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Executives

Gary T. Steele – President & Chief Executive Officer

Gregory S. Skinner – Chief Financial Officer & Vice President of Administration

Analysts

Tony Brenner – Roth Capital Partners

Peter Black – Winfield Capital

Michael Needleman – Preservation Asset Management

William Lauber – Sterling Capital Management

Landec Corporation (LNDC) Acquisition of GreenLine Foods, Inc. Conference Call April 23, 2012 4:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Landec special conference call regarding the acquisition of GreenLine Foods. At this time, all lines will remain in a listen-only mode. (Operator Instructions) As a reminder, today’s conference call is being recorded.

I would now like to turn the conference call over to your host, Mr. Gary Steele, Chairman and CEO. You may go ahead.

Gary T. Steele

Good afternoon and thanks for joining us in this special conference call to discuss Landec's acquisition of GreenLine Foods. I have with me today Greg Skinner, our Chief Financial Officer and Ron Midyett, the CEO of Apio.

During today’s call, we may make forward-looking statements that involve certain risk and uncertainties that could cause actual results to differ materially. These risks are outlined in our filings with the Securities and Exchange Commission, including the Company's Form 10-K for fiscal year 2011.

This morning, we announced the acquisition of GreenLine Foods from The Riverside Company, a global private equity firm. We are very excited about the acquisition of GreenLine, as it is a very good fit with our Apio value-added fresh-cut vegetable business. We see significant operational synergies from this acquisition.

GreenLine is the largest provider of fresh-trimmed, microwaveable packaged green beans in North America, and manages the process from the field through its online, on time delivery to customers. From its original product focus on fresh-trimmed, microwaveable green beans, the Company has added new product items including wax beans, bean blends, sugar snap peas and French green beans.

When GreenLine’s specialty packaged beans reaches consumers, they are already trimmed and ready to cook, ensuring quick preparation, consistent quality and easy storage. GreenLine’s primary production facilities are located in Bowling Green, Ohio and Hanover, Pennsylvania. Additional production facilities are located in Vero Beach, Florida and Pico Rivera, California with distribution centers in New York and South Carolina.

The addition of GreenLine’s significant footprint on the East Coast and dedicated fleet of privately operated trucks is a strong complement to Apio’s California base of operations. With this investment, we now have two leading brands, Eat Smart and GreenLine in the fresh-cut produce market. Additionally, we have significantly expanded our distribution in retail grocery chains, added new food service customers and acquired strategic East Coast processing and distribution facilities.

With the GreenLine acquisition, Landec’s Apio food business will now have products in approximately 80% of North American retail grocery store sites. These new capabilities will allow Apio to offer enhanced services to our customers with a broader range of products, all with a continued commitment to product quality and food service.

U.S. consumer demand is growing for fresh-cut vegetables including green beans as consumers seek fresh healthy foods conveniently prepared. GreenLine is well positioned to support this growing market with strong sourcing capabilities and a national distribution network to ensure year-round supply of high quality product to its customers. Over time, this expanded distribution will provide greater placement potential for new products and will enable our Apio food business to take advantage of the growth in the fresh-cut green bean category as consumer demand continues to shift away from the purchase of unwashed and untrimmed bulk green beans.

This acquisition is immediately accretive and provides our Apio food business with critical mass to better serve both existing and new customers.

For Landec fiscal year beginning May 28, 2012 GreenLine’s revenue is estimated at approximately $95 million to $100 million annually and EBITDA is estimated to be between $10 million to a $11 million. In addition, we see operational and customer synergies that can be realized in the next 12 to 24 months.

The acquisition of GreenLine is consistent with our strategy of investing in our two core businesses, our food business and our biomedical materials business. We seek accretive investments that builds on our material science technology, as demonstrated by our Lifecore acquisition in 2010. We also seek to strengthen our channels of distribution to provide greater penetration of our products and markets we serve as demonstrated by our investment and Windset Farms in 2011 and now by our acquisition of GreenLine Foods in 2012.

