, foodservice distributors, and retailers.
The markets in which we operate are expected to remain highly competitive for the foreseeable future. See also “Item 1A. Risk Factors – Industry Risks – Increased competition may result in reduced sales or profits” of this Form 10-K. ​ Seasonality ​ Our product contribution margin percentage, inventory levels, net sales, and cash flows are affected by seasonality.
Risk Factors – Industry Risks – Increased competition may result in reduced sales or profits” of this Form 10-K. ​ 6 Table of Contents Seasonality ​ Our product contribution margin percentage, inventory levels, net sales, and cash flows are affected by seasonality.
Prior to that, Mr. Scheufler spent more than 20 years at The Procter & Gamble Company, a consumer goods corporation, in a variety of roles of increasing responsibility after starting his career in manufacturing operations in 1990. ​ Michael J. Smith has served as our Senior Vice President and General Manager of Foodservice, Retail, Marketing and Innovation since April 2018.
Scheufler spent more than 20 years at The Procter & Gamble Company, a consumer goods corporation, in a variety of roles of increasing responsibility after starting his career in manufacturing operations in 1990. ​ Marc Schroeder has served as our President, International since May 29, 2023. Mr.
Annually, we make cash grants through the Lamb Weston Foundation, including through our Pay it Forward program, which gives our employees a role in directing some of the Foundation’s funds.
Annually, we make cash grants through the Lamb Weston Foundation, including through our Pay it Forward program, which gives our employees a role in directing some of the Foundation’s funds. In addition, we offer a matching gifts program to employees, paid volunteer time off, non-profit board service grants, and an employee dependent scholarship program.
The Retail segment’s primary products are frozen potatoes sold under our owned or licensed brands, including Grown in Idaho and Alexia , other licensed equities comprised of brand names of major North American restaurant chains, and the retailers’ own brands. ​ Other ​ The Other reporting segment primarily includes our vegetable and dairy businesses, as well as unrealized mark-to-market adjustments associated with commodity hedging contracts. ​ Joint Venture Relationships ​ We conduct some of our business through three unconsolidated joint ventures and include our share of the earnings of these affiliates as equity method investment earnings in our consolidated financial statements based on our economic ownership interest in each of these joint ventures.
The Retail segment’s primary products are frozen potatoes sold under our owned or licensed brands, including Grown in Idaho and Alexia , other licensed equities comprised of brand names of major North American restaurant chains, and the retailers’ own brands. ​ Other ​ The Other reporting segment primarily includes our vegetable and dairy businesses, as well as unrealized mark-to-market adjustments associated with commodity hedging contracts. ​ Joint Venture Relationships ​ We hold a 50 percent ownership interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a joint venture with RDO Frozen Co., that operates a single potato processing facility in the U.S.
For segment financial information see Note 13, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 13, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
We believe that the grower networks to which we have access provide a sufficient source of raw potato inputs year-to-year.
We also have potato growing regions in Canada, China, Australia, and Argentina that support our processing facilities in those countries. We believe that the grower networks to which we have access provide a sufficient source of raw potato inputs year-to-year.
From June 2015 until October 2016, Mr. Spytek was Of Counsel at Winston & Strawn LLP, a law firm.
He also served as Senior Vice President from October 2016 to May 2023 and Corporate Secretary from October 2016 to November 2020. From June 2015 until October 2016, Mr. Spytek was Of Counsel at Winston & Strawn LLP, a law firm.
Madarieta has 25 years of finance management and leadership experience spanning public and privately held companies and Big 4 public accounting firms. ​ Sharon L. Miller has served as our Senior Vice President and General Manager, Global Business Unit since September 2016. Before that, she served as Conagra’s Vice President and General Manager, Lamb Weston Global Business Unit since 2015.
Madarieta has more than 25 years of finance management and leadership experience spanning public and privately held companies and Big 4 public accounting firms. ​ Sharon L. Miller has served as our President, North America since May 29, 2023.
We provide all sales and marketing services to Lamb Weston RDO and receive a fee for these services based on a percentage of the net sales of the venture. ​ ● During fiscal 2022, we held a fifty percent ownership interest in Lamb Weston Alimentos Modernos S.A.
We provide all sales and marketing services to Lamb Weston RDO and receive a fee for these services based on a percentage of the net sales of the venture. 4 Table of Contents We account for our investment in Lamb Weston RDO under the equity method of accounting.
In that role, he led the company’s Lamb Weston and Foodservice businesses, as well as its previously divested Spicetec Flavors & Seasonings and J.M. Swank operations. Mr. Werner also served as interim President of Conagra’s Private Brands from June 2015 through its divestiture in February 2016. Before his appointment as President, Commercial 8 Table of Contents Foods, Mr.
Prior to that, he served as President, Commercial Foods, for Conagra, a food company, since May 2015. In that role, he led the company’s Lamb Weston and Foodservice businesses, as well as its previously divested Spicetec Flavors & Seasonings and J.M. Swank operations. Mr.
Scheufler served as Vice President of Global Operations at Mondelēz International, Inc., a food and beverage company, from July 2014 until August 2019. During his tenure at Mondelēz International, Mr. Scheufler oversaw a major global restructuring program to optimize the global supply chain footprint, including the manufacturing, customer service, quality, logistics, health, safety and environment, and innovation functions.
Scheufler oversaw a major global restructuring program to optimize the global supply chain footprint, including the manufacturing, customer service, quality, logistics, health, safety and environment, and innovation functions. Prior to that, Mr.
Financial Statements and Supplementary Data” of this Form 10-K. ​ Sales, Distribution and Customers ​ We benefit from strong relationships with a diverse set of customers.
This joint venture’s financial results are consolidated in our financial statements. ​ For more information, see Note 4, Joint Venture Investments, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​ Sales, Distribution and Customers ​ We benefit from strong relationships with a diverse set of customers.
Since joining Conagra in 1999, Ms. Miller has held various leadership positions, including Vice President of Sales for LWM. Prior to that, Ms. Miller was a key sales and business leader within Lamb Weston in both the U.S. and Canada.
Before that, she served as our Senior Vice President and General Manager, Global Business Unit since September 2016 and Conagra’s Vice President and General Manager, Lamb Weston Global Business Unit from 2015 to August 2016. Since joining Conagra in 1999, Ms. Miller has held various leadership positions, including Vice President of Sales for LW EMEA. Prior to that, Ms.
Werner ​ Director, President and Chief Executive Officer ​ 56 Bernadette M. Madarieta ​ Senior Vice President and Chief Financial Officer ​ 47 Sharon L. Miller ​ Senior Vice President and General Manager, Global Business Unit ​ 56 Gerardo Scheufler ​ Senior Vice President and Chief Supply Chain Officer ​ 54 Michael J.
Werner ​ Director, President and Chief Executive Officer ​ 57 Bernadette M. Madarieta ​ Chief Financial Officer ​ 48 Sharon L. Miller ​ President, North America ​ 57 Sukshma Rajagopalan ​ Chief Information and Digital Officer ​ 49 Gerardo Scheufler ​ Chief Supply Chain Officer ​ 55 Marc Schroeder ​ President, International ​ 52 Michael J.
We are committed to providing a work environment that fosters respect, inclusion, fairness, and dignity, and is free of harassment, discrimination, or fear of retaliation. ​ 7 Table of Contents Recruitment, Training, and Development. We believe maintaining a robust pipeline of talent is crucial to our ongoing success and is a key aspect of succession planning efforts across the organization.
In addition, in fiscal 2023, we introduced a DEI learning and development platform to our global workforce to support team members’ DEI learning. ​ Recruitment, Training, and Development ​ We believe maintaining a robust pipeline of talent is crucial to our ongoing success and is a key aspect of succession planning efforts across the organization.
She also has held various sales positions with North American food manufacturers and foodservice distributors. ​ Gerardo Scheufler has served as our Senior Vice President and Chief Supply Chain Officer since August 2019. Prior to joining Lamb Weston, Mr.
Miller was a key sales and business leader within Lamb Weston in both the U.S. and Canada. She also has held various sales positions with North American food manufacturers and foodservice distributors. ​ Sukshma Rajagopalan has served as our Chief Information and Digital Officer since June 2023. Ms.
Smith ​ Senior Vice President and General Manager of Foodservice, Retail, Marketing and Innovation ​ 45 Eryk J. Spytek ​ Senior Vice President, General Counsel, and Chief Compliance Officer ​ 54 Steven J. Younes ​ Senior Vice President and Chief Human Resources Officer ​ 56 ​ Thomas P.
Smith ​ Chief Operating Officer ​ 46 Eryk J. Spytek ​ General Counsel and Chief Compliance Officer ​ 55 Steven J. Younes ​ Chief Human Resources Officer ​ 57 ​ Thomas P. Werner has served as our President and Chief Executive Officer and a member of our board of directors since November 2016.
As a global company, we honor and celebrate the diversity in our team, which we believe enriches our work lives and drives diversity of perspectives in our decision-making. We define diversity as the unique abilities, experiences, and cultural backgrounds our employees bring to our Company’s workplace.
We define diversity as the unique abilities, experiences, and cultural backgrounds our employees bring to our Company’s workplace. We are committed to providing a work environment that fosters respect, inclusion, fairness, and dignity, and is free of harassment, discrimination, or fear of retaliation.
Prior to that, he served as Senior Vice President, Growth and Strategy beginning in September 2016. Mr.
Smith has served as our Chief Operating Officer since May 29, 2023. Prior to that, he served as Senior Vice President and General Manager of Foodservice, Retail, Marketing and Innovation since April 2018 and Senior Vice President, Growth and Strategy from September 2016 until March 2018. Mr.
In fiscal 2022, we also adopted a flexible work policy for office-based employees intended to allow employees flexibility in work location while maintaining productivity and performance expectations, as well as enhanced our vacation policy to add additional days of paid time-off for certain employee groups to better align with competitive market practice.
Benefits for employees outside of the U.S. vary by country but are generally market competitive and representative of prevalent local company sponsored benefit programs. We have also adopted a hybrid work policy for office-based employees intended to allow employees flexibility in work location while maintaining productivity and performance expectations.
French fries represent the majority of our value-added frozen potato product portfolio. ​ We were organized as a Delaware corporation in July 2016, as a wholly owned subsidiary of Conagra Brands, Inc. (formerly, ConAgra Foods, Inc., “Conagra”).
French fries represent most of our value-added frozen potato product portfolio. ​ We were organized as a Delaware corporation in July 2016. Our common stock trades under the ticker symbol “LW” on the New York Stock Exchange. ​ 3 Table of Contents Segments ​ In July 2022, we acquired an additional 40 percent interest in Lamb Weston Alimentos Modernos S.A.
Removed
On November 9, 2016, we separated from Conagra and became an independent publicly traded company through the pro rata distribution by Conagra of 100% of our outstanding common stock to Conagra stockholders.
Added
(“LWAMSA”), our joint venture in Argentina, and, in February 2023, we acquired the remaining equity interest in LW EMEA, our joint venture in Europe. With the completion of the transactions, we own 90 percent and 100 percent of the equity interests in LWAMSA and LW EMEA, respectively.
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Our common stock trades under the ticker symbol “LW” on the New York Stock Exchange. ​ Our consolidated financial statements include the accounts of Lamb Weston Holdings, Inc. and its wholly owned subsidiaries. ​ 3 Table of Contents Segments ​ We have four reportable segments: Global, Foodservice, Retail, and Other.
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Accordingly, we consolidated LWAMSA’s and LW EMEA’s financial results in our consolidated financial statements beginning in our fiscal first and fourth quarters, respectively. The results are included in our Global segment. ​ During fiscal 2023, we had four reportable segments: Global, Foodservice, Retail, and Other. For further segment and financial information, see “Part II, Item 7.
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These joint ventures produce and market value-added frozen potato products for our customers: ​ ● We hold a fifty percent ownership interest in Lamb-Weston/Meijer v.o.f.
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Financial Statements and Supplementary Data” of this Form 10-K. ​ Effective May 29, 2023, in connection with our recent acquisitions and to align with our expanded global footprint, our management, including our chief executive officer, who is our chief operating decision maker, began managing our operations as two business segments based on management’s change to the way it monitors performance, aligns strategies, and allocates resources.
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(“LWM”), a joint venture with Meijer Frozen Foods B.V., that is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe and the Middle East. ​ ● We hold a fifty percent ownership interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a joint venture with RDO Frozen Co., that operates a single potato processing facility in the U.S.
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We accounted for our investments in LW EMEA and LWAMSA under the equity method of accounting until February 2023 and July 2022, respectively, when we acquired the majority ownership of these entities and began consolidating their respective financial results in our consolidated financial statements. In addition, LW EMEA owns a 75 percent interest in a joint venture in Austria.
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(“LWAMSA”), a joint venture with Selprey S.A., a wholly owned subsidiary of Sociedad Comercial del Plata S.A., that is headquartered in Argentina. LWAMSA manufactures and sells frozen potato products 4 Table of Contents principally in South America.
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The markets in which we operate are expected to remain highly competitive for the foreseeable future. See also “Item 1A.
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We included our share of the earnings of this unconsolidated joint venture as equity method investment earnings in our consolidated financial statements based on our economic ownership interest in LWAMSA. In July 2022, we acquired an additional forty percent interest in LWAMSA, increasing our total ownership of LWAMSA from fifty percent to ninety percent.
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In fiscal 2023, we launched our first business resource groups, which are voluntary, team member-led groups that bring employees together aligned around affinity areas. We believe these groups help create community and build inclusion. We have three business resource groups centered on women, multiculture and young professionals.
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Following this acquisition, we will consolidate LWAMSA’s results in our consolidated financial statements. ​ For more information, see Note 4, Equity Method Investments, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
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We also hold courses focused on leadership development for employees and people leaders across our global organization.
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For LWM, 5 Table of Contents European growing regions for the necessary potatoes are concentrated in the Netherlands, Austria, Belgium, Germany, France, and the United Kingdom. We also have potato growing regions in Canada, China, Australia, and Argentina that support our processing facilities in those countries.
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In addition, following our acquisition of the remaining equity interest in LW EMEA, we conducted a global employee culture survey to help assess employees’ reactions to the acquisition and plans for the full integration of LW EMEA with our other operations.
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In addition, we offer a matching gifts program to employees, paid volunteer time off, non-profit board service grants, and an employee dependent scholarship program. ​ Information About Our Executive Officers ​ The following are our executive officers as of July 18, 2022: ​ ​ ​ ​ ​ ​ Name ​ Title ​ Age Thomas P.
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Similar to our fiscal 2022 engagement survey, our executive leadership team reviewed the results of the survey and shared those results with our Compensation and Human Capital Committee.
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Werner has served as our President and Chief Executive Officer and a member of our board of directors since November 2016. Prior to that, he served as President, Commercial Foods, for Conagra, a food company, since May 2015.
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Further, in fiscal 2023, we adopted a volunteer reward program that allows employees to provide monetary donations to organizations where they volunteer and established the Team Member Relief Fund to provide financial support to employees experiencing hardships such as catastrophic events, illness, domestic violence, and other unforeseen circumstances. ​ Information About Our Executive Officers ​ The following are our executive officers as of July 17, 2023: ​ ​ ​ ​ ​ ​ Name ​ Title ​ Age Thomas P.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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If this occurs, we may be unable to adequately supply all of our existing customers’ needs and new customer opportunities, which could adversely affect our business, financial condition, and results of operations. ​ Our operations are dependent on a wide array of third parties. ​ The success of our end-to-end supply chain relies on the continued performance of a wide array of third parties.
If this occurs, we may be unable to adequately supply all our existing customers’ needs and new customer opportunities, which could adversely affect our business, financial condition, and results of operations. ​ Our operations are dependent on a wide array of third parties. ​ The success of our end-to-end supply chain relies on the continued performance of a wide array of third parties.
