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Table of Contents
 
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2002
 
 
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
OR
 
¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             
 
Commission file number 333-81235
 
ROYSTER-CLARK, INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
  
76-0329525
(State or other jurisdiction
of incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
1251 AVENUE OF THE AMERICAS — SUITE 900
NEW YORK, NEW YORK 10020
(212) 332-2965
(Address, including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x    No  ¨
 
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the last practical date:    Not Applicable
 

Table of Contents
ROYSTER-CLARK, INC.
 
FORM 10-Q
 
TABLE OF CONTENTS
 
         
Page
PART 1.
   
FINANCIAL INFORMATION:
     
Item 1.
   
Financial Statements
     
       
3
       
4
       
5
       
6
Item 2.
      
14
Item 3.
      
22
Item 4.
      
23
PART 2.
   
OTHER INFORMATION:
     
Item 6.
      
24
  
26
  
27
 
FORWARD-LOOKING STATEMENTS
 
This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in this Report, the words “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “hope,” “may” and similar expressions, as well as “will,” “shall” and other indications of future tense, are intended to identify forward-looking statements. Similarly, statements that describe the Company’s future plans, objectives, targets or goals are also forward-looking statements. The forward-looking statements are based on our current expectations and speak only as of the date made. These forward-looking statements involve known and unknown risks, uncertainties and other factors that in some cases have affected our historical results and could cause actual results in the future to differ significantly from the results anticipated in forward-looking statements made in this Report. Important factors that could cause a material effect include, but are not limited to, (i) changes in matters which affect the global supply and demand of fertilizer products, (ii) the volatility of the natural gas markets, (iii) a variety of conditions in the agricultural industry such as grain prices, planted acreage, projected grain stocks, U.S. government policies, weather and changes in agricultural production methods, (iv) possible unscheduled plant outages and other operating difficulties, (v) price competition and capacity expansions and reductions from both domestic and international producers, (vi) the relative unpredictability of national and local economic conditions within the markets we serve, (vii) environmental regulations, (viii) other important factors affecting the fertilizer industry, (ix) fluctuations in interest rates and (x) other factors referenced in the Company’s Reports and registration statements filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements.

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Table of Contents
 
Few of the forward-looking statements in this Report deal with matters that are within our control. Acquisition, financing and other agreements and arrangements must be negotiated with independent third parties and, in some cases, must be approved by governmental agencies. These third parties generally have interests that do not coincide with ours and may conflict with our interests. Unless the third parties and we are able to compromise their various objectives in a mutually acceptable manner, agreements and arrangements will not be consummated.

2

Table of Contents
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    Financial Statements
 
ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
(Dollars in thousands)
 
    
September 30, 2002
     
December 31, 2001
  
Assets
                
Current assets:
                
Cash
   
$
412
 
   
997
 
Trade accounts receivable, net of allowance for doubtful accounts of $4,911 and $5,350 at September 30, 2002 and December 31, 2001, respectively
   
 
98,817
 
   
73,754
 
Other receivables
   
 
43,393
 
   
24,381
 
Inventories
   
 
142,173
 
   
211,218
 
Prepaid expenses and other current assets
   
 
2,617
 
   
2,246
 
Deferred income taxes
   
 
6,084
 
   
6,000
 
    
  
Total current assets
   
 
293,496
 
   
318,596
 
Property, plant and equipment, net
   
 
188,729
 
   
203,445
 
Goodwill
   
 
16,540
 
   
16,540
 
Deferred income taxes
   
 
2,624
 
   
4,795
 
Deferred financing costs, net
   
 
8,936
 
   
10,512
 
Other assets, net
   
 
2,192
 
   
1,997
 
    
  
    
$
512,517
 
   
555,885
 
    
  
Liabilities and Stockholder’s Equity
                
Current liabilities:
                
Current installments of long-term debt
   
$
2,277
 
   
7,181
 
Customer deposits
   
 
18,298
 
   
60,900
 
Accounts payable
   
 
43,883
 
   
86,282
 
Accrued expenses and other current liabilities
   
 
24,312
 
   
24,314
 
    
  
Total current liabilities
   
 
88,770
 
   
178,677
 
Senior secured credit facility
   
 
131,804
 
   
89,244
 
10 1/4% First Mortgage Notes due 2009
   
 
200,000
 
   
200,000
 
Long-term debt, excluding current installments
   
 
205
 
   
363
 
Other long-term liabilities
   
 
5,809
 
   
6,018
 
    
  
Total liabilities
   
 
426,588
 
   
474,302
 
    
  
Stockholder’s equity:
                
Common stock, no par value. Authorized 350,000 shares; 1 share issued and outstanding
   
 
—  
 
   
—  
 
Additional paid-in capital
   
 
88,599
 
   
88,599
 
Accumulated deficit
   
 
(2,670
)
   
(7,016
)
    
  
Total stockholder’s equity
   
 
85,929
 
   
81,583
 
    
  
    
$
512,517
 
   
555,885
 
    
  
 
See accompanying notes to condensed consolidated financial statements.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in thousands)

 
    
Three Months ended
September 30,
     
Nine Months ended
September 30,
  
    
2002
     
2001
     
2002
     
2001
  
Net sales
   
$
125,382
 
   
120,454
 
   
753,840
 
   
821,184
 
Cost of sales
   
 
100,014
 
   
97,781
 
   
607,051
 
   
658,442
 
    
  
  
  
Gross profit
   
 
25,368
 
   
22,673
 
   
146,789
 
   
162,742
 
Selling, general and administrative expenses
   
 
37,707
 
   
39,092
 
   
119,661
 
   
131,371
 
Loss (gain) on disposal of property, plant and equipment, net
   
 
(75
)
   
17
 
   
88
 
   
859
 
    
  
  
  
Operating income (loss)
   
 
(12,264
)
   
(16,436
)
   
27,040
 
   
30,512
 
Interest expense
   
 
(7,307
)
   
(8,497
)
   
(21,726
)
   
(27,083
)
Gain on sales of natural gas contracts
   
 
1,893
 
   
—  
 
   
1,893
 
   
—  
 
    
  
  
  
Income (loss) before income taxes
   
 
(17,678
)
   
(24,933
)
   
7,207
 
   
3,429
 
Income tax expense (benefit)
   
 
(6,652
)
   
(9,275
)
   
2,861
 
   
1,824
 
    
  
  
  
Net income (loss)
   
$
(11,026
)
   
(15,658
)
   
4,346
 
   
1,605
 
    
  
  
  
 
 
 
 
See accompanying notes to condensed consolidated financial statements.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Dollars in thousands)

 
    
Nine Months ended September 30,
  
    
2002
     
2001
  
Cash flows from operating activities:
                
Net income
   
$
4,346
 
   
1,605
 
    
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Provision for doubtful accounts
   
 
2,223
 
   
2,603
 
Depreciation and amortization
   
 
20,506
 
   
20,053
 
Loss on disposal of property, plant and equipment
   
 
88
 
   
1,089
 
Gain on sale of natural gas contracts
   
 
(1,893
)
   
—  
 
Deferred income taxes
   
 
2,087
 
   
1,230
 
Changes in operating assets and liabilities increasing (decreasing) cash:
                
Trade accounts receivable
   
 
(27,286
)
   
(27,333
)
Other receivables
   
 
(17,119
)
   
(6,534
)
Inventories
   
 
69,045
 
   
86,491
 
Prepaid expenses and other current assets
   
 
(371
)
   
2,665
 
Other assets
   
 
(564
)
   
(1,116
)
Accounts payable
   
 
(42,399
)
   
(14,033
)
Accrued expenses and other current liabilities
   
 
(2
)
   
2,335
 
Other long-term liabilities
   
 
(209
)
   
364
 
    
  
Total adjustments
   
 
4,106
 
   
67,814
 
    
  
Net cash provided by operating activities
   
 
8,452
 
   
69,419
 
    
  
Cash flows from investing activities:
                
Proceeds from disposal of property, plant and equipment
   
 
1,589
 
   
1,018
 
Purchases of property, plant and equipment
   
 
(5,522
)
   
(11,373
)
Costs associated with Agro Acquisition
   
 
—  
 
   
(3,305
)
    
  
Net cash used in investing activities
   
 
(3,933
)
   
(13,660
)
    
  
Cash flows from financing activities:
                
Proceeds from senior secured credit facility
   
 
275,767
 
   
265,750
 
Payments on senior secured credit facility
   
 
(233,207
)
   
