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 second quarter and year-to-date period ended November 29,
2020. Looking forward, Landec’s strategy to create shareholder
value is to deliver against its long-term targets, strengthen its
balance sheet, selectively invest in innovation and growth and
implement strategic priorities to improve operating margins at
Curation Foods and drive top line growth at Lifecore.
CEO COMMENTS:Dr. Albert Bolles,
Landec’s President and CEO stated, “We are delivering against our
strategic plan to create shareholder value by significantly
improving the performance of Curation Foods in the first six months
of fiscal 2021, supporting the growth of Lifecore, and implementing
a comprehensive refinancing of the balance sheet. We drove a $10.6
million increase in our first six months adjusted EBITDA versus the
prior year period, with both segments contributing to this strong
performance. We believe that our hard work to optimize our
operations is resulting in significant improvements to our
consolidated financial results, which is demonstrated by our $33.4
million increase in operating cash flow in the first six months of
fiscal 2021 compared to the prior year period.”
Dr. Bolles continued, “At Lifecore, we remain
focused on supporting its business development pipeline and
advancing commercialization of key projects to drive consistent
long-term double-digit growth in a robust CDMO marketplace. At
Curation Foods, we believe that we have right sized and focused the
business and are beginning to demonstrate significant measurable
improvements. This is perhaps most visible in Curation Foods’ gross
margin profile, which increased approximately 360 basis points to
9.4% in the fiscal second quarter compared to 5.8% in the prior
year second quarter. We believe Curation Foods is well on its way
to achieving our estimated steady state gross margin targets of 11%
to 14% by fiscal year-end 2021 that we laid out previously. The
improved consolidated cash flow generation, which was largely
driven by the turnaround of Curation Foods, allowed us to close on
a comprehensive refinancing of our debt facilities on December 31,
2020, which provides us the flexibility and terms to continue
supporting growth initiatives at both our businesses. Looking
ahead, we remain focused on further advancing our key pillars of
success – simplifying the business, achieving operational
excellence, and focusing on customer and consumer insight-driven
innovation – to execute against our fiscal 2021 plan and to drive
consistent improvement in our financial performance.”
FISCAL SECOND QUARTER 2021 BUSINESS
HIGHLIGHTS:
- Revenues of $130.9 million, a
planned decrease of 8.2% year-over-year
- Gross profit of $20.6 million, an
increase of 33.0% year-over-year
- Net loss of $13.3 million, which
includes $4.4 million of restructuring and other non-recurring
charges such as legal expenses, as well as a Windset non-cash fair
market value adjustment of $9.4 million, both net of tax
- Diluted net loss per share of
$0.45; adjusted diluted net income per share of $0.02, which
excludes $0.15 per share of restructuring and other non-recurring
charges, as well as a $0.32 per share negative Windset fair market
value adjustment, both net of tax
- Adjusted EBITDA of $8.7 million,
compared to $0.9 million in the prior year period
- Lifecore segment adjusted EBITDA of
$7.3 million, compared to $5.6 million in the prior year
period
- Curation Foods segment adjusted
EBITDA of $2.4 million, compared to a loss of $4.4 million in the
prior year period
- Closed on a
comprehensive refinancing of credit facilities, which was
subsequently completed on December 31, 2020
FIRST SIX MONTHS FISCAL 2021 BUSINESS
HIGHLIGHTS:
- Revenues of $266.5 million, a
planned decrease of 5.2% year-over-year
- Gross profit of $37.0 million, an
increase of 19.9% year-over-year
- Net loss of $24.3 million, which
includes $12.5 million of restructuring and other non-recurring
charges such as expenses incurred by consolidating and optimizing
operations associated with Project SWIFT, as well as a Windset
non-cash fair market value adjustment of $9.1 million, both net of
tax
- Diluted net loss per share of
$0.83; adjusted diluted net loss per share of $0.09, which excludes
$0.43 per share of restructuring and other non-recurring charges,
as well as a $0.31 per share negative Windset fair market value
adjustment, both net of tax
- Adjusted EBITDA of $11.8 million,
compared to $1.2 million in the prior year period
- Lifecore segment adjusted EBITDA of
$8.7 million, compared to $5.0 million in the prior year
period
- Curation Foods segment adjusted
EBITDA of $4.7 million, compared to a loss of $2.6 million in the
prior year period
- Cash flow
provided by operations was $18.5 million, an improvement of $33.4
million year-over-year
SECOND QUARTER 2021
RESULTS:Fiscal second quarter 2021 results compared to
fiscal second quarter 2020 are as follows:
(Unaudited and in thousands,
except per-share data) |
|
Three Months Ended |
|
Change |
|
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
Revenues |
|
$ |
130,904 |
|
|
|
$ |
142,593 |
|
|
|
$ |
(11,689 |
) |
|
|
(8 |
) |
% |
Gross profit |
|
20,637 |
|
|
|
15,514 |
|
|
|
5,123 |
|
|
|
33 |
|
% |
Net loss |
|
(13,301 |
) |
|
|
(6,740 |
) |
|
|
(6,561 |
) |
|
|
(97 |
) |
% |
Adjusted net income
(loss) |
|
506 |
|
|
|
(4,835 |
) |
|
|
5,341 |
|
|
|
N/M |
|
|
Diluted net loss per
share |
|
(0.45 |
) |
|
|
(0.23 |
) |
|
|
(0.22 |
) |
|
|
(96 |
) |
% |
Adjusted diluted net income
(loss) per share* |
|
0.02 |
|
|
|
(0.17 |
) |
|
|
0.19 |
|
|
|
N/M |
|
|
EBITDA* |
|
3,120 |
|
|
|
(1,547 |
) |
|
|
4,667 |
|
|
|
N/M |
|
|
Adjusted EBITDA* |
|
$ |
8,710 |
|
|
|
$ |
887 |
|
|
|
$ |
7,823 |
|
|
|
882 |
|
% |
* See “Non-GAAP Financial Information” at the
end of this release for more information and for a reconciliation
of certain financial information.
Revenues decreased $11.7 million, or 8.2%,
year-over-year, which was primarily a result of a 10.1% decrease in
Curation Foods’ segment revenues, as described below, which was
partially offset by a 1.7% increase in the Lifecore segment
revenues.
Gross profit increased $5.1 million, or 33.0%,
year-over-year, and gross profit margin increased approximately 490
basis points to 15.8% compared to 10.9% in the prior year period.
The consolidated gross margin improvement was primarily driven by
the Curation Foods segment’s avocado products business, which
benefited from operational improvements and improved terms of raw
material sourcing compared to the same period in fiscal 2020.
Additionally, Curation Foods realized steady gross profit
generation versus the prior year, primarily from (1) higher gross
margin within its fresh packaged salads and vegetables business,
despite the planned decrease in revenues, (2) the positive
financial impacts of consolidating operations, and (3) the
continuous improvement in operations associated with Project SWIFT.
Across its businesses Curation Foods generated gross profit of
$10.2 million, a $3.3 million or 47.5% improvement year-over-year,
resulting in gross margin of 9.4% compared to 5.8% in the prior
year period. Lifecore also contributed to the increase in
consolidated gross margin as its business returned to gross margin
rates that were more consistent with such rates prior to the
COVID-19 pandemic and that were further bolstered by an
advantageous sales mix, driving a $1.9 million or 21.5% improvement
in gross profit year-over-year, that resulted in gross margin of
45.1% compared to 37.8% in the prior year period.
Net loss increased $6.6 million to $13.3 million
for fiscal second quarter, which includes $4.4 million of
restructuring and non-recurring charges, net of taxes, compared to
net loss of $6.7 million in the prior year comparable period.
Additionally, net loss was negatively impacted by the $9.4 million
change in the fair market value of its Windset investment, net of
taxes, reported in the fiscal 2021 second quarter primarily due to
changes in our financial assumptions relating to the fair market
value of the Windset investment, particularly relating to EBITDA,
nonproductive assets, and debt levels, compared to the $0.2 million
favorable change in the fair market value reported in the prior
year second quarter.
Adjusted EBITDA increased $7.8 million, or 882%,
year-over-year, to $8.7 million for fiscal second quarter which
excludes restructuring and other non-recurring charges. This
compares to adjusted EBITDA of $0.9 million in the prior year
second quarter. On the segment level during fiscal second quarter,
Curation Foods generated $2.4 million in Adjusted EBITDA, which
represents an increase of $6.7 million versus the prior year period
and Lifecore generated $7.3 million in Adjusted EBITDA, which
represents an increase of $1.6 million versus the prior year
period.
