SANTA MARIA, Calif., March 31, 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 2020 third quarter and first nine months ended February 23, 2020. Landec plans to create shareholder value by delivering against its long-term financial targets, investing in growth, strengthening its balance sheet, implementing strategic priorities to improve operating margins at Curation Foods and driving topline growth at Lifecore.FISCAL THIRD QUARTER 2020 BUSINESS HIGHLIGHTS:Revenues of $152.9 million, a decrease of 2% year over yearGross profit of $20.0 million, a decrease of 7% year over yearNet loss of $11.5 million, which includes $12.7 million of restructuring and other non-recurring charges, net of taxDiluted net loss per share of $0.39; adjusted diluted net income per share of $0.04, which excludes $0.43 per share of restructuring and other non-recurring charges, net of taxAdjusted EBITDA was $6.8 million, which excludes $16.8 million of restructuring and other non-recurring chargesReiterated full-year fiscal 2020 guidanceCEO COMMENTS:
“We implemented significant operational enhancements during the third quarter of fiscal 2020, which resulted in a $5.9 million sequential increase in our third quarter fiscal 2020 Adjusted EBITDA, compared to our second quarter fiscal 2020 Adjusted EBITDA,” said Dr. Albert Bolles, Landec’s President and CEO. “Adjusted third quarter earnings per share of $0.04 were in line with our recent guidance of $0.02 to $0.06 per share and represent a $0.20 sequential increase compared to our second quarter fiscal 2020. We believe that the turnaround of Curation Foods will continue to provide a foundation for further improvements in our operating cost structure and enhance profitability. We also believe that Lifecore is well positioned for continued growth following investments to increase its production capacity of sterile injectable products to meet increasing customer demand. These developments demonstrate the progress we have made toward achieving our strategic priorities to improve operating margins at Curation Foods, and to invest in growth to drive topline momentum at Lifecore. We are committed to maximizing the value of our portfolio through sound and deliberate execution in each of our segments, while protecting the planet for future generations with sustainable business practices.”FISCAL THIRD QUARTER 2020 RESULTS:
Fiscal third quarter 2020 results compared to fiscal third quarter 2019 are as follows:Revenues decreased $2.6 million, or 2%, year over year, resulting from a 3% decrease in revenues in the Curation Foods business, which was primarily driven by a planned $7.2 million decrease in revenues in the packaged vegetables bags and trays business as the Company sought to emphasize its focus on higher margin products. This decrease was partially offset by a $1.7 million, or 7% increase in revenues in the Lifecore business, which was primarily driven by a 50% increase in business development revenue.
Gross profit decreased $1.5 million, or 7%, year over year. Gross profit margin decreased 80 basis points to 13.1% compared to the prior year period. Gross margin was driven by an 8% decrease in gross profit in the Curation Foods business resulting from the sell-through of high-cost avocado products produced during the fiscal fourth quarter of 2019 and fiscal first quarter of 2020 when the cost of avocados were over two times higher than current costs, weather related events impacting raw materials supply, and a 6% decrease in Lifecore gross profit due to the previously announced timing of production and shipments.Net loss was $11.5 million for fiscal third quarter, which includes $12.7 million of restructuring and non-recurring charges, net of taxes, compared to net income of $1.5 million in the prior year comparable period, a decrease of $13.1 million.Adjusted EBITDA was $6.8 million for fiscal third quarter which excludes restructuring and other non-recurring charges. This compares to $7.7 million of Adjusted EBITDA in the prior year comparable period.SEGMENT RESULTS:Update on Lifecore:
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.Update on Curation Foods:
Curation Foods is the Company’s natural food business. Project SWIFT aims to strengthen the Curation Foods business by focusing on simplifying the business. Curation Foods will continue seeking to deliver the highest level of product quality and safety, while executing with excellence on its customer, grower and partner commitments. The Company believes that these actions chart a clear path towards improving the overall financial performance of Landec, creating long-term value. To date, the Company anticipates that the outcome of the announced actions will provide annualized cost savings of $5.0 million. The following decisive actions have been announced thus far:Project SWIFT provides a framework rooted in solid, achievable goals that align the Company’s resources. As previously announced, once Project SWIFT is fully implemented, Curation Foods aims to deliver the following steady-state organic growth and profitability targets on a run-rate basis by the end of fiscal 2021:
Curation Foods Organic Revenue Growth: 5%Curation Foods Gross Margin: 11% to 14%Curation Foods EBITDA Margin: 4% to 6%
BALANCE SHEET & AMENDED CREDIT AGREEMENT:
