Lifecore Biomedical Inc (LFCR) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen.

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.

Good morning and welcome to Landec's second quarter fiscal year 2012 earnings call.

I have with me today Greg 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 10K 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 pretax income.

For our Lifecore subsidiary, revenues increased 10% while pretax 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've 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 on 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.

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 same 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 business 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 per 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 pretax income from our investment in Windset Farms and a $1.1 million increase in pretax 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 pretax income and by an increase of approximately $400,000 in marketing and business development expenses.

For the first six months of fiscal 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 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 pretax income from our investment in Windset Farms and a $679,000 increase in pretax income from our Apio's value-added and export businesses.

These increases were partially offset by first, a $650,000 decrease in pretax income as a result of accruing performance based bonuses at Apio and corporate which were not accrued during the first six months of last year.

Second, a $598,000 increase in the income tax expense due to higher pretax income.

And third, a $236,000 decrease in pretax income for Lifecore due to the timing of production which resulted in reduced overhead absorption.

Turning to Landec's financial position.

During the first six months of fiscal year 2012, cash decreased by $7.8 million due to first the purchase of $4.8 million of our common stock on the open market through our stock buyback plan.

Second, the payback of $2.3 million of debt.

Third, the purchase of $3 million of equipment.

And fourth, a $7.4 million increase in trade receivables due to shipments of product in late November.

These decreases in cash were partially offset by generating $5.2 million of net income and from $5 million of non-cash expense items such as depreciation and amortization and the tax benefit from stock based compensation.

Gary, back to you.

Thanks, Greg.

Let's discuss the substantial progress achieved in the second quarter and the first six months of fiscal year 2012 and our outlook for the Company overall.

Apio has experienced an increase in demand for not only its fresh cut vegetable products and bags but also more recently, even trade products have shown a slight increase in demand.

The value-added fresh cut vegetable category has resumed volume growth with the overall industry category growing now at 5% over the last six months.

Apio's growth for fresh cut vegetable products during the last six months has been more than double the industry category growth while at the same time slightly increasing gross margins in our value-added business.

Lifecore continues to perform well.

As a reminder, Lifecore's biomaterials are directed towards ophthalmic, orthopaedic and veterinary medical applications which command high margins.

Lifecore continues to realize gains in productivity in its manufacturing process at its facility in Chaska, Minnesota.

Consistent with our plan, Lifecore is expanding its customer base and also expanding product sales to existing customers.

In addition we've identified new investment opportunities in the hyaluronic acid biomaterials arena which we will be focusing on in the upcoming quarters.

We see Lifecore continuing to realize an annual gross margin of approximately 50% though it may fluctuate quarter to quarter due to product mix and an annual EBITDA margin of around 30%.

In the licensing area we continue to support Chiquita in its Chiquita-to-Go banana program and its Fresh and Ready avocado program both of which use our BreatheWay packaging technology.

More recently we've been working with Chiquita to create an optimal atmosphere within shipping containers in the field of global transport of bananas.

Chiquita has a sizeable shipping container technology business that fits well with Landec's long term interest in using modified atmospheric technology for preserving produce during global transport.

Chiquita purchased their first order of BreatheWay membranes for containers during the second quarter of fiscal year 2012.

The container program is in the initial commercial testing phase.

In the Ag arena, now that the Monsanto grant has terminated, we've been working with an Ag consulting firm to investigate strategic options for our Intellicoat seed coating technology.

We've had discussions with several top seed treatment and crop protection companies who so far are expressing interest in our technology.

We'll just keep you apprized of that.

Bottom line, we're making substantial progress in our existing core businesses.

Looking to the future, we're focused on six primary goals.

First, grow Lifecore revenues and earnings by adding new customers and expanding business with existing customers based on Lifecore's strength in ophthalmology, viscoelastic materials and sterile filling plus investigating new applications for HA materials in the form of new medical devises or Agivent therapies.