SEGMENT RESULTS:
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Change |
|
Six Months Ended |
|
Change |
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
107,685 |
|
|
|
$ |
119,751 |
|
|
|
$ |
(12,066 |
) |
|
|
(10 |
) |
% |
|
$ |
221,523 |
|
|
|
$ |
246,424 |
|
|
|
$ |
(24,901 |
) |
|
|
(10 |
) |
% |
Lifecore |
|
23,219 |
|
|
|
22,842 |
|
|
|
377 |
|
|
|
2 |
|
% |
|
45,024 |
|
|
|
34,883 |
|
|
|
10,141 |
|
|
|
29 |
|
% |
Total revenues |
|
$ |
130,904 |
|
|
|
$ |
142,593 |
|
|
|
$ |
(11,689 |
) |
|
|
(8 |
) |
% |
|
$ |
266,547 |
|
|
|
$ |
281,307 |
|
|
|
$ |
(14,760 |
) |
|
|
(5 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
10,163 |
|
|
|
$ |
6,890 |
|
|
|
$ |
3,273 |
|
|
|
48 |
|
% |
|
$ |
21,507 |
|
|
|
$ |
19,712 |
|
|
|
$ |
1,795 |
|
|
|
9 |
|
% |
Lifecore |
|
10,474 |
|
|
|
8,624 |
|
|
|
1,850 |
|
|
|
21 |
|
% |
|
15,476 |
|
|
|
11,138 |
|
|
|
4,338 |
|
|
|
39 |
|
% |
Total gross profit |
|
$ |
20,637 |
|
|
|
$ |
15,514 |
|
|
|
$ |
5,123 |
|
|
|
33 |
|
% |
|
$ |
36,983 |
|
|
|
$ |
30,850 |
|
|
|
$ |
6,133 |
|
|
|
20 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
(12,383 |
) |
|
|
$ |
(8,348 |
) |
|
|
$ |
(4,035 |
) |
|
|
(48 |
) |
% |
|
$ |
(20,654 |
) |
|
|
$ |
(10,519 |
) |
|
|
$ |
(10,135 |
) |
|
|
(96 |
) |
% |
Lifecore |
|
4,492 |
|
|
|
3,459 |
|
|
|
1,033 |
|
|
|
30 |
|
% |
|
4,604 |
|
|
|
2,064 |
|
|
|
2,540 |
|
|
|
123 |
|
% |
Corporate |
|
(5,410 |
) |
|
|
(1,851 |
) |
|
|
(3,559 |
) |
|
|
(192 |
) |
% |
|
(8,251 |
) |
|
|
(3,069 |
) |
|
|
(5,182 |
) |
|
|
(169 |
) |
% |
Total net loss |
|
$ |
(13,301 |
) |
|
|
$ |
(6,740 |
) |
|
|
$ |
(6,561 |
) |
|
|
(97 |
) |
% |
|
$ |
(24,301 |
) |
|
|
$ |
(11,524 |
) |
|
|
$ |
(12,777 |
) |
|
|
(111 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curation Foods |
|
$ |
(212 |
) |
|
|
$ |
(5,764 |
) |
|
|
$ |
5,552 |
|
|
|
96 |
|
% |
|
$ |
(6,310 |
) |
|
|
$ |
(3,960 |
) |
|
|
$ |
(2,350 |
) |
|
|
(59 |
) |
% |
Lifecore |
|
7,271 |
|
|
|
5,626 |
|
|
|
1,645 |
|
|
|
29 |
|
% |
|
8,727 |
|
|
|
4,951 |
|
|
|
3,776 |
|
|
|
76 |
|
% |
Corporate |
|
(3,938 |
) |
|
|
(1,409 |
) |
|
|
(2,529 |
) |
|
|
(179 |
) |
% |
|
(6,759 |
) |
|
|
(2,224 |
) |
|
|
(4,535 |
) |
|
|
(204 |
) |
% |
Total EBITDA |
|
$ |
3,121 |
|
|
|
$ |
(1,547 |
) |
|
|
$ |
4,668 |
|
|
|
N/M |
|
|
|
$ |
(4,342 |
) |
|
|
$ |
(1,233 |
) |
|
|
$ |
(3,109 |
) |
|
|
(252 |
) |
% |
Lifecore Segment:
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Change |
|
Six Months Ended |
|
Change |
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CDMO |
|
$ |
18,259 |
|
|
|
$ |
17,810 |
|
|
|
$ |
449 |
|
|
|
3 |
|
% |
|
$ |
34,747 |
|
|
|
$ |
29,113 |
|
|
|
$ |
5,634 |
|
|
|
19 |
|
% |
Fermentation |
|
4,960 |
|
|
|
5,032 |
|
|
|
(72 |
) |
|
|
(1 |
) |
% |
|
10,277 |
|
|
|
5,770 |
|
|
|
4,507 |
|
|
|
78 |
|
% |
Total revenue |
|
$ |
23,219 |
|
|
|
$ |
22,842 |
|
|
|
$ |
377 |
|
|
|
2 |
|
% |
|
$ |
45,024 |
|
|
|
$ |
34,883 |
|
|
|
$ |
10,141 |
|
|
|
29 |
|
% |
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 robust
CDMO marketplace by finding additional opportunities to partner
with and provide value added services to 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.
In the second quarter, Lifecore realized total
revenues of $23.2 million, or a 1.7% increase versus the prior year
period driven by a 2.5% increase in its CDMO business, which was
partially offset by a 1.4% decrease in its fermentation
business.
Curation Foods Segment:
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Change |
|
Six Months Ended |
|
Change |
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
|
November 29, 2020 |
|
November 24, 2019 |
|
Amount |
|
% |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fresh packaged salads and vegetables |
|
$ |
92,423 |
|
|
|
$ |
104,912 |
|
|
|
$ |
(12,489 |
) |
|
|
(12 |
) |
% |
|
$ |
188,602 |
|
|
|
$ |
214,743 |
|
|
|
$ |
(26,141 |
) |
|
|
(12 |
) |
% |
Avocado products |
|
14,713 |
|
|
|
14,021 |
|
|
|
692 |
|
|
|
5 |
|
% |
|
31,729 |
|
|
|
30,221 |
|
|
|
1,508 |
|
|
|
5 |
|
% |
Technology |
|
549 |
|
|
|
818 |
|
|
|
(269 |
) |
|
|
(33 |
) |
% |
|
1,192 |
|
|
|
1,460 |
|
|
|
(268 |
) |
|
|
(18 |
) |
% |
Total revenue |
|
$ |
107,685 |
|
|
|
$ |
119,751 |
|
|
|
$ |
(12,066 |
) |
|
|
(10 |
) |
% |
|
$ |
221,523 |
|
|
|
$ |
246,424 |
|
|
|
$ |
(24,901 |
) |
|
|
(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 believes
that it is on a clear path towards improving the overall financial
performance of Landec, enhancing its ability to drive long-term
shareholder value.
