Landec Corporation Reports First Quarter Fiscal Year 2012 Results
MENLO PARK, Calif., Oct 04, 2011 (BUSINESS WIRE) -- Landec Corporation (Nasdaq:LNDC), today reported results for the first quarter of fiscal year 2012 ended August 28, 2011. Revenues for the first quarter of fiscal year 2012 increased 13% to $73.3 million compared to revenues of $65.0 million for the first quarter a year ago. Net income was $1.8 million or $0.07 per share in the first quarter of fiscal year 2012 compared to $2.3 million or $0.09 per share for the first quarter of last year.
Revenues increased $8.3 million during the first quarter of fiscal year 2012 compared to the first quarter of fiscal year 2011 primarily due to a $3.2 million increase in value-added fresh-cut vegetable revenues at Apio Inc., Landec's food subsidiary, primarily driven by the growth of the overall produce category and new product introductions and a $4.9 million increase in Apio export revenues due to greater availability of fruit to export.
The decrease in net income for the first quarter of fiscal year 2012 compared to the first quarter of fiscal year 2011 was primarily due to (1) a $348,000 decrease in gross profit for Apio Packaging because of lower BreatheWay® packaging sales to Chiquita compared to the initial large orders of BreatheWay for avocados to build inventory for initial product launch that occurred during the first quarter of last year, (2) a $280,000 decrease in gross profit for Lifecore from a product sales mix change resulting from the timing of shipments of aseptically filled products versus fermentation products, which reduced Lifecore's gross margin to 38% for the quarter, compared to Lifecore's expected gross margin of approximately 50% for all of fiscal year 2012, and (3) a $493,000 decrease in operating income due to higher operating expenses as a result of increased brokerage and commission sales expenses from higher sales at Apio and from accruing for bonuses at Apio and Corporate which were not accrued during the first quarter of last year. These decreases in operating income were partially offset by $281,000 in accrued dividend income from our preferred stock investment in Windset Farms, and a $242,000 reduction in income tax expense due to lower pre-tax income.
Gary Steele, Landec Chairman and CEO, commented, "We had a productive first quarter, achieving revenue growth of 13% and cash flow from operations of $4.4 million, which is the same amount of operating cash generated in the first quarter last year. While net income was lower during the first quarter this year compared to the same quarter last year, we exceeded our internal plan for the quarter. We are tracking well towards meeting or exceeding our financial guidance for fiscal year 2012 of 5% or better revenue growth and 30% to 40% net income growth after adding back the one-time impairment charge of $4.8 million to net income for fiscal year 2011."
"On September 14, 2011, we announced that Monsanto Company had informed us that it intends to allow the co-exclusive technology license agreement between Landec and Monsanto to expire in accordance with its terms on December 1, 2011, without Monsanto exercising its purchase option. As a result, Monsanto will pay Landec a $4 million termination fee on or prior to December 1, 2011. Since entering into the license agreement with Monsanto, the Company has been recognizing $200,000 in revenue per quarter as a result of this guaranteed termination fee. Importantly, all rights to the Intellicoat®seed coating and controlled release technology will be returned to Landec, allowing us to broaden our early stage discussions with other leading seed and crop protection companies," added Steele.
"Also during the first quarter, Chiquita decided to renew its licensing and distribution agreement with Apio for an additional five years, thus maintaining Chiquita's exclusive right to use our BreatheWay technology for existing programs with bananas, avocados and mangos, and adding selective shipping container applications to the agreement. We are very pleased to continue working with Chiquita, one of the global market leaders in tropical fruit sourcing, distribution and marketing. Our agreement with Chiquita includes guaranteed minimum purchases of BreatheWay membranes for all fields in which Chiquita has exclusive rights," concluded Steele.
Landec First Quarter 2012 Earnings Conference Call
A conference call will follow this release at 8:00 a.m. Pacific Time on Wednesday, October 5, 2011 during which senior management of Landec will present an overview of results for the first quarter of fiscal year 2012. Interested parties have the opportunity to listen to the conference call live on the Internet at http://www.landec.com on the Investor Relations web page. A replay of the webcast will be available for 30 days. Additionally investors can listen to the call by dialing (866) 238-1665 or (703) 639-1164 at least 5 minutes prior to the start. A replay of the call will be available through Wednesday, October 12, 2011 by calling (888) 266-2081or(703) 925-2533, code #1551099.
