Landec Corporation (Nasdaq:LNDC - News), a developer and marketer of technology-based polymer products for food, agricultural and licensed partner applications, today reported results for the first quarter ended January 26, 2003. Unless otherwise noted, all financial statement amounts are stated on a basis consistent with accounting principles generally accepted in the United States ("GAAP basis").

Total revenues for the quarter were $41.1 million versus $40.3 million in the first quarter of fiscal year 2002. Landec reported a net loss of $2.0 million, or $0.10 per diluted share, compared with a net loss of $3.5 million, or $0.22 per diluted share, for the same quarter in fiscal year 2002, reducing the first quarter EPS loss by more than half.

Results for our first quarter reflect the seasonality of Landec's business. The first quarter is, and historically has been, the weakest quarter in the fiscal year due to significantly higher produce sourcing costs for Apio during the winter months and due to losses at Landec Ag from incurring high sales and marketing costs to generate revenues that will not be realized until the second quarter.

"We are pleased that we are realizing benefits from the initiatives we put in place in prior years and the recent strengthening of our management team at Apio. These benefits have improved, and will continue to improve our cost structure, at the same time that we are experiencing increased demand for our technology-based products," commented Gary Steele, President and CEO of Landec. "During the first quarter of fiscal year 2003, sales of our value-added specialty packaging products grew nearly 30% compared to the prior quarter, and by 22% compared to the first quarter of fiscal year 2002. Our goal is to continue to grow Apio's value-added technology-based business, which has historically been less affected by commodity market fluctuations, and to position our 'fee-for-service' produce marketing and sales business for higher margins and lower operating costs."

"Product sales for the quarter were up $1.3 million compared to the same period last year," added Steele. "Apio's value-added specialty packaging produce revenues grew to $25.4 million from $20.9 million in the first quarter of last year. This increase was partially offset by lower Landec Ag revenues, attributable to the timing of seed corn shipments due to farmers making their ordering decisions later this year than in prior years. In the first quarter of fiscal year 2003, Landec Ag had revenues of only $64,000 compared to revenues of $614,000 in the first quarter of fiscal year 2002. Additionally, fruit sales and non specialty packaging produce sales were down $2.7 million in the first quarter of fiscal year 2003 compared to the first quarter of last year due to exiting the domestic fruit business and due to a product mix change in our non specialty packaging produce business."

"Even though non specialty packaging produce sales were lower, because of product mix changes, gross profits increased by 28% to $755,000 in the first quarter of fiscal year 2003 compared to $589,000 in the same period last year," said Gary Steele. "Gross profits for our value-added produce business were up over 70% to $3.5 million in the first quarter of fiscal year 2003 from $2.0 million in the first quarter last year. Overall gross profits as a percent of revenues increased to 13.9% in the first quarter of fiscal year 2003 from 11.6% in last year's first quarter," stated Steele.

"The success of our Intelimer® based food packaging technology has allowed us to convert not only fresh-cut produce but also whole produce into value added products that bring real differentiation to retailers and to growers. As a result, Apio's Eat Smart® products using our proprietary specialty packaging grew to 63% of Apio's revenues during the first quarter of fiscal year 2003 from 53% during last year's first quarter," Steele added.

"Our first quarter results also reflect the impact of the expanded efforts we are undertaking in our banana packaging technology program. Relative to the year-ago quarter, we have incurred planned incremental expenses in our banana sourcing and market trials in order to capitalize on this opportunity. For the first quarter of fiscal year 2003, the Company spent approximately $520,000 to expand its banana program compared to $320,000 during the first quarter of fiscal year 2002," Steele commented.

"As previously communicated, our R&D and trial work for the banana technology program is focused on three main objectives: (1) qualifying sources from large, multinational banana shipping companies, (2) optimizing the design and use of our 40 lb. Intelimer-based package so that the extended shelf life we deliver can be translated into consistent savings and increased sales for the retail grocery chains and (3) developing new package sizes for customers that will allow bananas to be sold in ways that are unique to the industry. We know the market needs technology that can extend banana shelf life and lower the costs to retailers. As we continue to work on optimizing our banana technology for retail applications, we will be focusing our short-term opportunities in market segments such as the food service industry, whose needs can be currently met with Landec's existing banana packaging and sources. We are scheduled to begin retail market tests of Apio's Eat Smart brand bananas by mid year. Our enthusiasm for our banana packaging technology has not wavered and we continue to allocate a significant amount of Company resources to this program," stated Steele.