Curation Foods realized total revenues of $107.7
million for the fiscal second quarter. The total segment revenues
decreased 10% versus the prior year period, primarily driven by the
planned reduction in Curation Foods’ legacy vegetable and tray
business in connection with Project SWIFT and by the ongoing
softness within the foodservice channel. As a result, the fresh
packaged salads and vegetables business revenue decreased $12.5
million, or 12%, to $92.4 million. The reduction in the legacy
vegetable and tray business is a key component of Curation Foods’
margin enhancement initiative as the business refocuses on higher
margin products and new product innovation. Partially offsetting
the revenue decrease in the fresh packaged salads and vegetables
business segment was growth in the avocado products business, which
increased 5%, to $14.7 million due to ongoing retail distribution
expansion of its innovative Avocado Squeeze product and growth in
the Cabo Fresh brand. Revenue in Technology decreased 33% due to
timing.
CASH FLOW & BALANCE
SHEETCash provided by operations was $18.5 million for the
six-month period ended November 29, 2020 compared to cash used by
operations of $14.9 million in the prior year period, representing
a $33.4 million improvement year-over-year. Cash from investing
activities improved $21.1 million versus prior year, driven by a
capital expenditure decrease of $8.6 million and fixed asset sales
proceeds of $12.9 million. Capital expenditures were $7.4 million
for the six-month period ended November 29, 2020 compared to $16.0
million in the prior year period.
The Company had cash and cash equivalents of
$2.5 million as of November 29, 2020. Total debt at fiscal second
quarter end was $170.2 million, consisting of its line of credit
and long-term debt. The Company’s net leverage ratio was
approximately 5.2:1 its trailing twelve month adjusted EBITDA,
which is an improvement of 3.6 turns compared to fiscal year end
2020 and primarily due to the combination of improved adjusted
EBITDA performance and lower net debt levels.
Subsequent Comprehensive Refinancing of
Credit Facilities: On January 4, 2020, the Company
announced its entry into a $245.0 million comprehensive refinancing
of its existing credit facilities on December 31, 2020. The new
structure includes a five-year $170.0 million uni-tranche term loan
agented by Goldman Sachs Specialty Lending Group, L.P. (“Goldman
Sachs”) and split equally with Guggenheim Credit Services, LLC
(“Guggenheim”) and a $75.0 million asset-based line of credit
provided by BMO Harris Bank N.A. (“BMO”), a lender under the
Company’s prior credit facilities, which matures in five years
subject to a springing maturity date described herein.
The $170.0 million uni-tranche term loan has a
five-year term with an interest rate of LIBOR plus 850 basis
points. Of the $170.0 million of the total borrowings, $150.0
million of the uni-tranche term loan was funded at closing and the
Company has access to an additional $20.0 million in multi-draw
delayed draw term loans from the closing date through the second
anniversary thereof subject to, among other conditions, certain
leverage covenants as defined by the credit agreement. The
uni-tranche term loan provides for interest-only payments for the
first two years. As a result, the Company expects that its annual
interest costs will increase by approximately $6.0 million, but
that the reduction in the Company’s annual principal payments of
approximately $12.0 million under the new credit facilities
compared to the Company’s existing credit facilities will result in
an anticipated net cash flows increase of approximately $6.0
million per year for the first two years.
The $75.0 million asset-based line of credit has
a five-year term, subject to a springing maturity that is ninety
days prior thereto if the uni-tranche term loan remains outstanding
at such time, with an initial interest rate of LIBOR plus 225 basis
points. Total allowable borrowings under the asset-based line of
credit are determined monthly as the lesser of $75.0 million and a
borrowing base as calculated under the credit facility, in each
case, subject to customary reserves. $36.0 million of the
asset-based line of credit was funded at closing.
As a result of refinancing the Company’s
existing credit facilities with these new credit facilities, in the
third quarter of fiscal 2021, Landec expects to record a $1.2
million charge, primarily as a result of the non-cash write off of
unamortized debt issuance costs related to the refinancing under
these new credit facilities. As of January 6, 2021, the Company had
$186.0 million in borrowings outstanding, including $150.0 million
under the term loan and $36.0 million under the revolving credit
facility.
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 anticipates
that fiscal third quarter revenue will be greater than the fiscal
fourth quarter revenue for both operating segments due to
variations in seasonality.
