• Landec Corporation Reports Second Quarter and First Half Fiscal Year 2021 Results

    المصدر: Nasdaq GlobeNewswire / 06 يناير 2021 15:05:01   America/Chicago

    SANTA MARIA, Calif., Jan. 06, 2021 (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 2021 second quarter and year-to-date period ended November 29, 2020. Looking forward, Landec’s strategy to create shareholder value is to deliver against its long-term targets, strengthen its balance sheet, selectively invest in innovation and growth and implement strategic priorities to improve operating margins at Curation Foods and drive top line growth at Lifecore.

    CEO COMMENTS:
    Dr. Albert Bolles, Landec’s President and CEO stated, “We are delivering against our strategic plan to create shareholder value by significantly improving the performance of Curation Foods in the first six months of fiscal 2021, supporting the growth of Lifecore, and implementing a comprehensive refinancing of the balance sheet. We drove a $10.6 million increase in our first six months adjusted EBITDA versus the prior year period, with both segments contributing to this strong performance. We believe that our hard work to optimize our operations is resulting in significant improvements to our consolidated financial results, which is demonstrated by our $33.4 million increase in operating cash flow in the first six months of fiscal 2021 compared to the prior year period.”

    Dr. Bolles continued, “At Lifecore, we remain focused on supporting its business development pipeline and advancing commercialization of key projects to drive consistent long-term double-digit growth in a robust CDMO marketplace. At Curation Foods, we believe that we have right sized and focused the business and are beginning to demonstrate significant measurable improvements. This is perhaps most visible in Curation Foods’ gross margin profile, which increased approximately 360 basis points to 9.4% in the fiscal second quarter compared to 5.8% in the prior year second quarter. We believe Curation Foods is well on its way to achieving our estimated steady state gross margin targets of 11% to 14% by fiscal year-end 2021 that we laid out previously. The improved consolidated cash flow generation, which was largely driven by the turnaround of Curation Foods, allowed us to close on a comprehensive refinancing of our debt facilities on December 31, 2020, which provides us the flexibility and terms to continue supporting growth initiatives at both our businesses. Looking ahead, we remain focused on further advancing our key pillars of success – simplifying the business, achieving operational excellence, and focusing on customer and consumer insight-driven innovation – to execute against our fiscal 2021 plan and to drive consistent improvement in our financial performance.”

    FISCAL SECOND QUARTER 2021 BUSINESS HIGHLIGHTS:

    • Revenues of $130.9 million, a planned decrease of 8.2% year-over-year
    • Gross profit of $20.6 million, an increase of 33.0% year-over-year
    • Net loss of $13.3 million, which includes $4.4 million of restructuring and other non-recurring charges such as legal expenses, as well as a Windset non-cash fair market value adjustment of $9.4 million, both net of tax
    • Diluted net loss per share of $0.45; adjusted diluted net income per share of $0.02, which excludes $0.15 per share of restructuring and other non-recurring charges, as well as a $0.32 per share negative Windset fair market value adjustment, both net of tax
    • Adjusted EBITDA of $8.7 million, compared to $0.9 million in the prior year period
    • Lifecore segment adjusted EBITDA of $7.3 million, compared to $5.6 million in the prior year period
    • Curation Foods segment adjusted EBITDA of $2.4 million, compared to a loss of $4.4 million in the prior year period
    • Closed on a comprehensive refinancing of credit facilities, which was subsequently completed on December 31, 2020

    FIRST SIX MONTHS FISCAL 2021 BUSINESS HIGHLIGHTS:

    • Revenues of $266.5 million, a planned decrease of 5.2% year-over-year
    • Gross profit of $37.0 million, an increase of 19.9% year-over-year
    • Net loss of $24.3 million, which includes $12.5 million of restructuring and other non-recurring charges such as expenses incurred by consolidating and optimizing operations associated with Project SWIFT, as well as a Windset non-cash fair market value adjustment of $9.1 million, both net of tax
    • Diluted net loss per share of $0.83; adjusted diluted net loss per share of $0.09, which excludes $0.43 per share of restructuring and other non-recurring charges, as well as a $0.31 per share negative Windset fair market value adjustment, both net of tax
    • Adjusted EBITDA of $11.8 million, compared to $1.2 million in the prior year period
    • Lifecore segment adjusted EBITDA of $8.7 million, compared to $5.0 million in the prior year period
    • Curation Foods segment adjusted EBITDA of $4.7 million, compared to a loss of $2.6 million in the prior year period
    • Cash flow provided by operations was $18.5 million, an improvement of $33.4 million year-over-year

