TRANSITION AND SEPARATION AGREEMENT
This Transition and Separation Agreement (the “Agreement”) is entered into by and between Albert D. Bolles, Ph.D. (“Executive”) and Landec Corporation, a Delaware corporation (the “Company”), effective as of August 10, 2022 (the “Effective Date”).
1. Transition; Separation of Employment.
(a) Effective as of the Effective Date, (1) Executive hereby resigns as the Chief Executive Officer and director of the Company and all other offices, directorships or equivalent positions held at the Company and its subsidiaries and (2) commences services as the Company’s President, Curation Foods. Executive shall remain employed by the Company as an employee at-will on the terms contained herein from the Effective Date until the earlier of the sale of all or substantially all of the Company’s avocado and guacamole business (as determined by the Company’s Board of Directors (the “Board”) in its good-faith discretion) and Executive’s termination of employment for any reason (such period, the “Transition Period” and such earlier date, the “Separation Date”). During the Transition Period, Executive will serve as President of Curation, will have all of the duties, responsibilities and authority commensurate with the position and will report to the Board. Effective as of the Separation Date, Executive’s employment with the Company and all of its affiliates shall terminate. Notwithstanding anything to the contrary contained herein, (i) the Company may terminate the Transition Period and Executive’s employment with the Company and its affiliates for Cause (as defined below) and (ii) Executive may terminate the Transition Period and Executive’s employment with the Company for any reason or no reason, provided that he provides no less than 30 days’ written notice.
(b) The parties hereto acknowledge and agree that, effective as of the Effective Date, that certain Amended and Restated Employment Agreement, effective as of July 23, 2020 and amended effective as of May 19, 2022 (collectively, the “Employment Agreement”) is superseded by this Agreement. Executive acknowledges and agrees that none of (i) his change in position from the Company’s Chief Executive Officer to President of Curation, (ii) his resignation of directorships held at the Company and its affiliates, and/or (iii) entering into this Agreement (including any changes herein to Executive’s compensation), in any case, constitute or will constitute an event giving rise to “Good Reason” for purposes of the Employment Agreement or any other agreement between Executive and the Company and/or its affiliates.
2. Compensation; Accrued Obligations.
(a) Salary; Bonus. During the Transition Period, the Company shall pay Executive a base salary in the amount of $657,758 per annum, prorated for the duration of the Transition Period (the “Base Salary”), payable in accordance with the Company’s normal payroll practices (but no less often than monthly). Executive agrees and acknowledges that he will not be eligible to participate in the Company’s annual cash bonus plan for fiscal year 2023; however, for purposes of determining any Severance Benefits (as defined below), his Target Bonus (as defined in the Employment Agreement) will be equal to 100% of his Base Salary.
(b) Equity Awards. During the Transition Period, the Company equity awards held by Executive as of the Effective Date (the “Company Equity Awards”) will remain outstanding and continue to vest and become exercisable (as applicable) in accordance with their terms. Effective as of the Separation Date, notwithstanding anything to the contrary contained in the award agreement evidencing the performance restricted stock unit award granted to Executive on September 30, 2020 (the “PSU Award”), the PSU Award shall be forfeited and cancelled for no consideration.
(c) Benefits. During the Transition Period, Executive shall continue to participate in the benefit plans, programs and arrangements of the Company maintained by the Company for the benefit of its similarly situated employees from time to time, consistent with the terms thereof and as such plans, programs and arrangements may be amended from time to time.
(d) Accrued Obligations; Business Expenses. Upon the Separation Date, the Company will pay to Executive all accrued salary and all accrued, unused vacation / paid time off through
the Separation Date; and within 30 days following the Separation Date, the Company will pay to Executive any unreimbursed business expenses incurred by Executive and submitted, in accordance with Company policy, prior to the Separation Date (collectively, the “Accrued Obligations”). Following the Separation Date, Executive shall be entitled to retain or receive any vested amounts due to Executive under any employee benefit plan, program or policy of the Company, in any case pursuant to and in accordance with the terms and conditions of the applicable plan, program or policy.
3. Separation Benefits.
(a) In consideration of, and subject to and conditioned upon (i) Executive’s continued employment through the Separation Date, (ii) Executive’s continued compliance with the terms and conditions of Section 6 of this Agreement and the Restrictive Covenants (as defined below) and (iii) Executive executing, on or within 21 days (or 45 days, to the extent necessary to comply with applicable law) following the Separation Date, and not revoking, the general release attached hereto as Exhibit A (the “Release”), the Company will pay or provide Executive the payments and benefits described in Section 6(a) of the Employment Agreement (collectively, the “Severance Benefits”) in accordance with the terms and conditions described therein; provided, however, that the PSU Award shall be treated in accordance with Section 2(b) herein.
(b) Notwithstanding the generality of the foregoing, in the event that Executive’s employment is terminated by the Company for Cause or Executive terminates his employment for any or no reason, Executive shall not be eligible for or entitled to receive the Severance Benefits set forth in this Section 3. “Cause” will mean if Executive:
(i) willfully breaches significant and material duties he is required to perform;
(ii) commits a material act of fraud, dishonesty, misrepresentation or other act of moral turpitude;
(iii) is convicted of a felony or another crime which is materially injurious to the reputation of the Company;
(iv) exhibits gross negligence in the course of his employment;
(v) is ordered removed by a regulatory or other governmental agency pursuant to applicable law; or
(vi) willfully fails to obey a material lawful direction from the Company.
(c) Return of Company Property. Executive acknowledges and agrees that all personal property and equipment furnished to or prepared by Executive in the course of or incident to his employment belong to the Company and shall be promptly returned to the Company upon termination of employment; provided, that if Executive becomes entitled to receive the Severance Benefits, Executive will be allowed to retain his Company laptop computer after the Company removes any and all confidential and proprietary information belonging to the Company. Executive further acknowledges and agrees that all confidential materials and documents, whether written or contained in computer files, electronic storage/iCloud systems or any other media, remain the property of the Company and shall be promptly returned to the Company upon termination of employment, to the extent reasonably practicable for Executive to do so.
4. Withholdings and Other Deductions. All compensation payable to Executive hereunder shall be subject to such withholdings and deductions as the Company is from time to time required to make pursuant to law, governmental regulation or order.
5. Warranty. Executive acknowledges that, upon receipt of the Accrued Obligations and the payments set forth herein, Executive has (i) received all monies and other benefits
due to Executive as a result of his employment with and separation of employment from the Company, and (ii) no right, title, or interest in or entitlement to any other payments or benefits other than as set forth in this Agreement. Executive further represents that he has not sustained a work-related injury or illness which he has not previously reported to the Company.
6. Incorporation by Reference; Restrictive Covenants.
(a) Sections 7(c), 9, 10 and 18 of the Employment Agreement are hereby incorporated by reference in their entirety and shall apply, mutatis mutandis, to the provisions set forth herein.
(b) Notwithstanding anything to the contrary contained herein, the parties acknowledge and agree that the restrictive covenants referenced to or contained in this Section 6 and Section 8 of this Agreement and in the Confidential Information and Invention Assignment Agreement executed by Executive (collectively, the “Restrictive Covenants”) shall remain in full force and effect in accordance with their terms and Executive shall continue to be bound by their terms, including following the termination of this Agreement.
