Good day, ladies and gentlemen, and welcome to the Landec first quarter fiscal 2014 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 Chief Executive Officer of Landec Corporation. Please go ahead.

Good morning, and thank you for joining Landec’s first quarter of fiscal year 2014 earnings call. I have with me today, Greg Skinner, Landec’s Chief Financial Officer. 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 fiscal year 2013. For the first quarter of fiscal year 2014, we exceeded our revenue plan and met our operating plan despite weather-related sourcing issues. During the first quarter, revenues increased 7% to $109.5 million and net income increased 9% to $4.8 million, or $0.18 per share. Also during the quarter, the change in the fair market value of our Windset investment contributed $5.4 million of pre-tax income. This amount, however, was $2.3 million lower than we had budgeted because of a change in the timing of when the projected increase in our Windset investment for all of fiscal year 2014 will be recognized. The change in the timing of the income recognition will result in approximately $0.06 per share shifting from the first quarter to the remaining three quarters of fiscal year 2014. While it is difficult to predict with precision, we continue to expect to recognize the 35% to 40% increase during fiscal year 2014 in the fair market value change of our Windset investment compared to the fair market value change in fiscal year 2013. Gross profit in Apio’s value-added vegetable business was lower in the first quarter of fiscal year 2014 compared to the first quarter last year because of shortages of certain commodities, mainly green beans and broccoli, as a result of weather-related sourcing issues. This resulted in produce sourcing costs that exceeded our expectations by approximately $2 million and reduced Apio’s value-added gross margin by 250 basis points in the first quarter. In addition, during the first quarter, Apio experienced product mix changes, such as an increase in the lower margin food service sales compared to the first quarter of last year. Also during the first quarter, Apio launched additional product offerings in its family of new superfood products and Windset completed construction of an additional 64 acres of hydroponic greenhouses in Santa Maria, California. Windset has already begun harvesting tomatoes and cucumbers in its new phase three, the first 32 acres of new expansion and they expect to begin harvesting tomatoes in phase four, the next 32 acres within two months, both phases are several months ahead of plan. This 64-acre expansion has doubled Windset’s capacity in California to 128 acres or 6 million square feet of greenhouse operations. Let me turn it over to Greg, who will take us through more of the financial details for the quarter.

Thank you, Gary, and good morning everyone. We reported yesterday that for the first quarter of fiscal 2014 revenues increased $7.4 million, to $109.5 million, compared to a $102.1 million in the year ago quarter. This increase was due to 16% or $10.8 million increase in revenues in Apio’s value-added business, and a $614,000 or 8% increase in the revenues at Lifecore. These increases in revenue were partially offset by an expected $4 million decrease in revenues in Apio’s export business due to a decline in volume sales primarily resulting from Indonesian export quotas on fruit. Net income in the first quarter of fiscal 2014 increased by 9% or $386,000 to $4.8 million or $0.18 per share compared to $4.4 million or $0.17 per share in the year ago quarter. The increase in net income was driven by a $5.4 million increase in the fair market value of our investment in Windset compared to a $4.3 million increase recorded in the year ago quarter and a $121,000 decrease in the pre-tax loss at Lifecore. The increases in net income in the first quarter were partially offset by a $1 million decrease in pre-tax income in Apio's value-added vegetable business due primarily to an increase in lower margin food service sales, higher than expected produce sourcing costs and the discontinuation of the Chiquita minimum purchases of BreatheWay membranes in December 2012 when the agreement changed from exclusive to non-exclusive rights. Cash and marketable securities totaled $10.2 million at the end of the quarter. Landec generated $4.5 million in cash flow from operations and purchased $4.3 million of capital equipment for capacity expansion at both Lifecore and Apio during the quarter. The company also paid down debt by $4.3 million during the quarter, and after the quarter we paid off the remaining balance of our line of credit. Gary, back to you.