    SECOND QUARTER 2021 RESULTS:
    Fiscal second quarter 2021 results compared to fiscal second quarter 2020 are as follows:

    (Unaudited and in thousands, except per-share data) Three Months Ended Change
      November 29, 2020 November 24, 2019 Amount %
    Revenues $130,904   $142,593   $(11,689)  (8)%
    Gross profit 20,637   15,514   5,123   33 %
    Net loss (13,301)  (6,740)  (6,561)  (97)%
    Adjusted net income (loss) 506   (4,835)  5,341   N/M  
    Diluted net loss per share (0.45)  (0.23)  (0.22)  (96)%
    Adjusted diluted net income (loss) per share* 0.02   (0.17)  0.19   N/M  
    EBITDA* 3,120   (1,547)  4,667   N/M  
    Adjusted EBITDA* $8,710   $887   $7,823   882 %

    * See “Non-GAAP Financial Information” at the end of this release for more information and for a reconciliation of certain financial information.

    Revenues decreased $11.7 million, or 8.2%, year-over-year, which was primarily a result of a 10.1% decrease in Curation Foods’ segment revenues, as described below, which was partially offset by a 1.7% increase in the Lifecore segment revenues.

    Gross profit increased $5.1 million, or 33.0%, year-over-year, and gross profit margin increased approximately 490 basis points to 15.8% compared to 10.9% in the prior year period. The consolidated gross margin improvement was primarily driven by the Curation Foods segment’s avocado products business, which benefited from operational improvements and improved terms of raw material sourcing compared to the same period in fiscal 2020. Additionally, Curation Foods realized steady gross profit generation versus the prior year, primarily from (1) higher gross margin within its fresh packaged salads and vegetables business, despite the planned decrease in revenues, (2) the positive financial impacts of consolidating operations, and (3) the continuous improvement in operations associated with Project SWIFT. Across its businesses Curation Foods generated gross profit of $10.2 million, a $3.3 million or 47.5% improvement year-over-year, resulting in gross margin of 9.4% compared to 5.8% in the prior year period. Lifecore also contributed to the increase in consolidated gross margin as its business returned to gross margin rates that were more consistent with such rates prior to the COVID-19 pandemic and that were further bolstered by an advantageous sales mix, driving a $1.9 million or 21.5% improvement in gross profit year-over-year, that resulted in gross margin of 45.1% compared to 37.8% in the prior year period.

    Net loss increased $6.6 million to $13.3 million for fiscal second quarter, which includes $4.4 million of restructuring and non-recurring charges, net of taxes, compared to net loss of $6.7 million in the prior year comparable period. Additionally, net loss was negatively impacted by the $9.4 million change in the fair market value of its Windset investment, net of taxes, reported in the fiscal 2021 second quarter primarily due to changes in our financial assumptions relating to the fair market value of the Windset investment, particularly relating to EBITDA, nonproductive assets, and debt levels, compared to the $0.2 million favorable change in the fair market value reported in the prior year second quarter.

    Adjusted EBITDA increased $7.8 million, or 882%, year-over-year, to $8.7 million for fiscal second quarter which excludes restructuring and other non-recurring charges. This compares to adjusted EBITDA of $0.9 million in the prior year second quarter. On the segment level during fiscal second quarter, Curation Foods generated $2.4 million in Adjusted EBITDA, which represents an increase of $6.7 million versus the prior year period and Lifecore generated $7.3 million in Adjusted EBITDA, which represents an increase of $1.6 million versus the prior year period.