7. Exceptions. Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement shall prohibit either party to this Agreement (or either party’s attorney(s)) from (i) filing a charge with, reporting possible violations of federal law or regulation to, participating in any investigation by, or cooperating with the U.S. Equal Employment Opportunity Commission, the U.S. Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory Authority (“FINRA”), the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the U.S. Commodity Futures Trading Commission, the U.S. Department of Justice or any other securities regulatory agency, self-regulatory authority or federal, state or local regulatory authority (collectively, “Government Agencies”), or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation, (ii) communicating directly with, cooperating with, or providing information (including trade secrets) in confidence to any Government Agencies for the purpose of reporting or investigating a suspected violation of law, or from providing such information to such party’s attorney(s) or in a sealed complaint or other document filed in a lawsuit or other governmental proceeding, and/or (iii) receiving an award for information provided to any Government Agency. Pursuant to 18 USC Section 1833(b), Executive acknowledges that (1) Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (y) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal, and (2) if Executive files a lawsuit for retaliation by the Company or its affiliates for reporting a suspected violation of law, Executive may disclose the trade secret to his attorney and use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. Further, nothing in this Agreement is intended to or shall preclude either party from providing truthful testimony in response to a valid subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law. If Executive is required to provide testimony, then unless otherwise directed or requested by a Governmental Agency or law enforcement, Executive shall notify the Company in writing as promptly as practicable after receiving any such request of the anticipated testimony and at least ten days prior to providing such testimony (or, if such notice is not possible under the circumstances, with as much prior notice as is possible) to afford the Company a reasonable opportunity to challenge the subpoena, court order or similar legal process.
8. Ongoing Cooperation. Subject to Section 7, Executive agrees that Executive will assist and cooperate with the Company and its affiliates (i) concerning reasonable requests for information about the business of the Company or its affiliates or Executive’s involvement and participation therein, (ii) in connection with the defense, prosecution or investigation of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company or its subsidiaries or affiliates, including any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, actions, investigations or proceedings relate to services performed or required to be performed by Executive,
pertinent knowledge possessed by Executive, or any act or omission by Executive, and (iii) and in connection with any investigation or review by any federal, state or local regulatory, quasi- or self-regulatory or self-governing authority or organization (including, without limitation, the SEC and FINRA) as any such investigation or review relates to services performed or required to be performed by Executive, pertinent knowledge possessed by Executive, or any act or omission by Executive. Executive’s full reasonable cooperation shall include, but not be limited to, being available to meet and speak with officers or employees of the Company, its affiliates and/or their counsel at reasonable times and locations, executing documents Executive knows to be accurate and truthful, appearing at the Company’s request as a witness at depositions, trials or other proceedings without the necessity of a subpoena, and taking such other actions as may reasonably be requested by the Company and/or its counsel to effectuate the foregoing. In requesting such services, the Company will consider other commitments that Executive may have at the time of the request and shall reimburse Executive for reasonable expenses.
9. Breach. In the event Executive breaches Section 6 (including the Restrictive Covenants), any outstanding obligations of the Company hereunder shall immediately terminate, and the Company’s covenants hereunder shall be deemed null and void in their entirety.
10. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, unless a superseding Federal law is applicable and except as otherwise provided in Section 18(b) of the Employment Agreement (which is incorporated by reference herein).
11. Waiver. The failure to enforce any provision of this Agreement shall not be construed to be a waiver of such provision or to affect the validity of this Agreement or the right of any party to enforce this Agreement.
12. Headings. The headings in this Agreement are provided solely for convenience, and are not intended to be part of, nor to affect or alter the interpretation or meaning of, this Agreement.
13. Severability. If any sentence, phrase, section, subsection or portion of this Agreement is found to be illegal or unenforceable, such action shall not affect the validity or enforceability of the remaining sentences, phrases, sections, subsections or portions of this Agreement, which shall remain fully valid and enforceable.
14. Assignment. This Agreement is personal to Executive and, without the prior written consent of the Company, shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives. This Agreement shall inure to the benefit of and be binding upon the Company and its respective successors and assigns.
15. Ambiguities. Both parties have participated in the negotiation of this Agreement and, thus, it is understood and agreed that the general rule that ambiguities are to be construed against the drafter shall not apply to this Agreement. In the event that any language of this Agreement is found to be ambiguous, each party shall have an opportunity to present evidence as to the actual intent of the parties with respect to any such ambiguous language.
16. Entire Agreement; Amendments. This Agreement (including the exhibits hereto), constitutes the entire agreement between the parties concerning the subject matter hereof. All prior discussions and negotiations have been and are merged and integrated into, and are superseded by, this Agreement (including, as of the Effective Date, the Employment Agreement), excluding any award agreements evidencing the Company Equity Awards (as amended by this Agreement). Executive acknowledges and agrees that the payments and benefits set forth herein constitute full and complete satisfaction of the Company’s obligations to Executive, and Executive shall have no right, title or interest in any payments or benefits except as provided herein. No amendments to this Agreement will be valid unless written and signed by Executive and an authorized representative of the Company.
17. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
18. Consultation with Counsel. Executive acknowledges (i) that Executive has thoroughly read and considered all aspects of this Agreement, that Executive understands all its provisions and that Executive is voluntarily entering into this Agreement, (ii) that he has been represented by, or had the opportunity to be represented by independent counsel of his own choice in connection with the negotiation and execution of this Agreement and has been advised to do so by the Company, and (iii) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment. Without limiting the generality of the foregoing, Executive acknowledges that he has had the opportunity to consult with his own independent tax advisors with respect to the tax consequences to him of this Agreement, and that he is relying solely on the advice of his independent advisors for such purposes.
19. Notices. All notices, requests and other communications hereunder shall be in writing and shall be delivered by courier or other means of personal service (including by means of a nationally recognized courier service or professional messenger service), or sent by email and also mailed first class, postage prepaid, by certified mail, return receipt requested, in all cases addressed to:
If to Executive: at Executive’s most recent address on the records of the Company
If to the Company:
Landec Corporation
2811 Airpark Drive
Santa Maria, CA 93455
Attention: Craig Barbarosh, Chairman of the Board of Directors
All notices, requests and other communications shall be deemed given on the date of actual receipt or delivery as evidenced by written receipt, acknowledgement or other evidence of actual receipt or delivery to the address. In case of service by telecopy, a copy of such notice shall be personally delivered or sent by registered or certified mail, in the manner set forth above, within three business days thereafter. Any party hereto may from time to time by notice in writing served as set forth above designate a different address or a different or additional person to which all such notices or communications thereafter are to be given.
[Signature page follows]
IN WITNESS WHEREOF, Executive has hereunto set Executive’s hand and the Company has caused these presents to be executed in its name on its behalf, all as of the day and year set forth below.
Dated: August 10, 2022 _/s/ Albert D. Bolles_____________
Albert D. Bolles, Ph.D.
