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
2021 first quarter ended August 30, 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 FIRST QUARTER 2021 BUSINESS
HIGHLIGHTS:
- Revenues of $135.6 million, a
planned decrease of 2.2% year-over-year
- Gross profit of $16.3 million, an
increase of 6.6% year-over-year
- Net loss of $11.0 million, which
includes $7.8 million of restructuring and other non-recurring
charges, net of tax
- Diluted net loss per share of
$0.38; adjusted diluted net loss per share of $0.11, which excludes
$0.27 per share of restructuring and other non-recurring charges,
net of tax
- Adjusted EBITDA of $3.1 million,
which excludes $10.6 million of restructuring and other
non-recurring charges
- Completed the asset sale and exited
the lease of its pre-operational salad dressing manufacturing
facility based in Ontario, California for $4.9 million on August 7,
2020
- Entered into a
definitive agreement to sell the Company’s Hanover manufacturing
facility and related assets for an aggregate purchase price of $8.7
million, which was subsequently completed on September 4, 2020
CEO COMMENTS:“We are pleased
with our strong performance in the fiscal first quarter which
demonstrates the progress in our operational execution that is the
product of our hard work in optimizing our business operations
during fiscal 2020,” said Dr. Albert Bolles, Landec’s President and
CEO. “Notably in the first quarter, year-over-year, while revenues
decreased 2%, gross profit increased nearly 7% and adjusted EBITDA
increased 890%. We remain committed to continuing to improve our
balance sheet and maximizing value across our portfolio of
businesses. We continue to be focused on generating profitable
growth through operational excellence and innovation driven by
customer and consumer insights. This starts with our Lifecore
segment, where we are supporting its business development pipeline
and advancing commercialization of key projects to drive consistent
double-digit growth. Within our Curation Foods business, we are
building upon the series of decisive actions associated with
Project SWIFT that has improved the segment’s financial performance
and we believe provides a foundation for profitable long-term
growth.”
FIRST QUARTER 2021
RESULTS:Fiscal first quarter 2021 results compared to
fiscal first quarter 2020 are as follows:
(Unaudited
and in thousands, except per-share data) |
|
Three Months Ended |
|
Change |
|
|
August 30, 2020 |
|
August 25, 2019 |
|
Amount |
|
% |
Revenues |
|
$ |
135,643 |
|
|
|
$ |
138,714 |
|
|
|
$ |
(3,071 |
) |
|
|
(2 |
) |
% |
Gross
profit |
|
16,347 |
|
|
|
15,336 |
|
|
|
1,011 |
|
|
|
7 |
|
% |
Net
loss |
|
(11,000 |
) |
|
|
(4,784 |
) |
|
|
(6,216 |
) |
|
|
(130 |
) |
% |
Diluted net
loss per share |
|
(0.38 |
) |
|
|
(0.16 |
) |
|
|
(0.22 |
) |
|
|
(135 |
) |
% |
Adjusted
diluted net loss per share* |
|
(0.11 |
) |
|
|
(0.16 |
) |
|
|
0.05 |
|
|
|
32 |
|
% |
EBITDA* |
|
(7,460 |
) |
|
|
314 |
|
|
|
(7,774 |
) |
|
|
N/M |
Adjusted
EBITDA* |
|
$ |
3,110 |
|
|
|
$ |
314 |
|
|
|
$ |
2,796 |
|
|
|
890 |
|
% |
* See “Non-GAAP Financial Information” at the end of this
release for more information and for a reconciliation of certain
financial information.
Revenues decreased $3.1 million, or 2.2%,
year-over-year, which was primarily a result of a 10.1% planned
decrease in Curation Foods’ segment revenues, which was nearly
offset by an 81.1% increase in the Lifecore segment revenues.
Gross profit increased $1.0 million, or 6.6%,
year-over-year, and gross profit margin increased 100 basis points
to 12.1% compared to the prior year period. Consolidated gross
margin was primarily driven by the Lifecore segment, where the
segment’s revenue growth, combined with a favorable sales mix, led
to an increase in gross profit that was nearly double that of the
prior year period, and by the Curation Foods segment’s avocado
business, where the business’s gross profit benefited from lower
cost avocados and operational improvements compared to fiscal 2020.
These gains were partially offset by the Curation Foods segment’s
revenue decrease, temporary production inefficiencies experienced
during the COVID-19 pandemic, and higher raw material costs due to
weather disruptions.
