Menlo Park, California, USA
January 5, 2010
Landec Corporation (Nasdaq:LNDC), today reported results for the second quarter and first half of fiscal year 2010. For the second quarter of fiscal year 2010, revenues increased 5% to $60.9 million versus revenues of $58.0 million in the second quarter of fiscal year 2009. The Company reported net income for both the second quarter of fiscal years 2010 and 2009 of $1.5 million or $0.06 per diluted share.
"We increased revenues and matched net income during the second quarter of fiscal year 2010 compared to the second quarter of fiscal year 2009," stated Gary Steele, Chairman and CEO of Landec. "Importantly, value-added fresh-cut vegetable revenues for Apio, Inc., Landec's food subsidiary, which accounts for 68% of Landec's second quarter revenues, increased $4.4 million, or 12%, during this year's second quarter compared to last year's second quarter. Also during our second quarter we modified our licensing agreement with Monsanto Company. The modified agreement is mutually beneficial and allows Monsanto to focus on specific seed treatment applications for Landec's Intellicoat® technology which are strategically important to Monsanto while giving us the flexibility to pursue on our own, or with other partners, applications of our Intellicoat polymer technology in seed coatings outside of the exclusive field licensed to Monsanto."
The increase in revenues for the second quarter of fiscal year 2010 was due to a $4.4 million increase in revenues from Apio's value-added fresh-cut vegetable business primarily due to an increase in market share. This increase in revenues was partially offset by a $1.3 million or 7% decrease in revenues from Apio's commission trading business due to decreased export sales primarily due to a shortage of export fruit produce.
For the second quarter of fiscal year 2010, Landec's net income was virtually unchanged from net income for the second quarter of fiscal year 2009 at $1.5 million. There were several offsetting reasons resulting in flat net income. Items increasing net income included: (1) a $166,000 increase in gross profit in Apio's value-added fresh-cut vegetable business primarily due to gross profit on increased revenues which was partially offset by increased raw material costs for produce, (2) a $192,000 decrease in operating costs, and (3) a $168,000 decrease in our income tax expense. These increases in net income were offset by (1) a $118,000 decrease in gross profit for Apio Packaging due to the contractual decrease in Chiquita minimums and a decrease in R&D funding from Apio's R&D agreement with the U.S. Military which was completed at the end of the second fiscal quarter of 2009, (2) a $179,000 decrease in gross profit in the Technology Licensing business primarily due to the completion of the Air Products licensing payments during the third quarter of fiscal year 2009, and (3) a $189,000 decrease in interest income due to lower yields on investments compared to the yields from investments in the same period last year.
Mr. Steele added, "Notably for the six months ended November 29, 2009 compared to the same period a year ago, Apio unit volume sales in the fresh-cut vegetable category increased 14% while, according to syndicated market data, the overall industry unit volume sales in the fresh-cut vegetable category increased 2% during the six months ended November 29, 2009 compared to the same period a year ago. For the month of November 2009 compared to November 2008, the industry unit volume sales in the fresh-cut vegetable category grew 8%. As a result, we believe that industry unit volume sales in the fresh-cut vegetable category will continue to grow during the second half of fiscal year 2010 assuming the economy continues to improve and consumers continue to return to buying fresh, nutritious and conveniently packaged produce products."
Revenues for the first six months of fiscal year 2010 decreased $7.9 million to $121.9 million compared to revenues of $129.8 million for the same period a year ago. Net income for the first six months decreased to $3.7 million or $0.14 per diluted share compared to net income of $4.3 million or $0.16 per diluted share for the same period last year.
The decrease in revenues during the first six months of fiscal year 2010 compared to the first six months of fiscal year 2009 was partially due to there being one extra week in the first quarter of fiscal year 2009 resulting in 27 weeks in the first six months of last year compared to 26 weeks in the first six months of this year. The extra week last year resulted in approximately $5.0 million of additional revenues in the first half of fiscal year 2009 compared to this year's first half. For Apio's trading business, in addition to having one less week of revenues during the first six months of this year, revenues decreased an additional $8.0 million due to $2.7 million of decreased sales in the domestic buy/sell business as a result of the Company's decision to exit virtually all of this business and from a $5.3 million decrease in export sales primarily due to a shortage of export fruit produce. These decreases in revenues were partially offset by the $2.7 million increase in revenues from Apio's value-added fresh-cut vegetable business. However, if you exclude the extra week during the first six months of fiscal year 2009, the increase in value-added fresh-cut vegetable revenues for the first six months of fiscal year 2010 would have been $5.8 million.
Net income for the first six months of fiscal year 2010 decreased $619,000 compared to the first six months of last year, primarily due to four reasons: (1) an approximate $600,000 decrease in gross profit due to one less week in the first half of fiscal year 2010 compared to the first half of last year, (2) a $305,000 decrease in gross profit for Apio Packaging due to the contractual decrease in Chiquita minimums and a decrease in R&D funding from Apio's R&D agreement with the U.S. Military which was completed at the end of the second fiscal quarter of 2009, (3) a $436,000 decrease in gross profit in the Technology Licensing business primarily due to the completion of the Air Products licensing payments during the third quarter of fiscal year 2009, and (4) a $258,000 decrease in interest income due to lower yields on investments compared to the yields from investments in the same period last year. These decreases were partially offset by a $798,000 reduction in our income tax expense due primarily to lower pre-tax income and by $248,000 in lower operating expenses. For the first six months of fiscal year 2010, cash flow from operations increased nearly 30% to $4.2 million compared to the first six months of fiscal year 2009.
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