Landec Corporation Reports Second Quarter and First Half Fiscal 2019 Results
“We continue to make progress toward our long-term strategic plan of driving growth and profitability through innovation within our contract development and manufacturing organization (CDMO) business at Lifecore and within our LNF business, which includes Eat Smart® packaged fresh vegetables and salad kits and our emerging natural food brands - O Olive & Vinegar®, Now Planting®, and our newly acquired
“Through the first seven months of fiscal 2019 we have made significant strides in both of our operating businesses. At LNF, we launched the Now Planting brand, with a line of pure-plant soups targeted for the plant-based consumer. We also completed the acquisition of
“For the second quarter of fiscal 2019 our consolidated revenues were
“Lifecore’s second 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 vegetables business into a branded natural foods company focused on plant-based foods with 100% clean ingredients. The recent acquisition of
“As we continue to launch innovative plant-based products, we are also focused on aggressively reducing costs in our LNF business. The entire food industry is facing considerable headwinds due to weather volatility and increasing costs in labor, freight and packaging. Recent tariffs have also significantly increased the costs of select raw materials in our food business. We have engaged the
“In our LNF business, fiscal 2019 second quarter revenues were
Second Quarter 2019 Results Compared to Second Quarter of 2018 from Continuing Operations
- Revenues increased 2% to
- Gross profit increased 11% to
- Gross profit margin increased 110 basis points to 13.3%
- Net income decreased to a
$0.02loss due to acquisition-related expenses
Revenues in the second quarter of fiscal 2019 increased 2% to
The Company recorded a net loss of
Fiscal Six Months 2019 Results
Revenues in the first six months of fiscal 2019 increased 5% to
The Company recorded a net loss of
Management Comments and Updated Guidance for Fiscal 2019
“We now expect consolidated revenues to grow 6% to 8% in fiscal 2019 compared to fiscal 2018 as a result of the projected revenues from
“For the third quarter of fiscal 2019, we expect revenues to be in the range of
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Important Cautions Regarding Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially, including such factors among others, as the timing and expenses associated with operations, the ability to achieve acceptance of the Company's new products in the market place, weather conditions that can affect the supply and price of produce, the timing of regulatory approvals, the ability to successfully integrate
CONSOLIDATED CONDENSED BALANCE SHEETS
|November 25, 2018||May 27, 2018|
|Cash and cash equivalents||$||1,514||$||2,899|
|Accounts receivable, net||53,420||53,877|
|Prepaid expenses and other current assets||5,904||7,958|
|Other current assets, discontinued operations||—||510|
|Total Current Assets||92,466||97,063|
|Investment in non-public company||68,100||66,500|
|Property and equipment, net||170,517||159,624|
|Intangible assets, net||75,876||76,352|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Other accrued liabilities||9,922||8,706|
|Line of credit||42,000||27,000|
|Current portion of long-term debt||4,940||4,940|
|Other current liabilities, discontinued operations||—||458|
|Total Current Liabilities||97,122||88,375|
|Long-term debt, less current portion||34,889||37,360|
|Capital lease obligation, less current portion||3,589||3,641|
|Other non-current liabilities||4,774||5,280|
|Additional paid-in capital||143,506||142,087|
|Accumulated other comprehensive income||1,135||1,148|
|Total Stockholders’ Equity||253,573||252,562|
|Total Liabilities and Stockholders’ Equity||$||411,654||$||404,703|
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per-share data)
|Three Months Ended||Six Months Ended|
|Cost of product sales||108,319||107,540||216,650||204,519|
|Operating costs and expenses:|
|Research and development||2,533||3,372||5,366||6,091|
|Selling, general and administrative||13,859||12,244||27,810||25,602|
|Total operating costs and expenses||17,199||15,616||33,983||31,693|
|Operating (loss) income||(606||)||(695||)||(1,053||)||2,030|
|Net (loss) income from continuing operations before taxes||
|Income taxes expense||(277||)||(165||)||(342||)||(1,475||)|
|Net (loss) income from continuing operations||(584||)||414||(395||)||2,769|
|Income (loss) from discontinued operations||—||141||—||(62||)|
|Income tax (expense) benefit||—||(42||)||—||18|
|Income (loss) from discontinued operations||—||99||—||(44||)|
|Net (loss) income||(584||)||513||(395||)||2,725|
|Non-controlling interest expense||—||(26||)||—||(92||)|
|Net (loss) income available to common stockholders||$||(584||)||$||487||$||(395||)||$||2,633|
|Diluted net (loss) income per share from continuing operations||
|Diluted net (loss) income per share from discontinued operations||
|Diluted net (loss) income per share||$||(0.02||)||$||0.02||$||(0.01||)||$||0.10|
|Shares used in diluted per share computations||27,764||27,875||27,751||27,866|
SECOND 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 growing.
c. The rapidly growing consumer segments for plant-based, 100% clean and natural products are looking for solutions.
2) What is the status of the cost-out initiative in your LNF business?
The cost-out initiative is going very well. Hackett, along with our dedicated internal teams, have identified numerous cost-out projects, with the initial projects beginning during the second quarter of fiscal 2019 and new projects being added throughout fiscal 2019. We expect to start realizing a net positive impact from these cost-out initiatives during the fourth quarter of fiscal 2019.
3) What were Apio’s market share numbers at end of the second quarter of fiscal 2019?
For the 52-weeks ended
4) Can you give us an update on your Windset investment?
Over the last couple of years, 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 and has purchased approximately 200 acres of land, with an option to buy another 100 acres, adjacent to its currently owned greenhouses in
We are currently estimating that the change in the fair market value of our Windset investment during fiscal 2019 will be approximately
5) How is the launch of Now Planting soups going?
We initially began shipping Now Planting soups in
6) What is the Company’s current total debt and leverage ratio after borrowing
The Company currently has approximately
7) What are Landec’s top priorities for the next 12 to 24 months?
Our continuing priorities are:
a) Working with the
b) Integrating the
c) Investing in our three growth platforms: 1) Lifecore, 2) Eat Smart salads, and 3) LNF emerging natural food brands.
8) How do the results by line of business for the three and six months ended
The results are as follows (unaudited and in thousands):
|Three Months Ended||Six Months Ended|
|Natural Foods (a)||$||109,466||$||108,348||$||221,517||$||211,965|
|Total Gross Profit||16,593||14,921||32,930||33,723|
|Research and Development:|
|Selling, General and Administrative:|
|Operating (Loss) Income before Allocation of Corporate Expenses|
|Total Operating (Loss) Income before Allocation of Corporate Expenses||(606||)||(695||)||(1,053||)||2,030|
|Corporate Expenses Allocation:|
|Operating (Loss) Income after Allocations of Corporate Expenses:|
|Total Operating (Loss) Income after Allocations of Corporate Expenses||(606||)||(695||)||(1,053||)||2,030|
|Non-Operating Income (Expense) (c):|
|Total Non-Operating Income||22||1,109||658||739|
|Net (Loss) Income from Continuing Operations:|
|Net (Loss) Income from Continuing Operations||$||(584||)||$||414||$||(395||)||$||2,769|
(b) Included in Other are Corporate expenses and acquisition-related 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