SEMINIS INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 28, 2003


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from				to

Commission File Number 000-26519

SEMINIS, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		36-0769130
(State of Incorporation)		(I.R.S. Employer Identification No.)
2700 Camino del Sol, Oxnard, California		93030-7967
(Address of Principal Executive Offices)		(Zip Code)

(805) 647-1572

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, address and former fiscal year, if changed since last report)

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 o

Indicate, by check mark whether the Registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). YES x NO o

As of April 29, 2003, the Registrant had 18,978,291 registered shares of Class A Common Stock, $0.01 par value per share, issued and outstanding and 45,142,508 unregistered shares of Class B Common Stock, $0.01 par value per share, issued and outstanding.

SEMINIS, INC.

Form 10-Q
For the Quarterly Period Ended March 28, 2003

TABLE OF CONTENTS


		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of March 28, 2003 and September 30, 2002	3
	Consolidated Statements of Operations for the Three and Six Months Ended March 28, 2003 and March 29, 2002	4
	Consolidated Statement of Stockholders’ Equity for the Six Months Ended March 28, 2003	5
	Consolidated Statements of Cash Flows for the Six Months Ended March 28, 2003 and March 29, 2002	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 6.	Exhibits and Reports on Form 8-K	23
	Signatures	26
	Certification of Results	27

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

SEMINIS, INC.
Consolidated Balance Sheets
(In thousands, except per share data)


						As of
			As of			September 30,
			March 28, 2003			2002

			(Unaudited)
Assets:
Current assets
	Cash and cash equivalents		$	34,901		$	36,805
	Accounts receivable, less allowances for doubtful accounts of $13,341 and $12,344, respectively			178,788			140,315
	Inventories			271,174			272,527
	Prepaid expenses and other current assets			4,876			2,427

		Total current assets		489,739			452,074
Property, plant and equipment, net				161,547			168,729
Goodwill, net				97,578			98,931
Intangible assets, net				56,520			61,872
Other assets				22,884			18,391

			$	828,268		$	799,997

Liabilities, Mandatorily Redeemable Stock and Stockholders’ Equity:
Current liabilities
	Short-term borrowings		$	40,990		$	28,532
	Current maturities of long-term debt			226,720			21,709
	Accounts payable			31,375			38,179
	Accrued liabilities			108,667			98,624

		Total current liabilities		407,752			187,044
Long-term debt				15,379			228,293
Deferred income taxes				16,503			15,753
Minority interest in subsidiaries				1,436			1,902

		Total liabilities		441,070			432,992

Commitments and contingencies (see Note 8)




Mandatorily redeemable stock
	Class B Redeemable Preferred Stock, $.01 par value; 25 shares authorized as of March 28, 2003 and September 30, 2002; 25 shares issued and outstanding as of March 28, 2003 and September 30, 2002			30,500			29,500

		Total mandatorily redeemable stock		30,500			29,500

Stockholders’ equity
	Class C Preferred Stock, $.01 par value; 17 and 14 shares authorized as of March 28, 2003 and September 30, 2002, respectively; 17 and 12 shares issued and outstanding as of March 28, 2003 and September 30, 2002, respectively (Liquidation Value of $191.9 and $138.2 million at March 28, 2003 and September 30, 2002, respectively)			1			1
	Class A Common Stock, $.01 par value; 211,000 shares authorized as of March 28, 2003 and September 30, 2002; 18,952 and 18,940 shares issued and outstanding as of March 28, 2003 and September 30, 2002, respectively			190			190
	Class B Common Stock, $.01 par value; 67,000 shares authorized as of March 28, 2003 and September 30, 2002; 45,142 shares issued and outstanding as of March 28, 2003 and September 30, 2002			452			452
	Additional paid-in-capital			698,308			699,255
	Accumulated deficit			(312,298	)		(324,558	)
	Accumulated other comprehensive loss			(29,955	)		(37,835	)

		Total stockholders’ equity		356,698			337,505

			$	828,268		$	799,997

The accompanying notes are an integral part of these consolidated financial
statements.

SEMINIS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)


			For the Three Months Ended						For the Six Months Ended

			March 28,			March 29,			March 28,			March 29,
			2003			2002			2003			2002

			(Unaudited)						(Unaudited)
Net sales			$	159,001		$	152,309		$	239,617		$	232,388
Cost of goods sold				58,008			56,458			88,241			86,744

	Gross profit			100,993			95,851			151,376			145,644

Operating expenses
	Research and development expenses			10,953			9,611			22,378			21,510
	Selling, general and administrative expenses			48,637			44,621			91,337			88,528
	Amortization of intangible assets			3,966			4,144			7,893			8,302

		Total operating expenses		63,556			58,376			121,608			118,340

	Gain on sale of assets			1,537			4,359			1,091			5,275

Income from operations				38,974			41,834			30,859			32,579

Other income (expense)
	Interest income			259			122			506			242
	Interest expense			(8,704	)		(7,054	)		(15,441	)		(14,344	)
	Foreign currency gain (loss)			213			(3,278	)		29			(4,342	)
	Other, net			316			212			447			(310	)

				(7,916	)		(9,998	)		(14,459	)		(18,754	)

Income before income taxes				31,058			31,836			16,400			13,825
Income tax expense				(7,018	)		(6,182	)		(4,140	)		(7,482	)

Net income				24,040			25,654			12,260			6,343
Preferred stock dividends				(4,661	)		(3,497	)		(9,184	)		(6,927	)
Additional capital contribution dividends				—			(1,164	)		—			(2,303	)

Net income (loss) available for common stockholders			$	19,379		$	20,993		$	3,076		$	(2,887	)

Net income (loss) available for common stockholders per common share:
	Basic		$	0.30		$	0.34		$	0.05		$	(0.05	)

	Diluted		$	0.29		$	0.33		$	0.05		$	(0.05	)

The accompanying notes are an integral part of these consolidated financial
statements.