Dated: August 10, 2022 _/s/ Craig Barbarosh_____________
Landec Corporation
Name: Craig Barbarosh
Title: Chairman of the Board of Directors
EXHIBIT A
GENERAL RELEASE
In exchange for good and valuable consideration, and intending to be legally bound by this General Release (the “Release”), I, the undersigned, agree as follows:
1.GENERAL RELEASE
I agree, on behalf of myself and my heirs, representatives, successors, and assigns, to release the Landec Corporation (the “Company”), its parents, subsidiaries, divisions, affiliates, and related entities and their respective past and present officers, directors, stockholders, managers, members, partners, employees, agents, servants, attorneys, predecessors, successors, representatives, and assigns (collectively the “Released Parties”), collectively, separately, and severally, of and from any and all rights, obligations, promises, agreements, debts, losses, controversies, claims, demands, causes of action, liabilities, suits, judgments, damages, and expenses, including without limitation attorneys’ fees and costs, of any nature whatsoever, whether known or unknown, foreseen or unforeseen, accrued or unaccrued, asserted or unasserted, which I ever had, now have, or hereafter may have against the Released Parties, or any of them, from the beginning of time up until the date I sign this Release, including without limitation the right to take discovery with respect to any matter, transaction, or occurrence existing or happening at any time before or upon my signing of this Release, with the exception of (i) any claims which cannot legally be waived by private agreement; and (ii) any claims which may arise after the date I sign this Release. This general release includes, but is not limited to, any and all claims whether based in equity, law or otherwise, including without limitation any federal, state, or local statute, code, regulation, rule, ordinance, constitution, order, or at common law. This general release includes, but is not limited to, any and all claims, related in any way to my employment with the Company and/or its predecessors, the termination of that employment), including but not limited to, any and all tort claims, contract claims, claims or demands related to stock, stock options or any other ownership interests in the Company, fringe benefits, severance pay wages, incentive compensation, bonuses, and other remuneration. My acceptance of this Release also releases any and all claims under the Age Discrimination in Employment Act of 1967, as amended (the “ADEA”). I understand that I should not construe this reference to age discrimination claims as in any way limiting the general and comprehensive nature of the release of claims provided under this Paragraph 1. Notwithstanding anything herein to the contrary, nothing in this Release shall be construed in any way to release (a) the Company’s post-employment obligations under the Transition and Separation Agreement by and between me and the Company, effective as of August 10, 2022 (the “Agreement”); (b) the Company’s obligation to indemnify me pursuant to the Company’s indemnification obligation pursuant to agreement or applicable law; or (c) workers’ compensation benefits, unemployment compensation benefits, or any other rights or benefits that, as a matter of law, may not be waived, including but not limited to unwaivable rights I might have under federal and/or state law. This Release does not limit or restrict my right under the ADEA to challenge the validity of this release in a court of law.
(a)Waiver of California Civil Code Section 1542
I also acknowledge that I have been advised of California Civil Code Section 1542, which reads as follows:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
I agree that I am waiving any and all rights I may have under California Civil Code Section 1542 with respect to the general release of claims in Paragraph 1 of this Release. In connection with this waiver, I acknowledge that I may hereafter discover claims presently unknown or unsuspected, or facts in addition to or different from those which I may now know or believe to be true, with respect to the claims released pursuant to Paragraph 1. Nevertheless, I intend to and do by this Release, fully, finally and forever, in the manner described in Paragraph 1, all such claims as provided therein. This Release shall
constitute the full and absolute release of all claims and rights released in this Release, notwithstanding the discovery or existence of any additional or different claims or facts relating thereto.
(b)Release of Claims Under the ADEA; Consideration & Revocation Period
(i)ADEA Claims Released. I understand that the general release set forth in Paragraph 1 above includes a release of any claims I may have, if any, against the Released Parties under the ADEA. I understand that my waiver of rights and claims under the ADEA does not extend to any ADEA rights or claims arising after the date I sign this Release and I am not prohibited from challenging the validity of this release and waiver of claims under the ADEA.
(ii)Consideration Period. I acknowledge that I have been given a period of at least twenty-one (21) days from the date this Release was initially delivered to me to decide whether to sign this Release (the “Consideration Period”). If I decide to sign this Release before the expiration of the Consideration Period, which is solely my choice, I represent that my decision is knowing and voluntary. I agree that any revisions made to this Release after it was initially delivered to me were either not material or were requested by me, and do not re-start the Consideration Period. I have been advised to consult with an attorney of my own choosing prior to signing this Release.
(iii)Revocation Period; Effective Date. I understand that I may revoke this Release within seven (7) days after I have signed it (the “Revocation Period”). This Release shall not become effective or enforceable until the eighth (8th) day after I sign this Release without having revoked it (the “Effective Date”). In the event I choose to revoke this Release, I must notify the Company in writing in accordance with Agreement and directed to the Company’s Chief Executive Officer, in which case this Release shall have no force or effect.
2.REPRESENTATIONS & WARRANTIES
By signing below, I represent and warrant as follows:
(a)There are no pending complaints, charges or lawsuits filed by me against any of the Released Parties.
(b)I am the sole and lawful owner of all rights, title and interest in and to all matters released under Paragraph 1, above, and I have not assigned or transferred, or purported to assign or transfer, any of such released matters to any other person or entity.
(c)I have been properly paid for all hours worked, and I have received all compensation due through my last date of employment with the Company.
(d)The Company has reimbursed me for all Company-related expenses incurred by me in direct consequence of the discharge of my duties, or of my obedience to the directions of the Company.
(e)The Company has not denied me the right to take leave under the Family and Medical Leave Act or any other federal, state or local leave law.
(f)I have not suffered or incurred any workplace injury in the course of my employment with the Company, other than any injury that was made the subject of a written injury report before I signed this Release.
(g)I confirm that the Confidential Information and Invention Assignment Agreement and Section 6 of the Agreement and the Restrictive Covenants (as defined therein) and such other Sections as are necessary to give effect to those Sections survive the termination of the Agreement, my employment, and my execution of this Release.
3.MISCELLANEOUS
(a)Notwithstanding any other provision of this Release, nothing contained in this Release prohibits me from filing a charge with or reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation, or providing truthful testimony in response to a lawfully-issued subpoena or court order. Further, this Release does not limit my ability to communicate with any governmental agency or entity or otherwise participate in any investigation or proceeding that may be conducted by any governmental agency or entity, including providing non-privileged documents or other information, without notice to me. Pursuant to 18 USC Section 1833(b), I will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (y) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, nothing in this Release prevents me from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that I have reason to believe is unlawful.
(b)All defined terms in this Release are as defined in the Agreement unless otherwise provided herein.
(c)I agree and acknowledge that the Agreement provides me with benefits from the Company which, in their totality, are greater than those to which I otherwise would be entitled.
(d)Nothing in the Agreement or this Release should be construed as an admission of wrongdoing or liability on the part of the Company or the other Released Parties, who expressly deny any liability whatsoever.
(e)This Release and its interpretation shall be governed and construed in accordance with the laws of the State of California without regard to its conflict of law principles.
(f)If any provision of this Release or portion thereof is found to be invalid, void or unenforceable, then the parties intend that it be modified only to the extent necessary to render the provision enforceable as modified or, if the provision cannot be so modified, the parties intend that the offending language be severed, and that the remainder of this Release, and all remaining provisions, remain valid, enforceable, and in full force and effect.
(g)Each of the Released Parties is an intended third-party beneficiary of this Release having full rights to enforce this Release.
(h)A facsimile or scanned (e.g., .PDF, etc.) signature on this Release shall be deemed to be an original.
By signing this Release, I acknowledge that I do so voluntarily after carefully reading and fully understanding each provision and all of the effects of this Release, which includes a release of known and unknown claims and restricts future legal action against the Company and other Released Parties.
Albert D. Bolles, Ph.D.
Dated: , 20 __
FOR IMMEDIATE RELEASE
Contact Information:
Investor Relations
Jeff Sonnek
(646) 277-1263
jeff.sonnek@icrinc.com
Landec Corporation Reports Fourth Quarter and Full Fiscal Year 2022 Results
Recently announced intent to rename and rebrand to Lifecore Biomedical, along with leadership and Board changes
Lifecore segment revenues increased 6.9% to $27.6 million in fiscal fourth quarter, and increased 11.5% to $109.3 million for the full fiscal year 2022, as compared to the respective prior year periods
Lifecore segment EBITDA increased 14.5% to $8.8 million in fiscal fourth quarter, and increased 16.4% to $28.5 million for the full fiscal year 2022, as compared to the respective prior year periods
Lifecore segment adjusted EBITDA increased 15.9% to $8.9 million in fiscal fourth quarter, and increased 17.9% to $28.9 million for the full fiscal year 2022, as compared to the respective prior year periods
Introduces fiscal 2023 full year guidance for Lifecore
SANTA MARIA, CA & MINNEAPOLIS, MN – August 10, 2022 - Landec Corporation (Nasdaq: LNDC) (“Landec” or the “Company”), a diversified health and wellness company with two operating businesses, Lifecore Biomedical, Inc. (“Lifecore”) and Curation Foods, Inc. (“Curation Foods”), reported results for the fiscal 2022 fourth quarter ended May 29, 2022. Additionally, as reported today in a separate press release, the Company announced its path forward as a CDMO-focused life sciences company, complete with a corporate rebranding to Lifecore Biomedical, new ticker symbol, and the naming of its go-forward executive leadership team and Board of Directors.
