Landec Corporation Reports Fiscal First Quarter 2019 Results
Revenues and Net Income Meet Expectations for First Quarter
Company Reiterates Full Year Fiscal 2019 Guidance
“We continue to make progress toward our long-term strategic plan of driving growth and profitability through innovation within our CDMO business at
“Our Lifecore strategy has been to accelerate growth and profitability by expanding the Lifecore business beyond its historical capabilities as a premium supplier of hyaluronic acid (HA). We have achieved this with the completion of Lifecore’s transition to a fully integrated CDMO, providing differentiated fermentation, aseptic filling and final packaging services for difficult-to-handle pharmaceutical products. We will continue to expand Lifecore’s CDMO development pipeline to drive future commercial product sales,” commented Hemmeter.
“Lifecore’s first quarter results were consistent with plan, generating revenues of
“The installation of Lifecore’s new
“Within our food business, we are transforming our traditional Apio packaged fresh vegetable business into an innovative
“As we continue to launch innovative plant-based products, we are also focused on aggressively reducing costs in our
“O, a premier producer of great-tasting, artisan-crushed olive oils and vinegars sourced from
“Now Planting is launching a new line of pure-plant soups during the second quarter of fiscal year 2019. The offering will include five flavors: Red Pepper Bisque, Sope Verde, Cajun Tomato Rice, Lemongrass Curry and Hominy Bean. Each soup comes in a 16oz patented package design that contains plant-based toppings and is targeted to the plant-forward consumer. The Now Planting pure-plant soups will be sold in the produce department of select retailers,” stated Hemmeter.
First Quarter 2019 Results Compared to First Quarter of 2018 from Continuing Operations
- Revenues increased 8% to
- Gross profit decreased 13% to
- Net income decreased from
$2.4 million to $190,000
Consolidated revenues in the first quarter of fiscal 2019 increased
Consolidated net income from continuing operations in the first quarter of fiscal 2019 decreased
Management Comments and Guidance for Fiscal 2019
“We are reiterating our fiscal 2019 guidance. We continue to expect consolidated annual revenues to increase 5% to 7% in fiscal 2019 compared to fiscal 2018. However, the mix of revenue growth has changed. We now expect Lifecore to grow 16% to 17%, versus 14% to 16%. In our
“For the second quarter of fiscal 2019, we expect revenues to be in the range of
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A replay of the call will be available through
Important Cautions Regarding Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially, including such factors among others, as the timing and expenses associated with operations, the ability to achieve acceptance of the Company's new products in the market place, weather conditions that can affect the supply and price of produce, the timing of regulatory approvals, the mix between domestic and international sales, and the risk factors listed in the Company’s Form 10-K for the fiscal year ended
CONSOLIDATED CONDENSED BALANCE SHEETS
|August 26, 2018||May 27, 2018|
|Cash and cash equivalents||$||1,359||$||2,899|
|Accounts receivable, net||48,660||53,877|
|Prepaid expenses and other current assets||8,312||7,958|
|Other current assets, discontinued operations||—||510|
|Total Current Assets||88,317||97,063|
|Investment in non-public company||67,500||66,500|
|Property and equipment, net||165,875||159,624|
|Intangible assets, net||76,114||76,352|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Other accrued liabilities||8,845||8,706|
|Line of credit||39,000||27,000|
|Current portion of long-term debt||4,940||4,940|
|Other current liabilities, discontinued operations||—||458|
|Total Current Liabilities||86,827||88,375|
|Long-term debt, less current portion||36,125||37,360|
|Capital lease obligation, less current portion||3,615||3,641|
|Other non-current liabilities||5,559||5,280|
|Additional paid-in capital||142,805||142,087|
|Accumulated other comprehensive income||1,059||1,148|
|Total Stockholders’ Equity||253,381||252,562|
|Total Liabilities and Stockholders’ Equity||$||402,901||$||404,703|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, except per share amounts)
|Three Months Ended|
|August 26, 2018||August 27, 2017|
|Cost of product sales||108,331||96,979|
|Operating costs and expenses:|
|Research and development||2,833||2,719|
|Selling, general and administrative||13,951||13,358|
|Total operating costs and expenses||16,784||16,077|
|Operating (loss) income||(447||)||2,725|
|Net income from continuing operations before taxes||254||3,665|
|Income tax expense||(64||)||(1,310||)|
|Net income from continuing operations||$||190||$||2,355|
|Loss from discontinued operations||$||—||$||(203||)|
|Income tax benefit||—||60|
|Loss from discontinued operations, net of tax||—||(143||)|
|Consolidated net income||—||2,212|
|Net income applicable to common stockholders||$||190||$||2,146|
|Diluted net income per share:|
|Income from continuing operations||$||0.01||$||0.08|
|Loss from discontinued operations||—||—|
|Total diluted net income per share||$||0.01||$||0.08|
|Shares used in diluted per share computation||28,020||27,858|
FIRST QUARTER ENDED
QUESTIONS & ANSWERS
1) Can you remind us of the headwinds and tailwinds impacting fiscal 2019?
