Landec Corporation Reports Fiscal First Quarter 2014 Results

Landec Corporation Reports Fiscal First Quarter 2014 Results

Company Exceeds Revenue Plan, Meets Operating Plan and Reiterates Full Year
Guidance

MENLO PARK, Calif., Sept. 24, 2013 (GLOBE NEWSWIRE) -- Landec Corporation
(Nasdaq:LNDC), a materials science company that develops and markets
innovative and patented products for healthy living applications in food and
biomedical markets, reported results for the first quarter of fiscal 2014
ended August 25, 2013.

Summary of First Quarter 2014 Results

  oRevenues increased 7% to $109.5 million, with Apio, Inc.'s value-added
    vegetable business up 16% and Lifecore Biomedical, Inc. up 8% compared to
    the first quarter of last year.
  oNet income increased 9% to $4.8 million or $0.18 per share compared to the
    last year's first quarter.
  oOperating income met plan but approximately $0.06 per share of net income
    from the change in the fair market value of our Windset investment will be
    shifted from the first quarter to the remaining three quarters due to
    timing.
  oCash and marketable securities totaled $10.2 million at quarter end after
    spending $4.3 million for capacity expansion and reducing debt by $4.3
    million during the quarter.

"Despite weather-related produce sourcing issues in our Apio food business,
the company exceeded its revenue plan and met its operating income plan for
the quarter," commented Gary Steele, Landec's Chairman and CEO. "The
contribution to net income of $5.4 million during the quarter from the change
in the fair market value of our investment in Windset Farms was $2.3 million
lower than we had budgeted strictly because of a change in the timing of
income recognition. This will result in approximately $0.06 per share shifting
from the first quarter to the remaining three quarters of fiscal 2014. While a
change in the fair market value of an investment is difficult to predict, per
our original guidance for fiscal 2014, we continue to expect to recognize a
35% to 40% increase in the fair market value change of our Windset investment
compared to the fair market value change in fiscal 2013.

"Gross profit in Apio's value-added vegetable business was lower in the first
quarter of fiscal 2014 compared to the first quarter last year as a result of
an increase in lower margin food service sales and higher than expected raw
produce sourcing costs from lower yields due to heavy rains in the Midwest and
along the East Coast and cooler than normal temperatures in California.

"Other operating highlights for the first quarter included Apio launching
additional product offerings in its family of new superfood products and the
company continuing to benefit from our partner Windset's 64-acres of newly
constructed hydroponic greenhouses in Santa Maria, California. Windset has
already begun harvesting from the first 32 acres (Phase 3) of its expansion
and expects to begin harvesting from the next 32 acres (Phase 4) within two
months delivering both phases several months ahead of plan. The accelerated
harvesting of both phases has been incorporated into Windset's revised
projections used to calculate the change in the fair market value of our
investment in Windset for both the first quarter of fiscal 2014 and the
estimate for all of fiscal 2014. This expansion has doubled Windset's capacity
in California to 128 acres or 6 million square feet of greenhouse operations."

Fiscal First Quarter 2014 Results

Revenue in the first quarter of fiscal 2014 increased by 7%, or $7.4 million,
to $109.5 million, compared to $102.1 million in the year-ago quarter, with
the improvement primarily due to a $10.8 million, or 16%, increase in revenues
in Apio's value-added businesses (which includes Apio's fresh-cut specialty
packaged vegetable business, Apio Cooling and Apio Packaging), and a $614,000,
or 8%, increase in revenues at Lifecore as a result of increased sales to
existing customers.

Apio's 16% growth in its value-added revenues in the first quarter compared to
the prior year quarter was primarily due to a 13% increase in sales volumes.
The increase in value-added revenues in the first quarter was partially offset
by an expected $4.0 million decrease in revenues in Apio's export business due
to a decline in volume sales primarily resulting from Indonesian import quotas
on fruit.

Net income in the first quarter of fiscal 2014 increased by 9%, or $386,000,
to $4.8 million or $0.18 per share compared to $4.4 million or $0.17 per share
in the year-ago quarter. The improvement was driven by a $5.4 million increase
in the fair market value of the company's investment in Windset compared to a
$4.3 million increase recorded in the year-ago quarter and a $121,000 decrease
in the pre-tax loss at Lifecore. The increases in net income in the first
quarter were partially offset by a $1.0 million decrease in pre-tax income in
Apio's value-added vegetable businesses due primarily to an increase in lower
margin food service sales, higher than expected produce sourcing costs and the
discontinuation of the Chiquita International Brands, Inc. minimums in
December 2012 when the agreement changed from exclusive to non-exclusive
rights for Landec's BreatheWay® packaging technology.

