INVESTMENTS IN JOINT VENTURES	3 Months Ended
Aug. 26, 2018
INVESTMENTS IN JOINT VENTURES
INVESTMENTS IN JOINT VENTURES	9. INVESTMENTS IN JOINT VENTURES Variable Interest Entity - Consolidated We hold a 49.99% interest in Lamb Weston BSW, a potato processing venture with Ochoa Ag Unlimited Foods, Inc. (“Ochoa”). Commencing on June 1, 2018, we have a contractual right to purchase the remaining equity interest in Lamb Weston BSW from Ochoa (the “call option”). We are also currently subject to a contractual obligation to purchase all of Ochoa’s equity investment in Lamb Weston BSW at the option of Ochoa (the “put option”). The purchase prices under the call option and the put option (collectively, the “options”) are based on the book value of Ochoa’s equity interest at the date of exercise, as modified by an agreed-upon rate of return for the holding period of the investment balance. The agreed-upon rate of return varies depending on the circumstances under which the options are exercised. In June 2018, we provided notice to exercise the call option for approximately $65 million, however, we continue to negotiate final terms and the noncontrolling interest has not been conveyed. At August 26, 2018, we recorded $57.2 million on our consolidated balance sheet for the redeemable noncontrolling interest, which was based on the value of Ochoa’s put option. Amounts we pay above the current recorded value will result in accretion of the redemption value. The accretion will not impact net income, but for purposes of calculating earnings per share, will reduce net income available to common shareholders. Lamb Weston and Lamb Weston BSW purchase potatoes from a shareholder of Ochoa. The aggregate amounts of such purchases were $17.5 million and $16.8 million for the thirteen weeks ended August 26, 2018 and August 27, 2017, respectively. Additionally, Lamb Weston and Lamb Weston BSW utilize storage facilities and water treatment services from a shareholder of Ochoa. The aggregate amounts of such costs were $1.2 million and $1.3 million for the thirteen weeks ended August 26, 2018 and August 27, 2017, respectively. We provide all sales and marketing services to Lamb Weston BSW. Under certain circumstances, we could be required to compensate Ochoa for lost profits resulting from significant production shortfalls. Lamb Weston BSW is a variable interest entity, and we have determined that we are the primary beneficiary of the entity. Accordingly, we consolidate the financial statements of Lamb Weston BSW. The carrying amounts of Lamb Weston BSW’s assets were $85.5 million and $94.2 million, and liabilities were $42.4 million and $47.0 million, at August 26, 2018 and May 27, 2018, respectively. As of August 26, 2018 and May 27, 2018, the carrying amounts of Lamb Weston BSW’s redeemable noncontrolling interest was $57.2 million and $55.6 million, respectively. Variable Interest Entity - Not Consolidated We hold a 50% interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a potato processing venture based in the United States. We also hold a 50% ownership interest in Lamb-Weston/Meijer v.o.f. (“Lamb-Weston/Meijer”), a joint venture with Meijer Frozen Foods B.V., which is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe. We have determined that Lamb Weston RDO and Lamb-Weston/Meijer are variable interest entities, but Lamb Weston is not the primary beneficiary. Lamb Weston does not have the power to direct the activities that most significantly impact the economic performance of the joint ventures. Accordingly, we do not consolidate the financial statements of these entities. We use equity method accounting to account for our ownership in these entities. The carrying value of our equity method investments, which include Lamb Weston RDO and Lamb-Weston/Meijer, at August 26, 2018 and May 27, 2018, was $221.7 million and $219.8 million, respectively. These amounts are included in “Equity method investments” in our Consolidated Balance Sheets. For the thirteen weeks ended August 26, 2018 and August 27, 2017, we had sales to our equity method investments of $6.5 million and $5.0 million and payments to our equity method investments of $2.7 million and $1.0 million, respectively. Total dividends from our equity method investments were $16.6 million and $12.9 million for the thirteen weeks ended August 26, 2018 and August 27, 2017, respectively. For more information about our investments in joint ventures, see Note 6, Investments in Joint Ventures, of the Notes to Combined and Consolidated Financial statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K.

