Lifecore Biomedical Inc (LFCR) 2001 Q4 法說會逐字稿

Good day ladies and gentlemen and welcome to Landec's (Company: Landec Corporation; Ticker: LNDC; URL: http://www.landec.com/) fourth quarter and year-end 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.

If anyone should require assistance during the conference, please press star, then zero on your touch-tone telephone. If anyone should disconnect and need to rejoin, please dial 1-877-817-7175.

And as a reminder ladies and gentlemen this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Gary Steele, Chief Executive Officer of Landec.

Mr. Steele, you may begin.

Thank you.

Good morning and thank you all for joining Landec's fourth quarter and year-end earnings conference call and Web cast.

I have with me today Greg Skinner, the company's Chief Financial Officer, who will discuss our financial results in a moment after I make some remarks.

During our call today, we may be making forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially.

These risks are outlined in yesterday's news release as well as in our filings with the Securities and Exchange Commission, including the company's Form 10-K for fiscal year 2000.

Also want to mention that a replay of this call will be made available through next Thursday, January 31st. It can be accessed by calling 888-266-2086 or 703-925-2435. the access code is 5778152, or you can access via the Internet at www.landec.com.

Our release yesterday highlights the difficulties we faced in the fiscal year 2001. Our financial results were disappointing, and we expect improved performance going forward, beginning in our second quarter 2002. As stated in the release, our financial performance was adversely impacted in four areas.

First, we were impacted in both the fourth quarter in all of fiscal 2001 by lower volumes and margins in Apio's fee for service, whole produce business. This is the area of our Apio food business that does not utilize Landec's proprietary packaging technology.

Second, Apio incurred a $2 million loss during the first half of 2001 from our investments in farming activities, during the winter season.

Third, Landec Ag, our seed sales and seed coating technology subsidiary was hurt in the spring of 2001 by lower than expected uncoated corn seed sales due to lower corn acreage being planted, primarily because of high input costs for the corn farmer in fertilize and corresponding low corn prices.

Again, this is a portion of Landec Ag's business that does not use our proprietary and Intelimer polymer technology.

And fourth, Dock Resins, sales of specially chemical products were adversely affected by the downturn in the U.S. economy.

All of these adverse impacts to our financial results were outside of our core technology and combined to affect our financial performance in 2001.

Let's turn to this year. Our goal for 2002 are three-fold. First, to generate net profits that are sustainable. Second, to strengthen our balance sheet, and third, commercially launch our banana-packaging technology.

So what are we doing to transition from the poor performance of 2001 to a good year in 2002 and beyond?

Let's start with how we intend to generate sustainable profits from operations. Our efforts center on streamlining and focusing our food business, Apio Inc. on our unique strengths and proprietary food packaging technology,

and our ability to effectively market and see specially packaging whole and processed produce to retail grocery chains and club stores.

In the second half of 2001, we began to exit what we considered to be commodity areas or our food business where we do not have unique competitive advantages. These areas are field harvesting and packing of produce, and carton yard inventory management.

We have also significant reduced our investment and thus our risk in joint ventures of crops in the winter months in the desert when crops from the central valleys of California are limited.

These actions, combined with the earlier decision to exit fruit packing and cooling operations focuses Apio on value-added products. It reduces our working capital needs,

improves our margins and lowers our overall risk, while maintaining our ability to supply the nation's largest retrial grocery chains, club stores and food service operators.

Our transition will be completed during the first half of fiscal 2002. We want to aggressively build our value-added technology business, using our proprietary and Intellipac packaging technology,

and to use Apio's strong sales capability and combine that with our centralized state of the art processing plant capability in central California.

We want three quarters or more of our food business to be technology driven within 24 months. This will be accomplished by adding new customers, increasing sales to existing customers, and by launching new products using our specialty packaging technology.

In fiscal year 2001, we launched 20 new products, making us one of the fastest, probably the fastest growing value-added technology produce company in America. The fresh cut produce demand is growing and we want to be the category leader.

Our R&D spending on new, value-added products including bananas this year will be close to $2 million in R&D.

We are committed to developing innovative new products. As we grow the value-added revenues of our food business, which has doubled in the past 24 months,

we also expect to be able to continue to lower our food business operating expenses in fiscal year 2002, and we are projecting to lower our expenses by about 1.5 to $2.5 million.