- Gross margin: The Company believes
that Curation Foods will continue to generate consistent sequential
quarterly improvement in its gross profit margin as the business
builds towards its steady-state gross profit margin target of 11%
to 14% by fiscal year-end 2021. The Company believes that Lifecore
has reverted to its pre-COVID gross margin levels and is managing
the business to its annualized target of approximately 40%. Taking
into account its fiscal first quarter COVID-related margin impact,
the Company expects Lifecore to achieve full year fiscal 2021 gross
margin of approximately 38%.
- Adjusted
EBITDA: The Company continues to anticipate minimal quarterly
variation between fiscal third and fiscal fourth quarter for its
consolidated adjusted EBITDA results.
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: Wednesday,
January 6, 2021Time: 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
Wednesday, January 13, 2021 by calling toll-free: (844) 512-2921 or
direct (412) 317-6671, and entering code 13714051.
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)
|
November 29, 2020 |
|
May 31, 2020 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
2,491 |
|
|
|
$ |
360 |
|
|
Accounts receivable, less allowance for credit losses |
66,545 |
|
|
|
76,206 |
|
|
Inventories |
71,202 |
|
|
|
66,311 |
|
|
Prepaid expenses and other current assets |
13,949 |
|
|
|
14,230 |
|
|
Total Current Assets |
154,187 |
|
|
|
157,107 |
|
|
|
|
|
|
Investment in non-public
company, fair value |
45,100 |
|
|
|
56,900 |
|
|
Property and equipment,
net |
170,973 |
|
|
|
192,338 |
|
|
Operating leases |
21,070 |
|
|
|
25,321 |
|
|
Goodwill |
69,386 |
|
|
|
69,386 |
|
|
Trademarks/tradenames,
net |
25,328 |
|
|
|
25,328 |
|
|
Customer relationships,
net |
11,784 |
|
|
|
12,777 |
|
|
Other assets |
1,332 |
|
|
|
2,156 |
|
|
Total Assets |
$ |
499,160 |
|
|
|
$ |
541,313 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Accounts payable |
$ |
60,892 |
|
|
|
$ |
51,647 |
|
|
Accrued compensation |
7,689 |
|
|
|
9,034 |
|
|
Other accrued liabilities |
12,715 |
|
|
|
9,978 |
|
|
Current portion of lease liabilities |
3,785 |
|
|
|
4,423 |
|
|
Deferred revenue |
644 |
|
|
|
352 |
|
|
Line of credit |
77,000 |
|
|
|
77,400 |
|
|
Current portion of long-term debt, net |
11,189 |
|
|
|
11,554 |
|
|
Total Current Liabilities |
173,914 |
|
|
|
164,388 |
|
|
|
|
|
|
Long-term debt, net |
82,000 |
|
|
|
101,363 |
|
|
Long-term lease
liabilities |
22,206 |
|
|
|
26,378 |
|
|
Deferred taxes, net |
6,745 |
|
|
|
13,588 |
|
|
Other non-current
liabilities |
5,357 |
|
|
|
4,552 |
|
|
Total Liabilities |
290,222 |
|
|
|
310,269 |
|
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
Common stock, $0.001 par
value; 50,000 shares authorized; 29,323 and 29,224 shares issued
and outstanding at November 29, 2020 and May 31, 2020,
respectively |
29 |
|
|
|
29 |
|
|
Additional paid-in
capital |
164,068 |
|
|
|
162,578 |
|
|
Retained earnings |
46,944 |
|
|
|
71,245 |
|
|
Accumulated other
comprehensive (loss) income |
(2,103 |
) |
|
|
(2,808 |
) |
|
Total Stockholders’
Equity |
208,938 |
|
|
|
231,044 |
|
|
Total Liabilities and
Stockholders’ Equity |
$ |
499,160 |
|
|
|
$ |
541,313 |
|
|
LANDEC
CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF
COMPREHENSIVE (LOSS) INCOME(Unaudited)(In thousands,
except per share amounts)
|
Three Months Ended |
|
Six Months Ended |
|
November 29, 2020 |
|
November 24, 2019 |
|
November 29, 2020 |
|
November 24, 2019 |
Product sales |
$ |
130,904 |
|
|
|
$ |
142,593 |
|
|
|
$ |
266,547 |
|
|
|
$ |
281,307 |
|
|
Cost of product sales |
110,267 |
|
|
|
127,079 |
|
|
|
229,564 |
|
|
|
250,457 |
|
|
Gross profit |
20,637 |
|
|
|