    SEGMENT RESULTS:

    (Unaudited and in thousands)

    		 Three Months Ended Change Six Months Ended Change
     November 29,
    2020    		 November 24,
    2019    		 Amount % November 29,
    2020    		 November 24,
    2019    		 Amount %
    Revenues:                
    Curation Foods $107,685   $119,751   $(12,066)  (10)% $221,523   $246,424   $(24,901)  (10)%
    Lifecore 23,219   22,842   377   2 % 45,024   34,883   10,141   29 %
    Total revenues $130,904   $142,593   $(11,689)  (8)% $266,547   $281,307   $(14,760)  (5)%
                     
    Gross profit:                
    Curation Foods $10,163   $6,890   $3,273   48 % $21,507   $19,712   $1,795   9 %
    Lifecore 10,474   8,624   1,850   21 % 15,476   11,138   4,338   39 %
    Total gross profit $20,637   $15,514   $5,123   33 % $36,983   $30,850   $6,133   20 %
                     
    Net (loss) income:                
    Curation Foods $(12,383)  $(8,348)  $(4,035)  (48)% $(20,654)  $(10,519)  $(10,135)  (96)%
    Lifecore 4,492   3,459   1,033   30 % 4,604   2,064   2,540   123 %
    Corporate (5,410)  (1,851)  (3,559)  (192)% (8,251)  (3,069)  (5,182)  (169)%
    Total net loss $(13,301)  $(6,740)  $(6,561)  (97)% $(24,301)  $(11,524)  $(12,777)  (111)%
                     
    EBITDA:                
    Curation Foods $(212)  $(5,764)  $5,552   96 % $(6,310)  $(3,960)  $(2,350)  (59)%
    Lifecore 7,271   5,626   1,645   29 % 8,727   4,951   3,776   76 %
    Corporate (3,938)  (1,409)  (2,529)  (179)% (6,759)  (2,224)  (4,535)  (204)%
    Total EBITDA $3,121   $(1,547)  $4,668   N/M   $(4,342)  $(1,233)  $(3,109)  (252)%

    Lifecore Segment:

    (Unaudited and in thousands)
    		 Three Months Ended Change Six Months Ended Change
     November 29,
    2020    		 November 24,
    2019    		 Amount % November 29,
    2020    		 November 24,
    2019    		 Amount %
    Revenue:                
    CDMO $18,259   $17,810   $449   3 % $34,747   $29,113   $5,634   19 %
    Fermentation 4,960   5,032   (72)  (1)% 10,277   5,770   4,507   78 %
    Total revenue $23,219   $22,842   $377   2 % $45,024   $34,883   $10,141   29 %

    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 robust CDMO marketplace by finding additional opportunities to partner with and provide value added services to 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.

    In the second quarter, Lifecore realized total revenues of $23.2 million, or a 1.7% increase versus the prior year period driven by a 2.5% increase in its CDMO business, which was partially offset by a 1.4% decrease in its fermentation business.

    Curation Foods Segment:

    (Unaudited and in thousands)

    		 Three Months Ended Change Six Months Ended Change
     November 29,
    2020    		 November 24,
    2019    		 Amount % November 29,
    2020    		 November 24,
    2019    		 Amount %
    Revenue:                
    Fresh packaged salads and vegetables $92,423   $104,912   $(12,489)  (12)% $188,602   $214,743   $(26,141)  (12)%
    Avocado products 14,713   14,021   692   5 % 31,729   30,221   1,508   5 %
    Technology 549   818   (269)  (33)% 1,192   1,460   (268)  (18)%
    Total revenue $107,685   $119,751   $(12,066)  (10)% $221,523   $246,424   $(24,901)  (10)%

    Curation Foods is the Company’s natural food business. Curation Foods is focused on providing access to innovative and nutritious 100% clean ingredient plant-based food. Through the execution of Project SWIFT – its value creation program that aims to strengthen the Curation Foods business by simplifying the business, improving operating cost structure, enhancing profitability with a focus on higher margin products and strengthening the Company’s balance sheet – the Company believes that it is on a clear path towards improving the overall financial performance of Landec, enhancing its ability to drive long-term shareholder value.

