lndc20170407_8k.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 3, 2019

 

 

LANDEC CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of incorporation)

 

 

0-27446

 

94-3025618

(Commission file number)

 

(IRS Employer Identification No.)

 

 

   5201 Great America Parkway, Suite 232, Santa Clara, California

95054

(Address of principal executive offices)

(Zip Code)

 

(650) 306-1650

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company   ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

 

 

 

 

1

 


 

 

Item 2.02  

Results of Operations and Financial Condition.

 

On January 3, 2019, Landec Corporation (the “Registrant”) issued a press release announcing its consolidated financial results for the second quarter of fiscal year 2019. The press release is furnished herewith as Exhibit 99.1.

 

The information in this Current Report, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section. The information in this Current Report, including Exhibit 99.1, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

   

Item 9.01 Financial Statements and Exhibits.

 

(d)     Exhibit.

 

The following exhibits are furnished as part of this report:

 

Exhibit

No.

 

Description

 

 

 

99.1

 

Registrant’s Press Release dated January 3, 2019 regarding financial results.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: January 3, 2019

     

 

LANDEC CORPORATION

 

 

 

 

 

 

 

 

 

 

By:

/s/ Gregory S. Skinner      

 

 

 

Gregory S. Skinner

 

 

 

Vice President of Finance and

 

 

 

Administration and Chief Financial Officer

 

 

 

2

   

 

 

 

EXHIBIT INDEX

 

Exhibit

No.

 

Description

 

 

 

99.1

 

Registrant’s Press Release dated January 3, 2019 regarding financial results.

 

 

 

3

 

 

ex_132096.htm

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

Contact Information:

 
   

At the Company:

Investor Relations:

Gregory S. Skinner

John Mills, Partner

Vice President Finance and CFO

(646) 277-1254

(650) 261-3677

John.Mills@ICRINC.com

 

Landec Corporation Reports Second Quarter and First Half Fiscal 2019 Results

 

Second Quarter Includes Acquisition-Related Expenses and Company Updates Full Year Guidance

 

SANTA CLARA, CA – January 3, 2019 – Landec Corporation (NASDAQ: LNDC), a leading innovator of diversified health and wellness solutions with two operating businesses, Landec Natural Foods (LNF) and Lifecore Biomedical, Inc. reported results for the fiscal 2019 second quarter and first six months ended November 25, 2018.

 

“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 Yucatan® and Cabo Fresh® brands,” stated Molly Hemmeter, Landec’s President and CEO.

 

“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 Yucatan Foods and entered the high growth guacamole category. This acquisition accelerates the transformation of LNF from a packaged fresh vegetables business to a branded, natural foods business by providing our emerging natural brand portfolio with critical mass. As the emerging brands scale, they are expected to contribute gross margins over 30% compared to a 10% to 12% gross margin for our packaged fresh vegetables business. Lifecore, the Company’s specialty CDMO focused on sterile injectable products, delivered another quarter of strong revenue growth. Landec’s recent investments in additional aseptic filling capacity position Lifecore for continued growth.

 

“For the second quarter of fiscal 2019 our consolidated revenues were $124.9 million, consistent with the low end of our revenue guidance for the quarter. The earnings per share was below guidance because of acquisition-related costs but in line with earnings per share guidance at breakeven excluding acquisition-related costs,” continued Hemmeter.

 

Lifecore

 

“Lifecore’s second quarter results were consistent with plan, generating revenues of $15.4 million and a gross profit of $5.7 million. Revenues increased 9% and 7% in the second quarter and first half of fiscal 2019, respectively, compared to the same periods last year. Gross profit increased 9% during the second quarter compared to the second quarter of last year and decreased 1% during the first six months of fiscal 2019 compared to the same period last year. The decrease for the first six months of fiscal 2019 was primarily a result of a shift in product mix during the first quarter of fiscal 2019. Lifecore is on pace to meet its original fiscal 2019 revenue growth expectations of approximately 14% to 16% while maintaining its historical gross margin of 41% to 44%. The current revenue growth forecast is slightly lower than the 16% to 17% we previously provided as a result of the timing of certain shipments that were previously projected to occur in the second half of fiscal 2019, now projected to occur in the first quarter of fiscal 2020.

