Risk Factors Dashboard
Once a year, publicly traded companies issue a comprehensive report of their business, called a 10-K. A component mandated in the 10-K is the ‘Risk Factors’ section, where companies disclose any major potential risks that they may face. This dashboard highlights all major changes and additions in new 10K reports, allowing investors to quickly identify new potential risks and opportunities.
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Risk Factors - LW
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Item 1A. Risk Factors” in this Form 10-K. We caution readers not to place undue reliance on any forward-looking statements included in this report, which speak only as of the date of this report. We undertake no responsibility for updating these statements, except as required by law.
PART I
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 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. 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.
Segments
We have two reportable segments: North America and International. For segment financial information, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 13,
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Segments, of the Notes to Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
North America
Our North America segment primarily includes frozen potato products sold in the United States, Canada, and Mexico to quick service and full-service restaurants and chains, foodservice distributors, non-commercial channels, and retailers. Our North America segment’s product portfolio includes frozen potatoes, commercial ingredients, and appetizers sold under the Lamb Weston brand, as well as frozen potatoes sold under the Company’s owned or licensed brands, including Grown in Idaho and Alexia, other licensed equities comprised of brand names of major North American restaurant chains, customer labels, and retailers’ own brands.
International
Our International segment primarily includes frozen potato products sold outside of North America to quick service and full-service restaurant chains, foodservice distributors, non-commercial channels, and retailers. Our International segment’s product portfolio includes frozen potatoes, commercial ingredients, and appetizers sold under the Lamb Weston brand, as well as many customer labels.
Joint Venture Relationships
We hold a 50% 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. 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. We account for our investment in Lamb Weston RDO under the equity method of accounting. 4 Table of ContentsWe account for our investment in Lamb Weston RDO under the equity method of accounting.
In July 2022, we acquired an additional 40% interest in Lamb Weston Alimentos Modernos S.A. (“LWAMSA”), our joint venture in Argentina. In addition, in February 2023, we acquired the remaining 50% equity interest in LW EMEA, our joint venture in Europe. With the completion of the transactions, we own 90% and 100% of the equity interests in LWAMSA and LW EMEA, respectively. With the completion of the transactions, we own 90 percent and 100 percent of the equity interests in LWAMSA and LW EMEA, respectively. Accordingly, we consolidated LWAMSA’s and LW EMEA’s financial results in our Consolidated Financial Statements beginning in the first and fourth quarters of our fiscal 2023, respectively. 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. In addition, LW EMEA owns a 75% interest in a joint venture in Austria. In addition, LW EMEA owns a 75 percent interest in a joint venture in Austria. This joint venture’s financial results are consolidated in our financial statements. Prior to their respective acquisitions, we accounted for our investments in LW EMEA and LWAMSA under the equity method of accounting.
For more information, see Note 12, 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. We sell our products through a network of internal sales personnel and independent brokers, agents, and distributors to chain restaurants, wholesale, grocery, mass merchants, club retailers, specialty retailers, and foodservice distributors and institutions, including businesses, educational institutions, independent restaurants, regional chain restaurants, and convenience stores. 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 14%, 13%, and 10% of our consolidated net sales in fiscal 2024, 2023, and 2022, respectively. No other customer accounted for more than 10% of our consolidated net sales in fiscal 2024, 2023, or 2022.
Research and Development
We leverage our research and development resources for both growth and efficiency initiatives. We seek to drive growth through innovation by creating new products, enhancing the quality of existing products, and participating in joint menu planning exercises with our customers. We also evaluate the sustainability impacts of our manufacturing processes and products in our research and development activities and continue to drive processing innovations aimed at reducing waste and water usage and improving food safety and quality.
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Trademarks, Licenses and Patents
Our trademarks are material to our business and are protected by registration or other means in the U.S. and most other geographic markets where the related food items are sold. Depending on the country, trademarks generally remain valid for as long as they are in use or their registrations are maintained. Trademark registrations generally are for renewable, fixed terms. 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 Twister Fries, and Lamb Weston CrissCut. We also sell certain products in connection with marks such as Grown in Idaho and Alexia, which we license from third parties.
We own numerous patents worldwide. We own numerous patents worldwide. We consider our portfolio of patents, patent applications, patent licenses, proprietary trade secrets, technology, know-how processes, and related intellectual property rights to be material to our operations. 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. 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. 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 also have grower relationships in potato growing regions in Canada, China, Australia, and Argentina that support our processing facilities in those countries. 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. We source edible oils through strategic relationships with key suppliers, and we source packaging and energy inputs through multiple suppliers under a variety of agreement types.
The prices paid for these raw materials, as well as other raw materials used in making our products, generally reflect factors such as weather, commodity market fluctuations, currency fluctuations, tariffs, and the effects of governmental agricultural programs. The prices of raw materials can fluctuate as a result of these factors.
During fiscal 2024, we continued to face increased costs for the primary raw materials for our products, including potatoes, edible oils, packaging, grains, starches, and energy inputs.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 seek to mitigate higher input costs through long-term relationships, contracting strategies, and hedging activities where an active market for an input exists, as well as through our pricing and productivity initiatives. We seek to mitigate higher input costs through long-term relationships, contract strategies, and hedging activities where an active market for an input exists, as well as through our pricing and productivity initiatives. See “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this Form 10-K for a further discussion of these issues.
Manufacturing
We operate 27 production facilities for our products. See "
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