As previously announced, on March 19, 2020, the Company entered into the Seventh Amendment to the Credit Agreement which, among other things, increased the leverage ratio covenant to 5.75 to 1.00 from 5.0 to 1.0 for the fiscal third quarter ended February 23, 2020. The Company believes it has sufficient flexibility within the amended agreement to maintain compliance during fiscal fourth quarter given its continued expectation for a significant lift in Adjusted EBITDA. Beginning in fiscal first quarter 2021, all other covenants remain substantively unchanged compared to the existing terms of the Credit Agreement.COVID-19 UPDATE:
Landec prioritizes the health and safety of its employees and products. Despite the current COVID-19 pandemic, both Curation Foods and Lifecore businesses currently remain operational. Each business has implemented action plans that guide the Company and its employees through this evolving situation. The Company’s Curation Foods business is experiencing a lift in demand in our retail and club channels as consumers make preparations for the COVID-19 pandemic, and its Lifecore business has remained largely unaffected to date.Dr. Bolles concluded, “Despite the current, extremely volatile environment, both of our businesses, Curation Foods and Lifecore Biomedical, have been able to remain operational, as both are considered to be a part of the country’s essential infrastructure for the ongoing health and safety of the public. As a result, our employees continue to work in these challenging times, and we are enormously grateful for their individual efforts. As we look ahead, Lifecore continues on its growth trajectory and we are excited to build on the momentum at Curation Foods with a strong acceleration in fourth quarter performance. We remain committed to delivering a strong finish to fiscal 2020 and look forward to continuing this improvement into next fiscal year.”GUIDANCE:
Excluding restructuring and other nonrecurring charges, tax implications and any potential impact of the COVID-19 pandemic, the Company is reiterating its full year fiscal 2020 guidance, which is detailed below with growth figures that are compared to fiscal 2019:Revenue from continuing operations:Consolidated Revenues: range of $580 million to $590 million (growth of 4% to 6%)Lifecore: range $84 million to $85 million (growth of 10% to 12%)Curation Foods: range of $496 million to $504 million (growth of 3% to 5%)Adjusted EBITDA:Consolidated: range $30 million to $34 million (growth of 15% to 30%)Lifecore: range of $21 million to $23 million (growth of 5% to 15%)Curation Foods: range of $12 million to $14 million (growth of 70% to 90%)Adjusted diluted net income per share:Consolidated: range of $0.16 to $0.20Conference 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, March 31, 2020
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Direct Webcast link: http://ir.Landec.com/events.cfmTo 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, April 7, 2020 by calling toll-free: (844) 512-2921 or direct (412) 317-6671, and entering code 13699982.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 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 Information
This press release contains non-GAAP financial information relating to EBITDA, Adjusted EBITDA, and adjusted net income per share. The Company has included reconciliation of these non-GAAP financial measures to their respective most directly comparable financial measures calculated in accordance with GAAP. See the section entitled “Non-GAAP Financial Information and Reconciliations” in this release for definitions of EBITDA, Adjusted EBITDA, and adjusted net income per share, and those reconciliations.The Company has disclosed these non-GAAP financial measures to supplement its consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures exclude/include certain items that are included in the Company’s results reported in accordance with GAAP. Management believes these non-GAAP financial measures provide useful additional information to investors about trends in the Company’s operations and are useful for period-over-period comparisons. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures. In addition, these non-GAAP financial measures may not be the same as similar measures provided by other companies due to the potential differences in methods of calculation and items being excluded/included. These non-GAAP financial measures should be read in conjunction with the Company’s consolidated financial statements presented in accordance with GAAP.Important Cautions Regarding Forward-Looking 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 (“SEC”), including the risk factors contained in our most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Forward-looking statements represent management’s current expectations and are inherently uncertain. Except as required by law, we do not undertake any obligation to update forward-looking statements made by us to reflect subsequent events or circumstances. Contact Information:
Investor Relations:
Jeff Sonnek
(646) 277-1263
[email protected]LANDEC CORPORATIONCONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
LANDEC CORPORATIONCONSOLIDATED CONDENSED STATEMENTS OF INCOME AND LOSSNon-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. We define adjusted diluted net income per share as diluted net income per share before certain restructuring and other non-recurring charges, net of tax. 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.
LANDEC CORPORATIONTHIRD QUARTER ENDED FEBRUARY 23, 2020
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