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Executives

Gary Steele – CEO

Greg Skinner – CFO

Analysts

Morris Ajzenman – Griffin Securities

Daniel Rizzo – Sidoti & Company

Brent Rystrom – Feltl & Company

Rob Schwartz – Cooper Creek Partners

Landec Corporation (LNDC) F4Q13 Earnings Call August 1, 2013 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the Landec Fourth Quarter and Fiscal Year-End 2013 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 be given at that time. (Operator Instructions) As a reminder, today’s 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.

Gary Steele

Good morning, and thank you for joining Landec’s fourth quarter and fiscal year-end 2013 earnings call. I have with me today, Greg Skinner, our Chief Financial Officer. This call is being webcast by NASDAQ OMX, and can be accessed at Landec’s website at www.landec.com on our Investor Relations page.

The webcast will be available for 30 days through August 31, 2013. A replay of the teleconference will be available for one week until midnight Eastern Time, Thursday, August 8, 2013 by calling 888-266-2081 or 703-925-2533. The access code for the replay is 1617672.

During today’s call, we may make forward-looking statements that involve certain risks and uncertainties that cause actual results to differ materially. These risks are outlined in our filings with the Securities and Exchange Commission, including the company’s Form 10-K for fiscal year 2012.

Fiscal year 2013 was an outstanding year for Landec. Our focus on Landec’s two core businesses is paying off. For the year, we achieved record revenues, which grew 39% to $442 million. And before incurring the earn-out adjustments, net income grew 47% to $18.7 million, and earnings per share grew 43% to $0.70 per share.

Both our food and biomedical materials businesses delivered strong revenues and earnings, while continuing to advance market share and leadership in their respective markets, positioning Landec well for future growth, providing products in the growing healthy living space.

Apio delivered total revenues for the fiscal year that grew 43% to $399 million along with pre-tax income that increased 34% to $26.6 million, before including the earn-out adjustment. Apio’s value-added food business revenues, including the benefit of acquiring GreenLine in April 2012, increased 54% to $320 million. The contribution to Apio’s net income from the Windset investment increased 33% to $9.2 million.

Our Lifecore Biomedical business delivered revenues for the fiscal year that grew 20% to $41 million, and pre-tax income that grew 23% to $9.4 million. Highlights of this important operational year includes: first, generating $1.8 million in operational savings by integrating GreenLine Foods into our Apio food business; second, launching our first product in our vegetable salad product line, and this first product, we call Sweet Kale Salad and this product and other soon will be available nationwide, and in Canada.

Third, adding several new food customers as part of our cross-selling effort between GreenLine and Apio customers; and fourth, adding significant sterile filling capacity at Lifecore Biomedical to support existing and new customers which allows us to move up the value-added chain for supplying HA injectable products, as well as non-HA products. And firth, continuing to support new initiatives at Windset farms where we own 20% of the company, which includes the doubling of their California hydroponic greenhouse capacity from three million square-feet to six million square-feet. All in all, a very good year.

Let me turn it over to Greg for financial details.

Greg Skinner

Thank you, Gary, and good morning everyone. In yesterday’s new release, Landec reported that for the fourth quarter of fiscal year 2013, revenues increased 30% to $107.1 million, compared to revenues of $82.6 million for the fourth quarter of last year. The $24.5 million increase in revenues for the fourth quarter of this year compared to fourth quarter of last year was primarily due to: first, a $15.7 million increase in revenues from GreenLine, which was acquired by Apio in April 2012; second, a $9.7 million increase in revenues in Apio’s non-GreenLine value-added businesses, which includes the Apio fresh-cut specialty packaged vegetable business, Apio Cooling and Apio Packaging; and third, $1.4 million increase in revenues at Lifecore, due to an increase in sales to existing customers.

The fourth quarter growth of $9.7 million in Apio’s value-added non-GreenLine businesses was due to continuing market share gains, which resulted in a 15% increase in sales volumes compared to the prior year quarter from new product offerings, new distribution gains, and an overall growth in the fresh-cut vegetable category of 9.6%.

These increases in revenue in the fourth quarter were partially offset by a $1.8 million decrease in revenues in Apio’s export business due to a decrease in volume sales and from a $528,000 decrease in corporate licensing revenue.

