Landec Corp
F:LDE
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Landec Corp
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Good morning, and thank you for joining Landec's First Quarter of Fiscal Year 2020 Earnings Call. With me on the call is Dr. Albert Bolles, Landec's Chief Executive Officer; and Greg Skinner, Landec's Chief Financial Officer.
During today's call, we may make forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially. These risks are outlined in our filings with the Securities and Exchange Commission, including the company's Form 10-K for fiscal year 2019.
Let me turn the call over to Al Bolles.
Thank you, and good morning, everyone. As a leading innovator in diversified health and wellness solutions, Landec is comprised of 2 operating businesses, Lifecore Biomedical and Curation Foods.
Lifecore Biomedical is a fully integrated contract development and manufacturing organization or CDMO that offers highly differentiated capabilities for development, fill and finish of difficult-to-manufacture pharmaceutical products distributed in syringes and vials.
As a leading manufacturer of premium injectable hyaluronic acid or HA, Lifecore brings over 35 years of expertise as a partner for a global and emerging biopharmaceutical and biotechnology companies across multiple therapeutic categories to bring their innovations to market.
Curation Foods, our natural foods business is focused on innovating plant-based foods with a 100% clean ingredients to retail, club and food service channels throughout North America. Curation Foods is able to maximize product freshness due to geographically dispersed network of growers, refrigerated supply chain and patented BreatheWay packaging technology, which naturally extends the shelf life of fruits and vegetables.
Curation Foods brands include Eat Smart fresh packaged vegetables and salads, O Premium artisan oil and vinegar products and Yucatan and Cabo Fresh avocado products.
We are focused on creating shareholder value by delivering against our financial targets, strengthening our balance sheet, implementing our strategic priorities to improve operating margins at Curation Foods, and investing in growth and driving top line momentum at Lifecore.
For the first quarter of fiscal '20, consolidated revenues increased 11% to $138 million compared to the first quarter of last year. However, we experienced a planned net loss and a decrease in gross profit and EBITDA during the first quarter of fiscal '20 compared to the first quarter of last year. This resulted in a first quarter net loss of $0.16, which met our guidance.
We are reiterating our full year fiscal '20 guidance, which calls for consolidated revenue from continuing operations to grow 8% to 10%, EBITDA of $36 million to $40 million and earnings per share of $0.28 to $0.32.
As we communicated last quarter, we expect to generate substantial profits in the second half of the fiscal year and we are positioned to achieve our goals for fiscal '20 with our team fully engaged in our strategy.
As a reminder, the second half acceleration is due to 3 factors. Number one, the timing of revenues and profits at Lifecore; number two, the timing in revenues and profits from the sale of the avocado products; and number three, the impact from our cost-out initiatives, which we expect to yield significant cost saving in the second half of fiscal '20.
Before I go into more detail concerning plans for fiscal '20 and beyond, let me turn the call over to Greg for some financial highlights.
Thank you, Al, and good morning, everyone.
Revenues increased during the first quarter of fiscal 2020, primarily due to the $16.2 million revenue contribution from avocado products, which were acquired on December 1, 2018, and from a $2.2 million or 4% increase in salad revenues compared to the first quarter of last year. These increases were partially offset by first, a $3.2 million decrease in green bean revenues due to the extremely heavy rains and flooding in the Ohio Valley during May and June resulting in yields of 35% to 50% of normal. Second, a planned $1.4 million decrease in revenues in the packaged vegetables in bags and trays business. And third, a $576,000 planned decrease at Lifecore.
The Lifecore decrease was a result of lower fermentation revenues during the first quarter of fiscal 2020 compared to the prior year, primarily due to the timing of customer shipment within the fiscal year.
The Lifecore revenue decrease was partially offset by a 49% increase in product development revenues due to an increase in development activities during the quarter. Gross profit decreased during the first quarter of fiscal 2020 compared to the first quarter of last year, primarily due to a $548,000 decrease in the Curation Foods segment from an unfavorable product mix and from a $453,000 decrease in our Lifecore segment as a result of a decrease in revenues and the timing of production within the fiscal year.
