INCOME TAXES (Tables)

12 Months Ended

May 31, 2020


	For the Fiscal Years Ended May
	2020		2019		2018
United States	$	462.0	$	574.5	$	478.2
Foreign		16.2		46.3		76.7
Total pre-tax income	$	478.2	$	620.8	$	554.9

Schedule of analysis of the components of the consolidated income tax provision


	For the Fiscal Years Ended May
	2020		2019		2018
Current
U.S. federal	$	75.7	$	66.8	$	94.3
State and local		13.2		17.7		14.7
Foreign		3.4		11.6		15.8
Total current provision for taxes		92.3		96.1		124.8

Deferred
U.S. federal		18.6		42.2		(4.4)
State and local		4.4		(0.1)		0.1
Foreign		(3.0)		(4.6)		0.7
Total deferred provision for taxes	$	20.0	$	37.5	$	(3.6)
Total provision for taxes	$	112.3	$	133.6	$	121.2

Schedule of reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax provision


	For the Fiscal Years Ended May
	2020		2019		2018
Provision computed at U.S. statutory rate (a)	$	100.4	$	130.4	$	162.6
Increase (reduction) in rate resulting from:
State and local taxes, net of federal benefit		15.3		14.8		12.6
Tax credits and domestic manufacturers deduction		(0.6)		(0.6)		(8.1)
Effect of taxes on foreign operations		(4.4)		(4.7)		(7.0)
Deferred impact of rate change (b)		—		—		(45.4)
Transition tax liability (b)		—		(2.4)		11.5
Other		1.6		(3.9)		(5.0)
Total provision for taxes	$	112.3	$	133.6	$	121.2
Effective income tax rate (c)		23.5%		21.5%		21.8%

(a)	The U.S. statutory tax rate was 21% for fiscal years 2020 and 2019. The impact of the lower U.S. statutory income tax rate from the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was phased in during fiscal 2018, resulting in a U.S. statutory tax rate of 29.3%.

(b)

In connection with the impact of the Tax Act in fiscal 2018, we recorded a $45.4 million net tax benefit from the impact of remeasuring our net U.S. deferred tax liabilities during fiscal 2018, including $5.5 million of deferred tax benefits originating during the year, with the new lower statutory tax rate. We also recorded an $11.5 million transition tax on our previously untaxed foreign earnings that is primarily payable over eight years. In fiscal 2019, we completed our analysis of the one-time impacts of the Tax Act and reduced the transition tax by $2.4 million.

(c)	The effective income tax rate is calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings.

Schedule of deferred income tax assets and liabilities


	May 31, 2020				May 26, 2019
	Assets		Liabilities		Assets		Liabilities
Property, plant and equipment	$	—	$	188.8	$	—	$	178.1
Goodwill and other intangible assets		54.9		—		64.1		—
Compensation and benefit related liabilities		19.7		—		17.8		—
Net operating loss and credit carryforwards (a)		5.2		—		15.3		—
Accrued expenses and other liabilities		15.2		—		14.2		—
Inventory and inventory reserves		4.5		—		11.5		—
Lease liabilities		36.9		—		—		—
Lease assets		—		35.4		—		—
Debt issuance costs		—		3.4		—		4.1
Investment in joint ventures		—		3.6		—		3.5
Other		7.7		8.6		12.1		8.6
		144.1		239.8		135.0		194.3
Less: Valuation allowance (b)		(54.5)		—		(64.6)		—
Net deferred taxes (c)	$	89.6	$	239.8	$	70.4	$	194.3

(a)	At May 31, 2020, Lamb Weston had approximately $20.3 million of gross ($4.6 million after-tax) foreign net operating loss carryforwards, of which the majority expire during fiscal 2021.

(b)

The valuation allowance is predominantly related to non-amortizable intangibles and the portion of the net operating loss carryforwards that we are not more likely than not to realize. The net impact on income tax expense related to changes in the valuation allowance, including net operating loss carryforwards, was zero in fiscal 2020, $1.1 million of benefit in fiscal 2019, and zero in fiscal 2018.

(c)

Deferred tax assets of $2.3 million and $1.8 million as of May 31, 2020 and May 26, 2019, respectively, were presented in “Other assets.” Deferred tax liabilities of $152.5 million and $125.7 million as of May 31, 2020 and May 26, 2019, respectively, were presented in “Deferred income taxes” as a long-term liability on the Consolidated Balance Sheets. The deferred tax asset and liability net position is determined by tax jurisdiction.

Schedule of change in the unrecognized tax benefits


	For the Fiscal Years Ended May
	2020			2019	2018
Beginning balance	$	21.7	$	13.2	$	6.9
Decreases from positions established during prior fiscal years		—		(0.8)		—
Increases from positions established during current and prior fiscal years		10.3		10.4		7.9
Expiration of statute of limitations		(0.7)		(1.1)		(1.6)
Ending balance (a)	$	31.3	$	21.7	$	13.2

(a)

If we were to prevail on the unrecognized tax benefits recorded as of May 31, 2020 and May 26, 2019, it would result in a tax benefit of $26.7 million and $18.8 million, respectively, and a reduction in the effective tax rate. The ending balances exclude $5.5 million and $3.9 million of gross interest and penalties in fiscal 2020 and 2019, respectively. We accrue interest and penalties associated with uncertain tax positions as part of income tax expense.