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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

For the Fiscal Year Ended September 30, 2002

OR

For the Transition Period from ________ to ________ .

Commission file number 0-26519

SEMINIS, INC.

(805) 647-1572
(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

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

Class A Common Stock, par value $0.01 per share
(Title of Class)

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. [   ]

The aggregate market value of the voting stock held by non-affiliates of Seminis, Inc. as of December 17, 2002 was approximately $47.87 million.

The number of shares outstanding of the registrant’s Class A Common Stock, par value $0.01 per share and Class B Common Stock, par value $0.01 per share, as of December 17, 2002 was 18,939,611 and 45,142,508 shares, respectively.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Stockholders of Seminis, Inc. are incorporated by reference into Part III hereof.

Table of Contents

SEMINIS, INC.

Form 10-K Annual Report
For the Fiscal Year Ended September 30, 2002

TABLE OF CONTENTS

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PART I

Item 1. Business

OVERVIEW

Seminis, Inc. (the “Company”, “we”) is the leading worldwide developer, producer and marketer of vegetable and fruit seeds. We produce more than 60 species and 4,000 vegetable and fruit seed products (which do not include tree and citrus fruits). We market our seeds through four full-line brands — Seminis, Asgrow, Petoseed and Royal Sluis — and five specialty and regional brands. Our 2002 net seed sales represented approximately 19% of the estimated $2.3 billion worldwide market for vegetable and fruit seeds (excluding tree and citrus fruits).

We use seeds as the delivery vehicle for innovative agricultural technology. We develop seeds designed to reduce the need for chemicals, increase crop yield, reduce spoilage, offer longer shelf life, create better tasting foods and provide better nutritional value for consumers. We have the largest vegetable and fruit germplasm bank in the world and substantially all of our seeds are developed through our hybridization process.

As a result, we are creating and setting the foundation to capture value at all steps of the vegetable and fruit production and distribution chain: growers, distributors, processors and retailers. Our strategy is to capture this value by marketing premium-priced seeds with quantifiable benefits and superior traits directly to the parties along the distribution chain who are able to derive the most value from these seeds. This value creation and capture strategy, from grower to processor, has been successfully implemented in the field crop industry. In April 2001, we became the first vegetable and fruit seed provider to employ this value capture strategy at the grower level through increased prices for our seeds.

We have established a worldwide presence and global distribution system. We market seeds in over 150 countries, have 48 research and development facilities in 17 countries and territories and production sites in over 25 countries. This allows us to remain close to local markets around the world, adapt our products to any microclimate and meet the preferences of local consumers.

We were incorporated in 1999 under Delaware law and we are the successor to an Illinois corporation, Seminis, Inc. organized in 1994. Our principal executive offices are located at 2700 Camino del Sol, Oxnard, CA 93030-7967, telephone (805) 647-1572 and our internet address is www.seminis.com.

INDUSTRY OVERVIEW

Global Demand

As the global demand for vegetables and fruits increases, the demand for seeds to grow these crops will increase as well. We believe a fundamental driver to the increase in demand for vegetables and fruits is global population growth. The United Nations is projecting that the world population will increase from 6.2 billion people in 2002 to 7.2 billion people in 2015. In developing countries, which will experience much of the growth, vegetable and fruit consumption increased 162% from 1980 to 1999. During the same period, worldwide consumption of vegetables and fruits increased 100%.

Another driver of demand for vegetables and fruits is the health and nutritional benefits they offer. Vegetables and fruits are proven to be valuable in meeting basic nutritional needs and in preventing disease. Vegetables and fruits have very little fat, are low in calories and contain vitamins and other nutritional components. Diets high in vegetables and fruits protect against the risk of cardiovascular disease, stroke, diabetes, iron-deficiency anemia and cataracts and have been proven to significantly reduce the risk of cancer. The demand for vegetables and fruits will increase as consumers become more concerned about the health and nutritional benefits of vegetables and fruits.

New Opportunities

In addition to an overall increase in the demand for vegetables and fruits, we believe there will be an increase in demand for hybrid seeds for which growers will pay a substantially higher price. The increase in demand for hybrid seeds will come from the increasing number of benefits that can be obtained through hybridization. These benefits include obtaining higher yields per acre, greater uniformity, greater resistance to pests, diseases and environmental conditions and improved quality, flavor and nutrition.

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Two breakthroughs in plant science occurred in the 1980’s that may facilitate increased productivity and higher quality vegetables and fruits. The first was the understanding of how genes, the fundamental components of the genetic code, work in plants to produce traits such as disease resistance or higher nutritional content. The second was the development of transformation technology, which is a process used to introduce new character traits into plants. These breakthroughs have opened a window of opportunity for the seed industry to generate value by developing products that increase productivity for farmers and/or have characteristics that cater to the preferences of consumers. We believe growers will pay a premium for seeds that increase productivity because advances in agricultural technology will be necessary to meet increased demand for vegetables and fruits as the amount of arable land in the world decreases. Similarly, we believe growers will pay premiums for seeds with improved output characteristics such as longer shelf life and higher nutrition. We believe seed producers will be able to capture a portion of this value being delivered to farmers, shippers, packers and consumers through increased prices.

Barriers to Entry

The vegetable and fruit seed industry is characterized by high barriers to entry. In order to develop products in the seed industry, companies need to have access to a broad germplasm bank as well as the capital to develop products over long periods of time. The development of a germplasm bank requires the accumulation of genetic materials over a period of years. Germplasm is scarce, expensive and must be refined to properly serve different markets. Furthermore, development cycles can last 5 to 12 years before a product is launched. Seed companies invest a considerable amount of capital in research and development to keep the product pipeline full. Other barriers to entry include the need for global distribution, lack of established brands and inability to achieve economies of scale in mass production.

COMPETITIVE STRENGTHS

Leading Market Position

We have a leading market share of vegetable and fruit seeds in the United States, Canada, Europe, Latin America, the Middle East and South Korea.

Strength of Germplasm Bank

We own what we believe is the largest vegetable and fruit germplasm bank in the world. We view our germplasm bank as our key strategic asset. Germplasm is the genetic information contained in seeds that captures the characteristics of vegetables and fruits, including: (i) input traits, such as resistance to pests and adverse weather conditions, (ii) system traits, such as long shelf life, reduced spoilage and enhanced processing capability and (iii) output traits, such as crop yield, color, texture, flavor, ready-to-eat convenience and nutrition. Because germplasm is extremely difficult to replicate, we view our germplasm bank as a barrier to entry and believe that combined with our research and development capabilities and systems we have a competitive advantage in developing and marketing better products.

Global Presence and Worldwide Distribution

Since our formation in 1994, we have built a global presence through a series of ten acquisitions. Through these acquisitions, we were able to gain access to or ownership of key technologies, patents and germplasm collections, to add developed and proven products to our portfolio and to enter new and established markets. We believe that through economies of scale in our global production and distribution system, we will be able to leverage our brands and product lines to increase market share and streamline costs. We currently market over 4,000 vegetable and fruit seed products in over 150 countries with production sites in over 25 countries. By geographically diversifying our production facilities, we can schedule our planting on a year-round basis, maximize yield, reduce inventory requirements and better ensure adequate supplies of our products.

Strength in Research and Development

We conduct research and development activities in 48 locations throughout the world, including 16 in North America, 10 in Europe, 2 in the Middle East, 4 in South America and Central America and 16 in Asia. We have an extensive research and development staff with over 620 full-time employees. By diversifying our research and development geographically, we are able to take advantage of local breeding resources and many different microclimates. We are also better positioned to tailor our products to local tastes and preferences.

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Brand Strength and Long Operating History

We market full lines of seeds under the Asgrow, Petoseed, Royal Sluis and, beginning in October 2001, Seminis brands. The Asgrow, Petoseed and Royal Sluis brands have each been in existence for over 50 years. Asgrow, Petoseed and Royal Sluis are well recognized in the industry and their markets for consistently developing and marketing high quality seeds for most major vegetable and fruit species. We also market seeds through five regional or specialty brands, which are targeted to respond to the demands of local markets. We believe that our brands rank among the leading brands worldwide in the vegetable and fruit seed markets.

Broad Customer Base and Growing Demand for Our Products

We have approximately 16,000 customers in over 150 countries and territories. No customer accounted for more than 3.0% of seed revenues in fiscal year 2002 and our ten largest customers accounted for approximately 14.0% of seed revenues in fiscal year 2002. Our product portfolio is also diversified, with no variety accounting for more than 1.3% of seed revenues in fiscal year 2002. Furthermore, our customer base is geographically diversified with no region accounting for more than 38.3% of seed revenues in fiscal year 2002.

We believe that demand for our products will increase as the world population and health awareness grows. The United Nations projects that the world population will increase by 16.1% to 7.2 billion from 2002 to 2015. Also, the increased awareness of the nutritional benefits of vegetables and fruits will have a positive impact on the demand for our products. Vegetables and fruits have proven to be valuable in meeting basic nutritional needs and in preventing disease. We expect that the growing worldwide population and health awareness will drive the continued growth in the vegetable and fruit market.

BUSINESS STRATEGY

Our business strategy is to focus on the following key initiatives:

Maintain Leadership in Product Development

Our current strategy is to continue to produce innovative and value-added products to increase revenues and improve cash flows. We plan to achieve this goal by leveraging our germplasm bank and our research and development capabilities to develop products that are profitable and that cater to local tastes and preferences. We also continue to develop products that will meet the demand for a growing population under the constraint of a declining amount of arable land. In fiscal year 2002, we launched over 80 new products.

Increase Revenues through Value Capture

The market for vegetable and fruit seeds (which excludes tree and citrus fruits) in 2002 was approximately $2.3 billion. We believe that the worldwide market for vegetable and fruit seeds represents only a small percentage of the worldwide market for vegetable and fruit sales by farmers (farmgate). As part of our value capture strategy, in April 2001, we implemented a pricing strategy to maximize revenues and increase our share of the farmgate revenues. The strategy includes identifying existing products that are under-priced based upon superior traits and quantifiable benefits and continuing to develop new products with these advanced traits and benefits.

Leverage Our Global Production and Distribution System

Because we grow and produce seeds all over the world, our portfolio of production facilities and growers lessens the effects of adverse weather conditions in a geographic region. We have the ability to shift production to utilize different seasons/climates in different regions of the world to accelerate product development.

Our global distribution system gives us inroads into the farming communities of the world. This allows us to stay in tune with the local markets and to develop products on a global basis for local preferences. We will continue to gather market information for new product development and expand our distribution system into new markets.

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PRODUCTS

Brands

Through our customer-focused, brand strategy, we provide choices to growers with respect to product, price, promotion and service. We also advance our goal of providing information to enable growers to anticipate changes in consumer trends rather than reacting to them. We have four full-line brands, Asgrow, Petoseed, Royal Sluis and, beginning in October 2001, Seminis, each with its own identity and positioning. Asgrow, Petoseed and Royal Sluis, through the years, have each featured important products in different regions and market segments, establishing highly valued brand identity, which we leverage through the introduction of new products. We also market seeds through regional or specialty brands, which are targeted to respond to the needs of local markets. These needs are driven by dietary preferences, desire for local products, specialized farm growing practices and local environmental and climatic conditions. We believe that our brands rank among the leading brands worldwide in the vegetable and fruit seed market.