Net income decreased during the first quarter of fiscal 2020 compared to the first quarter of last year due to first, a $1 million decrease in gross profit. Second, a $3.1 million increase in operating expenses, primarily from the addition of Yucatan Foods. Third, a $1.3 million increase in interest expense due to the increase in debt from the acquisition of Yucatan Foods. And fourth, no increase in the fair market value of the company's Windset investment compared to a $1 million increase during the first quarter of last year.
These decreases in net income were partially offset by a $1.5 million decrease in income tax expenses. EBITDA decreased $3 million to $314,000 during the first quarter of fiscal 2020 compared to the first quarter of last year due to the decrease in gross profit and from an increase in operating expenses, partially offset by an increase in depreciation and amortization expenses.
As Al noted in his opening remarks, we are reiterating our fiscal 2020 guidance set forth in our fourth quarter fiscal 2019 earnings release. We continue to expect consolidated revenues from continuing operations to grow 8% to 10%, with Lifecore growing in the range of 10% to 12% and Curation Foods growing 8% to 10%.
We continue to project consolidated earnings per share to be $0.28 to $0.32 and consolidated EBITDA to be in the range of $36 million to $40 million.
At the segment level, after corporate expense allocations, we expect EBITDA for Curation Foods of $19 million to $21 million, and EBITDA for Lifecore to be $21 million to $23 million. Corporate is expected to realize an EBITDA loss of approximately $4 million after allocations to Curation Foods and Lifecore.
For the second quarter of fiscal 2020, we're providing guidance for consolidated revenues to be in the range of $142 million to $146 million, with a net loss per share of $0.04 to $0.06 due to certain shipments for Lifecore, O and avocado products expected for the second quarter shipping to the third quarter, a portion of the cost-out savings for the second quarter delayed to the second half.
EBITDA is expected to be in the range of $4 million to $5 million.
During fiscal year 2020, we expect quarterly operating income to increase sequentially each quarter, with the fourth quarter generating the highest level of quarterly income. The timing of our income generation during the year is driven by the fact that first, Lifecore plans to generate over 80% of its operating income for the year during the second half in line with historical results based on customer order patterns. Second, all of the operating income from the sale of avocado products will occur in the second half of fiscal 2020. Third, we expect to recognize a large majority of our cost-out savings from our cost-out initiatives at Curation Foods during the second half of fiscal 2020. And fourth, our green bean supply has now fully recovered, and we expect that business to generate substantial profits in the second half of this fiscal year.
We continue to project cash flow from operations in the range of $26 million to $30 million and capital expenditures in the range of $40 million to $45 million, with the large majority of capital expenditures invested in capital -- capacity expansion at Lifecore and cost-out initiatives at Curation Foods.
Turning to our financial position. At the end of the first quarter of fiscal 2020, we had approximately $165 million of debt, which translated into a debt-to-equity ratio of 62%, a debt to tangible asset ratio of 39%. Our fixed coverage ratio at the end of the first quarter was 1.9, which is well above our covenant of 1.2. Our leverage ratio at the end of the first quarter was 4.4 in compliance with our debt covenant of 4.5 or less. We expect to be in compliance with all of our debt covenants going forward.
Importantly, we -- as we mentioned in the fourth quarter of fiscal 2019 earnings release at the end of July, we are actively engaged in discussions with our vendors to amend our debt agreements in order to enhance our flexibility. We are discussing a financial structure that will extend the overall terms of the debt, increase the amount of availability and amend our current covenants. The amendment should give us the necessary liquidity along with cash flow from operation to accelerate our cost-out automation projects and to expand our capacity at Lifecore. We expect to finalize an announcement within the next 30 days.
I'll now turn the call back to Al.