This is possible, because of exiting the previously mentioned business and because of Apio's recently launched state-of-the-art business system, which automates many tracking and reporting functions previously conducted annually. This transition process will continue throughout 2002.

In addition, we are experiencing improved year-to-year results in our ag subsidiary, Landec Ag. And this is happening with one-third fewer people. What is the cause of our improved performance in our ag business?

First a more stable fertilizer price situation for corn farmers; second, a better plan that we're executing in our part, combined with strong farmer interest in Landec Ag's seed-coating technology

that now allows us to talk to large farmers who were difficult for us to attract prior to the introduction of our

seed-coating technology.

Another profit improvement for us, area for us is our active pursuit of licensing partners that can lead to substantial collaboration, such as our recently reported $2.5 million licensing deal with UCB.

Over the last three years, we were focused on putting the pieces of our food and ag technology strategy together. Now the company and I can devote more time to partnering and licensing arrangements.

Let me turn to our second priority for this year, which is the strengthening of Landec's balance sheet. This is our second highest priority, and it is to lower debt levels and corresponding lowering of interest expense.

Our debt is higher than we are comfortable with, and a good portion of this debt has come as a result of our purchase of Apio in December 1999.

We want to lower debt, if possible, without dilute of equity financing. We are working on the sale of our Reedley fruit packing and cooling facilities, which is now currently in escrow,

and we publicly announced yesterday our intention to sell Dock Resins Corporation, our Linden, New Jersey specialty chemical manufacturing and sales company.

We have interested buyers and we have recorded the anticipated sale of Dock as a discontinued operation. Dock Resins no longer fits in our long-term strategy and we believe we will be able to sell if for cash and continue to have our proprietary polymers made by Dock

and supplied to us cost-effectively under Dock's new ownership. We expect to sell Dock Resins in this fiscal year 2002.

Our goal is to combine cash flow from operations, up front cash from several licensing deals and cash from the sale of Dock Resins and the sale of our fruit processing facilities,

with significantly reduced capital expenditure requirements and a less cash intensive food business to generate 15 million or more in new cash resources. We are well on our way to implementing this plan.

Last, but certainly not least we face a large market opportunity with our Intellipac banana packaging technology. What do we know now that is different than what we knew six months ago?

First, we know that we can scale the manufacturer of the packaging with our Intellipac breathable membrane, cost effectively, to many millions of units and do this all in a virtual manufacturing environment with little or no new capital investments on our part.

Second, we know that in our hands, and in the hands of several retail grocery chains with whom we have conducted trials, the technology works as advertised. Increased shelf life, fewer deliveries required, better color, better appearance and some even say better taste and most importantly, higher sales throughput.

Third, we have reliable sources of bananas that can be used to directly sell to retailers in club stores using our own Eat Smart brand of bananas.

Fourth, we know that several bananas companies want direct access to our technology, preferably exclusively.

And fifth, we know that retailers would strongly prefer that the technology not be linked exclusively to just one banana supplier.

And last, but not least, we are getting a feel for the premium price point that we think we can achieve in the market place.

So what is next with our banana program? A few more trials and a focus on three to five retailers that we believe can serve us well strategically as important initial customers.

We feel it's imperatively important that we try not to supply too many customers too soon until we demonstrate initial success with a select group of retailers.

We expect fiscal 2002 to be the year that we commercially launch our banana technology, and to put us in a position that by fiscal 2003, we'll be ready for significantly increased banana volumes.

Overall, fiscal 2001 was a year of disappointments and a year of transition. We expect fiscal year 2002 to be significantly better, beginning in our second quarter.

One last comment before I turn it over to Greg Skinner.

Excuse me. We have been asked numerous times why we do not give specific quarterly estimates in our quarterly releases or during these quarterly calls. My response to these inquiries is that once we achieve profitability and demonstrate we can predict and accurately estimate results,

we will then start to discuss specific quarterly estimates.

Let me turn it over to Greg.

Thank you Gary.

As outlined in yesterday's new release, Landec reported quarterly revenues from continuing operations for the fourth quarter of fiscal year 2001 of 39.3 million versus revenues of 50.7 million for the same period a year ago.

The decrease in revenues for the quarter was primarily due to decreased revenues in Apio's fee-for-service whole produce business, which decreased to 11 million in the fourth quarter this year from 18.4 million in the fourth quarter of fiscal year 2000,

and from Apio's commission trading business, which decreased to 12.2 million in the fourth quarter this year from 18 million in the same period last year.

