[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 |
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 Stock Market |
Large Accelerated Filer ___ | Accelerated Filer X | Emerging Growth Company ___ |
Non Accelerated Filer ___ | Smaller Reporting Company ___ |
Page | |||
August 25, 2019 | May 26, 2019 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 1,990 | $ | 1,080 | |||
Accounts receivable, less allowance for doubtful accounts | 61,402 | 69,565 | |||||
Inventories | 55,020 | 54,132 | |||||
Prepaid expenses and other current assets | 12,150 | 8,264 | |||||
Total Current Assets | 130,562 | 133,041 | |||||
Investment in non-public company, fair value | 61,100 | 61,100 | |||||
Property and equipment, net | 201,557 | 200,027 | |||||
Operating leases | 28,726 | — | |||||
Goodwill | 76,742 | 76,742 | |||||
Trademarks/tradenames, net | 29,928 | 29,928 | |||||
Customer relationships, net | 14,807 | 15,319 | |||||
Other assets | 2,715 | 2,934 | |||||
Total Assets | $ | 546,137 | $ | 519,091 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 46,162 | $ | 53,973 | |||
Accrued compensation | 7,399 | 10,687 | |||||
Other accrued liabilities | 8,790 | 10,001 | |||||
Current portion of lease liabilities | 3,601 | 75 | |||||
Deferred revenue | 488 | 499 | |||||
Line of credit | 70,600 | 52,000 | |||||
Current portion of long-term debt, net | 9,791 | 9,791 | |||||
Other current liabilities, discontinued operations | — | 65 | |||||
Total Current Liabilities | 146,831 | 137,091 | |||||
Long-term debt, net | 84,748 | 87,193 | |||||
Long-term lease liabilities | 30,026 | 3,532 | |||||
Deferred taxes, net | 17,686 | 19,393 | |||||
Other non-current liabilities | 1,899 | 1,738 | |||||
Total Liabilities | 281,190 | 248,947 | |||||
Stockholders’ Equity: | |||||||
Common stock, $0.001 par value; 50,000 shares authorized; 29,146 and 29,102 shares issued and outstanding at August 25, 2019 and May 26, 2019, respectively | 29 | 29 | |||||
Additional paid-in capital | 160,814 | 160,341 | |||||
Retained earnings | 104,652 | 109,710 | |||||
Accumulated other comprehensive (loss) income | (548 | ) | 64 | ||||
Total Stockholders’ Equity | 264,947 | 270,144 | |||||
Total Liabilities and Stockholders’ Equity | $ | 546,137 | $ | 519,091 |
Three Months Ended | |||||||
August 25, 2019 | August 26, 2018 | ||||||
Product sales | $ | 138,714 | $ | 124,668 | |||
Cost of product sales | 123,378 | 108,331 | |||||
Gross profit | 15,336 | 16,337 | |||||
Operating costs and expenses: | |||||||
Research and development | 2,821 | 2,791 | |||||
Selling, general and administrative | 16,895 | 13,803 | |||||
Total operating costs and expenses | 19,716 | 16,594 | |||||
Operating loss | (4,380 | ) | (257 | ) | |||
Dividend income | 281 | 413 | |||||
Interest income | 25 | 46 | |||||
Interest expense | (2,075 | ) | (758 | ) | |||
Other income | — | 1,000 | |||||
Net (loss) income from continuing operations before tax | (6,149 | ) | 444 | ||||
Income tax benefit (expense) | 1,365 | (109 | ) | ||||
Net (loss) income from continuing operations | $ | (4,784 | ) | $ | 335 | ||
Discontinued operations: | |||||||
Loss from discontinued operations | $ | — | $ | (190 | ) | ||
Income tax benefit | — | 45 | |||||
Loss from discontinued operations, net of tax | — | (145 | ) | ||||
Net (loss) income applicable to common stockholders | $ | (4,784 | ) | $ | 190 | ||
Basic net (loss) income per share: | |||||||
(Loss) income from continuing operations | $ | (0.16 | ) | $ | 0.01 | ||
Loss from discontinued operations | — | — | |||||
Total basic net (loss) income per share | $ | (0.16 | ) | $ | 0.01 | ||
Diluted net (loss) income per share | |||||||
(Loss) income from continuing operations | $ | (0.16 | ) | $ | 0.01 | ||
Loss from discontinued operations | — | — | |||||
Total diluted net (loss) income per share | $ | (0.16 | ) | $ | 0.01 | ||
Shares used in per share computation | |||||||
Basic | 29,139 | 27,738 | |||||
Diluted | 29,139 | 28,020 | |||||
Other comprehensive (loss) income, net of tax: | |||||||
Net unrealized losses on interest rate swaps (net of tax effect of $265 and $27) | $ | (612 | ) | $ | (89 | ) | |
Other comprehensive loss, net of tax | (612 | ) | (89 | ) | |||
Total comprehensive (loss) income | $ | (5,396 | ) | $ | 101 |
Three Months Ended August 25, 2019 | ||||||||||||||||||||||
Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | 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 income | — | — | — | (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 |
Three Months Ended August 26, 2018 | ||||||||||||||||||||||
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 |
Three Months Ended | |||||||
August 25, 2019 | August 26, 2018 | ||||||
Cash flows from operating activities: | |||||||
Consolidated net (loss) income | $ | (4,784 | ) | $ | 190 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation, amortization of intangibles and amortization of debt costs | 4,503 | 3,145 | |||||
Stock-based compensation expense | 528 | 728 | |||||
Deferred taxes | (1,442 | ) | (63 | ) | |||
Change in investment in non-public company, fair value | — | (1,000 | ) | ||||
Net gain on disposal of property and equipment | (7 | ) | (3 | ) | |||
Changes in current assets and current liabilities: | |||||||
Accounts receivable, net | 8,163 | 5,735 | |||||
Inventories | (888 | ) | 1,833 | ||||
Prepaid expenses and other current assets | (1,215 | ) | (363 | ) | |||
Accounts payable | (6,105 | ) | (2,544 | ) | |||
Accrued compensation | (3,288 | ) | (5,269 | ) | |||
Other accrued liabilities | (893 | ) | 386 | ||||
Deferred revenue | (11 | ) | (589 | ) | |||
Net cash (used in) provided by operating activities | (5,439 | ) | 2,186 | ||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (9,981 | ) | (14,440 | ) | |||
Proceeds from collections of notes receivable | 296 | — | |||||
Proceeds from sales of fixed assets | 19 | 3 | |||||
Net cash used in investing activities | (9,666 | ) | (14,437 | ) | |||
Cash flows from financing activities: | |||||||
Taxes paid by Company for employee stock plans | (55 | ) | (10 | ) | |||
Payments on long-term debt | (2,530 | ) | (1,271 | ) | |||
Proceeds from lines of credit | 35,000 | 12,000 | |||||
Payments on lines of credit | (16,400 | ) | — | ||||
Net cash provided by financing activities | 16,015 | 10,719 | |||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 910 | (1,532 | ) | ||||
Cash, cash equivalents and restricted cash, beginning of period | 1,465 | 3,216 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 2,375 | $ | 1,684 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||
Purchases of property and equipment on trade vendor credit | $ | 2,191 | $ | 3,118 |
(In thousands) | August 25, 2019 | May 26, 2019 | |||||
Cash and cash equivalents | $ | 1,990 | $ | 1,080 | |||
Restricted cash | 385 | 385 | |||||
Cash, cash equivalents and restricted cash | $ | 2,375 | $ | 1,465 |
(In thousands) | August 25, 2019 | May 26, 2019 | |||||
Raw materials | $ | 23,417 | $ | 23,195 | |||
Work in progress | 5,985 | 4,189 | |||||
Finished goods | 25,618 | 26,748 | |||||
Total | $ | 55,020 | $ | 54,132 |
(In thousands) | AOCI | ||
Accumulated OCI, net, as of May 26, 2019 | $ | 64 | |
Unrealized losses on interest rate swap contracts, net of tax effect | (612 | ) | |
Accumulated OCI, net, as of August 25, 2019 | $ | (548 | ) |
At August 25, 2019 | 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% |
(In thousands) | Impact on value of Contingent consideration liability as of August 25, 2019 | ||
10% increase in EBITDA forecast | $ | 100 |
At August 25, 2019 | 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 August 25, 2019 | ||
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 August 25, 2019 | Fair Value at May 26, 2019 | |||||||||||||||||||||
Assets: | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Interest rate swap contracts | $ | — | $ | 141 | $ | — | $ | — | $ | 644 | $ | — | |||||||||||
Investment in non-public company | — | — | 61,100 | — | — | 61,100 | |||||||||||||||||
Total assets | $ | — | $ | 141 | $ | 61,100 | $ | — | $ | 644 | $ | 61,100 | |||||||||||
Liabilities: | |||||||||||||||||||||||
Interest rate swap contracts | $ | — | $ | 856 | $ | — | $ | — | $ | 482 | $ | — | |||||||||||
Contingent consideration liability | — | — | 500 | — | — | 500 | |||||||||||||||||
Total liabilities | $ | — | $ | 856 | $ | 500 | $ | — | $ | 482 | $ | 500 |
(In thousands) | Windset Investment | Contingent Consideration Liability | |||||
Balance as of May 26, 2019 | $ | 61,100 | $ | 500 | |||
Fair value change | — | — | |||||
Balance as of August 25, 2019 | $ | 61,100 | $ | 500 |
(In thousands) | Three Months Ended | ||||||
Curation Foods: | August 25, 2019 | August 26, 2018 | |||||
Salads | $ | 51,261 | $ | 49,080 | |||
Core vegetables | 57,348 | 61,750 | |||||
Emerging brands | 18,064 | 1,221 | |||||
Total | $ | 126,673 | $ | 112,051 |
Three Months Ended | |||||||
Lifecore: | August 25, 2019 | August 26, 2018 | |||||
Aseptic | $ | 5,687 | $ | 5,766 | |||
Fermentation | 738 | 3,070 | |||||
Development services | 5,616 | 3,781 | |||||
Total | $ | 12,041 | $ | 12,617 |
(In thousands) | |||
Cash consideration | $ | 59,898 | |
Stock consideration | 15,068 | ||
$ | 74,966 |
(In thousands) | |||
Cash and cash equivalents | $ | 26 | |
Accounts receivable | 6,310 | ||
Inventories | 11,384 | ||
Prepaid expenses and other current assets | 1,589 | ||
Other assets | 102 | ||
Property and equipment | 14,083 | ||
Trademarks/tradenames | 15,900 | ||
Customer relationships | 11,000 | ||
Accounts payable | (4,507 | ) | |
Other accrued liabilities | (1,873 | ) | |
Deferred tax liabilities | (1,280 | ) | |
Net identifiable assets acquired | 52,734 | ||
Goodwill | 22,232 | ||
Total fair value purchase consideration | $ | 74,966 |
Three Months Ended | |||||||
(In thousands) | August 25, 2019 | August 26, 2018 | |||||
Cost of sales | $ | (26 | ) | $ | 101 | ||
Research and development | 30 | 25 | |||||
Selling, general and administrative | 524 | 602 | |||||
Total stock-based compensation | $ | 528 | $ | 728 |
Three Months Ended | |||||||
(In thousands, except per share amounts) | August 25, 2019 | August 26, 2018 | |||||
Numerator: | |||||||
Net (loss) income applicable to Common Stockholders | $ | (4,784 | ) | $ | 190 | ||
Denominator: | |||||||
Weighted average shares for basic net income per share | 29,139 | 27,738 | |||||
Effect of dilutive securities: | |||||||
Stock options and restricted stock units | — | 282 | |||||
Weighted average shares for diluted net income per share | 29,139 | 28,020 | |||||
Diluted net (loss) income per share | $ | (0.16 | ) | $ | 0.01 |
(In thousands) | August 25, 2019 | May 26, 2019 | |||||
Term loan | $ | 95,000 | $ | 97,500 | |||
Total principal amount of long-term debt | 95,000 | 97,500 | |||||
Less: unamortized debt issuance costs | (461 | ) | (516 | ) | |||
Total long-term debt, net of unamortized debt issuance costs | 94,539 | 96,984 | |||||
Less: current portion of long-term debt, net | (9,791 | ) | (9,791 | ) | |||
Long-term debt, net | $ | 84,748 | $ | 87,193 |
(In thousands, except term and discount rate) | Three Months Ended | ||
August 25, 2019 | |||
Finance lease cost: | |||
Amortization of leased assets | $ | 28 | |
Interest on lease liabilities | 90 | ||
Operating lease cost | 1,593 | ||
Variable lease cost and other | 165 | ||
Total lease cost | $ | 1,876 | |
Weighted-average remaining lease term: | |||
Operating leases | 13.75 | ||
Finance leases | 3.35 | ||
Weighted-average discount rate: | |||
Operating leases | 5.28 | % | |
Finance leases | 9.99 | % |
(In thousands) | Operating Leases | Finance Leases | Total | ||||||||
Remainder of 2020 | $ | 3,931 | $ | 335 | $ | 4,266 | |||||
2021 | 4,011 | 455 | 4,466 | ||||||||
2022 | 3,522 | 466 | 3,988 | ||||||||
2023 | 3,255 | 3,497 | 6,752 | ||||||||
2024 | 2,931 | 9 | 2,940 | ||||||||
Thereafter | 26,407 | 2 | 26,409 | ||||||||
Total lease payments | 44,057 | 4,764 | 48,821 | ||||||||
Less: interest | (14,053 | ) | (1,141 | ) | (15,194 | ) | |||||
Present value of lease liabilities | 30,004 | 3,623 | 33,627 | ||||||||
Less: current obligation of lease liabilities | (3,514 | ) | (87 | ) | (3,601 | ) | |||||
Total long-term lease liabilities | $ | 26,490 | $ | 3,536 | $ | 30,026 |
Three Months Ended | |||
(In thousands) | August 25, 2019 | ||
Cash paid for amounts included in the measurement of lease liabilities: | |||
Operating cash flows from operating leases | $ | 1,654 | |
Operating cash flows from finance leases | 90 | ||
Financing cash flows from finance leases | 30 |
Three Months Ended | |||||||
(In millions) | August 25, 2019 | August 26, 2018 | |||||
Canada | $ | 20.7 | $ | 19.9 | |||
Belgium | — | 2.0 | |||||
Ireland | 1.4 | 1.1 | |||||
All Other Countries | 1.7 | 0.8 |
(In thousands) | Curation Foods(1) | Lifecore | Other | Total | |||||||||||
Three Months Ended August 25, 2019 | |||||||||||||||
Net sales | $ | 126,673 | $ | 12,041 | $ | — | $ | 138,714 | |||||||
Gross profit | 12,822 | 2,514 | — | 15,336 | |||||||||||
Net loss from continuing operations | (2,171 | ) | (1,395 | ) | (1,218 | ) | (4,784 | ) | |||||||
Depreciation and amortization | 3,205 | 1,185 | 23 | 4,413 | |||||||||||
Dividend income | 281 | — | — | 281 | |||||||||||
Interest income | 20 | — | 5 | 25 | |||||||||||
Interest expense, net | 1,376 | — | 699 | 2,075 | |||||||||||
Income tax benefit | (586 | ) | (465 | ) | (314 | ) | (1,365 | ) | |||||||
Three Months Ended August 26, 2018(2) | |||||||||||||||
Net sales | $ | 112,051 | $ | 12,617 | $ | — | $ | 124,668 | |||||||
Gross profit | 13,370 | 2,967 | — | 16,337 | |||||||||||
Net income (loss) from continuing operations | 1,913 | (547 | ) | (1,031 | ) | 335 | |||||||||
Depreciation and amortization | 2,095 | 976 | 74 | 3,145 | |||||||||||
Dividend income | 413 | — | — | 413 | |||||||||||
Interest income | 31 | — | 15 | 46 | |||||||||||
Interest expense, net | 587 | — | 171 | 758 | |||||||||||
Income tax expense (benefit) | 708 | (182 | ) | (417 | ) | 109 |
(1) | During the third quarter of fiscal 2019, the Company started consolidating Yucatan Foods whose results are included in the Company's operating results starting from December 1, 2018. See Note 2 - Acquisition for more details of this transaction. |