Thanks, Greg.
We are confident about our plans to drive profitable growth in fiscal '20. Let me go into more details about the progress we are making in our Lifecore and Curation Foods business units.
Lifecore continues to see momentum benefiting from 3 industry trends. Number one, a growing trend among pharmaceutical and medical device companies to outsource development services and manufacturing. Number two, a growing number of products seeking FDA approval. And number three, the increasing trend towards injectable drugs.
According to report by GlobalData PharmSource, the projected incremental demand for injectable drug products is expected to increase by 75 million to 100 million units by 2023.
As a highly differentiated and fully integrated CDMO, Lifecore is uniquely positioned to capitalize on these tailwinds. Through Lifecore's 35 years as a global leader in manufacturing premium injectable-grade HA, Lifecore has developed the knowledge to process and manufacture difficult-to-formulate and fill pharmaceutical products in both syringes and vials. This has allowed Lifecore to establish high barriers to competition and create unique business development opportunities, which will continue to augment its business development pipeline with new projects to fuel its long-term growth.
This has been demonstrated by the 49% increase in our business development revenue during the first quarter of fiscal '20 compared to the prior-year period. Lifecore is also making progress in late-stage development customers from Phase III clinical studies to commercialization. The planned decrease in Lifecore revenues in the first quarter of fiscal '20 was due to timing. We are on track to meet our 10% to 12% Lifecore revenue growth goal in fiscal '20, and Lifecore will be profitable for the remaining 3 quarters of fiscal '20.
To meet future demand at Lifecore, we'll be investing an approximately $13 million for capacity expansion in fiscal '20. We continue to expect Lifecore to generate on average low- to mid-teen revenue growth over the next 5 years as it expands sales to existing customers, add new customers and continue to commercialize products that are currently in the development pipeline.
For our Curation Foods business, in the first quarter of fiscal '20, we made progress advancing our strategic priorities to improve financial performance, and we'll see the benefit of that progress during the third and fourth quarters of this fiscal year.
Our fiscal year '20 strategy for Curation Foods is to focus on growing a higher-margin products, optimize our operations, continue to mitigate the cost pressures facing our industry and to deliver breakthrough product innovation.
Weather issues and increased labor costs continue to be the greatest challenge to our business. Regarding weather, we've taken decisive action to mitigate this risk. First, as part of our guidance for fiscal '20, we have set aside a considerable contingency fund to cover unforeseen produce sourcing issues due to weather-related events, over and above what we have historically set aside in our plans. Second, in response to weather-related lack of supply of green beans in Q1 fiscal of '20, we implemented an over planting strategy in July for green bean. This benefited us greatly as we have seen very little impact from Hurricane Dorian, where heavy rains impacted green bean growing regions.
We are forecasting that we'll be able to meet all of our customer demand for green beans this coming holiday season. Regarding efforts to reduce cost, we advanced our cost-out program, which focuses on mitigating risk in our business to offset projected cost increases, primarily driven by cost of labor, freight and raw material produce sourcing.
We met our cost-out goal in Q1. We're on track to deliver $18 million to $20 million in savings in fiscal '20. Our activities focus on managing labor costs and increasing efficiencies in our plants and supply chain. Specifically on labor cost, we moved to a more efficient 5-day work week from a 6-day work week and renegotiated our labor contract for Guadalupe facility contributing $1.8 million in cost savings annually.
Regarding logistics, we captured synergies with the successful integration of Yucatan Foods products by integrating shipments of avocado products with Eat Smart salad products in our refrigerated trucks. We also realized additional operational efficiencies in logistics by eliminating low-margin delivery routes, while continuing to service our customers.
These actions result in improved service to our customers, while deliver ongoing monthly savings of over $200,000 or roughly $2.5 million annually.
