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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2003

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15d OF THE SECURITIES EXCHANGE ACT OF 1934

x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the Fiscal Year Ended December 31, 2002

or

¨    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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)

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)

SEE TABLE OF ADDITIONAL REGISTRANTS BELOW

FRANCIS P. JENKINS, JR.

CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

ROYSTER-CLARK, INC.

1251 AVENUE OF THE AMERICAS – SUITE 900

NEW YORK, NEW YORK 10020

(212) 332-2965

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With Copies to:

PETER A. BASILEVSKY, ESQ.

SATTERLEE STEPHENS BURKE & BURKE LLP

230 PARK AVENUE, SUITE 1130

NEW YORK, NEW YORK 10169-0079

(212) 818-9200

TITLE OF EACH CLASS

10 1/4% First Mortgage Notes Due 2009

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

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 ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ¨ Not applicable

State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days prior to the date of filing (see definition of affiliate in Rule 12b-2 of the Exchange Act.) Not applicable

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date. Not applicable

DOCUMENTS INCORPORATED BY REFERENCE: NONE

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ROYSTER-CLARK, INC.

TABLE OF ADDITIONAL REGISTRANTS

The address, including zip code, and telephone number, including area code, of the principal offices of the additional registrants listed above is: 1251 Avenue of the Americas—Suite 900, New York, New York 10020; the telephone number at that address is (212) 332-2965.

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ROYSTER-CLARK, INC.

FORM 10-K

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

This Form 10-K 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 difference 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, specifically in light of the September 11, 2001 terrorist attacks and their related aftermath, (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.

Few of the forward-looking statements in this Report deal with matters that are within our unilateral 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.

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PART I

ITEM 1.    BUSINESS.

General

We believe that we are one of the largest independent retail and wholesale distributors, in terms of retail sales, of agricultural fertilizer, seed, crop protection products and agronomic services to farmers in the United States. We primarily focus on major farming regions in the East, South and Midwest of the United States. Our distribution business supplies a full range of products and services to our retail and wholesale customers through approximately 400 facilities, including retail farm centers (“Farmarkets”), granulation, blending and seed processing plants, and a network of storage and distribution terminals and warehouses. In addition, we operate two nitrogen-manufacturing plants that supply our distribution business with nitrogen fertilizer products. We operate as a retailer and wholesaler of a complete line of products and services to help farmers become more profitable, efficient and environmentally sound. In 2002, we generated revenues of $898.1 million and EBITDA of $49.8 million (See the discussion of this item in Item 6, Selected Financial Data).

Royster-Clark, Inc. (“Company”) has a long history. W.S. Clark & Sons, Inc. began operations in 1872 as a general mercantile company. The corporate antecedents of Royster Company Inc. were formed in 1881 to utilize natural fertilizer resources from South America. Royster-Clark, Inc. was formed in 1992 through the merger of these two companies. The current management team assumed active control at Royster-Clark in the summer of 1995.

On April 22, 1999, 399 Venture Partners, Inc., an affiliate of Citicorp Venture Capital Ltd., through its newly formed company Royster-Clark Group, Inc. (“Royster-Clark Group” or “RCG”), acquired all of the outstanding shares of Royster-Clark, Inc. (predecessor) from some members of its management. Royster-Clark, Inc. (successor) then acquired all of the outstanding shares of three operating subsidiaries, IMC AgriBusiness, Inc., IMC Nitrogen Company and Hutson’s AG Service, Inc. from IMC Global, Inc. These three IMC entities are referred to as “AgriBusiness.”

In order to finance the acquisition of AgriBusiness and re-structure the Company’s debt, the Company used proceeds from equity contributions by 399 Venture Partners, Inc. of $59.0 million, management rollover equity of $19.6 million; issuance of $10.0 million of Royster-Clark Group junior subordinated notes maturing in 2010, to IMC Global, Inc.; the issuance of $200.0 million principal amount of 10.25% First Mortgage Notes due 2009 held by various financial institutions (“Noteholders”); and proceeds from a Senior Secured Credit Facility (“credit facility”) created on April 22, 1999. As a result of these transactions and subsequent issuance of stock, 399 Ventures and affiliates owns approximately 38.1% of the outstanding voting stock and 70.7% of the total outstanding stock of Royster-Clark Group, members of management own approximately 48.4% of the outstanding voting stock and 22.2% of the total outstanding stock of Royster-Clark Group and have the right to acquire an additional 10% of the voting stock through a stock purchase plan. Royster-Clark Group owns all of the outstanding stock of Royster-Clark, Inc.

AgriBusiness was initially formed in the mid-1980s as Vigoro Industries, Inc. through the leveraged buy-out of Kaiser Agricultural Chemicals and Estech Branded Fertilizer, both retailers of agricultural inputs. AgriBusiness acquired the East Dubuque nitrogen facility in 1987. Vigoro merged with IMC Global in 1996 and then AgriBusiness was formed, combining the Farmarket retail and nitrogen businesses of Vigoro and the Rainbow business of IMC Global. AgriBusiness expanded its retail and wholesale distribution system with the 1997 acquisition of Hutson’s Ag Service, Inc., a Kentucky-based crop production input distributor with approximately 25 retail stores.

Risk Factors

Risk factors to our business include, but are not limited to, the following:

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Business Operations

Agricultural Infrastructure

We have an extensive agricultural product infrastructure of approximately 380 facilities, including Farmarkets, granulation, blending and seed processing facilities and a network of storage and distribution terminals and warehouses. In addition, we operate two nitrogen-manufacturing plants that supply our distribution business with nitrogen fertilizer products. This infrastructure allows us to efficiently process, distribute and store product close to the end-user and supply our customers on a timely basis during the planting seasons. In addition, we use port facilities on the Atlantic Ocean and the Mississippi River system to provide flexibility in product purchasing, including the ability to access overseas markets when they offer lower prices than domestic markets. Our widespread geographical presence in some of the country’s most important farming regions provides diversity that helps to insulate our overall business from difficult farming conditions in any one particular area as a result of poor weather or adverse market conditions for specific crops. Our facilities cover the major farming markets in the East, South and Midwest. We believe that this market presence provides a number of competitive advantages as described below:

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Approximately 90% of our revenues relate to the distribution of crop production inputs purchased from third parties and resold to retail and wholesale customers. Therefore, we are only partially exposed to fluctuations in nitrogen fertilizer and other agricultural input prices. Less than 10% of our revenues come from the sale of nitrogen fertilizer products manufactured in our own facilities.

We have instituted central management controls and utilize our logistical expertise and enterprise information technology systems to manage our facilities network. We understand the importance of flexibility at the local level to adapt to local conditions. We aim to achieve the proper balance of central control and direction with local flexibility by utilizing team management and appropriate incentive programs.

