Landec Corporation (Nasdaq: LNDC), a diversified health and
wellness company with two operating businesses, Curation Foods,
Inc. and Lifecore Biomedical, Inc., reported results for the fiscal
2020 fourth quarter and full year ended May 31, 2020. The Company
previously announced its preliminary fiscal 2020 fourth quarter
revenue and other select financial metrics on June 29, 2020.
Looking forward, Landec intends to create further stockholder value
by delivering against its long-term financial targets,
strengthening its balance sheet, selectively investing in
innovation and growth, and implementing strategic priorities to
improve operating margins at Curation Foods and driving topline
growth at Lifecore.
FISCAL FOURTH QUARTER 2020 BUSINESS
HIGHLIGHTS:
- Revenues of $156.1 million, an increase of 2.2% year over
year
- Gross profit of $24.1 million, a decrease of 8.1% year over
year
- Net loss of $15.1 million, which includes $6.8 million of
restructuring and other non-recurring charges, net of tax and $9.6
million of impairment of goodwill and intangibles charges, net of
tax.
- Diluted net loss per share of $0.52; adjusted diluted net
income per share of $0.05, which excludes $0.23 per share of
restructuring and other non-recurring charges, net of tax and $0.34
per share of impairment of goodwill and intangibles charges, net of
tax.
- Adjusted EBITDA was $14.1 million, which excludes $9.2 million
of restructuring and other non-recurring charges and $13.0 million
of impairment of goodwill and intangibles charges.
- Sale of Curation Foods’ non-strategic manufacturing asset in
Ontario, California for $4.8 million
- Decision to retain Curation Foods’ legacy core vegetable bag
and tray business
FISCAL YEAR 2020 BUSINESS
HIGHLIGHTS:
- Revenues of $590.4 million, an increase of 5.9% year over
year
- Gross profit of $75.0 million, a decrease of 7.4% year over
year
- Net loss of $38.2 million, which includes $21.1 million of
restructuring and other non-recurring charges, net of tax and $9.6
million of impairment of goodwill and intangibles charges, net of
tax.
- Diluted net loss per share of $1.31; adjusted diluted net loss
per share of $0.26, which excludes $0.72 per share of restructuring
and other non-recurring charges and $0.33 per share of impairment
of goodwill and intangibles charges, net of tax.
- Adjusted EBITDA was $22.0 million, which excludes $28.3 million
of restructuring and other non-recurring charges and $13.0 million
of impairment of goodwill and intangibles charges.
- Introduced full-year fiscal 2021 guidance
CEO COMMENTS:“Our organization
worked tirelessly in fiscal 2020 to support the acceleration of
growth at Lifecore and to stabilize operations at Curation Foods.
Lifecore delivered high-margin revenue growth during fiscal 2020,
resulting from its attractive competitive position as a fully
integrated contract development and manufacturing organization
(CDMO). We believe Lifecore is poised to continue on its growth
trajectory based on industry trends, customer demand and its robust
business development pipeline,” said Dr. Albert Bolles, Landec’s
President and CEO. “As we transition to fiscal 2021, our Curation
Foods business has the benefit of a much more efficient
organization that was the result of our decisive actions that have
been implemented to date as part of Project SWIFT. Despite the
negative effects from the COVID-19 pandemic at Curation Foods
during the fiscal fourth quarter, we were still able to generate a
significant improvement in Curation Foods’ profitability in the
second half of fiscal 2020. In fiscal 2021, we will be further
leveraging the benefits we have derived to date from Project SWIFT,
as well as implementing measures that build on and advance Curation
Foods’ momentum in delivering more consistent operating
performance. In addition, we believe we have a plan in place to
strategically grow Curation Foods’ existing business lines through
consumer insight driven innovation. In fiscal 2021, with Lifecore
positioned to resume steady adjusted EBITDA growth, with Curation
Foods’ adjusted EBITDA expected to increase significantly, and with
both operations supported by disciplined capital management, we are
executing our plan to build a sustainable profitable future for our
employees and our shareholders.”
FOURTH QUARTER 2020
RESULTS:Fiscal fourth quarter 2020 results compared to
fiscal fourth quarter 2019 are as follows:
(Unaudited and in thousands,
except per-share data) |
|
Three Months Ended |
|
Change |
|
|
May 31, 2020 |
|
May 26, 2019 |
|
Amount |
|
% |
Revenues |
|
$ |
156,131 |
|
|
|
$ |
152,780 |
|
|
$ |
3,351 |
|
|
|
2 |
|
% |
Gross profit |
|
24,091 |
|
|
|
26,212 |
|
|
(2,121 |
) |
|
|
(8 |
) |
% |
Net (loss) income from
continuing operations |
|
(15,149 |
) |
|
|
367 |
|
|
(15,516 |
) |
|
|
N/M |
|
|
Diluted net (loss) income per
share |
|
(0.52 |
) |
|
|
0.01 |
|
|
(0.53 |
) |
|
|
N/M |
|
|
Adjusted diluted net income
per share* |
|
0.05 |
|
|
|
0.07 |
|
|
(0.03 |
) |
|
|
(38 |
) |
% |
EBITDA* |
|
(8,019 |
) |
|
|
7,616 |
|
|
(15,635 |
) |
|
|
(205 |
) |
% |
Adjusted EBITDA* |
|
$ |
14,120 |
|
|
|
$ |
11,844 |
|
|
$ |
2,276 |
|
|
|
19 |
|
% |
* See “Non-GAAP Financial Information” at the
end of this release for more information and for a reconciliation
of certain financial information.
