Lamb Weston Holdings Inc.

07/24/2026 | Press release | Distributed by Public on 07/24/2026 10:52

Annual Report for Fiscal Year Ending May 31, 2026 (Form 10-K)

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. Discussions of fiscal 2024 items and fiscal year comparisons between fiscal 2025 and 2024 that are not included in this Form 10-K can be found in "Part II, Item 7. 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 25, 2025, which we filed with the SEC on July 23, 2025. Results for the fiscal year ended May 31, 2026 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"). We have also presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted Selling, General and Administrative expenses ("SG&A"), Adjusted Income Tax Expense (Benefit), and Adjusted Equity Method Investment Earnings, each of which is considered a non-GAAP financial measure, to supplement the financial information included in this report. We also present net sales excluding FX and net sales excluding FX and extra week. Refer to "Non-GAAP Financial Measures" below for the definitions of Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Adjusted Income Tax Expense (Benefit), Adjusted Equity Method Investment Earnings, net sales excluding FX, and net sales excluding FX and extra week, and a reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, net income, gross profit, SG&A, and equity method investment earnings and net sales, as applicable. For more information, refer to the "Results of Operations" and "Non-GAAP Financial Measures" sections below.
Overview
Lamb Weston is a leading global producer, distributor, and marketer of value-added frozen potato products. 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. French fries represent most of our value-added frozen potato product portfolio.
During fiscal 2026, we operated our business in two reportable segments: North America and International. We report net sales and adjusted EBITDA by segment and on a consolidated basis. Net sales and Segment Adjusted EBITDA are the primary measures reported to our chief operating decision maker for purposes of allocating resources to our segments and assessing their performance. For additional information on our reportable segments, see "Non-GAAP Financial Measures" below and Note 13, Segments, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K.
Executive Summary
The following highlights our financial results for fiscal 2026. For more information, refer to the "Results of Operations" and "Non-GAAP Financial Measures" sections below.
In fiscal 2026, we delivered a solid year, led by strong volume and share growth in North America, while making meaningful progress in executing our Focus to Win strategy.
Internationally, volume grew in Asia Pacific, and Latin America, which more than offset volume losses in EMEA. Increased competition, softer demand and the disruption of shipments in the Middle East due to the conflict in Iran resulted in a challenging year for the EMEA region. We continue to actively manage these issues.
We are encouraged by our momentum with customers, including new wins and continued strengthening of existing relationships, notably in North America. The quality and depth of our relationships combined with our focus on service, consistent delivery and exceptional product quality are contributing to share gains in North America.
We advanced our executing with excellence strategic pillar through supply chain and manufacturing operating improvements. The significant productivity gains lowered our cost per pound and generated cost savings to offset inflation and unexpected costs.
Our Cost Savings Program exceeded its first year milestone of $100 million in savings. Based on the success of the program to date in delivering structural savings to supply chain and reducing SG&A, we will continue to pursue additional opportunities to improve our cost structure and capital efficiency.
Our disciplined approach to working capital resulted in $942.9 million in cash provided by operating activities. We have completed our capital growth initiatives, opening our new facility in Argentina to serve the growing Latin America market, and reduced structural capital intensity, lowering capital expenditures by $240.6 million from the prior year, to $410.1 million. Finally, we returned a total of $320.7 million to shareholders through $207.5 million in cash dividends and $113.2 million in repurchases of common stock.
We have additional strategic work underway to focus our resources on our goal of generating sustainable long-term value for shareholders.
Outlook
In fiscal 2027, we believe customers and consumers will continue to prioritize french fries as a menu and at home item. Our outlook assumes global restaurant traffic will be flat. We expect low single-digit sales volume growth and a low single-digit decline in price/mix for the full year. Net sales are expected to be flat to up slightly on a comparable weeks basis. As a result of cost savings, improved efficiencies and lapping one-time items, earnings growth is expected to outpace sales growth. Fiscal 2027 is a 52-week period versus a 53-week period in fiscal 2026.
With growth investments behind us, cash used for capital expenditures, excluding acquisitions if any, is expected to be approximately $380 million to $410 million and cash from operations is expected in the range of $750 million to $800 million.