The table below shows the characteristics of each of our brands in fiscal year 2002:

Sales and Marketing

Our product sales are widely diversified geographically, with Europe representing the largest percentage of total sales outside of North and Central America. The tables below illustrate the breadth of our worldwide seed sales and product family in fiscal year 2002.

Fiscal Year 2002 Net Seed Sales by Region

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Fiscal Year 2002 Net Seed Sales by Family

We reinforce the market positions of our products through strategic planning, pricing and communications. We believe that strong brands provide an advantage in the marketplace when introducing new varieties. The reputation, reliability and trust associated with our brands can lend credibility to representations made regarding new products.

Over the last year, we have reviewed our regional brand strategy in order to leverage our brand recognition and reputation, while optimizing our infrastructure in sales teams and breeding programs. By doing so, we continue to provide new products in a way that will be supported by brand identity and market opportunity.

This review resulted in the following:

•		we rationalized our product portfolio from over 6,000 varieties to just over 4,000,
•		we consolidated sales teams around the world to meet market needs and
•		we established teams of breeders focused on specialized lines of products and eliminated breeder redundancies in target markets.

We sell our products worldwide by using a wide range of distribution strategies involving direct sales, dealers, distributors and importers. Largely driven by local market needs, our distribution strategy for each geographic region is designed to maximize the market penetration of our brands.

While an important proportion of our sales are direct to growers, we also foster close relationships with dealers and distributors. Where there is a market need, we use these dealers and distributors as an outside direct sales force. Dealers and distributors extend our brands’ ability to reach growers in areas where there are geographic or other limitations to direct sales efforts. We are highly selective in the dealers and distributors chosen to represent our brands. Dealers and distributors are selected based on shared vision, technical expertise, local market knowledge and financial stability. In addition, we build dealer/distributor loyalty through an emphasis on service, access to breeders, joint trials, ongoing training and extensive promotional material support.

Product Development

We rely heavily on plant breeding supplemented with molecular and cellular technology to create new product innovations. We focus our internal product development activities on products that are likely to have practical market applications, create significant market value, command premium pricing and capture leading local market share.

We currently own or have pending over 132 patents in such areas as virus resistance, product quality, breeding technology, gene expression, cell selection and resistance genes. A total of 7 patents were issued and 14 new patent applications were filed in fiscal year 2002. In addition, we have protected more than 382 varieties under plant variety protection laws and we have applications pending on additional 196 varieties.

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Our new product development efforts utilize plant breeding, proprietary technology, biotechnology, molecular and cell biology and plant pathology to introduce innovative products to the marketplace in an efficient and cost-effective manner. We augment our internal product development efforts through technological alliances with leading companies, research institutions and universities. We believe that our internal research and development capability and access to innovative technology, coupled with our extensive germplasm resources, position us to best meet the changing demands and preferences of growers and end-consumers and increase our penetration in the value chain in the vegetable and fruit industry.

During fiscal year 2002, we believe our new product sales represented approximately 5.0% of revenue and existing products introduced into new countries or new markets over the last three years represented over 25.0% of total seed sales.

Product Development Platform

We conduct research and development activities in 48 locations throughout the world, including 16 in North America, 10 in Europe, 2 in the Middle East, 4 in South and Central America and 16 in Asia. By diversifying our research and development geographically, we are able to take advantage of local breeding resources and many different microclimates. We are also better able to tailor our products to local tastes and preferences.

Each region of the world has particular requirements for the production of vegetables and fruits. These requirements are driven by local environmental conditions such as temperature or rainfall as well as local consumer preference such as very sweet pink tomatoes in Japan or more acidic red tomatoes in Italy. We maintain an internally developed, proprietary database that contains information on local production and local consumer needs. We have compiled the information in this database to enable our plant breeders and marketing and sales personnel to more effectively design new products to meet the needs of local markets.

We incurred $44.3 million, $52.4 million and $58.4 million of expenses related to research and development during fiscal years 2002, 2001 and 2000, respectively. We have an extensive research and development staff with over 620 full-time people employed in research and development functions, including over 120 professionals with Ph.D. or M.S. degrees, including 79 plant breeders, 16 biotechnologists and 16 pathologists. Our plant breeding staff is structured by groups of related crops (families). Within each family, breeding is further structured by species to enhance product development efficiencies and adequately respond to changing consumer demands and preferences. All plant breeders have access to technology developed from our biotechnology, biochemistry and pathology laboratories. We provide incentives to our breeders to ensure that our new products are targeted at viable markets.

Germplasm

We own what we believe is the largest vegetable and fruit germplasm bank in the world. Our germplasm bank is our key strategic asset. Germplasm, our bank of genetic information, is contained in millions of seeds. These seeds capture the characteristics of vegetables and fruits grown for our customers in different regions of the world, including input traits, such as resistance to pests and adverse weather conditions and output traits, such as crop yield, color, texture, flavor and ready-to eat convenience. This extensive germplasm resource is extremely difficult to replicate, having been developed through more than 150 years of intensive research and development efforts.

The merger of the Petoseed, Asgrow and Royal Sluis germplasm, plus the additions of germplasm from Bruinsma, Hungnong, Choong Ang and other acquired vegetable seed businesses, has created a very diverse germplasm resource. The strength of our germplasm is the extensive diversity of materials available and the genetic characteristics it contains. Our breeders utilize our germplasm, as well as our proprietary technologies, to develop innovative products suitable to the needs of different markets and conditions. Our extensive germplasm base is the basis for continued development of innovative products and future growth.

Technology

Our product development technology positions us as one of the leaders in agricultural innovation. The time and capital required for the development of new products represent the most formidable barriers to entry in the vegetable and fruit seed industry. On average, it takes five to 12 years for a proprietary variety to reach commercial viability. We employ biotechnology, biochemistry, plant-to-plant genomics, tissue culture, dihaploids, cytoplasmic male sterility and molecular markers to enhance our plant breeding programs and improve the efficiency of our new product development efforts.

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Breeding — We maintain significant breeding programs for 28 major vegetable and fruit species that yielded more than 80 commercial varieties and more than 150 non-commercial products in fiscal year 2002. Our breeding strategy is to create vegetable and fruit hybrids and varieties with combinations of traits that are superior to principal competitor hybrids and varieties that meet or anticipate the changing demands of the market. These improved traits include more economical production, improved yields, superior disease resistance, environmental tolerance, longer shelf lives, superior processing characteristics and consumer benefits such as improved taste, appearance, nutrition, ready-to-eat convenience and health benefits.

Plant and Genetic Technology — Through the use of our proprietary processes, we enhance the efficiency of our breeding programs by enabling our breeders to identify and incorporate important plant traits into breeding lines, while significantly reducing the lead-time necessary to introduce commercially viable products. These proprietary processes include the use of tissue culture, dihaploid breeding, cytoplasmic male sterility, molecular markers, genomics and biotechnology.

Plant Pathology — Vegetables and fruits are susceptible to diseases that can affect yield as well as quality of the final product. In order for our plant breeders to develop vegetable and fruit varieties resistant to diseases, we believe we have established the largest plant pathology group in the industry to identify and understand diseases important in vegetables and fruits. With 16 scientists in a network of laboratories throughout the world, we are currently working on more than 100 different diseases, targeting those that have the greatest impact on commercial vegetable and fruit production.

As a result of these efforts, we lead the industry by providing what we believe to be the widest range of disease resistant hybrids that require reduced or no chemical applications while enhancing growers’ yield potential. Our plant pathology resources also enable us to maintain rigorous quality control standards. All seed-lots are screened for a wide variety of diseases that could be carried on the seed. Lots that may be contaminated are treated to destroy the disease organisms or are destroyed.

Strategic Relationships

We actively seek access to technology applicable to vegetables and fruits from companies, research institutions and leading universities. Either directly or through Savia, our majority owner, we have over 100 technology agreements providing access to germplasm, genes, technology, patents and proprietary knowledge. We actively develop collaborations and acquire technologies from private corporations, research institutions and leading universities. We believe that our investment in technology agreements and collaborations reduces the cost and risk normally associated with new product development, as we utilize collaborators for most of our basic research. We typically share the value created as a result of our agreements and collaborations with our partners once a product reaches commercialization.

Production and Operations

We typically contract with seed growers to produce 80-85% of our seeds. The balance is produced on company-owned farms. We provide the producer with male and female ''parent’’ lines for hybrid varieties and basic stock seed for open pollination varieties, which are multiplied into commercial quantities. The grower returns the seeds to one of our operations facilities for cleaning, quality control, packaging and climate-controlled storage prior to sale to the customer.

Our seeds are produced both domestically and internationally in 25 countries in the Northern and Southern Hemispheres to mitigate growing risks associated with weather or disease in any one region and to replicate local growing conditions. In the United States, we produce seeds in Arizona, California, Idaho, Oregon and Washington through contract production with high-quality, dependable growers. Seeds are produced internationally through subsidiaries in Argentina, Canada, Chile, France, Guatemala, Hungary, Italy, Mexico, New Zealand, Peru, South Africa, South Korea, Thailand and the Netherlands and through exclusive agents using our proprietary technology in Australia, China, Czech Republic, Denmark, Ecuador, Germany, India, Israel, Italy, Japan, Latvia, New Zealand, Romania, Slovakia, South Africa, Taiwan, Tanzania, Turkey and Vietnam.

By geographically diversifying our production facilities, we can schedule planting on a year-round basis, maximize yield, reduce inventory requirements and better ensure adequate supplies. In addition, we manage the availability of quality products throughout the world by maintaining production capabilities for each variety in at least two locations in each hemisphere. For example, a new variety with strong, unanticipated demand in the Northern Hemisphere can be supplied by using additional production from the Southern Hemisphere.

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We control contract production globally by providing on-site management and technical personnel to oversee the production process. We supply producers with stock seed, specialized hybridizing techniques and specialized sowing and harvesting equipment to ensure product quality. Production is split among numerous species, ranging from hand-labor intensive hybrid crops such as peppers and tomatoes, to machine planted and harvested seed crops such as peas, beans and sweet corn. Product quantities are determined by long-term sales forecasts, product safety stock in inventory and the production history for the region and product.

We have main processing facilities in California, Idaho, Washington, Chile, Italy, Hungary, the Netherlands and South Korea and auxiliary processing centers in Brazil, New Zealand and India. The location of our seed processing centers is intended to facilitate the flow of seeds from production areas to major markets. Our planning department utilizes a specially designed logistics system, which integrates the planning functions in production, operations and sales. The implementation of this system has provided real time information about inventory from crop in ground to finished and available inventory for sales over a four-year time horizon.

