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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 30, 2004

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

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

For the Fiscal Year Ended December 31, 2003

or

For the Transition period from                      to                     

Commission File Number: 333-81235

ROYSTER-CLARK, INC.

(Exact name of registrant as specified in its charter)

1251 AVENUE OF THE AMERICAS – SUITE 900

NEW YORK, NEW YORK 10020

(212) 332-2965

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

SEE TABLE OF ADDITIONAL REGISTRANTS BELOW

FRANCIS P. JENKINS, JR.

CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

ROYSTER-CLARK, INC.

1251 AVENUE OF THE AMERICAS – SUITE 900

NEW YORK, NEW YORK 10020

(212) 332-2965

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

With Copies to:

PETER A. BASILEVSKY, ESQ.

SATERLEE STEPHENS BURKE & BURKE LLP

230 PARK AVENUE, SUITE 1130

NEW YORK, NEW YORK 10169-0079

(212) 818-9200

TITLE OF EACH CLASS

101/4% First Mortgage Notes Due 2009

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

None

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

None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes  ¨  No  x

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

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

DOCUMENTS INCORPORATED BY REFERENCE:  NONE

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ROYSTER-CLARK, INC.

TABLE OF ADDITIONAL REGISTRANTS

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

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ROYSTER-CLARK, INC.

FORM 10-K

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

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

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

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PART I

ITEM 1.    BUSINESS.

General

We believe that we are one of the largest independent retail and wholesale distributors, in terms of retail sales, of agricultural fertilizer, seed, crop protection products and agronomic services to farmers in the United States. We primarily focus on major farming regions in the Southeast and Midwest of the United States. Our distribution business supplies a full range of products and services to our retail and wholesale customers through approximately 370 facilities, including retail farm centers (“Farmarkets”), granulation, blending and seed processing plants, and a network of storage and distribution terminals and warehouses. In addition, we operate two nitrogen-manufacturing plants that supply our distribution business with nitrogen fertilizer products. We operate as a retailer and wholesaler of a complete line of products and services to help farmers become more profitable, efficient and environmentally sound. In 2003, we generated revenues of $959.9 million and EBITDA of $51.4 million (See definition in Item 6, Selected Financial Data).

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

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

In order to finance the acquisition of AgriBusiness and re-structure the Company’s debt, the Company used proceeds from equity contributions by 399 Venture Partners, Inc. of $59.0 million, management rollover equity of $19.6 million; issuance of $10.0 million of Royster-Clark Group junior subordinated notes payable maturing in 2010, owned by IMC Global, Inc.; the issuance of $200.0 million principal amount of 10.25% First Mortgage Notes due 2009 held by various financial institutions (“Noteholders”); and proceeds from the Senior Secured Credit Facility (“credit facility”) created on April 22, 1999. As a result of these transactions and subsequent issuances and redemption of stock, 399 Ventures and affiliates owns approximately 38.0% of the outstanding voting stock and 70.7% of the total outstanding stock of Royster-Clark Group, members of management own approximately 48.6% of the outstanding voting stock and 22.3% of the total outstanding stock of Royster-Clark Group and have the right to acquire an additional 10% of the voting stock through a stock purchase plan. Royster-Clark Group owns all of the outstanding stock of Royster-Clark, Inc.

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

Risk Factors

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

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Business Operations

Agricultural Infrastructure

We have an extensive agricultural product infrastructure of approximately 370 facilities, including Farmarkets, granulation, blending and seed processing facilities and a network of storage and distribution terminals and warehouses. In addition, we operate two nitrogen-manufacturing plants that supply our distribution business with nitrogen fertilizer products. This infrastructure allows us to efficiently process, distribute and store product close to the end-user and supply our customers on a timely basis during the planting seasons. In addition, we use port facilities on the Atlantic Ocean and the Mississippi River system to provide flexibility in product purchasing, including the ability to access overseas markets when they offer lower prices than domestic markets. Our widespread geographical presence in some of the country’s most important farming regions provides diversity that helps to insulate our overall business from difficult farming conditions in any one particular area as a result of poor weather or adverse market conditions for specific crops. Our facilities cover the major farming markets in the East, South and Midwest. We believe that this market presence provides a number of competitive advantages as described below:

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

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

Retail Distribution

We operate approximately 250 Farmarkets, including approximately twenty third-party commission sales stores, making us one of the largest retailers of crop production inputs to farmers in North America. Farmarkets market their products and services primarily to end users, the farmers. Farmarkets typically service farmers within a 15 to 25 mile radius of their locations. We operate centers predominantly in the Midwest to service corn and soybean farmers and in the Southeast to service farmers focused on higher management crops, including cotton, peanuts, tobacco and vegetables.

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

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

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

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

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physical services include agronomic advice and crop production planning and consulting services as a means to maintain hands-on and personal relationships with the grower and use available knowledge and techniques to increase the grower’s opportunities for a successful crop.

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

Wholesale Distribution

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

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

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

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

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

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

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

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Nitrogen Fertilizer Production

We produce nitrogen fertilizer and industrial products that are sold through our wholesale distribution network. We own and operate a fully integrated nitrogen manufacturing plant in East Dubuque, IL, which produces nitrogen products for both the agricultural and industrial markets. This plant is designed to produce anhydrous ammonia, nitric acid, ammonium nitrate solution, liquid and granular urea, nitrogen solutions and carbon dioxide using natural gas as a feedstock. This plant can optimize the product mix according to swings in demand and pricing for its various products. In the year 2003, this plant produced approximately 826 thousand tons of these products compared to 965 thousand tons in 2002. Some were sold as produced and others consumed in the production of upgraded nitrogen products. Final products shipped from the plant totaled approximately 376 thousand tons of ammonia and upgraded nitrogen products compared to 473 thousand tons in 2002.