Retail Distribution

We operate approximately 260 Farmarket retail farm centers, including approximately twenty third-party commission sales stores, making us one of the largest retailers of crop production inputs to farmers in North America. Farmarkets market their products and services primarily to end users, the farmers. Farmarkets typically service farmers within a 15 to 25 mile radius of their locations. We operate centers predominantly in the Midwest to service corn and soybean farmers and in the Southeast to service farmers focused on higher management crops, including cotton, peanuts, tobacco and vegetables.

We sell a complete line of products to farmers, including fertilizer, seed and crop protection products. Each Farmarket tailors its product offering to the specific needs of farmers within its service area. While we provide a complete line of products and services, fertilizer represents the majority of the typical Farmarket’s business. We offer both blended fertilizer and our own premium branded granulated fertilizer products at most of our Farmarkets.

We also distribute a full range of crop protection products at our Farmarkets. For the convenience of our customers, Farmarkets carry inventories of herbicides, insecticides, fungicides and other products, which target pest problems affecting crops. This capability allows our retail centers to be a “one-stop supplier” for farmers who need a complete package of crop protection services, including technical advice, delivery services and field application. The Farmarket receives crop protection products from our network of strategically located distribution centers. We receive distributor and dealer cash rebates based on the volume and type of products that we sell. Cash rebates are typically paid near the end of the calendar year but may also be advanced monthly, as sales are made.

We also contract with area farmers to grow certified seed products that are processed and bagged in a number of seed processing facilities. As such, we have placed an emphasis on new seed technology and provide a complete range of seed to farmers through local retail centers. Increasingly, our seed product is processed for leading seed companies, and sold under their private labels. For example, we were one of the first outside companies to grow, process, bag and distribute Roundup Ready soybeans for Monsanto. Roundup Ready is a biotechnology product that allows the soybean to tolerate Roundup, a widely used crop protection product. Even with published stories concerning the commingling of crops produced from biotechnologically modified seed with conventional seed, we continue to believe that seed technology based on genetic engineering will be an important growth area for agriculture. In addition the Company produces and markets its own proprietary Vigoro Seed brand.

In addition to selling physical crop production inputs, Farmarket personnel provide physical and non-physical agronomic services to farmers. Physical services include the custom blending and application of crop nutrients to meet the agronomic needs of individual farmer’s fields based on basic soil sampling. Non-physical services include more sophisticated and technologically advanced services on a fee basis such as more detailed information derived from soil sampling, pest level monitoring and yield monitoring using global position systems satellites and satellite-linked variable rate spreaders and applicators that take advantage of the data. Other non-physical services include agronomic advice and crop production planning and consulting services as a means to maintain hands-on and personal relationships with the grower and use available knowledge and techniques to increase the grower’s opportunities for a successful crop.

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We operate point-of-sale computer systems at each of our Farmarkets that provide data daily for accounts receivable, inventory control, budgeting, forecasting, working capital management, material requirements planning and internal controls.

Wholesale Distribution

Our wholesale distribution activity supplies a full range of fertilizer, seed and crop protection products to customers in the Southeast and Midwest. Our primary wholesale business includes the purchase of nitrogen, phosphate and potash, three essential nutrients for plant growth, for resale to wholesale customers. We process the majority of these crop nutrients into blended and granulated fertilizer products and then sell them as mixed fertilizers.

We believe we are one of the largest North American producers of agricultural granulated fertilizer. In terms of number of plants, we have been a leading manufacturer and distributor of premium, branded agricultural granulated fertilizers with our primary market focus in the Southeastern farming regions. These products are marketed under the Super Rainbow, Rainbow, International, and Bonanza brand names. Granulated fertilizer products are primarily used by farmers who produce specialty crops, such as citrus fruits, vegetables, tobacco, peanuts and cotton. Farmers growing these crops are willing to invest more in premium crop nutrients, such as granulated fertilizers.

We operate six granulation plants which produce homogenized NPK (nitrogen, phosphate and potash) products. We believe that we are among the most efficient, low-cost producers of granulated fertilizers in the U.S. market. We have a cost-effective production process that uses potash, phosphate and nitrogen to manufacture granulated fertilizer products with excellent agronomic traits.

We also offer a range of products with slightly different nutrient contents within each branded, blended product category. The ability to offer a range of fertilizer blends helps us accommodate the needs of farmers growing a variety of specialty crops under different soil conditions. We also produce custom products to meet the specific needs of large customers.

We distribute our wholesale products in the southeastern United States through a network of over 900 independent dealers. Typically, our products represent 25% to 45% of a dealer’s annual product turnover. We have supplied granulated fertilizer products to some customers for more than 50 years. These long-term customer relationships provide a competitive advantage today.

Another key part of our wholesale business is a network of terminals and storage facilities located in the Midwest. This network services customers in Iowa, Missouri, Wisconsin, Minnesota, Illinois, Indiana, Kentucky, Michigan and Ohio, as well as in Pennsylvania, New York and West Virginia. When selling nitrogen fertilizer products, the East Dubuque and Cincinnati plants’ proximity to our wholesale business terminals provides a freight cost advantage over other suppliers, some of which must be transported from the Gulf Coast region or Trinidad. In addition to lowering freight costs, the location of our wholesale business’ supply terminals helps us meet the needs of customers in the Midwest in a timely manner.

We have developed a customer base throughout the Midwest in both the agricultural and industrial markets. In the aggregate, our wholesale business services approximately 1,200 customers in the region. Our wholesale business’ agricultural customer base is diverse and is composed of small family-owned distributors, larger regional dealers and several national chains. The industrial customer base is smaller and less seasonal than the agricultural customers.

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Nitrogen Fertilizer Production

We produce nitrogen fertilizer and industrial products that are sold through our wholesale distribution network. We own and operate a fully integrated nitrogen manufacturing plant in East Dubuque, IL, which produces nitrogen products for both the agricultural and industrial markets. This plant is designed to produce anhydrous ammonia, nitric acid, ammonium nitrate solution, liquid and granular urea, nitrogen solutions and carbon dioxide using natural gas as a feedstock. This plant can optimize the product mix according to swings in demand and pricing for its various products. In the year 2002, this plant produced approximately 965 thousand tons of these products. Some were sold as produced and others consumed in the production of upgraded nitrogen products. Final products shipped from the plant totaled approximately 473 thousand tons of ammonia and upgraded nitrogen products.

Located in the heart of the Midwest, we believe that the East Dubuque plant enjoys a significant freight cost advantage relative to competing facilities serving the region, over competing suppliers located in the Gulf Coast region, and over facilities which began production in Trinidad in 1998.