Some of the impacts our business has experienced, is continuing to experience, and may experience as a result of the COVID-19 pandemic, or any future pandemic or other contagious outbreak, include, but are not limited to, the following: ​ ● decreased sales to our foodservice customers resulting from the closure or reduction in capacity of many full-service restaurants and other commercial operations (e.g., hotels, schools and universities, sporting venues), which caused and can cause a significant reduction in consumer traffic; ● reduced demand at quick service restaurants, in particular in our international markets where most consumption is dine-in or carry-out as drive-thru options are more limited; ● shutdowns of one or more of our production facilities or lines, or disruption in our production timing and operations, including but not limited to, as a result of illness, labor shortages, government restrictions, or other workforce disruptions; ● continued commodity cost volatility, including higher edible oil, grain, and starch costs, which may not be sufficiently offset by our commodity hedging activities; ● increased transportation and warehousing costs, as well as disruptions in the transport of goods, including limited availability of shipping containers, from our supply chain to us and from us to our customers, which caused us to rely more heavily on higher cost transportation to maintain customer service levels; ● disruptions to our distribution capabilities or to our distribution channels, including those of our suppliers, logistics service providers, or independent distributors; ● failure of third parties on which we rely, including but not limited to, those that supply our packaging, ingredients, equipment and other necessary operating materials, co-manufacturers and independent contractors, to meet their obligations to us, or significant disruptions in their ability to do so; ● a change in demand for, or availability of, one or more of our products as a result of restaurants, other foodservice providers, retailers, or distributors, modifying their inventory, fulfillment or shipping practices; ● increased reliance on our information technology system as a result of work-from-home Company policies, causing us to be more vulnerable to cyberattacks or other disruptions as a result of team members accessing our networks and systems from off-site; and ● continued business disruptions and uncertainties related to the COVID-19 pandemic for a sustained period of time could result in additional delays or modifications to our strategic plans, capital expansion projects and other initiatives and hinder our ability to achieve anticipated cost savings and productivity initiatives on the original timelines. ​ These impacts have caused, and may continue to cause, changes in the mix of products sold, decreases in revenue, and increases in costs resulting in decreased profitability and cash flows from operations, which have caused, and may continue to cause, an adverse effect on our business, financial condition, and results of operations that may be material.
Some of the impacts our business has experienced, and may continue to experience, as a result of the COVID-19 pandemic, or any future pandemic or other contagious outbreak, include, but are not limited to, the following: ​ ● decreased sales to our foodservice customers resulting from the closure or reduction in capacity of many full-service restaurants and other commercial operations (e.g., hotels, schools and universities, sporting venues), which caused and can cause a significant reduction in consumer traffic; ● reduced demand at quick service restaurants, in particular in our international markets where most consumption is dine-in or carry-out as drive-thru options are more limited; ● shutdowns of one or more of our production facilities or lines, or disruption in our production timing and operations, including but not limited to, as a result of illness, labor shortages, government restrictions, or other workforce disruptions; ● continued commodity cost volatility, including higher edible oil, grain, and starch costs, which may not be sufficiently offset by our commodity hedging activities; ● increased transportation and warehousing costs, as well as disruptions in the transport of goods, including limited availability of shipping containers, from our supply chain to us and from us to our customers, which caused us to rely more heavily on higher cost transportation to maintain customer service levels; ● disruptions to our distribution capabilities or to our distribution channels, including those of our suppliers, logistics service providers, or independent distributors; ● failure of third parties on which we rely, including but not limited to, those that supply our packaging, ingredients, equipment and other necessary operating materials, co-manufacturers and independent contractors, to meet their obligations to us, or significant disruptions in their ability to do so; ● a change in demand for, or availability of, one or more of our products as a result of restaurants, other foodservice providers, retailers, or distributors, modifying their inventory, fulfillment or shipping practices; ● increased reliance on our information technology system as a result of work-from-home Company policies, causing us to be more vulnerable to cyberattacks or other disruptions as a result of team members accessing our networks and systems from off-site; and ● business disruptions and uncertainties related to a future pandemic for a sustained period of time could result in delays or modifications to our strategic plans, capital expansion projects and other initiatives and hinder our ability to achieve anticipated cost savings and productivity initiatives on the original timelines. ​ These impacts have caused, and may continue to cause, changes in the mix of products sold, decreases in revenue, and increases in costs resulting in decreased profitability and cash flows from operations, which have caused, and may continue to cause, an adverse effect on our business, financial condition, and results of operations that may be material.
Circumstances beyond our control, such as a labor dispute at a port, or workforce disruption, including those due to the COVID-19 pandemic or future pandemics or other contagious outbreaks, could prevent us from exporting our products in sufficient quantities to meet customer opportunities. During the latter half of fiscal 2022, limited shipping container availability along the U.S.
Circumstances beyond our control, such as a labor dispute at a port, or workforce disruption, including those due to pandemics such as the COVID-19 pandemic or other contagious outbreaks, could prevent us from exporting our products in sufficient quantities to meet customer opportunities. During the latter half of fiscal 2022, limited shipping container availability along the U.S.
Our failure to obtain or adequately protect our intellectual property or any change in law that lessens or removes the current legal protections of our intellectual property may diminish our competitiveness and adversely affect our business and financial results. We also license certain intellectual property, most notably Grown in Idaho and Alexia , from third parties.
Our failure to timely obtain or adequately protect our intellectual property or any change in law that lessens or removes the current legal protections of our intellectual property may diminish our competitiveness and adversely affect our business and financial results. We also license certain intellectual property, most notably Grown in Idaho and Alexia , from third parties.
The labor market has become increasingly tight and competitive, and we may face sudden and unforeseen challenges in the availability of labor, such as we have experienced during fiscal 2022 at some of our production facilities, which reduced our production run-rates and increased our manufacturing costs.
The labor market has become increasingly tight and competitive, and we may face sudden and unforeseen challenges in the availability of labor, such as we have experienced during fiscal 2022 and 2023 at some of our production facilities, which reduced our production run-rates and increased our manufacturing costs.
For example, in December 2021, our third-party service provider for our workforce management software, the Ultimate Kronos Group (“ Kronos ”), experienced a ransomware attack that resulted in Kronos temporarily decommissioning the functionality of certain of its cloud software, requiring us to find and implement other procedures to continue our payroll processes, which was time consuming and burdensome but did not have a material adverse impact on our business.
For example, in December 2021, our third-party service provider for our workforce management software, the Ultimate Kronos Group (“Kronos”), experienced a ransomware attack that resulted in Kronos temporarily decommissioning the functionality of certain of its cloud software, requiring us to find and implement other procedures to continue our payroll processes, which was time consuming and burdensome but did not have a material adverse impact on our business.
Changes in applicable laws or regulations or evolving interpretations thereof, including increased government regulations to limit the emissions of toxic air pollutants and carbon dioxide and other greenhouse gas emissions as a result of concern over climate change, may result in increased compliance costs, capital expenditures, and other financial obligations for us, which could affect our profitability or impede the production or distribution of our products, which could adversely affect our business, financial condition, and results of operations. ​ Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations. ​ There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters.
Changes in applicable laws or regulations or evolving interpretations thereof, including increased government regulations to limit the emissions of toxic air pollutants and carbon dioxide and other greenhouse gas emissions as a result of concern over climate change, may result in increased compliance costs, capital expenditures, and other financial obligations for us, which could affect our profitability or impede the production or distribution of our products, which could adversely affect our business, financial condition, and results of operations. 25 Table of Contents ​ Climate change, or legal, regulatory, or market measures to address climate change, may negatively affect our business and operations. ​ There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters.
Deterioration in the financial condition of significant customers could materially and adversely affect our business, financial condition, and results of operations. ​ Disruption of our access to export mechanisms could have an adverse impact on our business, financial condition, and results of operations. ​ To serve our customers globally, we rely in part on our international joint ventures, but also on exports from the U.S.
Deterioration in the financial condition of significant customers could materially and adversely affect our business, financial condition, and results of operations. ​ Disruption of our access to export mechanisms could have an adverse impact on our business, financial condition, and results of operations. ​ To serve our customers globally, we rely in part on our international joint venture and operations, but also on exports from the U.S.
A sustained labor shortage or increased turnover rates within our workforce, caused by COVID-19 or as a result of general macroeconomic factors, have led and could in the future lead to production or shipping delays, increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our production and distribution facilities and overall business.
A sustained labor shortage or increased turnover rates within our workforce, caused by COVID-19 or as a result of general macroeconomic factors, have led and could in the future lead to production or shipping delays, increased costs, such as increased overtime to meet demand and increased 13 Table of Contents wage rates to attract and retain employees, and could negatively affect our ability to efficiently operate our production and distribution facilities and overall business.
An increased supply of potatoes could lead to overproduction of finished goods and associated increased storage costs or destruction of unused potatoes at a loss. ​ Our business relies on a potato crop that has a concentrated growing region. ​ Ideal growing conditions for the potatoes necessary for our value-added products (e.g., french fries) are concentrated in a few geographic regions globally.
An increased supply of potatoes could lead to overproduction of finished goods and associated increased storage costs or destruction of unused potatoes at a loss. ​ 19 Table of Contents Our business relies on a potato crop that has a concentrated growing region. ​ Ideal growing conditions for the potatoes necessary for our value-added products (e.g., french fries) are concentrated in a few geographic regions globally.
If our products fail to meet consumer preferences or customer requirements, or we fail to introduce new and improved products on a timely basis, then the return on those investments will be less than anticipated, which could materially and adversely affect our business, financial condition, and results of operations. ​ 21 Table of Contents In addition, we compete against branded products as well as private label products.
If our products fail to meet consumer preferences or customer requirements, or we fail to introduce new and improved products on a timely basis, then the return on those investments will be less than anticipated, which could materially and adversely affect our business, financial condition, and results of operations. ​ In addition, we compete against branded products as well as private label products.
Our inability to enter into satisfactory co-packing agreements could limit our ability to implement our business plan or meet customer demand. ​ 16 Table of Contents Damage to our reputation as a trusted partner to customers and good corporate citizen could have a material adverse effect on our business, financial condition, and results of operations. ​ Our customers rely on us and our co-manufacturers to manufacture safe, high quality food products.
Our inability to enter into satisfactory co-packing agreements could limit our ability to implement our business plan or meet customer demand. ​ Damage to our reputation as a trusted partner to customers and good corporate citizen could have a material adverse effect on our business, financial condition, and results of operations. ​ Our customers rely on us and our co-manufacturers to manufacture safe, high quality food products.
Further escalation of geopolitical tensions related to military conflict could result in loss of property, expropriation, cyberattacks, supply disruptions, plant closures and an inability to obtain key supplies and materials, as well as adversely affect our business and our supply chain, our international subsidiaries and joint ventures, business partners or customers in the broader region, including our European growing regions for potatoes.
Further escalation of geopolitical tensions related to the military conflict could result in cyberattacks, supply disruptions, plant closures and an inability to obtain key supplies and materials, as well as adversely affect our business and our supply chain, our international subsidiaries and joint ventures, business partners or customers in the broader region, including our European growing regions for potatoes.
Risk Factors above. 23 Table of Contents Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brands. ​ We consider our intellectual property rights to be a significant and valuable aspect of our business.
Risk Factors above. ​ 26 Table of Contents Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products and brands. ​ We consider our intellectual property rights to be a significant and valuable aspect of our business.
Our profits would decrease as a result of a reduction in prices or sales volume. ​ We must identify changing consumer preferences and consumption trends and develop and offer food products to our customers that help meet those preferences and trends. ​ Consumer preferences evolve over time and our success depends on our ability to identify the tastes and dietary habits of consumers and offer products that appeal to those preferences.
Our profits would decrease as a result of a reduction in prices or sales volume. ​ 20 Table of Contents We must identify changing consumer preferences and consumption trends and develop and offer food products to our customers that help meet those preferences and trends. ​ Consumer preferences evolve over time and our success depends on our ability to identify the tastes and dietary habits of consumers and offer products that appeal to those preferences.
An overall labor shortage, lack of skilled labor, increased turnover or labor inflation, caused by COVID-19 or as a result of general macroeconomic factors, could have a material adverse impact on our business, financial condition, and results of operations. ​ In addition, health care, workers’ compensation, postretirement welfare, and pension costs are increasing.
An overall labor shortage, lack of skilled labor, increased turnover, or labor inflation, caused by COVID-19 or as a result of general macroeconomic factors, could have a material adverse impact on our business, financial condition, and results of operations. ​ In addition, health care and workers’ compensation costs are increasing.
Our future success and earnings growth depend in part on our ability to maintain the appropriate cost 11 Table of Contents structure and operate efficiently in the highly competitive value-added frozen potato product category. We continue to implement profit-enhancing initiatives that improve the efficiency of our supply chain and general and administrative functions.
Our future success and earnings growth depend in part on our ability to maintain the appropriate cost structure and operate efficiently in the highly competitive value-added frozen potato product category. We continue to implement profit-enhancing initiatives that improve the efficiency of our supply chain and general and administrative functions.
As additional industry capacity comes online, or market demand otherwise decreases, including as a result of the COVID-19 pandemic or future pandemics or other contagious outbreaks, we may face competitive pressures that would restrict our ability to increase or maintain prices, or we may lose market share.
As additional industry capacity comes online, or market demand otherwise decreases, including as a result of inflation or pandemics such as the COVID-19 pandemic or other contagious outbreaks, we may face competitive pressures that would restrict our ability to increase or maintain prices, or we may lose market share.
Damage to either could reduce demand for our products or cause production and delivery disruptions. ​ Our reputation could also be adversely impacted by any of the following, or by adverse publicity (whether or not valid) relating thereto: the failure to maintain high ethical, social, and environmental standards for our operations and activities, including the health, safety and security of our employees; our research and development efforts; our environmental impact, including use of agricultural materials, packaging, energy use, and waste management; our failure to comply with local laws and regulations; our failure to maintain an effective system of internal controls; or our failure to provide accurate and timely financial information.
Damage to either could reduce demand for our products or cause production and delivery disruptions. ​ Our reputation could also be adversely impacted by any of the following, or by adverse publicity (whether or not valid) relating thereto: the failure to maintain high ethical, social, and environmental standards for our operations and activities, including the health, safety, and security of our employees; our research and development efforts; our environmental impact, including use of agricultural materials, packaging, energy use, and waste management, and the failure to achieve any stated goals with respect to such matters; our failure to comply with local laws and regulations; our failure to maintain an effective system of internal controls; or our failure to provide accurate and timely financial information.
Further, because of the poor quality of the crop in the Pacific Northwest that was harvested in fall 2021, we encountered lower raw potato utilization rates in our production facilities during the second half of fiscal 2022, which increased our production costs.
Further, because of the poor quality of the crop in the Pacific Northwest that was harvested in fall 2021, we encountered lower raw potato utilization rates in our production facilities during the second half of fiscal 2022 and early fiscal 2023, which increased our production costs.
Customers include global, national and regional quick service and fast casual restaurants as well as small, independently operated restaurants, multinational, broadline foodservice distributors, regional foodservice distributors, and major food retailers. Some of these customers 15 Table of Contents independently represent a meaningful portion of our sales.
Customers include global, national and regional quick service and fast casual restaurants as well as small, independently operated restaurants, multinational, broadline foodservice distributors, regional foodservice distributors, and major food retailers. Some of these customers independently represent a meaningful portion of our sales.