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

The East Dubuque facility has historically operated at full capacity except for temporary cutbacks or shutdowns for maintenance or extraordinary market conditions. During 2001, natural gas prices declined from a high of $9.98 per MMBTU at the beginning of the year to $2.55 per MMBTU by the end of 2001. During 2002, natural gas prices again steadily rose. The Company took advantage of the natural gas price increases during the third quarter of 2002 through the sale of natural gas contracts realizing a gain of $1.9 million while not affecting the production at the East Dubuque plant. In 2003, the price of natural gas rose from $4.75 per MMBTU on January 2, 2003 and to a peak of over $19.07 in late February before dropping to below $6.00 per MMBTU by mid-March 2003. As a result of this temporary spike in natural gas prices, the Company elected to cease production at East Dubuque for three weeks in March 2003 in order to perform maintenance activities originally scheduled for August 2003. The plant resumed production by the end of March 2003. During the third and fourth quarter of 2003, the company locked in a portion of the daily natural gas requirements at price levels through staggered periods in early 2004 which would allow the Company to operate the plant at cost effective levels. As indicated by the production of ammonia and upgraded nitrogen products, there were periods during the year when production was not at full capacity levels. We anticipate that natural gas prices will continue at levels where it is economical to produce upgraded nitrogen products at the plant.

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

We also operate a smaller nitrogen manufacturing facility in Cincinnati, OH that shipped approximately 144,000 tons of upgraded nitrogen products in 2003 compared to 135,000 tons 2002. This plant purchases anhydrous ammonia and manufactures nitric acid and ammonium nitrate liquor for industrial use and nitrogen solutions for the agriculture market. The industrial market represents approximately 20% of sales of Royster-Clark manufactured nitrogen products. These industrial sales provide a year-round revenue source.

Seasonality

Our business is seasonal with approximately 69% of sales occurring between March and July. This seasonality results from the planting, growing and harvesting cycles. Inventories must be accumulated to be available for seasonal sales, requiring significant storage capacity. The accumulation of inventory is financed by suppliers, by customer prepayments and by the Company through its senior secured credit facility.

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

Products

The following table shows our revenues by product line for the years ended December 31, 2003, 2002 and 2001.

Competition

The market for the distribution of fertilizer, seed and crop protection products and agronomic services is competitive. We compete in the retail business primarily by providing a comprehensive line of products and what we believe to be superior services at competitive prices. We believe that there are approximately 9,000 farm retail centers in North America serving growers. These retail farm centers are operated by agricultural cooperatives, which have the largest market share in a majority of the markets we serve, national for profit companies and local and regional independent distributors.

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

Raw Materials and Supplies

Fertilizer, nitrogen, phosphate and potash are global commodities that can be purchased from multiple suppliers. We purchase our fertilizer, seed and crop protection products primarily from the major North American producers. We also have the capability to import products from foreign suppliers. Final purchasing decisions are made based on several factors including availability, price, quality and customer requirements. As a result of these factors, the quantity of imported materials purchased for later resale or consumption will vary. In connection with the acquisition of AgriBusiness in 1999, we entered into a ten-year supply agreement with IMC Global to purchase phosphates and potash. The purchase prices and quantities of the products covered by the IMC Global supply agreement are determined by market forces. The supply agreement automatically renews for additional 5-year periods unless either party cancels it. The supply agreement also specifies remedies available to the parties in the event of noncompliance, which include compensatory damages in the event of a failure to purchase or supply the required quantities of covered products. Purchases under this contract were well in excess of minimum requirements and exceeded $100 million during 2003. In January 2004, IMC Global announced plans for a merger with Cargill Crop Nutrition that is projected to be completed in the summer of 2004. Based on our existing contractual relationship and the significant volume of purchases that we make, we expect to maintain a positive relationship with the new entity; however, should adverse changes occur we would expect to be able to procure the materials required from other suppliers. In addition to the merger of Cargill and IMC Global, we believe that new phosphate production in China adds another variable to the future supply of phosphate and its pricing on the world market.

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Approximately 24% of the Company’s nitrogen solution, ammonia and urea products are sourced from the East Dubuque facility but it should be noted that products produced at East Dubuque are sold primarily in wholesale channels rather than through our network of retail farmarkets whose nitrogen requirements are met through purchases from a number of domestic and international suppliers.

The major raw material in the manufacture of nitrogen products is natural gas. We purchase natural gas monthly through a combination of spot market purchases and firm-supply, fixed-priced contracts. We are able to purchase natural gas at competitive prices due to our connection to the Northern Illinois Gas (Nicor) distribution system and its proximity to the Northern Natural Gas pipeline. Natural gas purchases were approximately 9.1 billion cubic feet in 2003 compared to approximately 10.4 billion cubic feet in 2002.

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

The Cincinnati plant purchases anhydrous ammonia for use in the production of nitric acid and other upgraded nitrogen products. Anhydrous ammonia is purchased from a variety of suppliers on the open market. The Company has had no problems in supplying anhydrous ammonia for the plant and expects no problems for the foreseeable future. The anhydrous ammonia is delivered to the plant by barge and rail.

Employees and Labor Relations

We employ approximately 2,000 non-unionized and salaried employees, 220 unionized employees and approximately 900 temporary employees during seasonal periods. We believe we have good relations with our employees. Currently we have 9 labor contracts in place covering the 220 unionized employees. Four of these contracts covering approximately 93 employees were renewed for two, three and four year terms in 2003. Two contracts covering fewer than 50 employees are up for renewal in 2004. We have not experienced work stoppages in the past and expect to be able to renew these contracts without work stoppages in 2004.

Environmental Matters

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

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

Since the end of last year, we have sold five locations for which we have been responding to the presence of hazardous substances, including nitrates, phosphorus and pesticides in soils and/or groundwater. We believe that we have performed sufficient remediation work and that language within the sales document allows us to anticipate no additional remediation work at the respective site. While from a practical standpoint we would not anticipate further remediation work at these sites, we can not be assured that there will not be further liabilities arising out of conditions for which the Company may be held responsible.

