Landec Corporation
Q2 2021 Earnings Call Transcript

Published: 6 Jan 2021

[Operator:]

Good afternoon and thank you for joining Landec's Fiscal 2021 Second Quarter Earnings Call. With me on the call today is Dr. Albert Bolles, Landec's Chief Executive Officer; Brian McLaughlin, Landec's Chief Financial Officer; and Jim Hall, President of Lifecore. 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 10-K for the fiscal year 2020.

[Albert Bolles:]

Thank you and good afternoon, everyone. I’d like to start by wishing everyone a healthy and joyful New Year and take a moment to recognize the contributions of our essential workers that both Lifecore and Curation Foods who show up every day at our facilities across the country. While many of us have been asked to modify our lives and work from home, our essential operational employees have remained on the frontlines and I am grateful for their perseverance. Landec is a leading innovator in diversified health and wellness solutions comprised of two operating businesses

[Brian McLaughlin:]

Thank you, Al. For the second quarter, consolidated revenues decreased by 8% year-over-year to $130.9 million. The decrease was driven by 10% planned decrease in Curation Foods revenues, which was partially offset by a 2% increase in Lifecore revenues.

[Albert Bolles:]

Thank you, Brian. Let me go into more detail about the progress we are making in our Lifecore and Curation Foods businesses to maximize shareholder value across our portfolio. Lifecore continues to benefit from a pharmaceutical market that is seeing increasing demand for new drug development, supported by an increasing number of drug products in various phases of clinical development. In addition, the CDMO market continues to see positive demand for services and drug developers continue to outsource development and manufacturing services in order to decrease time to market, save costs and reallocate internal resources. As the highly differentiated and fully integrated CDMO, Lifecore is positioned to capitalize on these tailwinds and continues to establish high barriers to competition. Lifecore’s speed and efficiency benefits its partners by decreasing their time to market which has immense value in their ability to improve patient lives to the commercialization of their innovative therapies. Looking forward, Lifecore will continue to provide long-term growth by taking advantage of positive market trends that will continue to expand its pipeline with new and existing customers, manage capacity to meet customer demand, and deliver commercial manufacturing excellence. During the second quarter, two of Lifecore’s key partners reported positive data from their Phase 2 clinical studies and are transitioning to Phase 3 development activities. Lifecore also initiated construction at their leased site three location to provide additional warehouse and storage space for their growing business. And finally, Lifecore successfully completed three audits with customers and received notification that the FDA approved a 30-day notice that allows Lifecore to serve as a complete testing and release site for raw materials and packaging components for a key customer with no questions, which is a testament to the world class quality system Lifecore has in place to support its customers. For Curation Foods, the exceptional outcomes of Project SWIFT, which we launched a year ago, have now stabilized the business and we are seeing those results play out in our financial performance. While our work is not done, we continue to focus on opportunities to improve our operating cost structure we have built a solid foundation to profitably grow our business. As you can see on our second quarter results, there is evidence of the gross margin improvement progression resulting from continuous improvement in our operations and consolidation activities that we've implemented with Project SWIFT. Further, we are in the final stages of strategic analysis of outsourcing our logistics operations. We are targeting a late fourth quarter implementation of this strategy that will drive greater efficiency and margin improvement, while simultaneously improving effectiveness with more frequent deliveries to our customers. This will result in less customer inventory waste and extend product shelf life for consumers. We have great confidence in margin improvement continuing through the balance of this fiscal year as we work towards the steady state gross margin targets we laid out in February of last year. This margin improvement is the key to improve cash flow generation and underpin our adjusted EBITDA guidance for this year. We are also continuing to push forward on our focus around high margins, consumer insights driven plant-based food Innovation. Our key current innovation, Yucatan and Cabo Fresh Squeeze continues to deliver growth as we expand our distribution. And our existing high margin guacamole club business is performing well. According to Nielsen research, the guacamole category is growing at 7% year-to-date compared to previous year. The Curation Foods brands continued to outpace the category. Year-to-date, all of Curation Foods avocado products are growing at more than double the category growth rate with our Cabo Fresh brand leading the way, growing at 4x the category growth rate. Our innovative squeeze products now comprise 13% of Curation Foods total avocado products retail sales. In our Eat Smart salad business, we have several innovations that we have launched or are launching this month. First, we are rolling out a new slimmer bag design that we believe will increase velocity and drive incremental growth with product line expansion. Second, we are having success in our plant-based innovation co-development partnerships with the club channel. We have two high margin salads in test market with two separate retailers that are both showing promising sales trajectories. We believe the innovation and other new products in our plant-based protein platform will drive profitable growth in FY '22. In summary, we have made tremendous progress and are starting to see the results. The Landec team is focused on creating value by delivering against our financial targets, strengthening our balance sheet, implementing our strategic priorities to improve operating margins, and making strategic investments in growth. We intend to fully realize the potential of each business through the sound and thoughtful execution, creating sustainable value for our shareholders, customers, employees and communities. Operator, please open the call for questions.

