UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 2, 1999
LANDEC CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of incorporation or organization)
0-27446 94-3025618
(Commission file number) (IRS Employer Identification No.)
3603 HAVEN AVENUE, MENLO PARK, CALIFORNIA 94025
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 306-1650
N/A
Former name or former address, if changed from last report)
-1-
The undersigned Registrant hereby amends the following items from the
Current Report on Form 8-K filed on December 17, 1999. The Registrant is
amending Item 7 to include certain required historical financial statements and
pro forma financial information and exhibits associated therewith.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
Filed as exhibit 99.1
(b) Pro Forma Financial Information
The following pages 3 through 9 contain (1) the unaudited pro
forma condensed combined balance sheets of Landec Corporation and
Apio, Inc. as of October 31, 1999 and the notes thereto and (2)
the unaudited pro forma combined statement of operations of Landec
Corporation and Apio, Inc. for the year ended October 31, 1999 and
the notes thereto.
(c) Exhibits
2.1* Form of Agreement and Plan Merger and Purchase Agreement
by and among the Registrant, Apio, Inc. and related
companies and each of the respective shareholders dated as
of November 29, 1999.
4.1* Series A Preferred Stock Purchase Agreement between the
Registrant and Frederick Frank, dated as of November 19,
1999.
10.27 Loan agreement between Apio, Inc. and the Bank of America
dated as of November 29, 1999 (incorporated by reference
to identically numbered exhibit filed with the
Registrant's Form 10-K for the year ended October 31,
1999).
23.1 Consent of McGladrey & Pullen, LLP, Independent
Accountants.
99.1 Financial Statements of Apio, Inc. and related entities as
of September 30, 1999 and December 31, 1998, 1997 and 1996
and for the nine months ended September 30, 1999 and 1998
and the three years ended December 31, 1998 with the
Report of McGladrey & Pullen, LLP, Independent Auditors.
- ----------------------------
* Previously filed.
The Registrant hereby agrees to file with the Securities and Exchange
Commission any schedules or exhibits to such agreement which are not filed
herewith, upon the request of the Securities and Exchange Commission.
-2-
LANDEC CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements
(collectively, "the Pro Forma Financial Statements") were prepared to give
effect to the acquisition by Landec Corporation ("Landec" or the "Company")
of all the outstanding capital stock of Apio, Inc. and certain related
entities ("Apio"). In addition, the Pro Forma Financial Statements include a
refinancing of certain debt instruments of Apio and a separate preferred
stock offering effected by Landec to raise proceeds used to purchase Apio.
The acquisition has been accounted for using the purchase method. The pro
forma condensed combined balance sheet as of October 31, 1999 assumes the
acquisition and related transactions occurred on the balance sheet date and
the pro forma combined statement of operations for the fiscal year ended
October 31,1999 assumes that the acquisition occurred on November 1, 1998. In
addition, Landec did not acquire certain non-core operations of Apio. The
balances related to these non-core operations, as well as the reversal of
certain eliminating entries included in the historical combined results are
specifically identified in a separate column in the Pro Forma Financial
Statements. The Pro Forma Financial Statements do not purport to represent
what Landec's financial position or results of operations would have been if
the acquisition in fact had occurred on the date or at the beginning of the
periods indicated or to project Landec's financial position or results of
operations for any future date or period.
The pro forma adjustments are based upon available information and upon
certain assumptions, as described in Note (a) to the Pro Forma Financial
Statements, that Landec believes are reasonable under the circumstances. The
purchase price has been allocated to the acquired assets and liabilities
based on their respective fair market values. The Pro Forma Financial
Statements and accompanying notes should be read in conjunction with the
historical consolidated financial statements and notes thereto of Landec and
the historical financial statements and notes thereto of Apio, which are
included as Exhibit 99.1 to this Form 8-K/A.