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

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

In connection with the 1999 acquisitions of AgriBusiness and Royster-Clark, the Company obtained indemnities for certain claims related to environmental matters that existed or arose prior to the acquisitions. The indemnities related to AgriBusiness are subject to a $4,500 deductible, may not to exceed 10% of the purchase price, or a total of $30,000 and certain time limitations. Indemnities related to claims arising out of environmental representations and warranties and claims associated with, arising from or relating to conditions existing prior to April 1999 associated with the real estate owned by AgriBusiness and transferred to the Company at closing expire in April 2004. Indemnities covering other environmental claims associated with, arising from or relating to conditions existing prior to April 1999 on real estate (other than real estate subject to the April 2004 indemnity expiration) formerly owned, leased or operated by the AgriBusiness or offsite disposition of contaminants survive indefinitely. The environmental indemnities related to Royster-Clark, Inc. (predecessor company) are subject to a deductible of $2,000 and an overall cap of $5,000 on all indemnities which expire in April 2004. In addition, Royster-Clark, Inc. (predecessor company) had obtained indemnities from Lebanon Chemical Corporation (LCC) for certain claims related to environmental matters that existed at sites acquired from LCC in December 1998. The Company has a claim pending under the indemnities from LCC. Other than that claim, the indemnity has expired. The Company also obtained indemnities from the former stockholder of Alliance for environmental conditions identified as of the date of acquisition. The indemnification remains in effect until notice is received requiring no further actions are received or after a two-year period of testing with no reportable results in deterioration of water quality.

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

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ITEM 2.    PROPERTIES.

We have an extensive infrastructure of approximately 370 facilities, consisting of retail farm centers (“Farmarkets”), granulation, blend, seed processing and manufacturing plants and an integrated network of warehouses and terminals. Our facilities cover the major farming markets in the Southeast and Midwest of the United States.

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

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

All of the properties in the above table (with the exception of the Union City, Tennessee and Petersburg, Virginia facilities) are subject to liens under the First Mortgage Notes discussed in note 12 to the consolidated financial statements included in this report. Petersburg, Virginia is subject to liens in connection with the amended and restated senior secured credit facility agreement executed on December 22, 2003.

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

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

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ITEM 3.    LEGAL PROCEEDINGS.

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

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

None.

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PART II

ITEM 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Not applicable.

ITEM 6.    SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS).

The following table provides selected financial and other data of Royster-Clark, Inc. and subsidiaries, as of and for each of the years ended December 31, 2003, 2002, 2001 and 2000 and the nine months ended December 31, 1999. This information should be read with the consolidated financial statements and related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations and Cash Flows” and other information found elsewhere in this report.

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

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

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS.

THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING STATEMENTS. SEE ‘FORWARD-LOOKING STATEMENTS’ ABOVE. YOU SHOULD NOT PLACE UNDUE RELIANCE ON ANY SUCH FORWARD-LOOKING STATEMENTS AS SUCH STATEMENTS SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE, AND WE MIGHT NOT UPDATE THEM TO REFLECT CHANGES THAT OCCUR AFTER THE DATE THEY ARE MADE.

General

Royster-Clark, Inc. together with its subsidiaries, (the “Company” or “Royster-Clark”) is a retail and wholesale distributor of mixed fertilizer, fertilizer materials, seed, crop protection products and agronomic services to farmers, primarily in the Southeast and Midwest of the United States. The Company’s operations include retail farm centers (“Farmarkets”), granulation, blending and seed processing plants, and a network of storage and distribution terminals and warehouses. In addition, the Company operates two nitrogen-manufacturing plants that supply the wholesale and industrial customers with nitrogen products. Our business is affected by a number of factors, including weather conditions, prevailing prices for fertilizer, natural gas used in the production of various fertilizers and other crop production inputs.

Weather conditions can significantly impact our results of operations, both for quarterly reporting and on an annual basis. Adverse weather conditions during the planting season may force farmers to either delay or abandon their planting, or change to another crop, which may lead to lower use of fertilizer, seed and crop protection products.

The crop production inputs distribution business is seasonal. Since 1999, sales occurring between March and July have varied from approximately 68% to 73% of annual sales based upon planting, growing and harvesting cycles. In 2003, approximately 69% of sales occurred between March and July. This seasonality results from the planting, growing and harvesting cycles of our customers. Inventories must be accumulated to be available for seasonal sales, requiring significant storage capacity. The accumulation of inventory is financed by suppliers, by customer prepayments and by the Company through its credit facility. Depending on weather and field conditions in the Company’s widely diverse geographic marketing areas, the period of heavy product shipments to customers can vary by several weeks, which may impact in which quarter sales are recorded.

Another factor affecting our business is the price for fertilizers. We purchase nitrogen materials, phosphates, and potash and resell these nutrients in either their original form or in the form of multi-nutrient fertilizers. Price volatility varies for major nitrogen, phosphate and potash products. The table below provides quarter end prices for the products indicated by Mid-Cornbelt or Midwest per ton price quote listing published by Green Markets (a publication reporting on fertilizer industry developments). Ammonia (anhydrous ammonia) is being illustrated as a proxy for nitrogen products, while DAP (diammonium phosphate) and potash (coarse muriate potash) are being used as proxies for phosphate and potash products.

While the level of nitrogen prices affects the profitability of our entire business, the level of nitrogen prices affects the profitability of our two nitrogen-manufacturing plants more directly. The level of phosphate and potash prices affects the profitability of our business since gross profit generated by our processing and distribution activities with these materials is typically a function of the underlying cost.

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The major raw material in the manufacture of nitrogen-based products is natural gas. During 2003, we purchased natural gas on the open market and through the use of fixed priced strip contracts for use in our nitrogen-production plant in East Dubuque, IL. The use of fixed-priced strips permits the Company to elect to lock in our gas costs for quantities of MMBTU’s that the Company elects to purchase on that basis. Over a period of years, natural gas exhibited a low degree of volatility until 2000 when natural gas prices increased dramatically from approximately $2.60 per MMBTU to approximately $9.98 per MMBTU at the end of 2000. The table below illustrates some of the degree of volatility of natural gas pricing quoted at the Henry Hub.

