Company Quick10K Filing
Lamb Weston
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 147 $9,032
10-Q 2020-01-03 Quarter: 2019-11-24
10-Q 2019-10-02 Quarter: 2019-08-25
10-K 2019-07-25 Annual: 2019-05-26
10-Q 2019-04-02 Quarter: 2019-02-24
10-Q 2019-01-04 Quarter: 2018-11-25
10-Q 2018-10-02 Quarter: 2018-08-26
10-K 2018-07-26 Annual: 2018-05-27
10-Q 2018-04-05 Quarter: 2018-02-25
10-Q 2018-01-04 Quarter: 2017-11-26
10-Q 2017-10-04 Quarter: 2017-08-27
10-K 2017-07-25 Annual: 2017-05-28
10-Q 2017-04-06 Quarter: 2017-02-26
10-Q 2017-01-10 Quarter: 2016-11-27
8-K 2020-01-03 Earnings, Exhibits
8-K 2019-10-02 Earnings, Exhibits
8-K 2019-09-26 Shareholder Vote
8-K 2019-08-05 Officers
8-K 2019-07-23 Earnings, Exhibits
8-K 2019-06-25 Exhibits
8-K 2019-04-18 Officers
8-K 2019-04-02 Earnings, Exhibits
8-K 2019-01-04 Earnings, Exhibits
8-K 2018-12-18 Other Events
8-K 2018-11-02 Other Events
8-K 2018-09-27 Shareholder Vote
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-04-05 Earnings, Exhibits
8-K 2018-01-04 Earnings, Exhibits
LW 2019-11-24
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management'S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex-31d1.htm
EX-31.2 ex-31d2.htm
EX-32.1 ex-32d1.htm
EX-32.2 ex-32d2.htm

Lamb Weston Earnings 2019-11-24

LW 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CPB 14,115 13,148 12,036 9,365 2,867 211 1,073 21,187 31% 19.7 2%
CAG 13,012 22,214 14,750 9,538 2,653 680 1,232 23,454 28% 19.0 3%
SJM 12,394 16,792 8,784 7,714 2,937 536 1,391 17,830 38% 12.8 3%
LW 9,032 3,048 3,053 3,756 1,004 487 891 11,300 27% 12.7 16%
BG 8,352 20,424 14,093 42,989 2,289 580 1,786 12,567 5% 7.0 3%
POST 7,743 11,398 8,181 5,868 1,818 171 938 13,746 31% 14.6 2%
INGR 5,606 5,998 3,402 5,730 1,299 401 801 7,255 23% 9.1 7%
FLO 4,879 3,220 1,926 4,044 0 179 414 5,768 0% 13.9 6%
LANC 4,047 905 179 1,308 326 151 235 3,850 25% 16.4 17%
DAR 3,374 5,037 2,630 3,328 721 88 440 4,927 22% 11.2 2%

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended November 24, 2019

OR

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

For the transition period from                 to 

Commission File Number: 1-37830

LAMB WESTON HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

 

61-1797411

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

599 S. Rivershore Lane
Eagle, Idaho

 

83616

(Address of principal executive offices)

 

(Zip Code)

(208) 938-1047

(Registrant’s telephone number, including area code)

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

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

Title of each class

    

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1.00 par value

LW

New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes     No 

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of December 27, 2019, the Registrant had 146,092,112 shares of common stock, par value $1.00 per share, outstanding.

