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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the Quarterly Period Ended June 27, 2003

OR

For the transition period from            to

Commission File Number 000-26519

SEMINIS, INC.

(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 o NO x

     As of July 31, 2003, the Registrant had 19,012,719 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.

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SEMINIS, INC.

Form 10-Q
For the Quarterly Period Ended June 27, 2003

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

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

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

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

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

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

[Additional columns below]

[Continued from above table, first column(s) repeated]

												Accumulated
				Additional								Other				Total
				Paid-In				Accumulated				Comprehensive				Stockholders’
				Capital				Deficit				Loss				Equity
Balance, September 30, 2002				$	699,255			$	(324,558	)		$	(37,835	)		$	337,505
Comprehensive income
	Net income (Unaudited)				—				8,916				—				8,916
	Translation Adjustment (Unaudited)				—				—				24,064				24,064
																	32,980
Conversion of additional capital
	Contribution to Class C Preferred Stock (Unaudited)				—				—				—				—
Options Exercised (Unaudited)					100				—				—				100
Dividends on Redeemable Preferred Stock (Unaudited)					(1,500	)			—				—				(1,500	)
Balance, June 27, 2003 (Unaudited)				$	697,855			$	(315,642	)		$	(13,771	)		$	369,085

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

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Consolidated Statements of Cash Flows
(In thousands)

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

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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 13 week quarter 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 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 that may be expected for any other interim period or for the fiscal year as a whole.

Supplementary Cash Flow Information

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

Loss per Common Share

Net loss per common share has been computed pursuant to the provisions of Statement of Financial Accounting Standards (“SFAS” ) No. 128, “Earnings per Share.” Basic loss per common share is computed by dividing net loss available to common stockholders by the average number of common shares outstanding during each period. Net loss available to common stockholders represents reported net income (loss) less preferred and additional capital contribution dividends. Diluted net loss per common share reflects the potential

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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 loss per share available for common stockholders.

A total of 4.1 million potential shares from options were excluded from the computation of diluted earnings per share for the three and nine months ended June 27, 2003, due to their antidilutive effect. A total of 4.4 million potential shares from options were excluded from the computation of diluted earnings per share for the three and nine months ended June 28, 2002, due to their antidilutive effect.

Contingently payable dividends represent dividends that may be payable to Savia if the exchange contemplated by the amended and restated exchange agreement described in Note 2 is not consummated. As part of the amended and restated exchange agreement, Savia agreed to forego dividends on its shares of Seminis Class C Preferred Stock and additional capital contributions effective July 1, 2002; however, such dividends would be payable if the transactions contemplated by the amended and restated exchange agreement are not completed and the amended and restated 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, the Financial Accounting Standards Board (“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. The adoption of SFAS No. 144 did not have a material effect on our consolidated financial position, results of operations or cash flows.

In May 2002, the FASB 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 FASB 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).”

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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. (“FIN” 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 that 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 Accounting Research Bulletin (“ARB”) No. 51.” This interpretation clarifies the application of ARB 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 condition or results of operations.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) used for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The provisions of this Statement are effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of this Statement is not expected to have significant impact on the Company’s financial condition or results of operations.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. This Statement requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). The provisions of this Statement are effective for financial instruments entered into or modified after May 31, 2003, and otherwise are effective at the beginning of the first interim period beginning after June 15, 2003. Upon adoption of this Statement, the Company will have to restate the carrying value of its mandatorily redeemable preferred stock to the present value of this obligation and reclassify this amount into liabilities on the balance sheet. Additionally, amounts previously accrued as dividends on the mandatorily redeemable preferred stock will be expensed in the statement of operation as interest expense.

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

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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 and $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. Outstanding interim principal obligations under the amendment included $6.0 million due in the fourth quarter of fiscal year 2003. The remaining outstanding amount totaling $210.6 million will be due in the first quarter of fiscal year 2004. We met all required principal and interest payments and were in compliance with all of our financial covenants at June 27, 2003 under the newly extended amendment. As all remaining amounts under the amended syndicated credit facility are due within one year, the $216.6 million of outstanding borrowings under the syndicated credit facility has been classified as a current liability as of June 27, 2003.

On May 30, 2003, we and/or certain other parties entered into an amended and restated exchange agreement, a contribution agreement, an agreement and plan of merger, a stock purchase agreement and certain other related agreements pursuant to which an acquisition company was formed at the direction of Fox Paine & Company, LLC, a San Francisco based private equity firm, to acquire all of the outstanding shares of the Company’s common stock. Public holders of approximately 15.8 million shares of Seminis common stock will receive cash consideration of $3.78 per share in the merger. Immediately following the merger and related transactions, Fox Paine, its affiliates and co-investors will own approximately 75% of the shares of Seminis common stock outstanding following the completion of the transactions, and the remaining shares will be owned by certain affiliates of Alfonso Romo Garza, Seminis’ and Savia’s current Chairman and Chief Executive Officer, certain creditors of a Savia affiliate and nine members of Seminis and Savia management. Additionally, certain entities affiliated with Mr. Romo will receive co-investment rights to purchase, subject to certain conditions, up to 34% of the outstanding shares of Seminis common stock following the transactions. Following the merger and related transactions, the Company will be privately held and Seminis common stock will no longer be listed on The Nasdaq National Market. Seminis stockholders representing approximately 85% of the voting power represented by the outstanding shares of Seminis common stock currently entitled to vote have entered into a voting agreement to vote in favor of the merger.

Prior to the consummation of the merger and pursuant to the terms of the amended and restated exchange agreement, Savia will exchange all of its outstanding shares of Seminis Class C preferred stock (including accrued Paid In Kind (“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 dividends for 37.7 million shares of Seminis Class A Common Stock and cash equal to $15.0 million plus interest at a rate of 10.0% per annum from July 1, 2002, less $3.0 million.

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Although we have met our obligations and covenant requirements under the amended syndicated credit facility through June 27, 2003, we must successfully execute a refinancing plan prior to December 31, 2003 in order to meet the final maturity of the facility. The consummation of the proposed transactions require the Company’s amended syndicated credit facility to be refinanced. It is anticipated that the proposed transactions would be funded, in part, by financing arranged by the newly-formed acquisition company. There can be no assurances that the merger and related transactions will be consummated. Failure to comply with existing covenants in the amended syndicated credit facility, which would make the facility callable, or our inability to refinance the facility 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:

Note 4 — Goodwill

Changes in the net carrying amount of goodwill for the period ended June 27, 2003, are as follows:

Goodwill acquired during the period resulted from the purchases of minority holdings of Selekta, a South African subsidiary and Nath Sluis, an Indian subsidiary.

Note 5 — Intangibles

The following table sets forth the Company’s intangible assets, at June 27, 2003 and September 30, 2002, which continue to be amortized:

Amortization expense on intangible assets was $4.0 and $4.2 million for the three months ended June 27, 2003 and June 28, 2002, respectively; and $11.9 and $12.5 million for the nine months ended June 27, 2003 and June 28, 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 $15.8, $14.5, $13.5, $12.6 and $12.0 million, respectively.

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Note 6 — Accrued Liabilities

Accrued liabilities consist of the following at June 27, 2003 and September 30, 2002:

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: