Landec Corporation Reports First Nine Months and Third Quarter Fiscal Year 2009 Results

Landec Ends Quarter with Record Cash of $63.9 Million
MENLO PARK, Calif.--(Business Wire)--
Landec Corporation (Nasdaq:LNDC), today reported results for the first nine
months and third quarter of fiscal year 2009. Revenues for the first nine months
of fiscal year 2009 increased 1.4% to $183.7 million compared to revenues of
$181.2 million for the same period a year ago. Net income for the first nine
months decreased to $5.9 million or $0.22 per diluted share compared to net
income of $10.2 million or $0.38 per diluted share for the same period last
year. For the third quarter of fiscal year 2009, revenues were $53.9 million
versus revenues of $59.6 million in the year ago quarter. The Company reported
net income for the third quarter of fiscal year 2009 of $1.5 million or $0.06
per diluted share compared to net income of $4.0 million or $0.15 per diluted
share in the third quarter of the prior year.

"For the first nine months of fiscal year 2009, we have increased revenues,
generated net income and generated cash flow from operations," stated Gary
Steele, Chairman and CEO of Landec. "Since November 2008, we have been feeling
the impact from the slumping U.S. economy and the decline in consumer spending.
However, we have held and slightly improved our gross margin and operating
margin during the third quarter relative to the second quarter. In addition, our
fresh-cut vegetable business continues to outperform the overall industry
category. According to syndicated market data, for the three and nine month
periods ended March 1, 2009, the overall industry unit volume sales in the
fresh-cut vegetable category declined 13% and 8%, respectively. Landec`s unit
volume sales in the fresh-cut vegetable category for the same three and nine
month periods declined 5% and 1%, respectively, compared to the same periods
last year, resulting in increased market share. We believe that the fresh-cut
vegetable industry category will return to positive growth during our fiscal
year 2010 as consumers return to fresh, nutritious and conveniently packaged
produce products."

"For our fiscal year ending May 31, 2009, we expect Landec revenues to be
moderately down compared to last fiscal year," stated Greg Skinner, Landec`s
Chief Financial Officer. "We expect our fourth quarter revenues to follow the
normal seasonal pattern resulting in a decrease of about 5% from third quarter
revenues. At this point in time, due to the uncertainty of the U.S. economy and
consumer spending, it is difficult to forecast our net income for all of fiscal
year 2009 with any degree of reliability. However, in our fourth quarter we
expect operating income to be higher than in our third quarter and we expect to
generate positive cash flow from operations. Our balance sheet remains very
strong, with no debt and with a record level of nearly $64 million of cash and
marketable securities."

For the first nine months of fiscal year 2009, the increase in overall revenues
of $2.5 million compared to the same period last year was due to a $4.0 million
or 8% increase in revenues from Apio`s commodity trading business primarily due
to an increase in domestic buy/sell revenues. This increase was partially offset
by a $1.3 million or 1% decrease in revenues from Apio`s value-added specialty
packaging vegetable products.

For the first nine months of fiscal year 2009, Landec`s net income decreased to
$5.9 million from $10.2 million in the same period last year due to several
factors. Items decreasing net income included: (1) a $3.3 million decrease in
gross profit in Apio`s value-added vegetable business primarily due to increased
raw material costs for produce and packaging, (2) an $883,000 or 46% decrease in
interest income due to the Company`s decision to invest only in FDIC-insured
certificates of deposit, U.S. government backed instruments and AAA rated
municipal bonds, all of which have yields that are considerably lower than those
the Company realized from its investments in the same period last year, and (3)
an increase in income tax expense of $189,000 due to an increase in Landec`s
effective tax rate for fiscal year 2009 to 41%. These decreases in net income
were partially offset by a $287,000 or 11% increase in gross profit for Apio`s
commodity trading business.

The decrease in revenues for the third quarter of fiscal year 2009 was primarily
due to: (1) a $3.0 million or 6% decrease in revenues from Apio`s value-added
specialty packaging vegetable products due to the decline in the fresh-cut
vegetable category during the third quarter, (2) a $1.3 million decrease in
revenues from Apio Packaging due to the timing of minimum payments from
Chiquita, and (3) a $1.3 million decrease in revenues from Apio`s commodity
trading business due to a decrease in trading sales volumes and from lower
average per unit sales prices due to product mix changes to lower priced fruit
products.