For the fourth quarter, net income increased 63% to $4.5 million or $0.17 per diluted share, compared to net income of $2.8 million or $0.11 per share for the fourth quarter of last year. The $1.7 million increase in net income during the fourth quarter of fiscal year 2013 compared to the fourth quarter of last year was due to: first, a $1.9 million increase in pre-tax income from Apio’s non-GreenLine businesses; second, $1.4 million of operating expenses associated with the acquisition of GreenLine that incurred during last year’s fourth quarter; third, a $700,000 increase in the fair market value of our investment in Windset; and fourth, a $543,000 increase in pre-tax income at Lifecore.

These increases in net income in the fourth quarter were partially offset by $2.6 million decrease in pre-tax income in Apio’s GreenLine business, due to significant green bean sourcing issues during the fourth quarter compared to the year ago fourth quarter when Apio owned the GreenLine business for only five weeks.

For fiscal year 2013, revenues increased 39% to $441.7 million versus revenues of $317.6 million for the same period a year ago. The $124.1 million increase in revenues in fiscal year 2013 compared to fiscal year 2012 results primarily from: first, an $85.8 million increase in revenues from GreenLine; second, a $27 million increase in revenue Apio’s non-GreenLine value-added businesses; third, a $7.1 million increase in Apio’s export revenues due to favorable pricing and mix changes; and fourth, a $7 million increase in revenues at Lifecore due primarily to FDA product approvals and increased sales to existing customers.

The $27 million fiscal year growth in Apio’s non-GreenLine valued-added businesses was due to continuing market share gains which resulted in a year-over-year 15% increase in sales volumes from new product offerings, new distribution gains and an overall growth in fresh-cut vegetable category at 10.6%. These increases in revenues were partially offset by $2.8 million decrease in corporate revenues, primarily due to the termination of the Monsanto licensing agreement at the end of second quarter of fiscal year 2012.

For fiscal year 2013, overall net income increased $9.9 million or 78% to $22.6 million or $0.85 per share, compared to net income of $12.7 million or $0.49 per share for the same period last year. The $9.9 million increase in net income in fiscal year 2013 compared to last year was primarily due to a $10.8 million increase in Apio’s pre-tax income, and a $1.7 million increase in Lifecore’s pre-tax income, as a result of increased revenues.

The $12.5 million net increase in pre-tax income for Apio and Lifecore was partially offset by $2.3 million increase in our income tax expense, and a $342,000 increase in the pre-tax loss at corporate.

The $10.8 million increase in Apio’s pre-tax income was comprised of: first, a $6.1 million increase in pre-tax income from GreenLine; second, a $2.3 million increase in the fair market value in our investment in Windset, compared to the increase in Windset’s fair market value during fiscal year 2012; and third, a $3.9 million non-recurring reversal of the GreenLine earn-out liability at the end of the second quarter. These increases in Apio’s pre-tax income are partially offset by a $1.7 million of interest expense associated with the debt incurred to fund the acquisition of GreenLine. Excluding the $3.9 million earn-out adjustment in fiscal year 2013, net income increased 47% to $18.7 million or $0.70 per diluted share, compared to fiscal year 2012.

Landec ended fiscal year 2013 with $15.3 million in cash and marketable securities. During fiscal year 2013, cash and marketable securities decreased by $6.9 million due primarily to: first capital expenditures of $8.9 million for property, plant and equipment; second, principal debt payments of $14.7 million; and third, the full earn-out payment of $10.0 million related to the acquisition of Lifecore.

These decreases were partially offset by: first, $21.2 million in combined cash flow from operations and dividends from Windset; second, a $1.3 million tax benefit from stock based compensation; and third, $3.4 million in cash from employees exercising stock options.

At May 26, 2013, the Company had approximately $22 million available to borrow under its lines of credit. Working capital at fiscal year-end 2013 was $34.9 million, a 141% increase compared to $14.5 million at the end of fiscal year 2013. Gary?

Gary Steele

Yes, thanks Greg. Looking ahead through products and process innovation and development, we will continue to support and advance the market leadership positions of our two core businesses; our Apio food business, and our Lifecore Biomedical business.

In addition, we will be addressing two major challenges in our food business. The first challenge is that more adverse weather seems to be occurring in North America. Weather events in the last several years point to the possibility of more severe and adverse weather regardless of the cause. Since we source most of our produce under third-party fixed price contracts, we do suffer when there are severe shortages of produce.

We will work to mitigate these events by further broadening our geographic diversification which we’re doing right now, and increasing our mix of produce categories, not to be reliant on just a few but many more, and modifying our grower contracting approach where necessary.