CEO COMMENTS:
James G. Hall, CEO of Landec Corporation and President of Lifecore, commented, "Lifecore finished the year on a high note — we delivered full year revenue growth of 11.5% to $109.3 million and adjusted EBITDA growth of 18% to $28.9 million — both of which exceeded our full year fiscal 2022 goals. Our business remains very well positioned as a fully-integrated CDMO with highly differentiated capabilities for the development, fill and finish of complex sterile, injectable-grade pharmaceutical products. Lifecore is aligned with large and growing addressable markets with attractive underlying tailwinds and we have a long history of success, proven by our long-term customer relationships and low turnover. Looking ahead to fiscal 2023, our growth continues to be driven by our robust development pipeline and we remain focused on driving towards a multi-year acceleration of annual revenue growth into the mid- to high-teens based upon current pipeline characteristics and favorable industry tailwinds in the coming years."
LANDEC FISCAL FOURTH QUARTER 2022 BUSINESS HIGHLIGHTS:
As previously reported, on December 13, 2021 the Company closed on the sale of its Curation Foods' fresh packaged salads and vegetables business (the “Eat Smart Disposition”), and as such, those results are reflected as discontinued operations in all periods presented within the Company’s financial statements. The operations associated with the Company's remaining Curation Foods assets will continue to be reflected in its consolidated financial results until their eventual disposition, at which time they will be transitioned into discontinued operations.
•Consolidated revenues of $47.6 million, an increase of 6.0% year-over-year
•Consolidated gross profit of $11.5 million, a decrease of 21.1% year-over-year, primarily due to cost inflation due to industry supply chain disruption at Curation Foods
•Consolidated net loss from continuing operations of $35.9 million, which includes a non-cash goodwill and intangibles impairment charge of $27.0 million, net of taxes, related to the avocado products business and $7.0 million of restructuring and other non-recurring charges such as legal expenses, both net of tax
•Consolidated adjusted EBITDA of $6.0 million, compared to $6.3 million in the prior year period, a decrease of 3.8% year-over-year
•Lifecore segment adjusted EBITDA of $8.9 million, compared to $7.7 million in the prior year period, an increase of 15.9% year-over-year
LANDEC FISCAL YEAR 2022 BUSINESS HIGHLIGHTS:
•Consolidated revenues of $185.8 million, an increase of 8.3% year-over-year
•Consolidated gross profit of $50.6 million, an increase of 0.2% year-over-year
•Consolidated net loss from continuing operations of $46.1 million, which includes a non-cash goodwill and intangibles impairment charge of $27.0 million, net of taxes, related to the avocado products business and $17.2 million of restructuring and other non-recurring charges such as legal expenses, both net of tax
•Consolidated adjusted EBITDA of $23.0 million, compared to $17.9 million in the prior year period, an increase of 28.7% year-over-year
•Lifecore segment adjusted EBITDA of $28.9 million, compared to $24.5 million in the prior year period, an increase of 17.9% year-over-year
CONSOLIDATED FISCAL FOURTH QUARTER 2022 RESULTS:
Fiscal fourth quarter 2022 results compared to fiscal fourth quarter 2021 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited and in thousands, except per-share data) | | Three Months Ended | | Change |
| | May 29, 2022 | | May 30, 2021 | | Amount | | % |
| Revenues | | $ | 47,627 | | | $ | 44,916 | | | $ | 2,711 | | | 6 | % |
| Gross profit | | 11,508 | | | 14,580 | | | (3,072) | | | (21) | % |
| Net loss | | (35,882) | | | (1,444) | | | (34,438) | | | (2385) | % |
| Adjusted net income (loss)* | | (1,876) | | | 121 | | | (1,997) | | | N/M |
| Diluted net loss per share | | (1.22) | | | (0.05) | | | (1.17) | | | (2378) | % |
| Adjusted diluted net income (loss) per share* | | (0.01) | | | — | | | (0.01) | | | N/M |
| EBITDA* | | (30,723) | | | 2,896 | | | (33,619) | | | N/M |
| Adjusted EBITDA* | | 6,020 | | | 6,257 | | | (237) | | | (4) | % |
* See “Non-GAAP Financial Information” at the end of this release for more information and for a reconciliation of certain financial information.
Revenues increased $2.7 million year-over-year, which was primarily a result of a 6.9% increase in Lifecore segment revenues and a 4.9% increase in Curation Foods segment revenues.
Gross profit decreased $3.1 million year-over-year. Results were driven by a $2.1 million increase in the Lifecore segment that was more than offset by a $5.2 million decrease in the Curation Foods segment.
Net loss from continuing operations increased $34.4 million to a loss of $35.9 million for fiscal fourth quarter, which includes a non-cash goodwill and intangibles impairment charge of $27.0 million, net of taxes, related to the avocado products business and $7.0 million of restructuring and non-recurring charges, net of taxes, related to consolidating and optimizing operations associated with Project SWIFT. This compares to a net loss of $1.4 million in the prior year period, which includes $1.6 million of restructuring and non-recurring charges, net of tax, related to consolidating and optimizing operations associated with Project SWIFT.
Adjusted EBITDA decreased $0.2 million, or 3.8%, year-over-year, to $6.0 million for fiscal fourth quarter 2022, which excludes restructuring and other non-recurring charges. This compares to adjusted EBITDA of $6.3 million in the prior year fiscal fourth quarter. At the segment level during fiscal fourth quarter 2022, Lifecore generated $8.9 million in adjusted EBITDA, which represents an increase of $1.2 million, or 15.9%, versus the prior year period.
SEGMENT RESULTS:
Lifecore Segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited and in thousands) | | Three Months Ended | | Change | | Twelve Months Ended | | Change |
| May 29, 2022 | | May 30, 2021 | | Amount | | % | | May 29, 2022 | | May 30, 2021 | | Amount | | % |
| Revenue: | | | | | | | | | | | | | | | | |
| CDMO | | $ | 22,362 | | | $ | 21,923 | | | $ | 439 | | | 2 | % | | $ | 86,313 | | | $ | 75,297 | | | $ | 11,016 | | | 15 | % |
| Fermentation | | 5,251 | | | 3,916 | | | 1,335 | | | 34 | % | | 23,007 | | | 22,790 | | | 217 | | | 1 | % |
| Total revenue | | $ | 27,613 | | | $ | 25,839 | | | $ | 1,774 | | | 7 | % | | $ | 109,320 | | | $ | 98,087 | | | $ | 11,233 | | | 11 | % |
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 utilizing its specialized capabilities 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 fiscal fourth quarter 2022, Lifecore realized total revenues of $27.6 million, a 6.9% increase as compared to the prior year period driven by a 34.1% increase in its fermentation business and a 2.0% increase in its CDMO business. The increase is primarily due to the timing of shipments within the fiscal year for the fermentation business. For the full fiscal year, CDMO revenues increased 14.6%.
Lifecore replaced three projects in its development pipeline in fiscal fourth quarter, with the total remaining at 24 active developmental programs under contract. These projects are delineated as follows: early phase or proof of concept (5), Phase 1 and Phase 2 clinical development (11), and Phase 3 clinical development or scale-up/commercial validation activity (8). Lifecore currently manufactures 26 commercial products for 13 clients, which remains unchanged from fiscal third quarter 2022.