As a result of the sharp rise in natural gas prices in early 2003, we elected to take down our nitrogen-production plant at East Dubuque, IL at the beginning of March 2003 for an early maintenance turnaround. This maintenance turnaround had been scheduled later in the year. We completed the turnaround and resumed production at the plant by the end of March 2003. Since December 31, 2003 through early March 2004, natural gas prices have fluctuated between over $5.00 per MMBTU to over $7.00 per MMBTU with pricing ranging from $5.20’s-$5.40’s in early March. We expect natural gas prices to moderate further as spring approaches. The level of natural gas prices directly affects profitability of our nitrogen-based products.

The Company is primarily a distribution company dealing in agricultural crop inputs. The Company derives revenues primarily from the distribution and sale of various crop inputs and services to agricultural customer for their crop input needs. These goods and services are sold directly to the customer farmers or wholesale customers who will resell to customer farmers or other wholesalers. Crop inputs include nutrient elements required for balanced plant development and growth. These nutrient elements include various dry and liquid materials and have varying nutritional content of nitrogen-based, phosphate-based and potash-based fertilizers as well as various types of micronutrients. Various weeds, insects and diseases can diminish our customers’ crop yield. Therefore, the Company offers a variety of herbicides, insecticides and fungicides, (collectively referred to as “crop protection products”) to enhance the success of our customer’s crop. The Company also markets various seed products to our customer base. Through the availability of genetically enhance seed products, we view the market for seed products to be increasingly important. While the dollar sales of seed may not become a dominant product line compared to other product lines offered, we believe that providing seed to our farmer customers has been and will be critical to future tie-in of other products being sold. In addition to products purchased and re-marketed in their purchased form, through the Company’s various production facilities and Farmarkets, we take various crop inputs and produce upgraded, value added products for sale to our customers. In the case of our Farmarkets, services are offered to the customer not only for delivery and application for products to the farmer’s fields creating a service link, differentiating our Company from merely a commodity distributor, but also crop management services in aiding the customer both before the sale and after the crops are in the farmer’s fields. In the case of our East Dubuque, IL facility, natural gas is used in the production of anhydrous ammonia and other upgraded nitrogen-based products. East Dubuque and our Cincinnati, Ohio facilities also manufacture and distribute products to industrial customers as well as products to agriculturally based customers.

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Results of Operations

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

Year ended December 31, 2003 compared to year ended December 31, 2002

Net sales.    Royster-Clark’s net sales were $959.9 million for 2003 compared to $898.1 million for 2002, an increase of $61.8 million, or 6.9%. The increase in sales resulted predominantly from approximately $83.4 million in price appreciation of fertilizer materials, particularly nitrogen-based products, and to a lesser extent, blended and granulated fertilizer, phosphates, potash, seed and other products, during the year. For the most part, this price appreciation is driven by higher costs of input materials, with increased natural gas costs being the primary driver. Such price appreciation is highly variable from year to year.

The eastern third of the country experienced persistent cool, cloudy and wet weather in the spring of 2003 (March through May) which adversely affected the volume of product shipments in several of the Company’s market areas in the Midwest and Southeast and Mid-Atlantic regions. The graphic below illustrates the unusual amounts of precipitation that affected the Company’s markets.

		Significant flooding struck Indiana and Ohio in July. In September, Hurricane Isabel struck the North Carolina coast and tracked up through the interior sections of North Carolina, Virginia and Pennsylvania.   The result of this level of precipitation was that some farmers switched from planting corn to soybeans, which require less fertilizer and crop protection inputs while other farmers elected not to plant and to file for crop insurance compensation instead. During the fourth quarter, some recovery of sales volumes lost earlier in the year were achieved as weather was more moderate and allowed for field work. A summary of the net increase in sales is shown below:

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Gross profit.    Gross profit was $182.1 million for 2003 compared to $181.6 million for 2002, an increase of $0.5 million, or 0.3%. The increase in gross profit resulted predominantly from the various sales volume and pricing factors discussed above. Gross margin was 19.0% for 2003 compared to 20.2% for 2002. Lower gross margin ratio resulted primarily from decreased high gross margin specialty seed sales and related technology licensing revenue that did not recur in 2003.

Selling, general and administrative expenses.    Selling, general and administrative expenses were $157.1 million for 2003 compared to $160.2 million for 2002, a decrease of $3.1 million, or 1.9%. Expense reductions resulted from efforts by management to increase returns. The decrease in selling, general and administrative expenses consisted of the following:

These decreases were partially offset by the following:

Loss on disposal of property, plant and equipment, net.    Loss on sales of fixed assets was $1.4 million in 2003 compared to $1.2 million in 2002. This increase was the result of $0.2 million higher losses of asset sales related to closed or poorly performing Farmarket locations.

Operating income.    Operating income was $23.6 million for 2003 compared to $20.2 million 2002, an increase of $3.4 million, or 16.8%, due to the factors described above. Operating income as a percentage of net sales was 2.5% for 2003 compared to 2.3% for 2002, an increase of 0.2%.

Interest expense.    Interest expense was $29.5 million for 2003 compared to $29.3 million for 2002, an increase of $0.2 million, or 0.7%. The increase in interest expense was due to higher average levels of borrowings partially offset by lower interest rates under the senior secured credit facility (credit facility). Average daily

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borrowings on the senior secured credit facility of $126.1 million in 2003 compared to $116.0 million in 2002 and higher average daily borrowings on a vendor financing note payable of $10.5 million in 2003 compared to 2002 resulted in approximately $1.3 million higher interest expense. The higher average daily borrowings were used to finance higher cost inventory resulting predominantly from higher natural gas prices. Interest expense decreased by approximately $1.1 million due to market rate reductions. Weighted average rate for borrowings under the credit facility during 2003 was 4.69% compared to 4.94% during 2002, a decline of 0.25%.

Gain on sale of natural gas contracts.    The Company did not experience any gains in 2003 on sales of natural gas contracts compared to a $1.9 million gain in 2002.

