Landec's CEO Discusses F2Q2012 Results - Earnings Call Transcript

Landec Corporation (LNDC)

F2Q2012 Earnings Call

January 04, 2012 11:00 am ET

Executives

Gary T. Steele – Chief Executive Officer

Gregory S. Skinner – Chief Financial Officer

Analysts

Tony Brenner – ROTH Capital Partners

Peter Black – Winfield Capital Corporation

Morris Ajzenman – Griffin Securities

Chris Krueger – Northland Capital Markets

Warrick Jervis – Trailhead Asset Management, LLC.

Michael Needleman – Preservation Asset Management

William Lauber – Sterling Capital Management

Rick Federman – Federman Investments

Peter Black – Winfield Capital

Nelson Obis – Winfield Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Landec Second Quarter Fiscal Year 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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. Please go ahead, Sir.

Gary T. Steele

Good morning, and welcome to Landec’s second quarter fiscal year 2012 earnings call. I have with me today Gregory Skinner, our Chief Financial Officer.

This call is being webcast by Thomson Reuters and can be accessed at Landec’s website at www.landec.com on the Investor Relations page. The webcast will be available for 30 days through February 3, 2012. A replay of the teleconference will be available for one week until midnight Eastern Time Wednesday, January 11, 2012 by calling 888-266-2081 or 703-925-2533. The access code for the replay is 1561486.

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 2011.

As reported in yesterday’s earnings release, for the second quarter of fiscal year 2012, revenues increased 16% and net income increased 63% compared to the second quarter of fiscal year 2011. Notably, our Apio food subsidiary had a very good quarter with revenues increasing $10.6 million or 18%, resulting in a $2.3 million or 155% increase in pre-tax income.

For our Lifecore subsidiary, revenues increased 10%, while pre-tax income was flat compared to the second quarter of last year due to the timing of production, which resulted in reduced overhead absorption. We do expect production at Lifecore to be greater in the second half of fiscal year 2012, resulting in higher absorption.

For the first six months of fiscal year 2012, revenues increased $19.8 million, or 15%, and net income increased $793,000, or 18%, compared to the first six months of last year. In addition, during the first six months of fiscal year 2012, we paid down debt by $2.3 million to $17.5 million, resulting in a debt-to-equity ratio of 12% at the end of the second quarter. Also in the quarter, we purchased 880,060 shares of our stock in the open market under our stock buyback plan at a total cost of $4.8 million.

Let me turn the discussion of our financial results and the details of that over to Greg.

Gregory S. Skinner

Thank you, Gary, and good morning everyone. In yesterday’s news release, Landec reported that for the second quarter of fiscal year 2012, revenues increased 16% to $81.6 million versus revenues of $70.2 million for the second quarter of last year. The increase in total revenues during this year’s second quarter compared to last year’s second quarter was primarily due to first, a $6 million increase in Apio’s value-added businesses, which includes the fresh-cut specialty packaged vegetable business, Apio Cooling, and Apio Packaging; second, a $4.6 million increase in Apio’s export business; and third, an $813,000 increase in Lifecore’s biomaterials business.

For the second quarter of fiscal year 2012, Landec’s net income increased 63% to $3.3 million or $0.13 share compared to $2.1 million or $0.08 per share for the second quarter of last year. The increase in net income during the second quarter of fiscal year 2012 compared to the second quarter last year was due to $1.4 million of pre-tax income from our investment in Windset Farms and a $1.1 million increase in pre-tax income from Apio’s value-added and export businesses. These increases were partially offset by an $840,000 increase in the income tax expense due to higher pre-tax income and by an increase of approximately $400,000 in marketing and business development expenses.

For the first six months of the year 2012, revenues increased 15% to $154.9 million versus revenues of $135.1 million for the same period a year ago. The increase in revenues during the first six months of fiscal year 2012 compared to the first six months of fiscal year 2011 was due to first, an $8.8 million increase in Apio’s value-added business; second, a $9.5 million increase in Apio’s export business; and third, a $1.6 million increase in Lifecore’s biomaterials business.

For the first six months of fiscal year 2012, net income increased 18% to $5.2 million or $0.20 per share compared to net income of $4.4 million or $0.16 per share for the same period last year. The increase in net income during the first six months of fiscal year 2012 compared to the same period last year was due to $1.7 million of pre-tax income from our investment in Windset Farms and a $679,000 increase in pre-tax income from our Apio’s value-added and export businesses.

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