Lifecore has a track record of retaining customers as our biomaterials are specked into customer FDA filings and manufacturing processes.

Second priority is to grow Apio's food business and maintain Apio's margins by demonstrating superior product quality and customer service while continuing to develop new, innovative products and enhancing our operating efficiencies.

We're developing several new specialty packaged product platforms for launch beginning in the spring of 2012 which will broaden our product line and help increase margins overall.

The future growth of our Apio food business will come from continuing to increase market share from the launch of new products, from increasing sales of BreatheWay packaging technology and expanding opportunities in hydroponic greenhouse growing.

Third priority.

Investigate our strategic options in the agricultural space as I mentioned earlier.

We are advancing several discussions and we're expanding our work in the Ag applications area, both efforts working to determine the level of interest that others have in our technology and to gauge the likelihood of entering into collaboration with one or more Ag companies and we hope to make some decisions by the end of this fiscal year.

Fourth, find new applications for BreatheWay packaging technology such as what we've done with Chiquita for transporting bananas globally in containers using BreatheWay technology.

Fifth priority, find new investment opportunities for growth and margin enhancement by identifying potential investment targets that have technology or commercial products that are synergistic with our materials and our channels of distribution.

Last but not least, we're working to maintain a strong balance sheet and we currently have over $200 million in assets, over $46 million of working capital, and over $28 million in cash and marketable securities.

In summary we've had a good second quarter and a very good first six months of the year.

Barring any adverse weather events during the winter months, we expect to meet or exceed our fiscal year 2012 guidance of 5% or more better revenue growth and net income growth of 30% to 40% after adding back the one-time impairment charge of $4.8 million to net income for fiscal year 2011.

We welcome your questions.

(Operator Instructions) Tony Brenner, Roth Capital Partners.

Good morning.

A couple questions.

Could you remind me what Apio's tray business is as a percent of the value-added mix?

The tray business right now is about 35%, bags about 65%.

Revenues.

We're talking about dollars.

Right.

Okay.

And Gary, in the release, particularly, you alluded to recent rainfall in the desert and that that might become a problem, but as I recall last year in December and January, the weather was pretty miserable in the desert.

Is there any reason, as you look at the situation today, to think that sourcing, and therefore, margins won't be much improved versus a year ago in the third quarter?

No reason to believe it.

Last year was just as you know, just a disaster weather wise and we're in much better shape this year, Tony, at this point.

Okay, was that just a cautionary comment or--

No, I mean there have been in December there were heavy rains down in Southern California, et cetera, et cetera.

We were worried about it but I think we're okay.

I think we're okay, Tony.

You don't want to jinx anything here but we've got to get through January and February and early March and then after that we should be in good shape.

But so far, things are pretty good.

Okay, and lastly, with Windset's new capacity coming onstream and continuing to come onstream, I guess, should that portend an increasing income contribution from Windset incrementally over the next several quarters?

Yes, the second phase, it was a two-phase project; it's 64-acres altogether of greenhouses.

The first 32 acres started harvesting in late October, early November and the second 32-acre phase started in a few weeks ago and so you should start seeing benefit from all 64 starting really more in our fourth quarter.

You'll see some, a slight pick up in the third quarter but the lion's share, or the largest quarter for this year at least, will be in our fourth quarter, Tony.

Okay.

So a step up, third quarter will be bigger than the second, fourth quarter bigger than the third.

I'd say the third quarter will be close to the second.

I don't think you're going to see the full impact.

Where you're really going to see it is when you get into the fourth quarter because the problem with the current quarter is you are really not getting any production out of Canada right now, whereas when you get to the fourth quarter, not only will you have the US fully online but you'll have Canada online also.

Would that business be seasonal or--

Well they can't grow during the winter months up in Canada because of the lack of sun.

And that was one of the many reasons they came to Santa Maria, California.

Ideal weather and you can grow through the winter months, Tony so you get -- now they will have all the benefits of California and Canada in the fourth quarter.

