LFCR 10-Q

Lifecore Biomedical, Inc. De (LFCR)

10-Q 2020-04-03 For: 2020-02-23

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Added on April 12, 2026

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Delaware			94-3025618
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification Number)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	LNDC	The NASDAQ Global Select Market


Large Accelerated Filer ___	Accelerated Filer X	Emerging Growth Company ___
Non Accelerated Filer ___	Smaller Reporting Company ___


	February 23, 2020		May 26, 2019
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	2,607	$	1,080
Accounts receivable, less allowance for doubtful accounts	69,763		69,565
Inventories	67,059		54,132
Prepaid expenses and other current assets	9,382		8,264
Total Current Assets	148,811		133,041

Investment in non-public company, fair value	61,300		61,100
Property and equipment, net	191,782		200,027
Operating leases	25,187		—
Goodwill	77,246		76,742
Trademarks/tradenames, net	29,928		29,928
Customer relationships, net	13,782		15,319
Other assets	2,024		2,934
Total Assets	$	550,060	$	519,091

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	63,660	$	53,973
Accrued compensation	8,458		10,687
Other accrued liabilities	11,111		10,001
Current portion of lease liabilities	3,900		75
Deferred revenue	618		499
Line of credit	58,500		52,000
Current portion of long-term debt, net	11,723		9,791
Other current liabilities, discontinued operations	—		65
Total Current Liabilities	157,970		137,091

Long-term debt, net	104,539		87,193
Long-term lease liabilities	26,757		3,532
Deferred taxes, net	11,662		19,393
Other non-current liabilities	1,464		1,738
Total Liabilities	302,392		248,947

Stockholders’ Equity:
Common stock, $0.001 par value; 50,000 shares authorized; 29,182 and 29,102 shares issued and outstanding at February 23, 2020 and May 26, 2019, respectively	29		29
Additional paid-in capital	162,077		160,341
Retained earnings	86,394		109,710
Accumulated other comprehensive (loss) income	(832)		64
Total Stockholders’ Equity	247,668		270,144
Total Liabilities and Stockholders’ Equity	$	550,060	$	519,091


	Three Months Ended						Nine Months Ended
	February 23, 2020		February 24, 2019		February 23, 2020		February 24, 2019
Product sales	$	152,928	$	155,554	$	434,235	$	404,779
Cost of product sales	132,881		133,985		383,338		349,988
Gross profit	20,047		21,569		50,897		54,791
Operating costs and expenses:
Research and development	2,747		2,739		8,390		8,005
Selling, general and administrative	18,783		15,588		54,000		43,791
Restructuring costs	13,528		—		13,934		—
Total operating costs and expenses	35,058		18,327		76,324		51,796
Operating (loss) income	(15,011)		3,242		(25,427)		2,995

Dividend income	281		413		843		1,238
Interest income	46		34		96		113
Interest expense	(2,211)		(1,771)		(6,455)		(3,275)
Other income, net	67		—		61		1,600
Net (loss) income from continuing operations before tax	(16,828)		1,918		(30,882)		2,671
Income tax benefit (expense)	5,310		(385)		7,840		(917)
Net (loss) income from continuing operations	$	(11,518)	$	1,533	$	(23,042)	$	1,754

Discontinued operations:
Loss from discontinued operations	$	—	$	(609)	$	—	$	(1,415)
Income tax benefit	—		143		—		333
Loss from discontinued operations, net of tax	—		(466)		—		(1,082)
Net (loss) income applicable to common stockholders	$	(11,518)	$	1,067	$	(23,042)	$	672

Basic net loss per share:
(Loss) income from continuing operations	$	(0.39)	$	0.05	$	(0.79)	$	0.06
Loss from discontinued operations	—		(0.02)		—		(0.04)
Total basic net (loss) income per share	$	(0.39)	$	0.03	$	(0.79)	$	0.02