SEMINIS, INC.
Consolidated Statement of Stockholders’ Equity
(In thousands)


																				Accumulated
		Class C				Class A				Class B				Additional						Other			Total
		Preferred Stock				Common Stock				Common Stock				Paid-In			Accumulated			Comprehensive			Stockholders'
		Number		Amount		Number		Amount		Number		Amount		Capital			Deficit			Loss			Equity

Balance, September 30, 2002			12	$	1		18,940	$	190		45,142	$	452	$	699,255		$	(324,558	)	$	(37,835	)	$	337,505
Comprehensive income Net income (Unaudited)			—		—		—		—		—		—		—			12,260			—			12,260
	Translation adjustment (Unaudited)		—		—		—		—		—		—		—			—			7,880			7,880


																								20,140
Conversion of additional capital contribution to Class C Preferred Stock (Unaudited)			5		—		—		—		—		—		—			—			—			—
Options Exercised (Unaudited)			—		—		12		—		—		—		53			—			—			53
Dividends on Redeemable Preferred Stock (Unaudited)			—		—		—		—		—		—		(1,000	)		—			—			(1,000	)

Balance, March 28, 2003 (Unaudited)			17	$	1		18,952	$	190		45,142	$	452	$	698,308		$	(312,298	)	$	(29,955	)	$	356,698

The accompanying notes are an integral part of these consolidated financial
statements.

SEMINIS, INC.
Consolidated Statements of Cash Flows
(In thousands)


				For the Six Months Ended

				March 28, 2003			March 29, 2002

				(Unaudited)
Cash flows from operating activities:
	Net income			$	12,260		$	6,343
	Adjustments to reconcile net income to net cash used in operating activities:
		Depreciation and amortization			15,343			15,948
		Gain on sale of fixed assets			(1,091	)		(1,257	)
		Deferred income taxes			802			593
		Provision (benefit) for minority interest subsidiary			(270	)		370
		Inventory write-down			8,352			8,200
		Gain on sale of non-core business			—			(4,018	)
		Compensation expense for restricted stock			—			2,600
		Other			1,388			38
		Changes in assets and liabilities:
			Accounts receivable		(34,168	)		(25,536	)
			Inventories		(279	)		(1,625	)
			Prepaid expenses and other assets		(5,640	)		(2,580	)
			Current income taxes		1,091			4,582
			Accounts payable		(7,937	)		(16,857	)
			Other liabilities		1,746			(1,624	)

		Net cash used in operating activities			(8,403	)		(14,823	)

Cash flows from investing activities:
	Purchases of fixed and intangible assets				(5,826	)		(5,796	)
	Proceeds from disposition of assets				7,613			24,342
	Proceeds from sale of non-core business				—			17,551
	Other				179			(554	)

		Net cash provided by investing activities			1,966			35,543

Cash flows from financing activities:
	Proceeds from long-term debt				596			509
	Repayment of long-term debt				(8,763	)		(36,216	)
	Net short-term borrowings				11,590			19,996
	Other				53			—

		Net cash provided by (used in) financing activities			3,476			(15,711	)

Effect of exchange rate changes on cash and cash equivalents					1,057			152

Increase (decrease) in cash and cash equivalents					(1,904	)		5,161
Cash and cash equivalents, beginning of period					36,805			22,323

Cash and cash equivalents, end of period				$	34,901		$	27,484

The accompanying notes are an integral part of these consolidated financial
statements.

SEMINIS, INC.
Notes to Consolidated Financial Statements
(In Thousands, Except Per Share Data)

Note 1 — Summary of Significant Accounting Policies

Description of Business

Seminis, Inc. (“Seminis,” “We“or the “Company”) is the leading worldwide developer, producer and marketer of vegetable and fruit seeds. The Company is a majority-owned subsidiary of Savia, S.A. de C.V. (“Savia”) and effectively began operations when it purchased Asgrow Seed Company in December 1994.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its majority controlled and owned subsidiaries. Investments in unconsolidated entities, representing ownership interests between 20% and 50%, are accounted for using the equity method of accounting. All material intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to prior periods to conform to the current quarter presentation.

Seminis generally operates on a thirteen week calendar closing on the Friday closest to the natural calendar quarter, except for the fiscal year end, which closes on September 30.

The unaudited consolidated financial statements included herein reflect all adjustments, (consisting only of normal recurring adjustments), that the Company considers necessary for a fair presentation of the results of operations for the interim periods covered and of the financial condition of the Company at the date of the interim balance sheet. The Company’s business is subject to seasonal fluctuation and, therefore, the results of operations for periods less than one year are not necessarily indicative of results, which may be expected for any other interim period or for the fiscal year as a whole.