(2) | The Curation Foods' segment operating results for the quarter ended August 26, 2018 have been restated to reflect the reclassification of the Now Planting brand to discontinued operations. |
(In thousands) | August 25, 2019 | May 26, 2019 | |||||
Other current liabilities, discontinued operations: | |||||||
Accounts payable | $ | — | $ | 51 | |||
Accrued expenses and other current liabilities | — | 14 | |||||
Total other current liabilities, discontinued operations | $ | — | $ | 65 |
Three Months Ended | |||||||
(In thousands) | August 25, 2019 | August 26, 2018 | |||||
Revenues | $ | — | $ | — | |||
Cost of sales | — | — | |||||
Research and development | — | (42 | ) | ||||
Selling, general and administrative | — | (148 | ) | ||||
Loss from discontinued operations, before taxes | — | (190 | ) | ||||
Income tax benefit | — | 45 | |||||
Loss from discontinued operations, net of tax | $ | — | $ | (145 | ) |
(In thousands, except percentages) | Three Months Ended | Change | ||||||||||||
August 25, 2019 | August 26, 2018 | Amount | % | |||||||||||
Curation Foods | $ | 126,673 | $ | 112,051 | $ | 14,622 | 13 | % | ||||||
Lifecore | 12,041 | 12,617 | (576 | ) | (5 | )% | ||||||||
Total Revenues | $ | 138,714 | $ | 124,668 | $ | 14,046 | 11 | % |
(In thousands, except percentages) | Three Months Ended | Change | ||||||||||||
August 25, 2019 | August 26, 2018 | Amount | % | |||||||||||
Curation Foods | $ | 12,822 | $ | 13,370 | $ | (548 | ) | (4 | )% | |||||
Lifecore | 2,514 | 2,967 | (453 | ) | (15 | )% | ||||||||
Total Gross Profit | $ | 15,336 | $ | 16,337 | $ | (1,001 | ) | (6 | )% |
(In thousands, except percentages) | Three Months Ended | Change | ||||||||||||
August 25, 2019 | August 26, 2018 | Amount | % | |||||||||||
Curation Foods | $ | 1,324 | $ | 1,315 | $ | 9 | 1 | % | ||||||
Lifecore | 1,451 | 1,205 | 246 | 20 | % | |||||||||
Other | 46 | 271 | (225 | ) | (83 | )% | ||||||||
Total R&D | $ | 2,821 | $ | 2,791 | $ | 30 | 1 | % |
(In thousands, except percentages) | Three Months Ended | Change | ||||||||||||
August 25, 2019 | August 26, 2018 | Amount | % | |||||||||||
Curation Foods | $ | 11,484 | $ | 8,909 | $ | 2,575 | 29 | % | ||||||
Lifecore | 1,947 | 1,598 | 349 | 22 | % | |||||||||
Other | 3,464 | 3,296 | 168 | 5 | % | |||||||||
Total SG&A | $ | 16,895 | $ | 13,803 | $ | 3,092 | 22 | % |
(In thousands, except percentages) | Three Months Ended | Change | ||||||||||||
August 25, 2019 | August 26, 2018 | Amount | % | |||||||||||
Dividend Income | $ | 281 | $ | 413 | $ | (132 | ) | (32 | )% | |||||
Interest Income | $ | 25 | $ | 46 | $ | (21 | ) | (46 | )% | |||||
Interest Expense | $ | (2,075 | ) | $ | (758 | ) | $ | (1,317 | ) | 174 | % | |||
Other Income | $ | — | $ | 1,000 | $ | (1,000 | ) | (100 | )% | |||||
Income Tax Benefit (Expense) | $ | 1,365 | $ | (64 | ) | $ | 1,429 | (2,233 | )% |
Exhibit Number | Exhibit Title |
CEO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | |
CFO Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. | |
CEO Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. | |
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. |
LANDEC CORPORATION | |||
By: | /s/ Gregory S. Skinner | ||
Gregory S. Skinner | |||
Executive Vice President of Finance and Administration and Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
/s/ Albert D. Bolles, Ph.D. | |
Albert D. Bolles, Ph.D. | |
Chief Executive Officer and President |
/s/ Gregory S. Skinner | |
Gregory S. Skinner | |
Executive Vice President of Finance and Administration and Chief Financial Officer |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
* | The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document. |
(1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
* | The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document. |
Business Segment Reporting - Narrative (Details) |
3 Months Ended | |
---|---|---|
Aug. 25, 2019
brand
segment
customer
|
Aug. 26, 2018
customer
|
|
Revenue, Major Customer [Line Items] | ||
Number of operating segments | segment | 3 | |
Number of natural food brands | brand | 4 | |
Sales Revenue, Net | Customer Concentration Risk | ||
Revenue, Major Customer [Line Items] | ||
Major customer number | 5 | 5 |
Sales Revenue, Net | Customer Concentration Risk | Top Five Customers | ||
Revenue, Major Customer [Line Items] | ||
Concentration risk percentage | 49.00% | 48.00% |
Sales Revenue, Net | Customer Concentration Risk | Curation Foods | ||
Revenue, Major Customer [Line Items] | ||
Major customer number | 2 | 2 |
Sales Revenue, Net | Customer Concentration Risk | Curation Foods | Costco | ||
Revenue, Major Customer [Line Items] | ||
Concentration risk percentage | 14.00% | 19.00% |
Sales Revenue, Net | Customer Concentration Risk | Curation Foods | Wal-mart | ||
Revenue, Major Customer [Line Items] | ||
Concentration risk percentage | 20.00% | 18.00% |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash and Cash Equivalents | The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:
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Schedule of Inventory, Current | Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist of the following:
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Comprehensive Income (Loss) | The components of AOCI, net of tax, are as follows:
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Schedule of Effect of Significant Unobservable Inputs for Contingent Liability | In determining the fair value of the Company’s contingent consideration liability, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
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Sensitivity Analysis | The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions:
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Schedule of Effect of Significant Unobservable Inputs for Investment | In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
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Schedule of Sensitivity Analysis of Fair Value, Transferor's Interests in Transferred Financial Assets | The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions:
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis:
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Fair Value, Assets and Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The following table reflects the fair value roll forward reconciliation of Level 3 assets and liabilities measured at fair value for the three months ended August 25, 2019:
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Disaggregation of Revenue | The following tables disaggregate segment revenue by major product lines:
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Stock-based Compensation and Stockholders' Equity |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based Compensation and Stockholders' Equity | Stock-based Compensation and Stockholders' Equity Stock-Based Compensation Activity The estimated fair value for stock options, which determines the Company’s calculation of stock-based compensation expense, is based on the Black-Scholes option pricing model. Restricted stock units ("RSUs") are valued at the closing market price of the Company’s common stock on the grant date. The Company uses the straight-line method to recognize the fair value of stock-based compensation arrangements. During the three months ended August 25, 2019, the Company did not grant any options to purchase shares of common stock and awarded 87,000 RSUs. As of August 25, 2019, the Company has reserved 2.5 million shares of Common Stock for future issuance under its current and former equity plans. Stock-Based Compensation Expense The Company’s stock-based awards include stock option grants and RSUs. The Company records compensation expense for stock-based awards issued to employees and directors in exchange for services provided based on the estimated fair value of the awards on their grant dates and is recognized over the required service periods, generally the vesting period. The following table summarizes stock-based compensation by income statement line item:
As of August 25, 2019, there was $4.3 million of total unrecognized compensation expense related to unvested equity compensation awards granted under the Landec incentive stock plans. Total expense is expected to be recognized over the weighted-average period of 1.85 years for stock options and 1.91 years for RSUs. Stock Repurchase Plan On July 14, 2010, the Company announced that the Board of Directors of the Company had approved the establishment of a stock repurchase plan authorizing the repurchase of up to $10 million of the Company’s common stock. The Company may repurchase its common stock from time to time in open market purchases or in privately negotiated transactions. The timing and actual number of shares repurchased is at the discretion of management of the Company and will depend on a variety of factors, including stock price, corporate and regulatory requirements, market conditions, the relative attractiveness of other capital deployment opportunities and other corporate priorities. The stock repurchase program does not obligate Landec to acquire any amount of its common stock and the program may be modified, suspended or terminated at any time at the Company's discretion without prior notice. During the three months ended August 25, 2019, the Company did not repurchase any of its outstanding common stock. |
Leases |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases The Company has entered into various non-cancellable operating lease agreements for manufacturing and distribution facilities, vehicles, equipment and office space. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company leases property and equipment under finance leases. Gross assets recorded under finance leases, included in “Property and equipment, net,” were $3.8 million as of both August 25, 2019 and May 26, 2019. Accumulated amortization associated with finance leases was $0.4 million as of both August 25, 2019 and May 26, 2019. The components of lease cost were as follows:
Our leases have original lease periods ending between 2019 and 2040. The Company's maturity analysis of operating and finance lease liabilities as of August 25, 2019 were as follows:
Supplemental cash flow information related to leases are as follows:
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Leases | Leases The Company has entered into various non-cancellable operating lease agreements for manufacturing and distribution facilities, vehicles, equipment and office space. Right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company leases property and equipment under finance leases. Gross assets recorded under finance leases, included in “Property and equipment, net,” were $3.8 million as of both August 25, 2019 and May 26, 2019. Accumulated amortization associated with finance leases was $0.4 million as of both August 25, 2019 and May 26, 2019. The components of lease cost were as follows:
Our leases have original lease periods ending between 2019 and 2040. The Company's maturity analysis of operating and finance lease liabilities as of August 25, 2019 were as follows:
Supplemental cash flow information related to leases are as follows:
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Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Fair Value Reconciliation of Level 3 (Details) $ in Thousands |
3 Months Ended |
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Aug. 25, 2019
USD ($)
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Defined Benefit Plan, Change in Fair Value of Plan Assets, Level 3 Reconciliation [Roll Forward] | |
Balance | $ 61,100 |
Balance | 61,100 |
Windset Investment | |
Defined Benefit Plan, Change in Fair Value of Plan Assets, Level 3 Reconciliation [Roll Forward] | |
Balance | 61,100 |
Fair value change | 0 |
Balance | 61,100 |
Contingent Consideration Liability | |
Defined Benefit Plan, Change in Fair Value of Plan Assets, Level 3 Reconciliation [Roll Forward] | |
Balance | 500 |
Fair value change | 0 |
Balance | $ 500 |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Sensitivity Analysis (Details) $ in Thousands |
Aug. 25, 2019
USD ($)
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Accounting Policies [Abstract] | |
10% increase in EBITDA forecast | $ 100 |
Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | Long-term debt, net consists of the following:
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Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Aug. 25, 2019 |
Aug. 26, 2018 |
May 26, 2019 |
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Income Tax Disclosure [Abstract] | |||
Income tax (benefit) expense | $ (1,365) | $ 109 | |
Effective tax rate | 22.00% | 25.00% | |
Unrecognized tax benefits | $ 1,000 | $ 600 | |
Unrecognized tax benefits that would result in an adjustment to effective tax rate | $ 900 | $ 500 |
Stock-based Compensation and Stockholders' Equity - Summary of Stock-based Compensation by Income Statement Line Item (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 25, 2019 |
Aug. 26, 2018 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | $ 528 | $ 728 |
Cost of sales | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | (26) | 101 |
Research and development | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | 30 | 25 |