Table of Contents

Table of Contents

Part I. FINANCIAL INFORMATION (Unaudited)

Item 1

Financial Statements

Consolidated Statements of Earnings for the Thirteen and Twenty-Six Weeks ended November 24, 2019 and November 25, 2018

3

Consolidated Statements of Comprehensive Income (Loss) for the Thirteen and Twenty-Six Weeks ended November 24, 2019 and November 25, 2018

4

Consolidated Balance Sheets as of November 24, 2019 and May 26, 2019

5

Consolidated Statements of Stockholders’ Equity for the Thirteen and Twenty-Six Weeks Ended November 24, 2019 and November 25, 2018

6

Consolidated Statements of Cash Flows for the Twenty-Six Weeks ended November 24, 2019 and November 25, 2018

7

Condensed Notes to Consolidated Financial Statements

8

Item 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4

Controls and Procedures

33

Part II. OTHER INFORMATION

34

Item 1

Legal Proceedings

34

Item 1A

Risk Factors

34

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

34

Item 3

Defaults Upon Senior Securities

34

Item 4

Mine Safety Disclosures

34

Item 5

Other Information

34

Item 6

Exhibits

35

Signatures

36

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

2

Table of Contents

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Lamb Weston Holdings, Inc.

Consolidated Statements of Earnings

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

Thirteen Weeks Ended

Twenty-Six Weeks Ended

    

November 24,

    

November 25,

    

November 24,

    

November 25,

2019

2018

2019

2018

Net sales

$

1,019.2

$

911.4

$

2,008.2

$

1,826.3

Cost of sales

734.1

662.4

1,474.5

1,346.7

Gross profit

285.1

249.0

533.7

479.6

Selling, general and administrative expenses

91.6

75.0

170.2

153.0

Income from operations

193.5

174.0

363.5

326.6

Interest expense, net

25.4

26.2

53.6

53.0

Income before income taxes and equity method earnings

 

168.1

 

147.8

 

309.9

 

273.6

Income tax expense

42.7

34.0

79.4

68.3

Equity method investment earnings

15.0

10.2

25.6

30.1

Net income

 

140.4

 

124.0

 

256.1

 

235.4

Less: Income attributable to noncontrolling interests

5.0

8.6

Net income attributable to Lamb Weston Holdings, Inc.

$

140.4

$

119.0

$

256.1

$

226.8

Earnings per share

Basic

$

0.96

$

0.74

$

1.75

$

1.47

Diluted

$

0.95

$

0.74

$

1.74

$

1.47

See Condensed Notes to Consolidated Financial Statements.

3

Table of Contents

Lamb Weston Holdings, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(unaudited, dollars in millions)

Thirteen Weeks Ended

Thirteen Weeks Ended

November 24, 2019

November 25, 2018

Tax

Tax 

Pre-Tax

(Expense)

After-Tax

Pre-Tax 

(Expense) 

After-Tax 

    

Amount

    

Benefit

    

Amount

    

Amount

    

Benefit

    

Amount

Net income

$

183.1

$

(42.7)

$

140.4

$

158.0

$

(34.0)

$

124.0

Other comprehensive income (loss):

  

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

0.2

(0.1)

0.1

0.2

 

0.2

Unrealized currency translation gains (losses)

(0.4)

1.0

0.6

(7.6)

 

 

(7.6)

Comprehensive income (loss)

 

182.9

 

(41.8)

 

141.1

 

150.6

 

(34.0)

 

116.6

Less: Comprehensive income attributable to noncontrolling interests

 

5.0

 

 

5.0

Comprehensive income (loss) attributable to Lamb Weston Holdings, Inc.

$

182.9

$

(41.8)

$

141.1

$

145.6

$

(34.0)

$

111.6

Twenty-Six Weeks Ended

Twenty-Six Weeks Ended

November 24, 2019

November 25, 2018

Tax

Tax 

Pre-Tax

(Expense)

After-Tax

Pre-Tax 

(Expense) 

After-Tax 

    

Amount

    

Benefit

    

Amount

    

Amount

    

Benefit

    

Amount

Net income

$

335.5

$

(79.4)

$

256.1

$

303.7

$

(68.3)

$

235.4

Other comprehensive income (loss):

 

  

 

  

 

 

  

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

 

0.4

(0.1)

 

0.3

 

0.4

(0.1)

 

0.3

Unrealized currency translation losses

 

(9.5)

 

1.0

 

(8.5)

 

(11.9)

 

 

(11.9)

Comprehensive income (loss)

 

326.4

 

(78.5)

 

247.9

 

292.2

 

(68.4)

 

223.8

Less: Comprehensive income attributable to noncontrolling interests

 

 

 

 

8.6

 

 

8.6

Comprehensive income (loss) attributable to Lamb Weston Holdings, Inc.

