Landec Corporation (Nasdaq: LNDC) (“Landec” or the “Company”), a
diversified health and wellness Company with two operating
businesses, Curation Foods, Inc. (“Curation Foods”) and Lifecore
Biomedical, Inc. (“Lifecore”), today announced an update of its
Curation Foods turnaround initiatives as part of Landec’s
shareholder value creation program, Project SWIFT. Landec also
announced its preliminary fiscal 2020 fourth quarter financial
results.
Curation Foods – Project SWIFT: Consolidation of
manufacturing operations contributes to $11 million in annualized
cost savings.
Project SWIFT, which is designed to identify opportunities to
transform the Company’s business with a focus on maximizing
strategic assets, optimizing its operational network and
rightsizing the organization, continues to progress favorably.
Following an internal review as part of Project SWIFT, Landec has
determined to close Curation Foods’ underutilized manufacturing
operations in Hanover, PA, sell the building and assets related
thereto, and consolidate its operations into its manufacturing
facilities in Guadalupe, CA and Bowling Green, OH, which is
targeted to occur by September 2020. By absorbing production
from the Hanover, PA facility into its remaining network of
facilities, Curation Foods expects to improve customer service and
productivity across the network and enhance the gross margin
profile in its fresh food portfolio.
Dr. Albert Bolles, Landec’s President and CEO, stated, “The
planned closure of our Hanover facility is a necessary step for the
Curation Foods business to achieve improved performance, and we
expect the proceeds of the sale of the building and assets will be
used to pay down debt and strengthen the balance sheet. We expect
that the outcome of these strategic actions associated with Project
SWIFT, and others announced to date, will provide operational
efficiency with annualized cost savings of approximately $11
million. Additionally, as a more streamlined organization, we are
empowering the Curation Foods team to focus more of their efforts
on our plant-based food innovation and operational excellence.”
The Company drove significant operational improvements within
the Curation Foods business throughout fiscal 2020, largely visible
in the fiscal fourth quarter, and operational improvements are
expected to continue in fiscal 2021. The Company is also encouraged
by the steady growth at Lifecore, despite the temporary headwinds
related to the COVID-19 pandemic.
Dr. Bolles continued, “While we delivered against our revenue
targets in the fiscal 2020 fourth quarter, the combination of the
unpredictability of consumer shopping patterns for fresh food and
the temporary manufacturing inefficiencies at Lifecore associated
with the COVID-19 pandemic, had a negative impact on our margin
delivery and overall profitability. However, we believe that the
enhancements to our business are durable and that the resulting
improvement in our gross and adjusted EBITDA margins should
positively impact fiscal 2021, which we expect will translate to
more consistent and sustainable profitable growth, enabling us to
maximize shareholder value across our business portfolio.”
Landec: Preliminary Fiscal 2020 Fourth Quarter Financial
Results The Company is providing preliminary, unaudited
financial results for the fiscal 2020 fourth quarter, ended May 31,
2020. Due to the COVID-19 pandemic, Curation Foods realized
significant shifts in customer demand toward some of its lower
margin product categories, further complicated by irregular
customer order volatility. The demand product shifts and volatility
caused order cancelations that resulted in supply chain
inefficiencies and other operational impacts lowering Curation
Foods’ margins. In addition, due to the COVID-19 pandemic, Lifecore
experienced some temporary manufacturing inefficiencies associated
with the new safety protocols that impacted Lifecore margins for
the fiscal 2020 fourth quarter but have since been resolved.
The following are preliminary and unaudited financial results
for the fiscal 2020 fourth quarter:
Revenue from continuing operations:
- Consolidated Revenues: approximately $156.1 million
- Lifecore: approximately $25.5 million
- Curation Foods: approximately $130.6 million
Net income (loss) from continuing operations:
- Consolidated (including Other segment): in the range of $(14.6)
million to $(17.6) million
- Lifecore: approximately $4.8 million
- Curation Foods: in the range of $(15.4) million to $(18.4)
million
Adjusted EBITDA:
- Consolidated (including Other segment): in the range of $12.6
million to $14.6 million
- Lifecore: approximately $7.5 million
- Curation Foods: in the range of $5.8 million to $7.8
million
Diluted net (loss) per share:
- Consolidated: in the range of $(0.50) to $(0.60)
Adjusted Diluted Net Income Per Share:
- Consolidated: in the range of $0.01 to $0.06
The Company’s actual financial results for the fiscal 2020
fourth quarter and full fiscal year, ended May 31, 2020, are
subject to finalization of its normal quarter-end and year-end
accounting procedures, and the audit of its fiscal 2020 financial
statements, and thus these foregoing numbers may not be reflective
of the Company’s actual results. The Company currently expects to
report its actual results for the fiscal 2020 fourth quarter and
full fiscal year by early August.
