Item 2.05. Costs Associated with Exit or Disposal Activities.
On January 17, 2023, Clever Leaves Holdings Inc.'s (the "Company") board of
directors authorized a restructuring plan that is designed to improve operating
margin and support the Company's growth, scale and profitability objectives. As
part of that restructuring plan, the Company has begun to wind-down its
operations in Portugal which has historically been comprised of cultivation,
post-harvesting and manufacturing activities which will result in approximately
96% reduction to the Company's workforce in Portugal and 21% reduction to the
Company's total workforce. Potential position eliminations in Portugal are
subject to local law and consultation requirements. The Company expects to
complete these actions in the first half of fiscal 2023.
The Company currently estimates that it will incur charges of approximately
$19 million to $21 million in connection with the restructuring plan. The total
expected range includes approximately $0.7 million to $0.9 million related to
severance and employee benefits, and approximately $12 million to $13 million
related to real estate and equipment exit costs, consisting of lease impairment
and property and equipment abandonment charges. The total expected range also
includes approximately $6 million to $7 million related to the write-off of
inventories that will not be sold.
The Company expects approximately $7 million in gross annualized run rate
savings to be realized from these actions by 2023. These savings will partially
mitigate the impact of higher labor costs and headwinds from the macroeconomic
environment, as well as fund additional investments to continue to drive a more
efficient cost structure long term.
The Company expects to provide its full year 2023 outlook during its fourth
quarter 2022 earnings call in March 2023. The charges that the Company expects
to incur are subject to a number of assumptions and actual expenses may differ
from the estimates disclosed above.
Item 2.06 Material Impairments.
The information contained in Item 2.05 relating to impairment charges is hereby
incorporated by reference.
Forward-Looking Statements
This Current Report on Form 8-K includes certain statements that are not
historical facts but are forward-looking statements for purposes of the safe
harbor provisions under the United States Private Securities Litigation Reform
Act of 1995. Forward-looking statements generally are accompanied by words such
as "aim," "anticipate," "believe," "can," "continue," "could," "estimate,"
"evolve," "expect," "forecast," "future," "guidance," "intend," "may,"
"opportunity," "outlook," "pipeline," "plan," "predict," "potential,"
"projected," "seek," "seem," "should," "will," "would" and similar expressions
(or the negative versions of such words or expressions) that predict or indicate
future events or trends or that are not statements of historical matters. Such
forward-looking statements, including statements relating to the Company's
wind-down of its operations in Portugal and the expected costs and cost savings
of such wind-down, are subject to risks and uncertainties, which could cause
actual results to differ from the forward-looking statements. Important factors
that may affect actual results or the achievability of the Company's
expectations include, but are not limited to: (i) expectations with respect to
future operating and financial performance and growth, including if or when
Clever Leaves will become profitable; (ii) Clever Leaves' ability to execute its
business plans and strategy and to receive regulatory approvals (including its
goals in its key markets); (iii) Clever Leaves' ability to capitalize on
expected market opportunities, including the timing and extent to which cannabis
is legalized in various jurisdictions; (iv) expectations with respect to
restructuring costs and savings, including in connection with the wind-down of
the Company's Portugal operations (v) global economic and business conditions,
including economic sanctions against Russia and their effects on the global
economy; (vi) geopolitical events (including the ongoing military conflict
between Russia and Ukraine), natural disasters, acts of God and pandemics,
including the economic and operational disruptions and other effects of COVID-19
such as the global supply chain crisis, travel restrictions, delays or
disruptions to physical shipments (including outright bans on imported
products), delays in issuing licenses and permits, delays in hiring necessary
personnel to carry out sales, cultivation and other tasks, and financial
pressures upon Clever Leaves and its customers; (vii) regulatory developments in
key markets for the Company's products, including international regulatory
agency coordination and increased quality standards imposed by certain health
regulatory agencies, and failure to otherwise comply with laws and regulations;
(viii) uncertainty with respect to the requirements applicable to certain
cannabis products as well as the permissibility of sample shipments, and other
risks and uncertainties; (ix) consumer, legislative, and regulatory sentiment or
perception regarding Clever Leaves' products; (x) lack of regulatory approval
and market acceptance of Clever Leaves' new products which may impede its
ability to successfully commercialize its CBD brand in the United States; (xi)
the extent to which Clever Leaves' is able to monetize its existing THC market
quota within Colombia; (xii) demand for Clever Leaves' products and Clever
Leaves' ability to meet demand for its products and negotiate agreements with
existing and new customers, including the sales agreements identified as a part
of the Company's 2022 strategic growth objectives; (xiii) developing product
enhancements and formulations with commercial value and appeal; (xiv) product
liability claims exposure; (xv) lack of a history and experience operating a
business on a large scale and across multiple jurisdictions; (xvi) limited
experience operating as a public company; (xvii) changes in currency exchange
rates and interest rates; (xviii) weather and agricultural conditions and their
impact on the Company's cultivation and construction plans; (xix) Clever Leaves'
ability to hire and retain skilled personnel in the jurisdictions where it
operates; (xx) Clever Leaves' rapid growth, including growth in personnel; (xxi)
Clever Leaves' ability to remediate a material weakness in its internal control
cover financial reporting and to develop and
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maintain effective internal and disclosure controls; (xxii) potential
litigation; and (xxiii) access to additional financing. The foregoing list of
factors is not exclusive. Additional information concerning certain of these and
other risk factors is contained in Clever Leaves' most recent filings with the
SEC. All subsequent written and oral forward-looking statements concerning
Clever Leaves and attributable to Clever Leaves or any person acting on its
behalf are expressly qualified in their entirety by the cautionary statements
above. Readers are cautioned not to place undue reliance upon any
forward-looking statements, which speak only as of the date made. Clever Leaves
expressly disclaims any obligations or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in its expectations with respect thereto or any change in
events, conditions or circumstances on which any statement is based.
Item 7.01. Regulation FD Disclosure.
Attached as Exhibit 99.1 and incorporated herein by reference is a copy of the
Company's press release dated January 23, 2023 announcing its decision to
wind-down its operations in Portugal.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
99.1 Press Release dated January 23, 2023
Cover Page Interactive Data File (the cover page XBRL tags are embedded within
104 the Inline XBRL document)
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