[Operator:]

Thank you. We will now be conducting a question-and-answer session. . Thank you. Our first question comes from Gerry Sweeney with ROTH Cap. Please proceed with your question.

[Gerry Sweeney:]

Good afternoon, Al and Brian. Thanks for taking my call.

[Albert Bolles:]

Happy New Year, Gerry.

[Gerry Sweeney:]

Happy New Year as well and congrats. It looks like Curation is turning the corner here, so it's starting to come out in the numbers. So it's a nice start to the New Year. My question revolves around Curation. I want to see if I can actually get this out in a way that makes sense here. So second half, you’re guiding to 11% to 14% gross margin by year end. Could you maybe bucket out some of the items that are going to drive that just from an operational standpoint as well as from market opportunity? Obviously, avocados are growing. I'm just curious about salads. It sounds like they have a little bit of a refresh come in next year. But just wanted to understand and just get a refresh per se on the avocado in second half of this year.

[Albert Bolles:]

Yes, Gerry. You're right. The avocado products business continues to double or having great success with our Cabo Fresh brand. So that's going to be a key driver for us as we continue in the second half of the year. We've also have done a lot in our mix when it comes to the Eat Smart salad business. A big part of Project SWIFT was not only what we did on the core veg business taking pricing and getting the cost down, but as we talked about before, Gerry, we’re also swapping out salads that are not profitable with more profitable salads that we think are going to turn better. So we're continuing to work that segment as well. And we've had a pretty good year thus far with the green bean category. This is the first time in a long time that we were able to not prorate customers at Thanksgiving based on the strategy that we took with our growing strategy, we had a record number of hurricanes. We’re minimally impacted. And we think we've figured out from a geographic standpoint how to manage a better future. And we anticipate as COVID begins to lift, none of us know exactly when that is, but with the vaccine, we're optimistic that some of our businesses that have been affected by COVID, primarily in the food service sector, will start to come back. So it's just a continuous focus and we have things going on with Project ZEST in our facilities in North America with Bowling Green that we believe will help us improve our overall margins.

[Brian McLaughlin:]

Yes. Hi, Gerry. This is Brian. I've got a couple of other quick things to drop in. So one, we're going to benefit in the second half of the year. For the full half -- second half of the year, the closure of Hanover, we didn’t close that until the beginning of the second quarter as well. Included in the 9.4 are actually above the gross margin line, some of the restructuring costs that go with Hanover if you back those out to sort of steady state, Curation would have had a 10.1% second quarter, not 9.4. Recognize 9.4 is the right way to report it. But just to give you that context. Q4 is a big quarter for Yucatan, in particular May driven by Cinco de Mayo and Memorial Day. It's our highest margin segment. So to have lift in that quarter, which we've had thus far has been an experience with the company. It also sort of helps lift things. And then lastly, from a raw risk reserve standpoint, the fourth quarter is traditionally the quarter that is the mildest, the kindest, and so as a result, the company typically has a margin that's in the fourth quarter that way as well. So just to add those things to what Al had been saying.

[Gerry Sweeney:]

Mother Nature is most kind in the fiscal fourth quarter.

[Albert Bolles:]

It is. Not always, 100% kind but more kind.

[Gerry Sweeney:]

The Curation, you said the 10.1 versus the 9.4 as reported, and that was one of my questions in the prepared remarks. You did say there was some I think headwinds that weren't adjusted, necessarily adjusted. Was that 700,000 it looks like, was that all of it or were there others sort of – maybe not true one-time items, but maybe some?

[Brian McLaughlin:]

Yes, there are other one-time items and restructuring that we had in the second quarter. Yes, adjustments but above the gross profit line, it was actually about 730,000 related to the Hanover closing.

[Gerry Sweeney:]

Got it. And that shouldn't be there on a go-forward basis for some of that ?

[Albert Bolles:]

Yes, we won’t have that going forward if that’s what you’re trying to say.