a. Labor, freight and packaging costs continue to increase.
b. Abnormal weather conditions continue to add volatility to our food business.
c. The vegetable tray category is declining.
d. The shifting landscape in U.S. retail to more private label products from branded products.
a. The trend for pharmaceutical and biotech companies to outsource product development and aseptic filling to CDMOs and the need for a CDMO which specializes in difficult-to-handle materials are both constantly growing.
c. The rapidly growing consumer segments for plant-based, 100% clean and natural products are looking for solutions.
2) Why was the gross margin for your
The gross margin in our
3) Why is your guidance for salad growth only 2% to 4% for fiscal 2019 after growing 17% during the first quarter of fiscal 2019?
During fiscal 2018 our salad revenues grew
4) What were Apio’s market share numbers at end of the first quarter of fiscal 2019?
For the 52-weeks ended
5) Can you give us an update on your Windset investment?
During the last twelve months, Windset has completed a 10-acre facility that uses a new type of greenhouse structure for growing strawberries on a small commercial scale and a new 30-acre glass greenhouse which has been fully planted with peppers.
Over the last couple of years, Windset has purchased approximately 200 acres of land, with an option to buy another 100 acres, adjacent to its currently owned greenhouses in
Windset’s gross profits continue to deliver double-digit growth with increasing EBITDA margins.
6) What are Landec’s top priorities for the next 12 to 24 months?
Our continuing priorities are:
a) Investing in capital expenditures, R&D, people and systems to drive growth in our three growth pillars: (1) Lifecore, (2) Eat Smart salads, and (3) new natural food products.
b) Increasing demand for our CDMO services and branded natural food products to fill existing capacity, drive plant efficiencies and increase our return on invested capital.
c) Implementing strategies to reduce our exposure to weather-related events in our food business by shifting our product mix to higher margin, less volatile natural food products and implementing aggressive cost cutting programs across our food business to offset cost increases.
7) How do the results by line of business for the three months ended
The results are as follows (unaudited and in thousands):
|Three Months Ended|
|August 26, 2018||August 27, 2017|
|Natural Foods (a)||$||112,051||$||103,617|
|Total Gross Profit||16,337||18,802|
|Research and Development:|
|Selling, General and Administrative:|
|Operating Income before Allocation of Corporate Expenses:|
|Total Operating Income before Allocation of Corporate Expenses||(447||)||2,725|
|Corporate Expenses Allocation:|
|Operating Income after Allocations of|
|Total Operating Income after Allocations of Corporate Expenses||(447||)||2,725|
|Non-Operating Income (Expense) (c):|
|Total Non-Operating Income||637||(370||)|
|Net Income from Continuing Operations:|
|Net Income from Continuing Operations||$||190||$||2,355|
(b) Included in Other are Corporate expenses.
(c) Non-Operating income (expense) includes: Windset dividends and FMV change, net interest expense and income taxes.
|At the Company:||Investor Relations:|
|Gregory S. Skinner||John Mills, Partner|
|Vice President Finance and CFO||(646) 277-1254|
Source: Landec Corporation