Quality Assurance

Quality assurance (QA) oversees an extensive program that is designed to build quality into the seed, beginning at the breeder level, continuing through production, processing and sale of the commercial seed. This group conducts extensive testing of our seed to confirm genetic purity and identity, both in the field and through molecular techniques, fieldwork in molecular purity, hybridity and identity analysis, as well as germination and physical purity evaluations. We also test the general health of the seed.

QA sets guidelines for the production and operations process, as well as monitors the correct application of procedures. In addition, this group interfaces with our customers to ensure their satisfaction with our products and services, gathering, analyzing and disseminating quality-related information to all our internal areas involved in the supply chain. As a result, we capitalize on the experience and historical information available to us across regions and functions.

COMPETITION

We face direct competition from technological advances by competitors such as other seed companies, chemical and pharmaceutical companies and biotechnology companies, many of which have substantially greater resources than we do. To remain competitive, we expend approximately 10.0% of our revenue from seed sales in research and development and strive to maintain technological alliances.

Our principal global competitors are Syngenta Seeds Inc., Sakata Seed Corp. and Groupe Limagrain. We also face local competition in each region. We believe that the key competitive drivers in the industry are proven performance, customer support in the field as well as price and service. We believe that our global and local presence gives us a leading role in the industry as well as a competitive advantage. The economies of scale that we have and our ability to quickly introduce new products to market provide us with a superior advantage in the marketplace.

INTELLECTUAL PROPERTY

We use a wide array of technological and proprietary processes to enhance our germplasm and product development programs. These technologies and proprietary processes enable us to create novel product concepts and reduce the time to market by, in many cases, two to five years. We file for patents on technology that is patentable, although we do not file for patents on all potentially patentable technologies. We currently own or have pending patents in such areas as virus resistance, product quality, breeding technology, gene expression, cell selection and resistance genes, including 51 issued or allowed patents in Australia, Canada, France, Germany, Great Britain, Italy, the Netherlands, South Africa and the United States. We currently have 81 patent applications filed or pending, in Argentina, Australia, Brazil, Canada, Chile, China, the European Union, Hungary, India, Indonesia, Israel, Japan, Mexico, New Zealand, Romania, South Korea, Saudi Arabia, Spain, Thailand, Turkey, Ukraine and the United States.

Intellectual property rights protect our products and technologies from use by competitors and others. Intellectual property rights of importance for us include utility patents, plant variety protection (PVP) certificates under plant variety protection laws, trademarks and trade secrets. The protection of our germplasm and varieties through patents and PVP certificates is focussed on open-pollinated varieties, parental lines, traits and gene technologies related to hybrid varieties, novel traits, novel breeding technologies, molecular markers and disease resistance.

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In the United States, the European Union, Japan and many other countries, plant varieties can be protected under laws which grant rights to plant breeders to protect their seeds, including the right to prevent third parties from importing or exporting, storing, processing, reproducing or selling protected varieties within the territory of protection. We have protected 382 plant varieties under plant variety protection certificates or plant variety right certificates in the United States, the European Union and other countries. We have another 196 applications for plant variety protection pending, mostly in the United States and the European Union.

Apart from obtaining patent and PVP protection Seminis has developed a corporate policy to protect its proprietary and confidential information such as trade secrets. In the past fiscal year a corporate policy has been announced. The implementation of this policy is now underway in the different functional areas of the company. The objectives of the trade secret policy are to prevent disclosure of sensitive information and to protect the company’s legal interests if its trade secrets are appropriated.

Recently the registration and maintenance of trademarks were transferred from the marketing to the Intellectual Resource Protection department. Seminis owns a large portfolio of trademarks in many countries of the world.

We intend to continue developing comprehensive intellectual property and protection through utility patents including key varieties and parent lines, PVP certificates and trade secrets. We will also aggressively expand protection of our varieties and parent lines through plant variety rights. We will continue to aggressively enforce all our intellectual property rights.

REGULATION

The developing, testing and commercialization of seed products are subject to legislation and regulation in various countries. These regulations may govern genetic exclusivity, environmental concerns, product viability, performance and labeling. While regulation adds a cost of doing business to the industry, it also provides protection for research and development investment in new products, thereby encouraging continued new product development.

Registration Process

Variety registration varies from country to country, but generally each variety must be phenotypically unique. That is, the size, color, maturity and quality must be verifiably different from the varieties that already exist in the market. Once a variety is registered it cannot be changed. In the United States, the registration process is voluntary and determination that a variety is unique is left to the breeder. In Europe and many other countries, the registration process is regulated and determination of uniqueness is made in official trials.

Phytosanitary Certification

The purpose of phytosanitary requirements is to prevent the spread of plant diseases that can be carried on seeds or other plant tissue. Each seed-producing country has agricultural inspectors that check the seed crops for the presence of specified diseases. After these crops are harvested, laboratory tests are also conducted to ensure that the seeds are clean and free of impurities. Having passed the inspection and lab tests, the department or ministry of agriculture of the producing country issues a phytosanitary certificate stating that the seeds are free of specified diseases. Importing countries then allow the seeds to cross their borders on the basis of these certificates.

Labeling of Genetically Engineered Products

There are no worldwide, accepted regulations for genetically engineered products. Consequently, we are required to seek and obtain regulatory approvals in each country where such seeds will be sold or where the harvested produce will be exported. In the European Union and Switzerland, labeling of genetically engineered products is mandatory, whereas in other countries, such as Canada and the United States, labeling is required only if there is a compositional change or a health risk associated with the product. Japan, Australia and New Zealand now also require labeling. Other regions where we sell products either have labeling requirements similar to the United States or have no labeling requirements. We believe we do comply with the labeling requirements of each country in which we conduct business.

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Environmental Regulation

Our worldwide operations are subject to a broad range of environmental and health and safety laws, regulations and standards. These laws, regulations and standards are related to, among other things, air emissions, waste water discharges, the use and handling of hazardous materials, product labeling, waste disposal practices, cleanup of environmental contamination and the use of chemicals in our agricultural growing operations. Capital expenditures for property, plant and equipment for environmental control activities were not material during the fiscal years ended September 30, 2002 or September 30, 2001.

Although we are unable to predict which environmental legal requirements may be adopted in the future, we have not made and do not anticipate making material expenditures with respect to environmental protection. The compliance cost associated with environmental legal requirements, however, could result in future additional costs to operations.

EMPLOYEES

As of September 30, 2002, we had approximately 2,702 employees. We believe we have good relations with our employees.

RECENT DEVELOPMENTS

On December 13, 2002, Savia, S.A. de C.V., Seminis’ majority stockholder, announced that it signed a letter of intent with Fox Paine & Company, LLC, a San Francisco based private equity firm, under which Fox Paine and certain Savia related parties will acquire all of the outstanding shares of Seminis, Inc. In response to the proposed transaction, the Company formed a special committee of the independent directors to evaluate the proposed transaction and its fairness and to make a recommendation to the full Board of Directors. The proposed transaction is subject to certain conditions, including the satisfactory completion of a review of the business and financial condition of Seminis by Fox Paine, the negotiation of definitive agreements covering the transactions contemplated under the letter of intent, the refinancing and incurrence of additional indebtedness of Seminis, the acquisition of the Seminis shares held by the public, the approval of the bank lenders of both Savia and its controlling stockholders, the obtaining of regulatory approvals, the approval of the Board of Directors of Seminis and Savia and the approval of the stockholders of Seminis and Savia.

On December 17, 2002 and January 4, 2003, four purported class action lawsuits were filed relating to the above-described transaction. Three of these actions — Garry Firth v. Alfonso Romo Garza, et al., Civil Action No. 20085, Boris Pozniak v. Alfonso Romo Garza, et al., Civil Action No. 20097 and Pablo Herranz v. Seminis, Inc., et al., Civil Action No. 20105 — were filed in the Delaware Court of Chancery (New Castle County), while the fourth, Mark Rosales v. Seminis, Inc., Case No. CIV216255, was filed in California Superior Court (Ventura County). The Firth, Pozniak and Herranz complaints name as defendants Savia S.A. de C.V. (“Savia”) and Seminis, Inc. (“Seminis”), along with Seminis’ directors. The Rosales complaint names as a defendant Seminis and its directors. All four complaints purport to be brought on behalf of Seminis common stockholders or their successors. All four complaints allege that the above-described transaction, if consummated, would provide insufficient consideration to Seminis common stockholders and allege that the defendants breached their fiduciary duties in connection with the transaction. The complaints seek a preliminary and permanent injunction to enjoin the transaction and, in the event the transaction is consummated, rescission and damages. The defendants will vigorously defend these actions.

Item 2. Properties

In fiscal year 2000, we relocated to our new worldwide headquarters and processing facility located in Oxnard, California. This facility is equipped with some of the highest quality, state-of-the-art, seed processing equipment and has been specifically designed for optimum storage conditions for vegetable and fruit seeds, to further ensure high quality seed inventory. Within the production process, we directly control significant, open-field production capacity in Chile, Mexico and Peru on land predominantly owned by us. Our main greenhouse production facilities are located in Mexico, on sites owned by us and in Chile, the Netherlands and France, on sites owned by us, but contracted out to third parties that grow seeds exclusively for us.

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We maintain 25 facilities throughout the world, equipped to handle activities such as seed harvesting, cleaning, sizing, treating, testing and packaging. In addition to our worldwide headquarters, we own and operate production and processing facilities in Idaho, Washington, Chile, France, New Zealand, South Africa, South Korea, Thailand, the Netherlands, Brazil, Italy, India and Hungary.

We conduct our research primarily at five company-owned research centers in France, Italy, South Korea, the Netherlands and the United States. We also conduct limited research at seven owned and ten leased facilities.

Item 3. Legal Proceedings

We are involved from time to time as a defendant in various lawsuits arising in the normal course of business. We believe that no current claims, individually or in the aggregate, will have a material adverse effect on our business, results of operations or financial condition.

As part of the formation of LSL PlantScience, LSL Biotechnologies contributed certain agreements between LSL Biotechnologies and a third party. These agreements contain provisions that permanently restrict the third party from engaging in the development or marketing of open field tomato seeds having long-shelf-life characteristics in certain areas in the world, including North America. In September 2000, the Antitrust Division of the United States Department of Justice filed suit in the United States District Court for the District of Arizona against LSL PlantScience, LSL Biotechnologies and our Company to delete these restrictive provisions. On March 29, 2002, the United States District Court dismissed without prejudice the action against LSL PlantScience, LSL Biotechnologies and Seminis.