Longer term, we’re exploring avenues to benefit from our partnership with Windset Farms which we believe is the market and innovation leader in year around hydroponic greenhouse growing approach.

The second challenge is that we can see continued consolidation in our customer base of retail grocery chains, you can read about this. The consolidation presents challenges when ownerships change, but at the same time they can open up opportunities to continue to allow us to take further market share gains.

Our fiscal year 2014 guidance is detailed in our press release. Highlights are that, we anticipate growth in both earnings and revenues. Our long-term goal is to generate average annual revenue growth of 10% a year and average annual net income growth of 20% a year over a five-year period.

In the fiscal year 2014, we expect our Apio value-added specialty packaged products business revenues to grow approximately 10% year-over-year due continued – due to the continued innovations and introductions of new products and further cross-selling between Apio and GreenLine customers. However, we expect Apio’s overall revenue growth to be dampened somewhat by the decrease in revenues in our export business of approximately 10% due to new import quotas recently enacted by Indonesia.

Importantly, earnings from Indonesia exports should remain approximately the same as the more restricted exports to Indonesia are expected to have higher margins.

At Lifecore for fiscal year 2014, we expect double-digit, approximately 10% to 15% revenue growth, as we roll out more products with customers, and as we expand into new funded product development partnerships.

And lastly, we expect to benefit from Windset’s doubling of its California, Santa Maria hydroponic greenhouse production facilities which begins with its first harvest this late fall, several months ahead of schedule.

Looking in our financial position, we expect cash flow from operations to be approximately $30 million to $35 million due to growth in earnings, an increase of 50% to 75% year-over-year. In addition, we plan to spend approximately $13 million to $15 million in capital expenditures in order to expand our capacity both in Apio in Santa Maria, California and at Lifecore up in Chaska, Minnesota in order to meet current and future demand.

We’re also reconfiguring our operations in Bowling Green, Ohio. Our charter is clear. We want to develop and commercialize new products for the healthy living applications in the food and biomedical materials markets. We want to bring healthy nutritious specially packaged fresh-cut produce products to consumers in North America.

We believe healthy eating leads to healthy living. We also want to do our part to enable people to enjoy a higher quality of life as they age. Our polymer-based Lifecore injectable biomedical materials for ophthalmic and orthopedic markets enable people to stay more active as they age. We plan to leverage our leadership positions and provide improved products to meet the increasing demand and opportunities generated by the robust growth in healthy living markets.

We look forward to another good year. And we are ready for your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Morris Ajzenman from Griffin Securities. Your question please.

Morris Ajzenman – Griffin Securities

Hi Gary, hi Greg.

Gary Steele

Hi Morris.

Greg Skinner

Hi Morris.

Morris Ajzenman – Griffin Securities

Just a couple of one-off things. In the most recent quarter, SG&A, maybe you can kind of talk about that $6.3 million, down sequentially materially and down year-over-year? And then clearly ahead I guess a step-up in the recognition of new investments in Windset. I guess more than what we might have thought in this current quarter. And then I guess on the other side, I guess offsetting that to some extent, I don’t know how you can kind of talk about this or frame this, but you talked about higher sourcing costs $3.5 [ph] million this quarter from GreenLine specifically weather related. You said weather going forward, adverse weather continuing, what should we kind of model – what should be an adverse weather expense – should be (inaudible) $3 million a quarter, do you guys incrementally see it could be less than that. And again let’s go back touch on the SG&A and the Windset increase in the fair market value in the quarter?

Greg Skinner

All right, let me take them one at a time. SG&A – this is Greg. Well unfortunately, we put together plans where they are aggressive for management in order to achieve their bonuses, and the goals were not met this year. As a result, we reversed the bonus that had been being accrued through the first three quarters of the year during the fourth quarter and that is the primary reason for the year-over-year decrease in sales in our SG&A, because last year bonus was paid and this year was not.

Secondly on Windset, they continue to expand, increase their profits. And as that occurs, we recognized 20% in the increase in their market value. And it continues to go up. And we expect it to go up next year, 35% to 40%. In fact, it’s part of our guidance. So with the addition of three and four we feel pretty – phases three and four, which is another 64 acres, we feel pretty confident in those projections for next year.

