Q4 2003 Landec Corporation Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning ladies and gentlemen and welcome to the Landec's new fiscal year end 2003 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. If anyone should require assistance during the call, please press the star then zero key on your touch-tone telephone. If anyone should disconnect and need to rejoin, please dial 1-888-413-4411. 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, President and CEO of Landec. Please go ahead sir.

GARY STEELE, PRESIDENT & CEO, LANDEC CORPORATION: Good morning and thank you for joining Landec's new fiscal year ended May 2003 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.

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 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 2002. Let me also mention that a replay of this call will be available through next Wednesday, August 20th. You can access that call by calling 888-266-2086 or 703-925-2435. The access code is 215634 and the web cast will be available for 30 days via the Internet at www.landec.com.

As previously disclosed, Landec changed its fiscal year end from the last Sunday in October to the last Sunday in May and that is effective as of May 25th, 2003, and therefore fiscal year 2003 is for a seven-month period that began October 28th, 2002 and ended on May 25th, 2003. Since our last earnings conference call in June that reported on our former second quarter, the most important milestone to report is the sale of our domestic commodity vegetable business to a group of Apio growers in exchange for cash, a per carton royalty, and very importantly -- a long term supply commitment. Included in our results for the seven months ended May 25th, 2003 is a charge of $1.1m or the equivalent of $0.05 per share for the write-down of assets previously associated with this business that we just sold. The sale of our domestic commodity vegetable business completes our focusing initiatives in our food business and allows us to concentrate on our high-growth specialty packaged produce products, which we currently sell under our Eat Smart brand. And very soon we would be selling also under the Dole brand. As a result of the sale of the commodity business, we will be more focused, have lower operating risks, especially in winter farming investments and be able to significantly reduce our selling, general and administrative expenses. We have positioned ourselves to increase revenues, profits, and cash flows going forward.

In addition, as announced during our last conference call in June, we have recently entered into an exclusive packaging and marketing agreement with Dole Fresh Vegetables, Inc. for Apio to sell and distribute a line of fresh cut produce under the Dole brand in the United States. This agreement should expand Apio's presence in the fresh-cut vegetable category through the sales and distribution of both the Dole brand and our existing Eat Smart brand. The Dole brand vegetable and party tray lines, which is expected to be introduced next month, will utilize Landec's proprietary Intelimer packaging technology in order to extend shelf life, reduce product shrink, and compensate for temperature fluctuations that may exist through the cold chain.

Now let me turn it over to Greg Skinner, who will comment on the financial results.

GREGORY SKINNER, CFO, LANDEC CORPORATION: Thank you Gary and good morning everyone.

As outlined in yesterday's news release, Landec reported revenues for the seven months ended May 25, 2003 of $112.3m versus revenues of $114.1m for the same period a year ago. The decrease in revenues for the period was due to several reasons. First, revenues from Apio's `fee-for-service` commodity produce business decreased to $12.8m in the seven months ended May 25, 2003 from $15.9m in the same period of fiscal 2002, because of the company's efforts to exit this business, which culminated in its sale in June of 2003. Second, revenues from Apio's export business decreased to $17.9m during the period from $21.6m last year, due to lower sales of fruits and broccoli to Asia. And third, a $1.5m decrease in banana sales from the year-ago period as the company focuses on the upcoming retail market trial. These decreases in revenues were almost completely offset by revenue growth in Apio's value-added vegetable produce business, which increased 15% to $15.4m (ph) during the seven months ended May 25, 2003 from $47.1m in the same …