(269,912
)
Proceeds from long-term debt
   
 
—  
 
   
256
 
Principal payments on long-term debt
   
 
(5,062
)
   
(104
)
Net decrease in customer deposits
   
 
(42,602
)
   
(51,897
)
    
  
Net cash used in financing activities
   
 
(5,104
)
   
(55,907
)
    
  
Net decrease in cash
   
 
(585
)
   
(148
)
Cash at beginning of period
   
 
997
 
   
413
 
    
  
Cash at end of period
   
$
412
 
   
265
 
    
  
Supplemental disclosure of cash flow information:
                
Cash paid during the period for interest
   
$
16,729
 
   
22,147
 
    
  
Cash paid during the period for income taxes
   
$
277
 
   
412
 
    
  
 
See accompanying notes to condensed consolidated financial statements.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Dollars in thousands)

 
(1)    Description of Business and Basis of Presentation
 
Royster-Clark, Inc. (herein referred to as Royster-Clark or the Company) is a retail and wholesale distributor of mixed fertilizer, fertilizer materials, seed, crop protection products and agronomic services to farmers, primarily in the East, South and Midwest. The Company’s operations consist of retail farm centers, granulation, blending and seed processing plants, and an integrated network of storage and distribution terminals and warehouses. In addition, the Company operates two nitrogen-manufacturing plants that supply the retail and wholesale distribution businesses with nitrogen fertilizer products.
 
The information presented as of September 30, 2002 and for the three and nine month periods ended September 30, 2002 and 2001 is unaudited, and reflects all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the Company’s financial position as of September 30, 2002 and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2002 and 2001. The December 31, 2001 balance sheet information was derived from the audited Consolidated Financial Statements for the year ended December 31, 2001.
 
The condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2001, which are included as part of the Company’s Annual Report on Form 10-K.
 
The Company’s business is highly seasonal with approximately 69% of sales generated between March and July. Results for the interim periods presented are not necessarily indicative of results that may be expected for the entire year.
 
Certain reclassifications have been made to the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2001 in order to conform to the financial statement presentation as of and for the three and nine months ended September 30, 2002.
 
(2)    Accounting Change
 
Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” which establishes accounting and reporting standards for goodwill and intangible assets. SFAS No. 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but rather tested for impairment at least annually. Upon the adoption of SFAS No. 142 effective January 1, 2002, the Company ceased amortizing amounts related to goodwill. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets.”
 
SFAS No. 142 prescribes a two-phase process for impairment testing of goodwill. The first phase, required to be completed by June 30, 2002, screens for impairment, while the second phase (if necessary), which is required to be completed by December 31, 2002, measures the impairment. The Company completed its first phase impairment analysis during the second quarter which indicated no impairment of its recorded goodwill; accordingly, the second testing phase, absent future indication of impairment, is not necessary during 2002.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

 
Intangible Assets
 
At January 1, 2002, the Company’s intangible assets consisted of non-compete agreements with former employees and owners of businesses acquired. These assets are being amortized over the legal term of the individual agreements, which is generally less than four years. At September 30, 2002 and December 31, 2001, the carrying value of these arrangements was $1.0 million and $1.0 million, respectively, which is net of $0.8 million and $0.5 million of accumulated amortization, respectively. Amortization of intangible assets amounted to $0.1 million and $0.1 million for the three months ended September 30, 2002 and 2001, respectively and $0.3 million and $0.3 million for the nine months ended September 30, 2002 and 2001, respectively.
 
These intangible assets are included in “other assets” in the accompanying condensed consolidated balance sheets. Estimated annual amortization expense for the next five years follows: 2002—$0.4 million; 2003—$0.5 million; 2004—$0.3 million; 2005—$0.1 million and no amortization in 2006.
 
Goodwill
 
At September 30, 2002 and December 31, 2001, the carrying value of goodwill was $16.5 million. In accordance with SFAS No. 142, the Company compared the fair value of the Company with the carrying value of assets and determined that goodwill recorded was not impaired. The fair value was determined using a present value of future cash flows technique.
 
For the three and nine months ended September 30, 2001, amortization of goodwill totaled $0.3 million and $0.9 million, respectively. The following table reconciles reported net income for the three and nine months ended September 30, 2002 and 2001 to net income that would have been recorded if SFAS No. 142 were effective for each of the periods presented:
 
    
Three Months Ended
September 30,
     
Nine Months Ended
September 30,
    
2002
     
2001
     
2002
   
2001
Reconciliation of net income:
                          
Net income
   
$
(11,026
)
   
(15,658
)
   
4,346
   
1,605
Add back: Goodwill amortization
   
 
—  
 
   
332
 
   
—  
   
943
    
  
  
  
Adjusted net income
   
$
(11,026
)
   
(15,326
)
   
4,346
   
2,548
    
  
  
  
 
(3)    Inventories
 
Inventories at September 30, 2002 and December 31, 2001 consist of the following:
 
    
September 30,
2002
   
December 31,
2001
             
Crop protection products
   
$
44,346
   
93,428
Fertilizers
   
 
23,021
   
25,824
Raw materials
   
 
54,666
   
62,624
Seeds
   
 
8,081
   
12,752
Sundries and other
   
 
12,059
   
16,590
    
  
    
$
142,173
   
211,218
    
  

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

 
(4)    Environmental Matters
 
The Company is subject to a wide variety of federal, state and local environmental laws and regulations. The Company has been identified as a potentially responsible party concerning the release of certain hazardous substances at five locations. While the current law potentially imposes joint and several liability upon each party named as a potentially responsible party, the Company’s contribution to clean up these sites is expected to be limited, given the number of other companies which have also been named as potentially responsible parties and the nature and amount of cleanup involved. A number of the Company’s facilities have been evaluated as having excess nitrates, phosphorous and pesticides in the surrounding soil or groundwater. In addition, several underground storage tanks have been removed or closed at some facilities and these sites have been evaluated for possible contamination. The Company has received letters advising that no further actions are required at two sites where remediation projects have been performed. Actions performed met guidance provided by the respective environmental authority. In total, cleanup of hazardous or potentially hazardous substances has been planned or is being performed at approximately 47 sites.
 
In connection with the acquisitions of IMC AgriBusiness, Inc., IMC Nitrogen Company and Hutson’s AG Service, Inc. (these three entities are collectively referred to as AgriBusiness) and Royster-Clark (Predecessor Company), the Company obtained indemnities for certain claims related to environmental matters that existed or arose prior to the acquisitions. The indemnities related to AgriBusiness are subject to a $4,500 deductible, an overall cap on all indemnities of approximately $27,000, and certain time limitations. The indemnities related to Royster-Clark, Inc. (Predecessor Company) are subject to a deductible of $2,000, certain time limitations and an overall cap of $5,000 on all indemnities. In addition, Royster-Clark, Inc. (Predecessor Company) had obtained indemnities from Lebanon Chemical Corporation (LCC) for certain claims related to environmental matters that existed at sites acquired from LCC in December 1998. The Company also obtained indemnities from the former stockholder of Alliance for environmental conditions identified as of the date of acquisition.
 
The Company has recorded environmental liabilities at September 30, 2002 and December 31, 2001 for the estimated cost of cleanup efforts of identified contamination or site characterization, which total $3,330 and $3,483, respectively, and are included in other long-term liabilities in the accompanying condensed consolidated balance sheets. Actual cash expenditures during the three ended September 30, 2002 and 2001 were $107 and $35, respectively and $153 and $117 for the nine months ended September 30, 2002 and 2001, respectively. These liabilities do not take into account any claims for recoveries from insurance or third parties and are not discounted. Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainty in evaluating environmental exposures.
 
(5)    Senior Secured Credit Facility
 
The Company maintains a senior secured credit facility that is subject to certain borrowing base limitations and to certain covenants, including maintenance of certain required financial ratios. In the quarterly report issued for the three and six months ended June 30, 2002, we reported the possibility that some of the covenants required under the senior secured credit facility at September 30, 2002 might not be met. As of September 30, 2002, we met our covenants and we continue to be in compliance with the requirements of this senior secured credit facility. Based on preliminary fourth quarter-to-date operating results and projections, we also expect to be in compliance with these covenants at the end of the current year. Looking further ahead, based on seasonal losses often experienced in the first quarter, it is possible that we will fall short of certain requirements as of March 31, 2003.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

 
The current senior secured credit facility expires at the end of April 2004 and in anticipation of that event, we have commenced a process to secure a new credit facility to replace our senior secured credit facility. While we anticipate we will be able to obtain an acceptable replacement during the first or second quarter of 2003 or renegotiate the covenants on the existing senior secured credit facility, should that become necessary, we can not provide assurance that we will be successful.
 