[Brian McLaughlin:]

And Gerry, as we progress with Project SWIFT, we believe that heavy lifting restructuring costs are behind us as we move forward.

[Gerry Sweeney:]

The other question I had was, Al, you touched upon a third there, but the food service. How much of an impact -- can you quantify how much COVID is sort of impacting it? I know it’s a little bit across the country and every place it’s different right now.

[Brian McLaughlin:]

Yes. It’s about $2 million plus in margins that goes with the headwinds.

[Albert Bolles:]

And we also have margin impact, Gerry, on our tray business, because people are not gathering. So we've seen a significant drop off for channel trays and a smaller box, but not insignificant with our single serve salads just because people aren't going into work but eating at home.

[Gerry Sweeney:]

Got it. That’s really helpful.

[Brian McLaughlin:]

If you were to roll all those up, it's about $3.5 million to $4 million that goes with that in terms of margin impact and what I've just describe –

[Gerry Sweeney:]

On an annualized basis, right?

[Brian McLaughlin:]

No. That's just the first half of the year.

[Gerry Sweeney:]

First half, okay. So that's considerable. It's the COVID world so we don't know what’s happening. But vaccine being rolled out, things get back to normal, that becomes less of a headwind next year, maybe even add a little boost to profitability, potentially next year. Is that a way of potentially -- not looking for guidance, but okay, got it. And then just real quick on logistics. That strategic review, would that also free up cash? I'm not sure if you leased trucks or do you own them. There’s a lot of cost --

[Albert Bolles:]

Yes. We have 30 plus trucks, Gerry, and the project that I’m wanting to get at since I came on board and we've had so many other things that we've had to do and we just didn't have the resources to do them all at once. So we started this study several months ago. And we're in the final stages of compiling the results, but they're fairly compelling for us. So we have 30 plus trucks and we do lease. Don't think we need all 30 some trucks. And there's going to be a play there for us that we believe is going to improve our margins. But if not more important, our effectiveness to our customers are greatly going to improve. We're going to be able to deliver 6x a week versus 3x a week. That's going to lead to better product freshness. It’s going to lead to less shrinkage at the customer level. And that combined with the launch of our new slim bag we believe is going to have an impact for us on shelf that will impact velocities as well as allow us to achieve more facings with the slimmer bag, which by the way had the same amount of ounces as our current bag has. So it's all kind of wrapped up in a big efficiency and effectiveness program that is going to start happening here in the second half, and really give us benefits into FY '22.

[Gerry Sweeney:]

Got it. I have one follow up and then I’m done. On the logistic side, is there a service benefit? So you can service your customers 6x instead of 3x, your spoilage shrinkage? I look at your shelves when I go to the grocery store, right? Sometimes the dates are a little , things like that. So if you improve that, could that get you into more stores, obviously improve the service but make sales easier or retention better?

[Albert Bolles:]

Yes. I'll tell you the sales force is very excited about the logistics program and this slim bag together to do what you just said all the above. So we expect to get more sales. We expect to be able to expand into new customers that we couldn't get to and meet the requirements as well as we have some significant shrinkage at some of our customers that we're now going to be get after, Gerry.

[Gerry Sweeney:]

Got it. I appreciate it. I’ll jump back in line. Thank you.

[Albert Bolles:]

Thanks, Gerry.

[Operator:]

Thank you. Our next question comes from Mitch Pinheiro with Sturdivant & Co. Please proceed with your question.

[Mitch Pinheiro:]

Hi. Good afternoon. Just a couple questions here. First, the gross margin goals, so 11 -- on Curation, 11% to 14% that's somewhere by the fourth quarter or was that a second half average? And then what I wanted to ask is, is that 11% to 14% range going to be something that we could count on for the following fiscal year?

[Albert Bolles:]

Yes, I'll just give you the details. As we've talked before that we are really committed to getting this business at a steady state and the 11 to 14 is what we expect to achieve in the fourth quarter. And Brian said we're at 10.1 now, so we’ve had significant improvements in our margins. So we expect that to carry over into fiscal year '22. And our job isn't done. Our focus on margin expansion will continue into FY '22 as well, Mitch.

[Brian McLaughlin:]

The second part of your question is, is that what we're looking for next year? Yes. There's just a lot of moving parts, as Al mentioned, this year so the idea is to get to that steady state going forward by the end of this calendar year, or by the end of this fiscal year.

[Mitch Pinheiro:]

With Windset, the charge, is that related to the put call date? When is the – could you remind me when the call date is?