Supplementary Cash Flow Information


		Six Months Ended

		March 28,		March 29,
		2003		2002

		(Unaudited)
Cash paid for interest		$	9,329	$	11,469
Cash paid for income taxes			2,247		2,307
Supplemental non-cash transactions:
	Class C Preferred Stock dividends		—		5,927
	Class B Redeemable Preferred Stock dividends		1,000		1,000
	Additional capital contribution dividends		—		2,303

Effective January 2001, Class C Preferred Stock and additional capital contribution accrue cash dividends at 10% per annum. The syndicated credit facility, however, precludes the payment of cash dividends. These dividends have not been accrued effective July 1, 2002 in accordance with the exchange agreement, dated as of July 1, 2002, by and between the Company and Savia (the “Exchange Agreement”), as further described in Note 2. As part of the Exchange Agreement, Savia agreed to forego dividends on Class C Preferred Stock and additional capital contributions effective July 1, 2002; however, such dividends would be payable if the transactions contemplated by the Exchange Agreement are not completed and the Exchange Agreement is terminated.

Income (Loss) per Common Share

Net income (loss) per common share has been computed pursuant to the provisions of Statement of Financial Accounting Standards No. 128, “Earnings per Share.” Basic income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the average number of common shares outstanding during each period. Net income (loss) available to common stockholders represents reported net income (loss) less preferred and additional capital contribution dividends. Diluted net income (loss) per common share reflects the potential dilution that could occur if dilutive securities and other contracts were exercised or converted into common stock or resulted in the issuance of common stock. The following table provides a reconciliation of net income (loss) and sets forth the computation for basic and diluted net income (loss) per share available for common stockholders.


		Three Months Ended						Six Months Ended
		March 28,			March 29,			March 28,			March 29,
		2003			2002			2003			2002

		(Unaudited)						(Unaudited)
Numerator for basic and diluted:
Net income		$	24,040		$	25,654		$	12,260		$	6,343
Preferred stock dividends			(500	)		(3,497	)		(1,000	)		(6,927	)
Additional capital contribution dividends			—			(1,164	)		—			(2,303	)
Contingent dividends payable			(4,161	)		—			(8,184	)		—

	Net income (loss) available for common stockholders	$	19,379		$	20,993		$	3,076		$	(2,887	)

Denominator — shares:
	Weighted average common shares outstanding (basic)		64,094			62,062			64,090			61,056
	Add: potential common shares:		2,161			887			1,080			—

	Weighted average common shares outstanding (diluted)		66,255			62,949			65,170			61,056

Net income (loss) available for common stockholders per common share:
	Basic	$	0.30		$	0.34		$	0.05		$	(0.05	)

	Diluted	$	0.29		$	0.33		$	0.05		$	(0.05	)

A total of 0.3 million potential shares from options were excluded from the computation of diluted earnings per share for the three and six months ended March 28, 2003 due to their antidilutive effect. A total of 1.0 million and 1.9 million of potential shares from options were excluded from the computation of diluted earning per share for the three and six months ended March 29, 2002, respectively, due to their antidilutive effect.

Contingently payable dividends represent dividends that may potentially be payable to Savia if the Exchange Agreement described in Note 2 is not consummated. As part of the Exchange Agreement, Savia agreed to forego dividends on Class C Preferred Stock and additional capital contributions effective July 1, 2002; however, such dividends would be payable if the transactions contemplated by the Exchange Agreement are not completed and the Exchange Agreement is terminated. These dividends have not been accrued but are included in the calculation of earnings per share.

Recent Accounting Pronouncements

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 have adopted SFAS No. 144 as of October 1, 2002. Such adoption did not 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. Accordingly, SFAS No. 145 was adopted by the Company on October 1, 2002. Such adoption did not have an impact on our 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.

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. Accordingly, the Company adopted FIN 45 during the quarter ended December 27, 2002. The company has no guarantees which would require disclosure under FIN 45.

In January 2003, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure, an amendment of FASB Statement No. 123.” SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. It also requires disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. SFAS No. 148 is effective for annual and interim periods beginning after December 15, 2002. As we have elected not to change to the fair value based method of accounting for stock-based employee compensation, the adoption of SFAS No. 148 will not have an impact upon our financial condition or results of operations.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities – an Interpretation of ARB No. 51.” The Interpretation clarifies the application of Accounting Research Bulletin No.51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The provisions of this Interpretation are effective for all enterprises with variable interests in variable interest entities created after January 31, 2003. The adoption of this Interpretation did not have a significant impact on the Company’s financial results.

Note 2 — Liquidity

As of September 30, 2000, we were not in compliance with certain covenants of our existing syndicated 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 syndicated 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 syndicated 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 syndicated credit facility. Upon receipt of the amended syndicated credit facility, 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 syndicated 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 syndicated 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 syndicated 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 syndicated credit facility at September 30, 2002. In October 2002, we paid an additional $5.0 million of principal as required by the amended syndicated credit facility; 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 syndicated credit facility and in January 2003, a formal amendment was executed. Among other things, the amendment extended the final maturity of the syndicated 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. We met all required principal and interest payments during the first six months of fiscal year 2003 and were in compliance with all of our financial covenants at March 28, 2003 under the newly extended amendment. As all remaining amounts under the amended syndicated credit facility are due within one year, the $223.3 million of outstanding borrowings under the syndicated credit facility have been classified as a current liability as of March 28, 2003.