The East Dubuque facility has historically operated at full capacity except for temporary cutbacks or shutdowns for maintenance or extraordinary market conditions. During 2001, natural gas prices declined from a high of $9.98 per MMBTU at the beginning of the year to below $2.00 during the year, ending at $2.55 per MMBTU by the end of 2001. During 2002, natural gas prices again steadily rose. The Company took advantage of the natural gas price increases during the third quarter of 2002 through the sale of natural gas contracts realizing a gain of $1.9 million while not affecting the production at the East Dubuque plant. Most recently, however, the price of natural gas has risen to $4.75 per MMBTU at December 31, 2002 and to a peak of over $19.07 in late February before dropping to below $6.00 per MMBTU by mid-March 2003. As a result of this temporary spike in natural gas prices, the Company elected to cease production at East Dubuque for three weeks in March 2003 in order to perform maintenance activities originally scheduled for August 2003. The plant resumed production by the end of March 2003. We anticipate that natural gas prices will continue at levels where it is economical to produce upgraded nitrogen products at the plant.

Product availability at the East Dubuque plant also allows us the ability to use product-exchange agreements with other nitrogen producers in the Midwest. These agreements allow reductions in transportation costs by limiting the East Dubuque service area to customers within a 100-mile radius of the plant. We often source products from competitors’ facilities on a cost-efficient basis for Farmarket retail centers outside the East Dubuque service area. Such swap arrangements, coupled with the extensive fertilizer storage capacity in our overall system, have enabled us to optimize production on a year-round basis and minimize transportation costs.

We also operate a smaller nitrogen manufacturing facility in Cincinnati, OH that shipped approximately 135,000 tons of upgraded nitrogen products in 2002. This plant purchases anhydrous ammonia and manufactures nitric acid and ammonium nitrate liquor for industrial use and nitrogen solutions for the agriculture market. The industrial market represents approximately 20% of sales of Royster-Clark manufactured nitrogen products. These industrial sales provide a year-round revenue source.

Seasonality

Our business is seasonal with approximately 68% of sales occurring between March and July. This seasonality results from the planting, growing and harvesting cycles. Inventories must be 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 senior secured credit facility.

As a result of the inherent seasonality of our business, we experience significant fluctuations in our revenues, income and net working capital levels. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” This seasonality also generally results in higher fertilizer prices during the peak periods, with prices typically reaching their highest point in the spring, decreasing in the summer, increasing in the fall through the next spring.

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Products

The following table shows our revenues by product line for the years ended December 31, 2002, 2001 and 2000.

Competition

The market for the distribution of fertilizer, seed and crop protection products and agronomic services is competitive. We compete in the retail business primarily by providing a comprehensive line of products and what we believe to be superior services at competitive prices. Industry observers estimate that there are approximately 9,200 farm retail centers in North America serving growers. These retail farm centers are operated by agricultural cooperatives, which have the largest market share in a majority of the markets we serve, national for profit companies and local and regional independent distributors.

Demand for the agricultural products and services that the Company offers may be affected by: 1) continued population growth, 2) government programs, 3) increasing farm size due to consolidation, 4) consolidation of crop input producers, 5) biotechnology and 6) evolving environmental, health and safety regulations.

Raw Materials and Supplies

Fertilizer, nitrogen, phosphate and potash are global commodities that can be purchased from multiple suppliers. We purchase our fertilizer, seed and crop protection products primarily from the major North American producers. We also have the capability to import products from foreign suppliers. Final purchasing decisions are made based on several factors including availability, price, quality and customer requirements. As a result of these factors, the quantity of imported materials purchased for later resale or consumption will vary. In connection with the acquisition of AgriBusiness in 1999, we entered into a ten-year supply agreement with IMC Global to purchase phosphate and potash. The purchase prices and quantities of the products covered by the IMC Global supply agreement are determined by market forces. The supply agreement automatically renews for additional 5-year periods unless either party cancels it. The supply agreement also specifies remedies available to the parties in the event of noncompliance, which include compensatory damages in the event of a failure to purchase or supply the required quantities of covered products. Purchases under this contract were well in excess of minimum requirements and exceeded $100 million during 2002.

Approximately 30% of the Company’s nitrogen solution, ammonia and urea products are sourced from the East Dubuque facility. The remaining requirements are purchased from a number of different suppliers.

The major raw material in the manufacture of nitrogen products is natural gas. During 2002, the Company purchased natural gas through a combination of fixed-price and indexed-priced contracts, which were short-term in nature. During the fourth quarter we purchased natural gas monthly on the spot market. We are able to purchase natural gas at competitive prices due to our connection to the Northern Illinois Gas (Nicor) distribution system and its proximity to the Northern Natural Gas pipeline. Natural gas purchases were approximately 10.4 billion cubic feet in 2002 compared to approximately 9.0 billion cubic feet in 2001.

While management believes that the Company will continue to have access to sufficient natural gas supplies to operate the East Dubuque facility for the foreseeable future, increases in the price of natural gas will affect the profitability of our sales of manufactured nitrogen products.

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The Cincinnati plant purchases anhydrous ammonia for use in the production of nitric acid and other upgraded nitrogen products. Anhydrous ammonia is purchased from a variety of suppliers on the open market. The Company has had no problems in securing supplies of anhydrous ammonia for the plant and does not anticipate problems in maintaining access to sufficient supplies foreseeable future. The anhydrous ammonia is delivered to the plant by barge and rail.

Employees and Labor Relations

We employ approximately 2000 non-unionized and salaried employees, 230 unionized employees and approximately 900 temporary employees during seasonal periods. We believe we have good relations with our employees. Currently we have 10 labor contracts in place covering the 230 unionized employees. Two of these contracts covering approximately 110 employees were renewed for three and four year terms in 2002. Five contracts covering fewer than 100 employees are up for renewal in 2003. We have not experienced work stoppages in the past and expect to be able to renew these contracts without work stoppages in 2003.

Environmental Matters

Our facilities and operations must comply with a variety of federal, state and local environmental laws, regulations and ordinances, including those related to air emissions, water discharges and chemical and hazardous waste management and disposal. Laws relating to workplace safety and worker health and safety also govern our operations, primarily the rules of the Occupational Safety and Health Administration and the United States Department of Transportation. We believe that our operations are in compliance in all material respects with current requirements under environmental laws and employee safety laws.

Environmental laws may hold current owners or operators of land or businesses liable for their own and for previous owners’ or operators’ releases of hazardous or toxic substances, materials or wastes, pollutants or contaminants, including petroleum and petroleum products. Because of our operations, the history of industrial or commercial uses at some of our facilities, the operations of predecessor owners or operators of some of the businesses, and the use, production and release of hazardous substances at these sites, the liability provisions of environmental laws may affect us. Many of our facilities have experienced some level of regulatory scrutiny in the past and are or may be subject to further regulatory inspections, future requests for investigation or liability for regulated materials management practices.

Since the end of last year, we have determined that we have performed sufficient remediation work at five sites allowing either state agencies to issue notices of no further actions or, as a result of voluntary cleanups to expect no further requests for additional remediation work at the respective site. While from a practical standpoint we would not anticipate further remediation work required with the receipt of notices of no further action, we can not be assured that there will not be further liabilities arising out of conditions for which the Company may be held responsible.