Revenues increased $3.4 million, or 2.2%, year
over year, which was primarily a result of a 5.8% increase in
revenues in the Lifecore segment and a 1.5% increase in the
Curation Foods segment. Lifecore’s performance was primarily driven
by a 13% increase in its CDMO business, partially offset by a 23%
decrease in its fermentation business. Curation Foods’ performance
was primarily driven by a 19% increase in its avocado products
business and a 13% increase in its technology business, partially
offset by a 1% decrease in its fresh packaged salads and vegetables
business.
Gross profit decreased $2.1 million, or 8.1%,
year over year. Gross profit margin decreased 170 basis points to
15.4% compared to the prior year period. Consolidated gross margin
was primarily driven by disruptions related to the COVID-19
pandemic at both of its operating segments. Curation Foods
experienced a 10.2% decrease in gross profit due to significant
shifts in customer demand toward some of its lower margin product
categories and irregular customer order volatility which resulted
in order cancellations that caused supply chain inefficiencies and
increased costs from other operational disruptions. Lifecore
experienced a 5.4% decrease in gross profit due to temporary
manufacturing inefficiencies, which have since been resolved,
associated with the new safety protocols that were implemented.
Net loss was $15.1 million for fiscal fourth
quarter, which includes $6.8 million of restructuring and
non-recurring charges, net of taxes and $9.6 million impairment of
goodwill and intangibles, net of tax, compared to net income of
$0.4 million in the prior year comparable period, a decrease of
$15.5 million.
Adjusted EBITDA increased $2.3 million, or
19.2%, year over year, to $14.1 million for fiscal fourth quarter
which excludes restructuring and other non-recurring charges and
impairment of goodwill and intangibles. This compares to $11.8
million of adjusted EBITDA in the prior year comparable period.
SEGMENT RESULTS:
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Change |
|
Twelve Months Ended |
|
Change |
|
|
May 31, 2020 |
|
May 26, 2019 |
|
Amount |
|
% |
|
May 31, 2020 |
|
May 26, 2019 |
|
Amount |
|
% |
Revenues: |
Curation Foods |
|
$ |
130,627 |
|
|
|
$ |
128,672 |
|
|
|
$ |
1,955 |
|
|
|
2 |
|
% |
|
$ |
504,533 |
|
|
|
$ |
481,686 |
|
|
|
$ |
22,847 |
|
|
|
5 |
|
% |
Lifecore |
|
25,504 |
|
|
|
24,108 |
|
|
|
1,396 |
|
|
|
6 |
|
% |
|
$ |
85,833 |
|
|
|
$ |
75,873 |
|
|
|
$ |
9,960 |
|
|
|
13 |
|
% |
Total Revenues |
|
$ |
156,131 |
|
|
|
$ |
152,780 |
|
|
|
$ |
3,351 |
|
|
|
2 |
|
% |
|
$ |
590,366 |
|
|
|
$ |
557,559 |
|
|
|
$ |
32,807 |
|
|
|
6 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit: |
Curation Foods |
|
$ |
13,231 |
|
|
|
$ |
14,735 |
|
|
|
$ |
(1,504 |
) |
|
|
(10 |
) |
% |
|
$ |
42,105 |
|
|
|
$ |
49,305 |
|
|
|
$ |
(7,200 |
) |
|
|
(15 |
) |
% |
Lifecore |
|
10,860 |
|
|
|
11,477 |
|
|
|
(617 |
) |
|
|
(5 |
) |
% |
|
$ |
32,883 |
|
|
|
$ |
31,698 |
|
|
|
$ |
1,185 |
|
|
|
4 |
|
% |
Total Gross Profit |
|
$ |
24,091 |
|
|
|
$ |
26,212 |
|
|
|
$ |
(2,121 |
) |
|
|
(8 |
) |
% |
|
$ |
74,988 |
|
|
|
$ |
81,003 |
|
|
|
$ |
(6,015 |
) |
|
|
(7 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income from Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
(15,935 |
) |
|
|
$ |
(1,845 |
) |
|
|
$ |
(14,090 |
) |
|
|
N/M |
|
|
$ |
(39,089 |
) |
|
|
$ |
(6,229 |
) |
|
|
$ |
(32,860 |
) |
|
|
N/M |
|
Lifecore |
|
4,775 |
|
|
|
5,484 |
|
|
|
(709 |
) |
|
|
(13 |
) |
% |
|
$ |
11,748 |
|
|
|
$ |
12,070 |
|
|
|
$ |
(322 |
) |
|
|
(3 |
) |
% |
Corporate |
|
(3,989 |
) |
|
|
(3,272 |
) |
|
|
(717 |
) |
|
|
22 |
|
% |
|
$ |
(10,850 |
) |
|
|
$ |
(3,719 |
) |
|
|
$ |
(7,131 |
) |
|
|
N/M |
|
Total Net (Loss) Income from
Continuing Operations |
|
$ |
(15,149 |
) |
|
|
$ |
367 |
|
|
|
$ |
(15,516 |
) |
|
|
N/M |
|
|
$ |
(38,191 |
) |
|
|
$ |
2,122 |