9. INVESTMENTS IN JOINT VENTURES

Variable Interest Entity - Consolidated

We hold a 49.99% interest in Lamb Weston BSW, a potato processing venture with Ochoa Ag Unlimited Foods, Inc. (“Ochoa”). Commencing on June 1, 2018, we have a contractual right to purchase the remaining equity interest in Lamb Weston BSW from Ochoa (the “call option”). We are also currently subject to a contractual obligation to purchase all of Ochoa’s equity investment in Lamb Weston BSW at the option of Ochoa (the “put option”). The purchase prices under the call option and the put option (collectively, the “options”) are based on the book value of Ochoa’s equity interest at the date of exercise, as modified by an agreed-upon rate of return for the holding period of the investment balance. The agreed-upon rate of return varies depending on the circumstances under which the options are exercised. In June 2018, we provided notice to exercise the call option for approximately $65 million, however, we continue to negotiate final terms and the noncontrolling interest has not been conveyed. At August 26, 2018, we recorded $57.2 million on our consolidated balance sheet for the redeemable noncontrolling interest, which was based on the value of Ochoa’s put option. Amounts we pay above the current recorded value will result in accretion of the redemption value. The accretion will not impact net income, but for purposes of calculating earnings per share, will reduce net income available to common shareholders.

Lamb Weston and Lamb Weston BSW purchase potatoes from a shareholder of Ochoa. The aggregate amounts of such purchases were $17.5 million and $16.8 million for the thirteen weeks ended August 26, 2018 and August 27, 2017, respectively. Additionally, Lamb Weston and Lamb Weston BSW utilize storage facilities and water treatment services from a shareholder of Ochoa. The aggregate amounts of such costs were $1.2 million and $1.3 million for the thirteen weeks ended August 26, 2018 and August 27, 2017, respectively. We provide all sales and marketing services to Lamb Weston BSW. Under certain circumstances, we could be required to compensate Ochoa for lost profits resulting from significant production shortfalls.

Lamb Weston BSW is a variable interest entity, and we have determined that we are the primary beneficiary of the entity. Accordingly, we consolidate the financial statements of Lamb Weston BSW. The carrying amounts of Lamb Weston BSW’s assets were $85.5 million and $94.2 million, and liabilities were $42.4 million and $47.0 million, at August 26, 2018 and May 27, 2018, respectively. As of August 26, 2018 and May 27, 2018, the carrying amounts of Lamb Weston BSW’s redeemable noncontrolling interest was $57.2 million and $55.6 million, respectively.

Variable Interest Entity - Not Consolidated

We hold a 50% interest in Lamb-Weston/RDO Frozen (“Lamb Weston RDO”), a potato processing venture based in the United States. We also hold a 50% ownership interest in Lamb-Weston/Meijer v.o.f. (“Lamb-Weston/Meijer”), a joint venture with Meijer Frozen Foods B.V., which is headquartered in the Netherlands and manufactures and sells frozen potato products principally in Europe. We have determined that Lamb Weston RDO and Lamb-Weston/Meijer are variable interest entities, but Lamb Weston is not the primary beneficiary. Lamb Weston does not have the power to direct the activities that most significantly impact the economic performance of the joint ventures. Accordingly, we do not consolidate the financial statements of these entities. We use equity method accounting to account for our ownership in these entities.

The carrying value of our equity method investments, which include Lamb Weston RDO and Lamb-Weston/Meijer, at August 26, 2018 and May 27, 2018, was $221.7 million and $219.8 million, respectively. These amounts are included in “Equity method investments” in our Consolidated Balance Sheets. For the thirteen weeks ended August 26, 2018 and August 27, 2017, we had sales to our equity method investments of $6.5 million and $5.0 million and payments to our equity method investments of $2.7 million and $1.0 million, respectively. Total dividends from our equity method investments were $16.6 million and $12.9 million for the thirteen weeks ended August 26, 2018 and August 27, 2017, respectively.

For more information about our investments in joint ventures, see Note 6, Investments in Joint Ventures, of the Notes to Combined and Consolidated Financial statements in “Part II, Item 8. Financial Statements and Supplementary Data” of the Form 10-K.