Net loss increased $6.2 million to $11.0 million
for fiscal first quarter, which includes $7.8 million of
restructuring and non-recurring charges, net of taxes, compared to
net loss of $4.8 million in the prior year comparable period.
Adjusted EBITDA increased $2.8 million, or 890%,
year-over-year, to $3.1 million for fiscal first quarter which
excludes restructuring and other non-recurring charges. This
compares to $0.3 million of adjusted EBITDA in the prior year
comparable period.
SEGMENT RESULTS:
(Unaudited
and in thousands) |
|
Three Months Ended |
|
Change |
|
|
August 30, 2020 |
|
August 25, 2019 |
|
Amount |
|
% |
Revenues: |
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
113,839 |
|
|
|
$ |
126,673 |
|
|
|
$ |
(12,834 |
) |
|
|
(10 |
) |
% |
Lifecore |
|
21,804 |
|
|
|
12,041 |
|
|
|
9,763 |
|
|
|
81 |
|
% |
Total
revenues |
|
$ |
135,643 |
|
|
|
$ |
138,714 |
|
|
|
$ |
(3,071 |
) |
|
|
(2 |
) |
% |
|
|
|
|
|
|
|
|
|
Gross
profit: |
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
11,345 |
|
|
|
$ |
12,822 |
|
|
|
$ |
(1,477 |
) |
|
|
(12 |
) |
% |
Lifecore |
|
5,002 |
|
|
|
2,514 |
|
|
|
2,488 |
|
|
|
99 |
|
% |
Total gross
profit |
|
$ |
16,347 |
|
|
|
$ |
15,336 |
|
|
|
$ |
1,011 |
|
|
|
7 |
|
% |
|
|
|
|
|
|
|
|
|
Net (loss)
income |
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
(8,271 |
) |
|
|
$ |
(2,171 |
) |
|
|
$ |
(6,100 |
) |
|
|
(281 |
) |
% |
Lifecore |
|
112 |
|
|
|
(1,395 |
) |
|
|
1,507 |
|
|
|
N/M |
Corporate |
|
(2,841 |
) |
|
|
(1,218 |
) |
|
|
(1,623 |
) |
|
|
(133 |
) |
% |
Total net
loss |
|
$ |
(11,000 |
) |
|
|
$ |
(4,784 |
) |
|
|
$ |
(6,216 |
) |
|
|
(130 |
) |
% |
|
|
|
|
|
|
|
|
|
EBITDA,
excluding Windset FMV change: |
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
(6,097 |
) |
|
|
$ |
1,804 |
|
|
|
$ |
(7,901 |
) |
|
|
N/M |
Lifecore |
|
1,457 |
|
|
|
(675 |
) |
|
|
2,132 |
|
|
|
N/M |
Corporate |
|
(2,820 |
) |
|
|
(815 |
) |
|
|
(2,005 |
) |
|
|
(246 |
) |
% |
Total EBITDA
excluding Windset FMV change |
|
$ |
(7,460 |
) |
|
|
$ |
314 |
|
|
|
$ |
(7,774 |
) |
|
|
N/M |
Lifecore Segment:
(Unaudited
and in thousands) |
|
Three Months Ended |
|
Change |
|
|
August 30, 2020 |
|
August 25, 2019 |
|
Amount |
|
% |
Revenue: |
|
|
|
|
|
|
|
|
CDMO |
|
$ |
16,488 |
|
|
$ |
11,303 |
|
|
$ |
5,185 |
|
|
46 |
% |
Fermentation |
|
5,316 |
|
|
738 |
|
|
4,578 |
|
|
620 |
% |
Total
revenue |
|
$ |
21,804 |
|
|
$ |
12,041 |
|
|
$ |
9,763 |
|
|
81 |
% |
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. Lifecore continues
to drive growth and profitability with a focus on building its
business development pipeline, maximizing capacity and advancing
product commercialization for innovative new therapies that improve
patients’ lives.
Lifecore realized total revenues of $21.8
million, or an 81% increase versus the prior year period as a
result of efforts to balance shipment timing throughout the fiscal
year to improve the quarterly balance of revenues within the fiscal
year. The revenue growth was driven by a 46% increase in its CDMO
business, coupled with a 620% increase in its fermentation business
primarily due to timing as a result of balancing customer
shipments.