|
|
|
$ |
(40,313 |
) |
|
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, excluding Windset FMV change, and restructuring |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
(12,446 |
) |
|
|
$ |
987 |
|
|
|
$ |
(13,433 |
) |
|
|
N/M |
|
|
$ |
(29,209 |
) |
|
|
$ |
4,168 |
|
|
|
$ |
(33,377 |
) |
|
|
N/M |
|
Lifecore |
|
7,504 |
|
|
|
8,469 |
|
|
|
(965 |
) |
|
|
(11 |
) |
% |
|
$ |
20,103 |
|
|
|
$ |
20,233 |
|
|
|
$ |
(130 |
) |
|
|
(1 |
) |
% |
Corporate |
|
(3,077 |
) |
|
|
(1,840 |
) |
|
|
(1,237 |
) |
|
|
67 |
|
% |
|
$ |
(10,157 |
) |
|
|
$ |
(2,045 |
) |
|
|
$ |
(8,112 |
) |
|
|
N/M |
|
Total EBITDA excluding Windset
FMV change |
|
$ |
(8,019 |
) |
|
|
$ |
7,616 |
|
|
|
$ |
(15,635 |
) |
|
|
N/M |
|
|
$ |
(19,263 |
) |
|
|
$ |
22,356 |
|
|
|
$ |
(41,619 |
) |
|
|
N/M |
|
Lifecore Biomedical Business
Update:CDMO partner Heron Therapeutics’ ZYNRELEF™
(formerly known as HTX-011) Candidate Received Positive Opinion
from European Medicines Agency
Lifecore is the Company’s CDMO business focused
on product development and manufacturing of sterile injectable
products. Lifecore continues to expand its presence in the CDMO
marketplace by finding additional opportunities to partner with
biopharmaceutical and medical device companies.
On July 24, 2020, Heron Therapeutics (“Heron”)
announced that it received a positive opinion from the European
Medicines Agency’s (EMA) Committee for Medicinal Product for Human
Use (CHMP), which adopted a positive opinion and a recommendation
for the granting of a marketing authorization for treatment of
post-operative pain in Europe. ZYNRELEF is a non-opioid,
dual-acting, fixed dose combination of the local anesthetic
bupivacaine with a low dose of the nonsteroidal anti-inflammatory
drug meloxicam.
Jim Hall, Lifecore’s President, commented, “We
are excited about this development and congratulate the Heron team
on their achieving this major regulatory milestone, which will help
relieve postoperative pain for a vast patient population across
Europe. Lifecore has been a proud partner of Heron for many years,
providing process development and support throughout the regulatory
approval process for ZYNRELEF. Moving forward, Lifecore will
continue to support Heron in its FDA approval process and look
forward to future positive outcomes.”
Lifecore Biomedical Key Initiatives:
- Business Development Pipeline
Progress:Business development revenue in the fourth quarter of
fiscal 2020 increased 5.8% year-over-year. Lifecore currently has
16 projects in its total development pipeline. The projects are
generally equally disbursed across the various stages of the
product development lifecycle, spanning from early phase clinical
development to pre-commercial validation, which aligns with the
business’ overall CDMO development strategy.
- Maximizing Capacity:Maximum
theoretical manufacturing capacity in fiscal 2020 increased to 22
million units from 17.5 million units with demand of approximately
6.5 million units. Based on commercialization timing estimates for
the products within the development pipeline, Lifecore intends to
have the capacity to fulfill customer demand for up to 22 million
units in the next 3 to 4 years. Lifecore also has the ability to
increase manufacturing capacity at its current location to 30
million units annually.
- Advancing Product
Commercialization:Lifecore currently expects one product in
development to be approved by the FDA for commercialization in
calendar year 2020 and the commercialization of one to two products
annually.
Curation
Foods:Concludes strategic review of legacy core
vegetable and tray business and sells salad dressing facility for
$4.8 Million
Curation Foods is the Company’s natural food
business. Curation Foods will continue seeking to deliver the
highest level of product quality and safety, while executing with
excellence on its customer, grower and partner commitments.
