JOINT VENTURE INVESTMENTS

3 Months Ended

Aug. 28, 2022

6. JOINT VENTURE INVESTMENTS

Consolidated Joint Ventures

In July 2022, we acquired an additional 40% interest in LWAMSA, which increased our total ownership from 50% to 90%. We recorded LWAMSA’s assets and liabilities at fair value, which included remeasuring our previously held equity interest at fair value, and we recognized a $15.1 million gain in “Equity method investment earnings” in our Consolidated Statement of Earnings. The fair value was determined utilizing industry EBITDA multiples and control premium comparable information, which are unobservable inputs, or Level 3 in the fair value hierarchy. We recorded the preliminary fair values as of the date of acquisition.

In connection with the purchase of the additional interest in LWAMSA, we ceased equity method accounting and began consolidating LWAMSA’s financial statements. The net sales, income from operations, and total assets acquired were not material to our consolidated net sales, income from operations, and total assets. LWAMSA’s operating results are included in our Global segment.

On September 6, 2022, we announced an expansion of french fry processing capacity in Argentina with the planned construction of a new manufacturing facility in Mar del Plata. The new processing facility is expected to produce more than 200 million pounds of frozen french fries and other potato products per year. Construction of the new line is expected to be completed in fiscal 2025. The total investment is expected to be approximately $240 million. This investment will add to the capacity produced at LWAMSA’s existing production facility in Buenos Aires.

Noncontrolling Interest

As of August 28, 2022, total LWAMSA interest not directly attributable to Lamb Weston, or NCI, was $8.2 million and was recorded in “Additional distributed capital” on our Consolidated Balance Sheet. For the thirteen weeks ended August 28, 2022, the net loss attributable to NCI was not significant and was recorded in “Selling, general and administrative expenses” in our Consolidated Statement of Earnings.

Unconsolidated Joint Ventures

Our equity method investments were as follows:


	August 28,		May 29,
(in millions)	2022		2022
LWM (a)	$	347.8	$	211.2
Lamb-Weston/RDO Frozen ("Lamb Weston RDO") (b)		24.1		19.4
LWAMSA (c)		—		26.1
Other		0.6		0.7
	$	372.5	$	257.4

(a)

We own 50% of LWM, a joint venture with Meijer Frozen Foods B.V., headquartered in the Netherlands that manufactures and sells frozen potato products principally in Europe and the Middle East. The investment balance includes $146.3 million of unrealized gains related to mark-to-market adjustments associated with changes in natural gas and electricity derivatives as commodity markets in Europe have experienced significant volatility during the thirteen weeks ended August 28, 2022. In September 2022, LWM completed the previously announced withdrawal from its joint venture in Russia.

(b)	We own 50% of Lamb Weston RDO, a joint venture with RDO Frozen Co., that operates a potato processing facility in the U.S.

(c)	In July 2022, we acquired an additional 40% interest in LWAMSA, increasing our total ownership to 90% and began consolidating the joint venture.

We have an agreement to share the costs of our global enterprise resource planning (“ERP”) system and related software and services with LWM. Under the terms of the agreement, LWM will pay us for the majority of its portion of the ERP costs in five equal annual payments, plus interest, beginning in the period the system is deployed at LWM. At August 28, 2022 and May 29, 2022, LWM’s portion of the ERP costs totaled $29.5 million and $23.4 million, respectively. We had $25.3 million and $20.5 million of receivables recorded in “Other assets” on our Consolidated Balance Sheets at August 28, 2022 and May 29, 2022, respectively. We expect the total receivable from LWM to increase as development and implementation of the next phase of our ERP system continues throughout fiscal 2023.