Although not impacting current liquidity, the Company entered into the Exchange Agreement to exchange all of its outstanding Seminis Class C Preferred Stock (including accrued PIK dividends) having a principal value of $120.2 million, additional capital contributions (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 2002 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.

In December 2002, Savia, 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 an acquisition company would be formed to acquire all the outstanding shares of Seminis common stock. The consummation of the proposed transaction would require the Company’s existing credit facility to be refinanced. It is anticipated that the proposed transaction would be funded, in part, by financing arranged by the newly-formed acquisition company. The proposed transaction is subject to certain conditions, including, among other things, the negotiation of definitive agreements and approval of the Seminis Board of Directors and stockholders. In response to the proposed transaction, Seminis formed a special committee of independent members of its Board of Directors on December 18, 2002 to, among other things, evaluate the proposed transaction and its fairness to the holders of Seminis common stock unaffiliated with Fox Paine or Savia and make a recommendation regarding the proposed transaction to the entire Seminis Board of Directors at the appropriate time. In April 2003, Savia announced that its shareholders approved the sale of Savia-owned Seminis shares as contemplated by the proposed transaction. While negotiations are proceeding, there can be no assurances that the proposed transaction will be approved by the Seminis special committee or Board of Directors, or that any transaction will be consummated.

Whereas we have met our obligations as well as covenant requirements under the amended credit facility through March 28, 2003, 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, as discussed above, there can be no assurances that the proposed transaction with Fox Paine and Savia will be consummated. Failure to comply with existing covenants, which would make the syndicated credit facility callable, or our inability to obtain adequate financing with terms satisfactory to Seminis prior to December 31, 2003 could have a material adverse impact on our business, results of operations or financial condition.

Note 3 — Inventories

Inventories consist of the following:


	March 28, 2003		September 30, 2002
	(Unaudited)
Seed	$	238,196	$	238,448
Unharvested crop growing costs		24,909		27,199
Supplies		8,069		6,880

	$	271,174	$	272,527

Note 4 — Goodwill

Changes in the net carrying amount of goodwill for the period ended March 28, 2003, are as follows:


		Amount

Balance as of September 30, 2002		$	98,931
	Goodwill acquired during the period (unaudited)		304
	Impairment losses (unaudited)		—
Translation adjustments and other (unaudited)			(1,657	)

Balance as of March 28, 2003 (unaudited)		$	97,578

Note 5 — Intangibles

The following table sets forth the Company’s intangible assets, at March 28, 2003 and September 30, 2002, which continue to be amortized:


			March 28, 2003						September 30, 2002

	Gross		Accumulated		Net		Gross		Accumulated		Net
	Carrying Amount		Amortization		Carrying Amount		Carrying Amount		Amortization		Carrying Amount

	(Unaudited)		(Unaudited)		(Unaudited)
Amortized intangible assets:
Germplasm	$	99,662	$	73,901	$	25,761	$	99,844	$	71,431	$	28,413
Software Costs		35,648		23,931		11,717		33,922		20,697		13,225
Trademarks		14,900		8,128		6,772		14,900		7,772		7,128
Other intangibles		26,813		14,543		12,270		25,953		12,847		13,106

Total	$	177,023	$	120,503	$	56,520	$	174,619	$	112,747	$	61,872

Amortization expense on intangible assets was $3,966 and $4,144 for the three months ended March 28, 2003 and March 29, 2002, respectively; and $7,893 and $8,302 for the six months ended March 28, 2003 and March 29, 2002, respectively. Based on current information, estimated amortization expense for acquired intangible assets for this fiscal year, and for each of the next four succeeding fiscal years, is expected to be approximately $15,756, $14,486, $13,454, $12,646 and $12,023, respectively.

Note 6 — Accrued Liabilities

Accrued liabilities consist of the following at March 28, 2003 and September 30, 2002:


	March 28, 2003		September 30, 2002

	(Unaudited)



Employee salaries and related benefits	$	45,857	$	44,754
Severance		5,053		3,269
Seedmen’s errors and omissions		5,449		4,072
Interest		3,234		412
Savia dividends and interest payable		26,146		25,383
Income taxes payable		4,135		3,236
Other		18,793		17,498

	$	108,667	$	98,624

Note 7 — Stock-Based Compensation

The Company has a policy whereby all stock option grants are priced at fair market value on the date of grant. Under the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company uses the intrinsic value method of accounting for stock-based compensation in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” Under the intrinsic value method, compensation cost is the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock.

In accordance with the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosures,” the following table reflects pro forma net income and earnings per share had the Company elected to adopt the fair value approach of SFAS No. 123:


	For The Three Months Ended						For The Six Months Ended

	March 28, 2003			March 29, 2002			March 28, 2003			March 29,2002

	(Unaudited)						(Unaudited)
Net income (loss) available for common stockholders, as reported	$	19,379		$	20,993		$	3,076		$	(2,887	)
Compensation expense, net of tax		(187	)		(161	)		(375	)		(321	)

Pro forma net income (loss) available for common stockholders	$	19,192		$	20,832		$	2,701		$	(3,208	)

Net income (loss) available for common stockholders per common share as reported:
Basic	$	0.30		$	0.34		$	0.05		$	(0.05	)
Diluted	$	0.29		$	0.33		$	0.05		$	(0.05	)

Pro forma net income (loss) available for common stockholders per common share:
Basic	$	0.30		$	0.34		$	0.04		$	(0.05	)
Diluted	$	0.29		$	0.33		$	0.04		$	(0.05	)

Note 8 — Contingencies

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.