(6)    Sales of Natural Gas Contracts
 
As a result of the purchase of IMC Nitrogen Company on April 22, 1999, the Company became the beneficial holder of rights, title and interests in certain natural gas leases in Canada. In July 2002, the Company sold its rights, title and interests in these beneficial holdings of natural gas resulting in a gain of approximately $1,270. In addition, in September 2002, the Company sold all its rights, title, and interests in several fixed-priced natural gas contracts resulting in a gain of $623. Amounts due under the sales agreements have been recorded in “other receivables” in the accompanying condensed consolidated balance sheet.
 
(7)    Condensed Financial Data of Guarantor Subsidiaries
 
The Company issued $200,000 of 10-1/4% First Mortgage Notes due April 2009 (herein referred to as the First Mortgage Notes) on April 22, 1999 to partially finance an acquisition. The First Mortgage Notes mature on April 22, 2009 and bear interest at 10 1/4% payable semi-annually in arrears. The First Mortgage Notes are secured by 17 principal properties, related fixtures and equipment and other related assets and a pledge of equity of certain subsidiaries. The First Mortgage Notes are guaranteed on a full, unconditional and joint and several basis, by each of the following subsidiaries of Royster-Clark:
 
Royster-Clark Realty LLC
   
Royster-Clark Nitrogen, Inc.
Royster-Clark Resources LLC
   
Alliance Fertilizer of Suffolk, Inc.
Royster-Clark AgriBusiness, Inc.
   
Seaboard Liquid Plant Food, Inc.
Royster-Clark AgriBusiness Realty LLC
     
 
There are currently no restrictions on the ability of Royster-Clark to obtain funds from its guarantor subsidiaries through dividends or loans.
 
The following tables present the condensed financial data of Royster-Clark and its guarantor subsidiaries as of September 30, 2002 and December 31, 2001 and for the three and nine month periods ended September 30, 2002 and 2001.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

 
Balance Sheet Data as of September 30, 2002:
 
      
Royster-Clark, Inc.
   
Guarantor Subsidiaries
     
Eliminations
     
Consolidated
  
Current assets:
                              
Cash
     
$
42
   
370
 
   
—  
 
   
412
 
Trade accounts receivable, net
     
 
—  
   
100,872
 
   
(2,055
)
   
98,817
 
Other receivables
     
 
3,212
   
54,086
 
   
(13,905
)
   
43,393
 
Inventories
     
 
—  
   
142,173
 
   
—  
 
   
142,173
 
Prepaid expenses and other current assets
     
 
—  
   
2,617
 
   
—  
 
   
2,617
 
Deferred income taxes
     
 
6,084
   
—  
 
   
—  
 
   
6,084
 
      
  
  
  
Total current assets
     
 
9,338
   
300,118
 
   
(15,960
)
   
293,496
 
Property, plant and equipment, net
     
 
11,863
   
176,866
 
   
—  
 
   
188,729
 
Goodwill
     
 
12,012
   
4,528
 
   
—  
 
   
16,540
 
Deferred income taxes
     
 
2,624
   
—  
 
   
—  
 
   
2,624
 
Deferred financing costs, net
     
 
8,936
   
—  
 
   
—  
 
   
8,936
 
Other assets, net
     
 
42
   
2,150
 
   
—  
 
   
2,192
 
Investment in subsidiaries
     
 
377,361
   
—  
 
   
(377,361
)
   
—  
 
      
  
  
  
      
$
422,176
   
483,662
 
   
(393,321
)
   
512,517
 
      
  
  
  
Current liabilities:
                              
Current installments of long-term debt
     
 
—  
   
2,277
 
   
—  
 
   
2,277
 
Customer deposits
     
 
—  
   
18,298
 
   
—  
 
   
18,298
 
Accounts payable
     
 
89
   
59,754
 
   
(15,960
)
   
43,883
 
Accrued expenses and other current liabilities
     
 
11,086
   
13,226
 
   
—  
 
   
24,312
 
      
  
  
  
Total current liabilities
     
 
11,175
   
93,555
 
   
(15,960
)
   
88,770
 
Senior secured credit facility
     
 
131,804
   
—  
 
   
—  
 
   
131,804
 
10 1/4% First Mortgage Notes due 2009
     
 
200,000
   
—  
 
   
—  
 
   
200,000
 
Long-term debt, excluding current installments
     
 
—
   
205
 
   
—  
 
   
205
 
Other long-term liabilities
     
 
486
   
5,323
 
   
—  
 
   
5,809
 
      
  
  
  
Total liabilities
     
 
343,465
   
99,083
 
   
(15,960
)
   
426,588
 
      
  
  
  
Stockholder’s equity:
                              
Common stock
     
 
—  
   
—  
 
   
—  
 
   
—  
 
Additional paid-in capital
     
 
78,599
   
387,361
 
   
(377,361
)
   
88,599
 
Retained earnings (accumulated deficit)
     
 
112
   
(2,782
)
   
—  
 
   
(2,670
)
      
  
  
  
Total stockholder’s equity
     
 
78,711
   
384,579
 
   
(377,361
)
   
85,929
 
      
  
  
  
      
$
422,176
   
483,662
 
   
(393,321
)
   
512,517
 
      
  
  
  

10

Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

 
Balance Sheet Data as of December 31, 2001:
 
           
Guarantor
                
      
Royster-Clark, Inc.
   
Subsidiaries
     
Eliminations
     
Consolidated
  
Current assets:
                              
Cash
     
$
42
   
955
 
   
—  
 
   
997
 
Trade accounts receivable, net
     
 
—  
   
73,754
 
   
—  
 
   
73,754
 
Other receivables
     
 
4,204
   
42,306
 
   
(22,129
)
   
24,381
 
Inventories
     
 
—  
   
211,257
 
   
(39
)
   
211,218
 
Prepaid expenses and other current assets
     
 
356
   
1,890
 
   
—  
 
   
2,246
 
Deferred income taxes
     
 
6,000
   
—  
 
   
—  
 
   
6,000
 
      
  
  
  
Total current assets
     
 
10,602
   
330,162
 
   
(22,168
)
   
318,596
 
Property, plant and equipment, net
     
 
13,354
   
190,091
 
   
—  
 
   
203,445
 
Goodwill
     
 
12,012
   
4,528
 
   
—  
 
   
16,540
 
Deferred income taxes
     
 
4,795
   
—  
 
   
—  
 
   
4,795
 
Deferred financing costs, net
     
 
10,512
   
—  
 
   
—  
 
   
10,512
 
Other assets, net
     
 
75
   
1,922
 
   
—  
 
   
1,997
 
Investment in subsidiaries
     
 
322,845
   
—  
 
   
(322,845
)
   
—  
 
      
  
  
  
      
$
374,195
   
526,703
 
   
(345,013
)
   
555,885
 
      
  
  
  
Current liabilities:
                              
Current installments of long-term debt
     
$
4
   
7,177
 
   
—  
 
   
7,181
 
Customer deposits
     
 
—  
   
60,900
 
   
—  
 
   
60,900
 
Accounts payable
     
 
—  
   
108,411
 
   
(22,129
)
   
86,282
 
Accrued expenses and other current liabilities
     
 
5,750
   
18,564
 
   
—  
 
   
24,314
 
      
  
  
  
Total current liabilities
     
 
5,754
   
195,052
 
   
(22,129
)
   
178,677
 
Senior secured credit facility
     
 
89,244
   
—  
 
   
—  
 
   
89,244
 
10 1/4% First Mortgage Notes due 2009
     
 
200,000
   
—  
 
   
—  
 
   
200,000
 
Long-term debt, excluding current installments
     
 
—  
   
363
 
   
—  
 
   
363
 
Other long-term liabilities
     
 
490
   
5,528
 
   
—  
 
   
6,018
 
      
  
  
  
Total liabilities
     
 
295,488
   
200,943
 
   
(22,129
)
   
474,302
 
      
  
  
  
Stockholder's equity:
                              
Common stock
     
 
—  
   
—  
 
   
—  
 
   
—  
 
Additional paid-in capital
     
 
78,599
   
332,845
 
   
(322,845
)
   
88,599
 
Retained earnings (accumulated deficit)
     
 
108
   
(7,085
)
   
(39
)
   
(7,016
)
      
  
  
  
Total stockholder's equity
     
 
78,707
   
325,760
 
   
(322,884
)
   
81,583
 
      
  
  
  
      
$
374,195
   
526,703
 
   
(345,013
)
   
555,885
 
      
  
  
  

11

Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

Statements of Operations Data for the three and nine months ended September 30, 2002 and 2001:
 
      
Royster-Clark, Inc.
     