In January 2002, melon growers in Costa Rica notified us that our Dorado melon seeds were infected with Watermelon Fruit Blotch. Growers who purchased the infected Seminis seeds and growers whose crops were infected by the bacteria that spread from crops grown with the infected Seminis seeds have claimed damages against us. The claims related to those growers who purchased Seminis seeds have been settled for approximately $5.8 million, of which, approximately $2.6 million was recovered under our errors and omissions insurance policy and the remainder of the settlement was paid by the Company by July 2002. The claims related to the growers with infected crops total approximately $5.2 million and we believe these claims are covered under our general liability insurance policy. We have tentatively settled all of these claims and we have advanced approximately $2.1 million to the growers; however, we are unable to finalize the settlement because our general liability insurance carrier has tentatively denied coverage. We are continuing to negotiate with our general liability insurance carrier on this matter. In the event we cannot finalize the settlement, claims could increase above $5.2 million.

In early 2000, we filed a suit against Dietrich Schmidt, the former president of Seminis and the current president of United Genetics, a competitor of ours, United Genetics and two former Seminis breeders, Ken Owen and Wei Ouyang, for trade secret misappropriation and breach of contract. Schmidt filed a counterclaim for defamation against us. We were unsuccessful on our claims for trade secret misappropriation and breach of contract and Schmidt was successful on his counterclaim with the court awarding him $1 in nominal damages. The court subsequently awarded Schmidt, Owen, Ouyang their attorneys’ fees. We have appealed certain aspects of the judgement, including the fee award. The appeal is still pending and is not expected to be decided until 2003.

On December 17, 2002 and January 4, 2003, four purported class action lawsuits were filed relating to the proposed transaction under which Fox Paine & Company, LLC, a San Francisco based private equity firm and certain Savia related parties will acquire all of the outstanding shares of Seminis, Inc. Three of these actions — Garry Firth v. Alfonso Romo Garza, et al., Civil Action No. 20085, Boris Pozniak v. Alfonso Romo Garza, et al., Civil Action No. 20097 and Pablo Herranz v. Seminis, Inc., et al., Civil Action No. 20105 — were filed in the Delaware Court of Chancery (New Castle County), while the fourth, Mark Rosales v. Seminis, Inc., Case No. CIV216255, was filed in California Superior Court (Ventura County). The Firth, Pozniak and Herranz complaints name as defendants Savia S.A. de C.V. (“Savia”) and Seminis, Inc. (“Seminis”), along with Seminis’ directors. The Rosales complaint names as a defendant Seminis and its directors. All four complaints purport to be brought on behalf of Seminis common stockholders or their successors. All four complaints allege that the above-described transaction, if consummated, would provide insufficient consideration to Seminis common stockholders and allege that the defendants breached their fiduciary duties in connection with the transaction. The complaints seek a preliminary and permanent injunction to enjoin the transaction and, in the event the transaction is consummated, rescission and damages. The defendants will vigorously defend these actions.

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Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders of the Company was held on September 26, 2002. At the Annual Meeting, Alfonso Romo Garza, Jose Manuel Garcia Garcia, Eugenio Najera Solorzano, Eugenio Garza Herrera and William F. Kirk were elected as directors of the Company. Over 82% of the voting shares voted in favor of the election of the aforementioned directors.

At the Annual Meeting, Stockholders approved the issuance of 37,669,480 shares of Class A common stock to Savia, S.A. de C.V. in exchange for the cancellation of the shares of Class C preferred stock and Additional Paid-In Capital and $10.0 million of accrued and unpaid dividend thereon. This proposal received 123,964,096 votes for approval, 122,945 votes against approval and 27,205 votes abstaining.

At the Annual Meeting, Stockholders approved the First Amendment to the Seminis, Inc. 1998 Stock Option Plan, as Amended and Restated. This proposal received 123,502,338 votes for approval, 586,229 votes against approval and 25,679 votes abstaining.

At the Annual Meeting, Stockholders approved the Seminis Inc. Restricted Stock Plan of 2001. This proposal received 123,866,028 votes for approval, 233,539 votes against approval and 14,679 votes abstaining.

At the Annual Meeting, Stockholders approved the appointment of PricewaterhouseCoopers LLP as the Company’s independent accountants for the fiscal year beginning October 1, 2001. This proposal received 123,964,511 votes for approval, 136,910 votes against approval and 12,825 abstaining.

Although the Exchange Agreement was approved by the Stockholders at the Annual Meeting, it is subject to customary closing conditions and approvals by creditors of Savia and the Company. At this time, all of the closing conditions and approvals have not been satisfied and therefore, the exchange has not been consummated. The Company may not complete all of the transactions contemplated under the Exchange Agreement until the conditions and approvals are obtained or waived, including the payment by the Company of the accrued and unpaid dividends on the Class B preferred stock and the consent of the lenders under the Company’s Syndicated Credit Facility.

Item 4A. Executive Officers of the Registrant

The following table shows our current executive officers and their areas of responsibility. Biographies are included after the table.

Alfonso Romo Garza has been the Chairman of the Board of Seminis since October 1995 and Chief Executive Officer of Seminis since January 1, 2000. Mr. Romo has been Chairman of the Board of Pulsar Internacional, S.A. de C.V., a private holding company and an affiliate of Seminis, since 1984. Mr. Romo has also been the Chairman of the Board and Chief Executive Officer of Savia, a holding company and our majority shareholder, since 1988 and the Chairman of the Board of

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Seguros Comercial America, S.A. de C.V. since 1989. Mr. Romo is also a director of Cementos Mexicanos, S.A. de C.V. and Gruma S.A. de C.V.

Eugenio Najera Solorzano has been a Director of Seminis since May 1998. Mr. Najera has been President and Chief Operating Officer of Seminis since August 2000. Mr. Najera was in charge of new business development at Savia from August 1997 to July 2000. From November 1992 to September 1997, Mr. Najera was Chief Operating Officer of Cigarrera La Moderna, S.A. de C.V., a manufacturer and distributor of cigarettes. Mr. Najera is a director of Savia.

Oscar Javier Velasco has been Senior Vice President, Asia for Seminis since June 2001. Mr. Velasco was Vice President, Strategic Services from October 2000 to May 2001 and was Vice President, Non-Core Business Activities from April 1999 to October 2000. Prior to joining Seminis, Mr. Velasco served as Vice President of Trade Marketing and Distribution of Cigarrera la Moderna, S.A. de C.V., from 1993 to October 2000.

Jose Manuel Madero Garza has been Vice President, Forecasting and Inventory Management for Seminis since August 2002. Mr. Madero was Managing Director of Pastelerias Monterrey from April 2001 to August 2002. He was also in various management and project coordination positions for Pulsar since January 1997.

Bruno Ferrari has been Executive Senior Vice President, Europe, Middle East and Africa for Seminis since November 2000. Mr. Ferrari has been Senior Vice President of Legal and Human Resources from January 1997.

Gaspar Alvarez Martinez has been Vice President and Worldwide Corporate Comptroller since December 2000 and was Worldwide Finance Director of Seminis from January 2000 to November 2000. Prior to joining Seminis, Mr. Alvarez served as a Director of the Controlling and Financial Planning at Savia from 1997 to 1999 and Finance General Manager at Savia from 1995 to1997.

Enrique Fernando Osorio Lopez has been Vice President, Treasury, Investor Relations and Information Technology of Seminis since July 2001. Previously, Mr. Osorio served as Vice President, Treasury and Investor Relations at Savia from June 1994 to June 2001.

Dr. Charles Edward Green has been Senior Vice President, Research and Development for Seminis since November 1999 and he previously directed new technology development at Seminis from 1996 to 1999.

Salvador Alanis Gracia has been Vice President, Strategic Support for Seminis since June 2001. Mr. Alanis joined Seminis in December 2000 working on strategic projects and served as Senior Director, Value Capture Planning and Control from March 2001 to June 2001. Prior to joining Seminis, Mr. Alanis was the Corporate Manager at Bionova, a biotechnology and fresh produce company and majority owned subsidiary of Savia from March 2000 to October 2000. Mr. Alanis served in various business development positions at Savia from October 1996 to March 2000.

Franco Campana has been Vice President, North America Sales for Seminis since October 2000 and was Director of North America Sales for Petoseed, a Seminis brand, from March 1999 to October 2000. Mr. Campana served in various sales management positions with Petoseed from 1988 to March 1999.

Jean Pierre Posa has been Vice President, South America Sales for Seminis since 1997. Mr. Posa served as General Manager Petoseed Chile from 1992 to 1997.

Jorge Barrera Gutierrez has been Secretary of Seminis since February 2001. Mr. Barrera has been Legal Counselor of Savia since 1986.

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PART II

Item 5. Market Price of the Registrant’s Common Equity and Related Stockholder Matters

MARKET INFORMATION FOR COMMON STOCK

Seminis’ Class A Common Stock began trading on the NASDAQ National Market System on June 30, 1999 and the initial public offering of Seminis’ Class A Common Stock was completed on July 5, 1999. Seminis shares of Class A Common Stock are traded under the symbol SMNS. The following table sets forth, for the quarters ended December 31, 1999, March 31, 2000, June 30, 2000, September 30, 2000, December 31, 2000, March 31, 2001, June 30, 2001, September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002 and September 30, 2002, the high and low prices as reported by the NASDAQ National Market System:

The closing price quoted on the NASDAQ National Market System on September 30, 2002 was $2.930 per share. As of December 17, 2002, there were 18,939,611 shares of Class A Common Stock outstanding with 73 owners of record.

Seminis also had 45,142,508 shares of its Class B Common Stock outstanding with 14 owners of record as of December 17, 2002. The Class B Common Stock is not traded on an exchange or in an over-the-counter market.

RECENT SALES OF UNREGISTERED SECURITIES

The following provides information as to Seminis’ securities sold by the Company during fiscal years 2000, 2001 and 2002, which were not registered under the Securities Act of 1933 as amended.

In April, May and June 2000, Seminis converted, $22.0 million, $14.0 million and $6.0 million, respectively, of intercompany advances from Savia into 2,200 shares, 1,400 shares and 600 shares of Class C Preferred Stock. In August and September 2000, Savia made additional equity investments of $10.0 million and $14.0 million, respectively, in exchange for 1,000 shares and 1,400 shares of Class C Preferred Stock. The issuance of such shares was effected in reliance on the exemption from registration under Section 4(2) of the Securities Act. Through September 30, 2000, 662.4 shares of Class C Preferred Stock were issued as dividends. Through December 31, 2000, additional 299.6 shares of Class C Preferred Stock were issued as dividends. Effective January 2001, the dividends of Class C Preferred Stock have been converted to a cash basis in accordance with the Board resolution on February 24, 1999. On October 1, 2002 the Board of Directors approved the conversion of the Savia additional capital contribution and the associated paid in kind (PIK) dividends that totaled $46.7 million to be converted to 4,670 shares of Class C Preferred Stock. Concurrently, the Board also adopted a resolution authorizing and directing an increase in the number of shares designated as Class C Redeemable Preferred Stock from 14,400 shares to 16,688 shares. No Class C Preferred Stock cash dividends have been paid to date due to the prohibition mandated in the credit agreement of the Syndicated Banks.

