Menlo Park, California
September 10, 2002
Landec Corporation (Nasdaq:LNDC), a developer and marketer
of technology-based polymer products for food, agricultural and
licensed partner applications, today reported results for the
third fiscal quarter ended July 28, 2002.
Total revenues for the quarter were $44.5 million versus $47.1
million in the third quarter of fiscal 2001. Landec reported a
net loss from continuing operations applicable to common
shareholders of $586,000, or $0.03 per share, compared with a
net loss of $1.6 million, or $0.09 per share, for the year ago
quarter. Revenues for the first nine months of fiscal 2002 were
$141.9 million versus revenues of $151.6 million a year ago. The
Company reported net income from continuing operations
applicable
to common shareholders of $1.1 million or $0.06 per diluted
share for the first nine months of fiscal 2002 compared to a
loss of $2.0 million or $0.12 per share, in the first nine
months of fiscal 2001. EBITDA -- earnings before interest,
taxes, depreciation and amortization -- for the third quarter
was $750,000 versus $299,000 in the third quarter of last year.
For the nine-month period, EBITDA was $5.1 million versus $3.5
million for the same period last year.
The results for the third quarter and for the first nine months
of fiscal 2002 include the impact of the change in accounting
for the amortization of intangibles. Intangibles deemed to have
an indefinite life are no longer amortized. The implementation
of this change increased third quarter net income by
approximately $656,000, or $0.03 per share and net income for
the first nine months by approximately $1.9 million, or $0.09
per diluted share. In addition, during the third quarter of
fiscal year 2002 the Company sold its Reedley fruit processing
facility for net proceeds of $2.2 million, resulting in a gain
of $436,000, or $0.02 per share.
"Revenues for the quarter and the first nine months are down 6%
as compared to the same periods last year because of the
Company's earlier decision to downsize its "fee-for-service"
commodity produce business," said Gary Steele, president and CEO
of Landec. "At the same time, revenues for the quarter from our
specialty packaging value-added produce business increased 29%
as compared to the year ago quarter. For the first nine months
revenues from our value-added business increased 18% and
revenues from our agricultural seed business increased
20% compared to the same period last year. Gross margins as a
percent of revenues increased to 15% in the third quarter of
fiscal year 2002 from 13% in last year's third quarter and for
the nine months gross margins have increased to 18% this year
from 15% last year."
"We expect fiscal 2002 revenues to be lower than the previous
year due to our strategic decision to downsize our
"fee-for-service" business which will decrease service revenues
for the year, as can be seen in our year to date results. While
service revenues will decrease, we expect revenues from product
sales to increase 10% to 20% from the prior year and we expect
gross margins as a percent of product sales to continue to
increase," continued Steele.
"Our third quarter results reflect the impact of the expanded
efforts we are expending on our banana packaging technology
program. As outlined in our press release on August 21, 2002, we
have incurred considerable incremental expense to expand our
banana sourcing and market trials in order to capitalize on this
opportunity. For the three and nine month periods ended July 28,
2002, the efforts to expand our banana program have impacted our
bottom line by approximately $700,000 and $1.5
million, respectively, with up to an additional $500,000
expected to be spent in the fourth quarter on these efforts,"
Steele added.
"Our R&D and trial work for the banana technology program is
focused on three main objectives: (1) qualifying sources from
large, multinational banana shipping companies, (2) optimizing
the use of our 40 lb. Intellipac(TM) package so that the
extended shelf life we deliver can be translated into consistent
savings and increased sales for the retail grocery chains and
(3) developing new package sizes for consumers that will allow
bananas to be sold in ways that are unique to the industry. We
know the market is in need of technology that can extend banana
shelf life and lower the costs to retailers. Since April 2002 we
have sold nearly $5 million of Eat Smart(R) bananas using our
Intellipac technology. We are not, however, comfortable
continuing to sell to the retail grocery marketplace until we
have qualified additional sources of bananas and further
optimize the technology for the 40 lb. package application. In
the meantime, the Company is focusing its short-term efforts for
its Intellipac banana packaging technology on opportunities
which include market segments such as the food service market
whose needs can be currently met with Landec's existing banana
sources," stated Steele.
"The success of our Intellipac food packaging technology has
allowed us to convert not only fresh-cut produce but also whole
produce commodities into value added products that bring real
differentiation to retailers and to growers. We project that
Apio's Eat Smart products using our proprietary Intellipac
specialty packaging will grow to over 50% of Apio's revenues
this year from 40% last year," Steele added.
Commenting on the financial condition of the Company, Steele
said, "During the quarter we used $7.4 million in cash, of which
$6.0 million was used to pay down debt. The ending cash balance
of $1.2 million plus $10.0 million available under our lines of
credit gives us a combined cash and lines of credit total of
$11.2 million, up from the combined cash and lines of credit
total of $11.1 million at the end of the second quarter. The
Company believes that the combined cash and lines of credit
total of $11.2
million, along with the projected cash from the sale of Dock
Resins and positive cash flow from operations expected during
the fourth quarter of this fiscal year, will provide sufficient
cash resources to effectively operate the business for the
foreseeable future without additional equity placements. During
the first nine months of fiscal year 2002, the Company has (1)
paid down debt by $16.2 million or a 49% reduction to $17.2
million from $33.4 million at the end of fiscal year 2001, (2)
reduced the debt-to-equity ratio from 67% at the end of fiscal
year 2001 to 29% at the end of the third quarter of fiscal year
2002 and, (3) nearly doubled net working capital to $10.4
million at the end of the third quarter of fiscal year 2002 from
$5.4 million at the end of fiscal year 2001."