 

“The installation of Lifecore’s new $16 million multi-purpose filling line was completed during the first quarter of fiscal 2019 and validation began during the second quarter with commercial production projected to begin in fiscal 2020. The new line will further enhance Lifecore’s growth strategy as a CDMO, which is specifically designed to align Lifecore’s capabilities with the growing needs and market expectations of its partners. This investment provides Lifecore with the capacity to fill commercial quantities of drug products in vials, which is incremental to the existing capacity to fill syringes, and which expands the breadth of products and markets that Lifecore will be able to address. Although the new line will be primarily utilized to fill vials, it is a dual function line that can be used to fill both vials and syringes, which provides significant versatility and increased capacity utilization. At full capacity, the new dual filling line has the potential to generate $40 million to $50 million of new incremental product revenues annually. Revenues and net income contribution will vary due to the product mix manufactured on the new line during any given year,” stated Hemmeter.    

 

 

 

 

Natural Foods

 

“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 Yucatan Foods, announced on December 3, 2018, accelerates this transformation. Not only will Yucatan Foods deliver incremental revenues starting in fiscal 2019 and incremental profits starting in fiscal 2020, but we also expect revenues from avocado products to grow by low double digits in fiscal 2020 compared to the revenues for the trailing twelve months due to leveraging the experience of our LNF sales team within produce and from the tailwinds in the guacamole category which is currently growing annually at 20% in the U.S. With the addition of Yucatan Foods, the LNF emerging natural food brands on a proforma basis are projected to comprise 13-15% of LNF revenues in fiscal 2019 (approximately $70-75 million in annual revenue had we owned Yucatan Foods for all of fiscal 2019), with Eat Smart packaged fresh vegetables and salad kits representing the largest portion of the natural food business. As they scale over time, the emerging brands, which are subject to much lower sourcing and cost volatility than our Eat Smart vegetables business, are expected to contribute a greater percentage of total profitability with gross margin growing to over 30%.

 

“Our Natural Foods business has a unique combination of capabilities that makes it truly differentiated in the market, with proven internal innovation capabilities, a refrigerated supply chain and a direct sales force with proven experience throughout the fresh perimeter of the store. We are uniquely positioned to deliver on-trend, fresh and plant-based solutions to consumers,” commented Hemmeter.

 

“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 Hackett Group, a third-party consulting firm with considerable experience in the produce industry, to identify cost reductions in our food operations above and beyond the cost savings that have already been identified by the Landec team to offset these increasing costs. The Landec operations team is working diligently with the Hackett Group to identify, quantify and implement cost savings initiatives and from their collective efforts we expect to realize a positive net impact beginning during the fourth quarter of fiscal 2019 and a full year net impact in fiscal 2020 and beyond.

 

“In our LNF business, fiscal 2019 second quarter revenues were $109.5 million and first half revenues were $221.5 million, an increase of 1% and 5%, respectively, compared to the same periods last year. Revenues in our green bean business for both the second quarter and first half of fiscal 2019 were negatively impacted by the hurricanes that hit the Southeast and Texas during September and October of 2018. In addition, as previously disclosed, our salad kit sales were lower than originally expected during the second quarter of fiscal 2019 due to private label initiatives in the Mass channel and a reduction in the number of salad rotations this fiscal year in the Club channel. Gross profit in our Natural Foods business was $10.9 million in the second quarter, $1.2 million higher than the second quarter of last year, due primarily to more favorable produce sourcing, except for green beans, partially offset by increased labor, freight and packaging costs in our packaged fresh vegetable business,” said Hemmeter.

 

Second Quarter 2019 Results Compared to Second Quarter of 2018 from Continuing Operations

 

Revenues increased 2% to $124.9 million

 

Gross profit increased 11% to $16.6 million

 

Gross profit margin increased 110 basis points to 13.3%

 

Net income decreased to a $0.02 loss due to acquisition-related expenses

 

Revenues in the second quarter of fiscal 2019 increased 2% to $124.9 million compared to $122.5 million in the year-ago quarter. The increase was primarily due to a $1.3 million or 9% increase in revenues at Lifecore and from a $1.1 million or 1% increase in LNF revenues.

