Lamb Weston Holdings, Inc.LW
Lamb Weston Holdings, Inc. Stock Compensation Disclosure
STOCK-BASED COMPENSATION
The Compensation and Human Capital Committee (the “Committee”) of our Board of Directors (the “Board”) administers our stock compensation plan (“Stock Plan”). The Committee, in its discretion, authorizes grants of restricted stock units (“RSUs”), performance share awards payable upon the attainment of specified performance goals (“Performance Shares”), dividend equivalents, and other stock-based awards. At May 25, 2025, we had 10.0 million shares authorized for issuance under the Stock Plan, and 5.5 million were available for future grants.
RSUs and Performance Shares
We grant RSUs to eligible employees and non-employee directors. The employee RSUs generally vest over a three-year period following the grant date, while the non-employee director RSUs generally vest one year after the grant date. We estimate the fair value of the RSUs based upon the market price of our common stock on the date of grant. Compensation expense is recognized over the period the employee or non-employee director provides service in exchange for the award.
Performance Shares are granted to certain executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. Awards actually earned range from 0% to 200% of the targeted number of Performance Shares for each of the performance periods. Awards, if earned, will be paid in shares of our common stock. Subject to limited exceptions set forth in the Stock Plan, any shares earned will generally vest over a three-year period following the grant date. The value of these Performance Shares is adjusted based upon the market price of our common stock and the anticipated attainment of Company-wide performance goals at the end of each reporting period and amortized as compensation expense over the service period.
We have also granted Performance Shares with vesting contingent upon relative total shareholder return goals, and, under special circumstances, stock price growth goals. Awards actually earned range from 0% to 200%, in the case of awards contingent on total shareholder return goals, or 0% to 300%, in the case of awards contingent on stock price growth goals, of the targeted number of Performance Shares. These Performance Shares are equity-settled awards that vest over a three-year service period following the grant date, and the number of units that actually vest is determined based on the achievement of the performance criteria set forth in the respective award agreement. The awards are measured based on estimated fair value as of the date of grant determined using a Monte Carlo simulation, and are amortized over the service period.
The weighted average Monte Carlo assumptions for Performance Shares granted during the fiscal year ended May 25, 2025 were:
| Assumptions | ||||||||
| Expected volatility of stock (%) | 36.1% - 36.6% | |||||||
| Risk-free interest rate (%) | 3.77% - 4.16% | |||||||
| Expected life (years) | 2.80 - 2.84 | |||||||
| Weighted average grant date fair value per unit | $56.71 - $58.31 | |||||||
The following table summarizes RSU and Performance Shares activity for fiscal 2025:
| RSUs | Performance Shares | |||||||||||||||||||||||||
| Shares | Weighted- Average Grant- Date Fair Value | Shares | Weighted- Average Grant- Date Fair Value | |||||||||||||||||||||||
| Outstanding at May 26, 2024 | 974,691 | $ | 80.55 | 441,062 | $ | 89.61 | ||||||||||||||||||||
| Granted (a) | 640,481 | 58.16 | 221,953 | 54.56 | ||||||||||||||||||||||
| Performance condition adjustment | 0 | — | (20,002) | 67.38 | ||||||||||||||||||||||
| Vested (b) | (538,997) | 78.34 | (73,254) | 69.02 | ||||||||||||||||||||||
| Forfeited/expired/cancelled | (173,941) | 70.79 | (55,537) | 72.44 | ||||||||||||||||||||||
| Outstanding at May 25, 2025 | 902,234 | $ | 67.86 | 514,222 | $ | 80.13 | ||||||||||||||||||||
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(a)Granted represents new grants and dividend equivalents accrued. Dividend equivalents are only paid on RSUs and Performance Shares that ultimately vest.
(b)The aggregate fair value of awards that vested in fiscal 2025, 2024, and 2023 was $37.7 million, $44.3 million, and $20.8 million, respectively, which represents the market value of our common stock on the date that the RSUs and Performance Shares vested. The number of RSUs and Performance Shares vested includes shares of common stock that we withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. RSUs that are expected to vest are net of estimated future forfeitures.
Stock Options
Under some circumstances, we have granted options to employees and non-employee directors to purchase shares of our common stock at exercise prices equal to the fair market value of the underlying common stock on the grant date. Options granted to employees generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of seven years. Options granted to non-employee directors generally vest one year after the grant date and have a term of ten years. During the fiscal year ended May 25, 2025, we granted an immaterial amount of stock options.
The following table summarizes stock option activity for fiscal 2025:
| Shares | Weighted- Average Exercise Price (per share) | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (in millions) (a) | |||||||||||||||||||||||
| Outstanding at May 26, 2024 | 666,604 | $ | 69.90 | 6.9 | $ | 12.9 | ||||||||||||||||||||
| Granted | 6,356 | 68.85 | ||||||||||||||||||||||||
| Exercised | (2,953) | 29.63 | ||||||||||||||||||||||||
| Forfeited/cancelled | (23,525) | 79.66 | ||||||||||||||||||||||||
| Outstanding at May 25, 2025 | 646,482 | $ | 69.72 | 5.9 | $ | 2.4 | ||||||||||||||||||||
| Exercisable at May 25, 2025 | 570,006 | $ | 68.25 | 5.7 | $ | 2.4 | ||||||||||||||||||||
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(a)The aggregate intrinsic values represent the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of our fiscal 2025, or $50.56 as of May 23, 2025, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at the end of the fiscal year. The amount changes based on the fair market value of our common stock.
Compensation Expense
Our stock-based compensation expense is recorded in “Selling, general and administrative expenses.” Compensation expense for stock-based awards recognized in the Consolidated Statements of Earnings, net of forfeitures, was as follows:
| For the Fiscal Years Ended May | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Stock-settled RSUs | $ | 28.9 | $ | 27.3 | $ | 20.1 | ||||||||||||||
| Performance Shares | 6.2 | 14.9 | 14.2 | |||||||||||||||||
| Stock options | 4.4 | 4.6 | 4.2 | |||||||||||||||||
| Stock-settled compensation expense | 39.5 | 46.8 | 38.5 | |||||||||||||||||
| Income tax benefit (a) | (6.0) | (7.5) | (7.1) | |||||||||||||||||
| Total compensation expense, net of tax benefit | $ | 33.5 | $ | 39.3 | $ | 31.4 | ||||||||||||||
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(a)Income tax benefit represents the marginal tax rate, excluding non-deductible compensation.
Based on estimates at May 25, 2025, total unrecognized compensation expense related to stock-based awards was as follows:
| (in millions, except data in years) | Unrecognized Compensation Expense | Remaining Weighted Average Recognition Period (in years) | ||||||||||||
| Stock-settled RSUs | $ | 33.0 | 1.7 | |||||||||||
| Performance Shares | 8.6 | 1.7 | ||||||||||||
| Stock options | 0.4 | 0.2 | ||||||||||||
| Total unrecognized compensation expense | $ | 42.0 | ||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jul 23, 2025 | Showing above |
| 2019 | Jul 25, 2019 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.