Landec's CEO Discusses F4Q2012 Results - Earnings Call Transcript

Landec Corp. (LNDC)

F4Q2012 Results Earnings Call

August 1, 2012 11:00 AM ET

Executives

Gary Steele – Chairman and CEO

Greg Skinner – Chief Financial Officer

Analysts

Tony Brenner – Roth Capital Partners

Morris Ajzenman – Griffin Securities

Will Lauber – Sterling Capital Management

Rick Fetterman – Fetterman Investments

Peter Black – Wynnefield Capital

Presentation

Operator

Good day, ladies and gentlemen. And welcome to the Landec Corporation Fiscal Year 2012 and Fourth Quarter 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 Steele

Good morning. And thank you for joining Landec’s fourth quarter and fiscal year end 2012 earnings call. I have Greg Skinner with me, Landec’s 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 31 days through September 1, 2012.

A replay of the teleconference will be available for one-week until midnight Eastern Time, Wednesday, August 8, 2012 by calling 888-266-2081 or 703-925-2533. The access code for the replay is 1583900.

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.

Yesterday in our earnings release we reported very good fourth quarter and fiscal year 2012 results. During fiscal year 2012, we achieved record levels of revenues and strong earnings and cash flow from operations along with substantial growth in overall unit volume sales.

As reported, we finished the year strong with the fourth quarter revenues increasing 21% to $82.6 million and fourth quarter net income increasing $5.5 million to $2.8 million, compared to a loss of $2.7 million during the fourth quarter of last year.

For all of fiscal year 2012, revenues increased 15% to a record $317.6 million and net income of $12.7 million or $0.49 a share. They grew 46% compared to fiscal year 2011 and after excluding the $4.8 million goodwill write-off in fiscal year 2011 of our Landec Ag, our former seed subsidiary. In addition, we increased cash flow from operations by 53% to $22.2 million.

Our results reflect a shift in our strategy starting several years ago, a shift to focus on core businesses build on our material science technology in ways where we can control our own success. We are now focused on two core businesses, food and Biomedical materials.

In the food business, we recognize substantial growth opportunities as consumers continue to seek healthy, convenient, fresh-cut produce food choices.

In the Biomedical materials area, we recognize opportunities for using our polymer materials in high margin value-added Biomedical materials applications. To increase growth in revenues and margins in our food business, in April of this year we acquired GreenLine Foods, which is an ideal synergistic match with our Apio food business.

In fiscal year 2013, the year that we started on June 1st, GreenLine is projected to contribute $95 million to $100 million in revenues and $10 million to $11 million in EBITDA.

In 2011, we invested in Windset Farms. As we saw advantages in using hydroponic greenhouse techniques to grow high quality produced throughout the year with consistently high yields.

From our 20% ownership investment in Windset, we received 7.5% annual dividend and a 20% share of the increase in their fair market value, which when combined contributed approximately $7 million to pre-tax income in 2012 and that’s on a $15 million original investment.

And to pursue opportunities in the Biomedical materials sector. In 2010, we acquired Lifecore Biomedical, which in 2012 contributed $34 million in revenues and over 30% EBITDA margins.

With these investments we are now focused on integrating GreenLine assisting Windset Farms and doubling its California greenhouse growing capacity, and expanding Lifecore’s customer base and product offerings.

We’ve taken steps to further focus and rationalize our business. We recently announced the sale of our Landec Ag seed coating business to INCOTEC, a leading provider of seed and coating technology products and services to the seed industry.

While we plan to continue to support our licensing partner applications for materials. We are directing most of our R&D spending in support of our core food and Biomedical materials businesses.

As reflected in our financial and business results, we had a very good fiscal year 2012 and we plan to continue our growth path for fiscal year 2013. For fiscal year 2013, we plan to grow Landec revenues by approximately 30% and net income by 25 to 35% compared to fiscal year 2012.

Let me turn over to Greg for discussion of this specific results.

Greg Skinner

Thank you, Gary, and good morning, everyone. In yesterday’s news release, Landec reported that for the fourth quarter of fiscal year 2012, revenues increased 21% to $8.6 million versus revenues of $68.1 million for the fourth quarter of last year.

The increase in total revenues during this year’s fourth quarter, compared to last year’s fourth quarter was primarily due to, first, $9.1 million of revenues from GreenLine; second, a $5.2 million increase in revenues Apio’s non-GreenLine value-added businesses, which include the Apio fresh-cut specialty packaged vegetable business, Apio Cooling and Apio Packaging; and third, a $1.3 million increase in revenues at Lifecore.

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