Landec is a materials science company, leveraging its capability in polymer science and bio-application development in order to commercialize new products within a variety of life science fields, including food, agricultural, personal care and medical device applications. With its Intelimer® polymers, Landec is able to customize its proprietary polymer materials for each application through the manipulation of controlled release, temperature activation and biocompatibility properties. Landec's subsidiary, Apio, has leveraged Landec's BreatheWay® membrane to become the leader in U.S. fresh-cut specialty vegetables. Landec Ag offers a full solution of seed coatings and enhancements that work with the latest genetic technologies to drive continuous improvements in crop yield. Landec has also commercialized dozens of personal care, industrial and adhesive products through its long-standing partner relationships. Through its subsidiary, Lifecore Biomedical, Landec is now a premium supplier of hyaluronan-based biomaterials to the ophthalmic, orthopedic and veterinary markets worldwide. For more information about the Company visit Landec's website at http://www.landec.com.
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, the severity of the current economic slowdown, weather conditions that can affect the supply and price of produce, the amount and timing of research and development funding and license fees from the Company's collaborative partners, 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 May 29, 2011 (See item 1A: Risk Factors) which may be updated in Part II. Item 1A Risk Factors in the Company's Quarterly Reports on Form 10-Q. As a result of these and other factors, the Company expects to continue to experience significant fluctuations in quarterly operating results and there can be no assurance that the Company will remain consistently profitable. The Company undertakes no obligation to update or revise any forward-looking statements whether as a result of new developments or otherwise.
--Tables and Q&A to Follow--
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LANDEC CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) | ||||||||
|
August 28, 2011 |
May 29, 2011 | |||||||
|
(unaudited) |
||||||||
|
ASSETS |
||||||||
| Current Assets: | ||||||||
| Cash, cash equivalents and marketable securities | $ | 39,354 | $ | 36,259 | ||||
| Accounts and income taxes receivable, net | 21,290 | 22,672 | ||||||
| Inventories, net | 19,628 | 20,161 | ||||||
| Prepaid expenses and other current assets | 7,717 | 6,534 | ||||||
| Total Current Assets | 87,989 | 85,626 | ||||||
| Property and equipment, net | 52,063 | 51,779 | ||||||
| Intangible assets, net | 52,179 | 52,256 | ||||||
| Investments in non-public companies, fair value | 15,714 | 15,662 | ||||||
| Investments in non-public companies, non-fair value | 793 | 793 | ||||||
| Other assets | 153 | 196 | ||||||
| Total Assets | $ | 208,891 | $ | 206,312 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY |
||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 18,531 | $ | 17,047 | ||||
| Accrued compensation | 2,625 | 3,080 | ||||||
| Other accrued liabilities | 13,620 | 3,581 | ||||||
| Deferred revenue | 1,150 | 2,657 | ||||||
| Current portion of long-term debt | 4,330 | 4,330 | ||||||
| Total Current Liabilities | 40,256 | 30,695 | ||||||
| Long-term debt, less current portion | 14,500 | 15,500 | ||||||
| Deferred taxes | 11,470 | 11,338 | ||||||
| Other non-current liabilities | 1,324 | 11,053 | ||||||
| Stockholders' Equity | ||||||||
| Common stock | 27 | 27 | ||||||
| Additional paid-in capital | 120,865 | 119,169 | ||||||
| Accumulated other comprehensive loss, net of taxes | (301 | ) | (267 | ) | ||||
| Retained earnings | 18,938 | 17,126 | ||||||
| Total Stockholders' Equity | 139,529 | 136,055 | ||||||
| Noncontrolling interest | 1,812 | 1,671 | ||||||
| Total Equity | 141,341 | 137,726 | ||||||
| Total Liabilities and Stockholders' Equity | $ | 208,891 | $ | 206,312 | ||||
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LANDEC CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands, except per-share data) (unaudited) | ||||||||
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Three Months Ended | ||||||||
| August 28, | August 29, | |||||||
| 2011 | 2010 | |||||||
| Revenues: | ||||||||
| Product sales | $ | 70,859 | $ | 62,261 | ||||
| Services revenues | 980 | 1,065 | ||||||