For example, it could: ​ ● make it more difficult for us to make payments on our debt; ● require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes; ● increase our vulnerability to adverse economic or industry conditions; ● limit our ability to obtain additional financing in the future to enable us to react to changes in our business; or ● place us at a competitive disadvantage compared to businesses in our industry that have less debt. ​ The agreements governing our debt contain various covenants that impose restrictions on us that may affect our ability to operate our business. ​ The credit agreements governing our term loans and revolving credit facility and the indentures governing our senior notes contain covenants that, among other things, limit our ability to: ● borrow money or guarantee debt; ● create liens; ● pay dividends on or redeem or repurchase stock; ● make specified types of investments and acquisitions; ● enter into agreements that limit the ability of our subsidiaries to pay dividends or other payments to us; ● enter into transactions with affiliates; and ● sell assets or merge with other companies. ​ These restrictions on our ability to operate our business could harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition, or other corporate opportunities. ​ Various risks, uncertainties, and events beyond our control could affect our ability to comply with these covenants.
For example, it could: ​ ● make it more difficult for us to make payments on our debt; ● require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, and other general corporate purposes; ● increase our vulnerability to adverse economic or industry conditions; ● limit our ability to obtain additional financing in the future to enable us to react to changes in our business; or ● place us at a competitive disadvantage compared to businesses in our industry that have less debt. ​ The agreements governing our debt contain various covenants that impose restrictions on us that may affect our ability to operate our business. ​ The credit agreements governing our term loans and revolving credit facilities and the indentures governing our senior notes contain covenants that, among other things, limit our ability to: 21 Table of Contents ● borrow money or guarantee debt; ● create liens; ● pay dividends on or redeem or repurchase stock; ● make specified types of investments and acquisitions; ● enter into agreements that limit the ability of our subsidiaries to pay dividends or other payments to us; ● enter into transactions with affiliates; and ● sell assets or merge with other companies. ​ These restrictions on our ability to operate our business could harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition, or other corporate opportunities.
For example, reduced availability of trucking capacity due to shortages of drivers, primarily as a result of the COVID-19 pandemic, has caused an increase in the cost of transportation for us and our suppliers.
For example, reduced availability of trucking capacity due to shortages of drivers, primarily as a result of the COVID-19 pandemic, caused an increase in the cost of transportation for us and our suppliers in fiscal 2022.
Further, our success depends on our ability to attract and retain personnel with professional and technical expertise, such as agricultural and food manufacturing experience, as well as finance, marketing, and other senior management professionals.
Further, our success depends on our ability to attract, retain, and develop effective leaders and personnel with professional and technical expertise, such as agricultural and food manufacturing experience, as well as finance, marketing, and other senior management professionals.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure and associated automated and manual control processes, we could be subject to billing and collection errors, business disruptions, or damage resulting from security breaches.
If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure and associated 23 Table of Contents automated and manual control processes, we could be subject to billing and collection errors, business disruptions, or damage resulting from security breaches.
Such action by the lenders could cause cross-defaults under our senior notes indentures. ​ 18 Table of Contents Any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in a downgrade to our credit ratings.
Such action by the lenders could cause cross-defaults under our senior notes indentures. ​ Any failure to meet required payments on our debt, or failure to comply with any covenants in the instruments governing our debt, could result in a downgrade to our credit ratings.
Despite careful security and controls design, implementation and updating, independent third-party verification and annual training of employees on information security and data protection, our information technology systems, some of which are dependent on services provided by third parties, may be vulnerable to, among other things, damage, invasions, disruptions, or shutdowns due to any number of causes such as catastrophic events, natural disasters, infectious disease outbreaks and other public health crises, fires, power outages, systems failures, telecommunications failures, security breaches, computer viruses, ransomware and malware, hackers, employee error or malfeasance, and other causes.
Despite careful security and controls design, implementation and updating, monitoring and routine testing, independent third-party verification, and annual training of employees on information security and data protection, our information technology systems, some of which are dependent on services provided by third parties, may be vulnerable to, among other things, damage, invasions, disruptions, or shutdowns due to any number of causes such as catastrophic events, natural disasters, infectious disease outbreaks and other public health crises, fires, power outages, systems failures, telecommunications failures, security breaches, computer viruses, ransomware and malware, hackers, employee error or malfeasance, potential failures in the incorporation of artificial intelligence, and other causes.
To the extent that price increases are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result in significant decreases in sales volume, our business, financial condition, or results of operations may be adversely affected. ​ We may not be able to offset any cost increases through productivity initiatives or through our commodity hedging activity.
To the extent that price increases are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result in significant decreases in sales volume, our business, financial condition, or results of operations may be adversely affected. ​ We also may not be successful in mitigating the effects of these cost increases through productivity initiatives or through our commodity hedging activity.
Damage to our reputation or loss of customer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, financial condition, and results of operations, as well as require additional resources to rebuild our reputation. ​ If we are unable to execute on large capital projects, complete potential acquisitions that strategically fit our business objectives, or integrate acquired businesses, our business, financial condition, and results of operations could be materially and adversely affected. ​ Demand for frozen potato products is growing, and we believe that this demand will continue to grow over the long-term.
Damage to our reputation or loss of customer confidence in our products for any of these or other reasons could result in decreased demand for our products and could have a material adverse effect on our business, financial condition, and results of operations, as well as require additional resources to rebuild our reputation. ​ If we are unable to execute on large capital projects, our business, financial condition, and results of operations could be materially and adversely affected. ​ Demand for frozen potato products is growing, and we believe that this demand will continue to grow over the long-term.
These amounts do not include any impact of unconsolidated net sales associated with our joint ventures, which are also subject to risks associated with international operations. ​ Many factors relating to our domestic and international sales and operations, many of which are outside of our control, have had, and could continue to have, a material adverse impact on our business, financial condition, and results of operations, including: ● pandemics and other public health crises, such as the flu, which may lead, and in the case of the COVID-19 pandemic, have led, to measures that decrease revenues, disrupt our supply chain or otherwise increase our storage, production or distribution costs and adversely affect our workforce, local suppliers, customers and consumers of our products; ● foreign exchange rates, foreign currency exchange and transfer restrictions, which may unpredictably and adversely impact our combined operating results, asset and liability balances, and cash flow in our consolidated financial statements, even if their value has not changed in their original currency; ● our consolidated financial statements are presented in U.S. dollars, and we must translate the assets, liabilities, revenue and expenses into U.S. dollars for external reporting purposes; ● changes in trade, monetary and fiscal policies of the U.S. and foreign governments, including modification or termination of existing trade agreements or treaties (e.g. the U.S. – Mexico – Canada Agreement), creation of new trade agreements or treaties, trade regulations, and increased or new tariffs, quotas, import or export licensing requirements, and other trade barriers imposed by governments.
We began consolidating the financial results of LWAMSA and LW EMEA in our consolidated financial statements in the first quarter and fourth quarter of fiscal 2023, respectively. ​ Factors relating to our domestic and international sales and operations, many of which are outside of our control, have had, and could continue to have, a material adverse impact on our business, financial condition, and results of operations, including: ● pandemics and other public health crises, such as the flu, which may lead, and in the case of the COVID-19 pandemic, have led, to measures that decrease revenues, disrupt our supply chain or otherwise increase our storage, production or distribution costs and adversely affect our workforce, local suppliers, customers and consumers of our products; ● foreign exchange rates, foreign currency exchange and transfer restrictions, which may unpredictably and adversely impact our combined operating results, asset and liability balances, and cash flow in our consolidated financial statements, even if their value has not changed in their original currency; ● our consolidated financial statements are presented in U.S. dollars, and we must translate the assets, liabilities, revenue and expenses into U.S. dollars for external reporting purposes; ● changes in trade, monetary and fiscal policies of the U.S. and foreign governments, including modification or termination of existing trade agreements or treaties (e.g., the U.S. – Mexico – Canada Agreement), creation of new trade agreements or treaties, trade regulations, and increased or new tariffs, sanctions, quotas, import or export licensing requirements, and other trade barriers imposed by governments.
During each of fiscal 2022, 2021 and 2020, net sales outside the U.S., primarily in Australia, Canada, China, Japan, Korea, Mexico, and Taiwan, accounted for approximately 17% of our net sales.
During each of fiscal 2023, 2022 and 2021, net sales outside the U.S., primarily in Australia, Canada, China, Europe, Japan, Korea, Mexico, and Taiwan, accounted for approximately 23%, 17%, and 17% of our net sales, respectively.
During fiscal 2022, 2021, and 2020, export sales from the U.S. accounted for approximately 12%, 13% and 16%, respectively, of our total net sales.
During fiscal 2023, 2022, and 2021, export sales from the U.S. accounted for approximately 11%, 12% and 13%, respectively, of our total net sales.
In addition, new technology that could result in greater operational efficiency may further expose our computer systems to the risk of cyberattacks.
In addition, new technology, such as artificial intelligence, that could result in greater operational efficiency may further expose our computer systems to the risk of cyberattacks.
If the global regulatory approach to acrylamide becomes more stringent and 22 Table of Contents additional legal limits are established, our manufacturing costs could increase.
If the global regulatory approach to acrylamide becomes more stringent and additional legal limits are established, our manufacturing costs could increase.
Sophisticated cybersecurity threats, including potential cyberattacks from Russia targeted against the U.S., pose a potential risk to the security and viability of our information technology systems, as well as the confidentiality, integrity, and availability of the data stored on those systems, including cloud-based platforms.
Further, continued geopolitical turmoil, including the ongoing war in Ukraine, has heightened the risk of cyberattacks. Sophisticated cybersecurity threats, including potential cyberattacks from Russia targeted against the U.S., pose a potential risk to the security and viability of our information technology systems, as well as the confidentiality, integrity, and availability of the data stored on those systems, including cloud-based platforms.
These difficulties have and may include loss of data; difficulty in making payments to third-parties; difficulty in completing financial reporting and filing reports with the SEC in a timely manner; or challenges in otherwise running our business. We may also experience decreases in productivity as our personnel implement and become familiar with new systems and processes.
We have experienced, and may continue to experience, difficulties as we transition to new upgraded systems and business processes. These difficulties have or may include loss of data; difficulty in making payments to third-parties; difficulty in completing financial reporting and filing reports with the SEC in a timely manner; or challenges in otherwise running our business.
These commodities are subject to price volatility and fluctuations in availability caused by many factors, including: changes in global supply and demand, weather conditions (including any potential effects of climate change), fire, natural disasters (such as a hurricane, tornado, earthquake, wildfire or flooding), disease or pests, agricultural uncertainty, water stress, health epidemics or pandemics or other contagious outbreaks, such as the COVID-19 pandemic, governmental incentives and controls (including import/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers including the financial and economic sanctions imposed by the U.S. and certain foreign governments in response to the war in Ukraine), limited or sole sources of supply, inflation, political uncertainties, acts of terrorism, governmental instability, war, or currency exchange rates.
These commodities are subject to price volatility and fluctuations in availability caused by many factors, including: changes in global supply and demand, weather conditions (including any potential effects of climate change), fire, natural disasters (such as a hurricane, tornado, earthquake, wildfire or flooding), disease or pests, agricultural uncertainty, water stress, health epidemics or pandemics or other contagious outbreaks, such as the COVID-19 pandemic, governmental incentives and controls (including import/export restrictions, such as new or increased tariffs, sanctions, quotas or trade barriers including the financial and economic sanctions imposed by the U.S. and certain foreign governments in response to the war in Ukraine), limited or sole sources of supply, inflation, political uncertainties, acts of terrorism, governmental instability, war, or currency exchange rates. ​ 12 Table of Contents During fiscal 2023, we experienced significantly elevated commodity and supply chain costs, including the costs of labor, raw materials, energy, fuel, packaging materials, and other inputs necessary for the production and distribution of our products.
Further, any failure to achieve our goals with respect to reducing our impact on the environment or perception of a failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change can lead to adverse publicity, which could damage our reputation.
Any delay or failure to achieve our goals with respect to reducing our impact on the environment or perception of a delay or failure to act responsibly with respect to the environment or to effectively respond to regulatory requirements concerning climate change can lead to adverse publicity, which could damage our reputation, as well as expose us to enforcement actions and litigation.
To support our customers’ growth, we believe we must invest in our production capabilities either through capital expansion or acquisitions. In 2021, we announced capital investments in a new french fry processing line in American Falls, Idaho and a new french fry processing facility in China.
To support our customers’ growth, we believe we must invest in our production capabilities either through capital expansion or acquisitions. In 2021 and 2022, we announced capital investments in new french fry processing lines in American Falls, Idaho, and new french fry processing facilities in Argentina, China, and the Netherlands.
It is possible that events beyond our control, such as operational failures, labor issues, cybersecurity events, global geopolitical conflict, such as the war in Ukraine, pandemics or other health issues, such as COVID-19, or other issues could impact our third parties.
It is possible that events beyond our control, such as operational failures, labor issues, heightened inflation, recession, financial and credit market disruptions, or other economic conditions, cybersecurity events, global geopolitical conflict, such as the war in Ukraine, pandemics or other health issues, such as COVID-19, or other issues could impact our third parties.
In particular, changes in U.S. trade programs and trade relations with other countries, including the imposition of trade protection measures by foreign countries in favor of their local producers of competing products, such as governmental subsidies, tax benefits, and other measures giving local producers a competitive advantage over Lamb Weston, may adversely affect our business and results of operations in those countries; ● negative economic developments in economies around the world and the instability of governments, including the actual or threat of wars, terrorist attacks, epidemics or civil unrest, including the war in Ukraine; ● earthquakes, tsunamis, droughts, floods or other major disasters that may limit the supply of raw materials that are purchased abroad for use in our international operations or domestically; ● increased costs, disruptions in shipping or reduced availability of freight transportation and warehousing, such as the reduced availability of shipping containers that we encountered in fiscal 2022; ● differing employment practices and labor standards in the international markets in which we operate; ● differing levels of protection of intellectual property across the international markets in which we operate; ● difficulties and costs associated with complying with U.S. laws and regulations applicable to entities with overseas operations, including the Foreign Corrupt Practices Act; ● the threat that our operations or property could be subject to nationalization and expropriation; ● varying regulatory, tax, judicial and administrative practices in the international markets in which we operate; ● difficulties associated with operating under a wide variety of complex foreign laws, treaties and regulations; and ● potentially burdensome taxation. ​ Any of these factors could have an adverse effect on our business, financial condition, and results of operations. ​ Changes in our relationships with significant customers could adversely affect us. ​ We maintain a diverse customer base across our four reporting segments.
In particular, changes in U.S. trade programs and trade relations with other countries, including the imposition of trade protection measures by foreign countries in favor of their local producers of competing products, such as governmental subsidies, tax benefits, and other measures giving local producers a competitive advantage over Lamb Weston, may adversely affect our business and results of operations in those countries; ● changes in capital controls, including currency exchange controls, government currency policies or other limits on our ability to import raw materials or finished products into various countries or repatriate cash from outside the United States; ● negative economic developments in economies around the world and the instability of governments, including the actual or threat of wars, terrorist attacks, epidemics or civil unrest, including the war in Ukraine; ● earthquakes, tsunamis, droughts, floods or other major disasters that may limit the supply of raw materials that are purchased abroad for use in our international operations or domestically; ● volatile commodity prices and increased costs of raw and packaging materials, labor, energy and transportation, disruptions in shipping or reduced availability of freight transportation and warehousing, such as the reduced availability of shipping containers that we encountered in fiscal 2022; ● differing employment practices and labor standards in the international markets in which we operate; ● differing levels of protection of intellectual property across the international markets in which we operate; ● difficulties and costs associated with complying with U.S. laws and regulations applicable to entities with overseas operations, including the Foreign Corrupt Practices Act; ● the threat that our operations or property could be subject to nationalization and expropriation; ● varying regulatory, tax, judicial and administrative practices in the international markets in which we operate; ● difficulties associated with operating under a wide variety of complex foreign laws, treaties and regulations; and ● potentially burdensome taxation. ​ 16 Table of Contents The nature and degree of the various risks we face can differ significantly among our regions and businesses.