Thanks, Greg. We are pleased with the sales growth in our food business in the first quarter. Sales did increase 16% year-over-year. The reception of our new products are strong and we continue to add new retail customers for our salad line and club store demand continues to be high. Regarding our export business, the Indonesian government's restriction on produce imports continues. Indonesia has been a large buyer of North American produce products including ours over the years. While their government restrictions affect our export sales volume, it is not affecting our export profits as lower margin volumes -- we're shipping lower volumes but the prices are still quite high. We've made substantial progress in expanding our Apio California facilities, putting in additional capacity for a new salad lines, adding green bean processing capability on the West Coast in our Santa Maria facility and adding vegetable processing capacity in our Bowling Green facility. These investments provide us with flexibility and scale for future growth. Lifecore Biomedical had a good quarter with 8% revenue growth and their outlook for the year remain solid. We continue to add sterile filling capacity in our Chaska, Minnesota facility. This allows us to offer our key customers the ability to fill and finish hyaluronic acid and non- hyaluronic acid products in a syringe device format for our customers who can then sell the products directly to customers, such as doctors and surgeons worldwide. We continue to seek and find ways to move up the value-added curve. Accordingly, we have stepped up our efforts to identify additional customers for our services, especially pharmaceutical companies that have drugs in development that are highly viscous and hard to fill in a syringe format, an area where Lifecore has unique expertise. We're impressed with the progress that our strategic…

(Operator Instructions). Our first question comes from the line of Reed Anderson from Northland Securities. Your question please.

Gary, I’ll probably start with you, just focusing on Apio and particularly the value-add, you had a real nice quarter there in terms of growth. Remind us, what do you think the, for the full year, what do you think the growth rate is going to shake out in that value add piece? And then secondly related to that, do you think that - will there be some quarters that are more up or down versus that or you think it will be fairly even across the balance of the three quarters?

Reed, overall we think that the value-added business will grow about 10% annually. We think that’s a good steady state growth factor certainly fueled by the introduction of new products and the category growth that I mentioned to you before. The category growth over the longhaul is probably around 6%, the industry category growth and we would be above that. We do have some seasonality - we do have higher volumes in the Thanksgivings and new years and Superball timeframe, Reed. But generally speaking I’d say 10% is a pretty good number for the value-added piece.

And then in terms of, if we look at that business and take it down and actually look at the margin side which really outside your control there were just factors there that pressured you this quarter and even last quarter. But if you think about margins on that business again kind of looking at the full year, do you think that what we saw in the first quarter is an anomaly in terms of the magnitude of that. Just some sense of what you’re planning for margins in that value-add business for the year?

Hey Reed, this is Greg Skinner. Okay. For the year obviously the sourcing in the first quarter was anomaly, we did not plan of those type of sourcing issues. Typically we will put in a contingency for - not typically, we do, for the year for sourcing issues quite often that is loaded, well at least the higher portion of it is loaded towards the winter months. And so this was somewhat unexpected. But overall the margins we had as a result in our plan, that plan on margins being equal to slightly higher than last year. The offsets being on the positive side, new product introduction, higher margins, bringing down margins slightly is the product mix, so we're seeing more higher sales in the food and service area, which is our lower margin business and then just a mix issue to more bags from trays. So overall we expect margins to be flat to slightly up this year compared to last year.

Okay. That's very helpful. Thank you. And then just a couple of others. In terms of the Lifecore business, the only question I have there is more just from an investment standpoint. Greg of the $13 million to $15 million I think you are spending on CapEx this year, how much of that ends up directed at Lifecore?

About $4 million to $5 million, right in that range.

Okay, good. And then lastly, just from a cash flow standpoint, because again earnings on a reported basis are sort of flattish, but really I think your cash flow is going to grow nicely, that's the expectation. Is that still your thinking on a operating basis kind of $30 million to $35 million this year?

Yeah. That's in the ballpark. Yeah.

Good. That's great. I'll let somebody else jump in, I'll get back in queue. Thank you very much. Good luck.

Thank you. Our next question comes from the line of Tony Brenner from Roth Capital Partners. Your question please.

Good morning. I have got a couple of questions as well. First of all, Gary you said that operating income met your plan, operating income was down 35% in the quarter. I didn't realize, but you were planning - declined. Maybe you could elaborate a little bit?

Yeah. Tony, this is Greg. We had planned on it. We looked at the mix issues going on, we knew what from a new product introduction when they were going to be rolling out. So we had anticipated that for the first quarter, our operating income would be down. However, if you will note for the year, we expect that to be up and therefore we're on track to meet our annual plan.

Okay. And why was Lifecore unprofitable in the quarter? Last year as I recall, a significant amount of shipments were pushed and deferred until the second quarter. So it should have been an easier comparison?

You’re off a quarter. Last year, they were shipped from the second to the third quarter. Last year, they actually had a loss that was higher than this year’s quarter. It's just the timing of the shipments within Lifecore. And so they actually beat their plan by $120,000. We had planned on a larger loss than what actually happened. And they had a loss in the first quarter of last year.

