Landec Corporation Reports First Quarter Fiscal Year 2021 Results
FISCAL FIRST QUARTER 2021 BUSINESS HIGHLIGHTS:
- Revenues of
$135.6 million , a planned decrease of 2.2% year-over-year - Gross profit of
$16.3 million , an increase of 6.6% 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 onAugust 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 onSeptember 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.
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 | |||||||||||||||||
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 | |||||||||||||||||
Amount | % | ||||||||||||||||||
Revenues: | |||||||||||||||||||
$ | 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: | |||||||||||||||||||
$ | 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 | |||||||||||||||||||
$ | (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: | |||||||||||||||||||
$ | (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 | |||||||||||||
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 | |||||||||||||||
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 | ) | % |
BALANCE SHEET UPDATE:
As of
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:
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
About
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
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except par value)
(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 | |||||||
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 | |||||
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per-share data) | Three Months Ended | ||||||||
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 | |||||||||
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 | |||||||||
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 |
||||||||||||||||||||
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 |
||||||||||||||||||||
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) |
FIRST QUARTER ENDED
Q1) What is the update on ongoing litigation associated with
As
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 80% of current capacity. Lifecore’s demand in fiscal 2020 was approximately 6.5 million units and is projected to be approximately 8.5 million units in fiscal 2021. Therefore, Lifecore’s current capacity is built to support manufacturing of slightly more than 10 million units. Based on the current projections for commercialization timing of the products in its development pipeline, management estimates it will utilize the majority of its 22 million unit theoretical capacity by fiscal 2025. Lifecore’s capital investment strategy over the next four years is focused on (1) making the necessary investment to build out the other components of capacity to support the growth in demand expected by fiscal 2025, and (2) investing in additional filling capacity to support its CDMO strategy beyond fiscal 2025 by installing two more filling lines within the current facility infrastructure. Once installed, Lifecore’s theoretical capacity would exceed 30 million units, which we anticipate would support our CDMO business beyond fiscal year 2030. As Lifecore’s CDMO product development pipeline continues to grow and expand, the projected commercialization rate will be monitored to determine the timing of future capacity needs, which will dictate future capacity investment and timing.
Contact Information:
Investor Relations
(646) 277-1263
jeff.sonnek@icrinc.com
Source: Landec Corporation