Diluted net loss per share:
(Loss) income from continuing operations	$	(0.39)	$	0.05	$	(0.79)	$	0.06
Loss from discontinued operations	—		(0.01)		—		(0.04)
Total diluted net (loss) income per share	$	(0.39)	$	0.04	$	(0.79)	$	0.02

Shares used in per share computation
Basic	29,170		28,919		29,155		28,140
Diluted	29,170		29,151		29,155		28,399

Other comprehensive loss, net of tax:
Net unrealized losses on interest rate swaps (net of tax effect of $124, $215, $305, $190)	$	(411)	$	(595)	$	(896)	$	(608)
Other comprehensive loss, net of tax	(411)		(595)		(896)		(608)
Total comprehensive (loss) income	$	(11,929)	$	472	$	(23,938)	$	64


[X]			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


[ ]			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Three and Nine Months Ended February 23, 2020
				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity
	Common Stock
	Shares	Amount
Balance at May 26, 2019	29,102	$	29	$	160,341	$	109,710	$	64	$	270,144
ASC 842 transition adjustment	—	—		—		(274)		—		(274)
Issuance of stock under stock plans	44	—		—		—		—		—
Taxes paid by Company for employee stock plans	—	—		(55)		—		—		(55)
Stock-based compensation	—	—		528		—		—		528
Net loss	—	—		—		(4,784)		—		(4,784)
Other comprehensive loss, net of tax	—	—		—		—		(612)		(612)
Balance at August 25, 2019	29,146	$	29	$	160,814	$	104,652	$	(548)	$	264,947
Issuance of stock under stock plans	17	—		30		—		—		30
Taxes paid by Company for employee stock plans	—	—		(75)		—		—		(75)
Stock-based compensation	—	—		787		—		—		787
Net loss	—	—		—		(6,740)		—		(6,740)
Other comprehensive income, net of tax	—	—		—		—		127		127
Balance at November 24, 2019	29,163	$	29	$	161,556	$	97,912	$	(421)	$	259,076
Issuance of stock under stock plans	19	—		—		—		—		—
Taxes paid by Company for employee stock plans	—	—		(45)		—		—		(45)
Stock-based compensation	—	—		566		—		—		566
Net loss	—	—		—		(11,518)		—		(11,518)
Other comprehensive loss, net of tax	—	—		—		—		(411)		(411)
Balance at February 23, 2020	29,182	$	29	$	162,077	$	86,394	$	(832)	$	247,668


Three and Nine Months Ended February 24, 2019
				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Common Stock
	Shares	Amount
Balance at May 27, 2018	27,702	$	28	$	142,087	$	109,299	$	1,148	$	252,562
Issuance of stock under stock plans	47	—		—		—		—		—
Taxes paid by Company for employee stock plans	—	—		(10)		—		—		(10)
Stock-based compensation	—	—		728		—		—		728
Net income	—	—		—		190		—		190
Other comprehensive loss, net of tax	—	—		—		—		(89)		(89)
Balance at August 26, 2018	27,749	$	28	$	142,805	$	109,489	$	1,059	$	253,381
Issuance of stock under stock plans	36	—		—		—		—		—
Taxes paid by Company for employee stock plans	—	—		(237)		—		—		(237)
Stock-based compensation	—	—		938		—		—		938
Net loss	—	—		—		(585)		—		(585)
Other comprehensive income, net of tax	—	—		—		—		76		76
Balance at November 25, 2018	27,785	$	28	$	143,506	$	108,904	$	1,135	$	253,573
Issuance of stock under stock plans	18	—		230		—		—		230
Issuance of common stock in connection with Yucatan Foods acquisition	1,203	1		15,067		—		—		15,067
Taxes paid by Company for employee stock plans	—	—		(95)		—		—		(95)
Stock-based compensation	—	—		816		—		—		816
Net income	—	—		—		1,067		—		1,067
Other comprehensive loss, net of tax	—	—		—		—		(595)		(595)
Balance at February 24, 2019	29,006	$	29	$	159,524	$	109,971	$	540	$	270,064