[Albert Bolles:]

It’s March 22.

[Mitch Pinheiro:]

Okay. So it was a substantial write down. What drove that?

[Albert Bolles:]

Yes, I’ll just jump in on this. It's really targeted around some situational issues, in particular, the extensive West Coast fires that resulted in very dense smoke all up and down the West Coast, affecting sunlight, production volumes, and as a result, revenue and earnings in all of their greenhouse facilities from California, all the way up into British Columbia. The model is still very solid. I think they're going to work through some of these situational issues. The way that the discount model works is close to an impact weighed very heavily as smoke lowered earnings, correspondingly. Lower earnings increased the depth in the discount modeling and the combination of those two being closed in and right now is what really drove it. As we go towards the put call date, the true value will be a function of trailing four early quarters, we get the greater of the average of whichever is more favorable to us. So if events from the trailing four quarters in March looking backwards are stable and you're not dealing with some of these issues, apart from just whatever business model and competitive issues they may have, then we may have a recovery on the number that we just put -- that we just wrote down. We may not, but we may. It will depend on actual numbers and events in March of 22.

[Mitch Pinheiro:]

Okay, very helpful. One more question with regard to the new financing. So I'm not a fixed income guy, but 850 over LIBOR seems high, doesn't it? Or is that just -- am I just -- I haven't really refinanced 100 million tranche of debt lately?

[Albert Bolles:]

Yes. I'm actually very happy with that. If you look back over the last nine months, the credit markets have changed quite a bit with COVID. Credit underwriting for senior lenders has changed quite a bit. I think this is on a blended rate. So when you blend them together, our average rate we think is going to be somewhere around 7.5%. I'm very happy with this type of re-bucketing in financing and the flexibility that provides to the company, our ability to support the growth platforms, in particular growth platforms at Lifecore and to be able to get that kind of financing without some sort of an equity component warrants or whatever that would be diluted to the shareholders, I'm thrilled of that.

[Mitch Pinheiro:]

Okay. But with -- I noticed like a lot of the covenants relate around Lifecore. It's almost a life -- I'm not sure what it is, but is -- obviously Lifecore has some CapEx needs down the road here. So I understand that, but the fact that it sort of relies and it's called out in the covenant that Lifecore gross profits need to be $29 million, it was kind of odd that it wasn't Landec gross profit and I was curious if you could comment on that.

[Albert Bolles:]

When you look at this type of debt, it's really a mezzanine piece. It's sort of sitting somewhere between shareholders and a senior lender. So there's definitely an enterprise value focus on the components. Clearly Lifecore adds a lot to that equation, if you're sort of in that space behind the senior lenders. So it makes sense that they would get as we more today, I think they're going to continue to shift favorably going forward and be more balanced between Curation and Lifecore. But it makes sense given sort of where they are in the capitalization equation that they would rely heavily upon sort of the enterprise value and the intrinsic value there and accordingly that puts a big focus on Lifecore.

[Mitch Pinheiro:]

All right, that's all I have. Thank you. That was some very helpful color.

[Operator:]

Thank you. Our next question comes from Mark Smith with Lake Street Capital Markets. Please proceed with your question.

[Mark Smith:]

Hi, guys. First one for me, you gave us some good insight into kind of food service environment, what's been happening there with COVID. Any additional insight into kind of grocery and club, what you're seeing from kind of those customers as well as from consumer behavior here recently?

[Albert Bolles:]

Yes. Hi, Mark. The club business has been affected primarily through trays. That's been a big impact as we sell most of our cut veg tray business to the club stores. So that business is down 50% or more for us and has remained down. The other issue that we have seen that some of the club stores is in their order patterns based on the lines that may be forming to go into the stores, there's been sort of a zigzagging of ordering that we’re seeing recently. And the other big impact for us has been on launching our new products. We're not able to do sampling programs that are important to us. And the ability to be as aggressive as we want to be to expand our new products, they are not as aggressive as they have been. And that flows over to the retail side, which is a lot of the customers are not doing resets on new products like they normally do. They're delaying them a bit based on the COVID environment. But we see that beginning to lift here we believe into Q4 and into Q1. So those are the big impacts that we see at the retail level and club level.

[Mark Smith:]

Okay. And then as we look purely at Canada, the avocado products, what are you seeing in that market as far as pricing? And how confident are you in kind of where the avocado pricing is today and that helping you get to your gross profit margin goals?