To date, the Company has announced actions with
Project SWIFT, its value creation program that aims to strengthen
the Curation Foods business by simplifying the business, and
estimates that it will provide total annualized cost savings of
approximately $11 million. The Company believes that these actions
chart a clear path towards improving the overall financial
performance of Landec, creating long-term value. The following
decisive actions have been announced thus far:
- Focus on Strategic
Assets:Conclusion of Strategic Review for Legacy Vegetable Bag and
Tray:Following a thorough review of the available strategic
alternatives with respect to its legacy vegetable bag and tray
business, management and the Board of Directors have determined
that retaining this business is the best approach to take advantage
of operational efficiencies that have already been realized, and
allows the Company to meet key strategic customer demand with a
full line of fresh plant-based products. The Company anticipates
this business will approximate $100 million to $110 million in
revenue in fiscal 2021. Management has reset the gross margin
structure associated with this business, and as a result, believes
that it will generate positive adjusted EBITDA contributions in
fiscal 2021.Non-Core Asset Divestitures:The Company continues to
drive toward a simplification of the Curation Foods business
through evaluating potential opportunities to divest non-core
assets. Management announced today the assignment of the lease and
sale of corresponding assets related to its yet-to-be-operational
salad dressing facility in Ontario, CA in exchange for $4.8 million
in cash. As previously announced, the Company is in the process of
exploring a sale of its Hanover, PA manufacturing operations.
- Network & Operational
Optimization:The Company has completed its consolidation and
centralization of the Curation Foods offices into its Innovation
Center headquarters in Santa Maria, CA in order to maximize
efficiency and productivity. In addition, the Company has improved
plant operations by implementing lean manufacturing practices.
- Organizational Redesign:The Company
continues to evaluate and make changes to Curation Foods structural
organization so that it can be competitive with industry benchmarks
and appropriate for the Company’s future direction, with a focus on
strategic initiatives, developing and elevating internal talent and
reducing headcount.
UPDATE REGARDING THE COVID-19
PANDEMICThere are many uncertainties regarding the current
novel coronavirus (“COVID-19”) pandemic, including the scope of
scientific and health issues, the anticipated duration of the
pandemic, and the extent of local and worldwide social, political,
and economic disruption it may cause. The COVID-19 pandemic has
had, and is expected to continue to have, meaningful adverse
impacts on many aspects of the Company’s operations, directly and
indirectly, including with respect to its impacts on customer
behaviors, business and manufacturing operations, inventory, the
Company’s employees, and the market generally, and the scope and
nature of these impacts continue to evolve each day. The Company
expects to continue to assess the evolving impact of the COVID-19
pandemic, and intends to make adjustments to its responses
accordingly.
BALANCE SHEET & AMENDED CREDIT
AGREEMENT: As previously announced, on July 15, 2020, the
Company entered into the Eighth Amendment to the Credit Agreement
which provided a limited default waiver with respect to the
Company’s noncompliance under its credit agreement through the most
recent fiscal period. The amendment also increases the Company’s
permitted exclusions for certain unusual, extraordinary or one-time
cash items for purposes of calculating EBITDA for the fiscal
quarter ending February 28, 2021 and thereafter (other than for
purposes of calculating the applicable interest rate) from 10% to
20% of EBITDA. In addition, the amendment includes certain
restrictions on the Company’s aggregate capital expenditures
through May 31, 2021, and the Company will incur a 50 basis point
increase in the applicable interest rates thereunder.
FISCAL 2021 OUTLOOK:Excluding
restructuring and other nonrecurring charges, tax implications and
any potential impact from the ongoing COVID-19 pandemic, the
Company is introducing its full year fiscal 2021 guidance, which is
detailed below with growth figures that are compared to fiscal
2020:
Revenue from continuing operations:
- Consolidated Revenues: range of
$530 million to $550 million (-10% to -7%)
- Lifecore: range of $93 million to
$97 million (+8% to +13%)
- Curation Foods: range of $437
million to $453 million (-13% to -10%)
Adjusted EBITDA:
- Consolidated: range of $33 million to $37 million (+50% to
+68%)
- Lifecore: range of $22.5 million to $24.5 million (+12% to
+22%)
- Curation Foods: range of $12 million to $14 million (+181% to
+238%)
Seasonality:
- From a revenue perspective, the Company anticipates minimal
quarterly variation due to seasonality for both Lifecore and
Curation Foods. At Lifecore, this is the result of a coordinated
effort to work with customers on shipment timing. From an adjusted
EBITDA perspective, the Company anticipates minimal quarterly
variation due to seasonality for the fiscal second, third, and
fourth quarters during which both Lifecore and Curation Foods are
expected to deliver normalized gross and adjusted EBITDA margins.