-3-
LANDEC CORPORATION
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
OCTOBER 31, 1999
(IN THOUSANDS)
Landec Apio, Non-Acquired Pro Forma Pro Forma
Corporation Inc. Entities (g) Adjustments Combined
-------------- ----------- --------------- --------------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,203 $ 862 $ (6) 2,198 (b)
9,100 (d)
(9,100) (c)
300 (f) $ 6,557
Accounts receivable, net 2,952 18,797 -- (3,510) (b)
(526) (e) 17,713
Accounts receivable, related parties -- 105 5 (110) (b) --
Advances to growers, net -- 1,678 -- 711 (b) 2,389
Inventory 7,641 4,651 (67) (111) (b)
(111) (e) 12,003
Investment in farming activities -- 1,319 -- 711 (b) 2,030
Current maturities of notes
receivable -- 4,393 -- (2,227) (b) 2,166
Current maturities of notes
receivable, related parties 138 3,052 2,243 (5,295) (b) 138
Deferred advertising 522 -- -- -- 522
Prepaid expenses and other current
assets 1,711 478 (7) (725) (a)
589 (b)
(24) (e) 2,022
Deferred taxes -- 47 -- 886 (a&h)
(47) (b) 886
-------------- ----------- --------------- --------------- ------------
Total Current Assets 16,167 35,382 2,168 (7,291) 46,426
Property and equipment, net 11,002 13,544 -- 1,398 (b) 25,944
Notes receivable, less current maturities -- 1,044 540 (670) (b) 914
Investment in affiliates -- 97 -- 23 (b) 120
Property held for sale -- 1,635 (1,635) -- --
Intangible assets, net 13,506 288 -- 25,083 (a)
(14) (b) 38,863
Other assets 33 300 (7) 81 (b)
408 (f)
(181) (f) 634
-------------- ----------- --------------- --------------- ------------
$ 40,708 $ 52,290 $ 1,066 18,837 $ 112,901
============== =========== =============== =============== ============
-4-
LANDEC CORPORATION
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
OCTOBER 31, 1999
(IN THOUSANDS)
Landec Apio, Non-Acquired Pro Forma Pro Forma
Corporation Inc. Entities (g) Adjustments Combined
-------------- ----------- --------------- --------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Outstanding checks in excess of bank
balance $ -- $ 3,516 $ -- (3,516) (b) $ --
Accounts payable 1,687 10,762 -- 3,390 (b)
(414) (e) 15,425
Accounts payable, related parties -- 482 (312) (170) (b) --
Accrued compensation 1,036 -- -- -- 1,036
Accrued expenses 1,327 4,378 (3) 767 (a)
3,680 (b)
(367) (e)
182 (f) 9,964
Accrued expenses, related parties -- 142 -- (142) (b) --
Deferred revenue 2,135 -- -- -- 2,135
Grower payables -- 8,559 -- (2,170) (b) 6,389
Grower payables, related parties -- 861 -- (529) (b) 332
Line of credit -- 9,158 -- (1,293) (b)
(7,865) (f) --
Current maturities of long term debt 125 1,763 (267) (648) (b)
1,739 (f) 2,712
Notes payable, related parties -- 2,813 -- (2,813) (b) --
-------------- ----------- --------------- --------------- ------------
Total Current Liabilities 6,310 42,434 (582) (10,169) 37,993
Long-term debt, less current maturities 2,637 5,296 (828) 1,437 (b)
4,092 (c)
6,471 (f) 19,105
Deferred taxes -- 27 -- 980 (a&h) 1,007
-------------- ----------- --------------- --------------- ------------
Total Liabiliaties 8,947 47,757 (1,410) 2,811 58,105
Minority interest -- 851 -- (63) (b)
614 (a&i) 1,402
Stockholders' Equity:
Preferred stock - Landec -- -- -- 9,100 (d) 9,100
Common stock - Landec 77,289 -- -- 342 (a)
12,071 (c) 89,702
Accumulated deficit - Landec (45,528) -- -- 120 (e) (45,408)
Equity - Apio -- 3,682 2,476 (6,158) (a) --
-------------- ----------- --------------- --------------- ------------
Total Stockholders' Equity 31,761 3,682 2,476 15,475 53,394
-------------- ----------- --------------- --------------- ------------
$ 40,708 52,290 $ 1,066 18,837 $ 112,901
============== =========== =============== =============== ============
SEE ACCOMPANYING NOTES.
-5-
LANDEC CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
OCTOBER 31, 1999
1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined balance sheet has been prepared by
combining the historical consolidated balance sheet of Landec at October 31,
1999 with the historical balance sheet of Apio at September 30, 1999, and
gives effect to the pro forma adjustments as described in the notes below.
(a) The acquisition of Apio, which was accounted for as a purchase, has been
recorded based upon available information and upon certain assumptions that
Landec believes are reasonable under the circumstances. Estimated
acquisition expenses of $1,834,000 include legal, accounting, consulting,
fairness opinion and miscellaneous costs. Included in these costs are
$342,000 paid in Landec Common Stock rather than cash and $725,000 paid
prior to the close of the acquisition which was recorded as a prepaid asset
by Landec. The purchase price has been allocated to the acquired assets and
liabilities based on their relative fair market values, subject to final
adjustments. These allocations are based on independent valuations and
other studies. The final values may differ from those set forth below.
(In thousands)
Estimated purchase price (Note c) $ 25,263
Estimated acquisition expenses 1,834
------------
Total estimated acquisition cost $ 27,097
============
Historical net book value of the assets at September 30, 1999 $ 6,158
Decrease in net book value of assets acquired (Note b) (3,436)
Change in Minority Interest (Note i) (614)
Net deferred tax liability (94)
Customer base 1,821
Work force in place 1,395
Trademark 9,100
Goodwill 12,767
------------
$ 27,097
============
The fair market value of property, plant and equipment at the date of
purchase approximated net book value and therefore an allocation of the
purchase price to adjust these assets was not required.