$

326.4

$

(78.5)

$

247.9

$

283.6

$

(68.4)

$

215.2

See Condensed Notes to Consolidated Financial Statements.

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Lamb Weston Holdings, Inc.

Consolidated Balance Sheets

(unaudited, dollars in millions, except share data)

November 24,

May 26,

    

2019

    

2019

ASSETS

 

 

  

  

Current assets:

 

 

  

  

Cash and cash equivalents

 

$

23.8

$

12.2

Receivables, less allowance for doubtful accounts of $1.3 and $1.3

 

399.7

 

340.1

Inventories

 

636.0

 

498.3

Prepaid expenses and other current assets

 

47.8

 

110.9

Total current assets

 

1,107.3

 

961.5

Property, plant and equipment, net

 

1,552.3

 

1,597.8

Operating lease assets

162.9

Equity method investments

257.9

224.6

Goodwill

 

307.2

 

205.9

Intangible assets, net

 

39.8

 

37.6

Other assets

 

39.4

 

20.7

Total assets

$

3,466.8

$

3,048.1

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

 

  

 

  

Short-term borrowings

$

9.9

$

8.4

Current portion of long-term debt and financing obligations

36.1

38.0

Accounts payable

 

406.0

 

289.2

Accrued liabilities

 

217.4

 

217.2

Total current liabilities

 

669.4

 

552.8

Long-term liabilities:

Long-term debt and financing obligations, excluding current portion

 

2,203.7

 

2,280.2

Deferred income taxes

149.5

125.7

Other noncurrent liabilities

 

243.1

 

94.0

Total long-term liabilities

2,596.3

2,499.9

Commitments and contingencies

Stockholders' equity:

 

  

 

  

Common stock of $1.00 par value, 600,000,000 shares authorized; 146,837,024 and 146,654,827 shares issued

 

146.8

 

146.7

Additional distributed capital

 

(877.0)

 

(890.3)

Retained earnings

 

1,021.9

 

803.6

Accumulated other comprehensive loss

 

(33.5)

 

(25.3)

Treasury stock, at cost, 833,820 and 585,794 common shares

(57.1)

(39.3)

Total stockholders' equity (deficit)

 

201.1

 

(4.6)

Total liabilities and stockholders’ equity

$

3,466.8

$

3,048.1

See Condensed Notes to Consolidated Financial Statements.

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Lamb Weston Holdings, Inc.

Consolidated Statements of Stockholders’ Equity
(unaudited, dollars in millions, except shares and per share data)

Thirteen Weeks Ended November 24, 2019 and November 25, 2018

    

    

    

Additional 

    

    

Accumulated 

    

Common Stock,

Common

Treasury

Paid-in

Other 

net of Treasury

Stock

Stock

(Distributed)

Retained

Comprehensive 

 Total 

Shares

    

Amount

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

    

 Equity

Balance at August 25, 2019

146,062,722

$

146.8

$

(46.7)

$

(884.7)

$

911.1

  

$

(34.2)

  

$

92.3

Dividends declared, $0.20000 per share

(29.2)

(29.2)

Common stock issued

76,787

0.2

0.2

Stock-settled, stock-based compensation expense

7.2

7.2

Repurchase of common stock and common stock withheld to cover taxes

(136,305)

(10.4)

(10.4)

Other

0.3

(0.4)

(0.1)

Comprehensive income

140.4

0.7

141.1

Balance at November 24, 2019

146,003,204

$

146.8

$

(57.1)

$

(877.0)

$

1,021.9

$

(33.5)

$

201.1

Balance at August 26, 2018

146,447,756

$

146.6

$

(6.8)

$

(896.4)

$

519.7

$

(8.5)

$

(245.4)

Increase in redemption value of noncontrolling interests in excess of earnings allocated