Curation Foods Segment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited and in thousands) | | Three Months Ended | | Change | | Twelve Months Ended | | Change |
| May 29, 2022 | | May 30, 2021 | | Amount | | % | | May 29, 2022 | | May 30, 2021 | | Amount | | % |
| Revenue: | | | | | | | | | | | | | | | | |
| Olive oil and vinegars | | $ | 2,270 | | | $ | 1,948 | | | $ | 322 | | | 17 | % | | $ | 9,287 | | | $ | 7,589 | | | $ | 1,698 | | | 22 | % |
| Avocado products | | 17,251 | | | 16,467 | | | 784 | | | 5 | % | | 65,269 | | | 63,575 | | | 1,694 | | | 3 | % |
| Technology | | 493 | | | 662 | | | (169) | | | (26) | % | | 1,910 | | | 2,295 | | | (385) | | | (17) | % |
| Total revenue | | $ | 20,014 | | | $ | 19,077 | | | $ | 937 | | | 5 | % | | $ | 76,466 | | | $ | 73,459 | | | $ | 3,007 | | | 4 | % |
Curation Foods is the Company’s natural food business. The Company continued its focus on execution of Project SWIFT – the Company’s value creation program that aims to strengthen the Curation Foods segment by simplifying the business, improving operating cost structure, and enhancing profitability with a focus on higher margin products. On December 13, 2021 the Company closed on the Eat Smart Disposition for $73.5 million in cash, subject to certain adjustments; those results have been reclassified as discontinued operations within the Company’s financial statements.
Curation Foods realized total revenues from continuing operations of $20.0 million for the fiscal fourth quarter, an increase of 4.9% versus the prior year period, primarily driven by a 16.5% increase in sales velocity from O Olive and a 4.8% increase in Avocado Products.
CASH FLOW & BALANCE SHEET
Cash used in operations was $24.4 million for the twelve month period ended May 29, 2022 compared to cash provided by operations of $15.0 million in the prior year period. Cash from investing activities increased $92.6 million versus the prior year period, primarily driven by proceeds from the Eat Smart disposition of $73.5 million plus sale of the Windset investment of $45.1 million. Capital expenditures were $28.1 million for the twelve month period ended May 29, 2022 primarily focused on supporting Lifecore’s long-term growth initiatives. Cash used in financing activities was $57.0 million for the twelve month period ended May 29, 2022 driven by repayments on the Company’s term debt.
During fiscal 2022, the Company repaid a total of $130.5 million in borrowings through the utilization of its net proceeds from the Windset investment sale and the Eat Smart Disposition, which was partially offset by additional borrowings during the year. The Company had cash and cash equivalents of $1.6 million as of May 29, 2022. Total bank debt, net of cash, at fiscal fourth quarter end was $136.4 million, consisting of its line of credit and long-term debt, compared to $192.7 million at fiscal 2021 year end.
FISCAL 2023 OUTLOOK:
The Company is introducing its full year fiscal 2023 guidance for its Lifecore and Corporate segments. Guidance metrics are provided below with growth figures that are compared to fiscal 2022:
•Lifecore segment revenue: range of $122 million to $126 million (+12% to +15%)
•Lifecore segment adjusted EBITDA: range of $31.0 million to $32.5 million (+7% to +12%)
•Other segment (corporate expense): range of ($7.0) million to ($7.5) million
Conference Call
The live webcast can be accessed via Landec’s website on the Investor Events & Presentations page. The webcast will be available for 30 days.
Date: Wednesday, August 10, 2022
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.
A replay of the call will be available through Wednesday, August 17, 2022 by calling toll-free: (844) 512-2921 or direct (412) 317-6671, and entering code 13731657.
About Landec Corporation
Landec Corporation (Nasdaq: LNDC) is a leading innovator of diversified health and wellness solutions with two operating businesses: Lifecore Biomedical, Inc. and Curation Foods, Inc. Lifecore Biomedical is a fully integrated contract development and manufacturing organization (CDMO) that offers highly differentiated capabilities in the development, fill and finish of complex 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. Curation Foods is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels. Curation Foods brands include Yucatan® and Cabo Fresh® avocado products and O Olive Oil & Vinegar® premium artisan products. 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, including with respects to EBITDA, adjusted EBITDA, Lifecore segment adjusted EBITDA, Curation Foods segment adjusted EBITDA, and Other segment adjusted EBITDA. 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, Lifecore segment adjusted EBITDA, Curation Foods segment adjusted EBITDA, and Other segment adjusted EBITDA.
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)
| | | | | | | | | | | |
| May 29, 2022 | | May 30, 2021 |
| (Unaudited) | | |
| ASSETS | | | |
| Current Assets: | | | |
| Cash and cash equivalents | $ | 1,643 | | | $ | 1,159 | |
| Accounts receivable, less allowance for credit losses | 48,326 | | | 41,430 | |
| Inventories | 66,966 | | | 63,076 | |
| Prepaid expenses and other current assets | 7,052 | | | 5,038 | |
| Current assets, discontinued operations | — | | | 37,618 | |
| Total Current Assets | 123,987 | | | 148,321 | |
| | | |
| Property and equipment, net | 130,435 | | | 120,286 | |
| Operating lease right-of-use assets | 8,580 | | | 17,098 | |
| Goodwill | 13,881 | | | 33,916 | |
| Trademarks/tradenames, net | 8,400 | | | 17,100 | |
| Customer relationships, net | 7,150 | | | 8,532 | |
| Other assets | 3,002 | | | 3,531 | |
| Other assets, discontinued operations | — | | | 154,140 | |
| Total Assets | $ | 295,435 | | | $ | 502,924 | |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current Liabilities: | | | |
| Accounts payable | $ | 15,802 | | | $ | 16,298 | |
| Accrued compensation | 9,262 | | | 7,754 | |
| Other accrued liabilities | 7,802 | | | 3,955 | |
| Current portion of lease liabilities | 5,026 | | | 1,600 | |
| Deferred revenue | 919 | | | 637 | |
| Line of credit | 40,000 | | | 29,000 | |
| Current portion of long-term debt, net | 599 | | | — | |
| Current liabilities, discontinued operations | — | | | 42,644 | |
| Total Current Liabilities | 79,410 | | | 101,888 | |
| | | |
| Long-term debt, net | 97,483 | | | 164,902 | |
| Long-term lease liabilities | 9,983 | | | 20,359 | |
| Deferred taxes, net | 232 | | | 6,140 | |
| Other non-current liabilities | 190 | | | 2,870 | |
| Non-current liabilities, discontinued operations | — | | | 3,981 | |
| Total Liabilities | 187,298 | | | 300,140 | |
| | | |
| Stockholders’ Equity: | | | |
| Common stock, $0.001 par value; 50,000 shares authorized; 29,513 and 29,333 shares issued and outstanding at May 29, 2022 and May 30, 2021, respectively | 30 | | | 29 | |
| Additional paid-in capital | 167,352 | | | 165,533 | |
| Retained earnings (accumulated deficit) | (58,659) | | | 38,580 | |