And then….

The big quarter for Lifecore will be the third quarter again.

I am sorry, say that again.

The big quarter for Lifecore as with last year will be the third quarter.

And it's all about timing of shipments, Tony. As you know, it's a batch fermentation process. It's, and we respond to forecast from our key customers and it's just a timing issue. So the first quarter is generally their weakest quarter.

And you indicated that all sales were to existing customers, but you’ve got some new capacity and new products, why are there no new customers buying your sterile filling for example?

We have several new customers that are buying limited quantities, but we are also receiving development fees that are fairly sizable. They help us underwrite the development process. So they are in the pipeline and they will represent substantial new revenues for us in the future, right now it’s mostly development fees.

Could you give us some explanation for the deferred revenue recognition on Windset which seems particularly strange given that the new capacity came on stream several months ahead of plan?

I’m going to try my best, it’s a little complicated, but the whole concept behind fair market value of accounting is you look out and so everything is based on a discounted cash flow. So we received a forecast from Windset and say here is what we are going to do over the next five years, give and take those numbers based on analysis done by the outside appraisers and others, you then discount that back to today, and say that's the value of that underlying investment and therefore we adjust our books accordingly. When we went into this year, we did a let’s call it ‘what if’ for lack of a better term on what we thought the change in investment would be for all of fiscal ’14. We drive the number, that's the number that went into our plan, it’s also the number that's in our guidance. I then went in and I can take full blame for this and gave my best guestimate of how it was going to fall out by quarter and kind of looking at history, I said two-thirds of the change or thereabouts for the entire year will occur in the first quarter. Well, instead, if you look at the numbers and based on what we put in the press release, it would closer to 50% occurred in the first quarter.

And what’s that variable?

You got their forecast, what changes there, you got the timing of when things come online, you’ve got the discount rates. I mean, there are multiple variables that go into this. And so I would just - my estimate was off for when it would fall out during the year. The $0.06 that we thought, the extra $0.06 that didn’t happen in the first quarter will happen based on what we know today over the next three quarters. So we are still going to hit the annual number, it’s just the timing and when it’s going to occur.

And that should be evenly distributed?

That’s best guess at this point, I mean [inaudible] given my estimate for the first quarter.

It would be reasonable Tony, that would be a reasonable assumption, yes.

Why should investors be comfortable with your full year projection given you are off by 40% on a quarterly basis?

I can’t answer that. Well, I can just tell you we’re still confident of the annual number. We are getting better at this. This is relatively new. This is not straightforward. It’s not like shipping a product and knowing, oh gee, we’ll recognize revenue on that, we know what our profit is. There is a lot of variables. You are using outside assistance to come up with your numbers.

[Inaudible] first quarter was exactly the opposite, you wound up having to restate upwards by 150% from what you originally reported. Any explanation as I recall was that you had to recognize immediately increases, projected increases for the full year?

Yeah, and that undoubtedly skewed my thought process on why I thought it would be so high this year given what happened last year. I kind of over corrected if you will.

Tony, the way I would look at it is, we expect the increase from year-to-year in the change in fair market value to be 35% to 40%, with their new forecast with their being ahead of plan in terms of starting up phase three and four there’s some solidification of pricing with their yield. We are very confident that that increase will happen.

Okay, thank you.

Our next question comes from the line of Peter Black from Wynnefield Capital.

Just a follow-up on one of Tony’s questions revolving around Lifecore. I think going back a few quarters if I remember correctly you spoke about having received or your customer having received, one of the customers FDA approval for several new products, but you didn’t really address that in the earnings release. So I am just wondering what we should expect from kind of new product introductions because it seemed like the growth of the business was a little bit light. So I was just wondering if you talk about that.

This is Greg, again. Yeah, that’s part of their growth. When we said 10% to 15% growth this year, it was factored again that about a year ago they received this new FDA approvals, you obviously don’t start shipping the day after you get the approval. And so it’s been building up in their system, and now this year we expect the full year’s worth of shipments from those new approvals in addition to what they have been doing in the past and that's one of the key drivers to their growth this year.

Okay. And are those products, are those in the ophthalmology market or are they in a different?