Results of Operations
53-Week Fiscal Year Ended May 31, 2026 Compared to 52-Week Fiscal Year Ended May 25, 2025
Fiscal Year Ended
(in millions, except percentages) May 31, 2026
(53 weeks) 		May 25, 2025 %
Increase (Decrease) 		% Increase (Decrease) excl. FX
Segment net sales
North America $ 4,395.2 $ 4,265.2 3% 3%
International 2,217.1 2,186.1 1% (4)%
$ 6,612.3 $ 6,451.3 2% 1%
Segment Adjusted EBITDA
North America $ 1,142.4 $ 1,109.3 3%
International $ 114.7 $ 257.6 (55)%
Net Sales
Net sales for fiscal 2026 increased $161.0 million, or 2%, to $6,612.3 million compared to the prior year. Fiscal 2026 benefited from a favorable foreign currency ("FX") impact of $123.1 million or 1%. Sales volume increased 7% driven by volume increases in North America, APAC, and Latin America. Price/mix declined 6% driven by continued price and trade support for our customers and volume wins in lower priced, highly competitive channels. Fiscal 2026 also benefited $127.1 million from the 53rd week in the fiscal year.
North America segment net sales for fiscal 2026, which includes all sales to customers in the U.S., Canada, and Mexico, increased $130.0 million, or 3%, to $4,395.2 million compared to fiscal 2025. Sales volume increased 9% compared to the prior year driven by strong customer retention and contract wins in fiscal 2026. Price/mix declined 6%, reflecting new contract prices and the carryover impact of fiscal 2025 customer support. Fiscal 2026 also benefited $86.4 million from the 53rd week in the fiscal year.
International segment net sales for fiscal 2026, which includes all sales to customers outside of North America, increased $31.0 million, or 1%, to $2,217.1 million year-over-year, including a favorable $115.3 million, or 5%, impact from FX. Sales volume increased 2%, as growth in Asia Pacific and Latin America offset losses in EMEA driven by challenging market conditions. Price/mix declined 6%, reflecting increased competitive pricing across the segment. Fiscal 2026 also benefited $40.7 million from the 53rd week in the fiscal year.
Gross Profit
Gross profit declined $38.9 million versus fiscal 2025 to $1,359.7 million.
Adjusted Gross Profit declined $123.3 million versus the prior year to $1,337.2 million primarily reflecting unfavorable global price/mix, as well as an incremental $33.1 million pre-tax charge related to the write-offs of excess raw potatoes in our International segment due to lower than planned sales volumes. These costs were partially offset by higher volumes, lower manufacturing costs per pound, and improved operational efficiencies across the organization.
Selling, General and Administrative Expenses
SG&A increased $31.1 million versus fiscal 2025 to $664.6 million.
Adjusted SG&A declined $6.0 million versus the prior year to $598.4 million. Cost savings associated with our Focus to Win strategy were partially offset by higher operating expenses and $18.8 million of write-offs related to previously capitalized costs associated with projects no longer under development.
Net Income, Adjusted EBITDA and Segment Adjusted EBITDA
Net income declined $67.2 million from fiscal 2025 to $290.0 million.
Adjusted EBITDA declined $112.8 million versus fiscal 2025 to $1,147.2 million. Adjusted EBITDA benefited $28.9 million from the 53rd week in fiscal 2026.
North America Segment Adjusted EBITDA increased $32.9 million to $1,142.3 million in fiscal 2026. Higher sales volumes, along with lower manufacturing costs per pound and the benefit of cost savings more than offset inflation and customer investments. North America Segment Adjusted EBITDA benefited $25.5 million from the 53rd week in fiscal 2026.
International Segment Adjusted EBITDA declined $142.9 million to $114.7 million. The decrease primarily reflects lower sales excluding FX, price/mix and higher manufacturing costs per pound, driven by a an incremental $33.1 million charge related to the write-offs of excess raw potatoes, lower utilization of our international production facilities, and start-up expenses for our new plant in Argentina. These were partially offset by benefits from cost savings initiatives. International Segment Adjusted EBITDA benefited $4.0 million from the 53rd week in fiscal 2026.
Interest Expense, Net
Interest expense, net increased $0.5 million, versus fiscal 2025, to $180.5 million. For more information, see Note 8, 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
Income tax expense for fiscal 2026 was $128.1 million compared to $143.1 million in the prior year period. The effective income tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 30.6% and 28.6% for fiscal 2026 and 2025, respectively.
For further information on income taxes, see Note 3, Income Taxes, of the Notes to Consolidated Financial Statements in "Part II, Item 8. Financial Statements and Supplementary Data" in this Form 10-K.