15,514 |
|
|
|
36,983 |
|
|
|
30,850 |
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Research and development |
2,572 |
|
|
|
2,822 |
|
|
|
5,080 |
|
|
|
5,643 |
|
|
Selling, general and administrative |
16,106 |
|
|
|
18,728 |
|
|
|
34,009 |
|
|
|
35,623 |
|
|
Legal settlement charge |
1,763 |
|
|
|
— |
|
|
|
1,763 |
|
|
|
— |
|
|
Restructuring costs |
1,662 |
|
|
|
— |
|
|
|
10,066 |
|
|
|
— |
|
|
Total operating costs and
expenses |
22,103 |
|
|
|
21,550 |
|
|
|
50,918 |
|
|
|
41,266 |
|
|
Operating loss |
(1,466 |
) |
|
|
(6,036 |
) |
|
|
(13,935 |
) |
|
|
(10,416 |
) |
|
|
|
|
|
|
|
|
|
Dividend income |
281 |
|
|
|
281 |
|
|
|
563 |
|
|
|
562 |
|
|
Interest income |
10 |
|
|
|
25 |
|
|
|
18 |
|
|
|
50 |
|
|
Interest expense, net |
(3,039 |
) |
|
|
(2,169 |
) |
|
|
(6,148 |
) |
|
|
(4,244 |
) |
|
Other (expense) income,
net |
(11,787 |
) |
|
|
(6 |
) |
|
|
(11,808 |
) |
|
|
(6 |
) |
|
Net loss before tax |
(16,001 |
) |
|
|
(7,905 |
) |
|
|
(31,310 |
) |
|
|
(14,054 |
) |
|
Income tax benefit |
2,700 |
|
|
|
1,165 |
|
|
|
7,009 |
|
|
|
2,530 |
|
|
Net loss |
$ |
(13,301 |
) |
|
|
$ |
(6,740 |
) |
|
|
$ |
(24,301 |
) |
|
|
$ |
(11,524 |
) |
|
|
|
|
|
|
|
|
|
Diluted net loss per common
share |
$ |
(0.45 |
) |
|
|
$ |
(0.23 |
) |
|
|
$ |
(0.83 |
) |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
|
|
Shares used in diluted per
share computation |
29,280 |
|
|
|
29,155 |
|
|
|
29,261 |
|
|
|
29,147 |
|
|
LANDEC
CORPORATIONCONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)(In thousands)
|
Six Months Ended |
|
November 29, 2020 |
|
November 24, 2019 |
Cash flows from operating
activities: |
|
|
|
Consolidated net loss |
$ |
(24,301 |
) |
|
|
$ |
(11,524 |
) |
|
Adjustments to reconcile net
loss to net cash provided by (used in) operating activities: |
|
|
|
Depreciation, amortization of
intangibles and amortization of debt costs |
9,826 |
|
|
|
9,030 |
|
|
Stock-based compensation
expense |
1,787 |
|
|
|
1,315 |
|
|
Deferred taxes |
(7,070 |
) |
|
|
(2,624 |
) |
|
Change in investment in
non-public company, fair value |
11,800 |
|
|
|
(200 |
) |
|
Net gain on disposal of
property and equipment held and used |
(34 |
) |
|
|
(15 |
) |
|
Loss on disposal of property
and equipment related to restructuring, net |
6,005 |
|
|
|
406 |
|
|
Other, net |
21 |
|
|
|
206 |
|
|
Change in contingent
consideration liability |
— |
|
|
|
(500 |
) |
|
Pacific Harvest note
receivable reserve |
— |
|
|
|
1,202 |
|
|
Changes in current assets and
current liabilities: |
|
|
|
Accounts receivable, net |
9,661 |
|
|
|
(397 |
) |
|
Inventories |
(4,891 |
) |
|
|
(4,431 |
) |
|
Prepaid expenses and other
current assets |
1,539 |
|
|
|
(554 |
) |
|
Accounts payable |
10,539 |
|
|
|
(6,105 |
) |
|
Accrued compensation |
(1,345 |
) |
|
|
(1,988 |
) |
|
Other accrued liabilities |
4,627 |
|
|
|
1,145 |
|
|
Deferred revenue |
292 |
|
|
|
112 |
|
|
Net cash provided by (used in)
operating activities |
18,456 |
|
|
|
(14,922 |
) |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Proceeds from sales of fixed
assets |
12,885 |
|
|
|
29 |
|
|
Purchases of property and
equipment |
(7,407 |
) |
|
|
(16,029 |
) |
|
Proceeds from collections of
notes receivable |
— |
|
|
|
364 |
|
|
Net cash provided by (used in)
investing activities |
5,478 |
|
|
|
(15,636 |
) |
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Taxes paid by Company for
employee stock plans |
(297 |
) |
|
|
(130 |
) |
|
Payments on long-term
debt |
(20,062 |
) |
|
|
(5,062 |
) |
|
Proceeds from lines of
credit |
24,000 |
|
|
|
62,900 |
|
|
Payments on lines of
credit |
(24,400 |
) |
|
|
(53,400 |
) |
|
Payments for debt issuance
costs |
(1,237 |
) |
|
|
(766 |
) |
|
Proceeds from sale of common