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DIVIDENDS

Seminis has never paid cash dividends on its common stock and Class C Preferred Stock. Under Seminis’ amended July 1999 credit agreement with Harris Trust and Savings Bank, Bank of Montreal and other lenders, Seminis is prohibited from paying cash dividends on its common stock and Class C Preferred Stock. Seminis has paid cash dividends on its Class B Preferred Stock in the past, but not in fiscal years 2001 or 2002. The Company is restricted from paying cash dividends on its Class B Preferred Stock until certain conditions are met.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table sets forth information concerning equity securities of the Company that are authorized for issuance under all compensation plans (in thousands, except per share data).

1.

The Seminis, Inc. 1998 Stock Option Plan, as Amended and Restated, was adopted by the Company prior to the initial public offering of the common stock of the Company in July 1999.

Item 6. Selected Consolidated Financial Data

The selected consolidated financial data presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements, including the notes thereto, included herein.

In fiscal year 2002, operating expenses included $0.8 million of consulting fees related to the company’s Global Restructuring and Optimization Plan and $7.3 million of compensation expenses related to the restricted stock awards. The Company ceased amortization of its goodwill in accordance with SFAS No. 142 in fiscal year 2002, whereas approximately $9.0 million of goodwill amortization was recorded during fiscal year 2001. Income tax expense reflected a $5.9 million U.S. tax refund and the utilization of net operating loss carryforwards.

In fiscal year 2001, gross profit included approximately $73.9 million of non-cash charges for inventory write-downs. Included in this amount was $58.2 million of write-downs, which occurred in conjunction with the Company’s Global Restructuring and Optimization Plan, whereby the Company rationalized its product line from 6,000 to 4,000 varieties as well as imposed more stringent quality standards. The loss from operations also included approximately $19.6 million of severance and other exit charges associated with the Company’s Global Restructuring and Optimization Plan and $2.6 million of compensation expense related to restricted stock awards. Income tax expense reflected the establishment of a valuation allowance totaling $62.8 million for certain deferred tax assets.

In fiscal year 2000, gross profit included approximately $58.9 million of non-cash charges for inventory write-downs. Write-downs totaling $18.4 million related to the Global Restructuring and Optimization Plan included inventories that were scrapped as part of the consolidation of production and distribution facilities. The loss from operations also included approximately $19.0 million of severance and other exit charges associated with the Company’s Global Restructuring and Optimization Plan, a $2.1 million charge related to Seminis’ research incentive program and a $6.4 million impairment write-down related to the Company’s investment in LSL PlantScience.

Income (loss) from continuing operations before extraordinary items available for common stockholders in fiscal year 1998 reflects the optional repurchase by Seminis of a portion of its mandatorily redeemable common stock at an amount in excess of the redemption value. Seminis was required to deduct this difference, which totaled $134.3 million, from income (loss) from continuing operations before extraordinary items for purposes of determining income (loss) from continuing operations before extraordinary items available for common stockholders and related per share amounts.

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Historical data for income (loss) from continuing operations before extraordinary items available for common stockholders reflect deductions for dividends on preferred stock and mandatorily redeemable preferred stock, for accretion of the redemption value of mandatorily redeemable common stock and, in fiscal year 1998, for the excess of purchase price over redemption value of the mandatorily redeemable common stock repurchased.

Whereas we have met our obligations as well as covenant requirements under the amended credit facility through September 30, 2002, we must successfully execute a refinancing plan prior to December 31, 2003 in order to meet the final maturity of the facility. We will continue to pursue a refinancing plan, which may include negotiation of a new credit facility, and/or placement of new debt securities; however, there can be no assurances that we will be able to successfully complete the refinancing. Additionally, there can be no assurances that the Fox Paine transaction will be consummated. Failure to comply with existing covenants, which would make the Syndicated debt callable, or our inability to obtain adequate financing with reasonable terms prior to December 31, 2003 could have a material adverse impact on our business, results of operations or financial condition.

Acquisitions and Effects of Purchase Accounting

Seminis was formed in 1994 to consolidate various industry-leading vegetable and fruit seed brands into one consumer-oriented, agrobiotechnology company. Seminis’ core business was created through the acquisition of the Asgrow seed business from the Upjohn Company in December 1994 and the subsequent combination of the Asgrow vegetable and fruit seed business with Petoseed and Royal Sluis businesses in October 1995. In fiscal year 1998, Seminis completed several acquisitions, including the acquisition of two South Korean companies, Hungnong Seed Co., Ltd. (“Hungnong”) and Choong Ang Seed Co., Ltd. (“Choong Ang”). In November 1998, Seminis completed the acquisition of the vegetable seed business of Agroceres, a Brazilian company. As a result of these transactions, the results of operations and consolidated financial position reflect the effects of purchase accounting.

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In fiscal year 2000, long term debt was reclassified as current long term debt due to the non-compliance of certain financial covenants of the credit agreement with the Syndicated Banks. Without the reclassification long term debt and working capital would have been $320,768 and $321,856, respectively.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the “Selected Consolidated Financial Data” and consolidated financial statements, including the notes thereto, appearing elsewhere herein. The following discussion and analysis contains certain “forward-looking statements” which are subject to certain risks, uncertainties and contingencies, including, without limitation, those set forth below, which could cause Seminis’ actual business, results of operations or financial condition to differ materially from those expressed in or implied by, such statements.

RISK FACTORS

Readers should be aware that there are various risk factors including, but not limited to, those set forth below:

	•		As of December 31, 2002, we had not completed a refinancing transaction in order to pay the remaining balance of our Syndicated Credit Facility totalling $224.7 million. The lenders agreed to temporarily extend the term of the credit facility and in January 2003, a formal amendment was executed. Among other things, the amendment extended the final maturity of the credit facility from the previously agreed on date of December 31, 2002 to December 31, 2003, revised principal payment dates under the term loan, instituted a new grid pricing formula to determine interest on borrowings and revised covenant obligations. Interim principal obligations under the amendment included $3.0 million and $9.5 million due in the third and fourth quarters of fiscal year 2003, respectively. The remaining outstanding amount totaling $212.2 million will be due in the first quarter of fiscal year 2004. Upon receipt of the amended credit agreement, long-term portions of borrowings were reclassified from current liabilities to long-term debt as of September 30, 2002. Whereas we have met our obligations as well as covenant requirements under the amended credit facility through September 30, 2002, we must successfully execute a refinancing plan prior to December 31, 2003 in order to meet the final maturity of the facility. We will continue to pursue a refinancing plan, which may include negotiation of a new credit facility, and/or placement of new debt securities; however, there can be no assurances that we will be able to successfully complete the refinancing. Additionally, there can be no assurances that the Fox Paine transaction will be consummated. Failure to comply with existing covenants, which would make the Syndicated debt callable, or our inability to obtain adequate financing with reasonable terms prior to December 31, 2003 could have a material adverse impact on our business, results of operations or financial condition.
	•		The Company is currently restricted from any additional borrowings under the Syndicated Credit Facility. As of November 2000, Seminis’ parent company suspended advancing funds to the Company.
	•		Savia owns approximately 63.4% of the Company’s outstanding common stock and controls 78.9% of the vote of its common stock. Accordingly, Savia controls the Company and has the power to approve all actions requiring the approval of our stockholders, including the power to elect all of its directors. Therefore, Savia effectively controls our management.

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	•		A new management team has been in place as of August 2000. The Company’s ability to generate operating profits and cash flows will be dependent on their successful implementation of the Company’s strategic initiatives including, but not limited to, the Global Restructuring and Optimization Plan.
	•		The Company continues to invest in research and development in order to enable us to identify and develop new products to meet consumer demands. In fiscal year 2002, our investment in research and development represented 9.8% of net sales. Despite investments in this area, our research and development may not result in the discovery or successful development of new products, which will be accepted by our customers.
	•		The Company may have the inability to protect its intellectual property due to the uncertainty of litigation and the ineffectiveness of the laws in some of the countries that the Company currently has operations, which could have a material adverse effect on our business, results of operations or financial condition.
	•		A change in United States law protecting plant patents could take away patent protection for the Company’s patented seeds, which could have a material adverse effect on our business, results of operations or financial condition.
	•		The Company faces substantial competition due to technological advances by competitors such as other seed companies, pharmaceutical and chemical companies and biotechnology companies. Many of these companies have substantially greater resources than we. If a competitor introduces a competitively successful product, it could take years to develop a competitive seed variety, which could have a material adverse effect on our business, results of operations or financial condition.
	•		The Company’s failure to accurately forecast and manage inventory could result in an unexpected shortfall or surplus of seeds, which could have a material adverse effect on our business, results of operations or financial condition.
	•		Extreme weather conditions, disease and pests can materially and adversely affect the quality and quantity of seeds produced. There can be no assurance that these factors will not affect a substantial portion of the Company’s production in any year and have a material adverse effect on our business, results of operations or financial condition.
	•		Defective seeds could result in warranty claims and negative publicity and the insurance covering warranty claims may become unavailable or be inadequate which could have a material adverse effect on our business, results of operations or financial condition.

OVERVIEW

Seminis was formed in 1994 to consolidate various industry-leading vegetable and fruit seed brands into one consumer-oriented producer and marketer of vegetable and fruit seeds. Our core business was created through the acquisition of the Asgrow seed business in December 1994 and the subsequent combination of the Asgrow business with the Petoseed and Royal Sluis seed businesses in October 1995. Since our formation, we have been at the forefront of the consolidation of the vegetable and fruit seed industry and have completed ten acquisitions.

Our rapid growth through acquisitions created a highly complex operation that impacted our results. An increasing level of inventory as well as production and quality assurance difficulties were the primary operating problems that resulted in us experiencing severe financial difficulties over the past several years.

Global Restructuring and Optimization Plan

In February 2000, we announced a cost-saving initiative designed to streamline operations, increase utilization of facilities and improve efficiencies. The first phase of the initiative, which commenced in fiscal year 2000 and focused on North American operations, was completed by the end of fiscal year 2001. In June 2001, we commenced the second phase, which was targeted at our global operations and expanded the phase to cover additional headcount reductions and to consolidate our facilities in Holland. The key elements to the Global Restructuring and Optimization Plan involve:

•		reorganizing our ten legacy seed companies into four geographical regions;
•		selling or consolidating certain operation and production facilities;

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•		reducing headcount that results from the reorganization and from facility consolidation;
•		rationalizing our product portfolio;
•		implementing an advanced logistics management information system; and
•		divesting non-strategic assets.

In connection with phase one of the Global Restructuring and Optimization Plan, we recorded pre-tax charges to operations of approximately $34.4 million for restructuring costs during fiscal year 2000 that included severance and other exit costs, inventory write-downs and costs associated with streamlining our products portfolio. Of this amount, $18.4 million was included in cost of goods sold for inventory write-downs. The remaining $16.0 million was included in selling, general and administrative expenses and consisted primarily of severance costs. The total phase one and initial phase two severance charges related to a planned 600-employee reduction worldwide in both operational and administrative groups.

