RELATED PARTY TRANSACTIONS	6 Months Ended
Nov. 27, 2016
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	3. RELATED PARTY TRANSACTIONS Prior to the Separation, our business was included in the Commercial Foods segment of Conagra and thus our transactions with Conagra were considered related party transactions. In connection with the Separation, we entered into a separation and distribution agreement, as well as various other agreements that govern our relationships with Conagra going forward, including a transition services agreement, tax matters agreement, employee matters agreement, and trademark license agreement. Under the transition services agreement, Conagra provides a number of corporate staff services to us based on direct and indirect costs associated with rendering those services. These services include information technology, accounting, and human resource services. The thirteen and twenty-six weeks ended November 27, 2016, include $0.4 million of expenses related to the transition services agreement. The transition services agreement expires in March 2018. Information included in the remainder of this Note 3 with respect to Conagra is strictly limited to our related party transactions with Conagra prior to the Separation Date. Prior to the Separation Date, Conagra allocated certain selling, general and administrative costs to Lamb Weston based on specific metrics correlated with the cost of services it provided or costs incurred on behalf of the Company (e.g., employee headcount, net sales, and square footage of office space, etc.). Allocations based upon these metrics resulted in $3.4 million and $11.5 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively, of selling, general and administrative costs allocated to Lamb Weston; and $7.7 million and $23.3 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively of selling, general and administrative costs allocated to Lamb Weston. Beginning in fiscal 2017, certain departmental charges, which were previously allocated, are now being directly absorbed by Lamb Weston. The above allocations were consistent with historical allocations for Lamb Weston; however, Conagra did not historically allocate certain other corporate costs to its various segments. For any remaining indirect corporate costs that supported Lamb Weston, Conagra allocated additional selling, general and administrative costs using an equal weighting between Lamb Weston product contribution margin (net sales less cost of sales and advertising and promotion expenses) and Lamb Weston total assets relative to consolidated Conagra product contribution margin and total assets. Allocations of indirect corporate costs were $8.4 million and $10.7 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $17.3 million and $24.4 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively, of selling, general and administrative costs. Although it is not practicable to estimate what such costs would have been if Lamb Weston had operated as a separate entity, Lamb Weston considers such allocations to have been made on a reasonable basis. The allocations discussed above ceased after the Separation Date. The Condensed Combined and Consolidated Balance Sheet as of May 29, 2016 and the Condensed Combined and Consolidated Statements of Earnings for the period up to the Separation Date for the thirteen and twenty-six weeks ended November 27, 2016 and November 29, 2015, include only the specific debt and interest expense of the legal entities that make-up Lamb Weston, and do not include any allocated interest expense or third-party debt of Conagra. See Note 11, Debt and Financing Obligations, for a discussion of indebtedness incurred in connection with the Separation. The interest expense included in Lamb Weston’s results of operations was $6.8 million and $1.5 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $8.3 million and $2.8 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively. Prior to the Separation, Conagra did not settle intercompany transactions with its subsidiaries on a routine basis. As a result, all amounts due to (from) Conagra are classified as “Parent companies’ invested equity” on the Condensed Combined and Consolidated Balance Sheet as of May 29, 2016. It reflects all changes in parent companies’ invested equity for all transactions between Conagra and Lamb Weston, including direct and allocated charges from Conagra to Lamb Weston, intercompany cash transfers, derivative hedging activities performed by Conagra for the benefit of Lamb Weston, sales of potatoes, vegetables, and other products for use by other Conagra affiliates, and net cash management activities. In addition, these financial statements reflect the sale of certain branded products manufactured for distribution by other Conagra affiliates. Income tax payments were made by Conagra on Lamb Weston’s behalf. Income taxes payable were settled in parent companies’ invested equity when payments are made by Conagra. Included in net sales are sales to Conagra of $4.0 million and $7.5 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $8.4 million and $15.5 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively. The related cost of sales were $3.4 million and $6.3 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $7.0 million and $13.0 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively. Lamb Weston also made purchases from Conagra of $2.6 million and $5.8 million during the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $7.9 million and $10.1 million during the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively. Conagra guarantees Lamb Weston’s performance under a third-party contract for certain warehousing, handling and transportation services for a portion of its finished goods inventory. The minimum term of the agreement is for a period of 20 years with three five-year renewal options. The costs of these services are adjusted annually, subject to a minimum monthly payment of $1.5 million.

