Landec Cuts Q2 EPS View; Expects To Meet Or Exceed Its FY Revenue Guidance

(RTTNews) - Polymer products Landec Corp. (LNDC) announced that it expects second quarter of fiscal 2014 net income to be approximately $0.13 per 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. Analysts polled by Thomson Reuters expect the company to report earnings of $0.21 per share for the second-quarter. Analysts' estimates typically exclude special items.

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 its contracted prices in order to meet the demand of its customers. Because the sales prices to the company's 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." stated Gary Steele.

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 its original guidance for net income growth of approximately 20%, after excluding the $3.9 million earn out adjustment in fiscal 2013.

Analysts expect the company to report revenues of $472.83 million for fiscal 2014.

Looking forward, the company said the demand for its value-added specialty packaged produce products remains strong, particularly for its new vegetable salad products.

As a result, the company said it currently expect Apio to meet or exceed its revenue plan for fiscal 2014. The company's Lifecore Biomedical business continues to perform well, and it expects 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, the company said.