Any disruptions, delays, or deficiencies in the transition, design, and implementation of a new ERP system, particularly any disruptions, delays, or deficiencies that impact our operations, could have a material adverse effect on our business, financial condition, and results of operations.
We may also experience decreases in productivity as our personnel implement and become familiar with new systems and processes. Any disruptions, delays, or deficiencies in the transition, design, and implementation of a new ERP system, particularly any disruptions, delays, or deficiencies that impact our operations, could have a material adverse effect on our business, financial condition, and results of operations.
Although COVID-19-related restrictions have generally been loosened or lifted, these restrictions and measures, and our efforts to act in the best interests of our employees, customers, suppliers, vendors, joint ventures, and other business partners, have affected and are continuing to affect our business and operations.
Although COVID-19-related restrictions, such as quarantines, travel bans, shutdowns and shelter-in-place orders, have generally been lifted, these restrictions and measures, and our efforts to act in the best interests of our employees, customers, suppliers, vendors, joint ventures, and other business partners, have affected and may continue to affect our business and operations.
While we believe we have identified and discussed below the material risks affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that may adversely affect our business, financial condition, or results of operations in the future. ​ Business and Operating Risks ​ Our business, financial condition, and results of operations may be adversely affected by inflationary pressures, increased costs, disruption of supply or interruptions or other constraints in the availability of key commodities and other necessary services. ​ A significant portion of our cost of goods comes from commodities such as raw potatoes, edible oil, grains, starches, and energy.
While we believe we have identified and discussed below the material risks affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that may adversely affect our business, financial condition, or results of operations in the future. ​ Business and Operating Risks ​ We may not be able to offset cost increases due to inflationary pressures on inputs necessary for the production and distribution of our products, such as labor, raw materials, energy, fuel, and packaging materials. ​ A significant portion of our cost of goods comes from commodities such as raw potatoes, edible oil, grains, starches, and energy.
These customers may be more capable of resisting price increases and more likely to demand lower pricing, increased promotional programs, or specialty tailored products. In addition, some of these customers (e.g., larger distributors and supermarkets) have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own brands.
In addition, some of these customers (e.g., larger distributors and supermarkets) have the scale to develop supply chains that permit them to operate with reduced inventories or to develop and market their own brands.
A downgrade in our credit ratings could limit our access to capital and increase our borrowing costs. ​ Technology Risks ​ We are significantly dependent on information technology, and we may be unable to protect our information systems against service interruption, misappropriation of data, or breaches of security. ​ We rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements.
In addition, changes in tax or interest rates in the U.S. or other countries, whether due to recession, economic disruptions, or other reasons, may adversely impact us. ​ Technology Risks ​ We are significantly dependent on information technology, and we may be unable to protect our information systems against service interruption, misappropriation of data, or breaches of security. ​ We rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements.
As a result, climate change could negatively affect our business and operations. See also “Industry Risks – Our business is affected by potato crop performance,” in this Item 1A.
See also “Industry Risks – Our business is affected by potato crop performance,” in this Item 1A.
For example, due to reduced availability of trucking capacity and shipping containers, global supply chain issues, labor shortages and inflation, we have experienced increases in transportation and warehousing costs. Additionally, we expect to face continued industry-wide cost inflation for various inputs, including commodities, ingredients, packaging materials, other raw materials, transportation, warehousing, and labor.
For example, labor shortages and inflation have increased our costs. Additionally, we expect to face continued industry-wide cost inflation for various inputs, including commodities, ingredients, packaging materials, other raw materials, transportation, warehousing, and labor.
In many instances, these sites depend on the availability of natural gas for use in the production of products, which may originate from Russia. Destabilizing effects that military conflict may pose for the European continent or the global oil and natural gas markets could adversely impact LWM’s ability to operate these facilities.
Destabilizing effects that the military conflict may pose for the European continent or the global oil and natural gas markets could adversely impact our ability to operate these facilities.
Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing the debt.
Various risks, uncertainties, and events beyond our control could affect our ability to comply with these covenants. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions.
We also depend upon our information technology infrastructure for digital marketing activities and for electronic communications among our locations, personnel, customers, third-party manufacturers and suppliers. The importance of such networks and systems has increased due to our adoption of flexible work-from-home policies for functional support areas, which in turn has heightened our vulnerability to cyberattacks or other disruptions.
The importance of such networks and systems has increased due to our adoption of flexible work-from-home policies for some of our functional support areas, which in turn has heightened our vulnerability to cyberattacks or other disruptions.
West Coast and disruptions to ocean freight networks across the Pacific Ocean resulted in lower export volumes in our Global segment. We have access to production outside of the U.S. through our facilities in Australia, Canada and China and joint ventures in Argentina and Europe, but we may be unsuccessful in mitigating any future disruption to export mechanisms.
We have access to production outside of the U.S. through our facilities in Australia, Austria, Canada, China, the Netherlands, the United Kingdom, and a joint venture in Argentina, but we may be unsuccessful in mitigating any future disruption to export mechanisms.
A significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations.
A significant increase in our obligations or future funding requirements could have a negative impact on our results of operations and cash flows from operations. Additionally, the annual costs of benefits vary with increased costs of health care and the outcome of collectively bargained wage and benefit agreements.
There can be no assurance that our customers will continue to purchase our products in the same quantities or on the same terms as in the past. The loss of a significant customer or a material reduction in sales to a significant customer could materially and adversely affect our business, financial condition, and results of operations.
The loss of a significant customer or a material reduction in sales to a significant customer could materially and adversely affect our business, financial condition, and results of operations.
We may voluntarily recall or withdraw products from the market in certain circumstances, which would cause us to incur associated costs; those costs could be meaningful. We may also be subject to litigation, requests for indemnification from our customers, or liability if the consumption or inadequate preparation of any of our products causes injury, illness, or death.
We may also be subject to litigation, requests for indemnification from our customers, or liability if 24 Table of Contents the consumption or inadequate preparation of any of our products causes injury, illness, or death.
Our inability to mitigate any such conditions by leveraging our production capabilities in other regions could negatively impact our ability to meet existing customers’ needs and new customer opportunities and could decrease our profitability. 20 Table of Contents The sophistication and buying power of some of our customers could have a negative impact on profits. ​ Some of our customers are large and sophisticated, with buying power and negotiating strength.
Our inability to mitigate any such conditions by leveraging our production capabilities in other regions could negatively impact our ability to meet existing customers’ needs and new customer opportunities and could decrease our profitability.
If we forgo sales to such market segments, we may lose customers and may not be able to regain or replace them later. ​ 14 Table of Contents Our business, financial condition, and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other factors related to our international operations, including foreign currency risks and trade barriers. ​ We conduct a substantial and growing amount of business with customers located outside the U.S., including through our joint ventures.
The pandemic has resulted in significant disruption of global financial markets, labor shortages, supply chain interruptions, increased commodity costs, inflation, and economic uncertainty, which has adversely impacted our business and may continue to do so. ​ 15 Table of Contents Our business, financial condition, and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other factors related to our international operations, including foreign currency risks and trade barriers. ​ We conduct a substantial and growing amount of business with customers located outside the U.S., including through our joint ventures.
As of May 29, 2022, we had $2,728.0 million of long-term debt, including current portion, recorded on our Consolidated Balance Sheet. Our level of debt could have important consequences.
As of May 28, 2023, we had approximately $3.5 billion of debt, including current portion, and short-term borrowings, recorded on our Consolidated Balance Sheet. Our level of debt could have important consequences.
Due to the uncertainty caused by COVID-19, we paused ERP work in fiscal 2021, after completing the first phase of implementation. We recently resumed designing the next phase of our ERP implementation and are in the build stage. We have experienced, and may continue to experience, difficulties as we transition to new upgraded systems and business processes.
Due to the uncertainty caused by COVID-19, we paused ERP work in fiscal 2021, after completing the first phase of implementation. We have resumed designing the next phase of our ERP implementation of central functions in North America and are in the test stage. We expect to begin implementing this next phase in fiscal 2024.
In addition, the effects of military conflict could heighten many of our other risks described in this Form 10-K. ​ Pandemics or other contagious outbreaks and government actions taken in response thereto, may adversely impact, and in the case of the COVID-19 pandemic, have adversely impacted and are likely to continue to adversely impact, our business, financial condition, and results of operations. ​ The ultimate impact that the COVID-19 pandemic and any future pandemic or other contagious outbreak will have on our business, financial condition, and results of operations is uncertain.
If we forgo sales to such market segments, we may lose customers and may not be able to regain or replace them later. ​ 14 Table of Contents Pandemics or other contagious outbreaks and government actions taken in response thereto, may adversely impact, and in the case of the COVID-19 pandemic, have adversely impacted and may continue to adversely impact, our business, financial condition, and results of operations. ​ The ultimate impact that the COVID-19 pandemic and any future pandemic or other contagious outbreak will have on our business, financial condition, and results of operations is uncertain.
A change in consumer preferences could also cause us to increase capital, marketing, and other expenditures, which could materially and adversely affect our business, financial condition, and results of operations. ​ Legal and Regulatory Risks ​ We may be subject to product liability claims and product recalls, which could negatively impact our relationships with customers and harm our business. ​ We sell food products for human consumption, which involves risks such as product contamination or spoilage, product tampering, other adulteration of food products, mislabeling, and misbranding.
Even if we do not encounter adverse effects, the transition, design, and implementation of a new ERP system, may be much more costly than we anticipated. ​ Legal and Regulatory Risks ​ We may be subject to product liability claims and product recalls, which could negatively impact our relationships with customers and harm our business. ​ We sell food products for human consumption, which involves risks such as product contamination or spoilage, product tampering, other adulteration of food products, mislabeling, and misbranding.
Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.
A default would permit lenders to accelerate the maturity of the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.
If we are unable to complete these or other large capital projects, or encounter unexpected delays, higher costs or other challenges, including those related to supply chain disruptions and availability of necessary labor, materials, and equipment, our business, financial condition, and results of operations could be materially and adversely affected. ​ In addition, from time to time, we evaluate acquisition candidates that may strategically fit our business objectives.
If we are 18 Table of Contents unable to complete these or other large capital projects, or encounter unexpected delays, higher costs or other challenges, including those related to supply chain disruptions and availability of necessary labor, materials, and equipment, our business, financial condition, and results of operations could be materially and adversely affected. ​ Our results may be adversely affected by our inability to complete or realize the projected benefits of acquisitions, divestitures and other strategic transactions. ​ Our ability to meet our objectives with respect to acquisitions and other strategic transactions may depend in part on our ability to identify suitable counterparties, negotiate favorable financial and other contractual terms, obtain all necessary regulatory approvals on the terms expected and complete those transactions.
Any interruption of our information technology systems could have operational, reputational, legal, and financial impacts that may have a material adverse effect on our business, financial condition, and results of operations. ​ In addition, if we are unable to prevent security breaches or unauthorized disclosure of non-public information, we may suffer financial and reputational damage, litigation or remediation costs, fines, or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, or suppliers.
Further, in the event our suppliers or customers experience a breach or system failure, their businesses could be disrupted or otherwise negatively affected, which may result in a disruption in our supply chain or reduced customer orders, which would adversely affect our business and financial results. ​ In addition, if we are unable to prevent security breaches or unauthorized disclosure of non-public information, we may suffer financial and reputational damage, litigation or remediation costs, fines, or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, or suppliers.
We could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems. ​ 19 Table of Contents Problems with the transition, design, or implementation of our new ERP system could interfere with our business and operations and adversely affect our financial condition. ​ We are in the process of building a new ERP system to replace our existing operating and financial systems.
We could also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems.
The foodservice distributors also sell products that compete with our products, and we sometimes need to reduce prices or provide rebates and other incentives to focus them on the sale of our products. ​ Our largest customer, McDonald’s Corporation, accounted for approximately 10% of our consolidated net sales during fiscal 2022.
The foodservice distributors also sell products that compete with our products, and we sometimes need to reduce prices or provide rebates and other incentives to focus them on the sale of our products. ​ There can be no assurance that our customers will continue to purchase our products in the same quantities or on the same terms as in the past.
As a result, we may be subject to additional obligations or liabilities over which we may not have complete control. 17 Table of Contents Our substantial debt may limit cash flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our debt obligations. ​ We have incurred substantial indebtedness.
A change in consumer preferences could also cause us to increase capital, marketing, and other expenditures, which could materially and adversely affect our business, financial condition, and results of operations. ​ Financial and Economic Risks ​ Our substantial debt may limit cash flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our debt obligations. ​ We have incurred substantial indebtedness.
Any of these disruptions could have a material adverse effect on our business, financial condition, and results of operations. ​ Labor shortages or stoppages, an inability to attract and retain key personnel, increased turnover or increases in labor and pension costs could adversely affect our business, financial condition, and results of operations. ​ Labor is a primary component of operating our business.
In addition, the occurrence of a significant supply chain disruption or the inability to access or deliver products that meet requisite quality and safety standards in a timely and efficient manner, could lead to increased warehouse and other storage costs or otherwise adversely affect our profitability and weaken our competitive position or harm our business. ​ Labor shortages or stoppages, an inability to attract and retain key personnel, increased turnover or increases in labor costs could adversely affect our business, financial condition, and results of operations. ​ Labor is a primary component of operating our business.
In particular, increasing regulation of utility providers, fuel emissions, or fuel suppliers could substantially increase the distribution and supply chain costs of our products. Also, consumers and customers may place an increased priority on purchasing products that are sustainably grown and made, requiring us to incur increased costs for additional transparency, due diligence, and reporting.
Also, consumers and customers may place an increased priority on purchasing products that are sustainably grown and made, requiring us to incur increased costs for additional transparency, due diligence, and reporting. In addition, we might fail to effectively address increased attention from the media, stockholders, activists, and other stakeholders on climate change and related environmental sustainability matters.
As a result, LWM determined that its net investment in the joint venture was impaired and wrote-off its investment in Russia; our portion of the non-cash impairment charge was $62.7 million. ​ Increased trade barriers or restrictions on global trade also could adversely affect our business, financial condition, and results of operations.
Increased trade barriers or restrictions on global trade also could adversely affect our business, financial condition, and results of operations.
Our failure to reduce costs through productivity gains or the elimination of redundant costs, or the occurrence of a significant supply chain disruption or the inability to access or deliver products, could adversely affect our profitability and weaken our competitive position or otherwise harm our business. ​ Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy caused by the war in Ukraine. ​ The global economy has been negatively impacted by increasing tensions related to the war in Ukraine.
All of these factors could result in increased costs or decreased revenues and could have an adverse effect on our business, financial condition, and results of operations. ​ Our business, financial condition, and results of operations could be adversely affected by disruptions in the global economy related to the ongoing war in Ukraine. ​ The global economy has been negatively impacted by the ongoing war in Ukraine.
To the extent we are unable to offset present and future cost increases, our business, financial condition, and results of operations could be materially and adversely affected. ​ In addition, we may have significant supply chain disruptions due to a number of factors outside of our control, including public health crises such as the COVID-19 pandemic, labor shortages, increased fuel costs, and the war in Ukraine, which have disrupted production and increased transportation and warehousing costs.
We have experienced, and may continue to experience, disruptions in our supply chain, including as a result of temporary workforce disruptions, labor shortages, increased transportation and warehousing costs, and other factors related to the effects of the COVID-19 pandemic and the ongoing war in Ukraine.
Those risks include: (i) diversion of management attention from existing businesses, (ii) difficulties integrating personnel and financial and other systems, (iii) difficulties implementing effective control environment processes, (iv) adverse effects on existing business relationships with suppliers and customers, (v) inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets, which would reduce future reported earnings, (vi) potential loss of customers or key employees of acquired businesses, and (vii) indemnities and potential disputes with the sellers.