Update on Credit AgreementAs previously
disclosed in the Company’s press release dated March 25, 2020, in
connection with the Seventh Amendment to the Credit Agreement, the
Company agreed to certain minimum monthly EBITDA and maximum
capital expenditure covenants through May 31, 2020. As a result of
the impacts of the COVID-19 pandemic, the Company was not in
compliance with certain of these covenants. The Company has been
granted a limited default waiver for the month of March 2020. In
connection with the limited default waiver, the Company has
incurred a one-time waiver fee equal to approximately $0.3 million
in aggregate, and certain other administrative and legal costs. The
Company is in discussions with its creditors to obtain a waiver
through May 31, 2020. As of May 31, 2020, $191.4 million of
indebtedness was outstanding under the Credit Agreement, which
matures on September 23, 2021.
Conference Call and Webcast – Today, June 29,
2020The live webcast can be accessed on Landec’s website
on the Investor Events & Presentations page. The webcast will
be available for 30 days.
Date: Monday, June 29, 2020Time: 5:00 p.m. Eastern time (2:00
p.m. Pacific time)Direct Webcast Link:
http://ir.Landec.com/events.cfm
To participate in the conference call via telephone, dial
toll-free: 877-407-3982 or 201-493-6780. Please call the conference
telephone number 5-10 minutes prior to the start time so the
operator can register your name and organization. If you have any
difficulty with the webcast or connecting to the call, please
contact ICR at (646) 277-1263.
A replay of the call will be available through Monday, July 6,
2020 by calling toll-free: (844) 512-2921 or direct (412) 317-6671,
and entering code 13705313.
About Landec CorporationLandec Corporation
(Nasdaq: LNDC) is a leading innovator of diversified health and
wellness solutions with two operating businesses: Curation Foods,
Inc. and Lifecore Biomedical, Inc. Landec designs, develops,
manufactures and sells products for the food and biopharmaceutical
industry. Curation Foods is focused on innovating and distributing
plant-based foods with 100% clean ingredients to retail, club and
foodservice channels throughout North America. Curation Foods is
able to maximize product freshness through its geographically
dispersed family of growers, refrigerated supply chain and patented
BreatheWay® packaging technology. Curation Foods brands include Eat
Smart® fresh packaged vegetables and salads, O Olive Oil &
Vinegar® premium artisan products, and Yucatan® and Cabo Fresh®
avocado products. Lifecore is a fully integrated contract
development and manufacturing organization (CDMO) that offers
highly differentiated capabilities in the development fill and
finish of sterile, injectable pharmaceutical products in syringes
and vials. As a leading manufacturer of premium, injectable grade
Hyaluronic Acid, Lifecore brings 35 years of expertise as a partner
for global and emerging biopharmaceutical and biotechnology
companies across multiple therapeutic categories to bring their
innovations to market. For more information about the Company,
visit Landec’s website at www.landec.com.
Non-GAAP Financial InformationThis press
release contains non-GAAP financial information relating to
Adjusted EBITDA and Adjusted Diluted Net Income Per Share. The
Company has included reconciliation of these non-GAAP financial
measures to their respective most directly comparable financial
measures calculated in accordance with GAAP. See the section
entitled “Non-GAAP Financial Information and Reconciliations” in
this release for definitions of Adjusted EBITDA and Adjusted
Diluted Net Income Per Share, and those reconciliations.
The Company has disclosed these non-GAAP financial measures to
supplement its consolidated financial statements presented in
accordance with GAAP. These non-GAAP financial measures
exclude/include certain items that are included in the Company’s
results reported in accordance with GAAP. Management believes these
non-GAAP financial measures provide useful additional information
to investors about trends in the Company’s operations and are
useful for period-over-period comparisons. These non-GAAP financial
measures should not be considered in isolation or as a substitute
for the comparable GAAP measures. In addition, these non-GAAP
financial measures may not be the same as similar measures provided
by other companies due to the potential differences in methods of
calculation and items being excluded/included. These non-GAAP
financial measures should be read in conjunction with the Company’s
consolidated financial statements presented in accordance with
GAAP.
