Lifecore Biomedical Inc (LFCR) 2005 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Landec's third quarter, fiscal year 2005 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 conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Gary Steele, president and CEO of Landec Corporation.

Sir, you may begin.

Good morning.

And thank you for joining Landec's third quarter, fiscal year 2005 earnings' conference call and webcast.

I have with me today, Greg Skinner, the Company's chief financial officer, who will discuss our financial results in just a moment.

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 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 2004.

I also want to mention that a replay of this call will be available through next Wednesday, April 6th.

It can be accessed by calling 888-266-2081 or 703-925-2533.

The access code is 661843.

And the webcast will be available for 30 days via the Internet at www.landec.com.

We had a very good third quarter, particularly in our Apio food business, with revenues increasing and net income increasing more than threefold over the same quarter last year.

The results for the third quarter and the first nine months of fiscal year 2005 are in line with achieving our goals of continuing to grow revenues and improve our bottom line results.

Consistent with the seasonality in our business, and with the results from fiscal year 2004, we expected that the first half of fiscal year 2005 would show losses, and the second half and the full year to be profitable.

Net income from our Apio food business was $1.2 million for the third quarter, and $4.0 million for nine months.

For the quarter, that's an improvement of $1.7 million, or over 300% for the nine months, an improvement of 2.4 million or over 150% compared to the same periods a year ago.

This growth was driven by increased sales volume, a year-over-year improvement in produce sourcing, resulting in lower cost of sales and improved operating efficiencies in our value-added vegetable processing plant.

In our banana program, we are working closely with Chiquita to develop packaging formats for use of our banana technology with Chiquita bananas.

The initial commercial market test of this innovative packaging and marketing concept began this month.

We are looking forward to expanding the market test to different geographies and various new commercial outlets, such as convenience stores, national coffee chains, drug stores, and food service over the next few quarters.

As a reminder, seasonality is inherent in our two core businesses - - Apio and Landec Ag.

Apio is subject to produce sourcing issues during the late fall and winter months.

Landec Ag recognizes nearly all of its revenues and profits during our third and fourth fiscal quarters, while realizing essentially no revenues during our first and second fiscal quarters.

Regarding Apio this winter, persistent heavy rains in the western United States for the past two months are resulting in severe produce shortages for the industry, and many produce categories that are important to Apio's product mix.

The depth and duration of these shortages cannot be predicted at this time, but it appears likely that these shortages will impact Apio throughout our fiscal fourth quarter.

Based on our results through the first nine months and our forecast for the fourth quarter of fiscal year 2005, we still believe that revenues for fiscal year 2005 will exceed $200 million.

As for our net income, we are still committed to our goal of doubling last year's net income of $2.9 million.

However, meeting this goal will be a function of just how severe the produce shortages are in our fourth quarter, as a result of heavy rains in California during the past two months.

Before I elaborate more on the quarter, and on our year-to-date operating milestones, let me turn the call over to Greg Skinner who will comment on the financial results.

Thank you, Gary.

And good morning, everyone.

As outlined in yesterday's news release, Landec reported total revenues for the third quarter of fiscal year 2005, of 51.5 million, versus revenues of 48.6 million for the same period a year ago.

The increase in total revenues during the third quarter was primarily due to revenue growth and Apio's value-added vegetable produce business, which increased 16%, to 33.2 million, compared to 28.6 million, in the same period last year.

For the third quarter of fiscal year 2005, the Company reported net income of $2.3 million, or $0.09 per diluted share, compared to net income of $725,000 or $0.03 for diluted share in the same period last year.

The significant increase in our net income during the third quarter, compared to the third quarter last year, was due to a 1.6 million increase in gross profits at Apio and a $189,000 increase in gross profits at Landec Ag.

These increases in net income were partially offset by planned increases in sales and marketing costs at Apio and Landec Ag of $543,000.

Notably, Apio's overall net income grew by 1.7 million during our third quarter, compared to the third quarter of last year.

Turning to the balance sheet, during the first nine months of fiscal year 2005, our consolidated cash balance increased by 8.4 million to a cash balance of 14.9 million.

This significant increase was due to net cash provided by operations of $12.1 million, primarily resulting from a $10.8 million increase in deferred revenue from corn seed deposits for corn that will be shipped during our fourth fiscal quarter and from the sale of $5 million of common stock of which 3.5 million was purchased by Chiquita, and the remainder purchased through employees exercising their stock options.