| Accumulated other comprehensive loss | (586) | | | (1,358) | |
| Total Stockholders’ Equity | 108,137 | | | 202,784 | |
| Total Liabilities and Stockholders’ Equity | $ | 295,435 | | | $ | 502,924 | |
LANDEC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Twelve Months Ended |
| May 29, 2022 | | May 30, 2021 | | May 29, 2022 | | May 30, 2021 |
| Product sales | $ | 47,627 | | | $ | 44,916 | | | $ | 185,786 | | | $ | 171,546 | |
| Cost of product sales | 36,119 | | | 30,336 | | | 135,233 | | | 121,075 | |
| Gross profit | 11,508 | | | 14,580 | | | 50,553 | | | 50,471 | |
| | | | | | | |
| Operating costs and expenses: | | | | | | | |
| Research and development | 2,056 | | | 1,900 | | | 7,841 | | | 7,423 | |
| Selling, general and administrative | 15,423 | | | 9,690 | | | 42,631 | | | 37,660 | |
| Impairment of goodwill and intangible assets | 28,735 | | | — | | | 28,735 | | | — | |
| Legal settlement charge | — | | | — | | | — | | | 1,763 | |
| Restructuring costs | 979 | | | 933 | | | 9,385 | | | 3,759 | |
| Total operating costs and expenses | 47,193 | | | 12,523 | | | 88,592 | | | 50,605 | |
| Operating loss | (35,685) | | | 2,057 | | | (38,039) | | | (134) | |
| | | | | | | |
| | | | | | | |
| Interest income | 15 | | | 17 | | | 81 | | | 48 | |
| Interest expense | (3,385) | | | (3,778) | | | (17,261) | | | (10,387) | |
| Loss on debt refinancing | — | | | — | | | — | | | (1,110) | |
| Other (expense) income, net | 2,655 | | | 47 | | | 3,296 | | | 111 | |
| Net loss before tax | (36,400) | | | (1,657) | | | (51,923) | | | (11,472) | |
| Income tax benefit (expense) | 518 | | 213 | | 5,839 | | 1,903 |
| Net loss from continuing operations | $ | (35,882) | | | $ | (1,444) | | | $ | (46,084) | | | $ | (9,569) | |
| | | | | | | |
| Discontinued operations: | | | | | | | |
| Loss from discontinued operations | $ | (596) | | | $ | (1,784) | | | $ | (51,276) | | | $ | (28,994) | |
| Income tax benefit | 7 | | | 362 | | | 121 | | | 5,898 | |
| Loss from discontinued operations, net of tax | (589) | | | (1,422) | | | (51,155) | | | (23,096) | |
| Net loss | (36,471) | | | (2,866) | | | (97,239) | | | (32,665) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Diluted net loss per share | | | | | | | |
| Loss from continuing operations | $ | (1.22) | | | $ | (0.05) | | | $ | (1.56) | | | $ | (0.33) | |
| Loss from discontinued operations | (0.02) | | | (0.05) | | | (1.74) | | | (0.79) | |
| Total diluted net loss per share | $ | (1.24) | | | $ | (0.10) | | | $ | (3.30) | | | $ | (1.12) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Shares used in diluted per share computation | 29,514 | | | 29,332 | | | 29,466 | | | 29,294 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
LANDEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
| | | | | | | | | | | |
| Twelve Months Ended |
| May 29, 2022 | | May 30, 2021 |
| Cash flows from operating activities: | | | |
| Net loss | $ | (97,239) | | | $ | (32,665) | |
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | |
| Impairment of goodwill and intangible assets | 60,792 | | | — | |
| Depreciation, amortization of intangibles, debt costs, and right-of-use assets | 17,788 | | | 19,867 | |
| | | |
| Deferred taxes | (6,884) | | | (7,893) | |
| Loss on disposal of property and equipment related to restructuring, net | 5,185 | | | 10,143 | |
| Stock-based compensation expense | 2,608 | | | 3,360 | |
| Loss on sale of Eat Smart | 336 | | | — | |
| Net loss on disposal of property and equipment held and used | 152 | | | 61 | |
| Provision (benefit) for expected credit losses | (14) | | | 418 | |
| Change in investment in non-public company, fair value | — | | | 11,800 | |
| Loss on debt refinancing | — | | | 1,110 | |
| Other, net | (426) | | | (74) | |
| | | |
| Changes in current assets and current liabilities: | | | |
| Accounts receivable, net | (6,292) | | | 5,775 | |
| Inventories | (6,081) | | | (3,352) | |
| Prepaid expenses and other current assets | (602) | | | 7,941 | |
| Accounts payable | 9,343 | | | (5,982) | |
| Accrued compensation | (2,522) | | | 3,270 | |
| Other accrued liabilities | (525) | | | 460 | |
| Deferred revenue | (18) | | | 778 | |
| Net cash (used in) provided by operating activities | (24,399) | | | 15,017 | |
| | | |
| Cash flows from investing activities: | | | |
| Proceeds from sale of Eat Smart | 73,500 | | | — | |
| Eat Smart sale net working capital adjustment and cash sale expenses | (9,839) | | | — | |
| Proceeds from sale of investment in non-public company | 45,100 | | | — | |
| Purchases of property and equipment | (28,134) | | | (23,769) | |
| Proceeds from sales of property and equipment | 1,141 | | | 12,913 | |
| Net cash provided by (used in) investing activities | 81,768 | | | (10,856) | |
| | | |
| Cash flows from financing activities: | | | |
| Proceeds from long-term debt | 20,000 | | | 170,000 | |
| Payments on long-term debt | (86,411) | | | (114,130) | |
| Proceeds from lines of credit | 55,111 | | | 100,000 | |
| Payments on lines of credit | (44,111) | | | (148,400) | |
| Payments for debt issuance costs | (821) | | | (10,484) | |
| Taxes paid by Company for employee stock plans | (789) | | | (405) | |
| | | |
| Net cash used in financing activities | (57,021) | | | (3,419) | |
| | | |
| Net increase in cash, cash equivalents and restricted cash | 348 | | | 742 | |
| Cash and cash equivalents and restricted cash, beginning of period | 1,295 | | | 553 | |
| Cash and cash equivalents and restricted cash, end of period | $ | 1,643 | | | $ | 1,295 | |
| | | |
| Supplemental disclosure of non-cash investing and financing activities: | | | |
| Purchases of property and equipment on trade vendor credit | $ | 2,260 | | | $ | 4,724 | |
LANDEC CORPORATION
SEGMENT RESULTS
(Unaudited and in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited and in thousands) | | Three Months Ended | | Change | | Twelve Months Ended | | Change |
| May 29, 2022 | | May 30, 2021 | | Amount | | % | | May 29, 2022 | | May 30, 2021 | | Amount | | % |
| Revenues: | | | | | | | | | | | | | | | | |
| Curation Foods | | $ | 20,014 | | | $ | 19,077 | | | $ | 937 | | | 5 | % | | $ | 76,466 | | | $ | 73,459 | | | $ | 3,007 | | | 4 | % |
| Lifecore | | 27,613 | | | 25,839 | | | 1,774 | | | 7 | % | | 109,320 | | | 98,087 | | | 11,233 | | | 11 | % |
| Total revenues | | $ | 47,627 | | | $ | 44,916 | | | $ | 2,711 | | | 6 | % | | $ | 185,786 | | | $ | 171,546 | | | $ | 14,240 | | | 8 | % |
| | | | | | | | | | | | | | | | |
| Gross profit: | | | | | | | | | | | | | | | | |
| Curation Foods | | $ | (1,853) | | | $ | 3,352 | | | $ | (5,205) | | | N/M | | $ | 6,808 | | | $ | 12,206 | | | $ | (5,398) | | | (44) | % |
| Lifecore | | 13,361 | | | 11,228 | | | 2,133 | | | 19 | % | | 43,745 | | | 38,265 | | | 5,480 | | | 14 | % |
| Total gross profit | | $ | 11,508 | | | $ | 14,580 | | | $ | (3,072) | | | (21) | % | | $ | 50,553 | | | $ | 50,471 | | | $ | 82 | | | — | % |
