Landec Corporation (LNDC)
F4Q10 (Qtr Ended 05/30/2010) Earnings Call
August 4, 2010 11:00 am ET
Gary Steele - Chairman and CEO
Greg Skinner - CFO
Tony Brenner - Roth Capital Partners
Morris Ajzenman - Griffin Securities
Chris Krueger - Northland Securities, Inc
Walter Sheckner - Titan Capital
Previous Statements by LNDC
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Welcome to the Landec Fourth Quarter Fiscal Year 2010 Earnings Call. At this time listeners are in a listen-only mode and later we will conduct a question and answer session and instructions will follow at that time. (Operator Instructions) As a reminder this program is being recorded.
I would now like to introduce your host for today's program, Mr. Gary Steele, Chairman and CEO of Landec Corporation.
Good morning and welcome to Landec's year-end and fourth quarter of fiscal year 2010 earnings call. I have with me today, Greg Skinnerm Landec's Chief Financial Officer.
This call is being webcast by Thompson CCBN and can be accessed at Landec's website at www.landec.com on our investor relations page. The webcast will be available for 30 days through September 3, 2010. A reply of the teleconference will be available for one week by calling 888-266-2081 or 703-925-2533. The access code for the replay is 1468225.
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 2009.
As reported in yesterday's press release for fiscal year 2010 Landec's revenues increased 1% to $238 million compared to revenues of $236 million in fiscal year 2009. Overall revenues increased slightly in spite of the difficult economic climate.
Net income for fiscal year 2010 decreased to $4 million or $0.15 per diluted share, compared to net income $7.7 million or $0.29 per diluted share last year. Reducing that income for fiscal year 2010 were $3.7 million in non-recurring charges, which are not tax deductible.
The $3.7 million reduction includes $2.7 million of acquisition related charges from the Lifecore acquisition, which closed on April 30, 2010 and $1 million from a non-cash partial impairment charge on our minority equity investment in Aesthetic Sciences. Excluding the $3.7 million in non-recurring charges, net income and earnings per share in fiscal year 2010 would have been the same as last fiscal year at $7.7 million or $0.29 per share, consistent with our guidance.
Under new accounting rules acquisition related expenses such as investment banking, legal and accounting fees are no longer capitalized but expense. In the quarter the transaction closes. We expensed $2.7 million in Lifecore acquisition related expenses in our fourth quarter.
Also during the fourth quarter we determined that our $1.8 million minority preferred equity investment in Aesthetic Sciences is unlikely to be fully recovered and therefore we recorded a $1 million non-cash partial impairment charge. This decision was driven by our review of the contractual terms of an asset sale and royalty agreement with Aesthetic Sciences entered into on July 16, 2010.
As we discussed in previous quarters Aesthetic Sciences has been in negotiations with multiple potential suitors over the past year, pursuing opportunities to either license or sell their Smartfil Injector System technology.
While management previously felt that these opportunities held sufficient upside to support the value of Landec's entire $1.8 million investment. It became during the fourth quarter in connection with the Aesthetic Sciences sale of its technology that significant uncertainty on the timing and magnitude of royalties from this agreement were in question and we may have difficulty in fully recovering our investment.
The non-cash impairment charge represents Landec's best estimate of the net realizable value of this investment in Aesthetic Sciences in light of the expected royalty stream associated with the technology sale. This does not affect Landec's cash in anyway,
Our remaining $800,000 investment in the Aesthetic Sciences will be periodically reviewed for possible additional impairment.
Turning to our fourth quarter of fiscal year 2010 results, revenues increased over 10% compared to the year ago quarter. Relative to the prior three quarters in fiscal year 2010 we improved our overall gross profit and gross margin. We are starting to see improvements in the fresh cut produce industry volume sales but victory should not yet be declared.
Pricing pressured continue as retailers continue to struggle with consumers' tight budgets. Also during the fourth quarter, we completed our acquisition of Lifecore. We also shipped large numbers of BreatheWay membrane for Chiquita's Avocado roll out. We advanced our technical work with Monsanto on seed coatings. We've launched new products with Air Products in the personal care field, including adding several new customers and we advanced our technology licensing discussions with several strategic partners as well as concluding and announcing a recent agreement with Windset Farms.
Let me turn it over to Greg Skinner to discuss the specifics of our results.
Thank you, Gary. Good morning, everyone. As outlined in yesterday's new release, Landec reported total revenues for fiscal year 2010 of $238 million versus revenues of $236 million for the same period a year ago.
The increase in total revenues during fiscal year 2010 was due to a $6.8 million or 4% increase in revenues from Apio's value added vegetable business, and from $1.5 million of revenues generated by Lifecore in the month of May. These increases were partially offset by $5.5 million or 9% decrease in revenues from Apio's commodity trading business.