stock |
— |
|
|
|
30 |
|
|
Proceeds from long-term
debt |
— |
|
|
|
27,500 |
|
|
Net cash (used in) provided by
financing activities |
(21,996 |
) |
|
|
31,072 |
|
|
Net decrease in cash, cash
equivalents and restricted cash |
1,938 |
|
|
|
514 |
|
|
Cash and cash equivalents,
beginning of period |
553 |
|
|
|
1,465 |
|
|
Cash and cash equivalents, end
of period |
$ |
2,491 |
|
|
|
$ |
1,979 |
|
|
|
|
|
|
Supplemental disclosure of
non-cash investing and financing activities: |
|
|
|
Purchases of property and
equipment on trade vendor credit |
$ |
1,526 |
|
|
|
$ |
3,174 |
|
|
Non-GAAP Financial Information and
Reconciliations
EBITDA, adjusted EBITDA, adjusted net income
(loss), and adjusted diluted net income (loss) 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 (benefit), and
depreciation and amortization. We define adjusted EBITDA as EBITDA
before certain restructuring and other non-recurring charges and
before impairment of goodwill and intangibles charges. We define
adjusted net income (loss) and adjusted diluted net income (loss)
per share as net income (loss) and diluted net income (loss) per
share, respectively, before certain restructuring and other
non-recurring charges and before the fair market value change of
the Company’s investment in Windset, 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 |
|
Six Months Ended |
|
|
November 29, 2020 |
|
November 24, 2019 |
|
November 29, 2020 |
|
November 24, 2019 |
Net loss |
|
$ |
(13,301 |
) |
|
|
$ |
(6,740 |
) |
|
|
$ |
(24,301 |
) |
|
|
$ |
(11,524 |
) |
|
FMV change in Windset
investment |
|
11,800 |
|
|
|
(200 |
) |
|
|
11,800 |
|
|
|
(200 |
) |
|
Interest expense, net of
interest income |
|
3,029 |
|
|
|
2,144 |
|
|
|
6,130 |
|
|
|
4,194 |
|
|
Income tax benefit |
|
(2,700 |
) |
|
|
(1,165 |
) |
|
|
(7,009 |
) |
|
|
(2,530 |
) |
|
Depreciation and
amortization |
|
4,292 |
|
|
|
4,414 |
|
|
|
9,039 |
|
|
|
8,827 |
|
|
Total EBITDA |
|
3,120 |
|
|
|
(1,547 |
) |
|
|
(4,341 |
) |
|
|
(1,233 |
) |
|
Restructuring and other
non-recurring charges (1) |
|
5,590 |
|
|
|
2,434 |
|
|
|
16,161 |
|
|
|
2,434 |
|
|
Total adjusted EBITDA |
|
$ |
8,710 |
|
|
|
$ |
887 |
|
|
|
$ |
11,820 |
|
|
|
$ |
1,201 |
|
|
(Unaudited and in
thousands) |
|
Three Months Ended |
|
Six Months Ended |
|
|
November 29, 2020 |
|
November 24, 2019 |
|
November 29, 2020 |
|
November 24, 2019 |
Net loss |
|
$ |
(13,301 |
) |
|
|
$ |
(6,740 |
) |
|
|
$ |
(24,301 |
) |
|
|
$ |
(11,524 |
) |
|
FMV change in Windset
investment, net of tax |
|
9,369 |
|
|
|
(171 |
) |
|
|
9,121 |
|
|
|
(164 |
) |
|
Restructuring and other
non-recurring charges, net of tax (1) |
|
4,438 |
|
|
|
2,076 |
|
|
|
12,492 |
|
|
|
1,996 |
|
|
Adjusted net income
(loss) |
|
$ |
506 |
|
|
|
$ |
(4,835 |
) |
|
|
$ |
(2,688 |
) |
|
|
$ |
(9,692 |
) |
|
(Unaudited) |
|
Three Months Ended |
|
Six Months Ended |
|
|
November 29, 2020 |
|
November 24, 2019 |
|
November 29, 2020 |
|
November 24, 2019 |
Diluted net loss per share |
|
$ |
(0.45 |
) |
|
|
$ |
(0.23 |
) |
|
|
$ |
(0.83 |
) |
|
|
$ |
(0.40 |
) |
|
FMV change in Windset
investment, net of tax, per diluted share |
|
$ |
0.32 |
|
|
|
$ |
(0.01 |
) |
|
|
$ |
0.31 |
|
|
|
$ |
— |
|
|
Restructuring and other
non-recurring charges, net of tax, per diluted share (1) |
|
$ |
0.15 |
|
|
|
$ |
0.07 |
|
|
|
$ |
0.43 |
|
|
|
$ |
0.07 |
|
|
Adjusted diluted net income
(loss) per share |
|
$ |
0.02 |
|
|
|
$ |
(0.17 |
) |
|
|
$ |
(0.09 |
) |
|
|
$ |
(0.33 |
) |
|
(Unaudited and in thousands) |
|
Curation Foods |
|
Lifecore |
|
Other |
|
Total |
Three Months Ended November
29, 2020 |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(12,383 |
) |
|
|
$ |
4,492 |
|
|
|
$ |
(5,410 |
