As announced in our third quarter earnings release, we increased revenues 26% and net income 33% during the third quarter 2011. Our Lifecore biomaterials subsidiary had a very good quarter with revenues of $12.2 million, generating $6.8 million of gross profit resulting in a gross margin of 56%. Overall in the third quarter, Landec’s consolidated gross margin increased to 17% from 14% in a year ago quarter.Notably during the third quarter, Apio purchased $15 million of senior preferred shares in Windset Farms. The investment represents a 21.1% equity ownership by Apio and Windset. We view Windset as the most advanced greenhouse operator in North America using hydroponic growing practices. The demand for greenhouse grown varieties is rising rapidly. The hydroponic process uses no soil and a fraction of the water required in fuel production while benefiting from higher yields per acre without traditional weather related or soil-borne risk. Windset has recently purchased 222 acres of land in Santa Maria Valley of California just 5 miles from our land – from our Apio operations. Windset is currently constructing 64 acres of greenhouses for numerous varieties of high value, hydroponically grown tomatoes and this project will be completed late this summer. The non-voting senior preferred shares will also yield an annual cash dividend of 7.5%. In addition, over the period of its minority interest ownership in Windset, Apio will recognize quarterly 20.1% of the change in the fare market value of Windset. Also under the terms of the agreement, Apio is represented on Windset’s Board. As you may recall in July 2010, Apio and Windset entered into an exclusive licensing agreement for Windset to use Landec’s proprietary breathable packaging to extend the self life of certain Windset greenhouse grown vegetables. We are excited about Windset’s prospects and our ownership position as it is a good financial investment and we share numerous strategic common interest.
In our Apio food business, the prolonged cold and wet weather continued to adversely impact produce sourcing. For those of you living on the West Coast you know that Northern California, Southern California, Arizona and Mexico, all the major growing areas for vegetables have experienced torrential downpours and flooding, as well as unusually cold weather since November of last year. Fields are flooded, produce yields are way down as is produced quality.While we’re not in the farming business, we need significant quantities of high quality vegetable products to supply our value added retail and club store customers. In the 12 years we have owned Apio, we have never experienced adverse weather of this magnitude and the weather related produce sourcing issues have continued through March. At this time, we are unable to estimate the full year adverse impact of our results from weather related produce sourcing issues. However, we do know that impact will be higher than our previous full year estimate of $3.5 million. Through the first nine months of our fiscal year, the negative impact on gross profit from weather related produce sourcing issues is $4.6 million. We also know that the impact of net income is partially mitigated by the better than expected results from Lifecore – from the Lifecore business and from the Apio export business. However, as a result of not being able to predict the weather for April and May nor the corresponding produce yields from field that we expect our growers to harvest in the next two months. It would not be helpful to anyone at this time to declare new earnings per share guidance, other than to State, we believe our earnings per share should show growth over last years earnings per share of $0.29, but will probably fall short of the lower end of our recent earnings per share guidance for fiscal year 2011 of $0.34. It should be noted that last years earnings per share of $0.29 is after excluding the non-recurring charges that we experienced in fiscal year 2010. Read the rest of this transcript for free on seekingalpha.com