(In thousands)	February 23, 2020		May 26, 2019		February 24, 2019		May 27, 2018
Cash and cash equivalents	$	2,607	$	1,080	$	1,722	$	2,899
Restricted cash	193		385		385		325
Cash, discontinued operations	—		—		—		(8)
Cash, cash equivalents and restricted cash	$	2,800	$	1,465	$	2,107	$	3,216


(In thousands)	AOCI
Accumulated OCI, net, as of May 26, 2019	$	64
Unrealized losses on interest rate swap contracts, net of tax effect	(896)
Accumulated OCI, net, as of February 23, 2020	$	(832)


	At February 23, 2020	At May 26, 2019
Cost of debt	5.1% to 5.5%	5.1% to 5.5%
Market price of risk adjustment	14%	14%
EBITDA volatility	28%	28%


	At February 23, 2020	At May 26, 2019
Revenue growth rates	6% to 7%	6%
Expense growth rates	5% to 7%	6%
Income tax rates	15%	15%
Discount rates	12%	12%


(In thousands)	Impact on value of investment in Windset as of February 23, 2020
10% increase in revenue growth rates	$	5,400
10% increase in expense growth rates	$	(4,200)
10% increase in income tax rates	$	(500)
10% increase in discount rates	$	(3,600)


(In thousands)	Fair Value at February 23, 2020										Fair Value at May 26, 2019
Assets:	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Interest rate swap contracts	$	—	$	58	$	—	$	—	$	644	$	—
Assets held for sale - nonrecurring	—		—		2,607		—		—		—
Investment in non-public company	—		—		61,300		—		—		61,100
Total assets	$	—	$	58	$	63,907	$	—	$	644	$	61,100
Liabilities:
Interest rate swap contracts	$	—	$	1,145	$	—	$	—	$	482	$	—
Contingent consideration liability	—		—		—		—		—		500
Total liabilities	$	—	$	1,145	$	—	$	—	$	482	$	500


	Nine Months Ended
	February 23, 2020		February 24, 2019
Cash flows from operating activities:
Consolidated net (loss) income	$	(23,042)	$	672
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, amortization of intangibles and amortization of debt costs	13,800		10,506
Stock-based compensation expense	1,881		2,482
Deferred taxes	(7,881)		540
Change in investment in non-public company, fair value	(200)		(1,600)
Change in contingent consideration liability	(500)		(3,500)
Net loss (gain) on disposal of property and equipment	135		(24)
Pacific Harvest note receivable reserve	1,202		—
Non-cash restructuring and impairment of assets charges	11,518		—
Other, net	139		—
Changes in current assets and current liabilities:
Accounts receivable, net	(198)		315
Inventories	(12,927)		(1,024)
Prepaid expenses and other current assets	551		1,066
Accounts payable	11,791		11,912
Accrued compensation	(2,230)		(3,061)
Other accrued liabilities	1,504		755
Deferred revenue	119		(1,590)
Net cash (used in) provided by operating activities	(4,338)		17,449

Cash flows from investing activities:
Purchases of property and equipment	(22,118)		(33,144)
Acquisition of Yucatan Foods (Note 2), net of cash acquired	—		(59,872)
Proceeds from collections of notes receivable	364		404
Proceeds from sales of fixed assets	2,432		239
Net cash used in investing activities	(19,322)		(92,373)

Cash flows from financing activities:
Proceeds from sale of common stock	30		230
Taxes paid by Company for employee stock plans	(175)		(342)
Proceeds from debt	27,500		60,000
Payments on long-term debt	(8,094)		(2,564)
Proceeds from lines of credit	84,400		34,000
Payments on lines of credit	(77,900)		(17,000)
Payments for debt issuance costs	(766)		(509)