Cash and marketable securities totaled $10.2 million at the end of the
quarter. Landec generated $4.5 million in cash flow from operations and
purchased $4.3 million of capital equipment for capacity expansion at both
Apio and Lifecore. The company also paid down debt by $4.3 million during the
quarter, and subsequent to quarter end, paid off the remaining balance of its
line of credit.

Management Comments and Guidance for Fiscal 2014

"Our strategy for growth in the healthy living space is to focus on our core
food and biomedical materials businesses by investing in new product
development and production expansion, while also capitalizing on our
technology and on our strong channels of distribution in order to drive growth
across all our businesses," noted Steele. "We are making good progress as
evidenced by the growth in revenues and net income during last fiscal year and
continued growth during the first quarter of fiscal 2014. We are reiterating
our financial guidance for fiscal 2014, which is to grow revenues by
approximately 6% and net income by approximately 20%, after excluding the $3.9
million earn out adjustment in fiscal 2013, barring any significant
weather-related negative events during the remainder of fiscal 2014."

Conference Call

Landec's senior management will host a conference call tomorrow to discuss its
fiscal first quarter 2014, followed by a question and answer period.

The live webcast can be accessed directly at www.landec.com/earningscall or on
the company's website on the Investor Events & Presentations page. The webcast
will be available for 30 days.

Date: Wednesday, September 25, 2013

Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)

Direct Webcast link: www.landec.com/earningscall

To participate in the conference call via telephone, dial toll-free (866)
793-1301 or (703) 639-1307. Please call the conference telephone number 5-10
minutes prior to the start time so the operator can register your name and
organization.

If you have any difficulty with the webcast or connecting to the call, please
contact Liolios Group at 1-949-574-3860.

A replay of the call will be available through Wednesday, October 2, 2013 by
calling toll-free (888) 266-2081 or direct (703) 925-2533, and entering code
#1621865.

About Landec Corporation

Landec Corporation is a materials science company that leverages its
proprietary polymer technologies, application development and innovation
capabilities to develop and commercialize new products in food and
biomaterials markets. Landec's subsidiary, Apio, has become the leader in US
fresh-cut specialty packaged vegetables sold in North America based on
combining Landec's proprietary food packaging technology and the strength of
two major national brands, Eat Smart® and GreenLine®, with the capabilities of
large scale processing and national distribution. Lifecore Biomedical, a
subsidiary of Landec, is a premium supplier of hyaluronan-based materials and
medical products to ophthalmic, orthopedic and veterinary markets worldwide.
In addition, Lifecore Biomedical provides specialized aseptic fill and finish
services in a cGMP validated manufacturing facility for supplying commercial,
clinical and pre-clinical products. Landec will also periodically work with
market-leading companies to develop and commercialize differentiated
polymer-based products under R&D and royalty agreements. For more information
about the company, visit Landec's website at www.landec.com.

Important Cautions Regarding Forward Looking Statements

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,
including such factors among others, as the timing and expenses associated
with operations, the ability to achieve acceptance of the Company's new
products in the market place, the ability to integrate GreenLine's operations
into the Company, weather conditions that can affect the supply and price of
produce, the amount and timing of research and development funding and license
fees from the Company's collaborative partners, the timing of regulatory
approvals, the mix between domestic and international sales, and the risk
factors listed in the Company's Form 10-K for the fiscal year ended May 26,
2013 (See item 1A: Risk Factors) which may be updated in Part II. Item 1A Risk
Factors in the Company's Quarterly Reports on Form 10-Q. 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.


LANDEC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)

                                                               
                                                 August 25, 2013 May 26, 2013
                                                (unaudited)    
ASSETS                                                          
Current Assets:                                                 
Cash, cash equivalents and marketable securities $10,194        $15,263
Accounts receivable, net                         33,178          36,743
Taxes receivable                                 4,942           5,103
Inventories, net                                 24,589          24,113
Deferred taxes                                   2,006           1,582
Prepaid expenses and other current assets        2,816           2,856
Total Current Assets                             77,725          85,660
                                                               
Investments in non-public companies              35,793          30,393
Property and equipment, net                      68,489          65,811
Intangible assets, net                           107,432         107,654
Other assets                                     1,394           1,424
Total Assets                                     $290,833       $290,942
                                                               
LIABILITIES AND STOCKHOLDERS' EQUITY                            
Current Liabilities:                                            
Accounts payable                                 $29,380       $32,256
Accrued compensation                             3,929           4,984
Other accrued liabilities                        3,219           2,332
Deferred revenue                                 628             1,248
Lines of credit                                  1,050           4,000
Current portion of long-term debt                5,961           5,933
Total Current Liabilities                        44,167          50,753
                                                               