 

The Company recorded a net loss of $584,000, or a $0.02 loss per share, in the second quarter of fiscal 2019 compared to net income from continuing operations of $414,000, or $0.02 per share, in the year-ago quarter. The decrease was a result of (1) $807,000 of acquisition-related expenses, (2) a $776,000 increase in operating expenses primarily due to the launch of Now Planting soups during the second quarter of fiscal 2019, (3) a $600,000 increase in the fair market value of the Company’s Windset investment during the second quarter of fiscal 2019 compared to a $1.3 million increase in the year-ago quarter, and (4) a $266,000 increase in interest expense. These decreases in net income were partially offset by a $1.7 million increase in gross profit resulting from a $1.2 million increase at LNF and a $461,000 increase at Lifecore.

 

 

 

 

Fiscal Six Months 2019 Results

Revenues in the first six months of fiscal 2019 increased 5% to $249.6 million from $238.2 million in the same period last year. The increase was primarily due to a $9.6 million or 5% increase in revenues at LNF and a $1.8 million or 7% increase in Lifecore revenues.

 

The Company recorded a net loss of $395,000, or a $0.01 loss per share, during the first six months of fiscal 2019 compared to net income from continuing operations of $2.8 million, or $0.10 per share, in the same period last year. The decrease was a result of (1) a $1.8 million decrease in operating income at LNF, before acquisition-related expenses, due to a $699,000 decrease in gross profit from increased labor, packaging and freight costs and from a $1.1 million increase in operating expenses due primarily from consulting and other expenses associated with our cost-out initiatives and from expenses surrounding the launch of Now Planting, (2) $807,000 of acquisition-related expenses, (3) a $1.6 million increase in the fair market value of the Company’s Windset investment during the first half of fiscal 2019 compared to a $2.2 million increase in the first half of last year, and (4) a $620,000 increase in interest expense. These decreases in net income were partially offset by a $1.1 million decrease in income tax expenses.

 

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 Yucatan during the second half of fiscal 2019. The additional Yucatan revenues will be partially offset by the effects of the hurricanes during the second quarter and by the previously disclosed lower than expected growth of salads this fiscal year. For fiscal 2019, compared to fiscal 2018, we expect Lifecore to grow 14% to 16% and LNF to grow of 5% to 7%,” stated Greg Skinner, Landec’s Vice President of Finance and CFO. “We now expect consolidated earnings per share to be $0.25 to $0.29 after accounting for the projected loss, estimated at $0.15 to $0.16 per share, from the acquisition of Yucatan as a result of (1) acquisition-related costs, (2) interest on new debt, (3) lower gross profit on acquired inventory, and (4) integration-related expenses, coupled with the change in the fair market value of our Windset investment now forecasted to be $2.5 million which is $1.5 million lower than originally projected. In addition, we are currently forecasting fiscal 2019 consolidated cash flows from operations of $26 million to $30 million and capital expenditures of $40 million to $45 million, after spending $18 million during the first six months of fiscal 2019.

 

“For the third quarter of fiscal 2019, we expect revenues to be in the range of $156 million to $159 million and net income to be $0.03 to $0.04 per share. The net income guidance for the third quarter reflects acquisition-related costs, additional interest expense, lower gross profit on acquired inventory from the Yucatan acquisition and integration-related expenses,” concluded Skinner.

 

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: Friday, January 4, 2019

Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)

Direct Webcast link: http://ir.Landec.com/events.cfm

 

To participate in the conference call via telephone, dial toll-free (844) 860-6243 or (661) 378-9884. 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) 277-1254.

 

A replay of the call will be available through Friday, January 11, 2019 by calling toll-free (855) 859-2056 or direct (404) 537-3406, and entering code 5465498.

 

About Landec Corporation 

Landec Corporation (Nasdaq: LNDC) is a leading innovator of diversified health and wellness solutions with two operating businesses, Landec Natural Foods (LNF) and Lifecore Biomedical, Inc. LNF is focused on innovating and distributing fresh, plant-based foods with 100% clean ingredients through grocery, mass market and foodservice channels. LNF is able to maximize product freshness for consumers throughout North America with its geographically dispersed family of growers, refrigerated supply chain and patented BreatheWay® packaging technology. LNF brands include Eat Smart® fresh packaged salads and vegetables, O Olive Oils & Vinegars®, Now Planting® pure-plant meal solutions and Yucatan® and Cabo Fresh® guacamole and avocado products. Lifecore Biomedical is a fully integrated contract development and manufacturing organization (CDMO) that offers expertise and capabilities in fermentation, specialty formulation, aseptic filling and final packaging for FDA regulated medical devices and drugs to customers for applications in a wide array of markets including Ophthalmic, Orthopedic and Oncology. For more information about the company, visit Landec’s website at www.landec.com.