For the fiscal first quarter, the Company anticipates that it will
experience margin related headwinds associated with expected
seasonal plant closures at its avocado products manufacturing
operation during the summer off-season, which lowers fixed cost
absorption for Curation Foods. At Lifecore, in fiscal first quarter
the business is experiencing temporary margin compression
associated with sell through of its higher cost inventory that
resulted from the fiscal fourth quarter 2020 COVID-19 manufacturing
inefficiencies, which have since been corrected and are not
expected to impact future quarters.
Brian McLaughlin, Chief Financial Officer
commented, “We are introducing fiscal 2021 guidance, which
demonstrates our expectation for a return to strong adjusted EBITDA
growth at Lifecore, even with its first quarter margin pressure due
to higher cost inventory related to COVID-19 and for improved
quarterly EBITDA contributions from Curation Foods following the
operational improvements that we made in fiscal 2020. At Curation
Foods, full year guidance implies an approximate 300 basis point
lift in gross margin versus fiscal 2020, achieving the low-end of
the steady-state targets we communicated to previously. The drivers
for the gross margin improvement are the anticipated turnaround of
our avocado products business, the cost-out improvements in our
manufacturing operations, the partial year benefit from the closure
of our Hanover facility, and the improved margin structure of our
legacy vegetable bag and tray business which now generates
approximately $100 - $110 million in revenues. The guidance is
before any additional actions associated with Project SWIFT,
further efforts to optimize our network, or new product
introductions.”
Conference CallThe live webcast
can be accessed directly at http://ir.Landec.com/events.cfm or on
Landec’s website on the Investor Events & Presentations page.
The webcast will be available for 30 days.
Date: Tuesday, August 11,
2020
Time: 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
Tuesday, August 18, 2020 by calling toll-free: (844) 512-2921 or
direct (412) 317-6671, and entering code 13707337.
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 Biomedical 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 EBITDA, adjusted EBITDA, and adjusted 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 EBITDA,
adjusted EBITDA, and adjusted 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 StatementsThis press release contains
forward-looking statements regarding future events and our future
results that are subject to the safe harbor created under the
Private Securities Litigation Reform Act of 1995 and other safe
harbors under the Securities Act of 1933 and the Securities
Exchange Act of 1934. Words such as “anticipate”, “estimate”,
“expect”, “project”, “plan”, “intend”, “believe”, “may”, “might”,
“will”, “should”, “can have”, “likely” and similar expressions are
used to identify forward-looking statements. All forward-looking
statements involve certain risks and uncertainties that could cause
actual results to differ materially, including such factors among
others, as the timing and expenses associated with operations, the
ability to achieve acceptance of the Company’s new products in the
market place, weather conditions that can affect the supply and
price of produce, government regulations affecting our business,
the timing of regulatory approvals, uncertainties related to
COVID-19 and the impact of our responses to it, the ability to
successfully integrate Yucatan Foods into the Curation Foods
business, and the mix between domestic and international sales. 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 (“SEC”), 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.
LANDEC
CORPORATIONCONSOLIDATED CONDENSED BALANCE
SHEETS(In thousands)
|
May 31, 2020 |
|
May 26, 2019 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
360 |
|
|
|
$ |
1,080 |
|
Accounts receivable, less
allowance for doubtful accounts |
76,206 |
|
|
|
69,565 |
|
Inventories |
66,311 |
|
|
|
54,132 |
|
Prepaid expenses and other
current assets |
14,230 |
|
|
|
8,264 |
|
Total Current Assets |
157,107 |
|
|
|
133,041 |
|
|
|
|
|
Investment in non-public
company, fair value |
56,900 |
|
|
|
61,100 |
|
Property and equipment,
net |
192,338 |
|
|
|
200,027 |
|
Operating leases |
25,321 |
|
|
|
— |
|
Goodwill |
69,386 |
|
|
|
76,742 |
|
Trademarks/tradenames,
net |
25,328 |
|
|
|
29,928 |
|
Customer relationships,
net |
12,777 |
|
|
|
15,319 |
|
Other assets |
2,156 |
|
|
|
2,934 |
|
Total Assets |