For the third quarter of fiscal year 2009, Landec`s net income decreased to $1.5
million from $4.0 million in the same period last year due to several factors.
Items decreasing net income included: (1) a $1.8 million decrease in gross
profit in Apio`s value-added vegetable business related to lower revenues and
higher costs outlined above, (2) a $1.3 million decrease in gross profits from
Apio Packaging related to the timing of revenues compared to the prior year, and
(3) a $307,000 or 58% decrease in interest income from lower yielding
instruments compared to the prior year. These decreases in net income were
partially offset by a $618,000 decrease in operating costs primarily due to
lower selling, general and administrative expenses at Apio and a $405,000
decrease in income tax expenses due to lower pre-tax earnings.

Landec Third Quarter 2009 Earnings Conference Call

A conference call will follow this release at 8:00 a.m. Pacific Time on
Wednesday, April 8, 2009 during which senior management of Landec will present
an overview of results for the first nine months and third quarter of fiscal
year 2009. Interested parties have the opportunity to listen to the conference
call live on the Internet at www.landec.com on the Investor Relations web page.
A replay of the webcast will be available for 30 days. Additionally investors
can listen to the call by dialing (866) 814-1913 or (703) 639-1357 at least 5
minutes prior to the start. A replay of the call will be available through
Wednesday, April 15, 2009 by calling (888) 266-2081or(703) 925-2533, code
#1343032.

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. For more information about the Company visit
Landec`s website at www.landec.com.

Except for the historical information contained herein, the matters discussed in
this news release are forward-looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially. These risk
factors are listed in the Company`s Form 10-K for the fiscal year ended May 25,
2008 (See item 1A: Risk Factors). As a result of these and other factors, the
Company expects to continue to experience significant fluctuations in quarterly
operating results and there can be no assurance that the Company will remain
consistently profitable. The Company undertakes no obligation to update or
revise any forward-looking statements whether as a result of new developments or
otherwise.

--Tables and Q&A to Follow--

LANDEC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)

March 1, 2009 May 25, 2008
(unaudited)
ASSETS
Current Assets:
Cash, cash equivalents and marketable securities $ 63,916 $ 59,039
Accounts receivable, net 12,835 19,871
Inventories, net 5,294 7,329
Notes and advances receivable 491 501
Deferred taxes 2,180 2,180
Prepaid expenses and other current assets 2,042 1,746
Total Current Assets 86,758 90,666

Property and equipment, net 22,116 21,306
Intangible assets, net 35,589 35,582
Other assets 3,759 3,035
Total Assets $ 148,222 $ 150,589

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 10,134 $ 19,264
Accrued compensation 1,167 2,197
Other accrued liabilities 1,651 2,930
Deferred revenue 4,002 3,613
Total Current Liabilities 16,954 28,004

Deferred revenue 3,500 5,000
Deferred taxes 3,019 1,569
Minority interest 1,641 1,550

Shareholders' Equity
Common stock 26 26
Additional paid-in capital 115,713 112,948
Retained earnings 7,369 1,492
Total Shareholders' Equity 123,108 114,466
Total Liabilities and Shareholders` Equity $ 148,222 $ 150,589

LANDEC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per-share data)
(unaudited)

Three Months Ended Nine Months Ended
March 1, February 24, March 1, February 24,
2009 2008 2009 2008
Revenues:
Product sales $ 51,242 $ 56,907 $ 175,370 $ 172,981
Services revenues 930 737 3,086 2,721
License fees 1,550 1,720 4,650 4,851
Research, development, and royalty revenues 189 243 595 674
Total revenues 53,911 59,607 183,701 181,227

Cost of revenue:
Cost of product sales 45,574 48,237 155,957 150,389
Cost of services revenues 746 623 2,473 2,261
Total cost of revenue 46,320 48,860 158,430 152,650

Gross profit 7,591 10,747 25,271 28,577

Operating costs and expenses:
Research and development 891 802 2,647 2,411
Selling, general and administrative 4,153 4,860 13,278 13,645
Total operating costs and expenses 5,044 5,662 15,925 16,056
Operating income 2,547 5,085 9,346 12,521

Interest income 220 527 1,032 1,915
Interest expense (2 ) (5 ) (6 ) (18 )
Other expense (110 ) (121 ) (406 ) (350 )
Net income before taxes 2,655 5,486 9,966 14,068
Income taxes (1,115 ) (1,520 ) (4,089 ) (3,900 )
Net income $ 1,540 $ 3,966 $ 5,877 $ 10,168

Diluted net income per share $ 0.06 $ 0.15 $ 0.22 $ 0.38

Shares used in diluted per share computations 26,564 26,936 26,763 26,961

LANDEC CORPORATION
THIRD QUARTER ENDED MARCH 1, 2009
QUESTIONS AND ANSWERS

1) What is the Company`s outlook for all of fiscal year 2009?