Our continued focus is on profitably building and growing our core food and biomedical businesses, while periodically and selectively collaborating with key partners under technology licensing arrangements in areas outside of our core businesses.

Now some financial details. We acquired the stock of GreenLine for $63 million in cash with no assumed debt. The agreement also includes future earnout potential for Riverside of up to $7 million based on GreenLine achieving certain financial targets during calendar year 2012. In conjunction with the acquisition, Apio secured $31.8 million in term financing secured by Apio’s and GreenLine’s fixed assets.

In addition, Apio entered into a five year $25 million working capital line with an interest rate of LIBOR plus 2% based on the combination of Apio and GreenLine accounts receivable and eligible inventory balances.

The term debt is comprised of a $12.7 million equipment loan, which matures in seven years with a fixed interest rate of 4.37% and a $19.1 million real estate loan that matures in 10 years with a fixed interest rate of 4.02%. Both the term financing and the working capital lines are being financed by GE Capital.

For fiscal year 2012 ending May 27, 2012 Landec will record approximately $800,000 of acquisition related expenses. In addition, the company will record approximately $1 million of loan origination fees, which will be amortized over approximately seven years. The company is forecasting that GreenLine’s operating results for the period from the close of the acquisition to the end of our current fiscal year ending May 27th, will offset a majority of the acquisition related expenses.

For fiscal year 2012, the year we’re in, as result of including GreenLine’s operating results for the last five weeks of this year, we are increasing our revenue guidance and maintaining our net income guidance. For fiscal year 2012, we now expect revenues to grow more than 10% compared to our previous guidance for revenues to grow 9%. And we are maintaining our guidance for net income to grow approximately 40% year-over-year compared to fiscal year 2011, after adding back the one-time impairment charge of $4.8 million to net income for last year’s fiscal year. What is this acquisition all about? Well, as we stated for some time now our focus has been growing and expanding our two core businesses. Where we can directly call on customers and where we are in control of our own destiny.

Over the past 24 months, we have expanded our biomedical materials business at Lifecore and add new capabilities in fermentation processing and filling operations and we’re now better utilizing our 112,000 square feet of plant capacity at Lifecore, as we add new products and customers.

Lifecore is generating gross margins of 50% or more with EBITDA margins of roughly 30%. At our Apio Food business, we are the market leader and specially package fresh-cut vegetables and now with GreenLine we have access to approximately 80% of retailers in North America with the broader product line and with processing shipping locations now on both the East and West Coast nearly population centers.

GreenLine’s customer base and Apio’s customer base fits extremely well. We aim to make buying our products easy for retail grocery chains and club stores. First with one-stop shopping for high quality specially package fresh-cut vegetable products and secondly with outstanding customer service and shipping logistics.

In addition, GreenLine put us into the food arena for the first time in a meaningful way. Apio and GreenLine will be combined into one fully integrated entity thus providing substantial synergies and operations in customer base over the next one to two years.

GreenLine as a great brand excellent grow our partners and a strong customer base and experience management team. We plan to build on their foundation. Our food business strategy now has three strong legs to stand on with Apio, GreenLine foods, and our investment in Windset Farms.

The acquisition of GreenLine serve to advance Apio’s already strong market momentum as demonstrated by Apio’s 19% unit volume growth over the last nine months compare to the overall fresh-cut produce industry category growth of 6.2%.

Apio’s unit volume growth in market share along with that GreenLine will continue to benefit from Apio’s focus on advancing and improving is competitive advantages and packaging technology, product line breath and quality, customer service and shipping logistics for on time delivery.

As stated, earlier this acquisition is highly accretive; we look forward to updating you on the integration of GreenLine as it progresses. Our focus remains on growing revenues and profitably generating cash flow to take advantage of further investment opportunities down the road.

We are now ready for the questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Tony Brenner of Roth Capital. Please go ahead.

Tony Brenner – Roth Capital Partners

Thank you.

Gary T. Steele

Hi, Tony

Tony Brenner – Roth Capital Partners

Good afternoon, I have a couple of questions. First with this acquisition, is Landec back in the farming business?