Another example of reducing cost, our R&D and Operations team worked together to reduce packaging material and optimize production for our fast-growing Eat Smart single-serve salad business, which grew 27% during the first quarter compared to the prior year quarter resulting in improving gross margin for the single-serve salad products by 460 basis points. We'll continue our efforts on improving operational excellence and productivity with automation projects in our facilities.
Optimization of the network and reviewing all of our existing and new packaging design, the formulations to ensure that we are reducing waste and producing products in the most efficient manner. Further, in continuing to strive for operational excellence, in September, the Curation Foods supply chain team successfully started our production in our Mexico facility for avocado products, which is important in order to be processing during the months when avocados are in season and could be purchased at reasonable prices.
Last year, due to the timing of the acquisition, the facility was 3 months late in opening, which resulted in purchasing high-cost avocados and production inefficiencies, both of which are significantly impacting margins as we sell-through this inventory. With our on-time start up in September, we're purchasing avocados at 50% less than we were purchasing them at the end of last year's production season.
Looking forward to the second quarter of fiscal '20, we have more productivity processes and measures in place to further improve efficiency and improve margins substantially. The positive impact will flow through with the sale of avocado product's inventory in Q3 and Q4 of fiscal '20.
A key driver of Curation Foods' business growth will be the innovative products that we bring to market along with focus on growth in our high-margin products that deliver on trend, 100% clean ingredients, plant-based foods. Notably, a newer more innovative products in our Eat Smart salad line account for 18% of salad revenues.
Consumer demand for plant-based foods is rapidly growing. According to Plant Based Foods Association and The Good Food Institute, the retail sales of plant-based food has grown 20% in the last year compared to non-plant based foods growing at only 2%.
In line with advancing our innovation strategy, during the first quarter, Curation Foods is in market testing 2 breakthrough products that will drive profitable growth. Both of these products are representative of my philosophy and experience that small changes to existing products deliver major market impact.
Changes we have made to these products are embedded with consumer and customer insights, and we believe the products meet unmet needs.
First, we recently launched Yucatan Guacamole Squeeze, a new first of its kind packaged guacamole product in a flexible squeeze pouch that allows for greater usage occasions and convenience. The unique package design allows for guacamole to be used as an everyday condiment. The technological breakthrough is in the design of the cap and nozzle, which extends the shelf life and reduces food waste because the guacamole does not brown in a squeezed container after the package is open. This not only meets the unmet consumer need, but provides us with a competitive advantage. The Yucatan Guacamole Squeeze product is currently in test with Walmart. We are planning for a national expansion once we compile the results of the test.
Second, we focused our resources on revamping our patent in BreatheWay packaging technology for expansion into new markets. While we continue to use our patented packaging technology to maintain optimal atmosphere for individually packaged produce, we have expanded into new markets with a complete supply chain packaging solution.
The BreatheWay packaging solution is being used to wrap pellets, raspberries for Driscoll's from its California distribution centers. For retailers, this results in reducing shrink, which improves profitability.
For consumers, this results in improved product quality and extended shelf life. We're planning to scale this business by extending our solutions to other varied products and to test several other adjacent perishable product categories. For our Natural Food brands, we'll continue to focus on growing our product lines and deliver high gross margin in growing retail categories.
According to Nielsen and IRI syndicated data, each of our Natural Food brands delivered double-digit retail sales growth and outpaced the category growth in the first quarter of fiscal '20 compared to the first quarter of last year. Eat Smart salads grew 11.2%, O brand Premium, Wine Vinegar and Olive Oil grew 30% and Avocado products grew 16.5%.
We continued to deemphasize on low-margin low-growth bag and trade fresh-cut vegetable products. This shift in our product mix is projected to deliver more than 150 basis points of improvement in gross margin in fiscal '20 compared to fiscal '19.
In all of these efforts, we remain focused on staying true to our mission of protecting our planet for future generations with sustainable business practices. We recently published our Landec Sustainability Handbook and are actively setting targets to reduce our environmental impact.