As part of the implementation of the expanded second phase of our Global Optimization Plan, we recorded a pre-tax charge of $12.0 million in selling, general and administrative expenses in the third quarter of fiscal year 2001. This charge was primarily related to severance and related costs resulting from an additional planned 250-employee reduction worldwide in both operational and administrative groups. In fiscal year 2001, we also recorded non-cash inventory write-downs of $58.2 million in cost of goods sold in order to comply with more stringent seed quality standards and to further rationalize our product portfolio from 6,000 to 4,000 varieties. We believe we have established adequate reserves for all of the remaining costs and expenses related to our Global Restructuring and Optimization Plan.

The remaining components of the restructuring accruals are as follows:

To date, there have been no material adjustments to amounts accrued under the plan. The remaining $3.3 million reserve balance is expected to be utilized in fiscal year 2003.

Improved Financial Performance

As a result of the implementation of the global restructuring and optimization plan, we have significantly improved our cash flows and established the basis for future profitable operations through:

	•		decreased operating expenses primarily through a reduction in global headcount and the consolidation of production and operations facilities;
	•		improved collections of accounts receivable;
	•		reduced inventory purchases resulting from improved forecasting and inventory controls; and
	•		the sale of non-core assets.

Together with price increases that we implemented in April 2001, during fiscal year 2002, we:

	•		reduced our debt by $57.6 million;
	•		reduced operating expenses as a percentage of sales by 7.9%; and
	•		generated positive cash flows from operations of approximately $38.1 million.

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Results of Operations

The table below sets forth Seminis’ results of operations data expressed as a percentage of net sales.

Year Ended September 30, 2002 Compared With Year Ended September 30, 2001

Net Sales

Net sales increased 0.6% to $452.6 million for the year ended September 30, 2002 from $449.9 million for the year ended September 30, 2001. The result was impacted by $4.8 million of negative currency fluctuations relating to weakness in the European Monetary Union Euro, Argentinean Peso and Brazilian Real versus the United States Dollar during the year ended September 30, 2002, compared to the same period in the prior fiscal year. In addition, the year ended September 30, 2001 included incremental net sales of $10.7 million from a non-core business divested in January 2002. In constant dollars, stated at monthly average exchange rates for fiscal year 2001 and excluding the sales of the non-core businesses, net seed sales would have increased 4.0%. This increase was primarily attributable to higher sales of spinach, onion, cucumber, tomato, white cabbage, peas and bean varieties in the Europe, Middle East and Africa region. Also, the North and Central America sales regions benefited from increased sales of lettuce, spinach and sweet and hot pepper varieties. The sales increases were primarily attributed to price increases implemented in these respective regions. Overall sales increases were partially offset by decreases in the Far East region sales due to weak economic and poor weather conditions and in South American sales due to the economic instability in Argentina, which also affected other countries in the region.

Gross Profit

Gross profit increased 28.9% to $280.7 million for the year ended September 30, 2002 from $217.8 million for the year ended September 30, 2001. Gross margin increased to 62.0% for the year ended September 30, 2002 from 48.4% for the year ended September 30, 2001. The improvement in both gross profit and gross margin was primarily due to a non-cash inventory write-down of $58.2 million taken during fiscal year 2001, related to the Global Restructuring and Optimization Plan. Excluding the non-cash inventory write-down, gross margin for the period ended September 30, 2001 would have been 61.4%. The increase was also due to seed price increases within the Europe, Middle East and Africa and the North and Central America sales regions as well as an improved product mix. Additionally, there was approximately $3.1 million of freight and handling charge revenue that was recognized in net sales during the year ended September 30, 2002 in compliance with EITF 00-10, “Accounting for Shipping and Handling Fees and Costs,”; with the corresponding expense recorded in selling, general and administrative expenses. In the prior year, through June 29, 2001, such freight and handling charge revenue was netted against the corresponding selling, general and administrative expenses, other than $1.3 million that was recognized in net sales in the fourth quarter of fiscal year 2001.

Research and Development Expenses

Research and development expenses decreased 15.5% to $44.3 million for the year ended September 30, 2002 from $52.4 million for the year ended September 30, 2001. $4.2 million of the decrease was due to personnel reductions and $1.3 million of other expenses resulted from initiatives of the Global Restructuring and Optimization Plan. The decrease was also attributable to an approximate $0.9 million research grant received in Europe which offset research and development expenses during the year ended September 30, 2002. In addition, expenses decreased by approximately $1.6 million due to the impact of the divestiture of a non-core business.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 8.5% to $174.9 million for the year ended September 30, 2002 from $191.1 million for the year ended September 30, 2001. The decrease was primarily the result of approximately $12.0 million of severance provision, $4.3 million of facility consolidating costs and $3.3 million of consulting fees due to restructuring initiatives incurred in fiscal year 2001 compared to $0.8 million of consulting fees for restructuring initiatives in fiscal year 2002. Additionally, the decrease was attributable to the elimination of approximately $8.9 million of expenses from a non-core business divested in January 2002, combined with the impact of further headcount reductions following the implementation of the Global Restructuring and Optimization Plan. The decrease in expenses was partially offset by a compensation charge of $7.3 million related to an employee restricted stock award plan recorded during the year ended September 30, 2002, compared to $2.6 million recorded during the prior fiscal year. Additionally, the decrease in expenses was offset by approximately $3.1 million of freight and handling charge revenue that was recognized in net sales during the year ended September 30, 2002. In the prior year, such freight and handling charge revenue was netted against the corresponding selling, general and administrative expenses, other than $1.3 million that was recognized in the fourth quarter of fiscal year 2001.

Amortization of Intangible Assets

Amortization of intangible assets decreased 39.1% to $17.1 million for the year ended September 30, 2002 from $28.0 million for the year ended September 30, 2001. The decrease was primarily due to the adoption of SFAS No. 142, “Goodwill and Other Intangible Assets.” The pronouncement requires that periodic amortization of goodwill be ceased and that annual reviews of the fair value of the goodwill need to be performed to determine if an impairment of the goodwill asset value exists. Upon completing our analyses, no impairment adjustments in goodwill and other intangible assets were required. Therefore, we recorded no goodwill amortization in accordance with SFAS No. 142 in fiscal year 2002, whereas approximately $9.0 million of goodwill amortization was recorded during fiscal year 2001. The decrease was also due to the effect of latter stages of accelerated amortization of intangible assets related to purchase accounting. The decrease was partially offset by the currency impact from the fluctuation of the South Korean Won on South Korean based intangible assets.

Interest Expense, Net

Interest expense, net, decreased 29.1% to $27.7 million for the year ended September 30, 2002 from $39.1 million for the year ended September 30, 2001. The decrease was primarily due to lower average debt balances and interest rates during fiscal year 2002 compared to the prior fiscal year. During the 12 months ended September 30, 2002, our bank debt balance decreased by approximately $57.6 million.

Other Non-Operating Income (Expense), Net

We had other non-operating income, including foreign currency gain (loss), net, of $1.8 million for the year ended September 30, 2002 as compared to other non-operating expense, net, of $1.6 million for the year ended September 30, 2001. Other non-operating income, net, for the year ended September 30, 2002 primarily consists of an approximate $3.9 million gain from the sale of a non-core business in January 2002, offset by foreign currency losses of $2.2 million resulting from currency fluctuations in South America and a United States Dollar denominated loan in the Netherlands and a minority interest provision of $1.2 million. Other income, net, also includes gains from non-strategic asset sales in South Korea. Other non-operating expense, net, for the year ended September 30, 2001, primarily resulted from the loss on sale of fixed assets of $1.9 million and a minority interest provision of $1.4 million. The expense was partially offset by a foreign currency gain of $1.7 million.

Income Tax Benefit (Expense)

Income tax expense was $2.5 million and $40.0 million for the years ended September 30, 2002 and September 30, 2001, respectively. The decrease in income tax expense was the result of utilization of net operating loss carryforwards in fiscal year 2002, the receipt of a $5.9 million tax refund in July 2002 in the United States due to certain changes in the U.S. tax law for net operating loss carrybacks, the mix of worldwide income tax rates and the establishment of valuation allowances for certain deferred tax assets in fiscal year 2001.

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Year Ended September 30, 2001 Compared With Year Ended September 30, 2000

Net Sales

Total net sales at actual currency rates decreased 5.2% to $449.9 million for the year ended September 30, 2001, from $474.4 million for the year ended September 30, 2000. The decrease was primarily due to currency fluctuation and divestiture of certain businesses. The weakness of the European Monetary Union Euro, the South Korean Won and Brazilian Real accounted for the majority of the $20.9 million decrease in sales from currency fluctuation in comparison to fiscal year 2000. The divestiture of the garden and soybean businesses impacted sales with a further decrease of $17.3 million. At a constant currency rate with fiscal year 2000, net seed sales increased 2.4% to $439.5 million for the year ended September 30, 2001, from $429.2 million for the year ended September 30, 2000. North America had the largest increase of $8.4 million with significant improvements in Mexico. At a constant currency rate with fiscal year 2000, South America had a sales increase of $2.8 million, despite unfavorable economic conditions in Argentina and Colombia; the Far East also recorded a net seed increase in sales of $0.6 million, even though Korea was negatively impacted by heavy snowfall and an economic downturn; Europe, the Middle East and Africa sales decreased by $1.5 million, mainly due to weather conditions in Southern Europe. Non-core business also increased sales by $3.4 million, at constant currency rates with fiscal year 2000, with Incotec being the major contributor.

Gross Profit

Gross profit decreased 8.2% to $217.8 million for the year ended September 30, 2001, from $237.3 million for the year ended September 30, 2000. Gross margin decreased to 48.4% for the year ended September 30, 2001, from 50.0% for the year ended September 30, 2000. Both gross profit and gross margin reflected total non-cash inventory writedowns of $73.9 and $58.9 million taken during fiscal year 2001 and 2000, respectively. The writedowns in fiscal year 2001 included approximately $58.2 million of charges taken in conjunction with the Company’s Global Restructuring and Optimization Plan, whereby the Company rationalized its product line from 6,000 to 4,000 varieties as well as imposed more stringent quality standards. Gross margins in fiscal year 2001 were also positively impacted by price increases resulting from efforts of the Global Restructuring and Optimization Plan.

Research and Development Expenses

Research and development expenses decreased 10.1% to $52.4 million for the year ended September 30, 2001 from $58.4 million for the year ended September 30, 2000. The decrease was due to an approximate $2.0 million charge related to Seminis’ research incentive program recorded in the first half of fiscal year 2000, with no corresponding charges in fiscal year 2001. The decrease in expenses was also a result of headcount reduction from the Global Restructuring and Optimization Plan and currency fluctuations from research and development operations in Europe during fiscal year 2001.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 14.2% to $191.1 million for the year ended September 30, 2001 from $222.6 million for the year ended September 30, 2000. The decrease was primarily the result of headcount reductions following the implementation of the Global Restructuring and Optimization Plan and, in part, the impact of currency fluctuations. Furthermore, the decrease was the result of divestiture of certain non-core businesses totaling $6.9 million, the absence of a $6.4 impairment charge recorded in fiscal year 2000 associated with the Company’s investment in LSL Plantscience and a restructuring charge primarily for severances of $12.0 million in fiscal year 2001 compared to $14.0 million in fiscal year 2000. The decrease was partially offset by facility moving costs of $4.3 million compared to $3.1 million and consulting fees for restructuring of $3.3 million compared to $2.0 million in fiscal years 2001 and 2000, respectively. Additionally, a compensation charge of $2.6 million for a newly established employee stock plan was taken in fiscal year 2001.

