Landec (NASDAQ:LNDC)

Second Quarter 2013 Results

• Revenues for the second quarter of fiscal year 2013 increased by 41% to $114.7 million compared to revenues of $81.6 million for the second quarter of fiscal year 2012.
• Net income increased by 167% to $8.9 million, or $0.34 per share, compared to net income of $3.3 million, or $0.13 per share, during the second quarter of fiscal year 2012.
• Non-gaap EPS for the second quarter 2013 of $0.19 vs $0.13 in prior year period.

Revenues and net income for the second quarter and the first half of fiscal year 2013 reflect strong operating results in our fresh-cut specialty packaged food subsidiary, Apio, Inc.'s value-added business that includes GreenLine Holding Company ("GreenLine"), which was acquired in April 2012, and Apio's export business. In addition to the strong operating results, the Company concluded at the end of the second quarter of fiscal year 2013, based on GreenLine's revenues for the first eleven months of calendar year 2012 and projections for December of 2012, that the required revenue target to meet the minimum earn-out payment to the former GreenLine owners, a target derived from the revenue projections of the former owners of GreenLine, will not be met. As a result, the $3.9 million earn-out liability recorded at the close of the GreenLine acquisition was reversed as of November 25, 2012 and the corresponding increase in operating income is reflected on the Consolidated Condensed Statements of Income under the caption "Change in value of contingent consideration" in this release (see Question 5 in the Questions and Answers section for more details). Also today, as reported in a separate release by Landec, the Company has restated its financial statements for the first quarter of fiscal year 2013 to reflect a $2.9 million increase in the previously reported fair market value of Windset Holdings 2010 Ltd. ("Windset").

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.

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.”