Got it.

Okay, thank you.

Thank you, Tony.

Thank you.

Peter Black, Wynnefield Capital.

Good morning, Gary and Greg.

How you doing?

Good morning.

Good.

Just two questions.

I'm just wondering if you could reconcile the 10% revenue growth that you saw at, now I'm forgetting the name of the --

Lifecore?

Lifecore, yes, with the statement that you saw less overhead absorption.

I guess I would intuitively expect that if your revenues are growing, you would absorb your fixed costs so just wondering if you could explain that.

Well, simply they had inventory coming into the end of the year and as a result if you look at their FY year-end 10 versus FY year-end 11, they grew out inventory by about $1.6 million.

Well, then a lot of that inventory was used in the first half of this year, so you didn't require the production needs during the first half but you will need them in the second half.

And we spread our overhead evenly over the year so if production shifts from one quarter or one half to the other half, then your overhead absorption will be lower in one half and higher in the next but over the course of the year we should fully absorb our overhead.

And Peter just not to get too lost in the quarters, they're having a good year and we're expecting them to hit their plan this year.

Okay, that makes sense and then you referenced it in the Q & A that you put together with the press release about the, I guess, a little bit slower than expected uptake in the avocado business.

Could you -- does that have anything to do with potentially higher price points than consumers are willing to pay?

Or are there still wrinkles in the distribution or sourcing of avocados that Chiquita has to work through.

2 things.

1 is they really beefed up their inventory prior to launch and so they really had a lot of inventory to start with and so they're working off the inventory so that's one factor.

And the other is and this is a little bit of conjecture on our part, Peter.

We don't have the interview in detail, but I still think they haven't quite lined up all the year round sourcing with fixed contracts that assure them of competitive pricing on the sourcing side, so I think it's a combination.

And third, I think they're working to find out how to communicate the value of the technology.

It's how do you explain and express the technology component to a consumer when it's a 10-pound bag and it's opened up in the back room and then placed out on display.

So there's a variety of things they're working on from the sourcing point of view, looking at other types of packaging formats that will help them and obviously they're working off their inventory.

So I think it's a combination of those three things.

Okay, great.

Thank you very much.

Thank you, Peter.

Appreciate it.

Thank you.

Morris Ajzenman, Griffin Securities.

Good morning, Morris.

Hi, hi guys.

I just need a little more clarity following up on Lifecore and, again, the numbers that are surfacing here.

Just getting a little confused here.

In one of your earlier statements in the presentation, I think you said your targeted gross margins from Lifecore are 50%, and then I'm looking at the most recent quarter, gross margins were 57%.

Now that is down from 64.3% a year ago in the same quarter, but yet you talked about insufficient overhead absorption and that improves into the second half.

But if we were at 57% gross margin in the most recent quarter, you targeted 50%, I'm not sure what that plays out into the third and fourth fiscal quarters.

Well, there's a pretty big mix change between -- at Lifecore, Morris, between the first and the fourth quarter and the second and the third quarter.

The second and the third quarter are historically -- and this year is going to end up being true to history -- are their high margin quarters, where you can recognize margins in the 57% range.

Whereas the first and fourth quarters, because of mix, are typically lower margin quarters.

If you look at it on a year-to-date basis, their margins are about 49% and we expect it to be slightly higher in the second half, maybe low 50s, so that the average for the year is 50%.

It all has to do with mix.

Okay, and then switching gears here, cash flow in the first half, there was a use of cash flow, share repurchase, talking about purchase of equipment.

How does it fare to the second half?

Should we foresee a major reversal in that we start generating cash again?

Oh, yes.

You'll see a very large increase in cash in the second half compared to the first half.

Specifically because the second quarter is a heavy quarter for the shipments of product late in the quarter, hence the reason receivables are up.

We advance to growers quite a bit during the second quarter because that's the winter months leading up to December, January, and February.

So it's a big cash usage quarter and, therefore, it drags down the first half of the year.