And lastly on the sourcing front, we’re doing everything possible that we can to geographically disperse where we got our produce from, but at the end of the day at certain times of the year, specifically the winter months and that’s what normally heads this. Now this year was unusual that they had a freeze in Florida in March that affected the fourth quarter, but typically from a – how you plan it out basis, and this part of our guidance, so when we put into our guidance, this is what we think our quarterlies are going to turn out to be. We factored into that guidance what we believe are reasonable contingencies for sourcing issues. You can’t predict the weather. Hopefully that answers your question.

Morris Ajzenman – Griffin Securities

Thanks. It does. Thank you.

Operator

Thank you. Our next question comes from the line of Daniel Rizzo from Sidoti & Company. Your question please.

Gary Steele

Yes, hi Dan.

Greg Skinner

Hi Dan.

Daniel Rizzo – Sidoti & Company

Hi guys, how are you doing?

Gary Steele

Good.

Daniel Rizzo – Sidoti & Company

The new products that you are introducing, the new salads. Are they all going to be roughly the same size in terms of sales, or was like the first one bigger than the rest, or is it something we think looking to sustain?

Gary Steele

Well I don’t think realistically. The Sweet Kale Salad was just hit it out of the ballpark kind of first introductory product. We did a lot of market research. We hired culinary experts. We had nutritionists involved. We really fought this one through, and we also I think got good fortune in that. There is a health binge in the country right now, and Kale is on the list of lot of people. And years ago, you wouldn’t even know how to spell Kale.

And so I think it’s an unusually successful product, Dan. And I wouldn’t – I think it’d be unreasonable to assume that we’re just going to keep hitting grand slam homeruns. I think we’ll be hitting singles and doubles and occasionally hit a triple and might even get lucky with a another big one, but we don’t expect a repeat of Sweet Kale Salad. That is what I would advise, but expect a family of products that collectively or what we’re doing is we’re creating a new category. We’re creating a category that no one has before which is to create vegetable based salads, meaning we’re not using baby lettuce and romaine salads and things, but that we’re not going into the south, the leaf lettuce where we’re staying with vegetables and mixtures that are in a salad format and that are extremely healthy and have – and they are all loaded with super foods.

And I think that category can really growth. So collectively, I think our new products will be very robust.

Daniel Rizzo – Sidoti & Company

Okay. And then the new products with Lifecore, the ones that are in the clinical trials and ones that are commercialized already. Is that all focused on ophthalmology or I mean you’re moving into I think HAs for joints. Is it – does it all focus on ophthalmology?

Gary Steele

Yes, the near-term new products are ophthalmology based, that’s our sweet spot, that’s our – where our channels of distribution are extremely strong, our customer relationships are strong, the margins are very attractive, etcetera, etcetera. Longer term, we are entertaining and beginning to work with development partners where they provide us with development funding. And a number of these programs are outside of ophthalmology but that’s longer term, Dan.

Daniel Rizzo – Sidoti & Company

Okay. And then last question. With the expansion of Windset Farms, is that also – would that be a different vegetable or is that going to be more tomatoes?

Gary Steele

The mix is going to change. Had they stated?

Greg Skinner

Not to my knowledge.

Gary Steele

They have not stated publicly what those mixtures are, but it will involve tomatoes plus other things.

Daniel Rizzo – Sidoti & Company

Okay. All right, thank you guys.

Gary Steele

And just so you know, as a company their main product lines are in the tomato family, the high-end tomatoes the grapes, the (inaudible) the romas, the cherries, those kind of things, and they’re also strong in peppers and they’re also strong in cucumbers.

Daniel Rizzo – Sidoti & Company

Okay, all right. Thank you.

Gary Steele

You’re welcome.

Operator

Thank you. Our next question comes from the line of Brent Rystrom from Feltl. Your question please.

Gary Steele

Hi Brent.

Brent Rystrom – Feltl & Company

Hi good morning.

Gary Steele

Good morning.

Greg Skinner

Good morning.

Brent Rystrom – Feltl & Company

Thank you. Couple of quick questions. Follow-up on that last comment about the cucumbers and tomatoes. Are the revenue and profitability going to be similar on those relative to tomatoes as those layer into the expansion?

Greg Skinner

Could you (inaudible).

Gary Steele

Is the profitability and margins for cucumbers and peppers comparable to tomatoes?

Greg Skinner

Yes, actually, slightly higher.

Brent Rystrom – Feltl & Company

All right. And then from a simplistic perspective, I am hearing from a couple of retailers particularly here in the Midwest and the Northeast that late point [ph] is hitting a lot of field grown tomatoes here in the Midwest and East, also during the frost in Canada May 29, hit (inaudible) and so there is some pricing pressure higher. Are you guys seeing that?