Guarantor Subsidiaries
     
Eliminations
     
Consolidated
  
Three Months Ended September 30, 2002
                                
Net sales
     
$
943
 
   
140,623
 
   
(16,184
)
   
125,382
 
Cost of sales
     
 
104
 
   
111,619
 
   
(11,709
)
   
100,014
 
      
  
  
  
Gross profit
     
 
839
 
   
29,004
 
   
(4,475
)
   
25,368
 
Selling, general and administrative expenses
     
 
296
 
   
41,886
 
   
(4,475
)
   
37,707
 
Loss (gain) on disposal of property, plant and equipment, net
     
 
40
 
   
(115
)
   
—  
 
   
(75
)
      
  
  
  
Operating income (loss)
     
 
503
 
   
(12,767
)
   
—  
 
   
(12,264
)
Interest expense
     
 
(502
)
   
(6,805
)
   
—  
 
   
(7,307
)
Gain of sales of natural gas contracts
     
 
—  
 
   
1,893
 
   
—  
 
   
1,893
 
      
  
  
  
Income (loss) before income taxes
     
 
1
 
   
(17,679
)
   
—  
 
   
(17,678
)
Income tax benefit
     
 
—  
 
   
(6,652
)
   
—  
 
   
(6,652
)
      
  
  
  
Net income (loss)
     
$
1
 
   
(11,027
)
   
—  
 
   
(11,026
)
      
  
  
  
Three Months Ended September 30, 2001
                                
Net sales
     
$
987
 
   
139,890
 
   
(20,423
)
   
120,454
 
Cost of sales
     
 
106
 
   
113,588
 
   
(15,913
)
   
97,781
 
      
  
  
  
Gross profit
     
 
881
 
   
26,302
 
   
(4,510
)
   
22,673
 
Selling, general and administrative expenses
     
 
281
 
   
43,378
 
   
(4,567
)
   
39,092
 
Loss on disposal of property, plant and equipment, net
     
 
11
 
   
6
 
   
—  
 
   
17
 
      
  
  
  
Operating income (loss)
     
 
589
 
   
(17,082
)
   
57
 
   
(16,436
)
Interest expense
     
 
(588
)
   
(7,909
)
   
—  
 
   
(8,497
)
      
  
  
  
Income (loss) before income taxes
     
 
1
 
   
(24,991
)
   
57
 
   
(24,933
)
Income tax benefit
     
 
—  
 
   
(9,275
)
   
—  
 
   
(9,275
)
      
  
  
  
Net income (loss)
     
$
1
 
   
(15,716
)
   
57
 
   
(15,658
)
      
  
  
  
Nine Months Ended September 30, 2002
                                
Net sales
     
$
2,744
 
   
804,038
 
   
(52,942
)
   
753,840
 
Cost of sales
     
 
315
 
   
645,812
 
   
(39,076
)
   
607,051
 
      
  
  
  
Gross profit
     
 
2,429
 
   
158,226
 
   
(13,866
)
   
146,789
 
Selling, general and administrative expenses
     
 
887
 
   
132,679
 
   
(13,905
)
   
119,661
 
Loss on disposal of property, plant and equipment, net
     
 
52
 
   
36
 
   
—  
 
   
88
 
      
  
  
  
Operating income
     
 
1,490
 
   
25,511
 
   
39
 
   
27,040
 
Interest expense
     
 
(1,485
)
   
(20,241
)
   
—  
 
   
(21,726
)
Gain on sales of natural gas contracts
     
 
—  
 
   
1,893
 
   
—  
 
   
1,893
 
      
  
  
  
Income before income taxes
     
 
5
 
   
7,163
 
   
39
 
   
7,207
 
Income tax expense
     
 
2
 
   
2,859
 
   
—  
 
   
2,861
 
      
  
  
  
Net income
     
$
3
 
   
4,304
 
   
39
 
   
4,346
 
      
  
  
  
Nine Months Ended September 30, 2001
                                
Net sales
     
$
3,256
 
   
869,835
 
   
(51,907
)
   
821,184
 
Cost of sales
     
 
316
 
   
694,579
 
   
(36,453
)
   
658,442
 
      
  
  
  
Gross profit
     
 
2,940
 
   
175,256
 
   
(15,454
)
   
162,742
 
Selling, general and administrative expenses
     
 
649
 
   
146,408
 
   
(15,686
)
   
131,371
 
Loss on disposal of property, plant and equipment, net
     
 
403
 
   
456
 
   
—  
 
   
859
 
      
  
  
  
Operating income
     
 
1,888
 
   
28,392
 
   
232
 
   
30,512
 
Interest expense
     
 
(1,882
)
   
(25,201
)
   
—  
 
   
(27,083
)
      
  
  
  
Income before income taxes
     
 
6
 
   
3,191
 
   
232
 
   
3,429
 
Income tax expense
     
 
2
 
   
1,822
 
   
—  
 
   
1,824
 
      
  
  
  
Net income
     
$
4
 
   
1,369
 
   
232
 
   
1,605
 
      
  
  
  

12

Table of Contents

ROYSTER-CLARK, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2002
(Dollars in thousands)

 
Statements of Cash Flow Data for the nine months ended September 30, 2002 and 2001:
 
      
Royster-Clark, Inc.
     
Guarantor Subsidiaries
       
Eliminations
   
Consolidated
  
Nine Months Ended September 30, 2002
                                
Net cash provided by (used in) operating activities
     
$
(42,623
)
   
51,075
 
     
—  
   
8,452
 
      
  
    
  
Cash flows from investing activities:
                                
Proceeds from disposal of property, plant and equipment
     
 
67
 
   
1,522
 
     
—  
   
1,589
 
Purchases of property, plant and equipment
     
 
—  
 
   
(5,522
)
     
—  
   
(5,522
)
      
  
    
  
Net cash provided by (used in) investing activities
     
 
67
 
   
(4,000
)
     
—  
   
(3,933
)
      
  
    
  
Cash flows from financing activities:
                                
Proceeds from senior secured credit facility
     
 
275,767
 
   
—  
 
     
—  
   
275,767
 
Payments on senior secured credit facility
     
 
(233,207
)
   
—  
 
     
—  
   
(233,207
)
Principal payments on long-term debt
     
 
(4
)
   
(5,058
)
     
—  
   
(5,062
)
Net decrease in customer deposits
     
 
—  
 
   
(42,602
)
     
—  
   
(42,602
)
      
  
    
  
Net cash provided by (used in) financing activities
     
 
42,556
 
   
(47,660
)
     
—  
   
(5,104
)
      
  
    
  
Net decrease in cash
     
 
—  
 
   
(585
)
     
—  
   
(585
)
Cash at beginning of period
     
 
42
 
   
955
 
     
—  
   
997
 
      
  
    
  
Cash at end of period
     
$
42
 
   
370
 
     
—  
   
412
 
      
  
    
  
Nine Months Ended September 30, 2001
                                
Net cash provided by operating activities
     
$
4,038
 
   
65,381
 
     
—  
   
69,419
 
      
  
    
  
Cash flows from investing activities:
                                
Proceeds from disposal of property, plant and equipment
     
 
159
 
   
859
 
     
—  
   
1,018
 
Purchases of property, plant and equipment
     
 
—  
 
   
(11,373
)
     
—  
   
(11,373
)
Costs associated with Agro acquisition
     
 
—  
 
   
(3,305
)
     
—  
   
(3,305
)
      
  
    
  
Net cash provided by (used in) investing activities
     
 
159
 
   
(13,819
)
     
—  
   
(13,660
)
      
  
    
  
Cash flows from financing activities:
                                
Proceeds from senior secured credit facility
     
 
265,750
 
   
—  
 
     
—  
   
265,750
 
Payments on senior secured credit facility
     
 
(269,912
)
   
—  
 
     
—  
   
(269,912
)
Proceeds from long-term debt
     
 
—  
 
   
256
 
     
—  
   
256
 
Principal payments on long-term debt
     
 
(35
)
   
(69
)
     
—  
   
(104
)
Net decrease in customer deposits
     
 
—  
 
   
(51,897
)
     
—  
   
(51,897
)
      
  
    
  
Net cash used in financing activities
     
 
(4,197
)
   
(51,710
)
     
—  
   
(55,907
)
      
  
    
  
Net decrease in cash
     
 
—  
 
   
(148
)
     
—  
   
(148
)
Cash at beginning of period
     
 
42
 
   
371
 
     
—  
   
413
 
      
  
    
  
Cash at end of period
     
$
42
 
   
223
 
     
—  
   
265
 
      
  
    
  

13

Table of Contents
ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING STATEMENTS. SEE “FORWARD-LOOKING STATEMENTS” ABOVE.
 