3. RELATED PARTY TRANSACTIONS

Prior to the Separation, our business was included in the Commercial Foods segment of Conagra and thus our transactions with Conagra were considered related party transactions. In connection with the Separation, we entered into a separation and distribution agreement, as well as various other agreements that govern our relationships with Conagra going forward, including a transition services agreement, tax matters agreement, employee matters agreement, and trademark license agreement. Under the transition services agreement, Conagra provides a number of corporate staff services to us based on direct and indirect costs associated with rendering those services. These services include information technology, accounting, and human resource services. The thirteen and twenty-six weeks ended November 27, 2016, include $0.4 million of expenses related to the transition services agreement. The transition services agreement expires in March 2018. Information included in the remainder of this Note 3 with respect to Conagra is strictly limited to our related party transactions with Conagra prior to the Separation Date.

Prior to the Separation Date, Conagra allocated certain selling, general and administrative costs to Lamb Weston based on specific metrics correlated with the cost of services it provided or costs incurred on behalf of the Company (e.g., employee headcount, net sales, and square footage of office space, etc.). Allocations based upon these metrics resulted in $3.4 million and $11.5 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively, of selling, general and administrative costs allocated to Lamb Weston; and $7.7 million and $23.3 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively of selling, general and administrative costs allocated to Lamb Weston. Beginning in fiscal 2017, certain departmental charges, which were previously allocated, are now being directly absorbed by Lamb Weston.

The above allocations were consistent with historical allocations for Lamb Weston; however, Conagra did not historically allocate certain other corporate costs to its various segments. For any remaining indirect corporate costs that supported Lamb Weston, Conagra allocated additional selling, general and administrative costs using an equal weighting between Lamb Weston product contribution margin (net sales less cost of sales and advertising and promotion expenses) and Lamb Weston total assets relative to consolidated Conagra product contribution margin and total assets. Allocations of indirect corporate costs were $8.4 million and $10.7 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $17.3 million and $24.4 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively, of selling, general and administrative costs. Although it is not practicable to estimate what such costs would have been if Lamb Weston had operated as a separate entity, Lamb Weston considers such allocations to have been made on a reasonable basis. The allocations discussed above ceased after the Separation Date.

The Condensed Combined and Consolidated Balance Sheet as of May 29, 2016 and the Condensed Combined and Consolidated Statements of Earnings for the period up to the Separation Date for the thirteen and twenty-six weeks ended November 27, 2016 and November 29, 2015, include only the specific debt and interest expense of the legal entities that make-up Lamb Weston, and do not include any allocated interest expense or third-party debt of Conagra. See Note 11, Debt and Financing Obligations, for a discussion of indebtedness incurred in connection with the Separation. The interest expense included in Lamb Weston’s results of operations was $6.8 million and $1.5 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $8.3 million and $2.8 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively.

Prior to the Separation, Conagra did not settle intercompany transactions with its subsidiaries on a routine basis. As a result, all amounts due to (from) Conagra are classified as “Parent companies’ invested equity” on the Condensed Combined and Consolidated Balance Sheet as of May 29, 2016. It reflects all changes in parent companies’ invested equity for all transactions between Conagra and Lamb Weston, including direct and allocated charges from Conagra to Lamb Weston, intercompany cash transfers, derivative hedging activities performed by Conagra for the benefit of Lamb Weston, sales of potatoes, vegetables, and other products for use by other Conagra affiliates, and net cash management activities. In addition, these financial statements reflect the sale of certain branded products manufactured for distribution by other Conagra affiliates. Income tax payments were made by Conagra on Lamb Weston’s behalf. Income taxes payable were settled in parent companies’ invested equity when payments are made by Conagra.

Included in net sales are sales to Conagra of $4.0 million and $7.5 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $8.4 million and $15.5 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively. The related cost of sales were $3.4 million and $6.3 million for the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $7.0 million and $13.0 million for the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively. Lamb Weston also made purchases from Conagra of $2.6 million and $5.8 million during the thirteen weeks ended November 27, 2016 and November 29, 2015, respectively; and $7.9 million and $10.1 million during the twenty-six weeks ended November 27, 2016 and November 29, 2015, respectively.

Conagra guarantees Lamb Weston’s performance under a third-party contract for certain warehousing, handling and transportation services for a portion of its finished goods inventory. The minimum term of the agreement is for a period of 20 years with three five-year renewal options. The costs of these services are adjusted annually, subject to a minimum monthly payment of $1.5 million.