 

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 Yucatan Foods into the Landec Natural Foods business, 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 27, 2018 (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.

 

 

 

 

 

Landec Corporation

CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

 

   

November 25, 2018

   

May 27, 2018

 
   

(unaudited)

         

ASSETS

               

Current Assets:

               

Cash and cash equivalents

  $ 1,514     $ 2,899  

Accounts receivable, net

    53,420       53,877  

Inventories, net

    31,628       31,819  

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  

Other assets

    4,695       5,164  

Total Assets

  $ 411,654     $ 404,703  
                 

LIABILITIES AND STOCKHOLDERS' EQUITY

               

Current Liabilities:

               

Accounts payable

  $ 31,719     $ 34,668  

Accrued compensation

    6,824       9,978  

Other accrued liabilities

    9,922       8,706  

Deferred revenue

    1,717       2,625  

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  

Deferred taxes

    17,707       17,485  

Other non-current liabilities

    4,774       5,280  
                 

Stockholders' Equity

               

Common stock

    28       28  

Additional paid-in capital

    143,506       142,087  

Accumulated other comprehensive income

    1,135       1,148  

Retained earnings

    108,904       109,299  

Total Stockholders’ Equity

    253,573       252,562  

Total Liabilities and Stockholders’ Equity

  $ 411,654     $ 404,703  

 

 

 

 

 

 

 

 

Landec Corporation

Consolidated CONDENSED Statements of INCOME

(In thousands, except per-share data)

(unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

November 25, 2018

   

November 26, 2017

   

November 25, 2018

   

November 26, 2017

 

Product Sales

  $ 124,912     $ 122,461     $ 249,580     $ 238,242  
                                 

Cost of product sales

    108,319       107,540       216,650       204,519  
                                 

Gross profit

    16,593       14,921       32,930       33,723  
                                 

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  

Acquisition-related costs

    807             807        

Total operating costs and expenses

    17,199       15,616       33,983       31,693  

Operating (loss) income

    (606 )     (695 )     (1,053 )     2,030  
                                 

Dividend income

    412       412       825       825  

Interest income

    33       42       79       73  

Interest expense

    (746 )     (480 )     (1,504 )     (884 )

Other income

    600       1,300       1,600       2,200  

Net (loss) income from continuing operations before taxes

    (307 )     579       (53 )     4,244  

Income taxes expense

    (277 )     (165 )     (342 )     (1,475 )

Net (loss) income from continuing operations

    (584 )     414       (395 )     2,769  
                                 

Discontinued operations:

                               

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

  $ (0.02 )   $ 0.02     $ (0.01 )   $ 0.10  

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  

 

 

 

 

LANDEC CORPORATION

SECOND QUARTER ENDED NOVEMBER 25, 2018

QUESTIONS & ANSWERS

 

1)

Can you remind us of the headwinds and tailwinds impacting fiscal 2019?

 

Headwinds:

 

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.

 

Tailwinds:

 

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.

 

b.

The North America healthy eating trend continues as packaged salad kit, core vegetable and green bean categories continue to grow.

 

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 October 27, 2018, the size of the North American market in which Apio participates (vegetable bags, vegetable trays and multi-serve salad kits) was approximately $4.1 billion (in consumer retail dollars), including retail and club stores. Of this market, Apio’s overall market share per Nielsen was approximately 14% while Apio’s Eat Smart multi-serve salad kits had a market share of approximately 13%.  In the retail market, excluding Costco, at October 27, 2018 our Eat Smart multi-serve salad kits in Canada had a 38% market share and an 85% ACV and in the U.S. achieved a 6.4% market share and a 48% ACV. Our goal is to continue to grow the Eat Smart market share and ACV in the U.S. and Canada for all our multi-serve salad kit products, as well as our newly launched single-serve salad kit products.

 

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 Santa Maria. Windset is in the early planning stages of further expansion in California and/or Nevada with construction estimated to begin in 2020.

 

We are currently estimating that the change in the fair market value of our Windset investment during fiscal 2019 will be approximately $2.5 million.

 

5)

How is the launch of Now Planting soups going?