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 denied coverage. We continue to believe the policy covers these claims and are pursuing enforcement of our rights under the policy coverage of the claims. 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 and 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 late 2003.

The Rosales complaint names as a defendant Seminis and its directors. All five complaints purport to be brought on behalf of Seminis common stockholders or their successors. The four complaints filed in Delaware have been consolidated into one action. All five 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the 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 totaling $224.7 million. The lenders agreed to temporarily extend the term of the syndicated credit facility and in January 2003, a formal amendment was executed. Among other things, the amendment extended the final maturity of the syndicated credit facility from the previously agreed upon 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. Whereas we have met our obligations as well as covenant requirements under the amended syndicated credit facility through March 28, 2003, 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 syndicated 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 proposed transaction with Savia and Fox Paine 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, Savia, 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.

• A new management team has been in place since 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 (as described below).

• 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 U.S. 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 the Company. 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 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. 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, which allows us to remain close to local markets around the world, adapt our products to any microclimate and meet the preferences of local consumers.

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;

• 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 Restructuring and 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:


			Amounts			Balance at		Additional		Amounts			Balance at		Additional		Amounts			Balance at		Amounts			Balance at
	Charges		Incurred			Sept. 30,		Charges		Incurred			Sept. 30,		Charges		Incurred			Sept. 30,		Incurred			Mar 28,
	2000		2000			2000		2001		2001			2001		2002		2002			2002		2003			2003

																						(Unaudited)			(Unaudited)
Severance and related expenses	$	14.0	$	(1.8	)	$	12.2	$	12.0	$	(12.3	)	$	11.9	$	—	$	(8.6	)	$	3.3	$	(2.6	)	$	0.7
Inventory write-downs		18.4		(18.4	)		—		58.2		(58.2	)		—		—		—			—		—			—
Other		2.0		(2.0	)		—		—		—			—		—		—			—		—			—

Total	$	34.4	$	(22.2	)	$	12.2	$	70.2	$	(70.5	)	$	11.9	$	—	$	(8.6	)	$	3.3	$	(2.6	)	$	0.7

To date, there have been no material adjustments to amounts accrued under the plan. The remaining $0.7 million reserve balance is expected to be utilized in fiscal year 2003.

Results of Operations

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


	Three Months Ended						Six Months Ended

	March 28,			March 29,			March 28,			March 29,
	2003			2002			2003			2002

	(Unaudited)						(Unaudited)

Net sales		100.0	%		100.0	%		100.0	%		100.0	%

Gross profit		63.5			62.9			63.2			62.7
Research and development expenses		6.9			6.3			9.3			9.2
Selling, general and administrative expenses		30.6			29.3			38.1			38.1
Amortization of intangible assets		2.5			2.7			3.3			3.6

Total operating expenses		40.0			38.3			50.7			50.9
Gain on sale of assets		1.0			2.8			0.4			2.2

Income from operations		24.5			27.4			12.9			14.0
Interest expense, net		(5.3	)		(4.6	)		(6.3	)		(6.1	)
Other non-operating income (expense), net		0.3			(2.0	)		0.2			(2.0	)

Income before income taxes		19.5			20.8			6.8			5.9
Income tax expense		(4.4	)		(4.1	)		(1.7	)		(3.2	)

Net income		15.1	%		16.7	%		5.1	%		2.7	%

Six months ended March 28, 2003 compared with six months ended March 29, 2002

Net sales

Net sales increased 3.1% to $239.6 million for the six months ended March 28, 2003 from $232.4 million for the same period ended March 29, 2002. The result was primarily due to $11.1 million of favorable currency fluctuations relating to the strengthening of the Euro and South Korean Won versus the U.S. Dollar during the six months ended March 28, 2003, compared to the same period in the prior fiscal year, offset by $2.0 million from the divestiture of a non-core business in January 2002. In constant dollars, stated at monthly average exchange rates of fiscal year 2002, and excluding the sales of the divested and phased out non-core businesses, sales would have decreased 0.8%. Despite a general seed price increase in all the regions, sales were affected by a volume decrease. This decrease was primarily due to weaker sales in the Far East that were attributable to a reduction of acreage for hot pepper varieties and demand for watermelon varieties. Our business is subject to seasonal fluctuations and, therefore, the sales for the first half of a fiscal year are not necessarily indicative of those to be expected in any other interim period or for an entire fiscal year.

Gross Profit

Gross profit increased 3.9% to $151.4 million for the six months ended March 28, 2003 from $145.6 million for the six months ended March 29, 2002. Gross margin increased to 63.2% for the six months ended March 28, 2003 from 62.7% for the six months ended March 29, 2002. The increase was primarily due to general seed price increases in all regions as well as an improved product mix.

Research and Development Expenses

Research and development expenses increased 4.0% to $22.4 million for the six months ended March 28, 2003 from $21.5 million for the six months ended March 29, 2002. The increase was primarily due to the currency fluctuation impact on research and development expenses denominated in the Euro and South Korean Won.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 3.2% to $91.3 million for the six months ended March 28, 2003 from $88.5 million for the six months ended March 29, 2002. The increase was primarily attributable to an accrual of $4.4 million related to an executive severance package, the incurrence of $1.2 million of legal and financial advisory expenses related to the proposed transaction and currency fluctuation impact during this fiscal year. Such increases were partially offset by $2.9 million of expenses related to a divested non-core business, $2.6 million of restricted stock award expenses and $0.8 million of consulting fees related to restructuring during the same period last fiscal year.