We are still in the process of responding to the presence of hazardous substances, including nitrates, phosphorus and pesticides in soils and/or groundwater at forty-four sites. At other locations, past releases of fertilizers or other hazardous substances have been documented along with the corrective actions we have taken. Our environmental consultants and we have concluded that no further action is currently required. In addition, we have also removed or filled in place underground storage tanks from some of our facilities and, in some instances are responding to historic releases at these locations. In total, both voluntary and government ordered cleanups of releases of hazardous substances are planned or being performed at approximately forty-four sites. Also, with the limitations described below, indemnity may be available for locations for which response actions are planned or required. The cost of these on-going and potential response actions is not expected to have a material adverse effect on our business, financial condition or results of operations.

The Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), provides for responses to, and, in some instances, joint and several liability for releases of, hazardous substances into the environment. We have been identified as a potentially responsible party under CERCLA for five off-site locations to date. We believe we are a de minimis party or not liable at all for those sites.

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In connection with the acquisitions of AgriBusiness and Royster-Clark, the Company obtained indemnities for certain claims related to environmental matters that existed or arose prior to the acquisitions. The indemnities related to AgriBusiness have $4.5 million deductible, certain time limitations and an overall cap on all indemnities of approximately $27.0 million. The indemnities related to Royster-Clark, Inc. (Predecessor Company) are subject to a deductible of $2.0 million, certain time limitations and an overall cap of $5.0 million 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. This indemnity has deductibles, caps, cost sharing and time limitations depending on the subject matter of the environmental claim. As part of their indemnity obligation, Lebanon is required to respond to environmental conditions at five of our facilities. The Company also obtained indemnities from the former stockholder of Alliance for environmental conditions identified as of the date of the acquisition.

Based on our experience to date, we believe that the future cost of compliance with existing environmental laws, including liability for known environmental claims, will not have a material adverse effect on our business, financial condition or results of operations. However, future events, such as changes in existing laws and regulations or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on our business, financial condition or results of operations. Compliance with more stringent laws or regulations, as well as stricter or different interpretations of existing laws, may require additional expenditures by us that could be material.

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ITEM 2.    PROPERTIES.

We have an extensive infrastructure of approximately 380 facilities, consisting of retail farm centers (“Farmarkets”), granulation, blend, seed processing and manufacturing plants and a network of warehouses and terminals. Our facilities cover the major farming markets in the East, South and Midwest.

A typical Farmarket is located in or near a small farming community. The main building would normally include office space for two or three people, an area to receive customers and indoor warehousing of 5,000 to 10,000 square feet for crop protection products and seeds. Typically, there is a second building for the storage of bulk fertilizers and materials. A majority of Farmarkets would also have a fertilizer blending facility, where fertilizer materials are mixed together to produce bulk fertilizer products.

The following table provides information regarding our principal production and storage facilities.

All of the properties in the above table (with the exception of the Union City, Tennessee and Petersburg, Virginia facilities) are subject to liens under the First Mortgage Notes discussed in note 12 to the consolidated financial statements included in this report.

In addition to the properties noted above, our two real estate subsidiaries own approximately 260 Farmarkets and other production, storage and distribution facilities with our operating subsidiary owning the assets purchased subsequent to April 22, 1999. The stock of the two real estate subsidiaries is subject to liens by holders of the First Mortgage Notes.

In addition to the assets and properties we own, we lease warehouses and terminals from third parties. These facilities enhance our ability to source products to retail centers and wholesale customers throughout the year, especially during the high-volume spring season.

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ITEM 3.    LEGAL PROCEEDINGS.

We do not believe that there are any current, pending or threatened legal proceedings, including ordinary litigation incidental to the conduct of our business and the ownership of our properties that, if adversely determined, would materially affect us.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Not applicable.

ITEM 6.    SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS)

The following table provides selected financial and other data of Royster- Clark, Inc., as of and for each of the years ended December 31, 2002, 2001 and 2000, the nine months ended December 31, 1999 and the one year period ended December 31, 1998. This information should be read with the consolidated financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations and Cash Flows” and other information found elsewhere in this report.

Effective April 1, 1999, Royster-Clark Group, a newly formed entity capitalized with approximately $59.0 million in cash, acquired all of the then outstanding stock of Royster-Clark, Inc. On April 22, 1999, Royster-Clark, Inc. acquired all of the outstanding shares of three operating subsidiaries, IMC AgriBusiness, Inc., IMC Nitrogen Company and Hutson’s AG Service, Inc. from IMC Global, Inc. These three IMC entities are referred to as “AgriBusiness.” As a result, the income statement, balance sheet and other data of Royster-Clark, Inc. as of and for years ended December 31, 2002, 2001 and 2000, the nine months ended December 31, 1999, derived from our audited consolidated financial statements, reflect the acquisition of Royster-Clark and AgriBusiness and are described as “Successor” and are not comparable with Royster-Clark, Inc. as predecessor company.

The selected “Predecessor” financial and other data as of and for the year ended 1998 were derived from the audited financial statements of Royster-Clark, Inc. prior to its acquisition by Royster-Clark Group.

Financial exhibits and related commentary include presentation of and reference to a non-GAAP financial measure. This non-GAAP financial measure is Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”). The Company’s management believes that the inclusion EBITDA provides useful information to investors regarding the Company’s financial condition and results of its operations for several reasons. Three of the financial ratio covenants included in the Company’s senior secured credit facility agreement are driven by the company’s net earnings explicitly excluding the effects of interest, taxes and non-cash charges, which is a close analog of EBITDA. The Company’s success in maintaining or improving EBITDA is an indication of the Company’s ability to maintain the liquidity provided by the senior secured credit facility. Secondly, in today’s capital markets, the ability of the Company to attract new investment and working capital finance to support its growth is largely a function of its ability to generate cash to pay interest, maintain its physical capital, satisfy its tax obligations and reward investments. It is useful for investors to know whether this ability is being enhanced or degraded and EBITDA is widely accepted as a bellwether indicator of that ability. Finally, Company management uses EBITDA internally as the primary profitability measurement to inform decisions and reward the performance of decision-making employees. EBITDA presented below should not be construed as a substitute for operating income or as a better indicator of liquidity than cash flow from operating activities, which are determined in accordance with GAAP, nor is EBITDA necessarily a measure of our ability to fund our cash needs. EBITDA may not be comparable to similarly titles measures reported by other companies.

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EBITDA as defined above is reconciled to GAAP measurements in the following table for the years presented in this document.

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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 a 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, prevailing prices for fertilizer, natural gas used in the production of various fertilizers and other crop production inputs.