These increases were partially offset by the purchase of $3.1 million of property plant equipment, primarily to improve and expand the capacity of Apio's value-added processing facility and a decrease of 4.5 million in net borrowings under the Company's lines of credit.

As of February 27th, 2005, we had availability under our lines of credit of 17.5 million, up from 13.3 million at the end of the prior quarter.

Additionally, on our balance sheet during first nine months, and consistent with the seasonal nature of our businesses, inventories increased 28 percent to 14.4 million, primarily due to the purchase of seed corn and deferred revenues increased to 11.6 million, from 807,000 at the end of fiscal year 2004, primarily due to deposits for the seed corn of 10.8 million, that will be shipped during the Company's fourth fiscal quarter of 2005.

That concludes my formal presentation, and let me turn the call back to Gary.

Thanks, Greg.

A very important milestone thus far in fiscal year 2005 is our joint technology and licensing agreement with Chiquita announced in September of 2004.

We have formed a joint development collaboration with Chiquita that is focused on applying Landec's innovative packaging technology, initially targeting new retail channels that traditionally have not sold bananas.

Examples of such channels are convenience stores, coffee retail chains, and drugstores.

Market testing of the new packaging formats using our technology has just begun.

Consistent with our comments last quarter, we do not expect material revenues or gross profits from our banana program in fiscal year 2005.

In addition to entering into an agreement with Chiquita, we have numerous achievements thus far this fiscal year.

First, our food subsidiary, Apio, revenues from value-added produce products have increased 17%.

Notably, sales of the value-added vegetable trade products increased by 72%, and sales of the value-added 12-ounce product line increased by 12% compared to the first nine months of last year.

In fact, according to ACNielsen, for the three months ended December 31st, 2004, Apio's market share for sales of vegetable trays to retail grocery stores in the U.S. was 46%, up from 36% from the year ago three months' period, ended December 31st, 2003.

Second, Apio grew its produce export revenues by 15% and export gross profits by 26%, compared to the first nine months of fiscal year 2004.

Our export business, Calex, is currently one of the largest U.S. exporters of broccoli to Asia.

Third, Landec Ag introduced 26 new corn hybrids for 2005, bringing the lineup to 116 hybrid seed varieties, 55 of which are hybrid offerings that will be using Intellicoat Early Plant seed coating technology, up from 32 hybrids last year.

And, fourth, we reduced companywide interest expense by $363,000, or 52% compared to the first nine months of last year.

Overall, for the first nine months of fiscal year 2005, we have increased our net income by over 200%, to $2.3 million from $725,000 for the first nine months of fiscal year 2004.

And we have increased and improved our cash balances to $14.9 million from $6.5 million at the end of fiscal year 2004.

This is the strongest that our balance sheet has been since going public.

We have five primary objectives for fiscal year 2005.

First, to grow our value-added specialty package food business; second, grow our Ag Seed customer base and corresponding revenues for all of our seed products; third, commercially launch our banana packaging technology with Chiquita; fourth, continue to add strategic partner relationships in each of our businesses; and fifth, increase revenues to over $200 million and double net income over fiscal year 2004 net income of $2.9 million.

Through the first nine months of fiscal year 2005, we are on our way to achieving these objectives.

Looking forward to the fourth quarter and the fiscal year-end, we offer the following regarding our different lines of businesses based on our current visibility: Regarding Apio's value-added produce business, the near record heavy rains over the past couple of months are currently impacting our ability to source produce that meets our quality standards and our ever-expanding volume needs.

When developing our financial goal of doubling net income compared to fiscal year of 2004, we did factor in some winter sourcing risks, and through the first nine months of fiscal 2005 - - fiscal year 2005, the financial impact has been in line with those expectations.

However, the recent continuous rains have severely disrupted the late winter and early spring crop planting cycle in many of our key sourcing regions - - actually all of them - - and therefore we expect to experience produce sourcing problems during our fourth fiscal quarter.

We are working diligently to minimize this disruption and keep our customers happy.

The extent of negative financial consequences due to this disruption cannot be estimated at this time.

In our seed business, we expect to realize well above industry growth this year and will grow both revenues and profits in fiscal year 2005, compared to last fiscal year.

However, at this time, it appears that the seed business will fall somewhat short of our growth targets of 10 to 15% for overall revenues and 15 to 20% for growth in gross profits as compared to fiscal year 2004.

