Lamb Weston Holdings, Inc.LW
Lamb Weston Holdings, Inc. Income Taxes Disclosure
INCOME TAXES
Pre-tax income, inclusive of equity method investment earnings, consisted of the following:
| For the Fiscal Years Ended May | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | 418.1 | $ | 807.8 | $ | 794.2 | ||||||||||||||
| Non-U.S. | 82.2 | 147.7 | 439.3 | |||||||||||||||||
| Total pre-tax income | $ | 500.3 | $ | 955.5 | $ | 1,233.5 | ||||||||||||||
The provision for income taxes included the following:
| For the Fiscal Years Ended May | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current | ||||||||||||||||||||
| U.S. federal | $ | 85.7 | $ | 140.5 | $ | 174.1 | ||||||||||||||
| State and local | 6.3 | 36.1 | 25.8 | |||||||||||||||||
| Non-U.S. | 50.7 | 54.8 | 24.3 | |||||||||||||||||
| Total current provision for taxes | 142.7 | 231.4 | 224.2 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| U.S. federal | (1.3) | 27.7 | (12.6) | |||||||||||||||||
| State and local | (0.6) | (14.6) | (0.4) | |||||||||||||||||
| Non-U.S. | 2.3 | (14.5) | 13.4 | |||||||||||||||||
| Total deferred provision for taxes | $ | 0.4 | $ | (1.4) | $ | 0.4 | ||||||||||||||
| Total provision for taxes | $ | 143.1 | $ | 230.0 | $ | 224.6 | ||||||||||||||
A reconciliation of income tax expense using the 21% U.S. statutory tax rate on income from operations, including equity method earnings and before income taxes, compared with the actual provision for income taxes follows:
| For the Fiscal Years Ended May | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Provision computed at U.S. statutory rate | $ | 105.1 | $ | 200.7 | $ | 259.0 | ||||||||||||||
| Increase (decrease) in rate resulting from: | ||||||||||||||||||||
| State and local taxes, net of federal benefit | 5.1 | 20.1 | 21.2 | |||||||||||||||||
| Non-U.S. operations (a) | 19.0 | 5.5 | (11.7) | |||||||||||||||||
| Change in valuation allowance (b) | 14.7 | 3.6 | (0.7) | |||||||||||||||||
| Consolidation of previously held equity interests (c) | — | — | (43.1) | |||||||||||||||||
| Other | (0.8) | 0.1 | (0.1) | |||||||||||||||||
| Total income tax expense | $ | 143.1 | $ | 230.0 | $ | 224.6 | ||||||||||||||
| Effective income tax rate (b)(d) | 28.6 | % | 24.1 | % | 18.2 | % | ||||||||||||||
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(a)We derive the effective tax rate expense or (benefit) attributed to non-U.S. income taxed at different rates, including the impact of permanent items. The statutory tax rates range from 8.25% to 35%.
(b)The predominant change in the valuation allowance and effective income tax rate in fiscal 2025 is attributable to the establishment of a valuation allowance against certain international deferred tax assets and international permanent differences.
(c)In connection with the joint venture acquisitions, we recorded a $43.1 million rate benefit based on a $425.8 million ($379.5 million after-tax) related to the remeasurement of our initial equity interests to fair value.
(d)The effective income tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings. The effective tax rate in fiscal 2023 included the tax impact of the remeasurement of our initial 50% equity interests in LW EMEA and our joint venture in Argentina, Lamb Weston Alimentos Modernos S.A (“LWAMSA”), and other acquisition-related items. The fiscal 2023 tax rates were affected by mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe experienced significant volatility. Excluding these items, our effective tax rate was 21.8% in fiscal 2023.
Income Taxes Paid
Income taxes paid, net of refunds, were $149.7 million, $188.8 million, and $226.5 million in fiscal 2025, 2024, and 2023, respectively.