In summary, we have confidence in our guidance for fiscal '20. The Landec team is focused on creating value and delivering against our financial targets, strengthening our balance sheet, implementing our strategic priorities to improve operating margins at Curation Foods and investing in growth and driving top line momentum at Lifecore.
I'm confident in our plan in place to make the changes necessary to be successful and secure long-term profitable growth to deliver value to our customers, consumers and shareholders.
Thank you for joining us today and for your ongoing interest in Landec.
We're now open for questions.
[Operator Instructions] Our first question comes from the line of Brian Holland with D.A. Davidson.
You mentioned setting aside in guidance some cushion for sourcing volatility. Where do we stand today within that range of outcome? So in other words, to what extent did the rains and flooding in the Ohio Valley stretch that contingency? And then how quickly can the new product -- produce sourcing initiatives you've spoken to help to ease some of those pressure?
Well, a lot of our -- Brian, it's Greg. A lot of our -- from history, if you look at that, a lot of our contingency uses in the past or produce sourcing issues in the past have been more of the second quarter, third quarter item. So while we were talking about it originally what we had set aside for contingencies, most of that was associated with those quarters. By the time we went out with our guidance for the year, in July, we already knew about the green bean issues and the -- for the first quarter. So that was factored into our guidance.
So we still have a reasonable and what we feel is adequate -- more than adequate contingency for the last 9 months of the year.
Yes, I just want to add that the over planting strategy is a new approach for us. Historically, we have not been able to supply green beans, which is a very good product for us during the holiday season. And we knew -- I mean, hurricanes happen every year. So we diversified our geographic regions, over planted, and now we're in position, we believe to not be prorating customers as we have done historically, which we hope will begin to build back confidence of what we're doing.
Appreciate the color and clarity there. With respect to Yucatan, what else do we need to do with respect to heavy lifting there, right ? So you've got production started on time. It sounds like the staff is fully trained. What else do you need to implement there? And what is the timing on that look like as we move through the balance of the year, and I'm thinking long-term about the initiatives that you have there?
Well, we've done a lot of heavy lifting during the summer months to build our staff. Last year, we had a high degree of turnover, and we put in extensive training programs this year. So we have the staff in place. We're not seeing high turnover, and of course, we have startup on time with the low crew. So that was the heavy lifting we did this year. I think I mentioned before, we're putting in metrics that worked there before around amount of pounds per day yields, et cetera. Looking forward, it's about automation for us. We still have a lot of people particularly on the second and tertiary packaging lines doing a lot of handwork. So we see automation there as a way that we will continually improve our margins, just like we're doing at -- in the Guadalupe facilities. We see that as an opportunity in the future as we get the capital to automate Yucatan.
Last one for me. On the Yucatan, the Guacamole Squeez Product, curious, where the placement is in Walmart for the test? Are you sort of with the dips or with the condiments? And where optimally would that product be placed as you think about broader distribution?
Yes. So we're in a roughly 1,300 Walmarts geographically dispersed. We are in the Dairy section right now. We have some 16-ounce clock there, and we worked at the buyer to put it in there. So that's where we are now. We're just accumulating the data, and we expect that from that, we'll be doing a lot of follow-ups with the buyer, specific regions, stores to get and understand and mine the data and find the optimal place for us to put it. And there might be a product that goes in more than one spot in the store.
Our next question comes from the line of Anthony Vendetti with Maxim.
So just to talk about a little bit more about the cost-out initiatives, and Al, since you came in, you've been focused on exiting low-margin businesses or businesses that didn't make sense as part of the strategy going forward and focusing on the high-margin products. Can you just give a little more color about -- around the exact specificity of those initiatives? And what has caused them to get pushed out just a little bit into the second half of this year?
Well, there's actually several things that are going on in the cost-out program. We have been fairly aggressive where we can be on taking out the low-cost -- well, the high-cost, low-margin SKUs, primarily in our fresh-cut vegetable tray and bag line. So that's an ongoing process that we are continually doing. The big part of cost-out is the installation of the capital that allows us to automate. So that is ongoing.