General
 
Royster-Clark, Inc. together with its subsidiaries, (the “Company” or “Royster-Clark”) is a retail and wholesale distributor of mixed fertilizer, fertilizer materials, seed, crop protection products and agronomic services to farmers, primarily in the East, South and Midwest. The Company’s operations include retail farm centers (“Farmarkets”), granulation, blending and seed processing plants, and an integrated network of storage and distribution terminals and warehouses. In addition, the Company operates two nitrogen-manufacturing plants that supply the retail and wholesale distribution businesses with nitrogen fertilizer products. Our business is affected by a number of factors, including weather conditions and the availability and prevailing prices for fertilizer, natural gas used in the production of various fertilizers and other crop production inputs.
 
Weather conditions can significantly affect our results of operations, both for quarterly reporting and on an annual basis. Adverse weather conditions during the planting season may force farmers to either delay or abandon their planting, or change to another crop, which may lead to lower use of fertilizer, seed and crop protection products.
 
The crop production inputs distribution business is seasonal, with approximately 69% of our sales occurring between March and July based upon planting, growing and harvesting cycles. This seasonality results from the planting, growing and harvesting cycles of our customers. Inventories are accumulated to be available for seasonal sales, requiring significant storage capacity. The accumulation of inventory is financed by suppliers or by the Company through its credit facility. Depending on weather and field conditions in the Company’s widely diverse geographic marketing areas, the period of heavy product shipments to customers can vary by several weeks, which may have a material impact on which quarter sales are recorded.
 
Another factor affecting our business is the price for fertilizers. We purchase nitrogen materials, phosphates, and potash and resell these nutrients in either their original form or in the form of multi-nutrient fertilizers. Prices for phosphates have recently experienced some volatility while potash has been relatively stable over the past several years. During the third quarter of 2002, nitrogen pricing declined for the first weeks of the quarter and steadily rose for the remainder of the quarter with higher increases during the later portion of September compared to 2001 when pricing experienced steady declines. While the level of nitrogen prices affects the profitability of our entire business, the level of nitrogen prices affects the profitability of our two nitrogen-manufacturing plants more dramatically.
 
The major raw material in the manufacture of nitrogen-based products is natural gas. We purchase natural gas through market-priced contracts and on the open market for use in our nitrogen-production plant in East Dubuque, IL. Natural gas pricing quoted at the Henry Hub was $2.55 per MMBTU at December 31, 2001. The price for natural gas has ranged from approximately $3.04 to $4.09 per MMBTU during the quarter and was $4.09 per MMBTU as of September 30, 2002. The average and median price for the quarter ended September 30, 2002 were approximately $3.33 and $3.29, respectively. The level of natural gas prices directly affects profitability of our nitrogen-based products.

14

Table of Contents
 
Results of Operations
 
Three months ended September 30, 2002 compared to three months ended September 30, 2001
 
The following table and discussion provides information regarding Royster-Clark’s statement of operations as a percentage of net sales.
 
    
Three Months ended
  
    
September 30,
  
    
2002
       
2001
  
Net sales
   
100.0
%
     
100.0
 
Cost of sales
   
79.8
 
     
81.2
 
    
    
Gross profit
   
20.2
 
     
18.8
 
Selling, general and administrative expenses
   
30.1
 
     
32.5
 
Gain on disposal of property, plant and equipment, net
   
(0.1
)
     
—  
 
    
    
Operating loss
   
(9.8
)
     
(13.7
)
Interest expense
   
(5.8
)
     
(7.1
)
Gain on sales of natural gas contracts
   
1.5
 
     
—  
 
    
    
Loss before taxes
   
(14.1
)
     
(20.8
)
Income tax benefit
   
(5.3
)
     
(7.7
)
    
    
Net loss
   
(8.8
)%         
     
(13.1
)
    
    
 
Net sales.    Royster-Clark’s net sales were $125.4 million for the third quarter of 2002 compared to $120.5 million for the same period in 2001, an increase of $4.9 million, or 4.1%. The increase in sales resulted predominantly from approximately $11.5 million in increased volume of various fertilizer materials, predominantly nitrogen products, crop protection, seed and grain products and application and service revenues. This increase in sales was partially offset by price depreciation of approximately $6.6 million. The decline in natural gas prices from the high levels encountered in 2001 was the prime driver in this price depreciation. The change in sales resulted from the following factors:
 
 
•
 
Sales volume increases were a net of $11.5 million resulting from increases in crop protection products of approximately $6.8 million, various nitrogen fertilizer products (“nitrogen products”) of approximately $4.8 million, various phosphate products of approximately $1.5 million, grain and seed products of approximately $2.2 million and increased revenues on application and services of approximately $2.2 million. These increases were partially offset by volume decreases in granulated and blended fertilizer products of approximately $3.7 million and volume decreases in lime, landplaster, micronutrient, and other products of approximately $2.3 million. The increase in sales volume of crop protection products resulted from planting delays from the second quarter shifting application of crop protection products into the third quarter. Increases in nitrogen and phosphate product sales volume resulted from early movement of product for fall season sales predominantly to larger wholesale accounts and to a lesser extent, retail customers. Application and service income increased due to application of products due to planting delays from the second quarter and early movement of fertilizer to retail customers for the fall season. The decreases in sales volumes resulted from reduced fertilizer application due to continued dry conditions in the Southeast.
 
 
•
 
Market related sales price depreciation of nitrogen products accounted for approximately $4.8 million of the $6.6 million price depreciation. Price depreciation also affected crop protection products and liquid and dry blend fertilizers. Nitrogen products are used in both liquid and dry blended fertilizers and were affected by nitrogen price depreciation. Decreased sales of $0.6 million resulted from blended and granulated price depreciation and other mix changes. Crop protection product price depreciation of approximately $0.8 million resulted predominantly from generic product competition during the third quarter. Lower sales of seed products resulted predominantly from lower prices received on sales of seed to elevators.

15

Table of Contents
 
Gross profit.    Gross profit was $25.4 million for the third quarter of 2002 compared to $22.7 million for the same period in 2001, an increase of $2.7 million, or 11.9%. The increase in gross profit resulted from favorable costs of East Dubuque manufactured nitrogen products during the quarter, increased sales volumes described above and improved operating rates of several of our granulation plants. The increase of gross profit was partially offset by lower product rebates for the quarter. Price depreciation from product groups described above was substantially offset by lower costs of those product groups. Gross margin was 20.2% for the third quarter of 2002 compared to 18.8% for the same period in 2001. The increase in gross margin increased by 1.4% due to the favorable leverage of East Dubuque manufacturing costs.
 
Selling, general and administrative expenses.    Selling, general and administrative expenses were $37.7 million for the third quarter of 2002 compared to $39.1 million for the same period in 2001, a decrease of $1.4 million, or 3.6%. The decrease in selling, general and administrative expenses resulted from the following factors:
 
 
•
 
Employee compensation costs were approximately $1.4 million lower due to personnel reductions and hour reductions of staff initiated to reduce costs.
 
 
•
 
Expenses were approximately $0.5 million lower compared to 2001 due to cost savings measures including seasonal labor, overtime, auto, services, telephone and supplies.
 
 
•
 
Amortization of goodwill and other assets was approximately $0.3 million lower compared to 2001, predominantly due to adoption of provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. During 2001, selling, general and administrative expenses reflect charges for the amortization of goodwill, which is no longer amortized in the current year with the adoption of SFAS No. 142. For the three months ended September 30, 2001, amortization of goodwill totaled $0.3 million.
 
 
•
 
Medical health insurance expense and other benefits and taxes were $0.3 million lower than last year due to fewer employees, favorable experience and an increase in employee sharing of healthcare costs.
 
 
•
 
Rent expense was approximately $0.2 million lower than the comparable period last year due to improved utilization of equipment.
 
