Landec Corporation Reports First Quarter Fiscal Year 2007 Results.

MENLO PARK, Calif. -- Landec Corporation (Nasdaq:LNDC), today reported results for the first quarter of fiscal year 2007. Revenues for the first quarter were $51.1 million versus revenues of $49.7 million for the same period a year ago. The Company reported net income for the quarter of $14,000 or $0.00 per diluted share compared to a net loss of $521,000 or $0.02 per share for the same period last year.

"We have five primary objectives for fiscal year 2007: (1) continue to grow our value-added specialty packaging food business, (2) increase the growth of our agricultural seed revenues, (3) expand our banana packaging technology with Chiquita Brands International, Inc., (4) continue to add strategic partner and customer relationships and (5) grow overall revenues by over 10%, excluding Apio's trading business, while increasing net income by 35% to 45% compared to fiscal year 2006 results," stated Gary Steele, President and Chief Executive Officer of Landec. "Despite higher than expected produce sourcing costs in the first quarter, the Company remains on track to achieve these objectives."

Operating Highlights

Apio, Inc. - Landec's Food Subsidiary

Nick Tompkins, President and CEO of Apio reported, "During the first quarter, sales of our value-added specialty packaging vegetable products grew 18% to $35.0 million compared to $29.7 million in the same period last year. The 18% growth in value-added specialty packaging revenues is up from the 17% year-to-year growth recorded in the fourth quarter of fiscal year 2006 and up from the fiscal year 2006 growth of 13%. Partially offsetting the growth in Apio's value added business was a 20% decrease in revenues from Apio's commission trading business to $15.8 million from $19.8 million in the same period last year due to planned decreases in Apio's domestic commodity buy/sell business and lower export volume sales as a result of produce shortages."

"Apio's gross profits from value-added vegetable products decreased in the first quarter by $1.0 million to $4.5 million compared to the same period in the prior year. This decrease in gross profits was attributable to weather related shortages of contracted product which required Apio to procure supplemental product on the open market at costs significantly above contracted prices. The increases in produce sourcing cost were substantially mitigated by a more profitable mix of products sold and improved operational efficiencies," said Tompkins.

"Overall Apio revenues increased to $50.8 million during the first quarter of fiscal year 2007 compared to $49.5 million for the same period a year ago. Overall Apio gross profit decreased $1.1 million to $5.4 million compared to $6.5 million for the first quarter last year while net income decreased $200,000 to $1.7 million for the first quarter of fiscal year 2007 compared to $1.9 million for the same period last year," added Tompkins.

Landec Ag, Inc. - Landec's Seed Subsidiary

Tom Crowley, President and CEO of Landec Ag reported, "During the Company's first and second fiscal quarters Landec Ag is preparing for the upcoming sales season and as a result is expending efforts on sales and marketing. Virtually no Landec Ag sales occur in the Company's first and second fiscal quarters. Essentially all of Landec Ag's sales occur in Landec's third and fourth fiscal quarters, with the majority being realized in the fourth fiscal quarter."

A factor affecting Landec Ag's results during the first quarter of fiscal year 2007 compared to the first quarter of fiscal year 2006 is the loss of $626,000 from sales and marketing expenses associated with the Heartland Hybrids[R] brand products which were not included in the prior year first quarter since Landec acquired Heartland at the beginning of the second fiscal quarter of last year.

Landec's Intelimer[R] Supply and Licensing Business

The Company is working with a number of existing and potential customers to expand the use of Intelimer polymers in cosmetic and personal care products, as well as industrial non-food and non-agricultural products.

On March 14, 2006, the Company entered into an exclusive license and research and development agreement with Air Products and Chemicals, Inc. providing Air Products with the exclusive right to use Landec's Intelimer materials technology in specific fields worldwide. The license fees for this agreement will be recognized as license revenue over a three year period beginning March 2006. Landec received an upfront licensing fee of $900,000 at close and will receive up to an additional $1.6 million of license payments that will be paid in quarterly installments of $200,000 each during years two and three of the agreement. Additionally, in accordance with the agreement, Landec will receive 40% of the gross profits that are generated from the sale of products by Air Products after March 14, 2007 that incorporate Landec's Intelimer materials.

Landec Consolidated

For the first quarter of fiscal year 2007 net income was $14,000 which is $535,000 higher than the same period last year due to several factors. Items increasing net income included: (1) a $1.3 million settlement of insurance claims related to a fire that occurred at Landec's Dock Resins' facility in 2000 which was recognized as a reduction in Corporate selling, general and administrative expenses, (2) a decrease in selling, general and administrative expenses at Apio of $630,000 due primarily to lower sales and marketing expenses during this year's first quarter compared to the same period last year and (3) a $314,000 increase in non operating income due to increased interest income and reduced minority interest expenses. Net income was decreased by (1) a $1.0 million decrease in gross profits from Apio's value-added business due to significant produce shortages during the quarter, (2) a $118,000 decrease in gross profits from Apio's trading business due to lower planned revenues and (3) from a loss of $626,000 at Heartland Hybrids which was not acquired until the beginning of the second quarter of fiscal year 2006.

Landec's First Quarter of Fiscal Year 2007 Earnings Conference Call

A conference call will follow this release at 8:00 a.m. Pacific Time on Wednesday, September 27, 2006, during which senior management of Landec will present an overview of results for the first quarter of fiscal year 2007. 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 [phone] or [phone] at least 5 minutes prior to the start. A replay of the call will be available through Wednesday, October 4, 2006 by calling [phone], code #962506.

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 28, 2006 (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--

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