Gary T. Steele

No, we don’t want to be the farming business they work with growers that they and work with for a number of years. And Tony I would say if there is any greatest strength of GreenLine it would be there grow relationships in the fact that they have aligned with the leading growers in green beans and that main build for growing green beans ranges from Florida up to Ohio, just depending on the seasonality. So, they contract with growers, just as Apio contracts with growers. We are not in the farming business.

Tony Brenner – Roth Capital Partners

Do you have GreenLine’s trailing 12 month revenues?

Gregory S. Skinner

Yes. They will be obviously out there in the public domain within – whatever 70 days when we release the pro forma numbers. But our guidance for this next year’s 95 to 100 and just assume that you can back off the category growth from that to get their calendar 12 number is.

Gary T. Steele

And the category growth has been about 7%. Did that answer your question, Tony?

Tony Brenner – Roth Capital Partners

No. But it will do. I gather there is a mix and match in terms of retailers and that GreenLine is not in many of the retailers that Apio has a presence in, including club, and vise vera, how quickly can that retailer synergy be achieved and to what – what extend is it reasonable to look for that to happen in the first fiscal year.

Gary T. Steele

Ron, do you want to address that question?

Ronald L. Midyett

Yes. Tony, you’re right in saying that there are some shared customers, but then there is also quite a list of unique customers that either Apio or GreenLine possesses, and we will be looking at those as synergistic opportunities. I think the best way to answer your question is, it really depends on what their current supply situation is if some of those customers perhaps are under contract under a different supply condition, obviously, it’s going to be depended on those specific details. But I would say generally, we are really looking at capturing both operational and sales synergies over the first 12 to 24 months.

Tony Brenner – Roth Capital Partners

Well, it’s – I mean, if your GreenLine guidance and I mean there is a 7% difference between the top and low end of your guidance. So I’m not sure what that implies. But if you are saying it's going to be up at category rates, then the implication is that there is no incremental retailer in your guidance, is that fair for both businesses? Is that what you are saying?

Gary T. Steele

Yes. Pretty much. Sometimes I understand how conservative this guidance really is and what’s assumed in there, in benefiting from the two businesses being together. It sounds like none.

Gregory S. Skinner

It’s conservative and that’s what we want to be until we own this business for a while. So, you are right, it is conservative. And we see upside to that conservatism, but let us get into it. But, for example, GreenLine doesn't at all have a presence in Costco, but it may take us years or quarters to get into Costco, if at all.

Tony Brenner – Roth Capital Partners

I understand, Costco is tough. But grocery might be easier. Last question, is there opportunity to use Apio’s technology or Landec’s technology with GreenLine.

Gary T. Steele

Not on the small packages, Tony. Green beans are low respiring, they really don't need the type of atmosphere modification. But as we move to larger packages for club stores and for food service, that will be a high priority for us to test to see if it really does benefit from the BreatheWay technology. So, no on the small packages, maybe on the larger packages.

Tony Brenner – Roth Capital Partners

Thank you very much.

Gregory S. Skinner

Thank you.

Operator

(Operator Instructions) Our next question comes from Peter Black of Winfield Capital. Please go ahead with your question.

Peter Black – Winfield Capital

Hey, gentlemen.

Gregory S. Skinner

Hi, Peter.

Peter Black – Winfield Capital

How are you doing? One of my questions was answered, the last one I had is just I realized the working capital facility will move up and down throughout the year, but what’s your net debt right now after the acquisition closes?

Gregory S. Skinner

Well, in total, if you are throwing in – is it just – is your question just on this acquisition or total for Landec?

Peter Black – Winfield Capital

Total for Landec now, yeah.

Gregory S. Skinner

60 million.

Peter Black – Winfield Capital

60.

Gregory S. Skinner

60.

Peter Black – Winfield Capital

60 got it. Okay, okay thanks. I appreciate it.

Gregory S. Skinner

Thanks Peter.

Operator

Our next question comes from Michael Needleman with Preservation Asset Management. Please go ahead.