We were planning to sell our Early Plant Corn products to at least one major seed company this year.

Major seed companies aren't currently preoccupied with mergers and acquisitions and expanding their lines of genetically engineered traits.

We remain very interested in working with the major seed companies for Early Plant Corn products, but this will evolve over the next several years.

In the near term, we have centered our focus on selling our Intellicoat coated seed products through our own direct sales force and through regional seed companies, who are receptive to our - - to using our technology as a very important differentiating feature.

We intend to continue to grow our overall seed business at rates substantially above industry levels.

The keys to growth in our seed business are retaining customers, generating leads for new customers, and selling a higher value mix of products.

Thus far in fiscal year 2005, we have maintained our historical retention rates for existing customers and are generating substantial numbers of leads for new customers while also increasing the higher value mix of products.

In the periods of time since our second quarter release, we are encouraged by our ability to generate new leads through new techniques, the new customer leads that helped us generate additional sales in profits.

We continue our efforts to validate and sell Early Plant Corn coated seed products directly to the farmer, through our Fielder's Choice direct sales organization.

In addition Intellicoat Early Plant coated corn is currently marketed through ten seed partners - - regional seed partners - - up from six for last year.

We are focusing our Early Plant Corn program on small and medium-sized seed companies that seek new differentiable products where our Intellicoat coatings can help the farmer increase both yields and profits.

The measurable benefits to our customers in 2004, and in prior years, strengthen our outlook for continued growth in the use of Intellicoat Early Plant coated corn.

In our banana program, we are working closely with Chiquita, developing packaging formats for use in the banana technology, using the Chiquita brand for bananas.

Initial commercial test of this innovative packaging and marketing concept are just beginning.

We are looking forward to expanding the market test to different geographies and various new commercial outlets, such as convenience stores, national coffee chains, drugstores, and food service during the next few quarters.

We are still estimating a $1 million loss in our banana program for this fiscal year 2005, to cover our R&D and start-up costs, which is down significantly from a $2.4 million loss in our banana program last fiscal year 2004.

In our licensing and supply business, we were actively pursuing new partners in all aspects of our business, and we're hopeful that we'll be entering into one additional partnership arrangement that utilizes our polymer technology before the end of this year calendar year.

In summary, for fiscal year 2005, our goals are to increase revenues to over $200 million and double fiscal year 2004's net income of $2.9 million.

We continue to believe that we will meet or exceed our revenue goal.

Meeting our income goal will be a function of just how severe the produce shortages are in the fourth quarter as a result of these heavy rains in California and in the western U.S. during the past two months.

Turning to the next fiscal year, we are currently in the process of developing our fiscal year 2006 plan.

We look forward to continuing growth in revenues, profits, and cash flow.

We will give you more specific guidance in our fiscal year-end 2005 results release.

We continue our commitment to grow profitably and deliver highly differentiable branded products that provide increasing value to our customers in order to enhance shareholder value.

We appreciate your ongoing support, and we are now open for questions.

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Tony Brenner.

Your question, please.

Thank you.

I have two questions, actually.

First of all, with respect to the licensing partners with Early Plant Corn, you're - what exactly are you showing to them?

The coating?

The technology?

You're not selling seed, right?

What we're doing, Tony - - are you referring to these ten partners, I presume?

That's correct.

For some of them, we are selling coated seed, and for the most part that's what we do.

We will take their hybrids into our coating plant, coat them, and provide them for them to their own sales force.

The intentions in the long-term will be to license the ability for some of these seed companies to do their own coating, especially the bigger seed companies who have treatment plants and other types of capabilities already in place.

But for these regional seed companies, we are doing the coating on their hybrids, on their own seeds, and then returning them to them for sale.

I see.

And what portion, then, of Early Plant seeds are you selling directly versus the collection of licensees who sell them?

Well, I still think the mix is still slanted to our own direct sales force through Fielder's Choice direct, Tony, just because this is in a start-up phase but that mix will shift.

We envision that more of this will be sold through third parties, and even though we mentioned in our comments today that the challenge is to working with some of the two or the three major companies are sizable, we're - - we still plan on at least working with one of those majors to sell Early Plant Corn in the next year or two.

So that's not an effort that we have stopped.

It's just that it - - the least path of resistance right now, the selling directly to the farmer, through Fielder's Choice Direct, using these ten - -

How long will it take for that mix shift to be more heavily licensing, do you think.