Income tax expense.    Income tax expense was $15.4 million for 2003 compared to an income tax benefit of $2.6 million for 2002. The effective tax rate was 262.0% for 2003 compared to 36.5% for 2002. The increase in income tax expense and the effective tax rate was due to establishing a valuation allowance against deferred tax assets as required by SFAS No. 109, “Accounting for Income Taxes” at the end of the second quarter of 2003. Beginning July 1, 2003 and for future quarters, the Company will not record a net income tax expense or benefit until GAAP requirements for unrestricted recognition of deferred tax assets have been satisfied.

Net loss.    Net loss was $21.3 million for 2003 compared to $4.6 million for 2002, an increased loss of $16.7 million, due to the factors described above.

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

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

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

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

These decreases were partially offset by the following:

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

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

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

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

Gain on sale of natural gas contracts.    The increase in gain on sale of natural gas contracts resulted from opportunities to profit from such sales due to increases in natural gas prices during 2002 compared to 2001. As a result of the purchase of IMC Nitrogen Company on April 22, 1999, the Company became the beneficial holder of rights, title and interests in certain natural gas leases in Canada. In July 2002, the Company sold its rights, title and interests in these beneficial holdings of natural gas resulting in a gain of approximately $1.3 million. In addition, in September 2002, the Company sold all its rights, title, and interests in several fixed-priced natural gas contracts resulting in a gain of $0.6 million. Amounts due under the sales agreements were collected by the end of 2002.

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

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

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

Environmental Matters

The Company is subject to a wide variety of federal, state and local environmental laws and regulations. The Company has been identified as a potentially responsible party concerning the release of certain hazardous substances at five locations. While the current law potentially imposes joint and several liability upon each party named as a potentially responsible party, the Company’s contribution to clean up these sites is expected to be limited, given the number of other companies which have also been named as potentially responsible parties and the nature and amount of cleanup involved. A number of the Company’s facilities have been evaluated as having excess nitrates, phosphorous, and pesticides in the surrounding soil or groundwater. In addition, several underground storage tanks have been removed or closed at some facilities and these sites have been evaluated for possible contamination. In total, cleanup of hazardous or potentially hazardous substances has been planned or is being performed at approximately 39 sites.

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In connection with the 1999 acquisitions of AgriBusiness and Royster-Clark, the Company obtained indemnities for certain claims related to environmental matters that existed or arose prior to the acquisitions. The indemnities related to AgriBusiness are subject to a $4,500 deductible, may not to exceed 10% of the purchase price, or a total of $30,000 and certain time limitations. Indemnities related to claims arising out of environmental representations and warranties and claims associated with, arising from or relating to conditions existing prior to April 1999 associated with the real estate owned by AgriBusiness and transferred to the Company at closing expire in April 2004. Indemnities covering other environmental claims associated with, arising from or relating to conditions existing prior to April 1999 on real estate (other than real estate subject to the April 2004 indemnity expiration) formerly owned, leased or operated by the AgriBusiness or offsite disposition of contaminants survive indefinitely. The environmental indemnities related to Royster- Clark, Inc. (predecessor company) are subject to a deductible of $2,000 and an overall cap of $5,000 on all indemnities which expire in April 2004. In addition, Royster-Clark, Inc. (predecessor company) had obtained indemnities from Lebanon Chemical Corporation (LCC) for certain claims related to environmental matters that existed at sites acquired from LCC in December 1998. The Company has a claim pending under the indemnities from LCC. Other than that claim, the indemnity has expired. The Company also obtained indemnities from the former stockholder of Alliance for environmental conditions identified as of the date of acquisition. The indemnification remains is effect until notice is received requiring no further actions or after a two-year period of testing with no reportable results in deterioration of water quality.

At December 31, 2003, the Company had accruals of approximately $3,105 thousand for future costs associated with environmental remediation of certain properties compared to $3,260 thousand at December 31, 2002. Costs charged against these accruals for the year ended December 31, 2003 and 2002 were approximately $232 thousand and $222 thousand, respectively. During the year, certain estimates were revised given changing facts that came to light during the year that resulted in a net increase in environmental accruals of $77 thousand for properties being monitored. Environmental remediation projects related to the cleanup of regulated substances are in progress at approximately 39 sites. The cleanup efforts primarily involve remediation of excess nitrates, phosphorous and pesticides in soils and/or groundwater at these sites, or costs to be incurred in the cleanup and monitoring of old underground storage tanks. Certain of these remediation efforts are of a long-term nature. The cost of these on-going and potential response actions is not expected to have a material adverse effect on our business, financial condition or results of operations.

Liquidity and Capital Resources

Our primary capital requirements are for working capital, debt service, capital expenditures and possible acquisitions. For day-to-day liquidity requirements, we operate with a senior secured credit facility with a consortium of lenders. On December 22, 2003, the Company completed the refinancing of its senior secured credit facility with an amended and restated senior secured credit facility (replacement facility) from a consortium of lenders. The terms and provisions of the replacement facility are similar to the terms and provisions of the former senior secured credit facility except as noted below. Replacement facility raises the amount available to the Company from its then current $205,000 up to $225,000, subject to certain borrowing base limitations. The replacement facility expires in three years and bears interest at LIBOR plus a spread based on the Company’s leverage. The replacement facility will employ prime interest loans at times. The weighted average interest rates on the senior secured credit facilities were 4.69% at December 31, 2003 and 4.94% at December 31, 2002. The replacement facility is secured by (1) a lien on all accounts receivable, inventory and certain other assets of the Company and its subsidiaries (except for the collateral securing the First Mortgage Notes, as discussed in note 12 to the consolidated financial statements), (2) all of the common stock of the Company, and (3) all of the common stock of the Company’s subsidiaries, except for the equity interests of certain subsidiaries pledged to secure the First Mortgage Notes. Amounts outstanding under the credit facilities totaled $142,979 and $143,121 at December 31, 2003 and 2002, respectively.