The decrease in selling, general and administrative expenses was partially offset by increases in property and general liability insurance of approximately $0.6 million, storage and handling of approximately $0.3 million, property taxes of approximately $0.2 million and various other increases of approximately $0.2 million. Selling, general and administrative expense as a percentage of net sales was 30.1% for the third quarter of 2002 compared to 32.5% for the same period in 2001. Lower selling, general and administrative expenses as a percent of net sales resulted from personnel reductions, lower amortization and other expense reductions not driven by volume changes. Quarterly selling, general and administrative expense as a percent of net sales fluctuates widely within the fiscal year due to the seasonal nature of sales volumes with selling, general and administrative expense exhibiting less seasonal fluctuations.
 
Gain on disposal of property, plant and equipment, net.    Gain on sales of fixed assets was $0.1 million in 2002 compared to no gain or loss in 2001. This increase was the result of asset sales during the quarter compared to the comparable period last year.
 
Operating loss.    Operating loss was $12.3 million for the third quarter of 2002 compared to $16.4 million for the same period in 2001, a decrease of $4.1 million, or 25.0%. This decrease was the result of factors discussed above. Operating loss as a percentage of net sales was 9.8% for the third quarter in 2002 compared to 13.7% for the same period in 2001 due to the increased gross margin and the decreased selling, general and administrative expenses as a percentage of sales as described above.
 
Interest expense.    Interest expense was $7.3 million for the third quarter in 2002 compared to $8.5 million for the same period in 2001, a decrease of $1.2 million, or 14.1%. The decrease in interest expense was due to

16

Table of Contents
lower average daily borrowings for the quarter against our senior secured credit facility and lower interest rates. Average daily borrowings against our senior secured credit facility used to fund working capital needs were $33.0 million lower in 2002 compared to 2001 resulting in approximately $0.6 million less interest expense. Lower interest rates on the senior secured credit facility of approximately 1.7% resulted in approximately $0.6 million less expense in 2002 as compared to 2001.
 
Gain on sales of natural gas contracts.    As a result of the purchase of IMC Nitrogen Company on April 22, 1999, the Company became the beneficial holder of rights, title and interests in certain natural gas leases in Canada. In July 2002, the Company sold its rights, title and interests in these beneficial holdings of natural gas resulting in a gain of approximately $1.3 million. In addition, in September 2002, the Company sold all its rights, title, and interests in several fixed-priced natural gas contracts resulting in a gain of $0.6 million.
 
Income tax benefit.    Income tax benefit was $6.7 million for the third quarter of 2002 compared to $9.3 million for the same period in 2001, a decrease of $2.6 million. The lower income tax benefit was primarily attributable to lower taxable losses. The effective tax rate was 37.6% for the third quarter of 2002 compared to 37.2% for the same period in 2001. The higher effective tax rate in 2002 compared to 2001 resulted from the elimination of goodwill amortization effective January 1, 2002 as a result of the adoption of SFAS No. 142.
 
Net loss.    Net loss was $11.0 million for the third quarter of 2002 compared to $15.7 million for the same period in 2001, a decrease of $4.7 million, resulting from the fluctuations noted above.
 
Nine months ended September 30, 2002 compared to nine months ended September 30, 2001
 
The following table and discussion provides information regarding Royster-Clark’s statement of operations as a percentage of net sales.
 
    
Nine Months ended
September 30,
  
    
2002
     
2001
  
Net sales
   
100.0
%
   
100.0
 
Cost of sales
   
80.5
 
   
80.2
 
    
  
Gross profit
   
19.5
 
   
19.8
 
Selling, general and administrative expenses
   
15.9
 
   
16.0
 
Loss on disposal of property, plant and equipment, net
   
—  
 
   
0.1
 
    
  
Operating income
   
3.6
 
   
3.7
 
Interest expense
   
(2.9
)
   
(3.3
)
Gain on sales of natural gas contracts
   
0.3
 
   
—  
 
    
  
Income before taxes
   
1.0
 
   
0.4
 
Income tax expense
   
0.4
 
   
0.2
 
    
  
Net income
   
0.6
%
   
0.2
 
    
  
 
Net sales.    Royster-Clark’s net sales were $753.8 million for the first nine months of 2002 compared to $821.2 million for the same period in 2001, a decrease of $67.4 million, or 8.2%. The decrease in sales resulted predominantly from approximately $87.4 million in price depreciation of fertilizer materials, crop protection and seed products, predominantly nitrogen products during the second quarter that continued into the beginning of the third quarter. Declining natural gas prices from the high levels encountered in 2001 was the prime driver in this price depreciation. Inclement weather in several of the Company’s market areas in Indiana, Ohio, Illinois, Kentucky and Tennessee during the later portion of the first quarter and during the second quarter affected product shipments. Some farmers switched from planting corn to soybeans, which require less fertilizer and crop

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protection inputs while other farmers elected not to plant and file for crop insurance compensation. The change in sales resulted from the following factors:
 
 
•
 
Market related sales price depreciation of various nitrogen fertilizer products accounted for approximately $68.8 million of the $87.4 million price depreciation. Price depreciation affected liquid and dry blended fertilizers and, to lesser extent, phosphate and potash products. Nitrogen products are used in both liquid and dry blended fertilizers and were affected by nitrogen price depreciation resulting in approximately $9.5 million in price depreciation. Crop protection product price depreciation of approximately $3.2 million resulted predominantly from generic product competition during the second quarter.
 
 
•
 
Sales volume increases were a net of $20.0 million resulting from volume increases in nitrogen products of approximately $26.0 million, grain and seed products of $6.1 million and $2.6 million from other products. Volume declines in blended and granulated fertilizer products of approximately $13.5 million and crop protection products of approximately $1.2 million partially offset the volume increases described above. The increase in nitrogen products resulted primarily from regaining market share from 2001 when we passed on business anticipating higher returns during heavy second quarter movement and early movement of product for fall season sales predominantly to larger wholesale accounts and to a lesser extent, retail customers during the third quarter. In addition, farmers applied nitrogen products for the maximum payback on their input dollars at the expense of blended and granulated fertilizer that offers a nutrient mix. Volume increases in grain and seed products resulted from increased volumes shipped through the Company’s grain operations and increased sales of seed to elevators. Decreases in blended and granulated fertilizer sales volumes were the result of several factors that affected our markets to varying degrees. The volume declines in granulated products sales in the Southeast resulted from reduced fertilizer application due to continued dry conditions, limited supply of certain fertilizer grades and mixes and unprofitable customers we elected not to service. Limited supply of certain fertilizer grades and mixes resulted from Company efforts that modified some of its manufacturing processes. We did not attain previous manufacturing rates resulting in lower available tons. Lower crop protection product sales volumes resulted from reduced corn acres planted.
 
Gross profit.    Gross profit was $146.8 million for the first nine months of 2002 compared to $162.7 million for the same period in 2001, a decrease of $15.9 million, or 9.8%. The decrease in gross profit resulted from the various sales volume and pricing factors discussed above. Gross margin was 19.5% for the first nine months of 2002 compared to 19.8% for the same period in 2001. Lower gross margin percentage resulted primarily from sales price declines in nitrogen products.
 
Selling, general and administrative expenses.    Selling, general and administrative expenses were $119.7 million for the first nine months of 2002 compared to $131.4 million for the same period in 2001, a decrease of $11.7 million, or 8.9%. The decrease in selling, general and administrative expenses resulted from the following factors:
 
 
•
 
Expenses were approximately $6.8 million lower compared to 2001 due to less expense supporting sales decreases including incentives, seasonal labor and overtime, fuel, power, doubtful accounts, travel, entertainment, repairs and supplies. Cost savings initiated in response to sales decreases were included in the lower expense.
 
 
•
 
Full time salary and benefit costs were approximately $2.3 million lower due to personnel reductions.
 
 
•
 
Expenses at distribution centers handling crop protection and seed products and various terminals handling nitrogen solution and other fertilizer materials were $1.7 million lower due to the leverage effect of increased shipments through the facilities.
 
 
•
 
Medical health insurance and workers compensation expenses were $1.2 million lower than last year due to fewer employees, favorable experience and an increase in employee sharing of healthcare costs.

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•
 
Rent expense was approximately $0.9 million lower than the comparable period last year due to improved utilization of equipment.
 