These decreases were partially offset by continued revenue growth in Apio's value-added specially packaging business, which increased over 14 percent to 15.8 million in the fourth quarter this year from 13.9 million in the fourth quarter of fiscal year 2000.

The revenue decrease in Apio's fee-for-service business was primarily due to Apio's restructuring plans, which has had a short-term effect of reducing produce volumes available for sale.

The restructuring plan involves exiting the cash, labor and equipment intensive field harvesting and packing portions of that fee-for-service business, so that Apio can focus on it's higher margin, technology-based, value-added business and it's sales and marketing of whole produce.

The benefit of the restructuring won't be realized until the second half of fiscal year 2000 after the corresponding cost reductions have been fully implemented.

The decrease in revenues in the commission trading business is due to changes in contract terms, where Apio no longer takes title to certain products, and therefore, the revenue recognized is the commission on the sale instead of the end value sale. The corresponding gross profit, however, is the same.

During the fourth quarter the company reported a net loss from continuing operations of 2.9 million or 17 cents per share versus a net loss of 1.7 million or 11 cents per share for the fourth quarter last year.

The increase in the company's loss is primarily due to decreased gross profits in Apio's fee-for-service and commission trading businesses from 5.1 million last year to 2.8 million in the fourth quarter this year,

and due to a quarter-over-quarter increase of 500,000 in net interest and other expenses. These amounts were partially offset by $1 million in increased gross profits from Apio's value-added food business.

EBITDA from continuing operations for the fourth quarter of fiscal year 2001 were a negative 610,000 versus EBITDA of a negative 36,000 for the same period a year ago.

For all of fiscal year 2001, Landec has revenue from continuing operations of 190.9 million, compared to 197.2 million in fiscal 2000. The company reported a net loss from continuing operations of 4.8 million or 29 cents per share compared to a net loss of 2.1 million or 13 cents per share last year.

EBITDA from continuing operations for fiscal year 2001 were 2.8 million versus 4.3 million in fiscal 2000.

The company also reported in yesterday's new release that it's selling Dock Resins, our specialty chemical subsidiary. The financial results of Dock Resins have been reclassified to discontinued operations in the income statement and its net assets are shown as assets held for sale in the balance sheet.

The estimated loss from discontinued operations for the fourth quarter was 2.9 million or 18 cents per share and for all of fiscal year 2001 the estimate loss from discontinued operations was three million or 19 cents per share.

In preparation for achieving profitably and generating positive cash flow from operations in fiscal year 2002, the company has instituted several initiatives to streamline operations.

These initiatives include first, focusing on growing our proprietary technology base product lines in food and ag by launching new products, adding new customers and building the banana business.

Second, reducing Landec Ag's work force and sales and marketing expenses resulting in approximately 2.5 million of annual cost savings.

Third, outsourcing Apio's carton yard operations, which will free up approximately $4 million in working capital.

Fourth, reducing Apio's investment in desert, crops in the desert in the winter months by more than 80 percent as compared to last year.

Fifth, discontinuing the cash, labor and equipment intensive field harvesting and packing portion or Apio's fee-for-service business, which should result in about one-third less revenues next year, but with margins, which are expected to double from their current levels of 12 percent.

And sixth, continue to work to reduce Apio's annual operating expenses by 1.5 to $3 million.

And last, strengthen the balance sheet by selling Dock Resins and Reedley, pursuing R&D collaborations with up front payments and royalties, generating cash flow from operations, using lines of credit seasonally and paying down debt.

All of the above initiatives are designed to allow management to focus on and grow Landec Corporation's core food and ag businesses going forward.

Turning to the balance sheet, our cash remains virtually the same at 8.7 million at the end of fiscal year 2001, compared to 8.6 million at the end of last year. This small increase was primarily due to several upsetting reasons.

First, cash from the sale of preferred and common stock of 5.5 million. Second, the collection of 3.4 million of notes receivable in advances, and third, net borrowings under Landec line of credit of 6.9 million.

These sources of cash were used to fund operations and pay down of nearly $11 million of grower payables, for the purchase of $7 million of property and equipment to expand Apio's value-added facility in order to meet the growing demand for Intellipac-based product and to implement Apio's new ERP business system.

With the end, with the year-end cash position of 8.7 million, reduce capital requirements, availability of existing lines of credit, and reduced operating expenses going forward, we expect to be able to meet our operating goals during the next 12 months without a major equity financing.

