We have financial commitments and obligations that arise in the ordinary course of our business. These include long-term debt (discussed in Note 7, Debt and Financing Obligations), lease obligations (discussed in Note 8, Leases), purchase obligations and capital commitments for goods and services, and legal proceedings (discussed below).

A summary of our purchase obligations, excluding capital commitments, as of May 29, 2022 are as follows. The expected timing of payments of the obligations in the table are estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations:

(a)

The amounts in the table above exclude purchase commitments under potato supply agreements due to uncertainty of pricing and quantity. Potato supply agreements have maximum contracted pricing with deductions for certain quality attributes, and quantities purchased are determined by the yields produced on contracted acres. Total purchases under all our potato supply agreements were $717.6 million, $621.4 million, and $646.5 million in fiscal 2022, 2021, and 2020, respectively.

We had capital commitments of approximately $304.7 million and $75.0 million as of May 29, 2022 and May 30, 2021, respectively, that represent commitments for construction of a previously announced french fry production line and plant modernization investments. Capital commitments were not recorded as liabilities on our Consolidated Balance Sheets as of May 29, 2022 as we had not yet received the related goods nor taken title to the property.

Guarantees and Indemnifications

We provide guarantees, indemnifications, and other assurances to third parties in the normal course of our business. These include tort indemnifications, environmental assurances, and representations and warranties in commercial agreements. At May 29, 2022, we were not aware of any material liabilities arising from any guarantee, indemnification, or financial assurance we have provided. If the fair value of such liability becomes material, we will accrue for it at that time.

We are a party to various potato purchase supply agreements with partner growers, under which they deliver their potato crop from the contracted acres to Lamb Weston during the harvest season, and pursuant to the potato supply agreements, pricing for this inventory is determined after delivery, taking into account crop size and quality, among other factors. Total purchases under these agreements were $146.6 million, $139.8 million, and $142.7 million in fiscal 2022, 2021, and 2020, respectively, under the terms of the potato supply agreements. These purchases are initially recorded in inventory and charged to cost of sales as related inventories are produced and subsequently sold. Under the terms of these potato supply agreements, we have guaranteed repayment of short-term bank loans of the potato suppliers, under certain conditions. At May 29, 2022, we have effectively guaranteed $35.9 million of supplier loans. We have not established a liability for these guarantees, as we have determined that the likelihood of our required performance under the guarantees is remote. Under certain other potato supply agreements, we make advances to growers prior to the delivery of potatoes. The aggregate amounts of these advances were $28.1 million and $23.9 million at May 29, 2022 and May 30, 2021, respectively, and were recorded in “Prepaid expenses and other current assets,” on our Consolidated Balance Sheets.

We and our partner are jointly and severally liable for all legal liabilities of LWM. See Note 4, Equity Method Investments, for further information on LWM’s liabilities and capital structure.

After taking into account liabilities recognized for all of the foregoing matters, management believes the ultimate resolution of such matters would not have a material adverse effect on our financial condition, results of operations, or cash flows. It is reasonably possible that a change to an estimate of the foregoing matters may occur in the future.

Legal Proceedings

We are a party to legal actions arising in the ordinary course of our business. These claims, legal proceedings and litigation principally arise from alleged casualty, product liability, employment, and other disputes. In determining loss contingencies, we consider the likelihood of loss as well as the ability to reasonably estimate the amount of such loss or liability. An estimated loss is recognized when it is considered probable that a liability has been incurred and when the amount of loss can be reasonably estimated. While any claim, proceeding or litigation has an element of uncertainty, we believe the outcome of any of these that are pending or threatened will not have a material adverse effect on our financial condition, results of operations, or cash flows.