Curation Foods Segment:
(Unaudited
and in thousands) |
|
Three Months Ended |
|
Change |
|
|
August 30, 2020 |
|
August 25, 2019 |
|
Amount |
|
% |
Revenue: |
|
|
|
|
|
|
|
|
Fresh packaged salads and vegetables |
|
$ |
96,179 |
|
|
$ |
109,831 |
|
|
$ |
(13,652 |
) |
|
|
(12 |
) |
% |
Avocado products |
|
17,017 |
|
|
16,200 |
|
|
817 |
|
|
|
5 |
|
% |
Technology |
|
643 |
|
|
642 |
|
|
1 |
|
|
|
0.2 |
|
% |
Total
revenue |
|
$ |
113,839 |
|
|
$ |
126,673 |
|
|
$ |
(12,834 |
) |
|
|
(10 |
) |
% |
Curation Foods is the Company’s natural food business. Curation
Foods is focused on providing access to innovative and nutritious
100% clean ingredient plant-based food. Through the execution of
Project SWIFT, its value creation program that aims to strengthen
the Curation Foods business by simplifying the business, improving
operating cost structure, enhancing profitability with a focus on
higher margin products and strengthening the Company’s balance
sheet, the Company is on a clear path towards improving the overall
financial performance of Landec, enhancing the Company’s ability to
drive long-term shareholder value.
Curation Foods realized total revenues of $113.8
million, or a 10% decrease versus the prior year period. The
decrease was primarily driven by the reduction in Curation Foods’
legacy vegetable and tray business in connection with Project SWIFT
and by the continued softness experienced by the Company’s food
service business during the COVID-19 pandemic. This resulted in a
decrease of 12% in the revenues of the Fresh Packaged Salads and
Vegetables business. The reduction in the legacy vegetable and tray
business is a key aspect of the Company’s goal of focusing on
higher margin products and new product innovation in the Curation
Foods segment. Revenue in Avocado Products increased 5%, primarily
due to incremental growth in the retail distribution of its
innovative Avocado Squeeze product. Revenue in Technology increased
0.2%, due to timing.
BALANCE SHEET UPDATE: As of
August 30, 2020, the Company was in compliance with all of its
financial covenants under the Company’s credit agreement. The
Company’s total leverage ratio (as calculated under its credit
agreement) improved from 5.9:1 for the fiscal quarter ended May 31,
2020 to 4.7:1 for the fiscal quarter ended August 30, 2020, which
was primarily driven by cash generated from, and the related pay
down of debt related to, the sales of its Hanover and Ontario
assets and by improved operating performance. As of August 30,
2020, the Company had $173.9 million in borrowings outstanding
under its credit agreement, including $69.0 million under its
revolving credit facility and $104.9 million under its term loan.
As previously disclosed, the Company’s borrowings under its credit
agreement mature on September 23, 2021. Management is actively
exploring refinancing the Company’s indebtedness thereunder.
Brian McLaughlin, Chief Financial Officer
commented, “We remain confident in our ability to drive
significantly improved adjusted EBITDA generation in fiscal 2021
following the operations turnaround efforts during fiscal 2020. We
aim to demonstrate consistency in our operating results this year
and reestablish base-line profitability within our Curation Foods
segment, while continuing to support the growth of Lifecore. In the
near-term, refinancing of our debt is a top corporate
priority.”
FISCAL 2021 OUTLOOK:Excluding
restructuring and other nonrecurring charges, tax implications and
any potential impact from the ongoing COVID-19 pandemic, the
Company is reiterating 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:
- Revenue: the Company continues to
anticipate minimal quarterly variation due to seasonality for both
Lifecore and Curation Foods.
- Adjusted EBITDA: the Company
continues to anticipate 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.
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, October 6,
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
Tuesday, October 13, 2020 by calling toll-free: (844) 512-2921 or
direct (412) 317-6671, and entering code 13710380.