[Albert Bolles:]

Yes. Well, this is the first full year that we've been able to run the plant with the model that we have where we buy avocados at low costs in the fall and be able to put them away on low cost. And we were operating at very, very efficiently and we're able to put away a lot of the low cost avocado products, which helps us on our margin and pricing. And our innovation, as I mentioned, the guacamole squeeze is working very well for us. We have some programs in place where that's currently our lowest margin product, but it's growing the most, that we are going to be significantly improving the gross margins of the squeeze product now that it's successful. And Cabo Fresh is getting a lot of good traction. I've talked before, Mark, that this brand really resonates with millennials. And we're seeing that in terms of the growth rate that we are experiencing with the Cabo Fresh brands.

[Mark Smith:]

Great. And then this might be too broad of a question, but following the refinancing, what are kind of next steps that we look at and in the turnaround of this business, as we've moved through a lot of SWIFT to kind of what are the big picture items that we should be looking at now?

[Albert Bolles:]

Well, we still have a few things to do on the SWIFT program, as I mentioned. I would say if this was a baseball game, we're probably in the seventh inning. But the heavy restructuring costs that we've gone through with what we did this past year with closing Hanover, taking down a production overhead, consolidating our offices, rightsizing our FTEs, I would say the majority of that is behind us. We'll probably have some restructuring with the logistics project, but we think the paybacks are tremendous. But for me, the big focus now is we've got a pipeline loaded with innovation. And as we move forward into Q3 and into Q4, we really begin to transition the Curation Foods business from one of getting there by cutting costs to really growing profitably in our categories of avocado products and our salads, primarily based around a plant-based protein salad. So it's really set us up for growth, Mark. That's really what we’re looking forward to having the momentum take us from the second half of the year into FY '22.

[Mark Smith:]

Okay, so really a transition from turnaround to now kind of operating and growth.

[Albert Bolles:]

Right, I would say we're at an inflection point right now and we have really improved the relationships with our key customers. They're very healthy now and we've got a lot of innovation that we are planning on launching and a lot of innovation that we're working directly with them on in a very collaborative way. The relationship, we don't really talk about this, Mark, but the relationship with our customers, what we were a year ago versus today, it is absolutely night and day. So I remain very confident that as we move forward, that we're going to be growing this business through our innovation while we continue to have a cold eye on cost.

[Mark Smith:]

Okay, sounds great. Thank you.

[Albert Bolles:]

Thank you, Mark.

[Operator:]

Thank you. Our next question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.

[Anthony Vendetti:]

Thank you. Good evening. So just a couple of questions. One is, you talked about the logistics review. Can you quantify what you found when looking at the logistics of your operations and what were the quantifiable benefits that you were able to extract from that?

[Albert Bolles:]

Well, we don't have all the numbers figured out yet. But I will tell you just where we are right now there is several million in savings we believe we can achieve. We also believe there's, as I said, just not only the efficiency standpoint of logistics, but there's an effectiveness rate which we really won't know what that is until we get into it. But it's pretty clear for us by decreasing shrink, getting fresher product on the shelf, the opportunity to expand our facings holistically we think this program will have a really great payback for us. So that's where we're at with this. And it's going to take us a little bit of time. It's not something I can just turn the light switch on. But as I mentioned, Mitch, we're going to be out in Q4 with doing this.

[Anthony Vendetti:]

Okay. And then just on the new innovations, the single serve, you have nice improvement in the Curation gross margin, higher margin products, that seems to be starting to bear fruit? Can you talk about the incorporation of plant-based alternatives? What's the opportunity that you see there? And when can we expect to see that start to be a contributor for you?

[Albert Bolles:]

Yes. So our focus has been on really gaining insights here with our consumers, working with our customers and we know there's a growing flexitarian consumer out there that's not vegetarian, but they're trying to eat less meat. So we have really focused our innovation around that. We've launched -- at the club store level, we have two launches that happened here just recently. They're very promising. These are higher margin products for us and we've only launched four new products. So we've got a lot of discipline in our processes about what we send out the door. It's not only got to be the right product, but it's got to be at the right margin level for us. So, we're betting that we're going to start to see impact of that into Q4 and then begin to really pay off for us in FY '22. COVID has slowed us down in terms of the rate that we would like to expand, but the feedback that we're getting from the customers says that we have very strong products.

[Anthony Vendetti:]

You said you launched at the club store level, but that opportunity is still would you say in the nascent stages, because of COVID. And eventually as we go forward here, this could become -- is it fair to say you believe this could become a significant opportunity in the not too distant future?