Equity Method Investment Earnings
Equity method investment earnings from unconsolidated joint ventures were $7.5 million and $15.2 million for fiscal 2026 and 2025, respectively. Adjusted Equity Method Investment Earnings were $7.5 million and $25.7 million for fiscal 2026 and 2025, respectively. The decline of $18.2 million in earnings was primarily the result of lower gross profit, with higher volumes more than offset by unfavorable price/mix. The results for the current and prior year reflect earnings associated with our 50% interest in Lamb Weston/RDO Frozen.
Fiscal 2026 Compared to Fiscal 2025 Balance Sheet Changes
Changes to our Consolidated Balance Sheet compared with May 25, 2025, were driven by a decline in inventories as we continued to align our global supply chain organization and our focus on optimizing inventory levels globally to meet customer needs, a decline in outstanding debt, including a reduction in the use of our revolving credit facility and long-term debt, and an increase in our treasury stock related to our stock repurchase program. These were mostly offset by an increase in accrued liabilities and deferred tax liabilities.
Liquidity and Capital Resources
As of May 31, 2026, we had $68.2 million of cash and cash equivalents, with $1,284.3 million additional amounts available for borrowing under our revolving credit facility. We believe we have sufficient liquidity to meet our business requirements for the next 12 months and the foreseeable future thereafter. Cash generated by operations, supplemented by our cash and cash equivalents and availability under our revolving credit facility, are our primary sources of liquidity for funding our business requirements. Our funding requirements include capital expenditures, changes in working capital, and returning cash to stockholders in the form of cash dividends and share repurchases. These expenditures could increase or decrease as a result of our financial results, future economic conditions, supply chain constraints for equipment, our regulatory compliance requirements, and other factors. At May 31, 2026, we had commitments for capital expenditures of $152.8 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, except percentages) 2026 2025
Net cash flows provided by (used for):
Operating activities 942.9 868.3
Investing activities (380.2) (648.0)
Financing activities (569.1) (225.0)
(6.4) (4.7)
Effect of exchange rate changes on cash and cash equivalents 3.9 4.0
Net decrease in cash and cash equivalents (2.5) (0.7)
Cash and cash equivalents, beginning of period 70.7 71.4
Cash and cash equivalents, end of period 68.2 70.7
Operating Activities
During fiscal 2026, cash provided by operating activities increased $74.6 million to $942.9 million. The increase largely relates to $55.1 million of favorable changes in working capital, led by higher accrued liabilities tied to compensation and benefit accruals due to better performance achievement, lower inventories, and a $19.5 million increase in net income, adjusted for non-cash items. See "Results of Operations" in this MD&A for more information related to the increase in income from operations.
Investing Activities
Investing activities used $380.2 million of cash in fiscal 2026, compared with $648.0 million in fiscal 2025. Expenditures in fiscal 2026 primarily related to our investments to expand our french fry capacity in Argentina and other production facility modernization efforts. Expenditures in fiscal 2025 primarily related to our investments to expand our french fry capacity in the Netherlands, the U.S., and Argentina. The expansion in the U.S. was completed during the fourth quarter of fiscal 2024, the expansion in the Netherlands was completed during the second quarter of fiscal 2025, and the expansion in Argentina was completed in the first quarter of fiscal 2026. In addition, we had $26.0 million of proceeds from the sale of property, plant and equipment in fiscal 2026, an increase of $24.0 million over fiscal 2025. The prior year also included $21.1 million of gains from Argentina blue chip swap transactions.
Financing Activities
During fiscal 2026, we used $569.1 million of cash for financing activities. We had net repayments of $240.7 million related to short-term and long-term debt. In addition, we paid $207.5 million in cash dividends to common stockholders. We used $113.2 million to repurchase 2,344,468 shares of our common stock at a weighted-average price of $48.28 per share.
During fiscal 2025, we used $225.0 million of net cash for financing activities. We had net proceeds of $42.8 million from our revolving credit facility and other short-term credit facilities held by subsidiaries and $500 million of proceeds from our amended term loan facility that was used primarily to repay an existing term loan facility and outstanding borrowings under our revolving credit facility. We used $294.4 million to repurchase an aggregate of 4,867,449 shares at a weighted-average price of $57.94 per share and withheld 216,317 shares from employees to cover income and payroll taxes on equity awards that vested during the period. In addition, we paid $206.9 million in cash dividends to common stockholders.
