Menlo Park, California
March 13,  2001

Landec Corporation (Nasdaq: LNDC), 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 28, 2001. 

Total revenues for the quarter were $48.1 million versus $33.9 million in the prior year first quarter of fiscal 2000. Landec reported a loss of $3.9 million, or $0.24 per share, compared with a loss of $4.6 million, or $0.30 per share, for the year ago quarter. The results for the year ago first quarter of fiscal 2000 include only two months of operating activity from Apio, Inc., which was acquired on December 2, 1999. EBITDA -- earnings before interest, taxes, depreciation and amortization -- for the quarter were a negative $1.9 million versus a negative $1.3 million in the first quarter of last year. 

The financial statements for the prior year first quarter of fiscal 2000 have been restated to reflect the cumulative effect of the change in accounting principle resulting from the Company's adoption of accounting pronouncement, SAB 101, at the end of fiscal 2000. SAB 101 impacts how the Company accounts for previously recorded up-front licensing revenues related to agreements that involve ongoing R&D and/or supply commitments. The adoption of SAB 101 at fiscal year end 2000 was treated as if it had occurred at the beginning of fiscal year 2000. As a result of adopting this new pronouncement, Landec will recognize these up-front license revenues prorated over the life of the respective contractual commitment periods. 

"Our first quarter results reflect the seasonal pattern in Landec's revenues and profits, with the first quarter historically showing the weakest revenue and profit results," said Gary Steele, President and CEO of Landec. "First quarter revenues increased 42 percent versus the year
ago quarter, but were down 10 percent relative to the prior quarter. Our outlook for the next three quarters, and for fiscal year 2001, remains positive. We expect fiscal 2001 revenues to grow over last year, and we expect to be profitable for fiscal year 2001." 

"The seasonality in revenues and profits is due to two major factors," continued Steele. "First, the Company's seed technology subsidiary, Landec Ag, records virtually all of its revenues and profits during the second fiscal quarter. Secondly, the Company's food technology subsidiary, Apio, can experience produce sourcing issues in the winter months. An early stretch of unseasonable weather this winter adversely affected the Company's sourcing of crops and resulted in $3.0 million in net losses during the quarter." 

"Landec acquired Apio about a year ago in order to expand the Company's proprietary specialty packaging Intellipac(TM) applications through the synergistic operations of an established food company with long standing grower sources of produce. At the time of the acquisition, the majority of Apio's business was oriented toward traditional commodity produce sales and service. Since the acquisition, the majority of Apio's business has shifted to value added products that utilize Landec's proprietary Intellipac technology. 

"The rapid success of our Intellipac technology has allowed us to begin to transfer not only fresh-cut produce but also whole commodities into value added products that bring real differentiation to retailers and to growers," Steele added. "Shipments of iceless broccoli, our first
whole commodity product that utilizes Intellipac technology, began in November 2000 and since its introduction, unit shipments have grown at a 50% compounded rate per month. 

"As our specialty packaging product lines expand and distribution increases, we plan to sell a much higher percentage of our growers' products, using Intellipac technology at fixed prices, thus minimizing the impact of commodity market fluctuations. This predictability for our grower partners greatly reduces and eventually will eliminate the need for Apio's traditional investment risk in crops. We plan to introduce three new iceless value added commodity products using the Intellipac technology within the next 4-6 months. 

"As a result of the winter season losses, and in preparation for improving profitability for the rest of fiscal year 2001, the Company recently instituted initiatives to streamline operations, mostly in non-technology segments of our business," commented Steele. "These initiatives included a ten percent reduction of the Company's workforce and, in the future, the sale of non-essential assets. In addition, the Company is developing a strategy to reduce winter operating risks and will have programs in place before the next winter season." 

Commenting on the financial condition of the company, Steele said, "With the quarter ending cash position of $6.5 million and with positive cash flow from operations expected for the rest of the year, the Company expects to meet operating goals this fiscal year without a major equity financing. The Company may consider a small equity financing sometime in the next twelve months." 

Operating Highlights and Outlook 

Apio Gaining in Store Chains and Export Market 

During the quarter, Apio's iceless product line continued to experience accelerating growth. In addition, Apio initiated programs to broaden its product offerings, including a new export program for the Company's iceless products, which will expand the use of Intellipac technology to export markets. Apio also introduced eight new product offerings during the quarter and expanded its retail and club store presence to over 7800 stores at the end of the first fiscal quarter 2001 from approximately 4000 stores at the end of the year ago quarter. These efforts have the potential to generate substantial revenues for Apio over the coming quarters. In addition, the Company is conducting shipping trials using Intellipac technology for bananas, a $4 billion annual market worldwide and the nation's leading produce item. 

Landec Ag Accelerates Sales and Trials 

Landec Ag, the Company's Intellicoat(R) seed coating subsidiary, also expanded product offerings during the quarter, including its new Early Plant(TM) hybrid corn, wheat/coated soybean Relay Crop(TM) System and Harvestar(TM) offerings, which join the existing line-up of Fielder's Choice Direct(R) hybrid corn and Pollinator Plus(TM) seed corn coatings. The Company's proprietary seed coatings control the timing of seed germination, which can widen the usually narrow window of time for planting crops. 

Pollinator Plus is a coated inbred seed corn, and was the Company's first commercialized Intellicoat product. Pollinator Plus was introduced during last fiscal year and is being successfully sold to over 30 leading seed companies. The Company is optimistic about the future of this product line and expects to double unit sales and customers during fiscal 2001. 

The next generation of Intellicoat products is being tested in a significantly expanded number of field trials this spring. The next generation of Intellicoat products include the wheat/coated soybean Relay Crop System and Early Plant hybrid corn. Landec Ag's Relay Crop System enables farmers to plant two crops on the same acreage in the same year, resulting in higher overall yields and lower overall production costs. The field trial program for Relay Crop will be expanded to 2700 acres this spring from 900 acres last year. Early Plant hybrid corn is designed to allow corn farmers to safely and reliably plant hybrid corn 2-4 weeks earlier than normal, since Landec's proprietary coating delays germination until the soil reaches the optimal soil germination temperature. Otherwise, planting 2-4 weeks earlier in cold soil could cause the seed to die. Allowing the farmer to have a wider planting window lowers costs and potentially increases yields. The field trial program for Early Plant hybrid corn will be expanded to 3000 acres this spring from 20 acres last year. 

Landec Ag also directly markets and sells uncoated seeds and this spring the Company is introducing a new Harvestar product line, which offers high performance alfalfa and nutrient enhanced hybrid seed corn. These products will be sold to new and existing customers who have been expressing interest in these types of seeds.  

Landec Corporation designs, develops, manufactures and sells temperature-activated and other specialty polymer products for a variety of food, agricultural and licensed partner applications. The Company's temperature-activated polymer products are based on its proprietary Intelimer(R) polymers which differ from other polymers in that they can be customized to abruptly change their physical characteristics when heated or cooled through a pre-set temperature switch. 

Company news release
N3380