Selling, general and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total stock-based compensation | $ 524 | $ 602 |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Basis of Presentation, and Summary of Significant Accounting Policies | Organization, Basis of Presentation, and Summary of Significant Accounting Policies Organization Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture, and sell differentiated products for food and biomaterials markets, and license technology applications to partners. The Company sells specialty packaged branded Eat Smart® and private label fresh-cut vegetables and whole produce to retailers, club stores, and food service operators, primarily in the United States and Canada. The Company also sells premier specialty olive oils and wine vinegars under its O Olive Oil & Vinegar® (“O”) brand to natural food, conventional grocery and mass retail stores primarily in the United States and Canada. The majority of Yucatan® and Cabo Fresh® branded guacamole and avocado products are sold in the U.S. grocery channel, but they are also sold in U.S. mass retail, Canadian grocery retail and foodservice channels. Landec's food company, Curation Foods, Inc. (“Curation Foods”) serves as the corporate umbrella for a portfolio of four natural food brands, including the Company’s flagship brand Eat Smart as well as three emerging natural food brands, consisting of O olive oil and vinegar products, and its two new brands, Yucatan and Cabo Fresh authentic guacamole and avocado products, acquired by the Company through the acquisition of Yucatan Foods on December 1, 2018. O, Yucatan and Cabo Fresh are referred to collectively as “Emerging Brands”. See Note 2 - Acquisitions for more details. The Company has two proprietary polymer technology platforms: 1) Intelimer® polymers, and 2) hyaluronan (“HA”) biopolymers. The Company sells HA-based and non-HA biomaterials through its Lifecore Biomedical, Inc. (“Lifecore”) subsidiary. The Company’s HA biopolymers and non-HA materials are proprietary in that they are specially formulated for specific customers to meet strict regulatory requirements. The Company’s technologies, along with its customer relationships and tradenames, are the foundation and key differentiating advantages upon which Landec has built its business. Basis of Presentation The accompanying unaudited consolidated financial statements of Landec have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made which are necessary to present fairly the financial position of the Company at August 25, 2019 and the results of operations and cash flows for all periods presented. Although Landec believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements and related footnotes prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. The accompanying financial data should be reviewed in conjunction with the audited financial statements and accompanying notes included in Landec's Annual Report on Form 10-K for the fiscal year ended May 26, 2019. The Company’s fiscal year is the 52- or 53-week period that ends on the last Sunday of May with quarters within each year ending on the last Sunday of August, November, and February; however, in instances where the last Sunday would result in a quarter being 12-weeks in length, the Company’s policy is to extend that quarter to the following Sunday. A 14th week is included in the fiscal year every five or six years to realign the Company’s fiscal quarters with calendar quarters. In May 2019, the Company discontinued the Now Planting business. As a result, the Now Planting business, which was launched during the second quarter of fiscal year 2019, has been reclassified as a discontinued operation under the provisions of Accounting Standards Codification ("ASC") 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20") for the three months ended August 26, 2018. The results of operations for the three months ended August 25, 2019 are not necessarily indicative of the results that may be expected for an entire fiscal year because there is some seasonality in Curation Foods’ business and the order patterns of Lifecore’s customers which may lead to significant fluctuations in Landec’s quarterly results of operations. Basis of Consolidation The consolidated financial statements are presented on the accrual basis of accounting in accordance with GAAP and include the accounts of Landec Corporation and its subsidiaries, Curation Foods and Lifecore. All intercompany transactions and balances have been eliminated. The financial results of Yucatan Foods have been included in our consolidated financial statements from the date of acquisition on December 1, 2018. Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities, and operations of a VIE if it is determined to be the primary beneficiary of the VIE. An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders, or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the partnership interest and equity investment in the non-public company are not VIEs. Reclassifications Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition; loss contingencies; sales returns and allowances; inventories; self-insurance liabilities; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets including intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock-based compensation. These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates. Cash and Cash Equivalents The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of money market funds. The market value of cash equivalents approximates their historical cost given their short-term nature. Reconciliation of Cash and Cash Equivalents and Restricted Cash as presented on the Statements of Cash Flows The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:
Restricted Cash The Company was required to maintain $0.4 million of restricted cash at August 25, 2019 and May 26, 2019 related to certain collateral requirements for obligations under its workers' compensation programs. The restricted cash is included in Other assets in the Company’s accompanying Consolidated Balance Sheets. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist of the following:
If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also records a provision for slow moving and obsolete inventories based on the estimate of demand for its products. Related Party Transactions The Company sells products to and earns license fees from Windset Holdings 2010 Ltd. (“Windset”). During both the three months ended August 25, 2019 and August 26, 2018, the Company recognized revenues of $0.1 million. These amounts have been included in product sales in the accompanying Consolidated Statements of Comprehensive (Loss) Income. The related receivable balances of $0.2 million and $0.5 million are included in Accounts receivable in the accompanying Consolidated Balance Sheets as of August 25, 2019 and May 26, 2019, respectively. All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors. Debt Issuance Costs The Company records its line of credit debt issuance costs as an asset, and as such, $0.2 million and $0.2 million were recorded as Prepaid expenses and other current assets, and Other assets in the accompanying Consolidated Balance Sheets, respectively, as of August 25, 2019 and $0.1 million and $0.2 million, respectively, as of May 26, 2019. The Company records its term debt issuance costs as a contra-liability, and as such, $0.2 million and $0.3 million was recorded as Current portion of long-term debt, and Long-term debt net in the accompanying Consolidated Balance Sheets, respectively, as of August 25, 2019 and $0.2 million and $0.3 million, respectively, as of May 26, 2019. Financial Instruments The Company’s financial instruments are primarily composed of commercial-term trade payables, grower advances, notes receivable, and debt instruments. For short-term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long-term debt approximates its carrying value. Cash Flow Hedges The Company has entered into interest rate swap contracts to manage interest rate risk. These derivative instruments may offset a portion of the changes in interest expense. The Company designates these derivative instruments as cash flow hedges. The Company’s derivative instruments are subject to master netting arrangements. These arrangements include provisions to setoff positions with the same counterparties in the event of default by one of the parties. The Company accounts for its derivative instruments as either an asset or a liability and carries them at fair value in Other assets or Other non-current liabilities in the accompanying Consolidated Balance Sheets. The accounting for changes in the fair value of derivative instruments depends on the intended use of the derivative instrument and the resulting designation. For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated Other Comprehensive Income (“AOCI”) in Stockholders’ Equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized in earnings in the current period. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. Accumulated Other Comprehensive Income Comprehensive income consists of two components, net income and Other Comprehensive Income (“OCI”). OCI refers to revenue, expenses, and gains and losses that under GAAP are recorded as a component of stockholders’ equity but are excluded from the determination of net income. The Company’s AOCI consists of net deferred gains and losses on its interest rate swap contracts accounted for as cash flow hedges. The components of AOCI, net of tax, are as follows:
The Company does not expect any transactions or other events to occur that would result in the reclassification of any significant gains or losses into earnings in the next 12 months. Investment in Non-Public Company On February 15, 2011, the Company made its initial investment in Windset which is reported as an Investment in non-public company, fair value, in the accompanying Consolidated Balance Sheets as of August 25, 2019 and May 26, 2019. The Company has elected to account for its investment in Windset under the fair value option. See Note 3 – Investment in Non-public Company, for further information. Assets Held for Sale In June 2019, the Company designated the Santa Maria office as the Curation Foods headquarters, and decided to close and put up for sale the Curation Foods office in San Rafael, CA. The San Rafael property has been designated as held for sale as of August 25, 2019 and the net carrying value of $2.8 million is presented as Other current assets within the Consolidated Balance Sheet as of August 25, 2019. The disposal is expected to occur by the end of the calendar year, and is not expected to have a material impact to the Company's financial statements. Leases Under Topic 842, the Company determines if an arrangement is a lease at inception. Right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is a quoted rate based on the understanding of what the Company's credit rating would be. Certain agreements may contain the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset. The Company, when reasonably certain to exercise the option, considers these options in determining the measurement of the lease. The Company's lease agreements do not contain any material residual value guarantees. The Company's lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The Company combines fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of lease assets and liabilities. Payments under lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. These amounts primarily include payments affected by changes in price indices. Intangible Assets The Company’s intangible assets are comprised of customer relationships with a finite estimated useful life of eleven to thirteen years, and trademarks/tradenames and goodwill with indefinite useful lives. Finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. Indefinite lived intangible assets are reviewed for impairment at least annually. For goodwill and other indefinite-lived intangible assets, the Company performs a qualitative impairment analysis in accordance with ASC 350-30-35. Partial Self-Insurance on Employee Health and Workers Compensation Plans The Company provides health insurance benefits to eligible employees under self-insured plans whereby the Company pays actual medical claims subject to certain stop loss limits and self-insures its workers compensation claims. The Company records self-insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Any projection of losses concerning the Company's liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as inflation rates, changes in severity, benefit level changes, medical costs, and claims settlement patterns. This self-insurance liability is included in Other accrued liabilities in the accompanying Consolidated Balance Sheets and represents management's best estimate of the amounts that have not been paid as of August 25, 2019 and May 26, 2019. It is reasonably possible that the expense the Company ultimately incurs could differ and adjustments to future reserves may be necessary. Business Interruption Insurance Recoveries In the third quarter of fiscal year 2019, the Company recalled five SKUs of Eat Smart single-serve Salad Shake-Ups!™. In the fourth quarter of fiscal year 2019, the Company submitted a product recall claim. In the first quarter of fiscal year 2020, the Company recognized $2.4 million of business interruption insurance recoveries. Amounts received on insurance recoveries related to business interruption are recorded as a reduction to “Cost of sales” and are classified as operating cash flows. Fair Value Measurements The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company. See Note 3 – Investment in Non-public Company for further information. The Company also measures its contingent consideration liability at fair value. See Note 2 – Acquisitions for further information. The Company has not elected the fair value option for any of its other eligible financial assets or liabilities. The accounting guidance established a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows: Level 1 – observable inputs such as quoted prices for identical instruments in active markets. Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data. Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions. As of August 25, 2019 and May 26, 2019, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including its interest rate swap contracts, its minority interest investment in Windset and its contingent consideration liability from the acquisition of O. The fair value of the Company’s interest rate swap contracts is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 fair value measurement and is included in Other assets or Other non-current liabilities in the accompanying Consolidated Balance Sheets. The fair value of the Company’s contingent consideration liability from the acquisition of O utilizes significant unobservable inputs, including projected earnings before interest, taxes, depreciation and amortization (“EBITDA”) and discount rates. As a result, the Company’s contingent consideration liability associated with the O acquisition is considered a Level 3 measurement liability and is included in Other non-current liabilities in the accompanying Consolidated Balance Sheets. In determining the fair value of the Company’s contingent consideration liability, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