Amortization of Intangible Assets

Amortization of intangible assets decreased 4.9% to $7.9 million for the six months ended March 28, 2003 from $8.3 million for the six months ended March 29, 2002. The decrease was primarily 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.

Gain on Sale of Assets

The gain on sale of assets of $1.1 million for the six months ended March 28, 2003 was primarily from the sale of certain South Korean assets, a Salinas, California property and a company owned house. The gain on sale of assets of $5.3 million for the six months ended March 29, 2002 was primarily from the sale of a non-core business and asset sales of our South Korean subsidiary.

Interest Expense, Net

Interest expense, net, increased 5.9% to $14.9 million for the six months ended March 28, 2003 from $14.1 million for the six months ended March 29, 2002. The increase was primarily due to amortization of increased deferred financing fees and higher interest rates resulting from the amendment of the Company’s syndicated credit facility in January 2003, offset by the effect of lower average debt balances.

Other Non-Operating Income (expense), Net

We had other non-operating income, including foreign currency gain (loss), net, of $0.5 million for the six months ended March 28, 2003 as compared to other non-operating expense, net, of $4.7 million for the six months ended March 29, 2002. Other non-operating income, net, for the six months ended March 28, 2003 primarily consists of non-operating gains from subsidiaries in South Korea and Chile. Other non-operating expense, net, for the six months ended March 29, 2002 primarily consists of foreign currency losses of $4.3 million resulting from currency fluctuations in South America and a United States Dollar denominated loan in the Netherlands.

Income Tax Expense

Income tax expense was $4.1 million for the six months ended March 28, 2003 compared to income tax expense of $7.5 million for the six months ended March 29, 2002. The change in the effective tax rate during the first six months of fiscal year 2003 compared to the same period in the prior year was primarily due to the mix of worldwide income. The decrease was also due to a change in the effective tax rates for the current period compared to the same period of the prior year resulting from taxable income generated in jurisdictions with net operating loss carryforwards for which no benefits were previously recorded.

Three months ended March 28, 2003 compared with three months ended March 29, 2002

Net sales

Net sales increased 4.4% to $159.0 million for the three months ended March 28, 2003 from $152.3 million for the same period ended March 29, 2002. The result was primarily due to $10.3 million of favorable currency fluctuations relating to the strengthening of the Euro and South Korean Won versus the U.S. Dollar during the three months ended March 28, 2003, compared to the same period in the prior fiscal year. In constant dollars, stated at monthly average exchange rates of fiscal year 2002, and excluding the phased out non-core business, sales would have decreased 2.3%. Despite a general seed price increase in all the regions, sales were affected by a volume decrease. This decrease was primarily due to weaker sales in the Far East that were attributable to a reduction of acreage for hot pepper varieties and demand for watermelon varieties. Our business is subject to seasonal fluctuations and, therefore, the sales for the second quarter of a fiscal year are not necessarily indicative of those to be expected in any other interim period or for an entire fiscal year.

Gross Profit

Gross profit increased 5.4% to $101.0 million for the three months ended March 28, 2003 from $95.9 million for the three months ended March 29, 2002. Gross margin increased to 63.5% for the three months ended March 28, 2003 from 62.9% for the three months ended March 29, 2002. The increase was primarily due to general seed price increases in all regions as well as an improved product mix.

Research and Development Expenses

Research and development expenses increased 14.0% to $11.0 million for the three months ended March 28, 2003 from $9.6 million for the three months ended March 29, 2002. The increase was primarily due to the currency fluctuation impact on research and development expenses denominated in the Euro and South Korean Won.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 9.0% to $48.6 million for the three months ended March 28, 2003 from $44.6 million for the three months ended March 29, 2002. The increase was primarily attributable to an accrual of $4.4 million related to an executive severance package, the incurrence of $1.2 million of legal and financial advisory expenses related to the proposed transaction and currency fluctuation impact during this fiscal year. Such increases were partially offset by $1.3 million of restricted stock award expenses and $0.5 million of consulting fees related to restructuring during the same period last fiscal year.

Amortization of Intangible Assets

Amortization of intangible assets decreased 4.3% to $4.0 million for the three months ended March 28, 2003 from $4.1 million for the three months ended March 29, 2002. The decrease was primarily 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.

Gain on Sale of Assets

The gain on sale of assets of $1.5 million for the three months ended March 28, 2003 was primarily from the sale of certain South Korean assets, a Salinas, California property and a company owned house, compared to a gain on sale of assets of $4.4 million for the three months ended March 29, 2002 primarily from the sale of a non-core business and fixed asset sales from subsidiaries in the U.S. and South Korea.

Interest Expense, Net

Interest expense, net, increased 21.8% to $8.4 million for the three months ended March 28, 2003 from $6.9 million for the three months ended March 29, 2002. The increase was primarily due to amortization of increased deferred financing fees and higher interest rates resulting from the amendment of the Company’s syndicated credit facility in January 2003, offset by the effect of lower average debt balances.