No, they are in the ophthalmology market. That's their franchise, that's their strength, that's their sweet spot and they are HA based. And then what I mentioned earlier in terms of some products and development, they are non-HA based and very much utilize the expanded sterile filling capacity that we have put in place.

This is [Nelson] next to Peter. I just had a different question, having to do with sourcing. It looks as though you wound up with the quantity that you needed and earlier you said that when you have problems with the weather you have shared pain in regard to the growers. I'm just curious since you are such a large market for them, you are not defining shared pain, but maybe just to put some color on that, there are certainly many models out there where the initial producers bears the brunt of the pain so that it doesn't affect your P&L so to speak or someone positionally where you are. Can you in general terms talk about that?

Yeah. When you have weather-related events, everybody share some pain. Actually the growers have adverse yield. They just can't get enough product of the acre that they planted. And we have to go out to serve our customers. We have to go out sometimes than buy products on the open market, which is not a lot of fun because obviously in shortages, the prices are higher and sometimes we have to call our customers and say we have to allot you. We have to scale back your needs and so everybody is dealing with the adverse effects of weather. So the grower has lower yields. Therefore, they are transferring less volume. They get fewer dollars. We've got the issue of going out in the open market, paying higher dollars for the scarce resources and the customers are dealing with issues that have to do with allotment. So that’s what happens in these situations, Nelson. So everybody has got skin in the game.

Just to drill down a little further, it seems like ultimately you wound up with what you needed. Is that correct?

Well, we went out in the open market.

No, I understand that. So that’s the second part of my question. Aren’t large enough to essentially say to whatever the open market is that when we need to access you, we will expect a lower price or does that not work?

No, we're not large enough. No, that doesn’t work.

Our next question comes from the line of Matt Sherwood from Cooper Creek Partners.

First of all, I just had a housekeeping. I am a little bit confused on the Windset thing. If you just take a step back and say, hey we thought Windset was going to grow 2.8 to 3.2 pre-tax for the year in Q4 press release and it grew 1.1 in Q1 and you thought it was going to grow another 2.3. That implies that Windset was going to be negative year-end here for the rest of the year, which just seems like a little bit of an extreme assumption. So just trying to reconcile that?

Well the total growth remember last year you got to add, last year with that the value of Windset grew $8.1 million, we said let’s round it. It’s going to grow $3 million this year. So you are up to 11.1 one, right? So we are saying of that 11.1 approximately 60% two-thirds is going to happen in the first quarter, so you can do the math. And then the rest will be over the last three quarters. Instead it came out to be closer to 50%, it grew 5.4. So now we are saying 5.5 to 5.9 is going to happen in the second half of the year. So I think when you do the math that way you’ll see it works out.

Okay. Then in terms of the other things you just said on the call is hey we have a sourcing allowance for bad weather and then we used it up in Q1 so does that imply then that if there is bad weather in the winter you’re going to have to reduce your guidance for the year?

No. If I said that then I (inaudible) we didn’t used it up in quarter one. The amount we allotted to quarter one we underestimate. Well, the weather was worse than what we typically see in quarter one. And so therefore we expanded $2 million more than what we've set aside for Q1. Now when we setup our plan, the line share of our contingency for produce sourcing issues is allotted to the winter month and that is still there.

Okay. So it’s still there. Okay. And then third question, I just have [like], it just seems to me that the bean business sourcing in contracts work a little bit differently from the way that they do in your broccoli business where in the bean business you are taking risk on the price and you are getting a fixed price from the grocer whereas in the broccoli you have contracts and obviously there is there is a disastrous sourcing issue then you get hit, but the bean business it seems like just whether the part of the business it’s volatile, private equity had problems with that, you are having problems with that it’s just part of the business. Can you sort of just argue against that and just why it’s not part of the business for bean?

Well, it’s certainly part of the business I can’t argue against that, this is Greg again. But it does go the other way. Perfect example was the third quarter of last year you expect prices to be very high during the winter months and Florida weather was fantastic during that timeframe. And we were actually getting beans at much less than what we had thought we would be getting at that for. And it was a very big [positive] unfortunately that turned around in the fourth quarter and all working out to be fairly even over the course of the year. But that’s just the nature of the business. It is different than the fact that there is a green bean market. And therefore the product that you are getting from your growers is based on the market whereas our crops at here in California are based on a contracted price. And so the bigger issue out here is volume. So volume obviously also affects the green bean business lower volumes higher price so therefore we’re paying our price.