Commenting on the financial condition of the Company, Steele said, "During the first quarter of fiscal year 2003, we continued our efforts to pay down debt. During fiscal year 2002, we reduced our debt from $33.4 million to $17.5 million and our debt at the end of the first quarter of fiscal year 2003 was $14.3 million compared to $17.5 million at the end of fiscal year 2002. Our debt to equity ratio decreased to 26% at the end of the first quarter of fiscal year 2003 from 31% at the end of fiscal year 2002 and 67% at the end of fiscal year 2001."

"We have four primary objectives for fiscal year 2003, (1) increase profits, (2) continue to strengthen our balance sheet, (3) commercially launch our banana packaging technology for retail applications while expanding our food service banana business and (4) continue to grow our food and ag technology businesses," commented Steele.

"Landec's proprietary temperature-activated Intelimer polymers solutions are patent protected and are changing the economics and the quality of the food and seed products we have targeted. In addition, our technology is opening up new solutions in the medical, consumer and adhesive markets. We have numerous technology-driven applications in our pipeline and look forward to introducing several new products during the upcoming year," concluded Steele.

Operating Highlights and Outlook

Apio's Intellipac Packaging Products Business Continues to Grow

Since the beginning of fiscal year 2002, Apio has introduced fourteen new value-added produce product offerings and has expanded its retail and club store presence to over 8,700 stores.

In addition, during the first quarter of fiscal year 2003 Apio realized record volumes and revenues from its value-added products. The three fastest-growing product lines; party trays, iceless case liner products and 12-ounce retail packages collectively grew 68% compared to the prior quarter and 38% compared to the first quarter of fiscal year 2002.

Landec Ag's Intellicoat® Seed Coating Product Sales Accelerate

Landec Ag, the Company's Intellicoat seed coating subsidiary, is commercially launching its Early Plant(TM) hybrid corn during fiscal year 2003. Early Plant hybrid corn joins the existing line-up of Landec Ag commercial products which include Pollinator Plus® coatings for inbred corn seed, Relay(TM) Intercropping of wheat and Intellicoat coated soybean, Fielder's Choice Direct® hybrid corn and the Harvestar(TM) product line, introduced in 2000, which offers high performance alfalfa and nutrient enhanced hybrid corn seed.

Early Plant hybrid corn is designed to allow corn farmers to safely and reliably plant hybrid corn three to four weeks earlier than normal, by using Landec Ag's proprietary Intellicoat coating which delays germination until the soil reaches the optimal soil germination temperature. Otherwise, planting earlier in cold, wet soil could cause poor or no germination to occur. Allowing the farmer to have a wider planting window lowers costs, reduces risks and potentially increases yields. The program for Early Plant hybrid corn is projected to increase three-fold to over 40,000 acres this spring from 13,000 acres in 2002.

In 2002 Early Plant corn trials, when comparing Intellicoat coated corn seeds to uncoated corn seeds, the Intellicoat coated seeds showed better, more uniform emergence and higher stand counts for improved yield potential. In 2003, Landec Ag is commercially launching its Intellicoat Early Plant corn seed coating technology using Fielder's Choice Direct brand of hybrid seed corn and using brands of two regional seed companies. In addition, 34 U.S. seed companies will be conducting separate evaluations of the Intellicoat Early Plant hybrid corn technology on their own hybrids during 2003, up from eight seed companies conducting similar trials last year.

Landec Ag's first Intellicoat-based commercial product is called Pollinator Plus. Pollinator Plus seed coatings are applied to inbred seed corn to delay seed germination and extend the pollination window thus reducing risks and increasing yields for seed companies. Pollinator Plus is already being used by 30 major seed companies in the production of hybrid seed corn. Seed companies are rapidly increasing their use of this technology, and this product line is projected to be planted on over 80,000 acres in 2003 up 33% compared to 60,000 acres in 2002. In addition, Landec Ag recently entered into a joint licensing agreement with Incotec International BV, a recognized world leader in seed coating enhancement technologies, that will make Pollinator Plus coatings available to the European Union market starting this year.

Landec Ag, headquartered in Monticello, Indiana, combines its proprietary Intellicoat seed coating technology products with its unique electronic, direct marketing and consultative selling approach -- eDC(TM), which is supported by its sophisticated telephonic and electronic call center.