(b) The decrease in the net book value of the assets from September 30, 1999
to the close date of December 2, 1999 is a result of a decrease in the
net book value of assets acquired due to operating activities,
shareholder draws of approximately $2.1 million and accrued transaction
costs of approximately $330,000 incurred by Apio from September 30, 1999
to December 2, 1999.
(c) The acquisition by Landec for all the outstanding capital stock of Apio
and certain related entities was exchanged for the following:
(In thousands)
Landec common stock $ 12,071
Contractual deferred obligations 4,092
Cash paid at closing 9,100
----------------
Purchase price $ 25,263
=================
Landec issued 2.5 million shares of Landec Common Stock to the former
shareholders of Apio. The stock was valued at the average closing price,
as quoted by the Nasdaq National Market, for three days before and after
the date of the close. The resulting value was discounted due to
registration restrictions on the stock. The discount factors used were
based on independent valuations.
-6-
Landec has agreed to pay a total of $5.3 million to certain former
shareholders of Apio. The obligations are due in five equal annual
payments beginning January 2, 2001. These obligations do not bear
interest and accordingly have been discounted at 9% over five years.
Furthermore, $750,000 of the cash consideration and 401,667 shares of the
equity consideration has been set aside in escrow to cover costs
associated with outstanding obligations of Apio as well as any potential
breach of representations and warranties made by Apio in connection with
the acquisition. In addition, up to $200,000 of the cash consideration
may be paid out in the future upon collection of certain receivables.
A former principal shareholder of Apio is also entitled to receive
additional cash consideration from Landec depending on the future
performance of the business acquired.
(d) On November 19, 1999 the Company completed a financing that raised $9.1
million, net of issuance costs, through a private placement of 166,667
shares of non-dividend paying convertible Preferred Stock (representing
1,666,670 shares of Common Stock on a converted basis).
(e) Historical accounts receivable and accounts payable balances resulting
from the sale of packaging materials from Landec to Apio and the gross
margin included in Apio's packaging materials inventory have been
eliminated.
(f) In connection with the acquisition, Apio refinanced several of it's
existing debt instruments. The borrowings prior to the refinancing
totaled $10.9 million at interest rates ranging from 8.2% to 9.75%. As a
result of the refinancing, Apio entered into a term loan for $11.25
million and a revolving line of credit, subject to borrowing base
limitations.
Apio also entered into an interest rate swap agreement which converted
the borrowing rate on the term loan to a fixed rate of 7.02% plus a
spread, based on certain debt to equity ratios, resulting in an initial
borrowing rate of 9.52%. The interest rate on the revolving line of
credit is prime plus 0.5%.
The company incurred fees of $408,000 to effect the refinancing which
will be recognized as interest expense over the term of the debt.
(g) Landec did not acquire certain non-core operations of Apio. The balances
related to these non-core operations, as well as the reversal of certain
eliminating entries included in the historical combined results, are
reflected in this column.
(h) See note (d) to the pro forma statement of operations.
(i) The addition to minority interest is due to an increase in the minority
shareholder position as a result of the acquisition.