 
•
 
Amortization of goodwill and other assets was approximately $0.9 million lower compared to 2001, due predominantly to adoption of provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” During 2001, selling, general and administrative expenses reflect charges for the amortization of goodwill, which is no longer amortized in the current year with the adoption of SFAS No. 142. For the first nine months ended September 30, 2001, amortization of goodwill totaled $0.9 million.
 
 
•
 
Other expenses were approximately $0.5 million lower compared to 2001 due to the results of other cost savings measures.
 
The decrease in selling, general and administrative expenses was partially offset by increases in property and general liability insurance of approximately $1.7 million, depreciation of approximately $0.7 million and other net increases of various expenses of approximately $0.2 million. Selling, general and administrative expense as a percentage of net sales was 15.9% for the first nine months of 2002 compared to 16.0% for the same period in 2001. Lower selling, general and administrative expenses as a percent of net sales resulted from personnel reductions and other expense reductions not driven by volume changes being right-sized with sales reductions and lower amortization. Quarterly selling, general and administrative expense as a percent of net sales fluctuates widely within the fiscal year due to the seasonal nature of sales volumes with selling, general and administrative expense exhibiting less seasonal fluctuations.
 
Loss on disposal of property, plant and equipment, net.    Loss on sales of fixed assets was $0.1 million for the first nine months of 2002 compared to $0.9 million in 2001. This decrease was the result of the disposal last year of a former administrative office in 2001 and fewer asset sales.
 
Operating income.    Operating income was $27.0 million for the first nine months of 2002 compared to $30.5 million for the same period in 2001, a decrease of $3.5 million, or 11.5%. This decrease was the result of factors discussed above. Operating income as a percentage of net sales was 3.6% for the first nine months in 2002 compared to 3.7% for the same period in 2001 due to lower gross margin discussed above that was partially offset by lower expense as a percentage of sales in selling, general and administrative expenses.
 
Interest expense.    Interest expense was $21.7 million for the first nine months in 2002 compared to $27.1 million for the same period in 2001, a decrease of $5.4 million, or 19.9%. The decrease in interest expense was due to both lower average daily borrowings for the first nine months against our senior secured credit facility and lower interest rates. Average daily borrowings against our senior secured credit facility used to fund working capital needs were $53.5 million lower in 2002 compared to 2001 resulting in approximately $2.8 million less interest expense. Lower interest rates on the senior secured credit facility of approximately 1.7% resulted in approximately $2.6 million less expense in 2002 as compared to 2001.
 
Gain on sales of natural gas contracts.    As a result of the purchase of IMC Nitrogen Company on April 22, 1999, the Company became the beneficial holder of rights, title and interests in certain natural gas leases in Canada. In July 2002, the Company sold its rights, title and interests in these beneficial holdings of natural gas resulting in a gain of approximately $1.3 million. In addition, in September 2002, the Company sold all its rights, title, and interests in several fixed-priced natural gas contracts resulting in a gain of $0.6 million.
 
Income tax expense.    Income tax expense was $2.9 million for the first nine months of 2002 compared to $1.8 million for the same period in 2001, an increase of $1.1 million. The higher income tax expense is primarily attributable to a higher taxable income, but was partially offset by the lower effective income tax rate due to the elimination of goodwill amortization effective January 1, 2002 because of the adoption of SFAS No. 142. The effective tax rate was 39.7% for the first nine months of 2002 compared to 53.2% for the same period in 2001. The lower effective tax rate in 2002 compared to 2001 resulted from the elimination of goodwill amortization in

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2002 compared to 2001 when nondeductible goodwill amortization and lower taxable income yielded a significantly higher effective tax rate.
 
Net income.    Net income was $4.3 million for the first nine months of 2002 compared to $1.6 million for the same period in 2001, an increase of $2.7 million, resulting from the fluctuations noted above.
 
Liquidity and Capital Resources
 
Our primary capital requirements are for working capital, debt service, capital expenditures and possible acquisitions. For day-to-day liquidity requirements, we operate with a $245 million senior secured credit facility (“credit facility”) with a consortium of banks. The credit facility expires in April 2004. At September 30, 2002, the borrowing base provisions under the facility supported a borrowing availability of $144.7 million, from which we had drawn $131.8 million. This facility includes up to $10.0 million for letters of credit. This facility contains financial and operational covenants and other restrictions with which we must comply, including a requirement to maintain certain financial ratios and limitations on our ability to incur additional indebtedness.
 
In the quarterly report issued for the three and six months ended June 30, 2002, we reported the possibility that some of the covenants required under the senior secured credit facility at September 30, 2002 might not be met. As of September 30, 2002, we met our covenants and we continue to be in compliance with the requirements of this senior secured credit facility. Based on preliminary fourth quarter-to-date operating results and projections, we also expect to be in compliance with these covenants at the end of the current year. Looking further ahead, based on seasonal losses often experienced in the first quarter, it is possible that we will fall short of certain requirements as of March 31, 2003.
 
The current senior secured credit facility expires at the end of April 2004 and in anticipation of that event, we have commenced a process to secure a new credit facility to replace our senior secured credit facility. The Company believes that beginning the process now to replace the credit facility provides the Company with more latitude in negotiating favorable terms for the Company and taking advantage of the current favorable interest rate environment. Based on specific preliminary proposals received from capable financial institutions, we believe that we will be successful in replacing the current facility in either the first or second quarter of 2003 with a new facility expiring in 2006. While we anticipate we will either replace the existing senior secured credit facility or renegotiate the covenants on it, should that become necessary, we can not provide assurance that we will be successful.
 
Capital expenditures were $5.5 million for the nine months ended September 30, 2002 compared with $11.4 million for the nine months ended September 30, 2001. These capital expenditures were primarily for facilities improvements and machinery and equipment replacement projects. We estimate total capital expenditures, excluding acquisitions, for 2002 will range from $6.5 to $7.5 million.
 
Net cash provided by operating activities for the nine months ended September 30, 2002 was $8.5 million compared to $69.4 million for comparable period in 2001, a decrease of $60.9 million. The most significant component of lower cash flows provided by operating activities was movement in operating assets and liabilities of $61.7 million. Combined cash used in inventory and accounts payable of $45.8 million was due to increased purchases of favorably priced inventory for short-term inventory needs for the fall that was not as heavily vendor financed as last year. Lower collections of other receivable of $12.5 million resulted primarily from the collection last year of $12.2 million of the receivable recorded December 2000 for the sale of natural gas purchase contracts. Lower cash provided by operating activities also resulted from net cash used in prepaid expenses of $0.4 million in 2002 compared to cash provided by prepaid expenses of $2.7 million in 2001.
 
Net cash used in investing activities amounted to $3.9 million in 2002 compared to $13.7 million in 2001, a decrease of $9.8 million. The decrease in net cash used in investing activities resulted from:
 
 
•
 
Lower capital expenditures of $5.9 million in 2002;

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•
 
$3.3 million in acquisition costs associated with the attempted acquisition of Agro Distribution expended in 2001; and
 
 
•
 
$0.6 million in higher proceeds from the sale of property, plant and equipment in 2002.
 
Net cash used in financing activities totaled $5.1 million compared to $55.9 million in 2001, a decrease of $50.8 million. Decreased cash used in financing activities in 2002 compared to 2001 resulted from lower payments of $36.7 million and higher proceeds of $10.0 million from the credit facility compared to 2001 and a decrease in cash provided by customer deposits of $9.3 million in 2002 compared to 2001. Lower working capital needs required lower borrowings under the credit facility. The decrease in cash used in customer deposits resulted from lower customer deposits at December 2001 compared to 2000, due primarily to price depreciation of nitrogen products. The payment of $5.0 million on a five-year note payable entered in 1997 partially offset the decreases described above.
 
Net working capital, excluding senior secured credit facility and current installments of long-term debt at September 30, 2002 totaled $207.0 million versus $147.1 million at December 31, 2001, an increase of $59.9 million, or 40.7%. This increase resulted primarily from the typical seasonal activity of increases in trade accounts and other receivables and decreases in inventory, customer deposits and accounts payable from normal seasonal movement of operating assets and liabilities. Working capital changes are summarized in the table below.
 
Working capital increases:
       
Trade account receivable
   
$
25.1
Accounts payable
   
 
42.4
Customer deposits
   
 
42.6
Other receivables
   
 
19.0
    
Total increases
   
 
129.1
    
Working capital decreases:
       
Inventory
   
 
69.1
Prepaid expenses and other current assets
   
 
0.1
    
Total decreases
   
 
69.2
    
Net increase
   
$
59.9
    
 
Recently Issued Accounting Standards
 
Statement of Financial Accounting Standards No. 143
 
In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We do not believe the implementation of this standard will have a material effect on our financial condition or results of operations.
 