Long-term debt, less current portion             32,961          34,372
Deferred taxes                                   26,781          24,054
Other non-current liabilities                    1,455           1,349
                                                               
Stockholders' Equity                                            
Common stock                                     26             26
Additional paid-in capital                       126,502        126,258
Retained earnings                                57,161         52,409
Total Stockholders' Equity                       183,689        178,693
Non-controlling interest                        1,780          1,721
Total Equity                                     185,469        180,414
Total Liabilities and Stockholders' Equity       $290,833       $290,942



LANDEC CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)

                                              Three Months Ended
                                              August 25, 2013 August 26, 2012
Revenues:                                                     
Product sales                                  $108,929       $101,303
Services revenue, related party                550            771
Total revenues                                 109,479        102,074
                                                             
Cost of revenue:                                              
Cost of product sales                          96,430         87,664
Cost of services revenue                       517           647
Total cost of revenue                          96,947         88,311
                                                             
Gross profit                                   12,532         13,763
                                                             
Operating costs and expenses:                                 
Research and development                       1,926          2,204
Selling, general and administrative            8,630          8,556
Total operating costs and expenses             10,556         10,760
Operating income                               1,976         3,003
                                                             
Dividend income                                281            281
Interest income                                60             26
Interest expense                               (431)          (541)
Other income                                   5,400          4,259
Net income before taxes                        7,286          7,028
Income tax expense                             (2,475)        (2,565)
Consolidated net income                        4,811         4,463
Non controlling interest                       (59)           (97)
Net income and other comprehensive income                     
applicable to common stockholders              $4,752         $4,366
                                                             
Diluted net income per share                   $0.18          $0.17
                                                             
Shares for diluted net income per share        27,081         26,212
                                                             

                              LANDEC CORPORATION
                     FIRST QUARTER ENDED AUGUST 25, 2013
                             QUESTIONS & ANSWERS

1)Why is the gross profit as a percentage of revenue (gross margin) down for
the quarter compared to the first quarter of last year?

During the first quarter of fiscal 2014, Apio's value-added business
experienced shortages of certain commodities, mainly green beans and broccoli,
as a result of weather-related sourcing issues. This resulted in produce
sourcing costs that exceeded our expectations by approximately $2.0 million
and reduced Apio's value-added gross margin by 250 basis points in the first
quarter.In addition, during the first quarter we experiencedan increase in
lower margin food service sales compared to the first quarter of last year.

2)How is your new vegetable salad product line progressing?Are you still
unable to fully meet demand for your Sweet Kale Salad?

Our new vegetable salad processing line is fully operational and as a result
we are significantly expanding distribution of our Sweet Kale Salad and Ginger
Bok Choy to club stores, retail grocery chains and food service
distributors.Now that our recently added salad processing line is up and
running, we expect to fully meet demand for all of our salad products for the
foreseeable future.

3)What new products and/or programs other than Apio's vegetable salad line
does the company plan to introduce during fiscal 2014?

In addition to the Sweet Kale Salad and Ginger Bok Choy salads, Apio plans to
launch additional salads to take advantage of a number of upward trends in
specific nutrient-dense superfood items.There are also several additional
innovative value-added vegetable products we plan to launch over the next 12
months.

Later this fiscal year, we expect our partner Windset to launch new
BreatheWay® packaged products for both cucumbers and peppers, as our testing
has demonstrated a significant increase in shelf life for these products using
Landec's technology. We are also working with new partners toward the
commercialization of our BreatheWay technology for several high volume fruit
items.

At Lifecore, we are realizing the anticipated impact of expanded product sales
attributable to recent U.S. approvals for several products. Lifecore expects
continued incremental revenues and profits from these recently approved
products in fiscal 2014. In addition, Lifecore is actively supporting
development programs with partners who are currently in Phase III clinical
studies.The efforts supporting these programs are expected to generate
additional development revenue in fiscal 2014, and have the opportunity to
generate commercial revenues in the future.

4)What is the status of Windset's new Santa Maria, California expansion?

Windset has been in full production with its first 64 acres of greenhouses in
Santa Maria since December of 2012 with different varieties of tomatoes.
Production performance has been exceeding Windset's original expectations.As
mentioned earlier, Windset's 64-acre expansion of hydroponic greenhouse
capacity in Santa Maria, California is several months ahead of plan with the
first 32 acres already being harvested and the next 32 acres expected to begin
harvesting within the next two months, allowing Windset to benefit from
attractive pricing in the winter months.