Right. So it just seems like the stories you’ve been putting in your press release, I mean you could have put in 3Q sourcing positively impacted as [bad debt], it just seems like it’s part of the business in beans, which doesn’t make it a worse business, but just the different business?

Yeah, and overtime we are looking at aligning the contracting approach and sourcing approach, so that they are more similar with what we are doing in California. So that will be over a time period of couple of years.

Fair enough.

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

So the third quarter assuming the strongest again for Lifecore, is there something about that quarter or the way the business works for or it’s going to be coming in the third quarter or it’s just a coincidence for those two years?

No, it’s a timing of the shipment to one of their larger customer. And the timing of that when the customer wants it is in the third quarter. And so it’s (inaudible) and said we wanted in the second quarter and we wanted in the fourth quarter well then that would impact at least for the lot of couple years, they wanted their product shipped in the third quarter.

But I guess my question is based on, is this the nature of the business that makes it necessary in the third quarter or is it again just one of those things goes [through] years, that’s when they wanted, there is something which you should…?

I don’t think there is any more cataract surgeries by example, Dan, in the third and fourth quarter. I think it’s just their way they manage their inventory. And under our ownership it’s these large customers in the third quarter. So I don’t think there is any particular market reason other than their buying practices.

Okay. And then with Windset and the expansion which is going so well. I mean after this has been done where else would, if anywhere would they be looking to expand. Is there adjacent fields there or do they have to go to a different state, how would that work?

Absolutely not going to a different state. When you find the ideal site, let’s say it took 2.5 years to identify which is in Santa Maria, California and I think I have mentioned before it's ideal because you have cool nights, not cool nights you have one days, not days and they have learned and they had some competitors that just absolutely fell on their source by building facilities in fact it’s in Arizona, probably the worst place you can imagine. So they bought land in the surrounding area and they have substantial opportunities to expand and they have the infrastructure in place in Santa Maria, that's why I think they were able to finish these two new phases ahead of time because the infrastructure was already in place, they were up on the learning curve and the yields there are remarkable, absolute remarkable yields, so why would you want to go some place else. So they have either bought the land or have options to adjacent land to expand and they will expand.

And those adjacent lands, is it roughly the same size of what they have or is it smaller, what's the scale there?

Roughly about the same.

About the same.

Okay, great. Thank you, guys.

Thank you. Our next question comes from the line of Scott (inaudible) Capital.

Hi guys. Good morning. Thanks for the time on the call today. I wanted to see if I could encourage you to touch based on something that you said a little bit in your remarks and that is the Chiquita Banana contract and that commercial relationship. Can you give us a little update on how that’s going? And as a follow on to that, the company’s core intellectual property asset is, well among several of them, but one very important one is the BreatheWay technology, which is in many ways revolutionary and has potentially expansion potential of enormous size. How are you guys doing on licensing that technology to other providers? And also there was some talk of developing application for usage in fruits and berries. It would be very interesting to hear how that’s going?

Okay. Scott, first of all on the Chiquita transition, we went from exclusive to non-exclusive. And if you follow Chiquita, they had some company challenges they had a change in relationship. From what I can see from a distance, those changes have been positive, but it's just made sense. They were paying us a substantial check every year for the right to stay exclusive and they were cutting their, lowering their headcount, they were moving their headquarters. And so that transition made sense for them and in retrospect it made sense for us. We continue to ship to them substantial numbers of membranes for the banana business. It gave us an opportunity to work with them and approach others in the banana area which we are doing with one company, which may or may not pan out. It also allowed us to, it freed up some other fields where we are working with some other partners, one of which we can’t talk about which is Windset farms and you will be seeing the use of the membrane technology, the BreatheWay technology on products such as peppers and cucumbers. And you will start seeing that in the next couple of quarters. We also have initiated development programs with several other potential customers in what I call high value applications for the use of the membrane technology. I will say the berries family is a tougher one. I had mentioned this in the past Scott that berries has the problem that when you put it into a sealed package, that's why berries are typically sold in a little basket not sealed. When you put them in a sealed package, they tend to collect moisture and then exacerbate the mole that is already on the berries when they are grown in the field. So that was been a tough one for us and for others. So we’re going after targets where the sealed package approach the use of BreatheWay technology really does substantially and dramatically improve shelf life. So we have a number of these programs that are well in development and I would expect to see them in commerce in addition to Windset in the next 12 months. Does that represent a material impact on revenues in the short term? No. Is that a nice addition to profitability in the middle term? Yes. So stay tuned on that, we will keep you posted.