(10.0)

(10.0)

Dividends declared, $0.19125 per share

(28.0)

(28.0)

Common stock issued

51,064

0.3

0.3

Stock-settled, stock-based compensation expense

5.0

5.0

Common stock withheld to cover taxes

(6,917)

(0.5)

(0.5)

Other

0.2

(0.3)

(0.1)

Comprehensive income (loss)

119.0

(7.4)

111.6

Balance at November 25, 2018

146,491,903

$

146.6

$

(7.3)

$

(900.9)

$

610.4

$

(15.9)

$

(167.1)

Twenty-Six Weeks Ended November 24, 2019 and November 25, 2018

    

    

    

Additional 

    

    

Accumulated 

    

Common Stock,

Common

Treasury

Paid-in

Other 

net of Treasury

Stock

Stock

(Distributed)

Retained

Comprehensive 

 Total 

Shares

    

Amount

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

    

 Equity

Balance at May 26, 2019

146,069,033

$

146.7

$

(39.3)

$

(890.3)

$

803.6

  

$

(25.3)

  

$

(4.6)

Adoption of ASC 842 leases

20.5

20.5

Dividends declared, $0.40000 per share

(58.4)

(58.4)

Common stock issued

182,197

0.1

0.1

0.2

Stock-settled, stock-based compensation expense

12.6

12.6

Repurchase of common stock and common stock withheld to cover taxes

(248,026)

(17.8)

(17.8)

Other

0.6

0.1

0.7

Comprehensive income (loss)

 

256.1

(8.2)

247.9

Balance at November 24, 2019

146,003,204

$

146.8

$

(57.1)

$

(877.0)

$

1,021.9

$

(33.5)

$

201.1

Balance at May 27, 2018

146,332,332

$

146.4

$

(2.9)

$

(900.4)

$

426.4

$

(4.3)

$

(334.8)

Adoption of ASC 606 revenue from contracts with customers

13.7

13.7

Increase in redemption value of noncontrolling interests in excess of earnings allocated

(10.9)

(10.9)

Dividends declared, $0.38250 per share

(56.0)

(56.0)

Common stock issued

220,531

0.2

0.9

(0.1)

1.0

Stock-settled, stock-based compensation expense

9.2

9.2

Common stock withheld to cover taxes

(60,960)

(4.4)

(4.4)

Other

0.3

(0.4)

(0.1)

Comprehensive income (loss)

226.8

(11.6)

215.2

Balance at November 25, 2018

146,491,903

$

146.6

$

(7.3)

$

(900.9)

$

610.4

$

(15.9)

$

(167.1)

See Condensed Notes to Consolidated Financial Statements

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Lamb Weston Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited, dollars in millions)

Twenty-Six Weeks Ended

    

November 24,

    

November 25,

2019

2018

Cash flows from operating activities

Net income

$

256.1

$

235.4

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of intangibles and debt issuance costs

91.7

77.2

Stock-settled, stock-based compensation expense

12.6

9.2

Earnings of joint ventures in excess of distributions

(7.6)

(4.5)

Deferred income taxes

17.2

27.9

Other

2.0

6.2

Changes in operating assets and liabilities, net of acquisition:

Receivables

(55.2)

(28.2)

Inventories

(133.4)

(149.4)

Income taxes payable/receivable, net

17.5

3.7

Prepaid expenses and other current assets

46.3

51.0

Accounts payable

126.4

114.8

Accrued liabilities

(28.3)

(26.5)

Net cash provided by operating activities

$

345.3

$

316.8

Cash flows from investing activities

Acquisition of business, net of cash acquired

(116.7)

Additions to property, plant and equipment

(88.1)

(170.4)

Additions to other long-term assets

(19.3)

Investment in equity method joint venture

(17.1)

Other

1.0

1.7

Net cash used for investing activities

$

(240.2)

$

(168.7)

Cash flows from financing activities

Proceeds from issuance of debt

299.3

Repayments of debt and financing obligations

(318.1)