Oh, I think, two to three years.

Okay.

I think that's the transition.

But we - - you know, we have a good growth plan.

I think we'll be able to talk more about some of the specifics of our Landec Ag growth plan in the fourth quarter release.

So, you know there's - - there's plenty of growth in our future for that business.

Okay.

One question regarding Apio's value-added business.

Given the presence of the Dole brand product, and the fact that your market share in some of these key product areas is now quite large.

In a period of product shortage, what do you think is your pricing flexibility now or your ability to raise prices compared to what it's been in past years, which apparently was very little?

That's a - - that's an excellent question.

And the - - and, as you know, Tony - -because you are in Southern California, and you have you been building arks down there as well as we have up here - - obviously, there's - - there's an industrywide problem and we - - we're trying - - our commitment is to delivering to customers high quality produce.

We're not going to - - we're not going to change those parameters at all.

And, so as a result, we're looking at all factors, including interim and temporary price increases that might cover some of these interim costs.

I think, I think the whole industry is looking at their cost structure, and that includes packaging cost increases, produce shortages, having to go further away to find the sources that we need.

So to answer your question is - - I think that everybody is looking at all of this, and maybe there is some - - maybe there's some latitude here at least in the short-term to deal with this severe shortage issue and that may include price.

Thank you.

Thank you.

Thank you.

Our next question comes from Bill Gibson with Nollenberger Capital Partners.

Your question, please.

Yes, just a little bit of a follow-up to Tony's question.

Are we - - as I look at the gross margins on the value-added side, it seems like they have been declining over the last couple of years, you know, a little bit each year.

Is this sort of the level we should be expecting going forward or is there room to expand this?

Hi, Bill.

This is Greg.

I will answer that question.

Well, right now, year-over-year, the margins and value added have been relatively flat, around 15%, and I would say on a go-forward basis, just from, as Gary just mentioned, increase in cost inputs, not only from a sourcing issue, but also from a packaging issue, you can anticipate that margins will maintain this level because the offset to the increase and inputs will be further automation of our plant, more efficiencies in that plant, and so ,therefore, I would expect to see margins about at this level going forward.

Okay, is the third quarter is that a weather issue?

I mean, I notice at least in the short history I've got going back three years, that it's typically lower than the second.

Well, typically, that is the case.

Now year-over-year, this year's third quarter was much better than last year.

A lot of that has to do with the fact that the sourcing issues we had a year ago, we didn't experience in the third quarter this year.

We're going to experience them in the fourth quarter.

And that's why you are seeing an improvement year-over-year.

But typically, yes, the third quarter is usually our sourcing issue quarter.

It just got pushed out a quarter this year.

Thanks.

And then on the licensing front, I understand about a new license.

Any updates on any existing licenses, or can you share with us any expansion in the cosmetic area?

All we can share is that we are broadening our relationship with L'Oreal, and they are expanding their thinking geographically in terms of the use of our additives in their creams and lotions.

And we are looking at a new area with them, that we - - we will disclose at a little bit later time, Bill, when we are further along.

But that relationship continues and is broadening.

Okay.

And then just one last thing, regarding bananas.

I know we just started the test, but have you gotten any initial feedback on the first few weeks?

No, I don't have any and neither does Greg.

I think it's just too early.

And I think that - - this first is very small, very limited test, but April, May, June, we're going to get into some - - if things go according to plan, we'll get into some sizable numbers of sites.

So I think that our year-end call will be a more appropriate time to provide some of that feedback.

Good.

Thanks, Gary.

Thank you, Bill.

Thank you. [OPERATOR INSTRUCTIONS] Our next question comes from [Jeremy Hillman], from Monarch Financial.

Your question, please.

Hi, good morning, guys.

Good morning, Jeremy.

Good morning, Jeremy.

Hi.

I wanted to get into the Chiquita and Fresh Express - - Chiquita's purchase of Fresh Express, which, you know, is about a billion dollar annual revenue business; and I wanted to see, you know, if you guys thought that there was any opportunity to tap into that.

You know, how big it could be.

Any timing and any kind of color you might have or discussion on that might be great.

Okay, it's - - Jeremy, just so you know, that's a different business focus than what we have.

Chiquita's strength has been in bananas and fruit.

The brand is, you know, second to none in the world.