As of December 31, 2003, the company was in technical default with respect to three provisions of the credit agreement relating to (1) access to cash management accounts, (2) qualification of property insurance providers and (3) the failure to disclose separately a partnership which was wrongly believed to have been

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dissolved. These violations were the result of changes in the language of the amended and restated agreement, the full import of which was not realized until after the closing. In March 2004, the consortium of lenders formally waived these defaults.

At December 31, 2003, the borrowing base provisions under the replacement credit facility supported a gross borrowing availability of $156.5 million, from which we had drawn $143.0 million. The replacement facility includes up to $20.0 million for letters of credit of which there were letters of credit totaling $8.2 million outstanding at December 31, 2003. This facility contains financial and operational covenants and other restrictions with which we must comply, including a requirement to maintain certain financial ratios and limitations on our ability to incur additional indebtedness. While there are various covenants and other restrictions with which we must comply, the Company believes that this replacement facility provides improved operating effectiveness and flexibility for the Company in the future. We believe that cash generated from operations and borrowings available under the credit facility will be sufficient to meet our operating and capital needs in the foreseeable future.

From time to time, we review our financing needs and capital structure. As a result of our review, we may periodically explore alternatives to our current financing, including the issuance of additional long-term debt, refinancing our credit facility and other restructuring or financings. In addition, we may from time to time seek to retire our outstanding First Mortgage Notes in open market purchases, privately negotiated transactions or otherwise. These repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amount of repurchases of our First Mortgage Notes may be material and may involve significant amounts of our cash and debt availability.

Net cash provided by operating activities for the year ended December 31, 2003 was $28.4 million compared to net cash used of $37.7 million for the comparable period in 2002, an increase in net cash provided of $66.1 million. The most significant component of increased cash provided by operating activities was movement in operating assets and liabilities of $63.0 million. At December 31 of any given year there is a large degree of variability over which the Company does not have a great deal of control. The overall trend of nitrogen prices, resulting in large part to changes in natural gas costs, will influence customers whether or not they elect to take advantage to company programs for prepayment. While changes in customer prepayment is not classified as cash provided by or used in operating activity, generally, before there is a customer deposit, the customer first pays off their trade account receivable leading to cash provided by operating activities. Changes in nitrogen prices will also affect the inventory investments the Company must make even though the physical volume may be roughly constant from year to year. At December 31, changes in other receivables are primarily driven by the timing of vendor rebate receipts. Most vendor rebate programs settle up near the end of the year. As a result, historically, receipts have straddled very closely around December 31 – sometimes shortly before and sometimes shortly after. During 2003, the Company made a concerted effort to collect the vendor rebates prior to December 31, although we can not assure that such attempts will be effective each year.

Net cash used in investing activities amounted to $9.7 million in 2003 compared to $5.3 million in 2002, an increase of $4.4 million. The increase in net cash used in investing activities resulted from increased capital expenditures of $4.2 million in 2003 and lower proceeds from sales of property, plant and equipment of $0.2 million.

Capital expenditures were $11.1 million for the year ended December 31, 2003 compared with $6.9 million for the year ended December 31, 2002. These capital expenditures were primarily for facility improvements, machinery and equipment replacement, and environmental improvement projects. We estimate total capital expenditures, excluding acquisitions, for 2004 of approximately $12.0 million.

Net cash used in financing activities totaled $18.8 million in 2003 compared to net cash provided by financing activities of $42.9 million in 2002. Cash was used in higher net payments of $54.0 million on the credit

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facilities and higher payments on vendor financing note of $22.2 million in 2003 compared to 2002. Cash was also used in the payment of $4.1 million in deferred financing costs associated with the credit facilities during 2003. Cash used in these changes was partially offset by higher cash provided by customer deposits of $11.5 million and lower payments on long-term debt of $7.1 million.

Net working capital, excluding current installments of long-term debt at December 31, 2003 totaled $209.5 million versus $209.0 million at December 31, 2001, an increase of $0.5 million, or 0.2%. Working capital changes are summarized in the table below.

This decrease in working capital resulted primarily from the earlier cash collection of vendor rebates in other receivables and collections on customer accounts reducing trade accounts receivable and increases in customer deposits. In previous years higher amounts of vendor rebates were collected in January compared to December in 2003. We believe that the increased customer deposits reflect both the solvency of the Company’s customers and their confidence in the Company as a supplier. The company has evidence that some customers believe that various products will continue to rise in price and potentially be in restricted supply in some markets. Accordingly, such customers are taking advantage of locking in supplies and pricing increases and business tax benefits in making these deposits by December 31. While some margin may be lost in obtaining early season pricing, such customers are less likely to price shop with other suppliers and will likely use the Company as their sole supplier for their crop input requirements and related services that the Company provides. The lower note payable relates to early payment of vendor invoices last year that were not repeated in 2003. Lower accounts payable resulted primarily from lower purchases using accounts payable financing at December 31. Higher inventory resulted primarily from higher cost inventory on hand that resulting primarily from higher natural gas costs.

Obligations and Commitments

The following tables summarize our material contractual obligations and commitments, including both on- and off-balance sheet arrangements (in millions) at December 31, 2003:

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Long-term debt obligations.    Long-term debt obligations include the Company’s 10 ¼% First Mortgage Notes, the senior secured credit facility and various notes payable.

First Mortgage Notes.    The Company issued $200 million of 10 ¹/4% First Mortgage Notes due April 2009 to partially finance the acquisition of AgriBusiness in 1999. The First Mortgage Notes bear interest at 10.25% payable semi-annually in arrears. The First Mortgage Notes are secured by 17 principal properties, related fixtures and equipment and other related assets and a pledge of equity of certain subsidiaries. RCG and certain subsidiaries also unconditionally guarantee the First Mortgage Notes. The First Mortgage Notes are not redeemable prior to April 1, 2004 except in the case of a change of control. Thereafter, the First Mortgage Notes are redeemable in whole or in part, at the Company’s option, at a 5.125% premium, declining ratably to par on April 1, 2007, plus accrued and unpaid interest, if any, to the date of redemption.