Weather conditions can significantly impact 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. Typically, approximately 70% of sales occur between March and July based upon planting, growing and harvesting cycles. In 2002, approximately 68% of sales occurred between March and July. This seasonality results from the planting, growing and harvesting cycles of our customers. Inventories must be 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 several weeks, which may impact in 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 2002, the price of anhydrous ammonia as measured by the high of Green Market Mid-Cornbelt prices traded within a $10 per ton range ($185 – $195) for the first three quarters of 2002 before steadily increasing to $245 per ton by the end of 2002. In contrast, during 2001, prices peaked in February 2001 at $375 per ton and steadily decreased to a low of $180 per ton by the end of 2001. 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. Over a period of years, natural gas exhibited a low degree of volatility until 2000 when natural gas prices increased dramatically from approximately $2.60 per MMBTU to approximately $9.98 per MMBTU. Natural gas pricing quoted at the Henry Hub was $4.75 per MMBTU at December 31, 2002 compared to $2.55 per MMBTU at December 31, 2001. The price for natural gas has ranged from approximately $1.97 to $5.14 per MMBTU during 2002. The average and median price for the year ended December 31, 2002 were approximately $3.52 and $3.35, respectively. Since December 31, 2002, natural gas prices have increased sharply to a peak of $19.07 per MMBTU before dropping to below $6.00 per MMBTU in mid-March 2003. As a result of the sharp rise in natural gas prices, we elected to take down our nitrogen-production plant at East Dubuque, IL at the beginning of March 2003 for an early maintenance turnaround. This maintenance turnaround had been scheduled later in the year. We completed the turnaround and resumed production at the plant by the end of March 2003.

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We expect natural gas prices to moderate further as spring approaches. The level of natural gas prices directly affects profitability of our nitrogen-based products.

Results of Operations

The following table and discussion provides information regarding Royster-Clark, Inc.’s statement of operations as a percentage of net sales.

Year ended December 31, 2002 compared to year ended December 31, 2001

Net sales.    Royster-Clark’s net sales were $898.1 million for 2002 compared to $953.8 million for 2001, a decrease of $55.7 million, or 5.8%. The decrease in sales resulted predominantly from approximately $91.4 million in price deflation of fertilizer materials, predominantly nitrogen products, crop protection products and to a lesser extent, seed products, during the second quarter that continued into the beginning of the third quarter. In addition to this sharp deflation, 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 adversely affected the volume of product shipments. Some farmers switched from planting corn to soybeans, which require less fertilizer and crop protection inputs while other farmers elected not to plant and file for crop insurance compensation. The decrease in sales resulted from the net of the following:

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Gross profit.    Gross profit was $181.6 million for 2002 compared to $197.9 million for 2001, a decrease of $16.3 million, or 8.2%. The decrease in gross profit resulted predominantly from the various sales volume and pricing factors discussed above partially offset by gross margin contributed by new revenues generated by specialty seed and related technology sales. Gross margin was 20.2% for 2002 compared to 20.7% for 2001. Lower gross margin resulted primarily from sales price declines in nitrogen products.

Selling, general and administrative expenses.    Selling, general and administrative expenses were $160.2 million for 2002 compared to $173.2 million for 2001, a decrease of $13.0 million, or 7.5%. Many of the expense reductions under which management has control resulted from efforts under an initiative by management to reduce expenses to yield increased returns. The decrease in selling, general and administrative expenses resulted from the following:

These decreases were partially offset by the following:

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Loss on disposal of property, plant and equipment, net.    Loss on sales of fixed assets was $1.2 million in 2002 compared to $0.9 million in 2001. This increase was the result of $0.3 million higher losses of asset sales of closed or poor performing Farmarket locations.

Expenses related to Agro acquisition.    The Company did not incur expenses related to potential acquisitions in 2002 resulting in $4.2 million lower expense.

Operating income.    Operating income was $20.2 million for 2002 compared to $19.6 million 2001, an increase of $0.6 million, or 3.1%, due to the fluctuations noted above. Operating income as a percentage of net sales was 2.3% for 2002 compared to 2.0% for 2001, an increase of 0.3%.

Interest expense.    Interest expense was $29.3 million for 2002 compared to $34.9 million for 2001, a decrease of $5.6 million, or 16.0%. The decrease in interest expense was due both to lower average levels of borrowings and lower market interest rates, which affects the rate charged on borrowings under the senior secured credit facility. Lower average daily borrowings on the senior secured credit facility of $116.0 million in 2002 compared to $154.2 million in 2001 and repayment of notes payable during the year resulted in approximately $3.2 million lower interest expense. Interest expense decreased by approximately $2.4 million due to market rate reductions. Weighted average rate for LIBOR borrowings during 2002 was 6.1% compared to 8.1% during 2001, a decline of 2.0%.

Gain on sale of natural gas contracts.    The increase in gain on sale of natural gas contracts resulted from opportunities to profit from such sales due to increases in natural gas prices during 2002 compared to 2001. 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. Amounts due under the sales agreements were collected by the end of 2002.

Gain on insurance.    The Company did not experience any losses in 2002 resulting in insurance gains or losses compared to a $1.9 million gain in 2001 resulting from compensation for losses in a fire at Waynesville, North Carolina.

Income tax benefit.    Income tax benefit was $2.6 million for 2002 compared to $4.5 million for 2001. This decrease is attributable to the decrease in loss before taxes of $6.1 million for 2002 resulting from the factors described above. The effective tax rate was 36.5% for 2002 compared to 33.7% for 2001. The increase in the effective tax rate resulted from the impact of goodwill amortization and other nondeductible items for taxes.

Net loss.    Net loss was $4.6 million for 2002 compared to $8.9 million for 2001, a decreased loss of $4.3 million, due to the fluctuations noted above.

Year ended December 31, 2001 compared to year ended December 31, 2000

Net sales.    Royster-Clark’s net sales were $953.8 million for 2001 compared to $913.9 million for 2000, an increase of $39.9 million, or 4.4%. The increase in sales resulted from the following:

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The above increases were partially offset by a reduction in fertilizer sales of $5.0 million due to lower granulated fertilizer sales in the southeast in areas that were affected by drought conditions and lower acreage due to government cutbacks of tobacco quotas.

Gross profit.    Gross profit was $197.9 million for 2001 compared to $185.4 million for 2000, an increase of $12.5 million, or 6.7%. Gross margin was 20.7% for 2001 compared to 20.3% for 2000. Higher gross margin resulted primarily from improved purchase costs and rebates for crop protection, seed and fertilizer material product categories. This increase was partially offset by the unabsorbed cost of approximately $3.9 million due to the lost production of East Dubuque during the first quarter of 2001 while the plant was shutdown and sales price depreciation on nitrogen and crop protection products discussed above.

Selling, general and administrative expenses.    Selling, general and administrative expenses were $173.2 million for 2001 compared to $163.2 million for 2000, an increase of $10.0 million, or 6.1%. The increase in selling, general and administrative expenses resulted from the following:

These increases were partially offset by the following:

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Expenses related to Agro acquisition.    The Company entered into a purchase agreement to acquire certain assets of Agro Distribution, LLC (“Agro”) on June 14, 2001. The Company and Agro could not reach agreement on certain key elements of the proposed transaction and terminated the purchase agreement on October 17, 2001. During the negotiation period, the Company incurred costs associated with the acquisition. At December 31, 2001, these costs totaled $4.2 million representing legal, accounting and other direct costs of the acquisition including costs incurred associated with software costs related to the acquisition.