| | | | | | | | | | | | | | | | |
| Net (loss) income from continuing operations: | | | | | | | | | | | | | | | | |
| Curation Foods | | $ | (36,155) | | | $ | 453 | | | $ | (36,608) | | | N/M | | $ | (30,333) | | | $ | (357) | | | $ | (29,976) | | | 8397% |
| Lifecore | | 5,359 | | | 4,753 | | | 606 | | | 13 | % | | 16,675 | | | 14,461 | | | 2,214 | | | 15 | % |
| Other | | (5,086) | | | (6,650) | | | 1,564 | | | (24) | % | | (32,426) | | | (23,673) | | | (8,753) | | | 37 | % |
| Total net loss from continuing operations | | $ | (35,882) | | | $ | (1,444) | | | $ | (34,438) | | | (2385) | % | | $ | (46,084) | | | $ | (9,569) | | | $ | (36,515) | | | (382) | % |
| Loss from discontinued operations, net of tax: | | | | | | | | | | | | | | | | |
| Curation Foods | | $ | (589) | | | $ | (1,422) | | | $ | 833 | | | (59) | % | | $ | (48,114) | | | $ | (23,096) | | | $ | (25,018) | | | 108 | % |
| Other | | — | | | — | | | — | | | N/M | | (3,041) | | | — | | | (3,041) | | | N/M |
| Net (loss) income | | $ | (36,471) | | | $ | (2,866) | | | $ | (33,605) | | | 1173 | % | | $ | (97,239) | | | $ | (32,665) | | | $ | (64,574) | | | 198 | % |
| | | | | | | | | | | | | | | | |
| EBITDA: | | | | | | | | | | | | | | | | |
| Curation Foods | | $ | (36,316) | | | $ | (349) | | | $ | (35,967) | | | 10306 | % | | $ | (87,973) | | | $ | (22,956) | | | $ | (65,017) | | | 283 | % |
| Lifecore | | 8,815 | | | 7,702 | | | 1,113 | | | 14 | % | | 28,542 | | | 24,531 | | | 4,011 | | | 16 | % |
| Other | | (3,222) | | | (4,457) | | | 1,235 | | | (28) | % | | (15,709) | | | (16,123) | | | 414 | | | (3) | % |
| Total EBITDA | | $ | (30,723) | | | $ | 2,896 | | | $ | (33,619) | | | N/M | | $ | (75,140) | | | $ | (14,548) | | | $ | (60,592) | | | 416 | % |
Non-GAAP Financial Information and Reconciliations
EBITDA and adjusted EBITDA are non-GAAP financial measures. We define EBITDA as earnings before interest, income tax expense (benefit), and depreciation and amortization. We define adjusted EBITDA as EBITDA before certain restructuring and other non-recurring charges. 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 | | Twelve Months Ended |
| | May 29, 2022 | | May 30, 2021 | | May 29, 2022 | | May 30, 2021 |
| Net loss | | $ | (36,471) | | | $ | (2,866) | | | $ | (97,239) | | | $ | (32,665) | |
| Interest expense, net of interest income | | 3,370 | | | 3,761 | | | 17,180 | | | 11,449 | |
| Income tax benefit | | (518) | | | (213) | | | (5,839) | | | (1,903) | |
| Depreciation and amortization | | 2,896 | | | 2,214 | | | 10,758 | | | 8,571 | |
| Total EBITDA | | (30,723) | | | 2,896 | | | (75,140) | | | (14,548) | |
| Restructuring and other non-recurring charges (1) | | 7,419 | | | 1,939 | | | 18,273 | | | 9,339 | |
| Impairment of goodwill and intangibles | | 28,735 | | | — | | | 28,735 | | | — | |
| Loss from discontinued operations, net of tax | | 589 | | | 1,422 | | | 51,155 | | | 23,096 | |
| Total adjusted EBITDA | | $ | 6,020 | | | $ | 6,257 | | | $ | 23,023 | | | $ | 17,887 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| (Unaudited and in thousands) | | Lifecore | | Curation Foods | | Other | | Total |
| Three Months Ended May 29, 2022 | | | | | | | | |
| Net (loss) income | | $ | 5,359 | | | $ | (36,744) | | | $ | (5,086) | | | $ | (36,471) | |
| Interest expense, net of interest income | | (15) | | | — | | | 3,385 | | | 3,370 | |
| Income tax (benefit) expense | | 1,692 | | | (679) | | | (1,531) | | | (518) | |
| Depreciation and amortization | | 1,779 | | | 1,107 | | | 10 | | | 2,896 | |
| Total EBITDA | | 8,815 | | | (36,316) | | | (3,222) | | | (30,723) | |
| Restructuring and other non-recurring charges (1) | | 115 | | | 5,836 | | | 1,468 | | | 7,419 | |
| Impairment of goodwill and intangibles | | — | | | 28,735 | | | — | | | 28,735 | |
| Loss from discontinued operations, net of tax | | — | | | 589 | | | — | | | 589 | |
| Total adjusted EBITDA | | $ | 8,930 | | | $ | (1,156) | | | $ | (1,754) | | | $ | 6,020 | |
| | | | | | | | |
| Twelve Months Ended May 29, 2022 | | | | | | | | |
| Net (loss) income | | $ | 16,675 | | | $ | (78,447) | | | $ | (35,467) | | | $ | (97,239) | |
| Interest expense, net of interest income | | (72) | | | 300 | | | 16,952 | | | 17,180 | |
| Income tax (benefit) expense | | 5,266 | | | (13,831) | | | 2,726 | | | (5,839) | |
| Depreciation and amortization | | 6,673 | | | 4,005 | | | 80 | | | 10,758 | |
| Total EBITDA | | 28,542 | | | (87,973) | | | (15,709) | | | (75,140) | |
| Restructuring and other non-recurring charges (1) | | 387 | | | 11,958 | | | 5,928 | | | 18,273 | |
| Impairment of goodwill and intangibles | | — | | | 28,735 | | | — | | | 28,735 | |
| Loss from discontinued operations, net of tax | | — | | | 48,114 | | | 3,041 | | | 51,155 | |
| Total adjusted EBITDA | | $ | 28,929 | | | $ | 834 | | | $ | (6,740) | | | $ | 23,023 | |
| | | | | | | | |
| Three Months Ended May 30, 2021 | | | | | | | | |
| Net (loss) income | | $ | 4,753 | | | $ | (969) | | | $ | (6,650) | | | $ | (2,866) | |
| Interest expense and loss on debt refinancing, net of interest income | | — | | | 135 | | | 3,626 | | | 3,761 | |
| Income tax (benefit) expense | | 1,502 | | | (261) | | | (1,454) | | | (213) | |
| Depreciation and amortization | | 1,447 | | | 746 | | | 21 | | | 2,214 | |
| Total EBITDA | | 7,702 | | | (349) | | | (4,457) | | | 2,896 | |
| Restructuring and other non-recurring charges (1) | | — | | | — | | | 1,939 | | | 1,939 | |
| | | | | | | | |
| Loss from discontinued operations, net of tax | | — | | | 1,422 | | | — | | | 1,422 | |
| Total adjusted EBITDA | | $ | 7,702 | | | $ | 1,073 | | | $ | (2,518) | | | $ | 6,257 | |
| | | | | | | | |
| Twelve Months Ended May 30, 2021 | | | | | | | | |
| Net (loss) income | | $ | 14,461 | | | $ | (23,453) | | | $ | (23,673) | | | $ | (32,665) | |
| Interest expense and loss on debt refinancing, net of interest income | | — | | | 545 | | | 10,904 | | | 11,449 | |
| Income tax (benefit) expense | | 4,568 | | | (3,020) | | | (3,451) | | | (1,903) | |
| Depreciation and amortization | | 5,502 | | | 2,972 | | | 97 | | | 8,571 | |
| Total EBITDA | | 24,531 | | | (22,956) | | | (16,123) | | | (14,548) | |
| Restructuring and other non-recurring charges (1) | | — | | | 2,123 | | | 7,216 | | | 9,339 | |
| | | | | | | | |
| Loss from discontinued operations, net of tax | | — | | | 23,096 | | | — | | | 23,096 | |
| Total adjusted EBITDA | | $ | 24,531 | | | $ | 2,263 | | | $ | (8,907) | | | $ | 17,887 | |
(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 fourth quarter of fiscal year 2022, the Company incurred (1) $1.0 million of restructuring charges ($9.4 million year to date), primarily related to consulting, legal costs, lease impairment, and $6.4 million ($8.9 million year to date) of certain non-recurring charges, primarily related to potential environmental and compliance matters at Curation Foods’ Avocado Products factory in Silao, Mexico, and other restructuring related legal and consulting costs.
