Landec Corporation Reports First Quarter Fiscal Year 2021 Results
Landec Corporation (Nasdaq: LNDC) reported fiscal Q1 2021 results with revenues of $135.6 million, a 2.2% year-over-year decline. Despite this, gross profit increased by 6.6% to $16.3 million. The company reported a net loss of $11.0 million, influenced by $7.8 million in restructuring charges. Adjusted EBITDA surged 890% to $3.1 million. The company reiterated its full-year guidance, expecting revenues between $530 million and $550 million, reflecting a 10% to 7% decline compared to fiscal 2020.
- Gross profit increased by 6.6% year-over-year to $16.3 million.
- Adjusted EBITDA surged by 890% to $3.1 million.
- Lifecore segment revenue increased by 81% year-over-year.
- Revenues decreased by 2.2% year-over-year, primarily due to a 10.1% drop in the Curation Foods segment.
- Net loss increased by $6.2 million to $11.0 million, affected by restructuring costs.
- Curation Foods segment revenues decreased by 10% compared to the prior year.
Reiterates Fiscal 2021 Guidance
SANTA MARIA, Calif., Oct. 06, 2020 (GLOBE NEWSWIRE) -- 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 of2.2% year-over-year - Gross profit of
$16.3 million , an increase of6.6% 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
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
Gross profit increased
Net loss increased
Adjusted EBITDA increased
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
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
Curation Foods realized total revenues of
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
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 Call
The 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, 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, October 13, 2020 by calling toll-free: (844) 512-2921 or direct (412) 317-6671, and entering code 13710380.
About Landec Corporation
Landec 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
Non-GAAP Financial Information
This 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 Statements
This 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 CORPORATION
CONSOLIDATED 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, | 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 CORPORATION
CONSOLIDATED 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) | Curation Foods | 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) |
LANDEC CORPORATION
FIRST 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
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
Contact Information:
Investor Relations
Jeff Sonnek
(646) 277-1263
jeff.sonnek@icrinc.com
FAQ
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