| License fees and royalty revenues | 1,462 | 1,627 | ||||||
| Total revenues | 73,301 | 64,953 | ||||||
| Cost of revenues: | ||||||||
| Cost of product sales | 61,269 | 52,286 | ||||||
| Cost of services revenues | 782 | 850 | ||||||
| Total cost of revenues | 62,051 | 53,136 | ||||||
| Gross profit | 11,250 | 11,817 | ||||||
| Operating costs and expenses: | ||||||||
| Research and development | 2,333 | 2,232 | ||||||
| Selling, general and administrative | 6,044 | 5,652 | ||||||
| Total operating costs and expenses | 8,377 | 7,884 | ||||||
| Operating income | 2,873 | 3,933 | ||||||
| Dividend income | 281 | -- | ||||||
| Interest income | 76 | 107 | ||||||
| Interest expense | (176 | ) | (227 | ) | ||||
| Other income (expense) | 9 | (58 | ) | |||||
| Net income before taxes | 3,063 | 3,755 | ||||||
| Income tax expense |
(1,110 |
) |
(1,352 |
) | ||||
| Consolidated net income | 1,953 | 2,403 | ||||||
| Noncontrolling interest | (141 | ) | (99 | ) | ||||
| Net income applicable to Common Stockholders | $ | 1,812 | $ | 2,304 | ||||
| Diluted net income per share | $ |
0.07 |
$ |
0.09 |
||||
| Shares for diluted net income per share | 26,687 | 26,719 | ||||||
LANDEC CORPORATION
FIRST QUARTER ENDED AUGUST 28, 2011
QUESTIONS AND ANSWERS
1) How are the Chiquita programs progressing?
Chiquita has made the decision to renew the licensing and distribution agreement with Apio for another five years, thus maintaining Chiquita's exclusive right to use our BreatheWay technology for bananas, avocados and mangos.The Chiquita-to-Go® banana program continues to grow at double digit rates and is a higher margin program for Chiquita.The Fresh and Ready® avocado program is a strategic focus for Chiquita and Landec's BreatheWay technology for avocados continues to demonstrate good performance in the marketplace.In connection with renewing the agreement, the companies have agreed to add the use of our BreatheWay technology for creating an optimal atmosphere within shipping containers in the field of global transport of tropical fruit.Chiquita has a sizable shipping container technology business that fits well with Landec's long-term interest in using modified atmosphere technology for preserving produce during global transport. The container concept is in development and we will update you as the technology is advanced and tested.
2) What is the status of Windset's new Santa Maria, California operation?
Windset is several months ahead of plan.They have completed construction on the first 64 acres of greenhouses, which also includes the completion of the processing facility and the water treatment plant.Half of the 64 acres has been planted with different varieties of tomatoes and the second half should be fully planted with tomatoes by the middle of October.Initial harvest and sales should begin in November.
3) What are Lifecore's priorities over the next 24 months?
Lifecore's first priority is to drive revenue and earnings growth by adding several new customers and expanding product sales to its existing customer base.The second priority is to investigate new applications for hyaluronan in the form of new medical devices and/or as an adjuvant therapy.
4) Are you considering new investments or acquisition initiatives?
Yes.Our new investment search is focused on opportunities where we can accelerate growth in our core businesses of food and biological materials while increasing our overall margins.We are focused on identifying potential investment targets that have technology and commercial products that are synergistic with our polymer technologies and our existing core businesses.
5) Is the fresh-cut produce category returning to a growth mode and how has the weather been in California during the first part of fiscal year 2012?
We have seen some growth over the last six months and are hopeful this is a trend that will continue during all of fiscal year 2012.The overall fresh-cut produce category experienced a 6% growth in volume during the last six months.This growth is coming mostly in the bagged fresh-cut vegetable category whereas the fresh-cut vegetable tray demand has yet to rebound.For our internal plan for fiscal year 2012, we expected year-over-year growth in the industry category to be about 3%.As for the weather, we have experienced very good weather this summer with no sourcing issues through the first four months of fiscal year 2012.
