WEB NEWS Comments & Business Outlook
First Quarter 2013 Results
Revenues increased 39% to $102.1 million compared to revenues of $73.3 million for the first quarter a year ago.
Net income increased 40% to $2.5 million or $0.10 per share compared to $1.8 million or $0.07 per share for the first quarter of last year.
Gary Steele, Landec Chairman and CEO, commented, “We had a productive first quarter with revenues growing 39% and net income increasing 40%. Net income and margins were adversely impacted during the first quarter of fiscal year 2013 by the drought in the Midwest which resulted in approximately $1.2 million of incremental costs associated with the sourcing of green beans. Conversely, net income was positively impacted by the shift of $1.9 million of revenue and $1.0 million of pre-tax profit at Lifecore to the first quarter that had been planned for the second quarter. Without this shift, revenues and profits for Lifecore would have been in line with our plan and guidance for the first quarter in which we had expected Lifecore to record lower revenues and profits during the first quarter compared to the first quarter of last year. The drought issue in the first quarter and the shift in a shipment at Lifecore do not change our expected results for the first half or for the full fiscal year of 2013.”
“Our strategy for growth is to focus on our core food and biomedical materials businesses, while capitalizing on our technology and on our strong channels of distribution in order to drive growth across all our businesses. We are making good progress as evidenced by the growth in revenues, gross profit and net income during last fiscal year and the first quarter of this fiscal year. We are tracking well towards meeting our financial guidance for fiscal year 2013, which is to grow revenues by approximately 30% and net income by 25% to 35%,” concluded Steele.
Comments & Business Outlook
Fourth Quarter 2012 Results
Revenues for the fourth quarter of fiscal year 2012 increased 21% to $82.6 million compared to revenues of $68.1 million for the fourth quarter of fiscal year 2011.
Net income increased to $2.8 million, or $0.11 per diluted share, compared to a net loss of $2.7 million, or $0.10 per share, during the fourth quarter of fiscal year 2011.
Gary Steele, Landec’s Chairman and CEO, commented, “We had a very good fourth quarter. As compared to the fourth quarter of fiscal year 2011, the Apio total value-added business grew revenues 31% during the quarter due to GreenLine revenues of $9.1 million and a $5.2 million growth in sales for Apio’s non-GreenLine value-added businesses. In addition, Lifecore grew revenues 24% during the quarter. Net income, which included net income from GreenLine of $1.6 million and acquisition related expenses of $2.0 million, increased 36% during the fourth quarter of fiscal year 2012, after excluding the goodwill write off of $4.8 million from the results for the fourth quarter of fiscal year 2011.”
Management Comments and Guidance for Fiscal Year 2013
“As reflected in our financial results, we had a very good fiscal year 2012 with revenue growth of 15% and net income growth of 46%, after excluding the $4.8 million goodwill write off in fiscal year 2011, and we plan to continue our growth path into fiscal year 2013. For fiscal year 2013, we plan to grow Landec revenues by approximately 30% and net income by 25% to 35% compared to fiscal year 2012. Landec’s strategy, as evidenced by the growth in revenues, gross profit and net income during fiscal year 2012, is to focus on our core food and biomaterial businesses and also to capitalize on our unique polymer technology and on our strong channels of distribution to drive growth across our businesses,” concluded Mr. Steele.
Ron Midyett, Apio’s CEO stated, “The acquisition of GreenLine and our investment in Windset have significantly contributed to the year-over-year growth in both revenues and pre-tax income for Apio. In addition, our non-GreenLine value-added businesses realized very good growth as a result of the addition of new customers, increased sales to existing customers, and new product introductions. Our Cal-Ex export business also had a very good year achieving record revenues and pre-tax income during fiscal year 2012.”
Dennis Allingham, Lifecore’s CEO, said, “Lifecore has recently been notified by two of its customers that they have received product clearances by the FDA. Lifecore expects that these new products recently approved by the FDA, combined with anticipated increases in sales of existing products, will result in Lifecore growing revenues by approximately 15% in fiscal year 2013, while maintaining historical margins.”
Acquisition Activity
MENLO PARK, Calif.--(BUSINESS WIRE ® Coating and Seed Technology Companies, a leading provider of seed and coating technology products and services to the seed industry. The partnership provides Landec access to growing global markets for its polymer technology and enables Landec to exit the day-to-day operations of its agricultural seed coating business. These agreements enable Landec to focus on developing new polymer formulations for an agricultural market increasingly dependent on seed coating technology and to leverage INCOTEC’s global presence in the seed treatment markets.
In the first agreement, Landec sold its seed subsidiary, Landec Ag LLC, to INCOTEC Holding North America, Inc. Landec Ag was sold to INCOTEC for $600,000, which will result in a gain of approximately $400,000.
Acquistion of GreenLine Foods from 4/23/2012
MENLO PARK, Calif.--(BUSINESS WIRE $95 million to $100 million and EBITDA is estimated to be between $10 million to $11 million.
The acquisition of GreenLine combines two leading brands in the fresh-cut produce market, the Apio Eat Smart® brand and the GreenLine® brand, resulting in combined market presence in approximately 80% of North American retail grocery store sites, supported by GreenLine’s strategic and extensive East Coast processing and distribution facilities. GreenLine’s primary production facilities are located in Bowling Green, Ohio and Hanover, Pennsylvania. Additional production facilities are located in Vero Beach, Florida and Pico Rivera, California with distribution centers in Chester, New York and Rock Hill, South Carolina. The addition of GreenLine’s significant footprint on the East Coast and dedicated fleet of privately operated trucks complements and strengthens Apio’s California base of operations.