The fair value of our contingent consideration liability is sensitive to change in forecasts. The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions:
The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs, including projected cash flows, growth rates, and discount rates. As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment. There was no change in the fair value of the Company’s investment in Windset for the three months ended August 25, 2019. In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
The revenue growth, expense growth, and income tax rate assumptions are considered the Company's best estimate of the trends in those items over the discount period. The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium, and the company’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities. The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions:
Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis:
The following table reflects the fair value roll forward reconciliation of Level 3 assets and liabilities measured at fair value for the three months ended August 25, 2019:
Revenue Recognition The Company follows the five step, principles-based model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the Company expects to be entitled in exchange for those goods or services. Revenue, net of estimated allowances and returns, is recognized when the Company has completed its performance obligations under a contract and control of the product is transferred to the customer. Substantially all revenue is recognized at the time shipment is made or upon delivery as control of the product is transferred to the customer. Revenue for development service contracts are generally recognized based upon the labor hours expended relative to the total expected hours as a measure of progress to depict transfer of control of the service over time. The services are not distinct and are accounted for as a single performance obligation for each customer. For descriptions of the Company’s product offerings and segments refer to Note 10 – Business Segment Reporting in our annual report on Form 10-K for the year ended May 26, 2019. The Company’s standard terms of sale are included in its contracts, purchase orders, and invoices. As such, all revenue is considered revenue recognized from contracts with customers. Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold. The Company has elected to account for shipping and handling as fulfillment activities, and not a separate performance obligation. The Company’s standard payment terms with its customers range from 30 days to 90 days. Certain customers may receive cash-based incentives (including: volume rebates, discounts, and slotting fees), which are accounted for as variable consideration to the Company’s performance obligations. The Company estimates these sales incentives based on the expected amount to be provided to its customers and reduces revenues recognized towards its performance obligations. The Company does not anticipate significant changes in its estimates for variable consideration. Occasionally, the Company enters into bill-and-hold arrangements, where it invoices the customer for products even though it retains possession of the products until a point-in-time in the future when the products will be shipped to the customer. In these contracts, the primary performance obligation is satisfied, and revenue is generally recognized, at a point-in-time when the product is segregated from the Company’s general inventory, it's ready for shipment to the customer, and the Company does not have the ability to use the product or re-deploy it to another customer. The Company disaggregates its revenue by segment product lines based on how it markets its products and reviews results of operations. The following tables disaggregate segment revenue by major product lines:
Contract Assets and Liabilities Contract assets primarily relate to the Company’s conditional right to consideration for work completed but not billed at the reporting date. The Company’s contract assets as of August 25, 2019 and May 26, 2019 were $6.5 million and $5.6 million, respectively. Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. The Company’s contract liabilities as of August 25, 2019 and May 26, 2019 were $0.1 million and $0.2 million, respectively. Revenue recognized during the three months ended August 25, 2019 that was included in the contract liability balance at the beginning of fiscal year 2020 was $0.1 million. Shipping and Handling Shipping and handling costs are incurred to move the Company’s products from production and storage facilities to the customer. Handling costs are incurred from the point the product is segregated from the Company’s general inventory until it is provided to the shipper and generally include costs to store, move and prepare the products for shipment. The cost of shipping and handling services is recognized in Cost of product sales. When the costs of shipping and handling are passed on to a customer, the related amount is recorded in revenue. Legal Contingencies In the ordinary course of business, the Company is involved in various legal proceedings and claims. The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each fiscal quarter and adjusted to reflect the impacts of negotiations, estimate settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal fees are expensed in the period in which they are incurred. Curation Foods has been the target of a union organizing campaign which has included three unsuccessful attempts to unionize Curation Foods' Guadalupe, California processing plant. The campaign has involved a union and over 100 former and current employees of Pacific Harvest, Inc. and Rancho Harvest, Inc. (collectively "Pacific Harvest"), Curation Foods' labor contractors at its Guadalupe, California processing facility, bringing legal actions before various state and federal agencies, the California Superior Court, and initiating over 100 individual arbitrations against Curation Foods and Pacific Harvest. The legal actions consisted of three main types of claims: (1) Unfair Labor Practice claims ("ULPs") before the National Labor Relations Board (“NLRB”), (2) discrimination/wrongful termination claims before state and federal agencies and in individual arbitrations, and (3) wage and hour claims as part of two Private Attorney General Act (“PAGA”) cases in state court and in over 100 individual arbitrations. The ULP claims were settled in fiscal year 2017 for $0.3 million. Curation Foods was responsible for half of this settlement, or $0.2 million. On May 5, 2017, the parties to the remaining actions executed a Settlement Agreement concerning the discrimination/wrongful termination claims and the wage and hour claims which covers all non-exempt employees of Pacific Harvest working at Curation Foods' Guadalupe, California processing facility from September 2011 through the settlement date. Under the Settlement Agreement, the plaintiffs were paid $6.0 million in three installments: $2.4 million of which was paid in July 2017, $1.8 million of which was paid in November 2017 and $1.8 million of which was paid in July 2018, representing the final payment due under the settlement agreement. The Company and Pacific Harvest have each agreed to pay one half of the settlement payments. The Company paid the entire first two installments of $4.2 million and will be reimbursed by Pacific Harvest for its $2.1 million portion. As of August 25, 2019, the outstanding balance of the receivable was $1.3 million of which $0.9 million and $0.4 million is included in Prepaid and other current assets and Other assets, respectively, in the accompanying Consolidated Balance Sheets. This receivable will continue to be repaid through monthly payments until fully paid, which the Company expects to occur by December 2020. The Company’s recourse against non-payment by Pacific Harvest is its security interest in assets owned by Pacific Harvest. The receivable is reviewed quarterly for collectability. At August 25, 2019, the Company has concluded that the receivable is not impaired and therefore is not subject to an impairment loss. Recent Accounting Guidance Recently Adopted Pronouncements Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use-assets. Effective May 27, 2019, the Company adopted the ASU on a modified retrospective basis. Prior period amounts were not adjusted and continue to be reported in accordance with historical accounting policies under ASC 840: Leases (Topic 840). The Company elected the package of practical expedients under which the Company has not reassessed prior conclusions about lease classification and initial direct costs. The Company elected the hindsight expedient to evaluate lease terms, and made a policy election that does not recognize right-of-use assets and lease liabilities related to short-term leases. Upon adoption of ASU 2016-02, the Company recorded a transitional adjustment of $0.3 million to opening retained earnings to write off the difference in deferred rent balances from prior periods for operating leases with non-level rent. The difference arises from recalculation of deferred rent after applying updated lease terms as a result of applying hindsight. Additionally, the adoption of the standard had a significant impact in the condensed consolidated balance sheet due to the recognition of $31.1 million of operating lease liabilities, along with $30.0 million of operating lease right-of-use assets. This change had no impact on the Company’s ability to meet its loan covenants as the impact from the adoption of ASU 2016-02 was taken into consideration when determining its loan covenants. Derivatives and Hedging, Financial Instruments In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), which amends the presentation and disclosure requirements and changes how companies assess effectiveness. The amendments are intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. The Company adopted ASU 2017-12 on May 27, 2019, without any impact to the Company's consolidated financial statements and related disclosures. In April 2019, the FASB issued ASU 2019-04, Topic 815, Derivatives and Hedging which affects the recognition and measurement of financial instruments, including derivatives and hedging. For entities that have adopted ASU 2017-12, the hedging amendments in ASU 2019-04 are effective as of the beginning of the first annual reporting period beginning after the date of issuance. The Company adopted ASU 2019-04 on May 27, 2019, without any impact to the Company's consolidated financial statements and related disclosures. Share-Based Compensation In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"), which simplifies the accounting for share-based payments granted to non-employees for goods and services. The guidance aligns the accounting for non-employee equity based awards with the accounting for employee equity-based awards, and requires equity-classified share-based payment awards issued to non-employees to be measured based on the grant date price, rather than remeasure the awards through the performance completion date. ASU 2018-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted ASU 2018-07 on May 27, 2019. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements and related disclosures. Recently Issued Pronouncements to be Adopted Cloud Computing Arrangements In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ("ASU 2018-15"), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The Accounting Standards Update generally aligns the guidance on recognizing implementation costs incurred in a cloud computing arrangement that is a service contract with that for implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. ASU 2018-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application is permitted. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements. Entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. Financial Instruments – Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, and Topic 825, Financial Instruments, which provides practical expedients and policy elections related to the presentation and disclosure of accrued interest and the related allowance for credit losses and clarifies how to disclose line-of-credit arrangements that are converted to term loans. ASU 2019-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. |
Diluted Net Income Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Diluted Net Income Per Share | The following table sets forth the computation of diluted net income per share:
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Discontinued Operations (Tables) |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposal Groups, Including Discontinued Operations | Components of amounts reflected in loss from discontinued operations, net of tax are as follows:
The carrying amounts of the major classes of liabilities of the Now Planting business included in liabilities of discontinued operations are as follows:
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Debt - Long-term Debt (Details) - USD ($) $ in Thousands |
Aug. 25, 2019 |
May 26, 2019 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term debt | $ 95,000 | $ 97,500 |
Less: unamortized debt issuance costs | (461) | (516) |
Total long-term debt, net of unamortized debt issuance costs | 94,539 | 96,984 |
Less: current portion of long-term debt, net | (9,791) | (9,791) |
Long-term debt, net | 84,748 | 87,193 |
Term loan | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 95,000 | $ 97,500 |
Stock-based Compensation and Stockholders' Equity - Narrative (Details) - USD ($) |
3 Months Ended | |
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Aug. 25, 2019 |
Jul. 14, 2010 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted options (in shares) | 0 | |
Shares for future issuance (in shares) | 2,500,000 | |
Repurchase plan authorized amount | $ 10,000,000 | |
Treasure shares acquired (in shares) | 0 | |
RSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Awarded (in shares) | 87,000 | |
Weighted-average period (in years) | 1 year 10 months 29 days | |
Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation expense | $ 4,300,000 | |
Weighted-average period (in years) | 1 year 10 months 5 days |
Label | Element | Value |
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Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (274,000) |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 25, 2019 |
Aug. 26, 2018 |
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Income Statement [Abstract] | ||
Change in net unrealized gains on interest rate swap, tax | $ 265 | |
Change in net unrealized gains on interest rate swap, tax | $ 27 |
Document And Entity Information - shares |
3 Months Ended | |
---|---|---|
Aug. 25, 2019 |
Sep. 27, 2019 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | LANDEC CORP \CA\ | |
Entity Central Index Key | 0001005286 | |
Current Fiscal Year End Date | --05-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding (in shares) | 29,152,474 | |
Document Type | 10-Q | |
Document Period End Date | Aug. 25, 2019 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false |
Acquisitions |
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions Yucatan Foods Acquisition On December 1, 2018, (the "Acquisition Date") the Company acquired all of the voting interests and substantially all of the assets of Yucatan Foods, a manufacturer and seller of avocado-based food products. The total consideration paid to acquire Yucatan Foods was $75.0 million, consisting of $59.9 million in cash and 1,203,360 shares of common stock (“Stock Consideration”) with a fair value of $15.1 million. The fair value of the Stock Consideration is based on a per-share value of the Company’s common stock on the Acquisition Date. Given that the Sellers are restricted from selling the Landec common stock, a discount for lack of marketability was applied to the Stock Consideration. The discount for lack of marketability was based on restricted stock studies, pre-IPO studies, and utilizing the Black-Scholes option pricing model to estimate a discount of 17.5% and 20.0% for the 3-year and 4-year lockup period, respectively. Pursuant to the terms of the purchase agreement, all 1,203,360 shares issued as Stock Consideration will be held in an escrow account to secure the indemnification rights of Landec with respect to certain matters, including breaches of representations, warranties and covenants such as environmental and tax representations. The Stock Consideration is comprised of two tranches, with 3-year and 4-year lock-up provisions, respectively, such that 50% of the Stock Consideration is released from lock-up on November 30, 2021, the 3-year anniversary of the close date of the transaction, and 50% of the Stock Consideration is released on November 30, 2022, the 4-year anniversary of the close date of the transaction. Yucatan Foods, founded in 1991, with its headquarters in Los Angeles, CA, produces and sells guacamole and other avocado products under its Yucatan and Cabo Fresh brands primarily in the U.S. and Canada. Yucatan Foods' production facility is located in Guanajuato, Mexico, very near where avocados are grown. Landec acquired Yucatan Foods to grow, strengthen, and stabilize its position in the natural foods market and to improve Curation Foods' margins over time. Upon acquisition, Yucatan Foods became a wholly-owned subsidiary of Curation Foods. The Acquisition Date fair value of the consideration paid consisted of the following:
The excess of the purchase price over the aggregate fair value of identifiable net assets acquired was recorded as goodwill. These preliminary fair values of the assets acquired and the liabilities assumed were determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. The primary areas of the purchase price that are not yet finalized are related to income taxes and consideration of indemnification provisions for environmental related items. The fair value of assets acquired and liabilities assumed in accounting for the acquisition is set forth in the table below:
Intangible Assets The Company identified two intangible assets in connection with the Yucatan Foods acquisition: trademark/tradenames valued at $15.9 million and customer relationships valued at $11.0 million, which are included within Trademarks/tradenames and Customer relationships in the accompanying Consolidated Balance Sheets, respectively. Tradenames are considered to be an indefinite lived asset and therefore, will not be amortized. Customer relationships have an estimated useful life of 12 years and will be amortized to operating expenses on an accelerated basis that reflects the pattern in which the economic benefits are consumed. The tradenames are valued using the relief from royalty valuation method and the customer relationships are valued using the excess earnings method. Goodwill The goodwill recognized from the Yucatan Foods acquisition is primarily attributable to Yucatan Foods' long history and expected synergies from future growth and expansion of our Curation Foods business segment. Approximately 80% of the goodwill is expected to be deductible for income tax purposes. The Company will test goodwill for impairment on an annual basis or sooner, if indicators of impairment are present. O Acquisition On March 1, 2017, the Company purchased substantially all of the assets of O for $2.5 million in cash plus contingent consideration of up to $7.5 million based upon O achieving certain EBITDA targets. All accounting for this acquisition is final. The potential earn out payment of up to $7.5 million is based on O’s cumulative EBITDA over the Company’s fiscal years 2018 through 2020. At the end of each fiscal year, beginning in fiscal year 2018, the former owners of O will earn the equivalent of the EBITDA achieved by O for that fiscal year up to $4.6 million over the three year period. The former owners can then earn an additional $2.9 million on a dollar for dollar basis for exceeding $6.0 million of cumulative EBITDA over the three year period. Each quarter the Company performs, with the assistance of a third party appraiser, an analysis of O’s projected EBITDA over the earnout period. Based on this analysis, the Company records a contingent consideration liability, included in Other non-current liabilities. As of August 25, 2019 and May 26, 2019, the contingent consideration liability was $0.5 million and $0.5 million, respectively, representing the present value of the expected earn out payments. |
Leases - Supplemental Cash Flow Information (Details) $ in Thousands |
3 Months Ended |
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Aug. 25, 2019
USD ($)
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Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 1,654 |
Operating cash flows from finance leases | 90 |
Financing cash flows from finance leases | $ 30 |
Discontinued Operations - Assets and Liabilities of Discontinued Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Aug. 25, 2019 |
Aug. 26, 2018 |
May 26, 2019 |
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Other current liabilities, discontinued operations: | |||
Loss from discontinued operations, before taxes | $ 0 | $ (190) | |
Income tax benefit | 0 | 45 | |
Loss from discontinued operations, net of tax | 0 | (145) | |
Discontinued Operations | Now Planting | |||
Other current liabilities, discontinued operations: | |||
Accounts payable | 0 | $ 51 | |
Accrued expenses and other current liabilities | 0 | 14 | |
Total other current liabilities, discontinued operations | 0 | $ 65 | |
Revenues | 0 | 0 | |
Cost of sales | 0 | 0 | |
Research and development | 0 | (42) | |
Selling, general and administrative | 0 | (148) | |
Loss from discontinued operations, before taxes | 0 | (190) | |
Income tax benefit | 0 | 45 | |
Loss from discontinued operations, net of tax | $ 0 | $ (145) |
Investment in Non-public Company |
3 Months Ended |
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Aug. 25, 2019 | |
Investments, Debt and Equity Securities [Abstract] | |
Investment in Non-public Company | Investment in Non-public Company On February 15, 2011, Curation Foods entered into a share purchase agreement (the “Windset Purchase Agreement”) with Windset. Pursuant to the Windset Purchase Agreement, Curation Foods purchased from Windset 150,000 Senior A preferred shares for $15.0 million and 201 common shares for $201. On July 15, 2014, Curation Foods increased its investment in Windset by purchasing from the Newell Capital Corporation an additional 68 common shares and 51,211 junior preferred shares of Windset for $11.0 million. After this purchase, the Company’s common shares represent a 26.9% ownership interest in Windset. The Senior A preferred shares yield a cash dividend of 7.5% annually. The dividend is payable within 90 days of each anniversary of the execution of the Windset Purchase Agreement. The non-voting junior preferred stock does not yield a dividend unless declared by the Board of Directors of Windset and no such dividend has been declared. The Shareholders’ Agreement between Curation Foods and Windset, as amended on March 15, 2017, includes a put and call option (the “Put and Call Option”), which can be exercised on or after March 31, 2022, whereby Curation Foods can exercise the put to sell its common, Senior A preferred shares, and junior preferred shares to Windset, or Windset can exercise the call to purchase those shares from Curation Foods, in either case, at a price equal to 26.9% of the fair market value of Windset’s common shares, plus the liquidation value of the preferred shares of $20.1 million ($15.0 million for the Senior A preferred shares and $5.1 million for the junior preferred shares). Under the terms of the arrangement with Windset, the Company is entitled to designate one of five members on the Board of Directors of Windset. The investment in Windset does not qualify for equity method accounting as the investment does not meet the criteria of in-substance common stock due to returns through the annual dividend on the non-voting senior preferred shares that are not available to the common stockholders. As the put and call options require all of the various shares to be put or called in equal proportions, the Company has deemed that the investment, in substance, should be treated as a single security for purposes of accounting. The fair value of the Company’s investment in Windset was determined utilizing the Windset Purchase Agreement’s put/call calculation for value and a discounted cash flow model based on projections developed by Windset, and considers the put and call conversion options. These features impact the duration of the cash flows utilized to derive the estimated fair values of the investment. These two discounted cash flow models’ estimate for fair value are then weighted. Assumptions included in these discounted cash flow models will be evaluated quarterly based on Windset’s actual and projected operating results to determine the change in fair value. During the three months ended August 25, 2019 and August 26, 2018, the Company recorded $0.3 million and $0.4 million, respectively, in dividend income. The increase in the fair market value of the Company’s investment in Windset for the three month periods ended August 25, 2019 and August 26, 2018 was $0 and $1.0 million, respectively, and is included in Other income in the accompanying Consolidated Statements of Comprehensive (Loss) Income. |
Debt |
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Long-term debt, net consists of the following:
On September 23, 2016, the Company entered into a Credit Agreement with JPMorgan, BMO, and City National Bank, as lenders (collectively, the “Lenders”), and JPMorgan as administrative agent, pursuant to which the Lenders provided the Company with a $100.0 million revolving line of credit (the “Revolver”) and a $50.0 million term loan facility (the “Term Loan”), guaranteed by each of the Company’s direct and indirect subsidiaries and secured by substantially all of the Company’s assets, with the exception of the Company’s investment in Windset. On November 30, 2018, the Company entered into the Fourth Amendment to the Credit Agreement (the "Amendment"), which increased the Term Loan to $100.0 million and the Revolver to $105.0 million. Both the Revolver and the Term Loan continue to mature on September 23, 2021, with the Term Loan requiring quarterly principal payments to increase to $2.5 million beginning March 1, 2019, with the remainder continuing to be due at maturity. The primarily purpose of the Amendment was to fund the Company's acquisition of Yucatan Foods and its related entities on December 1, 2018, to pay certain fees and expenses incurred in connection with the consummation of the Amendment, and for other general corporate purposes. See Note 2 - Acquisitions for more details on Yucatan Foods acquisition. Interest on both the Revolver and the Term Loan continues to be based upon the Company’s leverage ratio (generally defined as the ratio of the Company’s total indebtedness on such date to the Company’s consolidated EBITDA for the period of four consecutive fiscal quarters ended on or most recently prior to such date), at a per annum rate of either (i) the prime rate plus a spread of between 0.25% and 2.25% or (ii) the Eurodollar rate plus a spread of between 1.25% and 3.25%. The amended agreement increased the leverage ratio covenant to 4.50 to 1.00 from 3.50 to 1.00 through March 1, 2020. The Credit Agreement provides the Company the right to increase the Revolver commitments and/or the Term Loan commitments by obtaining additional commitments either from one or more of the Lenders or another lending institution at an amount of up to $10.0 million. The Credit Agreement continues to contain customary financial covenants and events of default under which the obligation could be accelerated and/or the interest rate increased. The Company was in compliance with all financial covenants as of August 25, 2019. As of August 25, 2019, $70.6 million was outstanding on the Revolver, at an interest rate of 4.98% under the Eurodollar option. Derivative Instruments On November 1, 2016, the Company entered into an interest rate swap contract (the “2016 Swap”) with BMO at a notional amount of $50 million. The 2016 Swap has the effect of changing the Company’s Term Loan obligation from a variable interest rate to a fixed 30-day LIBOR rate of 1.22%. On June 25, 2018, the Company entered into an interest rate swap contract (the “2018 Swap”) with BMO at a notional amount of $30.0 million. The 2018 Swap has the effect of converting the first $30.0 million of the total outstanding amount of the Company’s 30-day LIBOR borrowings from a variable interest rate to a fixed 30-day LIBOR rate of 2.74%. |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies (Policies) |