It is difficult to forecast the remainder of fiscal year 2009.Short-term buying
habits of customers have changed significantly as the U.S. economy continues to
slump.The just-ended month of March continued to show a slowdown in the overall
fresh-cut vegetable category compared to the same period last year, especially
in the fresh-cut tray segment.To be conservative, we are assuming that unit and
sales growth in the overall fresh-cut vegetable category for the remainder of
fiscal year 2009 will be negative in comparison to last year.However, during the
remainder of fiscal year 2009 compared to the same period last year, we expect
to continue to grow market share, reduce operating expenses and generate net
income and positive cash flow from operations.

2) What are Landec`s corporate priorities for the next couple of years?

We have five priorities:(1) continue to generate operating cash flow, (2) extend
the commercialization of our BreatheWay packaging programs in bananas, avocados,
mangos and new applications, (3) provide strong technology support to our
licensing corporate partners in launching new products, (4) seek synergistic
acquisition opportunities that use our technology or expand our technology base,
and (5) expand our Intelimer polymer materials R&D activities in order to
develop new business opportunities.

In order to successfully advance our priorities, our plan through fiscal years
2009 and 2010 includes the following initiatives:

a)Complete new licensing partnerships

b)Expand the sales of our packaging technology with Chiquita and others

c)Bring the seed coating program with Monsanto to field trials

d)Start at least one new initiative in a promising area of materials science
outside of our food technology business

e)Continue to generate income and positive cash flow

f)Evaluate synergistic and accretive acquisition opportunities that utilize or
complement our technology

g)Maintain a strong balance sheet

3) How is the Chiquita collaboration progressing?

Our programs with Chiquita are progressing on three fronts and delayed on one
front:

a) In the Chiquita-To-Go program, Chiquita bananas in our packaging are being
sold to coffee chains, convenience stores and mini-mart gas stations.Chiquita is
a major supplier of bananas to Starbucks for both its Vivanno banana smoothie
program and the individual sale of bananas throughout the United States.In
addition, the Chiquita-To-Go program has been launched in three European
countries.Even in this challenging economic environment, the Chiquita-To-Go
program is progressing in both the U.S. and Europe.

b) In the QSR arena, McDonald`s has been conducting regional market tests for
products with bananas using Chiquita bananas delivered in our BreatheWay
packaging and we have been informed that the Chiquita bananas delivered in our
BreatheWay packaging have met the technical requirements for the delivery to
test trial sites.We do not know the specifics of McDonald`s plans concerning
bananas.

c) In the avocado program with Chiquita, Chiquita is selling avocados packaged
in our BreatheWay packaging technology to food service customers and retail
grocery chains and the avocado program continues to go well.

d) Retail grocery store advanced trials for bananas have been put on hold until
such time that consumers are prepared to purchase innovative packaged bananas
with longer shelf life that are sold as a premium priced product.

4) What are the longer-term revenue growth prospects for Apio`s food technology
business, which consists of Apio`s value-added specialty packaged vegetables
business plus Apio`s separate packaging technology business?

We continue to have the concerns we mentioned last quarter about the U.S.
economy and the impact it is having on consumers.We believe that our BreatheWay
packaged food products provide excellent value and a healthy choice for
consumers.In the short-term, we expect that consumer demand will remain weak,
especially for our tray products, but we foresee good long-term growth in our
food business by (1) capturing new customers, and (2) expanding our BreatheWay
technology to new markets and application areas. For our food business, our
longer-term growth plans include six major initiatives.