Chiquita's strength has been largely more strongly held in Europe.

They wanted to build some strength in the U.S.

Fresh Express' focus is on, primarily on fresh-cut salads.

That is not a business we focus on.

We're in the fresh-cut vegetable business, and we're obviously doing things in the fruit area, starting with bananas.

So we are in different businesses.

We have a lot of admiration and respect for both of those organizations.

As we understand it, there were quite a few bidders in the mix, and Chiquita won the day.

And, is there some synergy among our companies down the road?

Possibly.

You know, we use similar distribution channels and go after similar customers, but our focus right now is to build our value-added vegetable business, which as you can tell from our results, is growing at a very nice clip, and to succeed in our collaboration with banana packaging with Chiquita.

So we're - - we are pretty focused, and we wish Chiquita great luck with, and great success with Fresh Express.

It looks like a good move for them, and we're happy for them.

But as far as we're concerned, it's not in our space, and we'll keep going forward, where we add a lot of value.

Right.

So you don't see them really making any push into the fresh-cut fruit side of that business.

Oh, okay now.

Both of them are in the fresh-cut fruit business, and there's probably some - - I'm sure they see some synergy in combining their forces.

Whether or not we can participate and help either of them, or with others, in the fresh-cut fruit business, is in our - - is down the road, Jeremy.

We're not in the fresh-cut - - we're not in the fresh-cut fruit business.

We are - - we are looking at packaging of whole bananas, and if we were to extend that, we would be looking at packaging of whole fruit in other categories, and we would probably be picking partners.

So, you know, we're open to that possibility; but right now, both of those companies are in the fresh cut fruit business.

They are not using packaging technology, per se.

They are using regional processing and next day delivery to get fresh-cut fruit to their customers.

So, is there something in the future that's synergistic?

Possibly, yes.

No conflict in fresh-cut fruit, if that made sense to all the parties.

Okay.

Great.

Thanks, guys.

Thank you.

Thank you.

Our next question comes from Kevin Sonnet [ph] with RK Capital.

Your question, please.

Thanks.

Good morning, Kevin

Good morning.

Could you, maybe, remind us or maybe frame the kind of potential economics of the deal with Chiquita, and maybe in the sense of, you know, there's 10,000 sites that you are looking at, and, you know, for every site, on average, there's an opportunity for 500 or 1,000 bags per year.

You know, a certain amount of cents per bag.

Some, you know, give us some sort of framework of where that could go over time?

That's a tough one for us, because the way this works, is Chiquita is the, as you know, will take all the burden and the heavy lifting on marketing and selling and choosing what customer sites.

And the other tough one here, and I - - I'm not trying to dodge your question, it's just, we're just not sure how to answer it - - is that we're talking about markets that are not developed; there's no history of - - we mentioned national coffee chains and, you know, you can - - you can kind of guess what kind of retailers that would be, the number of sites, et cetera.

But there's no precedent for anybody having the ability to get bananas through those logistics, and in good shape, so that there's enough shelf life to get the right type of product to the consumer, who is walking in and spending $3, $4 for a cup of coffee.

So, you know, if you happen to be walking down the street in Manhattan, and you live in Manhattan, you know that people pay $0.75, $0.50 for a single banana.

And yet in a grocery store, everybody is sensitive to the per pound cost.

So to make a long story short, we don't know the answer to that.

I don't think that Chiquita would have invested this heavily in - - in this technology and in their own work, or have made an investment of Landec if they didn't think this was a many multimillions dollar opportunity for them.

But there's no market research study that can guide us on this, because it's all a new territory.

So, I apologize, but I can't answer your question directly, other than to say that it's substantial.

Okay.

All right.

Thanks.

Thank you.

Our next question comes from Mike Mork, with Mork Capital Management.

Your question, please.

Hi, Mike Mork here.

I live up in Healdsburg, and we get around 50 inches of rain up here.

So I know what you've been going through.

Do you have any broccoli up there?

I don't know.

We - - mostly wine.

Okay.

Mostly grapes.

But, you know, it sounds like it's going to be a struggle to hit this double which, I guess, will be 5.9 million, let's say do 5.5 million or so.

My question is - - What is the leverage involved here?

If we had a normal rainy season, if there is such a thing, what would you - - what would the numbers have been then?

Well, we - - we said that our goal all along, Mike, was to double income from last year.

Income last year was $2.9 million.