Whereas the second half of the year, not only do you get your moneys back from your advances, you collect your receivables, but in this particular year, we collected our $4 million from Monsanto slightly after the end of the quarter so that's obviously going to benefit the second half also.

Okay.

And CapEx about $6 million or so for this fiscal year?

Yes.

Okay, thank you.

Thank you, Morris.

Thank you.

Chris Krueger, Northland Capital Markets.

Good morning, Chris.

Hi.

You indicated that at least in the current quarter or recent weeks or something like that that you've seen some growth return to your tray business.

When was the last time you had a full quarter of positive growth for the tray business?

A couple years.

Maybe 2008?

Its been at least two years, Chris and it's a long time in coming and I can't tell you that this return to growth is sustainable.

Let's see after a few quarters.

But it's been a long time.

September 2008 was the last quarter.

2008, okay.

In your core Apio fresh veggie business you're outperforming the market again.

Has there been new distribution gains or new changes you've entered or what do you think is driving that?

I think it's a combination of we've launched some new products, we're the innovators in the industry and we've also picked up a couple of new accounts and that combination is material for us.

And there's an overall theme here if it's not clear enough and that is we're really hunkering down and focusing on our core businesses because we believe in those.

They're in our control and that's where we're making our investments and we're really good operators.

We're close to our customers, and so you'll be hearing much more about our core businesses and less about trying to pursue some licensing deal that's not really central to what we're really trying to do.

We might do those occasionally but our core businesses are what we believe in and they're starting to, without the adverse weather -- by the way last year would have been a very good year as well except for the weather, so we have the good fortune of good weather, as well as performing well, so that's what's going on.

New products and we mentioned that in the spring we'll start launching a plethora of new products in our value-added food business.

Okay, last question.

In your Windset investment, I know you indicated in your press release that in the early months that it's meeting expectations, but can you talk a little bit about actual yields versus what the Windset guys, maybe, have experienced in the past and what they're seeing so far?

We can't -- let's just say that we're very pleased with how things are going.

We don't want to be talking about that level of detail if you can understand.

But let's just say that it looks like the combination of their siting of their 3 million square feet of hydroponic greenhouse space in Santa Maria, California -- that was a real good location --combined with their knowledge, operating knowledge of how to do this using technology and experience is really paying off.

And let me just say without talking about yields that it's going very well, but I think it's too early to declare much of anything.

A quarter doesn't make the whole story complete, so we'll keep you apprised on that but so far, we're really pleased and so are they.

Okay, very good, thank you.

Thank you, Chris.

Thank you.

Warrick Jervis, Trailhead Asset Management.

Good morning.

Good morning.

Congratulations on a good quarter.

Wonder if you can give us a little bit of an update of what's going on with the Air Products lines and what we should expect there?

Slow, and frankly, disappointing for us.

They are working to expand the product lines.

There was a launch of a new product platform that we developed with them and for them at the Milan Cosmetic Show in April.

It takes a year -- and they're very excited about this platform.

It takes a year or two for that to work through the toxicology and acceptance phase of the cosmetic companies.

It's a nice business for us.

We get 40% of the gross profits but it's just, frankly, not hugely material for us and while we're in over 50 products, we need to be in hundreds of products.

So we're hoping for better, but I wouldn't want to mislead you in telling you that that's going to change any time soon.

Okay, thank you.

Any update on the pharmaceuticals?

Well, we have a couple of initiatives in the drug delivery area and it looks as though our HA materials may be used by a significant customer, or emerging significant customer, as a complementary material in the delivery of a drug.

We're looking at another drug program where hyaluronic acid or HA, our Lifecore materials, might be a different shading drug as an adjuvant therapy.

We're also talking to people about using our Intelimer materials as a delivery system.

So you have to be a little patient on this one, but it's an area of great interest to us and it's in our R&D priority list.

Okay, thanks very much.

Thank you.

Thank you.