The first three initiatives are for our Apio value-added specialty packaged
vegetables business:

i) Develop and launch new, innovatively designed products such as those we have
developed in our vegetable tray and salad lines.

ii)Look for synergistic acquisition partners that can benefit from our
BreatheWay technology and channels of distribution, as well as from our
expertise in post harvest physiology, sourcing, and processing.

iii)Access unique produce with consumer traits that bring discernible
differentiation in nutrition, taste, color, aroma and/or texture.We will do this
through our exclusive licensing arrangement with Monsanto Seminis, the world`s
largest vegetable seed trait developer and supplier.Initial field trials began
this past fall.

The next three initiatives are for our Apio packaging technology business:

i)Expand the use of our BreatheWay technology internationally. We announced a
new distribution agreement in June 2008 with Breakthrough Solutions for our
packaging technology for South America.

ii)Expand our BreatheWay technology in new markets in North America such as food
service and the U.S. Military.Our Apio food business now has these efforts
underway using our BreatheWay packaging technology.

iii)Expand our BreatheWay technology into new product applications such as
tomatoes, melons and flowers to name a few.

5) What is happening in the Monsanto licensing program?

During 2008Monsanto formed a new business called the Seed Treatment Business
which allows Monsanto to develop its seed treatments internally rather than
purchasing its seed treatments from third parties.The concept of seed treatments
is to place an insecticide or fungicide directly onto the seed surface in order
to protect the seed and the seedling as it emerges.Our belief continues to be
that Landec`s Intellicoat seed coating technology can be an integral and
proprietary part of Monsanto`s commitment to building a major position in seed
treatments worldwide by using Landec`s seed coatings as a "carrier" of
insecticides/fungicides which can be dispensed at the appropriate time based on
either changes in soil temperature or time.We continue to be positive about this
program and in fiscal year 2009 we are focused on validating the use of Landec`s
coating technology for these applications, including the start of field trials
which are on track for calendar year 2009.

6) What is happening with Air Products?

The progress was slow in the first two years while Air Products was building its
personal care team, but momentum is now building as new product applications and
formulations are emerging from the laboratory.Landec and Air Products are
focused on two areas -- personal care and catalysts. Air Products has recently
accelerated its sales and marketing efforts, particularly in the area of
personal care, which should lead to new customers and new product introductions
in fiscal year 2010.

7) What is happening with Aesthetic Sciences?

Aesthetic Sciences is making good progress on the technology front and has
recently received an approval from the European Union to make and sell its
Smartfil Injection System in Europe.However, Aesthetic Sciences is in need of
working capital financing to be able to make and sell its Smartfil Injection
System.The current venture capital environment for raising new capital is very
limited.The management of Aesthetic Sciences is currently looking for financing
through corporate partner relationships so they can continue to pursue the
opportunities in the dermal filler arena using Landec`s Intelimer technology and
to launch the Smartfil Injection System.

8) How does Landec management plan to handle the current recession and economic
downturn?

Because of the strength of our balance sheet and the fact that we continue to
generate positive cash flow from operations, we see the next 12-18 months as an
opportune time to further investigate acquisitions and corporate licensing.There
may be one or more companies that potentially have synergistic products and/or
technology platforms that would be an excellent fit for Landec.A number of
companies do not have the capital structure to grow.In addition, many
corporations are cutting back on R&D expenditures but they need access to new
products and technologies and will seek licenses from companies such as
Landec.We are prepared to capitalize on these trends by using our strong balance
sheet and positive operating cash flow without sacrificing the security of
maintaining substantial cash reserves.

9) How is the M&A search progressing?

We have been working on identifying potential target companies for nearly a year
now.One potential target company in the food products arena, for which we have
spent a considerable amount of time and legal fees to evaluate, is no longer an
acquisition target.We will continue to evaluate opportunities in the food
business.In the non-food portion of our business, we have recently hired an M&A
advisor to assist in finding potential material science-oriented target
companies.

10) How much of this year`s increased tax expense are you expecting to actually
have to pay?

Because of the benefit of substantial net operating losses, primarily from the
repurchase of subsidiary options, and tax credit carryforwards, we are
estimating that in fiscal year 2009 Landec will pay only 15% of its GAAP income
tax expense in cash, for an effective cash tax rate of approximately 6%,
resulting in the preservation of cash and a favorable impact on our cash
balance.

11) What are your early thoughts regarding fiscal year 2010?