(In thousands)	February 23, 2020		May 26, 2019
Raw materials	$	29,893	$	23,195
Work in progress	4,343		4,189
Finished goods	32,823		26,748
Total	$	67,059	$	54,132


(In thousands)	Three Months Ended						Nine Months Ended
Curation Foods:	February 23, 2020		February 24, 2019		February 23, 2020		February 24, 2019
Salads	$	50,402	$	49,387	$	149,819	$	140,417
Core vegetables	61,050		68,071		174,684		195,203
Emerging brands	16,030		14,394		49,403		17,394
Total	$	127,482	$	131,852	$	373,906	$	353,014


	Three Months Ended						Nine Months Ended
Lifecore:	February 23, 2020		February 24, 2019		February 23, 2020		February 24, 2019
Aseptic	$	6,802	$	7,432	$	22,242	$	21,326
Fermentation	11,442		11,450		17,211		16,436
Development services	7,202		4,820		20,876		14,003
Total	$	25,446	$	23,702	$	60,329	$	51,765


(In thousands)	Windset Investment		Contingent Consideration Liability
Balance as of May 26, 2019	$	61,100	$	500
Fair value change	200		(500)
Balance as of February 23, 2020	$	61,300	$	—


(In thousands)
Cash consideration	$	59,898
Stock consideration	15,068
	$	74,966


	Three Months Ended						Nine Months Ended
(In thousands, except per share amounts)	February 23, 2020		February 24, 2019		February 23, 2020		February 24, 2019
Numerator:
Net (loss) income applicable to common stockholders	$	(11,518)	$	1,067	$	(23,042)	$	672
Denominator:
Weighted average shares for basic net loss per share	29,170		28,919		29,155		28,140
Effect of dilutive securities:
Stock options and restricted stock units	—		232		—		259
Weighted average shares for diluted net loss per share	29,170		29,151		29,155		28,399

Diluted net (loss) income per share	$	(0.39)	$	0.04	$	(0.79)	$	0.02


(In thousands, except term and discount rate)	Three Months Ended		Nine Months Ended
	February 23, 2020		February 23, 2020
Finance lease cost:
Amortization of leased assets	$	29	$	86
Interest on lease liabilities	89		269
Operating lease cost	1,626		4,791
Variable lease cost and other	725		1,279
Total lease cost	$	2,469	$	6,425

Weighted-average remaining lease term:
Operating leases			11.37
Finance leases			2.85
Weighted-average discount rate:
Operating leases			5.26		%
Finance leases			9.99		%


(In thousands)	Operating Leases
Fiscal year 2020	$	5,056
Fiscal year 2021	4,044
Fiscal year 2022	3,589
Fiscal year 2023	3,350
Fiscal year 2024	3,047
Thereafter	9,335
Total	$	28,421


(In thousands)	Capital Leases
Fiscal year 2020	$	486
Fiscal year 2021	489
Fiscal year 2022	460
Fiscal year 2023	3,490
Fiscal year 2024	—
Thereafter	—
Total minimum lease payment	4,925
Less: amounts representing interest and taxes	(1,291)
Total	3,634
Less: current portion included in other accrued liabilities	(102)
Long-term capital lease obligation	$	3,532


	Three Months Ended						Nine Months Ended
(In millions)	February 23, 2020		February 24, 2019		February 23, 2020		February 24, 2019
Canada	$	17.5	$	24.1	$	52.3	$	40.2
Belgium	9.3		9.9		12.4		2.5
Ireland	0.7		1.4		3.2		2.3
All Other Countries	1.8		0.8		5.1		2.0


(In thousands)	Curation Foods⁽¹⁾		Lifecore		Other		Total
Three Months Ended February 23, 2020
Net sales	$	127,482	$	25,446	$	—	$	152,928
Gross profit	9,162		10,885		—		20,047
Net (loss) income from continuing operations	(12,636)		4,910		(3,792)		(11,518)
Depreciation and amortization	3,356		1,272		22		4,650
Dividend income	281		—		—		281
Interest income	—		—		46		46
Interest expense	1,376		—		835		2,211
Income tax (benefit) expense	(4,901)		1,467		(1,876)		(5,310)