Michael Needleman, Preservation Asset Management.

Good morning, Michael.

Hi, good morning.

Thank you for taking the question here.

A couple of questions.

If you could help me out a little bit, in your prepared announcement, you talk about that the first half you see almost two-thirds of the revenue from the export being received.

Did you experience that same two-thirds last year in your export business?

Yes, that's a historical average, Michael.

We have more fruit and produce to export in the first half of the year than you do--

So apples-to-apples you experience that basically [year-end] basis correct?

Yes, it could be as high as 70/30 but two-thirds, one-third, I think if you went back 10 years and averaged it I think that would be a pretty good number.

And I understand the mix from the standpoint of the Lifecore area, but I don't understand the absorption and maybe you can help me out.

Currently what are you guys running as far as capacity utilization and what do you think that's going to be if you had the inventory?

What do you think that's going to be in the second half?

Well, the overall in the course of the year we're probably around 50% capacity.

There's obviously room to grow there.

Do I have those exact percentages?

No, as to make a guesstimate at this point is probably 40/60 first half to second half because we did have some inventory that carried over from last year.

And just so that I have an understanding of the mix, when you refer to the mix of the margins being significantly lower in the second and third quarters, where are those products going versus first and fourth quarter?

Okay, in the first and fourth quarter, the majority of our sales are for the aseptic filling products which is where we actually make the HA.

We fill it in a syringe, we sell the syringe.

Okay.

That particular product or products is going to absorb most all your overhead and most of all your labor.

Whereas during the third and -- the second and third quarters, the mix shifts more to selling just the powder and the powder is just a fermentation process, -- requires very little labor, requires very little overhead, and therefore, their margins are more in the 75% to 80% range whereas the aseptic filling is more in the 30% to 35% range and that's why you have the big swing in mix.

But you're getting a higher price for the, I guess, the more heavily detailed product; is that correct on the revenue basis?

Yes, well it's kind of almost apples and oranges because in one case you're selling the full finished product and other case you're selling a raw material really.

Because your customer is then going to take that powder, convert it into a liquid and do their own filling on their end, so it's kind of hard to say, it's kind of hard to compare the prices but yes.

In general, what you were saying is correct.

One last question.

In terms of the tray business you talked about, does that have a higher margin than the bag business?

Yes.

Slightly.

Okay, thank you so much, gentlemen.

Thanks, Michael.

Thank you.

WIll Lauber, Sterling Capital Management.

Good morning, Will.

Good morning.

On Apio, kind of reading between the lines in your release, can I assume that you guys are starting to see some margin pressure or -- you said one of the goals I think was to maintain the margins.

Can you talk about pricing?

Oh, we're not starting to see margin pressure.

We've had it ever since October 2008 when the great recession started, Will.

And consumers were really squeezed and therefore, buyers were squeezing suppliers, et cetera, et cetera, so don't read anything new here.

It's out there.

It's in the food world.

It's fairly competitive.

We differentiate ourselves with technology and good customer service and product quality and those things, so don't read anything in there that's new.

But, overall, business wise, our strategy and our management team's focus is on increasing overall margins for Landec as a consolidated Company and that means we've got to launch new products that have higher margins than the old products and we've got to change our business mix just as we did with Lifecore when we bought them.

You may recall they raised our overall gross margin 320 basis points last year, even though they were only 10% of our revenues, so our focus is on improving margins overall as a Company.

So there's nothing -- there's no new competitive pressures or new (inaudible - technical difficulty) in the food business that are any different than what we've seen in the last few years in terms of margin pressure.

And when did you guys receive the Monsanto payment?

Was that in December?

December 1.

December 1, so that will show up in the next reported quarter?

Yes, yes.

Okay.

Any update on the Clearly Fresh Bags?

No.

It's in retail trials in Texas and we're letting it run for a while and see how it goes.

Okay, and I think you gave the information, I could probably figure it out, but if you have it handy, Greg, what is the average buyback price?