Gary Steele

I have to confess and Greg will confess, we don’t know. It may happen, we’re just not aware of that, but the beauty of their approach as you will now and as you – you’re talking about the – there was some real bad weather up in the Leamington, Ontario area.

Brent Rystrom – Feltl & Company

Exactly the May 29 frost that wiped out about 20% of the crop.

Gary Steele

Yes, I mean – and so anyway to make a long story short, they are immune to that. The weather in Santa Maria, California is very stable, good sunlight, good heat units year around. And so as those things do occur and I am sorry, we just don’t know if the pricing pressures are moving up quite yet, they are going to be in great shape, absolutely in great shape.

And let me remind you that with this – with our second phase, what they call, phase three and four, we’ll just call it the next three million square-feet, they’re ahead of us by couple of months. And if they can catch some volumes – some new volume, incremental volume during the winter months, that’s a real plus because that is generally the highest priced highest margin season for them.

Brent Rystrom – Feltl & Company

And they do have it – what we call and OND season, that October, November, December, where parties and other holiday things kind of lift prices and margin as well seasonally?

Greg Skinner

Well I don’t know if it’s specifically related to that, but there is no doubt that what they – from a pricing standpoint, margin standpoint, it goes up to the winter because you’re not really competing against field tomatoes any more, other than those that are coming up from Mexico.

Gary Steele

Well and some out of park [ph], but we know the supply and demand situations much better winter months prices go up. So that’s been historically true. From the (inaudible) sweet spot is, if they can have more square footage, more acreage for these winter months, it will be a real benefit for them.

Brent Rystrom – Feltl & Company

And my final question would be, can you give us a sense on Apio and Lifecore? How does the bulb glow throughout the year? You view it as fairly stable growth rates for both businesses or will be – there would be better or worse quarters?

Greg Skinner

Well there is going to be some seasonality, there is no double about it. If you look at – I think in Q&A too, in our press release we kind of laid out by quarter what we thought the revenues would be and the profits. Just as a reminder about three quarters of our revenues in our export business, occurs in the first six months of our fiscal year, and only 25% in the last six months. That’s because during the first six months you’ve got the summer and fall, so obviously you have a lot more produce to export.

In the Lifecore business, their biggest quarter from a revenue and profit standpoint is going to be the third quarter, which is similar to last year and that’s because that’s when they ship the lion’s share of their powder sales for the year, occur during the third quarter and that is their very high margin product. And that’s where you see the SKU where we say our breakout for the year is 29% in the first quartet, then 21% in the second, jumping to 31% in the third, that’s the Lifecore effect, and then 19% in the fourth.

The big increase in the first quarter is when – because we expect that the lion’s share of the increase in our fair market value next year for Windset will occur in the first quarter.

Brent Rystrom – Feltl & Company

Thank you very much.

Gary Steele

You’re welcome.

Operator

Thank you. Our next question comes from the line of Rob Schwartz from CCP. Your question please.

Rob Schwartz – Cooper Creek Partners

Hi guys, how are you? I just had a quick two part question. It looks to me like over the past year or so, the tax rate was about 36.5% and this quarter it was 20.9%. So what resulted in that change? And then if I look at the core business ex the tax rate benefit and the bonus accrual reversal, it looks like the quarter was about a $0.11 not $0.17. So I just want to what – what’s in the core business, where that shortfall came from?

Greg Skinner

Well the $3.9 million was actually recorded – what was it? Last quarter or the – at the end of the second quarter. So that did not impact our fourth quarter at all. So the fourth quarter is just based on operations.

Rob Schwartz – Cooper Creek Partners

No, I’m sorry. You misunderstand. I am talking about the bonus accrual that resulted in an much lower corporate SG&A.

Greg Skinner

Yes. So that was about probably made in our reversal in the fourth quarter, and hence the change year-over-year about $1 million. The tax decrease for the year in comparison to the prior year, the combination of the $3.9 million is not tax affected because it’s a goodwill type of item. So it was never tax affected to begin with. So the reversal was not tax affected. So that has a big impact on your effective tax rate, is it’s sitting in your income and you are not have to tax provision against it.