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 or (loss) per share. The Company has included
reconciliations 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 or
(loss) 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, 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, except par value)
|
August 30, 2020 |
|
May 31, 2020 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current
Assets: |
|
|
|
Cash and cash equivalents |
$ |
589 |
|
|
|
$ |
360 |
|
|
Accounts receivable, less allowance for credit losses |
65,027 |
|
|
|
76,206 |
|
|
Inventories |
59,998 |
|
|
|
66,311 |
|
|
Prepaid expenses and other current assets |
21,753 |
|
|
|
14,230 |
|
|
Total
Current Assets |
147,367 |
|
|
|
157,107 |
|
|
|
|
|
|
Investment
in non-public company, fair value |
56,900 |
|
|
|
56,900 |
|
|
Property and
equipment, net |
171,413 |
|
|
|
192,338 |
|
|
Operating
leases |
22,109 |
|
|
|
25,321 |
|
|
Goodwill |
69,386 |
|
|
|
69,386 |
|
|
Trademarks/tradenames, net |
25,328 |
|
|
|
25,328 |
|
|
Customer
relationships, net |
12,281 |
|
|
|
12,777 |
|
|
Other
assets |
1,396 |
|
|
|
2,156 |
|
|
Total
Assets |
$ |
506,180 |
|
|
|
$ |
541,313 |
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
Liabilities: |
|
|
|
Accounts payable |
$ |
50,722 |
|
|
|
$ |
51,647 |
|
|
Accrued compensation |
8,895 |
|
|
|
9,034 |
|
|
Other accrued liabilities |
9,607 |
|
|
|
9,978 |
|
|
Current portion of lease liabilities |
4,001 |
|
|
|
4,423 |
|
|
Deferred revenue |
477 |
|
|
|
352 |
|
|
Line of credit |
69,000 |
|
|
|
77,400 |
|
|
Current portion of long-term debt, net |
11,027 |
|
|
|
11,554 |
|
|
Total
Current Liabilities |
153,729 |
|
|
|
164,388 |
|
|
|
|
|
|
Long-term
debt, net |
93,919 |
|
|
|
101,363 |
|
|
Long-term
lease liabilities |
23,018 |
|
|
|
26,378 |
|
|
Deferred
taxes, net |
9,359 |
|
|
|
13,588 |
|
|
Other
non-current liabilities |
4,997 |
|
|
|
4,552 |
|
|
Total
Liabilities |
285,022 |
|
|
|
310,269 |
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
Common
stock, $0.001 par value; 50,000 shares authorized; 29,242 and
29,224 shares issued and outstanding at August 30, 2020 and May 31,
2020, respectively |
29 |
|
|
|
29 |
|
|
Additional
paid-in capital |
163,388 |
|
|
|
162,578 |
|
|
Retained
earnings |
60,245 |
|
|
|
71,245 |
|
|
Accumulated
other comprehensive (loss) income |
(2,504 |
) |
|
|
(2,808 |
) |
|
Total
Stockholders’ Equity |
221,158 |
|
|
|
231,044 |
|
|
Total
Liabilities and Stockholders’ Equity |
$ |
506,180 |
|
|
|
$ |
541,313 |
|
|
|
|
|
|
|
|
|
|
LANDEC
CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS
(Unaudited
and in thousands, except per-share data) |
Three Months Ended |
|
August 30, 2020 |
|
August 25, 2019 |
Product sales |
$ |
135,643 |
|
|
|
$ |
138,714 |
|
|
Cost of
product sales |
119,296 |
|
|
|
123,378 |
|
|
Gross
profit |
16,347 |
|
|
|
15,336 |
|
|
|
|
|
|
Operating
costs and expenses: |
|
|
|
Research and development |
2,508 |
|
|
|
2,821 |
|
|
Selling, general and administrative |
17,903 |
|
|
|
16,895 |
|
|
Restructuring costs |
8,404 |
|
|
|
— |
|
|
Total operating costs and expenses |
28,815 |
|
|
|
19,716 |
|
|
Operating
loss |
(12,468 |
) |
|
|
(4,380 |
) |
|
|
|
|
|