FOR IMMEDIATE RELEASE
Contact Information:
Investor Relations
Jeff Sonnek
(646) 277-1263
jeff.sonnek@icrinc.com
Landec Corporation Announces Intention to Become Lifecore Biomedical
Landec expected to rename and rebrand to Lifecore Biomedical and update Nasdaq ticker symbol
Names new CEO
Announces future changes to its Board of Directors
SANTA MARIA, CA & MINNEAPOLIS, MN – August 10, 2022 - Landec Corporation (Nasdaq: LNDC) (“Landec” or the “Company”), a diversified health and wellness company focused on its growing Lifecore Biomedical (“Lifecore”) business – a fully integrated contract development and manufacturing organization (“CDMO”) that offers highly differentiated capabilities in the development, fill and finish of complex sterile injectable pharmaceutical products in syringes and vials – today formally announced the Company’s path forward as a CDMO-focused life sciences company, complete with a planned corporate rebranding, new ticker symbol, and the naming of its go-forward executive leadership team and Board of Directors.
Board and Management Commentary
Craig Barbarosh, Chairman of the Board of Landec, stated, “With Project SWIFT rapidly coming to a close, we are thrilled to announce several corporate actions in support of our focused strategy to accelerate growth at Lifecore. Lifecore has produced compound revenue growth of 15% and EBITDA growth of 25% since fiscal 2015. We have supported the Lifecore business since we took ownership of the company, investing in new capacity and capabilities. As we look ahead, we expect Lifecore to continue to build upon its strong development pipeline, further expand its breadth of services and become the leading CDMO focused on complex projects. We are extremely excited about the path ahead for this exceptional business.”
Mr. Barbarosh added, “On behalf of the entire Board, I’d like to thank and acknowledge Dr. Albert Bolles for his significant contributions to Landec over the years, first as a Board member and subsequently as our CEO, as he readily stepped into the role to help us execute our action plan to extract value from our diverse businesses. Now that Project SWIFT is substantively complete, Dr. Bolles has agreed to transition to President of Curation Foods, Inc. to oversee the remaining disposition activities. Concurrent with this transition, the Board has appointed current Lifecore President, James G. Hall, as the Company’s new CEO and we look forward to his continued stewardship of this great CDMO asset. Additionally, I also thank and acknowledge the contributions of our four board members who intend either not to seek re-election to or step down from our Board as of our upcoming annual meeting in October of this year.”
Dr. Albert Bolles commented, “I want to commend the entire Landec organization for their resolve over the past couple of years to create significant value for the benefit of shareholders and to help navigate the Company through very challenging times – I am grateful for everyone’s individual contributions. In addition to streamlining the Curation Foods business, we also sold our fresh packaged salad and vegetable business, our Windset investment, and our BreatheWay business – utilizing those proceeds to collectively de-lever our balance sheet by approximately $112 million. I look forward to overseeing our team’s efforts to sell the remaining Curation Foods assets in the near-term. It has been a pleasure leading the team through this important transition and I am
excited to monitor Lifecore’s progress as it continues to build its development pipeline, leverage its capacity, and accelerate growth in the years to come.”
Transition to ‘Lifecore Biomedical’ and Related Corporate Actions
•Corporate rebranding from Landec Corporation to Lifecore Biomedical – The Company intends to formally rebrand its corporate identity, including changing its corporate name to Lifecore Biomedical in the near future. Lifecore is a fully integrated CDMO with highly differentiated capabilities for the development, fill and finish of sterile, injectable-grade pharmaceutical products. Lifecore addresses a large and growing market supported by underlying tailwinds and multiple levers to drive an acceleration in long-term revenue growth.
•Ticker symbol transition to ‘LFCR’ – Concurrent with the corporate rebranding, the Company expects to begin trading under its new ticker ‘LFCR’ on The Nasdaq Stock Market. No action is required by Landec stockholders with respect to the ticker symbol change and it does not affect the rights of stockholders. The common stock will continue to be listed on Nasdaq and the CUSIP number will remain unchanged. Timing of the cut-over to the new ticker symbol will be communicated in due course.
•Names new CEO and anticipated changes to the Board of Directors –
◦New CEO - The Board has appointed James G. Hall as its new Chief Executive Officer and to serve as a director on the Board of Directors, effective today. John Morberg, Landec’s current Chief Financial Officer will continue on in his role and support the finance organization. Dr. Albert Bolles will serve as President of Curation Foods, Inc. to oversee the remaining disposition activities related to the remaining Curation Foods businesses.
◦Board Changes – In connection with this announcement, four members of the Board of Directors of the Company, Deborah Carosella, Tonia Pankopf, Andrew K. Powell, and Catherine A. Sohn, have indicated that they will either step down or not stand for reelection to the Board of Directors at our next annual meeting in October of this year, which will create a life sciences focused Board of Directors with deep and diverse expertise, comprised of seven individuals.
Update on Remaining Curation Foods Assets
The Company intends to continue exploring potential sale opportunities for its remaining Curation Foods assets – Yucatan Foods and O Olive Oil & Vinegar. Subject to market conditions, the Company anticipates completing these sales during fiscal year 2023. Should both or either business be sold by the Company, the results of the operations of such businesses will be reported as discontinued operations for the period of sale and any comparable periods reported.
Fiscal Fourth Quarter 2022 Results to be Announced Today -- August 10, 2022
Date: Wednesday, August 10, 2022
Time: 2:00 p.m. Pacific time (5:00 p.m. Eastern time)
Direct Webcast link: https://viavid.webcasts.com/starthere.jsp?ei=1560352&tp_key=1933ba14f1
Via telephone: dial toll-free: 1-877-407-3982 (U.S.) or 1-201-493-6780 (International). A replay of the call will be available through Wednesday, August 17th, by calling toll-free: 1-844-512-2921 (U.S.) or 1-412-317-6671 (International), and entering code 13731657.
About Landec Corporation
Landec Corporation (Nasdaq: LNDC) is a leading innovator of diversified health and wellness solutions with two operating businesses: Lifecore Biomedical, LLC. and Curation Foods, Inc. Lifecore Biomedical is a fully integrated contract development and manufacturing organization (CDMO) that offers highly differentiated capabilities in the development, fill and finish of complex 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. Curation Foods is focused on innovating and distributing plant-based foods with 100% clean ingredients to retail, club and foodservice channels through its Yucatan® and Cabo Fresh® avocado products and O Olive Oil & Vinegar® premium artisan products. For more information about the Company, visit Landec’s website at www.landec.com.
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 of the Company to recognize the anticipated benefits of the sale of the remaining Curation Foods businesses, future liabilities that may arise from the previously completed divestiture transactions, the ability to successfully operate the remaining Curation Foods businesses during the pendency of their divestitures, , our ability to successfully complete the transition of the Company’s business and operations to focus on Lifecore, including the changes to its corporate name and ticker symbol, the executive team transition, and related matters, the timing of regulatory approvals, uncertainties related to COVID-19 and the impact of our responses to it, and the ability to successfully realize the anticipated benefits of the refocusing of the Company’s business on Lifecore. 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 Corp. Contact Information:
Investor Relations
Jeff Sonnek
(646) 277-1263
jeff.sonnek@icrinc.com