It would be premature to give any specific guidance at this point since we have
just begun our planning and budgeting process for fiscal year 2010.We do plan to
give revenue and income guidance during our fiscal year end 2009 results press
release and conference call.As we look to our next fiscal year, our preliminary
outlook indicates a number of areas that will need to be considered as we go
through our planning process, including:

1)The projected direction of the U.S. economy during our fiscal year 2010

2)Projected industry category growth for fresh-cut vegetables

3)Projected progress in our licensing programs with Chiquita and Air Products

4)Timing of new product launches and rate of ramp up

5)Timing of acquisitions by Landec, if any

6)Known and projected cost increases and the likelihood of being able to
increase prices to offset some or all of the cost increases

7)Market responses of our competitors

8)Rate of return on our cash investments

As we begin thinking about our next fiscal year, we continue to focus on
achieving our long-term objectives which include on-going revenue growth, with
profitability and positive cash flow, in both our food technology business and
our technology licensing business.We also believe that over the next five years,
our pre-tax margin mix will begin to change with the increasing contribution to
sales and pre-tax margin from our non-food technology licensing business, which
generates higher margins and which is expected to grow fasterthan the continuing
growth in our value-added specialty packaging vegetable business.If our partners
execute in a timely way, and if we continue to implement our plans well, we
should see both gross margins and net margins increasing over a 3-5 year
timeline.

We believe our future obligations to our shareholders are to: (1) focus on
technology innovation and new product development, (2) continue supporting our
collaborative partners Chiquita, Monsanto and Air Products, and (3) insure that
our sizable cash balances are protected in investments that are safe, and
available as needed to selectively pursue and take advantage of profitable
growth opportunities.

12) How do the Pre-Tax results by line of business for the three and nine months
ended March 1, 2009 compare with the same periods last year?

The results are as follows (unaudited and in thousands):

Three months Three months Nine months Nine months
ended 3/1/09 ended 2/24/08 ended 3/1/09 ended 2/24/08
Revenues:
Apio Value Added(a) $ 43,936 $ 46,889 $ 124,252 $ 125,547
Apio Packaging (b) 586 1,873 2,055 2,203
Technology Subtotal 44,522 48,762 126,307 127,750
Apio Trading (c) 7,650 8,974 52,301 48,279
Total Apio 52,172 57,736 178,608 176,029
Tech. Licensing (d) 1,739 1,871 5,093 5,198
Total Revenues 53,911 59,607 183,701 181,227

Gross Profit:
Apio Value Added 4,622 6,434 15,287 18,566
Apio Packaging 581 1,852 1,907 2,116
Technology Subtotal 5,203 8,286 17,194 20,682
Apio Trading 649 590 2,984 2,697
Total Apio 5,852 8,876 20,178 23,379
Tech. Licensing 1,739 1,871 5,093 5,198
Total Gross Profit 7,591 10,747 25,271 28,577

R&D:
Apio 306 253 980 908
Tech. Licensing 585 549 1,667 1,503
Total R&D 891 802 2,647 2,411

S,G&A:
Apio 2,785 3,759 9,422 10,460
Corporate 1,368 1,101 3,856 3,185
Total S,G&A 4,153 4,860 13,278 13,645

Other (e):
Apio (34 ) (29 ) (62 ) 39
Corporate 142 430 682 1,508
Total Other 108 401 620 1,547

Net Income (Loss) Before Taxes:
Apio 2,727 4,835 9,714 12,050
Tech. Licensing 1,154 1,322 3,426 3,695
Corporate (1,226 ) (671 ) (3,174 ) (1,677 )
Net Income Before Taxes $ 2,655 $ 5,486 $ 9,966 $ 14,068

a) Apio`s Value-Added business includes revenues and gross profit from Apio
Cooling LP.

b) Apio Packaging includes the BreatheWay trademark for banana packaging,
packaging technology for other shelf life sensitive vegetables and fruit, plus
other unique packaging solutions.

c) Apio`s Trading business includes its commission-based commodity export
business and its commission-based domestic commodity buy/sell business.

d) Included in Tech. Licensing are the Intellicoat license fees from Monsanto.

e) Included in Other are net interest income and non-operating income/(expense).

Landec Corporation
Gregory S. Skinner, 650-261-3677
Vice President Finance and CFO
or
EAS & Associates
Liz Saghi, 805-967-0161

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