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VARIABLE INTEREST ENTITIES | 12 Months Ended
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May 29, 2016
Variable Interest Entity, Measure of Activity [Abstract] |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES Variable Interest Entities Consolidated We own a 49.99% interest in Lamb Weston BSW, LLC ("Lamb Weston BSW"), a potato processing venture with Ochoa Ag Unlimited Foods, Inc. ("Ochoa"). 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 ("production shortfalls"). Commencing on June 1, 2018, or on an earlier date under certain circumstances, we have a contractual right to purchase the remaining equity interest in Lamb Weston BSW from Ochoa (the "call option"). We are 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 (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 any of the options are exercised. As of May 29, 2016, the price at which Ochoa had the right to put its equity interest to us was $47.4 million. This amount is presented within other noncurrent liabilities in our Consolidated Balance Sheets. We have determined that Lamb Weston BSW is a variable interest entity and that we are the primary beneficiary of the entity. Accordingly, we consolidate the financial statements of Lamb Weston BSW. At May 31, 2015, we held a promissory note from Lamb Weston BSW with a balance of $36.1 million. The promissory note and accrued interest was repaid in full during the third quarter of fiscal 2016. In addition, as of May 31, 2015, we provided lines of credit of up to $15.0 million to Lamb Weston BSW which were terminated in the third quarter of fiscal 2016. The amounts owed by Lamb Weston BSW to the Company as of May 31, 2015 were not reflected in our Consolidated Balance Sheet, as they were eliminated in consolidation. During the third quarter of fiscal 2016, Lamb Weston BSW issued a $30.0 million promissory note with a financial institution. The note includes a $23.0 million fixed rate loan segment with interest at 4.34% and a $7.0 million variable rate loan segment with interest at LIBOR plus an applicable margin ranging from 1.90% to 2.30%, payable in semi-annual installments through fiscal 2032. Lamb Weston BSW also issued a $10.0 million revolving note with interest at LIBOR plus an applicable margin ranging from 1.75% to 2.00% that matures in June 2021. As of May 29, 2016, Lamb Weston BSW had $1.0 million outstanding against this revolving note. Our variable interests in Lamb Weston BSW include an equity investment in the venture, the options, the promissory note, certain fees paid to us by Lamb Weston BSW for sales and marketing services, the contingent obligation related to production shortfalls, and the lines of credit advanced to Lamb Weston BSW. Our maximum exposure to loss as a result of our involvement with this venture is equal to our equity investment in the venture, the balance of the promissory note extended to the venture, the amount, if any, advanced under the lines of credit, and the amount, if any, by which the put option exercise price exceeds the fair value of the noncontrolling interest in Lamb Weston BSW upon its exercise. Also, in the event of a production shortfall, we could be required to compensate Ochoa for lost profits. It is not possible to determine the maximum exposure to losses from the potential exercise of the put option or from potential production shortfalls. However, we do not expect to incur material losses resulting from these potential exposures. Due to the consolidation of these variable interest entities, we reflected the following in our Consolidated Balance Sheets:
| May 29, 2016 |  | May 31, 2015
Cash and cash equivalents | $ | 4.3 |  |  | $ | 13.7 |
Receivables, less allowance for doubtful accounts | 0.1 |  |  | 0.2 |
Inventories | 1.2 |  |  | 1.3 |
Prepaid expenses and other current assets | 0.4 |  |  | 0.3 |
Property, plant and equipment, net | 52.2 |  |  | 53.2 |
Goodwill | 18.8 |  |  | 18.8 |
Brands, trademarks and other intangibles, net | 5.2 |  |  | 6.0 |
Total assets | $ | 82.2 |  |  | $ | 93.5 |
Notes payable | $ | 1.0 |  |  | $ | — |
Current installments of long-term debt | 0.5 |  |  | — |
Accounts payable | 10.9 |  |  | 16.9 |
Accrued payroll | 0.8 |  |  | 0.7 |
Other accrued liabilities | 0.9 |  |  | 0.6 |
Senior long-term debt, excluding current installments | 29.5 |  |  | — |
Other noncurrent liabilities (minority interest) | 32.2 |  |  | 31.3 |
Total liabilities | $ | 75.8 |  |  | $ | 49.5 |
The liabilities recognized as a result of consolidating the Lamb Weston BSW entity do not represent additional claims on our general assets. The creditors of Lamb Weston BSW have claims only on the assets of Lamb Weston BSW. The assets recognized as a result of consolidating Lamb Weston BSW are the property of the venture and are not available to us for any other purpose, other than as a secured lender under the promissory note and lines of credit. Variable Interest Entities Not Consolidated We also have variable interests in certain other entities that we have determined to be variable interest entities, but for which we are not the primary beneficiary. We do not consolidate the financial statements of these entities. We hold a 50% interest in Lamb Weston RDO, a potato processing venture (see Note 7). We provide all sales and marketing services to Lamb Weston RDO. We receive a fee for these services based on a percentage of the net sales of the venture. We reflect the value of our ownership interest in this venture in other assets in our Consolidated Balance Sheets, based upon the equity method of accounting. The balance of our investment was $16.9 million and $14.6 million at May 29, 2016 and May 31, 2015, respectively, representing our maximum exposure to loss as a result of our involvement with this venture. The capital structure of Lamb Weston RDO includes owners' equity of $33.9 million and term borrowings from banks of $41.1 million as of May 29, 2016. We have determined that we do not have the power to direct the activities that most significantly impact the economic performance of this venture. We lease certain office buildings from entities that we have determined to be variable interest entities. The lease agreements with these entities include fixed-price purchase options for the assets being leased. The lease agreements also contain contingent put options (the “lease put options”) that allow the lessors to require us to purchase the buildings at the greater of original construction cost, or fair market value, without a lease agreement in place (the “put price”) in certain limited circumstances. As a result of substantial impairment charges related to our Private Brands operations, these lease put options are exercisable now and remain exercisable until generally 30 days after the end of the respective lease agreements. We are amortizing the difference between the estimated put price and the estimated fair value (without a lease agreement in place) of each respective property over the remaining respective lease term within selling, general and administrative expenses. As of May 29, 2016, the estimated amount by which the put prices exceeded the fair values of the related properties was $58.5 million, of which we have accrued $9.3 million. As these buildings are worth considerably more when under lease agreements than when vacant, we may be able to mitigate some, or all of the financial exposure created by the put options by maintaining active lease agreements and/or by subleasing the buildings to credit worthy tenants. We do not expect to ultimately incur material financial losses as a result of the potential exercise of the lease put options by the lessors. These leases are accounted for as operating leases, and accordingly, there are no material assets or liabilities, other than the accrued portion of the put price, associated with these entities included in our Consolidated Balance Sheets. We have determined that we do not have the power to direct the activities that most significantly impact the economic performance of these entities. In making this determination, we have considered, among other items, the terms of the lease agreements, the expected remaining useful lives of the assets leased, and the capital structure of the lessor entities.

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