We said also, this morning, that we have in our plan what we called normal and reasonable allowances for variances, volume variances or rework variances where you have to work a little bit harder with the produce that comes in to get the quality you want, because it is been waterlogged, that kind of stuff.

So we had that in our plan.

And so our expectation, without this impact is - - was, as we said, to double income from last year.

Maybe a little bit of upside, but depending on the weather, but now we're facing this severe weather impact.

I - - Mike - - you know, we're not giving up the ghost here.

We're doing everything possible to minimize variances, to source high-quality produce.

We are allotting our customers in terms of - - we're not meeting their full needs and demands temporarily.

But, you know, I will tell you, we're committed to busting our tail to get as close to that doubling as we can.

So how far is the downside?

I think it's - - it's - - it could be - - it could be modest, but, you know, we're not talking about catastrophic here.

Okay.

But my question was more, if we had a normal year this year, you know, instead of 5.8, it would have been 6.5 million, or what?

Well, if we had had a normal year - -

Well, even in a normal year, Mike, you're going to have some sourcing issues.

That, that's just the nature of the game.

And, as Gary said, we factor that in.

So when we put in our plan, we were - - we were basically counting on a relatively normal year, which is - - some sourcing issues.

So, we've doubled.

So the answer to your question is - - that's where the 5.8 came up with, is that there was nothing catastrophic, if you will.

We're going to have some sourcing issues.

It's normal.

We know it's going to happen, and that's how we came up with the 5.8.

Okay.

That's fine.

Thanks, Mike.

Okay.

Thank you.

Thank you.

Our next question comes from Rick Billy[ph] of Chestnut Ridge Capital.

Your question, please.

Sticking with the sourcing issues, you were discussing earlier price increases, potential price increases.

Have any price increases been put into effect now; and if not, what are you waiting for?

What do you need to see?

We haven't - - we haven't discussed or disclosed any price increases at this time, Rick.

You know, you look at all the parameters in the industry in terms of what our other competitors are doing.

What is their supply situation?

We're - - we're just looking at it, as closely as we can.

And, you know, obviously, we have an interim situation here, where our costs are - - are sizable, in terms of sourcing.

For example, we've got cost increases due to sourcing some produce on the open market, that's not coming from our contractual grower relationships.

So, let me just say that we are taking some steps.

We haven't publicly disclosed anything regarding price increases at this time.

There's some sensitivities in talking about that kind of stuff, at this point, from a competitive point of view; so I'm just going to stop right where we are right now, if that's okay.

Well, let me ask this question, and if you don't answer it, you don't answer it.

Have you been able to pass through to your customers your cost increases even?

Or are we - - are you facing a double-edged sword; that is you are not getting enough quantity, and the price on that quantity is not going up, yet the cost is?

We are - - we are - - we are passing on a portion of some of our cost increases, but not - - we're not getting fully reimbursed for these cost increases.

We're bearing some costs, and our customers are temporarily bearing some of the cost increases.

Okay.

And a unrelated question.

The Chiquita trial has started.

You have, obviously, been selling them some membranes.

Can you talk about the size of that - - of those sales at this point.

Oh, yeah, very small.

Very small.

It's just in the start-up mode.

There's no materiality to the volumes in this fiscal year.

How fast that builds up, I don't know.

But, any sizable trials will be taking place and beginning over the summer.

Can you talk about the price of those membranes, if it's one or a multiple - - you know, different membranes - - what's the price range?

Yes, I'm not going to get into the specifics for probably obvious reasons, but it is a function of size and whether or not we're selling membranes only or membranes with films.

But, it's going to vary and it's predetermined.

We have kind of a formula that is based on the size of the package.

Are you selling membranes with film to Chiquita?

We're doing both at this time.

Okay.

Thank you.

Thank you.

Thank you.

I'm showing no further questions at this time.

I would now like to hand the conference back to Mr. Steele for any closing remarks.

Just want to say that we are appreciative of people following the Company.

Thanks to our investors for their dedication.

The first three quarters have been very good for us.

And we are fully committed to working through this sourcing issue as quickly as we can.

We'll report on that, and we're very optimistic about further growth and for our plan for next year.

So thank you very much for being a part of this call today.

We appreciate it.

Ladies and gentlemen, thank you for your participation in today's conference.

This does conclude the program.

You may now disconnect.

Everyone, have a wonderful day.