Potential risks also include: ​ ● the inability to integrate acquired businesses into our existing operations in a timely and cost-efficient manner, including our recent acquisition of the remaining equity interests in LW EMEA; ● diversion of management's attention from other business concerns; ● potential loss of key employees, suppliers and/or customers of acquired businesses; ● assumption of unknown risks and liabilities; ● the inability to achieve anticipated benefits, including revenues or other operating results; ● operating costs of acquired businesses may be greater than expected; ● difficulties integrating personnel and financial and other systems; ● inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets, which would reduce future reported earnings; ● indemnities and potential disputes with the sellers; and ● the inability to promptly implement an effective control environment. ​ If we are unable to complete or realize the projected benefits of recent or future acquisitions, including our acquisition of LW EMEA, divestitures or other strategic transactions, our business or financial results may be adversely impacted. ​ Industry Risks ​ Our business is affected by potato crop performance. ​ Our primary input is potatoes and every year, we must procure potatoes that meet the quality standards for processing into value-added products.
Removed
Despite our ability to source raw materials necessary to meet demand for our products, certain ingredients and packaging, including edible oils, grains, starches, and other commodities, have been and may continue to be adversely impacted by shortages due to the COVID-19 pandemic, global supply chain disruptions and the war in Ukraine.
Added
To the extent we are unable to offset present and future cost increases, our business, financial condition, and results of operations could be materially and adversely affected. ​ Disruption to our supply chain could adversely affect our business . ​ Our ability to manufacture or sell our products may be impaired by damage or disruption to our manufacturing, warehousing or distribution capabilities, or to the capabilities of our suppliers, logistics service providers, or independent distributors.
Removed
Although we are unable to predict the impact to our ability to source these materials in the future, we expect these supply pressures to continue in the near future. ​ Recently, the costs of labor, raw materials, energy, fuel, packaging materials and other inputs necessary for the production and distribution of our products have rapidly increased.
Added
This damage or disruption could result from execution issues, as well as factors that are difficult to predict or beyond our control such as increased temperatures due to climate change, water stress, extreme weather events, natural disasters, product or raw material scarcity, fire, terrorism, pandemics (such as the COVID-19 pandemic), armed hostilities (including the ongoing war in Ukraine), strikes, labor shortages, cybersecurity breaches, governmental restrictions or mandates, disruptions in logistics, supplier capacity constraints, or other events.
Removed
These factors may lead to our inability to access or deliver products that meet requisite quality and safety standards in a timely and efficient manner, which have led and could lead to increased warehouse and other storage costs.
Added
Failure to take adequate steps to mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, may adversely affect our business, financial condition, and results of operations.
Removed
Such adverse and uncertain economic conditions have caused, and may continue to cause, supply chain disruptions and increased costs for transportation, energy, and raw materials, including edible oil, grains, and starches. Furthermore, the U.S. and certain foreign governments have imposed financial and economic sanctions on certain industry sectors and parties in Russia.

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Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−0 removed2 unchanged
We also own and lease general office/support facilities in the regions in which we operate, including Australia, Canada, China, Mexico, Japan, Singapore, and the U.S. ​ 24 Table of Contents Our manufacturing assets are shared across all reportable segments. Therefore, we do not identify or allocate assets by reportable segment.
We also own and lease general office/support facilities in the regions in which we operate, including Argentina, Australia, Austria, Canada, China, Mexico, Japan, Singapore, the Netherlands, the United Kingdom and the U.S. ​ Our manufacturing assets are shared across all reportable segments. Therefore, we do not identify or allocate assets by reportable segment.
For more information, see Note 13, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​ In addition to the facilities noted above, our joint ventures own or lease processing facilities in Argentina, Austria, the Netherlands, the United Kingdom, and the U.S. ​ ​
For more information, see Note 13, Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​ ​
The following table sets forth our principal production and processing facilities as of May 29, 2022: ​ ​ ​ ​ ​ ​ Location ​ Type of Facility and Number ​ Owned/ Leased Domestic: ​ ​ ​ ​ American Falls, ID ​ Production Facility and Cold Storage ​ Owned (1) Boardman, OR ​ Production Facility (2), Production Facility and Cold Storage ​ Owned (3) Connell, WA ​ Production Facility, Cold Storage ​ Owned (1), Leased (1) Delhi, LA ​ Production Facility, Cold Storage, Farm ​ Owned (1), Leased (2) Hermiston, OR ​ Production Facility ​ Owned (1) Pasco, WA ​ Production Facility (2) ​ Owned (2) Paterson, WA ​ Production Facility, Farm (4) ​ Owned (2), Leased (3) Quincy, WA ​ Production Facility ​ Owned (1) Richland, WA ​ Production Facility ​ Owned (1) Twin Falls, ID ​ Production Facility ​ Owned (1) Warden, WA ​ Production Facility ​ Owned (1) ​ ​ ​ ​ ​ International: ​ ​ ​ ​ Hallam, Australia ​ Production Facility and Cold Storage (2) ​ Leased (2) Shangdu, China ​ Production Facility ​ Owned (1) Taber, Canada ​ Production Facility and Cold Storage ​ Owned (1) ​ We use our farms as a source of raw materials, to better understand the costs of growing potatoes, and to deploy agronomic research.
The following table sets forth our principal production and processing facilities as of May 28, 2023: ​ ​ ​ ​ ​ ​ Location ​ Type of Facility and Number ​ Owned/ Leased Domestic: ​ ​ ​ ​ American Falls, ID ​ Production Facility and Cold Storage ​ Owned (1) Boardman, OR ​ Production Facility (2), Production Facility and Cold Storage ​ Owned (3) Connell, WA ​ Production Facility, Cold Storage ​ Owned (1), Leased (1) Delhi, LA ​ Production Facility, Cold Storage, Farm ​ Owned (1), Leased (2) Hermiston, OR ​ Production Facility ​ Owned (1) Park Rapids, MN (a) ​ Production Facility and Cold Storage ​ Owned (1) Pasco, WA ​ Production Facility (2) ​ Owned (2) Paterson, WA ​ Production Facility, Farm (4) ​ Owned (2), Leased (3) Quincy, WA ​ Production Facility ​ Owned (1) Richland, WA ​ Production Facility, Innovation Center ​ Owned (2) Twin Falls, ID ​ Production Facility ​ Owned (1) Warden, WA ​ Production Facility ​ Owned (1) ​ ​ ​ ​ ​ International: ​ ​ ​ ​ Bergen-op-Zoom, The Netherlands ​ Production Facility ​ Owned (1) Broekhuizenvorst, The Netherlands ​ Production Facility ​ Owned (1) Buenos Aires, Argentina ​ Production Facility ​ Owned (1) Hallam, Australia ​ Production Facility and Cold Storage (2) ​ Leased (2) Hollabrunn, Austria (b) ​ Production Facility ​ Owned (1) Kruiningen, The Netherlands ​ Production Facility ​ Owned (1) Oosterbierum, The Netherlands ​ Production Facility ​ Owned (1) Shangdu, China ​ Production Facility ​ Owned (1) Taber, Canada ​ Production Facility and Cold Storage ​ Owned (1) Wisbech, The United Kingdom ​ Production Facility ​ Owned (1) (a) We own a 50 percent interest in this facility through our Lamb Weston RDO joint venture. ​ (b) LW EMEA owns a 75 percent interest in a joint venture in Austria.
Added
This joint venture’s financial results are consolidated in our financial statements. ​ We use our farms as a source of raw materials, to better understand the costs of growing potatoes, and to deploy agronomic research.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. LEGAL PROCEEDINGS ​ For information regarding our legal proceedings, see Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​
ITEM 3. LEGAL PROCEEDINGS ​ For information regarding our legal proceedings, see Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K. ​ 28 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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On December 17, 2021, we announced that our Board of Directors had authorized the repurchase of an additional $250.0 million of our common stock under this program.
On December 17, 2021, we announced that our Board of Directors had authorized the repurchase of an additional $250.0 million of our common stock under this program, bringing the total amount authorized under the program to $500.0 million of our common stock.
Repurchases may be made at our discretion from time to time on the open market, subject to applicable laws, including pursuant to a repurchase plan administered in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, or through privately negotiated transactions. ​ 26 Table of Contents Performance Graph ​ The following graph and table compare the cumulative total return on our common stock with the cumulative total return of the Standard & Poor’s (“S&P”) 500 Index, the S&P 400 Packaged Food Index, which we consider to be our peer group, and the S&P 500 Packaged Food Index.
Repurchases under the program may be made at our discretion from time to time on the open market, subject to applicable laws, including pursuant to a repurchase plan administered in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, or through privately negotiated transactions. 30 Table of Contents Performance Graph ​ The following graph and table compare the cumulative total return on our common stock with the cumulative total return of the Standard & Poor’s (“S&P”) 500 Index, the S&P 400 Packaged Foods Index, which we consider to be our peer group, and the S&P 500 Packaged Foods Index for the five years ended May 26, 2023 (the last trading day of our fiscal year).
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ Our common stock is listed on the New York Stock Exchange under the ticker symbol “LW.” At July 18, 2022, there were 11,015 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ Our common stock is listed on the New York Stock Exchange under the ticker symbol “LW.” At July 17, 2023, there were 10,490 holders of record of our common stock.
The graph and table assume that $100 was invested in our common stock, the S&P 500 Index, the S&P 400 Packaged Food Index, and the S&P 500 Packaged Food Index on May 26, 2017, and that all dividends were reinvested .
The graph and table assume that $100 was invested in our common stock, the S&P 500 Index, the S&P 400 Packaged Foods Index, and the S&P 500 Packaged Foods Index on May 25, 2018, and that all dividends were reinvested .
The cumulative total return shown below are based on the last trading day in Lamb Weston’s fiscal year. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 26, ​ May 25, ​ May 24, ​ May 29, ​ May 28, ​ May 27, ​ 2017 ​ 2018 ​ 2019 ​ 2020 ​ 2021 ​ 2022 Lamb Weston ​ $ 100 ​ $ 145 ​ $ 140 ​ $ 137 ​ $ 190 ​ $ 159 S&P 500 Index ​ $ 100 ​ $ 115 ​ $ 122 ​ $ 134 ​ $ 188 ​ $ 188 S&P 400 Packaged Foods Index ​ $ 100 ​ $ 99 ​ $ 124 ​ $ 118 ​ $ 138 ​ $ 133 S&P 500 Packaged Foods Index ​ $ 100 ​ $ 84 ​ $ 94 ​ $ 101 ​ $ 120 ​ $ 125 ​ The above performance graph and other information furnished under this Part II, Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the provisions of Section 18, of the Securities Exchange Act of 1934, as amended. ​
The cumulative total return shown below are based on the last trading day in Lamb Weston’s fiscal year. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 25, ​ May 24, ​ May 29, ​ May 28, ​ May 27, ​ May 26, ​ 2018 ​ 2019 ​ 2020 ​ 2021 ​ 2022 ​ 2023 Lamb Weston ​ $ 100 ​ $ 96 ​ $ 94 ​ $ 131 ​ $ 109 ​ $ 178 S&P 500 Index ​ $ 100 ​ $ 106 ​ $ 116 ​ $ 163 ​ $ 164 ​ $ 169 S&P 400 Packaged Foods Index ​ $ 100 ​ $ 125 ​ $ 119 ​ $ 140 ​ $ 134 ​ $ 138 S&P 500 Packaged Foods Index ​ $ 100 ​ $ 111 ​ $ 119 ​ $ 141 ​ $ 148 ​ $ 164 ​ The above performance graph and other information furnished under this Part II, Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the provisions of Section 18, of the Securities Exchange Act of 1934, as amended. ​
Our Board of Directors has no obligation under Delaware law or our amended and restated certificate of incorporation to declare or pay dividends, and dividends on Lamb Weston common stock are limited to legally available funds. ​ Purchases of Equity Securities by the Issuer ​ The following table presents information related to total shares purchased during the periods presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Value of Maximum ​ ​ Total Number ​ Average ​ Shares (or Units) ​ Number of Shares that ​ ​ of Shares (or ​ Price Paid ​ Purchased as Part of ​ May Yet be Purchased ​ ​ Units) ​ Per Share ​ Publicly Announced ​ Under Plans or Programs Period Purchased (a) (or Unit) Plans or Programs (b) (in millions) (b) February 28, 2022 through March 27, 2022 ​ ​ 1,114 ​ $ 63.68 ​ ​ — ​ $ 293.6 March 28, 2022 through April 24, 2022 ​ ​ 72,675 ​ $ 67.70 ​ ​ 72,365 ​ $ 288.7 April 25, 2022 through May 29, 2022 ​ ​ 306,928 ​ $ 64.25 ​ ​ 306,928 ​ $ 268.9 Total ​ ​ 380,717 ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) Represents repurchased shares of our common stock under our publicly announced share repurchase program, which were repurchased at a weighted average price of $64.91, and shares withheld from employees to cover income and payroll taxes on equity awards that vested during the period. ​ (b) On December 20, 2018, we announced that our Board of Directors had authorized a $250.0 million share repurchase program with no expiration date.
Our Board of Directors has no obligation under Delaware law or our amended and restated certificate of incorporation to declare or pay dividends, and dividends on Lamb Weston common stock are limited to legally available funds. ​ Purchases of Equity Securities by the Issuer ​ The following table presents information related to total shares purchased during the periods presented below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Approximate Dollar ​ ​ ​ ​ ​ ​ ​ ​ Total Number of ​ Value of Maximum ​ ​ Total Number ​ Average ​ Shares (or Units) ​ Number of Shares that ​ ​ of Shares (or ​ Price Paid ​ Purchased as Part of ​ May Yet be Purchased ​ ​ Units) ​ Per Share ​ Publicly Announced ​ Under Plans or Programs Period Purchased (a) (or Unit) Plans or Programs (b) (in millions) (b) February 27, 2023 through March 26, 2023 ​ ​ 1 ​ $ 101.98 ​ ​ — ​ $ 228.4 March 27, 2023 through April 23, 2023 ​ ​ 27,496 ​ $ 109.07 ​ ​ 27,496 ​ $ 225.4 April 24, 2023 through May 28, 2023 ​ ​ 13,035 ​ $ 110.01 ​ ​ 13,035 ​ $ 223.9 Total ​ ​ 40,532 ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) Represents repurchased shares of our common stock under our publicly announced share repurchase program, which were repurchased at a weighted average price of $109.37 per share, and shares withheld from employees to cover income and payroll taxes on equity awards that vested during the period. ​ (b) On December 20, 2018, we announced that our Board of Directors had authorized a $250.0 million share repurchase program with no expiration date.
Removed
This graph and table cover the period from May 26, 2017 through May 27, 2022 (the last trading day of our fiscal year).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Financial Statements and Supplementary Data” of this Form 10-K. ​ Non-GAAP Financial Measures ​ To supplement the financial information included in this report, we have presented product contribution margin on a consolidated basis, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures, Adjusted Diluted EPS, and Adjusted Net Income, each of which is considered a non-GAAP financial measure. ​ Product contribution margin is one of the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance.
Financial Statements and Supplementary Data” of this Form 10-K. ​ Non-GAAP Financial Measures ​ To supplement the financial information included in this report, we have presented product contribution margin on a consolidated basis, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures, Adjusted Income from Operations, Adjusted Net Income, and Adjusted Diluted EPS, each of which is considered a non-GAAP financial measure. ​ Product contribution margin is one of the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance.
While we believe the judgments and estimates discussed above and made by management are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts. Further information on income taxes is provided in Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
While we believe the judgments and estimates discussed above and made by management are appropriate and reasonable under the circumstances, actual resolution of these matters may differ from recorded estimated amounts. Further information on income taxes is provided in Note 5, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
See Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, for more information on our purchase obligations and the timing of future payments and capital commitments in connection with the expansion and replacement of existing facilities and equipment. ​ (b) Amounts represent estimated future interest payments assuming our long-term debt is held to maturity and using interest rates in effect as of May 29, 2022. ​ Off-Balance Sheet Arrangements ​ We do not have any off-balance sheet arrangements as of May 29, 2022 that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. ​ Critical Accounting Estimates ​ Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S.
