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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."