We -- as we said we're a little behind in Q2, but that's only a timing issue because of equipment. We fully expect that to recover in the second half. So we're really focused there on the automation side. And then thirdly, we have gotten very aggressive in terms of looking at the kind of packaging we have, how much plastic do we have in the package? Do we have the optimal formulations? All those things we are actively looking at, reformulating it so that we don't disappoint our consumers and we optimize what we're putting into our bags. That's ongoing and it's pretty much the third leg, if you will, the cost-out opportunity that I see.
Okay. Any chance that this gets pushed out into not just the second half, but into the fourth quarter? Or is it really just right now sounds like a little bit of a timing issue, noting major? And then as you're moving towards these high-margin products and culling some of the low-margin products, do you expect, because this quarter, right, the revenue, if we exclude, Yucatan was down, I think, 1.5% to 2% -- 1.7%, I think. Do you expect organic revenue growth to start to show an acceleration as we move into the second half of the year? Or is the culling process going to prevent that from happening until fiscal 2021?
Well, we see that the organic revenue will grow in the second half. As I mentioned, our single-serve salads are really growing really well for us in retail. We've got a lot of work going on to improve the margins. I think I mentioned, we have improved it by 460 basis points. So our salads continue to grow. We also have a whole new line of restage coming with Eat Smart. It's been a long time since that brand has been refreshed, that consumer data that says we can drive velocities by the improvements and changes that we have done to the brand restage, and you'll see that it's going to be implemented in January. And we have O Olive coming on as well, which we're projecting a bumper crop and that will continue.
And in the second half as well, we see more organic growth coming from Yucatan line and from Squeeze continuing to national rollout.
And just to your first question, I don't see -- we're not forecasting, we're confident about our cost-out number for the year, but cost-out is going to be a way of life here. And we see more in further years. As I mentioned, there is opportunity in Yucatan, and we'll continue to be cost-out as part of our culture to improve our margins and our profitability as we continue.
And the one area that we still have under investigation is optimizing the network. We have a lot of facilities, and we're looking at those some of our non-strategic assets, procurement logistics. We have a full team dedicated to that and expect to start to see some impact of that, not only in the second half, but in the fiscal year '21 as well.
[Operator Instructions] Our next question comes from the line of Chris Krueger with Lake Street Capital Markets.
Just a couple of questions on the new products. First, on the Guacamole Squeeze product. I believe you stated you're testing at about 1,300 Walmart stores. Is there a timeline for that work? How long the test phase will take?
Typically, it's around -- about 3 months is the typical test. We've been out there 3 weeks now, maybe 4. We haven't been in all Walmarts for that a lot of times. But I will tell you, we're getting into the data store-by-store and are seeing some encouraging results. So we plan on continuing that test. There's a lot going on here with placement, price point, all these things that we just want to test with the partner, learn and then -- and making plans now for the national launch.
You'll see the national launch will be available in the second half of the year, Q3.
You said national launch at not just Walmart but rather other stores as well?
Yes, yes. We're planning on other retailers and maybe even clubs.
Okay. And then, just out of curiosity, Al, how long did it take to develop that product?
Well, there were some early prototypes done in Q1 -- I think Q4 and Q1. And frankly, when I saw them, and we got into the consumer insights, we accelerated the launch of that product. We want to be first mover in the category, and we also have some opportunities to create some competitive barriers to competition. You'll probably see other squeezed packages come follow us, but right now, the feature that we're really emphasized on is that we have this proprietary nozzle closure flexible package that once you use it, air doesn't go back in the package and it doesn't brown, which is one of the #1 consumer compliance of guacamole. So there's very little waste with this product.
So we -- it's one that we move from the back burner to the front burner, got focused resources on it, put a project product management team in place and executed, I think, very well given the short period of time we did it.