6) What are the future plans for your seed business now that Monsanto has informed you that they are discontinuing work on your technology?
We have hired an Ag consulting firm to investigate business options for our Intellicoat technology.They are actively arranging meetings with top seed treatment and crop protection companies.Our technology team is continuing to advance our controlled release technology for agricultural applications.
7) Has the Company recently purchased any of its Common Stock under the buyback plan approved by the Board of Directors?
Yes.Between September 22, 2011 and October 3, 2011, the Company purchased 604,768 shares of Landec Common Stock at a total cost of $3.3 million.
8) What are Landec's priorities for the next 12 to 24 months?
Our goals are as follows: (1) grow Lifecore's business by utilizing Lifecore's strengths in ophthalmology, viscoelastic materials and sterile filling, (2) grow Apio's food business and maintain Apio's margins, (3) support Chiquita with its roll-out plans for avocados, (4) support Landec Ag in targeting top seed treatment and crop protection companies, (5) continue to invest in polymer chemistry R&D, (6) find new applications for BreatheWay packaging technology and Intelimer polymer technology that can be commercialized through Landec's subsidiaries or third party partners, (7) find new investment opportunities for growth and margin enhancement, and (8) maintain a strong balance sheet. We see growth opportunities and we are continuing to expand our investment in R&D to take advantage of these opportunities, while continuing the shift in revenue mix to higher margin businesses.
9) How do the results by line of business for the three months ended August 28, 2011 compare with the same period last year?
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The results are as follows (unaudited and in thousands): | ||||||||
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Three months |
Three months | |||||||
| Revenues: | ||||||||
| Apio Value Added(a) | $ | 43,363 | $ | 40,558 | ||||
| Apio Export (b) | 21,355 | 16,483 | ||||||
| Total Apio | 64,718 | 57,041 | ||||||
| Lifecore | 7,121 | 6,385 | ||||||
| Tech. Licensing © | 1,462 | 1,527 | ||||||
| Total Revenues | 73,301 | 64,953 | ||||||
| Gross Profit: | ||||||||
| Apio Value Added | 6,059 | 6,363 | ||||||
| Apio Export | 1,014 | 932 | ||||||
| Total Apio | 7,073 | 7,295 | ||||||
| Lifecore | 2,715 | 2,995 | ||||||
| Tech. Licensing | 1,462 | 1,527 | ||||||
| Total Gross Profit | 11,250 | 11,817 | ||||||
| R&D: | ||||||||
| Apio | 270 | 223 | ||||||
| Lifecore | 1,086 | 1,054 | ||||||
| Tech. Licensing | 977 | 955 | ||||||
| Total R&D | 2,333 | 2,232 | ||||||
| S,G&A: | ||||||||
| Apio | 3,350 | 3,021 | ||||||
| Lifecore | 994 | 989 | ||||||
| Tech. Licensing | 111 | 118 | ||||||
| Corporate | 1,589 | 1,524 | ||||||
| Total S,G&A | 6,044 | 5,652 | ||||||
| Other (d): | ||||||||
| Apio | 201 | (71 | ) | |||||
| Lifecore | (173 | ) | (258 | ) | ||||
| Corporate | (1,089 | ) | (1,300 | ) | ||||
| Total Other | (1,061 | ) | (1,629 | ) | ||||
| Net Income (Loss): | ||||||||
| Apio | 3,654 | 3,980 | ||||||
| Lifecore | 462 | 694 | ||||||
| Tech. Licensing | 374 | 454 | ||||||
| Corporate | (2,678 | ) | (2,824 | ) | ||||
| Net Income | $ | 1,812 | $ | 2,304 | ||||
a) Apio's Value-Added business includes revenues and gross profit from Apio Cooling LP. and Apio Packaging.
b) Apio's Export business includes its commission-based commodity export business.
c) Included in Tech. Licensing is the Intellicoat license fees from Monsanto.
d) Included in Other are net interest income/(expense), dividend income, non-operating income/(expense) and income tax expense.
SOURCE: Landec Corporation
Landec Corporation
Gregory S. Skinner, 650-261-3677
Vice President Finance and CFO