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements of Landec have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made which are necessary to present fairly the financial position of the Company at August 25, 2019 and the results of operations and cash flows for all periods presented. Although Landec believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements and related footnotes prepared in accordance with GAAP have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. The accompanying financial data should be reviewed in conjunction with the audited financial statements and accompanying notes included in Landec's Annual Report on Form 10-K for the fiscal year ended May 26, 2019. The Company’s fiscal year is the 52- or 53-week period that ends on the last Sunday of May with quarters within each year ending on the last Sunday of August, November, and February; however, in instances where the last Sunday would result in a quarter being 12-weeks in length, the Company’s policy is to extend that quarter to the following Sunday. A 14th week is included in the fiscal year every five or six years to realign the Company’s fiscal quarters with calendar quarters. In May 2019, the Company discontinued the Now Planting business. As a result, the Now Planting business, which was launched during the second quarter of fiscal year 2019, has been reclassified as a discontinued operation under the provisions of Accounting Standards Codification ("ASC") 205-20, Presentation of Financial Statements - Discontinued Operations ("ASC 205-20") for the three months ended August 26, 2018. The results of operations for the three months ended August 25, 2019 are not necessarily indicative of the results that may be expected for an entire fiscal year because there is some seasonality in Curation Foods’ business and the order patterns of Lifecore’s customers which may lead to significant fluctuations in Landec’s quarterly results of operations. |
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Basis of Consolidation | Basis of Consolidation The consolidated financial statements are presented on the accrual basis of accounting in accordance with GAAP and include the accounts of Landec Corporation and its subsidiaries, Curation Foods and Lifecore. All intercompany transactions and balances have been eliminated. The financial results of Yucatan Foods have been included in our consolidated financial statements from the date of acquisition on December 1, 2018. Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities, and operations of a VIE if it is determined to be the primary beneficiary of the VIE. An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders, or b) as a group the holders of the equity investment at risk lack any one of the following three characteristics: (i) the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that the partnership interest and equity investment in the non-public company are not VIEs. |
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Reclassifications | Reclassifications Certain reclassifications have been made to prior year financial statements to conform to the current year presentation. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition; loss contingencies; sales returns and allowances; inventories; self-insurance liabilities; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long-lived assets including intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock-based compensation. These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results may differ from management’s estimates. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company records all highly liquid securities with three months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of money market funds. The market value of cash equivalents approximates their historical cost given their short-term nature. |
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Restricted Cash | Restricted Cash The Company was required to maintain $0.4 million of restricted cash at August 25, 2019 and May 26, 2019 related to certain collateral requirements for obligations under its workers' compensation programs. The restricted cash is included in Other assets in the Company’s accompanying Consolidated Balance Sheets. |
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Inventories | Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value and consist of the following:
If the cost of the inventories exceeds their net realizable value, provisions are recorded currently to reduce them to net realizable value. The Company also records a provision for slow moving and obsolete inventories based on the estimate of demand for its products. |
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Related Party Transactions | Related Party Transactions The Company sells products to and earns license fees from Windset Holdings 2010 Ltd. (“Windset”). During both the three months ended August 25, 2019 and August 26, 2018, the Company recognized revenues of $0.1 million. These amounts have been included in product sales in the accompanying Consolidated Statements of Comprehensive (Loss) Income. The related receivable balances of $0.2 million and $0.5 million are included in Accounts receivable in the accompanying Consolidated Balance Sheets as of August 25, 2019 and May 26, 2019, respectively. All related party transactions are monitored quarterly by the Company and approved by the Audit Committee of the Board of Directors. |
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Debt Issuance Costs | Debt Issuance Costs The Company records its line of credit debt issuance costs as an asset, and as such, $0.2 million and $0.2 million were recorded as Prepaid expenses and other current assets, and Other assets in the accompanying Consolidated Balance Sheets, respectively, as of August 25, 2019 and $0.1 million and $0.2 million, respectively, as of May 26, 2019. The Company records its term debt issuance costs as a contra-liability, and as such, $0.2 million and $0.3 million was recorded as Current portion of long-term debt, and Long-term debt net in the accompanying Consolidated Balance Sheets, respectively, as of August 25, 2019 and $0.2 million and $0.3 million, respectively, as of May 26, 2019. |
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Financial Instruments | Financial Instruments The Company’s financial instruments are primarily composed of commercial-term trade payables, grower advances, notes receivable, and debt instruments. For short-term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long-term debt approximates its carrying value. Cash Flow Hedges The Company has entered into interest rate swap contracts to manage interest rate risk. These derivative instruments may offset a portion of the changes in interest expense. The Company designates these derivative instruments as cash flow hedges. The Company’s derivative instruments are subject to master netting arrangements. These arrangements include provisions to setoff positions with the same counterparties in the event of default by one of the parties. The Company accounts for its derivative instruments as either an asset or a liability and carries them at fair value in Other assets or Other non-current liabilities in the accompanying Consolidated Balance Sheets. The accounting for changes in the fair value of derivative instruments depends on the intended use of the derivative instrument and the resulting designation. For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated Other Comprehensive Income (“AOCI”) in Stockholders’ Equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized in earnings in the current period. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions. Accumulated Other Comprehensive Income Comprehensive income consists of two components, net income and Other Comprehensive Income (“OCI”). OCI refers to revenue, expenses, and gains and losses that under GAAP are recorded as a component of stockholders’ equity but are excluded from the determination of net income. The Company’s AOCI consists of net deferred gains and losses on its interest rate swap contracts accounted for as cash flow hedges. The components of AOCI, net of tax, are as follows:
The Company does not expect any transactions or other events to occur that would result in the reclassification of any significant gains or losses into earnings in the next 12 months. |
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Investment in Non-Public Company | Investment in Non-Public Company On February 15, 2011, the Company made its initial investment in Windset which is reported as an Investment in non-public company, fair value, in the accompanying Consolidated Balance Sheets as of August 25, 2019 and May 26, 2019. The Company has elected to account for its investment in Windset under the fair value option. |
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Assets Held for Sale | Assets Held for Sale In June 2019, the Company designated the Santa Maria office as the Curation Foods headquarters, and decided to close and put up for sale the Curation Foods office in San Rafael, CA. The San Rafael property has been designated as held for sale as of August 25, 2019 and the net carrying value of $2.8 million is presented as Other current assets within the Consolidated Balance Sheet as of August 25, 2019. The disposal is expected to occur by the end of the calendar year, and is not expected to have a material impact to the Company's financial statements. |
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Leases | Leases Under Topic 842, the Company determines if an arrangement is a lease at inception. Right-of-use ("ROU") assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate is a quoted rate based on the understanding of what the Company's credit rating would be. Certain agreements may contain the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset. The Company, when reasonably certain to exercise the option, considers these options in determining the measurement of the lease. The Company's lease agreements do not contain any material residual value guarantees. The Company's lease agreements generally contain lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The Company combines fixed payments for non-lease components with lease payments and account for them together as a single lease component which increases the amount of lease assets and liabilities. Payments under lease arrangements are primarily fixed, however, certain lease agreements contain variable payments, which are expensed as incurred and not included in the operating lease assets and liabilities. These amounts primarily include payments affected by changes in price indices. |
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Intangible Assets | Intangible Assets The Company’s intangible assets are comprised of customer relationships with a finite estimated useful life of eleven to thirteen years, and trademarks/tradenames and goodwill with indefinite useful lives. Finite-lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group) may not be recoverable. Indefinite lived intangible assets are reviewed for impairment at least annually. For goodwill and other indefinite-lived intangible assets, the Company performs a qualitative impairment analysis in accordance with ASC 350-30-35. |
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Partial Self-Insurance on Employee Health and Workers Compensation Plans and Business Interruption Insurance Recoveries | Partial Self-Insurance on Employee Health and Workers Compensation Plans The Company provides health insurance benefits to eligible employees under self-insured plans whereby the Company pays actual medical claims subject to certain stop loss limits and self-insures its workers compensation claims. The Company records self-insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Any projection of losses concerning the Company's liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as inflation rates, changes in severity, benefit level changes, medical costs, and claims settlement patterns. This self-insurance liability is included in Other accrued liabilities in the accompanying Consolidated Balance Sheets and represents management's best estimate of the amounts that have not been paid as of August 25, 2019 and May 26, 2019. It is reasonably possible that the expense the Company ultimately incurs could differ and adjustments to future reserves may be necessary. Business Interruption Insurance Recoveries In the third quarter of fiscal year 2019, the Company recalled five SKUs of Eat Smart single-serve Salad Shake-Ups!™. In the fourth quarter of fiscal year 2019, the Company submitted a product recall claim. In the first quarter of fiscal year 2020, the Company recognized $2.4 million of business interruption insurance recoveries. Amounts received on insurance recoveries related to business interruption are recorded as a reduction to “Cost of sales” and are classified as operating cash flows. |