For more information about our debt, including among other items, our revolving credit facility, term loan facilities, 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. Financial Statements and Supplementary Data" of this Form 10-K. At May 31, 2026, 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. The unconditional purchase obligations are enforceable and legally binding arrangements 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 31, 2026 are as follows:
(in millions) Total Payable within 12 Months
Total debt and financing obligations (a) $ 3,928.7 $ 320.0
Interest on long-term debt (b) 691.1 174.7
Leases (a) 144.0 32.4
Purchase obligations and capital commitments (a) 1,179.0 363.5
Total $ 5,942.8 $ 890.6
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(a)See the below Notes to the Consolidated Financial Statements included in "Part II, Item 8. Financial Statements and Supplementary Data" of this Form 10-K for more information.
•Total debt and financing obligations. See Note 8, Debt and Financing Obligations, for more information on debt payments and the timing of expected future payments.
•Leases. 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. 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 31, 2026. This does not reflect a reduction for future estimated capitalized interest amounts.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as of May 31, 2026 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. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to our trade promotions, income taxes, and impairment, among others. We base our estimates on historical experiences combined with management's understanding of current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting estimates are those that are most important to the portrayal of our financial condition and operating results. These estimates require management's most difficult, subjective, or complex judgments. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Committee of our Board.
We have made appropriate accounting estimates based on the facts and circumstances available as of the reporting date. 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 incentives include, but are not limited to, discounts, coupons, rebates, and volume-based incentives. The estimates for sales incentives are based principally on historical sales and redemption rates, influenced by judgments about current market conditions such as competitive activity in specific product categories.
Trade promotion programs include introductory marketing funds such as slotting fees, cooperative marketing programs, temporary price reductions, and other activities conducted by our customers to promote our products. The costs of these programs are recognized as a reduction to revenue with a corresponding accrued liability. The estimate of trade promotions is inherently difficult due to information limitations as the products move beyond distributors and through the supply chain to operators. Estimates made by management in accounting for these costs are based primarily on our historical experience with marketing programs, with consideration given to current circumstances and industry trends and include the following: quantity of customer sales, timing of promotional activities, current and past trade-promotion spending patterns, the interpretation of historical spending trends by customer and category, and forecasted costs for activities within the promotional programs.
The determination of sales incentive and trade promotion costs requires judgment and may change in the future as a result of changes in customer demand for our products and promotion participation, particularly for new programs related to the introduction of new products. Final determination of the total cost of promotion is dependent upon customers providing information about proof of performance and other information related to the promotional event. 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. At May 31, 2026 and May 25, 2025, we had $100.3 million and $88.2 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. We measure deferred tax assets and liabilities using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled.
Inherent in determining the annual tax rate are judgments regarding business plans, planning opportunities, and expectations about future outcomes. Management judgments are required for the following items:
•Management reviews deferred tax assets for realizability. Valuation allowances are established when management believes that it is more likely than not that some portion of the deferred tax assets will not be realized. 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 more-likely-than-not recognition threshold of Accounting Standards Codification ("ASC") 740, Income Taxes. These contingency accruals are adjusted in light of changing facts and circumstances, such as the progress of tax audits, the expiration of the statute of limitations for the relevant taxing authority to examine a tax return, case law and emerging legislation. 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 31, 2026, 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. We have not recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S. earnings or for outside basis differences in our subsidiaries, because we plan to indefinitely reinvest such earnings and basis differences. Remittances of non-U.S. earnings are based on estimates and judgments of projected cash flow needs, as well as the working capital and investment requirements of our non-U.S. and U.S. operations. Material changes in our estimates of cash, working capital, and investment needs in various jurisdictions could require repatriation of indefinitely reinvested non-U.S. earnings, which could be subject to applicable non-U.S. income and withholding taxes. 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. Financial Statements and Supplementary Data" of this Form 10-K.
Goodwill
As of May 31, 2026, we had $1,130.1 million of goodwill recorded on our consolidated balance sheet. Goodwill is not amortized but is tested for impairment at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Our annual impairment test is typically performed in the fourth quarter of each fiscal year.
We perform goodwill impairment tests at the reporting unit level, which represents an operating segment or a component of an operating segment. Our reporting units align with our operating segments. The impairment test may involve either a qualitative assessment or a quantitative assessment. In a qualitative assessment, we evaluate various factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If the qualitative assessment indicates a potential impairment, or if we elect to bypass the qualitative assessment, we proceed to a quantitative test.
For quantitative goodwill impairment tests, we determine the fair value of our reporting units using an income approach. Under the income approach, we calculate the fair value of each reporting unit based on the present value of estimated future cash flows. Considerable management judgment is necessary to evaluate the impact of operating and macroeconomic changes to estimate the future cash flows used to determine the fair value of each reporting unit. Management's estimates rely on various assumptions, including: future cash flows, projections of revenue growth rates, operating margins, capital expenditures, and working capital requirements. These are based on historical performance, current market conditions, our internal operating plans and strategies, discount rates, and a weighted-average cost of capital (WACC) that reflects the risk inherent in the projected cash flows. This rate is derived from market data for comparable companies and adjusted for specific reporting unit risk, country risk, or asset risks.