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

Senior secured credit facility.    The Company maintains a senior secured credit facility (credit facility) that allowed it to borrow up to $225.0 million, subject to certain borrowing base limitations as of December 31, 2003. The credit facility expires in three years and bears interest at LIBOR plus a spread based on the Company’s leverage. The replacement facility will employ prime interest loans at times. The credit facility is secured by (1) a lien on all accounts receivable, inventory and certain other assets of the Company and its subsidiaries (except for the collateral securing the First Mortgage Notes, as discussed in note 12 to the consolidated financial statements), (2) all of the common stock of the Company, and (3) all of the common stock of the Company’s subsidiaries, except for the equity interests of certain subsidiaries pledged to secure the First Mortgage Notes.

The credit facility is subject to certain covenants, including limitations on additional indebtedness, limitations on liens, limitations on capital expenditures and maintenance of certain required financial ratios. The credit facility also restricts the payment of dividends by the Company to RCG. Dividends are restricted to (1) amounts necessary to enable RCG to pay overhead expenses in an amount not to exceed $2.0 million annually; (2) amounts necessary to enable RCG to pay income and other taxes; and (3) $1.0 million over the life of the agreement for the purpose of repurchasing, redeeming or otherwise acquiring and retiring any capital stock, stock warrants, stock options or other rights to acquire capital stock of RCG. Dividends made under the third provision are further restricted in that such dividends may not be made if a default has occurred (or would occur if the dividend payment were made), or such dividend payments would result in noncompliance with any financial covenants.

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

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

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

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purchase commitments for natural gas for use in the manufacture of anhydrous ammonia at our East Dubuque, IL facility. These commitments only comprise a portion of the facility’s natural gas requirements which are fulfilled through open market purchases each month. We believe that sufficient natural gas supplies can be economically obtained through open market purchases at the current time. We monitor the natural gas markets and should our perceptions alter, we may enter into purchase commitments at that time. The amount present above for purchase obligations is for company-wide purchases of selected materials. We do not aggregate open purchase orders executed in the normal course of business by each of our operating locations and such purchase orders are therefore not included on the table.

The Company also has commitments in connection with the acquisition of AgriBusiness in 1999, which the Company entered into a ten-year supply agreement with IMC Kalium Ltd. (Kalium) and IMC-Agrico Company (Agrico), both of which are subsidiaries of IMC Global. Under the terms of the supply agreement, the Company is required to purchase (and Agrico and Kalium are required to supply) certain products in an amount equal to its estimated normal business requirements of the former AgriBusiness locations. The purchase prices and quantities of the products covered by the agreement are determined by market forces. The agreement automatically renews for subsequent periods of five years unless otherwise canceled by either party. In addition, the agreement specifies remedies available to the parties in the event of noncompliance, which include compensatory damages in the event of a failure to purchase (or supply) the required quantities of the covered products. Purchases under this contract were well in excess of minimum requirements and exceeded $100 million during 2003. We expect to purchase quantities of materials above the prescribed minimums under this agreement during 2004.

In January 2004, IMC Global announced plans for a merger with Cargill Crop Nutrition that is projected to be completed in the summer of 2004. Based on our existing contractual relationship and the significant volume of purchases that we make, we expect to maintain a positive relationship with the new entity; however, should adverse changes occur we would expect to be able to procure the materials required from other suppliers.

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

Other long-term liabilities.    Amounts shown consist primarily of patent and technology and severed employee contracts which have been recorded on our December 31, 2003 balance sheet. The Company signed contracts in 2002, which provided an exclusive license for use of certain patents and intellectual property from the owners over a period of time, subject to extensions. The contracts prescribe payments over a four-year period. The Company has agreements to pay four former employees under separation agreements. The table does not include our environmental liabilities, long-term disability accruals, and accruals for self-insurance losses and defined benefit pension and other post-retirement plans because it is not certain when these liabilities will become due. Future contributions to the defined benefit pension plan will be dependant upon pending legislation, future changes in discount rates and the earnings performance of the plan assets. We have made no contributions nor were we required to make contributions to the defined benefit pension plan in 2003 or 2002.

We expect that all of our cash sources from operations and our credit facility will be sufficient for at least the next three years, while our current credit facility is in place, to meet our obligations and commitments described above. We are not aware of any material trend, uncertainty related to cash flow, capital resources, capital requirements or liquidity that would prevent us having sufficient cash resources to operate our current business.

Contingent Obligations

Employment contracts. The Company has employment contracts with certain members of management. These employment agreements are terminable by the Company with or without cause. In the event that the employment agreements are terminated without cause and provided that executives comply with the confidentiality and non-competition covenants, they will be entitled to receive all payments as defined in the respective agreements. The

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contracts extend through April 2004 with an automatic one-year extension thereafter unless notice of intent not to renew is given, either by the Company or by the executive. If termination without cause had occurred as of December 31, 2003, the Company would have been required to pay approximately $2.3 million to satisfy its obligations.

Letters of credit.    The Company maintains letters of credit for various types of insurance coverage, leases and other needs. The letters of credit generally have a one-year maturity and are on an evergreen renewing basis. As of December 31, 2003, the Company has $8.2 million of letters of credit outstanding.

Pension Obligations

As of December 31, 2003, our defined pension obligations exceed the fair value of plan assets by $655 thousand, up from $447 thousand as of December 31, 2002. The increase in under-funded status was due primarily due to actual returns on plan assets not exceeding actuarial losses and interest and service costs. In 2003, we recorded an increase to the minimum pension liability of $165 thousand and an increase to other comprehensive loss of $105 thousand, net of tax of $64 thousand.

Critical Accounting Policies and Estimates

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

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

Inventory Valuation

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

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

Allowance for Doubtful Accounts

Our estimate of the allowance for uncollectible receivables is based on a risk-based analysis of historical write-offs, current sales levels and sales terms and the age of our receivables. Substantially all of our customers

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are involved in the agricultural industry, which is influenced by a variety of factors which are out of our control, including weather conditions, government policy and regulation and world economic conditions, among others. As a result, we continuously evaluate our aged receivables for collection risk. We have not experienced significant changes in the estimate of our allowance for uncollectible receivables in the past.