Our next question comes from the line of Will Lauber from Sterling Capital.

My question is on Windset. I have a couple of questions. I just wanted to understand that the process of how you come up with the fair market value. Windset I guess they will send their financial to you every quarter, and those are audited. Is that in the [factory]?

It’s not every quarter per say when they have an update and those numbers will go directly to our appraiser that we use. So we don’t touch them. And then based on just market information that’s out there, what’s the risk profile of Windset is the change quarter-to-quarter, the timing of between now and the put/call day which is the for purposes of a discounted cash flow that is the potential liquidity day, it’s a day that which we could put it to make a call. So everything goes out to that date, it’s then discounted back from that date to the current period. And therefore as you get closer to that date, the amount that you are discounting it back is less and therefore just automatically nothing else changes your value would go up just from the time value or money perspective.

But as far as Windset financial statements, are those audited every year or how is that?

Yeah, they have an annual audit, that’s just performed.

Yeah, and the appraisal goes to outside independent appraiser. It is reviewed by our accounting firm, Ernst & Young in terms of their appraisal group. So it’s got multiple external eyes and reviews.

Okay. And then in the annual report you broken out for your discounted cash flow models on 2012 versus 2013 I guess your assumptions for the growth and expense growth rates came down and your discount rate went up fairly substantial. I guess the first question on that is, can you just say why you did that and what the assumptions were and then are you using the same in 2014 as you were in 2013?

Well, the growth rates are driven by what they have in their plan, and the reason for the big variance is, they typically have relatively low growth rate for things like their buy/sell program. Windset revenues were generated from three different sources, buy/sell where they just go out and buy it on the open market from other greenhouse growers. They have a substantial number of grower marketing agreements, where they will work with another greenhouse grower, who maybe has 20 acres under class not large enough to justify processing center and so therefore their product is marketed under the Windset name. And of course what they grow themselves like in Canada and here in the U.S. So really they have three different businesses, each of which could have different revenue projection rates and that is reflected in these numbers. As far as the discount rate goes, if you look at it on a year-over-year basis, that’s a primary driver that increase is the fact that three and four was coming online, but the construction wasn’t completed. So you didn’t know if you are going to come in on budget in that. They didn’t really know what the time you’re doing at year end, the exact crops they are going to be planning in three and four. There were just a lot of unknowns associated with three and four, which was a fairly substantial increase in their projections as if they obviously have three and four coming online within the next four years, which is what you look out in the projections. So that was the primary driver for the range and the increase in that range for the discount rate.

So the effect assume for 2014 the discount rate will come down?

Yes.

Okay. And then kind of more of the picture question here. And I know you are only one party to it. But it seems like this Windset investment, because the portion that's not the dividend, the fair market value is, I guess it's somewhat (inaudible) because it's non-cash earnings. And I'm just wondering, I guess when do we wait till 2017 before this is somewhat monetized or is maybe an IPO of the Windset in the future or do you possibly buy more Windset, if you could just talk about some of your plans?

First of all, there is two parties involved here and the [Noel] family and Landec family are extremely close in terms of working relationships. We do a number of things together. We buy their tomatoes. They are using our membranes, et cetera, et cetera that we do something jointly. So we're highly interested in their success. I would say that first of all, the monetizing is February of 2017 in terms of the put/call. There is no anticipation on either party side to bring that forward. And of the options you mentioned in terms of them selling out to private equity firm or going public or selling more to us, I would put my money on us increasing our stake over time. We're not interested in controlling the company at this point. We think they are doing a super job. We think they have got strong leadership, that's even getting stronger and deeper. So I don't think that they are thinking IPO, I don't think they are thinking of selling, I think they are thinking how do we keep building this. So if anything we would like to own more. And I don’t want to say anymore at this point, but just know that that’s our interest. I don't think they were opposed to it at all. So I think that’s the route. And because of some of the things that were in our contract in terms of our having first rights et cetera, et cetera, I think it's reasonably likely that we will increase our ownership stake because we think they are hitting the ball out of the ballpark. And I don’t, clearly tell you that we think about weather a lot and they don’t worry about it. They’ve got that part pretty much figured out. So overtime, we think that they’ve got the answer to the weather issue and I don’t need to tell this group of people that weather has been getting weird around the world, especially in North America.