Operating Highlights and Outlook
Apio's Intellipac Packaging Products Business Continues to
Grow
During the first nine months of fiscal year 2002, Apio's iceless
packaging product line continued to experience accelerated
growth. Apio now has six iceless packaging products for
vegetables utilizing our Intellipac case liner technology,
including bunch and crown broccoli, eighteen pound cartons of
loose broccoli florets, Asian cut broccoli crowns, export cut
broccoli crowns and green onions. The expansion of the iceless
packaging product line has the potential to generate substantial
revenues for Apio over the coming quarters and years. Apio also
introduced eight new product offerings during the first nine
months of fiscal year 2002 and expanded its retail and club
store presence to over 8,700 stores from 7,600 at the end of
fiscal year 2001.
In addition, the Company has expanded its banana program using
Intellipac technology and is in the process of qualifying
sources in five primary banana producing countries and working
directly with large, multinational banana shipping companies to
ensure consistently high quality and year round availability of
bananas. Apio will be conducting more retail banana trials in
the U.S and with select banana companies. Bananas are a $4 to
$4.5 billion annual worldwide market for distributors, which in
turn, is a $9 to $10 billion annual worldwide market for
retailers. Bananas are the nation's leading produce item,
contributing approximately nine to ten percent of produce
department sales in the U.S.
Landec Ag's Intellicoat(R) Seed Coating
Product Sales Accelerate
Landec Ag, the Company's Intellicoat seed coating subsidiary,
has expanded its field trials and commercial sales during fiscal
year 2002 for its new Early Plant(TM) hybrid corn. The new
products join the existing line-up of Intellicoat coated
Pollinator Plus(TM) seed corn coatings, Relay(TM) Intercropping
of wheat and coated soybean and Fielder's Choice Direct(R)
hybrid corn.
Early Plant hybrid corn is designed to allow corn farmers to
safely and reliably plant hybrid corn two to three weeks earlier
than normal, since Landec's proprietary Intellicoat coating
delays germination until the soil reaches the optimal soil
germination temperature. Otherwise, planting two to three weeks
earlier in cold, wet soil could cause poor or no germination to
occur. Allowing the farmer to have a wider planting window
lowers costs, reduces risks and potentially increases yields.
The program for Early Plant hybrid corn has increased five-fold
to approximately 15,000 acres this spring from 3,000 acres in
2001.
For the 2002 planting season, when comparing Intellicoat coated
seeds to uncoated seeds in early-plant trials, the Intellicoat
coated seeds have consistently shown better, more uniform
emergence and higher stand counts for improved yield potential.
Landec Ag is now commercially launching its Intellicoat Early
Plant corn seed coating technology on its Fielder's Choice
Direct hybrid seed corn. Orders to date have exceeded the total
units sold all of last year by nearly 60% or 2,800 units.
In addition, eight of the top U.S. seed companies are conducting
separate evaluations of the Intellicoat Early Plant hybrid corn
technology on their own hybrids during 2002. Successful results
could lead to licensing agreements as early as 2003.
Pollinator Plus seed coatings are applied to inbred seed corn to
delay seed germination and extend the pollination window thus
reducing risks and increasing yields for seed companies.
Pollinator Plus is already being used by 30 major seed companies
in the production of hybrid seed corn. Seed companies are
rapidly increasing their use of this technology, and this
product line has been planted on over 60,000 acres in 2002,
three times the 20,000 acres in 2001.
Another Intellicoat application is the Relay Intercropping of
wheat and Intellicoat coated soybeans system. The Relay system
enables Central and Northern Corn Belt farmers, whose growing
season is normally too short for double cropping, to
successfully inter-plant coated soybeans into wheat fields and
gain more revenue by harvesting two crops off the same field in
the same year. This Intellicoat application is in its third year
of successful commercial on-farm sales.
Landec Ag also directly markets and sells seed products using a
sophisticated telephonic and electronic call center
headquartered in Monticello, Indiana. In 2000, Landec Ag
introduced its Harvestar(TM) product line, which offers high
performance alfalfa and nutrient enhanced hybrid seed corn.
These products are being sold to new and existing customers who
have expressed interest in these types of seeds.
Landec Corporation designs, develops, manufactures and sells
temperature-activated and other specialty polymer products for a
variety of food, agricultural and licensed partner applications.
The Company's temperature-activated polymer products are based
on its proprietary Intelimer(R) polymers which differ from other
polymers in that they can be customized to abruptly change their
physical characteristics when heated or cooled through a pre-set
temperature switch.
The complete release is at
www.landec.com
|