Other Non-Operating Income (Expense), Net

Seminis had other non-operating income, including foreign currency gain (loss), net, of $0.5 million for the three months ended March 28, 2003 as compared to other non-operating expense, net, of $3.1 million for the three months ended March 29, 2002. Other non-operating income, net, for the three months ended March 28, 2003 primarily consists of an approximate $0.2 million gain from foreign currency resulting from currency fluctuations of a United States Dollar denominated loan in the Netherlands and $0.3 million of non-operating gains from subsidiaries in Chile and South Korea. Other non-operating expense, net, for the three months ended March 29, 2002 primarily consists of foreign currency losses of $3.3 million resulting from currency devaluations in South America and a United States Dollar denominated loan in the Netherlands, offset by $0.2 million of non-operating gains from several subsidiaries.

Income Tax Expense

Income tax expense increased 13.5% to $7.0 million for the three months ended March 28, 2003 from $6.2 million for the three months ended March 29, 2002. The change in the effective tax rate during the second quarter of fiscal year 2003 compared to the same period in the prior year was primarily due to the mix of worldwide income.

Seasonality

The seed business is highly seasonal. Generally, net sales are highest in the second fiscal quarter due to increased demand from Northern Hemisphere growers who plant seed in the early spring. We recorded 33.7% of our fiscal year 2002 net sales during our second fiscal quarter. We have historically operated at a loss during the first and third fiscal quarters due to lower sales during such quarters. Our results in any particular quarter should not be considered indicative of those to be expected for a full year.

Liquidity and Capital Resources

Cash flows from operations

Operating activities utilized $8.4 million in cash flow during the first six months of fiscal year 2003 compared to $14.8 million utilized during the same period in the prior fiscal year. When compared to the corresponding period in the prior year, the improvement in cash utilization was primarily due to the increase in net income, a reduction in the payment of accounts payable and accrued liabilities, offset by increases in accounts receivable and prepaids.

Cash flows from investments

Investing activities provided $2.0 million in cash flow during the first six months of fiscal year 2003 compared to $35.5 million in the same period in the prior fiscal year. The variance is primarily due to $17.6 million of proceeds from the sale of a non-core business and $24.3 million of proceeds from the disposition of assets primarily related to an office building in Seoul during last fiscal year. Capital expenditures remained consistent between the two fiscal periods.

Cash flows from financing

Our total indebtedness as of March 28, 2003 was $283.1 million, of which $223.3 million were borrowings under our existing syndicated credit facility. We had $13.0 million, $10.8 million, $6.9 million and $24.0 million of borrowings by our United States, Italian, Spanish and South Korean subsidiaries, respectively, and $5.1 million of borrowings by other foreign subsidiaries.

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 2002 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.

In December 2002, Savia, 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 an acquisition company would be formed to acquire all the outstanding shares of Seminis common stock. The consummation of the proposed transaction would require the Company’s existing credit facility to be refinanced. It is anticipated that the proposed transaction would be funded, in part, by financing arranged by the newly-formed acquisition company. The proposed transaction is subject to certain conditions, including, among others, the negotiation of definitive agreements and approval of the Seminis Board of Directors and stockholders. In response to the proposed transaction, Seminis formed a special committee of independent members of its Board of Directors on December 18, 2002 to, among other things, evaluate the proposed transaction and its fairness to the holders of Seminis common stock unaffiliated with Fox Paine or Savia and make a recommendation regarding the proposed transaction to the entire Seminis Board of Directors at the appropriate time. In April 2003, Savia announced that its shareholders approved the sale of Savia-owned Seminis shares as contemplated by the proposed transaction. While negotiations are proceeding, there can be no assurances that the proposed transaction will be approved by the Seminis special committee or Board of Directors, or that any transaction will be consummated.

Seminis’ exposure to foreign currency fluctuations is primarily due to foreign currency gains or losses that occur from intercompany receivables and payables between Seminis and its foreign subsidiaries and from the U.S. dollar denominated loan, originated by SVS Holland, B.V., a foreign subsidiary of Seminis. Seminis does not have any material outstanding hedging contracts as of March 28, 2003.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our market risk disclosures set forth in the 2002 Form 10-K have not changed significantly through the second quarter ended March 28, 2003.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company’s chief executive officer and VP WW Corporate Comptroller and chief accounting 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 quarterly 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. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible controls and procedures.

(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 quarterly report.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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 denied coverage. We continue to believe the policy covers these claims and are pursuing enforcement of our rights under the policy to provide coverage of the claims. 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 late 2003.

On December 17, 2002 and January 4, 2003, five 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 would acquire all of the outstanding shares of Seminis. Four 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, Pablo Herranz v. Seminis, Inc., et al., Civil Action No. 20105 and Haven Capital Management v. Seminis, Inc., et al., Civil Action No. 20140-NC were filed in the Delaware Court of Chancery (New Castle, County), while the fifth, Mark Rosales v. Seminis, Inc., Case No. CIV216255, was filed in California Superior Court (Ventura County). The Firth, Pozniak, Herranz and Haven complaints name as defendants Savia and Seminis, along with Seminis’ directors. The Rosales complaint names as a defendant Seminis and its directors. All five complaints purport to be brought on behalf of Seminis common stockholders or their successors. The four complaints filed in Delaware have been consolidated into one action. All five 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 6. Exhibits and Reports on Form 8-K


(a)	Exhibits See exhibits index.

(b)	Reports on Form 8-K None.