Under the agreement with Riverside, Apio acquired all of the outstanding equity interests of GreenLine for $63.0 million in cash with no assumed debt. The agreement also includes future earn-out potential for Riverside of up to $7.0 million based on GreenLine achieving certain financial targets during calendar year 2012. In conjunction with the acquisition, Apio obtained $31.8 million in term financing secured by Apio’s and GreenLine’s fixed assets. In addition, Apio entered into a five-year, $25.0 million working capital line, with an interest rate of LIBOR plus 2%, based on the combination of Apio and GreenLine accounts receivable and eligible inventory balances. The term debt is comprised of a $12.7 million equipment loan which matures in seven years with a fixed interest rate of 4.37% and a $19.1 million real estate loan that matures in ten years with a fixed interest rate of 4.02%. Both the term financing and the working capital line are being financed by GE Capital.
For the fiscal year ending May 27, 2012, Landec will record approximately $800,000 of acquisition related expenses. In addition, the Company will record approximately $1.0 million of loan origination fees which will be amortized over approximately seven years. The Company is forecasting that GreenLine’s operating results for the period from the close of the acquisition to our fiscal year end of May 27, 2012 will offset a majority of the acquisition related expenses.
For fiscal year 2012, as a result of including GreenLine operating results for the last five weeks, we are increasing our revenue guidance and maintaining our net income guidance. For fiscal year 2012, we now expect revenues to grow more than 10% compared to our previous guidance for revenues to grow 9% to 10% and we are maintaining our guidance for net income to grow approximately 40% compared to fiscal year 2011, after adding back the one-time impairment charge of $4.8 million to net income for fiscal year 2011.
Gary Steele, Landec’s Chairman and CEO, commented, “The acquisition of GreenLine is consistent with our strategy for profitable growth in our core businesses by investing in opportunities where we can accelerate growth while increasing our net income. GreenLine’s product line is synergistic with our well established channels of distribution and significantly expands Apio’s customer base, product line and geographic presence. In addition to providing greater penetration for our products in the market and advancing Apio’s long-term growth and profitability goals, we see operational and customer synergies that can be realized in the next 12 to 24 months.”
Ron Midyett, CEO of Landec’s Apio business, added, “U.S. consumer demand is growing for the convenience of pre-washed, trimmed and ready-to-cook fresh-cut green beans. GreenLine is benefiting from this growth based on its leading market position supported by strong produce sourcing and a national distribution network to ensure year-round supply of high quality fresh-cut green bean products to its customers. With this investment we have added new growth products, significantly expanded Apio’s customer base in retail grocery, added new foodservice customers, and acquired strategic East Coast processing and distribution facilities. These new capabilities will allow Apio to offer enhanced services to our customers with a broader range of products, all with a continued commitment to product quality and food safety.”
Concluded Steele, “The acquisition of GreenLine will serve to significantly grow Apio’s already strong market momentum demonstrated by Apio’s 19% unit volume growth in its value-added, fresh-cut specialty packaged vegetable business over the last nine months compared to the overall fresh-cut produce category growth in volume of 6.2%. Apio’s unit volume growth and market share, along with that of GreenLine, will continue to benefit from Apio’s focus on advancing and improving its competitive advantages in technology, product line breadth and quality, customer service and shipping logistics.”
Joint Venture
Licensing agreements
MENLO PARK, Calif.--(BUSINESS WIRE entered into three agreements with INCOTEC ® Coating and Seed Technology Companies, a leading provider of seed and coating technology products and services to the seed industry. The partnership provides Landec access to growing global markets for its polymer technology and enables Landec to exit the day-to-day operations of its agricultural seed coating business. These agreements enable Landec to focus on developing new polymer formulations for an agricultural market increasingly dependent on seed coating technology and to leverage INCOTEC’s global presence in the seed treatment markets.
In the second agreement, Landec entered into a seven-year exclusive technology license and polymer supply agreement with INCOTEC Field Crops North America LLC for the use of Landec’s Intellicoat® polymer seed coating technology for male inbred corn which is sold under the Pollinator Plus® label. This license does not include the use of Intellicoat for the controlled release of an active ingredient for agricultural applications which will be retained by Landec. Landec will be the exclusive supplier of Pollinator Plus polymer to INCOTEC during the term of the license agreement and Landec will receive a royalty equal to 20% of the revenues realized by INCOTEC from the sale of or sublicense of Pollinator Plus coatings during the first four years of the agreement and 10% for the last three years of the agreement.
In the third agreement, Landec entered into a five-year exclusive technology license and polymer supply agreement with INCOTEC HOLDINGS B.V. for the joint development of new polymer and unique coatings for use in seed treatment formulations. In this agreement Landec will receive a value share which will be mutually agreed to by both parties prior to each application being developed.
Gary Steele, Landec’s Chairman and CEO, stated, “These agreements with INCOTEC allow Landec to focus on its two core businesses, food products and biomedical materials, while capitalizing on our Intelimer® polymer technology for agricultural applications by leveraging INCOTEC’s existing global distribution channels. Landec will retain all rights to its controlled release technology for agriculture. INCOTEC has worldwide operations and is rapidly growing its North American operations for supplying seed treatment formulations to major seed companies. Landec Ag’s facility and operations in Oxford, Indiana will now be operated by INCOTEC and Landec will provide polymer supply and R&D support from our Menlo Park, California location. We are very pleased to be working with INCOTEC, a market leader in seed coating formulations.”