    Curation Foods realized total revenues of $107.7 million for the fiscal second quarter. The total segment revenues decreased 10% versus the prior year period, primarily driven by the planned reduction in Curation Foods’ legacy vegetable and tray business in connection with Project SWIFT and by the ongoing softness within the foodservice channel. As a result, the fresh packaged salads and vegetables business revenue decreased $12.5 million, or 12%, to $92.4 million. The reduction in the legacy vegetable and tray business is a key component of Curation Foods’ margin enhancement initiative as the business refocuses on higher margin products and new product innovation. Partially offsetting the revenue decrease in the fresh packaged salads and vegetables business segment was growth in the avocado products business, which increased 5%, to $14.7 million due to ongoing retail distribution expansion of its innovative Avocado Squeeze product and growth in the Cabo Fresh brand. Revenue in Technology decreased 33% due to timing.

    CASH FLOW & BALANCE SHEET
    Cash provided by operations was $18.5 million for the six-month period ended November 29, 2020 compared to cash used by operations of $14.9 million in the prior year period, representing a $33.4 million improvement year-over-year. Cash from investing activities improved $21.1 million versus prior year, driven by a capital expenditure decrease of $8.6 million and fixed asset sales proceeds of $12.9 million. Capital expenditures were $7.4 million for the six-month period ended November 29, 2020 compared to $16.0 million in the prior year period.

    The Company had cash and cash equivalents of $2.5 million as of November 29, 2020. Total debt at fiscal second quarter end was $170.2 million, consisting of its line of credit and long-term debt. The Company’s net leverage ratio was approximately 5.2:1 its trailing twelve month adjusted EBITDA, which is an improvement of 3.6 turns compared to fiscal year end 2020 and primarily due to the combination of improved adjusted EBITDA performance and lower net debt levels.

    Subsequent Comprehensive Refinancing of Credit Facilities:
    On January 4, 2020, the Company announced its entry into a $245.0 million comprehensive refinancing of its existing credit facilities on December 31, 2020. The new structure includes a five-year $170.0 million uni-tranche term loan agented by Goldman Sachs Specialty Lending Group, L.P. (“Goldman Sachs”) and split equally with Guggenheim Credit Services, LLC (“Guggenheim”) and a $75.0 million asset-based line of credit provided by BMO Harris Bank N.A. (“BMO”), a lender under the Company’s prior credit facilities, which matures in five years subject to a springing maturity date described herein.

    The $170.0 million uni-tranche term loan has a five-year term with an interest rate of LIBOR plus 850 basis points. Of the $170.0 million of the total borrowings, $150.0 million of the uni-tranche term loan was funded at closing and the Company has access to an additional $20.0 million in multi-draw delayed draw term loans from the closing date through the second anniversary thereof subject to, among other conditions, certain leverage covenants as defined by the credit agreement. The uni-tranche term loan provides for interest-only payments for the first two years. As a result, the Company expects that its annual interest costs will increase by approximately $6.0 million, but that the reduction in the Company’s annual principal payments of approximately $12.0 million under the new credit facilities compared to the Company’s existing credit facilities will result in an anticipated net cash flows increase of approximately $6.0 million per year for the first two years.

    The $75.0 million asset-based line of credit has a five-year term, subject to a springing maturity that is ninety days prior thereto if the uni-tranche term loan remains outstanding at such time, with an initial interest rate of LIBOR plus 225 basis points. Total allowable borrowings under the asset-based line of credit are determined monthly as the lesser of $75.0 million and a borrowing base as calculated under the credit facility, in each case, subject to customary reserves. $36.0 million of the asset-based line of credit was funded at closing.

    As a result of refinancing the Company’s existing credit facilities with these new credit facilities, in the third quarter of fiscal 2021, Landec expects to record a $1.2 million charge, primarily as a result of the non-cash write off of unamortized debt issuance costs related to the refinancing under these new credit facilities. As of January 6, 2021, the Company had $186.0 million in borrowings outstanding, including $150.0 million under the term loan and $36.0 million under the revolving credit facility.