That concludes our formal comments. We'll now open up the call for questions.

Operator, we're ready for questions now.

Thank you sir. If you have a question at this time, please press the one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key.

Once again if you have a question at this time, please press the one key on your touch-tone telephone.

Our first question comes from George Dahlman of US Bancorp Piper Jaffrey. Your question please?

Yes, good morning. I wonder if you could take me through a little bit the cap expenditures that you had for '01 and how you expect that to break out in '02 in light of Dock expected to come off the books and in light of the reduced operations at Apio?

Hi George, this is Greg.

Hi Greg.

In '01, the seven million number I just mentioned, that excludes the amounts that were spent at Dock Resins.

That amount is almost exclusively associated with Apio last year, and primarily in the area of the new ERP business system, which is approximately half of that amount, about three million. And the rest is in the building and expanding of the VA facility.

And going forward, because of the ERP system now being complete, and because of the expansions we did last year, we expect our capital expenditures next year to be in the two to two-and-a-half range, which is about five million less.

What will that be primarily focused on?

Similar, it's a continued expansion of some of the lines at the value-added plan.

And some investments, George, in Indiana, in terms of scale-up of coding equipment.

OK, thank you.

Thank you.

Thank you Mr. Dahlman. Our next question comes from Tony Brenner from Roth Capital. Your question please.

I have a couple of questions, if I may. In the, in your release, you allude to the first quarter loss, possibly equaling the loss of last year.

How much of that perspective first quarter loss relates to the continuing restructuring of the Apio fee-for-service business in the first quarter? Is that the primary factor or not?

The primary factor Tony, this is Greg, is the Landec Ag piece. It's the worst quarter for Landec Ag as a first quarter. It's a high sales and marketing quarter for them.

Well, I understand, but last year was seasonal also. The reason, what I'm getting at is last year the first quarter was impacted unusually by farming losses and some other factors, and presumably those are absent this year; therefore, I'm wondering why the loss should be as large as it was.

It is a, well it's a combination of several things. The first quarter will always be, well, under our current structure, will always be our worst quarter. It's just a quarter where, as I've already mentioned, Landec Ag is high expenses/low cost, and in the area of Apio, it's the lowest volume quarter.

It's high sourcing cost quarter, because it's the winter months, and even though we were able to dramatically decrease our investment in the desert, you still have issues where you have to go out on the open market and get the crop in order to service your customers.

And then this year, because of the startup of the new business system, not only did we have implementation costs startup, but we also had last year the capitalization of those costs that were going into the capital side are now having to be expensed, and that all occurred in the first quarter at Apio.

So it's a combination of all that. And there is some still residual effects of the restructuring. The exact number, I don't have available.

OK, but that new business system for the full 12 months will be a plus, not a negative. Is that ...

It's plus. It will be a negative for, you know, the first three or four months, obviously why we're implementing it and are having training going on and consultants in there, all those type of costs when you're in the initial phases can be capitalized; in the later phases, they have to be expensed.

OK. Second, you indicate in the release that the benefits, one of the benefits of the fee-for-service business is the margins on that business now will roughly double to 20 to 25 percent. Previously you had indicated at 35 to 40 percent margin goal. What's ...

Well ...

... for the change?

Initially when we came out with that first estimate, we thought we would be able to not recognize and gross up the carton portion of the charges to the growers.

We figured that was just going to be a pass-through, and it would be charged directly from our Georgia Pacific, who we've outsourced our carton yard to, to the grower and we weren't going to have to recognize any of that, not the cost side or the revenue side.

Well because they're of accounting rules and what we've been told by our accountants, we must show that carton going through as both revenue and cost.

I see.

So, or even though the gross profit dollars are the same, the margins came down accordingly. So that was the only change.

And the third thing I wanted to ask about was the commercial launch of bananas next quarter. I presume that means the second quarter beginning next week.

Yes.

What exactly do you mean by commercial launch? You make it sound like an extended test before you fully pursue sales next year. But you've been in extended tests, so what's the change really?

There's no change, commercial launch means we start selling it as a full commercial product, Tony, and we intend to do that in our second quarter.

We've been doing testing, we'll be doing testing for the next five years, because we will be constantly improving the product, but what we mean by commercial launch is that we enter into contract with major retailers, and we're heavily in those discussions right now and sorting out pricing and buy-ins et cetera. So we ...