Amortization of Intangible Assets

Amortization of intangible assets decreased 7.9% to $28.0 million for the year ended September 30, 2001 from $30.5 million for the year ended September 30, 2000. The decrease was primarily due to the effect of latter stages of accelerated amortization of intangible assets related to purchase accounting. Furthermore, the decrease was attributable to the currency impact from the devaluation of the South Korean Won on Korean based intangible assets. The decrease was partially offset by an increase in intangible asset amortization in an U.S. subsidiary.

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Interest Expense, Net

Interest expense, net, increased 17.1% to $39.1 million for the year ended September 30, 2001 from $33.4 million for the year ended September 30, 2000. The increase was primarily due to higher effective interest rates in this fiscal year compared to last fiscal year. Furthermore, the increase was due to the acceleration of deferred financing cost amortization related to the Company’s credit facility. The acceleration was a result of the advancement of the maturity date of the term loan.

Other Non-Operating Income (Expense), Net

Seminis had other non-operating expense, net of $1.6 million for the year ended September 30, 2001, as compared to other non-operating income, net of $2.2 million for the year ended September 30, 2000. Other non-operating expense, net, for the year ended September 30, 2001 included other expense, net of $1.9 million, primarily from the loss on the sale of fixed assets, offset by a foreign currency gain of $1.7 million and a minority interest provision of $1.4 million. Other income in fiscal year 2000 included a $10.0 million gain on the asset sales of MBS, a soybean subsidiary, a currency loss of $5.4 million, primarily associated with Seminis Vegetable Seeds Holland on its U.S. Dollar denominated loan and a minority interest provision of $1.2 million.

Income Tax Benefit (Expense)

We had an income tax expense of $40.0 million for the year ended September 30, 2001, as compared to an income tax benefit of $24.6 million for the year ended September 30, 2000. The increase in income tax expense during fiscal year 2001 primarily related to a provision of a valuation allowance against the deferred tax assets arising from net operating loss carryforwards. As of September 30, 2001, our tax assets for net operating loss carryforwards primarily consisted of a Netherlands carryforward of $45,655 that has an indefinite life and a United States carryforward of $94,456, which will begin to expire in 2020. Although a valuation allowance has been established on these tax assets, we have commenced certain initiatives in order to utilize these loss carryforwards before they expire.

Contractual Obligations and Commercial Commitments

The following tables summarize the Company’s contractual obligations and commitments at September 30, 2002:

(1)		See Note 8 to the Consolidated Financial Statements
(2)		See Note 12 to the Consolidated Financial Statements

The Company’s contractual obligations and commercial commitments are discussed in the Liquidity and Capital Resources section below and in the footnotes to the Consolidated Financial Statements.

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Liquidity and Capital Resources

Cash flows from operations

As a result of our Global Restructuring and Optimization Plan, we have made significant strides in the enhancement of our cash flow. Operating activities provided $38.1 million in cash flow in fiscal year 2002 compared to $13.5 million of cash utilized in fiscal year 2001. These improvements in cash flows were primarily due to the positive impacts of: (i) a decrease in the levels of seed purchases for inventory reflecting improved production planning over our inventory level, (ii) a decrease in both production overhead and operating expenses resulting from the successful implementation of the Global Restructuring and Optimization Plan and (iii) an improvement in collections of accounts receivables. These working capital improvements were partially offset by severance costs in connection with the Global Restructuring and Optimization Plan and a reduction in the level of accounts payable.

Cash flows from investments

Capital expenditures increased to $14.9 million for the year ended September 30, 2002, from $14.3 million in the prior fiscal year. The increase was partly due to $5.2 million investment that primarily related to a production facility, which is being utilized to consolidate our South Korean operations and to enhance our growth strategy in the Far East market. Additionally, $2.3 million of capital expenditure was attributable to the expansion of our Hungarian facility in order to consolidate large seed operations in Europe. Other investing activities for the year ended September 30, 2002 included approximately $28.5 million in proceeds from the sale of assets, primarily relating to the sale of an office building in Seoul, South Korea and $17.6 million from the sale of a non-core business.

During fiscal year 2001, we sold our properties in Saticoy (California), Filer (Idaho) and Vineland (New Jersey) as part of our efforts to reduce and consolidate our operation and production facilities. Other investing activities for the year ended September 30, 2001 included approximately $14.1 million in proceeds from the sale of non-operating assets.

Cash flows from financings

We have issued 10,830 shares of our Class C Preferred Stock to Savia for a total purchase price of $108.3 million. These shares accrue dividends quarterly at a rate of 10.0% per year. In October and November 2000, we received an additional $31.9 million and $14.0 million, respectively, of capital contributions from Savia. We have agreed to pay dividends on these contributions at the same rate as the Class C Preferred Stock. Through July 1, 2002, there were approximately $25.0 million of accrued and unpaid dividends on the outstanding Class C Preferred Stock and additional capital contributions. We have also paid dividends of $12.7 million in the form of additional shares on the Class C Preferred Stock, which are classified as additional paid in capital.

Since December 2000, we have not received any further capital contributions from Savia and we have financed our operations through cash flows from operations and the disposition of assets.

On October 1, 2002 the Board of Directors approved the conversion of the Savia additional capital contribution and the associated paid in kind dividends that totaled $46.7 million to be converted to 4,670 shares of Class C Preferred Stock. Concurrently, the Board also adopted a resolution authorizing and directing an increase in the number of shares designated as Class C Redeemable PIK Preferred Stock from 14,400 shares to 16,688 shares.

We had $4.5 million of accrued and unpaid dividends relating to our Class B mandatorily redeemable preferred stock at September 30, 2002. These accrued dividends are classified within mandatorily redeemable stock.

Our total indebtedness as of September 30, 2002 was $278.5 million, of which $229.7 million were borrowings under our existing credit facility and we had $14.9 million, $9.4 million, $6.2 million and $14.6 million of borrowings by our United States, Italian, Spanish and South Korean subsidiaries, respectively and $3.7 million of borrowings by other foreign subsidiaries.

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As of September 30, 2000, we were not in compliance with certain covenants of our existing credit facility, which gave the lenders the right to accelerate payment of all amounts outstanding under the facility. In December 2000, the lenders granted a waiver with respect to these covenants that extended through April 30, 2001, at which time any defaults would once again arise. As we did not expect to be in compliance with our covenants once the waiver expired, all outstanding borrowings under the credit facility were classified as a current liability as of September 30, 2000. In connection with granting the waivers, the lenders agreed to reschedule principal payments within fiscal year 2001. The lenders also accelerated the final maturity of the term loan and the termination date for the revolving credit commitments to June 30, 2002 from June 30, 2004. We were obligated to deliver a financial plan through September 30, 2002, which detailed cash flow projections on a monthly basis as well as proposed alternatives for the refinancing of the credit facility or recapitalization of the company.

On May 31, 2001, our lenders agreed with the financial plan that we submitted and agreed to restructure our existing credit facility. Upon receipt of the amended credit agreement, long-term portions of borrowings were reclassified from current liabilities to long-term debt. Among other things, the amendment extended the final maturity of the credit facility from the previously agreed on date of June 30, 2002 to December 31, 2002, revised principal payment dates under the term loan, instituted a new grid pricing formula to determine interest on borrowings and revised covenant obligations. Interim principal obligations under the amendment included $16.0 million due in the fourth quarter of fiscal year 2001, $19.0 million, $4.0 million, $31.0 million and $9.0 million due in the first, second, third and fourth quarters of fiscal year 2002, respectively. All remaining amounts were due in the first quarter of fiscal year 2003.

In October 2001, we completed the sale of an office building in Seoul, South Korea, which generated net proceeds of approximately $20.0 million. We used $19.5 million of the proceeds to make the scheduled $19.0 million payment on the credit facility in October 2001. We also sold one of our non-core businesses in January 2002, which generated additional proceeds of approximately $17.6 million. We used $13.0 million of the proceeds to prepay our existing credit facility in January 2002 and utilized our operating cash flow to pay the remaining $18.0 million in June 2002.

We met all required principal and interest payments during fiscal years 2002 and 2001 and were in compliance with all of our financial covenants under the amended credit agreement at September 30, 2002. In October 2002, we paid an additional $5.0 million of principal as required by the amended credit agreement; however, as of December 31, 2002, we had not completed a refinancing transaction in order to pay the remaining balance of $224.7 million. The lenders agreed to temporarily extend the term of the credit facility and in January 2003, a formal amendment was executed. Among other things, the amendment extended the final maturity of the credit facility from the previously agreed on date of December 31, 2002 to December 31, 2003, revised principal payment dates under the term loan, instituted a new grid pricing formula to determine interest on borrowings and revised covenant obligations. Interim principal obligations under the amendment included $3.0 million and $9.5 million due in the third and fourth quarters of fiscal year 2003, respectively. The remaining outstanding amount totaling $212.2 million will be due in the first quarter of fiscal year 2004. Upon receipt of the amended credit agreement, long-term portions of borrowings were reclassified from current liabilities to long-term debt as of September 30, 2002.

Although not impacting current liquidity, the Company entered into an exchange agreement with its majority shareholder, Savia S.A. de C.V. as of July 1, 2002 to exchange all of its outstanding Seminis Class C Preferred Stock (including accrued PIK dividends) having a principal value of $120.2 million, additional paid-in capital (including accrued PIK dividends) of $46.7 million and accrued and unpaid cash dividends of $10.0 million into 37.7 million shares of Seminis Class A common stock. The remaining accrued and unpaid cash dividends on the Class C Preferred Stock of $15.0 million will remain due and payable and will be paid in cash by the Company in accordance with the terms of the exchange agreement. On July 3, 2002, the Company received an opinion from UBS Warburg that, as of such date, the number of shares of Class A common stock to be received by Savia in the exchange was fair from a financial point of view to the holders of the Company’s Class A common stock and Class B common stock (in each case other than Savia and its affiliates and other than holders of the Company’s Class B common stock that also hold shares of the Company’s Class B Redeemable preferred stock). The exchange agreement was approved by the Company’s Board of Directors on July 3, 2002 and was approved by our stockholders on September 26, 2002. Although the exchange agreement was approved by the Stockholders at the Annual Meeting, it is subject to customary closing conditions and approvals by creditors of Savia and the Company. At this time, all of the closing conditions and approvals have not been satisfied and therefore, the exchange has not been consummated. The Company may not complete all of the transactions contemplated under the exchange agreement until the conditions and approvals are obtained or waived, including the payment by the Company of the accrued and unpaid dividends on the Class B preferred stock and the consent of the lenders under the Company’s Syndicated Credit Facility.