 

We initially began shipping Now Planting soups in October 2018 to Publix in the U.S. and Loblaws in Canada. We are working closely with these two strategic customers in a market test to optimize product placement, pricing and promotional plans, to maximize consumer adoption. We expect the work in these initial test stores will continue through the remainder of fiscal 2019.

 

6)

What is the Company’s current total debt and leverage ratio after borrowing $60 million for the Yucatan acquisition?

 

The Company currently has approximately $145 million of debt which translates into a debt to equity ratio of approximately 0.57 and debt to tangible assets ratio of 0.43. Our leverage ratio at the close was approximately 3.7, our covenant is 4.5 or less which means we had borrowing capacity in excess of $30 million. The third and fourth quarters of our fiscal year is when we generate a large majority of our cash flow from operations and therefore we expect our leverage ratio to decrease and our borrowing capacity to increase by fiscal 2019 year end. Our covenant stays at 4.5 until December 2019 and then drops to 4.0 and stays at that level until December 2020.

 

7)

What are Landec’s top priorities for the next 12 to 24 months?

 

Our continuing priorities are:

 

a)

Working with the Hackett Group to identify, quantify and implement cost saving initiatives in our LNF business.

 

b)

Integrating the Yucatan team and operations into our LNF business.

 

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 November 25, 2018 compare with the same periods last year?

 

 The results are as follows (unaudited and in thousands):

 

   

Three Months Ended

 

Six Months Ended

   

November 25, 2018

   

November 26, 2017

 

November 25, 2018

 

November 26, 2017

Revenues:

Natural Foods (a)

  $ 109,466     $ 108,348   $ 221,517   $ 211,965  

Lifecore

    15,446       14,113     28,063     26,277  

Total Revenues

    124,912       122,461     249,580     238,242  
                             

Gross Profit:

Natural Foods

    10,915       9,704     24,285     24,984  

Lifecore

    5,678       5,217     8,645     8,739  

Total Gross Profit

    16,593       14,921     32,930     33,723  
                             

Research and Development:

Natural Foods

    1,175       1,488     2,532     2,505  

Lifecore

    1,225       1,334     2,430     2,702  

Other (b)

    133       550     404     884  

Total R&D

    2,533       3,372     5,366     6,091  
                             

Selling, General and Administrative:

Natural Foods

    9,558       8,158     18,615     16,692  

Lifecore

    1,647       1,428     3,245     2,943  

Other

    3,461       2,658     6,757     5,967  

Total SG&A

    14,666       12,244     28,617     25,602  
                             

Operating (Loss) Income before Allocation of Corporate Expenses

Natural Foods

    182       58     3,138     5,787  

Lifecore

    2,806       2,455     2,970     3,094  

Other

    (3,594 )     (3,208)

 

  (7,161)

 

  (6,851 )

Total Operating (Loss) Income before Allocation of Corporate Expenses

    (606 )     (695 )   (1,053 )   2,030  

 

Corporate Expenses Allocation:

                               

Natural Foods

    (1,416 )     (2,284 )     (2,799 )     (4,569 )

Lifecore

    (1,075 )     (821 )     (1,969 )     (1,642 )

Other

    2,491       3,105       4,768       6,211  

 

Operating (Loss) Income after Allocations of Corporate Expenses:

                               

Natural Foods

    (1,234 )     (2,226 )     339       1,218  

Lifecore

    1,731       1,634       1,001       1,452  

Other

    (1,103 )     (103 )     (2,393 )     (640 )

Total Operating (Loss) Income after Allocations of Corporate Expenses

    (606 )     (695 )     (1,053 )     2,030  

 

Non-Operating Income (Expense) (c):

                               

Natural Foods

    816       1,791       1,010       1,948  

Lifecore

    (433 )     (374 )     (250 )     (347 )

Other

    (361 )     (308 )     (102 )     (862 )

Total Non-Operating Income

    22       1,109       658       739  

 

Net (Loss) Income from Continuing Operations:

                               

Natural Foods

    (418 )     (435 )     1,349       3,166  

Lifecore

    1,298       1,260       751       1,105  

Other

    (1,464 )     (411 )     (2,495 )     (1,502 )

Net (Loss) Income from Continuing Operations

  $ (584 )   $ 414     $ (395 )   $ 2,769  

 

(a) Natural Foods includes Apio Eat Smart, Apio Packaging, O and Now Planting.

(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.