Gregory S. Skinner

Hey, Michael.

Michael Needleman – Preservation Asset Management

Good afternoon, how are you? Just my first question was answered, but the second question is, are you going to kind of go back and try to get a new line of credit or what’s the intention here. I know you are going to – have cash flow for CapEx and a number of other issues, but on your debt and your cash position, how do you kind of think about that?

Gregory S. Skinner

The goal here is because we had to borrow some money – this is Greg Skinner, we had to borrow some money under the working capital line to complete the deal because we wanted to keep at least $20 million in cash and our [CAGR] didn't want to clear the cupboard. Our goal is to payoff that working capital line over the next 12 to 18 months and leave the term debt in place, I mean a 4.37 and 4.02 interest rates, those are very attractive. So we don’t plan to do anything as far as paying those off early. Now, we are sitting on a ton of cash at some point down the line and they are still outstanding, then we would look at paying them off early. But as far as the term, we plan to just to pay it over the course of the term.

Michael Needleman – Preservation Asset Management

And the working capital line that you currently have is approximately how much?

Gregory S. Skinner

It’s 25 million maximum, we borrowed about 12.8 as part of the deal so about half of what is available to borrow and it’s a LIBOR plus 2%, so we are borrowing it at 2.25.

Michael Needleman – Preservation Asset Management

So just one last question, given the size and the structure of the Company is greatly changing, do you think you are going to re-negotiate that line to a larger line?

Gregory S. Skinner

Right now we don’t anticipate it because all the companies that we own generate free cash flow. So, we plan on using that free cash flow to pay these lines down. And in fact, we may keep it in place because the unused fee is relatively cheap, but our goal is to get out of that line as quick as possible.

Michael Needleman – Preservation Asset Management

And was this is a bidding process that you guys went against or was this just yourselves negotiating?

Gregory S. Skinner

It’s a good question, Michael. It’s the first time we’ve ever been involved in a competitive bidding situation, so we were up against others.

Michael Needleman – Preservation Asset Management

Okay, all right. And it is a main last question for me. Management is staying on?

Gregory S. Skinner

Yeah.

Michael Needleman – Preservation Asset Management

Okay.

Gregory S. Skinner

Yeah. There is a solid management team back there, they got in to where it is and so we’re happy to have them.

Michael Needleman – Preservation Asset Management

Thank you so much.

Operator

(Operator Instructions) I have a question from Bill Lauber with Sterling Capital. Please go ahead with your questions.

Gary T. Steele

Hey Bill.

William Lauber – Sterling Capital Management

This is actually Will here.

Gary T. Steele

Well, hi Will.

William Lauber – Sterling Capital Management

At lunch, I walked up to the grocery store its close to our office here and I looked at their products. They have carrots, as well?

Gregory S. Skinner

Yeah, they do.

Gary T. Steele

Yeah.

William Lauber – Sterling Capital Management

Okay. And I know in that grocery store chain, Eat Smart has never had anything in there, as far as I know. They carry the Chiquita avocados, but they mainly use the Mann’s for that. So is that something where you’re hoping to use the distribution where you can work out a deal to maybe take Mann’s space in those situations?

Gary T. Steele

You hit the nail on the head Will.

William Lauber – Sterling Capital Management

Okay.

Gary T. Steele

Those are types of customer synergies that we would look to capitalize on and so we are very strong and I know on store chain you’re talking about probably Schnucks markets, we want to benefit from their presence where we are not and vice versa.

William Lauber – Sterling Capital Management

Okay. All right, thank you very much.

Gary T. Steele

Thanks will.

Operator

(Operator Instructions) I’m not showing any other questions in the queue at this time.

Gary T. Steele

Okay. Well, we want to thank you all on short notice for being on this call today. We look forward to updating you on the progress with our new acquisition. In summary, this does give us the critical mass we’ve been seeking for few years and the East Coast presence. So we’re very excited about this get together with GreenLine and we look forward to keeping you apprised of our progress and our plans. So many thanks for being with us today.

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the conference. You may now disconnect. Good day.

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