(20.3)

Dividends paid

(58.5)

(56.0)

Repurchase of common stock and common stock withheld to cover taxes

(17.8)

(4.4)

Proceeds (payments) of short-term borrowings, net

 

1.4

 

4.3

Cash distributions paid to noncontrolling interest

(6.1)

Other

0.1

1.1

Net cash used for financing activities

$

(93.6)

$

(81.4)

Effect of exchange rate changes on cash and cash equivalents

0.1

(0.7)

Net increase in cash and cash equivalents

 

11.6

 

66.0

Cash and cash equivalents, beginning of the period

12.2

55.6

Cash and cash equivalents, end of period

$

23.8

$

121.6

See Condensed Notes to Consolidated Financial Statements.

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Condensed Notes to Consolidated Financial Statements

1.    NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Lamb Weston Holdings, Inc. (“we,” “us,” “our,” the “Company,” or “Lamb Weston”), along with its joint venture partners, is a leading global producer, distributor, and marketer of value-added frozen potato products and is headquartered in Eagle, Idaho. We have four reportable segments: Global, Foodservice, Retail, and Other. See Note 15, Segments, for additional information on our reportable segments.

Basis of Presentation

The accompanying consolidated financial statements present the financial results of Lamb Weston for the thirteen and twenty-six weeks ended November 24, 2019 and November 25, 2018, and have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America. These financial statements are unaudited but include all adjustments (consisting only of normal recurring adjustments) that we consider necessary for a fair presentation of such financial statements. The preparation of financial statements involves the use of estimates and accruals. Actual results may vary from those estimates. Results for interim periods should not be considered indicative of results for our full fiscal year, which ends the last Sunday in May. These financial statements and condensed notes should be read together with the combined and consolidated financial statements and notes in our Annual Report on Form 10-K for the fiscal year ended May 26, 2019 (the “Form 10-K”), which we filed with the Securities and Exchange Commission on July 25, 2019.

Certain amounts in the prior period consolidated financial statements have been reclassified to conform with the current period presentation.

New and Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASC 842”). We adopted the provisions of the guidance effective May 27, 2019 (the beginning of our fiscal year), using the modified retrospective transition method and prior periods were not recast. The adoption of the standard resulted in a $26.6 million ($20.5 million, net of tax) cumulative-effect adjustment to the opening balance of retained earnings for the elimination of $38.7 million of land and $65.3 million of finance lease obligations related to a sale leaseback. The adoption also resulted in the recognition of approximately $155 million of right of use assets and short-term and long-term liabilities recorded on our consolidated balance sheet related to operating leases. We elected to adopt certain of the optional practical expedients including electing to not reassess lease classification, initial direct costs of existing leases, or whether existing contracts contain a lease. In addition, we elected to account for each contract’s lease and non-lease components as a single lease component. The standard did not have a material impact on our results of operations or cash flows. See Note 6, Leases, for more information.

Accounting Pronouncements Not Yet Adopted

Receivables – Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This update amends the impairment or incurred model by requiring the use of forward-looking information to assess the allowance for doubtful accounts. This guidance is effective in fiscal 2021 (beginning June 1, 2020), including interim periods, with early adoption permitted. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief. This update provides targeted transition relief allowing for an irrevocable one-time election upon adoption of the new credit losses standard to measure

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financial assets previously measured at amortized cost using the fair value option. This guidance is effective concurrent with the adoption of ASU 2016-13. The adoption of this standard is not expected to have a significant impact on our financial statements.

Defined Benefit Plans

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. This update removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant to defined benefit pension and other postretirement plans. This guidance is effective for our fiscal 2022 (beginning May 31, 2021) with early adoption permitted. The adoption of this standard is not expected to have a significant impact on our financial statements.

There were no other accounting pronouncements recently issued that had or are expected to have a material impact on our financial statements.