As a reminder, during fiscal 2013, we recognized pre-tax income of $8.1
million from our percentage of the increase in Windset's fair market value and
we recognized $1.1 million of dividend income from our Windset preferred
stock.During the first quarter of fiscal 2014, we recognized an increase of
$5.4 million in the fair market value of our investment and $281,000 of
dividend income.For the remaining three quarters of fiscal 2014, we expect to
recognize a $5.5 million to $5.9 million increase in the fair market value of
our investment in Windset. We will also recognize $281,000 of dividend income
per quarter totaling $1.1 million for fiscal 2014, the same as last year. In
the first two and a half years of our $15 million investment in Windset, we
have recognized $22.8 million of income.

5) How is the cross selling of products between GreenLine and Apio
progressing?

Other than new product roll outs, the primary focus of our sales team is the
cross selling of Eat Smart® products to GreenLine customers and GreenLine®
products to Eat Smart customers. We have recently added several new food
customers as part of our cross selling effort, however, this continuing effort
will take time since most opportunities are based on contracts expiring or
coming up for bid.In addition,cross selling has been hampered by produce
shortages due to adverse weather.

6)Is the fresh-cut produce category continuing to grow?

According to Nielson/Perishable Group, for the 12 months ending July 2013, the
fresh cut vegetable category unit volume grew 11%. Apio's unit volume growth
for the same period was 13%.

7)What are the key priorities for Lifecore's future growth?

Lifecore's growth is being fueled by an increase in volume in its aseptic
filling business. In support of this growth strategy, we plan to make capital
investments to provide for automation, operating efficiencies and increased
capacity. The anticipated capacity demand is based on active development
programs being commercialized in the future. The development program
opportunities have resulted from expanding existing customer relationships as
well as from emerging new customers. The investment and strategic growth
direction are well synchronized and positions Lifecore to attract both HA and
non-HA based opportunities. This effort greatly strengthens Lifecore's market
presence by offering existing and potential customers a complete service
profile of technical expertise, product development, quality systems and
commercial capacity.

8) What are Landec's top priorities for the next 12 to 24 months?

Our top priorities are: (1) expanding capacity at Apio and Lifecore in order
to meet current and future demand; (2) continuing to integrate GreenLine into
Apio's operations; (3) growing Apio's business by launching new products and
gaining new customers through cross selling opportunities utilizing our two
leading fresh-cut produce brands, Eat Smart and GreenLine;and (4) growing
Lifecore's business by broadening products and services with existing and new
customers, as well as expanding into additional product development
partnerships for new potential commercial uses of our biomedical materials.

9)How do the results by line of business for the three months ended August
25, 2013 compare with the same period last year?

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

                                             
                    Three months ended 8/25/13 Three months ended 8/26/12
Revenues:                                     
Apio Value Added(a) $79,436                   $68,631
Apio Export         21,398                     25,358
Total Apio          100,834                    93,989
Lifecore            8,587                      7,973
Corporate (b)       58                         112
Total Revenues      109,479                    102,074
                                             
Gross Profit:                                 
Apio Value Added    8,881                      9,943
Apio Export         1,205                      1,342
Total Apio          10,086                     11,285
Lifecore            2,388                      2,366
Corporate           58                         112
Total Gross Profit  12,532                     13,763
                                             
R&D:                                          
Apio                275                        328
Lifecore            1,305                      1,149
Corporate           346                        727
Total R&D           1,926                      2,204
                                             
S,G&A:                                        
Apio                5,253                      5,485
Lifecore            1,095                      1,272
Corporate           2,282                      1,799
Total S,G&A         8,630                      8,556
                                             
Other (c):                                    
Apio                5,249                     4,004
Lifecore            2                         (76)
Corporate           (2,475)                  (2,565)
Total Other         2,776                    1,363
                                             
Net Income (Loss):                            
Apio                9,807                     9,476
Lifecore            (10)                     (131)
Corporate           (5,045)                   (4,979)
Net Income          $4,752                   $4,366

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

b) Included in Corporate are the non-Apio and non-Lifecore license and R&D fee
revenues and gross profit.

c) Included in Other is other operating income/(expense), net interest
income/(expense), dividend income, change in the FMV of Windset, non-operating
income/(expense) and income tax expense.

CONTACT: At the Company:
         Gregory S. Skinner
         Vice President Finance and CFO
         (650) 261-3677
        
         Investor Relations:
         Justin Vaicek
         949-574-3860
         LNDC@liolios.com

company logo