But you will try to limit the extent of that at first or?

Yeah, we have, under the way we're launching this this year, our primary objective is to prove that the technology works as advertised, and that we can gain a significant premium over the traditional pricing in this market place.

So that's our goal. We feel that we have the manufacturing capability, the technical support capability, and the sourcing of banana capability to allow us to serve a, you know, a handful, four to five retailers very well, and we want to get it right the first time.

So that's why it's a highly focused approach. You would be pleased with the folks that we are going after, because they are nationally known retail chains. And so our objective is to get it right this year, get everything working properly, show the value equation, and then be prepared for letting it rip in 2003.

At that scale, would bananas contribute to profits this year?

Yes, slightly, yes.

OK.

It's not going to be the mainstay of our profit generation this year, but yes, it would be contributing to profits.

Thank you very much.

Thanks Tony. Other questions?

Thank you Mr. Brenner. Once again ladies and gentlemen, if you have a question at this time, please press the one key on your touch-tone telephone.

Our next question is a follow-up from George Dahlman of US Bancorp Piper Jaffrey. Your question please.

Yes, I'm wondering how you allocate your marketing expenses. Do you run them across as incurred or do you budget them for the year, and then prorate, you know, some sort of an scheme for each quarter, or do you just simply expense them as you incur them?

Well George, it's Greg, we typically, with one exception and I'll get into the exception in a second, we expense it as incurred and that's true at Apio across the board. At Fielder's Choice, it's a little different, Landec Ag, our seed subsidiary, because they have two pieces and this is all according to accounting rules.

One is called their lead generation, which must be expensed as incurred, and then the second piece is actual offers, where they'll send out a catalog. Well, the offer piece is capitalized and that is expensed as the bags are shipped.

The lead generation is expensed as incurred. And that's about one-third of their advertising costs are associated with lead generation and two-thirds are the offers.

OK, thank you.

Thank you Mr. Dahlman. Our next question comes from Bill Gibson of Bank of America Securities. Your question please.

A couple of questions. I just want to make sure I understand this. When we're looking at the fourth quarter sales at Apio in the value-added being up 14 percent, were there capital constraints holding that back or is that?

No.

OK. That is what it is.

Yeah.

And on the trading side where that was down, I know you talked about, and I missed some of that, recognizing just the commission versus gross value, was that number an apples-to-apples?

As far as the amount that it was down?

Yeah, 12.2 versus 18, I think is what I got.

Yeah the large majority of that decrease was just the result of that change in contract terms. Last year in 2000 we actually took title to the product, and then turned around with a commission and sold it.

This year, we're just selling it straight through without taking title and if you don't take title under accounting rules, you don't gross up the revenue.

Got it. Good. Appreciate that.

The gross profit's pretty much the same at the bottom line. It's just that you're not grossing it up and recognizing revenue.

Got it. Thanks.

Bill, you know, I'm thinking a little bit more about your first question, this is Gary. We did have this last fourth quarter some produce sourcing limitations that stymied us a little bit. So, you asked were there capital constraints, the answer was no.

We did have some situations where we just literally could not fully supply some of our customers during that fourth quarter.

Now is this something that you, how should we be, I know it's a little earlier for you to be giving a quarterly guidance, you mentioned that, but how should we be viewing that side of the business as say, growth in '02 versus '01?

The technology specialty packaging?

Yes.

You ought to be looking for about 20 to 25 percent growth.

OK.

It's the growth area for us. We're adding customers. We're adding product lines, you know, it's, to be perfectly honest with you, it's been a real challenge to source the produce to keep up with this type of growth, but we're hanging in there.

Good.

This is where we're focusing the company, obviously in our food business.

Yeah, well that's, that was what was behind my question, because I quite frankly had thought it ought to be growing a little higher than what it did.

Yeah ...

and this is going to hurt us ...

... We understand ...

... the sourcing will hurt us in the first quarter too, and that's why we made the mention that we thought the loss would be equivalent to last year. A lot of that has to do with the cost of going out and sourcing product during the winter months.

We are aggressively pursuing some unique and innovative and strategic options for sourcing some of the critical product components that we need that are beyond what I'd call the traditional central California sourcing.

And our technology allows us to do it uniquely and no one else could do what we're planning to do. As we do it and implement it, we'll tell you about it specifically.

Yeah, I'm going to spend some brainpower on that one. Thanks a lot, but I appreciate it. Thanks Gary.