Important Cautions Regarding Forward-Looking
StatementsCertain statements in this communication are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended, which involve
certain risks and uncertainties that could cause actual results to
differ materially, including such factors as, among others, the
timing and expenses associated with the Company’s operations; the
impact of the COVID-19 pandemic on us, our business, our customers,
or the economy generally; the anticipated success of the Company’s
pending strategic initiatives, including the timing of such
initiatives and the Company’s ability to recognize anticipated
annual savings on its anticipated timeline, or at all, the ability
of the Company to negotiate an amendment to its existing Credit
Agreement successfully, or at all, the ability of the Company to
achieve acceptance of new products in the market place, weather
conditions that can affect the supply and price of produce,
government regulations affecting the Company’s business, the timing
of regulatory approvals necessary to operate the Company’s
business, the Company’s ability to successfully integrate Yucatan
Foods into the Curation Foods business, the mix between domestic
and international sales and any other statements about our future
expectations, plans, intentions, beliefs or prospects expressed by
management or the Company. For additional information about factors
that could cause actual results to differ materially from those
described in the forward-looking statements, please refer to our
filings with the Securities and Exchange Commission, including the
risk factors contained in our most recent Quarterly Report on Form
10-Q and Annual Report on Form 10-K. Forward-looking statements
represent management’s current expectations and are inherently
uncertain. Except as required by law, we do not undertake any
obligation to update forward-looking statements made by us to
reflect subsequent events or circumstances.
Non-GAAP Financial Information and
ReconciliationsAdjusted EBITDA and Adjusted Diluted Net
Income Per Share are non-GAAP financial measures. We define EBITDA
as earnings before the fair market value change of the Company’s
investment in Windset, interest expense, income tax expense, and
depreciation and amortization. We define Adjusted EBITDA as
earnings before the fair market value change of the Company’s
investment in Windset, interest expense, income tax expense,
depreciation and amortization, impairment of goodwill, intangible
and other assets, and certain restructuring and other non-recurring
charges. We define Adjusted Diluted Net Income Per Share as diluted
net income per share before impairment of goodwill, intangible and
other assets, and certain restructuring and other non-recurring
charges, net of tax. The table below presents the reconciliation of
these non-GAAP financial measures to their respective most directly
comparable financial measures calculated in accordance with GAAP
and other supplemental information. See “Non-GAAP Financial
Information” above for further information regarding the Company’s
use of non-GAAP financial measures.
(Estimated and Unaudited) |
|
|
Three Months Ended May 31, 2020 |
|
|
|
Diluted net (loss) income per
share from continuing operations |
|
$ |
(0.50) – (0.60) |
Impairment of goodwill,
intangible, and other assets; net of tax, per diluted share
(1) |
|
|
0.36 – 0.41 |
Restructuring and other
non-recurring charges; net of tax, per diluted share |
|
|
0.20 |
Adjusted diluted net income
per share from continuing operations |
|
$ |
0.01 – 0.06 |
|
|
|
|
(Estimated, Unaudited, and in
thousands) |
|
CurationFoods |
|
Lifecore |
|
Other |
|
Total |
Three Months Ended May 31,
2020 |
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
|
$ |
(15,362) –(18,362 |
) |
|
$ |
4,775 |
|
|
$ |
(4,020 |
) |
|
$ |
(14,607) –(17,607 |
) |
FMV change of investment in
Windset |
|
4,400 |
|
|
— |
|
|
— |
|
|
4,400 |
|
Interest expense, net of
interest income |
|
1,370 |
|
|
— |
|
|
1,770 |
|
|
3,140 |
|
Income tax (benefit)
expense |
|
(5,627) –(6,627 |
) |
|
1,426 |
|
|
(854 |
) |
|
(5,055) –(6,055 |
) |
Depreciation and
amortization |
|
3,536 |
|
|
1,303 |
|
|
27 |
|
|
4,866 |
|
Total EBITDA |
|
(11,683) –(15,683 |
) |
|
7,504 |
|
|
(3,077 |
) |
|
(7,256) –(11,256 |
) |
Impairment of goodwill,
intangible, and other assets (1) |
|
14,000 –16,000 |
|
|
— |
|
|
— |
|
|
14,000 –16,000 |
|
Restructuring and other
non-recurring charges |
|
5,479 |
|
|
— |
|
|
2,397 |
|
|
7,876 |
|
Total Adjusted EBITDA |
|
$ |
5,796 –7,796 |
|
|
$ |
7,504 |
|
|
$ |
(680 |
) |
|
$ |
12,620 –14,620 |
|
|
|
|
|
|
|
|
|
|
(1) The Company is in the preliminary stages of analyzing
its goodwill and intangible assets for impairment. The initial
analysis indicates impairment to Curation Foods’ goodwill,
trademarks and tradenames, and customer relationships with respect
to its O Olive Oil and Vinegar and Yucatan brands. The Company will
provide further information when it completes its goodwill and
intangible impairment analysis and reports its actual results for
the fiscal 2020 fourth quarter and full fiscal year.
Contact Information:Investor
Relations:Jeff Sonnek(646)
277-1263jeff.sonnek@icrinc.com
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