Secondly, we finished our tax returns for GreenLine. We were able to do some state enforcement planning if you will and strategies behind state enforcement of your income and revenues and that reduced our rate. We had quite a bit of employee activity in the fourth quarter, where we had a lot of stock option exercises which is a tax benefit to the company. And then lastly, the R&D credit was renewed and we finished the analysis during the fourth quarter, and it turned out to be better than we originally anticipated.

So all in all, that resulted in a large decrease in the fourth quarter. However, we expect going forward that this was a onetime pick up, a nice benefit that resulted in us overpaying taxes to the tune of $5 million, which will benefit us next year, but next year we should be back at the 37% rate that we’ve been at for the last few years.

Rob Schwartz – Cooper Creek Partners

Right. I guess sort of what I am asking – that’s great, that’s great tax planning, but it seems like before the quarter started, you didn’t know that the tax rate was going to be this beneficial. You didn’t know how much about the million dollar bonus accrual add-back. So something – I’m just trying to understand what part of the core business was materially worse than you saw? Was it weather-related beans or broccoli or?

Gary Steele

Sourcing. We had – so sourcing shortages in the fourth quarter was green beans.

Rob Schwartz – Cooper Creek Partners

Right. Is that the right – I mean so the core business now as we look forward to next year into the model, from core operations ex these tax benefits, is that $0.11 sort of the right number?

Greg Skinner

For the fourth quarter of this year?

Rob Schwartz – Cooper Creek Partners

Right. Ex the tax benefit in the bonus accrual add-back?

Greg Skinner

I haven’t done the math, but if you’ve done it then I can’t argue that. There is no doubt our margins were down during the quarter as a result of sourcing, so I mean you could go the opposite way and say well if we didn’t have the $3.5 million green beans hit for the quarter, then we would have been up $0.10 more.

Rob Schwartz – Cooper Creek Partners

Right.

Greg Skinner

So it depends on if the glass is half empty or half full.

Rob Schwartz – Cooper Creek Partners

Right. Okay. And last question just with that green bean issue that hit your fourth quarter, how is weather so far this quarter and...

Gary Steele

Mixed. You probably have been following the heavy rains that came up through the Georgia, South Carolina. First of all, our new year started June 1, so we’re really into this, what, eight weeks, but it’s mixed. California weather is generally okay, you get some heat spells but we have contingency for that. But the green bean side has been mixed so far, but we’re doing okay, I mean nothing catastrophic, but you guys are reading the same papers we are. You got heavy rains, you got heat and etcetera, etcetera and that’s why I made the comments that I did that – there is – there seems to be some climate change issues going on in North America and that’s why we’re diversifying our sourcing regions, that’s why we’re looking at modifying our contract approach, that’s why we’re expanding our product lines, so they were just dependent on broccoli and green beans and things like that.

So we have to be proactive. We have to anticipate this and we do build in contingencies for weather into our planning. It’s just that – it’s mixed. For green beans, it’s been mixed in the first eight weeks.

Rob Schwartz – Cooper Creek Partners

Okay. But you don’t expect any type of hit as dramatic as the Q4 impact from sourcing?

Gary Steele

God willing, yes, you’re right. Yes, yes we don’t.

Rob Schwartz – Cooper Creek Partners

Okay. All right, thanks guys.

Gary Steele

Thank you.

Operator

Thank you. Our next question is a follow-up question from the line of Morris Ajzenman from Griffin Securities. Your question please.

Gary Steele

Hi Morris.

Morris Ajzenman – Griffin Securities

Just curious, how much sourcing – how much do you actually buy from this point from Windset. What percent of your Apio revenues, so what are the (inaudible) you put on that?

Gary Steele

Not material.

Greg Skinner

Very small.

Gary Steele

Very small. It’s not material. Tomatoes for our trays, you’ve seen our trays, Morris, and they use the cherries and the grapes. And on a dollar and poundage basis, it would be very small. We can see that increasing overtime. So – but what you’ll be also seeing is you’ll start to see some Windset products coming out this year that have our BreatheWay technology on them. So we’re very excited about that, and we’ll keep you posted on that. So, but in terms of our purchasing from them tomatoes, it’s pretty small.

Morris Ajzenman – Griffin Securities

Thank you.

Gary Steele

You’re welcome.

Operator

Thank you. (Operator Instructions) And I am not showing any further questions at this time.

Gary Steele

Okay. Well, just want to thank everybody for being on the call today and thank you for your ongoing interest in Landec. We’ll keep you posted on our progress and plans. Many thanks.

Operator

Thank you, ladies and gentlemen for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.

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