Loss on disposal of property, plant and equipment, net.    Loss on sales of fixed assets was $0.9 million in 2001 compared to $0.6 million in 2000. This increase was the result of $0.2 million higher impairment charges on individual low performing Farmarket locations that have been closed in 2001 and other asset sales of closed or low performing Farmarket locations.

Operating income.    Operating income was $19.6 million for 2001 compared to $21.6 million 2000, a decrease of $2.0 million, or 9.3%, due to the fluctuations noted above. Operating income as a percentage of net sales was 2.0% for 2001 compared to 2.4% for 2000, a decline of 0.4%.

Interest expense.    Interest expense was $34.9 million for 2001 compared to $38.0 million for 2000, a decrease of $3.1 million, or 8.2%. The decrease in interest expense was due primarily to lower market interest rates, which affects the rate charged on borrowings under the credit facility and borrowings. Weighted average rate for LIBOR borrowings during 2001 was 8.1% compared to 10.2% during 2000, a decline of 2.1%. The decrease was partially offset by $2.6 million higher average daily borrowings on the senior secured credit facility of $154.2 million in 2001 compared to $151.6 million in 2000.

Gain on insurance.    In May 2001, the Company suffered a fire at its blend facility located in Waynesville, North Carolina destroying the main blending building, the machinery and equipment and inventory contained inside. The Company has recorded a gain of $1.9 million on the insurance settlement related to this loss.

Income tax benefit.    Income tax benefit was $4.5 million for 2001 compared to $2.0 million for 2000. This increase is attributable to the decrease in income before taxes for 2001 described above. The effective tax rate was 33.7% for 2001 compared to 30.0% for 2000. The increase in the effective tax rate resulted from the impact of goodwill amortization and other nondeductible items for taxes.

Net loss.    Net loss was $8.9 million for 2001 compared to $4.8 million for 2000, an increased loss of $4.1 million, due to the fluctuations noted above.

Environmental Matters

At December 31, 2002, the Company had accruals of approximately $3.3 million for future costs associated with environmental remediation of certain properties. Costs charged against these accruals for the year ended December 31, 2002 and 2001 were approximately $222 thousand and $179 thousand, respectively. Environmental remediation projects related to the cleanup of regulated substances are in progress at approximately forty-four sites. The cleanup efforts primarily involve remediation of excess nitrates, phosphorous and pesticides in soils and/or groundwater at these sites, or costs to be incurred in the cleanup and monitoring of old underground storage tanks. Certain of these remediation efforts are of a long-term nature.

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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 senior secured credit facility (“credit facility”) with a consortium of banks, with a $245 million borrowing limit at December 31, 2002. The credit facility expires in April 2004. At December 31, 2002, the borrowing base provisions under the facility supported a borrowing availability of $157.4 million, from which we had drawn $143.1 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 financial ratios and limitations on our ability to incur additional indebtedness. We believe that cash generated from operations and borrowings available under the credit facility will be sufficient to meet our operating and capital needs in the foreseeable future.

As of December 31, 2002, the Company was in violation of the net worth covenant under the credit facility. In March 2003, the consortium of lenders with 100% concurring agreed to waive the violation of the net worth covenant and amend the financial covenant ratios for quarterly measurement dates through the remaining term of the credit facility. A covenant has been added to the credit facility agreement requiring that the Company diligently pursue, obtain and accept, not later than September 30, 2003, a written commitment to refinance all of the current credit facility obligations that is feasible and that will provide payment in full of the credit facility obligations on or before the maturity date in April 2004. Additionally, the Company and the consortium of lenders agreed to lower the available borrowing capacity under the credit facility from the current $245.0 million to $205.0 million. The interest rate charged under the credit facility was amended to reflect a 25 basis point increase through September 2003, 50 basis point increase in October 2003, 75 basis point increase in November 2003 and 125 basis point increase thereafter. The Company expects to meet all of the revised covenants and to obtain a replacement credit facility commitment in accordance with the amendment; however, there can be no guarantee that it will be successful or, if successful, that the replacement facility will be on terms comparable to the existing facility. We believe that cash generated from operations and borrowings available under the amended credit facility will be sufficient to meet our operating and capital needs within the term of the current credit facility.

Capital expenditures were $6.9 million for the year ended December 31, 2002 compared with $13.8 million for the year ended December 31, 2001. These capital expenditures were primarily for facility improvements, machinery and equipment replacement, computer system integration expenditures and environmental improvement projects. We estimate total capital expenditures, excluding acquisitions, for 2003 will range from $10.0 to $13.0 million.

Net cash used in operating activities for the year ended December 31, 2002 was $37.7 million compared to net cash provided by operating activities of $66.2 million in 2001. The most significant component of cash flows used in operating activities was movement in operating assets and liabilities with higher inventory, trade receivables and other receivables being the largest components. Net cash used in investing activities amounted to $5.3 million in 2002 compared to $11.8 million in 2001. The decrease in net cash used in investing activities resulted from $6.9 million lower cash used for capital expenditures, higher proceeds of $0.3 million from sales of property, plant and equipment and the purchase of $0.7 million of technology and patent licenses. Net cash provided by financing activities totaled $42.9 million in 2002 compared to net cash used in financing activities of $53.9 million in 2001. Cash was provided by lower net payments of $100.6 million on the credit facility and a decrease in cash used in customer deposits of $3.6 million. Cash provided by these changes was partially offset by payments on current installments of long-term debt of $7.3 million.

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Net working capital, excluding senior secured credit facility and current installments of long-term debt at December 31, 2002 totaled $209.0 million versus $144.7 million at December 31, 2001, an increase of $64.3 million, or 44.4%. Working capital changes are summarized in the table below.

This increase in working capital resulted primarily from higher purchases during December to achieve favorable pricing terms and availability of product. Higher notes payable relates to those inventory purchases. Higher trade accounts receivable resulted from increased sales for the December period compared to the comparable period in 2001. Higher other receivables of $14.0 million consisted of rebate receivables that were collected in January 2003 versus collection of similar receivables made in December 2001.

Contractual Obligations and Commitments

The following tables summarize our material contractual obligations, including both on- and off-balance sheet arrangements, and our commitments (in millions) at December 31, 2002:

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Contractual obligations

Operating lease financing. The Company leases office facilities, rail cars and various types of equipment under noncancelable operating leases whose term’s range from one to fifteen years. The most significant portion of the operating leases relate to equipment used in the application of crop inputs to farmer’s fields and equipment used by support staff at our Farmarket locations.

Customer deposits. The Company accepts both interest bearing and non-interest bearing customer deposits. Customer deposits are refundable upon demand either in cash or product. Interest rates paid on customer accounts vary based on economic conditions and are posted at the locations where the Company accepts customer deposits. Deposits accepted in anticipation of repayment with product are typically repaid within a year.

