Landec's CEO Presents At Acquisition Of GreenLine Foods, Inc. Conference (Transcript)

Landec Corporation (LNDC)

Acquisition of GreenLine Foods, Inc. Conference Call

April 23, 2012 4:00 pm ET

Executives

Gary T. Steele – President & Chief Executive Officer

Gregory S. Skinner – Chief Financial Officer & Vice President of Administration

Analysts

Tony Brenner – Roth Capital Partners

Peter Black – Winfield Capital

Michael Needleman – Preservation Asset Management

William Lauber – Sterling Capital Management

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Landec special conference call regarding the acquisition of GreenLine Foods. At this time, all lines will remain in a listen-only mode. (Operator Instructions) As a reminder, today’s conference call is being recorded.

I would now like to turn the conference call over to your host, Mr. Gary Steele, Chairman and CEO. You may go ahead.

Gary T. Steele

Good afternoon and thanks for joining us in this special conference call to discuss Landec's acquisition of GreenLine Foods. I have with me today Greg Skinner, our Chief Financial Officer and Ron Midyett, the CEO of Apio.

During today’s call, we may make forward-looking statements that involve certain risk 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.

This morning, we announced the acquisition of GreenLine Foods from The Riverside Company, a global private equity firm. We are very excited about the acquisition of GreenLine, as it is a very good fit with our Apio value-added fresh-cut vegetable business. We see significant operational synergies from this acquisition.

GreenLine is the largest provider of fresh-trimmed, microwaveable packaged green beans in North America, and manages the process from the field through its online, on time delivery to customers. From its original product focus on fresh-trimmed, microwaveable green beans, the Company has added new product items including wax beans, bean blends, sugar snap peas and French green beans.

When GreenLine’s specialty packaged beans reaches consumers, they are already trimmed and ready to cook, ensuring quick preparation, consistent quality and easy storage. GreenLine’s primary production facilities are located in Bowling Green, Ohio and Hanover, Pennsylvania. Additional production facilities are located in Vero Beach, Florida and Pico Rivera, California with distribution centers in New York and South Carolina.

The addition of GreenLine’s significant footprint on the East Coast and dedicated fleet of privately operated trucks is a strong complement to Apio’s California base of operations. With this investment, we now have two leading brands, Eat Smart and GreenLine in the fresh-cut produce market. Additionally, we have significantly expanded our distribution in retail grocery chains, added new food service customers and acquired strategic East Coast processing and distribution facilities.

With the GreenLine acquisition, Landec’s Apio food business will now have products in approximately 80% of North American retail grocery store sites. These new capabilities will allow Apio to offer enhanced services to our customers with a broader range of products, all with a continued commitment to product quality and food service.

U.S. consumer demand is growing for fresh-cut vegetables including green beans as consumers seek fresh healthy foods conveniently prepared. GreenLine is well positioned to support this growing market with strong sourcing capabilities and a national distribution network to ensure year-round supply of high quality product to its customers. Over time, this expanded distribution will provide greater placement potential for new products and will enable our Apio food business to take advantage of the growth in the fresh-cut green bean category as consumer demand continues to shift away from the purchase of unwashed and untrimmed bulk green beans.

This acquisition is immediately accretive and provides our Apio food business with critical mass to better serve both existing and new customers.

For Landec fiscal year beginning May 28, 2012 GreenLine’s revenue is estimated at approximately $95 million to $100 million annually and EBITDA is estimated to be between $10 million to a $11 million. In addition, we see operational and customer synergies that can be realized in the next 12 to 24 months.

The acquisition of GreenLine is consistent with our strategy of investing in our two core businesses, our food business and our biomedical materials business. We seek accretive investments that builds on our material science technology, as demonstrated by our Lifecore acquisition in 2010. We also seek to strengthen our channels of distribution to provide greater penetration of our products and markets we serve as demonstrated by our investment and Windset Farms in 2011 and now by our acquisition of GreenLine Foods in 2012.

Our continued focus is on profitably building and growing our core food and biomedical businesses, while periodically and selectively collaborating with key partners under technology licensing arrangements in areas outside of our core businesses.

Now some financial details. We acquired the stock of GreenLine for $63 million in cash with no assumed debt. The agreement also includes future earnout potential for Riverside of up to $7 million based on GreenLine achieving certain financial targets during calendar year 2012. In conjunction with the acquisition, Apio secured $31.8 million in term financing secured by Apio’s and GreenLine’s fixed assets.

In addition, Apio entered into a five year $25 million working capital line with an interest rate of LIBOR plus 2% based on the combination of Apio and GreenLine accounts receivable and eligible inventory balances.

The term debt is comprised of a $12.7 million equipment loan, which matures in seven years with a fixed interest rate of 4.37% and a $19.1 million real estate loan that matures in 10 years with a fixed interest rate of 4.02%. Both the term financing and the working capital lines are being financed by GE Capital.

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