As with all companies, we are subject to global economic risks like those we experienced during the recent severe recession. Specific to Landec, the primary risk at Apio aside from weather-related produce sourcing risks, would be the loss of a key customer at the time of a contract renewal. This loss would typically be due to pricing pressure that can result in margins that are not acceptable to Landec, leading the Company to make a conscious decision to walk away from that business, which we have done in the past.
Regarding Lifecore, the greatest risk is generally associated with the timing of the regulatory approval process for new opportunities, and secondarily, maintaining the existing contractual supply relationships. Any regulatory risk is accounted for in the financial projections and the supply risk is mitigated by longstanding, long-term, renewable supply contracts.
7) What is the status of Windset's new Santa Maria, California operation?
Windset has been in full production with its first 64 acres of greenhouses in Santa Maria since December of 2011 with different varieties of tomatoes. Production performance has been exceeding Windset's original expectations, and in September 2012 they completed their second planting of tomatoes for all 64 acres. Late last fall Windset started the construction on the next 64 acres of greenhouses on their Santa Maria property adjacent to the first 64 acres. The additional 64 acres of greenhouses will utilize the same packaging and processing facilities as the first 64 acres thus reducing the overall construction costs for this expansion.During the first nine months of fiscal year 2013, we have recognized a total of $7.1 million in pre-tax income from our investment in Windset which included $6.3 million from our portion of the increase in Windset's fair market value and $844,000 of dividend income from our Windset preferred stock. For the fourth quarter of fiscal year 2013, we currently expect to recognize approximately $1.0 million from our portion of the increase in Windset's fair market value and $281,000 of dividend income from our Windset preferred stock. Since February 15, 2011, the date of our original $15 million investment in Windset, we have recognized $15.1 million of pre-tax income, equal to our original investment. We are very pleased with our 20% ownership and investment in Windset and with the future prospects for Windset. 8) What new products and/or programs does the Company plan to introduce during fiscal year 2013?
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