Patent and technology contracts. The Company signed contracts in 2002, which provided an exclusive license for use of certain patents and intellectual property from the owners over a fixed period of seven years with automatic extensions as long as certain minimum terms are met. The contracts prescribe payments over a four-year period.

Severed employee contracts. The Company has agreements to pay three former employees under separation agreements.

Borrowings

First Mortgage Notes. The Company issued $200 million of 10-1/4% First Mortgage Notes due April 2009 to partially finance the acquisition of AgriBusiness in 1999. The First Mortgage Notes bear interest at 10.25% 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. RCG and certain subsidiaries also unconditionally guarantee the First Mortgage Notes. The First Mortgage Notes are not redeemable prior to April 1, 2004 except in the case of a change of control. Thereafter, the First Mortgage Notes are redeemable in whole or in part, at the Company’s option, at a 5.125% premium, declining ratably to par on April 1, 2007, plus accrued and unpaid interest, if any, to the date of redemption.

The First Mortgage Notes are subject to certain covenants, including restrictions on dividend payments and retirement of equity interests, issuance of new indebtedness or preferred stock and certain transactions with affiliates. Dividends may not be made if default has occurred (or would occur if the dividend payment were made), or such dividend payments would result in noncompliance with any financial covenants. Dividend payments are further restricted in amount to at most 50% of consolidated net income of the Company from the date of origination of the First Mortgage Notes to the end of the most recently completed fiscal quarter. Subject to certain limitations, dividends or other payments may be permitted for certain equity interest transactions, reimbursement of expenses incurred by RCG in its capacity as a holding company that are attributed to the operations of the Company and other limited transactions.

Senior secured credit facility. The Company maintains a senior secured credit facility (credit facility) that allowed it to borrow up to $245.0 million, subject to certain borrowing base limitations as of December 31, 2002. In March 2003, the Company and the consortium of lenders agreed to an amendment to the credit facility that, among other matters, lowered the available borrowing capacity under the credit facility from the current $245.0 million to $205.0 million. The credit facility expires in April 2004 and bears interest at LIBOR plus a spread. The credit facility is secured by (1) a lien on all accounts receivable, inventory, general intangibles and all other assets of the Company and its subsidiaries (except for the collateral securing the First Mortgage Notes, as discussed below), (2) all of the common stock of the Company, and (3) all of the common stock of the Company’s subsidiaries, except for the equity interests of certain subsidiaries pledged to secure the First Mortgage Notes.

The credit facility is subject to certain covenants, including limitations on additional indebtedness, limitations on liens, limitations on capital expenditures and maintenance of certain required financial ratios. Financial ratios were amended as a result of the amendment approved in March 2003. The credit facility also restricts the payment of dividends by the Company to RCG. Dividends are restricted to (1) amounts necessary to

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enable RCG to pay overhead expenses in an amount not to exceed $2.0 million; (2) amounts necessary to enable RCG to pay income and other taxes; and (3) $1.0 million over the life of the agreement for the purpose of repurchasing, redeeming or otherwise acquiring and retiring any capital stock, stock warrants, stock options or other rights to acquire capital stock of RCG. Dividends made under the third provision are further restricted in that such dividends may not be made if a default has occurred (or would occur if the dividend payment were made), or such dividend payments would result in noncompliance with any financial covenants. A covenant has been added to the credit facility agreement requiring that the Company diligently pursue, obtain and accept, not later than September 30, 2003, a written commitment to refinance all of the current credit facility obligations that is feasible and that will provide payment in full of the credit facility obligations on or before the maturity date in April 2004.

Vendor notes payable.    In December 2002, the Company entered into a short-term financing arrangement with a finance company related to a vendor of the Company (the vendor). Existing trade accounts payable due to the vendor was refinanced with this note resulting in no cash proceeds from the note. The terms of the note are such that the interest will not be paid for the first six months. Following the six months, interest will accrue at an interest rate of LIBOR plus 3%. The note is due in December 2003. The face value of the note is $22,227, and is reflected net of $487 of imputed interest at 4.4%. The $487 has been reflected as a reduction of the cost of inventory purchased with the arrangement.

Other notes payable.    Other notes payable includes three notes incurred for the purchase of various property, plant and equipment, with no individual note exceeding $175 thousand.

Commitments

Supply agreement. In connection with the acquisition of AgriBusiness in 1999, the Company has entered into a ten-year supply agreement with IMC Kalium Ltd. (Kalium) and IMC-Agrico Company (Agrico), both of which are subsidiaries of IMC Global. Under the terms of the supply agreement, the Company is required to purchase (and Agrico and Kalium are required to supply) certain products in an amount equal to its estimated normal business requirements of the former AgriBusiness locations. The purchase prices and quantities of the products covered by the agreement are determined by market forces. The agreement automatically renews for subsequent periods of five years unless otherwise canceled by either party. In addition, the agreement specifies remedies available to the parties in the event of noncompliance, which include compensatory damages in the event of a failure to purchase (or supply) the required quantities of the covered products. Purchases under this contract were well in excess of minimum requirements and exceeded $100 million during 2002. We expect to purchase quantities of materials above the prescribed minimums under this agreement during 2003.

Employment contracts.    The Company has employment contracts with certain members of management. These employment agreements are terminable by the Company with or without cause. In the event that the employees are terminated without cause and provided that executives comply with the confidentiality and non-competition covenants, they will be entitled to receive all payments as defined in the respective agreements. The contracts extend through April 2004 with an automatic one-year extension thereafter unless notice of intent not to renew is given, either by the Company or by the executive. If termination without cause had occurred as of December 31, 2002, the Company would have been required to pay approximately $2.1 million to satisfy its obligations.

Letters of credit.    The Company maintains letters of credit for various types of insurance coverage and other needs.

Purchase commitments.    The Company has commitments to purchase various other fertilizer materials for resale or the manufacture of other blended or mixed fertilizers.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally

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accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate the judgments and estimates underlying all of our accounting policies, including those related to inventories, allowance for doubtful accounts, rebate receivables, impairment of long-lived assets, deferred tax valuation allowances, restructuring reserves and contingencies and litigation. We base our estimates on historical experience and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Materially different results in the amount and timing of our actual results for any period could occur if our management made different judgments or utilized different estimates.

The U.S. Securities and Exchange Commission has defined critical accounting policies as those that are both most important to the portrayal of our financial condition and results and which require our most difficult, complex or subjective judgments or estimates. Based on this definition, we believe our critical accounting policies include the policies of inventory valuation, allowance for doubtful accounts, rebate receivables, impairment of long-lived assets, goodwill and deferred taxes. For all financial statement periods presented, there have been no material modifications to the application of these critical accounting policies

Inventory Valuation

We value our inventories at the lower of cost or market using the average cost method. To properly reflect our inventories at the lower of cost or market, we perform an analysis quarterly to determine whether an allowance for obsolescence or market declines is required. Our analysis considers current market selling prices for our products, historical quantities sold and quantities on hand. Historically, our allowances for obsolescence and market declines have not been significant.