[Albert Bolles:]

Yes. We've launched in the club stores, but we haven't been able to expand, like we normally would be in this COVID environment. And we are expecting and have commandment for expansion in the second half of the year. And this is a big, big platform for us that we've invested in and that we believe is going to be a differentiator for us as we move forward.

[Anthony Vendetti:]

Excellent. Then just last question, I don't know if you gave this number, but on the Avocado Squeeze product, you had 6,000 I believe points of distribution on the last call. Where's that now in terms of points of distribution? And do you have a goal by the end of this fiscal year in terms of how many points of distribution you want to be in with that product?

[Albert Bolles:]

Yes, we're actually focused on the percent ACV. And right now, Squeeze is at 19% ACV. And our goal is to -- just to kind of give you a point on Yucatan, that’s 46.5% ACV. So we continue to see Squeeze grow in a speedy force. And as I said, we have some things planned that we see margin expansion in the Squeeze product as well.

[Anthony Vendetti:]

Okay, great. I'll hop back in the queue. Thanks. I appreciate it.

[Albert Bolles:]

Thanks, Anthony.

[Operator:]

Thank you. Our last question comes from Mike Morales with Walthausen & Co. Please proceed with your question.

[Michael Morales:]

Good evening, folks. Thanks for taking my question. Hope you're all staying safe and well. Guys, I want to start off on the Windset portion. And understanding the operational challenges that they've had with everything that was going on, help me understand as we get closer to this put call date, where's the confidence coming from that Windset is going to actually be able to afford a redemption of the preferred if you guys actually do put it to them? With all the operational challenges, it's not unreasonable to think that that creates financing needs that they might need? Where's the confidence coming from?

[Albert Bolles:]

Yes. Brian, why don’t you take that one?

[Brian McLaughlin:]

Yes. Exactly. Well, there are a few things. My sense is, but we're just poking at this with them, is that they're going to substitute us out somewhere in their capital structure behind their senior lenders. The way that our formula works, it's a very low multiple in that segment of EBITDA. I am very confident. I think there are all sorts of folks lining up, at least from my initial discussions with them and the different advisors that they're talking to, that that is a very likely way for them to take us out. I don't see them writing a check. It's a very asset intensive business model. If you have the greenhouse space, your platform is going to grow. There's a lot of demand for that space. Some amount of greenhouse space has reverted over to the cannabis world, which is putting more of a demand on Windset’s model. They're an excellent player. Their operational model is very, very solid. They're doing very well. They do have a fair amount of debt, not too much given honestly, close to their ratios, which I am, but I do think that if they have the ability to tap into senior regulated bank financing that they're going to use that to continue to expand their platform and their growth model. And I believe they have many options behind a senior lender group and then being able to finance their growth to find someone to substitute us out.

[Michael Morales:]

Sure. And I guess mindful that you guys were just talking to creditors about this whole refi. Do you anticipate – so you're not anticipating them having any problem with the debt load that they do have and arranging more financing?

[Albert Bolles:]

I do not. I think that they are not financeable. They just actually put a brand new financing arrangement in place and it's a very strong model. So I'm very close to it.

[Michael Morales:]

Sure, understood. And turning over to the credit agreement, bear with me on this one, but a few interesting things stuck out to me in this one relative to previous agreements. A previous question noted that consolidated gross profit is really just defined in Lifecore’s gross profit, so not really considering Curation in that at all. I know you guys have a specifically defined term for what a permitted Curation sale might look like. And I found it interesting that there was a clause for allowing equity awards in anticipation of a spin-on to Lifecore. So all of that taken together and mindful of the good work that you guys have done in kind of improving Curation’s operating structure, this certainly seems like much more tangible language than we've seen in the past as we think about value creation. So apologies for that long question, but I guess the total of it is can you guys just give an update on how the Board is thinking about value creation, mindful of this refi and the work that you've done to improve the operating structure of businesses?

[Albert Bolles:]

Well, I'll answer that. I continually work with my Board. I think you know that we've expanded the Board and added some more life science folks on their expertise, if you will. And as we move forward, I continue to work with my Board to how we can enhance and create more shareholder value. So it's part of our strategy.

[Michael Morales:]

Understood. That's all that I had. I'll take the rest offline. I appreciate it, folks. Hope you guys stay safe and well.

[Albert Bolles:]

Thank you very much. And I thank everyone today for having their interest in Landec and Happy New Year to everyone and stay safe. Thank you very much.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.