$ |
541,313 |
|
|
|
$ |
519,091 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Accounts payable |
$ |
51,647 |
|
|
|
$ |
53,973 |
|
Accrued compensation |
9,034 |
|
|
|
10,687 |
|
Other accrued liabilities |
9,978 |
|
|
|
10,001 |
|
Current portion of lease
liabilities |
4,423 |
|
|
|
75 |
|
Deferred revenue |
352 |
|
|
|
499 |
|
Line of credit |
77,400 |
|
|
|
52,000 |
|
Current portion of long-term
debt, net |
11,554 |
|
|
|
9,791 |
|
Other current liabilities,
discontinued operations |
— |
|
|
|
65 |
|
Total Current Liabilities |
164,388 |
|
|
|
137,091 |
|
|
|
|
|
Long-term debt, net |
101,363 |
|
|
|
87,193 |
|
Long-term lease
liabilities |
26,378 |
|
|
|
3,532 |
|
Deferred taxes, net |
13,588 |
|
|
|
19,393 |
|
Other non-current
liabilities |
4,552 |
|
|
|
1,738 |
|
Total Liabilities |
310,269 |
|
|
|
248,947 |
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
Common stock, $0.001 par
value; 50,000 shares authorized; 29,224 and 29,102 shares issued
and outstanding at May 26, 2019 and May 31, 2019, respectively |
29 |
|
|
|
29 |
|
Additional paid-in
capital |
162,578 |
|
|
|
160,341 |
|
Retained earnings |
71,245 |
|
|
|
109,710 |
|
Accumulated other
comprehensive (loss) income |
(2,808 |
) |
|
|
64 |
|
Total Stockholders’
Equity |
231,044 |
|
|
|
270,144 |
|
Total Liabilities and
Stockholders’ Equity |
$ |
541,313 |
|
|
|
$ |
519,091 |
|
LANDEC
CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF
INCOME AND LOSS
(Unaudited and in thousands,
except per-share data) |
Three Months Ended |
|
Twelve Months Ended |
|
May 31, 2020 |
|
May 26, 2019 |
|
May 31, 2020 |
|
May 26, 2019 |
Product sales |
$ |
156,131 |
|
|
|
$ |
152,780 |
|
|
|
$ |
590,366 |
|
|
|
$ |
557,559 |
|
|
Cost of product sales |
132,040 |
|
|
|
126,568 |
|
|
|
515,378 |
|
|
|
476,556 |
|
|
Gross profit |
24,091 |
|
|
|
26,212 |
|
|
|
74,988 |
|
|
|
81,003 |
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Research and development |
2,710 |
|
|
|
3,461 |
|
|
|
11,099 |
|
|
|
11,466 |
|
|
Selling, general and
administrative |
18,187 |
|
|
|
18,271 |
|
|
|
72,188 |
|
|
|
62,062 |
|
|
Impairment of goodwill and
intangible assets |
12,953 |
|
|
|
2,000 |
|
|
|
12,953 |
|
|
|
2,000 |
|
|
Restructuring costs |
3,352 |
|
|
|
— |
|
|
|
17,285 |
|
|
|
— |
|
|
Total operating costs and
expenses |
37,202 |
|
|
|
23,732 |
|
|
|
113,525 |
|
|
|
75,528 |
|
|
Operating (loss) income |
(13,111 |
) |
|
|
2,480 |
|
|
|
(38,537 |
) |
|
|
5,475 |
|
|
|
|
|
|
|
|
|
|
Dividend income |
281 |
|
|
|
412 |
|
|
|
1,125 |
|
|
|
1,650 |
|
|
Interest income |
6 |
|
|
|
32 |
|
|
|
103 |
|
|
|
145 |
|
|
Interest expense, net |
(3,146 |
) |
|
|
(1,955 |
) |
|
|
(9,603 |
) |
|
|
(5,230 |
) |
|
Other income (expense) |
(4,455 |
) |
|
|
— |
|
|
|
(4,395 |
) |
|
|
1,600 |
|
|
Net (loss) income from
continuing operations before tax |
(20,425 |
) |
|
|
969 |
|
|
|
(51,307 |
) |
|
|
3,640 |
|
|
Income tax (expense)
benefit |
5,276 |
|
|
|
(602 |
) |
|
|
13,116 |
|
|
|
(1,518 |
) |
|
Net (loss) income from
continuing operations |
(15,149 |
) |
|
|
367 |
|
|
|
(38,191 |
) |
|
|
2,122 |
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
Loss from discontinued
operations |
— |
|
|
|
(823 |
) |
|
|
— |
|
|
|
(2,238 |
) |
|
Income tax benefit |
— |
|
|
|
194 |
|
|
|
— |
|
|
|
527 |
|
|
(Loss) from discontinued
operations, net of tax |
— |
|
|
|
(629 |
) |
|
|
— |
|
|
|
(1,711 |
) |
|
Net (loss) income applicable
to common stockholders |
(15,149 |
) |
|
|
(262 |
) |
|
|
(38,191 |
) |
|
|
411 |
|
|
|
|
|
|
|
|
|
|
Diluted net (loss) income per
share from continuing operations |
$ |
(0.52 |
) |
|
|
$ |
0.01 |
|
|
|
$ |
(1.31 |
) |
|
|
$ |
0.07 |
|
|
Diluted net (loss) per share
from discontinued operations |
$ |
— |
|
|
|
$ |
(0.02 |
) |
|
|
$ |
— |
|
|
|
$ |
(0.06 |
) |
|
Diluted net (loss) income per
share |
$ |
(0.52 |
) |
|
|
$ |
(0.01 |
) |
|
|
$ |
(1.31 |
) |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
Shares used in diluted per
share computations |
29,184 |
|
|
|
29,015 |
|
|
|
29,162 |
|
|
|
28,607 |
|
|
Non-GAAP Financial Information and
Reconciliations
EBITDA, adjusted EBITDA, and adjusted 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 as adjusted EBITDA as
EBITDA before certain restructuring and other non-recurring charges
and before impairment of goodwill and intangibles charges. We
define adjusted diluted net income per share as diluted net income
per share before certain restructuring and other non-recurring
charges, net of tax, and before impairment of goodwill and
intangibles 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.