We perform a full physical count of our inventory each year on September 30. For periods before and after the physical count we estimate and accrue for inventory shrinkage. Our accrual for shrink is based on the actual historical shrink results of our most recent physical inventory, adjusted as necessary for economic and market conditions. We have not experienced significant fluctuations in historical shrink rates at our facilities.

Allowance for Doubtful Accounts

Our estimate of the allowance for uncollectible receivables is based on a risk-based analysis of historical write-offs, current sales levels and sales terms and the age of our receivables. Substantially all of our customers are involved in the agricultural industry, which is influenced by a variety of factors which are out of our control, including weather conditions, government policy and regulation and world economic conditions, among others. As a result, we continuously evaluate our aged receivables for collection risk. We have not experienced significant changes in the estimate of our allowance for uncollectible receivables in the past.

Rebate Receivables

Rebates are received from crop protection products, raw material and seed vendors, based on programs sponsored by the vendors. The programs vary based on product type and specific vendor practice. More than 80% of the rebates earned are from crop protection product vendors. The majority of the rebate programs run on a crop year basis, typically from October 1^st to September 30^th, although other fiscal periods are sometimes utilized. The majority of the rebates are earned based on the sales a dealer generates of a vendor’s product in a given crop year. The rebate accrual booked monthly is based on actual sales and the historical rebate percentage received in the prior year. The actual rebates earned for most programs are finalized in our fourth quarter and adjustments are made to the accrual as necessary. These adjustments have historically resulted in additional rebate income in the fourth quarter. Because the nature of the programs and the amount of rebates available are determined by our vendors, there can be no assurance that this trend will continue.

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Impairment of long-lived assets

We assess the impairment of long-lived assets on an ongoing basis and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based upon an estimate of future undiscounted cash flows. Our evaluation is performed by location. Factors we consider that could trigger an impairment review include the following:

When we determine that the carrying value of a long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure impairment based on the difference between an asset’s carrying value and an estimate of fair value, which may be determined based upon quotes or a projected discounted cash flow.

Goodwill

Goodwill is reviewed annually or sooner if changes in circumstances indicate the carrying value may not be recoverable under the provisions of SFAS No. 142 “Goodwill and Other Intangible Assets.” Fair values are estimated based upon future discounted cash flows. If actual cash flows or cost of capital estimates change, we may have to record impairment charges. The key variables that we must estimate include assumptions regarding future sales volume, prices and other economic factors. Significant management judgment is involved in estimating these variables, and they include inherent uncertainties since they are forecasting future events. If such assets were considered impaired, they would be written down to fair value as appropriate and could be material to the Company’s results of operations.

Deferred Income Tax Assets

We have had unprofitable operations for the last three years. These losses have generated a sizeable federal tax net operating loss, or NOL, carryforwards of approximately $60 million as of December 31, 2002. Generally accepted accounting principles require that we record a valuation allowance against the deferred tax asset associated with this NOL if it is “more likely than not” that we will not be able to utilize it to offset future taxes. Deferred tax assets are reviewed annually for recoverability using the same forecasts used for the evaluation of the fair value of goodwill described above. Projections of future revenues use key variables that we must estimate and include assumptions regarding future sales volume, prices and other economic factors. Significant management judgment is involved in estimating these variables, and they include inherent uncertainties since they are forecasting future events. Based on our analysis, we believe that it is more likely than not that we will be profitable in the future and realize all of the NOL carryforwards. If we continue to operate at a loss or are unable to generate sufficient future taxable income, a valuation allowance against all or a significant portion of our deferred tax assets may be required.

Recently Issued Accounting Standards

Emerging Issues Task Force Issue No. 01-06

In January 2003, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue 02-16, “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor.” This EITF provides guidance on the income statement classification of amount received by a customer, including a reseller and limited guidance regarding timing of recognition for volume rebates. This consensus is effective and should be applied to fiscal periods beginning after December 15, 2002. Due to the seasonality of the business, management is working on determining the impact on the Company’s financial condition or results of operations.

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Financial Accounting Standard Board Interpretation No. 46

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB No. 51.” This Interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation is not expected to have a material effect on the Company’s financial statements. The Interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that the Company will consolidate or disclose information about variable interest entities when the Interpretation becomes effective.

Statement of Financial Accounting Standards No. 148

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” SFAS No. 148 amends SFAS No.123, “Accounting for Stock-Based Compensation”, to provide alternative methods for voluntary transition to SFAS No. 123’s fair value method of accounting for stock-based employee compensation. SFAS No. 148 also requires disclosure of the effects of an entity’s accounting policy with respect to stock-based employee compensation on reported net income (loss) and earnings (loss) per share in annual and interim financial statements. The provisions of SFAS No. 148 are effective in fiscal years beginning after December 15, 2002. Management does not believe that the adoption of SFAS No. 148 will have a material effect on the Company’s financial condition or results of operations.

Financial Accounting Standard Board Interpretation No. 45

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, an interpretation of FASB Statements No.5, 57 and 107 and a rescission of FASB Interpretation No. 34.” This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation are applicable to guarantees issued or modified after December 31, 2002 and are not expected to have a material effect on the Company’s financial statements. The disclosure requirements are effective for financial statements of interim or annual periods ending after December 15, 2002.

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.” SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity.” SFAS No. 146 generally requires a liability for a cost associated with an exit or disposal activity to be recognized and measured initially at its fair value in the period in which the liability is incurred. The pronouncement is effective for exit or disposal activities initiated after December 31, 2002. SFAS No. 146 is effective prospectively after December 31, 2002. Management does not believe that the adoption of SFAS No. 146 will have a material effect on the Company’s financial condition or results of operations.

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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 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 the Company’s financial condition or results of operations.

Statement of Financial Accounting Standards No. 143

In June 2001, the Financial Accounting Standards Board 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 the Company’s financial condition or results of operations.

ITEM 7A.    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 purchases natural gas for use in its East Dubuque facility on the spot market 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 has experienced no difficulties in securing supplies of natural gas, however, natural gas is purchased at market prices and such purchases are subject to price volatility.

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 $1.2 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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ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholder

Royster-Clark, Inc.:

We have audited the accompanying consolidated balance sheets of Royster-Clark, Inc. and subsidiaries of December 31, 2002 and 2001, and the related consolidated statements of operations, stockholder’s equity and comprehensive loss, and cash flows for each of the years in the three-year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Royster-Clark, Inc. and subsidiaries as of December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

As discussed in note 2 to the consolidated financial statements, the Company implemented Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002.

March 5, 2003

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ROYSTER-CLARK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001

(Dollars in thousands)

See accompanying notes to consolidated financial statements.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2002, 2001 and 2000

(Dollars in thousands)