    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 anticipates that fiscal third quarter revenue will be greater than the fiscal fourth quarter revenue for both operating segments due to variations in seasonality.
    • Gross margin: The Company believes that Curation Foods will continue to generate consistent sequential quarterly improvement in its gross profit margin as the business builds towards its steady-state gross profit margin target of 11% to 14% by fiscal year-end 2021. The Company believes that Lifecore has reverted to its pre-COVID gross margin levels and is managing the business to its annualized target of approximately 40%. Taking into account its fiscal first quarter COVID-related margin impact, the Company expects Lifecore to achieve full year fiscal 2021 gross margin of approximately 38%.
    • Adjusted EBITDA: The Company continues to anticipate minimal quarterly variation between fiscal third and fiscal fourth quarter for its consolidated adjusted EBITDA results.

    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: Wednesday, January 6, 2021
    Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific 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 Wednesday, January 13, 2021 by calling toll-free: (844) 512-2921 or direct (412) 317-6671, and entering code 13714051.

    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 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 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, 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.

    LANDEC CORPORATION
    CONSOLIDATED CONDENSED BALANCE SHEETS
    (In thousands, except par value)

     November 29, 2020 May 31, 2020
     (Unaudited)  
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$2,491   $360  
    Accounts receivable, less allowance for credit losses66,545   76,206  
    Inventories71,202   66,311  
    Prepaid expenses and other current assets13,949   14,230  
    Total Current Assets154,187   157,107  
        
    Investment in non-public company, fair value45,100   56,900  
    Property and equipment, net170,973   192,338  
    Operating leases21,070   25,321  
    Goodwill69,386   69,386  
    Trademarks/tradenames, net25,328   25,328  
    Customer relationships, net11,784   12,777  
    Other assets1,332   2,156  
    Total Assets$499,160   $541,313  
        
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Accounts payable$60,892   $51,647  
    Accrued compensation7,689   9,034  
    Other accrued liabilities12,715   9,978  
    Current portion of lease liabilities3,785   4,423  
    Deferred revenue644   352  
    Line of credit77,000   77,400  
    Current portion of long-term debt, net11,189   11,554  
    Total Current Liabilities173,914   164,388  
        
    Long-term debt, net82,000   101,363  
    Long-term lease liabilities22,206   26,378  
    Deferred taxes, net6,745   13,588  
    Other non-current liabilities5,357   4,552  
    Total Liabilities290,222   310,269  
        
    Stockholders’ Equity:   
    Common stock, $0.001 par value; 50,000 shares authorized; 29,323 and 29,224 shares issued and outstanding at November 29, 2020 and May 31, 2020, respectively29   29  
    Additional paid-in capital164,068   162,578  
    Retained earnings46,944   71,245  
    Accumulated other comprehensive (loss) income(2,103)  (2,808) 
    Total Stockholders’ Equity208,938   231,044  
    Total Liabilities and Stockholders’ Equity$499,160   $541,313  

    LANDEC CORPORATION
    CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
    (Unaudited)
    (In thousands, except per share amounts)

     Three Months Ended Six Months Ended
     November 29, 2020 November 24, 2019 November 29, 2020 November 24, 2019
    Product sales$130,904   $142,593   $266,547   $281,307  
    Cost of product sales110,267   127,079   229,564   250,457  
    Gross profit20,637   15,514   36,983   30,850  
            
    Operating costs and expenses:       
    Research and development2,572   2,822   5,080   5,643  
    Selling, general and administrative16,106   18,728   34,009   35,623  
    Legal settlement charge1,763   —   1,763   —  
    Restructuring costs1,662   —   10,066   —  
    Total operating costs and expenses22,103   21,550   50,918   41,266  
    Operating loss(1,466)  (6,036)  (13,935)  (10,416) 
            
    Dividend income281   281   563   562  
    Interest income10   25   18   50  
    Interest expense, net(3,039)  (2,169)  (6,148)  (4,244) 
    Other (expense) income, net(11,787)  (6)  (11,808)  (6) 
    Net loss before tax(16,001)  (7,905)  (31,310)  (14,054) 
    Income tax benefit2,700   1,165   7,009   2,530  
    Net loss$(13,301)  $(6,740)  $(24,301)  $(11,524) 
            
    Diluted net loss per common share$(0.45)  $(0.23)  $(0.83)  $(0.40) 
            