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Fair Value Measurements | Fair Value Measurements The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non-public company. See Note 3 – Investment in Non-public Company for further information. The Company also measures its contingent consideration liability at fair value. See Note 2 – Acquisitions for further information. The Company has not elected the fair value option for any of its other eligible financial assets or liabilities. The accounting guidance established a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows: Level 1 – observable inputs such as quoted prices for identical instruments in active markets. Level 2 – inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data. Level 3 – unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions. As of August 25, 2019 and May 26, 2019, the Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis, including its interest rate swap contracts, its minority interest investment in Windset and its contingent consideration liability from the acquisition of O. The fair value of the Company’s interest rate swap contracts is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level 2 fair value measurement and is included in Other assets or Other non-current liabilities in the accompanying Consolidated Balance Sheets. The fair value of the Company’s contingent consideration liability from the acquisition of O utilizes significant unobservable inputs, including projected earnings before interest, taxes, depreciation and amortization (“EBITDA”) and discount rates. As a result, the Company’s contingent consideration liability associated with the O acquisition is considered a Level 3 measurement liability and is included in Other non-current liabilities in the accompanying Consolidated Balance Sheets. In determining the fair value of the Company’s contingent consideration liability, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
The fair value of our contingent consideration liability is sensitive to change in forecasts. The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions:
The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs, including projected cash flows, growth rates, and discount rates. As a result, the Company’s investment in Windset is considered to be a Level 3 measurement investment. There was no change in the fair value of the Company’s investment in Windset for the three months ended August 25, 2019. In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:
The revenue growth, expense growth, and income tax rate assumptions are considered the Company's best estimate of the trends in those items over the discount period. The discount rate assumption takes into account the risk-free rate of return, the market equity risk premium, and the company’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities. The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions:
Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The following table summarizes the fair value of the Company’s assets and liabilities that are measured at fair value on a recurring basis:
The following table reflects the fair value roll forward reconciliation of Level 3 assets and liabilities measured at fair value for the three months ended August 25, 2019:
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Revenue Recognition | Revenue Recognition The Company follows the five step, principles-based model to recognize revenue upon the transfer of promised goods or services to customers and in an amount that reflects the consideration for which the Company expects to be entitled in exchange for those goods or services. Revenue, net of estimated allowances and returns, is recognized when the Company has completed its performance obligations under a contract and control of the product is transferred to the customer. Substantially all revenue is recognized at the time shipment is made or upon delivery as control of the product is transferred to the customer. Revenue for development service contracts are generally recognized based upon the labor hours expended relative to the total expected hours as a measure of progress to depict transfer of control of the service over time. The services are not distinct and are accounted for as a single performance obligation for each customer. For descriptions of the Company’s product offerings and segments refer to Note 10 – Business Segment Reporting in our annual report on Form 10-K for the year ended May 26, 2019. The Company’s standard terms of sale are included in its contracts, purchase orders, and invoices. As such, all revenue is considered revenue recognized from contracts with customers. Shipping and other transportation costs charged to customers are recorded in both revenue and cost of goods sold. The Company has elected to account for shipping and handling as fulfillment activities, and not a separate performance obligation. The Company’s standard payment terms with its customers range from 30 days to 90 days. Certain customers may receive cash-based incentives (including: volume rebates, discounts, and slotting fees), which are accounted for as variable consideration to the Company’s performance obligations. The Company estimates these sales incentives based on the expected amount to be provided to its customers and reduces revenues recognized towards its performance obligations. The Company does not anticipate significant changes in its estimates for variable consideration. Occasionally, the Company enters into bill-and-hold arrangements, where it invoices the customer for products even though it retains possession of the products until a point-in-time in the future when the products will be shipped to the customer. In these contracts, the primary performance obligation is satisfied, and revenue is generally recognized, at a point-in-time when the product is segregated from the Company’s general inventory, it's ready for shipment to the customer, and the Company does not have the ability to use the product or re-deploy it to another customer. The Company disaggregates its revenue by segment product lines based on how it markets its products and reviews results of operations. The following tables disaggregate segment revenue by major product lines:
Contract Assets and Liabilities Contract assets primarily relate to the Company’s conditional right to consideration for work completed but not billed at the reporting date. The Company’s contract assets as of August 25, 2019 and May 26, 2019 were $6.5 million and $5.6 million, respectively. Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. |
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Shipping and Handling | Shipping and Handling Shipping and handling costs are incurred to move the Company’s products from production and storage facilities to the customer. Handling costs are incurred from the point the product is segregated from the Company’s general inventory until it is provided to the shipper and generally include costs to store, move and prepare the products for shipment. The cost of shipping and handling services is recognized in Cost of product sales. When the costs of shipping and handling are passed on to a customer, the related amount is recorded in revenue. |
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Legal Contingencies | Legal Contingencies In the ordinary course of business, the Company is involved in various legal proceedings and claims. The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each fiscal quarter and adjusted to reflect the impacts of negotiations, estimate settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Legal fees are expensed in the period in which they are incurred. Curation Foods has been the target of a union organizing campaign which has included three unsuccessful attempts to unionize Curation Foods' Guadalupe, California processing plant. The campaign has involved a union and over 100 former and current employees of Pacific Harvest, Inc. and Rancho Harvest, Inc. (collectively "Pacific Harvest"), Curation Foods' labor contractors at its Guadalupe, California processing facility, bringing legal actions before various state and federal agencies, the California Superior Court, and initiating over 100 individual arbitrations against Curation Foods and Pacific Harvest. The legal actions consisted of three main types of claims: (1) Unfair Labor Practice claims ("ULPs") before the National Labor Relations Board (“NLRB”), (2) discrimination/wrongful termination claims before state and federal agencies and in individual arbitrations, and (3) wage and hour claims as part of two Private Attorney General Act (“PAGA”) cases in state court and in over 100 individual arbitrations. |
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Recent Accounting Guidance | Recent Accounting Guidance Recently Adopted Pronouncements Leases In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right-of-use-assets. Effective May 27, 2019, the Company adopted the ASU on a modified retrospective basis. Prior period amounts were not adjusted and continue to be reported in accordance with historical accounting policies under ASC 840: Leases (Topic 840). The Company elected the package of practical expedients under which the Company has not reassessed prior conclusions about lease classification and initial direct costs. The Company elected the hindsight expedient to evaluate lease terms, and made a policy election that does not recognize right-of-use assets and lease liabilities related to short-term leases. Upon adoption of ASU 2016-02, the Company recorded a transitional adjustment of $0.3 million to opening retained earnings to write off the difference in deferred rent balances from prior periods for operating leases with non-level rent. The difference arises from recalculation of deferred rent after applying updated lease terms as a result of applying hindsight. Additionally, the adoption of the standard had a significant impact in the condensed consolidated balance sheet due to the recognition of $31.1 million of operating lease liabilities, along with $30.0 million of operating lease right-of-use assets. This change had no impact on the Company’s ability to meet its loan covenants as the impact from the adoption of ASU 2016-02 was taken into consideration when determining its loan covenants. Derivatives and Hedging, Financial Instruments In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"), which amends the presentation and disclosure requirements and changes how companies assess effectiveness. The amendments are intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, including interim periods within those periods. The Company adopted ASU 2017-12 on May 27, 2019, without any impact to the Company's consolidated financial statements and related disclosures. In April 2019, the FASB issued ASU 2019-04, Topic 815, Derivatives and Hedging which affects the recognition and measurement of financial instruments, including derivatives and hedging. For entities that have adopted ASU 2017-12, the hedging amendments in ASU 2019-04 are effective as of the beginning of the first annual reporting period beginning after the date of issuance. The Company adopted ASU 2019-04 on May 27, 2019, without any impact to the Company's consolidated financial statements and related disclosures. Share-Based Compensation In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"), which simplifies the accounting for share-based payments granted to non-employees for goods and services. The guidance aligns the accounting for non-employee equity based awards with the accounting for employee equity-based awards, and requires equity-classified share-based payment awards issued to non-employees to be measured based on the grant date price, rather than remeasure the awards through the performance completion date. ASU 2018-07 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted ASU 2018-07 on May 27, 2019. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements and related disclosures. Recently Issued Pronouncements to be Adopted Cloud Computing Arrangements In August 2018, the FASB issued ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract ("ASU 2018-15"), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The Accounting Standards Update generally aligns the guidance on recognizing implementation costs incurred in a cloud computing arrangement that is a service contract with that for implementation costs incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. ASU 2018-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early application is permitted. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. Fair Value Measurement In August 2018, the FASB issued ASU 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). The guidance eliminates, adds and modifies certain disclosure requirements for fair value measurements. Entities will no longer have to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. Financial Instruments – Credit Losses In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), which requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, and Topic 825, Financial Instruments, which provides practical expedients and policy elections related to the presentation and disclosure of accrued interest and the related allowance for credit losses and clarifies how to disclose line-of-credit arrangements that are converted to term loans. ASU 2019-04 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is currently assessing the future impact of this update on its consolidated financial statements and related disclosures. |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Aug. 25, 2019 |
Aug. 26, 2018 |
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Segment Reporting Information [Line Items] | ||
Net sales | $ 138,714 | $ 124,668 |
Curation Foods | ||
Segment Reporting Information [Line Items] | ||
Net sales | 126,673 | 112,051 |
Lifecore | ||
Segment Reporting Information [Line Items] | ||
Net sales | 12,041 | 12,617 |
Salads | Curation Foods | ||
Segment Reporting Information [Line Items] | ||
Net sales | 51,261 | 49,080 |
Core vegetables | Curation Foods | ||
Segment Reporting Information [Line Items] | ||
Net sales | 57,348 | 61,750 |
Emerging brands | Curation Foods | ||
Segment Reporting Information [Line Items] | ||
Net sales | 18,064 | 1,221 |
Aseptic | Lifecore | ||
Segment Reporting Information [Line Items] | ||
Net sales | 5,687 | 5,766 |
Fermentation | Lifecore | ||
Segment Reporting Information [Line Items] | ||
Net sales | 738 | 3,070 |
Development services | Lifecore | ||
Segment Reporting Information [Line Items] | ||
Net sales | $ 5,616 | $ 3,781 |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Reconciliation of Cash, Cash Equivalents (Details) - USD ($) $ in Thousands |
Aug. 25, 2019 |
May 26, 2019 |
Aug. 26, 2018 |
May 27, 2018 |
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Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 1,990 | $ 1,080 | ||