The key assumptions used in our impairment tests are inherently uncertain and require a high degree of estimation. Changes in economic and operating conditions, industry trends, competitive pressures, or our ability to execute strategic initiatives could materially impact these assumptions and, consequently, the estimated fair values. Variations between actual operating results and our forecasts, or unfavorable changes in market factors such as interest rates or comparable company earnings multiples, could lead to future impairment charges.
As of May 31, 2026, we performed a quantitative impairment test for the International reporting unit and a qualitative assessment for the North America reporting unit. The International reporting unit's estimated fair value exceeded its carrying value; however, its fair value is more sensitive to changes in projected operating results and key assumptions, including discount rates. In a future period, lower-than-expected sales or profitability and/or an increase in the WACC could reduce the International reporting unit's estimated fair value and result in a goodwill impairment. Our qualitative assessment indicated that it is more likely than not that the North America reporting unit's fair value exceeded its carrying value as of May 31, 2026.
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.
Non-GAAP Financial Measures
To supplement the financial information included in this report, we have presented Adjusted EBITDA, Adjusted Gross Profit, Adjusted SG&A, Adjusted Income Tax Expense (Benefit), and Adjusted Equity Method Investment Earnings, each of which is considered a non-GAAP financial measure. We also present net sales excluding FX and net sales excluding FX and extra week, which provide information on net sales as if foreign currency exchange rates had remained constant between the current and prior-year periods, and as if there were only fifty-two weeks in the current fiscal year. 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. Management believes that presenting these non-GAAP financial measures provides investors with useful supplemental information because they (i) provide meaningful supplemental information regarding financial performance by excluding impacts of foreign currency exchange translation and unrealized mark-to-market derivative gains and losses and other items affecting comparability between periods, (ii) permit investors to view our operating and financial performance using the same tools that management uses to evaluate performance across periods and to make budgeting, operating and strategic decisions, and (iii) otherwise provide supplemental information that may be useful to investors in evaluating our operating and financial performance. In addition, we believe that the presentation of these non-GAAP financial measures, when considered together with their most directly comparable GAAP financial measure and corresponding 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.
The non-GAAP financial measures presented in this report should be viewed in addition to, and not as alternatives for, financial measures prepared in accordance with GAAP that are also presented in this report. These measures are not substitutes for their comparable GAAP financial measures, such as net income, gross profit, SG&A, income tax expense, equity method investment earnings, net sales, or other measures prescribed by GAAP, and there are limitations to using non-GAAP financial measures. 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.
The following table reconciles net income to Adjusted EBITDA.
For the Fiscal Years Ended May
2026 2025
Net income (a) $ 290.0 $ 357.2
Interest expense, net 180.5 180.0
Income tax expense 128.1 143.1
Income from operations including equity method investment earnings 598.6 680.3
Depreciation and amortization (b) 400.9 378.2
Unrealized derivative gains (20.1) (23.1)
Foreign currency exchange (gains) losses (8.2) 15.2
Blue chip swap transaction gains - (21.1)
Stock based compensation 46.2 39.5
Items impacting comparability:
Cost Savings Program, Restructuring Plan, and other expenses 111.6 185.8
Shareholder activism expense 4.0 5.2
Pension termination 14.2 -
Adjusted EBITDA $ 1,147.2 $ 1,260.0
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(a)Net income included the following:
i.Fiscal 2026 included Cost Savings Program, Restructuring Plan, and other expenses of $111.6 million ($98.1 million after-tax, or $0.71 per share) related to the Cost Savings Program announced on July 23, 2025 and the Restructuring Plan announced on October 1, 2024. Fiscal 2025 included $185.8 million ($143.7 million after-tax, or $1.01 per share) of expenses related to the Cost Savings Program, Restructuring Plan, and other expenses;
ii.Unrealized gains of $20.1 million ($15.2 million after-tax, or $0.11 per share) and $23.1 million ($17.2 million after-tax, or $0.12 per share) related to mark-to-market adjustments associated with commodity and currency hedging contracts for fiscal 2026 and 2025, respectively;
iii.Foreign currency exchange losses of $8.2 million ($5.7 million after-tax, or $0.05 per share) and gains of $15.2 million ($10.9 million after-tax, or $0.07 per share) for fiscal 2026 and 2025, respectively;
iv.Fiscal 2025 included blue chip swap transaction gains of $21.1 million ($20.0 million after-tax or $0.14 per share);
v.Stock-based compensation expense of $46.2 million ($38.5 million after-tax, or $0.28 per share) and $39.5 million ($33.4 million after-tax, or $0.23 per share) for fiscal 2026 and 2025, respectively;
vi.Advisory fees related to shareholder activism matters of $4.0 million ($3.1 million after-tax, or $0.02 per share) and $5.2 million ($4.0 million after-tax, or $0.03 per share) for for fiscal 2026 and 2025, respectively;
vii.Fiscal 2026 included pension settlement charges of $14.2 million ($11.0 million after-tax, or $0.08 per share) to fully fund the Company's defined benefit pension plan, enabling lump sum payments to participants and transferring the remaining obligations and related plan assets to an insurer through a group annuity contract; and
viii.Fiscal 2025 included an estimated $31 million loss related to the voluntary product withdrawal that occurred in the fourth quarter of fiscal 2024. The total charge to reporting segments was approximately $19 million to the North America segment and approximately $12 million to the International segment.
