Industry-Wide Severe Produce Shortages Continue, Overall Revenues Still on Target
MENLO PARK, Calif., Nov. 22, 2013 (GLOBE NEWSWIRE) — Landec Corporation (Nasdaq:LNDC), a materials science company that develops and markets innovative and patented products for healthy living applications in food and biomedical markets, announced that it expects second quarter of fiscal 2014 net income to be approximately $0.13 per diluted share due to severe shortages of produce resulting in much higher than projected costs for raw materials in the Company’s value-added vegetable business.
Landec’s food business, Apio, Inc., enters into annual contracts with growers for produce which are based on a fixed price per delivered pound. Apio also enters into contracts with its customers which are on a fixed price per unit. In periods of severe produce sourcing shortages, the Company will purchase produce on the open market at prices in excess of our contracted prices in order to meet the demand of our customers. Because the sales prices to our customers are fixed, the excess we pay for produce above contract during times of shortage negatively impacts the Company’s bottom line.
“Profitability during the second quarter has been severely impacted by an industry-wide shortage of produce which has resulted in higher than projected costs for most of our key produce items,” stated Gary Steele, Landec Chairman and CEO. “A variety of factors have contributed to these produce shortages, but the primary cause has been an unusual confluence of extraordinarily unfavorable weather conditions along the East Coast, California and Mexico, the top three growing areas for vegetables in North America. The higher than projected costs are expected to result in a significantly lower gross margin in our value-added vegetable business during the second quarter of fiscal 2014 compared to the prior and year-ago quarters. It appears that shortages and quality issues will also continue into our third quarter.”
“In 25 years of working in the produce industry, I have never experienced such a prolonged period of adverse growing, supply and quality conditions,” stated Ron Midyett, Apio President and CEO. “These disruptive conditions have occurred during historically stable growing and sourcing periods and we have yet to enter the winter months which are typically the most unpredictable weather months of the year.”
For all of fiscal 2014, the Company currently expects to meet or exceed its original revenue guidance which was to grow revenues approximately 6%. Year-over-year consolidated net income is now estimated to be flat to up 5% compared to our original guidance for net income growth of approximately 20%, after excluding the $3.9 million earn out adjustment in fiscal 2013.
“Looking forward, demand for our value-added specialty packaged produce products remains strong, particularly for our new vegetable salad products,” added Steele. “As a result, we currently expect Apio to meet or exceed its revenue plan for fiscal 2014. Our Lifecore Biomedical business continues to perform well, and we expect Lifecore to meet or exceed both its revenue and net income plan for the fiscal year. Additionally, Windset Farms’ 64-acre hydroponic greenhouse expansion in Santa Maria, California is now fully operational and producing commercial products. Landec remains profitable with a strong balance sheet and good growth prospects ahead.”
About Landec Corporation
Landec Corporation is a materials science company that leverages its proprietary polymer technologies, application development and innovation capabilities to develop and commercialize new products in food and biomaterials markets. Landec’s subsidiary, Apio, has become the leader in US fresh-cut specialty packaged vegetables sold in North America based on combining Landec’s proprietary food packaging technology and the strength of two major national brands, Eat Smart® and GreenLine®, with the capabilities of large scale processing and national distribution. Lifecore Biomedical, a subsidiary of Landec, is a premium supplier of hyaluronan-based materials and medical products to ophthalmic, orthopedic and veterinary markets worldwide. In addition, Lifecore Biomedical provides specialized aseptic fill and finish services in a cGMP validated manufacturing facility for supplying commercial, clinical and pre-clinical products. Landec will also periodically work with market-leading companies to develop and commercialize differentiated polymer-based products under R&D and royalty agreements. For more information about the company, visit Landec’s website at www.landec.com.
Important Cautions Regarding Forward-Looking Statements
Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially, including such factors among others, as the timing and expenses associated with operations, the ability to achieve acceptance of the Company’s new products in the market place, the ability to integrate GreenLine’s operations into the Company, weather conditions that can affect the supply and price of produce, the amount and timing of research and development funding and license fees from the Company’s collaborative partners, the timing of regulatory approvals, the mix between domestic and international sales, and the risk factors listed in the Company’s Form 10-K for the fiscal year ended May 26, 2013 (See item 1A: Risk Factors) which may be updated in Part II. Item 1A Risk Factors in the Company’s Quarterly Reports on Form 10-Q. As a result of these and other factors, the Company expects to continue to experience significant fluctuations in quarterly operating results and there can be no assurance that the Company will remain consistently profitable. The Company undertakes no obligation to update or revise any forward-looking statements whether as a result of new developments or otherwise.
CONTACT: At the Company: Gregory S. Skinner Vice President Finance and CFO (650) 261-3677 Investor Relations: Matt Glover or Michael Koehler 949-574-3860 LNDC@liolios.com