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In December 2002, Savia, Seminis’ majority stockholder announced that it signed a letter of intent with Fox Paine & Company LLC under which Fox Paine and certain Savia related parties will acquire all the outstanding shares of Seminis, Inc. The proposed transaction is subject to numerous conditions; however, if completed, such a change in control would require the credit facility to be paid in full. It is anticipated that such a transaction would be funded by financing arranged by Fox Paine.

Whereas we have met our obligations as well as covenant requirements under the amended credit facility through September 30, 2002, we must successfully execute a refinancing plan prior to December 31, 2003 in order to meet the final maturity of the facility. We will continue to pursue a refinancing plan, which may include negotiation of a new credit facility, and/or placement of new debt securities; however, there can be no assurances that we will be able to successfully complete the refinancing. Additionally, there can be no assurances that the Fox Paine transaction will be consummated. Failure to comply with existing covenants, which would make the Syndicated debt callable, or our inability to obtain adequate financing with reasonable terms prior to December 31, 2003 could have a material adverse impact on our business, results of operations or financial condition.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, restructuring costs and contingencies and litigation, on an on-going basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the 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. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the following critical accounting policies, among others, involve the more significant judgments and estimates used in the preparation of our consolidated financial statements.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Many of our customers are located in foreign jurisdictions where payment terms and the timing of collections can differ from domestic transactions. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Our inventory is recorded at the lower of cost or market. The value of each seed variety in inventory is dependent upon various quality characteristics, which deteriorate over time. Write-downs of inventory to market value are based upon assumptions about future demand and market conditions, the success of our sales programs and the shelf life of the seeds. If actual market conditions and sales results are less favorable than those projected by management, additional inventory write-downs may be required.

We are subject to proceedings, lawsuits, other claims related to seedmen’s errors and omissions, environmental, labor and other matters. We assess the likelihood of adverse judgments or outcomes to these matters as well as the range of potential losses. A determination of the reserves required, if any, is made after careful analysis. The required reserves may change in the future due to new developments.

We have recorded reserves in connection with restructuring our business. These reserves principally include estimates related to employee separation costs, the consolidation or closing of facilities and the valuation of certain assets, including inventory. Actual costs could be different from those estimated.

In assessing the recoverability of our goodwill and long-lived assets, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets must be made as well as the related estimated useful lives. If these estimates or their related assumptions change in the future as a result of changes in strategy and/or market conditions, we may be required to record impairment charges for these assets not previously recorded. On October 1, 2001, we adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which required us to analyze our goodwill for impairment issues during fiscal year 2002 and on a periodic basis thereafter.

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The carrying value of our deferred tax assets is dependent upon our ability to generate sufficient future taxable income in certain tax jurisdictions. We established a valuation allowance against certain of our deferred tax assets due to uncertainties related to the ability to utilize these assets, primarily consisting of net operating losses carried forward and foreign tax credits, before they expire. The valuation allowance is based on our estimates of taxable income by each jurisdiction in which we operate and the period over which the assets will be recoverable. In the event that actual results differ from these estimates, or we adjust these estimates in future periods, the valuation allowance would change and could materially impact our financial position and results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 141, “Business Combinations,” was effective for the company on July 1, 2001. SFAS No. 141 addresses financial accounting and reporting for business combinations and supersedes APB Opinion No. 16, “Business Combinations,” and FASB Statement No. 38, “Accounting for Preacquisition Contingencies of Purchased Enterprises.” All business combinations in the scope of this Statement are to be accounted for using one method, the purchase method.

SFAS No. 142, “Goodwill and Other Intangible Assets,” was effective for the Company for fiscal years beginning after December 15, 2001, but was adopted early as of the beginning of fiscal year 2002. SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, “Intangible Assets.” It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. We have ceased the amortization of goodwill due to our adoption of SFAS No. 142 and no impairment was required in fiscal year 2002.

In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations.” SFAS No. 143, is effective for fiscal years beginning after June 15, 2002 and requires an entity to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. Management has not yet determined the impact, if any, of the adoption of this standard on the financial position or results of operation of the Company.

In August 2001, FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supersedes SFAS No. 121 but retains many of its fundamental provisions. In addition, SFAS No. 144 expands the scope of discontinued operations to include more disposal transactions. We will adopt SFAS No. 144 as of October 1, 2002. We do not expect SFAS No. 144 to have a material effect on our consolidated financial position, results of operations or cash flows.

In May 2002, the Financial Accounting Standards Board issued SFAS No. 145, “Rescission of SFAS Nos. 4, 44 and 64, Amendment of SFAS No. 13 and Technical Corrections.” Among other things, SFAS No. 145 rescinds various pronouncements regarding extinguishment of debt and allows extraordinary accounting treatment for early extinguishment only when the provisions of Accounting Principles Board Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequent Occurring Events and Transactions” are met. SFAS No. 145 provisions regarding early extinguishment of debt are generally effective for fiscal years beginning after May 15, 2002. The Company believes this new standard will not have an impact on its business, consolidated financial position, results of operations or cash flow.

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 supersedes previous accounting guidance, principally Emerging Issues Task Force 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).”

SFAS No. 146 requires that the liability for costs associated with an exit or disposal activity be initially measured at fair market value and recognized when the liability is incurred. In periods subsequent to initial measurement, changes to the liability are measured using the credit-adjusted risk-free rate that was used in the initial measurement of the liability recorded. The cumulative effect of a change resulting from revisions either to the timing or the amount of estimated cash flow is recognized as an adjustment to the liability in the period of the change and charged to the same line items in the statement of operations used when the related costs were initially recognized. Under EITF No. 94-3, a liability for an exit cost was recognized at the date of the Company’s commitment to an exit plan.

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The provisions of SFAS No. 146 are required to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company believes SFAS No. 146 may affect the timing of recognizing future restructuring costs, as well as the amounts recognized, depending on the nature of the exit or disposal activity and the timing of the related estimated cash flows.

On November 25, 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees of Indebtedness of Others, Including Indirect Guarantees of Indebtedness of Others, an interpretation of FASB Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34.” FIN 45 clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies, relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. The disclosure provisions of the Interpretation are effective for financial statements of interim or annual periods that end after December 15, 2002.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

MARKET RISK DISCLOSURES

We do not have any financial instruments held for trading purposes and do not hedge any of our market risks with derivative instruments.

The currencies that experienced significant fluctuations in fiscal year 2002 were the European Monetary Union Euro, Argentinean Peso and Brazilian Real. Our primary market risk exposure relates to foreign currency fluctuations in connection with foreign currency gains or losses that occur from intercompany receivables and payables between us and our foreign subsidiaries and from the United States Dollar denominated loan under our existing credit facility originated by SVS Holland, B.V., one of our foreign subsidiaries.

The fair value of short-term borrowings approximates cost due to the short period of time to maturity. The fair value of long-term debt was estimated based on current interest rates available to Seminis for debt instruments with similar terms, degrees of risk and remaining maturities. The interest expense would be impacted by $2.5 million with a fluctuation of 100 basis points. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that Seminis could realize in a current market exchange.

The fair value of Seminis’ borrowing arrangements and other financial instruments is as follows:

Principal amount by expected maturity as of 9/30/02:

Principal amount by expected maturity as of 9/30/01:

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Item 8. Financial Statements and Supplementary Data

The consolidated financial statements and report of independent accountants are filed as part of this report on pages F-1 through F-25.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

Information regarding executive officers of the Company is located in Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K. Other information required by this item is incorporated by reference to Seminis’ definitive proxy statement for the Annual Meeting of Stockholders, which will be filed within 120 days of September 30, 2002 with the Securities and Exchange Commission pursuant to Regulation 14A.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to Seminis’ definitive proxy statement for the Annual Meeting of Stockholders, which will be filed within 120 days of September 30, 2002 with the Securities and Exchange Commission pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is incorporated by reference to Seminis’ definitive proxy statement for the Annual Meeting of Stockholders, which will be filed within 120 days of September 30, 2002 with the Securities and Exchange Commission pursuant to Regulation 14A.

Item 13. Certain Relationships and Related Transactions

The information required by this item is incorporated by reference to Seminis’ definitive proxy statement for the Annual Meeting of Stockholders, which will be filed within 120 days of September 30, 2002 with the Securities and Exchange Commission pursuant to Regulation 14A.

Item 14. Controls and Procedures

(a)		Evaluation of disclosure controls and procedures. The Company’s chief executive officer and chief financial officer have evaluated the effectiveness of the Company’s “disclosure controls and procedures” [as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “Exchange Act”)] as of a date (the “Evaluation Date”) within 90 days before the filing date of this annual report. Based on such evaluation, they have concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.
(b)		Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls during the period covered by this annual report.

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

          (a)(1) Listing of Consolidated Financial Statements

          Reference is made to the index set forth on Page F-1.

          (a)(2) Listing of Financial Statement Schedules.

          Schedule II — Valuation and Qualifying Accounts on page S-1

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

          (a)(3) Listing of Exhibits  — See Index to Exhibits beginning on Page 34 of this report.

          (b) Reports on Form 8-K - Seminis filed a Form 8-K on August 9, 2002 in regards to an agreement with Savia, S.A. de C.V., its majority shareholder, to exchange all of its outstanding shares of Class C Preferred Stock, additional paid-in capital and unpaid and accrued dividends on the Class C Preferred Stock and additional paid-in capital of $10 million into 37,669,480 shares of Class A Common Stock. Accrued dividends on the Class C Preferred Stock of $15 million will remain due and payable and will be paid in cash in accordance with the Exchange.

          (c) Exhibits  — See Index to Exhibits beginning on Page 34 of this report.

          (d) Financial Statement Schedules — The following consolidated financial statement schedule is included herein: Schedule II — Valuation and Qualifying Accounts.

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Table of Contents

Exhibit Index

(a)		Incorporated by reference to Seminis’ Form S-1 filed on February 11, 1999.
(b)		Incorporated by reference to Seminis’ Amendment No. 2 to Form S-1 filed on May 27, 1999.
(c)		Incorporated by reference to Seminis’ Amendment No. 3 to Form S-1 filed on June 21, 1999.
(d)		Filed with the June 30, 2000 Form 10Q.
(e)		Filed with the September 30, 2000 Form 10K.
(f)		Filed with the December 30, 2000 Form 10Q.
(g)		Filed with the March 30, 2001 Form 10Q.
(h)		Filed with the June 29, 2001 Form 10Q.
(i)		Filed with the September 30, 2001 Form 10K.
(j)		Filed with the June 28, 2002 Form 10Q.
(k)		Filed with the September 30, 2002 Form 10K.