US: Produce shortage means diluted shares for Landec
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."
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.
Source: marketwatch.com