    Shares used in diluted per share computation29,280   29,155   29,261   29,147  

    LANDEC CORPORATION
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Unaudited)
    (In thousands)

     Six Months Ended
     November 29, 2020 November 24, 2019
    Cash flows from operating activities:   
    Consolidated net loss$(24,301)  $(11,524) 
    Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
    Depreciation, amortization of intangibles and amortization of debt costs9,826   9,030  
    Stock-based compensation expense1,787   1,315  
    Deferred taxes(7,070)  (2,624) 
    Change in investment in non-public company, fair value11,800   (200) 
    Net gain on disposal of property and equipment held and used(34)  (15) 
    Loss on disposal of property and equipment related to restructuring, net6,005   406  
    Other, net21   206  
    Change in contingent consideration liability—   (500) 
    Pacific Harvest note receivable reserve—   1,202  
    Changes in current assets and current liabilities:   
    Accounts receivable, net9,661   (397) 
    Inventories(4,891)  (4,431) 
    Prepaid expenses and other current assets1,539   (554) 
    Accounts payable10,539   (6,105) 
    Accrued compensation(1,345)  (1,988) 
    Other accrued liabilities4,627   1,145  
    Deferred revenue292   112  
    Net cash provided by (used in) operating activities18,456   (14,922) 
        
    Cash flows from investing activities:   
    Proceeds from sales of fixed assets12,885   29  
    Purchases of property and equipment(7,407)  (16,029) 
    Proceeds from collections of notes receivable—   364  
    Net cash provided by (used in) investing activities5,478   (15,636) 
        
    Cash flows from financing activities:   
    Taxes paid by Company for employee stock plans(297)  (130) 
    Payments on long-term debt(20,062)  (5,062) 
    Proceeds from lines of credit24,000   62,900  
    Payments on lines of credit(24,400)  (53,400) 
    Payments for debt issuance costs(1,237)  (766) 
    Proceeds from sale of common stock—   30  
    Proceeds from long-term debt—   27,500  
    Net cash (used in) provided by financing activities(21,996)  31,072  
    Net decrease in cash, cash equivalents and restricted cash1,938   514  
    Cash and cash equivalents, beginning of period553   1,465  
    Cash and cash equivalents, end of period$2,491   $1,979  
        
    Supplemental disclosure of non-cash investing and financing activities:   
    Purchases of property and equipment on trade vendor credit$1,526   $3,174  

    Non-GAAP Financial Information and Reconciliations

    EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted diluted net income (loss) 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 (benefit), and depreciation and amortization. We define adjusted EBITDA as EBITDA before certain restructuring and other non-recurring charges and before impairment of goodwill and intangibles charges. We define adjusted net income (loss) and adjusted diluted net income (loss) per share as net income (loss) and diluted net income (loss) per share, respectively, before certain restructuring and other non-recurring charges and before the fair market value change of the Company’s investment in Windset, 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 Six Months Ended
      November 29, 2020 November 24, 2019 November 29, 2020 November 24, 2019
    Net loss $(13,301)  $(6,740)  $(24,301)  $(11,524) 
    FMV change in Windset investment 11,800   (200)  11,800   (200) 
    Interest expense, net of interest income 3,029   2,144   6,130   4,194  
    Income tax benefit (2,700)  (1,165)  (7,009)  (2,530) 
    Depreciation and amortization 4,292   4,414   9,039   8,827  
    Total EBITDA 3,120   (1,547)  (4,341)  (1,233) 
    Restructuring and other non-recurring charges (1) 5,590   2,434   16,161   2,434  
    Total adjusted EBITDA $8,710   $887   $11,820   $1,201  


    (Unaudited and in thousands) Three Months Ended Six Months Ended
      November 29, 2020 November 24, 2019 November 29, 2020 November 24, 2019
    Net loss $(13,301)  $(6,740)  $(24,301)  $(11,524) 
    FMV change in Windset investment, net of tax 9,369   (171)  9,121   (164) 
    Restructuring and other non-recurring charges, net of tax (1) 4,438   2,076   12,492   1,996  
    Adjusted net income (loss) $506   $(4,835)  $(2,688)  $(9,692) 