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Twelve Months Ended |
|
|
May 31, 2020 |
|
May 26, 2019 |
|
May 31, 2020 |
|
May 26, 2019 |
Net (loss) income from continuing operations |
|
$ |
(15,149 |
) |
|
|
$ |
367 |
|
|
$ |
(38,191 |
) |
|
|
$ |
2,122 |
|
|
FMV change in Windset
investment |
|
4,400 |
|
|
|
— |
|
|
4,200 |
|
|
|
(1,600 |
) |
|
Interest expense, net of
interest income |
|
3,140 |
|
|
|
1,923 |
|
|
9,500 |
|
|
|
5,085 |
|
|
Income tax (benefit)
expense |
|
(5,276 |
) |
|
|
602 |
|
|
(13,116 |
) |
|
|
1,518 |
|
|
Depreciation and
amortization |
|
4,866 |
|
|
|
4,724 |
|
|
18,344 |
|
|
|
15,230 |
|
|
Total EBITDA |
|
(8,019 |
) |
|
|
7,616 |
|
|
(19,263 |
) |
|
|
22,355 |
|
|
Restructuring and other
non-recurring charges (1) |
|
9,186 |
|
|
|
2,228 |
|
|
28,331 |
|
|
|
1,695 |
|
|
Impairment of goodwill and
intangibles (2) |
|
12,953 |
|
|
|
2,000 |
|
|
12,953 |
|
|
|
2,000 |
|
|
Total adjusted EBITDA |
|
$ |
14,120 |
|
|
|
$ |
11,844 |
|
|
$ |
22,021 |
|
|
|
$ |
26,050 |
|
|
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Twelve Months Ended |
|
|
May 31, 2020 |
|
May 26, 2019 |
|
May 31, 2020 |
|
May 26, 2019 |
Diluted net (loss) income per share from continuing operations |
|
$ |
(0.52 |
) |
|
|
$ |
0.01 |
|
|
$ |
(1.31 |
) |
|
|
$ |
0.07 |
|
Restructuring and other
non-recurring charges, net of tax, per diluted share (1) |
|
$ |
0.23 |
|
|
|
$ |
— |
|
|
$ |
0.72 |
|
|
|
$ |
— |
|
Impairment of goodwill and
intangibles, net of tax, per diluted share (2) |
|
$ |
0.34 |
|
|
|
$ |
0.06 |
|
|
$ |
0.33 |
|
|
|
$ |
0.06 |
|
Adjusted diluted net income
(loss) per share from continuing operations |
|
$ |
0.05 |
|
|
|
$ |
0.07 |
|
|
$ |
(0.26 |
) |
|
|
$ |
0.13 |
|
(Unaudited and in thousands) |
|
Curation Foods |
|
Lifecore |
|
Other |
|
Total |
Three Months Ended May 31,
2020 |
|
|
|
|
|
|
|
|
Net (loss) income from continuing operations |
|
$ |
(15,935 |
) |
|
|
$ |
4,775 |
|
|
$ |
(3,989 |
) |
|
|
$ |
(15,149 |
) |
|
FMV change in Windset
investment |
|
4,400 |
|
|
|
— |
|
|
— |
|
|
|
4,400 |
|
|
Interest expense, net of
interest income |
|
1,370 |
|
|
|
— |
|
|
1,770 |
|
|
|
3,140 |
|
|
Income tax (benefit)
expense |
|
(5,817 |
) |
|
|
1,426 |
|
|
(885 |
) |
|
|
(5,276 |
) |
|
Depreciation and
amortization |
|
3,536 |
|
|
|
1,303 |
|
|
27 |
|
|
|
4,866 |
|
|
Total EBITDA |
|
(12,446 |
) |
|
|
7,504 |
|
|
(3,077 |
) |
|
|
(8,019 |
) |
|
Restructuring and other
non-recurring charges (1) |
|
6,789 |
|
|
|
— |
|
|
2,397 |
|
|
|
9,186 |
|
|
Impairment of goodwill and
intangibles (2) |
|
12,953 |
|
|
|
— |
|
|
— |
|
|
|
12,953 |
|
|
Total adjusted EBITDA |
|
$ |
7,296 |
|
|
|
$ |
7,504 |
|
|
$ |
(680 |
) |
|
|
$ |
14,120 |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended May 31,
2020 |
|
|
|
|
|
|
|
|
Net (loss) income from
continuing operations |
|
$ |
(39,088 |
) |
|
|
$ |
11,749 |
|
|
$ |
(10,852 |
) |
|
|
$ |
(38,191 |
) |
|
FMV change in Windset
investment |
|
4,200 |
|
|
|
— |
|
|
— |
|
|
|
4,200 |
|
|
Interest expense, net of
interest income |
|
5,467 |
|
|
|
— |
|
|
4,033 |
|
|
|
9,500 |
|
|
Income tax (benefit)
expense |
|
(13,028 |
) |
|
|
3,346 |
|
|
(3,434 |
) |
|
|
(13,116 |
) |
|
Depreciation and
amortization |
|