) |
|
|
$ |
(13,301 |
) |
|
FMV change in Windset
investment |
|
11,800 |
|
|
|
— |
|
|
|
— |
|
|
|
11,800 |
|
|
Interest expense, net of
interest income |
|
1,376 |
|
|
|
— |
|
|
|
1,653 |
|
|
|
3,029 |
|
|
Income tax (benefit)
expense |
|
(3,911 |
) |
|
|
1,419 |
|
|
|
(207 |
) |
|
|
(2,700 |
) |
|
Depreciation and
amortization |
|
2,906 |
|
|
|
1,360 |
|
|
|
26 |
|
|
|
4,292 |
|
|
Total EBITDA |
|
(212 |
) |
|
|
7,271 |
|
|
|
(3,938 |
) |
|
|
3,120 |
|
|
Restructuring and other
non-recurring charges (1) |
|
2,591 |
|
|
|
— |
|
|
|
2,999 |
|
|
|
5,590 |
|
|
Total adjusted EBITDA |
|
$ |
2,379 |
|
|
|
$ |
7,271 |
|
|
|
$ |
(939 |
) |
|
|
$ |
8,710 |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended November 29,
2020 |
|
|
|
|
|
|
|
|
Net (loss) income from
continuing operations |
|
$ |
(20,654 |
) |
|
|
$ |
4,604 |
|
|
|
$ |
(8,251 |
) |
|
|
$ |
(24,301 |
) |
|
FMV change in Windset
investment |
|
11,800 |
|
|
|
— |
|
|
|
— |
|
|
|
11,800 |
|
|
Interest expense, net of
interest income |
|
2,751 |
|
|
|
— |
|
|
|
3,378 |
|
|
|
6,130 |
|
|
Income tax (benefit)
expense |
|
(6,523 |
) |
|
|
1,454 |
|
|
|
(1,940 |
) |
|
|
(7,009 |
) |
|
Depreciation and
amortization |
|
6,316 |
|
|
|
2,669 |
|
|
|
54 |
|
|
|
9,039 |
|
|
Total EBITDA |
|
(6,310 |
) |
|
|
8,727 |
|
|
|
(6,759 |
) |
|
|
(4,341 |
) |
|
Restructuring and other
non-recurring charges (1) |
|
11,055 |
|
|
|
— |
|
|
|
5,106 |
|
|
|
16,161 |
|
|
Total adjusted EBITDA |
|
$ |
4,745 |
|
|
|
$ |
8,727 |
|
|
|
$ |
(1,653 |
) |
|
|
$ |
11,820 |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended November
24, 2019 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,348 |
) |
|
|
$ |
3,459 |
|
|
|
$ |
(1,851 |
) |
|
|
$ |
(6,740 |
) |
|
FMV change in Windset
investment |
|
(200 |
) |
|
|
— |
|
|
|
— |
|
|
|
(200 |
) |
|
Interest expense, net of
interest income |
|
1,364 |
|
|
|
— |
|
|
|
780 |
|
|
|
2,144 |
|
|
Income tax benefit |
|
(1,723 |
) |
|
|
919 |
|
|
|
(361 |
) |
|
|
(1,165 |
) |
|
Depreciation and
amortization |
|
3,143 |
|
|
|
1,248 |
|
|
|
23 |
|
|
|
4,414 |
|
|
Total EBITDA |
|
(5,764 |
) |
|
|
5,626 |
|
|
|
(1,409 |
) |
|
|
(1,547 |
) |
|
Restructuring and other
non-recurring charges (1) |
|
1,406 |
|
|
|
— |
|
|
|
1,028 |
|
|
|
2,434 |
|
|
Total adjusted EBITDA |
|
$ |
(4,358 |
) |
|
|
$ |
5,626 |
|
|
|
$ |
(381 |
) |
|
|
$ |
887 |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended November 24,
2019 |
|
|
|
|
|
|
|
|
Net (loss) income from
continuing operations |
|
$ |
(10,519 |
) |
|
|
$ |
2,064 |
|
|
|
$ |
(3,069 |
) |
|
|
$ |
(11,524 |
) |
|
FMV change in Windset
investment |
|
(200 |
) |
|
|
— |
|
|
|
— |
|
|
|
(200 |
) |
|
Interest expense, net of
interest income |
|
2,720 |
|
|
|
— |
|
|
|
1,474 |
|
|
|
4,194 |
|
|
Income tax (benefit)
expense |
|
(2,309 |
) |
|
|
454 |
|
|
|
(675 |
) |
|
|
(2,530 |
) |
|
Depreciation and
amortization |
|
6,348 |
|
|
|
2,433 |
|
|
|
46 |
|
|
|
8,827 |
|
|
Total EBITDA |
|
(3,960 |
) |
|
|
4,951 |
|
|
|
(2,224 |
) |
|
|
(1,233 |
) |
|
Restructuring and other
non-recurring charges (1) |
|
1,406 |
|
|
|
— |
|
|
|
1,028 |
|
|
|
2,434 |
|
|
Total adjusted EBITDA |
|
$ |
(2,554 |
) |
|
|
$ |
4,951 |
|
|
|
$ |
(1,196 |
) |
|
|
$ |
1,201 |
|
|
(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 second quarter of
fiscal 2021, the Company incurred (1) $1.7 million ($10.1 million
year to date) 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 for the
year to date period and (2) $3.9 million ($6.1 million year to
date) 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. |
Contact
Information:Investor RelationsJeff
Sonnek(646) 277-1263jeff.sonnek@icrinc.com
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