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred income tax assets and liabilities were as follows:
| May 25, 2025 | May 26, 2024 | |||||||||||||||||||||||||
| (in millions) | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||
| Property, plant and equipment | $ | — | $ | 297.9 | $ | — | $ | 322.6 | ||||||||||||||||||
| Goodwill and other intangible assets | 17.1 | — | 17.4 | — | ||||||||||||||||||||||
| Compensation and benefit related liabilities | 26.3 | — | 27.8 | — | ||||||||||||||||||||||
| Net operating loss and credit carryforwards (a) | 34.1 | — | 22.9 | — | ||||||||||||||||||||||
| Accrued expenses and other liabilities | 12.2 | — | 20.1 | — | ||||||||||||||||||||||
| Inventory and inventory reserves | 8.7 | — | 17.7 | — | ||||||||||||||||||||||
| Lease obligations | 28.9 | — | 31.4 | — | ||||||||||||||||||||||
| Operating lease assets | — | 26.6 | — | 28.9 | ||||||||||||||||||||||
| Research and development expenditures | 18.4 | — | 21.4 | — | ||||||||||||||||||||||
| Equity method investments | — | 5.7 | — | 7.1 | ||||||||||||||||||||||
| Other | 9.8 | 12.0 | 11.0 | 6.0 | ||||||||||||||||||||||
| 155.5 | 342.2 | 169.7 | 364.6 | |||||||||||||||||||||||
| Less: Valuation allowance (b) | (65.7) | — | (53.1) | — | ||||||||||||||||||||||
| Net deferred taxes (c) | $ | 89.8 | $ | 342.2 | $ | 116.6 | $ | 364.6 | ||||||||||||||||||
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(a)At May 25, 2025, Lamb Weston had approximately $76.4 million of gross ($19.7 million after-tax) non-U.S. net operating loss carryforwards, of which $6.0 million (after-tax) will expire by fiscal 2031. The remaining $13.7 million (after-tax) non-U.S. net operating loss carryforwards will not expire. Lamb Weston also had a non-U.S. tax credit carryforward of $0.6 million, which will expire by fiscal 2033, and a state business credit carryforward of $13.7 million, which will expire by fiscal 2039.
(b)The valuation allowance is predominantly related to non-amortizable intangibles in the United States, with a lesser portion attributable to valuation allowances against certain international deferred tax assets.
(c)Deferred tax assets of $1.1 million and $8.2 million, as of May 25, 2025 and May 26, 2024, respectively, were presented in “Other assets.” Deferred tax liabilities of $253.5 million and $256.2 million as of May 25, 2025 and May 26, 2024, respectively, were presented in “Deferred income taxes” as“Long-term liabilities” on the Consolidated Balance Sheets. The deferred tax asset and liability net position is determined by tax jurisdiction.
The accounting standards allow companies to adopt an accounting policy to either recognize deferred taxes for global intangible low-taxed income (“GILTI”) or treat such as a tax cost in the year incurred. We have elected to recognize the tax on GILTI as a period expense in the period the tax is incurred. Under this policy, we have not provided deferred taxes on temporary differences that upon their reversal will affect the amount of income subject to GILTI in the period.
We have not established deferred income taxes on accumulated undistributed earnings and other basis differences for operations outside the U.S., as such earnings and basis differences are indefinitely reinvested. Determining the unrecognized deferred tax liability for these earnings is not practicable. Generally, no significant U.S. federal income taxes will be imposed on future distributions of non-U.S. earnings under the current law. However, distributions to the U.S. or other jurisdictions could be subject to withholding and other local taxes, and these taxes would not be material.
Uncertain Tax Positions
The aggregate changes in the gross amount of unrecognized tax benefits, excluding interest and penalties, recorded in the accompanying Balance Sheets, consisted of the following:
| For the Fiscal Years Ended May | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Beginning balance | $ | 79.6 | $ | 59.6 | $ | 40.4 | ||||||||||||||
| Decreases from positions established during prior fiscal years | (1.5) | (3.6) | — | |||||||||||||||||
| Increases from positions established during current and prior fiscal years (a) | 16.6 | 29.4 | 26.3 | |||||||||||||||||
| Decreases relating to settlements with taxing authorities | (1.7) | (0.5) | (4.9) | |||||||||||||||||
| Expiration of statute of limitations | (10.4) | (5.3) | (2.2) | |||||||||||||||||
| Ending balance (a) | $ | 82.6 | $ | 79.6 | $ | 59.6 | ||||||||||||||
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(a)If we were to prevail on the unrecognized tax benefits recorded as of May 25, 2025 and May 26, 2024, it would result in a tax benefit of $71.4 million and $69.0 million, respectively, and a reduction in the effective tax rate. The ending balances exclude $17.8 million and $15.3 million of gross interest and penalties in fiscal 2025 and 2024, respectively. We accrue interest and penalties associated with uncertain tax positions as part of income tax expense.
Lamb Weston conducts business and files tax returns in numerous countries, states, and local jurisdictions. We do not have any significant open tax audits. Major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years. Statute of limitation expirations could reduce the uncertain tax positions by approximately $16 million during the next 12 months.
Although the timing of the resolutions and/or closures of audits is highly uncertain, it is reasonably possible that certain U.S. federal, state, and non-U.S. tax audits may be concluded within the next 12 months. This process could increase or decrease the balance of our gross unrecognized tax benefits. The estimated impact on income tax expense and net income is not expected to be significant.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jul 23, 2025 | Showing above |
| 2024 | Jul 24, 2024 | |
| 2023 | Jul 25, 2023 | |
| 2022 | Jul 27, 2022 | |
| 2021 | Jul 27, 2021 | |
| 2020 | Jul 28, 2020 | |
| 2019 | Jul 25, 2019 | |
| 2018 | Jul 26, 2018 | |
| 2017 | Jul 25, 2017 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.