Restricted cash | 385 | 385 | ||
Cash, cash equivalents and restricted cash | $ 2,375 | $ 1,465 | $ 1,684 | $ 3,216 |
Acquisitions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition | The Acquisition Date fair value of the consideration paid consisted of the following:
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Schedule of Purchase Price Allocation |
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Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Lease Cost and Supplemental Cash Flow Information | Supplemental cash flow information related to leases are as follows:
The components of lease cost were as follows:
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Maturity Analysis of Finance Lease Liabilities | Our leases have original lease periods ending between 2019 and 2040. The Company's maturity analysis of operating and finance lease liabilities as of August 25, 2019 were as follows:
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Maturity Analysis of Operating Lease Liabilities | Our leases have original lease periods ending between 2019 and 2040. The Company's maturity analysis of operating and finance lease liabilities as of August 25, 2019 were as follows:
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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Aug. 25, 2019 |
May 26, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 29,146,000 | 29,102,000 |
Common stock, shares outstanding (in shares) | 29,146,000 | 29,102,000 |
Diluted Net Income Per Share - Narrative (Details) - shares shares in Millions |
3 Months Ended | |
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Aug. 25, 2019 |
Aug. 26, 2018 |
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Class of Stock [Line Items] | ||
Amount of securities excluded from computation of earnings per share (in shares) | 2.6 | 1.4 |
RSUs | ||
Class of Stock [Line Items] | ||
Amount of securities excluded from computation of earnings per share (in shares) | 0.1 |
Leases - Narrative (Details) - USD ($) $ in Thousands |
Aug. 25, 2019 |
May 26, 2019 |
---|---|---|
Lessee, Lease, Description [Line Items] | ||
Property and equipment, net | $ 201,557 | $ 200,027 |
Assets Held Under Finance Leases | ||
Lessee, Lease, Description [Line Items] | ||
Property and equipment, net | 3,800 | 3,800 |
Accumulated amortization | $ 400 | $ 400 |
Leases - Components of Lease Cost (Details) $ in Thousands |
3 Months Ended |
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Aug. 25, 2019
USD ($)
| |
Finance lease cost: | |
Amortization of leased assets | $ 28 |
Interest on lease liabilities | 90 |
Operating lease cost | 1,593 |
Variable lease cost and other | 165 |
Total lease cost | $ 1,876 |
Weighted-average remaining lease term: | |
Operating leases | 13 years 9 months |
Finance leases | 3 years 4 months 6 days |
Weighted-average discount rate: | |
Operating leases | 5.28% |
Finance leases | 9.99% |
Business Segment Reporting - Sales by Geographic Area (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Aug. 25, 2019 |
Aug. 26, 2018 |
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Segment Reporting Information [Line Items] | ||
Net sales | $ 138,714 | $ 124,668 |
Canada | ||
Segment Reporting Information [Line Items] | ||
Net sales | 20,700 | 19,900 |
Belgium | ||
Segment Reporting Information [Line Items] | ||
Net sales | 0 | 2,000 |
Ireland | ||
Segment Reporting Information [Line Items] | ||
Net sales | 1,400 | 1,100 |
All Other Countries | ||
Segment Reporting Information [Line Items] | ||
Net sales | $ 1,700 | $ 800 |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Fair Value of Contingent Consideration Liability (Details) - Rate |
Aug. 25, 2019 |
May 26, 2019 |
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Cost of debt | Minimum | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Measurement Input | 0.051 | 0.051 |
Cost of debt | Maximum | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Measurement Input | 0.055 | 0.055 |
Market price of risk adjustment | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Measurement Input | 0.14 | 0.14 |
EBITDA volatility | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | ||
Measurement Input | 0.28 | 0.28 |
Acquisitions - Schedule of Business Acquisitions (Details) - Yucatan $ in Thousands |
Dec. 01, 2018
USD ($)
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Business Acquisition [Line Items] | |
Cash consideration | $ 59,898 |
Stock consideration | 15,068 |
Total consideration | $ 74,966 |
Diluted Net Income Per Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diluted Net Income Per Share | Diluted Net Income Per Share The following table sets forth the computation of diluted net income per share:
Due to the Company’s net loss for the three months ended August 25, 2019, the net loss per share includes only weighted average shares outstanding and thus excludes 0.1 million of outstanding options and RSUs as such impacts would be antidilutive for this period. For the three months ended August 25, 2019 and August 26, 2018, the computation of the diluted net income per share excludes the impact of options to purchase 2.6 million and 1.4 million shares of Common Stock, respectively, as such impacts would be antidilutive for this period. |
Business Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment Reporting | Business Segment Reporting The Company has three strategic reporting business segments: the Curation Foods segment, the Lifecore segment, and the Other segment. The Company decided to discontinue its Now Planting business during the fourth quarter of fiscal year 2019. As a result, the operating results for the Now Planting business are presented as a discontinued operation in the Company's accompanying Consolidated Financial Statements and the financial results for fiscal year 2019 comparable periods have been reclassified to present the Now Planting business as a discontinued operation. The Curation Foods business includes (i) four natural food brands, Eat Smart, O Olive Oil & Vinegar, as well as Yucatan and Cabo Fresh, acquired by the Company through the acquisition of Yucatan Foods during the third quarter of fiscal 2019 (see the Note 2 - Acquisitions for more details on this transaction), and (ii) BreatheWay® activities. The Curation Foods segment includes activities to market and pack specialty packaged whole and fresh-cut fruit and vegetables, the majority of which incorporate the BreatheWay specialty packaging for the retail grocery, club store and food services industry and are sold primarily under the Eat Smart brand and various private labels. The Curation Foods segment also includes sales of BreatheWay packaging to partners for fruit and vegetable products, sales of olive oils and wine vinegars under the O brand, and sales of avocado products under the recently acquired brands Yucatan and Cabo Fresh. The Lifecore segment sells products utilizing hyaluronan, a naturally occurring polysaccharide that is widely distributed in the extracellular matrix of connective tissues in both animals and humans, and non-HA products for medical use primarily in the Ophthalmic, Orthopedic and other markets. The Other segment includes corporate general and administrative expenses, non-Curation Foods and non-Lifecore interest income and income tax expenses. All of the Company's assets are located within the United States of America except for the production facility in Mexico, which was acquired by the Company as a result of the Yucatan Foods acquisition. The Company’s international sales by geography are based on the billing address of the customer and were as follows:
Operations by business segment consisted of the following:
During the three months ended August 25, 2019 and August 26, 2018, sales to the Company’s top five customers accounted for 49% and 48% of sales, respectively. The Company’s top two customers, Costco Wholesale Corporation and Wal-Mart Stores, Inc., from the Curation Foods segment, accounted for 14% and 20%, respectively, of revenues for the three months ended August 25, 2019, and 19% and 18%, respectively, for the three months ended August 26, 2018. |
Leases - Maturity Analysis of Operating and Financing Lease Liabilities (Details) - USD ($) $ in Thousands |
Aug. 25, 2019 |
May 26, 2019 |
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Operating Leases | ||
Remainder of 2020 | $ 3,931 | |
2021 | 4,011 | |
2022 | 3,522 | |
2023 | 3,255 | |
2024 | 2,931 | |
Thereafter | 26,407 | |
Total lease payments | 44,057 | |
Less: interest | (14,053) | |
Present value of lease liabilities | 30,004 | |
Less: current obligation of lease liabilities | (3,514) | |
Total long-term lease liabilities | 26,490 | |
Finance Leases | ||
Remainder of 2020 | 335 | |
2021 | 455 | |
2022 | 466 | |
2023 | 3,497 | |
2024 | 9 | |
Thereafter | 2 | |
Total lease payments | 4,764 | |
Less: interest | (1,141) | |
Present value of lease liabilities | 3,623 | |
Less: current obligation of lease liabilities | (87) | |
Total long-term lease liabilities | 3,536 | |
Total | ||
Remainder of 2020 | 4,266 | |
2021 | 4,466 | |
2022 | 3,988 | |
2023 | 6,752 | |
2024 | 2,940 | |
Thereafter | 26,409 | |
Total lease payments | 48,821 | |
Less: interest | (15,194) | |
Present value of lease liabilities | 33,627 | |
Less: current obligation of lease liabilities | (3,601) | $ (75) |
Total long-term lease liabilities | $ 30,026 |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Assumptions for Investment Used in Discounted Cash Flow Models (Details) $ in Thousands |
Aug. 25, 2019
USD ($)
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Accounting Policies [Abstract] | |
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) |
Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Components of Other Comprehensive Income (Details) $ in Thousands |
3 Months Ended |
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Aug. 25, 2019
USD ($)
| |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |
Balance | $ 270,144 |
Balance | 264,947 |
AOCI | |
AOCI Including Portion Attributable to Noncontrolling Interest, Net of Tax [Roll Forward] | |
Balance | 64 |
Unrealized losses on interest rate swap contracts, net of tax effect | (612) |
Balance | $ (548) |
Income Taxes |
3 Months Ended |
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Aug. 25, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The provision for income taxes for the three months ended August 25, 2019 and August 26, 2018 was a benefit of $1.4 million and an expense of $0.1 million, respectively. The effective tax rate for the three months ended August 25, 2019 and August 26, 2018 was 22% and 25%, respectively. The effective tax rate for the three months ended August 25, 2019 was higher than the statutory federal income tax rate of 21%, primarily due to the impact of state taxes and stock-based compensation, partially offset by federal & state R&D Credits. As of August 25, 2019 and May 26, 2019, the Company had unrecognized tax benefits of $1.0 million and $0.6 million, respectively. Included in the balance of unrecognized tax benefits as of August 25, 2019 and May 26, 2019 was $0.9 million and $0.5 million, respectively, of tax benefits that, if recognized, would result in an adjustment to the Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly within the next twelve months. The Company has elected to classify interest and penalties related to uncertain tax positions as a component of its provision for income taxes. The Company has accrued an insignificant amount of interest and penalties relating to the income tax on the unrecognized tax benefits as of August 25, 2019 and May 26, 2019. Due to tax attribute carryforwards, the Company is subject to examination for tax years 2015 forward for U.S. tax purposes. The Company is also subject to examination in various state jurisdictions for tax years 2012 forward, none of which were individually material. |
Discontinued Operations |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations | Discontinued Operations During the fourth quarter of fiscal year 2019, the Company discontinued its Now Planting soups. As a result, the Company met the requirements of ASC 205-20¸ to report the results of the Now Planting business as a discontinued operation. The operating results for the Now Planting business have therefore been reclassified as a discontinued operation in fiscal year 2019. The carrying amounts of the major classes of liabilities of the Now Planting business included in liabilities of discontinued operations are as follows:
After the Now Planting business was discontinued, the operations associated with this business qualified for reporting as discontinued operations. Accordingly, the operating results, net of tax, from discontinued operations are presented separately in the Company’s Consolidated Statements of Comprehensive (Loss) Income and the notes to the consolidated financial statements have been adjusted to exclude the Now Planting business for the three months ended August 26, 2018. Components of amounts reflected in loss from discontinued operations, net of tax are as follows:
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Stock-based Compensation and Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | The following table summarizes stock-based compensation by income statement line item:
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Business Segment Reporting (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 25, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area | The Company’s international sales by geography are based on the billing address of the customer and were as follows:
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Schedule of Segment Reporting Information, by Segment | Operations by business segment consisted of the following:
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Organization, Basis of Presentation, and Summary of Significant Accounting Policies - Components of Inventories (Details) - USD ($) $ in Thousands |
Aug. 25, 2019 |
May 26, 2019 |
---|---|---|
Accounting Policies [Abstract] | ||
Raw materials | $ 23,417 | $ 23,195 |
Work in progress | 5,985 | 4,189 |
Finished goods | 25,618 | 26,748 |
Total | $ 55,020 | $ 54,132 |
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