13,240 |
|
|
|
5,008 |
|
|
96 |
|
|
|
18,344 |
|
|
Total EBITDA |
|
(29,209 |
) |
|
|
20,103 |
|
|
(10,157 |
) |
|
|
(19,263 |
) |
|
Restructuring and other
non-recurring charges (1) |
|
20,697 |
|
|
|
— |
|
|
7,634 |
|
|
|
28,331 |
|
|
Impairment of goodwill and
intangibles (2) |
|
12,953 |
|
|
|
— |
|
|
— |
|
|
|
12,953 |
|
|
Total adjusted EBITDA |
|
$ |
4,441 |
|
|
|
$ |
20,103 |
|
|
$ |
(2,523 |
) |
|
|
$ |
22,021 |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended May 26,
2019 |
|
|
|
|
|
|
|
|
Net (loss) income from
continuing operations |
|
$ |
(1,845 |
) |
|
|
$ |
5,484 |
|
|
$ |
(3,272 |
) |
|
|
$ |
367 |
|
|
FMV change in Windset
investment |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
Interest expense, net of
interest income |
|
1,226 |
|
|
|
— |
|
|
697 |
|
|
|
1,923 |
|
|
Income tax (benefit)
expense |
|
(1,489 |
) |
|
|
1,827 |
|
|
264 |
|
|
|
602 |
|
|
Depreciation and
amortization |
|
3,095 |
|
|
|
1,158 |
|
|
471 |
|
|
|
4,724 |
|
|
Total EBITDA |
|
987 |
|
|
|
8,469 |
|
|
(1,840 |
) |
|
|
7,616 |
|
|
Restructuring and other
non-recurring charges |
|
1,502 |
|
|
|
— |
|
|
726 |
|
|
|
2,228 |
|
|
Impairment of goodwill and
intangibles |
|
2,000 |
|
|
|
— |
|
|
— |
|
|
|
2,000 |
|
|
Total adjusted EBITDA |
|
$ |
4,489 |
|
|
|
$ |
8,469 |
|
|
$ |
(1,114 |
) |
|
|
$ |
11,844 |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended May 31,
2019 |
|
|
|
|
|
|
|
|
Net (loss) income from
continuing operations |
|
$ |
(6,228 |
) |
|
|
$ |
12,070 |
|
|
$ |
(3,719 |
) |
|
|
$ |
2,122 |
|
|
FMV change in Windset
investment |
|
(1,600 |
) |
|
|
— |
|
|
— |
|
|
|
(1,600 |
) |
|
Interest expense, net of
interest income |
|
3,166 |
|
|
|
— |
|
|
1,919 |
|
|
|
5,085 |
|
|
Income tax (benefit)
expense |
|
(1,374 |
) |
|
|
4,023 |
|
|
(1,131 |
) |
|
|
1,518 |
|
|
Depreciation and
amortization |
|
10,204 |
|
|
|
4,140 |
|
|
886 |
|
|
|
15,230 |
|
|
Total EBITDA |
|
4,168 |
|
|
|
20,233 |
|
|
(2,045 |
) |
|
|
22,355 |
|
|
Restructuring and other
non-recurring charges |
|
969 |
|
|
|
— |
|
|
726 |
|
|
|
1,695 |
|
|
Impairment of goodwill and
intangibles |
|
2,000 |
|
|
|
— |
|
|
— |
|
|
|
2,000 |
|
|
Total adjusted EBITDA |
|
$ |
7,137 |
|
|
|
$ |
20,233 |
|
|
$ |
(1,319 |
) |
|
|
$ |
26,050 |
|
|
(1) During fiscal year 2020, the
Company announced a restructuring plan to drive enhanced
profitability, focus the business on its strategic assets and
redesign the organization to be the appropriate size to compete and
thrive. This includes a reduction-in-force, a reduction in leased
office spaces, and the sale of non-strategic assets. In addition,
the Company incurred certain non-recurring charges during fiscal
year 2020, primarily related to potential environmental and
compliance matters at Curation Foods’ Avocado Products’ factory in
Mexico, impairment of fixed assets and other assets, and other
restructuring related consulting costs.(2) These
impairments are related to Curation Foods’ goodwill, trademarks and
tradenames, and customer relationships with respect to its O Olive
Oil and Vinegar and Yucatan brands.
Contact
Information:Investor RelationsJeff
Sonnek(646) 277-1263jeff.sonnek@icrinc.com
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