I'd have to do the math.

It's $4.8 million and [880,000], so what is it, about $5.45, something like that?

Yes, that's about right, Will.

Okay, how much authorization is still left?

Let's see.

We've got about $3.8 million to go of the $10 million.

I did the math.

It's $5.45 exactly.

Okay.

I guess kind of a longer term question.

I don't know if I'm reading between the lines, but you guys have, I think with your stock price I'm getting the impression that you guys think that the Apio business alone is worth what your stock is trading right now.

And I'm wondering is that something that you look at?

And when I look back over these past couple years, I think the one thing where you guys would definitely get an A in is the Lifecore and it looks like this Windset Farms is a good deal as well.

Maybe getting rid of that Apio business you won't have to worry about the weather.

Does that make sense for the shareholders if you do believe that the Apio business alone is worth the stock price now?

It's a fair question, Will, and then pre-Lifecore, we didn't have that luxury of even having that conversation.

Post-Lifecore you can have that conversation.

We do have that conversation.

As we do, we're interested how do we increase shareholder value, so if that is one way of doing it, you can bet that we're talking about it.

But there are other ways that we see increasing shareholder value and so we're considering --we consider it all.

So would you, you believe this is worth pretty much what your stock price is alone?

I do, yes.

Okay.

Thank you.

Thank you, Will.

Thank you.

Rick Fetterman, Fetterman Investments.

Good morning, Rick.

Good morning.

My question was asked and answered earlier.

Thank you very much.

Okay, thank you.

Thank you.

(Operator Instructions) Peter Black, Wynnefield Capital.

Hi.

I'm just wondering, how do you, from an accounting perspective, calculate the fair value of the Windset investment from quarter to quarter?

Well, from the end of last year, there's a formula that we negotiated as part of the agreement that is the formula that will be used in 6 years if we put it to them or they call it.

We determine, at least for the time being, and this is based on a third party appraisal, that that formula approximated fair market value.

So we've been using that formula at least for the first two quarters of this year.

We will be doing an annual appraisal, which is basically a discounted cash flow analysis which is using their five-year plan, obviously applying a discount to that plan, comparing it to other market participants out there, and that's really how we do it right now is to use that formula.

And as long as that formula continues to approximate fair market value based on annual appraisals, we'll continue to use that formula.

If it ever diverges, then it's a matter of sitting down with Ernst & Young and figuring out how do you do it on a quarterly basis without getting quarterly appraisals, and there yet, so far, the formula is fair market value.

Got it.

Thanks a lot.

Okay, Bye.

Thank you.

Nelson Obus, from Wynnefield Capital.

Thank you.

My question was answered, thanks.

Warrick Jervis, Trailhead Asset Management.

Can you refresh me on what the size of the buyback authorization is?

$10 million.

Okay.

And is there a certain level of cash that you intend to keep available for additional acquisitions?

Or are you going to just continue to buy back shares going forward here?

Fair question and we're not at the $10 million level but we are not in the business of just buying back stock.

There's just a point when you feel like your share price is not properly valued and so you have this type of plan.

But we want to preserve most of our cash for investments in our current core businesses and we are actively and selectively looking for further acquisitions.

If we could find another Lifecore or another investment like we just did with Windset, we would pursue that aggressively.

And we have had a history of finding companies that we acquired and have integrated into our Company successfully, and there aren't a lot of companies that know how to do that and we're very picky.

And so to answer your question, we want the vast majority of any cash that we are generating or cash that we already have to be available for existing investment businesses and future acquisitions, that's our focus.

Okay, great.

Thank you.

Thank you.

(Operator Instructions) And I'm not showing any further questions at this time.

I'd like to turn the program back to Management for any further remarks.

Well we appreciate your being with us today.

Thank you for taking your time to hear the updates on Landec and we look forward to keeping you posted on our progress.

Many thanks.

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

This does conclude the program.

You may now disconnect.

Good day.