2.    EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per common share for the periods presented (dollars and shares in millions, except per share amounts):

Thirteen Weeks Ended

Twenty-Six Weeks Ended

    

November 24,

    

November 25,

    

November 24,

    

November 25,

2019

2018

2019

2018

Numerator:

 

  

 

  

 

  

 

  

Net income attributable to Lamb Weston Holdings, Inc.

$

140.4

$

119.0

$

256.1

$

226.8

Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated, net of tax benefits (a)

 

 

10.0

 

 

10.9

Net income available to Lamb Weston common stockholders

$

140.4

$

109.0

$

256.1

$

215.9

Denominator:

 

  

 

  

 

  

 

  

Basic weighted average common shares outstanding

 

146.2

 

146.6

 

146.2

 

146.5

Add: Dilutive effect of employee incentive plans (b)

 

0.9

 

0.8

 

0.9

 

0.8

Diluted weighted average common shares outstanding

 

147.1

 

147.4

 

147.1

 

147.3

Earnings per share (a)

Basic

$

0.96

$

0.74

$

1.75

$

1.47

Diluted

$

0.95

$

0.74

$

1.74

$

1.47

(a)In November 2018, we entered into an agreement to acquire the remaining 50.01% interest in Lamb Weston BSW, LLC (“Lamb Weston BSW”). Our Consolidated Statements of Earnings includes 100% of Lamb Weston BSW’s earnings beginning November 2, 2018. During the thirteen and twenty-six weeks ended November 25, 2018, net income available to common stockholders and earnings per share included accretion expense, net of estimated tax benefits, of $9.5 million, or $0.06 per share, to increase the redeemable noncontrolling interest to the amount we agreed to pay to acquire the remaining interest in Lamb Weston BSW. While the accretion, net of estimated tax benefits, reduced net income available to Lamb Weston common stockholders and earnings per share, it did not impact net income in the Consolidated Statements of Earnings.

(b)Potentially dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of outstanding restricted stock units and performance awards. As of November 24, 2019 and November 25, 2018, we did not have any stock-based awards that were antidilutive.

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3.    INCOME TAXES

Income tax expense was $42.7 million and $34.0 million for the thirteen weeks ended November 24, 2019 and November 25, 2018, respectively; and $79.4 million and $68.3 million for the twenty-six weeks ended November 24, 2019 and November 25, 2018, respectively. The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 23.3% and 21.5% for the thirteen weeks ended November 24, 2019 and November 25, 2018, respectively; and approximately 23.7% and 22.5% for the twenty-six weeks ended November 24, 2019 and November 25, 2018, respectively, in our Consolidated Statements of Earnings. The effective tax rate varies from the U.S. statutory tax rate of 21% principally due to the impact of U.S. state taxes, foreign taxes, permanent differences, and discrete items.

Income Taxes Paid

Income taxes paid, net of refunds, were $44.4 million and $36.0 million during the twenty-six weeks ended November 24, 2019 and November 25, 2018, respectively.

Unrecognized Tax Benefits

There have been no material changes to the unrecognized tax benefits disclosed in Note 5, Income Taxes, of the Notes to Combined and Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" of the Form 10-K, and we do not expect any significant changes to unrecognized tax benefits in the next 12 months.

4.    INVENTORIES

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

    

November 24,

May 26,

2019

    

2019

Raw materials and packaging

$

213.5

 

$

93.1

Finished goods

 

386.7

 

 

371.4

Supplies and other

 

35.8

 

 

33.8

Inventories

$

636.0

 

$

498.3

5.    PROPERTY, PLANT AND EQUIPMENT

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

    

November 24,

May 26,

2019

    

2019

Land and land improvements (a)

$

107.0

$

142.2

Buildings, machinery, and equipment

 

2,606.8

 

2,542.3

Furniture, fixtures, office equipment, and other

 

106.8

 

105.2

Construction in progress

 

71.7

 

84.8

Property, plant and equipment, at cost

 

2,892.3

 

2,874.5

Less accumulated depreciation

 

(1,340.0)

 

(1,276.7)

Property, plant and equipment, net

$

1,552.3