Dividend
income |
281 |
|
|
|
281 |
|
|
Interest
income |
8 |
|
|
|
25 |
|
|
Interest
expense, net |
(3,109 |
) |
|
|
(2,075 |
) |
|
Other income
(expense), net |
(21 |
) |
|
|
— |
|
|
Net loss
before tax |
(15,309 |
) |
|
|
(6,149 |
) |
|
Income tax
expense |
|
4,309 |
|
|
|
|
1,365 |
|
|
Net loss
applicable to common stockholders |
(11,000 |
) |
|
|
(4,784 |
) |
|
|
|
|
|
Diluted net
loss per share |
$ |
(0.38 |
) |
|
|
$ |
(0.16 |
) |
|
|
|
|
|
Shares used
in diluted per share computations |
|
29,242 |
|
|
|
|
29,139 |
|
|
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 (loss) per share as diluted net
income (loss) 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 |
|
|
August 30, 2020 |
|
August 25, 2019 |
Net loss |
|
$ |
(11,000 |
) |
|
|
$ |
(4,784 |
) |
|
FMV change
in Windset investment |
|
— |
|
|
|
— |
|
|
Interest
expense, net of interest income |
|
3,101 |
|
|
|
2,050 |
|
|
Income tax
benefit |
|
(4,309 |
) |
|
|
(1,365 |
) |
|
Depreciation
and amortization |
|
4,748 |
|
|
|
4,413 |
|
|
Total
EBITDA |
|
(7,460 |
) |
|
|
314 |
|
|
Restructuring and other non-recurring charges (1) |
|
10,570 |
|
|
|
— |
|
|
Total
adjusted EBITDA |
|
$ |
3,110 |
|
|
|
$ |
314 |
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
Three Months Ended |
|
|
August 30, 2020 |
|
August 25, 2019 |
Diluted net loss per share |
|
$ |
(0.38 |
) |
|
|
$ |
(0.16 |
) |
|
Restructuring and other non-recurring charges, net of tax, per
diluted share (1) |
|
$ |
0.27 |
|
|
|
$ |
— |
|
|
Adjusted
diluted net loss per share |
|
$ |
(0.11 |
) |
|
|
$ |
(0.16 |
) |
|
(Unaudited
and in thousands) |
|
CurationFoods |
|
Lifecore |
|
Other |
|
Total |
Three Months
Ended August 30, 2020 |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(8,271 |
) |
|
|
$ |
112 |
|
|
|
$ |
(2,841 |
) |
|
|
$ |
(11,000 |
) |
|
FMV change
in Windset investment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Interest
expense, net of interest income |
|
1,376 |
|
|
|
— |
|
|
|
1,725 |
|
|
|
3,101 |
|
|
Income tax
(benefit) expense |
|
(2,612 |
) |
|
|
35 |
|
|
|
(1,732 |
) |
|
|
(4,309 |
) |
|
Depreciation
and amortization |
|
3,410 |
|
|
|
1,310 |
|
|
|
28 |
|
|
|
4,748 |
|
|
Total
EBITDA |
|
(6,097 |
) |
|
|
1,457 |
|
|
|
(2,820 |
) |
|
|
(7,460 |
) |
|
Restructuring and other non-recurring charges (1) |
|
8,464 |
|
|
|
— |
|
|
|
2,106 |
|
|
|
10,570 |
|
|
Total
adjusted EBITDA |
|
$ |
2,367 |
|
|
|
$ |
1,457 |
|
|
|
$ |
(714 |
) |
|
|
$ |
3,110 |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended August 25, 2019 |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(2,171 |
) |
|
|
$ |
(1,395 |
) |
|
|
$ |
(1,218 |
) |
|
|
$ |
(4,784 |
) |
|
FMV change
in Windset investment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Interest
expense, net of interest income |
|
1,356 |
|
|
|
— |
|
|
|
694 |
|
|
|
2,050 |
|
|
Income tax
benefit |
|
(586 |
) |
|
|
(465 |
) |
|
|
(314 |
) |
|
|
(1,365 |
) |
|
Depreciation
and amortization |
|
3,205 |
|
|
|
1,185 |
|
|
|
23 |
|
|
|
4,413 |
|
|
Total
EBITDA |
|
1,804 |
|
|
|
(675 |
) |
|
|
(815 |
) |
|
|
314 |
|
|
Restructuring and other non-recurring charges (1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total