-7-
LANDEC CORPORATION
UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED OCTOBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Landec Apio, Non-Acquired Pro Forma Pro Forma
Corporation Inc. Entities (i) Adjustments Combined
--------------- ------------ ---------------- ------------ --------------
Revenues:
Product sales $ 33,927 83,883 $ (7) $ (3,079) (e) $ 114,724
Services -- 62,828 -- 8,763 (h) 71,591
Services, related parties -- 10,887 (10) (8,763) (h) 2,114
Research and development revenues 770 -- -- -- 770
License fees 750 -- -- -- 750
--------------- ------------ ---------------- ------------ --------------
Total revenues 35,447 157,598 (17) (3,079) 189,949
--------------- ------------ ---------------- ------------ --------------
Cost of revenue
Product sales 21,476 72,684 (285) (3,079) (e)
1,586 (h) 92,382
Product sales, related parties -- 1,735 7 (1,586) (h) 156
Services -- 61,825 (256) (92) (h) 61,477
Services, related parties -- 467 -- 92 (h) 559
--------------- ------------ ---------------- ------------ --------------
Total revenues 21,476 136,711 (534) (3,079) 154,574
--------------- ------------ ---------------- ------------ --------------
Gross profit 13,971 20,887 517 -- 35,375
Farming revenue (loss) -- (1,982) -- (179) (h) (2,161)
Farming revenue (loss,) related party -- (179) -- 179 (h) --
Operating costs and expenses
Research and development 5,758 -- -- -- 5,758
Selling, general and administrative 11,192 18,865 (60) 1,554 (a)
131 (f) 31,682
--------------- ------------ ---------------- ------------ --------------
Total operating costs and
expenses 16,950 18,865 (60) 1,685 37,440
--------------- ------------ ---------------- ------------ --------------
Operating income (loss) (2,979) (139) 577 (1,685) (4,226)
Interest income 363 743 25 343 (h) 1,474
Interest income, related parties -- 279 205 (343) (h) 141
Interest expense (99) (1,458) 413 (368) (c)
(214) (g)
(338) (h) (2,064)
Interest expense, related party -- (133) (205) 338 (h) --
Other income -- -- 17 -- 17
Equity in net income (loss) of
unconsolidated subsidiaries -- (25) -- -- (25)
--------------- ------------ ---------------- ------------ --------------
Income (loss) before income taxes
and minority interest (2,715) (733) 1,032 (2,267) (4,683)
Provision for income taxes (54) (18) 1 17 (d) (54)
Minority interest in consolidated
subsidiaries -- (196) -- (115) (j) (311)
--------------- ------------ ---------------- ------------ --------------
Net income (loss) $ (2,769) $ (947) $ 1,033 $ (2,365) $ (5,048)
=============== ============ ================ ============ ==============
Basic and diluted net income (loss) per $ (.21) $ (.32)
share =============== ==============
Shares used in calculating basic and
diluted per share information 13,273 2,563 (b) 15,836
=============== ============ ================ ============ ==============
SEE ACCOMPANYING NOTES.
-8-
LANDEC CORPORATION
NOTES TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
OCTOBER 31, 1999
The unaudited pro forma condensed combined statement of operations has been
prepared by combining the historical consolidated statement of operations of
Landec for the fiscal year ended October 31, 1999 with the historical statement
of operations of Apio for the twelve months ended September 30, 1999, and gives
effect to the pro forma adjustments as described in the notes below.
(a) Amortization expense of intangible assets arising from the acquisition of
Apio, as shown below, is reflected in the pro forma adjustments and
detailed as follows (dollars in thousands):
PERIOD OF TWELVE MONTH
AMOUNT AMORTIZATION AMORTIZATION
------ ------------ ------------
Intangible assets:
Work force in place 1,395 5 years 279
Customer base 1,821 10 years 182
Trademark 9,100 20 years 455
Goodwill 12,767 20 years 638
-------------- --------------
$ 25,083 $ 1,554
============== ==============
(b) The pro forma adjustment reflects the issuance of 2,562,500 shares of
Landec common stock in connection with the acquisition of Apio. These
shares were assumed to have been issued on November 1, 1998, for purposes
of calculating the pro forma loss per share.
(c) Imputed interest expense on the deferred obligations issued in the
purchase of Apio (see note (c) to the pro forma balance sheet).
(d) Income tax expense associated with Apio on an historical basis
reflects "S" Corporation status, therefore, any taxable income was
credited directly to the shareholders of Apio and Apio did not pay
state or federal income tax, other than certain minimum taxes.
Subsequent to the acquisition, Apio's taxable earnings and losses will
be included in Landec's consolidated tax return. Landec is a "C"
Corporation with a history of operating losses. Since the pro forma
statement of operations indicates a loss on a combined basis, no combined
tax benefit has been recorded. In addition, the balance sheet includes a
pro forma adjustment to recognize the difference between the book and
tax bases of Apio's assets and liabilities, in accordance with SFAS
No. 109.
(e) Historical sales and cost of product sales relating to the sale of
packaging materials from Landec to Apio have been eliminated.
(f) Compensation expense related to an increase in officer salaries as a
result of the acquisition.
(g) Interest expense is due to the refinancing of debt at an overall
increased interest rate and the amortization of refinancing fees (see
note (f) to the pro forma balance sheet). The effect of a 1/8% change in
the interest rate on the revolving line of credit is approximately
$1,500.
(h) Pro forma adjustment to reclassify related party transactions. The
caption historically reflected business activity with principle
shareholders of Apio. Subsequent to the acquisition these individuals are
not principle shareholders.
(i) Landec did not acquire certain non-core operations of Apio. The balances
related to these non-core operations, as well as the reversal of certain
eliminating entries included in the historical combined results, are
reflected in this column.
(j) The addition to minority interest is due to an increase in the minority
shareholder position as a result of the acquisition.
-9-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LANDEC CORPORATION
Registrant
Date: February 15, 2000 By: /s/ Gregory S. Skinner
---------------------------------------
Gregory S. Skinner
Vice President of Finance and Chief
Financial Officer
-10-