See Note 14, Commitments, Contingencies, Guarantees, and Legal Proceedings, for more information on our purchase obligations and the timing of future payments and capital commitments in connection with the expansion and replacement of existing facilities and equipment. ​ (b) Amounts represent estimated future interest payments assuming our long-term debt is held to maturity and using interest rates in effect as of May 28, 2023. ​ Off-Balance Sheet Arrangements ​ We do not have any off-balance sheet arrangements as of May 28, 2023 that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. ​ Critical Accounting Estimates ​ Management’s discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with U.S.
Changes in valuation allowances from period to period are included in the tax provision. ​ ● We establish accruals for unrecognized tax benefits when, despite the belief that our tax return positions are fully supported, we believe that an uncertain tax position does not meet the recognition threshold of Accounting Standards Codification (“ASC”) 740, Income Taxes .
Changes in valuation allowances from period to period are included in the tax provision. ​ 40 Table of Contents ● We establish accruals for unrecognized tax benefits when, despite the belief that our tax return positions are fully supported, we believe that an uncertain tax position does not meet the recognition threshold of Accounting Standards Codification (“ASC”) 740, Income Taxes .
While it is difficult to predict the final outcome or timing of resolution for any particular matter, we believe that the accruals for unrecognized tax benefits at May 29, 2022, reflect the estimated outcome of known tax contingencies as of such date in accordance with accounting for uncertainty in income taxes under ASC 740. ​ ● We recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost.
While it is difficult to predict the final outcome or timing of resolution for any particular matter, we believe that the accruals for unrecognized tax benefits at May 28, 2023, reflect the estimated outcome of known tax contingencies as of such date in accordance with accounting for uncertainty in income taxes under ASC 740. ​ ● We recognize the tax impact of including certain foreign earnings in U.S. taxable income as a period cost.
Product contribution margin represents net sales less cost of sales and advertising and promotion (“A&P”) expenses. Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with the performance of our segments.
Product contribution margin represents net sales less cost of sales and advertising and promotion (“A&P”) expenses. Product contribution margin includes A&P expenses because those expenses are directly associated with the performance of our segments.
Discussions of fiscal 2020 items and fiscal year comparisons between fiscal 2021 and 2020 that are not included in this Form 10-K can be found in “Part II, Item 7.
Discussions of fiscal 2021 items and fiscal year comparisons between fiscal 2022 and 2021 that are not included in this Form 10-K can be found in “Part II, Item 7.
During fiscal 2022, financing activities primarily related to issuing U.S. dollar-denominated senior notes and a RMB-denominated loan facility for combined net proceeds of $1,676.1 million, offset by $1,698.1 million of debt and financing obligation repayments, including cash used to redeem our previously outstanding senior notes due 2024 and 2026 (including the payment of a call premium of $39.6 million), and the payment of $138.4 million of cash dividends to common stockholders.
As of May 28, 2023, $223.9 million remained authorized for repurchase under our share repurchase program. ​ During fiscal 2022, financing activities primarily related to issuing U.S. dollar-denominated senior notes and a RMB-denominated loan facility for combined net proceeds of $1,676.1 million, offset by $1,698.1 million of debt and financing obligation repayments, including cash used to redeem our previously outstanding senior notes due 2024 and 2026 (including the payment of a call premium of $39.6 million), and the payment of $138.4 million of cash dividends to common stockholders.
Final determination of the total cost of promotion is dependent upon customers 35 Table of Contents providing information about proof of performance and other information related to the promotional event. Because of the complexity of some of these trade promotions, the ultimate resolution may result in payments that are different from our estimates.
Final determination of the total cost of promotion is dependent upon customers providing information about proof of performance and other information related to the promotional event. Because of the complexity of some of these trade promotions, the ultimate resolution may result in payments that are different from our estimates. As additional information becomes known, we may change our estimates.
Financial Statements and Supplementary Data” of this Form 10-K for more information. ​ ● Long-term debt, including current portion . See Note 7, Debt and Financing Obligations, for more information on debt payments and the timing of expected future payments. ● Leases .
Financial Statements and Supplementary Data” of this Form 10-K for more information. ​ ● Short-term borrowings and long-term debt, including current portion . See Note 8, Debt and Financing Obligations, for more information on debt payments and the timing of expected future payments. 38 Table of Contents ● Leases .
See Note 8, Leases, for more information on our operating and finance lease obligations and timing of expected future 34 Table of Contents payments. ● Purchase obligations and capital commitments .
See Note 9, Leases, for more information on our operating and finance lease obligations and timing of expected future payments. ● Purchase obligations and capital commitments .
Our MD&A is based on financial data derived from the financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and certain other financial data (including product contribution margin on a consolidated basis, Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA including unconsolidated joint ventures, Adjusted Diluted earnings per share (“EPS”), and Adjusted Net Income) that is prepared using non-GAAP financial measures.
Results for the fiscal year ended May 28, 2023 are not necessarily indicative of results that may be attained in the future. ​ Our MD&A is based on financial data derived from the financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and certain other financial data (including product contribution margin on a consolidated basis, Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), Adjusted EBITDA including unconsolidated joint ventures, Adjusted Income from Operations, Adjusted Net Income, and Adjusted Diluted earnings per share (“EPS”)) that is prepared using non-GAAP financial measures.
These amounts include a $10.4 million loss related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts in fiscal 2022, and a $27.8 million gain related to the 31 Table of Contents contracts in fiscal 2021.
These amounts include a $48.4 million loss related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts in fiscal 2023, and a $10.4 million loss related to contracts in fiscal 2022.
The unconditional purchase obligation arrangements are entered into in the normal course of business in order to ensure adequate levels of sourced product are available. ​ A summary of our material cash requirements for our known contractual obligations as of May 29, 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ (in millions) ​ Total ​ Payable within 12 Months Long-term debt, including current portion (a) $ 2,745.0 $ 31.3 Interest on long-term debt (b) ​ ​ 829.2 ​ ​ 126.7 Leases (a) ​ ​ 157.8 ​ ​ 26.4 Purchase obligations and capital commitments (a) ​ ​ 956.5 ​ ​ 387.6 Total $ 4,688.5 $ 572.0 ​ (a) See the below Notes to the Consolidated Financial Statements included in “Part II, Item 8.
The unconditional purchase obligation arrangements are entered into in the normal course of business to ensure adequate levels of sourced product are available. ​ A summary of our material cash requirements for our known contractual obligations as of May 28, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ (in millions) ​ Total ​ Payable within 12 Months Short-term borrowings and long-term debt, including current portion (a) $ 3,479.8 $ 214.4 Interest on long-term debt (b) ​ ​ 960.3 ​ ​ 169.3 Leases (a) ​ ​ 200.5 ​ ​ 34.8 Purchase obligations and capital commitments (a) ​ ​ 1,233.9 ​ ​ 717.1 Total $ 5,874.5 $ 1,135.6 (a) See the below Notes to the Consolidated Financial Statements included in “Part II, Item 8.
During fiscal 2021, we repurchased 328,918 shares of our common stock at an average price of $78.19 and withheld 164,992 shares of common stock from employees to cover income and payroll taxes on equity awards that vested during the period. ​ For more information about our debt, including among other items, interest rates, maturity dates, and covenants, see Note 7, Debt and Financing Obligations, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
In addition, we used $158.4 million of cash to repurchase 2,407,184 shares of our common stock at an average price of $62.59 per share and withheld 118,204 shares from employees to cover income and payroll taxes on equity awards that vested during the year. ​ For more information about our debt, including among other items, interest rates, maturity dates, and covenants, see Note 8, Debt and Financing Obligations, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
In addition, we used $158.4 million of cash to repurchase 2,407,184 shares of our common stock at an average price of $62.59 and withheld 118,204 shares from employees to cover income and payroll taxes on equity awards that vested during the year.
In addition, we used $51.6 million of cash to repurchase 569,698 shares of our common stock at an average price of $78.99 per share and withheld 83,974 shares from employees to cover income and payroll taxes on equity awards that vested during the year.
We report net sales and product contribution margin by segment and on a consolidated basis. Product contribution margin, when presented on a consolidated basis, is a non-GAAP financial measure. Net sales and product contribution margin are the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance.
Net sales and product contribution margin are the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance.
Our portion of the non-cash impairment charge was $62.7 million. ​ The following table reconciles net income to Adjusted Net Income, and diluted EPS to Adjusted Diluted EPS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended May ​ ​ 2022 ​ 2021 ​ 2022 (a) ​ 2021 (a) (in millions, except per share amounts) ​ Net Income ​ Diluted EPS As reported ​ $ 200.9 ​ $ 317.8 ​ $ 1.38 ​ $ 2.16 Items impacting comparability: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Write-off of net investment in Russia (b) ​ ​ 62.7 ​ ​ — ​ ​ 0.43 ​ ​ — Loss on extinguishment of debt (c) ​ ​ 40.5 ​ ​ — ​ ​ 0.27 ​ ​ — Total items impacting comparability ​ ​ 103.2 ​ ​ — ​ ​ 0.70 ​ ​ — Adjusted ​ $ 304.1 ​ $ 317.8 ​ $ 2.08 ​ $ 2.16 (a) Diluted weighted average common shares were 145.9 million and 147.1 million in fiscal 2022 and 2021, respectively. ​ (b) See footnote (a) to the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures above for a discussion of the item impacting comparability. ​ (c) The fiscal year ended May 29, 2022, includes a loss on the extinguishment of debt of $53.3 million ($40.5 million after-tax), which consists of a call premium of $39.6 million related to the redemption of our senior notes due 2024 and 2026 and the write-off of $13.7 million of debt issuance costs associated with those notes. ​ 38 Table of Contents
Equity method investment earnings for fiscal 2022 included a non-cash impairment charge of $62.7 million (before and after-tax, or $0.43 per share) related to LW EMEA’s withdrawal from its joint venture in Russia. ​ 42 Table of Contents The following table reconciles income from operations to Adjusted Income from Operations, net income to Adjusted Net Income, and diluted EPS to Adjusted Diluted EPS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended May ​ ​ 2023 ​ 2022 ​ 2023 ​ 2022 ​ 2023 (a) ​ 2022 (a) (in millions, except per share amounts) ​ Income from Operations ​ Net Income ​ Diluted EPS As reported ​ $ 882.1 ​ $ 444.4 ​ $ 1,008.9 ​ $ 200.9 ​ $ 6.95 ​ $ 1.38 Items impacting comparability: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ LW EMEA acquisition-related items: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on acquisitions (b) ​ ​ — ​ ​ — ​ ​ (364.4) ​ ​ — ​ ​ (2.52) ​ ​ — Inventory step-up (c) ​ ​ 27.0 ​ ​ — ​ ​ 20.0 ​ ​ — ​ ​ 0.14 ​ ​ — Acquisition expenses, net (c) ​ ​ (21.8) ​ ​ — ​ ​ (12.2) ​ ​ — ​ ​ (0.08) ​ ​ — Total LW EMEA acquisition-related items impacting comparability ​ ​ 5.2 ​ ​ — ​ ​ (356.6) ​ ​ — ​ ​ (2.46) ​ ​ — Gain on acquisition of interest in LWAMSA (b) ​ ​ — ​ ​ — ​ ​ (15.1) ​ ​ — ​ ​ (0.10) ​ ​ — Impact of LW EMEA natural gas and electricity derivatives (c) ​ ​ 18.7 ​ ​ — ​ ​ 41.9 ​ ​ (23.5) ​ ​ 0.29 ​ ​ (0.16) Loss on extinguishment of debt (d) ​ ​ — ​ ​ — ​ ​ — ​ ​ 40.5 ​ ​ — ​ ​ 0.27 Write-off of net investment in Russia (e) ​ ​ — ​ ​ — ​ ​ — ​ ​ 62.7 ​ ​ — ​ ​ 0.43 Total items impacting comparability ​ ​ 23.9 ​ ​ — ​ ​ (329.8) ​ ​ 79.7 ​ ​ (2.27) ​ ​ 0.54 Adjusted ​ $ 906.0 ​ $ 444.4 ​ $ 679.1 ​ $ 280.6 ​ $ 4.68 ​ $ 1.92 (a) Diluted weighted average common shares were 145.2 million and 145.9 million in fiscal 2023 and 2022, respectively. ​ (b) See footnote (b) to the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures above for a discussion of the item impacting comparability. ​ (c) See footnote (a) to the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures above for a discussion of the item impacting comparability. ​ (d) The fiscal year ended May 29, 2022, includes a loss on the extinguishment of debt of $53.3 million ($40.5 million after-tax, or $0.27 per share), which consists of a call premium of $39.6 million related to the redemption of our senior notes due 2024 and 2026 and the write-off of $13.7 million of debt issuance costs associated with those notes. ​ (e) See footnote (b) to the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures above for a discussion of the item impacting comparability. ​ 43 Table of Contents
We, along with our joint ventures, are the number one supplier of value-added frozen potato products in North America. We, along with our joint ventures, are also a leading supplier of value-added frozen potato products internationally, with a strong and growing presence in high-growth emerging markets.
We are the number one supplier of value-added frozen potato products in North America and are a leading supplier of value-added frozen potato products internationally, with a strong and growing presence in high-growth emerging markets. We offer a broad product portfolio to a diverse channel and customer base in over 100 countries.
Product contribution margin represents net sales less cost of sales and advertising and promotion expenses. Product contribution margin includes advertising and promotion expenses because those expenses are directly associated with the performance of our segments.
Product contribution margin represents net sales less cost of sales and A&P expenses. Product contribution margin includes A&P expenses because those expenses are directly associated with the performance of our segments. Product contribution margin, when presented on a consolidated basis, is a non-GAAP financial measure.
There were no indications of other-than-temporary impairment in any of our other equity method investments. ​ New and Recently Issued Accounting Standards ​ For a listing of new and recently issued accounting standards, see Note 1, Nature of Operations and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Financial Statements and Supplementary Data” of this Form 10-K. ​ New and Recently Issued Accounting Standards ​ For a listing of new and recently issued accounting standards, see Note 1, Nature of Operations and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Financial Statements and Supplementary Data” of this Form 10-K. ​ Obligations and Commitments ​ As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements, lease agreements, potato supply agreements, and unconditional purchase obligations.
At May 28, 2023, we were in compliance with all covenants contained in our credit agreements. ​ Obligations and Commitments ​ As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as debt agreements, lease agreements, potato supply agreements, and unconditional purchase obligations.
Financial Statements and Supplementary Data” in this Form 10-K. ​ Equity Method Investment Earnings (Loss) ​ We conduct meaningful business through unconsolidated joint ventures and include our share of the earnings (loss) based on our economic ownership interest in them.
Financial Statements and Supplementary Data” in this Form 10-K. ​ Equity Method Investment Earnings (Loss) ​ We conducted meaningful business through unconsolidated joint ventures until we acquired the remaining interest of LW EMEA in February 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended May 30, 2021, which we filed with the SEC on July 27, 2021 . ​ Overview ​ Lamb Weston, along with our joint ventures, is a leading global producer, distributor, and marketer of value-added frozen potato products.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended May 29, 2022, which we filed with the SEC on July 27, 2022.
The higher costs per pound primarily reflected double-digit cost inflation from key inputs, including: edible oils; ingredients such as grains and starches used in product coatings; packaging; labor; and higher transportation costs.
Incremental earnings from the consolidation of the financial results of LW EMEA beginning in the fiscal fourth quarter also contributed to the increase. The higher costs per pound primarily reflected double-digit cost inflation for key inputs, including: raw potatoes, edible oils, ingredients such as grains and starches used in product coatings, labor, and energy.