Thank you Bill.

Thank you Mr. Gibson. Our next question comes from Peter Siris of Gerrilla Capital. Your question please.

Hi, excuse me for sounding dumb and being confused, I may be both today, but the OK, let me start with, I'm trying to understand what your business is, so excuse me if I'm asking dumb questions ...

OK, Peter.

But in, let's start with the packaging and the bananas and the rest of this stuff. Why is it better for you to be in the produce business versus finding a major, versus being in the technology business and finding a major partner to do this for you? You start with that question.

Peter, we started out in the packaging business. This is Gary Steele.

Right.

And we found that with the exception of maybe two customers in this business, no one understood the importance of our packaging technology. It looked as thought it was going to be a very long, slow educational process. People in this produce business are not typically familiar with or use technology.

They typically don't want to pay for it, and we had a customer call Apio that was using it and exploiting it very rapidly and Apio has a marketing and sales platform for selling to every major retail grocery chain,

club store chain and increasingly food service operator chains, and so that's why we were able last year to launch 20 new products.

If we were trying to sell this as a packaging technology alone, maybe Dole (Company: Dole Food Company Incorporated; Ticker: DOL; URL: http://www.dole.com/) would understand and maybe Fresh Express, but no one else was.

So we just moved, we can move faster and better and we can capture market share. We're now in 7,500 retail stores.

We are the largest produce supplier to Costco (Company: Costco Wholesale Corporation; Ticker: COST; URL: http://www.costco.com/) and Sam's Club.

We are -- we have two full-time dedicated sales people on Wal*Mart (Company: Wal*Mart Stores Inc.; Ticker: WMT ; URL: http://www.wal-mart.com/), and we're just adding stores and customers because the Apio marketing and sales strength,

the direct relationships that they've built over the years, and also because of the relationships that we now have through Apio with growers who can supply us the produce.

What we need to do is to make sure that the commodity pieces of that business are minimized or we exit from them all together so that we can focus on the technology side.

Now let's move to the banana side. Landec didn't know how to spell banana until we got together with Apio, and what we have at Apio is we have former Del Monte (Company: Del Monte Foods Company; Ticker: DLM; URL: http://www.delmonte.com/) and Dole banana people

who are there in place who are helping us drive this strategy, know the customer base and we are connected with every major retailer in the United States right now in terms of talking to them directly, not indirectly, but directly about our banana technology. This all comes with the capabilities that reside at Apio.

OK, so the strategy as I understand it is to cut back on sort of commodity Apio business.

Correct.

And to try to build up a branded value-added Apio business in bananas and other products that the retailer will understand that it's better to pay $10 and have, you know, five percent spoilage, than pay $8 and have 30 percent spoilage.

Right. You got it.

And the reason that the numbers look crappy here, I'm sorry for that word, but look lousy here is that the commodity business is worse than was expected? Am I understanding that correctly?

If you had to simplify it, you did a good job.

OK.

And when we bought Apio, we got the baby in the bathtub; we got the water, rubber ducky and the whole bit, and we don't like the dirty water. So we're draining it.

OK, so you're moving out of all that stuff and what's happening in the other licensing areas?

OK, in other licensing areas, which are outside of our food and ag area, our technology has many, many uses. And they are in the medical area; they're in the industrial applications area; and they're in the consumer area.

The first of these, and by the way, Peter, let me mention to you, over the last couple years, I will just personalize this a little bit, I didn't have the time or the bandwidth to spend much time on this licensing stuff as we were putting the pieces together in food an ag.

Now I am focusing more on that with several people here and you should expect to hear about more partnering arrangements that allow us to leverage our investment in our technology. This UCB agreement, which generates $2.5 million for us in cash this year is one example. We have others in the works.

Our polymer technology can be used in medical devices, dental devices, consumer cosmetics, packaging adhesives.

There's a 100 -- 100 applications that we have absolutely no intention or frankly, ability to pursue on our own, so we will do those through licensing and partnering deals. And you're going to be hearing more about that.

Great, thank you very much.

Thank you Peter.

Gentlemen at this point, we have no further questions. Would you like to proceed with any closing remarks?

We just appreciate folks participating in this conference call. In summary, we are focusing on improved performance. And we look forward to discussing that with you during the year, and thank you all for joining us.

Ladies and gentlemen, thank you for participating in today's conference, this concludes the program. You may now disconnect. Good day.