Menlo Park, California
September 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 third quarter ended July 29, 2001.

Total revenues for the quarter were $50.2 million versus $61.5 million in the prior year third quarter of fiscal 2000. Landec reported a net loss of $1.3 million, or $0.08 per share, compared with a net loss of $568,000, or $0.04 per share, for the same quarter in fiscal year 2000. Revenues for the first nine months of fiscal 2001 were $160.6 million versus revenues of $156.2 million a year ago. The Company reported a loss of $2.1 million or $0.13 per share during the first nine months of fiscal 2001 compared to a loss of $2.2 million or $0.14 per share, in the first nine months of fiscal 2000. EBITDA -- earnings before interest, taxes, depreciation and amortization -- for the quarter were $840,000 versus $1.3 million in the third quarter of last year. For the nine-month period EBITDA was $4.2 million versus $4.9 million for the same period last year.

"Our third quarter results were adversely impacted by lower volumes and margins in Apio's ''fee-for-service" whole produce business that does not utilize Landec's proprietary packaging technology,'' said Gary Steele, President and CEO of Landec. "As outlined in our press release on August 30, 2001, we are in the process of restructuring Apio's ''fee-for-service" business. This restructuring focuses on exiting the cash, labor and equipment-intensive field harvesting and packing operations portion of that business. The effects of the steps taken thus far are decreases in service revenues and margins during the third quarter, and expected decreases in the fourth quarter, of fiscal year 2001. During the third quarter of fiscal 2001, Apio's service revenues were $14.6 million compared to $26.0 million in the third quarter of fiscal 2000 and service gross profits during the third quarter
decreased from $4.0 million last year to $1.9 million this year. During the quarter, we began implementing several strategic initiatives at Apio that will have a negative impact on our fiscal year 2001 results but will position the Company for profitability next year and beyond. These initiatives include 1) outsourcing Apio's carton yard operations to Georgia Pacific, which will free up approximately $4 million in working capital, 2) reducing our winter season farming investments by more than 80% and, 3) implementing our transition out of the field harvesting and packing of the whole produce portion of our ''fee-for-service" business.'' Steele continued, "These initiatives should lead to higher margins, lower cash needs and greater predictability of operating results in the future.''

Landec acquired Apio twenty-one months ago in order to combine the Company's proprietary specialty packaging Intellipac applications with synergistic operations of a leading, established food company. At the time of the acquisition, the majority of Apio's business was oriented toward traditional commodity produce sales and service. Since the acquisition, Apio has experienced substantial growth in its line of specialty packaged products that utilize Landec's proprietary Intellipac technology. This business has nearly doubled its revenue to over $70 million per year in less than two years. Apio's restructuring allows it to continue to grow its technology based value-added business while establishing an infrastructure that will drive operating costs down in the "fee-for-service'' produce business which, in turn, will benefit both Apio and its grower partners. This reduced cost structure will also allow the "fee-for-service'' produce marketing and sales business to grow in tandem with Apio's value-added business. A similar strategy and change in business structure was implemented last year in Apio's fruit business. After exiting the processing of fruit, Apio continued to market and sell whole fruit. The results from that restructuring have been very successful as Apio has decreased its costs and cash needs in its fruit business while increasing gross margins.

"With the growth of Apio's Eat Smart(TM) products using our proprietary Intellipac(TM) specialty packaging, we project that over 40% of Apio's revenues this year will be derived from technology-based products up from 30% last year. Our goal is to continue to grow Apio's value-added technology-based products, which are less influenced by commodity market fluctuations, while working with our current and new grower partners to expand and grow our ''fee-for-service" produce marketing and sales business based on a more focused, lower cost structure,'' stated Steele.

The financial statements for the first nine months of the prior year have been restated to reflect the cumulative effect of the change in accounting principle resulting from the Company's adoption of SEC Staff Accounting Bulletin 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.

Commenting on the financial condition of Landec, Steele added, "Our priorities are to focus on the operating results from our food and agricultural businesses while strengthening our cash position by selling non-strategic assets, entering into selective license agreements with upfront cash payments, increasing our cash flow from operations and selectively using bank lines for seasonal swings in volume. We expect these liquidity actions to take the next 12 months to be fully implemented, and to result in approximately $15-$20 million in new and previously unavailable cash resources. With the combination of these liquidity actions, our lines of credits and our current cash position of $5.5 million, we expect to operate without an additional equity financing for 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 the expansion of the export program for the Company's iceless products that utilize Intellipac technology. Apio also introduced fourteen new product offerings during the first nine months of fiscal 2001 and expanded its retail and club store presence to over 7,100 stores from 5,500 a year ago. These efforts have the potential to generate substantial revenues for Apio over the coming quarters. In addition, the Company is conducting shipping and ripening trials using Intellipac technology for bananas, a $4 to $4.5 billion annual worldwide market for distributors, which in turn, is a $9 to $10 billion annual worldwide market for retailers. Bananas are the nation's leading produce item, contributing approximately nine to ten percent of produce department sales in the United States.

Landec Ag Accelerates Sales and Trials of Technology Products

Landec Ag, the Company's Intellicoat® seed coating subsidiary, expanded its field trials during fiscal year 2001 for its new Early Plant(TM) hybrid corn and Relay Crop(TM) System of wheat and coated soybean. The new products under development join the existing line-up of Fielder's Choice Direct® hybrid corn and Intellicoat coated Pollinator Plus(TM) seed corn coatings.

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 the seed companies. Pollinator Plus, the Company's first commercial Intellicoat product, was introduced during last fiscal year and is being successfully sold to over 30 leading seed companies. In 2001, Pollinator Plus was planted on more than 15,000 acres. The Company expects to expand this product line to over 30,000 acres in 2002.

The next generation of Intellicoat products is being tested in a significantly expanded number of field trials this spring. These Intellicoat products include the Relay Crop System of wheat and coated soybean and Early Plant hybrid corn. Landec Ag's Relay Crop System includes Intellicoat coated soybeans which enable farmers to plant two crops on the same acreage in the same year, resulting in higher overall yields and income per acre for the farmer. The field trial program for Relay Crop has been expanded to 3,000 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 Intellicoat coating delays germination until the soil reaches the optimal soil germination temperature. Otherwise, planting 2-4 weeks 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 field trial program for Early Plant hybrid corn has been expanded to 3,000 acres this spring from 20 acres last year.

Landec Ag also directly markets and sells seed products using a sophisticated telephonic and electronic call center headquartered in Monticello, Indiana. This last spring the Company introduced a new Harvestar(TM) 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 expressed 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® 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
N3800