For more information, see Note 7, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” in this Form 10-K. ​ Income Taxes ​ Our effective tax rate was 26.3% for fiscal 2022, compared to 22.2% in fiscal 2021.
Financial Statements and Supplementary Data” in this Form 10-K. ​ Income Taxes ​ Our effective tax rate was 18.2% for fiscal 2023, compared to 26.3% in fiscal 2022.
Cost of sales was $477.1 million, up 1% compared to fiscal 2021, primarily due to higher manufacturing and distribution costs, partially offset by lower sales volumes. ​ Other product contribution margin declined $45.6 million to $2.2 million in fiscal 2022, as compared to $47.8 million in fiscal 2021.
Retail cost of sales was $501.9 million, up 5%, primarily due to higher manufacturing costs, partially offset by lower sales volumes. 35 Table of Contents ​ Other product contribution margin decreased $31.1 million to a loss of $28.9 million in fiscal 2023, as compared to a $2.2 million gain in fiscal 2022.
At May 29, 2022 and May 30, 2021, we had $41.2 million and $39.9 million, respectively, of accrued trade promotions payable recorded in “Accrued liabilities” on our Consolidated Balance Sheets. ​ Income Taxes ​ We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards.
The increase from May 29, 2022 is primarily due to the LW EMEA Acquisition. ​ Income Taxes ​ We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards.
The increase reflects a $53.3 million ($40.5 million after-tax) loss on extinguishment of debt associated with the redemption of our previously outstanding senior notes due 2024 and 2026. Excluding this loss, interest expense, net declined $10.6 million, reflecting a lower weighted average interest rate.
The decrease reflects a $53.3 million ($40.5 million after-tax, or $0.27 per share) loss on extinguishment of debt associated with the redemption of our previously outstanding senior notes due 2024 and 2026, which occurred in fiscal 2022.
To the extent there are differences between these estimates and actual results, our consolidated financial statements may be affected. ​ Sales Incentives and Trade Promotion Allowances ​ We promote our products with advertising, consumer incentives, and trade promotions. Sales promotions include, but are not limited to, discounts, coupons, rebates, and volume-based incentives.
If our estimates of the economic lives change, depreciation or amortization expenses could increase or decrease. ​ Sales Incentives and Trade Promotion Allowances ​ We promote our products with advertising, consumer incentives, and trade promotions. Sales promotions include, but are not limited to, discounts, coupons, rebates, and volume-based incentives.
Unfavorable changes in working capital primarily related to a decrease in accounts payable due to timing, an increase in receivables attributable to higher sales at the end of fiscal 2022, compared with the end of fiscal 2021, and higher finished goods inventories due to increased input costs and global disruption in freight networks.
Favorable changes in working capital primarily related to an increase in accounts payable due to timing, a decrease in receivables attributable to timing of collection, and an increase in accrued liabilities due to higher compensation and benefits accrued in fiscal 2023, compared with fiscal 2022.
Gross profit also included a $28.9 million decrease in unrealized mark-to-market adjustments associated with commodity hedging contracts, which includes a $9.5 million loss in the current year, compared with a $19.4 million gain related to these items in the prior year. ​ Lamb Weston’s overall product contribution margin in fiscal 2022 declined $1.1 million to $813.1 million, compared with $814.2 million in fiscal 2021.
The increase in gross profit was partially offset by a $29.0 million change in unrealized mark-to-market adjustments associated with commodity hedging contracts, reflecting a $38.5 million loss in the current year, compared with a $9.5 million loss related to these items in the prior year. ​ Lamb Weston’s overall product contribution margin in fiscal 2023 increased $584.6 million, or 72%, to $1,397.7 million.
Price/mix increased 9%, primarily reflecting the benefit of pricing actions across each of our business segments to offset input, manufacturing, and transportation cost inflation, as well as favorable mix.
Net sales, excluding the incremental sales attributable to the Acquisitions, increased 20% versus the prior year. Price/mix increased 26%, reflecting the benefit of pricing actions across each of our core business segments to counter input and manufacturing cost inflation.
Our effective tax rate varies from the U.S. statutory tax rate of 21% principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items, and was elevated in fiscal 2022 relative to our historical rate due to the Russia impairment charge.
Our effective tax rate varies from the U.S. statutory tax rate of 21% principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items. ​ For further information on income taxes, see Note 5, Income Taxes, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Equity method investment earnings also included a $26.5 million unrealized gain related to mark-to-market adjustments associated with currency and commodity hedging contracts in fiscal 2022 and an $11.3 million gain related to these items in fiscal 2021.
Equity method investment gains in fiscal 2022 included a $26.5 million unrealized gain related to mark-to-market adjustments associated with currency and commodity hedging contracts, of which $31.7 million ($23.5 million after-tax, or $0.16 per share) related to gains in natural gas and electricity derivatives .
We believe we have sufficient liquidity to meet projected capital expenditures, service existing debt and meet working capital requirements for the next 12 months 32 Table of Contents with current cash balances and cash from operations, supplemented as necessary by available borrowings under our existing revolving credit facility. ​ Cash Flows ​ Below is a summary table of our cash flows, followed by a discussion of the sources and uses of cash through operating, investing, and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended May (in millions) 2022 2021 Net cash flows provided by (used for): ​ ​ Operating activities ​ $ 418.1 ​ $ 553.2 Investing activities ​ (310.5) ​ (162.5) Financing activities ​ (363.4) ​ (974.0) ​ ​ (255.8) ​ (583.3) Effect of exchange rate changes on cash and cash equivalents ​ (2.7) 2.8 Net decrease in cash and cash equivalents ​ $ (258.5) ​ $ (580.5) ​ Operating Activities ​ During fiscal 2022, cash provided by operating activities decreased $135.1 million to $418.1 million, compared to $553.2 million for fiscal 2021.
At May 28, 2023, we had commitments for capital expenditures of $623.9 million. ​ Cash Flows ​ Below is a summary table of our cash flows, followed by a discussion of the sources and uses of cash through operating, investing, and financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended May (in millions) 2023 2022 Net cash flows provided by (used for): ​ ​ Operating activities ​ $ 761.7 ​ $ 418.6 Investing activities ​ (1,340.9) ​ (310.5) Financing activities ​ 340.8 ​ (363.4) ​ ​ (238.4) ​ (255.3) Effect of exchange rate changes on cash and cash equivalents ​ 18.2 (3.2) Net decrease in cash and cash equivalents ​ ​ (220.2) ​ ​ (258.5) Cash and cash equivalents, beginning of period ​ ​ 525.0 ​ ​ 783.5 Cash and cash equivalents, end of period ​ $ 304.8 ​ $ 525.0 ​ Operating Activities ​ During fiscal 2023, cash provided by operating activities increased $343.1 million to $761.7 million, compared to $418.6 million for fiscal 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ The following discussion and analysis is intended to provide a summary of significant factors relevant to our financial performance and condition. The discussion and analysis should be read together with our consolidated financial statements and related notes in “Part II, Item 8.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ​ The following management’s discussion and analysis of our results of operations and financial condition, which we refer to in this filing as “MD&A,” should be read in conjunction with the audited financial statements and the notes thereto.
Favorable price, volume and mix drove the increase, and were partially offset by higher manufacturing and distribution costs per pound. Cost of sales was $863.8 million, up 28% compared to fiscal 2021, primarily due to higher manufacturing and distribution costs and higher sales volumes. ​ Retail product contribution margin declined $10.8 million, or 9%, to $109.4 million in fiscal 2022.
Foodservice cost of sales was $930.8 million, up 8%, primarily due to higher manufacturing costs, partially offset by lower sales volumes. ​ Retail product contribution margin increased $170.7 million, or 156%, to $280.1 million in fiscal 2023. Pricing actions drove the increase, which was partially offset by higher costs per pound and a $7.6 million increase in A&P expenses.
These measures are not a substitute for their comparable GAAP financial measures, such as gross profit, net income or diluted earnings per share, as applicable, and there are limitations to using non-GAAP financial measures. ​ See “Results of Operations – Fiscal Year Ended May 29, 2022 Compared to Fiscal Year Ended May 30, 2021 – Net Sales and Product Contribution Margin” above for a reconciliation of product contribution margin on a consolidated basis to gross profit. ​ 37 Table of Contents The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended May (in millions) 2022 (a) 2021 Net income ​ $ 200.9 ​ $ 317.8 Equity method investment (earnings) loss ​ ​ 10.7 ​ ​ (51.8) Interest expense, net ​ ​ 161.0 ​ ​ 118.3 Income tax expense ​ ​ 71.8 ​ ​ 90.5 Income from operations ​ ​ 444.4 ​ ​ 474.8 Depreciation and amortization ​ ​ 187.3 ​ ​ 182.7 Adjusted EBITDA ​ ​ 631.7 ​ ​ 657.5 ​ ​ ​ ​ ​ ​ ​ Unconsolidated Joint Ventures ​ ​ ​ ​ ​ ​ Equity method investment earnings (loss) ​ ​ (10.7) ​ ​ 51.8 Interest expense, income tax expense, and depreciation and ​ ​ ​ ​ ​ ​ amortization included in equity method investment earnings (loss) ​ ​ 42.0 ​ ​ 39.1 Item impacting comparability ​ ​ ​ ​ ​ ​ Write-off of net investment in Russia (a) ​ ​ 62.7 ​ ​ — Add: Adjusted EBITDA from unconsolidated joint ventures ​ ​ 94.0 ​ ​ 90.9 ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA including unconsolidated joint ventures ​ $ 725.7 ​ $ 748.4 (a) In May 2022, LWM announced its intent to withdraw from its investment in Russia and wrote-off its net investment.
For example, the non-GAAP financial measures presented in this report may differ from similarly titled non-GAAP financial measures presented by other companies, and other companies may not define these non-GAAP financial measures the same way we do. ​ See “Results of Operations – Fiscal Year Ended May 28, 2023 Compared to Fiscal Year Ended May 29, 2022 – Net Sales, Gross Profit, and Product Contribution Margin” above for a reconciliation of product contribution margin on a consolidated basis to gross profit. ​ The following table reconciles net income to Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Fiscal Years Ended May (in millions) 2023 2022 Net income ​ $ 1,008.9 ​ $ 200.9 Equity method investment (earnings) loss ​ ​ (460.6) ​ ​ 10.7 Interest expense, net ​ ​ 109.2 ​ ​ 161.0 Income tax expense ​ ​ 224.6 ​ ​ 71.8 Income from operations ​ ​ 882.1 ​ ​ 444.4 Depreciation and amortization ​ ​ 218.3 ​ ​ 187.3 Items impacting comparability ​ ​ ​ ​ ​ ​ Acquisition expenses, net (a) ​ ​ (21.8) ​ ​ — LW EMEA derivative losses (gains) (a) ​ ​ 18.7 ​ ​ — Inventory step-up (a) ​ ​ 27.0 ​ ​ — Adjusted EBITDA ​ ​ 1,124.3 ​ ​ 631.7 ​ ​ ​ ​ ​ ​ ​ Unconsolidated Joint Ventures ​ ​ ​ ​ ​ ​ Equity method investment earnings (loss) ​ ​ 460.6 ​ ​ (10.7) Interest expense, income tax expense, and depreciation and ​ ​ ​ ​ ​ ​ amortization included in equity method investment earnings ​ ​ 29.1 ​ ​ 42.0 Items impacting comparability ​ ​ ​ ​ ​ ​ LW EMEA derivative losses (gains) (b) ​ ​ 37.8 ​ ​ (31.7) Gain on acquisitions (b) ​ ​ (425.8) ​ ​ — Write-off of net investment in Russia (b) ​ ​ — ​ ​ 62.7 Add: Adjusted EBITDA from unconsolidated joint ventures ​ ​ 101.7 ​ ​ 62.3 ​ ​ ​ ​ ​ ​ ​ Adjusted EBITDA including unconsolidated joint ventures ​ $ 1,226.0 ​ $ 694.0 (a) I ncome from operations for fiscal 2023 included a net $21.8 million gain ($12.2 million after-tax, or $0.08 per share) related to actions taken to mitigate the effect of changes in currency rates on the purchase of the remaining equity interest in LW EMEA, net of other acquisition-related costs.
Volume and price/mix each increased 15%. The benefits of product and freight pricing actions taken throughout the year to offset inflation, as well as favorable mix, drove the increase in price/mix.
The carryover benefits of pricing actions taken in the prior year, as well as actions taken in fiscal 2023, to counter inflationary pressures drove the increase in price/mix.
The decrease related to $130.4 million of cash used for unfavorable changes in working capital, and a $4.7 million decrease in net income, adjusted for non-cash income and expenses.
The increase related to a $306.8 million increase in net income, adjusted for non-cash income and expenses, in addition to an increase of $36.3 million of cash provided by favorable changes in working capital. See “Results of Operations” in this MD&A for more information related to the increase in income from operations.
Refer to “Non-GAAP Financial Measures” below for the definitions of product contribution margin, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures, Adjusted Diluted EPS, and Adjusted Net Income, and a reconciliation of these non-GAAP financial measures to gross profit, net income or diluted EPS, as applicable. ​ Executive Summary ​ In fiscal 2022, we delivered a solid financial and operating performance in a highly challenging environment that was characterized by severe input and transportation cost inflation, a historically poor potato crop in the Pacific Northwest, and constraints in labor availability and logistics networks.
Refer to “Non-GAAP Financial Measures” below for the definitions of product contribution margin, Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures, Adjusted Income from Operations, Adjusted Net Income, and Adjusted Diluted EPS, and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, gross profit, income from operations, net income, or diluted EPS, as applicable. ​ Acquisitions of Joint Venture Interests ​ In February 2023, we completed the acquisition of the remaining 50 percent equity interest in Lamb-Weston/Meijer v.o.f.
Price/mix increased 6% and volume increased 2%. The benefit of domestic and international product and freight pricing actions to offset inflation, as well as favorable mix, drove the increase in price/mix.
Net sales, excluding the incremental sales attributable to the Acquisitions, grew 22%. The benefit of domestic and international 34 Table of Contents pricing actions to counter multi-year inflationary pressures, as well as favorable mix, drove a 27% increase in price/mix.
Global segment cost of sales was $1,806.6 million, up 13% compared to fiscal 2021, primarily due to higher manufacturing and distribution costs and higher sales volumes. ​ Foodservice product contribution margin increased $109.3 million, or 32%, to $449.3 million in fiscal 2022.
Global cost of sales was $2,328.1 million, up 29%, primarily due to higher manufacturing costs. ​ Foodservice product contribution margin increased $101.7 million, or 23%, to $551.0 million. Pricing actions drove the increase, which was partially offset by higher costs per pound and the impact of lower sales volumes.
We believe that the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing our operating performance and underlying prospects. These non-GAAP financial measures should be viewed in addition to, and not as alternatives for, GAAP financial measures.
In addition, we believe that the presentation of these non-GAAP financial measures, when considered together with the most directly comparable GAAP financial measures and the reconciliations to those GAAP financial measures, provides investors with additional tools to understand the factors and trends affecting our underlying business than could be obtained absent these disclosures. ​ 41 Table of Contents The non-GAAP financial measures provided in this report should be viewed in addition to, and not as alternatives for, financial measures prepared in accordance with GAAP that are presented in this report.
Excluding these mark-to-market adjustments, Other segment product contribution margin declined $7.4 million, largely due to higher manufacturing costs and lower sales volumes in our vegetable business. ​ Selling, General and Administrative Expenses ​ SG&A expenses were $387.6 million, up $30.4 million, or 9%, in fiscal 2022 compared with fiscal 2021.