Rebate Receivables

Rebates are received from crop protection products, raw material and seed vendors, based on programs sponsored by the vendors. The programs vary based on product type and specific vendor practice. More than 80% of the rebates earned are from crop protection product vendors. The majority of the rebate programs run on a crop year basis, typically from October 1^st to September 30^th, although other fiscal periods are sometimes utilized. The majority of the rebates are earned based on the sales a dealer generates of a vendor’s product in a given crop year. The rebate accrual booked monthly is based on actual sales and the use of a reasonably estimable rebate percentage derived from binding arrangements so long as the receipt of such payment is deemed probable. Most rebates are settled and received during our fourth quarter, although some programs settle and payments not are received until our first quarter. To the extent that programs can not meet the conditions of: 1) resulting from a binding arrangement, 2) payments under the arrangement is probable and 3) the amount is reasonably estimable, earnings will be recorded when payment is received, which will typically be during our fourth quarter. Most of our rebate programs meet the conditions set forth in EITF Issue 02-16, “Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor.” However, we expect higher income during the fourth quarter for rebate programs that do not meet the requirements of EITF Issue 02-16 resulting from lower income being recorded during the first three fiscal quarters.

Impairment of long-lived assets

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

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

Goodwill

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

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Deferred Income Tax Assets

Deferred tax assets are reviewed annually for recoverability using the same forecasts used for the evaluation of the fair value of goodwill described above. Projections of future revenues use key variables that we must estimate and include assumptions regarding future sales volume, prices and other economic factors. Significant management judgment is involved in estimating these variables, and they include inherent uncertainties since they are forecasting future events. We have had unprofitable operations for the last four years. These losses have generated a federal tax net operating loss, or NOL, carryforwards of approximately $65 million as of December 31, 2003. Generally accepted accounting principles require that we record a valuation allowance against the deferred tax assets if it is “more likely than not” that we will not be able to utilize it to offset future taxes. In June 2003, as a result of the Company’s cumulative losses incurred in recent years and the lower than expected income for the second quarter, the Company could not satisfy the requirement by generally accepted accounting principles that it was “more likely than not” that we will be able to utilize it to offset future taxes. As a result, the Company recorded a valuation reserve for the full amount of the net deferred tax assets at June 30, 2003. Beginning July 1, 2003 and for future quarters, the Company will not record a net income tax expense or benefit until GAAP requirements for unrestricted recognition of deferred tax assets have been satisfied.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to various market risks, including commodity price risk and interest rate risk. The Company has entered into limited commodity hedging activities with respect to its grain and seed purchases. The majority of these contracts settle in cash. Such settlements have not had a significant effect on liquidity in the past, nor are they expected to be significant in the future. In the past, the provisions of the credit facility have not provided the Company the flexibility to perform any significant hedging activities. While, we do not anticipate initiating any significant hedging activities, the amended and restated credit facility that closed in December 2003 will provide the Company with more flexibility with which to consider hedging activities in natural gas, interest rates or expanded use in seed and grain. We continue to evaluate the possibilities for hedging to manage the volatility associated with various aspects of our business. We do not use derivatives for speculative or trading purposes.

Commodity Price Risk

The Company is exposed to market risk due to changes in natural gas prices. Natural gas is a raw material used in the production of various nitrogen-based products that the Company either manufactures at its East Dubuque plant or purchases from vendors. Market prices of nitrogen-based products are affected by changes in natural gas prices as well as supply and demand and other factors. As a normal course of business, the Company purchases nitrogen-based products during the winter and early spring to supply its needs during the high sales volume spring season. Nitrogen-based inventory remaining at the end of the spring season will be subject to market risk due to changes in natural gas prices and supply and demand. Currently, the Company purchases natural gas for use in its East Dubuque facility on the spot market, but has also used short-term, fixed supply, fixed price purchase contracts which will lock in pricing for a portion of its natural gas requirements through the winter months which have demonstrated the highest degree of volatility. Notwithstanding these purchase contracts, the Company is exposed to significant, although not excessive market risk. Changes in levels of natural gas prices and market prices of nitrogen-based products can materially affect the Company’s financial position and results of operations. The Company has experienced no difficulties in securing supplies of natural gas, however, natural gas is purchased at market prices and such purchases are subject to price volatility.

The Company engages in limited commodity hedging activities with respect to its grain and seed purchases. Grain and seed hedging activities are marked to market every month and price fluctuations are reflected in the consolidated statements of operations.

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Interest Rate Risk

The Company is also exposed to changes in interest rates. The interest rates that we pay for borrowings under our credit facility are based primarily on the LIBOR rate of interest charged by the agent bank under our credit facility. Our operating results will be impacted by changes in interest rates. We estimate that based on an annual average balance on our credit facility that each 1% change in market interest rate will impact before tax earnings by approximately $1.3 million. Our First Mortgage Notes bear interest at a fixed rate of 10 ¹/4%. Some of our customer deposits also bear interest at a fixed rate, which is established on an annual basis at the beginning of each farming season based on prevailing market rates for similar programs in each of the regions in which we operate.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholder

Royster-Clark, Inc.:

We have audited the accompanying consolidated balance sheets of Royster-Clark, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholder’s equity and comprehensive loss, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Royster-Clark, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

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

/s/    KPMG LLP

March 5, 2004

Norfolk, Virginia

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ROYSTER-CLARK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2003 and 2002

(Dollars in thousands)

See accompanying notes to consolidated financial statements.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years ended December 31, 2003, 2002 and 2001

(Dollars in thousands)

See accompanying notes to consolidated financial statements.

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ROYSTER-CLARK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY AND COMPREHENSIVE LOSS

Years ended December 31, 2003, 2002 and 2001

(Dollars in thousands)