    (Unaudited) Three Months Ended Six Months Ended
      November 29, 2020 November 24, 2019 November 29, 2020 November 24, 2019
    Diluted net loss per share $(0.45)  $(0.23)  $(0.83)  $(0.40) 
    FMV change in Windset investment, net of tax, per diluted share $0.32   $(0.01)  $0.31   $—  
    Restructuring and other non-recurring charges, net of tax, per diluted share (1) $0.15   $0.07   $0.43   $0.07  
    Adjusted diluted net income (loss) per share $0.02   $(0.17)  $(0.09)  $(0.33) 


    (Unaudited and in thousands) Curation
    Foods    		 Lifecore Other Total
    Three Months Ended November 29, 2020        
    Net (loss) income $(12,383)  $4,492   $(5,410)  $(13,301) 
    FMV change in Windset investment 11,800   —   —   11,800  
    Interest expense, net of interest income 1,376   —   1,653   3,029  
    Income tax (benefit) expense (3,911)  1,419   (207)  (2,700) 
    Depreciation and amortization 2,906   1,360   26   4,292  
    Total EBITDA (212)  7,271   (3,938)  3,120  
    Restructuring and other non-recurring charges (1) 2,591   —   2,999   5,590  
    Total adjusted EBITDA $2,379   $7,271   $(939)  $8,710  
             
    Six Months Ended November 29, 2020        
    Net (loss) income from continuing operations $(20,654)  $4,604   $(8,251)  $(24,301) 
    FMV change in Windset investment 11,800   —   —   11,800  
    Interest expense, net of interest income 2,751   —   3,378   6,130  
    Income tax (benefit) expense (6,523)  1,454   (1,940)  (7,009) 
    Depreciation and amortization 6,316   2,669   54   9,039  
    Total EBITDA (6,310)  8,727   (6,759)  (4,341) 
    Restructuring and other non-recurring charges (1) 11,055   —   5,106   16,161  
    Total adjusted EBITDA $4,745   $8,727   $(1,653)  $11,820  
             
    Three Months Ended November 24, 2019        
    Net loss $(8,348)  $3,459   $(1,851)  $(6,740) 
    FMV change in Windset investment (200)  —   —   (200) 
    Interest expense, net of interest income 1,364   —   780   2,144  
    Income tax benefit (1,723)  919   (361)  (1,165) 
    Depreciation and amortization 3,143   1,248   23   4,414  
    Total EBITDA (5,764)  5,626   (1,409)  (1,547) 
    Restructuring and other non-recurring charges (1) 1,406   —   1,028   2,434  
    Total adjusted EBITDA $(4,358)  $5,626   $(381)  $887  
             
    Six Months Ended November 24, 2019        
    Net (loss) income from continuing operations $(10,519)  $2,064   $(3,069)  $(11,524) 
    FMV change in Windset investment (200)  —   —   (200) 
    Interest expense, net of interest income 2,720   —   1,474   4,194  
    Income tax (benefit) expense (2,309)  454   (675)  (2,530) 
    Depreciation and amortization 6,348   2,433   46   8,827  
    Total EBITDA (3,960)  4,951   (2,224)  (1,233) 
    Restructuring and other non-recurring charges (1) 1,406   —   1,028   2,434  
    Total adjusted EBITDA $(2,554)  $4,951   $(1,196)  $1,201  


    (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 second quarter of fiscal 2021, the Company incurred (1) $1.7 million ($10.1 million year to date) of restructuring charges, primarily related to the impairment and sale of the Company’s Hanover, Pennsylvania manufacturing facility and related severance charges, and other restructuring related consulting costs; partially offset by the gain on sale of the Company’s Ontario, California facility for the year to date period and (2) $3.9 million ($6.1 million year to date) of certain non-recurring charges, primarily related to potential environmental and compliance matters at Curation Foods’ Avocado Product’s factory in Silao, Mexico, and other restructuring related legal and consulting costs.


    Contact Information:
    Investor Relations
    Jeff Sonnek
    (646) 277-1263
    jeff.sonnek@icrinc.com 


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