Excluding these mark-to-market adjustments, product contribution margin increased $6.9 million, largely due to higher prices in our vegetable business. ​ Selling, General and Administrative Expenses ​ SG&A expenses in fiscal 2023 increased $162.4 million, or 42%, to $550.0 million, and included a net $21.8 million gain ($12.2 million after-tax, or $0.08 per share) related to actions taken to mitigate the effect of changes in currency rates on the purchase price of LW EMEA, net of other acquisition-related costs.
Our management also uses Adjusted EBITDA, Adjusted EBITDA including unconsolidated joint ventures, Adjusted Diluted EPS, and Adjusted Net Income, to evaluate our performance excluding the impact of certain non-cash charges and other special items in order to have comparable financial results to analyze changes in our underlying business between reporting periods.
Our management also uses Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA including unconsolidated joint ventures. Management uses these non-GAAP financial measures to assist in analyzing what management views as our core operating performance for purposes of business decision making.
For more information about our investments in joint ventures, see Note 4, Equity Method Investments, of the Notes to the Consolidated Financial Statements in “Part II, Item 8.
Excluding this loss, interest expense, net increased $1.5 million due primarily to additional interest expense associated with debt incurred for the LW EMEA Acquisition. For more information, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
In addition to maintenance capital expenditures, fiscal 2022 also reflected increased investments to support capacity expansion projects in Idaho and China. ​ We expect capital investments in fiscal 2023 to be approximately $475 million to $525 million, depending on timing of projects, which include among other items: construction of a previously announced french fry production line and plant modernization investments in Idaho, construction of a greenfield french fry processing facility in China, and capital investments to upgrade information systems and ERP infrastructure.
Our funding requirements include capital expenditures for announced manufacturing expansions in China, Idaho, the Netherlands, and Argentina, as well as capital investments to upgrade information systems and ERP infrastructure, working capital requirements, and dividends. We expect capital investments in fiscal 2024 to be approximately $800 million to $900 million, depending on timing of projects and excluding acquisitions, if any.
Removed
Financial Statements and Supplementary Data” of this Form 10-K. Results for the fiscal year ended May 29, 2022 are not necessarily indicative of results that may be attained in the future. ​ The following generally discusses fiscal 2022 and 2021 items and fiscal year comparisons between fiscal 2022 and 2021.
Added
(“LW EMEA”), and in July 2022, we acquired an additional 40 percent interest in Lamb Weston Alimentos Modernos S.A. (“LWAMSA”). With the completion of the transactions, we own 100 percent and 90 percent of the equity interests in LW EMEA and LWAMSA (the “Acquisitions”), respectively.
Removed
We, along with our joint ventures, offer a broad product portfolio to a diverse channel and customer base in over 100 countries.
Added
We acquired the remaining interest in LW EMEA (the “LW EMEA Acquisition”) for consideration consisting of €531.6 million ($564.0 million) in cash, which excludes settlement of pre-existing relationships and cash held by LW EMEA, and 1,952,421 shares of our common stock. We used $42.3 million of cash to acquire the additional equity interest in LWAMSA.
Removed
French fries represent the majority of our value-added frozen potato product portfolio. ​ Management’s discussion and analysis of our results of operations and financial condition, which we refer to in this filing as “MD&A,” is provided as a supplement to the consolidated financial statements and related notes included elsewhere in this Form 10-K to help provide an understanding of our financial condition, changes in financial condition and results of our operations.
Added
We began consolidating LW EMEA’s and LWAMSA’s results in our consolidated financial statements following the respective acquisitions. The results are included in our Global segment. We discuss the Acquisitions in more detail in Note 3, Acquisitions, in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
Removed
We drove strong net sales growth by executing pricing actions and improving product and customer mix. These actions, along with our supply chain productivity initiatives, served to offset some, but not all, of the cost and operating headwinds that we faced throughout the year.
Added
Changes in our fiscal 2023 financial results compared to fiscal 2022 were primarily driven by the consolidation of the financial results of LW EMEA in fiscal 2023. ​ Overview ​ Lamb Weston is a leading global producer, distributor, and marketer of value-added frozen potato products.
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Specifically, compared with the prior year: ​ ● Net sales increased 12% to $4,098.9 million ● Income from operations decreased 6% to $444.4 million ● Net income decreased 37% to $200.9 million and Adjusted Net Income decreased 4% to $304.1 million ● Diluted EPS decreased 36% to $1.38 and Adjusted Diluted EPS decreased 4% to $2.08 ● Adjusted EBITDA including unconsolidated joint ventures decreased 3% to $725.7 million ● Net cash provided by operating activities declined 24% to $418.1 million ​ Compared with fiscal 2021, the increase in net sales was primarily driven by higher price/mix and sales volumes.
Added
French fries represent most of our value-added frozen potato product portfolio. ​ During fiscal 2023, we operated our business in four reportable segments: Global, Foodservice, Retail, and Other. We report net sales and product contribution margin by segment and on a consolidated basis. Product contribution margin, when presented on a consolidated basis, is a non-GAAP financial measure.
Removed
The increase in price/mix reflected the benefit of multiple product pricing actions across each of our business segments to offset input cost inflation, as well as higher prices charged for product delivery. The increase in sales volumes reflected 28 Table of Contents higher shipments to restaurant and foodservice channels in North America as demand continued to rebound towards pre-pandemic levels.
Added
Financial Statements and Supplementary Data” in this Form 10-K. ​ 32 Table of Contents Effective May 29, 2023, in connection with our recent acquisitions and to align with our expanded global footprint, our management, including our chief executive officer, who is our chief operating decision maker, began managing our operations as two business segments based on management’s change to the way it monitors performance, aligns strategies, and allocates resources.
Removed
The increase was most pronounced in our Foodservice segment, which has a higher proportion of its sales to on-premise dining establishments, while shipments to our large chain quick service restaurant (“QSR”) and casual dining restaurant customers in the U.S., which are included in our Global segment, also increased.
Added
This resulted in a change from four reportable segments to two (North America and International), effective the beginning of fiscal 2024.
Removed
The sales volume increase was partially offset by lower export volumes, which are included in our Global segment, and lower shipments in our Retail segment.
Added
All summary financial information on a prospective basis will be presented under the new reportable segments beginning with the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ending August 27, 2023. ​ Executive Summary ​ The following highlights our financial results for fiscal 2023.
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Our sales growth was also tempered by widespread industry supply chain constraints that resulted in lower production run-rates and throughput in our production facilities. ​ Outside of North America, the recovery in frozen potato demand varied and generally lagged U.S. demand.
Added
For more information, refer to the “Results of Operations” and “Non-GAAP Financial Measures” sections below. ​ In fiscal 2023, we delivered record net sales and earnings through a combination of improved pricing and supply chain productivity savings, while we continued to operate in a significant input cost inflation environment.
Removed
Shipments to customers in China fell as restaurant traffic and consumer demand was negatively affected by government-imposed restrictions geared towards reducing the spread of COVID-19-related variants, while shipments to other key markets in Asia and Oceania were negatively affected by global logistics constraints.
Added
Our net sales growth was driven primarily by pricing actions across each of our core business segments, as well as incremental sales attributable to the acquisitions of additional equity interests in LW EMEA and LWAMSA. Sales volume declined, largely reflecting our efforts to strategically manage customer and product mix by exiting certain lower-priced and lower-margin business.
Removed
In Europe, which is served by our LWM joint venture, sales volumes increased as restaurant traffic continued to improve, although earnings were negatively affected by inflation, production, and transportation challenges. ​ Gross profit in fiscal 2022 was flat compared to fiscal 2021, as favorable price/mix offset higher manufacturing and distribution costs on a per pound basis, while income from operations declined $30.4 million to $444.4 million as a result of higher selling, general and administrative (“SG&A”) expenses. ​ Compared to fiscal 2021, net income declined $116.9 million to $200.9 million, while Diluted EPS declined $0.78 to $1.38.
Added
To a lesser extent, sales volumes towards the end of fiscal 2023 were also negatively affected by softening traffic in casual dining and full-service restaurant channels (which largely impacted our Foodservice segment), certain international customers reverting to pre-Covid inventory practices (impacted our Global segment), and certain customers in select U.S. retail channels temporarily lowering prices to reduce private label inventories (impacted our Retail segment).
Removed
Most of the declines were due to a $62.7 million (before and after-tax, or $0.43 per share) non-cash impairment charge associated with LWM’s announced intent, in the fourth quarter of fiscal 2022, to withdraw from its joint venture in Russia in response to the war in Ukraine, as well as a loss of $53.3 million ($40.5 million after-tax or $0.27 per share) associated with a transaction to lower the interest rates and extend the maturities on some outstanding debt (see Liquidity and Capital Resources below). ​ We generated full-year cash from operations of $418.1 million and cash flow after investing activities of $107.6 million.
Added
Outside of North America, frozen potato demand varied, although restaurant traffic trends in our key markets, including Europe, generally softened as customers and consumers both faced similar or more severe macroeconomic environments, including persistent inflation and rising interest rates, than in the U.S. ​ Gross profit in fiscal 2023 increased as favorable price/mix more than offset higher manufacturing costs on a per pound basis and the impact of lower sales volumes.
Removed
We ended the year with $525.0 million of cash and cash equivalents and no borrowings on our revolving credit facility. In addition, we returned $289.1 million to our stockholders, including $138.4 million in cash dividends and $150.7 million of share repurchases.
Added
Incremental earnings from the consolidation of the financial results of LW EMEA beginning in the fiscal fourth quarter also contributed to the increase. Increased gross profit was partially offset by higher selling, general and administrative (“SG&A”) expenses, resulting in the increase in income from operations.
Removed
In July 2022, we used approximately $42 million to acquire an additional forty percent interest in our joint venture in Argentina, LWAMSA, increasing our total ownership from fifty percent to ninety percent.
Added
Higher income from operations drove the increase in net income and diluted EPS. ​ In fiscal 2023, we generated net cash from operating activities of $761.7 million, up $343.1 million versus the prior year, due to higher earnings, partially offset by increased working capital.
Removed
Following the acquisition, we will consolidate LWAMSA’s results in our consolidated financial statements. ​ Outlook ​ In fiscal 2023, we expect price/mix to increase largely due to pricing actions that we began to implement in fiscal 2022 in an effort to mitigate manufacturing and distribution cost inflation.
Added
We ended fiscal 2023 with $304.8 million of cash and cash equivalents and a $1.0 billion undrawn U.S. revolving credit facility.
Removed
We also expect sales volumes to grow largely due to the expected continuation in the rise of U.S. demand for frozen potato products, although our volume growth may be tempered by production capacity and logistics constraints. In addition, we expect that U.S. restaurant traffic, demand, and volume growth may be increasingly volatile as consumers respond to the current inflationary environment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, foreign currency exchange rates, and interest rates. In the normal course of business, we may periodically enter into derivatives to minimize these risks, but not for trading purposes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, changes in currency rates, and interest rates. In the normal course of business, we may periodically enter into derivatives to minimize these risks, but not for trading purposes.
Financial Statements and Supplementary Data” of this Form 10-K. 39 Table of Contents
Financial Statements and Supplementary Data” of this Form 10-K. 44 Table of Contents
It should be noted that any change in the fair value of the contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item. ​ Including our joint ventures, we transact business in multiple currencies and are subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries.
It should be noted that any change in the fair value of the contracts, real or hypothetical, would be substantially offset by an inverse change in the value of the underlying hedged item. ​ Foreign Currency Exchange Rate Risk ​ We are subject to currency exchange rate risk through investments and businesses owned and operated in foreign countries.
A one percent increase in interest rates related to variable-rate debt would result in an increase in interest expense and a corresponding decrease in income before taxes of $5.8 million annually ($4.5 million after-tax) and $5.9 million annually ($4.6 million after-tax) at May 29, 2022 and May 30, 2021, respectively. ​ For more information about our market risks, see Note 7, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
A one percent increase in interest rates related to variable-rate debt would result in an annual increase in interest expense and a corresponding decrease in income before taxes of $13.3 million annually ($10.3 million after-tax) and $5.8 million annually ($4.5 million after-tax) at May 28, 2023 and May 29, 2022, respectively. ​ For more information about our debt, see Note 8, Debt and Financing Obligations, of the Notes to Consolidated Financial Statements in “Part II, Item 8.
Additionally, based on our LWM joint venture’s open commodity contract hedge positions as of May 29, 2022 and May 30, 2021, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Equity method investment earnings” of $6.1 million ($4.6 million after-tax) and $1.5 million ($1.1 million after-tax), respectively.
Based on our open commodity hedge positions as of May 29, 2022, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would have resulted in a charge to “Cost of sales” of $4.5 million ($3.5 million after-tax) and a charge to “Equity method investment earnings” of $6.1 million ($4.6 million after-tax).
Risk Factors” of this Form 10-K. ​ Based on our open commodity contract hedge positions as of May 29, 2022 and May 30, 2021, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of $4.5 million ($3.5 million after-tax) and $7.7 million ($5.9 million after-tax), respectively.
Based on our open commodity contract hedge positions as of May 28, 2023, a hypothetical 10 percent decline in market prices applied to the fair value of the instruments would result in a charge to “Cost of sales” of $9.0 million ($6.8 million after-tax).
At May 29, 2022 and May 30, 2021, we had no financial instruments to hedge foreign currency risk. ​ At May 29, 2022, we had $2,170.0 million of fixed-rate and $575.0 million of variable-rate debt outstanding. At May 30, 2021, we had $2,166.0 million of fixed-rate and $586.6 million of variable-rate debt outstanding.
At May 28, 2023, we had $2,170.0 million of fixed-rate and $1,309.8 million of variable-rate debt outstanding. At May 29, 2022, we had $2,170.0 million of fixed-rate and $575.0 million of variable-rate debt outstanding.
Removed
The effects of the COVID-19 pandemic and the disruptions in the global economy caused by the war in Ukraine have resulted in volatility and uncertainty in the markets in which we operate.
Added
All of the following potential changes are based on sensitivity analyses performed on our financial positions as of May 28, 2023 and May 29, 2022. Actual results may differ materially. ​ Commodity Price Risk ​ The objective of our commodity exposure management is to minimize volatility in earnings due to large fluctuations in the price of commodities.
Removed
At the time of this filing, we are unable to predict or determine the impacts that these events may continue to have on our exposure to market risk from commodity prices, foreign currency exchange rates and interest rates, among other factors. For additional discussion, refer to “Forward-Looking Statements,” “Liquidity and Capital Resources” within “Part II, Item 7.
Added
We may use commodity swap or forward purchase contracts, in addition to sourcing from multiple providers, to manage risks associated with market fluctuations in oil and energy prices.
Removed
Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as “Item 1A.
Added
Our operations in foreign countries export to, and compete with imports from other regions. As such, currency movements can have a number of direct and indirect impacts on our financial statements. Direct impacts include the translation of international operations’ local currency financial statements into U.S. dollars and the remeasurement impact associated with non-functional currency financial assets and liabilities.
Removed
We have interest rate risk associated with our variable-rate debt.
Added
Indirect impacts include the change in competitiveness of exports out of the United States (and the impact on local currency pricing of products that are traded internationally). The currency that has the most impact is the Euro. From time to time, we may economically hedge currency risk with foreign currency contracts, such as forward contracts.
Added
Based on monetary assets and liabilities denominated in foreign currencies, we estimate that a hypothetical 10 percent adverse change in exchange rates versus the U.S. dollar would result in losses of $48.8 million ($37.1 million after-tax) and $6.5 million ($5.0 million after-tax) as of May 28, 2023 and May 29, 2022, respectively.
Added
The increased hypothetical risk from May 29, 2022 is primarily related to the increase in our non-U.S. assets and liabilities. ​ Interest Rate Risk ​ We issue fixed and floating rate debt in a proportion that management deems appropriate based on current and projected market conditions.

Other LW 10-K year-over-year comparisons