Exhibit Index


Exhibit
Number		Description

(a) 1		Form of Underwriting Agreement
(c) 2		Merger Agreement by and between Seminis, Inc., an Illinois corporation and Seminis, Inc., a Delaware corporation
(c) 3.1		Certificate of Incorporation
(c) 3.2		Certificate of Designations of Class A Mandatorily Redeemable Preferred Stock and Class B Mandatorily Redeemable Preferred Stock of Seminis, Inc.
(c) 3.3		Certificate of Designations of Class C Redeemable Preferred Stock of Seminis, Inc.
(c) 3.4		By-Laws
(c) 4.1		Form of Class A Common Stock Certificate
(a) 4.2		Registration Rights Agreement by and among Seminis, Inc. and certain shareholders of Seminis, dated October 1, 1995
(c) 5		Opinion of Milbank, Tweed, Hadley & McCloy LLP
(a) 10.1		Seminis, Inc. 1998 Stock Option Plan
(b) 10.2		Amended and Restated Seminis, Inc. 1998 Stock Option Plan
(a) 10.3		Share Subscription Agreement by and between Seminis, Inc. and Hungnong Seed Co., Ltd., dated June 12, 1998
(c) 10.4		Form of New Syndicated credit facility among Seminis, Inc, Seminis Vegetable Seeds, Inc., SVS Holland B.V., as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as lenders, dated as of June 28, 1999
(c) 10.5		Form of Letter Agreement between Savia, S.A. de C.V. and Seminis, Inc. dated as of June 21, 1999
(d) 10.6		Second Amendment and Waiver to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V., as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, Dated as of June 29, 2000, effective March 31, 2000
(d) 10.7		Security Agreement Re: Accounts, Inventory and General Intangibles among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V., as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of June 29, 2000
(e) 10.8		Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V., as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of September 30, 2000, effective September 30, 2000.
(d) 10.9		Extension of Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V., as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of December 30, 2000, effective December 30, 2000.
(f) 10.10		Modification and Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V. as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of December 29, 2000, effective December 29, 2000.
(g) 10.11		Modification and Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V. as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of April 30, 2001, effective April 30, 2001.
(h) 10.12		Modification and Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V. as borrowers, Harris Trust and Savings Bank, individually time parties thereto, as Lenders, dated as of May 31, 2001, effective May 31, 2001. and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to
(i) 10.13		Revision to (h) 10.12
(b) 21		Subsidiaries of Registrant
27.1		Financial Data Schedule
(j)99.1/99.2		Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(k) 99.3/99.4		Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(k) 10.14		Modification and Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V. as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of December 31, 2002, effective December 31, 2002.
(k) 10.15		Modification and Interim Waiver Agreement to Syndicated credit facility dated as of June 28, 1999 among Seminis, Inc., Seminis Vegetable Seeds, Inc., SVS Holland B.V. as borrowers, Harris Trust and Savings Bank, individually and as Administrative Agent, Bank of Montreal, individually and as Syndication Agent and the Lenders from time to time parties thereto, as Lenders, dated as of December 31, 2002, effective December 31, 2002.
(l) 99.5/99.6		Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(m) 99.7/99.8		Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(n) 10.16		Employment contract of Alfonso Romo Garza
(o) 10.17		Employment contract of Eugenio Najera Solorzano
(p) 10.18		Employment contract of Bruno Ferrari
(q) 10.19		Employment contract of Oscar Velasco Martinez
(r) 10.20		Employment contract of Gaspar Alvarez Martinez
(s) 10.21		Consulting Agreement between Seminis Vegetable Seeds, Inc. and N and N Corporate Consulting, S.C.


Exhibit
Number		Description

(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.
(l)		Filed with the December 27, 2002 Form 10Q.
(m)-(s)		Filed with the March 28, 2003 Form 10Q.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: May 12, 2003				SEMINIS, INC.



				/s/ Alfonso Romo Garza Alfonso Romo Garza Chief Executive Officer (Principal Executive Officer)

				/s/ Gaspar Alvarez Martinez Gaspar Alvarez Martinez VP WW Corporate Comptroller & Chief Accounting Officer (Principal Financial and Accounting Officer)

Certification

I, Alfonso Romo Garza, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Seminis, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: May 12, 2003



				/s/ Alfonso Romo Garza Alfonso Romo Garza Chief Executive Officer

Certification

I, Gaspar Alvarez Martinez, certify that:


Date: May 12, 2003

				/s/ Gaspar Alvarez Martinez Gaspar Alvarez Martinez VP WW Corporate Comptroller & Chief Accounting Officer

	•		As of December 31, 2002, we had not completed a refinancing transaction in order to pay the remaining balance of our syndicated credit facility totaling $224.7 million. The lenders agreed to temporarily extend the term of the syndicated credit facility and in January 2003, a formal amendment was executed. Among other things, the amendment extended the final maturity of the syndicated credit facility from the previously agreed upon 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. Whereas we have met our obligations as well as covenant requirements under the amended syndicated credit facility through March 28, 2003, 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 syndicated 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 proposed transaction with Savia and Fox Paine 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, Savia, 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.

	•		A new management team has been in place since 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 (as described below).

	•		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 U.S. 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 the Company. 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.

	•		reorganizing our ten legacy seed companies into four geographical regions;

	•		selling or consolidating certain operation and production facilities;

	•		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.

1.		I have reviewed this quarterly report on Form 10-Q of Seminis, Inc.;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

	a)		Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

	b)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

	c)		Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

	a)		All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and