adjusted EBITDA |
|
$ |
1,804 |
|
|
|
$ |
(675 |
) |
|
|
$ |
(815 |
) |
|
|
$ |
314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 included a
reduction-in-force, a reduction in leased office spaces, and the
sale of non-strategic assets. Related to these continued
activities, in the first quarter of fiscal 2021, the Company
incurred 1) $8.4 million of restructuring charges, primarily
related to the impairment and sale of the Company’s Hanover,
Pennsylvania manufacturing facility and related severance charges,
and other restructuring related consulting costs; partially offset
by the gain on sale of the Company’s Ontario, California facility
and 2) $2.2 million of certain non-recurring charges, primarily
related to potential environmental and compliance matters at
Curation Foods’ Avocado Product’s factory in Silao, Mexico, and
other restructuring related legal and consulting costs. |
|
|
LANDEC CORPORATIONFIRST
QUARTER ENDED AUGUST 30, 2020
Q1) What is
the update on ongoing litigation associated with Yucatan
Foods?As Landec previously disclosed in its second quarter
2020 Form 10-Q, the Company discovered and reported to U.S.
regulators a compliance issue at its Yucatan Foods production
facility in Guanajuato, Mexico. The conduct at issue began prior to
Landec’s acquisition of Yucatan Foods in December 2018 and relates
to potential environmental and foreign corrupt practices act
compliance matters associated with regulatory permitting at the
facility. The Company has taken appropriate remedial measures,
including personnel action and implementing new policies and
procedures. The Company is cooperating in the U.S. government
investigation that followed the Company’s disclosure. Because this
is an ongoing legal matter, the Company is not able to provide more
details at this time. However, the issue does not relate to the
health, safety or quality of the food the Company sells. On
September 2, 2020, one of the former owners of Yucatan filed a
lawsuit against the Company in Los Angeles County Superior Court
for breach of employment agreement, breach of contract, and related
claims, seeking damages and return of stock held in escrow for the
indemnification claims described above. The Company intends to
contest this lawsuit vigorously and to pursue its indemnification
claims against all former owners of Yucatan. Landec incurred
expenses of approximately $0.9 million in the first quarter fiscal
2021 which are primarily related to legal expenses associated with
these matters, and it expects to incur additional expenses in
future quarters until these matters are resolved. At this time, the
Company cannot predict the amount of these expenses or the
recovery, if any. The Company considers these expenses to be
non-recurring expenses and not part of its ordinary course of
business.
Q2) Would
you please explain Lifecore’s current capacity, projected demand,
and its capital allocation strategy supporting the
business?Lifecore invests in the capital necessary to
build the infrastructure and associated equipment that it can
utilize to support the manufacturing of products across its entire
commercial product portfolio. If investment is needed for equipment
to support the manufacturing of a specific product, that investment
is funded by the partner for that specific product.
Lifecore’s current facility, infrastructure, and
filling equipment have been set-up to provide a theoretical filling
capacity of 22 million units. This is broken into approximately
18.5 million units of syringe filling capacity and 3.5 million
units of vial filling capacity. Since the lead time to build
filling capacity takes 3 to 4 years from the time equipment is
ordered until final regulatory approval is received, Lifecore
monitors projected filling capacity needs based on the
commercialization rate of the products within its development
pipeline.
Although the business has a theoretical filling
capacity to fill approximately 22 million units, Lifecore does not
build the other components of capacity until the demand supports
the need. The other components of capacity, all of which have
shorter lead times than building primary filling capacity
include:
- Manufacturing
and support personnel
- Product testing
capability
- Product specific
formulation and filling change parts
- Packaging
equipment
- Utilities
Lifecore manages its overall capacity so current
demand does not exceed 80% of current capacity. Lifecore’s demand
in fiscal 2020 was approximately 6.5 million units and is projected
to be approximately 8.5 million units in fiscal 2021. Therefore,
Lifecore’s current capacity is built to support manufacturing of
slightly more than 10 million units. Based on the current
projections for commercialization timing of the products in its
development pipeline, management estimates it will utilize the
majority of its 22 million unit theoretical capacity by fiscal
2025. Lifecore’s capital investment strategy over the next four
years is focused on (1) making the necessary investment to build
out the other components of capacity to support the growth in
demand expected by fiscal 2025, and (2) investing in additional
filling capacity to support its CDMO strategy beyond fiscal 2025 by
installing two more filling lines within the current facility
infrastructure. Once installed, Lifecore’s theoretical capacity
would exceed 30 million units, which we anticipate would support
our CDMO business beyond fiscal year 2030. As Lifecore’s CDMO
product development pipeline continues to grow and expand, the
projected commercialization rate will be monitored to determine the
timing of future capacity needs, which will dictate future capacity
investment and timing.
Contact
Information:Investor RelationsJeff
Sonnek(646) 277-1263jeff.sonnek@icrinc.com
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