Statement of Financial Accounting Standards No. 145
 
In April 2002, the FASB issued SFAS No. 145, “Recission of FAS No. 4, 44 and 64, Amendment of FAS No. 13, and Technical corrections.” This Statement rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, and an amendment of that Statement, SFAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” This Statement also rescinds SFAS No. 44, “Accounting for Intangible

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Assets of Motor Carriers.” This Statement amends SFAS No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This statement has a variety of effective dates due to the various standards affected, but generally is effective for years beginning or transactions after May 15, 2002, with early application encouraged. We do not believe the implementation of this standard will have a material effect on our financial condition or results of operations.
 
Statement of Financial Accounting Standards No. 146
 
In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized at the date of an entity’s commitment to an exit plan. A fundamental conclusion reached by the Board in this Statement is that an entity’s commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. Therefore, this Statement eliminates the definition and requirements for recognition of exit costs in Issue 94-3. This Statement also establishes that fair value is the objective for initial measurement of the liability. SFAS No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. SFAS No. 146 is effective prospectively after December 31, 2002. We do not believe the implementation of this standard will have a material effect on our financial condition or results of operations.
 
ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk
 
The Company is exposed to market risk due to changes in natural gas prices. Natural gas is a raw material used in the production of various nitrogen-based products that the Company either manufactures at its East Dubuque plant or purchases from vendors. Market prices of nitrogen-based products are affected by changes in natural gas prices as well as supply and demand and other factors. As a normal course of business, the Company purchases nitrogen-based products during the winter and early spring to supply its needs during the high sales volume spring season. Nitrogen-based inventory remaining at the end of the spring season will be subject to market risk due to changes in natural gas prices and supply and demand. Currently, the Company enters into limited indexed price commitments to purchase natural gas for use in its East Dubuque facility and therefore is exposed to significant market risk. Changes in levels of natural gas prices and market prices of nitrogen-based products can materially affect the Company’s financial position and results of operations.
 
The Company is also exposed to changes in interest rates. The interest rates that we pay for borrowings under our credit facility are based primarily on the LIBOR rate of interest charged by the agent bank under our credit facility. Our operating results will be impacted by changes in interest rates. We estimate that based on an estimated annual average balance on our credit facility that each 1% change in market interest rate will impact before tax earnings by approximately $1.1 million. Our First Mortgage Notes bear interest at a fixed rate of 10 1/4%. Some of our customer deposits also bear interest at a fixed rate, which is established on an annual basis at the beginning of each farming season based on prevailing market rates for similar programs in each of the regions in which we operate.
 
The Company engages in limited commodity hedging activities with respect to its grain and seed purchases. Given the current economic climate, we believe that the rates in force approximate market rates. We do not hold or issue derivative financial instruments for trading purposes.

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At September 30, 2002, the Company’s exposure to market risk factors had not materially changed from December 31, 2001.
 
ITEM 4.    Controls and Procedures
 
(a)
 
Evaluation of disclosure controls and procedures.
 
Within the 90-day period prior to the date of this report, the Company, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (the “Evaluation”). Based upon the Evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that material information relating to the Company, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this quarterly report was being prepared.
 
(b)
 
Changes in internal control.
 
There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the Evaluation.

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PART 2.    OTHER INFORMATION
 
ITEM 6.    Exhibits and Reports on Form 8-K
 
(a)
 
(1)    Financial Statements:
 
The following condensed consolidated financial statements are included in Part 1, Item 1, of this  Form 10-Q:
 
Condensed Consolidated Balance Sheet as of September 30, 2002 and December 31, 2001
 
Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2002 and 2001
 
Condensed Consolidated Statements of Cash Flow for the Nine Months ended September 30, 2002 and 2001
 
 
(2)
 
Financial Statement Schedules: None.
 
 
(3)
 
Exhibits:
 
 
  3.01
 
Restated Certificate of Incorporation of the Company.†
 
 
  3.02
 
Certificate of Amendment of Restated Certificate of Incorporation of the Company.†
 
 
  3.03
 
Amended and Restated Bylaws of the Company.†
 
 
  4.01
 
Indenture dated as of April 22, 1999 by and among the Company, the Guarantors, and the United States Trust Company of New York, as Trustee.†
 
 
  4.02
 
Form of 101/4% First Mortgage Note Due 2009 (Included in Exhibit 4.01)†
 
 
10.01
 
Credit Agreement dated as of April 22, 1999 by and among the Company, the Guarantors, various lenders, DLJ Capital Funding, as arranger and syndication agent, J.P. Morgan Securities Inc., as documentation agent and U.S. Bancorp Ag Credit, Inc., as administrative agent.†
 
 
10.03
 
Supply Agreement dated as of April 22, 1999 among IMC Kalium Ltd., IMC-Agrico Company and the Company. Portions of this exhibit have been omitted pursuant to a request for confidential treatment.†
 
 
10.04
 
Company Employee Savings and Investment Plan.†
 
 
10.05
 
Royster-Clark Group, Inc. 1999 Restricted Stock Purchase and Option Plan.†
 
 
10.06
 
Employment Agreement dated as of April 22, 1999 by and among Francis P. Jenkins, Jr., Royster-Clark Group, Inc. and Royster-Clark, Inc.†
 
 
10.14
 
Amendment Agreement dated August 18, 2000 amending Credit Agreement.††
 
 
10.15
 
Second Amendment to Revolving Credit Agreement among Royster-Clark, Inc., various financial institutions, DLJ Capital Funding, J.P. Morgan Securities, Inc., and U.S. Bancorp, Ag Credit, Inc.†††
 
 
10.16
 
Employment Agreement dated as of December 1, 1999 between Royster-Clark, Inc. and G. Kenneth Moshenek.††††
 
 
10.17
 
Employment Agreement dated as of December 1, 1999 between Royster-Clark, Inc. and Walter Vance.††††
 
 
10.18
 
Form of Waiver and Consent dated May 6, 2002 under the Revolving Credit Agreement by and among Royster-Clark, Inc. and various financial institutions*
 
 
99.01
 
Certification of Periodic Financial Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350‡
 
 
99.02
 
Certification of Periodic Financial Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350 ‡

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†
 
Incorporated by reference to Registration Statement on Form S-4 (Reg. No.: 333-81235) where it has been filed as an Exhibit.
††
 
Incorporated by reference to Exhibit No. 10.14 to Form 10Q for the quarterly period ended June 30, 2000 (Reg. No.: 333-81235) filed on August 21, 2000.
†††
 
Incorporated by reference to Exhibit No 10.15 to Form 10Q for the quarterly period ended September 30, 2000 (Reg. No.: 333-81235) filed on November 14, 2000.
††††
 
Incorporated by reference to Exhibit No 10.15 to Form 10K for the annual period ended December 31, 2000 (Reg. No.: 333-81235) filed on April 2, 2001.
*
 
Incorporated by reference to Exhibit No 10.18 to Form 10Q for the quarterly period ended March 31, 2002 (Reg. No.: 333-81235) filed on May 14, 2002.
‡
 
Filed herein.
 
(b)
 
Reports on Form 8-K – None

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
ROYSTER-CLARK, INC.
 
/s/    PAUL M. MURPHY
Paul M. Murphy
Chief Financial Officer
 
DATE:    November 14, 2002

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ROYSTER-CLARK, INC.
 
CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Francis P. Jenkins, Jr., Chief Executive Officer of Royster-Clark, Inc. certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of Royster-Clark, Inc.;
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
 
 
(a)
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
 
(b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
 
(c)
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
 
 
(a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
(b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Dated:  November 14, 2002
 
By:  /S/    FRANCIS P. JENKINS, JR.
                                                                                                         
Francis P. Jenkins, Jr.
Chief Executive Officer

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ROYSTER-CLARK, INC.
 
CERTIFICATION PURSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES EXCHANGE ACT
OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Paul M. Murphy, Chief Financial Officer of Royster-Clark, Inc. certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of Royster-Clark, Inc.;
 
2.
 
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
 
4.
 
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
 
 
(a)
 
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
 
 
(b)
 
evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
 
 
(c)
 
presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
 
 
(a)
 
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
(b)
 
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Dated:  November 14, 2002
 
By:  /S/    PAUL M. MURPHY
                                                                                                         
Paul M. Murphy
Chief Financial Officer

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