Business Segment Reporting

9 Months Ended

Feb. 23, 2020

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 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 expense, 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:


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

Operations by business segment consisted of the following:


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

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

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

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

⁽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 three and nine months ended February 24, 2019 have been restated to reflect the reclassification of the Now Planting brand to discontinued operations.

During the nine months ended February 23, 2020 and February 24, 2019, sales to the Company’s top five customers accounted for 44% and 46% of sales, respectively. The Company’s top two customers, Costco Wholesale Corporation and Wal-

Mart Stores, Inc., from the Curation Foods segment, accounted for 15% and 18%, respectively, of revenues for the nine months ended February 23, 2020, and 17% and 16%, respectively, for the nine months ended February 24, 2019.