(b)Depreciation and amortization included interest expense, income tax expense, and depreciation and amortization from equity method investments of $8.8 million and $8.2 million for fiscal 2026 and 2025, respectively.
The following tables reconcile gross profit to Adjusted Gross Profit, SG&A to Adjusted SG&A, income tax expense (benefit) to Adjusted Income Tax Expense (Benefit), and equity method investment earnings to Adjusted Equity Method Investment Earnings:
Fiscal Year Ended May 31, 2026 Gross Profit SG&A Income
Tax Expense
(Benefit) (a) 		Equity Method
Investment Earnings
As reported $ 1,359.7 $ 664.6 $ 128.1 $ 7.5
Unrealized derivative gains and losses (b) (30.1) (10.0) (4.9) -
Foreign currency exchange gains (b) - 8.2 (2.5) -
Stock-based compensation (b) - (46.2) 7.7 -
Items impacting comparability: (b)
Cost Savings Program, Restructuring Plan, and other expenses 7.6 - 13.5 -
Shareholder activism expense - (4.0) 0.9 -
Pension settlement - (14.2) 3.2 -
Total adjustments (22.5) (66.2) 17.9 -
Adjusted $ 1,337.2 $ 598.4 $ 146.0 $ 7.5
Fiscal Year Ended May 25, 2025
As reported $ 1,398.6 $ 633.5 $ 143.1 $ 15.2
Unrealized derivative gains (b) (13.4) 9.7 (5.9) -
Foreign currency exchange losses (b) - (15.2) 4.3 -
Blue chip swap transaction gains (b) - 21.1 (1.1) -
Stock-based compensation (b) - (39.5) 6.1 -
Items impacting comparability: (b)
Restructuring Plan expenses 75.3 - 42.1 10.5
Shareholder activism expense - (5.2) 1.2 -
Total adjustments 61.9 (29.1) 46.7 10.5
Adjusted $ 1,460.5 $ 604.4 $ 189.8 $ 25.7
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(a)Items are tax effected at the marginal rate based on the applicable tax jurisdiction.
(b)See footnotes in the reconciliation of net income to Adjusted EBITDA above for further discussion.
The following table reconciles net sales to net sales excluding FX and net sales excluding FX and extra week.
Fifty-Three Weeks Ended May 31, 2026 Net Sales FX Net Sales excluding FX Extra Week Net Sales excluding FX and Extra Week
North America $ 4,395.2 $ (7.8) $ 4,387.4 $ (86.4) $ 4,301.0
International 2,217.1 (115.3) 2,101.8 (40.7) 2,061.1
$ 6,612.3 $ (123.1) $ 6,489.2 $ (127.1) $ 6,362.1
The following table reconciles Segment Adjusted EBITDA to Segment Adjusted EBITDA excluding extra week.
Fifty-Three Weeks Ended May 31, 2026 (a) Segment Adjusted EBITDA Extra Week Segment Adjusted EBITDA excluding Extra Week
North America $ 1,142.3 $ (25.5) $ 1,116.8
International 114.7 (4.0) 110.7
Unallocated corporate costs (109.8) 0.6 (109.2)
$ 1,147.2 $ (28.9) $ 1,118.3
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(a)Foreign currency impact on Segment Adjusted EBITDA is immaterial as favorable net sales impact is offset by unfavorable operating expense impact.
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