Okay. And my last question is on the BreatheWay technology to be used for the supply chain of perishable items. I believe in your initial press release, you indicated you had a customer already using it for raspberries. Is there a supply -- is there a pipeline building within that product? And what do see as a market opportunity?
Yes. So we -- well, we started with -- started testing with Driscoll's, who is the largest berry manufacturer in the world, and they wanted to start with raspberries because that's the most perishable berry there is. So we are testing with them now. We're supplying the film and our BreatheWay patch, and then we'll be retrofitting it under existing berry lines. So it's on test now and we're working with them on the details for ramping it up. But it's a great opportunity for us because it's a low-capital play for us and it takes advantage of scaling the BreatheWay technology, which we historically have not really been able to do and provide great value to not only Driscoll's, but to the customers and to consumers. And we have plans for other adjacent fresh categories as well that are separate from berries that we'll be testing in the upcoming months.
Our next question comes from the line of Mike Petusky with Barrington Research.
So on the acceleration you guys are expecting in salads going forward, how much of that hinges on new product acceptance?
Well, as I said, our single-serving -- single-serve salads are growing and have been growing fairly rapidly. So our focus there is to continue to fuel that at retail, that's where they're growing and to improve our margins. We do have a new line that we plan to introduce in the second half of the year. We have a major customer who has already agreed to put it into test with us. So we will continue to add innovation to our salads, but we're going to be very, very targeted in what we do, and we have hired a outside firm, innovation firm, to help us in terms of being able to find insights with consumers that we can apply to salads.
So you're not going to see what we have historically done, which is to put a lot of salads out there and see if they stick. We're doing a much better job upfront, gaining consumer insights, partnering with customers, and putting a test-and-learn process that we can learn together and not pay a high cost intuition in case it doesn't work.
So we've taken a far more targeted approach, but certainly, the Eat Smart salads is an area that given where things are going with plant-based proteins and just people eating more, as I mentioned in my upfront talk, that the whole area of plant-based foods is really growing. We have a lot of tailwinds here that I think we just need to take better advantage of.
Okay. So I'm not entirely clear. So is the second half acceleration -- or really the acceleration for the rest of the year, as I'm reading the release is that around an acceleration of single-serve and a new product introduction? Or what is that…
So there's 3 things. So just to be clear. So one is single-serve is growing, and our focus is to improve the margin on that as it grows. Number two is we will be testing a new line in the second half of the year. And third, as I had mentioned on the previous call that we have a whole restage going on with Eat Smart brand that we've done several months of testing on and believe that's going to drive velocities of our existing products. It's been a long time since there's been a refresh of the Eat Smart brand and it's frankly outdated, and we have some contemporary packaging graphics that we believe will improve our velocities.
And then just a question around the guidance. It is the third consecutive quarter, there wasn't any bump from the fair market value of Windset investment running through the income statement. And I guess what I'm wondering is what's assumed for the year in terms of net income statement line in your guidance?
Well, right now, we just got a new 5-year plan from them. And whenever you get a new one, it kind of resets everything. And then they'll be giving us their new budget for '20, coming up probably not till the third quarter. So I would assume for now that the growth as we get closer to the call date is going to slow down. And so I would think somewhere in the $300,000 range per quarter is probably a reasonable estimate going forward.
Okay. And you're assuming $300,000 in the second quarter?
That is part of our guidance.
Okay. All right. And then just last question, just -- and cash flow that you mentioned it, cash flow from ops and CapEx for the quarter?
Going forward?
No, no. For Q1?
The CapEx, I'm sorry, say that again?
Cash flow from ops and CapEx?
CapEx for the quarter was about $10 million, which is about 1/4 of the -- well within our range for the year, and cash flow from operations going to approximate our loss.
Mr. Bolles, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.
Once again, thank you for joining us today and for your ongoing interest in Landec. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.