Nine Months Ended February 23, 2020
Net sales	$	373,906	$	60,329	$	—	$	434,235
Gross profit	28,874		22,023		—		50,897
Net (loss) income from continuing operations	(23,154)		6,974		(6,862)		(23,042)
Depreciation and amortization	9,704		3,705		69		13,478
Dividend income	843		—		—		843
Interest income	31		—		65		96
Interest expense	4,128		—		2,327		6,455
Income tax (benefit) expense	(7,210)		1,920		(2,550)		(7,840)

Three Months Ended February 24, 2019⁽²⁾
Net sales	$	131,852	$	23,702	$	—	$	155,554
Gross profit	9,993		11,576		—		21,569
Net income (loss) from continuing operations	(6,350)		5,835		2,048		1,533
Depreciation and amortization	2,875		1,028		145		4,048
Dividend income	413		—		—		413
Interest income	26		—		8		34
Interest expense	1,164		—		607		1,771
Income tax expense (benefit)	(686)		1,946		(875)		385

Nine Months Ended February 24, 2019⁽²⁾
Net sales	$	353,014	$	51,765	$	—	$	404,779
Gross profit	34,570		20,221		—		54,791
Net income (loss) from continuing operations	(4,385)		6,586		(447)		1,754
Depreciation and amortization	7,109		2,982		415		10,506
Dividend income	1,238		—		—		1,238
Interest income	87		—		26		113
Interest expense	2,027		—		1,248		3,275
Income tax expense (benefit)	116		2,196		(1,395)		917


(In thousands)	Curation Foods		Lifecore					Other						Total
Three Months Ended February 23, 2020
Asset write-off costs	$	10,648	$		—	$		—		$	10,648
Employee severance and benefit costs	1,135		—					610						1,745
Lease costs	392		—					26						418
Other restructuring costs	529		—					188						717
Total restructuring costs	$	12,704	$	—				$	824					$	13,528

Nine Months Ended February 23, 2020
Asset write-off costs	$	10,648	$		—	$	406					$	11,054
Employee severance and benefit costs	1,135		—					610						1,745
Lease costs	392		—					26						418
Other restructuring costs	529		—					188						717
Total restructuring costs	$	12,704	$	—				$	1,230					$	13,934


(In thousands)	Three Months Ended						Change						Nine Months Ended				Change
	February 23, 2020		February 24, 2019		Amount		%		February 23, 2020		February 24, 2019		Amount		%
Curation Foods	$	127,482	$	131,851	$	(4,369)	(3)	%	$	373,906	$	353,014	$	20,892	6	%
Lifecore	25,446		23,703		1,743		7	%	60,329		51,765		8,564		17	%
Total Revenues	$	152,928	$	155,554	$	(2,626)	(2)	%	$	434,235	$	404,779	$	29,456	7	%


Exhibit Number			Exhibit Title
10.1			Seventh Amendment to Credit Agreement, dated March 19, 2020, by and among Landec Corporation, Curation Foods, Inc., GreenLine Logistics, Inc., Yucatan Foods, Inc., Camden Fruit Corp., BMO Harris Bank, N.A., City National Bank and JPMorgan Chase Bank, N.A (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 25, 2020).

31.1+			CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

31.2+			CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

32.1+			CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

32.2+			CFO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**			XBRL Instance

101.SCH**			XBRL Taxonomy Extension Schema

101.CAL**			XBRL Taxonomy Extension Calculation

101.DEF**			XBRL Taxonomy Extension Definition

101.LAB**			XBRL Taxonomy Extension Labels

101.PRE**			XBRL Taxonomy Extension Presentation

+			Filed herewith.

** XBRL			information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.