I agree with you. I just think that this is quite probable now that this Windset investment is being under-valued by the markets because of its non-cash earnings.

I couldn't agree with you more. But we're, we’ll just keep going forward and supporting them. And I think this well I’ll just give you an example. Greg and I were at their facilities the other day and we were watching, literally their cucumber plants are growing six inches not the cucumbers, but the plant itself is growing six inches a day. The yields are remarkable and the way they do things. And what they’ve learned in terms of learning curve from their Phase 1and 2 in Santa Maria have now been to their advantage carried over into Phase 3 and 4. And so the yields are the highest in the world and they’ve got this thing pretty much not. And so we want to be a part of that future.

Okay. And my last question is as far as I can find the only publicly traded operation with significant greenhouse operation is village farms, which is on the Toronto Stock Exchange. Can you give any color as to how Windset compares to them as far as operations?

They are a reputable company, we don’t know them, but honestly the new Windset people do, because they are neighbors up in British Columbia. They have had a tough go as I understand it, I am telling you things from second hand. They’ve sighted a plant in, oh gosh, I believe it was Texas, a large facility. And it turned out to be a really bad place. It was horribly damaged by hailstorms, glass greenhouses’ hails done a good mix, the weather was not particularly conducive for year round growing. They sighted facility near oil and gas fields. So they were having difficulty getting labor at a reasonable rate because the labor was going to the oil and gas fields and not to their plant, on and on and on. So I think they’ve had a rough go of it well and that’s why I came back and say that location, location, location is really critical. We saw that with another company that have been public EuroFresh, went bankrupt, they’ve sighted their facilities in Arizona, bad place et cetera, et cetera. So I think Windset has a unique formula and they are off to the races as they say, I think they are blown by their competitors.

Okay. Thank you.

You’re welcome.

Thank you. Our next question comes from the line of Craig Pieringer from Wells Capital Management.

Good morning. This is a good segue to my question. You mentioned that Windset doesn’t worry about weather, but do they worry about the curly top tomato virus and…

Oh yeah, absolutely.

Especially since experts say – think there will be a larger infestation next year. And specifically is the Windset hydroponic barrier an impenetrable defence or is it possibly a risk if that barrier should be breached?

It’s not impenetrable. It is a risk, it’s a fear, as everybody has fears that’s the worry for hydroponic greenhouse growing or greenhouse growing in general. There are viruses, there are cankers, there are bacteria, there is white flies you get all that kind of wonderful stuff in the early years when there are really heavy insect and pest pressures more so than others. They have and no one has a foolproof system, Craig, and you will see that periodically Windset and others will have these kinds of infestations and it’s the issue of how they deal with it that is key and Windset, I don’t want to go into a lot of details for competitive reasons, but they really got I think the best mitigation approaches the way they have containment systems, the way that they are proactive in terms of managing pest pressures and the fact that they have the ability, let’s pick a horrible case, let’s say they have it a real bad case of it they have these grower marketing agreements, they have these buy-sell agreements so that their customers are not without product if they had an emergency. But so no one has figured out how to eliminate this altogether, but if I had to put my money on somebody, I put in on their systems. I think you have seen their facilities, you know the way, they take seriously technology, they have imported the state-of-the-art technology in terms of dealing with not only how to get the best yields, but also how to mitigate pest pressures, they really have that well under control.

What is curly top tomato virus?

Please help me, I don’t know. I know what botrytis is, but I don’t know about curly top tomato virus. So if you have anything on it, please send it to us. But I couldn’t tell you.

Alright. Thank you.

Thank you. (Operator Instructions) And this does conclude the question-and-answer session of today’s program. I’d like to hand the program back to management for any further remark.

Yeah. Thanks everybody for being on the call today, appreciate your questions. I know there were a number of them directed to how to deal with adverse weather, we are dealing with it. What gives us encouragement and confidence in the business is that the category is growing at a double-digit rate right now. Lifecore is on track for this year. We have these new products that are being launched at higher margins. Our VA category is up, our sales are up, our volumes were up. And Windset as we have discussed at late, it has expanded and on the road. So we see those as positive signs. And we will have to grapple with the sourcing and weather issues as we go forward. And to do that we will modify as best we can, the number of geographic locations where we source and also modify to some extent the way we contract. So thank you for being on the call and we look forward to keeping you apprised of our progress.

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